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PPACA PULSE CHECK: PART 2 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 10, 2013 

Serial No. 113–80 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Phil Gingrey, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 3 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 4 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 5 

Hon. Tim Murphy, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

Hon. G.K. Butterfield, a Representative in Congress from the State of North 

Carolina, opening statement ............................................................................... 14 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 119 

WITNESSES

W. Brett Graham, Managing Partner, Leavitt Partners ...................................... 18 

Prepared statement .......................................................................................... 20 

Answers to submitted questions ...................................................................... 121 

Antoinette Kraus, Executive Director, Pennsylvania Health Access Network ... 30 

Prepared statement .......................................................................................... 32 

Edward A. Lenz, Senior Counsel, American Staffing Association, on Behalf 

of the Employers for Flexibility in Health Care Coalition ................................ 38 

Prepared statement .......................................................................................... 40 

Answers to submitted questions ...................................................................... 125 

Cheryl Campbell, Senior Vice President, CGI Federal, Inc. ................................ 51 

Prepared statement .......................................................................................... 53 

Answers to submitted questions ...................................................................... 129 

John Lau, Program Director, Serco, Inc. ............................................................... 57 

Prepared statement .......................................................................................... 59 

Answers to submitted questions ...................................................................... 152 

Lynn Spellecy, Corporate Counsel, Equifax Workforce Solutions ....................... 76 

Prepared statement .......................................................................................... 78 

Answers to submitted questions ...................................................................... 157 

Michael Finkel, Executive Vice President for Program Delivery, Quality Software Services, Inc. ............................................................................................... 92 

Prepared statement .......................................................................................... 94 

Answers to submitted questions ...................................................................... 160 

SUBMITTED MATERIAL

Democratic memorandum, dated September 10, 2013, ‘‘Re: Committee Investigation of Affordable Care Act Contractors,’’ submitted by Mr. Waxman ...... 9 

Letter of August 30, 2013, from Mr. Waxman to Mr. Upton, submitted by 

Mr. Butterfield ..................................................................................................... 16 

(1) 

PPACA PULSE CHECK: PART 2 

TUESDAY, SEPTEMBER 10, 2013 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:15 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Joe Pitts (chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Burgess, Murphy, 

Blackburn, Gingrey, Lance, Cassidy, Guthrie, Griffith, Bilirakis, 

Ellmers, Pallone, Dingell, Matheson, Green, Butterfield, 

Christensen, Castor, Sarbanes, DeGette, and Waxman (ex officio). 

Staff present: Clay Alspach, Chief Counsel, Health; Matt Bravo, 

Professional Staff Member; Karen Christian, Chief Counsel, Oversight and Investigations; Noelle Clemente, Press Secretary; Paul 

Edattel, Professional Staff Member, Health; Julie Goon, Health 

Policy Advisor; Brad Grantz, Policy Coordinator, Oversight and Investigations; Sydne Harwick, Legislative Clerk; Sean Hayes, Counsel, Oversight and Investigations; Katie Novaria, Professional Staff 

Member, Health; Andrew Powaleny, Deputy Press Secretary; Heidi 

Stirrup, Health Policy Coordinator; Ziky Ababiya, Democratic Staff 

Assistant; Brian Cohen, Democratic Staff Director, Oversight and 

Investigations, and Senior Policy Advisor; Hannah Green, Democratic Staff Assistant; Elizabeth Letter, Democratic Assistant Press 

Secretary; Karen Lightfoot, Democratic Communications Director 

and Senior Policy Advisor; Karen Nelson, Democratic Deputy Committee Staff Director, Health; Stephen Salsbury, Democratic Special Assistant; and Matt Siegler, Democratic Counsel. 

Mr. PITTS. This subcommittee will come to order. The Chair will 

recognize himself for an opening statement. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

On August 1st, CMS Administrator Marilyn Tavenner testified 

before the full committee on implementation of the Affordable Care 

Act. She assured us that despite numerous delays, including a oneyear delay of the employee choice provision of the SHOP exchanges, the employer mandate, and verification of eligibility for 

insurance subsidies, that the exchanges would be ready on October 

1st to begin enrolling Americans in new health plans and that implementation of the law’s other provisions was on track. 

2 

Since that hearing, we have learned of several troubling developments. On August 13, The New York Times reported that it had 

discovered a delay in the implementation of the law’s out-of-pocket 

caps buried in a list of 137 frequently Asked questions posted on 

the Department of Labor’s Web site on February 20, 2013. On August 27, CMS announced that instead of finalizing contracts with 

health plans set to participate in exchanges between September 5 

and September 9, as had been expected, final contracts would not 

be signed until mid-September. 

The Affordable Care Act’s implementation involves a litany of 

Federal and State agencies, and my constituents are understandably confused about what is happening with the exchanges, enrollment and premiums. Considering the administration’s track record 

on deadlines and delays, reassurances from CMS officials are not 

comforting. 

In our previous hearing, Administrator Tavenner also made an 

extraordinary remark that she had only heard of ‘‘isolated incidents’’ of the ACA having burdensome or negative impact on Americans. 

I would briefly like to share the experiences of some of my constituents who are being harmed by the law. In April of this year, 

Eastern Lancaster County School District and Penn Manor School 

District in Lancaster, Pennsylvania, both announced that they 

were outsourcing some employees to avoid the costs of complying 

with the ACA’s employer mandate. Elanco will outsource approximately 90 food service workers and classroom aides, and Penn 

Manor is shifting more than 95 special-education classroom aides 

off its payroll. The affected employees work over 30 hours a week, 

thus triggering the employer mandate, and the school districts simply cannot afford to pay for the additional expenses of covering 

these individuals. 

Dairy farmers in my district, members of the Mt. Joy Farmers 

Cooperative Association, which is affiliated with Dairylea Cooperative, currently enjoy a negotiated plan characterized by a low-risk 

pool and shared savings. As of January 1, 2014, they will lose this 

unique risk pool and be forced on to the exchanges. 

A father from my district wrote me, distraught, about his daughter’s work hours being cut to 28 hours a week, because her employer could not absorb the cost of providing her with health insurance. He is among dozens of people who have told me that their 

hours have been cut, and they have been moved from full-time to 

part-time as a direct result of the ACA. Dozens more have expressed shock at the staggering premium increases they that face 

in 2014. These are not isolated incidents. 

With that, I would like to welcome all of our witnesses here 

today, and I look forward to their testimony. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The subcommittee will come to order. 

The Chair will recognize himself for an opening statement. 

On August 1, CMS Administrator Marilyn Tavenner testified before the full committee on implementation of the Affordable Care Act. 

She assured us that despite numerous delays—including one-year delays of the 

′′employee choice’’ provision of the SHOP exchanges, the employer mandate, and 

3 

verification of eligibility for insurance subsidies—that the exchanges would be ready 

on October 1 to begin enrolling Americans in new health plans and that implementation of the law’s other provisions was on track. 

Since that hearing, we have learned of several troubling developments. 

On August 13, The New York Times reported that it had discovered a delay in 

the implementation of the law’s out-of-pocket caps—buried in a list of 137 Frequently Asked Questions posted on the Department of Labor’s Web site on February 

20, 2013. 

On August 27, CMS announced that instead of finalizing contracts with health 

plans set to participate in exchanges between September 5 and September 9—as 

had been expected—final contracts would not be signed until mid-September. 

Obamacare’s implementation involves a litany of Federal and State agencies. 

My constituents are understandably confused about what is happening with the 

exchanges, enrollment, and premiums. 

Considering the administration’s track record on deadlines and delays, reassurances from CMS officials are not comforting. 

In our previous hearing, Administrator Tavenner also made an extraordinary remark that she had only heard of ‘‘isolated incidents’’ of the ACA having burdensome 

or negative impact on Americans. 

I would briefly like to share the experiences of some of my constituents who are 

being harmed by the law. 

In April of this year, Eastern Lancaster County (Elanco) School District and Penn 

Manor School District in Lancaster, PA, both announced that they were 

‘‘outsourcing’’ some employees to avoid the costs of complying with the ACA’s employer mandate. 

Elanco will outsource approximately 90 food service workers and classroom aides, 

and Penn Manor is shifting more than 95 special-education classroom aides off its 

payroll. The affected employees work over 30 hours a week, thus triggering the employer mandate, and the school districts simply cannot afford to pay for the additional expenses of covering these individuals. 

Dairy farmers in my district, members of the Mt. Joy Farmer’s Cooperative Association, which is affiliated with Dairylea Cooperative, currently enjoy a negotiated 

plan characterized by a low-risk pool and shared savings. As of January 1, 2014, 

they will lose this unique risk pool and be forced on to the exchanges. 

A father from my district wrote me, distraught, about his daughter’s work hours 

being cut to 28 hours a week, because her employer could not absorb the cost of 

providing her with health insurance. He is among dozens of people who have told 

me that their hours have been cut, and they have been moved from full-time to parttime as a direct result of the ACA. 

Dozens more have expressed shock at the staggering premium increases they face 

in 2014. 

These are not ‘‘isolated incidents.’’ 

I would like to welcome all of our witnesses here today, and I look forward to 

their testimony. 

I yield back. 

Mr. PITTS. I yield the balance of my time to the gentleman from 

Georgia, Dr. Gingrey. 

OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Mr. GINGREY. Thank you, Mr. Chairman. 

We are now 3 weeks from the beginning of open enrollment for 

Obamacare exchanges. It is fitting that we have before us today the 

vendors who are charged with running the exchanges. While I am 

sure that these companies are working as best they can to meet the 

deadlines, the reality is that most were awarded contracts within 

the past few months and the complex system has yet to be fully 

tested. How can taxpayers expect to feel secure with their personal 

information in the exchange when they have not had adequate security checks to determine its effectiveness. 

Mr. Chairman, Obamacare will saddle taxpayers with higher premiums, fewer choices and the potential for employment disruption. 

4 

We must work to ensure that our citizens will not face fraud and 

identity theft from the law as well, and with that, I yield back and 

I thank you for the time. 

Mr. PITTS. The Chair thanks the gentleman. 

At this time I would like to request unanimous consent for Representative DeGette to participate in the subcommittee hearing. 

Without objection, so ordered. 

And the Chair recognizes the ranking member, Mr. Pallone, for 

5 minutes for an opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Chairman Pitts, and a special thanks 

to our witnesses for taking the time to be here today. I know you 

are right in the middle of gearing up for the October 1st start of 

open enrollment for the health care exchanges and that your time 

is valuable. 

I must say that I am extremely troubled by the Republicans’ repeated tactics to try to slow the progress of all those individuals 

and organizations working so hard to implement the Affordable 

Care Act. In particular, the oversight letter that committee Republicans sent to 51 groups, primarily community organizations that 

receive grants to serve as navigators to help the uninsured sign up 

for benefits under the ACA I think is despicable. This is an egregious abuse of the committee process and an attempt by Republicans to intimidate community organizations and overwhelm them 

with information requests at a critical period so that they don’t implement the program. 

I have been working with organizations in my district such as 

the Food Bank of Monmouth in Ocean County, who have taken on 

the responsibility of being navigators for the community and make 

sure that they know their rights under the committee rules, but 

even more so, I am encouraging them to remain committed to the 

critical work they are doing and not be detracted from their laudable goals of helping uninsured people gain coverage. 

It is time that the Republicans stop trying to obstruct the law. 

Health care reform is undeniably moving forward. It is hypocritical 

that Republicans are holding this hearing today so say that the 

health exchanges are not ready and that the administration doesn’t 

have enough staff or resources when the Republicans are the ones 

who refuse to adequately fund the law and are out advocating for 

it to be defunded. But despite this, I think what we will hear today 

from our witnesses is that the contractors, community organizations and States are ready for October 1st. 

It is going to be a challenge, that is for sure. Will the rollout be 

flawless? No. Will there likely be some hiccups along the way as 

with any major program rollout? Yes. But these groups have been 

working day and night to make sure that they are ready for enrollment so that Americans can start receiving the benefits of health 

insurance, and starting October 1st, millions of people will gain access to health care coverage they didn’t have before. Individuals in 

every State will have access to a health exchange where they can 

select coverage from an array of qualified health plans. Every 

5 

health plan will offer essential health benefits including preventative services such as screenings and vaccines, mental health services, trips to the emergency room, outpatient care, care before and 

after your baby is born, prescription drugs, lab tests and pediatric 

services including dental care and vision care for kids. 

Now, one area where more progress is needed is State expansion 

of Medicaid. An important tool included in the ACA was the 

strengthening of Medicaid by allowing States to expand coverage to 

individuals and families who did not previously qualify for the program but also did not have the resources to access affordable, quality care through the private insurance market. Not only is this beneficial for low-income Americans, it is an advantageous fiscal arrangement for States, and I am disappointed that a number of 

States still have not chosen to expand Medicaid coverage, and anticipate we will hear from Ms. Kraus from the Pennsylvania Health 

Access Network today about how the continued refusal of States to 

accept Federal funding and expand Medicaid will hurt low-income 

families as well as State economies. 

So implementing the ACA is a huge undertaking. It involves the 

coordination of a number of complicated provisions. We can’t expect 

everything to go perfectly but we can support the administration, 

the contractors, the community partners and the States in their efforts so that the American people can access health care as intended on October 1st and receive the assistance they need to sign 

up for health insurance. I just hope that my Republican colleagues 

will realize this and stop trying to impede the law and those working to implement it. 

I yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the vice chair of the subcommittee, Dr. Burgess, 5 minutes for 

opening statement. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. I thank the chairman for yielding, and let me just 

say in reply to my friend from New Jersey that it is the oversight 

function of this committee and its subcommittees that really has 

been one of the cherished functions in the Congress in the United 

States, and certainly under both Democratic and Republican committee leadership, the oversight function is one that other Members 

of Congress look to. They look to the oversight function of this committee. So now we are in a new situations where self-attestation 

is going to be the launch word for people who show up and sign 

up for benefits. Why we wouldn’t have questions about the vast 

sums of money that have been pushed out the door relatively hostility to these navigator groups? Why wouldn’t we have questions 

as to their credentials, as to their ability to provide what they’ve 

been required to provide, and why wouldn’t we have questions that 

other Members of Congress would like answered as well. So really, 

it is the function of this committee to provide that oversight function, and I for one, Mr. Chairman, am grateful that those letters 

did go out, and certainly in support of the fact that we are trying 

to simply get the information that the administration for whatever 

reason does not want to give to the Congress. 

6 

Mr. PALLONE. Would the gentleman yield? 

Mr. BURGESS. No, I will not. I have got some things to say. If 

I have time at the end, you may be welcome to it. 

We have 3 weeks, 3 short weeks, 21 days, ready or not, October 

1st, the health exchanges including the Federally Facilitated Marketplaces run by the Obama administration will open while the 

White House, Treasury and Health and Human Services continue 

to report that everything will be ready, everything is fine. We have 

only seen missed deadlines, delays and really an overall lack of information. 

The most significant function for the operation of the exchanges 

as it turns out is not in the hands of the administration but has 

been outsourced. It has been contracted to organizations, and many 

of those witnesses are before us today and we appreciate your participation. The Federal hub will be the centerpiece of the exchanges, coordinating data from other five Federal agencies, millions of individuals, hundreds of insurance carriers and in all 50 

States. Not surprisingly, the complexity involving coordinating the 

exchange has led several States, notably Oregon and California, to 

indicate that they will likely need to delay access to their online 

marketplaces. States have begun making contingency plans but the 

administration continues the same refrain: we will be ready. 

Instead of communicating with Congress, the administration has 

decided just to open the door to eligibility errors and fraud and inappropriate payments by removing verification requirements and 

allowing consumers to simply use self-attestation. Because the 

agency is silent, because Health and Human Services will not 

speak on this, we must go to the source—the contractors who have 

to live in a world. Your world is comprised of contingencies and 

possibilities, deadlines and an ever-shifting environment. You know 

you deal with contingencies all the time. 

The President’s health care law continues to create more chaos, 

more uncertainty for Americans. Since the administration won’t 

admit the enormity and complexity of the task they have undertaken, we have our witnesses today, and I hope that we will hear 

from them, from these people who are actually preparing the systems will be able to tell us the real status of the implementation 

of the Affordable Care Act. 

Let me then yield to the chairman of the Oversight Subcommittee, Mr. Murphy. 

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA 

Mr. MURPHY. Thank you very much, Doctor. 

You know, it is kind of a preposterous thing the gentleman from 

New Jersey says, as if the Oversight and Investigations Committee 

has no business having oversight and investigation. 

When we had multiple hearings, we heard from people from the 

administration that everything was fine for business rollout, only 

to say well, it wasn’t ready and they had to slip in little unknown 

statements they were going to delay it for a year. They said the exchanges actually were supposed to start their training August 1. 

They didn’t even start hiring until lately. Also, we saw the adminVerDate Aug 31 2005 15:36 Mar 24, 2014 Jkt 037690 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\113-80~1\113-80~1 WAYNE
7 

istration had to waive some of the rules for caps on copayments 

and deductible. Labor has to take out full-page expensive ads to get 

the attention of CMS, who wasn’t talking to them. Treasury came 

before us and said they haven’t heard any concerns from individuals. And by law and by design, the way the bill was written, the 

navigators have to be people who are inexperienced with selling insurance by law. 

So we have every right to ask questions on behalf of the American people. That is what oversight is supposed to do. Quite frankly, I am puzzled by people who are trying to say that we are trying 

to delay this. No, I think the delays have been there because the 

administration, even though they have had a few years to do this, 

simply is not ready to bring this forward upon the American people. So we will continue to ask questions about how this program 

is going. If everything is fine, people will have nothing to be afraid 

of, but quite frankly, I think we have a lot to be afraid of, and that 

is why things aren’t fine. Thank you. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the ranking member of the full committee, Mr. Waxman, 5 minutes 

for an opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. 

It is an interesting example today of the Republicans ignoring 

their own oversight findings. They started this investigation in August. They did interviews. They got documents. They learned that 

the contractors were doing everything right and they were on target to meet the deadlines. Rather than talk about that, they are 

attacking the law which they have attacked from the very beginning. They want to portray health reform as an impossibly complex, inevitably doomed enterprise, and that is what we are hearing again today. 

We have four private-sector contractors who are actually in the 

trenches with the administration implementing this law. Today’s 

witnesses are not political. They will tell us that the administration 

is making steady, step-by-step progress. Their testimony will deflate the overheated Republican rhetoric of a coming health care 

apocalypse. 

Last month, the committee launched an extensive investigation 

into these contractors. They peppered them with questions and 

they scoured the documents for signs of impropriety. What they 

found can be summarized in one word: nothing. The facts don’t 

measure up to their doom-and-gloom talk. That is why they have 

said virtually nothing about their own investigation. 

To fill this void, the Democratic staff is releasing a supplemental 

memo outlining what we learned from the oversight investigation. 

The key findings are as follows. One, the contractors and CMS 

have numerous systems in place to secure the privacy of consumer 

information; two, the contractors are on track to complete their remaining tasks by October 1; three, CMS’s management of the program is sound; and four, these contractors are creating thousands 

of jobs throughout the country. 

8 

In my view, the timing of the committee’s investigation is under 

suspicion. Burdensome demands came during the most critical 

phase of these contractors’ work. The committee is taking the same 

approach in its investigation of the health care navigators. But 

having launched the investigation and received extensive responses, we should not ignore what we have learned. That is why 

I ask unanimous consent that this memorandum that I referred to 

be made part of the record. 

Mr. PITTS. Without objection, so ordered. 

[The information follows:] 

9 


86926.001

FRED UPTON, MICHIGAN 

CHAIRMAN 

HENRY A. WAXMAN, CALIFORNIA 

RANKING MEMBER 

ONE HUNDRED THIRTEENTH CONGRESS 

~ongte~~ of toe Wntteb ~ta:te~ 

~ou~e of ~epre~entatibe~ 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HOUSE OFFICE BUILDING 

WASIllNGTON, DC 20515-6115 

Majority (202) 22S-2927 

Minonty (202) 225·3641 

MEMORANDUM 

September 10, 2013 

To: Committee on Energy and Commerce Democratic Members and Staff 

Fr: Committee on Energy and Commerce Democratic Staff 

Re: Committee Investigation of Affordable Care Act Contractors 

I. EXECUTIVE SUMMARY 

On August 6, 2013, Chairman Fred Upton and other Republican members of the 

Committee on Energy and Commerce issued a letter requesting briefings and documents from 

six contractors involved in implementing the Affordable Care Act \ACA): Booz Allen, CGI, 

eHealthlnsurance, Equifax Workforce Solutions, Serco, and QSSI. According to the letters, the 

interviews and document requests were conducted "in order to better understand the work you 

have contracted to do, and the status of that work in light of the scheduled open enrollment 

period beginning October 1, 2013.,,2 

All six of these contractors were interviewed by and provided documents to the 

Committee staff, and four of them will be testifying before the Subcommittee on Health today. 

This memorandum summarizes the information that the Committee received during this 

investigation. 

During the investigation, the contractors told the Committee that they (1) have numerous 

measures in place to secure the privacy of consumers' personal financial and health information; 

(2) are on track to have any remaining tasks completed for October 1, the opening date of the 

law's health insurance marketplaces; (3) are satisfied with the management of their contracts by 

the Centers for Medicare and Medicaid Services (CMS); and (4) are creating jobs across the 

country through their work to implement this law. 

1 Letters to Booz Allen, CGI, eHealthlnsurance, Equifax Workforce Solutions, Serco, and 

QSSI, from Reps. Upton, Barton, Pitts, Blackburn, and Burgess (Aug. 6, 2013). 

2Id. 
10 


86926.002

II. ACA CONTRACTORS ARE PROTECTING CONSUMERS' PERSONAL DATA 

Safeguarding consumers' personal information is a critical component of the 

implementation of the ACA. The contractors contacted by the Committee appear to be taking 

this responsibility seriously. 

The contractors told the Committee they will comply with applicable federal privacy 

laws, including the Health Insurance Portability and Accountability Act (HIP AA) and the 

Federal Information Security Management Act. They also said they will have to meet the 

Minimum Acceptable Risk Standards for Exchanges (MARS-E) and other security standards, as 

specified in their contracts with CMS. 3 

Several of the contractors described additional steps they are taking. At Serco, which has 

the contract to process paper applications submitted to federally facilitated marketplaces (FFM), 

employees will be subject to background checks, receive training on handling personal 

information, and be blocked from accessing the Internet and using mobile devices at their desks 

while processing applications, in addition to other security measures. 4 Additionally, the threepage applications that these employees process will not contain any personal health information, 

unlike the lengthy forms that many consumers must fill out to obtain private health insurance 

today. 

CGI Federal, the contractor designing the Healthcare.gov website, said it has 

incorporated specific CMS-approved security measures into its software design. It also stated 

that the company is using third-party experts to independently test system security. 5 

eHealthInsurance informed the Committee that its contract was updated to improve privacy and 

security provisions in July 2013. 6 

Some of the concerns about security in the ACA's health insurance marketplaces have 

focused on the data hub that will connect with the Social Security Administration, Internal 

Revenue Service, other government agencies, and select outside contractors to verify information 

for the FFM. QSSI, the main contractor building this data hub, informed the Committee that the 

hub would not store any personal data, instead allowing information to pass only from one entity 

to another. 7 Additionally, Michael Finkel, the Executive Vice President for Program Delivery at 

3 Briefing by CGI to House Committee on Energy and Commerce Staff(Aug. 19,2013); 

Briefing by eHealthInsurance to House Committee on Energy and Commerce Staff (Aug. 14, 

2013); Briefing by Equifax Workforce Solutions to House Committee on Energy and Commerce 

Committee Staff (Aug. 14, 2013); Briefing by Serco to House Committee on Energy and 

Commerce Staff (Aug. 22, 2013). 

4 Briefing by Serco to House Committee on Energy and Commerce Staff (Sept. 3, 2013). 

5 Briefing by CGI to House Committee on Energy and Commerce Staff (Aug. 19,2013). 

6 Briefing by eHealthlnsurance to House Committee on Energy and Commerce Staff 

(Aug. 14,2013). 

7 Briefing by QSSI to House Committee on Energy and Commerce Staff(Sept. 4, 2013). 

2 
11 


86926.003

QSSl, told the Committee that QSSl had received the preliminary results of an outside security 

assessment on August 30,2013. 8 This review found no major security issues with the data hub. 9 

Mr. Finkel also said that CMS will put in place on-going security monitoring systems once the 

data hub is operational on October 1.10 

Several of the contractors responsible for obtaining and using personal information under 

the ACA also told the Committee that they already have extensive experience collecting and 

protecting such information. For example, eHealthlnsurance has an existing marketplace for 

insurance that collects such information, while Equifax maintains detailed credit profiles on 

millions of Americans and collects and uses payroll information to determine eligibility for 

Medicaid and S_CHIP.11 

III. ACA CONTRACTORS INFORMED COMMITTEE STAFF THAT TASKS ARE 

BEING COMPLETED IN A TIMELY FASHION 

Republican leaders have raised concerns about the readiness of CMS and its contractors 

for the October I rollout of the Affordable Care Act marketplaces. However, information 

provided to the Committee by the contractors that were interviewed indicates that key portions of 

the marketplace systems are being completed in a timely fashion. 

COl indicated that it was on schedule for designing and developing software for the 

Healthcare.gov website, had met all major deadlines, and was conducting appropriate testing 

internally and with outside parties. 12 

Similarly eHealthlnsurance reported that it was on schedule to set up its website so that 

consumers in states using the FFM could compare and buy approved health insurance plans. 13 

Equifax reported that it had already completed key "end to end" tests of their income 

verification systems; Serco reported that it had hit or beaten all key deadlines. 14 

8 Id. 

9 Id. 

10 Id. 

11 Briefing by eHealthlnsurance to House Committee on Energy and Commerce Staff 

(Aug. 14, 2013); Briefing by Equifax Workforce Solutions to House Committee on Energy and 

Commerce Committee Staff (Aug. 14,2013). 

12 Briefing by COl to House Committee on Energy and Commerce Staff (Aug. 19,2013). 

13 Briefing by eHealthlnsurance to House Committee on Energy and Commerce Staff 

(Aug. 14, 2013). 

14 Briefing by Equifax Workforce Solutions to House Committee on Energy and 

Commerce Committee Staff (Aug. 14,2013); Briefing by Sereo to House Committee on Energy 

and Commerce Staff (Aug. 22, 2013). 

3 
12 


86926.004

IV. ACA CONTRACTORS ARE SATISFIED WITH CMS'S CONTRACT 

MANAGEMENT 

Every contractor asked by the Committee staff indicated confidence and satisfaction with 

CMS's contract management process. Booz Allen told the Committee that it had a "very 

pleasant experience" with CMS and that the agency was responsive to its questions. IS John Lau, 

the Program Director for Serco, also described CMS's management as "perfectly competent.,,16 

Richard Martin, Vice President of Healthcare for CGI, told the Committee that CMS was 

"passionate about getting this right - not just done, but right." 17 

V. ACA CONTRACTORS ARE CREATING JOBS 

Documents provided to the Committee and interviews with ACA contractors indicate that 

ACA contracts will create thousands of jobs. To process paper applications under the ACA, 

Serco will employ 1,954 individuals in the company's profram management office and at 

production centers in Kentucky, Arkansas, and Missouri. 1 CGI has approximately 300 

employees and subcontractor personnel working on its contract to design the software for the 

FFM.19 QSSI has employed approximately 160 full-time equivalent employees as part of its 

contract to build the data hub; these are high-skill jobs including website developers, business 

analysts, managers, and other similar positions.2o Booz Allen employed 42 individuals to work 

on three of the company's ACA-related contracts.21 

VI. CONCLUSION 

Republican leaders have expressed concerns about many aspects of the Affordable Care 

Act, including CMS and contractor preparedness for the October 1 opening of the health care 

marketplaces and the ability ofCMS and its contractors to adequately protect consumers' private 

financial and health information. In order to investigate these and other concerns, the Committee 

requested voluminous information and briefings from key CMS contractors. The documents 

provided to the Committee by these contractors and the briefings that they provided to the 

Committee did not support the Republicans' concems. The contractors reported that they are 

2013). 

2013). 

2013). 

2013). 

15 Briefing by Booz Allen to House Committee on Energy and Commerce Staff (Aug. 23, 

16 Briefing by Serco to House Committee on Energy and Commerce Staff (Aug. 22, 

17 Briefing by CGI to House Committee on Energy and Commerce Staff (Aug. 19,2013). 

18 Briefing by Serco to House Committee on Energy and Commerce Staff (Aug. 22, 

19 E-mail from CGI to Democratic Committee Staff(Sept. 9, 2013). 

20 Briefing by QSSI to House Committee on Energy and Commerce Staff (Sept. 4, 2013). 

21 Briefing by Booz Allen to House Committee on Energy and Commerce Staff (Aug. 23, 

4 
13 


86926.005

completing tasks in a timely fashion, that they are taking numerous steps to ensure that consumer 

privacy is protected, and that eMS is effectively managing these contracts. 

5 
14 

Mr. WAXMAN. I want to make just a couple of points before I 

yield. Inevitably, there will be some glitches and hiccups in implementation of this law, and I expect every time they find any hiccup, the Republicans here in Washington will make a hue and cry 

about it. I believe we should keep our eyes on the bigger picture: 

problems that arise will be fixed, and we are on a steady path to 

offering every American quality, affordable health coverage and 

making our health care system more sensible, efficient and fair. 

It is also important to remember that most of the implementation problems are likely to come from Republican State leaders who 

are openly obstructing the goals of the law. Antoinette Kraus of 

Pennsylvania Health Action has firsthand knowledge of what this 

senseless intransigence means to the hardworking Americans 

caught in the middle. 

I am now going to yield 2 minutes to my colleague and friend, 

Mr. Butterfield. 

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH 

CAROLINA 

Mr. BUTTERFIELD. Thank you very much, Mr. Waxman, for yielding time. Mr. Waxman, I want to associate myself completely with 

your statement and that of Mr. Pallone. 

Mr. Chairman, I am absolutely outraged that the chairmen of the 

full committee and Subcommittees on Health and Oversight as well 

as other Republican members of this committee sent a 3-page investigatory letter to 51 grant recipients demanding that they answer questions giving them only 2 weeks to provide detailed descriptions of the anticipated scope of wrong, among other very specific questions, to provide all documentation and communications 

related to their grant. My question to my staff and to you, my 

friends: how can 15 members of this committee simply get together 

and send a letter without committee action? Wasn’t the vast majority of the information being sought by Chairmen Upton and Pitts 

and Murphy included in the navigator’s application to CMS? 

These grant recipients only received word they were selected to 

receive the grant on August 15th. Might I remind my colleagues 

that the marketplace goes live on October 1st, less than one month 

away? The majority is forcing these recipients away from their important work of getting ready on October 1st and diverting their 

limited resources to entertain its fishing expedition. Yes, that is 

what I am calling it, a fishing expedition, that will surely come 

back empty-handed. There is no evidence of any kind that any navigator grantees have misappropriated or misused grant funds in 

any way whatsoever. This is a gross misuse of the company’s investigative authority and just another way this majority is attempting 

to derail the Affordable Care Act. 

I am outraged by your actions. I want you to tell me when these 

letters came back what you have discovered. I believe you will 

come back empty-handed. 

Thank you. I yield back to Mr. Waxman. 

Mr. WAXMAN. I yield back my time. 

Mr. PITTS. The Chair thanks the gentleman. 

That concludes the—— 

15 

Mr. BUTTERFIELD. May I ask unanimous consent to include in 

the record a copy of Mr. Waxman’s letter dated August 30th? Mr. 

Waxman’s letter to Mr. Upton dated August 30th, may I include 

this in the record? 

Mr. PITTS. Without objection, so ordered. 

Mr. BUTTERFIELD. Thank you, Mr. Chairman. 

[The information follows:] 

16 


86926.006

FRED UPTON, MICHIGAN 

CHAIRMAN 

HENRY A, WAXMAN, CALIFORNIA 

RANKING MEMBER 

ONE HUNDRED THIRTEENTH CONGRESS 

(!Congress of tbe Wntteb $tates ;t,ou~e of l\eprt~etttatibe~ 

COMMITIEE ON ENERGY AND COMMERCE 

2125 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6115 

The Honorable Fred Upton 

Chainnan 

Committee on Energy and Commerce 

2125 Rayburn House Office Building 

Washington, D.c' 20515 

Dear Chairman Upton: 

Majority {2021225-2927 

MioOlity l202! 225··3641 

August 30, 2013 

I am writing regarding letters you sent yesterday to 51 groups that received grants to 

serve as Navigators to help the uninsured sign up for benefits under the new health care law. 

There is no legitimate predicate for these letters and no evidence of any malfeasance from any of 

the organizations. It is an abuse of your oversight authority to launch groundless investigations 

into civic organizations that are trying to make health refonn a success. 

You have opened investigations of every group that received Navigator grants in 11 

states. You have asked these organizations to respond to extensive and time-consuming requests 

for information. You are demanding that the groups provide "all documents and 

communications related to your Navigator grant." And you are requesting that they provide 

briefings and answer a long list of questions on organization budgets and employee training, 

education, monitoring, review, and supervision. 

The timing of these letters is particularly suspect. You are insisting on voluminous 

document productions by September 13, just when these groups need to be focused on their 

mission of helping uninsured Americans enroll for coverage. Indeed, it appears that these 

requests may have been sent solely to divert the resources of small, local community groups, just 

as they are needed to help with the new health care law. Certainly, there is no explanation of 

what legitimate purpose is served by the Committee making such invasive requests of small, 

non-partisan, and community-based organizations like Arizona's Carnpesinos Sin Fronteras, Inc. 

(recipient of a $71,386 grant), Louisiana's Martin Luther King Health Center, Inc. (recipient of 

an $81,086 grant), and New Jersey's Food Bank of Monmouth and Ocean Counties, Inc. 

(recipient of a $137,217 grant). 

Unfortunately, these are not the only investigations you are conducting that are draining 

resources from entities doing important and time-sensitive work to implement the health care law 

and deterring others from working with these groups or the Administration. In May, you sent 

letters to HHS, Enroll America, and 15 other entities seeking detailed information and 
17 


86926.007

The Honorable Fred Upton 

August 30, 2013 

Page 2 

documents regarding their work to inform the public about new benefits. Earlier this month, 

with no public notice, you sent letters to six HHS Affordable Care Act contractors, seeking 

briefings and documents from these entities. These investigations appear to be little more than 

fishing expeditions. 

As you know, I am a strong believer in the congressional oversight process. Done right, 

oversight can prevent abuses, ensure laws are implemented correctly, and save taxpayer money. 

But your investigations of the implementation of the Affordable Care Act do not appear to be 

designed to achieve these goals. Their impact is not to enlighten the Committee, but to 

intimidate and divert resources from the effort to implement the law. 

I urge you to reconsider these misguided investigations. 

Sincerely, 

Henry A. Waxman 

Ranking Minority Member 

House Energy and Commerce Committee 
18 

Mr. PITTS. All right. We have one panel, seven witnesses today. 

First, we have Mr. Brett Graham, Partner and Director of exchange Programs, Leavitt Partners. We have Ms. Antoinette 

Kraus, Director of Pennsylvania Health Access Network; Mr. Edward Lenz, Senior Counsel, American Staffing Association, testifying on behalf of the Employers for Flexibility in Health Care Coalition; Ms. Cheryl Campbell, Senior Vice President of CGI Federal; 

Mr. John Lau, Program Director of Serco; Ms. Lynn Spellecy, Corporate Counsel, Equifax Workforce Solutions; and Mr. Michael 

Finkel, Executive Vice President of Program Delivery, QSSI. 

Thank you for coming today. You have 5 minutes to summary 

your testimony. Your written testimony will be placed in the 

record. 

At this point I will recognize Mr. Graham for 5 minutes for his 

summary. 

STATEMENTS OF W. BRETT GRAHAM, MANAGING PARTNER, 

LEAVITT PARTNERS; ANTOINETTE KRAUS, EXECUTIVE DIRECTOR, PENNSYLVANIA HEALTH ACCESS NETWORK; EDWARD A. LENZ, SENIOR COUNSEL, AMERICAN STAFFING ASSOCIATION, ON BEHALF OF THE EMPLOYERS FOR FLEXIBILITY IN HEALTH CARE COALITION; CHERYL CAMPBELL, 

SENIOR VICE PRESIDENT, CGI FEDERAL, INC.; JOHN LAU, 

PROGRAM DIRECTOR, SERCO, INC.; LYNN SPELLECY, CORPORATE COUNSEL, EQUIFAX WORKFORCE SOLUTIONS; AND 

MICHAEL FINKEL, EXECUTIVE VICE PRESIDENT FOR PROGRAM DELIVERY, QUALITY SOFTWARE SERVICES, INC. 

STATEMENT OF W. BRETT GRAHAM 

Mr. GRAHAM. Good morning, Chairman Pitts, members of the 

subcommittee. Thank you for the opportunity to testify today about 

the ACA as well as State readiness around State health insurance 

exchanges. I am the Managing Director of Leavitt Partners Center 

for Health Care Intelligence around health insurance exchanges. 

We advise clients on the health insurance exchange landscape. Several of my colleagues have been very involved in both the design 

and development of insurance exchanges both in the private sector 

as well as publicly. Leavitt Partners has also been very involved in 

advising clients on implementation and being ready for that implementation. 

First, let me say that it has been very impressive all the work 

that States have done to be ready for the open enrollment season, 

which is just 3 weeks away. What they have done has been impressive. That being said, today where we stand, there is not a single 

State that is completely ready for open enrollment 3 weeks away. 

In an ideal world, States would be well into their outreach and 

education campaigns with all of the exchange operations and 

functionality fully tested and completed. In the current situation, 

however, uncertainty and doubt still surrounds how functional 

these systems will be on October 1st. 

The bottom line is that while Leavitt Partners believes that a 

very baseline functionality of State-based exchanges will be up and 

running on October 1st, it can be expected that most, if not all, exchanges will experience a rocky enrollment period as they work to 

19 

overcome both known and unanticipated challenges that arise. 

Today I would like to focus on four critical challenges that States 

are facing as they work towards implementation in the short term. 

The first challenge States are facing is the complexity of an exchange’s architecture itself. The establishment of these health insurance exchanges is one of the most aggressive and complex IT 

projects the Federal Government has ever undertaken, certainly in 

the health care space. Coupling the complexity of these challenges 

with the informational delays has clearly strained States’ capacity 

to complete their exchanges both on time and as originally scoped. 

In fact, as States are making final preparations for open enrollment, many have had to de-scope the capabilities they planned in 

order to be up and running on October 1st. While this is the right 

thing to do from a management perspective, it will certainly have 

an impact on consumers as they go to the exchanges. 

The second challenge that is facing States is data verification 

and integration with the Federal Data Services Hub. Our surveillance of the exchange landscape shows that while some States have 

completed testing, others are working through the final testing 

phases despite still being in the building stage of development. 

This is problematic. Several States have expressed to us concern 

about using the Federal Data Services hub and where possible are 

planning to use their own data resources for verification. 

The third challenge is privacy and security. In addition to integration challenges, there are also serious concerns regarding security of the hub’s data. The Office of the Inspector General recently 

stated that any additional delays in completing the security authorization package would result in an incomplete assessment of system risks and needed security controls. 

The fourth challenge should not be underestimated. It is achieving optimal enrollment. Because of the compressed timeline, States 

have not been able to devote the necessary resources to outreach 

and education. Tens of thousands of consumers, if not hundreds of 

thousands of consumers, will come to these exchanges with little or 

no prior exposure to health insurance coverage. They will need 

comprehensive assistance to be able to make these very important 

decisions. A lack of information and a high potential for misinformation will increase the likelihood for error, increase the possibility consumers will select suboptimal products and possibly result 

in a delayed enrollment. 

In conclusion, Mr. Chairman, let me restate that although 

Leavitt Partners believes that baseline functionality of State-based 

exchanges will be up and running in 3 weeks, it can be expected 

that due to the challenges associated with, number one, the complexity of the IT exchange infrastructure and architecture, number 

two, the Federal Data Services Hub, three, privacy and security, 

and finally, four, the necessary arrangements and outreach associated with achieving optimal enrollment. Very few States will have 

a comprehensive working exchange on October 1st. This will result 

in a rocky enrollment period. Thank you. 

[The prepared statement of Mr. Graham follows:] 

20 


86926.008

Testimony of W. Brett Graham, Partner & Managing Director, Leavitt Partners 

Hearing on PPACA Pulse Check: Part 2 

United States House of Representatives Committee on Energy and Commerce 

September 10, 2013 

Based on our surveillance and understanding of the health insurance exchange landscape, Leavitt 

Partners believes that while baseline functionality of state-based exchanges will be up and running on 

October 1, it can be expected that most, if not all, exchanges will experience a rocky enrollment period 

as they work to overcome both known and unknown operational challenges. This statement focuses on 

four critical challenges that states are currently facing and how these challenges will impede effective 

exchange operations in the short term. 

The first challenge states are facing is the complexity of an exchange's architecture itself. The 

establishment of health insurance exchanges is one of the most complex IT projects ever initiated by the 

federal government. Coupling the complexity of the project with informational delays has clearly 

strained states' capacities to complete their exchanges on time and as originally scoped. In fact, as 

states are making final preparations for open enrollment, many have had to de-scope the capabilities 

they planned to have available to consumers during the initial weeks of operation. While such 

downgrading is necessary to achieve basic functionality by October 1, the changes will impact the ability 

of both consumers and stakeholders to effectively access the system. 

The second challenge is data verification and integration with the federal data services hub. Our 

surveillance of the exchange landscape shows that while some states have completed basic testing with 

the hub, others are working through the final testing phases despite still being in the building stages of 

development. Several states have expressed concern to us about using the federal data services hub 

and, where possible, are planning on using their own data sources for verification. 

The third challenge is privacy and security. In addition to integration challenges, there are also serious 

concerns regarding the security of the hub's data. The Office of Inspector General recently stated that 

any additional delays in completing the security authorization package would result in an incomplete 

assessment of system risks and needed security controls. 

The fourth challenge is achieving optimal enrollment. Because of compressed timelines, states have 

not been able to devote necessary resources to outreach and education. Tens of thousands of 

consumers, who have had no prior exposure to health insurance coverage, will need comprehensive 

assistance navigating the system. A lack of information, and a high potential for misinformation, will 

increase the likelihood for error, increase the possibility that consumers will select sub-optimal 

products, or delay enrollment. 

Until these challenges are properly addressed, they could reduce usability ofthe system and impact the 

user-experience. More importantly, these challenges could diminish exchanges' success in increasing 

consumer choice and access to appropriate health insurance coverage. 

LEAVITT PARTNERS,llC 801-538~5082 Offices in Salt Lake City and Washington, D.C LeovittPartnerS.com I ~2013 
21 


86926.009

LEAVITT 

-

1< \ h 1 ~ j 1" " 

Testimony of W. Brett Graham 

Partner & Managing Director, Center for Exchange Intelligence 

Leavitt Partners 

hearing on 

PPACA Pulse Check: Part 2 

before the 

United States House of Representatives Committee on Energy and Commerce 

Subcommittee on Health 

September 10, 2013 
22 


86926.010

Testimony of W. Brett Graham 

Partner & Managing Director, Center for Exchange Intelligence 

Leavitt Partners 

Good morning Chairman Pitts, Ranking Member Pallone, and members of the 

Subcommittee. Thank you for the opportunity to testify today on the ACA and health insurance 

exchange readiness, specifically the challenges that states are facing in exchange 

implementation. I am the Managing Director of Leavitt Partners Center for Health Insurance 

Exchange Intelligence, which advises clients on the rapidly evolving public and private exchange 

environment. In addition to tracking state and national exchange progress, Leavitt Partners has 

been involved in the design and development of exchanges in a number of states and provides 

guidance on exchange implementation to both public and private entities. 

First of all, I'd like to acknowledge the amount of work that has been completed by 

states is impressive. It is important to note though, that at this moment, not a single state 

appears to be completely ready for open enrollment, which begins a short three weeks from 

today on October 1. In an ideal situation, the fourteen states and the District of Columbia that 

elected to operate state-based exchanges would be well into their outreach and education 

campaigns, with all exchange operations and functionality thoroughly tested and completed. 

In the current situation, however, uncertainty and doubt remains as to how functional 

systems will be on October 1. Although most of these states have awarded consumer assistance 

grants and have announced which insurance carriers will be participating on their exchange, 

many of the states have only recently begun to test their systems with federal eligibility 

verification and premium administration systems. 

2 
23 


86926.011

The bottom line is that while Leavitt Partners believes that baseline functionality of 

state-based exchanges will be up and running on October 1, it can be expected that most, if not 

all, exchanges will experience a rocky enrollment period as they work to overcome both known 

and unknown operational challenges. 

My remarks today will focus on four critical challenges that states are currently facing, 

how these challenges will impede effective exchange operations in the short term, and what 

lessons can be learned from Medicare Part D. Challenges I will discuss include: 

• The complexity of an exchange's architecture 

• Data verification and the federal data services hub 

• Privacy and security 

• Achieving optimal enrollment 

Until properly addressed, these challenges could reduce usability of the system, impact the 

user-experience, and diminish the success of exchanges in increasing consumer choice and 

access to appropriate health insurance coverage. 

The complexity of an exchange's architecture 

The establishment of health insurance exchanges is one of the most complex IT projects 

ever initiated by the federal government (see figure 1). Coupling the complexity of the project 

with a tight implementation timeline and informational delays has clearly strained states' 

capacities to complete their exchanges on time and as originally scoped. 

In fact, as states are making final preparations for open enrollment, many have had to 

prioritize the capabilities that they planned to have available to consumers during the initial 

3 
24 


86926.012

weeks of operation, knowing that there is insufficient time to complete everything. Some of the 

de-scoping solutions that we have witnessed include: 1) a limited release for initial website 

access;' 2) manual processing for complex issues;2 3) removing online chat functions for 

consumer assistance;3 and 4) limited accommodations for foreign languages. 4 While such descoping is necessary to achieve basic functionality by October 1, the changes will impact the 

ability of both consumers and stakeholders to effectively access the system. 

Figure 1 

4 
25 


86926.013

Tight implementation timelines and informational delays have also left states with 

inadequate time to test their systems before exchanges open for enrollment, which means the 

functional capabilities of exchanges remain largely unproven. For example, while most statebased exchanges are leveraging private-sector technologies for their exchange architecture and 

functionality, integrating these technologies with existing Medicaid and other state systems is 

proving to be a significant challenge. Some states are currently in the process of implementing 

a comprehensive eMS 90/10 Medicaid modernization project, which means they have to test 

and integrate two new systems, while other states are dealing with the connectivity and 

integration challenges associated with an older system. Problems with this integration will slow 

the enrollment process, delay eligibility determinations, and increase the potential for errors, 

fraud, and abuse. 

System testing between exchanges and participating stakeholders has also been slow to 

occur. Many of our clients are indicating that a lack of adequate testing of technical integrations 

between exchanges and stakeholder platforms is an area of major concern. This, and a lack of 

clarity on rules and requirements between states and stakeholders, is forcing clients to develop 

contingency plans for all possible scenarios. 

Data verification and the federal data services hub 

States are also facing challenges integrating with the federal data services hub, which is 

used to verify applicant information for income, citizenship, immigration status, and access to 

minimum essential coverage. The hub will provide one connection to common federal data 

sources such as the IRS, Social Security, and Homeland Security. Our surveillance of the 

5 
26 


86926.014

exchange landscape shows that while some states have completed basic testing with the hub, 

others are working through the final testing phases despite still being in the building stages of 

development. Several states have expressed concern to us about using the federal data services 

hub and, where possible, are planning on using their own data sources for verification. Some 

states mentioned they would like HHS to provide a waiver from hub use for the first year as 

technical issues are fixed and integration processes are refined. 

As such, it is questionable as to whether states have had an adequate amount of time to 

complete the testing needed for their systems to efficiently operate on October 1. Inaccurate or 

untimely information will reduce usability of the system and impact the user-experience. 

Privacy and security 

In addition to integration challenges, there are also concerns regarding the security of 

the hub's data. The Office of Inspector General stated in a recent report, "If there are additional 

delays in completing the security authorization package, the CMS CIO may not have a full 

assessment of system risks and security controls needed for the security authorization decision 

by the initial opening enrollment period."s 

Achieving optimal enrollment 

Because states have been so focused on completing the technical infrastructure of 

exchanges in a compressed timeline, they have not been able to devote necessary resources to 

outreach and education. While several states are in the process of developing comprehensive 

outreach campaigns, recent surveys show that many Americans still don't understand the law, 

6 
27 


86926.015

exchanges, or what options are available to them in 2014.6 It is expected that most states will 

have a difficult time engaging eligible populations and raising awareness of available subsidies, 

increased Medicaid eligibility, and other ACA provisions. 

It is also expected that consumers will face challenges in understanding how to use the 

exchange system. Tens of thousands of individuals who will be utilizing exchanges will have had 

no prior exposure to health insurance or coverage options. These are very complex products 

and many individuals will need comprehensive assistance throughout the entire enrollment 

process. In many cases, however, Navigators are still being selected and trained, and their 

ability to penetrate a community and facilitate enrollment remains largely untested. 

Application Programming Interfaces will also not be available in most state-based exchanges, 

limiting the role web-based brokers will be able to play in optimizing access and enrollment. 

Many of our clients are indicating that there is little clarity on when, where, and how 

consumers will be educated on exchange processes and receive enrollment assistance. A lack of 

information, and a high potential for misinformation, will increase the likelihood for error, 

increase the possibility that consumers will select sub-optimal products, or delay enrollment. 

Lessons learned from Medicare Part 0 

It is important to note that an IT project of this size and scope is going to have issues 

regardless of the amount of time available for implementation. Technical issues are inherent 

with any IT project big or small. But when time is significantly limited, the probability of 

experiencing larger issues grows. Our company Founder and CEO, former Secretary of Health 

and Human Services Michael leavitt, experienced a similar situation with the roll-out of 

7 
28 


86926.016

Medicare Part D. Technical glitches caused delays, insufficient testing led to system errors, and 

detailed outreach campaigns were needed to educate seniors about the new program. 

Even with these challenges, the Department of Health and Human Services was arguably 

more prepared for implementing the smaller-scale Part D program in 2006 than the current 

administration is for implementing the much larger-scale ACA today. And with open enrollment 

starting in only 21 days, serious questions remain as to how effective exchanges will be. 

Conclusion 

In conclusion Mr. Chairman, although Leavitt Partners believes that baseline 

functionality of state-based exchanges will be up and running in three weeks, it can be 

expected that due to the challenges outlined in this statement, very few states will have a 

comprehensive working exchange on October 1. It is also expected that exchanges will 

experience a problematic enrollment period as states and the federal government work to 

overcome both known and unknown challenges. 

Unfortunately, this means that most consumers will experience frustration as they 

complete the exchange enrollment and eligibility process. There will be technical issues that will 

impede a consumer's ability to enroll in a seamless and timely manner. There will be challenges 

to consumers understanding the system and getting necessary assistance. Until properly 

addressed, these challenges could reduce usability of the system and impact the userexperience. More importantly, these challenges could diminish exchanges' success in increasing 

consumer choice and access to appropriate health insurance coverage. 

8 
29 


86926.017

1 Cover Oregon (2013). August 8,2013 Board Documents. Available from http://www.coveroregon.com/wpcontent/uploads/2013/08/8_8_13_board_documents.pdf. 

2 Access Health CT (June 26, 2013). Board of Directors Meeting Masterdeck. Available from 

http://www .ct.gov /hix/lib/hix/062613 _ Board _ of_ Directors_ Meeting_ Master _ Deck_II. pdf. 

'Washington Health Benefit Exchange (July 24, 2013). Operational Readiness Presentation. Available from 

http://www.wahbexchange.org/files/8313/7427 /3849/HBE_EB_130724_0perational_Readiness]resentation.pdf. 

4 S. Kliff & S. Somashekhar (August 24, 2013). States scramble to get health-care law's insurance marketplaces up 

and running. Washington Post. Available from http://articies.washingtonpost.com/. 

5 Department of Health and Human Services (August 2013), Office of Inspector General, Observations Noted 

During the OIG Review of CMS's Implementation of the Health Insurance Exchange-Data Services Hub. Available 

from http://oig.hhs.gov/oas/reports/region1/181330070.pdf. 

6 Kaiser Family Foundation Health Tracking Poll (conducted April 15-20, 2013). Available from http://kff.org/healthreform/poll-finding/kaiser-health-tracking-poll-april-2013/. 

9 
30 

Mr. PITTS. The Chair thanks the gentleman and recognizes Ms. 

Kraus 5 minutes for an opening statement. 

STATEMENT OF ANTOINETTE KRAUS 

Ms. KRAUS. Mr. Chairman and members of the committee, thank 

you for the opportunity to speak on the implementation of the Affordable Care Act in Pennsylvania. 

I am the Director of the Pennsylvania Health Access Network. 

We are a statewide coalition representing over 60 organizations 

and 1 million Pennsylvanian consumers. Some of our partners include local health centers, physician groups, churches, retiree associations and community groups. Our mission is to make sure every 

Pennsylvanian has access to quality, affordable health care. In my 

work, I meet people from all walks of life: working moms and dads, 

retirees, young adults, laid-off workers and small business owners. 

They come from different backgrounds and live in different places, 

but their fears and anxieties over health care are the same: How 

do I find coverage? Can I afford to keep it? What do I do now that 

I have been denied because of a preexisting condition? Thankfully, 

we have the opportunity to address these fears and relieve the anxiety that so many of our neighbors, and your constituents, live with 

daily. We can do that by moving forward to fully implement the Affordable Care Act in Pennsylvania. 

We can often get caught up in talking about the mechanics of implementing this law, but we should never lose sight of what this 

means for working families. Already in Pennsylvania, the Affordable Care Act has brought 177,000 children with preexisting conditions freedom from no longer being denied coverage; a boost for the 

bottom line of 160,000 small businesses, who are eligible for tax 

credits; stability for 91,000 young adults who have been able to 

stay covered on their parents’ insurance; and soon in just 21 days, 

all Pennsylvanians will enjoy the freedom and feel the security that 

comes from knowing that affordable health care is within reach no 

matter where you work, how much you earn or if you have been 

sick in the past. 

I want to tell you about two of these folks. Karen and Gary 

Capanello, they live in Waterford, which is a small town in Erie 

County. Karen and Gary own their own small business, a commercial cleaning company. For the last 2 years, Karen and Gary have 

been uninsured. The couple makes too much to qualify for Medicaid 

but nowhere near enough to afford the prices charged to people 

with preexisting conditions. Gary has heart problems and Karen 

has a torn tendon in her foot. Karen worries every day about Gary 

and all the things he is forced to put off. She is scared that if the 

couple continues to delay treatment, they might not be around to 

see their youngest son Tony graduate from high school. That is a 

fear no mom should have, especially one who works as hard as 

Karen. Thankfully, Karen and Gary won’t have to live with fear 

much longer. On October 1st, they will be able to start looking for 

coverage in the Health Insurance Marketplace. They will choose 

from the same plans as all of you. They will have quality options 

that will cover the services Karen needs to fix her foot and the preventative care Gary needs to keep his heart healthy. 

31 

We are less than a month away from the day the door opens to 

1.2 million Pennsylvanians who are sitting where Karen and Gary 

are today on the outside of our health care system looking it, hoping, praying, waiting to get in and to get the care they need. The 

Affordable Care Act opened that door. Political posturing, partisanship and delays threaten to keep it slammed shut. 

Unfortunately, in Pennsylvania, we have seen our Governor, Tom 

Corbett, work to block 1.2 million uninsured Pennsylvanians from 

feeling the full benefit of the Affordable Care Act. While the new 

law gave each State the flexibility and tools to create a marketplace that fosters real competition, offers family and small businesses the best quality choices and ensures rates are reasonable, 

Pennsylvania, like several other States, chose to reject this opportunity and relinquish its responsibilities to the Federal Government. Instead of working in the best interest of our Commonwealth, Pennsylvania officials have been slow to implement the Affordable Care Act, delaying and defaulting on key provisions of the 

law. 

I want to be very clear about what it is at stake for Pennsylvania 

and its decision over Medicaid expansion. The choice Governor 

Corbett and State House leaders make will determine whether or 

not our Commonwealth brings in $43 billion in new Federal funding over the next decade, whether or not we create up to 40,000 

family-sustaining jobs, whether we continue to burden taxpayers 

with $1 billion in uncompensated care, and whether or not we 

leave 400,000 Pennsylvanians shut out from getting affordable coverage. Too many hardworking Pennsylvanians are forced to gamble 

every day with their lives and their likelihoods. They are counting 

down the days until they can sign up for coverage in the marketplace and they are praying that Governor Corbett will move forward with Medicaid expansion. They are looking forward to secure 

coverage no matter what the economic situation is. 

There is a fundamental opportunity in the Affordable Care Act: 

the chance to make our future secure, the chance for us and working families and small business owners to be in control. We know 

there will be bumps along the way as there always are with any 

new major piece of legislation. Medicare and Social Security didn’t 

enjoy a perfect rollout. There were challenges, tweaks and changes 

along the way but we worked together to make those laws work for 

the American people. That is what we need to do today. 

The Affordable Care Act has already made the lives of millions 

of Pennsylvanians better, and if we get out of the way and let it 

work, this will open the door to stable, quality, affordable health 

care for 1.2 million of our uninsured neighbors. Too many lives and 

too many likelihoods are on the line to keep that door shut. 

Thank you for allowing me today, and I look forward to your 

questions. 

[The prepared statement of Ms. Kraus follows:] 

32 


86926.018

Statement for the Record by 

Antoinette Kraus, Executive Director, Pennsylvania Health Access Network 

House Committee on Energy and Commerce 

Subcommittee on Health 

Implementation of the Affordable Care Act in Pennsylvania 

Tuesday, September 10,2013 

Mr. Chairman and Members of the Committee: 

Thank you for the opportunity to speak today on the implementation of the Affordable Care Act 

in Pennsylvania. The Pennsylvania Health Access Network is a statewide coalition of over 60 

organizations representing over one million Pennsylvanians. Some of our partners include local 

health centers, physicians' groups, churches, retiree associations, and community groups. Our 

mission is to make sure every Pennsylvanian has access to quality, affordable health care. 

In my work, I meet people from all walks of life - working moms and dads, retirees, young 

adults, laid-off workers and small business owners. They come from different backgrounds and 

live in different places, but their fears and anxieties over health care are the same: 

How do I find coverage? Can I afford to keep it? What do I do now that I've been denied 

because of a pre-existing condition? My rates just went up again, but my paycheck didn't what 

should I do now? Where do I tum? 

These are the questions I hear, from folks across the Commonwealth. And it's no surprise, given 

the recent trends with health insurance in Pennsylvania: 

Between 2000 and 2009, insurance premiums in Pennsylvania increased by 95%, I while wages 

increased by just 17.5%. Health insurance has become less affordable for individuals and small 

businesses, and, as a result, job-based coverage is on the decline. Between 2001 and 2009, 

876,484 Pennsylvanians lost coverage from an employer, faster than only 2 other states in the 

nation.2 

As the ranks of the uninsured swell, so does the burden on family budgets, Pennsylvania's 

safety-net providers, and our local hospitals who continue to absorb millions of dollars each year 

in "uncompensated care" that's provided to those without insurance, who end up in the 

emergency room needing care that they're unable to fully pay for. 

1 Kaiser Family Foundation, Paper #7951: "Health Care and the Middle Class: More Costs and Less Coverage." Available at: 

http://wwwkff.orglhealthrefonn/uploadf7951.pdf. 

2 Economic Policy Institute Report: "Employer·sponsored health insurance erosion continues." Available at 

http'/IVvww.epi.org/publicationlbp247/ 
33 


86926.019

Thankfully, we have the opportunity to reverse these trends and relieve the anxiety that so many 

of our neighbors - and your constituents - live with daily. We can do that by moving forward to 

fully implement the Affordable Care Act in Pennsylvania. We can often get caught up in talking 

about the mechanics of implementing this law, but we should never lose sight of what this means 

for working families. 

Already in Pennsylvania, the Affordable Care Act has brought: 

Security and peace of mind to the families of 177,000 children with pre-existing 

conditions) like asthma and leukemia, who no longer have to fear being denied coverage 

over a pre-existing condition; 

A boost for the bottom line of 160,000 small businesses,4 who are newly-eligible for tax 

credits to reduce their cost of providing health insurance to their employees, if they 

choose to do so; 

Stability for 91,000 young adults,S who have been able to stay covered on their parents' 

insurance up to age 26; 

Much-needed relieffor 222,703 seniors who, in 2012, saved an average of$753 6 on 

prescription medications in the "donut hole" coverage gap last year. Since the Affordable 

Care Act put these discounts in place, Pennsylvania seniors have saved over $393 

million. That helps seniors on fixed incomes, but also our local economies as those freedup dollars can be spent in the Main Street businesses in cities and towns across the state. 

More money in the pockets of over 675,000 hardworking families and small business 

owners to whom more than $58 million in rebates7 was returned from their insurance 

companies since 2011. Before the new law, insurers could take the money we paid them 

in premiums to provide us coverage and use it on things like advertising, lobbying, and 

CEO perks - things that have nothing to do with the quality or value of our coverage. 

Thanks to the new law, Pennsylvanians are getting more bang for our buck, with at least 

80% of our premium dollars going toward our medical care rather than overhead and 

excess. 

Freedom for 4.5 million Pennsylvanians - including 1.7 million women and 1.1 million 

children - who no longer have to fear restrictive and arbitrary lifetime and annual caps 

J u.s. Department of Health and Human Services: "How the Health Care Law is Making a Difference for the People of Pennsylvania." Available 

at: http://wwwhhs.govlhealthcare/factslbystateipa.html. 

4 Small Business Majority and Families USA: "A Helping Hand for Small Businesses: Health Insurance Tax Credits." Available at: 

h!!p.Jlwv1w.fami!iesusa,orgiassets!pdfs/health-rctbnu/HcJping·Smal1·Businesses pdf. 

5 U.s. Department of Health and Human Services' Estimate of the number of uninsured young adults who are eligible to remain on their parents' 

plan is from interim final ruJes for the dependent coverage provision (May 13,2010), distributed across the states based upon the proportion of all 

uninsured young adults (ages 19-25) in the U,S. living In the state. Available at; http://,,,,,,y\v.hhs.gov!healthcare/facts/bystate!Pa.htmL 

6 U S. Department of Health and Human Services, Center for Medicare and Medicaid Services (eMS) Report: "The Affordable Care Act: A 

Stronger Medicare Program." Available at: httpJ/vvwwemsgov!apps/fiIes/Medlcarereport2012.pdf 

7 The Center for Consumer Information & Oversight (CClIO), Centers for Medicare & Medicaid Services (eMS). "2012 MLR Rebates by State 

and Market" Available at: http !/"./\V\v.Cn1s.2ov/CC11()/ResourccslDala-ResourceslDownloads120 12·mlr .rebatcs-by-state·and·market.pdf. 
34 


86926.020

shutting off their coverage or forcing a choice between stopping treatment or declaring 

bankruptcy over medical costs.8 

And soon - in just 112 days - all Pennsylvanians will enjoy the freedom and feel the security 

that comes with knowing that affordable health care is within reach, no matter where you work, 

how much you earn, or if you've been sick in the past. 

I want to tell you about two of those folks now. Karen and Gary Carpinello live in Waterford, a 

small town in Erie County. They've been married for 33 years, and have 3 children and 6 

grandchildren. They call their youngest son, Tony, who'll turn 11 next year their "little surprise 

God blessed us with." Karen and Gary run their own small business - a commercial cleaning 

company. For the last two years, Karen, at age 52, and Gary, at age 62, have been uninsured. 

The couple makes too much money to qualify for Medicaid, but nowhere near enough to afford 

the prices charged to people with pre-existing conditions. They had been covered through a state 

health insurance option for people who don't have access to job-based coverage, called 

adultBasic, but unfortunately, that was one of the first cuts the new Corbett administration chose 

to make soon after taking office in 2011. 

In addition to high blood pressure, Karen has a torn tibial tendon in her right foot; it's an 

incredibly painful injury that requires surgery and up to a year of rehabilitative care to fix. Karen 

works hard every day, in pain, and sometimes breaks down in tears at the end of the night 

because the pain is so bad. 

Gary has been battling some heart problems that doctors had been regularly monitoring with 

stress tests - something that he's now putting off, because the couple can't afford to payout of 

pocket. 

Karen worries every day about Gary and all the things he's forced to put off. She's scared that if 

the couple continues to delay treatment, they might not be around to see their young son Tony 

graduate from high school. 

That's a fear no mom should have, especially one who works as hard as Karen. Thankfully, 

Karen and Gary won't have to live in fear much longer. On October 15

1, they'll be able to start 

looking for coverage in the Health Insurance Marketplace. 9 They'll choose from the same plans 

as all of you. They'll have quality options that will cover the rehabilitative services that Karen 

needs to fix her foot, and the preventive care Gary needs to keep his heart healthy. They'll get a 

break on costs from new tax credits and cost-sharing reductions. Their coverage will be secure, 

thanks to new consumer protections that ensure we all get good value for our health care dollars, 

and that we can count on our coverage being there when we need it. 

We are less than a month away from the day the door opens to 1.2 million Pennsylvanians who 

are sitting where Karen and Gary are today on the outside of our health care system, looking 

8 U.S. Department of Health and Human Services, Center for Medicare and Medicaid Services (eMS) analysis ofD.S. Census Data. 

http://W\vw.hhsgovlhealthcarc/factslbystate/pa.htm!. 

<). The Health Insurance Marketplace is accessible online at www.healthcare.gov or by phone, 2417 at: 1 ~&OO~31&~2596. A special resource line 

for Small Businesses is available Monday - Friday, 9am - 5pm at: 1~&OO~706~7915. 
35 


86926.021

in; hoping, praying, waiting to get in. The Affordable Care Act opens that door. Political 

posturing, partisanship and delays threaten to keep it slammed shut. 

Unfortunately, in Pennsylvania, we've seen our Governor, Tom Corbett, work to keep that door 

slammed shut, and block 1.2 million uninsured Pennsylvanians from feeling the full benefit of 

the Affordable Care Act. 

While the new law gave each state the flexibility and tools to create a marketplace that fosters 

real competition, offers families and small businesses the best quality choices, and ensures rates 

are reasonable, Pennsylvania, like several other states chose to reject this opportunity and 

relinquish its responsibilities to the federal government. Instead of working in the best interest of 

our Commonwealth, Pennsylvania officials have been slow to implement the Affordable Care 

Act, delaying and defaulting on key provisions of the law. 

Pennsylvania was the 48th state to submit our plan to integrate our IT systems and submitted it 

after the deadline had passed. 10 We had to have HHS step in and review rate hikes above 10 %, 

until we finally addressed the issue enacting legislation that fails to adequately protect small 

business owners and individuals buying coverage in the small group market from unjustified, 

excessive rate increases. l

! We defaulted on designing an Essential Health Benefits package that 

would best meet the unique needs of families in our state. All of these decisions have slowed 

down our ability to best implement the Affordable Care Act in Pennsylvania. 

However, the most striking example of Pennsylvania's obstruction of the new law, and the one 

that carries the most serious consequences - not just for low-income families, but also our state's 

hospitals and our economy - is Governor Corbett's continued opposition to accepting federal 

funding to expand Medicaid. 

As you know, the Affordable Care Act worked to provide health insurance to individuals earning 

up to 138% of the federal poverty level 12 by requiring states to expand Medicaid coverage, 

drawing upon 100% federal funding in the first three years, and 90% after 2019. The Supreme 

Court ruling, however, derailed those plans, making Medicaid Expansion optional for states. As 

oftoda~ despite a strong showing of bipartisan support for expanding coverage in our State 

Senate 3 chamber, and among states with Republican Governors across the country - Governor 

Corbett and State House leadership have failed to move forward with Medicaid Expansion. 

](/ Gettmg into Gear for 2014,' Brieting, Data from 50~State Survey of Medicaid and CHrP Eligibility and 

Enrollment Policies: bJ.tI;!!Lkf[Q[gInl'illigllirumlL~im?,:i!lli!cg;;;i0llI::2'!ll±:hJj,lli!lg;:g===Ul£:fQl.l::iliilitJIQrrt;jQ~!!tilli:Y.\:y,Qf: 

medicaid-and~chi p-c t igibi! i ty-and~enrollJ1l£!ll:.P.:oJ ic leS 

II Advocates question Fa. bills to review rise in health-insurance rates: httpJlarticJes.philly.com!201 ! ~! 2~07!business/30486335 ! stateinsurers-insunmce-dc!2urtment-ratc-lllcreases 

12 The Patient Protection and Affordable Care Act. signed into law March 2010, allows for Medicaid to be expanded to childless adults making up 

to 133% of the FPL as in section 1396 a(a)(lO)(A)(i)(VUI), but there is a 5% income disregard and so the eligibility guidelines aTe essentially 

increased to 138% of the FPL 

U On June 30th, 17 Repu.blicans joined \v:ith 23 Democrats in Pennsylvania's State Senate in voting to advance Medicaid Expansion by amending 

the Welfare Code through House Bill 1075. The roll call vote can be viewed here: 

http'//wwvv.!eois.state.pa.us/cfdocs/Jegis/RClPublic/rc view action2.cfm?scss yr=2013&sess ind=Q&rc body'''S&rc nbr=232. 
36 


86926.022

I want to be very clear about what's at stake for Pennsylvania in this decision over Medicaid 

Expansion. The choice Governor Corbett and State House leaders make will determine whether 

or not our Commonwealth brings in $43 billion in new federal funding l4 over the next decade; 

whether or not we create up to 40,000 new, family-sustaining jobs 15 in every region across the 

state; whether we save money for state taxpayers, or add to the burden of continuing to foot the 

bill for a broken system that piles nearly $1 billion in "uncompensated care" onto our community 

hospitals;16 and, most seriously - whether or not we leave over 400,000 Pennsylvanians shut out 

from getting affordable coverage. 

Three independent fiscal studies, conducted by the RAND Corporation, the Economy League, 

and Pennsylvania's Independent Fiscal Office - our state's version of the Congressional Budget 

Office l7 - confirmed the positive economic impact that accepting new federal funding and 

moving forward with Medicaid Expansion would have on our state. 

Each study shows that even after adjusting for state costs,18 Medicaid Expansion would result in 

a net fiscal gain to our state, generating more than $3 billion in new economic activity each 

yearl9 and saving the state budget dollars we're currently spending on a patchwork system of 

state-funded insurance programs that leave out nearly half-a-million low-income Pennsylvanians. 

There is a steep cost associated with a failure to bring Medicaid Expansion to Pennsylvania. 

Most glaringly, Pennsylvania taxpayers will be forced to forfeit the opportunity to put the federal 

tax dollars we've already paid as part of the Affordable Care Act - a law, which, as you all 

know, has been scored by the Congressional Budget Office as reducing our federal deficit - to 

work in our state. 

Without Medicaid Expansion, there will be no influx of federal dollars into our economy, no new 

jobs created, no relief for taxpayers, who will continue to foot the bill for a broken system, and 

no hope for over 400,000 uninsured Pennsylvanians, who are forced to gamble every day with 

their lives and with their livclihoods?O 

14 Between 2013 ~ 2022, The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State~by~State Analysis, John 

Holahan, Matthew Buettgens, Caitlin Carrol!. Stan Dom The Urban Institute. Full report available at: 

httQ:l/kalserfamilyfoundation.fi1cs. v>'Ordpress com/20 13/0 1/8384.001' 

" THE ECONOMIC AND FISCAL IMPACT OF MEDICAID EXPANSION IN PENNSYLVANIA. Pennsylvania Economy League. Inc., 

Econsult Solutions, Inc. April 2013. Full report available at: 

http://economyleague.orgtfilesfPEL MEDICAID EXPANSrON REPORT FINALpdf. 

16 fIospita! and Heahhsystem A.;;sociation of Pennsylvania, April 2013: The Economic Impact of Medicaid Expansion on Pennsylvania 

Executive Summary of RAND Health Research Report Available at: 

htm:J/\\Vi\V haponiine.orgJdmvnloadslHAP Executive Summa!), of RAND lIt;:alth Research ReQort April2013_pdf 

17 An Analysis of Medicaid Expansion in Pennsylvania. The Independent Fiscal Office (n:O) of Pennsylvania The IFO provides revenue 

projections for use in the state budget process along with impartial and timely analysis of fiscal, economic and budgetary issues to assist 

Commonwealth residents and the General Assembly in their evaluation of policy decisions. May 2013. Full report available at 

http:)!"',">'!w ItQ stllte.pa.usJresoufces/Pl)FIMed!caid Expansion Report %20May 13 pdf. 

III The Economic Impact of Medicaid Expansion on Pennsylvania. Carter C. Price, Julie M. Donohue, Evan Saltzman, Dulani Woods, Christine 

Elbner for the RAND Health, a division of the RAND Corporation. Full report aVailable at 

http.f/wv .. whapon!inc.orgJdo\vn!oads/IIAP RA;\;D I Icalth The Economic Impact of Medicaid Expansion on Pennsylvania Research Repor 

t March2013.pdf 

10 The Economic [mpact of Medicaid Expansion on Pennsylvania - RAND Corporation. 

20 Kaiser Family Foundation, The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State~by-State Analysis. 
37 


86926.023

Cheryl Gannon is a health care worker from Washington County, who knows what it's like to 

roll those dice. She does it every day, even though she works full-time and provides critical 

services to people with disabilities. Cheryl works as a homecare attendant and makes around 

$13,000 a year. The work she does allows her consumer, Ronald, to live independently and with 

dignity. It is hard work - physically and emotionally demanding - that takes a special person to 

do. 

Unfortunately, Cheryl's employer does not offer insurance. Cheryl worries about what might 

happen if she gets sick. She can't afford to miss work, and can't afford to get treated. She, like 

thousands of other working Pennsylvanians, has seen how quickly an accident or illness can 

bring on financial catastrophe. Last year, Cheryl fell and broke her ribs - an injury that left her 

unable to work for a month, and facing thousands of dollars in medical debt. Cheryl still doesn't 

know how or when she'll be able to pay those bills. 

Cheryl's fate, like nearly half-a-million Pennsylvanians, is uncertain. Her income of $13,000 a 

year barely puts over 100% of the federal poverty level the line at which tax credits start to 

help folks afford coverage in the Marketplace. If Cheryl's hours are decreased or if she loses her 

job and drops below 100% FPL, she won't be able to qualify for Medicaid in Pennsylvania and 

she won't get any financial help to afford coverage in the Marketplace. She won't face a tax 

penalty for going uninsured - as the Obama Administration has said that low-income folks in 

states that don't expand Medicaid won't be penalized if they're unable to afford coverage - but 

she'll once again be forced to gamble with her health and her livelihood. 

For now, Cheryl is counting down the days until she can enroll in a plan in the Marketplace and 

praying that Governor Corbett and State House leaders will move forward with Medicaid 

Expansion, so her coverage will be secure, no matter what her economic situation is. 

This is the fundamental opportunity in the Affordable Care Act: the chance to make our future 

secure; the chance for us as working families and small business owners to be in control. We 

know there will be bumps along the way, as there always are with any new, major piece of 

legislation. Medicare and Social Security didn't enjoy a perfect roll-out; there were challenges, 

tweaks and changes along the way. But overall, we all worked together to make those laws work 

for the American people. That's what we need to do today. 

The Affordable Care Act has already made the lives of millions of Pennsylvanians better, and, if 

we get out of the way and let it work, this law will open the door to stable, quality, affordable 

health care for 1.2 million of our uninsured neighbors. Too many lives and too many livelihoods 

are on the line to keep that door shut. Thank you for hearing our concerns and allowing us to 

testify today. 
38 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

Mr. Lenz 5 minutes for your opening statement. 

STATEMENT OF EDWARD A. LENZ 

Mr. LENZ. Good morning, Mr. Chairman and members of the 

subcommittee. I am Senior Counsel of the American Staffing Association, which is a founding member of the Employers for Flexibility in Health Care Coalition, which is called E–FLEX, and I am 

appearing today on behalf of the coalition. 

E–FLEX represents leading trade associations and businesses in 

the retail, restaurant, hospitality, construction, temporary staffing, 

supermarket and other service-related industries. It also represents 

employer-sponsored health plans that insure millions of American 

workers. The coalition strongly supports employer-sponsored coverage, and we have been working to ensure that it remains a vibrant and competitive option under the ACA. Our members employ 

a major portion of the U.S. workforce each year, upwards of 30 million people. We offer flexible work opportunities, and the jobs we 

create are leading the jobs recovery. 

But the high turnover rates and the fluctuating work schedules 

of our employees pose unique challenges in offering ACA-compliant 

health coverage, and we have been working with the administration to address those challenges in a way that does not impose unnecessary operational complexity that could disrupt our workforces 

or the labor markets. To that end, proposed regulations issued earlier in the year would a look-back measurement period to determine the full-time status of so-called variable-hour employees for 

purposes of offering coverage, but offering coverage is only part of 

the equation. 

Many other issues affecting employers, which are integrally related to the employer mandate and the offer of coverage, have not 

been resolved, for example, the processes for determining employee 

eligibility for premium tax assistance and the employer reporting 

requirements, and for that reason, E–FLEX members supported 

the administration’s 1-year delay in enforcement of the employer 

mandate. 

As you know, the administration issued proposed employer reporting rules just last week. We have not fully evaluated the proposal but our initial reaction is that they do not take the holistic 

approach that we have been urging that takes into account all of 

the processes affecting employers’ coverage obligations, especially 

the process for determining eligibility for subsidies and the interaction between employers, health insurance exchanges and the 

multiple Federal agencies involved in making those determinations. Given that our members’ software and other systems must 

be in place by January 1st of this coming year to start tracking employees’ hours in order to get ready for 2015, the absence of final 

reporting rules creates major uncertainty for employers as they 

head into the coming year. 

I would like to touch briefly on three other major issues of concern to E–FLEX. First is the definition of full-time employee under 

the ACA. Full-time, as you know, is defined as 30 hours per week. 

It is below what most employers consider to be full time, and unfortunately, it is creating perverse economic incentives to reduce emVerDate Aug 31 2005 15:36 Mar 24, 2014 Jkt 037690 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 F:\113-80~1\113-80~1 WAYNE
39 

ployee hours. We think that increasing hours to 35 or 40 would 

benefit employees by increasing their take-home pay, allowing employers to offer better coverage, allowing for more flexible employee 

work schedules, and interestingly, also because of how the Medicaid and ACA tax credit eligibility rules work, increasing the 

hours would actually allow more lower-income employees to be eligible for those benefits. 

The 30-hour definition is already having an adverse impact in 

the market. We see that. And once those changes occur, employees 

won’t be able to recapture the lost wages, the flexible hours or the 

better benefits that they might otherwise have had. So we strongly 

encourage Congress to act now to bring the definition of full-time 

employee more in line with current workforce practices. 

Another key issue is the definition of large employer. The ACA 

defines a large employer as one having 50 or more full-time employees including full-time-equivalent employees. Full-time equivalence, the inclusion of full-time equivalence, greatly expands the 

scope of the law to cover many smaller businesses, and our concern 

is that this will stifle their ability to manage their workforces and 

in some cases may even discourage them from expanding their 

businesses or offering health coverage. 

Finally, we remain concerned about the law’s requirement that 

large employers enroll full-time employees into coverage automatically if an employee does not make an election. We think it is inappropriate to enroll employees in coverage they didn’t select and 

may not want or need. It would impose a major administrative employer on employers and would result in unexpected and certainly 

undesired payroll deductions for many employees. 

We greatly appreciate the opportunity to present the views of E– 

FLEX and we look forward to continuing to work with you and the 

administration to resolve the many outstanding issues that remain 

to be addressed. Thank you. 

[The prepared statement of Mr. Lenz follows:] 

40 


86926.024

Statement of the 

E-FLEX COALITION 

on the 

Patient Protection and Affordable Care Act 

By 

Edward A. Lenz 

Senior Counsel 

American Staffing Association 

Before the 

United States House of Representatives 

Energy & Commerce Committee 

Subcommittee on Health 

PPACA Pulse Check: Part 2 

September 10, 2013 
41 


86926.025

Statement of E-FlEX Coalition 

PPACA Pulse Check: Part 2 

September 10, 2013 

Summary of Major Points 

Employers with high employee turnover rates and fluctuating work schedules face 

unique challenges in complying with the Affordable Care Act; this requires unique 

solutions to avoid disruption of their work forces and the labor markets. 

• The ACA's definition of "full time" as 30 hours of service per week is below what most 

employers consider full-time and is creating perverse economic incentives to reduce 

employee hours. Congress should act to bring the definition in line with current work 

force practices. 

• The ACA defines "large employer" as 50 or more full-time employees, including "fulltime equivalents." Including "full-time equivalents" will stifle smaller employers' ability 

to manage their workforces and could discourage business expansion and offering of 

health coverage. 

• Proposed regulations would allow a "look-back measurement period" to determine the 

full-time status of "variable hour" employees for purposes of the employer mandatebut other issues integrally related to the mandate, including employer reporting rules, 

have not been resolved. 

• The just-issued proposed employer reporting rules fail to take a holistic view of 

employers' obligations under the law. Employers thus face major uncertainty regarding 

the software and other systems they must develop and implement now to be ready for 

2015. 

The ACA provision requiring large employers to auto-enroll full-time employees into 

coverage is inappropriate; it would impose a major administrative burden on employers 

and result in unexpected payroll deductions for many employees who do not want or 

need coverage. 

2 
42 


86926.026

About E-FlEX 

Employers for Flexibility in Health Care ("E-FlEX") is a coalition of leading trade associations and 

businesses representing retail, restaurant, hospitality, construction, temporary staffing, 

supermarket, and other service-related industries, as well as employer-sponsored health plans 

insuring millions of American workers. Coalition members strongly support employersponsored coverage-the backbone of the U.S. health care system-and have been working to 

ensure that such coverage remains a vibrant and competitive option under the PPACA ("ACA"). 

E-FLEX coalition members collectively employ a significant percentage of the U.S. work force 

each year-upwards of 30 million people. The jobs we create offer employees flexible work 

opportunities and are a leading contributor to the nation's economic job recovery. But those 

jobs are also characterized by high turnover rates and fluctuating work schedules. Therefore, a 

primary coalition goal is to ensure our members' ability to offer ACA-compliant health 

insurance coverage to our "variable hour" employees without unnecessary operational 

complexity that could disrupt our work forces or the labor markets.1 

The Administration has addressed one major issue of concern to E-FlEX members that 

addresses the challenges presented in offering health coverage to variable hour employees-by 

allowing a "look-back measurement period" to determine the full-time status of those 

employees for purposes of the employer shared responsibility provisions under IRC §4980H. 

But many other issues affecting employers integrally related to those provisions have not been 

resolved-including the procedures for determining employee eligibility for premium tax 

1 Temporary staffing firms offer a striking example of the "variable hour" nature of the work forces of E-FLEX 

coalition members. In 2012, staffing firms employed an average of almost 3 million temporary and contract 

workers on any given day. But over the course of the year, they employed 11.5 million people- an annual 

turnover rate of almost 300%. 

3 
43 


86926.027

assistance, and the employer reporting requirements under IRC §§6055 and 6056. For that 

reason, E-FlEX members supported the Administration's one-year delay in enforcement of IRC 

§4980H. 

Key Issues of Concern to E-FLEX Members 

Definition of Full-Time Employee: The ACA's definition of "full time" as 30 hours of service per 

week is significantly below what most employers consider to be full-time and is creating 

perverse economic incentives to reduce employee hours. The E-FLEX coalition supports 

increasing the weekly hours required for full-time status. This would significantly benefit 

employees and employers by: 

Increasing employee take-home pay 

• Allowing employers to offer more generous and affordable health coverage, 

• Giving lower-income employees access to more affordable coverage options,2 and 

• Allowing for more flexible employee work schedules. 

Because the law requires employers to measure their workforces in 2014 to comply in 2015, 

the 30-hour definition is already having an adverse impact. Once the labor market shifts, 

employees won't be able to recapture lost wages, flexible hours, or more generous benefits. 

The E-FLEX coalition strongly encourages Congress to act now to bring the definition more line 

with current workforce practices. 

Definition of "large Employer": The definition of a large employer under the ACA is based on 

whether an employer has 50 or more full-time employees. In making this calculation, 

employers must include "full-time equivalent" employees, thus significantly expanding the 

scope of the law to cover many smaller employers with large numbers of variable hour 

'For example, in states that don't expand Medicaid, a single employee working 30 hours per week at the federal 

minimum wage would fall below 100% of the federal poverty level and thus be ineligible for either Medicaid or 

premium tax credits under ACA. But at 35 or 40 hours, the employee's income would exceed 100% of FPl which 

would qualify for tax credits. Increasing the hours also would benefit employees by reducing the top hourly wage 

rate at which they would be eligible for credits. For example, at 30 hours, an employee earning $29.46 per hour 

(400% of FPL) would be eligible. But at 35 or 40 hours, the top wage would drop to $25.25 (35 hours) and $22.10 

(40 hours). The lowest hourly wage, of course, could not fall below the federal minimum wage of $7.25 per hour. 

4 
44 


86926.028

employees whose connection with the workplace, or with the employer, is tenuous or 

intermittent. The E-FLEX coalition is concerned that including "full-time equivalents" in the 

definition of large employer will stifle the ability of smaller employers to manage their 

workforces and, in some cases, may discourage them from expanding their businesses or 

offering health coverage. 

Absence of Final Employer Reporting Rules 

Also of pressing concern to E-FLEX members is the absence of definitive guidance on the 

employer information reporting requirements under IRC §§6055 and 6056. The one-year delay 

of the §4980H requirements means employers will not have penalty exposure until 2015. But 

they still must have their information technology and human resources systems in place by Jan. 

1,2014 in order to track employees' hours of service in 2014 and comply with their ACA 

coverage obligations on Jan. 1, 2015. 

Without clear guidance on what IRC §§6055 and 6056 require, employers face major 

uncertainty regarding the software and other systems they must develop and implement now. 

The employer reporting rules were issued in proposed form just last week (Sept. 5) and contain 

substantial new reporting obligations that include data elements beyond those prescribed in 

statute. The proposed rules are narrowly focused on the IRS's role in verifying compliance with 

the individual and employer mandates and fail to take a holistic view of the role that employers 

play in providing coverage to individuals and the myriad reporting requirements they are 

already subject to. 

To address the reporting issues holistically, the E-FLEX coalition has, since 2011, been urging a 

number of approaches to mitigate the record keeping and reporting burdens on employers. 

These recommendations were most recently detailed in an Aug. 5 letter to the Secretaries of 

Treasury, Health and Human Services, and Labor, a copy of which is attached to this statement 

for inclusion in the record. The key recommendations can be summarized as follows: 

5 
45 


86926.029

Enhance the accuracy of determinations of eligibility for premium assistance tax credits 

by giving employers flexibility to provide information to employees and health 

exchanges regarding the employer health coverage offered on a prospective basis. This 

would have the major benefits of reducing the number of retroactive "claw-backs" of 

tax credits previously granted to individuals and allowing employers to more accurately 

determine their potential exposure to penalties. 

Simplify end-of-year employer reporting for purposes of verifying compliance and 

assessing tax penalties-for example, by minimizing the number of reporting fields and 

allowing "safe harbor" exceptions for employers that meet certain prima facie 

compliance criteria or that have a de minimis number of employees receiving tax 

credits. 

Auto-enrollment: The ACA requires large employers to enroll full-time employees into coverage 

automatically if an employee does not make an election. The E-FLEX coalition believes that 

enrolling employees in coverage they did not select, and may not want or need, is 

inappropriate. It would impose a major administrative burden on employers and result in 

unexpected (and undesired) payroll deductions for many employees. 

We greatly appreciate the opportunity to present the views of the E·FLEX coalition and look 

forward to continuing to work with the Administration and Congress to resolve the many 

outstanding issues that remain to be addressed. 

For more information contact: 

Christine Pollack, Vice PreSident, Government Affairs, Retail Industry Leaders Association, 

christine.pollack@rila.org 

Michelle Neblett, Director, Labor & Workforce Policy, National Restaurant Association, 

mneblett@restaurant.org 

Robert Rosado, Director, Government Relations, Food Marketing Institute, rrosado@fmLorg 

Ed Lenz, Senior Counsel, American Staffing Association, elenz@americanstaffing.net 

Peter Rubin, Vice President, Federal Affairs, Aetna, rubinp@aetna.com 

6 
46 


86926.030

Anne Phelps, Principal, Washington Council Ernst & Young, anne.phelps@wc.ey.com 

7 
47 


86926.031

Employers for Flexibility in Health Care 

August 5, 2013 

The Honorable Jacob J. Lew 

Secretary 

Department of the Treasury 

1500 Pennsylvania Avenue, NW 

Washington, DC 20220 

The Honorable Kathleen Sebelius 

Secretary 

Department of Health and Human Services 

200 Independence Avenue SW 

Washington, DC 20201 

The Honorable Thomas E. Perez 

Secretary 

Department of Labor 

200 Constitution Avenue NW 

Washington, DC 20210 

Dear Secretaries Lew, Sebelius and Perez: 

We are writing on behalf of the Employers for Flexibility in Health Care (E-FLEX) 

Coalition to express our sincere appreciation for the Administration's decision to 

provide a year of transition relief to employers for information reporting requirements 

under IRC §§6055 and 6056 and excise taxes under IRC §4980H under the Affordable 

Care Act. This critical recognition by the Administration that employers need more 

time to implement complex new rules brings much-needed relief to employers across 

the nation and acknowledges the inextricable link among the employer coverage 

requirements, the information reporting requirements and other employer provisions 

of the law. 

The E-FLEX Coalition is a group of leading trade associations and businesses in the 

retail, restaurant, supermarket, hospitality, health care, construction, temporary 

staffing and other service-related industries, that provide employer-sponsored plans 

insuring millions of American workers. Members of E-FLEX are strong supporters of 

employer-sponsored coverage and have appreciated the opportunity to work closely 

with the Administration to ensure that employer-sponsored coverage remains a 

competitive option for all employees, whether full-time, part-time, temporary or 

seasonal. 

For the past two years, the E-FLEX Coalition has urged the Administration to provide 

transition relief to allow employers sufficient time to plan, budget and implement 

these new rules, especially those related to information reporting. The 

Administration's willingness to act upon the concerns of employers is the kind of 

flexibility we need in the implementation of a complex law to ensure that employers 

can continue to offer affordable coverage to their workers. Many members of the 
48 


86926.032

Employers for Flexibility in Health Care 

E-FLEX Coalition will use the 2014 transition period as a "practice year" to build their 

tracking and compliance systems while working to voluntarily comply with the law's 

employer requirements. 

We will continue to work with the Administration to develop the rules on reporting 

requirements under IRC §§6055 and 6056. We welcome an opportunity to review the 

recommendations we have submitted on streamlining and improving information 

reporting processes, including our comments in response to Notices 2012-31,2012-

32 and 2012-33 and the HHS Bulletin on Verification of Access to EmployerSponsored Coverage. 

In addition, we would like to call attention to several issues that have arisen as a result 

of Notice 2013-45, which provided official notice of the transition period in 2014. 

Application of Transition Rules in 2015. Notice 2013-45 raises additional questions 

about how transitional rules that were provided for 2014 as part of the Treasury 

Department's proposed rule under IRC §4980H will operate in 2015. Given that 2015 

will now be the first year in which employers could face excise taxes under IRC 

§4980H, employers need clarification regarding whether such transition relief will be 

extended into 2015. We urge the Administration to issue further guidance about the 

status of several transitional policies, including: 

• Transition rules for non-calendar year plans that begin during the 2015 

calendar year; 

• Measurement periods for stability periods that start in 2015; and 

• Minimum number of months an employer may use to determine applicable 

large employer status in 2015 and applicability of the coverage proviSions 

under IRC §4980H. 

Timely clarification around the application of these and other transition rules in 2015 

will minimize confusion for employers working towards compliance with the law in 

2014 and 2015. 

Reliance on existing guidance and proposed rules in 2015. Notice 2012-58, which 

outlined guidance on determining full-time employees, provided much-needed 

flexibility for employers with variable hour workforces, including the look-back 

measurement/stability period and affordability safe harbors. The Notice provided 

employers certainty that they could rely on the guidance through at least the end of 

2014. Similarly, proposed rules on IRC §4980H noted that employers may rely on the 

proposed regulations for guidance "pending the issuance of final regulations or other 

applicable guidance." Given the voluntary compliance approach the Administration has 

decided to take for 2014 with respect to reporting requirements and employer 

penalties, we urge the Administration to consider extending through 2015 the 

certainty with which employers can rely on guidance in Notice 2012-58 and the 

proposed rules in IRC §4980H. As many of our members will use 2014 as a practice 

year to voluntarily comply with the law, we will continue to work with the 

Administration to make refinements to the proposed rules as we learn about their 

practical applicability in 2014. 

2 
49 


86926.033

Employers for Flexibility in Health Care 

Information reporting under IRe §§6055 and 6056. The E-FLEX Coalition looks 

forward to working with the Administration as it develops rules on reporting 

requirements under IRC §§6055 and 6056. In light of the time needed to implement 

the necessary reporting systems, we urge the Administration to issue proposed rules 

on IRC §§6055 and 6056 as soon as possible so that employers can build and 

implement the necessary systems. 

Since 2011, members of the E-FLEX Coalition have taken a holistic view of the law, 

having recognized that the employer requirements under the law are inextricably 

linked. How the reporting process is structured among employers, insurance 

Exchanges, and the federal agencies - and the timing and frequency of these 

interactions - will have a major impact on our business decisions about how to 

implement the law and our administrative processes and costs. 

Minimizing the number of inaccurate determinations of individual eligibility for 

premium assistance tax credits to purchase Exchange coverage is a major priority of 

the E-FLEX Coalition. It is in all of our interests to avoid our employees having to repay 

tax credits when employer-sponsored coverage that meets the law's affordability and 

minimum value standards is available to them. As such, we are exploring the options 

the Administration has provided for employers to communicate with employees about 

the coverage they offer via the Department of Labor's model notice to employees 

about Exchanges under the Fair Labor Standards Act and the Department of Health 

and Human Services' employer pre-enrollment template as part of the model 

application for Exchange coverage. 

The E-FLEX Coalition hopes to work with the Administration to find ways that 

employers can certify to IRS prospectively certain data elements under IRC §6056 

about coverage available to employees to improve the accuracy of Exchanges' 

determinations of eligibility for advance payment of premium tax credits. This stands 

as the best path forward given that -- as HHS recognized in its July 5 final rule that 

addressed Exchange eligibility processes and other issues -- there currently is no 

comprehensive data source of eligibility for employer-sponsored coverage. In addition, 

given that HHS has confirmed that data from IRS, the Social Security Administration 

and the Department of Homeland Security "should be available every day" via the data 

hub (See CMS-2234-F), the Administration would not need to develop a separate data 

source of eligibility for employer-sponsored coverage if it can collaborate with the 

employer community to develop flexible options for reporting under IRC §§6055 and 

6056 throughout the year. 

The E-FLEX Coalition is committed to working with the Administration to simplify and 

streamline the employer information reporting requirements under the law in part by 

continuing to offer employers of different sizes and structures flexibility and options to 

comply with the law's requirements. In order to assist with the upfront determination 

of individual eligibility for tax credits and the availability of employer-sponsored 

coverage, we continue to explore options under the employer reporting requirements 

that would allow employers to report prospectively to the IRS general information 

about the coverage offered to employees (e.g., availability of minimum value plans 

and affordability based on employee wage bands). By giving employers the flexibility 

to report required data elements to the IRS on timeframes that coordinate with the 

3 
50 


86926.034

Employers for Flexibility in Health Care 

enrollment process, the Administration could use the federal data hub to provide 

Exchanges with access to more timely information about individuals' access to 

employer-sponsored coverage. In addition, we are exploring options to streamline end 

of year reporting for purposes of certifying compliance with the law and assessing tax 

penalties such as minimizing reporting fields, exceptions-based reporting based on 

limited number of employees receiving tax credits, and safe harbors for employers 

who are able to demonstrate compliance with the law. 

We would like to thank you again for the opportunity to share our comments with the 

Administration on provisions of the ACA that affect employers, and we appreciate the 

constructive way in which the Administration has engaged with the employer 

community in developing regulatory guidance. The E-FLEX Coalition looks forward to 

working with the Administration to address issues that preserve employer-sponsored 

coverage and smooth the implementation process for employers and employees. 

For questions related to this letter, please contact Anne Phelps, Principal. Washington 

Council Ernst & Young, Ernst & Young LLP, at 202-467-8416, on behalf of the 

Employers for Flexibility in Health Care Coalition. 

Sincerely, 

Employers for Flexibility in Health Care 

Enclosure 

cc: The Honorable Max Baucus 

The Honorable Orrin Hatch 

The Honorable Tom Harkin 

The Honorable Lamar Alexander 

The Honorable Dave Camp 

The Honorable Sander Levin 

The Honorable Fred upton 

The Honorable Henry Waxman 

The Honorable John Kline 

The Honorable George Miller 

4 
51 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

Ms. Campbell 5 minutes for an opening statement. 

STATEMENT OF CHERYL CAMPBELL 

Ms. CAMPBELL. Good morning, Chairman Pitts, Congressman 

Pallone, members of the committee. Thank you very much for the 

opportunity to appear before you today. My name is Cheryl Campbell. I am the Senior Vice President at CGI Federal, a company 

that has provided information technology services to the Federal 

Government for more than 36 years. In my role, I lead CGI 

Federal’s Health and Compliance Business Unit. I am responsible 

for all projects at the Department of Health and Human Services 

and several other Federal agencies. It is my pleasure to appear 

today to discuss CGI Federal’s role as the contractor designing and 

developing the IT application known as the Federally Facilitated 

Marketplace, which I will call the marketplace. This application is 

one of several components being developed that will allow citizens, 

health insurance issuers, CMS and many States to participate in 

the marketplace for health insurance mandated by the Patient Protection and Affordable Care Act. 

CMS conducted a competitive procurement, and on September 

30, 2011, selected CGI Federal to design and develop the marketplace consistent with requirements established by CMS. At the 

time of contract award, most of these requirements were not fully 

defined. For that reason, the contract was issued as a cost reimbursement-type contract, and the project’s original scope was defined broadly. During the course of performance, CMS has modified 

the contract on several occasions generally in response to more detailed requirements. 

CGI Federal’s scope of work includes the following three work 

streams: architecting and developing a marketplace that may be 

used by any State that opts out of building and operating its own; 

second, designing an IT solution that is adaptable and modular to 

accommodate the implementation of additional functional requirements and services; and third, participating in a collaborative environment and relationship in support of coordination between CMS 

and its primary partners. 

When open enrollment begins on October 1, 2013, the marketplace will have three key functions to assist citizens in comparing, 

selecting and enrolling in qualified health plans. First, eligibility 

and enrollment, which serves as the front door for consumers to determine eligibility for and enroll in a qualified plan; second, plan 

management which serves as the entry point for health insurers to 

submit their plans for CMS certification as qualified health plans; 

and third, financial management, which allows CMS to manage financial transactions with issuers. 

The IT solution developed by CGI Federal has been structured to 

support CMS as it provides pre-implementation models to the 

States. The Federally Facilitated Marketplace, the State Partnership Marketplace and the State-Based Marketplace. To date, the 

marketplace implementation has achieved all of its key milestones 

from the initial architecture review in October 2011 to project baseline review in March 2012, and most recently, the operational readiness review in September 2013. Additionally, in April 2013, health 

52 

insurers began submitting their plans to the system for review by 

CMS. Starting in August 2013, consumers were able to go into the 

system and register their counts. At this time, CGI Federal is confident that it will deliver the functionality that CMS has directed 

to enable qualified individuals to begin enrolling in coverage when 

the initial enrollment period begins in October 1, 2013. 

Moving forward, CGI Federal is confident in its ability to deliver 

successfully on its contract and remains committed to the success 

of the marketplace as a mechanism for providing health insurance 

coverage by the statutory deadline of January 1, 2014. 

I appreciate the opportunity to appear before you today and 

would be pleased to answer any questions that you may have. 

Thank you. 

[The prepared statement of Ms. Campbell follows:] 

53 


86926.035

Written Testimony of Cheryl Campbell 

Senior Vice President 

CGI Federal Inc. 

Prepared for 

The House Committee on Energy and Commerce 

Subcommittee on Health 

September 10, 2013 
54 


86926.036

Chairman Pitts, Congressman Pallone, Members of the Committee, thank you very much for the 

opportunity to appear before you today. My name is Cheryl Campbell and I am a Senior Vice President 

at CGI Federal Inc. (CGI Federal), a company that has provided information technology (IT) and business 

process services to the federal government for more than 36 years. In my role, I lead CGI Federal's 

Health and Compliance Programs Business Unit, including responsibility for all of its projects at the 

Department of Health and Human Services (HHS) and several other federal agencies. It is my pleasure to 

appear today before you at this hearing to discuss CGI Federal's role as the contractor deSigning and 

developing the complex, IT application known as the Federally-Facilitated Marketplace (FFM), formerly 

known as the Federal-Facilitated Exchange. The FFM application, one of several components being 

developed in a multi-stakeholder environment, will allow citizens, health insurance issuers, the Centers 

for Medicare and Medicaid Services (CMS), and many States to participate in the marketplace for 

affordable health insurance mandated by the Patient Protection and Affordable Care Act (PPACA). 

On September 30, 2011, CMS conducted a competitive procurement and selected CGI Federal to design 

and develop the FFM. CMS issued CGI Federal a task order for this work under CGI Federal's Enterprise 

Systems Development, Indefinite-Delivery, Indefinite-Quantity type contract. Currently, the task order 

includes: a 29-month Base Period for deSign, development, and implementation; one (1) 6-month and 

two (2) one-year Option Periods for operations and maintenance; and a 6-month Transition Out Period. 

The task order directs CGI Federal to design and develop a FFM that will perform the functions and 

business processes that CMS has identified in regulations and guidance issued pursuant to the PPACA. 

At the time of task order award, most of these regulations and guidance were still being finalized and 

the associated system requirements defined fully. For that reason, the FFM task order was issued as a 

cost-reimbursement type task order and the project's original scope was defined broadly with 

deliverable dates to be determined by CMS. During the course of performance, CMS has modified the 

task order on several occasions, generally in response to more detailed requirements regarding system 

functionality as regulations and policy were better defined. 

Generally, CGI Federal's scope of work includes the following three (3) work streams: 

1) Architecting and developing a FFM that may be used by any State that opts out of building and 

operating its own marketplace; 

2) Designing an IT solution that is adaptable and modular to accommodate the implementation of 

additional functional requirements and services; and 

3) Participating in a collaborative environment and relationship in support ofthe coordination 

between CMS and its primary partners. 

When open enrollment begins on October 1, 2013, the FFM will have three (3) key functions to assist 

citizens in comparing, selecting, and enrolling in qualified health plans in States that have chosen not to 

build their own marketplace. These three (3) key operational functions include: 
55 


86926.037

1) Eligibility & Enrollment. The FFM will serve as the "front door" for consumers to fill out an 

online health insurance application, determine their eligibility for health insurance, and enroll in 

a qualified health plan. Among other things, the FFM will interface with a Data Services Hub 

being developed by a contractor under another contract to access income, citizenship, and the 

information necessary to determine an individual's eligibility for health insurance, and whether 

that individual also is eligible for subsidies or credits. The FFM also will allow citizens to view, 

compare, select, and enroll in health plans available through the exchange. 

2) Plan Management. The FFM will serve as the entry point for health insurers to submit plans for 

CMS certification as qualified health plans. CMS will use the FFM to acquire, certify, and 

manage issuers offering qualified health plans through the FFM. CMS also will coordinate plan 

management activities with States, including monitoring and oversight, account management, 

and recertification. Health insurers began submitting their plans to the system in April 2013. 

3) Financial Management. The FFM will allow CMS to manage financial transactions with issuers, 

including calculating reinsurance payments, risk adjustments and corridors, and premium 

processing. 

Under CGI Federal's task order, CMS is responsible for establishing the business processes and general 

requirements for the FFM system and CGI is tasked with deSigning and developing an IT architecture to 

achieve these requirements. The business processes and general requirements come from the PPACA 

and regulations, policy, and guidance issued by CMS, CMS' requirements contractor, and other Federal 

agencies and are influenced by the diverse approaches individual States have adopted to implement the 

law. To that end, the IT solution has been structured to support CMS as it provides three (3) 

implementation model options to the States. In the most basic terms, these three (3) options are: 

1) Federally Facilitated Marketplace - HHS operates the marketplace for a State; 

2) State Partnership Marketplace - A State operates plan management or customer support or 

both and HHS operates the remainder of the marketplace for that State; and 

3) State-Based Marketplace - A State operates the entire marketplace, but has the option to use 

HHS Support for certain activities. 

To date, the FFM implementation has achieved all of its key milestones from the initial Architecture 

Review in October 2011 to Project Baseline Review in March 2012 and, most recently, the Operational 

Readiness Review in September 2013. Additionally, in April 2013, health insurers began submitting their 

plans to the system for review by CMS. Starting in August 2013, consumers were able to go into the 

system and register their accounts. 

At this time, CGI Federal is confident that it will deliver the functionality that CMS has directed to enable 

qualified individuals to begin enrolling in coverage when the initial enrollment period begins on October 
56 


86926.038

1,2013. Moving forward, CGI Federal also is confident in its ability to deliver successfully on its task 

order and remains committed to the success of the FFM as a key mechanism for providing health care 

coverage by the statutory deadline of January 1, 2014. I appreciate the opportunity to appear before 

you today and would be pleased to answer any questions that you may have. 
57 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

Mr. Lau 5 minutes for an opening statement. 

STATEMENT OF JOHN LAU 

Mr. LAU. Good morning, Mr. Chairman, Congressman Pallone, 

other members of the subcommittee. My name is John Lau. I represent Serco Inc., and I am the Program Director for CMS contract. 

Thank you for the opportunity to appear today to discuss Serco’s 

role in this program. For the next several minutes, I will provide 

you with an overview of Serco, my background, the contract we 

have been awarded, and the status of our work to date. 

Serco is a U.S. company based in Reston, Virginia, and we employ over 8,000 Americans across 45 States. We provide professional, technology and management services, primarily to the U.S. 

government and our customers include every branch of the U.S. 

military, numerous Federal civilian agencies, and the intelligence 

community. We are a wholly owned subsidiary of Serco Group PLC 

headquartered in the U.K. However, Serco Inc. maintains a separate board of directors and separate management under the terms 

of a special security agreement with the Department of Defense. 

Serco has decades of award-winning experience in governmentrelated records management and processing support programs. Examples of this experience include processing large volumes of visa 

applications for the Department of State, patent application processing and classification for the U.S. Commerce’s Patent and 

Trademark Office, records management and application and petition processing for the Department of Homeland Security, and 

records management services at the U.S. Citizenship and Immigration Services National Benefits Center. Personally, I have over 30 

years of experience specializing in implementation and management of large Health and Human Services programs such as Medicaid and other public assistance programs. I have been responsible 

for overseeing eligibility and enrollment support programs for up to 

30 million citizens involving 50 million or more transactions per 

year, and those experiences include the California State Children’s 

Health Insurance Program, the Texas Eligibility Support System 

for Medicaid, Children’s Health Insurance Program, food stamps, 

and at the time, Temporary Assistance for Needy Families. This 

experience gives me the confidence to say that our team is dedicated and equipped to deliver on our contractual commitments. 

Under the CMS contract, which was awarded to us on July 1, we 

will provide support services in the determination of eligibility for 

the Federally Facilitated Marketplace and the State-Based Marketplace for the eligibility support tasks under the Affordable Care 

Act. The contract tasks include intake, routing, review, troubleshooting of applications submitted for enrollment into a qualified 

health plan, and for insurance affordable programs including but 

not limited to advanced payment of premium tax credits, cost-sharing reductions, Medicaid Children’s Health Insurance Program, and 

the Basic Health Program were applicable beginning on October 1, 

2013. It includes 10 base tasks and potentially three optional tasks, 

and in my written testimony, I have a lot more detail on those 

tasks, which I think it is best in the interest of time to review 

there. 

58 

The funded base year of the contract totals $114 million, and our 

role is to support a process that is as efficient, accurate and protective of personal privacy as is technologically possible. I will just in 

full disclosure, there are two pending modifications to our contract, 

which may change some of the scope that we currently have. However, we are prepared to manage the estimated 6.2 million paper 

applications representing about 30 percent of the total applications 

projected to be received between October 1st and March 31, 2014. 

We don’t do recruitment of Americans to submit applications nor 

are we involved in eligibility or enrollment decisions. 

We are on schedule to deliver all requirements for our contract, 

and I look forward and am happy to answer any questions you 

might have. 

[The prepared statement of Mr. Lau follows:] 

59 


86926.039

serco 

.-. 

Summary of Testimony of John Lau 

Serco Program Director for CMS contract HHSM-500-20 13-00 118C 

"PP ACA Pulse Check: Part 2" 

Before the Energy and Commerce Subcommittee on Health, 

U.S. House of Representatives 

September 10, 2013 

Serco Inc. Overview 

Serco Inc., aU .S. company based in Reston, Virgnia, employs over 8,000 Americans. We 

provide professional, technology and management services primarily to the U.S. Federal 

government including every branch of the U.S. military, numerous federal civilian agencies and 

the intelligence community. Today we provide support in 45 states across the country. 

CMS Program 

Contract Overview 

In July 2013, Serco was awarded the Centers for Medicare & Medicaid Services (CMS) contract 

to process and verify applications for a qualified healthcare plan as it pertains to the Patient 

Protection and Affordable Care Act (ACA). The funded base year tasks total $114,307,266. 

Serco is prepared to manage the estimated 6.2 million paper applications which are to be 

received between October 1,2013 and March 31, 2014. 

CMS-ES Information Security and PII/PHI Protection 

Serco is dedicated to protecting the privacy of consumers through the paper application process. 

The company is committed to applying and enforcing a strong information security program and 

strict controls. Sereo is implementing and maintaining information security management, 

operational, and technical controls for CMS-ES, as per the requirements of tbe CMS Information 

Security Framework and FISMA for the protection of Personally Identifiable Information (PH) 

and Personal Health Information (PHI). 

Team and Staffing 

Serco has comprised a team of experienced and new employees, and large and small businesses 

to deliver on the CMS contract commitments. The Program Director has over 30 years of 

experience specializing in the implementation and management oflarge scale health programs. 

Facilities 

Serco has set up three locations in Arkansas, Kentucky and Missouri to support the program. 

Contract Deliverables 

Serco is on schedule to deliver all requirements for the CMS contract to support open enrollment 

beginning on October 1,2013. 
60 


86926.040

serco 

.-. 

Summary of Testimony of John Lau 

Serco Program Director for CMS contract HHSM-500-20 13-00 lI8C 

"PP ACA Pulse Check: Part 2" 

Before the Energy and Commerce Subcommittee on Health, 

U.S. House of Representatives 

September 10, 2013 

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Serco Overview 

Serco Inc., a U.S. company based in Reston, Virginia, employs more than 8,000 people, with 

reported annual revenue of$1.2 billion last year. We provide professional, technology and 

management services primarily to the U.S. Federal government. Our customers include every 

branch of the U.S. military, numerous federal civilian agencies and the intelligence community. 

Serco Inc. was incorporated in the United States in 1988 and over the last 25 years we have 

assisted our government customers with their need to respond to new mandates and expand the 

scope of their missions. From the west coast, where we have over 400 employees in San Diego, 

California, providing command, control, communications, and computer intelligence services to 

the U.S. Navy, to the east coast where we have 450 employees in Portsmouth, New Hampshire, 

providing records management services to the Department of State, we have a track record of 

providing service excellence and exceeding expectations across the country. 

To elaborate on records management services, which are critical capabilities in perfonning work 

under our CMS contract, we have extensive experience in this area for the U.S. government. 

Some of our major programs include patent application processing and classification for the U.S. 

Patent and Trademark Office; records management and application and petition processing for 

the U.S. Citizenship and Immigration Services' Service Centers; visa application processing at 

the State Department's National Visa Center and Kentucky Consular Center; and, records 

management services at the U.S. Citizenship and Immigration Services' National Benefits 

Center. These experiences have helped Serco develop and refine best practices which are already 

being incorporated into the CMS work. 
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These programs also highlight our robust experience in working with the Federal government. 

At Serco, we embrace our customer's mission, and make it our passion. It is this mindset that has 

earned us the trust of our government, military and intelligence customers. For example, we 

have: 

• Assisted 2 million Soldiers and their family members with personnel and career transition 

support; 

• Managed 63 air traffic control towers in 11 states; 

• Managed 62 million active records at several U.S. Department of Homeland Security 

facilities; and, 

• Managed 32 million immigrant and non-immigrant Visa transactions last year, 

Sereo Inc. is a wholly-owned subsidiary of Sereo Group pic, headquartered in the United 

Kingdom. As a cleared U.S. company delivering solutions to the U.S. Federal government, we 

operate under a Special Security Agreement (SSA), ensuring that we are insulated from influence 

by our non-U.S. parent company. This protective security measure is overseen by the 

Department of Defense, Defense Security Service (DSS). We have a dedicated security team, 

along with a Serco Inc. Board of Directors separate from our parent company and a special 

committee of the board which oversees the SSA requirements and ensure that we are in good 

standing with DSS. Since our SSA was granted in April 1998, we have successfully passed all 

evaluations, with the most recent assessment resulting in four consecutive "Superior" ratings. In 

July of this year, Serco was one of24 recipients out of 13,500 defense contractors who received 

the James S. Cogswell Outstanding Industrial Achievement Award from DSS. 

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Contract Overview 

Serco was awarded the Centers for Medicare & Medicaid Services (CMS) contract to provide 

support services in the determination of eligibility for the Federally-Facilitated Marketplace 

(FFM) and the State-Based Marketplace (SBM) for the Eligibility Support tasks under the 

Patient Protection and Affordable Carc Act (ACA). The contract is HHSM-500-2013-00118C 

and became effective on July 1,2013. 

The contract tasks include the intake, routing, review, and troubleshooting of applications 

submitted for enrollment into a Qualified Health Plan and for insurance affordability programs 

including, but not limited to, Advance Payment of Premium Tax Credits, Cost-Sharing 

Reductions, Medicaid, Children's Health Insurance Program, and the Basic Health Program, 

where applicable, beginning on October 1, 2013. 

Our role is to support a process that is as efficient, accurate and protective of personal privacy as 

is technologically possible. We are prepared to manage the estimated 6.2 million paper 

applications, which is 30 percent of the total applications, to be received between October 1, 

2013 and March 31, 2014 (based on a May 2013 CBO Estimate). Serco is not responsible for the 

recruitment of Americans (0 submit an application, the eligibility decisions, nor the online 

enrollment system and its software. 

This contract was awarded as a Cost-Plus-Fixed-Fee type contract with a 12-month base period 

and four (4) 12-month option periods. At present, only base year required tasks are funded for 

$114,307,266. There are four optional years and three optional tasks, and if fully exercised, this 
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would bring the total contract price to $1,248,871,357. We are on schedule to deliver all 

requirements for the CMS contract, which has ten baseline and three optional tasks, as described 

below: 

• Baseline Task I is on paper intake and forms processing. Our mailroom will sort, 

classify, and route postal mail, inter-office correspondence, courier mail, and related 

documents received throughout the day based on document category and CMS standard 

operating procedures. We will use an automated solution built around Rapid Opening and 

Extraction Desks for bigh-volume opening and extraction of mail. We will also manage 

the mail triage to sort incoming mail by document category, form number, or other 

criteria. We will then prepare all forms and correspondence prior to imaging. For Image 

Paper Documents, our approach is threefold: I) Scan Quality Control- ensuring the 

images accurately represent the original documents; 2) Indexing and Validationassociating scanned images with index metadata to store/search/retrieve the images; and 

3) Post Index and Image Processing - resulting in a cross-reference table that links 

images to coded records based on document number. 

• Baseline Task 2 is to support processing of paper applications. Our leadership team has 

decades of award-winning experience in records management, including processing large 

volumes of visa applications for the Depattment of State, the Department of Homeland 

Security, and the Department of Commerce, as well as applications for Medicaid and 

public assistance programs for the Department of Health and Human Services. Lesson 

learned from these similar projects will accelerate our work. We will support the 

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processing of all paper applications for Enrollment in a Qualified Health Plan (QHP) and 

for Insurance Affordability Programs (lAP), Employer and Employee Applications for 

Small Business Health Options Program (SHOP) and Applications for Exemptions 

(beginning with the 2014 tax year). 

• Baseline Task 3 is to support verification of the information. Once application 

information is entered in Federal Marketplace Processing System (FMPS), our workflow 

addresses eligibility verification. While many verification sources may be standard, our 

team will handle State-specific verification requirements using the approved standard 

operating procedures. 

• Baseline Task 4 is on complex issue resolution. We have substantial experience in 

providing health insurance eligibility support and the expertise required to address the 

complexities of ACA and related programs. We have established a knowledge base of 

eligibility scenarios that will enable us to address the most complicated issues. 

Baseline Task 5 is on limited telephone support. We will establish, operate, and maintain 

phone support facilities for CMS to address clarifications for calls escalated from the call 

center contractor. We will organize the facility, the teams, call distribution, call handling, 

service delivery, and management along general Information Technology Infrastructure 

Library (ITIL) guidelines for service delivery standards and best practices. 

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• Baseline Task 6 is on mass changes. There are times when regulatory changes, 

workarounds for system or clerical issues, or recommendations made based on findings, 

research and analysis discovered during the operations of Eligibility Support Services 

(ESS) will require changes to enrollment or eligibility data affecting many individuals, 

and employers in FMPS. We will work collaboratively with CMS and the FMPS 

contractor to provide research, analysis, code development, and test support, and when 

directed, implement changes to FMPS with respect to enrollment and eligibility data 

issues. We built and maintain many complex data record and processing solutions and 

can readily support mass change needs to FMPS whether they be on demand, in batch, or 

of a more complex nature. 

• Baseline Task 7 is on maintenance of standard operating procedures. We will establish a 

configuration library from which wc will structure the usage and maintenance of program 

policies, standard operating procedures, and workflow tasks accessible to the cntire 

program staff. W c wi II manage the standard operating procedures using our defined 

configuration management process and a Change Control Board. Recommended standard 

operating procedure changes will be submitted to CMS for review and approval. We 

understand that operating environments are dynamic and as we move forward, we plan on 

recommending workflow and SOP changes reflecting process improvements. 

• Baseline Task 8 is on training and coordination. Our training concept of operations is a 

planned progression of training and full integration with quality and performance 

measurement: startup, new hire, job-specific, refresher, remedial, and continuous learning 
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training. We will draw on our existing training practices on similar programs; our 

capability to do so is critical to rapidly develop a complete, effective, and timely training 

program. 

• Baseline Task 9 is on performance, quality assurance and data analytics. Serco's 

dashboard tool and methodology provides comprehensive visibility and control over the 

performance indicators that matter. In our customized outcome-based approach, 

stakeholders share views of what the mission is, how the business fits together to support 

it, and where and why value is created. Incorporating data and metrics from existing 

performance management system data sources, the dashboard gives a clear line of sight 

between the program's activities resources and outcomes. It allows the Program Director 

and Site Managers at all levels to share perspectives, see cause-and-effect relationships, 

and understand the impact of decisions. 

• Baseline Task 10 is on program management. To provide eMS with a low-risk solution 

for managing all tasks under this contract, we will draw on our collective best practices to 

support and implement eligibility support operations. Our Program Management 

Organization (PMO) is designed to provide outstanding quality, services, and products in 

a timely fashion. It will provide cohesive management of our large document-processing 

centers and multiple business partners, expertise to exceed program performance metrics, 

and support for the rapid implementation of value-added, cost-saving innovations 

throughout the life of the ESS contract. 

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Our three optional tasks: 

• Task 11 is on the development of a standard operating procedure. We have readymade 

templates for developing SOPs. We will develop any new SOPs in eMS format. The 

templates ensure all applicable SOP structural components are considered for 

incorporation, making for a complete process document. Serco will maintain these 

optional task SOPs with process improvements in the same manner as described 

previously in Task 7. 

• Task 12 is on an increase in volume of exchange participation. From a personnel 

perspective, our Project Managers will use forecasting models driven by performance 

history to provide a baseline against which to assess the operational impact of 

unanticipated volume changes on personnel staffing levels. From a facility perspective, 

we have proven strategies for managing increased staff size without increasing the 

facility footprint through effective use of multiple and expanded shifts in multiple sites 

without requiring overtime. From an IT perspective, we propose using virtual machines 

that operate on blade servers. Our servers and network will be ready for surge and heavier 

workloads with little cost impact to the infrastructure. We are prepared to accomplish any 

associated subtasks necessary to seamlessly address these optional task volume 

requirements, such as training and coordination. 

• Task 13 is on an increased volume of appeals requests. As in Optional Task 12, we have 

the capability to accommodate unanticipated volume changes in Appeals Requests. We 

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will develop a workforce expansion/contraction plan and implementation time line for 

CMS to consider. 

On August 21, 2013, Serco received a request from CMS for a proposal to modify the contract 

due to changes in the government's estimates on workload. In addition, CMS requested that 

Serco include translation and interpreter services, and to include pricing on performing employee 

background checks for all project staff members. We provided these to them on September 3 and 

September 5,2013, respectively. 

CMS-ES Information Security and PH/PHI Protection 

Protecting the privacy of consumers through the paper application process is top priority for 

Serco and CMS. We are committed to applying and enforcing a strong information security 

program and strict controls across all of our contracts and operations. 

For this program specifically, we are implementing and maintaining information security 

management, operational, and technical controls for CMS-ES, as per the requirements of the 

CMS Information Security Framework and FISMA for the protection of Personally Identifiable 

Information (PU) and Personal Health Information (PHI). 

The ES operations includes security features and controls that include: dedicated secure facilities 

with physical access controls, monitoring, and guard force; background checks and vetting of all 

personnel; segmented and compartmented IT and computer networks, based on ES roles and 

operations; no access to outside Internet, email, wireless, and mobile devices for all ES 

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operations that process PIlIPHI; and secure access to CMS Eligibility Support Desktop (ESD), 

where all information resides. 

The Standard Operating Procedures describe and script the proper handling of PH and PHI across 

the entire flow of information through ES - from paper mail through digital processing and 

finally through destruction and/or returning of information to the consumer. 

We are conducting initial and periodic Security Awareness and Training for all personnel, which 

will include: privacy laws, policies, guidance, and principles; our role and obligations in 

protecting PII/PHI and how we protect PIIIPHI in all forms; privacy - how we recognize and 

respond to various threats; and, procedures to report a privacy incident or suspicion of 

information breach. 

Team and Staffing 

We recognize the essential role of timely and accurate eligibility determinations to achieve the 

program's elements. That is why we have a strong team of employees to help deliver on our 

commitments to the government, as well as the American people. 

From a leadership perspective, I'll oversee the program as Program Director. I have over 30 

years of experience specializing in the implementation and management oflarge scale HHS 

programs. I have been responsible for overseeing eligibility and enrollment support service 

programs for up to 30 million citizens and 50 million transactions per year, including the 

California State Children's Health Insurance Program and the Texas Eligibility Support system 

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for Medicaid, Children's Health Insurance Program, and Temporary Assistance for Needy 

Families. This experience gives me the confidence to say today that our tearn is dedicated and 

equipped to deliver on our contract commitments. 

The Deputy Program Director is Francis Moody. Francis is a Vice President at Serco and has 

directed Sereo's efforts at the Department of State's National Visa Center and Kentucky 

Consular Center (NVC/KCC) for more than 11 years with the processing of immigrant and nonimmigrant visa applications. NVC/KCC processes in excess of 32 million transactions each year 

supported by a staff of over 800 employees. 

To fulfill the CMS contract, we needed to hire over J ,500 new employees in three major groups 

- baseline staff utilized year round, contingent or on call employees available for unanticipated 

increases in volume during non-peak periods, and seasonal workers for peak volume periods 

associated with health plan enrollment opportunity windows. These employees will be 

responsible for project management, mail, file/case management, document scanning, analysis 

and quality control in support of eligibility determination to manage the healthcare insurance 

applications mandated under the ACA. 

As of September 3, 2013, over 6,744 employment applications have been submitted. We hosted 

job fairs near the new Serco facilities and set up over 1,557 interviews for pre-screened 

applicants. We also accepted walk-ins and had computers available for people to apply online at 

the job fair sites. The executed job fairs ran smoothly and were well-received. 

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We have extended 1,194 offers for new Serco and subcontractor employees with each of them to 

go through background checks (noted in the job advertising and on applications). Starting on 

September 9, the new hires will be required to attend orientation, training, practice, and live 

testing sessions. 

Five of the seven subcontractors under this contract are small businesses including veteran and 

women owned companies. We are proud to have them on our team. At Serco we know the 

important contributions small businesses can make as a member of our team, and the valueadded services they provide in support of our customers. We have a proven track record of 

exceeding Small Business subcontracting goals and have seven mentor protege programs; four 

recognized by DHS, and one each with the State Department, GSA and the FAA. 

We are also proud of our efforts to hire military veterans. We recognize the incredible skill sets 

that these men and women bring to the workforce, and want to harness those skills while 

supporting the eMS contract. We are working with local workforce organizations and services 

that have specific veteran representatives to drive awareness of our available jobs. We are 

consistently active in helping veterans find jobs within our company and have veteran-specific 

resources on our website to match veterans with possible Serco careers. This type of dedication 

has led to us receiving the Virginia Valued Veterans certificate for our commitment to recruiting, 

hiring, training and retaining veterans. 

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The full CMS team including Francis and myself - will be overseen by Serco's Executive 

Team. Our Executive Team brings a diverse background and has an average of over 28 years' 

experience in leadership and management positions in the Federal government market sector. 

Facilities 

We selected the locations for the new Serco facilities based on a variety of factors, including the 

competitive labor costs with higher unemployment rates so we can create a positive impact on 

the local economies. We selected three locations: London, Kentucky opening October 1; 

Rogers, Arkansas- opening October 15; and, Wentzville, Missouri, near St. Louis - opening 

October 30. 

These sites meet required task volume levels and are ready to be expanded to address optional 

task increases. Wc will handlc required tasks with a single eight-hour shift and have the ability to 

expand to additional shifts and/or ten-hour shifts to meet optional tasks. We have found this to be 

an effective technique in our support of other Federal customers like DHS National Benefits 

Center where we use two 1 Q-hour shifts and Saturday work hours when required. 

Our technical solution puts the optimal workforce into a comfortable and effeetive work 

environment to promote employee satisfaetion that fosters high productivity and quality service 

delivery. All facilities include administrative offices for site management and open office space 

for eligibility, outbound calls, and related functions. 

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Contract Deliverables 

This program is divided into two phases - start-up/implementation and operations. The tlrst 

phase is the start-up/implementation period, which began in July. This phase includes the 

coordinating of task schedules, frequent production of deliverables, employee hiring and onboarding, employee orientation and training, pre- and live testing, and close monitoring of key 

milestone dates and events. The second phase is operations, which runs from the 'go-live" date 

through the complete lifecycle of operations. It includes performance under the baseline tasks 

described earlier with quantitative performance monitoring and enhancement through continuous 

quality improvement. 

Serco is dedicated to delivering on our contract commitments. We have held kick-off meetings 

(July 11; July 31), developed plans for training (July 29), project management (August 8), 

business continuity (July 16) and quality assurance, improvement and control (August 16), 

created reports for project design (July 25) and the monthly status (August 15), drafted key 

performance indicators (August 9) and continue to hold weekly teleconference meetings with 

COR and other CMS contractors. 

During the month of September for the Kentucky and Arkansas facilities, Serco is installing and 

testing networks and equipment, hiring and training new employees, conducting pretests of 

system, holding "dress rehearsals" with employees, and performing live tests of system. The 

Kentucky facility will go live October 1 and the Arkansas facility will go live on October 15. 

The Wentzville facility will follow a similar time line with a go live date of October 30. 

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As we continue to drive this program forward, we are keenly aware of the challenges placed in 

our hands, and prepared to devote every resource necessary to meet our obligations to our 

contracting agency - and to the American people. 

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Mr. PITTS. The Chair thanks the gentleman and now recognizes 

Ms. Spellecy 5 minutes for an opening statement. 

STATEMENT OF LYNN SPELLECY 

Ms. SPELLECY. Good morning, Chairman Pitts, Congressman 

Pallone and distinguished member of the subcommittee. My name 

is Lynn Spellecy, and I serve as Senior Director and Corporate 

Counsel for Equifax Workforce Solutions. In that role, I am the primary attorney responsible for the day-to-day legal operations of the 

business unit, and I provide guidance, advice and legal support. I 

appreciate the opportunity today to provide information related to 

the income verification services that Equifax Workforce Solutions 

will be providing to CMS to assist them in their benefit eligibility 

determination requirements under the Affordable Care Act. 

Equifax Workforce Solutions is a wholly owned subsidiary of 

Equifax Incorporated. Workforce Solutions provides employers with 

various human resources-related services. We serve employer clients by providing services like unemployment claims management, 

W–2 processing, I–9 management and similar other functions. 

One of the largest parts of our business is providing income 

verification on behalf of employers. Workforce Solutions responds to 

requests for employment and income information on behalf of our 

employer clients so that the employers do not have to devote resources to answering the phone and dealing with these requests, 

which typically come from lenders, social services agencies and any 

other entity that has the need to verify a consumer’s employment 

or income information. 

In order to provide this service for our employer clients, our clients send us a data feed every time they process their payroll so 

every couple of weeks usually. This feed contains information regarding their employees’ salary information and employment history. We take that information and store it in a database that we 

call The Work Number. We then accept requests from verifier clients—the lenders, social services agencies and others mentioned 

previously—and provide consumer employment and income information in response to those verifier requests. The Work Number is 

a consumer recording database that is regulated by the Consumer 

Financial Protection Bureau and is subject to the Federal Fair 

Credit Reporting Act. Therefore, we credential all of our verifier clients to be sure that the entity making the request is entitled to receive the information that they are requesting. Subject to Federal 

laws, we make sure that the verifier client has a permissible purpose to access the data, and we require that the verifier obtain consumer consent before we release income information. 

By providing automated access to employment and income information, we alleviate the need for employers to have human resources staff verifying income when their employees are seeking a 

loan, for example. On the verification side, we can give verifiers the 

information so that they can process loans more quickly and reliably. Similarly, the process benefits consumers because consumers 

can obtain more ready access to credit and to the services for which 

they have applied without the delays caused by having to manually 

obtain pay stubs and provide them to lenders and others. 

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Our contract with CMS is to provide the same services we provide to thousands of other social services agencies and lenders 

every day. In late November, CMS issued a request for proposals 

to provide automated income and employment verification to the 

CMS hub in order to enable CMS to make its determination of consumer eligibility for tax credits and then programs like Medicaid 

and CHIP. We responded to that RFP, and we were notified at the 

end of March of this year that we had won the RFP. We entered 

into a contract with CMS at the beginning of April. The contract 

is a 1-year contract renewable for up to 5 years. We will be doing 

verification similar to what we provide to other clients. CMS will 

provide us with information from a consumer who has requested 

qualification for Medicaid, CHIP or a tax subsidy or reduced cost 

sharing. CMS will obtain the consumer’s consent to have their employment and income information verified. In response to CMS’s request, we will provide CMS with income and employment information that we have stored in The Work Number database. CMS will 

use that information to enable a determination as to whether that 

individual is eligible for CHIP, Medicaid and a tax subsidy or reduced cost sharing. 

Equifax Workforce Solutions is prepared to provide income 

verifications to CMS. We operate in a closely regulated environment in accordance with Federal law, and consumers provide their 

written consent to CMS before we verify their income. The configuration between Equifax Workforce Solutions and the CMS data hub 

has been tested, and we stand by our commitment to maintain the 

highest standards for information security and consumer data privacy. 

Thank you for the opportunity to testify, and I welcome your 

questions. 

[The prepared statement of Ms. Spellecy follows:] 

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Summary points: 

One-Page Summary 

Testimony of Lynn Spellecy 

Corporate Counsel 

Equifax Workforce Solutions 

Before the Subcommittee on Health 

Committee on Energy & Commerce 

U.S. House of Representatives 

September 10, 2013 

• Equifax Workforce Solutions will be providing income verification services under a 

contract to the Centers for Medicare & Medicaid Services (CMS) to assist in their 

eligibility determinations for benefits under the Affordable Care Act (ACA). 

• The services we will be performing for CMS are similar to those we currently provide to 

30 states in their eligibility reviews for Medicaid and Children's Health Insurance 

Program (CHIP). Equifax Workforce Solutions provides over 10 million verifications 

annually to government entities including agencies in all fifty states. We also provide 

these services for many employers, including 75% of the Fortune 500 companies and 

many federal agencies, when their employees initiate transactions requiring income 

verification. 

• Equifax Workforce Solutions income verification service delivers a streamlined, secure 

and timely transfer of information to government entities and employers. Equifax 

Workforce Solutions operates in a closely regulated environment in accordance with 

federal law, and consumers provide written consent before we verify their income. Our 

database has close to 54 million current employee payroll records. 

• After a competitive bid process (including an ROJ and RFP), CMS awarded a 5-year 

contract to Equifax Workforce Solutions in March of2013 to provide real time 

verification of income to assist CMS in the verification of eligibility for Medicaid, CHIP, 

premium tax credits and reduced cost sharing. CMS will obtain written consent to verify 

the income from each applicant prior to sending the request to Equifax Workforce 

Solutions. 

• Equifax Workforce Solutions is qualified to provide income and employment 

verifications (not benefit eligibility determinations) to CMS because we maintain the 

largest database of its kind and have been providing this service to government agencies 

and businesses since 1995. 
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Testimony of Lynn Spellecy 

Corporate Counsel 

Equifax Workforce Solutions 

Before the 

Subcommittee on Health 

Committee on Energy & Commerce 

U.S. House of Representatives 

PPACA Pulse Check: Part 2 

September 10,2013 
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Good morning Chainnan Pitts, Ranking Member Pallone, and distinguished Members of the Subcommittee. 

My name is Lynn Spellecy and I serve as Senior Director and Corporate Counsel for Equifax Workforce 

Solutions. I appreciate the opportunity to appear before you today and provide infonnation related to the 

income verification services that Equifax Workforce Solutions will be providing to the Centers for Medicare 

& Medicaid Services (CMS) to assist in their administration of the benefit programs defined by the 

Affordable Care Act. Our services to CMS will be similar to the income verifications that we currently 

provide to 30 states in their review of Medicaid and Children's Health Insurance Program (CHIP) eligibility. 

EQUIFAX WORKFORCE SOLUTIONS 

When people hear the name Equifax, many think of us as the company that provides credit reports to their 

lenders when they apply for a new mortgage, refinance their current mortgage, buy a new car or try to obtain 

a new credit card. [am here to discuss Equifax Workforce Solutions - which is a subsidiary of Equifax, but 

is separate from the credit reporting business. This business unit is employed by over 8,200 human resources 

departments and is the leading income verification service in the country. Equifax Workforce Solutions 

provides human resource data, analytic services, and verifications of income and employment to both the 

public and private sector. We manage unemployment claims, tax matters, and employment and income 

verification services to over 75% of the Fortune 500 companies. We also provide other outsourced human 

resources functions, such as 1-9 compliance and management, W -2 and payroll processing, workforce 

analytics and employee onboarding. 

THE WORK NUMBER 

Our automated employment and income verification service is provided through our proprietary datahase 

known as The Work Number®. The Work Number delivers a streamlined, secure and timely transfer of 
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information between employers and verifiers that ultimately benefits the consumer by accelerating the 

decision process on their loan or government benefit, while freeing the employer from the disruption of 

verification requests. Over 2,900 employers, including the majority of Fortune 500 businesses and most of 

the federal civilian contractors, contribute their payroll information to the database at each pay period, 

entrusting Equifax Workforce Solutions to provide critical human resources functions on their behalf. The 

Work Number database has close to 54 million current employee payroll records and is projected to grow to 

78 million records by the year 2017. Equifax Workforce Solutions operates in a closely regulated 

environment in accordance with federal law and consumers provide written consent before we verify their 

income. 

When a consumer seeks a loan for housing or auto, or fills out a credit card application, the lender often 

requests verification of the applicant's employment and income. Without The Work Number database, the 

lender or government agency would typically call the Human Resource department of the consumer's 

employer for that information - often suspending the consumer's financial transaction or government benefit 

until the necessary data was confirmed. The Work Number allows lenders and government agencies to 

verify employment and income without contacting the employer directly, speeding up the verification 

process and reducing the burden on the employer. 

Additionally, The Work Number service is utilized by federal and state government agencies as they seek to 

verify eligibility for government public assistance benefits. Benefits such as the Supplemental Nutrition 

Assistance Program (SNAP), Temporary Assistance to Needy Families (TANF), CHIP, and Medicaid or 

housing assistance require a social services agency to verify that a consumer meets the program's eligibility 

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requirements. The Work Number provides a streamlined, secure and timely solution for government 

agencies as they process applications for government benefits. 

The Work Number database of employee payroll information is a completely separate operation from the 

division ofEquifax that manages its credit bureau data. The two information sources are kept separate and 

data stewardship rules dictate how the information is handled within each organization. Both data sources, 

however, are compliant with the federal Fair Credit Reporting Act (FCRA) and both are protected by 

globally recognized standards for information security and data management. 

FAIR CREDIT REPORTING ACT 

Equifax Workforce Solutions is compliant with all applicable federal and state regulations. Equifax 

Workforce Solutions is a "consumer reporting agency,,1 as defined by the FCRA when it provides services 

that rely upon The Work Number database. Automated verifications of income and employment provided 

by Equifax Workforce Solutions through The Work Number are "consumer reports,,2 and regulated by the 

FCRA. The verification of a consumer's employment and income in determining a consumer's eligibility for 

benefits under the Affordable Care Act is a "permissible purpose" and is authorized under FCRA Section 

604. This section of the law allows a consumer reporting agency to furnish a consumer report under the 

following relevant circumstances: 

(a) (3) To a person which it has reason to believe-

(D) intends to use the information in connection with a determination of the consumer's 

eligibility for a license or other benefit granted by a governmental instrumentality required by law to 

consider an applicant's financial responsibility or status. 

I FCRA Section 603 (f) 

2 FCRA Section 603(d)(J) 

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As part of our FCRA compliance obligations, Equifax Workforce Solutions requires the credentialing of all 

verifier clients and we obtain certifications that The Work Number data will only be used for pennissible 

purposes as allowed under the FCRA. Equifax Workforce Solutions also provides consumers the ability to 

obtain an annual free copy of their "Employment Data Report," our Workforce Solutions employment and 

income data file, and a process to dispute any inaccuracies they may find in their data within The Work 

Number. 

In addition to the permissible purpose requirements contained within the FCRA, Equifax Workforce 

Solutions in most cases requires consumer consent in order for a verifier to receive income information from 

The Work Number. Verifiers are also subject to potential audits during which they are required to show 

proof of consumer consent. 

GOVERNMENT EXPERIENCE 

As I mentioned earlier, state and federal government agencies utilize Equifax Workforce Solutions to verify 

consumers' income and employment to help determine their eligibility for government benefit programs. In 

2011, one in three Americans lived in households that received some kind of income-based government 

bencfit3 Equifax Workforce Solutions provides over 10 million verifications annually to government 

entities including agencies in all fifty states. We help them review applications and verify income for 

various programs such as SNAP, TANF, Medicaid, child support enforcement, and for state and local 

housing subsidies. Government organizations that administer public assistance to low-income individuals 

and families use The Work Number to check applicant provided infonnation, identify missing or incomplete 

data, and reduce program fraud. 

3 United Slates Census Bureau 

4 
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Federal agencies such as the Social Security Administration (SSA) and the Department of Treasury also 

utilize The Work Number for verification services. The SSA contracts with Equifax Workforce Solutions 

for verifying past and current wages of individuals applying for or currently receiving Social Security 

Retirement, Survivors and Disability Insurance benefits and Supplemental Security Income benefits. The 

SSA uses The Work Number service to verify the wages of individuals applying for benefits and for those 

already receiving benefits. 

The Department of Treasury recently contracted with Equifax Workforce Solutions to help the agency 

enforce H.R. 4053, the "Improper Payments Elimination and Recovery Improvement Act of2012." Equifax 

Workforce Solutions provides access to The Work Number database for employment and income 

verifications in order for the Department of Treasury to facilitate the identification of improper payments by 

the agency. 

The Commonwealth of Pennsylvania has worked with Equifax Workforce Solutions since 2010. 

Pennsylvania's Department of Public Welfare relies on Equifax Workforce Solutions to provide income 

verifications of applicants for the state's public welfare programs (SNAP, TANF and Medicaid) through the 

Office of Income Maintenance. These agencies access The Work Number through a secure web-based 

platform for real time information regarding an applicant's current employment status and payroll income. 

The Work Number also provides an "Alert" product to the state's Bureau of Child Support Enforcement 

(BCSE). This Alert service monitors over 725,000 social security numbers of liable parents on a weekly 

basis and informs BCSE of any significant changes in income that would impact an active case. 

5 
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Another example of a state agency using The Work Number is the Michigan Higher Education Authority. 

This authority depends on income verifications through The Work Number for servicing student loan 

applications. Also in Michigan, The Department of Human Services and The Bureau of Adult and Family 

Services have utilized the Work Number income data since 2007 to help detennine applicants' eligibility for 

SNAP, TANF and Medicaid programs. 

Equifax Workforce Solutions requires its public sector verifier clients, other than child support enforcement 

agencies4

, to obtain the applicant's consent for the verification of his or her income. The consumer will 

typically sign his or her consent in the application documents. This consent policy goes beyond FCRA 

requirements and provides the consumer with increased transparency and awareness that their income will be 

further verified when applying for these government benefits. 

eMS 

The Affordable Care Act charged CMS with assisting millions of Americans to obtain health insurance 

through their employers and exchanges. After a competitive bid process that included a Request for 

Information and a Request for Proposal, CMS awarded a contract to Equifax Workforce Solutions in March 

of this year to provide real time verification of income and employment to the CMS Data Hub to facilitate 

the verification of eligibility for Medicaid and CHIP, as well as for eligibility for premium tax credits and 

reduced cost sharing. 

As I mentioned earlier in my testimony, we have almost 54 million active employee payroll records and over 

2,900 public and private sector employers contributing their payroll data to The Work Number every pay 

4 See FCRA Section 604(0)(4)(5) 

6 
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period. The Work Number database includes payroll data on approximately one-third ofthe working 

population in the United States and reflects employees at all wage levels. 

The Equifax Workforce Solutions contract with CMS has the potential to cover five years of service, but it is 

an annual contract renewable each year. Equifax Workforce Solutions is qualified to provide income and 

employment verifications to CMS because we maintain the largest database of its kind in the country and we 

have been providing similar income verification services to government agencies and businesses since 1995. 

SOLUTION DELIVERY 

Under the Equifax Workforce Solutions contract with CMS, CMS will obtain consent to verify the income 

from each applicant prior to sending the request to Equifax Workforce Solutions. CMS will also certify its 

FCRA permissible purpose for each request. Once an application is submitted and consent is obtained from 

the applicant filer, CMS will provide the applicant's name, date of birth, and social security number to the 

hub which in turn will send a request to The Work Number. If there is a match in The Work Number 

database, we will validate that the information matched is that of the applicant. If we are confident in the 

match, we will then evaluate the data in The Work Number database to determine if we have sufficient 

information to satisfy the CMS match requirements specified in our contract. If so, we will return to CMS 

the employer's name, federal Employment Identification Number and address, as well as the employee's 

employment status, pay data, gross earnings and net earnings. 

Under Equifax Workforce Solutions' contract with CMS, the applicant will need to provide CMS the right to 

validate their income when filling out their application for insurance benefits and/or tax credits, Like other 

government verifier clients, CMS will be subject to Equifax Workforce Solutions audits during which CMS 

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will be required to show proof of consent for verifying an applicant's income or employment, For each 

verification request of an applicant's income, an inquiry will be posted on the consumer's Employment Data 

Report maintained by Equifax Workforce Solutions. The inquiry will neither appear on nor impact the 

consumer's credit report or credit score because The Work Number is managed by Equifax Workforce 

Solutions, a separate entity from Equifax's credit reporting business. As stated above, a consumer may 

request their Employment Data Report maintained by Equifax Workforce Solutions to review for accuracy 

and potentially dispute any errors. 

TESTING 

When Equifax Workforce Solutions partners with a new government verifier client, we develop appropriate 

integration technology on both sides to successfully deliver the verifications in a timely and secure manner. 

The Equifax Workforce Solutions integration with the eMS Data Hub has been successfully established. 

We have already performed end-to-end testing with both the hub and the state exchanges, and intend to test 

our data flow with the Federally Facilitated Marketplace next week. 

From the inception of the project in April 0[20]3, Equifax Workforce Solutions has worked closely with 

eMS and its contractors to establish a progression plan of testing for the successful delivery ofEquifax 

Workforce Solutions income verification solution. Our team first supported testing of the custom 

components of the solution that we developed to support the requirements for eMS. These tests included 

modifications and enhancements to our standard service to accept the data elements from eMS that will be 

used to match an applicant to one or more records in The Work Number database. The tests were conducted 

independent of the huh to allow us (0 isolate potential defects or issues and quickly resolve them. At the 

8 
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completion of the initial test phase, we conducted an acceptance test with the CMS Contracting Officer 

Representative to validate completeness of our solution and its compliance with the requirements. 

Second, we collaborated with CMS and the hub contracting vendor to initiate connectivity testing between 

the various CMS test environments and those implemented at Equifax Workforce Solutions to support our 

clients. Our connectivity testing uncovered some configuration issues with the gateway between our 

systems. Our team resolved these issues in July and we were successful in establishing an application 

connection between CMS and Equifax Workforce Solutions. 

During the third phase of testing, we collaborated with CMS and the hub contracting vendor to conduct 

testing of our application through the gateway. The testing consisted of prcparing, loading, and executing 

over 200 test cases between the hub and our service. Each test case resulted in either a match or non·match 

to simulate the different types of transactions anticipated when the system goes live on October 1,2013. In 

all cases, a response was provided back to the hub and we determined that all tests were successfully 

executed. 

Fourth, Equifax Workforce Solutions conducted volume testing to simulate the expected volumes identified 

in our contract during peak periods. Testing was conducted by our team independent of the hub to allow us 

to refine the performance of our solution and the dedicated infrastructure that was procured to support the 

CMS contract. 

In the fifth test phase, Equifax Workforce Solutions prepared for and supported end·to·end testing of the 

state facilitated markets. This testing was initiated in late August and focused on supporting states in their 

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efforts to conduct testing of their state facilitated market applications. This testing will proceed through 

Septemher 14, 2013, and our team will continue to support this testing as necessary. 

The tinal phase of testing prior to production is scheduled for September 15,2013, when we will initiate 

testing with the Federally Facilitated Marketplace. This testing is expected to be conducted in much the 

same way as we currently SUppOlt our existing state customers that purchase our income veritication 

solutions. From Equifax Workforce Solutions' standpoint, our technical interfaces are with the hub and we 

do not foresee any changes in our test results during this tinal phase. 

SECURITY 

Managing large amounts of highly contidential data and sensitive information is an extremely important 

responsibility. Equifax has the highest standards for information security and data privacy. The Equifax 

Global Security organization provides for the protection of every Equifax subsidiary, including Equifax 

Workforce Solutions, and ensures that their information and resources are in accordance with appropriate 

security policies, controls and applicable regulatory doctrine. Equifax Global Security protects data from a 

wide range of threats in all formats, during both transmission and storage. The goals of the security program 

are the preservation of: 

I) Contidentiality - the securing of information so that is accessible only to those authorized to have access; 

2) Integrity - safeguarding the accuracy and completeness of information and processing methods; and 

3) Availability - providing authorized users with access to information and associated assets when required. 

The Equifax Global Security program holds a global accreditation under ISO/IEC 27001: 2005. This 

standard, published by the International Standards Organization (ISO) and the International Electrotechnical 

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Commission (lEC), formally specifies a management system that is aligned with eleven specific domains of 

information security that are designed to ensure management control of an organization's information 

security program, ISO 27001 provides a holistic, risk-based approach to identifying and managing risks to 

key information systems and assets. ISOIlSE 27001 requires organizations to systematically examine their 

security risks; design and implement a comprehensive set of information security controls and other risk 

mitigation strategies (e.g., risk avoidance by limiting certain activities); and to adopt a management process 

that ensures that the information security controls continue to meet organizational needs in the evolving 

threat environment. The standard specifies the requirements for establishing, implementing, operating, 

monitoring, reviewing, maintaining and improving a documented Information Security Management System. 

Equifax is formally audited and annually certified for compliance with ISO/lEC 27001. ISO/ISE 27001 

forms the foundation on which Equifax builds compliance with various legal, regulatory and contractual 

security requirements that govern its data and activities. This allows Equifax to monitor its subsidiaries' 

compliance with multiple regulatory regimes, as each subsidiary, including Equifax Workforce Solutions, 

may operate across economic sectors and therefore be subject to multiple regulatory regimes, including the 

FCRA, the Financial Privacy and Safeguards Rules of the Gramm-Lcach-Bliley Act, as well as other 

requirements. 

As a federal contractor to CMS, Equifax Workforce Solutions must also comply with the Privacy Act of 

1974, Federal Information Security Management Act (FISMA), the Health Insurance Portability and 

Accountability Act (HIPAA) and the privacy and security provisions of the Affordable Care Act. 

The security controls required to meet FISMA are specific and detailed for information protection and 

availability. Real time auditing assures a high level of security and protection of our customer's data. 

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Equifax Global Security is constantly evaluating new threats and making adjustments as necessary to ensure 

the best protective measures are in place. Equifax is certified and accredited for FISMA to accept 

government data and has a history of protecting data for several large government customers. Equifax 

maintains an active FlSMA Authority to Operate through the National Finance Center for information 

systems supporting the verification of income service. 

To ensure security of the communications between Equifax Workforce Solutions and the hub, all messages 

will have transport level encryption and all contents of communications will be encrypted with private 

certificates that were exchanged between both Equifax and the hub contracting vendor. 

CONCLUSION 

Equifax Workforce Solutions is ready for the October 1,2013 open enrollment date and the implementation 

of our income verification for applicants seeking financial assistance under the Affordable Care Act. With 

the experience we have gained from providing income verifications to 30 states for their similar reviews of 

consumer applications for Medicaid and CHIP benefits, Equifax Workforce Solutions is prepared to provide 

our services to CMS. We operate in a closely regulated environment in accordance with federal law and 

consumers provide their written consent before we verify their income. The configuration between Equifax 

Workforce Solutions and the CMS Data Hub has been successfully tested and Equifax Workforce Solutions 

stands by Our commitment to maintain the highest standards for information security and consumer data 

privacy. Thank you for the opportunity to testify and I welcome your questions. 

12 
92 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

Mr. Finkel 5 minutes for his opening statement. 

STATEMENT OF MICHAEL FINKEL 

Mr. FINKEL. Good morning, Chairman Pitts, Ranking Member 

Pallone and members of the subcommittee. My name is Michael 

Finkel, and I am the Executive Vice President for Program Delivery at QSSI. My role is to ensure successful project delivery and 

implementation. I have worked in the IT field for 17 years, and 

manage the delivery of numerous government programs. 

QSSI is a leading systems integrator that designs and builds custom IT systems, and we have been working with CMS since 2006. 

Currently, QSSI is one of several contractors developing systems at 

the direction of CMS that will support Health Insurance Marketplaces, commonly known as exchanges. While we do various work 

with CMS in this area, today I will focus on QSSI’s role in developing the Data Services Hub on behalf of CMS. 

Our job is to write the software code based on CMS approved 

specifications for the Data Services Hub. We expect the Data Services Hub will be ready for CMS to operate as planned on October 

1st. In simple terms, the Data Services Hub will transfer data. It 

will facilitate the process of verifying applicant information by 

routing queries and responses between given marketplaces and 

various data sources. The Data Services Hub itself will not determine consumer eligibility, it will not determine which health plans 

are available in the marketplace, and it will not handle personal 

medical records. 

Here is how it will work. A consumer will go to the Health Insurance Marketplace web portal to fill out enrollment forms and select 

health insurance plan. Certain information the consumer provides 

to the marketplace such as citizenship will have to be verified. The 

marketplace will direct a query to external information sources 

such as government databases. Those queries will be funneled 

through the Data Services Hub. Once the requested information is 

sent back, eligible consumers can then enroll in one of the available 

plans. The enrollment data, such as name, address and premium 

amount will be transferred through the Data Services Hub from 

the originating marketplace to the health plan chosen by the consumer. 

It is important to keep in mind that CMS owns and will operate 

the hub. It is housed in the CMS secure cloud hosted at the 

Terremark Data Center. We are developing the hub within CMS’s 

environment where it will remain. 

Let me address the status of this work. I can report that our delivery milestones for the Data Services Hub are being met on time. 

We have completed software coding for the Data Services Hub for 

all functionality required for October 1st. We are continuing performance and integration testing. We have connected to the Data 

Services Hub to the databases at the key Federal agencies that will 

be used for verifying information. We have connected the Data 

Services Hub to the system that will transfer data to and from 

health plan issuers. We expect that data services functionality 

planned for October 1st to be ready. 

93 

Finally, let me turn to data security. As I said earlier, the Data 

Services Hub is located in the CMS secure cloud. CMS and its information security contractors will continually monitor the Data 

Services Hub. Government regulations require CMS to follow National Institute of Standards and Technology’s security guidelines 

applicable to the Data Services Hub. The design and development 

of the Data Services Hub complies with these standards. 

Additionally, the Data Services Hub has recently undergone an 

independent security risk assessment by CMS’s security assessment contractor, the Mitre Corporation. Our understanding is that 

that assessment did not identify any issues that would prevent 

CMS from launching the Data Services Hub on October 1st. Once 

in production, CMS will enforce additional security controls to protect systems including controlling access and changes to the system. The Data Services Hub will continually be monitored by CMS 

and its information security contractors. 

Thank you for the opportunity to testify today. I will be happy 

to answer any questions you might have. 

[The prepared statement of Mr. Finkel follows:] 

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86926.070

U.S. House Committee ou Euergy & Commerce Subcommittee on Health 

Hearing on "PP ACA Pulse Check: Part 2" 

Testimony of Michael Finkel 

Quality Software Services, Inc. 

September 10,2013 

Chainnan Pitts, Ranking Member Pallone, and Members of the Subcommittee, good moming. 

My name is Michael Finkel, and I am the Executive Vice President for Program Delivery of 

Quality Software Services, Inc., or QSSI. My role at QSSI is to oversee our project managers 

and staff, and ensure successful and efficient project delivery and implementations, with a 

particular focus on government IT projects. I have worked in IT for 17 years, concentrating on 

health care IT for the last nine years, and have successfully managed the delivery of numerous 

government programs during that time. I am pleased to be here this morning to introduce you to 

QSSI and discuss our work with the Centers for Medicare and Medicaid Services (CMS) on the 

federal Data Services Hub. 

QSSI was founded in Maryland in 1997, and we are a leading systems integrator. We work with 

customers in the public and private sectors to design and build custom IT systems, including 

security and privacy solutions, cloud-based applications, and data management systems. 

QSSI has worked with Federal government agencies for nearly 15 years and with CMS since 

2006. Currently, QSSI is one of several contractors working at the direction of CMS to develop 

systems that will support health insurance marketplaces, commonly referred to as Exchanges. 

While we do various work with CMS in this area, my testimony today focuses on QSSI's role in 

developing the Data Services Hub on behalf ofCMS. Our job is to write the software code, 

based on CMS-approved specifications for the Data Services Hub. We expect the Data Services 

Hub will be ready for CMS to operate as planned on October I st. 

The Data Services Hub: What It Is, How It Works 

Simply put, the Data Services Hub will transfer data. It will facilitate the process of verifying 

applicant infonnation data, which is used by health insurance marketplaces to detennine 

eligibility for qualified health plans and insurance programs, as well as for Medicaid and CHIP. 

The Hub's function will be to route queries and responses between a given marketplace and 

various data sources. The Data Services Hub itself will not detennine consumer eligibility, nor 

will it determine which health plans are available in the marketplaces. 
95 


86926.071

Here's more detail on how the Data Services Hub will work: 

A consumer interested in purchasing health insurance online will go to a health insurance 

marketplace's web portal to fill out enrollment forms and select a plan. Certain information the 

consumer provides to the marketplace, such as citizenship, will have to be verified. The 

marketplace will direct a query to external information sources, such as government databases. 

Those queries will be funneled through the Data Services Hub. 

Once the requested information is sent back, eligible consumers are then able to enroll in one of 

the available plans. The enrollment data, such as name, address, and premium amount, will then 

be transferred through the Data Services Hub from the originating marketplace to the health plan 

chosen by the consumer. 

It's important to keep two characteristics of the Hub in mind. One, while the Data Services Hub 

will pass eligibility data from verification sources to the federal and state marketplaces and 

enrollment data from marketplaces to plan issuers, it will not handle personal medical records. 

Second, CMS owns and will operate the Hub, and will house it in the CMS secure cloud hosted 

at the Terremark Data Center. We are developing the Hub within CMS' environment, where it 

will remain. Once the Hub is operational, QSS!'s role will be to support CMS in ensuring proper 

system performance, including maintenance and the development of enhancements as requested 

by CMS, as systems integrators routinely do for their customers on the customers' systems. 

Status of the Data Services Hub 

Our delivery milestones for Data Services Hub completion are being met on time. We expect 

CMS' Data Services Hub will be ready as planned by October 1 st. 

At this point: 

• We have completed software coding for the Data Services Hub for all its required 

October 1 st functions. 

• Weare continuing performance and integration testing. 

• We have connected the Data Services Hub to databases at the key federal agencies that 

will be used to verify information. 

• We have connected the Data Services Hub to the system that will transfer data to and 

from the health plan issuers. 

As with any large scale project, we continue to review and test the Data Services Hub and will 

do so until launch. Additionally, CMS' independent tester has been testing the Data Services 

2 
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86926.072

Hub. The results to date have been routine and have required, in some instances, modifications 

and improvements to the system that are being successfully completed. 

Data Security 

Lastly, let me tum to data security, which we know is a longstanding priority for this Committee. 

Under the Federal Information Security and Management Act, CMS is required to follow the 

National Institute of Standards and Technology'S security standards and guidelines for federal IT 

systems. Accordingly, the design and development of the Data Services Hub complies with 

these standards. As an IT solution provider to many federal agencies for nearly 15 years, QSSI 

is experienced at developing systems that comply with these standards. The Data Services Hub 

recently underwent an independent Security Risk Assessment by CMS' security assessment 

contractor, the Mitre Corporation. Our understanding from the preliminary report is that the 

Security Risk Assessment did not identify any issues that would prevent CMS from launching 

the Data Services Hub on October IS'. 

As I mentioned previously, the Data Services Hub code is being developed, will launch, and will 

operate from within the CMS secure cloud hosted at the Terremark Data Center. Once in 

production, CMS will enforce additional security controls to protect the system, including 

controlling access and changes to the system. The Data Services Hub will be monitored 

continually by CMS and its information security contractors. 

Thank you for the opportunity to discuss QSSI and our work on the Data Services Hub. 

I'm happy to answer any questions you might have. 

3 
97 

Mr. PITTS. The Chair thanks the gentleman and thanks all the 

witnesses for your testimony, and we will now begin questioning 

and answering. I will begin the questioning, and recognize myself 

5 minutes for that purpose. 

Mr. Graham, in your testimony, you included a chart, and we 

will put it up on the screen, which displays the sheer complexity 

of the exchange, enrollment and subsidy eligibility process, and I 

would like to walk through this chart to help our constituents as 

to what they will face interacting with the exchange and what happens to the data provided on the application. 

Mr. GRAHAM. Sure. 

Mr. PITTS. I have a series of questions I would like to ask you. 

My constituents may apply for enrollment through a paper application. Is that correct? 

Mr. GRAHAM. Yes. 

Mr. PITTS. She could also apply online. Is that correct? 

Mr. GRAHAM. Correct. 

Mr. PITTS. It is also possible to apply by phone. Is that correct? 

Mr. GRAHAM. Correct. 

Mr. PITTS. A navigator or an in-person consumer could also be 

involved. Is that correct? 

Mr. GRAHAM. That is correct. 

Mr. PITTS. And so the navigators and others will have access to 

personal information included on the application such as Social Security number, date of birth, address and household income. Is that 

correct? 

Mr. GRAHAM. That is my understanding. 

Mr. PITTS. There would have to be a check on whether an individual is eligible for Medicaid, and the application information 

would then need to be transferred to the State. Is that correct? 

Mr. GRAHAM. That is correct. 

Mr. PITTS. The Federal Data Services Hub will have to route information to several agencies as well. Is that correct? 

Mr. GRAHAM. That is correct. 

Mr. PITTS. A check will occur with Homeland Security to verify 

residency as well. Is that correct? 

Mr. GRAHAM. That is correct. 

Mr. PITTS. The Social Security Administration will have to verify 

citizenship. Is that correct? 

Mr. GRAHAM. Yes. 

Mr. PITTS. The IRS will also check prior-year income. Is that 

right? 

Mr. GRAHAM. Yes. 

Mr. PITTS. If household income doesn’t match, CMS will check income verification with a private contractor. Is that correct? 

Mr. GRAHAM. Yes. 

Mr. PITTS. If the private contractor does not have data on file, 

CMS claims they will conduct an audit to check for eligibility. Is 

that right? 

Mr. GRAHAM. Yes. 

Mr. PITTS. Individuals with affordable employer-sponsored coverage are not eligible for a subsidy. There may have to be a phone 

call to an applicant’s employer to verify this. Is that correct? 

Mr. GRAHAM. There would be verification needed, yes. 

98 

Mr. PITTS. The exchange interface will show approved plan options upon the entering of application information. Is that correct? 

Mr. GRAHAM. Correct. 

Mr. PITTS. Then the beneficiary premium will have to be calculated correctly after the household income and size is considered. 

Is that correct? 

Mr. GRAHAM. Yes. 

Mr. PITTS. Paper documentation verifying information on the application may or may not be asked of the beneficiary. Is that correct? 

Mr. GRAHAM. Correct. 

Mr. PITTS. Treasury will be responsible for making sure payment 

is then sent to the plan. Is that right? 

Mr. GRAHAM. Correct. 

Mr. PITTS. Based on the application’s information, cost-sharing 

subsidies will be calculated based on actuarial value and payments 

will then be sent to plans accordingly. Is that correct? 

Mr. GRAHAM. Correct. 

Mr. PITTS. Overpayments and underpayments of subsidies will be 

dealt with during a reconciliation process, both for the plan. Is that 

correct? 

Mr. GRAHAM. Correct. There will be a reconciliation process 

afterwards. 

Mr. PITTS. Is there a similar reconciliation process for the beneficiary? 

Mr. GRAHAM. The beneficiary? What do you mean by that? 

Mr. PITTS. The tax credits for the individual. 

Mr. GRAHAM. So if an individual receives too many tax credits 

because they have reported incorrect or their income status 

changes throughout the year, there would be a reconciliation process. 

Mr. PITTS. And what happens if there is incorrect information? 

Mr. GRAHAM. So it is projected that if an individual receives too 

much subsidy based upon either the information they submit or the 

change in income throughout the year, then they would owe the repayment of whatever additional subsidy they receive throughout 

the year. 

Mr. PITTS. Would that clawback come back from the insurance 

companies or from the individual’s income? 

Mr. GRAHAM. It would come from the individual’s income. They 

would owe it. 

Mr. PITTS. Well, now, I don’t have much time left. I have just 

gone through 20 steps of the complexities associated with the ACA 

exchange enrollment. I am a little skeptical the system can actually 

function as advertised on October 1st, given the myriad of missed 

deadlines by the administration, and I am afraid this Rube Goldberg experiment will not end well. Trillions of taxpayer dollars are 

at stake, and it is our duty to watch this closely as we approach 

open enrollment. 

I wish I could go further but my time is up, and I will yield to 

the ranking member 5 minutes for questions. 

Mr. PALLONE. Mr. Chairman, because I didn’t have time before, 

I just wanted to respond to this notion that on the Republican part 

that somehow this letter that was sent out to navigators including 

99 

the Food Bank of Monmouth in Ocean County in my district was 

somehow an appropriate oversight function, which I don’t think it 

is. First of all, you should understand, and I can use the Food 

Bank as an example, that they have just begun the process of trying to sign up people who are uninsured that happen to come to 

the Food Bank, and normally when we have oversight functions, it 

is after the program has actually been implemented, not before it 

even begins. My concern is that this letter is solely designed to 

cause delay and to basically take resources away from the outreach 

effort of an organization like the Food Bank, and there has been 

no evidence that there has been any mishandling of these funds, 

particularly since most of the funds haven’t even been used. 

So when I say that that oversight function is inappropriate, it is 

because it is not consistent with what we usually do in the committee. We don’t usually start oversight and ask a myriad of questions before the program has even begun and before there is any 

indication that there is any kind of misuse of funds. So that is why 

I say strictly a delaying tactic and trying to intimidate these organizations such as the Food Bank from actually trying to sign up the 

uninsured. 

I wanted to ask two questions. We hear all this over-the-top criticism of the ACA and the implementation process from my Republican colleagues, and as a supplemental memo the staff released 

today shows the contractors here today are working hard to do a 

good job. But I just wanted to down the line and ask the contractors whether they agree or disagree with my characterization, and 

I will start from the left. Granting that there may be hiccups and 

unanticipated issues, are you on track to deliver on your contract 

and have things up and running, or is this whole implementation 

effort doomed to failure? I know you have sort of answered this so 

maybe I will just ask yes or no whether you are on track to deliver 

and have things up and running or you think it is hopeful. If you 

could just answer quickly, I will run down the line starting with 

Mr. Graham. 

Mr. GRAHAM. So Leavitt Partners is not—— 

Mr. PALLONE. You are not involved. OK. Ms. Kraus? 

Ms. KRAUS. We are not a contractor. 

Mr. PALLONE. OK. Then let us start with the contractors. 

Ms. CAMPBELL. So I am the first one on the contractor side. The 

answer would be yes, we are prepared. 

Mr. PALLONE. OK. 

Mr. LAU. Yes, Serco is prepared. 

Ms. SPELLECY. Equifax Workforce Solutions is prepared. 

Mr. FINKEL. QSSI is on schedule. 

Mr. PALLONE. All right. Thank you so much. 

And this is the reality. It simply doesn’t match up with my Republican colleagues’ over-the-top rhetoric. Those working to implement this law are doing difficult but important work. Not everything is going to go perfectly but we have an obligation to work together to make this law work for the American people, and obviously those who are the contractors are not having a problem in 

terms of getting up and running. 

So I want to ask a second question of Ms. Kraus, if I could. My 

Republican colleagues seem intent on using this hearing to argue 

100 

that the Affordable Care Act is not ready to be implemented. They 

are looking for the smallest missed deadline, using any indication 

of difficulty of this task to argue that implementation is failing, 

and I think again we need to put this in perspective. Whatever implementation hiccups or glitches we see from here, the negative effects will be nothing, in my opinion, compared to the harm governors around this Nation are doing to their citizens by rejecting 

the ACA’s Medicaid expansion. So Ms. Kraus, can you put this in 

perspective for us? What can you tell us about the very harm your 

State’s decision not to expand Medicaid is going to have and how 

does that compare to, say, a week’s delay in testing IT readiness? 

Ms. KRAUS. Thank you. So just to put it in perspective, so on October 1st, there will be approximately 400,000 Pennsylvanians that 

will not have access to health insurance. They will not be able to 

get tax credits on the exchange. They can’t qualify for health insurance now. So they are going to continue to be forced to go to Pennsylvania’s emergency rooms. Hospitals as part of the Affordable 

Care Act are facing cuts in uncompensated care, and in Pennsylvania, hospitals face about $1 billion a year in uncompensated care 

costs, and they are still going to have to pay for that. In addition, 

you know, the economic benefits to Pennsylvania by accepting Federal funding is huge. We are looking at, you know, $3 billion a year 

in increased economic activity. Our own independent fiscal office, 

which is a nonpartisan group, looked at it. We are looking at, you 

know, being able to create 40,000 jobs in Pennsylvania each year 

alone from Medicaid dollars and, you know, Pennsylvania taxpayers are going to continue to have to shoulder the costs of uncompensated care and paying for folks that end up in the emergency room. So as we look forward to October 1st, this is going to 

cause a big problem for 400,000 Pennsylvanians. 

In terms of IT infrastructure, we have 1.2 million uninsured in 

Pennsylvania, about 1.1 million will qualify for the exchange, and 

Medicaid expansion, if we go down that road, these are folks that 

have been uninsured, you know, for a long time, have been shut 

out of the market because they have a preexisting condition, and 

these folks are just counting down the days until October 1st. Their 

survival counts on it. Right now they have to choose between, you 

know, feeding their family or figuring how to pay medical bills. We 

hear all the time from clients who, you know, have ended up in the 

emergency room. They don’t have health insurance. They have 

huge bills. They don’t know how they are going to pay them and 

they don’t know where they are going to turn next. So on October 

1st, they will be able to start the process of making sure they have 

financial security and nothing like this happens. 

Mr. BURGESS. [Presiding] Great. Let us wrap it up there. The 

gentleman’s time is expired and now recognize myself for 5 minutes 

for questions. 

Mr. Lau, your contract was awarded on July 1st of this year. Is 

that correct? 

Mr. LAU. Yes, Congressman. 

Mr. BURGESS. So on July 2nd, things changed, didn’t they, as far 

as the employer mandate was concerned? 

Mr. LAU. Correct, yes. 

101 

Mr. BURGESS. So were you prepared for that contingency? Was 

this something that had been discussed as you were tendering that 

contract? 

Mr. LAU. Well, at that stage, we were prepared because we 

hadn’t—we were just really getting started then. So there was not 

a change of course that was required. 

Mr. BURGESS. Had you been to the White House and talked to 

the administration about some of these changes that they were contemplating? 

Mr. LAU. No, Congressman. 

Mr. BURGESS. Ms. Campbell, let me ask you, at any point have 

you or CGI been to the White House to discuss the potential 

changes that were coming to the Affordable Care Act, the contingency plans that they were laying? 

Ms. CAMPBELL. No, sir, we have not. 

Mr. BURGESS. And Mr. Lenz, how about yourself? 

Mr. LENZ. Well, we are not contractors, sir, so we have had discussions with the administration with respect to the employer mandate but not with respect to implementation of the infrastructure. 

Mr. BURGESS. But in regards to the employer mandate, what 

were those discussions? 

Mr. LENZ. Well, our group in particular had tremendous concern 

about implementation and specifically around the definition of who 

is a full-time employee, given the unique nature of our workforce— 

lots of people that come and go. Their work patterns are unpredictable and uncertain, and at least in that respect, the administration 

acknowledged that that posed significant problems, not just for employers but also for the administration of the program. So we were 

able to agree on a look-back rule. The administration was accommodating in that respect. But as I noted in my opening remarks, 

it is not the whole—it doesn’t answer all of the questions. We still 

have lots of questions relating to reporting, how the premium tax 

credits will be administered and so on. 

Mr. BURGESS. These meetings at the White House, when did they 

occur? 

Mr. LENZ. Well, they were—I wouldn’t say they were at the 

White House. They were with the agencies that are responsible for 

the development of the rules, primarily treasury. 

Mr. BURGESS. Did you talk to them during the month of June? 

Mr. LENZ. I can’t recall whether we actually spoke to them in 

June. We had several meetings with them. 

Mr. BURGESS. Mr. Lau, let me go back to you. Your contract is 

a cost-plus arrangement. Is that correct? 

Mr. LAU. That is correct. 

Mr. BURGESS. And because of the changes that have occurred, 

well, if I am doing the arithmetic correctly, this will represent 

about 10 percent of your business. Is that correct? 

Mr. LAU. The employer postponement? Is that what you are—— 

Mr. BURGESS. No, no, just your contract. 

Mr. LAU. Oh, with this—I don’t know the exact percentage for 

Serco. You may well be correct. 

Mr. BURGESS. You record a cost, or your contract price was $114 

million. 

Mr. LAU. Base year, yes, sir. 

102 

Mr. BURGESS. And your annual revenues are about $1.2 billion? 

Mr. LAU. That is close to 10 percent, yes, sir. 

Mr. BURGESS. So this is a big deal for you all? 

Mr. LAU. It is certainly a big deal, yes. 

Mr. BURGESS. And, I mean, does it concern you that as you—I 

mean, you are working through a highly complex set of circumstances. Does it concern you that things seem to be changing? 

Mr. LAU. I think that things generally tend to change in complex 

programs like this. I have been doing these for 30 years. The company itself has lots of experience, and the one thing we know is 

that change is a constant, and sometimes the pace of that change 

increases as you get closer to the deadline. 

Mr. BURGESS. See, and this is what—— 

Mr. LAU. We are prepared to accommodate and adjust to whatever changes. 

Mr. BURGESS. But look, at the committee level, we invite members of the administration in. We expect to get answers to our 

questions, and the question about contingency plans, and what are 

you doing to deal with the complexity of this program, really, we 

get no answers, so your responses today are really the first that we 

have heard that the administration is in fact or the agency is in 

fact considering the fact that things may not be exactly as they 

think. 

Mr. Graham, let me just ask you a question because you used a 

word that I had actually used in questioning Mr. Cohen from the 

Office of Consumer Information and Insurance Oversight. You used 

the word ‘‘de-scoping.’’ Is that something that you have encountered in your study of this? 

Mr. GRAHAM. Yes. In fact, many of the State-Based exchanges 

have been very public in their intent. Some of the earliest ones 

were messaging their plan to de-scope as early as April, so it is the 

right thing for them to do, given where they are. 

Mr. BURGESS. Yes, I don’t disagree with that, but again, Mr. 

Cohen, in response to a direct question at the end of April, said no 

de-scoping, no delay. 

My time is expired. Let me recognize Mr. Green for 5 minutes 

for questions, please. 

Mr. GREEN. Thank you, Mr. Chairman. 

I appreciate our panel being here today because of our oversight 

effort on the law now, and coming from Texas, it is really important because we have a national plan. Our State decided not to 

participate. 

One of the things I want to talk about is, the Affordable Care Act 

sets important nationwide standards on insurance plans and 

makes financial assistance available to those who need it, but the 

law preserves the State’s primary role in regulating your insurance 

markets. The law was designed to be a floor and not a ceiling for 

consumer protections in the insurance market. It encourages States 

to set up their own health insurance marketplaces and tailor rules 

and regulations for them. 

But many States, including my own, have decided to turn over 

control of their health insurance marketplace to the Federal Government. Handing the keys to the Federal Government seems to be 

a strange way to be pro-States’ rights, but that is their option. In 

103 

contrast, States like Maryland and California have been running 

their own marketplaces and working to implement the law and 

have driven down insurance premiums, expanded options for small 

businesses and helped simplify cost sharing and deductibles. 

Ms. Kraus, what benefits can States realize by taking a more active parting implementation and setting up their own marketplaces, and how would things look in your State if they were taking 

a more active role? 

Ms. KRAUS. Thank you, and like Texas, Pennsylvania has decided to default to the Federal Government. In doing that, we have 

given up a lot of flexibility and we have really been slow to move 

forward. For example, we were the 40th State to submit our plans 

to integrate our IT. We submitted it after the deadline was passed, 

so that is slowing up the process in Pennsylvania. We have seen 

other States go above the Affordable Care Act standards. Oregon, 

for example, went above the requirements of the ACA in terms of 

rate review. This year they brought in $69 million from waste, 

fraud and abuse at looking at insurance plans in the marketplace 

in 2014. Other States have done things to strengthen their essential health benefits package. We defaulted to a larger small group 

plan. States have, you know, defined rehabilitative services, providing, you know, consumers with greater protection with disabilities. So we have really passed up the ability to be innovative and 

creative and really craft a marketplace that would work best for 

Pennsylvania. 

Mr. GREEN. I want to ask you about fraud and subsidies. We 

have heard this the last few weeks—in fact, the House may be voting tomorrow on it—about a particularly offensive attack we heard 

recently on health reform that the health insurance subsidies will 

be rife with fraud. Marketplaces will have robust verification of 

consumers’ income before they receive any financial assistance, and 

the IRS will make sure no one receives excess subsidies when taxes 

are filed at the end of the year. There are penalties for perjury for 

lying to get these benefits, and the ACA even added new penalties 

for providing false information on the application. And yet we still 

hear what I consider slander of the hardworking people who get a 

little help from these programs are really just fraudsters trying to 

get benefits they aren’t eligible for. 

Ms. Kraus, you worked with many folks who might need a little 

assistance from these important public programs. These people, are 

they just people looking for a free lunch or are they actually willing 

to commit fraud to get it? 

Ms. KRAUS. No. I mean, look, the majority of folks that would 

qualify in Pennsylvania for Medicaid expansion, about 80 percent 

of them have one full-time worker in a job. They are just trying to 

get health insurance to protect them and their family. I think you 

pointed out, HHS has been very clear in setting up guidelines on 

protection against fraud and penalties for navigators that choose to 

not have security standards in place. If we look at how folks apply 

for health insurance today, you have to hand over an array of your 

health history, very private data. An insurance company can decide 

whether or not you have health insurance. Going forward, it is income, it is age and geographic location. So, you know, to me, that 

104 

is a lot safer than handing over very personal, detailed health insurance records. 

Mr. GREEN. Well, as we know, October 1st, States like Pennsylvania and Texas, we are going to have a national plan with no 

State input. I am not familiar with Pennsylvania law but I know 

as a former State legislator in Texas, we tried to get, for example, 

80 percent of the premium by statute. Does Pennsylvania have 

anything on a State level that requires a certain amount of premium to go back to benefits like the Affordable Care Act does? 

Ms. KRAUS. No, we don’t, so the Affordable Care Act actually 

makes sure that, you know, Pennsylvania consumers are protected, 

and I think in Pennsylvania, the average Pennsylvania consumer 

saw about $200 in a rebate this year from refunds from insurance 

companies that did not spend 80 percent on actual care. 

Mr. GREEN. Well, I appreciate that because that is one of the 

things I hear from employers, particularly small businesses, by 

going to their exchanges and they can starting October 1st but they 

will be able to make sure that at least 80 percent of their premium 

dollar will come back to benefits. 

Ms. KRAUS. Correct. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. BURGESS. The gentleman yields back his time. The Chair 

now recognizes the gentlelady from Tennessee 5 minutes for questions, please. 

Mrs. BLACKBURN. Thank you, Mr. Chairman, and thank you all 

for being here and for your testimony and allowing us to do the due 

diligence that our constituents expect from us. 

Mr. Lenz, I would like to come to you, if I may, sir. 

Mr. LENZ. Yes, ma’am. 

Mrs. BLACKBURN. We have all been in our districts for 5 weeks, 

and I have to tell you, not a single day went by that I did not hear 

from employers or employees and hearing about changes, reductions in benefits, uncertainty, confusion, and you know, they say, 

well, the employer mandate, that delay for a year still doesn’t take 

away that underlying requirement. We know that it is still there 

and it is going to be affecting jobs and job creators. All these mandates seem to just have a crushing effect. I met this morning with 

a group of business leaders from another State, and when I said 

our goal is to delay, defund, repeal, replace Obamacare and find 

something workable, they broke into applause because in their 

State, just like in mine, it is a huge problem. 

So what I would like for you to do is take just a few seconds and 

expand on your testimony and kind of connect for us how the 

Obamacare requirements on employers are causing the job market 

to contract and not to grow. 

Mr. LENZ. Well, thank you, Ms. Blackburn. We do represent a 

specific group of employers and a specific concern in regard to what 

we sometimes refer to as variable-hour employees, that is, temporary, part-time employees who work patterns are intermittent, 

unpredictable, short term and so on. They present unique challenges under the statute. We certainly recognize that there is general concern on the part of employers about implementation, and 

we have addressed some of that in our own testimony, but I would 

have to confine my comments to the unique circumstances of our 

105 

particular workforce, and there are lots of them. As I pointed out, 

there are upwards of 30 million employees that are in that category, and so we have made some progress, I think. We recognize 

that it is the law and that we are compelled to comply with it but 

we still have major concerns about implementation, the timing of 

it, and as you pointed out, the fact that the employer mandate has 

been delayed a year does not mean that we don’t have to be ready 

now. In fact, we had to be ready yesterday and 6 months ago, and 

we weren’t and couldn’t in large because rules weren’t out that we 

could rely on, in particular, regarding the reporting rules. Now, 

they just came out last week and we are scrambling to look at 

them and to digest them. We were somewhat disappointed to see 

that some of the suggestions that we had urged that had not been 

adopted for various reasons, and we understand that there is lots 

of complexity associated with it, but it doesn’t relieve the fact that 

we have major concerns about implementation on January 1st of 

this coming year, not 2015, because all these software programs 

have to be in place, up and running, so that employers can begin 

to track hours now in order to know who they have to offer coverage to on January 1, 2015. So this has been an ongoing problem 

in trying to get certainty and answers as to how we need to operate 

in order to comply. 

Mrs. BLACKBURN. Thank you. 

Mr. Lau, I want to talk with you a minute about Serco. You 

know, you are talking about the data you have got to start holding 

now in order to be ready on January 1, 2015, and then as you look 

at the amount of information on your employees. Well, one of the 

main problems that we hear about from our constituents, the main 

concern is the lack of privacy that they are going to have, and their 

lack of faith that people are going to be able to protect that personally identifying information and the fear that some of that could be 

used against them. So what kind of provisions are you putting in 

place? 

Mr. LAU. Well, Serco has a very comprehensive privacy and security program beginning with security of the facility, thorough background checks on each and every employee that will work there, 

compartmentalization of the roles and functions of the employees, 

role-based security so that employees can only see certain parts of 

an applicant’s record. We deal with no personal health information. 

None of that is there. It is PII mostly. We also have extensive 

training, a cultural background to instill in all of our workers respect for the information and the fact that it represents very personal information of people and citizens. In addition, there are a 

number of technological components as well in compliance with 

Federal information security standards and NIST standards and 

things like that so there are firewalls and other preventions. So the 

networks are not accessible to the Internet. They are point-to-point 

networks and so there is just layer after layer of security in place. 

Mrs. BLACKBURN. Thank you. Yield back. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the gentlelady from the Virgin Islands, Dr. Christensen, for 5 minutes for questions. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman, and thank the 

panelists for being here this morning. 

106 

I want to focus on some of the concerns that Mr. Butterfield 

raised earlier. Mr. Graham, in your testimony you described consumer outreach as being very important. As a matter of fact, it is 

one of your four key areas of concern. By consumer outreach, I assume you mean advertising, public events and the navigator program and similar efforts to inform the public about their new insurance options in the exchange. Is that correct? 

Mr. GRAHAM. That is correct. When I say outreach, I mean just 

going out in the community and making consumers aware of their 

choices so that they might make the optimal choices for themselves. 

Mrs. CHRISTENSEN. And is it also important to make sure that 

the largest number of young people and healthy people are also engaged, taking advantage of the exchange so that the cost might be 

lower? 

Mr. GRAHAM. One of the changes that the ACA brought about 

was clearly how risk pools would be created, and as the risk pools 

are created, certainly, as with any insurance product, it is necessary to have a broad spectrum of individuals in that pool. And 

so if the exchanges were not able to attract those individuals, there 

would be problems in subsequent years. 

Mrs. CHRISTENSEN. And so you would agree that States that are 

not doing the consumer outreach and education are likely to see 

higher costs than those who are more active? 

Mr. GRAHAM. Well, when you say higher costs, higher costs overall or higher costs—— 

Mrs. CHRISTENSEN. Of the premiums. 

Mr. GRAHAM. Of the premium? So they run the risk of having not 

attracted the right risk pool or everyone into that risk pool and so 

having premiums be higher in subsequent years. 

Mrs. CHRISTENSEN. And Ms. Kraus, you agree also? I am sure 

that consumer education efforts are important to make this law 

work properly? 

Ms. KRAUS. Yes, correct. 

Mrs. CHRISTENSEN. You know, it is good to see that witnesses invited by both Democrats and Republicans agreeing on something 

this important. I think it is unfortunate that the Republicans are 

attacking the HHS for investing in efforts to inform the public, and 

it is even more unfortunate that they are working to undermine 

the civic and community groups that are going to be doing some 

of that consumer outreach, and I hope we can agree, just as President Bush did with Medicare Part D, a robust consumer outreach 

and education campaign for these new insurance options is important, and we should all get behind it. 

I remember when we passed Medicare Part D. It was not the 

Democrats’ version of the bill. It created a donut hole that didn’t 

treat the territories equitably, and yet I went out across my community to do outreach to ensure that people understood the bill 

and engaged our foundation in doing a lot of outreach across the 

country. And, you know, I think that is that the we ought to go instead of trying to undermine the law and unfund the law that is 

already helping individuals across the country. 

Ms. Kraus, I was in Pittsburgh about 2 weeks ago at a women’s 

conference and heard firsthand and personal the issues of health 

107 

disparities and lack of insurance in that community, and it is extremely unfortunate that Medicaid expansion is not going to be accepted even, as you have said, when it creates jobs, helps the economy in Pittsburgh and of course provides services to many—this is 

a women’s conference who are uninsured in the area. 

I think, you know, that really was the question that I wanted to 

ask, Mr. Chairman, and I will yield back the balance of my time. 

Mr. PITTS. The Chair thanks the gentlelady and recognizes the 

gentleman from New Jersey, Mr. Lance, 5 minutes for questions. 

Mr. LANCE. Thank you, Mr. Chairman, and good morning to the 

panel. 

Mr. Graham, as I understand it, under the law, States will be 

responsible for accepting application transfers from an exchange 

where Medicaid eligibility needs to be determined. There has been 

some systems testing of such transfers where in fact Medicaid eligibility is valid. However, testing has not been completed for cases 

where Medicaid eligibility cannot be determined for various reasons including an incomplete file. From your perspective, Mr. 

Graham, has there been sufficient testing with the States, and if 

not, what are some of the financial risks to the States? 

Mr. GRAHAM. So the question about has there been sufficient 

testing, one of the key things here is that it is different in every 

State so that some States are further along in testing, and certainly more testing would be more beneficial. The risks of not having testing completed or if something doesn’t work as plan is really 

delay: delay for the consumer and delay for enrollment. So in those 

instances where things cannot be done in an automated or electronic way, then physical documents have to be faxed in or brought 

in in some form or fashion and interaction has to occur with the 

consumer that delays the actual process to be able to become enrolled. So the risk is delay. 

Mr. LANCE. And can you estimate how long that delay might be? 

Mr. GRAHAM. We know that HHS is required to be able to actually, in instances where it goes to a manual system or has information brought in, it has a 90-day review period. So that is what the 

law requires. I can’t estimate in terms of how long things might go 

out should there be challenges in Medicaid and HHS. 

Mr. LANCE. It would be my suspicion at least that it will be 

longer than 90 days. Do you share that suspicion? 

Mr. GRAHAM. I think delays tend to be longer than we originally 

expect. 

Mr. LANCE. Can you tell us, perhaps you don’t know this, which 

States have done a good jobs so far in this regard and which States 

need to do a better job? 

Mr. GRAHAM. I would be happy do that offline for you in terms 

of getting into specifics with States. 

Mr. LANCE. Thank you, Mr. Chairman, and am willing to yield 

my time to anyone who would like it. Dr. Burgess? 

Mrs. BLACKBURN. If the gentleman would yield? 

Mr. LANCE. Whatever time the gentlelady would like. 

Mrs. BLACKBURN. Just a couple of minutes. Adding to your question, which I think was a great one on detailing the States, and you 

said you would talk with the Congressman offline. I wish that you 

108 

would submit that in writing so that it could be put into the record 

of the committee, and I yield back to Mr. Lance. 

Mr. LANCE. Thank you. Is there any other member on our side 

who would like—— 

Mr. PITTS. If the gentleman would yield? 

Mr. LANCE. Absolutely. I certainly will, Mr. Chairman. 

Mr. PITTS. Mr. Lenz, I had another question. In my opening 

statement, I mentioned that Eastern Lancaster County School District, Penn Manor School District in Lancaster, Pa., both announced that they were outsourcing some employees to avoid the 

cost of complying with the ACA’s employer mandate. The school 

districts simply cannot afford to pay for the additional expenses 

covering these individuals. Are you hearing similar stories or anecdotes like these from members of your coalition due to the ACA? 

Mr. LENZ. Yes, we are hearing questions being raised as to 

whether businesses or entities that would otherwise be subject to 

the ACA would try to outsource some of their workers in order to 

avoid the rules. It is not clear how that is actually going to play 

out because the responsibility for employer coverage is going to be 

determined based on common law employer rules. So it really ultimately will be a legal question as to who the responsible employer 

is. We have addressed that at great length to our members of the 

American Staffing Association. I am not speaking on behalf of E– 

FLEX now but temporary staffing firms are in the business of supplying employees to other businesses that require temporary help 

or other contract help, and so there are questions in those so-called 

third-party employment relationships who is the actual employer. 

Our view is, if the temporary staffing firm, for example, is offering 

or providing compliant health care coverage, it shouldn’t ultimately 

matter who technically the common-law employer is as long as the 

arrangement is not being used to circumvent the law. But those are 

technical questions. In some cases they raise thorny issues but they 

remain to be addressed as we go along. 

Mr. PITTS. Thank you. The gentleman’s time is expired. The 

Chair now recognizes the gentlelady from Florida, Ms. Castor, 5 

minutes for questions. 

Ms. CASTOR. Thank you, Mr. Chairman, and thank you to the 

panel. This is an important time in the enrollment, or in the implementation of the Affordable Care Act, particularly with the online 

marketplaces about to come online in the open enrollment period 

that will run October to March. In my home State of Florida, it is 

particularly important. The U.S. Census Bureau reported over the 

last couple of weeks that 25 percent of the population in the State 

of Florida is uninsured. That is about 3.8 million individuals. Now, 

most people have insurance, and if you have insurance, you want 

other people to have insurance because otherwise you are going 

to—part of your copayment and premiums is going to go to subsidize folks who do not have insurance, and if you have insurance 

today, you have already seen the benefits of the Affordable Care 

Act. In essence, you have new rights. You cannot be discriminated 

against for preexisting conditions. You cannot be kicked off your 

policy if you get sick. In the greater Tampa Bay area, we already 

have almost 50,000 young adults who have been able to stay on 

their parents’ policies. That is very positive. Over 200,000 small 

109 

businesses in the State of Florida are eligible for the new tax credits. That is very meaningful in a State that has so many mom-andpop small businesses. 

One of my favorites for folks who have insurance today is the 

fact that just in the greater Tampa Bay area, over $47 million has 

come back into the pockets of families due to the new requirements 

that 80 to 85 percent of your premiums and copays have to go to 

health insurance. So rebates have come back to about a million 

people just in my greater community. 

But what concerns me now is that we are not all working together to address the flaws and improve the Affordable Care Act. 

Instead, we continue to run into obstruction. Last month, Ranking 

Member Waxman and the Democrats on this committee released 

an analysis describing 10 ways that Republicans have acted to undermine and obstruct the Affordable Care Act. That in addition to 

the 40 repeal votes that have taken up precious time here in the 

House this session. That is a waste of time. We have got to be 

working together on this. And then when you look across at the 

States, Republicans Governors, including mine, some have refused 

to take the Medicare expansion in the State of Florida. That means 

that our hard-earned tax dollars that Floridians have paid are 

most going to come back to our State, $50 billion over the next 10 

years. That is not smart. That is not in the public interest. 

But I wanted to highlight to my colleagues today the one that 

takes the cake, the one that wins the ideology over the public interest award, and that is the fact that in the State of Florida, the Republican legislature passed a law to actually remove State oversight and regulation of insurance companies and their rates. When 

Secretary Sebelius was in Florida a few weeks ago, she said she 

knew of no other State that had gone this far. The States still have 

the authority to negotiate and regulate insurance rates. So in this 

effort to elevate ideology and obstruction over the best interests of 

my neighbors, they now have taken the cops off the beat to regulate insurance rates. I want to know if anyone on this panel thinks 

that that is in the best interest of our businesses and consumers. 

I didn’t think so. I haven’t heard of anyone outside of the Republican legislature and our Governor, even if they don’t like 

Obamacare and the Affordable Care Act, that thinks it is reasonable for the State to put insurance companies in charge of where 

the rates go. I really think it is a shame, and like I said before, 

if you have insurance, you want other folks to have insurance. 

Ms. Kraus, I would like to ask your perspective on these Republican efforts to undermine the law. What kind of impact are they 

having on the implementation in your State? I can tell you in my 

State, it is very problematic. 

Ms. KRAUS. Yes, I mean, I just to emphasize this again and really hit this home. Medicaid expansion is huge, and when we have 

400,000 people with health insurance, and that affects every single 

person. It affects, as you said, the folks that have health insurance, 

we are paying for that, and we are going to continue to have to pay 

for that. Like Florida, Pennsylvania’s tax dollars are going to be 

thrown out the window to pay for health insurance coverage in 

other States. We are an island of no amongst other States. Our 

110 

neighbors, New Jersey, Ohio, Maryland, they are all moving forward with Medicaid expansion. 

Ms. CASTOR. Thank you, and I yield back. 

Mr. PITTS. The Chair thanks the gentlelady. The Chair now recognizes the gentleman from Louisiana, Dr. Cassidy, 5 minutes for 

questions. 

Mr. CASSIDY. Thank you, Mr. Chairman. 

Mr. Graham, earlier there was a question suggesting the possibility of fraud in this arrangement where there wouldn’t be income 

verification was merely a straw horse—straw man. I understand 

that under the earned income tax credit, it is estimated that 21 to 

25 percent of the payments are fraudulent, and that is when they 

totally integrated hub with the IRS. Now, are you as comfortable 

that in States like California where it is going to be self-attestation 

with no verification by the IRS that the level of fraud will be less, 

or what is your perspective as to what is going to happen? 

Mr. GRAHAM. I am not an expert to project on what the fraud 

may or may not be. I will just say that in areas where the systems 

testing hasn’t been completed or hasn’t done to the full extent that 

it was originally intended to or needed, that the potential for fraud 

exists. 

Mr. CASSIDY. And knowing that we are all sinners and fall short 

of the glory of God, it seems reasonable that there could be some 

fraud? 

Mr. GRAHAM. That is a reasonable expectation. 

Mr. CASSIDY. I mean, it is almost laughable to say that there 

won’t be, and there is going to be a trillion dollars spent on the 

health insurance exchanges over the next 10 years. The Federal 

taxpayers are about to get whacked. 

Ms. Campbell, you mentioned that everything is kind of going 

well as regards a baseline, but it is my understanding that the systems have not included foreign-language support, and yet I have already read that the hope to get the big numbers, the young men 

who currently are not insurance but will theoretically pay three 

times the market rate in order to participate in the exchange, will 

rely on people who are minorities, many of whom will not have 

English as a primary language. So that said, is it true—I mean, 

you tell me, I don’t know—are the exchanges robust in terms of 

their ability to support folks for whom English is not a primary 

language? 

Ms. CAMPBELL. So Spanish is part of the rollout for implementation. 

Mr. CASSIDY. But is it ready? Is the Spanish—put it this way. If 

I was a primary Spanish speaker, would I be able to log on and 

have a seamless experience as regards my ability to interface with 

the forum? 

Ms. CAMPBELL. For the online application, yes. 

Mr. CASSIDY. And what about Vietnamese? 

Ms. CAMPBELL. I don’t have an answer for that but I can get 

back to you. 

Mr. CASSIDY. That would be great. Chinese, Mandarin? 

Ms. CAMPBELL. I have an answer for the Spanish version. I can 

get back to you with the other dialects. 

111 

Mr. CASSIDY. OK. So for these other folks who perhaps are not 

currently insured in Orange County, which I gather Orange County 

has the greatest concentration of Vietnamese outside of Vietnam 

may not be quite ready. Now, granted, a lot of those folks speak 

English, but still I am a little interested. 

Mr. Lenz, I have heard the President’s health care law described 

as one of the most significant anti-growth policies that have been 

passed by Congress. I am proud to say I voted against it. And that 

we continue to see a declining unemployment rate but only because 

people are dropping out of the job market. The total number of jobs 

is actually terrible. It is just that people are no longer looking for 

work. 

Now, you described something along those lines. The businesses 

that you represent, do you say that they are encouraged to grow 

by this law or perhaps they are otherwise encouraged? 

Mr. LENZ. Well, it is almost cliche ́ to say that businesses don’t 

respond well to uncertainty and higher costs have an impact on 

hiring. Those are just basic business truths. I think our members 

believe that. I think we are particularly concerned about the definition of full-time employee as we mentioned. The 30-hour definition 

we think is not working well and is having perverse economic impacts already. 

Mr. CASSIDY. And if I may interrupt, also, when I speak to small 

business owners, she will tell me that she is spending so much 

thinking about this law, she is not actually thinking about how to 

expand her business. She is trying not to run afoul of the Federal 

Government as opposed to where do I next open up. Is that a fair 

statement? 

Mr. LENZ. Well, let me just say on behalf of the American Staffing Association, which represents temporary staffing companies, 

the great majority of which are small business owners, we have 

lots of employees that come and go but most of them are small 

businesses by anybody’s reckoning. There is tremendous anxiety 

about enforcement, very much confusion because of the complexity. 

Mr. CASSIDY. So it is fair to say, if they are confused, conflicted, 

whatever, then it is fair to say that they are not thinking as much 

about expanding their business? 

Mr. LENZ. I think that is a fair statement. 

Mr. CASSIDY. Lastly, let me just make the point, Ms. Kraus, you 

have been very wonderful about how Pennsylvania is going to benefit from this, but let me just say that Pennsylvania’s small group 

market has a projected 27 percent increase in their premiums, that 

Pennsylvania’s individual market, one insurer predicted an average 

increase of 30 percent in the individual market, males facing premium increases of 11 to 63 percent. Heck, it doesn’t seem as good 

for the law in Pennsylvania if you are that male getting a 63 percent in your premium. 

Ms. KRAUS. Well, I mean, I think a couple of things. First, when 

we talk about small businesses, we have to remember that small 

businesses with 50 or fewer employees are exempt from having to 

offer health insurance coverage, and I think when you go out—— 

Mr. CASSIDY. So your only salvation is that you are exempt? 

Ms. KRAUS. No, but I think when you go out and talk to small 

businesses, a large concern is, you know, the cost of health insurVerDate Aug 31 2005 15:36 Mar 24, 2014 Jkt 037690 PO 00000 Frm 00115 Fmt 6633 Sfmt 6633 F:\113-80~1\113-80~1 WAYNE
112 

ance. We have seen health insurance costs rise astronomically over 

and over for years before the Affordable Care Act, and for the first 

time in history, insurance rates have slowed, and this year they 

only grew by 4 percent. So I think this is going to start to help 

small business owners that can now pull their power together and 

get coverage that is offered—— 

Mr. CASSIDY. Based on what the insurers say, it seems more an 

article of faith. It is a hope. It doesn’t seem to be what the insurers 

are saying. 

I am out of time. I yield back. Thank you. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the ranking member of the full committee, Mr. Dingell, for 5 minutes for questions. 

Mr. DINGELL. Thank you, Mr. Chairman, for holding this hearing, and thank you to our witnesses. 

First of all, I welcome the opportunity to hear from our witnesses 

today about the progress of ACA implementation. One misconception that seems to be a big one is the data hub. These questions 

are for Mr. Finkel of Quality Software Services Inc. Mr. Finkel, 

these are yes or no questions. QSSI has a contract with CMS to 

work on what is known as the data hub. Is that correct? Yes or no. 

Mr. FINKEL. Yes. 

Mr. DINGELL. Now, Mr. Finkel, we have heard from some that 

the data hub will be this new government database with personal 

medical information. Is this an accurate characterization of the program? Yes or no. 

Mr. FINKEL. No. 

Mr. DINGELL. Would you submit for the record what is a correct 

representation of the circumstances, please? 

Mr. FINKEL. Yes. 

Mr. DINGELL. All right. Now, instead, is it fair to say the data 

hub is technological tool to help facilitate the transfer of data between government agencies? Yes or no. 

Mr. FINKEL. Yes. 

Mr. DINGELL. Now, will data hub handle personal medical 

records at all? Yes or no. 

Mr. FINKEL. No. 

Mr. DINGELL. Mr. Finkel, will the data hub be up and running 

3 weeks from today on October 1? Yes or no. 

Mr. FINKEL. Yes. 

Mr. DINGELL. Could you please submit for the record a summary 

of the functions of data hub that may relate to an earlier question 

I asked? Could you do that for me, please, sir? 

Mr. FINKEL. We will work with the committee on that. 

Mr. DINGELL. Very good. Work with me. This committee might 

not be quite as helpful. 

The next questions are for Mr. Lau of Serco. Mr. Lau, does Serco 

have experience in handling applications and records management 

for government agencies? Yes or no. 

Mr. LAU. Yes. 

Mr. DINGELL. CBO has estimated that 6.2 million paper applications will be submitted between October 1, 2013, and March 31, 

2014. Does Serco have the capability to handle this large amount 

of paper application? Yes or no. 

113 

Mr. LAU. Yes. 

Mr. DINGELL. Now, Mr. Lau, how many people has Serco hired 

to work on this CMS contract? 

Mr. LAU. To date, 1,200. The plan is for about 2,000 by October 

1st. 

Mr. DINGELL. Now, if you want to submit for the record, it would 

be appreciated. 

Now these questions are for Ms. Spellecy of Equifax. Ms. 

Spellecy, will Equifax get prior consent from a consumer before 

conducting an income verification report on that individual? Yes or 

no. 

Ms. SPELLECY. CMS will obtain the consent first, yes. 

Mr. DINGELL. Thank you. Now, does this practice go above and 

beyond what is required of Equifax under the Fair Credit Reporting Act? Yes or no. 

Ms. SPELLECY. Yes. 

Mr. DINGELL. Now, has Equifax done testing of your income 

verification systems with data hub and the State exchanges? Yes 

or no. 

Ms. SPELLECY. Yes. Now, will income verification services provided by Equifax be ready in 3 weeks when the marketplaces are 

open or rather are available for open enrollment? Yes or no. 

Ms. SPELLECY. Yes. 

Mr. DINGELL. Now, I want to thank you all for your testimony. 

This is a critical time in our history. The American people are 

counting on us. When I was back home in Michigan just recently, 

my constituents weren’t asking me political questions about the Affordable Care Act. They wanted to know where and how to sign up 

for quality, affordable health care that will help their families and 

their small businesses. We have only 3 weeks before the marketplaces open. The time for political games is over, and it is time for 

this body, the Congress, and the Senate, to quit playing games. It 

is also time for us to understand that we have to work together. 

The law is the law, and ACA is the law of the land, and frankly, 

we should all be working together to ensure that implementation 

goes smoothly as possible in the interest of seeing to it that we 

don’t waste hundreds of millions or perhaps billions of dollars that 

has been spent so that and that we don’t dissipate our opportunities to see to it that the American people can get a chance to see 

to it that health care is a matter of right, not a privilege just for 

those who are well-to-do, and I would observe that working men 

and women need this legislation. It is something which will help 

them to live a better quality of life and will improve medical care 

all across the board. I would also note that it is saving money for 

everybody in sight, and if we will just give it a chance and work 

together, I believe the country will be better off for it. I thank you, 

Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you, Mr. Chairman, and I appreciate it 

very much. I appreciate all the witnesses being here. As you might 

gather, Mr. Dingell and I do not agree on this point although I respect him greatly and appreciate his contributions over the many 

decades to this committee, and obviously whenever you have a law 

114 

on the books, it is Congress’s obligation to review it and make sure 

it makes sense, and each Congress has a separate obligation to do 

that, and we come to somewhat different conclusions. 

Mr. Lenz, I noticed with some interest on your summary of major 

points, your very last point, you said it would impose a major administrative burden on employers and result—referring to the 

large employer auto-enroll requirement—and result in an unexpected payroll deduction for many employees who do not want it 

or need coverage. Am I to assume that you are referring to perhaps 

the husband whose wife has a much better plan with her employer 

and now he is going to be automatically enrolled, albeit his wife 

has a better plan and already has a family plan for them and their 

children? Is that the type of thing you are referencing? 

Mr. LENZ. That would be one example. 

Mr. GRIFFITH. And would another example be the one that a constituent came to me with last year or a similar situation where a 

student, full-time enrolled in college, also held a full-time job and 

through the Affordable Care Act was forced off of their parents’ 

plan because they were eligible through their employer and then 

they ended up having to spend more money because obviously 

being part of a family plan with their parents, it was free, but now 

because they were doing what I hope my kids will have the fortitude to do, carry a full-time load at school and a full-time job, it 

ended up costing them several thousand dollars a year. Would that 

be another example of that kind of a problem that this Act is just 

not ready for? 

Mr. LENZ. Yes, sir. 

Mr. GRIFFITH. And I would ask the gentleman also, I noticed on 

page 5 of your testimony, you indicate that the 1-year delay of the 

employer requirements means employers will not have penalty exposure until 2015 but they must still have their information technology and human resources systems in place by January 1, 2014, 

in order to track employees’ hours of service in 2014 and comply 

with the ACA coverage obligations on January 1, 2015, but I would 

ask you, Mr. Lenz, has your organization taken into consideration 

what happens if the courts determine that the President didn’t 

have the authority—and I ask this question because I can’t find 

where in the bill the President has the authority to delay the employer mandate. If a court finds oh, let us say, next September that 

the President didn’t have that authority, you all have got the 

records, aren’t your employers then responsible for going back in 

and reimbursing the costs of that health insurance to their employees that they thought they weren’t mandated to provide but now 

they are if they hadn’t provided something that would have been 

in compliance with ACA as of January 1, 2014? 

Mr. LENZ. Well, that would be quite a conundrum. 

Mr. GRIFFITH. And isn’t it a possibility, understanding that there 

is nothing directly authorizing the President to delay the employer 

mandate and recognizing that we do live in a litigious society? 

Mr. LENZ. We do indeed, sir. 

Mr. GRIFFITH. And so this conundrum could be a great detriment 

to many employees in the United States, and isn’t it also just one 

of the thousands of examples out there of why you are concerned 

115 

about employers not knowing what the rules are and what they 

have to do and what is coming next as a part of this Act? 

Mr. LENZ. There are multiple opportunities for unforeseen consequences here. 

Mr. GRIFFITH. There are indeed. There are indeed. 

I would go back to Mr. Graham. I was reminded when you were 

talking about the fraud—and I know you don’t want to get on 

record as to what percentages are fraud or whether it will be more 

or less, and I understand that, but a friend of mine once explained 

to me, and I thought it made good sense, that locks are just there 

to help keep the honest men and women honest, and that that is 

why you have locks because if there is somebody who really wants 

to get into your house or get into your car, they are going to figure 

out a way to get in. And so doesn’t it cause you some concern that 

we don’t have proper locks in place on fraud when it comes to this 

particular Act and the various requirements that you say what 

your income is or don’t say what your income is? 

Mr. GRAHAM. When I ride my bicycle to work, I lock it up. 

Mr. GRIFFITH. Yes, sir. I appreciate your answer. 

Mr. Chairman, unless somebody wants my last 30 seconds, I 

yield back. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentleman from Florida, Mr. Bilirakis, 5 minutes for questions. 

Mr. BILIRAKIS. Thank you so much. Thanks for holding this hearing. I apologize for being late. I was at the other hearing. 

A question for Mr. Lau. Did CMS, in any of your conversations, 

state why they waited until July to issue the contract? 

Mr. LAU. No, it was a competitive procurement, so I am not sure 

what—— 

Mr. BILIRAKIS. Well, did they not know that paper processing 

was required when the exchanges would go online? Do you usually 

get contracts affecting 6.2 million people 3 months before it occurs? 

Mr. LAU. Well, this one was certainly more challenging that most 

in that regard in time spent. 

Mr. BILIRAKIS. Thank you. 

A question for Ms. Campbell. Ms. Campbell, can you talk about 

CGI’s role in the exchange? Do you make all final decisions for 

yourself and the subcontractors? 

Ms. CAMPBELL. I would be happy to discuss the role of CGI as 

our role on the exchanges. For us, I would like to equate it to sort 

of the face of the exchange. This is where an individual will be able 

to go into a portal, sign up, actually put in a profile, peruse the 

database or peruse the system to determine which plan is of interest to themselves. They will also be able to determine their eligibility through a series of questions, and then they will make their 

selection, and that is the portal that CGI is developing for the marketplace, or for the exchange. 

Mr. BILIRAKIS. Next question. Ms. Campbell, who is ultimately 

considered the integrator, or quarterback, for making sure the exchange works properly? 

Ms. CAMPBELL. That would be CMS. 

Mr. BILIRAKIS. Thank you. 

Next question for Mr. Finkel. Will QSSI be offering the Data 

Services Hub after open enrollment on October 1st through 2014? 

116 

Mr. FINKEL. No. As I stated, CMS will be operating the Data 

Services Hub once it goes live. 

Mr. BILIRAKIS. Another question. According to the Inspector General Office’s report, it says that CMS’s Chief Information Officers 

expects to make a security authorization on September 30th. Is it 

responsible to make this decision so late in the process? The original timeline, as I understand, was September 4th, the decision 

would be made. Can you comment on that? 

Mr. FINKEL. I cannot comment on CMS and what they will approve and when. I can tell you that the Data Services Hub has 

gone through a security risk assessment that was completed on August 30th and we have no reason to believe why CMS cannot sign 

off on the Data Services Hub. 

Mr. BILIRAKIS. OK. Thank you very much, Mr. Chairman. I appreciate it. I yield back. 

Mr. PITTS. The Chair thanks the gentleman. That concludes the 

first round of questions. We will have one follow-up on each side. 

So Dr. Burgess, you have 5 minutes for follow-up. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Ms. Campbell, let me just ask you, in your testimony you referenced that your company has achieved all its milestones and the 

last one you referenced was the operational readiness review in 

September of 2013. Do I understand that correctly? 

Ms. CAMPBELL. That is correct. 

Mr. BURGESS. Is that something you can make available to the 

subcommittee? 

Ms. CAMPBELL. I can make available our report that we submitted to CMS. 

Mr. BURGESS. Can you make that—have you made it available 

to the committee? 

Ms. CAMPBELL. We have not made that available to the committee. 

Mr. BURGESS. Well, then I would ask that if you would make 

that available to the committee. Mr. Chairman, when staff gets 

that, I would appreciate the opportunity to review it. 

Mr. Graham, we talked just a little bit about de-scoping, and the 

reason this is important, and I am not just picking on this, but 

look, February 1st with the elysian fields of Obamacare still 11 

months away, the window for application to the Federal preexisting 

program closed, and it closed rather suddenly without warning to 

the people who had been trying to go six months without health insurance to age into the program. So for almost a full year, the 

promise of coverage for preexisting conditions has been an empty, 

hollow promise. The caps on out-of-pocket expenditures was very 

quietly delayed for a year. Apparently the press picked it up here 

in the past month but it was something that actually happened 

much earlier in the year. Of course, we have had the discussions 

about the employer mandate being delayed. There have been other 

pieces of this apparatus that have sort of fallen into the barrage 

on the way to October 1st and January 1st. When you all talk together, when all of the smart minds who are in charge of the 

outsourced implementation, when you get together, are there 

things that you talk about and speculate about that may be the 

117 

next to go or the next shoe to drop as far as the pieces of the Affordable Care Act that may go by the wayside? 

Mr. GRAHAM. With respect to the de-scoping, when we look at 

what capabilities each of the State-based exchanges will have and 

which ones will be live on October 1 and those that are not, how 

long they will take to come up, we project that as in many IT implementations, it will be 3 or 6 months for many of those things 

to go. 

With respect to the law itself, there is a lot of talk about where 

that is. I don’t know that I am the best to comment on that. 

Mr. BURGESS. You are all I have got. You know, as we look at 

this group assembled in front of us, you are an impressive group, 

and there are some impressive contracts that go with the work that 

you sell to the Federal Government, and with all respect to the 

ranking member of the subcommittee, I mean, a local Meals on 

Wheels outfit being able to do what you all are doing and it has 

taken you months to do and hundreds of millions of dollars in some 

cases, is it really responsible to expect that some community organization is going to be able to accomplish what you all have been 

tasked to accomplish? I mean, anybody is free to answer that question. I should do like Chairman Dingell; I need a yes or no. I got 

no answer, so Mr. Chairman, I am going to assume that it is a no. 

Let me yield back the balance of my time in the interest of other 

members of the committee. If someone wants to claim it, they may 

do so. 

Mr. PITTS. Thank you. The Chair recognizes the ranking member 

for follow-up. 

Mr. PALLONE. Thank you. I am glad Dr. Burgess brought up the 

navigators or, in my cases, the food bank issue. You know, again, 

I want to ask a question of Ms. Kraus, but I disagree totally in 

terms of who should be a navigator. I mean, I mentioned the Food 

Bank of Monmouth in Ocean County, which is one of a number of 

organizations or nonprofits in New Jersey that, you know, received 

a grant to act as a navigator and now has been subject to these 

what I consider intimidation tactics by the Republicans on the committee, but I totally disagree with Dr. Burgess. 

The Food Bank of Monmouth in Ocean County, which I am very 

familiar with in my district, took on this responsibility because 

they just get I don’t know how many hundreds or thousands of people that come to the food bank on a regular basis and obviously a 

lot of them are uninsured and a lot of them are probably people 

who may be afraid to even admit that they are uninsured or go to 

a place to try to find insurance. And so I think they are an excellent organization that would actually be charged with trying to 

deal with the uninsured and navigate them so that they get insurance, and I think that the whole purpose of these grants is to try 

to find somebody who can play that role in a significant way, even 

if they don’t have extensive background doing that. I commend 

them for taking on the role. 

But Ms. Kraus, my concern is that they may be intimidated, that 

resources are being taken away because they have to answer all 

these questions at the same time that there is no evidence of any 

wrongdoing or any predicate for this kind of time-consuming and 

burdensome investigation that the GOP on this committee are 

118 

going about, and, you know, these are small community-based 

groups. The timing, I think, was very suspicious, imposing a burden on these groups before the October 1st rollout. It is only a few 

weeks away. 

So can you offer some perspective on the importance of these 

navigators and the impact on implementation of the law if the Republicans ’ intimidation disrupts their efforts? I am not asking you 

to say they are being intimidated but I know that some have already suggested that they might just not proceed because of the 

questions and all the paperwork. 

Ms. KRAUS. Yes, I mean, look, 75 percent of those that are eligible for coverage have no idea that this is coming. The majority of 

them have never had access to health care before so a fundamental 

piece of the Affordable Care Act was to place community organizations in these local communities to help folks that might need a little extra help. They are not building IT infrastructure; they are 

there to help people kind of walk through the process and understand what health insurance means. In Pennsylvania, there are 

community organizations that have been helping folks for year: the 

Federally Qualified Health Centers, which folks walk into their office every day and they help them enroll in public assistance programs. So we are not reinventing new community organizations, 

and we need to be assisting these organizations to make sure they 

have their resources and the tools they need to reach constituents 

where they are and make sure they take advantage of the Affordable Care Act. 

Mr. PALLONE. I appreciate that. And the other thing that I would 

point out, you know, New Jersey is another State where the Governor, wrongly, in my opinion, decided not to set up a State exchange, and the outreach efforts for those State are very limited. 

The fact of the matter is, if you didn’t set up your own State exchange, a lot of the Federal dollars that would have gone to help 

you do that in terms of outreach are just not made available, and 

so it is particularly important that these community organizations 

be out there in this time period trying to sign people up, and I 

just—again, I know I am beating a dead horse here but I just feel 

that it was very wrong on the part of the Republicans on this committee to use these kind of tactics right now when we are really 

trying to sign people up, and these are community-based organizations that really have no ax to grind, they are trying to help people. 

Thank you very much. Thank you, Mr. Chairman. 

Mr. PITTS. That concludes the questioning. I would like to thank 

the witnesses for your testimony, for answering all the questions. 

There may be follow-up questions. We will ask that you please respond promptly as members submit those. I remind members they 

have 10 business days to submit questions for the record, and those 

questions should be submitted by the close of business on Tuesday, 

September 24th. Very important hearing, very important information. Thank you for your courtesy and your patience. 

Without objection, the subcommittee is adjourned. 

[Whereupon, at 12:22 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

119 


86926.073

Opening Statement of Chairman Fred Upton 

Health Subcommittee Hearing on "PP ACA Pulse Check: Part 2" 

September 10, 2013 

Three weeks from today the Affordable Care Act's exchanges open for 

enrollment, but as October 1 st fast approaches the American people continue to ask, 

"is the administration truly ready?" 

On August 1 st, CMS Administrator Tavenner testified before the Full 

Committee on the implementation of the health law. In her testimony, she assured 

the committee that despite numerous delays of the law, the exchanges were on 

schedule and the administration would be ready to enroll Americans in new health 

plans beginning October 1 st, She was also confident that all other provisions of the 

law were on track. Yet a report published by an independent government watchdog 

the very next day revealed that security testing for the exchange data hubs was 

actually months behind. 

We are now three weeks from the exchanges opening for enrollment, and 

questions and uncertainties continue to overwhelm. Issues related to readiness 

testing and functionality ofthe exchanges have yet to be addressed. Missed 

deadlines, delays, and untimely guidance will affect critical components of the 

exchanges, including eligibility determinations, integration with existing state 

programs, and coordination among agencies. 

This uncertainty is also real for employers. The delay of the employer 

mandate may provide employers with more time, but it does not provide answers 

or eliminate burdens. Under the law, employers are still asked to provide 

government-approved coverage or pay a penalty, and the reporting requirements 
120 


86926.074

have not been altered, only delayed. Guidance on how reporting requirements will 

be administered has not been made available, leaving employers in the dark on 

how to plan for 2015. 

I have heard firsthand from Southwest Michigan employers like Lake 

Michigan Mailers and ServiceMaster on how the law's costly mandates and 

penalties are harming business operations and health care for their workers. In 

another case, Kalamazoo-based manufacturer Stryker Corporation has announced 

that it will reduce its global workforce by approximately 5 percent, or 1,000 

employees, in order to absorb the law's new domestic medical device tax. 

Unfortunately, these are not isolated incidents as countless job creators across the 

country are facing similar scenarios. 

This committee has conducted ongoing oversight on the health law's 

implementation, and since January 2011, we have held numerous hearings to 

ensure the American public has the information they need. Our work will continue 

well beyond October 1 st but this hearing is another opportunity for us to get 

answers for our constituents and better understand what lies ahead in the coming 

weeks. 

I thank the witnesses for coming today, and I look forward to your 

testimony. 
121 


86926.075

FRED UPTON, MICHIGAN 

CHAIRMAN 

HENRY A. WAXMAN, CALIFORNIA 

RANKING MEMBER 

ONE HUNDRED THIRTEENTH CONGRb", 

Mr. Brett Graham 

<!ongte~~ of tbe Wniteb ~tate~ 

~ott5e of ltepre9'entl1tiue5 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6115 Majority (202) 225---2927 

Mfoority (202) 225··3641 

September 26, 2013 

Director of Exchange Programs 

Leavitt Partners 

299 South Main Street, Suite 2300 

Salt Lake City, UT 84111 

Dear Mr. Graham: 

Thank you for appearing before the Subcommittee on Health on Tuesday, September 10,2013, to 

testify at the hearing entitled "PPACA Pulse Check: Part 2." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for tcn business days to permit Members to submit additional questions for the record, which are 

attached. The format of your responses to these questions should be as follows: (I) the name of the 

Member whose question you are addressing, (2) the complete text of the question you are addressing in 

bold, and (3) your response to that question in plain text. 

Also attached are Member requests made during the hearing. The format of your responses to 

these rcquests should follow the same format as your responses to the additional questions for the record. 

To facilitate the printing ofthe hearing record, please respond to these questions and requests by 

the close of business on Thursday, October 10,2013. Your responses should be mailed to Sydne 

Harwick, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office Building, 

Washington, D.C. 20515 and e-mailed in Word format to Sydoc.Harwick@mail.hoose,gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Josep 

Chairman 

Subcommittee on Health 

cc: The Honorable frank Pallone, Jr., Ranking Member, Subcommittee on Health 

Attachments 
122 


86926.076

Response to Questions and Member Requests for the Record 

October 09, 2013 

W. Brett Graham, Partner & Managing Director, Leavitt Partners 

Hearing on PPACA Pulse Check: Part 2 

United States House of Representatives Committee on Energy and Commerce 

on September 10, 2013 

Additional Questions for the Record 

The Honorable Gus Bilirakis 

1. One of the things that I have been concerned about is the difficulty in integrating Exchange 

systems, either federal or state run, with outside systems. One challenge is Medicaid eligibility 

check. To enroll in the Exchanges there is supposed to be a Medicaid eligibility check. However, 

many states may not have their systems online to make eligibility determinations under the new 

Medicaid eligibility formula. How will the system deal with a lack of information on these 

eligibility checks? What happens to the consumer or the state? 

Integration between the exchange and state Medicaid systems is one of the most complex 

technological challenges associated with implementation of an exchange. Not only is it difficult to 

connect two large processing systems, but the challenge is exacerbated by the fact that some states 

are currently in the process of implementing a comprehensive Medicaid modernization projectwhich means they have to test and integrate two new systems-while other states are dealing with 

the connectivity and integration challenges associated with older legacy systems. 

To work around these challenges, some states are developing contingency plans that include 

performing these determinations manually and relying on self-attestation to make initial Medicaid 

or subsidy determinations (e.g., requiring consumers to provide documented proof of their income, 

residency, etc., rather than verifying it through the Federal Data Services Hub or other electronic 

verification systems). Processing Medicaid and subsidy determinations manually and relying on selfattestation will delay enrollment-increasing the potential that consumers won't receive coverage 

by January 1, 2014-as well as increase the possibility of unintentional errors, fraud, and abuse. 

Page 1 013 
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86926.077

2. What type of security standard are the states using that create their Exchange and/or use their 

own data portals? How does it compare to the FISMA standard that the federal exchange is using? 

Should CMS require a higher standard? Is CMS implementing this trillion dollar law on the cheap? 

The guidance outlined in the Cooperative Agreement to Support Establishment of the Affordable 

Care Act's Health Insurance Exchanges requires the following of states with respect to the security 

and privacy standards of exchanges. 

Per National Institute of Standards and Technology (NIST) publications, the design and 

implementation must take into account security standards and controls. (For details on NIST 

publications, see: http://csrc.nist.gov/publications/PubsSPs.html) 

HIPAA: The HIPAA Privacy and Security Rules provide Federal protections for personal health 

information held by covered entities and give patients an array of rights with respect to that 

information. At the same time, the Privacy Rule is balanced so that it permits the disclosure 

of personal health information needed for patient care and other important purposes. 

• Security: The applicant shall address the Security requirements in Patient Protection and 

Affordable Care Act; Establishment of Exchanges and Qualified Health Plans; Exchange 

Standards for Employers found in 45 CFR § 155.260, and other applicable Security 

requirements. 

• Federal Information Processing Standards (FIPS): Under the Information Technology 

Management Reform Act (iTMRA), Division E, National Defense Authorization Act for FY 

1996 (P.l. 104-106)' the Secretary of Commerce approves standards and guidelines that are 

developed by the National Institute of Standards and Technology (NIST) for Federal 

computer systems. These standards and guidelines are issued by NIST as Federal 

Information Processing Standards (FIPS) for use government-wide. NIST develops FIPS when 

there are compelling Federal government requirements such as for security and 

interoperability and there are no acceptable industry standards or solutions. See 

Recommendation 5.3 in Section 1561 recommendations for more details: 

http:Uhealthit.hhs.gov/portal!server.pt?open=512&mode=2&obHD=3161 

With respect to Federal Information Security Management Act (F/SMA) (which applies to both 

federal and state-based exchanges), the Minimum Acceptable Risk Standards for Exchanges (MARSE) requires health insurance exchanges and common program enrollment systems to meet certain 

federal legislation and regulations. The most significant federal laws to be met are FISMA and 

HIPAA. 

These requirements and standards are proven and, we believe, do provide a sufficient level of 

security and privacy (it is important to note that Leavitt Partners does not have direct expertise in 

information security, but can speak to it from a high level). If these standards are thoroughly tested 

and met during the implementation phases, requiring a higher standard of security is not 

necessary. The concern is that states simply have not had enough time to perform comprehensive 

testing to guarantee an adequate level of performance for the initial enrollment period. So, while 

CMS is ensuring the necessary security standards are used, it may not have provided sufficient time 

for states to test processes and policies in order to adequately meet FISMA and other standards. 

Page 2 of 3 
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86926.078

Member Requests for the Record 

The Honorable Leonard Lance 

1. Has there been sufficient testing with the States, and if not, what are some of the financial risks to 

the States? If there are to be any delays, do you believe they would be longer than 90 days? 

Which States have done a good job so far in this regard and which States need to do a better job? 

Due to markedly short timelines for implementation, very few states have had sufficient time to 

conduct comprehensive system testing. In fact, many states were simultaneously testing and 

building systems leading up to the October 1 go-live date-a less than ideal process for testing 

overall system effectiveness. For many states, exchange testing is expected to continue during the 

initial enrollment period, with much of the remaining testing to take place around the development 

of back-end systems for carrier interaction and the dispatch of enrollment information. 

The lack of testing and short timelines increases the probability of exchanges experiencing 

unexpected problems that will need to be fixed during, rather than prior to implementation (which 

generally requires additional resources and costs). It is also expected that once exchanges get past 

the challenges associated with website functionality and the user-interface, they will move on to the 

next set of problems. For example, during the first week of the open enrollment period, state and 

federal exchanges experienced some significant challenges that impacted a consumer's ability to 

enroll. The concern is that if something as fundamental as creating a user account is causing 

problems, then what issues are consumers going to encounter when they start the more 

complicated enrollment and eligibility process for premium subsidies? Overcoming these challenges 

will require additional time and resources and may create a backlog of consumers waiting to 

complete the enrollment and eligibility process. Until these issues are fixed, many states are using 

inefficient manual workarounds, potentially resulting in unexpected costs and increasing the 

exchange's operating costs over time. 

There is no precedence for determining a reasonable timeframe in which these manual 

determinations can or will be made. However, we do know that many of the state exchanges are 

attempting to process these issues in less than 90 days of receiving the consumer's application or 

dispute. Still, if the current exchange problems persist or the systems cannot achieve the deSired 

functionality, it could be possible that an increased volume of manual determinations may force 

longer timelines for consumer enrollment and create delays past 90 days. 

While every state would have preferred to implement additional capabilities if they had more time 

and resources, all state-based exchanges had to de-scope their plans in order to meet the October 1 

launch. Still, during these first few days of operation, some states have offered a higher degree of 

functionality than others. If we were to develop two categories around state-based exchange 

readiness-those that had minor delays, but are capable of facilitating enrollment, and those that 

had significant delays and may need to delay enrollment-the number of states falling in each 

category would nearly be an even split. 

While this underscores the lack of preparedness, there is a widely held expectation that exchange 

enrollment will be ramping up as we approach the coming 2014 benefit year. As a result, a major 

priority for exchanges over the next few weeks will be making necessary system refinements to 

allow consumers sufficient time to shop and enroll by the end of the year. 

Page 3 of 3 
125 


86926.079

FRED UPTON, MICHIGAN 

CHAIRMAN 

HENRY A. WAXMAN, CALIFORNIA 

RANKING MEMBER 

Mr. Edward A. Lcnz 

Senior Counsel 

ONE HUNDRED THIRTEENTH CONGREl 

€ongrtss of tbe Wniteb ietates 

li)ottse ot itepreselltatibes 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6115 Majority (202) 225-2927 

Minority (202) 225-3641 

September 26, 2013 

American Staffing Association 

277 S. Washington Street, Suite 200 

Alexandria, VA 22314 

Dear Mr. Lenz: 

Thank you for appearing before the Subcommittee on Health on Tuesday, September 10,2013. to 

testify at the hearing entitled "PPACA Pulse Check: Part 2." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for ten business days to permit Members to submit additional questions for the record, which are 

attached. The fornmt of your responses to these questions should be as follows: (I) the name of the 

Member whose question you are addressing, (2) the complete text of the question you are addressing in 

bold, and (3) YOIll' answer to that question in plain text. 

To facilitate the printing of the hearing record, please respond to these questions by the close of 

business on Thursday, October 10,2013. Your responses should be mailed to Sydne Harwick, 

Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office Building, 

Washington, D.C. 20515 and c-l11ailed in Word fonnal to Sydne.Harwick@mail,house.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

.;n7:;...u"/rJ's 

~:--

Chairman 

Subcommittee on Health 

cc: The Honorable Frank Pallone, Jr., Ranking Member, Subcommittee on Health 

Attachment 
126 


86926.080

Employers for Flexibility in Health Care 

The Honora ble Joseph R. Pitts 

House of Representatives 

Committee on Energy and Commerce 

2125 Rayburn House Office Building 

Washington, DC 20515-6115 

Dear Chairman Pitts, 

October 9, 2013 

Thank you for the opportunity to appear before the Committee on Energy and Commerce 

Subcommittee on Health on September 10, 2013 on behalf of the Employers for Flexibility in Health Care 

Coalition (E-FLEX) and the American Staffing Association. Please find below responses to the 

Committee's questions for the record. 

The Honorable Joseph R. Pitts 

1. At this time, what can employers do to be prepared for the enforcement of the employer 

mandate in January of 2015? What guidance do they need and when do they need it? 

Employers across the country are working throughout 2013 and 2014 to prepare to comply with 

the employer mandate. Employers are analyzing their workforce, determining their employer 

size, reviewing their health plan deSigns, communicating with employees, and building new 

reporting and compliance systems. A major concern for employers is the lack of final reporting 

regulations under Internal Revenue Code sections 6055 and 6056. It will take many employers 

12 to 18 months to budget, plan, build, program, and contract for new comprehensive reporting 

systems. The proposed rules are complex and unless modified may be costly for employers to 

implement and maintain. 

2. Has progress been made in revising the employer reporting requirements? Can you describe 

the burden this causes for employers in our district? 

The IRS released proposed regulations on September 5, 2013. The proposed regulations would 

require employers to report to the IRS complex, detailed information about their workforce, 

employees, employees' dependents and coverage options. In an effort to streamline the 

process, the proposed regulations eliminated four data elements, but added 10 additional new 

elements deemed necessary to determine compliance the individual and employer mandates. 

The proposed regulations also proposed three partial reporting safe harbors that offer very 

limited relief. As proposed, the regulations will require costly system changes, data collection 

and burdensome reporting to individuals and the IRS. 

1 
127 


86926.081

Employers for Flexibility in Health Care 

Of additional concern to the Members of the E-FLEX coalition is the failure of the proposed 

regulations to address the need to minimize the number of inaccurate determinations of 

individual eligibility for premium assistance tax credits to purchase Exchange coverage. It is in all 

of our interests to avoid employees having to repay tax credits when employer-sponsored 

coverage that meets the law's affordability and minimum value standards is available to them. 

The E-FLEX Coalition hopes that the IRS will work to find ways that employers can certify to IRS 

prospectively certain data elements under IRC §6056 about coverage available to employees to 

improve the accuracy of Exchanges' determinations of eligibility for advance payment of 

premium tax credits. This stands as the best path forward given that currently there is no 

comprehensive data source of eligibility for employer-sponsored coverage. In addition, given 

that HHS has confirmed that data from IRS, the Social Security Administration and the 

Department of Homeland Security "should be available every day" via the data hub (See CMS2234-F), the Administration would not need to develop a separate data source of eligibility for 

employer-sponsored coverage if it can collaborate with the employer community to develop 

flexible options for reporting under IRC §§6055 and 6056 throughout the year. 

3. Job creation has been and continues to be a priority for me and my colleagues. Do you think 

PPACA's demands of employers is creating perverse economic incentives and discouraging 

businesses from expanding and creating jobs? 

The law contains new definitions that employers will need to consider when analyzing their 

workforce. Because these new definitions are linked with tax penalties, basic economic 

principles require employers to take these new definitions into account in structuring their 

workforce and employee benefits and in anticipating their annual tax liability. As noted in EFLEX's statement and testimony, 30 hours is significantly below what many employers consider 

to be full-time and therefore the E-FLEX supports increasing the hours to bring the definition 

more in line with current workforce practices. A bipartisan effort is already underway to address 

this significant concern. 

4. Will you explain the "look back "period and explain what the absence of final reporting rules 

means for employers? 

The "look back" period is an essential tool for employers with high numbers of variable hour and 

seasonal employees that allows employers to look back over a longer period oftime (3-12 

months) to determine whether variable hour or seasonal employees are in-fact working on 

average 30 hours per week per month. PPACA defines an employee that works on average 30 

hours per week per month as working full time. Employers that use a "look-back" period must 

offer health coverage to those employees that are determined during the look back to be full 

time for at least 6 months and no less than the length of the look-back. 

2 
128 


86926.082

Employers for Flexibility in Health Care 

Absence of final reporting rules creates uncertainty for employers and will drive-up the cost of 

compliance for everyone seeking to comply in a compressed timeframe. 

Thank you for the opportunity to testify on behalf of the Employers for Flexibility in Health Care 

Coalition. We look forward to continuing to work with you and the Committee. 

Senior Counsel 

American Staffing Association 

Cc: The Honorable Frank Pallone, Jr. 

3 
129 


86926.083

FRED UPTON, MICHIGAN 

CHAIRMAN 

HENRY A, WAXMAN, CALIFORNIA 

RANKING MEMBER 

Ms, Cheryl Campbell 

Senior Vice President 

COl Federal 

ONE HUNDRED THIRTEENTH CONGF 

\!ongre$5s of tbe Wntteb $tates 

J[)ott~e of l~epre~ctttatibe~ 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAY8URN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6115 M,ll{)rlt'l (202) 225·,2927 

Mmorlty (202)2?S-:i641 

September 26, 2013 

1260 I Fair Lakes Circle 

Fairfax, VA 22033 

Dear Ms, Campbell: 

Thank you for appearing before the Subcommittee on Health on Tuesday, September 10,2013, to 

testify at the heating entitled "PPACA Pulse Check: Part 2." 

Pursuant (0 the Rules of the Committee on Energy and Commerce, the hearing record remains 

open tt)r ten business days to pennit Members to submit additional questions for the record, which are 

attached, The format of your responses to these questions should be as follows: (1) the name of the 

Member whose question you are addressing, (2) the complete text of the question you arc addressing in 

bold, and (3) your response to that question in plain text. 

Also attached are Member requests made during the hearing. The fOl1nat of your responses to 

these requests should foliow the same format as your responses to the additional questions for the record. 

To f\lcilitate the printing of the hearing record, please respond to these questions and requests by 

the close of business on Thursday, October 10,2013, Your responses should be mailed to Sydne 

Harwick, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn House Offiee Building, 

Washington, D.C. 20515 and e-mailed in Word format to Sydnc.Hanvick@mail.honse.gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Vo'!e:h ~",~/fIIr ,Pitts 

Chairman 

Subcommittee on Health 

cc: The Honorable Frank Pallone, .II'" Ranking Member, Subcommittee on Health 

Attachments 
130 


86926.084

CGI Federal Responses to Attachment 1 Additional Ouestions for the Record 

The Honorable Joseph R. Pitts 

1. The Wall Street Journal reported on September 19,2013, that "less than two weeks before the 

launch of insurance marketplaces created by the federal health overhaul, the government's 

software cannot reliably determine how much people need to pay for coverage." Was cor 

involved in the creation of this software? Ifso, please provide a written description of your 

responsibilities, current status, and a description of any delays or problems encountered. 

CGI Federal Response: The calculator is a part of the Federally-Facilitated Marketplace 

(FFM) that COl Federal is building at the direction of CMS. Under the contract with 

CMS, COl Federal's responsibilities were to follow requirements as defined by CMS to 

determine the business logic behind calculations and determinations. COl Federal 

worked with CMS to implement those requirements into a piece of software. The current 

status is that the software was deployed as part of the FFM that went live on October 1, 

2013. There were no delays and the software appears to be functioning consistent with 

CMS' requirements. 

2. If COl has been party to any talks or discussions of the inability to reliably determine how 

much people need to pay for coverage, please provide a written description of all of these 

conversations or discussions. 

CGI Federal Response: COl Federal's project team is in daily contact with both CMS 

and other stakeholders around all aspects of the FFM, including feedback related to the 

calculator. These conversations and discussions are all centered around making further 

improvements to system functionality based on business rules provided by CMS for 

eligibility and data from insurers. 

3. Is CO! currently in possession of any documents discussing or related to the ability of 

exchange software to reliably determine how much people need to pay for coverage? If so, 

please provide a written description of these materials and summarize their contents. 

CGI Federal Response: COl Federal has design documentation and logic flows related 

to this aspect of the FFM system. COl Federal also provides monthly reports to CMS 

regarding project status, including updates regarding the calculator functionality. 

The Honorable Gus Bilirakis 

I. Will you talk about COT's role in the exchange? Do you make all final decisions for yourself 

and subcontractors? 

CGI Federal Response: CMS directs the work of COl Federal under the contract. COl 

Federal is one of several contractors designing, developing, and implementing the 

Federal Exchange. COl Federal is responsible for the FFM software application that 

individuals, employers, brokers, navigators, carriers, and Federal and State officials will 
131 


86926.085

use to enable individuals to compare, select, and enroll in qualified health plans in States 

that have chosen not to build their own marketplace. The FFM has three key areas of 

functionality: 

I) Eligibility & Enrollment. The FFM allows consumers to fill out an online 

health insurance application, determine their eligibility for health insurance through 

the Federal Exchange and enroll in a qualified health plan (QHP). Among other 

things, it interfaces with a Data Services Hub being developed by another contractor 

under another contract to access income, citizenship, and other information 

necessary to determine an individual's eligibility for health insurance and whether 

that individual also is eligible for subsidies or credits. It also allows citizens to 

view, compare, select, and enroll in health plans available through the Federal 

Exchange. 

2) Plan Management. The FFM serves as the entry point for health insurers 

to submit plans for CMS certification as QHPs. CMS will use the application to 

acquire, certify, and manage issuers offering QHPs through the FFM. CMS also 

will coordinate plan management activities with States, including monitoring and 

oversight, account management, and recertification. 

3) Financial Management. The FFM allows CMS to manage financial 

transactions with issuers, including calculating reinsurance payments, risk 

adjustments and corridors, and premium processing. 

CGI Federal coordinates with many other contractors that also play critical roles in the 

Federal Exchange. For example, the FFM application that CGI Federal is responsible for 

will reside on hardware infrastructure that is maintained by Tcrremark Federal Group. 

Similarly, before individuals may access the FFM, they must first set up an account using 

the CMS Enterprise Identity Management system (EIDM), maintained by another 

contractor, Quality Software Services, Inc. (QSSI), under a separate contract vehicle. CGI 

Federal's FFM application also interfaces with the Federal Data Services Hub, maintained 

by QSSI. The Data Services Hub is responsible for providing electronic, near real-time 

access to Federal data, as well as access to State and third party data sources needed to 

verify consumer-eligibility information. 

2. Who is ultimately considered the integrator, or quarterback, for making sure the exchange 

works properly? 

CGI Federal Response: CMS is the systems integrator for the Federal Exchange. 

3. The Federal Exchange is a complicated architecture which serves as a hub for everything. 

How will the Exchange operate when so much of it is dependent on the input from other groups 

and those groups may not be ready on October I? For example, Medicaid eligibility: To enroll 

in the Exchanges there is supposed to be a Medicaid eligibility check. However, many states 

may not have their systems online to make eligibility determinations under the new Medicaid 

2 
132 


86926.086

eligibility formula. How will the system deal with a lack of information on these eligibility 

checks? 

COl Federal Response: The functions and issues described in this question are not 

performed by the FFM, but by the Data Services Hub. Thus, COl Federal is not in a 

position to answer this question. 

4. Has HHS, CMS, or another government agency come back to you and asked you to modify 

the initial contract? If so, what was changed? Did CMS state why they needed to make this 

change or why this was not included in the original bid? 

COl Federal Response: CMS has modified COl Federal's task order seven (7) times 

since it was initially awarded. These modifications generally have been issued in 

response to more detailed requirements regarding system functionality as regulations and 

policy were better defined. When CMS originally awarded COl Federal the task order 

award, most of the regulations and guidance implementing the Affordable Care Act had 

not yet been finalized. The following table summarizes the modifications to date: 

Modification No. Description and Date 

Modification I, Modification to purchase the software and hardware requirements for 

8/26112 the FFE (now known as FFM), as well as changes in the SOW. 

Modification 2, Modification reflecting administrative changes to the Task Order, 

11/16112 including restatement of CLINs, update to contracting officer and 

contracting specialist information, and revision of the deliverable 

schedule. 

Modification 3, Modification to cover changes in SOW such as: 

4/30/13 • Additional eligibility and enrollment requirements; 

• Account transfer between Medicaid and FFE (now FFM); 

• Coverage of families and small businesses; 

· Integration with additional systems; 

• Re-work associated with changes from Paperwork Reduction Act 

(PRA) process, incorporation of Medicaid/CHIP account transfer and 

associated MAOI rules complexity; 

· Re-work associated with changing policy and requirements from 

final/published rules; and 

• Additional/expansion of User Interface functionality from prototyping 

and Consumer Testing. 

Modification 4, Modification to include Akamai for Content Delivery Network. 

5/10/13 

Modification 5, Modification to: 

3 
133 


86926.087

Modification No. Description and Date 

signed 8/29113 • Add additional funding for the Base Year; 

effective 911113 

· Reduce CLiN OOOIAC, Travel; 

• Extend the period of perfonnance for Base Year· CLiN 0001 to 

February 28, 2014; 

· Change the period of perfonnance for Option Year CLIN 0002 from 

March I, 2014 through September I, 2014 so that Option Years 2 

forward align with the current contract structure; 

• As a result of revised software pricing for Adobe, reduce the 

estimated cost for Option Year I· CLiN 0002, Option Year2· CLIN 

0003, and Option Year 3· CLiN 0004; 

• Revise key personnel for Chief Architect, who is now Keith Rubin; 

and 

• Include a revised Statement of Work dated August 28, 2013. 

Modification 6, Modification to: 

signed 9/19/13 

· Fully fund the Adobe perpetual license in the Base Year instead of in 

effective 9113113 Option Years 2 and 3 and, as a result, make corresponding reductions 

to the estimated cost and award fee for Option Years 2 and 3. 

Modification 7, Undefinitized, unilateral change order modification per FAR 52.243·2, 

10·4·13 Changes Cost Reimbursement- Alternate n, directing CGI Federal to: 

• Assist CMS in its development and implementation of a solution to 

replace the functionality of Enterprise Identity Management (ElOM) 

currently provided by another contractor; 

• Assist CMS in developing, implementing, and maintaining a solution 

to replace the ElOM using similar software/equivalent software as 

approved by CMS by working at CMS' direction; and 

• Assert its right to an equitable adjustment within thirty (30) days if 

additional funding is needed for this effort as per FAR 52.243-2, 

Alternate II. 

5. What security standards do you use? Do you use FISMA standards for your private 

contracts? How would FISMA standards compare to equivalent commercial security standards? 

Would you describe it as a higher or lower standard? 

eGI Federal Response: CGI Federal's design for the FFM system adheres strictly to 

CMS standards for security and data transmission, which arc incorporated into CGI 

Federal's task order with CMS. Specifically, the FFM complies with all applicable 

portions of the Federal Information Security Management Act (FISMA), the Health 

Insurance Portability and Accountability Act of 1996 (HIPAA), the Health Information 

Technology for Economic and Clinical Health Act of 2009 (HITECI-I), and regulations 

implementing those statutes. The FFM also complies with I-II-1S' Policy for Information 

4 
134 


86926.088

Systems Security and Privacy, which establishes comprehensive IT security and privacy 

requirements for HHS' IT security programs and information systems. 

Although no data will be stored on any hardware owned or operated by COl Federal, 

because COl Federal is sensitive to the fact that the FFM will be used to collect personal 

health information and other sensitive information necessary for individuals to enroll in 

health care, it has spent considerable time and effort to ensure that the FFM complies 

fully with these requirements. In addition, CGI Federal has undergone an independent 

evaluation and test of its systems security program as part of its task order requirements. 

CGI Federal operates primarily within the federal government marketplace as a prime 

contractor or subcontractor on federal agency projects. As a result, CGr Federal is not in a 

position to offer a comparative analysis ofFISMA standards to commercial security 

standards. 

5 
135 


86926.089

CGI Federal Responses to Attachment 2-Member Requests for the Record 

During the hearing. Members asked you to provide additional iriformation for the record, and 

you indicated that you would provide that information. For your convenience. descriptions of the 

requested information are provided below. 

The Honorable Michael C. Burgess 

I. In your testimony, you referenced that your company has achieved all its milestones and the 

last one you referenced was the operational readiness review in September of2013. Would you 

please submit that report to the committee? 

CGI Federal Response: CGI Federal is pleased to submit the attached Summary 

Presentation regarding the Operational Readiness Review. 

6 
136 


86926.090

· .fFMOperations R"adinesSRevl~W 
137 


86926.091

Interfaces 

User/Partner Interactions 

Architecture Overview 

(Physical, Software,Data Flow, Operations) 

Performance 

Production Planning 

Testing 

Call Center,! Helpdesk Readiness 

Monica 

Justin 

Justin 

Keith 

Keith 

Scott 

Mazen 

Brandi 

2 
138 


86926.092

• FFM 

3 
139 


86926.093

• Maintain PM/FM as-is (as much as possible) in current 

production environment 

- Reduce risk during cutover 

- Different release, patch cycles 

• EE is a merger of existing LOA and PRIME infrastructure 

- Lite Account is replaced by MyAccount 

• Shared resources across PM/FM/EE 

- MarkLogic 

- Alfresco 

- Gluster 

• Shared resources across FEPS 

- Gluster 

- F5s 

4 
140 


86926.094

• Configured Blue/Green EE paths to support patching 

- SOAP (business and data), Tomcat 

• Merge and Cutover Phases 

- Prep PRIME for 95% completion. 

- Targeted for 9/15 

- Cutover to complete merge of current Prod and Prod' 

during 9/20-9/22 

• Data Merge 

- MarkLogic 

- Alfresco 

- Oracle 

s 
141 


86926.095

Apache -Tomcat Application 8 

Jpo~s SPA-,P Business' 

Services, " i\pptlcatiof> 

Jboss SOA-PBatch Application 

Gluster' AppliCation 2' 

BRMS Application 2 

EHC,\CfjE AppUcatioii '2 

AVealc Application 2 6 

Allache ~ Tomcat Alfresco' 'Data '4' L 

Jboss SOA-P Data Services Data 2 4 16 

.Jboss ,SOMI Satch Data 4 ~6 

Orade DB Data 4 16 

Gluster Data 4 

Marklogic (E-Nodes) Data 2 4 

Marklogic (D-Nodes) Data 3 8 

~~ 6 
142 


86926.096

layer 7 Presentation 4 16 

Terracotta Presentation 2 16 

Apache - Tomcat Application 16 

layer? Application 4 4 16 

Jboss SOA-P Business Application 16 16 Services 

Jboss SOA-P Batch Application 4 16 

Gluster Application 6 4 16 

BRMS Application 8 

Terracotta Application 6 16 

~oa~ Baiancec/F5 Data 2 

Tomcat Alfresco Data 6 2 16 

Jboss SOA-P Data Services Data 12 4 16 Jboss SOA-P Batch Data 4 4 16 

Oracle DB Data 2 4 16 

Gluster Data 8 4 16 

Marklogic (D-Nodes) Data 7 8 64 

~M~. 7 
143 


86926.097

• Consumer Access 

• CCR web services 

• CCR (NGD) web access (current) 

• CCR (NGD) web access (contingency) 

• CCR (SHOP) web access 

8 
144 


86926.098

9 
145 


86926.099

1. CCR user login to NGD or PIMS (SHOP) 

2. Consumer or SHOP call CCR 

3. CCR does a search within the NGD or SHOP 

4. NGD or SHOP call the CCR web services over 

internet 

5. Hits port 6443 on HW LB which sends the traffic to 

the L7 gateway in presentation zone 

6. L7 validates the cert (SSL mutual auth) and wsusername token 

7. Routes the call internally and sends the response 

back 

10 
146 


86926.100

CCRJNGD) web Access (cu.rrerit) 

1. CCR user login to NGD 

2. CCR clicks on access FFM link 

3. NGD federates with EIDM over internet 

4. EIDM validates SAML from NGD and establishes 

EIDM Session 

S. CCR user redirected back to NGD 

6. NGD access FFM URL with applicationlD and 

applicant ID 

7. L7 obtains CCR information from EIDM session and 

establishes FFM application session 

8. L7 redirects the user to FFM CCR landing page 

11 
147 


86926.101

1. CCR user login to NGD 

2. CCR clicks on access FFM link 

3. NGD federates with FFM over CMS Net 

4. FFM validates SAML, obtains all CCR information 

and establishes FFM application session 

5. L7 redirects the user to FFM CCR landing page 

12 
148 


86926.102

• IMPLlA Region 

- Support End to End and Issuers testing. 

- Available 9/11 for internal validation and 9/15 for E2E 

testing 

• IMPL1B Region 

- Supporting internal performance testing 

• PROD Region 

- Target for 9/15 to support ACA performance testing 

13 
149 


86926.103

• SLA Confirmation/Downtime Windows 

- Standard eMS Window is Sunday (morning) midnight to 

5:00am 

- Should additional windows be defined during break-in 

period? Expectations set that patches will occur. 

• Disaster Recovery 

• Desire for more test environment 

- Need a sustainable deployment schedule 

14 
150 


86926.104

• Performance/Capacity Planning 

- MarkLogic capacity planning 

- Layer7 

- Alfresco 

- Gluster 

• Functional Performance Testing, focused on these 

key areas: 

- Individual Application 

- Plan Compare/Rating Engine 

- Enrollment 

15 
151 


86926.105

Questions? 

16 
152 


86926.106

FRED UPTON, MICHIGAN 

CHAIRM,~N 

HENRY A. WAXMAN, CALIFORNIA 

RANKING MEMBER 

Mr. John Lilu 

Program Director 

Serco 

ONE HUNDRED THIRTEENTH CONGRESS 

(tCongress of tue l1niteb $tates 

l1)ottse of 1l\cpn'scntcltilJes 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HOUSE OFFiCE BUILDING 

WASHINGTON, DC 20515-6115 M;jjoflty {202l22&-2927 

Mlmlilty (202) 225··3641 

September 26, 2013 

18 J 8 Library Street, Suite 1000 

Reston, V A 20190 

DcaI' Mr. Lau: 

Thank you for appearing before the Subcommittee on Health 011 Tuesday, September 10,2013, to 

testify at the hearing entitled "PPACA Pulse Check: Part 2." 

Pursuant to the Rules ortlle Committee on Energy and Commerce, the hearing record remains 

open for ten business days to permit Members to submit additional questions for the record, which arc 

anaehed. The format of your responses to these questions should be as follows: (J) the name of the 

Member whose question you are addressing, (2) the complete text of the question you are addressing in 

bold. and (3) your response to that question in plain text. 

Also attached are Member requests made dlll'ing the hearing. The lonnat of your responses to 

these requests should follow the same format as your responses to the additional questions for the record. 

To facilitate the printing of the hearing record, please respond to these questions and requests by 

the close of business on Thursday, October 10, 2013. Your responses should be mailed to Sydne 

Harwick, Legislative Clerk, Committee on Energy and Commerce, 2125 Rayburn House Office Building, 

Washington, D.C. 20515 and e-mailed in Word format to Sydnc.Hanvick@mail./touse,gov. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

i:~"'A Chairman 

Subcommittee on llealth 

cc: The Honorable FranK Pallone, Jr., Ranking Member, Subcommittee on Health 

Attachments 
153 


86926.107

Bringing service to life serco 

October 9.2013 

The Honorable Joseph R. Pitts 

Chairman, Subcommittee on Health, Committee on Energy and Commerce 

U.S. House of Representatives 

2125 Rayburn House Office Building 

Washington, D.C. 20515 

Serco Inc. 

1818 Library Street 

Suite 1000 

Reston, VA 20'90 

United States 

T 703.939.6000 

F 703.939.6001 

w.wv,serco-na eom 

Re: Additional Questions for the Record and Member Requests from the Hearing, 

"PPACA Pulse Check; Part 2," on September 10,2013 

Dear Mr. Chainnan: 

I received your letter of September 26, 2013, containing additional questions for the record as 

well as Member requests from the hearing in which I testified, "PPACA Pulse Check: Part 2." 

Those questions and requests, along with my answers, are provided in the prescribed fonnat 

below. 

The Honorable Gus Bilirakis: Did CMS, in any of your conversations, state why they waited 

until July to issue the contract? Did they not know there would be paper processing 

required when the Exchanges go online? Do you usually get contracts affecting 6.2 million 

people, three months before they are to occur? 

Response: 

CMS did not give me a reason as to why the contract was awarded on July 1. I have no 

personal knowledge regarding CMS's rationale in this regard. In my experience, 

contracts like this one vary in requirements and it is difficult to characterize what is 

"usual." Transition times vary considerably, depending upon the requirements. 

-
154 


86926.108

serco 

The Honorable Gus Bilirakis: Has HHS, CMS, or another government agency come back to 

you and asked you to modify the initial contract? If so, what was changed? Did CMS state 

why they needed to make this change or why this was not included in the original bid? 

Response: 

Serco received from CMS a request for a modification to re-baseline our contract based 

on a change in circumstances: (I) CMS indicated that the Congressional Budget Office 

("CBO") had updated and revised its projections of the likely number of applications that 

would be received on paper, and (2) better information had become available on the 

estimated processing times for an application. The original bid had this type of 

information, which we used as the basis for our original proposal. The new CBO 

estimates in May 2013 revised those numbers, creating a need to adjust the contract 

requirements accordingly. 

The Honorable Gus Bilirakis: What security standards do you use? Do you use FISMA 

standards for your private contracts? How would FISMA standards compare to equivalent 

commercial security standards? Would you describe it as a higher or lower standard? 

Response: 

The majority of Serco's Federal Government contracts require FISMA or DIACAP 

standards. Even our non-Federal, non-DoD contracts (such as for the Virginia Dept. of 

Transportation) require a standard based on the same NIST Risk Management 

Framework (RMF) and Security Controls ofFISMA. Serco's internal standard for its 

corporate systems is also FISMAINIST-based. I would not describe the FISMA standard 

as higher or lower than commercial security standards, such as ISO 17799 or COBIT, but 

rather would describe it as consistent with commercial risk-management practice and 

controls. 

-
155 


86926.109

serco 

The Honorable John D. Dingell: How many people has Sereo hired to work on this CMS 

contract? Please elaborate. 

Response: 

For the CMS-ES contract, Serco is contracted to provide eligibility support services. 

Contract tasks include the intake, routing, processing, reviewing, and troubleshooting of 

applications submitted for enrollment into a Qualified Health Plan and for insurance 

affordability programs beginning October 1,2013. 

To meet the needs of this contract, Serco will hire new employees in three major groups: 

1) baseline staff utilized year-round; 2) contingent or on-call employees available for 

unanticipated increases in volume during non-peak periods; and 3) seasonal workers for 

peak volume periods associated with health plan enrollment opportunity windows. These 

employees will handle project management, mail, file/case management, document 

scanning, analysis, and quality control. A full listing of Serco CMS-ES jobs is available 

at http://ww!y-,-~t£9-na.comL!;ms-es,'cms-es-job~. 

On August 21, 2013, Serco received a request from CMS for a proposal to modify the 

contract due to changes in the government's estimates on workload. In addition, CMS 

requested that Sereo include translation and interpreter services, as well as pricing for 

performing employee background checks for all project staff members. Serco provided a 

complete modification proposal on September 5, 2013, and received a formal contract 

modification on September 25,2013. 

These jobs are currently available in three locations. As a result of the modification, 

Serco will perform the work in four facilities, located in Arkansas, Kentucky, Missouri, 

and Oklahoma. The locations were selected for a variety of reasons, including the highcaliber employee base and competitive labor costs with higher unemployment rates. 

Serco's goal is to create a positive impact on local economies. In these locations, Serco is 

running or will be running radio and newspaper advertisements to increase awareness of 

the jobs and to drive candidates to the Serco website to apply and for job fair information. 

The Company's staff are reviewing, selecting, screening, and scheduling interviews with 

candidates for available positions. The job fairs have been well-received and follow HR 

best practices, such as: 

• Establishing relationships with local stakeholders (unemployment offices, 

Chambers of Commerce, higher learning institutions, veteran's groups, etc.) to 

raise awareness and assist with promoting the job opportunities 

-
156 


86926.110

serco 

Using advertising to promote the job opportunities, through the channels that 

reach the majority of candidates, such as job websites, newspapers, radio, and 

word of mouth 

• Pre-screening applications to achieve a high on-site interview-to-hire ratio 

• Placing an operations and senior HR employee at the sign-in desk at job fair 

events to review incoming resumes and confirm position assignments prior to 

each interview 

• Beginning the background checks process at the job fairs 

• Ensuring that sub-contractors provide Serco with daily hiring results by labor 

category for tracking 

• Completing Mass OnboardingiData Entry spreadsheets on a daily basis to report 

updated hiring numbers 

• Providing on-site computers for job fair walk-ins to apply online 

The roll-out ofSerco's hiring and sites is a phased approach. Details regarding each 

location are noted below as of October 4, 2013: 

KENTUCKY 

Hiring Goal 909 

Applicants to Date 1,359 

, Interviews Scheduled 739 

Offers Accepted 615 

Total Employees on Board 615 

1,615 

2,407 

704 

574 

574 

783 

5,444 

1,170 

775 

16 

. . . 

477 

Thank you for this opportunity to provide additional information to the Subcommittee. 

Sincerely, 

~r:K~' John Lau ' 

Program Director 

Serco Inc. 

3,784 

9,~S9 

~!~.~~ .. 

1,964 

. _1,20~ 

-
157 


86926.111

FRED UPTON. MICHIGAN 

CHAIRMAN 

HENRY A. WAXMAN. CALIFORNIA 

RANKING MEMBER 

Ms. Lynn Spcllccy 

Corporate Counsel 

ONE HUNDRED THIRTEENTH CONGRESS 

<!Congre1\1\ of tbe Wniteb ~tate1\ 

~ouf5e of !\eprcf5entatibef5 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6115 Majority (202) 225-2927 

Minority (202) 225-3641 

September 26, 2013 

Equifax Workf(ll'CC Solutions 

11432 Lackland Road 

St. Louis, MO 63146 

Dear Ms. Spcllce)': 

Thank you for appcnring before the Subcommittee on Health Oil Tuesday, September 10,2013, to 

testify at the hcaring cntitlcd "PPACA Pulse Check: Part 2." 

Pursuant to the Rules of the Committee on Energy and Commerce, the hearing record remains 

open for ten business days to pcrmit Members to submit additional questions for the record, which are 

attached. The format of your responses to these questions should be as follows: (I) the name of the 

Member whose question you are addressing, (2) the complete text of the question you arc addressing in 

bold, and (3) your answer to that question in plain text. 

To facilitate the printing of the hearing record, please respond to these questions by the close of 

business on Thursday, October 10,2013. Your responses should be mailed to Sydnc Harwick, 

Legislative Clerk, Committee on Energy and Commerce, 2125 Raybum House Office Building, 

Washington, D.C. 20515 and e-mailed in Word format to Sydne.Harwick@mail,hollse,go\', 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

~;J//'Ir JOSePI~~ 4 

Chairman 

Subcommittee on Health 

cc: The Honorable Fmnk Pallone, Jr., Ranking Member, Subcommittee on Health 

Attachment 
158 


86926.112

Equifax Workforce Solutions 

Additional Questions for the Record 

Re: the Subcommittee on Health 

Committee on Energy & Commerce 

U.S. House of Representatives 

PPACA Pulse Check: Part 2 

The Honorable Gus Bilirakis 

1. You have data on about one third of the working population. How do you handle 

verification for people that you do not have data on? Are we to trust what they 

say? 

Equifax Workforce Solutions Work Number data is one of several sources of information 

used by CMS to determine applicant eligibility. Under the Equifax Workforce Solutions 

contract with CMS, the data hub will send us the applicant's name, date of birth and 

social security number, which CMS has already verified through other sources. Equifax 

Workforce Solutions will return the required data elements to CMS if the applicant's 

information matches a record in The Work Number database. Equifax Workforce 

Solutions will return a "no match" code to CMS if there is not a matching record in The 

Work Number database. 

2. In your testimony, you talk about the confidence in the data in your results. Will 

you talk more about how you determine confidence in the results? What makes 

you confident the data on a person is valid? What would give you pause? 

Equifax Workforce Solutions' core business is verifying employment and payroll 

information. Employers who participate in The Work Number database provide their 

regular payroll information directly to us in an electronic feed, which becomes the 

foundation for our verification services. Equifax Workforce Solutions works with 

employers to assist in the secure transfer of the data including an initial and then an 

ongoing process to verify the data quality. As our testimony stated, employees can 

access their Employment Data Report that includes a record of all verifications completed 

for that employee and the information that was shared. We have processes in place to 

investigate any disputes and to work with our employer clients to correct any data errors. 

3. Has HHS, CMS, or another government agency come back to you and asked you to 

modify the initial contract? If so, what was changed? Did CMS state why they 

needed to make this change or why this was not included in the original bid? 

CMS has modified the contract to reflect updated CMS Information Security 

requirements, a new Contracting Officer and her contact information, and a modification 

that includes a Technical Direction Clause that was not previously provided for in the 
159 


86926.113

contract. These modifications requested by CMS do not change the intent or the ongoing 

work being performed by Equifax Workforce Solutions. These changes were originated 

by CMS to reflect the most current regulations and points-of-contact because these items 

have changed since the award. 

4. What security standards do you use? Do you use FISMA standards for your 

private contracts? How would FISMA standards compare to the equivalent 

commercial security standards? Would you describe it as a higher or lower 

standard? 

As stated in our testimony, Equifax Workforce Solutions is certified to ISO 27001, a 

global security standard, and also has a FISMA certification. Both FISMA and ISO 

27001 require organizations to establish a formal security program, perform risk analysis, 

and implement administrative, technical and physical security controls that address those 

risks. FISMA is a federal law, applicable to executive branch agencies and their 

contractors, and supported by a standard for selecting and applying security controls. The 

standard is found in NIST SP 800-53. ISO 27001 is a global commercial standard that is 

also supported by requirements for selecting and applying security controls. We do not 

use FISMA in private contracts, but our approach to security through ISO 27001 is 

comparable to the standard that federal agencies maintain under FISMA. 
160 


86926.114

FRED UPTON, MICHIGAN 

CHAIRMAN 

HENRY A. WAXMAN, CALIFORNIA 

RANKING MEMBER 

ONE HUNDRED THIRTEENTH CONGRESS 

Mr. Michael Finkel 

€:ongress of tbe Wniteb ~tates 

~Ott5C of l\eprc5l'lltatiul'5 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6115 Majority (202\ 225-2927 

Minority (202) 225-3641 

September 26, 2013 

Executive Vice President for Program Delivery 

QSSI 

131 Elden Street, Suite 200 

Herndon, V A 20 I 70 

Dear Mr. Finkel: 

Thank you for appearing before the Subcommittee on Health on Tuesday, September 10,2013, to 

testify at the hearing entitled "PPACA Pulse Check: Part 2." 

PlII'suanl to the Rules orlhe Committee on Energy and Commerce. the hearing record remains 

open for ten business days to permit Members to submit additional questions for the record, which arc 

attached. The format of your responses to these questions should be as follows: (I) the name of the 

Member whose question you are addressing, (2) the complete text of the question you arc addressing in 

bold, and (3) your response to that question in plain text. 

Also attached arc Member requests made during the hearing. The format of your responses to 

these requests should follow the same lomlat as your responses to the additional questions lor the record. 

To facilitate the printing of the hearing record, please respond to these questions and requests by 

the close of business on Thursday, October 10,2013. Your responses should be mailed to Sydne 

Harwick, Legislative Clerk, Committee on Energy and Commerce, 2125 Raybunl House Omce Building, 

Washington, D.C. 20515 and c-l11ailcd in Word format to Sydne.Harwickl@mail.house.gov, 

Thank you again for yom time and efTort preparing and delivering testimony before the 

Subcommittee, 

Chainnan 

Subcommittee on Health 

cc: The Honorable Frank Pallone, Jr .. Ranking Member, Subcommittee on Health 

Attachments 
161 


86926.115

U.S. House Committee on Energy & Commerce Subcommittee on Health 

Hearing on "PPACA Pulse Check: Part 2" 

Supplemental Written Testimony of Michael Finkel 

Quality Software Services, Inc. 

October 1 0, 2013 

Supplemental Responses to Member Questions 

The Honorable Joseph R. Pitts' Questions 

Q: Will you please elaborate on the security systems that will protect data in the hub you 

are creating? 

A: Under the Federal Information Security and Management Act, CMS is required to follow the 

National Institute of Standards and Technology'S security standards and guidelines for 

federal IT systems. As a system integrator, QSSI was responsible for assuring that the design 

and development of the Data Services Hub complied with these NIST standards. QSSI has 

met its obligations from a system design and development standpoint. 

As I mentioned in my testimony, the Data Services Hub code is being developed, will launch, 

and will operate from within the CMS secure cloud hosted at the Terremark Data Center. 

Once in production, CMS will enforce additional security controls to protect the system, 

including controlling access and changes to the system. The Data Services Hub will be 

monitored continually by CMS and its information security contractors. 

While QSSI does not have full visibility into all of the layers of security CMS has in place, 

CMS has announced that the Data Service Hub and the associated component systems that 

comprise the health insurance market place (other than the State-Based Marketplaces) have 

several layers of protection in place to mitigate information security risk. For example, these 

systems will employ a continuous monitoring model that will utilize sensors and active event 

monitoring to quickly identify and take action against irregular behavior and unauthorized 

system changes that could indicate a potential incident. If a security incident occurs, CMS 

has noted that its Incident Response capability would be activated, which allows for the 

tracking, investigation, and reporting of incidents. This allows CMS and the Department of 

Health and Human Services (HHS) to quickly identify security incidents and ensure that the 

relevant law enforcement authorities, such as the HHS Office of Inspector General Cyber 

Crimes Unit, are notified for purposes of possible criminal investigation. 

1 
162 


86926.116

Q: Has QSSI completed stress testing of their system? Will you describe what stress 

testing entails and when you expect such stress testing to be complete? 

A: QSSI has completed its stress testing of the Data Service Hub. Based on that testing, QSSI 

believes that the Data Services Hub will be able to transmit the necessary number of queries. 

The Honorable Gus Bilirakis' Questions 

Q: In your statement, you mention that a security risk assessment by a coutractor did not 

identify any issues that would prevent the data services hub from lauuchiug. Did the 

security assessment find auy security eoncerns? Will you provide this eommittee with a 

copy of that report? 

A: The Security Risk Assessment did not find any issues that would preclude authorization to 

operate. As is common, the Security Risk Assessment identified a number of areas for 

enhancement. For example, the Security Risk Assessment proposed documentation 

enhancements and password setting protocol enhancement. QSSI has either addressed the 

recommendations or, in the case of a few non-critical items, identified enhancements that are 

pending approval or completion. The Mitre Corporation provided the final version of the 

Security Risk Assessment to CMS, and QSSI does not have a copy currently. 

Q: According to the Inspector General's report, it says that CMS's Chief Information 

Officer is expected to make his Security Authorization on September 30, one day before 

the Exchanges go online. Is it responsible to make this decision so late in the process? 

The original timeline was for it to be made on September 4. 

A: As noted in our testimony, an independent third-party tester, the Mitre Corporation 

conducted an independent Security Risk Assessment of the Data Services Hub which was 

completed on August 30, 2013. The Mitre Corporation provided its Security Risk 

Assessment to the CMS Chief Information Officer to allow him to assess whether or not to 

authorize operation of the Data Services Hub by eMS. 

Based on the Mitre Corporation Security Risk Assessment, the CMS Chief Information 

Officer provided the security authorization on September 6, 2013, well in advance of October 

1. 

Q: According to the Inspector General's report, the final report for the Security Control 

Assessment (SCA) is not due until September 20. That gives CMS 10 days to review the 

report and make any changes to your system. Is that really adequate time for CMS to 

do this? How much time would you have in the commercial sector? 

A: As noted above, the Security Risk Assessment was completed on August 30, 2013, and the 

security authorization was signed on September 6, 2013, well in advance of October 1. In 

2 
163 


86926.117

our experience, the timing of assessments depends on numerous variables. The timing of the 

assessment and the authorization is not notable based on QSSI's past experience in prior 

projects. 

Q: Has HHS, CMS, or another government agency come back to you and asked you to 

modify the initial contract? Is so, what was changed? Did CMS state why they needed 

to make this change or why this was not included in the original bid? 

A: As is common, CMS has issued contract modifications since the original Data Services Hub 

contract was awarded. Among other things, the modifications provided for the development 

of an Electronic Data Interchange which will be used to translate files from the federal and 

state marketplaces into a format that is more readily processed by issuers. As with the Data 

Services Hub, the Electronic Data Interchange is housed at the Terremark Data Center and 

operated by CMS. Other aspects of the modifications included the provision of additional 

hardware and software, as well as infrastructure support for CMS to operate its operations 

center. 

Q: What security standards do you use? Do you use FISMA standards for your private 

contracts? How would FISMA standards compare to the equivalent security 

standards? Would you describe it as a higher or lower standard? 

A: As noted in our testimony, as a CMS system, the Data Services Hub is covered by the 

Federal Information Security and Management Act and the security requirements set forth 

therein. Federal Information Security and Management Act was signed into law in 2002 and 

has been subsequently amended. Systems that are developed for private parties do not 

typically need to conform to the security requirements set forth in the Federal Information 

Security and Management Act. Commercial standards are often developed based on the 

Federal Information Security and Management Act standards. 

The Honorable John Dingell's Requests 

Q: Some have argued that the data hub will be a new government database with personal 

medical information, Is this an accurate characterization ofthe program? If not, what 

is the correct representation of the circumstances? 

A: No, it is not an accurate characterization. The Data Services Hub is a tool that will transfer 

data. The Hub's function will be to move data, acting as a router of data between a given 

marketplace and various data sources. 

The Data Services Hub will route data that will be used by the health insurance marketplaces 

to verify applicant information data to determine eligibility for qualified health plans and 

insurance programs, as well as for Medicaid and CHIP. A consumer interested in purchasing 

health insurance online will go to a health insurance marketplace's web portal to fill out 

3 
164 


86926.118

enrollment forms and select a plan. Certain information the consumer provides to the 

marketplace, such as citizenship, will have to be verified. The marketplace will direct a query 

to external information sources, such as government databases, through the Data Services 

Hub. The Data Services Hub will not store the verification data or the content of the queries 

made by the marketplaces. 

Once the requested verification information is sent back to the marketplace, eligible 

consumers are then able to enroll in one of the available plans. The Data Services Hub will 

not determine consumer eligibility, nor will it determine which health plans are available in 

the marketplaces. The enrollment data, such as name, address, and premium amount, will 

then be transferred through the Data Services Hub from the originating marketplace to the 

health plan the consumer chooses. 

While the Data Services Hub will pass eligibility data from verification sources to the federal 

and state marketplaces, and enrollment data from marketplaces to plan issuers, it will not 

handle any personal medical records. 

CMS owns and will operate the Hub, which is housed in the CMS secure cloud hosted at the 

Terremark Data Center. 

Q: Would you please provide a summary of the functions of the data hub? 

A: The principal functions of the Data Services Hub are the following services provided to the 

Federally-Facilitated Marketplace and the State-Based Marketplaces (collectively 

"marketplaces"): 

• Eligibility Verification Support: 

o The Data Services Hub will transmit verification requests from health insurance 

marketplaces to trusted databases, such as databases operated by the Social 

Security Administration, the Internal Revenue Service, the Department of 

Homeland Security, the Department of Veterans Affairs, Medicare, TRICARE, 

and Equifax. The Data Service Hub will then transmit the responses from the 

relevant database back to the originating marketplace. 

o For State-Based Marketplaces, the Data Services Hub will transmit an identity 

verification request to Experian. The Data Services Hub will then transmit the 

response from Experian to the originating marketplace. 

o The data transmitted will pertain to the applicant's identity and enrollment 

information, but will not include personal medical information. 

o The marketplaces, not the Data Services Hub, will serve as the "front door" for 

consumers to fill out an online health insurance application and to review 

qualified plans. 

o The Data Services Hub does not make eligibility detenninations, which is a 

function of the marketplaces. 

4 
165 

Æ 


86926.119

o The Data Services Hub does not store the content of the verification requests or 

the responses from the trusted sources. 

Enrollment Support: 

o The Data Services Hub will transmit enrollment data from the FederallyFacilitated Marketplace to issuers. The Data Services Hub will then transmit an 

acknowledgement from the issuer to the Federally-Facilitated Marketplace. 

o The Data Services Hub does not make enrollment selections, which are made by 

the applicant. 

o The Data Services Hub does not store the content of the qualified plans or the 

enrollment data. 

Plan Management Support: 

o The Data Services Hub will transmit information about qualified health insurance 

plans from issuers to the Federally-Facilitated Marketplace. The Data Services 

Hub does not make plan qualification determinations. 

o The Federally-Facilitated Marketplace is the tool that eMS will use to certify and 

manage qualified plans. 

Financial Management Support: 

o The Data Services Hub will transmit a list of issuers from the FederallyFacilitated Marketplace to the eMS accounting system for purposes of premium 

amounts. 

o The Data Services Hub does not determine reinsurance payments, risk 

adjustments and corridors, or premium amounts. The Federally-Facilitated 

Marketplace is the tool that eMS will use to calculate reinsurance payments, risk 

adjustments and corridors, and premium amounts. 

5