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HEALTH INSURANCE EXCHANGES: 

PROGRESS REPORT 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 14, 2013 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

SHERROD BROWN, Ohio 

MICHAEL F. BENNET, Colorado 

ROBERT P. CASEY, Jr., Pennsylvania 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

ROB PORTMAN, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

AMBER COTTLE, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 3 

WITNESSES 

Cohen, Gary, Deputy Administrator and Director, Center for Consumer Information and Insurance Oversight (CCIIO), Centers for Medicare and Medicaid Services, Department of Health and Human Services, Washington, 

DC .......................................................................................................................... 5 

Hughes, Don, Advisor to the Office of the Governor, State of Arizona, Phoenix, 

AZ .......................................................................................................................... 25

Ferguson, Christine, Director of the Rhode Island Health Benefit Exchange, 

State of Rhode Island, Providence, RI ................................................................ 27 

Tweardy Riveros, Bettina, Advisor to the Governor and Chair of the Delaware 

Health Care Commission, State of Delaware, Wilmington, DE ....................... 29 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 37 

Cohen, Gary: 

Testimony .......................................................................................................... 5 

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

Responses to questions from committee members ......................................... 52 

Ferguson, Christine: 

Testimony .......................................................................................................... 27 

Prepared statement .......................................................................................... 124 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 127 

Hughes, Don: 

Testimony .......................................................................................................... 25 

Prepared statement .......................................................................................... 131 

Tweardy Riveros, Bettina: 

Testimony .......................................................................................................... 29 

Prepared statement .......................................................................................... 139 

COMMUNICATION

AARP ........................................................................................................................ 145 

(III) 

(1) 

HEALTH INSURANCE EXCHANGES: 

PROGRESS REPORT 

THURSDAY, FEBRUARY 14, 2013 

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC. 

The hearing was convened, pursuant to notice, at 9:48 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Wyden, Cantwell, Nelson, Carper, Cardin, 

Casey, Hatch, Grassley, Crapo, Roberts, Enzi, and Isakson. 

Also present: Democratic Staff: Amber Cottle, Staff Director; 

David Schwartz, Chief Health Counsel; and Tony Clapsis, Professional Staff. Republican Staff: Kim Brandt, Chief Healthcare Investigative Counsel. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The hearing will come to order. 

I apologize to everybody for the delay. Something unavoidable 

came up, but we are here. 

In early 1964, just 2 months after the assassination of John F. 

Kennedy, President Lyndon Johnson delivered his first State of the 

Union address. He called on Congress to move forward with the 

late President’s bold agenda. He said we have ‘‘a unique opportunity and obligation to prove the success of our system. If we fail, 

if we fritter and fumble away our opportunity in needless, senseless quarrels between Democrats and Republicans, or between the 

House and the Senate, or between the Congress and the administration, then history will rightfully judge us harshly.’’ 

Last summer the Supreme Court, once and for all, ruled the Affordable Care Act to be the law of the land, settling the issue. After 

nearly a century of Americans fighting for real health care reform, 

we finally passed the Affordable Care Act in 2010. Health insurance exchanges or marketplaces are one of the most vital tools created by the law to provide nearly every American with health care. 

Now is the time for us to work together to ensure that the law 

and these marketplaces are implemented properly. These marketplaces are a new frontier and create a real opportunity for more 

Americans to get health insurance. For far too long, individuals 

and small businesses across the Nation, shopping for health insurance, were left to fend for themselves. 

A Commonwealth Fund study found that nearly three-quarters of 

individuals looking for coverage on the individual market never 

2 

bought a plan, with 61 percent of those citing premium costs as a 

primary reason. 

In preparation for this hearing, I did a little exercise and 

shopped around for health insurance online. I started, as most 

American families would, and typed into Google ‘‘individual health 

insurance plans.’’ In 0.26 seconds—I love Google—106 million results appeared, everything from AARP, United, Blue Cross, CareFirst, Kaiser Permanente, and many others. 

Needless to say, it was already a bit overwhelming. In fact, I 

think this is one application right here—we printed it out—for one 

person. I clicked on one insurance carrier’s website and found an 

application for their individual and family health plan. This is it: 

97 pages long: a 24-page questionnaire, followed by a 73-page disclosure form. Now, I went to law school, and this is Greek to me. 

With the marketplaces, there will be one simple web form application for consumers. 

Before health reform, plans were too expensive, with little protections. Insurers were able to terminate coverage when patients had 

cancer simply because these patients did not disclose a teenaged 

bout with acne or a bump on the chin as a child. 

Plans were described in legal jargon instead of plain English. 

Large companies, on the other hand, could use the leverage that 

came with their size to negotiate better plans at more stable prices. 

This inequality in the health care system created yet another case 

of the haves and the have-nots. But not anymore. The marketplaces created in health reform will help level the playing field. For 

the first time, individuals and small businesses will be able to pool 

their purchasing power to get better bang for their buck. 

Consumers will have access to one-stop competitive shopping for 

affordable health care, just like they have on Orbitz or Kayak for 

airfare and hotels. These marketplaces will provide clear comparisons of quality and price across the plans. At least, that is the goal. 

We have to make sure that happens. 

We already shop in competitive marketplaces for groceries, airline tickets, and cars. There is no reason the health insurance market should be any different. These marketplaces are scheduled to 

be up and running across the country on October 1st for coverage 

effective January 1, 2014. 

Two other critical components of the health care law are paired 

with the marketplaces: first, consumers will no longer have to 

worry about being denied coverage due to a preexisting condition 

or when they get sick; and second, tax credits will be available to 

help American families and businesses purchase insurance. 

I know the Department of Health and Human Services has been 

hard at work for nearly 3 years in preparation, but there are challenges. I want to make sure the Department is ready on day 1. It 

is important for the Congress and for the Finance Committee, on 

behalf of the American people, to closely oversee implementation of 

these new programs, especially the marketplaces. 

I expect Senators to ask a lot of questions, because there are a 

lot of challenges ahead. That is why we are here today. I expect 

to hear about the significant progress that the Centers for Medicare and Medicaid Services and States have made in implementing 

the marketplaces. 

3 

I am pleased with the level of flexibility that CMS has provided 

to States in order to get marketplaces up and running. Instead of 

a one-size-fits-all solution, CMS has worked with States to craft 

customized marketplaces that fit the specific needs of their residents, because all of us in Montana can assure you that Montana 

is a bit different from New York. 

CMS has told States they can run their own marketplace or 

share the responsibilities. If it prefers, it can let CMS facilitate the 

marketplaces. States are also free to make changes down the road. 

This flexibility is key to making sure that marketplaces work in 

each State across the country. We will ask CMS today whether 

progress is on track, targets are being met, and what more can be 

done to realize the promise of the Affordable Care Act. We will also 

hear from three States, each of which will provide unique perspective on the opportunities and challenges in creating these new marketplaces. 

So, as President Johnson urged in his State of the Union address, let us remember our obligation as we approach the marketplaces’ launch this fall. We have a real opportunity here to help 

Americans access affordable health care in a consumer-friendly 

way for the first time in a century. So let us not ‘‘fritter and fumble 

away our opportunity in needless, senseless quarrels.’’ Let us ensure that these marketplaces live up to their promise and deliver 

unprecedented access to high-quality health care. 

[The prepared statement of Chairman Baucus appears in the appendix.] 

The CHAIRMAN. Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Well, thank you, Mr. Chairman. Thank you for 

holding this hearing. I welcome this opportunity to join you in conducting congressional oversight on the implementation of the President’s health law, and more specifically on the nature of health 

care exchanges. 

It is no secret that the President promised that his plan to reform the health care system would reduce premiums by $2,500 for 

individuals. He made this promise more than once, and at the time 

I was skeptical, and I said so. As we are seeing now, I had good 

reason to be. We are already feeling the impact of the law as the 

cost of insurance premiums continues to go up. 

In 2014, when the law will be fully implemented, premiums will 

skyrocket further as insurers scramble to meet all of the new mandates that go into effect. The question is, how high are these costs 

going to go? We have estimates from an Oliver Wyman study that 

suggest premiums in the individual market next year will increase 

an average of 40 percent. 

The Society of Actuaries similarly estimates an average increase 

of 32 percent in premiums in the individual market, and, for many 

communities, it gets even worse. A recent survey of health plans 

reveals that premiums in the individual market in Phoenix, AZ 

could see an average increase of 157 percent; Milwaukee, WI will 

see an average increase of 190 percent. 

4 

If the point of the health care law was to reduce costs and increase access, these estimates show that it appears to have already 

failed. Some of the law’s supporters will say that these premium 

increases will be mitigated by the new health insurance subsidies; 

however, the Oliver Wyman study that I referred to found that 40 

percent of those covered in the individual health insurance market 

in 2011 would be ineligible for these subsidies in 2014. 

It also found that 36 percent of those currently uninsured can expect to pay more out of pocket for single coverage than they would 

otherwise, even with the availability of premium assistance. These 

rate increases will have a significant impact on the ability of individuals to purchase coverage. It was bad policy when we debated 

it, it was bad policy when the Democrats rammed it though the 

Senate, and it is still bad policy today. 

Now consumers are starting to see its impact just as they are 

about to be able to enroll in the new health exchanges. Today we 

are here to discuss these exchanges. As most of you know, I have 

a particular interest in this issue, because the State of Utah was 

one of the first States to establish a market-based State exchange 

prior to the passage of the law that met its unique demographic 

needs. 

The administration claims that health insurance exchanges will 

allow plans to compete for business, and therefore the cost of 

health insurance will be reduced. Unfortunately, the exchanges, as 

designed in the law, will do neither. They will actually increase 

health care costs. 

We know that State-based exchanges are being established in 18 

States. Of those States, 13 have published studies providing annual 

budget estimates for establishing and maintaining State exchanges. 

Those annual budget estimates range from $6 million to $300 million and will be funded through the establishment of exchange user 

fees. 

Similar to State-based exchanges, the federally facilitated exchange will be funded through the imposition of onerous user fees. 

The administration recently proposed a 3.5-percent fee on each 

plan offered through the exchange. This is no small amount. We all 

know the costs will be passed on to consumers in the form of higher prices. 

So I am concerned about this, as you can imagine, and have been 

from the beginning. I do not mean to find fault with those who are 

trying to do what is right, but I just do not see how it is going to 

work, and I do not see how it is going to work in an efficient, costsaving way. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

[The prepared statement of Senator Hatch appears in the appendix.] 

The CHAIRMAN. I am pleased now to welcome our first witness, 

Gary Cohen, Director of the Center for Consumer Information and 

Insurance Oversight at the Centers for Medicare and Medicaid 

Services. Then, when we get to the second panel, I will introduce 

them at that time. 

So, Mr. Cohen, why don’t you proceed? Your statement will be in 

the record. You can summarize it in about 5 minutes. And do not 

5 

pull any punches. Tell us what is really going on—not a bunch of 

stuff, but what is going on. 

Mr. COHEN. I will, Senator. Thank you. 

The CHAIRMAN. All right. 

STATEMENT OF GARY COHEN, DEPUTY ADMINISTRATOR AND 

DIRECTOR, CENTER FOR CONSUMER INFORMATION AND INSURANCE OVERSIGHT (CCIIO), CENTERS FOR MEDICARE 

AND MEDICAID SERVICES, DEPARTMENT OF HEALTH AND 

HUMAN SERVICES, WASHINGTON, DC 

Mr. COHEN. Thank you, Chairman Baucus, Ranking Member 

Hatch, and members of the Finance Committee, for the invitation 

to appear before you today. As Director for the Center for Consumer Information and Insurance Oversight at the Centers for 

Medicare and Medicaid Services, I oversee implementation of many 

of the provisions of the Affordable Care Act, including the exchanges or marketplaces. 

I know the biggest questions on everyone’s mind today are: are 

we making progress, are we on track, and will we be ready? I am 

very pleased to be here today to tell you that, yes, we are making 

great progress, we are on track, and we will be ready for people all 

across the country to obtain high-quality, affordable health care 

coverage beginning on October 1st. 

I thought it would be helpful to describe for you how a person 

will experience the new health insurance marketplace, and, as I do, 

to give you an idea of where we are in the design and building of 

it. 

Picture a consumer today. For example, a Mr. Smith, who is a 

resident of Montana, who is curious about his health insurance options under the health care law. He goes online. He types ‘‘healthcare law’’ into a search engine, and he finds Healthcare.gov. We relaunched the website recently with consumer-friendly videos and 

other information. Mr. Smith sees some helpful tips about the marketplace and the information he will need when he returns to the 

website to get enrolled in coverage this fall. 

In October, Mr. Smith finds a single, streamlined application 

that will enable him to find out whether he and his family are eligible for Medicaid, CHIP, or for tax credits to help pay for his insurance premiums to a commercial insurer. 

CMS has consulted with States, stakeholders, consumer groups, 

and the National Association of Insurance Commissioners, in developing this application. We conducted consumer testing to ensure 

that it makes sense to consumers at different income and educational levels. 

Since the information that Mr. Smith provides can be shared 

with State Medicaid and CHIP agencies, Mr. Smith will only have 

to submit one application. On January 28th, the public comment 

period began on both applications for individuals and for small 

businesses, and we expect them to be finalized by April. 

Now, Mr. Smith enters some basic information about himself and 

his family. CMS is building a data services hub that will access information from several sources, including the Social Security Administration, Department of Homeland Security, and the IRS, to 

6 

verify the information that Mr. Smith enters about his citizenship 

status, his income, and so forth. 

This data is subject to strong privacy and security protections, 

and it is important to note that the hub will not store any consumer data. Its purpose is to allow a seamless flow of information 

from different sources. We have already completed the hub’s technical design and reference architecture. We are establishing a 

framework for security across agencies and protocols for connectivity across agencies and with States, and we have begun testing 

the hub. 

Mr. Smith finds out in real time that he is eligible for tax credits 

to help pay for coverage through the marketplace, and he starts 

shopping for a plan. We are well-along in the process of making 

sure that he will find a variety of affordable, comprehensive, qualified health plans to choose from. CMS is building a plan management infrastructure that will enable us to receive, review, and approve applications from issuers for plans to be sold in the Federal 

marketplace. 

In November of last year, we provided issuers with a draft of the 

templates that they will use to submit their plans. We have gotten 

feedback on them, and issuers will begin submitting applications to 

us at the end of March. We will review those applications and will 

approve plans to be sold in the Federal marketplace by this summer. Issuers will then have an opportunity to review and make any 

corrections to the information about their plans that will appear on 

the website beginning in October. 

Once Mr. Smith chooses a plan that he thinks is right for himself 

and his family, the marketplace website will electronically transmit 

his enrollment data directly to the issuer and will provide a link 

for him to the issuer’s website, where Mr. Smith will be able to pay 

his first month’s premium so his coverage will begin and be effective on January 1st. 

Now, because Mr. Smith visited Healthcare.gov earlier in the 

year and was prepared with the basic information he needed, he 

was able to complete this entire application process in as little as 

30 minutes. But we know that many people will need some help, 

and a number of resources will be available to them. 

First, of course, a consumer may choose to work with an insurance agent or broker in his or her community or with an online 

web broker. For the marketplace that the Federal Government is 

managing, we are building a web portal for agents and brokers 

that will enable them to submit applications on behalf of individuals and small businesses. 

Consumers will also be able to get help from a navigator, funded 

by a grant from CMS or by a State that is operating its own marketplace. Our first funding opportunity for navigators will be going 

out shortly. We will fund people in the community who will be 

trained and certified to provide fair, accurate, and impartial information to consumers. 

Consumers will also be able to get help through a call center that 

will be available 24/7, will make assistance available in over 150 

languages, and will have assistance for the hearing impaired. As 

you can see, we have made great progress. More work remains to 

be done, of course, and I look forward to continuing to work with 

7 

States, stakeholders, issuers, consumers, and this committee on 

readying the marketplace for open enrollment. I am confident that 

the marketplace will be open and ready for business on October 

1st. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Mr. Cohen. 

[The prepared statement of Mr. Cohen appears in the appendix.] 

The CHAIRMAN. Of course, there are a million questions. Let me 

just start in one area. That is, what differences are there among 

the States? One State wants to access the marketplace. It begs the 

question whether it is State-based or federally run. Compare it 

with another State. To what degree will each person across the 

country, irrespective of States, experience the very same experience 

compared with not, because different States are different? What is 

going to be different among the States? 

Mr. COHEN. So, among the States where CMS will be operating 

the marketplace, the application will be the same. So, the experience for all those people will be exactly the same. States have the 

option of using our application or of modifying the application if 

they choose to, but they need to comply with all of the same criteria and requirements as will be true with the application that we 

are creating. So we anticipate that the experience will be very 

much the same all across the country in terms of the experience 

of coming online and applying for coverage. 

The CHAIRMAN. Could States change their minds? What happens 

when they change their minds? Can one State maybe be federally 

based and then decide it wants to be State-based? Can you go 

back? ‘‘We do not want to do that anymore; we want the Feds to 

do it.’’ I doubt that is ever going to happen, but, nevertheless, what 

flexibility do States have in deciding whether they want to run 

these marketplaces compared with the Feds? 

Mr. COHEN. As you know, we have encouraged States to operate 

their own marketplaces because we do believe that that gives them 

the most flexibility to serve their communities in a way that they 

believe is best for them. Not all States have been prepared to do 

that for 2014, but there will be opportunities beginning later this 

year to apply to operate a State marketplace beginning in 2015 and 

in years thereafter. 

So States absolutely will have that opportunity, and we will have 

the ability to learn from the experience of the States that have 

moved along a little faster to operate their own marketplaces, and 

we will also benefit from a lot of the work done by those States, 

because one of the requirements of the grants that we are giving 

to States is that the work that they do and that their vendors do 

be made available to other States as well. 

The CHAIRMAN. Could you give me the list of the various agencies where information has to be coordinated? You know, HHS, 

CMS, IRS. Just give me a list of all the other agencies where the 

box has to be checked. 

Mr. COHEN. Social Security, IRS, Homeland Security, and there 

may be others. I may have to get back to you with the complete 

list, but those are the major ones. 

The CHAIRMAN. I am a little surprised you do not know that, you 

cannot just rattle those off, bing, bing, bing, bing, bing, because 

8 

that is going to be key to the efficiency of these marketplaces. You 

cannot think of the others? 

Mr. COHEN. Those are the main ones that I can think of at this 

moment, but I am happy to get you that list. 

The CHAIRMAN. How are you going to be assured that the computers in all these different agencies are speaking the same language and they are all up and running? I mean, to tell you right 

off the top, two of those agencies you have already listed, I know 

have archaic computer systems today. 

Mr. COHEN. So, I am encouraged by the fact that we actually 

have already begun testing with Social Security, with Homeland 

Security, and with IRS on exactly what you are raising, Senator, 

the flow of data back and forth. So we are well-along with that 

process and expect to be able to complete that testing by this 

spring. So, I do not think we are going to experience problems 

there. 

The CHAIRMAN. What do you mean by ‘‘well-along?’’ What does 

that mean? 

Mr. COHEN. We have begun that testing, and we have a process 

where we will continue testing, continuing from now until the 

spring when it will be completed. 

The CHAIRMAN. How much information do you intend to share 

with this Congress as to how well this is progressing? That is, what 

happens if, in a month or two, you think, oh my gosh, we have a 

huge problem here. Is that information going to be shared with 

anybody, or are you just going to keep it to yourself? 

Mr. COHEN. We are happy to work with you and provide you 

with the information that you request from us. 

The CHAIRMAN. So, at this point, are there any ‘‘uh-oh’’ revelations? 

Mr. COHEN. No, we are very much on track with a plan that will 

get us to open enrollment beginning on October 1st. 

The CHAIRMAN. What about those different computer systems I 

asked about? Is it not true that almost all agencies have different 

computer systems that speak different languages? 

Mr. COHEN. I think that is why we are building this data hub, 

and it is designed in a way that it can accept data from the different agencies, and it can verify information coming into the data 

hub that will be entered as part of the application process. 

The CHAIRMAN. Well, my time is up. 

Senator Hatch? 

Senator HATCH. Thank you, Mr. Chairman. 

Mr. Cohen, the CMS guidance document on partnership exchanges provides an aggressive time schedule of only 10 months 

between the plan application process and the first day of coverage. 

This is mostly due to a delay in issuing regulations, many of which 

have yet to be made final. In a little over 1 month, Americans will 

be able to enroll in plans that will start October 1st. We are literally over 1 month away from the application process really beginning. 

Now, I recall that the Medicare Part D implementation timeline 

provided 2 years between the application process and the first day 

of coverage. We all remember some of the hiccups that occurred 

when the enrollment efforts first began. 

9 

Applying the lessons learned from the implementation of Medicare Part D, I have a hard time understanding how the administration expects to have exchanges up and running by October 1st, especially since we have no details on how the exchanges will work 

in over half the States. Now, with less than 8 months before open 

enrollment, how can you be confident that Americans will be able 

to enroll in plans starting October 1st? 

Mr. COHEN. Well, Senator, the partnership really enables States 

to continue doing their traditional State regulatory function, as 

they have done historically, in reviewing plans and approving them 

for sale. 

So it really does not call on States to perform a lot of very new 

functions. Their job is to have the issuer submit plans to them, to 

review those, and to make sure they meet the qualifications that 

are required under the law to be sold in the new marketplace. 

The other aspect of the partnership is consumer assistance, 

which again is a very traditional function that States have historically performed very well and which enables them to tailor the operation of the marketplace, their outreach, and the assistance that 

they provide consumers, to their communities. 

As far as the eligibility enrollment system goes, we are building 

a system that will function across all of the States where CMS will 

be operating the marketplace. As I said, we are well-along and on 

track and hitting our milestones to have that be ready for October 

1st. 

Senator HATCH. Mr. Chairman, I am going to have to go to Judiciary for a little while, but I am going to try to get back. 

The CHAIRMAN. Sure. 

Senator HATCH. That is how I will ask for additional time. 

The CHAIRMAN. Fine. Thank you, Senator. 

Senator Cantwell? 

Senator CANTWELL. Thank you, Mr. Chairman. You asked our 

witness to just go at it and do not tell us a bunch of stuff, so I am 

going to try to encourage the same discussion. It kind of reminds 

me already, there is a maxim in politics: a campaign does not a 

candidate make. That means you do not make somebody just because you have a campaign. It sounds to me this morning a lot 

about, technology does not make a cost-effective health plan. The 

details of how to drive down costs make a cost-effective health 

plan. 

So I am wondering if you can tell me why the Federal basic 

health option, which was supposed to be implemented in 2014 in 

conjunction with—not in the exchange but in conjunction with—is 

not being implemented. 

Mr. COHEN. Thank you, Senator. I appreciate your interest in the 

basic health plan. I have heard a lot of interest in the basic health 

plan as I have gone around the country and talked to different 

States and different groups. 

Given the scope of all of the coverage changes that States and 

the Federal Government will be implementing for January 1st and 

the value that we see of building on the experience that will be 

gained from those changes, we expect to issue proposed rules on 

the basic health plan for comment this year and make them final 

10 

in 2014, so the basic health plan would be operational beginning 

in 2015 for States that are interested in pursuing that. 

Senator CANTWELL. Well, I know even the President has kind of 

weighed in and said this is important, and I certainly appreciate 

that. But the law says that you are supposed to implement this in 

2014, so we are very concerned about the approach by the agency 

in trying to thwart this effort. 

So my question is, can you promise this committee that the agency is not offering any deals to States to get them to take a population that they have been able to achieve a more cost-effective delivery system for and trying to shove them onto the exchange as 

opposed to doing the basic health plan? 

Mr. COHEN. I think what we are doing is working with States to 

identify as much flexibility as we can to assure continuity of coverage as individuals’ incomes change, and to make it possible to 

provide premium assistance for people to purchase coverage 

through the exchange. 

Senator CANTWELL. Are you artificially raising the cost to all taxpayers by trying to lure people onto the exchange as opposed to giving them this option that is mandated by Federal law to be implemented in 2014? 

Mr. COHEN. No. 

Senator CANTWELL. You are sure of that? 

Mr. COHEN. Yes. 

Senator CANTWELL. So, if this committee asks for the specific details, it could get details? 

Mr. COHEN. We will be happy to work with you to get you details. Yes, Senator. 

Senator CANTWELL. And so, do you believe that you have a requirement to implement this by 2014? I get the feeling you are 

overwhelmed by the details of technology. I get that point. But I 

am trying to emphasize a very important point here. 

This committee and many people on this committee are very 

knowledgeable about State health plans that have driven down the 

cost to their consumers, and so it seems as if the agency is taking, 

I do not know how many pages out of 900, and saying, that is the 

health plan. It is the health plan of exchange. Where is the health 

plan of CO-OPs? Where is the health plan of the basic health plan? 

As far as I am concerned, I think the President signed all 900 

pages. I do not think he just said, it is just this one page. 

What I am very concerned about is that the agency seems to be 

thinking that the technology of the exchange is somehow the Holy 

Grail, and you are trying to lure States out of pursuing these COOP or basic health plan options and lure them onto the exchange 

because you think it is some sort of magic, and you are ignoring 

20 years of experience, at least from my State’s perspective, of delivering 20 to 30 percent more cost-effective delivery plans than 

what these individuals were able to get in the private sector. 

So we do not want to throw that away; we want it to be implemented. Our read of the statute is that you are supposed to do it 

in 2014 and not spend your time luring people into the exchange. 

Mr. COHEN. Well, I do not think we are trying to lure people into 

the exchange. We have funded 24 CO-OPs, and we are working 

with them to be as successful as they possibly can be. And I agree 

11 

with you that they are an important element of this in providing 

additional competition in what in many States is a very concentrated market. We agree with you. 

Senator CANTWELL. So you have no fear that these can stand 

alone and be separate? 

Mr. COHEN. I am sorry? 

Senator CANTWELL. You have no fear that a basic plan or a COOP can stand alone and not be part of the exchange? 

Mr. COHEN. No. 

Senator CANTWELL. All right. Well, we look forward to seeing the 

details of these other States proposals you have been working on. 

Thank you, Mr. Chairman. 

Mr. COHEN. Thank you. 

The CHAIRMAN. Thank you, Senator. 

Senator Nelson? 

Senator NELSON. Mr. Chairman, the health care law is working. 

Now, there are a couple of big obstacles in the way. One is, in some 

of the States, like my State, the State legislature and the Governor 

refuse to expand Medicaid—that is 1 million people in the State of 

Florida who would otherwise have health care—and refuse to implement the health care law, refuse to accept the grants that have 

come. All right. That is one thing. 

It is too bad that all the States did not comply, and the people 

of Florida are going to suffer because of the State government. But 

the fact is, the law says that there is going to be a health insurance 

exchange come 2014. So now we move to the next obstacle, which 

Senator Cantwell has just pointed out: the implementation of it. 

Of all of these incentives in the law to drive down the cost, one 

of those incentives that we put in the law was the communityoriented health plans. A consumer-oriented board would run a 

health insurance company. It was estimated that these were going 

to bring down the cost of premiums to the consumer by 10 to 15 

percent. 

Mr. Chairman, in the 11th-hour negotiation on trying to avert financial disaster on December 31st, New Year’s Eve, these guys negotiated away the Consumer Operated and Oriented health Plans, 

CO-OPs. That is the acronym for it: CO-OP. So I want to ask, why 

was that negotiated away? You have given grants into CO-OPs, approved applications for 24 States, but not the other remaining 26. 

There were applications in the pipeline, including applications from 

my State of Florida. Why was that negotiated away at the 11th 

hour? 

Mr. COHEN. Senator, first, I want to say we are big supporters 

of CO-OPs. I mean, we are working—— 

Senator NELSON. No, the question is, why was that lost at the 

11th hour, not that you are a fan of them. What is the answer? 

Mr. COHEN. I do not have an answer for you. 

Senator NELSON. Well, I can tell you that the representative of 

the Majority Leader, Kate Leone, in the negotiations, has told this 

Senator that, first of all, HHS had put CO-OPs on the table as a 

source of revenue. 

At the 11th hour, the question was asked, ‘‘Are there any applications in the pipeline?’’ In those 11th-hour negotiations, the answer, according to the Majority Leader’s office, was, ‘‘No, there are 

12 

no applications,’’ when in fact, over the course of the last year, only 

24 States’ applications had been granted. 

Obviously there were plenty of applications. There were applications out to be awarded right after the first of the year. So I want 

somebody to be accountable for this and, if it was a mistake, for 

somebody to own up to it. And then the question is, since you say 

you do not know, I would ask, Mr. Chairman, that this committee 

require an accounting that HHS respond to this question: how did 

it happen that it got negotiated away? 

Now my question would be, what are you going to do about it 

since CO-OPs, in fact, are estimated to bring down the cost 10 to 

15 percent for the consumers, for the premium-payers? What are 

we going to do to get those other 26 States into the system? 

Mr. COHEN. Well, Senator, what I am going to do is make sure 

that the 24 CO-OPs that we have funded are successful and demonstrate the results that you are talking about in terms of providing additional competition and lowering costs in the health market. That is what I can do at this point. 

Senator NELSON. So the answer is that the remaining 26 States 

get zero? 

Mr. COHEN. As of the current situation, we do not have authority 

to make loans to any additional CO-OPs. That is correct. 

Senator NELSON. Mr. Chairman, if we have this kind of implementation, then we are not going to fulfill the goal that we all set 

when we laboriously put together, in your committee, this health 

care bill. 

The CHAIRMAN. Might I ask, Mr. Cohen, you are saying that 

CMS does not have the authority to give grants to these other COOPs but does for some CO-OPs? Why the difference? I do not understand. 

Mr. COHEN. No. We have made loans to 24 CO-OPs, and, under 

the legislation that was passed at the end of the year, we no longer 

have authority or funding to make any more loans to new CO-OPs. 

The CHAIRMAN. All right. That is my question. Is it that you do 

not have the money or do not have the authority? 

Mr. COHEN. I think it is both. 

The CHAIRMAN. I would follow up on the question Senator Nelson 

asked: why not the authority? I want the answer to that question 

as to what happened. Another answer is, what could the policy rationale be? 

Mr. COHEN. My understanding of what was passed at the end of 

the year is that we no longer have funding authority to make loans 

to new CO-OPs. 

The CHAIRMAN. I am not talking about money; I am talking 

about authority. All right. We will have to get to the bottom of this. 

Senator Enzi? 

Senator ENZI. I cannot thank you enough, Mr. Chairman, for 

holding this hearing. I cannot thank Senator Cantwell and Senator 

Nelson enough for the questions that they have asked. They are 

part of a series of questions that I had as well. 

I am not sure how all this can come together, and part of it is 

because the States are not getting answers. My Governor wrote, on 

July 19, 2012, trying to find out enough about the exchange so that 

13 

our legislature could deal with the exchange. That is how we insist 

on doing it in Wyoming. 

The Governor does not have blanket authority to do whatever he 

wants. He does point out in his letter that we are a real frontier 

State and he does know that Rhode Island and Delaware are making progress, but he also points out that Wyoming has half the population of Delaware or half the population of Rhode Island, and we 

are spread out over a much bigger geographic area. 

Now, he wrote the letter in July 2012, and he got an answer. No, 

he did not get an answer; he got a letter in January of this year. 

Now, that is for getting an exchange done? Our legislature meets 

every year, but this is the year that they do law. Next year they 

just do budget and appropriation, so they needed the information 

before this session started in January. It just lasts January and 

February. Actually, it only lasts 40 days, and, in truth, it will only 

last 38 days. They do not use their full allotted time because they 

like to save 2 days in case the Governor vetoes something that is 

important to them so they can call themselves back into session. 

So they have virtually no chance to work on the exchange. I 

guess that leaves the Federal exchange. I am not sure that they 

will have a problem with the Federal exchange except for all of the 

unanswered questions about a Federal exchange. I cannot believe 

that we are forcing every State in the Nation to try to write their 

own program. That has to have a cost. I mean, it probably costs 

just as much as doing a Federal exchange. I have no idea how 

much money we are putting into writing the programs for this Federal exchange. 

I like what you described in the Federal exchange, but that is 

kind of what we are expecting each State to do at that State’s cost. 

But you are providing the money for it, so my first question, I 

guess, would be, HHS is kind to give kind of a blank check, set 

sums as necessary, to implement the health exchanges. Will there 

be any cap on the amount of money the Federal Government will 

use to do this? If not, why not? 

Mr. COHEN. The amount of money that we award in grants to 

States to plan and establish their exchange is based on an application that they submit to us and a thorough and rigorous evaluation 

of what the needs are in order to do that. 

I think as time goes by, and if States choose to operate their own 

exchange in future years, they will benefit from a lot of the work 

that has already been done, because, as I mentioned, one of the requirements of these grants is that the work that vendors are doing 

for States now be made available to other States going forward. 

Senator ENZI. It does look to me as though you are trying to force 

everyone into a Federal exchange. That may be our only option. I 

notice that it is to be paid for with user fees. Who pays that user 

fee, the individual, the State, the insurance company? How much 

is that going to be? 

Mr. COHEN. What we have proposed is a user fee that would be 

3.5 percent of premium owned by insurance companies selling 

products in the exchange. 

Senator ENZI. So it would be the insurance company paying it? 

Mr. COHEN. Based on the premium that they earn on selling 

their products in the exchange, yes. 

14 

Senator ENZI. Now, on this Federal exchange, one of the things 

I have suggested in the past is that there be some right to buy insurance across State lines. Will that be the case at the Federal exchange? 

Mr. COHEN. The Federal exchange will—the products that will be 

sold on the Federal exchange will be sold within each State and 

will be approved by the State insurance departments of each State. 

There is a provision in the law for a multi-State plan that the 

Office of Personnel Administration will be operating, and they have 

issued some proposed regulations on that, but that is not my program. 

Senator ENZI. So, without those CO-OPs, there is not much opportunity to expand the amount of competition then. I see that my 

time has expired. I hope that the record will stay open so that we 

can submit questions. 

The CHAIRMAN. Absolutely. It will be open for at least 48 hours. 

Senator ENZI. I have another 100 questions that my State needs 

answered, and we need them answered quicker than 6 months like 

we got with the response from the Secretary. 

The CHAIRMAN. On that point, Mr. Cohen, it would really be wise 

to answer these questions very promptly. 

Mr. COHEN. And I would just say—and we will do our best to answer the questions that we get as quickly as we can—I will say, 

with respect to Wyoming, I have personally met and spoken with 

the insurance commissioner of Wyoming a number of times with 

respect to the exchange and the options available to Wyoming. I 

know that my staff is on the phone with every State, talking with 

them about their development and the choices that they are making, on a regular basis. 

The CHAIRMAN. Thank you. 

Senator Isakson? 

Senator ISAKSON. Well, thank you, Mr. Chairman. 

Mr. Cohen, the first question I want to ask is the same question 

that was asked by the ranking member and the chairman, who 

probably talked to their Governors as well as to what they would 

like to ask. That is, can you give us certainty that the federally 

funded exchanges will be up and running on October 1st? You answered that question with the example of Mr. Smith going to 

Healthcare.gov and the efficiency of that system. 

I have a couple of questions on that. Have you tested Healthcare.gov with consumers? 

Mr. COHEN. Yes. 

Senator ISAKSON. And how has that test been done? Has it been 

done by the agency or by—— 

Mr. COHEN. We had focus groups, and we have had assistance 

with performing those consumer tests, and we have made changes 

to both the online application and to Healthcare.gov in response to 

that testing. 

Senator ISAKSON. Have you made any calculation or any estimate 

as to how many people will be able to use the Mr. Smith example 

on Healthcare.gov and how many are going to need assistance from 

agents or representatives of insurance companies, or counselors, or 

whatever? 

15 

Mr. COHEN. I do not have a number for you, but I know that we 

are preparing to make available in-person assistance or telephone 

assistance to everyone and anyone who may need it. So the goal 

is to have these navigators who will be out there in the community, 

who will be local community-based organizations, who will be able 

to reach out into their local communities as well as the call center, 

which is more of a national thing. Then in addition to that, the 

website will have online chat capability as well. 

Senator ISAKSON. Will the navigators be employees of CMS? 

Mr. COHEN. They will be grantees of CMS but not employees. 

Senator ISAKSON. So they will be independent contractors, but 

they will be paid by CMS? 

Mr. COHEN. They will receive grants, yes. 

Senator ISAKSON. All right. 

Are you familiar with the medical loss ratio limitations of the Affordable Care Act? 

Mr. COHEN. I am. 

Senator ISAKSON. I understand some States have asked for waivers, and CMS has denied those waivers. But, if you have a substantial number of people, which I think you will, who will seek some 

type of human assistance rather than totally depend on technology, 

the medical loss ratio restrictions really eliminate a lot of people 

who currently provide that from being able to be compensated, primarily independent contractors for insurance agencies. Have you 

discussed that subject with anybody? 

Mr. COHEN. We certainly are in communication with stakeholders, including the insurance industry, around the medical loss 

ratio. We did grant reductions in the ratio to a number of States. 

We did deny them to some where we found that there would not 

be a disruption in the market as a result of the medical loss ratio. We found in 2012 that we returned over $1 billion in excess 

premiums to consumers as a result of the medical loss ratio. I 

think that the availability of the online website that we will provide, the call center that we will provide, will help insurance companies reduce their costs for some of this marketing that they 

would otherwise have to do to attract people to the marketplace. 

Senator ISAKSON. Well, as someone who ran a business for a long 

time and, being dependent on the technological revolution, started 

transitioning consumer access to our services away from human 

beings and to technology access, you had better be sure you get it 

right the first time, because, if it crashes and burns on October 1st, 

you have a huge problem. When you talk about something affecting 

every American, it is tremendous. 

I have another question. Forty percent of adults with income below $30,000 and 60 percent without a high school diploma do not 

use a computer at all, and that was as of 2010. So you are going 

to have a lot of people who are going to need that human assistance. 

Are you familiar with the Preexisting Condition Insurance Program? 

Mr. COHEN. Yes. 

Senator ISAKSON. On January 31st, your office issued a report on 

the program, noting that while the enrollment had been substantially less than you anticipated, the costs per enrollee have been 

16 

much more expensive. Do you expect the Preexisting Condition Insurance Plan to run out of money before the end of 2013? 

Mr. COHEN. We made a number of changes already this year to 

the benefits that are offered in the Federal PCIP program, and we 

are continuing to monitor expenses very carefully. We understand 

that we have a set amount of funding that we are able to use for 

that program, and we will not exceed it. 

Senator ISAKSON. So that is the $5 billion, correct? 

Mr. COHEN. Yes. 

Senator ISAKSON. To that end, do you have a contingency plan, 

if you do run out before the end of the year, as to how you are 

going to transition these people? 

Mr. COHEN. We are looking at all sorts of options, but running 

out of money before the end of the year is one that we are doing 

everything we can to avoid, and I believe we will get to the end 

of the year and transition people onto the exchanges. 

Senator ISAKSON. Thank you, Mr. Cohen. 

Mr. COHEN. Thank you. 

Senator ISAKSON. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Hatch? 

Senator HATCH. Thank you. 

If I could just ask one other question. If you could give a ‘‘yes’’ 

or ‘‘no’’ answer on this, I would appreciate it. We are less than 9 

months away from open enrollment. With five crucial regulations 

yet to be finalized and no details from the data hub that will facilitate all eligibility determinations, it is hard to believe that the exchanges will be ready by October 1st. You can see my skepticism 

there. 

I am concerned about it, but a critical piece to eligibility determinations is a sharing of information between agencies. Now, has 

CMS assigned service-level agreements with IRS, SSA, Homeland 

Security, and all of the other agencies that will be providing information to the data hub? 

Mr. COHEN. We have. 

Senator HATCH. You have? You have signed agreements with 

them? 

Mr. COHEN. Yes. 

Senator HATCH. Will each Federal agency be able to provide accurate data in real time to the Federal Data Services Hub by October 1st? 

Mr. COHEN. They will. 

Senator HATCH. All right. I just wanted to make sure that is— 

thank you. Thanks, Mr. Chairman. 

The CHAIRMAN. Thanks, Senator. 

Senator Grassley? 

Senator GRASSLEY. Mr. Cohen, I would like to have you help me 

pinpoint a date, but, before I get to the question, I have a lead-in 

I want to read. A day is coming when we are going to find out who 

is right and who is wrong about premiums for plans sold through 

exchanges under the Affordable Care Act. 

Some of us think that there is going to be a real significant rate 

shock coming. The rate bands in the Affordable Care Act are too 

aggressive. The taxes and fees in the Affordable Care Act are too 

17 

inflationary, and the timetables for readiness are very compressed. 

There have been independent actuarial studies in several States 

that suggest the rate shock will be severe: Indiana, up 95 percent; 

Maine, 89 percent; Ohio, 85 percent. 

Now, I know others would strongly disagree. They say that everything is going to work out all right. Of course, soon we will 

know who is right. Individuals are supposed to receive coverage, including even members of Congress. And many of the staff in this 

room will be covered under these exchanges by January 1, 2014. 

So individuals should be allowed to enroll this fall, starting October 1st. Thinking further about the timeline, States have to have 

all the rules from HHS to finalize exactly how an exchange will 

work. Once everything is finalized, only then can States ask insurers if they intend to participate and what rates they expect to 

charge for coverage. 

Insurers then need some time to make their decisions about 

rates. But that day is coming when insurers turn in their homework, when insurers say, these are the rates that we will charge, 

assuming they do choose to participate. 

Now, here is my question. Mr. Cohen, while I will not hold you 

to a specific date, to the best of your knowledge, when will we 

know what premiums will be in the exchanges? 

Mr. COHEN. Thank you, Senator. In the Federal marketplace, insurers will begin submitting their plans to us, including the rates, 

on March 28th. That opportunity will be open until April 30th. We 

will then review those and make determinations as to which plans 

will be sold in the Federal marketplace by July. 

Senator GRASSLEY. All right. When you are saying by July, there 

is time where the administration and Congress can react if it is obvious that premium rate shocks are so severe in the exchange pool 

of some States that the market will go into some sort of fatal death 

spiral at that time? 

Mr. COHEN. We will know by July what the bids are, yes. 

Senator GRASSLEY. All right. 

Thank you very much, Mr. Chairman. That is all I have. 

The CHAIRMAN. Thank you, Senator. 

Next, we have Senator Casey. 

Senator CASEY. Thank you, Mr. Chairman. I appreciate the opportunity to participate in this hearing. I think it is critically important that the chairman and ranking member have planned this 

hearing, because we have to make sure that this works. Even 

though we still have great divisions about health care in this country in terms of the approach to it, some supporting the legislation, 

some not, those of us who supported it have to be determined to 

get it right. So, Mr. Chairman, I appreciate you gathering us together for this purpose. 

Mr. Cohen, we appreciate your work and your service. I wanted 

to ask you about the particular situation that my home State of 

Pennsylvania faces where they have defaulted to a federally facilitated exchange, if that is the right terminology, or federally facilitated marketplace. 

But in that instance, I guess I have at least two questions in the 

time that I have. One is, what efforts can you undertake, or have 

you undertaken, or what can our expectations be, as it relates to 

18 

the actions by the Federal Government to tailor a marketplace for 

Pennsylvania with all of the unique characteristics of one State 

versus the other, number one? 

I guess the second question is the question of communication: 

how are you communicating with consumers in a State like Pennsylvania? 

Mr. COHEN. Thank you, Senator. I appreciate the question. Since 

the Affordable Care Act was passed nearly 3 years ago, we have 

conducted a variety of stakeholder outreach consultations on implementation of the law, including meetings, calls, webinars, listening 

sessions, and, starting in March, we will begin a process to directly 

engage stakeholders in each of the States where CMS will be operating that federally facilitated marketplace. 

This is obviously an important opportunity for us to hear directly 

from individuals and organizations in each State. 

Senator CASEY. Let me stop you right there. On stakeholders, 

what is the kind of rough outline of who that is? 

Mr. COHEN. So, we are going to begin with a very broad outreach: anybody who wants to come in, conference calls, and those 

sorts of things, and then we envision ongoing conversations in each 

State led by the CMS regional offices with our community, our consumer advocate community, to make sure that we are really getting the information that we need to operate the marketplace in 

the right way as it varies from State to State. We recognize that 

there are differences, obviously, geographically, demographically, in 

the insurance market, and so we recognize that it is a very important process for us to go through. 

Senator CASEY. Your intention is to make sure it is tailored. Do 

you feel that you have the kind of flexibility and the resources to 

be able to do that? 

Mr. COHEN. We certainly have the flexibility, and we are going 

to use our resources as best we can to make sure that we are providing a marketplace that is suitable for each State. 

Senator CASEY. On the communication part of this with regard 

to consumers, is that something you can comment on? 

Mr. COHEN. So I think that consumers are going to see in the 

beginning a campaign that is a media campaign that will be 

launched soon just to begin to increase awareness of the law and 

what the benefits are and what it can do for them. When I say 

‘‘media,’’ I mean, of course, all sorts of media: social media, the traditional media. 

The purpose of that will be to try to drive people to Healthcare.gov, which really is the central source of information about the 

Affordable Care Act and the marketplaces in particular and will 

give people the information they will need to then come back in October when they can actually take action to get enrolled. 

In addition, we anticipate that these navigators are going to really play a crucial role in outreach to local communities, ethnic communities, communities with limited English proficiency, and the 

funding opportunity for navigator grants will be going out very 

soon. The first grants will be awarded in June. 

Senator CASEY. My time is running out and I was late, so I do 

not want to go over time. What I will do is, I will send you—— 

19 

The CHAIRMAN. Go ahead, Senator, if you have a couple of more 

questions. 

Senator CASEY. All right. Thank you, Mr. Chairman. That is nice 

to be able to have some extra time. I appreciate that. 

Just really one final question I was going to send you in writing, 

but I will ask it now. A great concern that so many of us have is 

making sure that, with regard to both Medicaid and the Children’s 

Health Insurance Program, that every eligible child gets enrolled 

and that we do not have any problems with that. What can you tell 

me about that in terms of your efforts as the marketplaces are 

being implemented? 

Mr. COHEN. I think that one of the things that is very encouraging about that is that, when people come to either the website 

or sit across the table from someone in their community who is 

helping them, they can go through a single process that will determine whether they are eligible for Medicaid or CHIP, or whether 

they are eligible for subsidies to purchase coverage through the exchange. So, it is what we call ‘‘no wrong door.’’ 

So all of the outreach and education that we will be doing will 

be geared toward getting everybody into the door, and then where 

they end up will be determined through the process of measuring 

what they are eligible for. But we will be looking at the entire community that we are trying to reach and the entire population that 

we are trying to get into coverage, and then they will be sorted out 

through the process of applying. 

Senator CASEY. Thanks very much. 

The CHAIRMAN. Thank you, Senator. 

Before we turn to Senator Wyden, I have to leave. Mr. Cohen, 

I would like you to, maybe just for a minute here, discuss with me 

what benchmarks, data, dates, that you have in mind as you proceed and begin to implement the statute. What do you want to 

have accomplished? And I want data here. I do not want just goals. 

How much in terms of numbers, by what date, in what subject? 

Just give me those benchmarks. We need to know. I would like 

you to break it out in a good-faith way, basically the way that you 

are probably already implementing it. Maybe you have six, seven 

different subjects. You have dates, timelines by which you want X 

amount accomplished so we can measure to see whether we have 

or have not met those deadlines. I would like those to me and the 

committee by Tuesday when we get back after this next recess. 

Give me the list. 

I want to know what you aim to accomplish, by what date, during this next year, in each of those subjects. I want it quantified 

so that, on down the road, maybe 2 months later, we can look and 

see how we are doing. We want to help you, but I think this will 

help you, answering the question I just asked. 

We have to get moving here. We have to know what we are doing 

and what we are not doing. We cannot just talk. It is deeds, not 

words. If you could get that to this committee by Tuesday following, this coming Tuesday, close of business Tuesday, I think it 

is going to help us a lot here. Thank you. 

Mr. COHEN. Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Wyden? 

Senator WYDEN. Thank you, Mr. Chairman. 

20 

Recently, Mr. Cohen, the IRS determined that affordability is 

going to be based on the cost of a worker’s individual coverage, not 

the cost of family coverage. So we are going to have millions of 

spouses and dependents in a kind of regulatory no-man’s land. 

During the health care debate, this issue was looked at, the whole 

question of affordability, particularly affordability for families, and 

a provision was added that would have allowed an employee to 

take their employer’s contribution, either individual or family, and 

then be able to shop for a policy that best fit their needs at a price 

that they could afford. 

Now, this is no longer available. As of now, this is no longer 

available. So, come January of 2014, we are going to have millions 

of families—not my characterization, it has been in the New York 

Times, all kinds of other places—really pinched. They are really in 

this kind of no-man’s land where they are unable to afford the family coverage offered through their employers and ineligible for subsidies that could be used by dependents on the exchange. 

What I would like to know is what you all are open to doing in 

terms of helping these people. This is not an abstract question; 

these are people who are going to get pounded here, middle-class 

families here, in a relatively short period of time. It seems to me, 

at a minimum, what you all ought to be doing now is looking at 

ways to give the States, through the exchanges, some flexibility to 

help people. Are you willing to do that? 

Mr. COHEN. Yes, we are. 

Senator WYDEN. All right. Now, I would like you to get back to 

me in writing with respect to specific ways in which you would like 

to work with the States to help people. I am encouraged by your 

answer. I know that this is something that you probably did not 

know would come up today. 

But in effect, what we would be especially interested in is ways 

in which the State would allow an employee to take an employer’s 

contribution to the exchange and be in a position to get more value 

for themselves and their family. Can you take a look specifically at 

that idea for me? 

Mr. COHEN. We would be happy to take a look at it. I do not have 

an answer for you today, but we will be happy to take a look at 

that. 

Senator WYDEN. All right. How long do you think it will take for 

you to get an answer to me on that? Can you say within a month? 

Mr. COHEN. Oh, I would think so. 

Senator WYDEN. All right. Very good. 

Senator HATCH. Has everybody had a chance to ask questions? 

Senator Roberts? 

Senator ROBERTS. Mr. Cohen, thank you for coming. Tough duty. 

Mr. COHEN. It was my pleasure, Senator. 

Senator ROBERTS. Stay in there. 

In many regulations implementing the PPAC statute, stakeholders are being given the minimum amount of time—minimum, 

not maximum, minimum—to respond, 30 days, to sometimes hundreds of pages of regulations, often with many of these regulations 

being issued in the same week. 

I cannot go to a stakeholder meeting comprised of all of our providers without somebody picking up a piece of paper and saying, 

21 

‘‘Senator, what about this?’’ Then I do not know about it, they do 

not know about it, we have to ask, and we get into some real problems. 

In these instances, the administration has had months, if not 

years, to draft and review, and OMB is given months to review as 

well. Will future regulations give stakeholders more than a minimal amount of time to review? It has been suggested by other 

nominees before the Finance Committee that 60 days would be a 

more reasonable time frame. 

It used to be 30 or even 60 days, and then 90 if thousands of 

comments came in, to say this regulation does not work well for us, 

we can tweak it, we can do this, we can do that. Some would oppose it, but at least there was a time frame where you could then 

work the regulations to better fit all of the stakeholders and the 

providers. 

In addition, we are getting feedback that many stakeholder 

groups do not believe the administration will take into account 

their comments when issuing the final regulations. I am talking 

about the final regulations now, that is, the subject of this hearing. 

I thank the chair and the ranking member for holding this hearing. 

I would like to point out a letter I, along with many of my colleagues, sent to the Department of Health and Human Services 

and Treasury and the Department of Labor, outlining our concerns. 

In your response dated February 12th, the Department noted that 

they are reviewing these comments and will finalize the rule soon. 

I would also note that the submissions for these rules to OMB 

show that they were submitted and received by OMB on February 

8th. Now, that tells me that you have in fact completed your review 

of the rules and are not still considering them. That careful consideration of thousands of comments was given at the most a little 

over 40 days to complete, and I can see why stakeholders are very 

skeptical of whom you are listening to and what you have to say. 

I would remind you that the traditional regulatory process, as described in both statute and executive order, calls for notice, comment, review, consideration of comments, and issuing of a final 

rule. What is being done to address this very troubling concern? 

Mr. COHEN. Thank you, Senator. I would make two points. I 

think, first of all, our process with respect to the policy that is 

being set forth in these rules has been to provide guidance bulletins ahead of time so that, before we even put out the proposed 

rules, we have gotten a tremendous amount of input from the 

stakeholder community with respect to them. 

So, as an example, the essential health benefits rule: we put out 

a bulletin well ahead of time. We got comments on the bulletin, 

and we incorporated those comments in what then became the proposed rule. In addition, I would say that, in all of the rulemakings 

that I have been involved with since I have been at CCIIO, we 

have very carefully considered comments we have gotten and, in 

many cases, have incorporated and made changes with respect to 

input that we have gotten from the stakeholder community. So I 

am disappointed that people are skeptical that we read them. We 

absolutely do. We do take them into consideration, and we have 

and will with respect to the rules that are becoming final now. 

22 

Senator ROBERTS. This, I think, raises an important question. 

The departments implementing PPAC have often referred to the 

subregulatory guidance documents such as you describe—the bulletins and the guidances and the postings on the website, the faxes, 

et cetera—to demonstrate stakeholder participation in the regulatory process. Here we have a question, and you are coming back 

with all of these bulletins and guidances and postings. I do not 

know who can keep up with all of that, but at any rate you are 

making the effort. 

But it raises several concerns. As subregulatory guidance does 

not hold the force of law, it generally does not reach, through notification and other means, the same amount of stakeholder participants and is outside the traditional regulatory process. That really 

can confound stakeholders with limited resources, both time and 

money. 

The rural health care delivery system does not have the folks out 

there to go through all of the bulletins, the guidances, the postings, 

the websites, and the faxes. Basically, we just have a situation 

where they cannot focus on what they need to focus on in regards 

to the regulatory mandates that they face. 

So the traditional regulatory process, as described in both statute 

and executive order, calls for notice, comment, review, consideration of comments, and issuing of the final rule. 

I think the administration is deviating severely from the normal 

rulemaking process, and it is a real problem with regard to the 

stakeholders. Now, I have made my speech, and I think you have 

responded. I am not sure we need to go into it any further. But this 

is a problem. 

Just as, in the State of the Union address, the President indicated that basically, if we have a situation where the obstreperous 

Congress, all of us combined, we do not buy his agenda and do it 

in a specific amount of time, a reasonable amount of time, he will 

simply issue executive orders and more regulations. 

Now, I will tell you what, that sent a chill through the entire 

health care industry, because we are drowning in regulations now, 

and, to my way of thinking, when you go into the subregulatory 

guidance documents as opposed to following the review and consideration of comments that is called for by executive order and statute—I know that it is convenient; I know that the regulations are 

so many and they are important and they are very comprehensive—that is a problem. So I would hope that we could get back 

to a more—just follow the law. Just follow the executive order and 

the statute. 

Mr. COHEN. Senator, I would just say that, in my experience, 

stakeholders have welcomed and are grateful for the guidance that 

we put out, the frequently asked questions, et cetera, that are intended to clarify. We are not making law in those documents, and 

we are very careful to use the regulatory process when it is called 

for and necessary. 

Senator HATCH. Thank you. 

Senator Carper, I think you are the last one. 

Senator CARPER. Yes. Thanks so much. 

Mr. Cohen, welcome. I just came from a press conference over on 

the House side with the head of GAO. They just released their 

23 

high-risk list, the high-risk ways for wasting money in the Federal 

Government, and there were a lot of good ideas of things we can 

do we ought to put on our to-do list. 

I quoted Mike Enzi, a venerable former mayor of Gillette, WY, 

who sits right over here next to Mr. Roberts. I quoted him again 

on the 80/20 rule. The 80/20 rule is Mike Enzi’s—I do not know if 

he wrote it, but it is a great rule. It goes like this: we agree on 80 

percent of the stuff, we disagree on 20 percent of the stuff. 

What he says is, we ought to focus on the 80 percent where we 

agree, get that done, and set aside the other 20 percent and come 

back to that another day. I think 80 percent of the people—I think 

probably close to 100 percent of the members of the Senate and 

this committee—agree that one of the keys to bringing down costs 

and getting us better health care results for less money is to create 

large purchasing pools so that individuals, small businesses, families, even mid-sized businesses up to 100 or so employees, have the 

opportunity to really participate in a large purchasing pool like we 

do through the Federal Employees Health Benefit Plan, to get more 

competition, arguably better health care results, and lower administrative costs. 

It is a great concept, and we are going to give this opportunity 

to every State to set up their own large purchasing pool, called an 

exchange. They can run it themselves, they can have the Federal 

Government run it for them, or they can be in a partnership where 

we do it together. We have to do it right. We have to get it right, 

and there is a lot that lies on the administration as we implement 

the Affordable Care Act. 

Mr. Chairman, our congressional delegation—Senator Coons, 

Congressman Carney, myself with our Governor Jack Markell—are 

going to be holding a series of forums up and down the State. It 

is a little State, so it is not hard to do. We will have them on 

nights, we will have them on weekends, we will have them during 

recess periods, we will have teleconference calls, just invite the 

business community to join us in person or by phone to figure out, 

how is this going to work, how can we make it work for them, how 

can we make it work for their employees? But we need to make 

sure that, from the administration, we have regulations that actually facilitate systems, particularly computer systems, that make it 

possible for them to understand what is available here and to make 

sure we seize this opportunity. 

Let me just ask the first two questions. The first one is—and I 

will ask you to be brief on this one if you will—how will the administration, how will the Department, be ensuring that businesses 

can comply with this new law? What are you doing? What can you 

be doing to better ensure that they can comply? Not just be dumbfounded by it, confused by it, but can actually comply? 

Mr. COHEN. Thank you, Senator. I think what you will see, beginning now and through the rest of the year until October, is a 

real outreach and education campaign to make sure that the Affordable Care Act and what it provides and what it requires is 

known out there in the community so that people understand what 

their obligations are and will be able to comply with it. 

Senator CARPER. All right. I am going to drill down on this a little bit. How are you planning to test the computer systems for the 

24 

exchanges to make sure that they work properly? Second, do you 

have a contingency plan to back up these computer systems when 

they run into glitches, and they probably will? 

Mr. COHEN. So, the answer to the first question is that there are 

a number of different computer systems that are being established 

to determine eligibility enrollment: the data hub, to verify information that is provided by people when they are applying; the system 

that will enable us to accept the issuer’s plans and review those to 

make sure that they comply with the law and are able to be sold 

in the marketplace. 

Testing has already begun on a number of those and will continue throughout the spring and into the summer, and we will have 

all of that completed in time to operate by October 1st. We are 

looking at contingency plans for every eventuality. 

Senator CARPER. All right. 

I like to quote, not just Mike Enzi, but I like to quote Albert Einstein. Some of you have heard me do this before, but Einstein used 

to say, ‘‘In adversity lies opportunity.’’ We have a huge adversity. 

We spend way more money on health care than any other country, 

as you know, and we do not get better results. This is like, Norway 

spends 50 percent less than us, and they cover everybody. We 

spend twice as much as the Japanese. They cover everybody, and 

they get better results. 

So there is great adversity here, but there is great opportunity 

here. If we do not seize the advantage of this opportunity to address it through setting up the exchanges, running them well in a 

cost-effective way, getting better health care results for less money, 

we have really missed a terrific opportunity. We cannot let that 

happen. I would just urge you and your colleagues—and I will be 

talking with the Secretary later today, Secretary Sebelius later 

today—just to sort of underscore that point. 

The last thing I would say to my colleagues is, some of us were 

supportive of the Affordable Care Act passing, some of us were not. 

I said from the start it is not perfect, but it is certainly better than 

what we have been doing, spending more money for health care, 

not getting better results, and not covering everybody. So, we have 

to do better than that. This is something that the Democrats and 

Republicans ought to be able to agree on. We ought to be able to 

agree with Governors and States to implement these exchanges, to 

implement them well. 

The key here: better health care results for less money. We can 

figure that out and implement it, particularly with respect to programs like Medicare and Medicaid where we know we need to do 

better. We know we need to reform those programs in ways that 

save some money, do not savage old people, and save the programs 

for the long haul. So we look forward to working with you. You just 

need to be on your A game. You need to be on your A game every 

day. 

Thank you, Mr. Chairman. 

Mr. COHEN. Thank you, Senator. 

Senator HATCH. Well, thank you, Senator. We appreciate you, 

Mr. Cohen. We appreciate you being here, and we look forward to 

seeing what you can do between now and October 1st. 

Mr. COHEN. Thank you. 

25 

Senator HATCH. Thanks so much. 

Well, our second panel will feature Don Hughes, Advisor to the 

Office of the Governor of the wonderful State of Arizona; Christine 

Ferguson, Director of the Rhode Island Health Benefit Exchange; 

and Bettina Tweardy Riveros, who is Advisor to the Governor and 

Chair of the Delaware Health Care Commission. 

As a reminder, your written statements will automatically go 

into the record. If you could limit your opening statements to 5 

minutes, we would appreciate it, but we are not going to be tough 

on that. So, it is up to you. We will start with you then, Mr. 

Hughes. 

Senator CARPER. If I could, one of our committee witnesses, our 

third witness—I do not know if we are saving the best for last— 

but Bettina Tweardy was my deputy legal counsel, deputy policy 

advisor, in my second term as Governor. She was so smart, so able, 

so hard-working, and she still continues to serve the people of 

Delaware in a different role and for a different Governor. But it is 

great to see Bettina. We welcome her and the other witnesses. 

Thank you just for letting me say this. Happy Valentine’s Day, 

Bettina. 

Senator HATCH. You were lucky to have him as Governor. 

We are happy to have you here. 

Ms. TWEARDY RIVEROS. Thank you, Senator. 

Senator HATCH. We will start with you, Mr. Hughes, and go from 

there. 

STATEMENT OF DON HUGHES, ADVISOR TO THE OFFICE OF 

THE GOVERNOR, STATE OF ARIZONA, PHOENIX, AZ 

Mr. HUGHES. Thank you, Ranking Member Hatch and members 

of the Senate Finance Committee. Thank you for the invitation to 

discuss Arizona’s experience in planning and designing a Statebased exchange and Governor Brewer’s decision to defer to the federally facilitated exchange. My name is Don Hughes. I serve as 

Governor Brewer’s Health Care Policy Advisor, and I am responsible for Arizona’s health insurance exchange activities. 

Arizona’s goal was to explore all options available to the State 

and to allow maximum flexibilities and options to the Governor 

with respect to the health insurance exchange. The State’s analysis 

concluded that the least risky options were to defer to the federally 

facilitated exchange or to leverage our existing State systems and 

fill gaps with new development. Both options presented the lowest 

cost to the State and provided the greatest likelihood of meeting 

ACA timelines. 

Maximizing options was important to Governor Brewer as she 

explored ways to address the rising uncompensated care costs associated with the more than 1.2 million uninsured Arizona residents 

representing 19 percent of Arizona’s population. 

The State’s research indicated that once an exchange was fully 

implemented, 587,000 uninsured people would find coverage in either private health insurance or Medicaid. The potential impact on 

the uninsured and uncompensated care made pursuit of a Statebased exchange attractive. 

Arizona intended to utilize as much flexibility as is afforded 

States under the Affordable Care Act and the exchange rules. The 

26 

goal is to design the most free market-oriented health insurance 

exchange in the country. Exchange planning and design work operated under the following principles. 

First, build on Arizona’s strong health insurance market; support 

the market facilitator approach; maximize consumer choice and 

competition; and impose minimal regulations and reporting requirements. With more than 35 health insurance companies actively writing in our small group market and more than 15 insurers actively doing business in the individual market, Arizona has 

a very healthy and competitive insurance market. 

No insurer has more than 24-percent market share. The exchange design that we were working on was intended to transfer 

the same level of competition and consumer choices that exist in 

the current insurance market to the exchange. In designing a 

State-based approach, leveraging existing State systems and filling 

the gaps with products developed by private sector vendors was determined to be the option that had the lowest costs, was most likely 

to be ready on time, and would provide Arizona with the most control over the design and operation of the exchange. 

For the past 10 years, the Arizona Health Care Cost Containment System (AHCCCS), Arizona’s Medicaid agency, has operated 

a web-based application system called Health-e-Arizona to receive 

and process applications and renewals. AHCCCS receives more 

than 40 percent of applications and 50 percent of renewals online 

through Health-e-Arizona today. 

Leveraging Health-e-Arizona with cutting-edge technology from 

the private sector to fill in the IT gaps presented the best option 

to meet the goal of providing a first-class consumer experience in 

reducing the uninsured rate in Arizona. 

The Arizona health insurance exchange is being designed to be 

a fully integrated system that will allow consumers and small employers to find information, determine eligibility for, and enroll in 

Medicaid, CHIP, SNAP, TANF, and private individual insurance, 

including the Advanced Premium Tax Credits and small group insurance. 

Arizona also believed in working collaboratively with the insurance industry to ensure an open-market approach. If Arizona had 

moved forward with a State-based exchange, there would have 

been more than 100 qualified health plans participating in the individual exchange and the Small Business Health Options Program 

(SHOP). This level of competition would have helped keep premiums affordable and maximized the choices for consumers. 

Arizona exchange staffing consultants worked diligently on a 

State-based exchange model to maintain that as a viable option for 

policy-makers. However, too many uncertainties prevented Arizona 

from fully committing to a State-based exchange. 

On November 28, 2012, Governor Brewer notified the administration that Arizona would defer to the federally facilitated exchange. The delay in releasing all necessary exchange and Medicaid rules were significant factors in the Governor’s decision. 

One large national insurance company commented that they 

would need 12 weeks from the time the rules were finalized to 

bring a product to market. The delay in issuing rules makes it difVerDate Nov 24 2008 17:49 May 27, 2014 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 R:\DOCS\87945.000 TIMD
27 

ficult for insurers to meet the filing deadlines for qualified health 

plan (QHP) certification for the initial open enrollment period. 

Also, the delay in finalizing the HHS Notice of Benefit and Parameters Payment Plan for 2014 impacts the risk adjustment, risk 

corridors, and transitional reinsurance programs and may cause insurance actuaries to be more cautious in setting premiums for the 

upcoming year. 

Finally, the status of development of a number of Federal services that a State-based exchange would be required to use was also 

unclear to us. Those services included the Federal Data Services 

Hub, the Advanced Premium Tax Credit and Cost Sharing Subsidy 

Service, the Actuarial Value Calculator, Minimum Value Calculator, and the Modified Adjusted Gross Income Business Rules. 

Arizona is now working collaboratively with HHS on the development of the FFE and how it will work in Arizona. It will monitor 

its efficacy, including costs, operations, and ease of use. I am happy 

to answer any questions. 

Senator HATCH. Well, thank you, sir. 

[The prepared statement of Mr. Hughes appears in the appendix.] 

Senator HATCH. We will now turn to you, Ms. Ferguson. 

STATEMENT OF CHRISTINE FERGUSON, DIRECTOR OF THE 

RHODE ISLAND HEALTH BENEFIT EXCHANGE, STATE OF 

RHODE ISLAND, PROVIDENCE, RI 

Ms. FERGUSON. Senator Hatch, members of the committee, thank 

you for the opportunity to speak with you today to share our perspective from Rhode Island on the State-based health benefits exchanges under the Affordable Care Act. 

On September 19, 2011, Governor Lincoln Chafee issued an executive order that created the Rhode Island Health Benefits Exchange within our executive branch. The exchange is guided by a 

13-member community advisory board which is overseeing exchange planning and development efforts. 

In June of 2012, I was appointed by the Governor to be the exchange Director. Since then, Rhode Island has continued to make 

progress in all areas of exchange benchmarks, with a rigorous 

inter-agency and stakeholder process that will continue to support 

the development and implementation of Rhode Island’s exchange. 

Our exchange will serve two important purposes: first, it will 

provide a robust marketplace for all Rhode Islanders to identify 

health insurance options and, for those eligible, to purchase coverage. Second, the exchange will negotiate for high-quality, affordable insurance options on behalf of small employers and individuals. Our exchange stands on Rhode Island’s strong history of 

health care advances and the support we have received from our 

congressional delegation. 

Senators Jack Reed and Sheldon Whitehouse have provided tremendous investment of time and support to ensure that Rhode Island is ready to implement the Affordable Care Act, and Congressmen James Langevin and David Cicilline have been unwavering in 

their support. 

Governor Lincoln Chafee and Rhode Island Lieutenant Governor 

Elizabeth Roberts, who is chair of the State’s Health Reform ComVerDate Nov 24 2008 17:49 May 27, 2014 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 R:\DOCS\87945.000 TIMD
28 

mission, have diligently coordinated all of the early work of our exchange, and the Lieutenant Governor continues to lead on broad 

health reform efforts. 

Our exchange also rests on decades of investment in Rhode Island’s health care infrastructure, including the Rhode Island Quality Institute founded by Senator Sheldon Whitehouse to promote 

health information technology, and the Rhode Island Chronic Care 

Sustainability Initiative, launched in 2008 by our Health Insurance 

Commissioner, Christopher Koller, to promote the patient-centered 

medical home, among dozens of other strong health care initiatives. 

We have a robust Medicaid managed-care program with participation by both private and public sector programs, run by Steve 

Costantino. In addition, we have innovative activities on the part 

of our primary care providers and practices, our hospitals, and our 

insurers. 

As a result, when our Exchange Advisory Board came together 

in 2011 to create our vision, mission, and goals, they were building 

on a strong history of collaborative work and commitment to Rhode 

Islanders’ health. 

The vision of the Exchange Advisory Board and the Governor’s 

executive order is to support health reform efforts at the State and 

national level that provide Rhode Islanders well-being and provide 

increased access to high-quality, coordinated care at a reasonable, 

predictable cost. 

Our mission is to serve as a robust resource for Rhode Islanders 

and Rhode Island businesses to learn about and easily compare the 

quality and affordability of their health insurance options, enroll in 

coverage, and, if eligible, access the Federal tax credit for coverage. 

We have five guiding goals: the first is to improve the health of 

Rhode Islanders; second, to achieve near-universal coverage; third, 

to favorably impact health insurance cost trends; fourth, to favorably impact health care delivery system effectiveness and efficiency; and fifth, to add value to employer health insurance purchasing. 

Why did we decide to create a State-based exchange? As we collected input from stakeholders, we heard again and again that high 

costs and unpredictable annual increases have made health insurance coverage unsustainable for most employers and out of reach 

for many individuals, from entrepreneurs taking the plunge into 

new ventures to those who are working multiple jobs. 

We are building an exchange by Rhode Islanders for Rhode Islanders, one that benefits from and contributes to the work of other 

States but is created to meet Rhode Islanders’ needs. The Affordable Care Act provides us with the tools to take advantage of 

Rhode Island’s historic health care achievements, the strong relationships between our partners throughout the State, and our advisory board’s carefully created vision. 

Rhode Island leaders felt that a State-based exchange was the 

best choice for us to carry out our goals. By purchasing for so many 

Rhode Islanders together, our exchange will give new power to 

small businesses and individuals in the health insurance marketplace by negotiating with health insurance carriers on their behalf. 

The work we are doing to create our exchange is complicated, 

and the timeline is pressing. Our very talented team is working 

29 

24/7 as hard as they have ever worked to get this done by the October 1st deadline. We are confident that we will meet this goal, and 

we are pleased with the help provided to us throughout the process 

by HHS and CCIIO. 

In closing, Rhode Island has worked hard to overcome its economic challenges through these difficulties. Rhode Island has retained our tremendous medical talent with world-class universities 

and nationally recognized, innovative providers and leaders. 

Our exchange can act as a catalyst for the necessary changes in 

our delivery system and our insurance markets to increase quality 

and transparency, support innovations that will keep Rhode Islanders healthy and more productive, and keep costs down. 

The exchange also has the potential to improve the business climate in Rhode Island as we all work together to harness its possibilities. We are grateful for this opportunity to highlight our opportunities, and I thank you once again for inviting me to share this 

information. 

Senator HATCH. Thank you, Ms. Ferguson. 

[The prepared statement of Ms. Ferguson appears in the appendix.] 

Senator HATCH. Ms. Riveros, we will take your testimony. 

STATEMENT OF BETTINA TWEARDY RIVEROS, ADVISOR TO 

THE GOVERNOR AND CHAIR OF THE DELAWARE HEALTH 

CARE COMMISSION, STATE OF DELAWARE, WILMINGTON, DE 

Ms. TWEARDY RIVEROS. Thank you, Senator Hatch, Senator Carper, and distinguished members of the Senate Finance Committee. 

Thank you for the opportunity to report on Delaware’s progress in 

establishing a State partnership health insurance exchange. 

Following a comprehensive stakeholder outreach process involving consumers, businesses, providers, brokers, carriers, and others, 

and a feasibility study, Delaware selected the State partnership exchange model due to concerns about the financial sustainability of 

a State-based exchange, given our State’s small population. 

This model provided the best opportunity to keep the cost of 

health plans as low as possible while maintaining State influence 

over our insurance market and consumer outreach, with the ultimate goal of making quality health care affordable and accessible 

to all Delawareans. 

Beginning October 1st of this year, Delawareans will be utilizing 

the Federal exchange portal to enroll in the health insurance plan 

with coverage beginning on January 1, 2014. However, as a partnership exchange State, Delaware will be recommending health 

plans for certification and applying State certification standards, 

administering programs to help consumers understand the coverage options, and supporting our small business community. 

In Delaware, we are a State of neighbors, and we believe this 

model, the partnership model, provides operational efficiency and 

financial stability while being highly responsive to local needs and 

stakeholder input. 

As a partnership State, setting State-based qualified health plan 

certification standards and defining the consumer outreach strategy aligns the exchange with other State health policy goals, including ensuring access to care and coverage, and ensuring we 

30 

have the workforce to provide that care, supporting quality and 

population health goals, and advancing critical cost-containment 

and payment reform initiatives. 

Foundational to all of these are supporting innovative technology 

and the DHIN—Delaware’s Health Information Network—infrastructure created under the leadership of distinguished committee 

member and former Governor, Senator Thomas R. Carper. 

Delaware’s progress on exchange establishment has been significant, and HHS has been very supportive and collaborative as we 

work together to launch the State partnership exchange model. 

In December, Delaware became the first State, true to form, conditionally approved to operate a partnership exchange. Today we 

can report that we are on track to complete State requirements 

necessary to support open enrollment on October 1, 2013. 

In the plan management area, Delaware has defined our essential health benefits package, finalized State-specific criteria for certifying the qualified health plans, and will be ready to review and 

certify plans by late July and transmit approved plan information 

to the Federal exchange portal in time to support open enrollment 

in October. 

Delaware also has made significant progress on the consumer assistance front, including finalizing certification requirements for 

Delaware’s consumer assistance provided through marketplace assisters, and initiating procurement for those marketplace assisters 

with programming and training of those individuals slated for 

April. On the start of open enrollment, these individuals will be 

ready to help consumers understand their responsibilities and the 

coverage spectrum available to them. 

Supporting Delaware’s consumers also means supporting our 

businesses. Providing information and assistance to the Delaware 

business community and building on the strong broker and agent 

network is a key component of our consumer outreach strategy, 

and we will have significant activity, as Senator Carper noted, in 

the months to come. 

Delaware is proud of our exchange establishment progress to 

date. We also understand there is still much work to be done before 

October, and we appreciate the collaboration of HHS with Delaware, including supporting our State-based outreach strategy for 

consumer assistance and education. 

We continue to be eager for final HHS guidance on certain operational elements, including the final data collection templates that 

issuers will use to prepare and submit information for qualified 

health plan certification; how the multi-State plans will maintain 

consistency with State certification standards; and how the SHOP 

Exchange and navigators will refer small employers to agents and 

brokers. 

Thank you for this opportunity to share with you Delaware’s experience and progress on this important initiative and our shared 

goal of improved health for all Delawareans and Americans. Thank 

you. 

Senator HATCH. Thank you. 

[The prepared statement of Ms. Tweardy Riveros appears in the 

appendix.] 

Senator HATCH. I appreciate the testimony of all three of you. 

31 

Let me just ask a few questions. Mr. Hughes, it is clear by your 

testimony that Arizona was very close to establishing a State-based 

exchange and could have had one up and running by October 1st, 

indicating little political opposition to establishing an exchange. 

Now you, in your testimony, ended by stating that the decision 

to not establish a State-based exchange was made because of operational challenges, especially related to the lack of information 

coming out of HHS. You also note that the timeline established for 

plan certification did not provide issuers or Arizona enough time to 

be ready by October 1st. 

Do you have any doubts about the ability of all exchanges to be 

fully ready to go on October 1st, especially due to the fact that, 

even if a State-based exchange is fully operational, it will still rely 

on the capabilities of the Federal Data Services Hub to make eligibility determinations? 

Mr. HUGHES. Senator Hatch, we were concerned about the uncertainty and the various moving pieces that are out there on where 

the Federal Data Services Hub and some of the other services are. 

We have made enough progress to this point that we are doing 

some initial testing with CMS on the Federal Data Services Hub. 

Our concern was, of the things that we could control, we would 

be ready on time, but there were simply things that were not in 

our control but were in the control of CCIIO or CMS, that we could 

not guarantee would be ready on time. It just seemed too risky for 

us to move forward. 

Our timeline—if we had moved forward with a State-based exchange for accepting applications for qualified health plans—was, 

we would have accepted applications beginning January 2nd and 

concluded accepting applications by the end of March, giving us 2 

months or 3 months to work with the carriers, to ensure that their 

applications were complete, and that they were ready to go. Rates 

would have been filed in May. 

We felt that gave us sufficient time and gave the carriers sufficient time to move forward with qualifying for a qualified health 

plan, but it all depended upon having the final rules done, the essential health benefits actuarial value rules, the market rules, and 

the others, otherwise they would not have had enough time to build 

their products and price their products in order to submit their applications to the Federal exchange or to a State-based exchange. 

That was one of the reasons why we decided to defer to the FFE. 

Senator HATCH. All right. 

Ms. Ferguson, have you experienced any challenge as a result of 

the administration’s delaying the issuance of regulations? 

Ms. FERGUSON. We were fortunate in that we were one of the 

very first States to get the planning money and the first State to 

get a 2nd-tier establishment grant, so we have been working closely with CCIIO and HHS from really the very beginning of the process. We made a calculation that we believe they will be able to get 

us what we need in time to get the work done. 

Senator HATCH. All right. 

Ms. Riveros, your testimony referenced the ability of Delaware to 

have influence over plan certification and consumer assistance 

standards as one of the reasons to go with a partnership exchange. 

The CMS guidance document on State Partnership Exchanges 

32 

states that HHS ‘‘will approve State partners to perform plan management or consumer assistance functions and retain authority 

over inherently governmental functions.’’ 

What authority does the State of Delaware retain when the administration has final say in all decisions that are inherently governmental functions, and could Delaware approve the sale of a 

health insurance product on the exchange without the express approval of HHS? What benefit does the partnership model provide 

to the State that the FFE does not provide, other than access to 

grant funding under section 1311? 

Ms. TWEARDY RIVEROS. Senator, first, the State of Delaware cannot approve a health plan for sale on the exchange that does not 

meet the Federal certification requirements. However, as a partnership State, Delaware has the opportunity to set requirements at 

the State level that will align our State health policy goals across 

this exchange. 

For example, we have in our State certification requirements requirements for support for transition for those who move between 

commercial insurance plans and Medicaid. We have requirements 

to support our technology infrastructure, the DHIN, in our certification standards. 

And we have other certification standards. For example, the business community sought a requirement that we require any issuer 

selling on our exchange to also offer for sale a bronze level, or 60- 

percent, actuarial value plan so that they would have a low-cost alternative in the market. Those are examples of specific ways that 

the State partnership exchange lets us influence our market, lets 

us align our State health policy goals through the exchange. 

Senator HATCH. Well, thank you. 

Senator Carper, if I can, I have one more question to all three, 

and then I am going to turn the gavel over to you, because I have 

to leave. 

Senator CARPER. It is a dangerous thing, turning the gavel over 

to me. [Laughter.] 

I will be on my best behavior. 

Senator HATCH. I am counting on that. 

Now, to all three of you, and let me start with you first, Mr. 

Hughes, we know that the law requires each exchange to be selfsustainable by January 1, 2015. Now, user fees had been proposed 

by States, and CMS has proposed a 3.5-percent user fee on all 

plans offered through the FFE. 

Can each of the panelists please tell me if your respective States 

analyzed the impact of a user fee on health insurance premiums? 

If so, detail the results of your analysis, if you can. I just think it 

would be good for the record to ask you that question. Yes, sir? 

Mr. HUGHES. Thank you, Senator Hatch. We did an analysis as 

to what our State-based exchange costs would be, both the IT costs 

and all of the other associated costs, with running a State-based 

exchange. We had made the decision, if we were moving forward, 

that we would do a flat dollar-amount fee rather than a percentage 

amount. 

We felt that, based upon our enrollment projections over time, 

that would cover our costs. We were looking to keep the administrative fee as low as possible because it simply adds to the cost of 

33 

the premium that a consumer or small employer would have to 

pay. 

In terms of the 3.5-percent assessment on insurance companies, 

that would be built into the premium and passed on to consumers. 

I have not seen a budget for the Federal exchange, so I do not 

know if that fee is going to cover the costs, because I do not know 

what their costs are going to be. 

That is a bit of a concern, that we have not seen a budget yet 

for what those costs will be and whether the 3.5-percent assessment on Arizona insurance policies will be kept within Arizona and 

pay for Arizona costs, or will it just go into a larger Federal budget 

that will pay for the entire cost of the 25 States that are deferring 

to a Federal exchange. 

Senator HATCH. All right. 

Ms. Ferguson? 

Ms. FERGUSON. We are in the midst of that analysis. We have 

a couple of different options in terms of approaches to covering the 

cost. We are happy to provide that analysis as it becomes available. 

Senator HATCH. That would be helpful. 

Yes, Ms. Riveros? 

Ms. TWEARDY RIVEROS. In Delaware, we conducted that analysis 

in 2011 and early 2012. We analyzed the cost of a State exchange, 

a Federal exchange, and a partnership exchange, and we took a 

very serious look at our direct costs associated with operating a 

State-based exchange, especially in light of our low population. 

Given our low population and the risk of low enrollment in particular, when we looked at the numbers, frankly, there was significant risk that we could not be financially self-sustaining, and that 

drove us to our decision to, among other reasons, support a State 

partnership exchange. 

Senator HATCH. Well, thank you. 

I am going to have to leave. You are the last person to question, 

so I will ask you to wrap up the hearing. But we are very happy 

to have the distinguished Senator on this committee. His experience as a Governor, his experience in many other ways, is just absolutely vital to this committee. I just really appreciate you being 

here, and I appreciate you. 

Senator CARPER. Thank you. Thank you so much. It is my privilege to serve with you. 

Senator HATCH. Thank you all for being here. I just want to personally thank you all for helping us to understand this better. 

Thank you. 

Senator CARPER. Thank you, Mr. Chairman. 

To our witnesses, thank you so much for joining us and sharing 

your testimony and responding to our questions. The record will remain open for, I think, about another 48 hours so that my colleagues who are not able to be here will have a chance to submit 

questions as well. 

I am the last Senator sitting, not standing, but do not take this 

as a sign that my colleagues are not interested, are not connected, 

and do not understand the importance of us getting the exchanges 

right in all 50 States. We have a number of staff members here, 

Senators’ staff, both minority and majority staff here, and a lot of 

folks are watching this by closed-circuit television. So your message 

34 

is getting out, and we will have an opportunity to ask some more 

questions, and I will have some as well. 

Right now, an Environment and Public Works hearing is going 

on. David Walker, the former Comptroller General of the United 

States, is sitting out there waiting to meet with me. The chairman 

of the House Committee on Homeland Security is waiting to meet 

with me in my hideaway right now, so there is a lot going on. 

That is just a sort of example of what all of us face here; it is 

rather frenetic. But I am delighted that you are here and especially 

delighted to see Bettina. I am grateful for the great work she has 

done for our State, not forever, but for a long time. So, thank you 

for that. 

Bettina referred to something called the Delaware Health Information Network, which I signed into law in my last term as Governor. I do not think I understood how important it was at the 

time, but it is becoming more important. 

Mike Leavitt, who was a former Governor from Utah, and 

Tommy Thompson, the Governor of Wisconsin, who later became 

Secretaries of Health and Human Services, were hugely supportive 

of our efforts in their roles as Secretary of Health and Human 

Services. Dr. Carolyn Clancy, who is going to be leaving us fairly 

soon in her service at the Department of Health and Human Services, has been a great supporter of our efforts. I would be foolish 

not to acknowledge those folks. 

Let me just ask you, if I could, Ms. Riveros, when you look at 

what we are doing in Delaware with respect to the Delaware 

Health Information Network, how does it help provide better 

health care outcomes for less money, and what pieces of that might 

be transferrable to other States to try to replicate? 

Ms. TWEARDY RIVEROS. Thank you, Senator. The Delaware 

Health Information Network is a health information exchange. As 

Senator Carper noted, we have, frankly, led the Nation, under his 

leadership beginning in 1997, and we have had an active health information exchange operational for nearly 6 years as of May of this 

year. 

Having the health information exchange in Delaware enables 

health information from disparate health care providers all over 

the State, and frankly potentially across our State borders, to be 

aggregated and available at the point of care, enabling coordination 

of care that is so difficult to achieve right now and is so foundational to the cost savings and the reduced costs and improved quality of care that we all seek to deliver. 

So having that health information exchange infrastructure, 

frankly, is like our highways are to transportation. It enables the 

transfer of data. But beyond that, it also enables us to better understand what the patient needs, what they have already had, 

whether they have already had an MRI 2 weeks ago and they do 

not need another one, so we can reduce costs in that way. 

It enables us to build on that foundation and develop new innovations that can ensure that we are bringing best practices to the 

point of contact and delivering that care to those patients. It also 

provides support for the payment reform models. When all of us 

speak about payment reforms and how we actually reduce the cost 

of care and get better quality outcomes, we talk a lot about delivVerDate Nov 24 2008 17:49 May 27, 2014 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 R:\DOCS\87945.000 TIMD
35 

ering value, we talk a lot about improving outcomes, and having 

outcomes-based reimbursement structures. 

But we cannot have those reimbursement structures if we do not 

know how we are getting to the best outcomes, so the DHIN technology infrastructure actually provides a very solid foundation to 

support the data and analytics works that can, not only support 

care coordination, but also the payment reform models and outcomes-based reimbursement models. So those learnings are all 

transferrable, I would say, to other States, and certainly we are 

more than welcome to share our experience with those other 

States. 

Senator CARPER. Please. 

Ms. FERGUSON. Senator—— 

Senator CARPER. I am going to ask you to be brief, because I 

have all those other things going on, please. Jump right in, though. 

Ms. FERGUSON. I just would be remiss if I did not, in the competitive arena that we are in in health care, support the fact that 

Senator Whitehouse originated our health information technology 

exchange in Rhode Island, the Rhode Island Quality Care Institute. 

So, as you are talking with him, I think everything that Ms. Riveros talked about is exactly the same benefit that we are seeing in 

Rhode Island, and I think we started at right around the same 

time. 

Senator CARPER. You just never know what is going to come out 

of those little States, you know? 

Ms. FERGUSON. Yes, I know. 

Senator CARPER. That is good. 

Ms. FERGUSON. We need to over-achieve. 

Senator CARPER. That is great. Thank you for saying that. 

We are blessed in our State, as all States are, with an entity that 

is part of the health care delivery system that is supported by 

Democrats and Republicans, whether the President is George W. 

Bush or happens to be Barack Obama. I think most of us support 

the exchanges; God knows I do. 

But the other thing is the federally qualified community health 

centers. I think they are just a great way to try to get better health 

care results for less money, to ensure that we address the needs 

of the least of these, but in a cost-effective way. 

I would ask you if I could, Chairwoman Riveros, could you just 

explain for us, just very briefly, how the federally qualified community health centers in our State—how they interact, or how do you 

expect that they will interact with our exchanges. Have you all 

given that much thought? If you have, any thoughts you have 

would be much appreciated. 

Ms. TWEARDY RIVEROS. Yes, Senator. In Delaware, we have a 

very strong federally qualified health center network. In fact, we 

recently opened a new center, as the Senator knows. So, when we 

see the present uninsured Delawareans in our State—we have a 

little over 100,000 uninsured Delawareans—and we look at the opportunities to provide them subsidies through the exchange and the 

opportunities afforded through the expansion of Medicaid, we definitely see that a significant number of those individuals will potentially be served by our federally qualified health centers. In fact, 

we have reached out to them and spoken to them about their need 

36 

to really ramp up and be able to continue to support that newly 

insured population. So they play, I would say, a critical role in our 

health care delivery system. 

In many ways, they have already developed the medical home 

models that we all talk so much about and are already working 

under those models. In fact, one of ours, West Side Healthcare, has 

been certified as a health home. So to me, they will be responsible 

for delivering care, and they have been successful in doing it in a 

cost-effective manner, and they will provide the capacity that we 

need to absorb this newly insured population. 

Senator CARPER. All right. Thank you for that. 

To each of you, Mr. Hughes, Ms. Ferguson, to Chairwoman 

Riveros, it is good to see you on this special day. February 14th 

comes around once a year. Since I get to be chairman, I get to do 

one of the things I most like to do, and it is to close a hearing with 

a musical reference. I was thinking, what could I possibly say on 

Valentine’s Day that might be appropriate for this hearing? 

The words of a couple of British guys, British lads named Lennon and McCartney, come to mind. I am not sure which album, 

whether it was the White Album or maybe Abbey Road, but the 

last words of the album go something like this—and this is really 

good for Valentine’s Day: ‘‘And in the end, the love we take is equal 

to the love we make.’’ I think one of the best ways to show the people of this country that we love and care for them is to make sure 

they have access to good health care, and we have an obligation to 

our taxpayers to make sure that we do it in a cost-effective way. 

With that in mind, Happy Valentine’s Day. This hearing is adjourned. 

[Whereupon, at 11:35 a.m., the hearing was concluded.] 

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A P P E N D I X 

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