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88–434 PDF 2014

S. HRG. 113–311 

THE POWER OF TRANSPARENCY: GIVING 

CONSUMERS THE INFORMATION THEY NEED 

TO MAKE SMART CHOICES IN THE HEALTH 

INSURANCE MARKET 

HEARING 

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 27, 2013 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JOHN D. ROCKEFELLER IV, West Virginia, Chairman 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

MARK WARNER, Virginia 

MARK BEGICH, Alaska 

RICHARD BLUMENTHAL, Connecticut 

BRIAN SCHATZ, Hawaii 

WILLIAM COWAN, Massachusetts 

JOHN THUNE, South Dakota, Ranking 

ROGER F. WICKER, Mississippi 

ROY BLUNT, Missouri 

MARCO RUBIO, Florida 

KELLY AYOTTE, New Hampshire 

DEAN HELLER, Nevada 

DAN COATS, Indiana 

TIM SCOTT, South Carolina 

TED CRUZ, Texas 

DEB FISCHER, Nebraska 

RON JOHNSON, Wisconsin 

ELLEN L. DONESKI, Staff Director 

JAMES REID, Deputy Staff Director 

JOHN WILLIAMS, General Counsel 

DAVID SCHWIETERT, Republican Staff Director 

NICK ROSSI, Republican Deputy Staff Director 

REBECCA SEIDEL, Republican General Counsel and Chief Investigator 

(III) 

C O N T E N T S 

Page 

Hearing held on February 27, 2013 ....................................................................... 1 

Statement of Senator Rockefeller ........................................................................... 1 

Statement of Senator Thune ................................................................................... 3 

Statement of Senator Nelson .................................................................................. 5 

Statement of Senator Pryor .................................................................................... 33 

Statement of Senator Cruz ..................................................................................... 35 

Statement of Senator McCaskill ............................................................................. 36 

Statement of Senator Schatz .................................................................................. 39 

WITNESSES

Lynn Quincy, Senior Policy Analyst, Consumers Union ...................................... 5 

Prepared statement .......................................................................................... 7 

Michael A. Livermore, Executive Director, Institute for Policy Integrity, New 

York University School of Law ........................................................................... 12 

Prepared statement .......................................................................................... 14 

Margaret O’Kane, President, National Committee for Quality Assurance ......... 18 

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

E. Neil Trautwein, Vice President and Employee Benefits Policy Counsel, 

National Retail Federation .................................................................................. 25 

Prepared statement .......................................................................................... 27 

APPENDIX

Response to written question submitted to Lynn Quincy by: 

Hon. John D. Rockefeller IV ............................................................................ 47 

Hon. Amy Klobuchar ........................................................................................ 47 

Response to written question submitted by Hon. Amy Klobuchar to Margaret 

E. O’Kane .............................................................................................................. 48 

(1) 

THE POWER OF TRANSPARENCY: GIVING 

CONSUMERS THE INFORMATION THEY 

NEED TO MAKE SMART CHOICES IN THE 

HEALTH INSURANCE MARKET 

WEDNESDAY, FEBRUARY 27, 2013 

U.S. SENATE, 

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, 

Washington, DC. 

The Committee met, pursuant to notice, at 2:30 p.m., in room 

SR–253, Russell Senate Office Building, Hon. John D. Rockefeller 

IV, Chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. JOHN D. ROCKEFELLER IV, 

U.S. SENATOR FROM WEST VIRGINIA 

The CHAIRMAN. The hearing will come to order. And we—please 

forgive us; we were having a little bit of fun up here. It doesn’t 

happen much around here, you know? You’ve got to take advantage 

of it when you can do that. 

Almost 4 years ago—that being 2009, I was good at math—this 

committee held a hearing on many challenges that consumers faced 

when trying to buy health insurance. And we spent a lot of time 

in this committee on the health insurance industry and healthcare. 

And at that hearing, we heard that shopping for health insurance 

was frustrating, confusing, and stressful. Consumers had no really 

easy way to find out what they were about to get. And then, one 

of the problems was that, under the old system, what the insurance 

company sent them was what they had to take before—well, they 

had to buy the insurance first, you see, and then they got the information about what they just bought. And that wasn’t really smart. 

So, consumers didn’t have any easy way to learn, or compare, 

which is the main thing, different healthcare plans. And that’s the 

whole point of this. I mean, we’re heading into a new era, 2014 almost on us. They could get slick marketing material from the insurance companies, which would say all kinds of things, but they 

couldn’t get straight answers about the services a health insurance 

plan did, or did not, which is just as important, cover. 

When they asked for further information about health insurance 

plans, consumers usually got bulky disclosure documents. We—I 

was hoping we’d have a lot of bulky disclosure documents around 

here so everybody could look at them. We don’t? I don’t want it; 

I’ve already seen it. But, it’s a trip. Some of these 100 page—consumers would get a—100 page explanations of what they had already paid for and, therefore, were going to have to have. 

2 

So, they couldn’t compare. They got their materials, but they 

couldn’t get straight answers. And when they asked for further information about health insurance plans, consumers usually got 

these bulky things. And something which makes a point with me, 

you know, there’s a fine print which can actually drive you crazy. 

That’s the fine print which the insurance companies used. I mean, 

you take your Magellan magnifying glass and put it right down 

there, and you can just barely catch the word. And there was no 

standard terminology in health insurance. For example, ‘‘copay,’’ 

‘‘hospitalizations’’—well, we all know what that means. No, we 

don’t. It varies, according to what the insurance plan might be. 

‘‘Out-of-pocket limit,’’ what does that mean? Well, it meant many 

different things. So, consumers were kind of in the dark, and that’s 

exactly where the health insurance companies wanted to keep 

them. And I’m not trying to be cynical about this, but it was—we 

had a fellow, named Wendell Potter, who testified, sat right there, 

Mr. Livermore, and he said that they did this purposely; they purposefully made things small, hard to read, long, legalese, 

healthcarese, so that people would just get discouraged from plowing through, and, therefore, would just go ahead and buy the product. 

Mr. Potter told us that the industry’s goal was to make their disclosure materials so impenetrable and confusing that consumers 

would give up and throw them away. 

Now, as long as consumers couldn’t understand what the policies—how they work, they wouldn’t understand the bad deal they 

might be getting. Maybe they weren’t, but maybe they were. They 

couldn’t know. 

While the market we’ve heard about in 2009 was profitable for 

health insurance companies, it was a disaster for families. And 

that’s all well documented, and we’ve done that. 

Consumers assumed that, if they paid their health insurance premiums every month, they were protected. I would have assumed 

that. I would have assumed that. It’s the way America works. Only 

too late would they discover that the fine print in their health insurance plans stuck them with thousands of dollars in unexpected 

medical bills. A complicated pregnancy, a cancer diagnosis, or even 

a broken limb, could push families well beyond their budgets. In 

fact, medical debt had become the leading cause of personal bankruptcy filings. We all know that. That’s been the case for years. 

So, after hearing too many of these stories, some of us got serious 

about bringing more transparency in the health insurance market. 

So, we created a clear labeling requirement in the Affordable Care 

Act, or the—you know, the—the Act, the healthcare act, 

Obamacare, whatever you want. So, we put that in there; they had 

to have clear labeling, just like when you look at how much caloric 

content, fat content, et cetera, you tend to get it on something that 

you buy. We required health insurance companies to clearly and 

accurately disclose to their customers that their—what their policies cost—that is now law—and what their services might cover. 

Instead of 20 or 40 or even 100 pages—and I have all three in my 

back of my book here—disclosure documents—the law required insurers to give consumers about a 4-page document, a Summary of 

Benefits and Coverage, SBC; and it had to be written in plain 

3 

English. And it is. And it had to be printed in font that customers, 

like me, could read, which was a strict requirement. 

The law also called for the development of industrywide standard 

definitions, so consumers could clearly understand words like 

‘‘copay’’ or ‘‘hospitalizations.’’ They—in other words, what was true 

for one plan had to be true for another plan. Then you just put that 

into law, and then you try to enforce it; and presumably you can, 

although everything takes time. With clearly presented plan features describing—using standard terms—consumers could finally 

make apples-to-apples comparison—and that was good—between 

the health insurance projects—products, and find the one that best 

met their health coverage needs. 

To help consumers understand how the policies would work in a 

real-life situation, the law also required insurers to give example 

of how their plans would cover the expenses of major health events, 

such as having a baby or treating a chronic disease, like diabetes. 

And then breast cancer comes into our discussion today, because 

people can identify—and you can see it in some of these plans, 

when you get them—how much individual—for, say, breast cancer, 

or for diabetes 2—I mean, what, exactly, are you paying? What, exactly, are you paying? It’s listed, and added up. 

So, after extensive discussion and consumer testing, insurance 

companies began issuing SBCs in the fall of 2012. While there may 

be room for improvement—and there is—these forms represent a 

major step forward. I’m actually very happy about this, because it 

helps consumers make informed judgments, which they need to do. 

So, with this new transparency, health insurance companies 

have a new incentive, to compete on the value of their product— 

the value of their products—and on their—not on their ability to 

confuse people. 

So, in closing, our witnesses today are going to tell us about how 

the SBC was developed and what they think of the SBC as a tool 

for creating transparency and improving consumers’ health plans, 

and also how they think it could get better. I’ve got a bunch of 

ideas on that; you probably have more. We need to—while we’re in 

the mood to get this SBC going, and while companies are adjusting 

to it, let’s make it as helpful as possible to the consumer. 

My honorable Ranking Member. 

STATEMENT OF HON. JOHN THUNE, 

U.S. SENATOR FROM SOUTH DAKOTA 

Senator THUNE. Thank you, Mr. Chairman, for holding this hearing. 

I appreciate all the witnesses who are here today to provide testimony. Thank you for being here. 

And, as the Chairman has mentioned, today’s hearing follows 

hearings this committee conducted in 2009 which explored the connection between how health insurance companies share information about the benefits and coverage of their plans and the ability 

of consumers to make informed choices in the marketplace. 

Mr. Chairman, I applaud your dedication to these issues. 

Anyone who has had to compare healthcare plans and make decisions for themselves or their families likely shares the goal of imVerDate Nov 24 2008 06:08 Jun 27, 2014 Jkt 075679 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 S:\GPO\DOCS\88434.TXT JACKIE
4 

proving the transparency and clarity of the plans’ descriptions, particularly in the individual and small group markets. 

We’re here to examine how healthcare plans share information 

with consumers in the health insurance market, and what changes 

have been made since 2009 specifically with regard to the implementation of the Summary of Benefits and Coverage provision, or 

SBC, which was championed by the Chairman. 

Since 2009, the health insurance landscape has changed dramatically. Some changes, like the requirement that health insurers provide standardized statements of benefits and coverage, we hope are 

for the better. It’s no surprise that Americans appear to embrace 

the idea that health insurance companies should provide easy to 

understand plan summaries. 

Polling by the Kaiser Family Foundation in 2011 showed that 

nearly 84 percent of respondents in its tracking poll held, ‘‘very favorable’’ or ‘‘somewhat favorable’’ views on this idea. 

As we explore the SBC today, which has yet to be fully implemented, it’s my hope that the Committee will find that actual 

users’ experiences are likely to match consumers’ high expectations. 

Health insurance is complicated, given the many variables that 

influence the actuarial assessments upon which coverage and premiums are based. Provisions, such as the SBC, should help simplify 

the process, but, at the same time, they must be implemented in 

a way that provides an accurate picture of what consumers can 

truly expect. The goals of clarity and transparency are goals that 

we all share, but we should not underestimate the ability of the 

government to implement good ideas in ways that create additional 

confusion for consumers. 

While some provisions in the healthcare law offer promise, I am 

concerned that they pale against the backdrop of unwelcome 

changes we have yet to fully realize. I’m especially concerned about 

how the multitude of regulations mandated by the Affordable Care 

Act will affect premiums. A recent study by Oliver Wyman found 

that the President’s health law will greatly increase the cost of insurance for those in the individual market by an average of 10 to 

20 percent. 

Taken as a whole, the regulatory burden of the Affordable Care 

Act is crushing. Since its enactment, there have been more than 

18,000 pages of regulations issued. The SBC provision is just one 

small part of this, and it’s my hope the discussion today will provide an opportunity to explore ways in which we can increase its 

utility. But, as we seek to protect consumers, we cannot ignore the 

larger law’s likely impact on premium increases. Perhaps our laws, 

like our health plans, should come with a straightforward summary 

of their likely cost and benefits to taxpayers; I think that would be 

refreshing, as well. 

So, I want to thank you all for being here. I look forward to hearing your testimony and the opportunity to interact with you, in 

some questions, and get your perspective on the SBC. 

Thank you, Mr. Chairman. 

The CHAIRMAN. I want to thank my Honorable Ranking Member, 

and beg his indulgence, because I asked Senator Nelson if he wanted to speak, which he has absolutely no right to do, under our 

5 

rules, as well established, but he said he wanted to say 20 seconds 

of nice things about me. 

[Laughter.] 

The CHAIRMAN. So, I decided—— 

Senator THUNE. We’d better indulge that. 

The CHAIRMAN. What I—that was my thinking. 

[Laughter.] 

The CHAIRMAN. The Senator from Florida. 

STATEMENT OF HON. BILL NELSON, 

U.S. SENATOR FROM FLORIDA 

Senator NELSON. Mr. Chairman, Mr. Ranking Member, I did 

want to say some nice things about you, because it is the passion 

that you continue to carry, from being one of the coauthors of the 

Affordable Care Act, that you bring to the chairmanship of this 

committee in such things as the hearing today, how to make it better. 

With your indulgence, I have the privilege of chairing my first 

hearing, in the Aging Committee, of which the subject matter is 

how to improve the healthcare bill that was passed back in 2009. 

So, Mr. Chairman, I want to thank you for your continuing passion. 

The CHAIRMAN. Senator Thune, he did overrun his time a bit. 

[Laughter.] 

The CHAIRMAN. But, I think that, in the spirit, we should be 

grateful. 

Senator THUNE. That’s right. Unanimous consent, Mr. Chairman, 

that he be allowed to use as much time as he already has used. 

[Laughter.] 

The CHAIRMAN. OK. 

Now our panel: Ms. Lynn Quincy, who’s the Senior Policy Analyst of the Consumers Union—and you’re smiling, which is good, 

because you’ll be first up; Mr. Michael Livermore, Executive Director, Institute for Policy Integrity, New York University School of 

Law; Ms. Margaret—a.k.a. Peggy—O’Kane, President, National 

Committee for Quality Assurance; and Mr. Neil Trautwein, who’s 

Vice President, Employee Benefits Policy Counsel, of the National 

Retail Federation. 

So, please give your testimony, and then we’ll have questions for 

you. 

STATEMENT OF LYNN QUINCY, SENIOR POLICY ANALYST, 

CONSUMERS UNION 

Ms. QUINCY. Senator Rockefeller, Senator Thune, and members 

of the Committee, thank you so much for having me here today. 

I’m absolutely delighted, on behalf of consumers everywhere, to 

come and talk about the Summary of Benefits and Coverage. 

I think we can all agree, health insurance is necessary for the 

health and financial security of American families. What’s more, 

consumers must be fully informed about how their health insurance works, as has already been referenced. 

We do not want them out in the marketplace, shopping with a 

blindfold on. And I’m afraid that’s a little bit too common, still. The 

Summary of Benefits and Coverage goes a long way toward taking 

6 

off the blindfold and helping them understand their coverage options. 

Today, we’re releasing a nationally representative survey that 

shows how the Summary of Benefits and Coverage fared in the 

marketplace last fall. This is our first experience with it out in the 

marketplace, and I’ll share a few findings with you. We also have 

evidence from pretesting of the form that was done by Consumers 

Union and by health plans when it was being developed. And, 

taken together, we have a really rich body of evidence, which says 

how consumers respond to this form. And I’d love to share just a 

couple highlights, because they’re all good. 

These are just the very—there we go—it’s a very visual form, so 

we’ve got to look at it while we’re talking about it. Here are just 

a few highlights from all of this evidence. One, consumers love the 

fact that they can line up plans from different carriers or different 

employers and compare them, apples to apples. This is a big deal 

for them. 

They are very reassured by the element that says why this matters, because they aren’t sure why different features matter. They 

really need help understanding how these important cost-sharing 

features work, and whether or not it’s important to pay attention 

to them. 

They really like having exceptions to coverage all in one place. 

It helps alleviate some of the worry they feel about the fine print 

that Senator Rockefeller referred to. 

They—but, what proved transformational, when we did our testing, is this element: the coverage example. The coverage example— 

in this case, it’s a medical scenario of having a baby—tells consumers three things that they’ve never seen before. 

One, how much does healthcare cost? Well, they don’t know; and 

so, they don’t know how much insurance they need. The coverage 

example takes care of that problem. 

It shows a bottom line for how much they would pay. That’s another thing they don’t know, because consumers find it very, very 

difficult to roll up all those disparate cost-sharing provisions, like 

benefit limits and annual limits and out-of-pocket maximums. It’s 

pretty high-level math. 

And third, and perhaps most surprising, it shows what the plan 

pays. And here—this shows the real value of consumer testing. 

That may not seem important; it may seem like it’s simply a residual. Well, it’s not. It reminded them of the importance of insurance 

coverage and the fact that an unexpected medical event might happen to them, and that they, if they have coverage, even if it has 

what seemed like a high deductible, they’re still getting a benefit, 

because they can see the number that represents what the health 

plan paid on their behalf. And perhaps you’ll recall that traditional 

health plan materials don’t actually include that information. 

So, this was enormous. And it’s a wonderful tool in your policymakers’ toolbox that you can be exploiting as we go forward with 

the SBC. 

I mentioned the survey in the fall. Here’s the bad news. Only 

half of consumers, in the fall, who shopped for private health insurance coverage recalled seeing the SBC. We must do a much better 

7 

1 Consumer Reports is the world’s largest independent product-testing organization. Using its 

more than 50 labs, auto test center, and survey research center, the nonprofit rates thousands 

of products and services annually. Founded in 1936, Consumer Reports has over 8 million subscribers to its magazine, website, and other publications. Its advocacy division, Consumers 

Union, works for health reform, food and product safety, financial reform, and other consumer 

issues in Washington, D.C., the states, and in the marketplace. 2 Informed Consumer Choices in Health Care Act of 2009. 

job of raising awareness. And I suspect we need to do a better job 

of getting the health plans to comply with the requirements. 

The good news is, when they did see the Summary of Benefits 

and Coverage, the survey respondents told us that they viewed it 

very favorably, and they told us it was more helpful than any other 

form of health plan information that we gave them in a list. This 

is things like information you get from your employer, advice from 

a broker, et cetera. So, good news, except for the awareness factor. 

Going forward, I hope that we will do things to improve the SBC, 

maybe get it professionally designed, add more coverage examples, 

and all the other recommendations I included in my written testimony. 

I will stop there. Thank you so much. 

[The prepared statement of Ms. Quincy follows:] 

PREPARED STATEMENT OF LYNN QUINCY, SENIOR POLICY ANALYST, 

CONSUMERS UNION

‘‘A RETROSPECTIVE AND PROSPECTIVE LOOK AT THE SUMMARY OF BENEFITS AND

COVERAGE FORM’’ 

Introduction 

Consumers Union, the policy and advocacy arm of Consumer Reports, 1 appreciates this opportunity to provide testimony on the new health insurance disclosure—the Summary of Benefits and Coverage or SBC form. 

The SBC provides a very important consumer protection. For the first time, consumers have a standardized disclosure that allows them to compare health plans, 

even plans from different carriers or different employers. This uniform, consumerfriendly information arms consumers to be better shoppers and, in turn, improves 

the insurance market place. What’s more, a robust body of evidence shows this product is working as intended. 

My testimony describes this evidence and recommends some next steps for the 

SBC and for consumer disclosures more generally. 

Brief Background 

The SBC requirement was included in the 2010 Affordable Care Act, based on legislation introduced earlier by Senator Rockefeller (D–WV).2 The statute described 

not only what should be in the SBC but also legislative goals for the document: 

• [Standards] shall ensure that the summary is presented in a culturally and linguistically appropriate manner and utilizes terminology understandable by the 

average plan enrollee. 

• Uniform definition of terms so that ‘‘consumers may compare health insurance 

coverage and understand the terms of that coverage (or exception to such coverage); 

Health insurance is costly and has profound implications for the health and financial security of America’s families. Hopefully, all would agree it is important that 

consumers be armed with information that is understandable, reliable, allows them 

to divine how much coverage they are getting and can be readily compared across 

health plans. The SBC requirements were a major step forward in this regard. 

We all know that not every consumer disclosure works in practice as intended by 

legislators. Consumers Union thinks it is very important to directly assess the impact of required disclosures on consumers. Two things must be done to reliably conduct this assessment: (1) use independent, trained moderators to test disclosures 

with real consumers simulating real marketplace conditions as closely as possible; 

and (2) monitor how well the disclosure functions in the marketplace after roll out. 

8 

3We’d like to recognize: California HealthCare Foundation, Commonwealth Fund, Missouri 

Foundation for Health and NYS Health Foundation. 4 Consumers Union and People Talk Research, Early Consumer Testing of New Health Insurance Disclosure Forms, December 2010 and Consumers Union and Kleimann Communication 

Group, Early Consumer Testing of the Coverage Facts Label: A New Way of Comparing Health 

Plans, August 2011. 5 America’s Health Insurance Plans Focus Group Summary, JKM Research, October 2010 and 

America’s Health Insurance Plans [and] Blue Cross Blue Shield Association Focus Group Summary, JKM Research, May 2011 [Report web links at the end of this testimony]. 6 Cognitive interviewing is a technique used to provide insight into learners’ perceptions in 

which individuals are invited to verbalize thoughts and feelings as they examine information. 

As described below, for the SBC we have a robust body of evidence that shows this 

product is truly helping consumers and is as good or better than other information 

found in the market today. 

Evidence from Testing 

For four years, I have served as a consumer representative with the National Association of Insurance Commissioners (NAIC), the organization tasked with initial 

development of the SBC form. NAIC reached out to a diverse group of stakeholders 

to develop the form, but did not plan any consumer testing. Nor did any of the Federal agencies tasked with writing the regulations on the SBC plan to conduct consumer testing. 

As a result, with the support of some generous foundations,3 Consumers Union 

stepped in to do two rounds of consumer testing on the prototype document.4 America’s Health Insurance Plans and Blue Cross Blue Shield Association also tested the 

prototype document.5 This testing used either focus groups or cognitive interviews 6

to learn how and when consumers would use the prototype forms. Participants were 

shown alternate versions of the form so that we could learn what was and wasn’t 

working. 

Lending credence to the findings, these studies agreed with each other in almost 

all respects. 

Health Insurance Is Complex—Consumers Dread Shopping 

In our testing, we started with open ended questions to assess how easy or difficult it was to shop for coverage prior to seeing the SBC. Few will be surprised that 

consumers find it very difficult to sort through health plan information. What’s critical is to understand just how profound this difficulty is, and to develop the nuanced 

understanding of consumer difficulties that will allow targeted improvements to 

health plan information. 

In our testing, consumers told us that health insurance was one of the hardest 

things they shop for. In particular, they highlighted the difficulty of figuring out 

how much coverage is offered by a plan. Specifically, sorting through a plan’s costsharing provisions was the most difficult aspect of health insurance shopping. 

Aside from premiums and copays, many cost-sharing concepts were unfamiliar to 

consumers. They don’t know the meaning of terms like benefit limit, annual limit, 

or out-of-pocket maximums. Yet these concepts must be used, together with covered 

services, to understand the overall financial protection offered by a health plan. 

Testing allows us to take a nuanced look at these consumer difficulties. As an example, there are three separate things that consumers find difficult about coinsur- ance: 

• Many are not sure who is responsible for paying the indicated percentage. They 

are particularly confused when presented with a coinsurance rate of 0 percent 

or 100 percent. 

• Many consumers have poor numeracy skills. They have difficulty applying a 

percentage to a dollar figure. 

• They don’t know what they have to pay. Coinsurance percentages are applied 

to the contracted charge between the health plan and the provider called the 

‘‘Allowed Amount.’’ At the point of shopping for a plan, or even when receiving 

medical care, this is an unknowable number so there is no bottom line for the 

consumer. Coinsurance of 75 percent might be better than 80 percent coinsurance—depending on those underlying contracted amounts. 

While not as frequent, consumers also had difficult understanding some covered 

service terms, like the difference between screenings and diagnostic tests. 

As a result, it is very difficult for consumers to figure out how much coverage is 

offered by a health plan. Even skilled consumers were leery of committing to a plan, 

because they were worried about the ‘fine print.’ Due to these concerns, consumers 

told us they dread shopping for health insurance coverage. 

9 

SBC Helps Consumers 

While the SBC does not reduce the underlying complexity of health plans, testing 

showed it does help consumers make sense of the coverage. In particular, consumers 

told us they liked: 

• Uniform layout of SBC—so they can line up forms for different plans and compare them; 

• ‘‘Why this matters’’ information—to provide a sense of how important specific 

features are; 

• Having ‘‘exceptions to coverage’’ all in one place; and 

• Coverage Examples—for reasons discussed below. 

Coverage Examples Were Transformational 

Coverage examples are a new feature, typically not provided in other plan summaries. For selected medical scenarios, these examples show how much the underlying health care costs and how much the plan would pay (Exhibit 1). 

Testing revealed that these examples provided consumers with three pieces of information they wouldn’t otherwise have: 

• How much medical care costs—helps them to avoid underinsuring 

• A bottom line showing what the patient owed—rolling up myriad cost-sharing 

provisions 

• What the plan paid towards the services 

Testing showed us that this last item was much more important than one would 

guess. Traditional health plan disclosures focus on what the patient pays towards 

costs. After a long list of costs paid by patient, some consumers question whether 

or not health insurance is a good deal. 


227LYNN1.eps
10 

7During development of the SBC, a breast cancer scenario was tested but not included in the 

initial requirements for the SBC. Because of the high charges associated with this scenario 

(roughly $100,000), this example generated the biggest consumer response among the three that 

were tested. HHS has committed to including up to four more coverage examples (for a total 

of six) in future revisions of the SBC. 8 Consumers Union and Kleimann Communication Group, Early Consumer Testing of the Coverage Facts Label: A New Way of Comparing Health Plans, August 2011 and America’s Health 

Insurance Plans [and] Blue Cross Blue Shield Association Focus Group Summary, JKM Research, May 2011. 9Kaiser Health Tracking Poll, November 2011. 

10L. Quincy, Early Experience With A New Consumer Benefit—the Summary of Benefits and 

Coverage, Consumers Union, February 2013. 11 Ibid. As an example, we saw SBCs where maternity was shown as ‘‘not covered’’ in the coverage example but failed to be listed in the box describing non-covered services. 12 UnitedHealth Group conducted a study which found that it clearer Part D and Medicare advantage products would save an estimated $4 million/year through reduced consumer calls. 

Industry wide savings would be greater and consumer satisfaction greater still (as not everyone 

who is confused call the help line). 

Showing what the plan paid—especially for an expensive illness like cancer 7— greatly increased consumers’ willingness to make a health plan selection and increased their confidence in the selection.8 It reminded consumers of the benefit that 

they get from purchasing insurance. 

That’s pretty powerful stuff! 

Evidence from Polling 

Survey evidence reinforces the findings from consumer testing. One nationally 

representative survey found that an SBC type of benefit ranked the highest among 

the many provisions in the ACA—showing it is highly valued by consumers.9

In order to see how well the SBC worked in practice, Consumers Union conducted 

our own nationally representative survey to see whether consumers used their new 

benefit when they shopped for private health insurance in the Fall of 2012—the first 

season when the benefit was available.10 We learned: 

• Awareness of the new benefit is low. Only about 50 percent of consumers who 

shopped for or renewed private health insurance coverage recalled seeing the 

SBC. Rates were even lower for those who shopped for coverage on their own 

in the non-group market. 

• Among shoppers that did see the SBC, their impressions were very favorable. 

Over 50 percent were very or completely satisfied with the specific features of 

the SBC, with very few expressing any dissatisfaction. When asked to rate the 

helpfulness of the SBC against other common sources of health plan information, the SBC was rated as helpful most often. 

• Few consumers reported seeing the new feature called ‘‘Coverage Examples.’’ 

Anecdotal evidence from the fall suggests that insurers may need to make it easier for shoppers and current enrollees to access their SBC, particularly in the nongroup market. They may also need to improve quality control to ensure that SBCs 

are released without errors.11

Who Should Bear the Cost of Complexity? 

Complexity has a cost. When consumers can’t confidently compare their health 

plan options, they may find themselves underinsured or fail to complete enrollment. 

Under-insured consumers act like uninsured consumers—consuming too little care 

due to concerns about costs, possibly leading to poorer health and greater medical 

expenses down the road. And consumer confusion costs money, leading to great use 

of customer help lines.12

In their comments responding to the proposed SBC rule, several insurers were 

concerned about the cost of producing the SBC form for consumers. At the high end, 

they estimated it would cost a dollar per enrollee to produce the form. 

We can debate what the right number is but for us, it comes down to this: health 

insurance is necessary for the health and financial security of families. With something this important and this expensive, consumers should not be asked to shop 

with a blindfold on, that is, with an incomplete idea how much coverage they are 

getting. 

Hence, someone has to invest the time to craft the reliable, comparative information like that found in the SBC. From a societal perspective, it makes much more 

sense for the expert health insurer to do it once, providing a clear summary for all 

future shoppers for the policy. The alternative is for each individual consumer to 

slog through the same analysis—or giving up and going without coverage or buying 

a product that doesn’t provide sufficient protection for their family. 

11 

13Decoding Your Health Insurance: The New Summary of Benefits and Coverage, Families 

USA, May 2012. 14Opponents of premium information argued that it was not specifically required by statute 

but testing and common sense shows that it is integral to achieving the statutory goal of allowing consumers to ‘‘compare coverage.’’ The NAIC recommendations conveyed to HHS included 

recommendations for how to include premium information when necessary underwriting information was not available. 15While the NAIC worked very hard to provide their recommendations to the tri-agencies and 

successfully engaged a diverse group of stakeholders, a designer has not yet been engaged to 

professionally improve the look and feel of the form. As this report shows, alternate approaches 

to layout may further improve consumers’ ability to use the form: http://www.naic.org/documents/committeeslblconsumerlinformationl110505lliteracylreview.pdf 16 Impressive work in this area includes CFPB’s the ‘‘Know Before You Owe’’ design and testing efforts with respect to mortgage disclosures (http://files.consumerfinance.gov/f/201207lcf 

pblreportltila-respa-testing.pdf) and the redesign of the energy star label for appliances 

(http://www.energystar.gov/ia/business/downloads/FTCs%20Appliance20Labeling%20Rule. 

pdf). 

And while some insurers and employers have crafted nice looking summaries over 

the years these have one big problem—they don’t use the same format. And some 

have failed to promote important loopholes in the coverage. 

An estimated 170 million consumers purchase private health coverage today. 

Many have a choice and would benefit from having a standard method of comparing 

plans: 

• 66 percent of employees whose employer offers coverage have a choice of 

plans.13

• Additionally, many employees have an alternate coverage option through their 

spouse’s employer. 

• Consumers purchasing in the non-group market (approximately 19 million 

today) also face a choice of plans. 

Even those with only one coverage option from their employer benefits from having a consumer-tested, understandable summary that shows them how to use their 

health plan and stays that same over time, rewarding them for learning to use the 

Summary. 

You can’t have a functioning marketplace until consumers are armed with the information they need to meaningfully compare products. Like the nutrition facts 

panel on food or the EPA’s miles per gallon sticker on new cars, having a standard 

description across products greatly facilitates shopping and encourages competition 

based on the underlying value of the products. 

Next Steps for the Summary of Benefits and Coverage 

Few consumer disclosures are perfect when initially rolled out. Evidence from 

testing and our survey suggest that the SBC could be improved in several ways. For 

example: 

• Add more coverage examples, including at least one showing an expensive illness like breast cancer. 

• Ensure that the medical costs displayed in the coverage examples represent realistic price levels. The current use of Medicare pricing is too low. 

• Test moving coverage examples closer to the front of the form so that more consumers are aware of them. 

• Add a row for premium back to the form. While the tested versions contained 

this information, it was removed in the final rule.14

• Work with a designer to improve the look and feel of the form.15

• Engage in activities to increase consumer awareness of the form. 

• Improve insurer oversight with respect to compliance with the rule. 

Require Consumer Testing and Monitoring of New Disclosures 

The value of consumer testing has been firmly established. Unfortunately, there 

is no uniform Federal policy with respect to pre-testing and monitoring federallyrequired, consumer-facing disclosures. 16 As a result, many disclosures are not tested or monitored to assess their consumer impact. 

Going forward, consumer pre-testing and post-launch monitoring should be required and funded by the governmental entity that requires the disclosure. This effort should be commensurate with the number of consumers expected to view the 

disclosure. We recommend that all findings from monitoring and testing be made 

12 

publicly available, to ensure independence and as an aid in the development of other 

materials for consumers. 

Thank you for the opportunity to comment on this very important consumer benefit. 

Submitted by: 

LYNN QUINCY, 

Senior Health Policy Analyst, 

Consumers Union. 

Web Links for the SBC Testing Studies 

The CHAIRMAN. Thank you very much. 

And actually, I was just thinking what Senator—Ranking Member Thune said—84 percent like it. I think it’s, far and away, the 

most popular thing in the entire Act. Isn’t that true? I won’t go—— 

Ms. QUINCY. That’s what the Kaiser poll showed. 

The CHAIRMAN. Now, Mr. Michael Livermore—as I indicated, Executive Director, Institute for Policy Integrity, New York University School of Law. 

STATEMENT OF MICHAEL A. LIVERMORE, 

EXECUTIVE DIRECTOR, INSTITUTE FOR POLICY INTEGRITY, 

NEW YORK UNIVERSITY SCHOOL OF LAW 

Mr. LIVERMORE. Thank you very much, Mr. Chairman, Senator 

Thune. It’s a wonderful opportunity to be here and have the opportunity to testify today. 

The center that I run at NYU focuses on the use of cost-benefit 

analysis to evaluate government policy. That’s really our area of 

expertise. And, as you know, cost-benefit analysis has been around 

for decades. And the question it asks is whether what we’re buying 

for the public is worth the price tag that we’re asking them to pay. 

That’s the fundamental question. 

Today, of course, we’re here to discuss provisions of the Affordable Care Act, requiring insurance companies to disclose, in a 

standard format, information to potential customers about their 

plans. The idea is to give consumers more information so they can 

make better health insurance decisions. 

Now, naturally, there’s going to be some costs associated with 

standard disclosure. Agencies have estimated we’re talking around 


227LYNN2.eps
13 

$70 million per year, give or take. But, looking at the cost of the 

SBC, alone, without attending to the benefits, is economically 

meaningless. The question is not whether there are some costs, in 

an absolute sense, but whether the benefits justify those costs. And 

compared to the potential benefits of improved consumers’ decisionmaking in the health insurance market, the costs of the SBC are 

going to be utterly swamped. 

Health insurance is a massive market in the United States; and 

changes to the way individuals, families, and businesses make decisions are likely to have significant consequences. Even a small improvement in consumer decisionmaking can generate very large 

economic returns in this market. More and better information 

means consumers can make better decisions, and it helps them find 

insurance products that fit their needs. 

There’s a substantial body of research in behavioral economics, 

psychology, in cognition, about consumers make decisions. Based 

on this research, we can see that health insurance is a context that 

provides particularly high challenges to consumers. It involves 

long-term probabilistic, risk-based assessments of people’s health, 

there’s a long time lag between buying insurance and when you actually need to rely on it to pay for care—there can be. And you 

don’t make these types of health insurance decisions very often, so 

you don’t build the kind of experience base that allows you to make 

smart decisions. 

Each of these, alone, would make the decision difficult for consumers, but, collectively, they really create major challenges to consumers maximizing their benefit. So, this disclosure really helps, in 

that respect. 

A second benefit is the time-saving to consumers by having a 

standardized, comparative document that they can utilize. Time is 

money in the healthcare selection business, just as everywhere else 

in life. No one would characterize collecting and comparing insurance plans as a leisure activity. It’s work. It’s no fun. So, for timepressed Americans, who have responsibilities to parents and families, communities, children, in addition to the hours they spend at 

work, anything that we can do, in public policy, to free up leisure 

time has real economic value. 

This information is also going to help value-conscious consumers 

get the most bang for their buck. And smarter, more informed consumers means that insurance companies will waste less time and 

money designing and promoting products that don’t maximize values for consumers—the dollar—the value that they get for their 

dollar. 

Consumers who also understand their plans better are in a better position to take advantage of coverage that’s offered, so they 

can access healthcare services when they need them, which is going 

to lead to better health. Especially for preventative care, we’re talking about long-term savings for the American economy. 

Finally, a straightforward, standardized disclosure creates incentives for insurance companies to compete on price, benefits, and 

quality. So, by helping to improve consumer decisionmaking, the 

SBC creates a virtuous cycle, where consumers can make better 

choices between plans that are already on offer, but also creates inVerDate Nov 24 2008 06:08 Jun 27, 2014 Jkt 075679 PO 00000 Frm 00017 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\88434.TXT JACKIE
14 

centives for insurance companies to provide better plans and better 

choices in the future. 

So, consumer disclosure has proven extremely important in a variety of different marketplaces. It’s hard to imagine going to the 

grocery store and not being able to look at nutrition labels or buy 

a new car without having access to fuel economy labels. And health 

insurance, if anything, is a context that screams out for this kind 

of disclosure requirement. It’s exactly the kind of context where 

consumers have the most to benefit. 

Now, one of the most promising features of the rule that I saw, 

the SBC rule, as it exists, is that the agencies have committed to 

continue testing and making the rule even better. There are many 

areas where improvement is certainly possible. Expansion of the 

coverage examples is one area that maybe we’ll have an opportunity to discuss some more. 

But, in general, the rule does a very good job. It’s a very first— 

good first cut, and it puts consumers in a much better position than 

they have been in the past. 

[The prepared statement of Mr. Livermore follows:] 

PREPARED STATEMENT OF MICHAEL A. LIVERMORE, EXECUTIVE DIRECTOR, 

INSTITUTE FOR POLICY INTEGRITY, NEW YORK UNIVERSITY SCHOOL OF LAW

Mr. Chairman, thank you for the opportunity to testify before the Senate Committee on Commerce, Science, and Transportation today. My name is Michael Livermore and I am the Executive Director of the Institute for Policy Integrity at New 

York University School of Law. Policy Integrity is a non-partisan think tank dedicated to improving the quality of government decisionmaking through advocacy and 

scholarship in the fields of administrative law, economics, and public policy. 

The focus of my testimony is section 2715 of the Public Health Service Act, as 

added by the Patient Protection and Affordable Care Act, which requires uniform 

disclosure standards in providing benefits and coverage explanation to insurance applicants and enrollees. On February 14, 2012, a Final Rule was published by the 

Department of Health and Human Services, Department of the Treasury, and Department of Labor on Summary of Benefits and Coverage and Uniform Glossary 

(the SBC Rule) pursuant to this section. 

My testimony will make three basic points: 

Analysis conducted by the agencies prior to promulgation of the final rule shows 

that the benefits of section 2715, which included both improved consumer decisionmaking and improved health outcomes, will outweigh the costs, likely by a 

substantial margin. 

The substantive requirements of section 2715 and the SBC Rule accord with 

available evidence on consumer decisionmaking. In particular, the use of examples and the standardization of disclosure of benefits and coverage information 

will empower consumers to process information about plan alternatives to make 

more informed choices that better match their risk preference and long-term 

needs. 

The agencies have committed to continually testing, updating, and improving 

the SBC Rule, which will lead to increased performance and greater net benefits 

over time. Because many regulatory contexts involve conditions of uncertainty, 

the agencies have adopted an appropriate policy of moving forward with welljustified measures while continually revising and improving their regulatory requirements in the face of new information. 

The Benefits of Section 2715 and the SCB Rule Outweigh the Costs 

In their final rule implementing the requirements of section 2715, the agencies 

find that benefits are likely to outweigh costs. Annual compliance costs are estimated at $73 million. Given the massive size of the private health insurance market 

15 

1For general background on the role of cost-benefit analysis in administrative decisionmaking, 

see RICHARD L. REVESZ & MICHAEL A. LIVERMORE, RETAKING RATIONALITY: HOW COST-BENEFIT

ANALYSIS CAN BETTER PROTECT THE ENVIRONMENT AND OUR HEALTH (2008). This testimony is 

based on comments submitted by the Institute for Policy Integrity to the Department of Health 

and Human Services on July 6, 2011, http://policyintegrity.org/documents/IPIlLetterltol HHSl7.6l.11l.pdf. 2 77 Fed. Reg. 8682. 

3For an overview of recent scholarship concerning how government provision of information 

and improved ‘‘choice architecture’’ can facilitate better consumer decisionmaking, see RICHARD

H. THALER & CASS R. SUNSTEIN, NUDGE: IMPROVING DECISIONS ABOUT HEALTH, WEALTH, AND

HAPPINESS (2008). 4 77 Fed. Reg. 8682. 

5 77 Fed. Reg. 8681. 

6 77 Fed. Reg. 8682–83. 

7 77 Fed. Reg. 8683. 

8Of course, some preventative care interventions are more justified on cost-effectiveness 

grounds than others. See generally, Joshua T. Cohen, Does Preventive Care Save Money? Health 

Economics and the Presidential Candidates, 358 N. ENGL. J. MED. 881 (2008). 

in the United States, even a small improvement in consumer decisionmaking would 

overwhelm this relatively modest cost.1

The agencies cite several ways in which the rule will benefit consumers. First, improved access to information will allow consumers to ‘‘make better coverage decisions, which more closely match their preferences with respect to benefit design, 

level of financial protection, and cost.’’ 2 Improved consumption decisions will result 

in increased consumer satisfaction. 

The factual premise underlying this conclusion is that, without the rulemaking, 

consumers would not have access to, and process, an optimal amount of information 

when making health insurance decisions. There are good reasons to believe that this 

is correct. Choosing a health insurance plan is a complex decision, involving a wide 

range of probabilistic judgments on the part of consumers. This decision is made infrequently, and any feedback that consumers receive is attenuated by time and intervening circumstances. Firms will not have the incentive to present consumers 

with the socially optimal amount of information, in the form most easily processed, 

if consumers cannot readily predict their satisfaction levels based on product 

choices. Health insurance is, therefore, a context that is very well suited to a government disclosure requirement meant to improve consumer decisionmaking.3

Second, the rule is expected to ‘‘benefit consumers by reducing the time they 

spend searching for and compiling health plan and coverage information.’’ 4 Search 

time reduction can be a substantial savings and can be as valuable as pecuniary 

savings or improved health. Collecting information about health insurance plans is 

not a leisure activity; it is a form of work that carries disutility: hourly wages serve 

as a reasonable proxy for the rate at which individuals are willing to trade leisure 

for monetary compensation. The agencies cite research by the National Bureau of 

Economic Research that shows that making health insurance decisions, in particular, involves substantial search costs.5 This type of information gathering activity is also redundant with similar efforts undertaken across the economy by other 

individuals: if a trustworthy agent can act on behalf of the American public to compile relevant information in an easily accessible format, it represents a real economic savings. 

Third, the rule is anticipated to ‘‘result[] in cost-savings for some value-conscious 

consumers who today pay higher premiums because of imperfect information about 

benefits.’’ 6 This consumer benefit could be interpreted as a transfer from insurance 

companies to their consumers, rather than a pure efficiency gain. However, the existence of these types of rents creates incentives for firms to compete, in an economically unproductive way, to capture them, at the very least through advertising. 

Equally problematic, from an efficiency perspective, would be attempts by insurance 

companies to increase these rents through product design, which not only involves 

the inefficient (from a social perspective) allocation of firm resources, but results in 

a marketplace with distorted consumer choices. 

Finally, by ‘‘making it easier for consumers to understand the key features of 

their coverage,’’ the rule is anticipated to ‘‘enhance consumers’ ability to use their 

coverage.’’ 7 If consumers are better able to access health care services when they 

need them, it can lead to substantial health benefits, which has obvious economic 

value. Increased utilization of preventative health care services, in particular, can 

lead to social value if long-term chronic or catastrophic health outcomes can be 

avoided through early medical intervention.8

An additional, longer-term benefit of the rule, which is alluded to in the final rulemaking document, is that ‘‘health insurance issuers and employers may face less 

pressure to compete on price, benefits, and quality’’ if consumers lack appropriate 

16 

9 77 Fed. Reg. 8681. 

10 77 Fed. Reg. 8680. 11 58 Fed. Reg. 51736. 12 76 Fed. Reg. 3822. 13 Christine Jolls et al., A Behavioral Approach to Law and Economics, in CASS R. SUNSTEIN, BEHAVIORAL LAW AND ECONOMICS 13, 42 (Cass R. Sunstein ed., 2000). 14See e.g., Judith H. Hibbard, et al., Informing Consumer Decisions in Health Care: Implications from Decision-Making Research, 75 MILBANK Q. 395 (1997). 15 Cass R. Sunstein, Introduction, BEHAVIORAL LAW AND ECONOMICS 1, 1. 16 Hunt Allocott, Beliefs and Consumer Choice (MIT Working Paper, Nov. 2010), available at 

http://web.mit.edu/allcott/www/papers.html. 17Memorandum from Cass R. Sunstein, Administrator, Office of Information and Regulatory 

Affairs to Heads of Exec. Dep’ts and Agencies 4 (June 18, 2010). 18 Id. at 3. 

information.9 The consequence is a marketplace with a distorted set of product 

choices. By helping improve consumer decisionmaking, the rule can facilitate a virtuous circle in which consumer satisfaction is increased not only through better 

choice between existing products, but also through the creation, and offer for sale, 

of insurance products that better conform to consumer preferences. 

While the agencies provide a qualitative discussion of the benefits of the rulemaking, there is no quantitative estimate of regulatory benefits. Since President 

Reagan issued Executive Order 12291 in 1981, there has been a stated policy within 

the Executive of quantifying and monetizing regulatory costs and benefits, and the 

agencies recognize that the current Executive Order governing regulatory review 

‘‘emphasizes the importance of quantifying both costs and benefits.’’ 10 The types of 

benefits anticipated by the rule, including increased consumer satisfaction, improved 

health outcomes, and time savings are all, in principle, amenable to quantification 

and monetization. 

Although ongoing analysis of the effects of the rulemaking, including quantification and monetization of regulatory costs and benefits, is appropriate (as discussed 

below), the agencies followed a prudent path by moving forward with this regulatory 

action and avoiding unnecessary delay in the service of additional ex-ante analysis. 

Executive Order 12866 (still operative) encourages agencies to utilize ‘‘alternatives 

to direct regulation, including . . . providing information upon which choices can be 

made by the public,’’ 11 and Executive Order 13563 encourages agencies to ‘‘consider 

regulatory approaches that reduce burdens and maintain flexibility and freedom of 

choice for the public . . . includ[ing] disclosure requirements as well as provision 

of information to the public in a form that is clear and intelligible.’’ 12 The difficulty 

of predicting the effects of disclosure requirements ex-ante, however, sometimes 

interferes with the ability to quantify and monetize benefits in advance. Nevertheless, the benefits of disclosure requirements will often exceed their costs, because 

they are among the least restrictive forms of regulation. Furthermore, the costs of 

alternative disclosure requirements are likely to be similar: the important question 

is often not whether some form of disclosure is economically justified, but how to 

design the disclosure to maximize its net benefits. In these cases, the inquiry associated with cost-benefit analysis collapses into a technical exercise of how best to design the disclosure to improve consumer decisionmaking. 

The Rule Is Based on the Available Evidence Concerning Consumer 

Decisionmaking 

Extensive research in the fields of behavioral economics, psychology, and cognition 

show that it is not enough to simply ‘‘provide information.’’ 13 Consumers are known 

to have cognitive biases that affect their decisionmaking. Academic research on how 

individuals absorb and process information can inform the design of government 

policy to deliver the best possible results for the American Public.14

Professor Cass Sunstein, until recently the administrator of the Office of Information and Regulatory Affairs, has argued that even seemingly small alterations in 

presentation format can ‘‘highlight different aspects of options and suggest alternative heuristics’’ that have demonstrable effects on people’s behavior.15 Interventions taking advantage of these effects can be strikingly cost-benefit justified, since 

these psychological cues typically cost very little.16

OIRA has issued guidance on the use of disclosure to achieve regulatory ends.17

According to this guidance document, summary disclosure should be concise and 

straightforward to ‘‘highlight the most relevant information’’ and to ‘‘increase the 

likelihood that people will see it, understand it, and act in accordance with what 

they have learned.’’ 18 Disclosure should avoid technical language or extraneous information that may be inaccessible to the average reader. OIRA has cautioned that 

‘‘[u]nduly complex and detailed disclosure requirements may fail to inform conVerDate Nov 24 2008 06:08 Jun 27, 2014 Jkt 075679 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\88434.TXT JACKIE
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19Office of Information and Regulatory Affairs, 2010 Report to Congress on the Benefits and 

Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities, Appendix D: Disclosure and Simplification as Regulatory Tools 55 (2010). 20 § 2715(b)(2). 21Stephen A. Somers & Roopa Mahadevan, Health Literacy Implications of the Affordable 

Care Act 4, Center for Health Care Strategies, Inc., November 2010 (report commissioned by 

the National Institute of Medicine). 22 Center for Health Care Strategies, Inc., Health Literacy Implications of the Affordable Care 

Act 1, Missouri Foundation for Health’s Health Summit, Dec. 9, 2010, available at 

www.mffh.org/mm/files/SummitlMahadevanlhandout.pdf. 23 Id. 24 77 Fed. Reg. 8670. 25 77 Fed. Reg. 8674. 26See generally David A. Armor and Shelley E. Taylor, When Predictions Fail: The Dilemma 

of Unrealistic Optimism, in HEURISTICS AND BIASES: THE PSYCHOLOGY OF INTUITIVE JUDGMENT

(Dale Griffin and Daniel Kahneman eds., 2002). 27Michael Greenstone, Toward a Culture of Persistent Regulatory Experimentation and Evaluation, in NEW PERSPECTIVES ON REGULATION 111, 113 (David Moss and John Cisternino eds., 

2009). 28OIRA 2010 REPORT, supra note 19 at 101. 29 § 2715(c). 

sumers’’ because the disclosure ‘‘may not be read at all, and if it is read, it may 

not have an effect on behavior’’ because it is poorly understood.19

Presenting information in this manner coincides with the statutory mandate to 

account for linguistic and educational barriers to health and literacy.20 There are 

large variations in the ‘‘degree to which individuals have the capacity to obtain, 

process and understand basic health information.’’ 21 The Center for Health Care 

Strategies (CHCS) notes that ‘‘[w]hile low health literacy is found across all demographic groups, it disproportionately affects non-white racial and ethnic groups; the 

elderly; individuals with lower socioeconomic status and education; people with 

physical and mental disabilities; those with low English proficiency (LEP); and nonnative speakers of English.’’ 22 Indeed, low health literacy has been estimated to cost 

the U.S. economy between $106 billion and $236 billion annually. 23 Presenting information in a format that is easy to understand and to act on will allow a wide 

range of consumers to make more informed insurance choices. If the SBC Rule prevents even a small portion of the costs of low health literacy, it will be extremely 

well justified in economic terms. 

The SBC Rule was developed after a consultation process facilitated by a working 

group convened by the National Association of Insurance Commissioners that was 

composed of ‘‘a diverse group of stakeholders’’ and that ‘‘considered the results of 

various consumer testing sponsored by both insurance industry and consumer associations.’’ 24 The rule references two focus group exercises, one conducted by America’s Health Insurance Plans (a trade association) and the other conducted by Consumers Union.25 This testing supports the agencies’ conclusion that the format of 

the disclosure information helped consumers make informed choices about their options. 

In addition to the standardized, simplified language used to disclose plan features, 

two benefits scenarios are included to illustrate plan differences. The common scenarios partially utilize the availability heuristic—people’s tendency to assess risk 

depending on how readily examples come to mind. The availability heuristic can, in 

this context, help counter detrimental overconfidence. Consumers tend to be overoptimistic regarding risks to life and health, which can lead them to select underinclusive insurance coverage. 26 If people can easily think of relevant examples, they 

are far more likely to be concerned about those risks than if they cannot. Presenting 

common scenarios can encourage a realistic weighing of these scenarios in insurance 

purchasing. 

The Agencies Plan to Continue Testing and Improving its Disclosure 

Format 

To maximize the benefits of the regulatory system, it is important to continually 

monitor and update regulatory programs in light of new information.27 OIRA has 

found that this may be particularly important ‘‘[w]ith respect to summary disclosure 

[because] agencies will often be able to learn more over time.’’ 28

Section 2715 requires a continual process ‘‘review[ing] and update[ing]’’ 29 the effects of the SBC Rule. The agencies have committed to measuring the effect of disclosure on behavior through ongoing empirical analysis and to modifying the standards accordingly. In particular, the agencies are ‘‘taking a phased approach to implementing the coverage examples and intend to consider additional feedback from conVerDate Nov 24 2008 06:08 Jun 27, 2014 Jkt 075679 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\88434.TXT JACKIE
18 

30 77 Fed. Reg. 8674. 31 Id. 32See Sunstein, supra note 17 at 6. 33OIRA 2010 REPORT, supra note 19 at 56. 34Sunstein, supra note 17 at 5. 

sumer testing in the future.’’ 30 Revisions should be made ‘‘to the extent. . .the evidence warrants,’’ 31 and it should be recognized that empirical findings may support 

retention of the agencies’ initial design choice. 

Best practices require testing of potential disclosure formats,32 and as OIRA guidance documents make clear, testing should be a major component of any label evaluation process.33 The agencies now have the opportunity to test the SBC design in 

market conditions. Questions that should be asked include ‘‘whether users are 

aware of the disclosure, whether they understand the disclosure, whether they remember the relevant information when they need it, whether they have changed 

their behavior because of the disclosure, and, if so, how.’’ 34

Conclusion 

The SBC Rule is an important move towards increased transparency in the health 

insurance market, with the ultimate aim of improving consumer welfare via informed consumer decisionmaking. Given the relatively low costs of implementing 

the rule (compared to the size of the market and potential benefits), a primary focus 

should continue to be testing and improving the design of summary disclosure and 

labeling to maximize the benefits of disclosing information. Consumers must be able 

to select insurance policies that better match their preferences and unique health 

needs if consumer satisfaction and improved health outcomes are to be realized. The 

current rule is likely to yield substantial net benefits, and the costs of delay associated with further pre-implementation analysis is not justified: the agencies have appropriately chosen to move forward with a rulemaking now, while committing themselves to further ex-post study. The SBC template is grounded in sound behavioral, 

economic, and psychological understandings of how consumers make choices, and 

further research, and refinement, will continue to increase the utility of this important consumer protection measure. 

The CHAIRMAN. That’s it? 

Mr. LIVERMORE. Yup. 

The CHAIRMAN. OK. 

Mr. LIVERMORE. Thank you. 

The CHAIRMAN. All right. 

Peggy O’Kane, President, National Committee for Quality Assurance. 

STATEMENT OF MARGARET O’KANE, PRESIDENT, 

NATIONAL COMMITTEE FOR QUALITY ASSURANCE 

Ms. O’KANE. Thank you, Mr. Chairman, and thank you, Ranking 

Member Thune. And I’m very pleased to be here today for this important hearing on increasing transparency in healthcare. 

My name is Margaret O’Kane, and I’m President of the National 

Committee for Quality Assurance. We’re an independent nonprofit 

organization founded in 1990, to improve quality and value in 

healthcare through measurement, transparency, and accountability; so it’s right there in our founding reason for being. We accredit health plans, and we measure the quality of both the care 

that they preside over and the members’ experience. 

Our nation is making great strides in using transparency to improve quality and value in healthcare. And, of course, value means 

quality—the amount of quality or health that you get for your 

healthcare dollar. This includes public reporting of standardized 

performance measures, performance-based accreditation, and Affordable Care Act innovations, like the standardized Summary of 

19 

Benefits and Coverage, which the other two have already spoken 

about so eloquently. 

The ACA provision linking Medicare Advantage bonus payments 

to performance has been especially effective, and recent research 

shows, beneficiaries are now more likely to pick high-value plans. 

In fact, we’ve seen Medicare Advantage plans’ quality results increasing significantly since the ACA linked bonus payments to performance scores. 

The ACA will further harness transparency to promote quality 

and value through State health insurance exchanges. Exchanges 

represent a unique opportunity to engage consumers in using 

transparent quality and cost data together to find the best value. 

And, of course, many consumers haven’t had a choice of plans for 

a long time, so this is actually a real marketplace that the exchange will create. 

Value means more than just low premiums, which may reflect 

low quality or high cost-sharing barriers to care. Value is the quality of the health and well-being you get for the total cost you pay, 

which includes premiums, copays, and deductibles. 

Helping consumers find the best value requires designing exchanges in ways that make our cost and quality information easy 

to use. If done effectively, this will also cause plans to compete, 

based on value, not just cost, and further drive consumer engagement and market performance. 

The complexity of cost and quality information can quickly overwhelm consumers. So, how exchanges present the data matters a 

great deal. Groups like Consumer Reports and behavioral economists, like Mr. Livermore’s center, are uniquely skilled in developing ways to communicate complex information effectively to consumers. Applying lessons from the science of behavioral economics 

and choice architecture can also help consumers to get the best 

value plans. 

In addition, the Federal Government is developing a quality rating system for exchanges, and we have high hopes that it will help 

consumers make more informed purchasing decisions. Up until 

now, large employers, the Federal Government, and many State 

Medicaid programs have been important users of quality information, and have pushed for and rewarded quality results. However, 

public reporting to consumers has had minimal impact. Exchanges 

have enormous potential to change that. We are particularly encouraged by our research that shows consumers, especially the uninsured who will be shopping for exchange coverage, want cost and 

quality information when they’re choosing plans. 

Given the many challenges in establishing exchanges, few states 

are yet actively working to use transparency to engage patients on 

cost and quality, and HHS has yet to issue rules on ACA activities 

to improve quality. Once exchanges are functioning, however, Congress should closely monitor Federal and State efforts, and require 

HHS to report on them, to ensure that this important opportunity 

to drive a value agenda is not lost. 

Despite the progress we are making, there are still important 

gaps in transparency. For example, we’re not able to compare quality in fee-for-service Medicare with Medicare Advantage plans, as 

20 

MEDPAC has recommended. We need transparency on the prices 

of healthcare services that drives costs. 

I brought my Time magazine. I don’t know how many—— 

The CHAIRMAN. Yes. 

Ms. O’KANE.—of you have seen. This guy’s been on every TV 

show that I watch. 

The CHAIRMAN. It’s must-reading, isn’t it? 

Ms. O’KANE. It really is. And I think it’s very salient to consumers. Consumers are really shocked when they read this. So, I 

think it’s kind of a golden opportunity to educate people more 

about what healthcare costs, and help them become part of driving 

the solution. 

We need to make transparency and consumer choice part of a 

broader value strategy that includes payment and delivery system 

reforms. We also must do more to understand how transparency 

can better engage consumers in taking a more active role in their 

own health. 

But, at least we’re heading in the right direction. And I think 

transparency, to me, is foundational to everything we do in public 

policy. 

So, thank you so much for the opportunity to be here today. 

[The prepared statement of Ms. O’Kane follows:] 

PREPARED STATEMENT OF MARGARET O’KANE, PRESIDENT, 

NATIONAL COMMITTEE FOR QUALITY ASSURANCE

Chairman Rockefeller, Ranking Member Thune, distinguished committee members, thank you for inviting me to this important hearing on increasing transparency in health care. I am Margaret O’Kane, President of the National Committee 

for Quality Assurance. NCQA is an independent, nonprofit organization founded in 

1990 to improve quality and value in health care through measurement, transparency and accountability. 

Our nation is making great strides in using transparency to improve quality and 

value in health care through public reporting of standardized performance measures, performance-based accreditation and Affordable Care Act (ACA) innovations 

like the standardized Summary of Benefits and Coverage. The ACA provision linking Medicare Advantage bonus payments to performance has been especially effective and recent research shows beneficiaries are more likely to pick high-performing 

plans. In fact, we have seen Medicare Advantage plans’ quality results increasing 

significantly since the ACA linked bonus payments to performance scores. 

The ACA will further harness transparency to promote quality and value through 

state health insurance Exchanges. Exchanges represent a unique opportunity to engage consumers in using transparent quality and cost data together to find the best 

value. Value means more than low premiums, which may reflect low quality or high 

cost-sharing barriers to care. Value is the quality of the health and well-being you 

get for the total cost you pay, which includes premiums, copays and deductibles. 

Helping consumers find the best value requires designing Exchanges in ways that 

promote competition among plans based on value, rather than premiums alone. The 

ACA requires a ‘quality rating system’ for Exchange plans that once deployed should 

be a strong step towards helping consumers find high-value plans. In addition, 

building Exchanges to promote value requires Web portals and other outreach materials that make cost and quality information easy to find and use. The complexity 

of the information can quickly overwhelm consumers, so how Exchanges present 

data matters a great deal. Groups like Consumer Reports are uniquely skilled in 

developing approaches to communicate this information effectively to consumers. 

Applying lessons from the science of behavioral economics and ‘‘choice architecture’’ 

can also help guide consumers to plans offering the best value. 

Up until now, large employers, the Federal government and many state Medicaid 

programs have been important users of quality information and have pushed for 

quality results. However, public reporting of cost and quality information to consumers has, thus far, had minimal impact. Exchanges have enormous potential to 

change that. We are particularly encouraged by our research finding that conVerDate Nov 24 2008 06:08 Jun 27, 2014 Jkt 075679 PO 00000 Frm 00024 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\88434.TXT JACKIE
21 

1MedPAC Report to Congress, March 2010: http://medpac.gov/documents/Mar10lEntire 

Report.pdf. 2 HEDIS® is a registered trademark of NCQA. 3 CAHPS® is a registered trademark of the Agency for Healthcare Research and Quality 

(AHRQ), which oversees the survey. 4http://www.ncqa.org/Portals/0/State%20of%20Health%20Care/2012/SOHC%20Report%20 

Web.pdf 

sumers—especially the uninsured, who will be shopping for Exchange coverage— 

want cost and quality information when choosing plans and providers. 

Given the many challenges in establishing Exchanges, few states are currently 

working on all the potential strategies to use transparency to engage consumers on 

cost and quality. Once the Exchanges get past the immediate job of getting enrollment systems into place, however, Congress should encourage both Federal and 

state Exchanges to support innovation and consumer engagement using the many 

potential strategies available. Congress should also consider having HHS report on 

Exchange progress on transparency. 

Despite the progress we are making, there are still important gaps in transparency. For example, we are not able to effectively compare quality in Medicare 

fee-for-service with Medicare Advantage plans, something MedPAC has recommended to change.1 We need much greater transparency on the prices of health 

care services that drive costs. We must make transparency and consumer choice 

part of a broader value strategy that includes payment and delivery system reforms. 

We also must do more to understand how to use transparency to better engage consumers in taking a more active role in their own health and health care. 

Public Reporting of Standardized Measurement: There is now widespread use of 

standardized, audited performance measures like the Healthcare Effectiveness Data 

and Information Set (HEDIS®)2 and the Consumer Assessment of Healthcare Providers and Systems Survey (CAHPS®).3 For 20 years, we have publicly reported results from HEDIS, the most widely used and respected performance measurement 

set in health care. HEDIS includes more than 70 measures of proven, effective 

care—and of waste that increases costs and harms patients. CAHPS measures patient experience, such as whether patients get care when they need it; whether physicians listen to patients and explain things in a way they can understand; and 

whether customer service is helpful and respectful. 

More than 125 million enrollees (2 of every 5 Americans) are enrolled in a health 

plan that submits audited clinical quality and patient customer experience data to 

NCQA. NCQA translates that data into health plan ‘‘report cards’’ that everyone can 

see for free on the www.ncqa.org website. We also use the data to publish plan 

rankings in Consumer Reports magazine and to develop our annual State of Health 

Care Quality Report.4 Measuring and publicly reporting results are essential for 

driving, and holding plans accountable for, needed improvement in quality and cost. 

The result is dramatic improvement over time in areas like optimal care for diabetes 

and hypertension—saving both lives and money. 


227OKANE1.eps
22 

5 Howell, Reid, Shrank, Association Between Medicare Advantage Plan Star Ratings and Enrollment, Journal of the American Medical Association, January 2013 http://jama.jamanet 

work.com/article.aspx?articleid=1557733 6 Choice Architecture: Design Decisions that Affect Consumers’ Health Plan Choices, 

Kleimann Communication Group and Consumers Union, July 2012, http://www.con 

sumersunion.org/pdf/ChoicelArchitecturelReport.pdf 7 Building State Exchanges To Get Better Value, National Committee for Quality Assurance, 

2012, http://www.ncqa.org/PublicPolicy/Exchanges.aspx 

Estimated Savings if All Plans Performed as Well as the Top 10% 

MEASURE AVOIDABLE HOSPITAL COSTS 

Breast Cancer Screening $329 million–$332 million 

Cholesterol Management $935 million–$2.1 billion 

Controlling High Blood Pressure $1.4 million–$2.5 billion 

Diabetes Care—HbA1c Control $294 million–$614 million 

Osteoporosis Management $12.4 million–$32 million 

Persistent Beta-Blocker Treatment $5.5 million–$30 million 

Smoking Cessation $831 million–$900 million 

TOTAL $2.4 billion–$6.5 billion 

Performance-Based Accreditation: HEDIS and CAHPS are essential components of 

NCQA’s performance-based Health Plan Accreditation program that measures and 

publicly reports on the quality of care and patient experience that plans deliver. 

More than 136 million Americans are in NCQA-Accredited plans, a 30 percent increase since 2009. Most state Medicaid programs also require or recognize NCQA 

Accreditation, as does the Medicare Advantage program and the Federal Employees 

Health Benefit Program. The ACA specifically requires all Exchange plans to have 

accreditation, based on the NCQA model. 

Transparency & the Affordable Care Act 

The ACA includes several important transparency advances that will promote 

quality and value. The standardized Summary of Benefits and Coverage is already 

making it easier for consumers to compare plan benefits and costs to identify affordable coverage, a critical first step toward quality care. The ACA further promotes 

transparency through Medicare Advantage performance-based bonuses, state Exchange accreditation and public reporting requirements. 

Medicare Advantage Star Ratings: The ACA requires using transparency to drive 

Medicare Advantage improvements through bonuses to plans based on a publicly reported 5-Star Rating system of clinical quality and patient experience. Most states 

also now use pay-for-performance systems to drive improvements in Medicaid. In 

just the two first years of the Medicare Advantage bonus system, more than 25 percent of plans have improved their HEDIS scores and the number of highest-rated 

5-Star plans has increased from 3 to 11. Medicare posts Star Ratings on the 

www.medicare.gov plan finder to help beneficiaries make informed enrollment decisions. The plan finder also flags consistently poor performing plans and discourages 

beneficiaries from enrolling in them. 

Recent research shows that Medicare beneficiaries are more likely to pick plans 

with higher star ratings. The study found that a one star increase was linked to 

a 9.5 percent greater likelihood of enrollment for new beneficiaries and a 4.5 percent 

greater likelihood for those switching plans.5 In short, public reporting is helping 

consumers find high value plans, which should lead to better care for beneficiaries 

and will further encourage those plans to improve quality and lower costs. 

We believe Star Ratings could have more impact if the plan finder listed highest 

quality plans first instead of listing plans with the lowest estimated beneficiary 

costs first, as it does now. Research shows ‘‘what consumers see first will frame 

their understanding of the rest of information—in effect, creating a mental model 

for them . . . (that) influences the consumer’s final decision.’’ 6

Building State Health Insurance Exchanges to Promote Value: One of the ACA’s 

most important transparency advances begins this fall, when health insurance Exchanges open for enrollment. Exchanges have great potential to realign market 

forces if designed to promote competition among plans based on value.7 This marks 

substantial change from the current insurance market, which encourages competiVerDate Nov 24 2008 06:08 Jun 27, 2014 Jkt 075679 PO 00000 Frm 00026 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\88434.TXT JACKIE
23 

8 Value Judgment: Helping Health care Consumers Use Quality and Cost Information, http:// 

www.ncqa.org/Portals/0/Public%20Policy/CHCF%20ValueJudgmentQualityCostInformation 

.pdf 

tion based on low premiums alone that may reflect poor quality or high cost-sharing 

barriers to care. 

Importantly, the law also requires the Secretary to develop a ‘Quality Rating System’ for Exchange plans. NCQA is supporting CMS in the work on this new rating 

system—under the leadership of Booz Allen Hamilton and in collaboration with Pacific Business Group on Health. We have high hopes that it will be a critical tool 

for Exchanges to help consumers make more informed purchasing decisions. 

Health plans have many tools they can use to promote quality. 

• They can use ‘‘value-based insurance design,’’ or ‘‘smart cost-sharing’’ that reduces barriers to prevention and good management of chronic conditions, averting costly complications. 

• They can develop networks and encourage enrollees to use high-quality providers. 

• They can remind enrollees and providers about important needs like routine 

screening and prescription refills. 

• They can promote shared decision making to encourage patients and providers 

to make informed treatment choices together, based on objective, current 

science on the pros and cons of various options. 

• They can promote quality by supporting and encouraging enrollees to get care 

in recognized PCMHs and ACOs, delivery system reforms focused on improving 

cost and quality. 

Today, cost and quality vary widely among health plans because people rarely 

help understanding plan value. The problem is compounded because people often believe that more services automatically mean better care (rather than waste and the 

potential for harm), or that more expensive care is always more effective. This is 

not true. High quality care is not always the most expensive care for a number of 

reasons. Expenses may be driven up by unnecessary utilization or by high prices. 

Because higher costs do not necessarily lead to higher quality, it is critical to educate consumers on the concept of value and to encourage them to consider both cost 

and quality data when selecting plans and providers. Informed consumers can help 

elevate the importance of value in health care by shopping for and choosing plans 

and providers with the highest quality and lowest costs. 

Consumers Want Transparent Cost & Quality Information: NCQA research with 

the California Healthcare Foundation found that with help, consumers quickly understand that quality does not necessarily cost more—and that it can cost less.8

Consumers generally need help to understand this, as it is not intuitive for most 

people. However, once consumers do understand it, they are greatly interested in 

using cost and quality information together to help them select a health plan or 

physician organization. We also found that the people most interested in this information are the uninsured who will be accessing health care coverage through the 

Exchanges. 

Exchanges can advance transparency on cost and quality by: 

• Helping Exchange shoppers understand value. 

• Helping Exchange shoppers find high-value plans. 

There are additional important principles Exchanges should follow to help consumers make the most of transparent cost and quality information. Exchanges need 

to: 

• Present information to consumers as simply as possible. Studies and experience 

shows that too much information can bog down the enrollment process or prevent someone from choosing a plan. 

• Build from existing measures and data collection systems to ensure straightforward and efficient implementation. This will help align efforts to improve 

quality and provide information on performance to consumers and regulators, 

limiting the burden on states, plans and the federal government. 

• Limit data collection to data that has a clear use; there is considerable cost for 

reporting unused data. 

• Add more information, new measures and quality improvement and assurance 

strategies over time. Give stakeholders the opportunity to comment on direction, and give plans and states the opportunity to implement system changes. 

24 

9 Healthcare Spending and Preventive Care in High-Deductible and Consumer-Directed Health 

Plans, Buntin et al, American Journal of Managed Care, March 2011. 10 Nearly Half of Families In High-Deductible Health Plans Whose Members Have Chronic 

Conditions Face Substantial Financial Burden, Galbraith et al, Health Affairs, May 2011. 11http://www.aarp.org/content/dam/aarp/health/medicarelinsurance/2011-07/2011-cro 

nin-report-final.pdf 

Helping Exchange Shoppers Understand Value: One of the most important things 

Exchanges can do to promote value is help shoppers understand the need to look 

beyond premiums to total out-of-pocket costs and quality ratings. Many Exchange 

shoppers do not currently have insurance and may have low health literacy and 

scant knowledge about total coverage costs or how to evaluate plan quality. Exchanges that address this information gap will help people find plans that produce 

better outcomes at lower costs. 

Exchange shoppers need to understand copays and deductibles in addition to premiums. In the Massachusetts health Exchange, for example, many enrollees chose 

plans based on low premiums alone, only to discover when seeking care that they 

must also pay deductibles and copays. Cost sharing may be significant in the lowerpremium Silver and Bronze plans that will attract many modest-income Exchange 

shoppers, but high cost sharing discourages people, especially those with modest incomes, from getting care.9 10 When cost sharing discourages use of necessary, costeffective care, the result can be expensive, preventable problems. The failure to treat 

preventable problems up front will continue to drive up health care costs and make 

coverage difficult to afford. 

Shoppers also are not likely to know that Exchange plans must report on measures of clinical quality (like the HEDIS measures) and on ‘‘experience of care’’ measures (like the CAHPS measures). Exchanges that help consumers understand how 

to use total cost and quality data will see more of them choosing high-value plans, 

and encourage insurers to compete on improving both cost and quality scores. That 

will maximize consumer-driven market forces to promote better value. 

Helping Exchange Shoppers Find Value: Once Exchange shoppers understand the 

importance of total cost and quality, the next step is making it easy for shoppers 

to find and use this information when they choose a health plan. Exchanges can accomplish this by using Web portals and report cards that employ choice architecture. 

Most shoppers will not know how to assess complex cost and quality data, even 

if they understand the importance of total cost and quality. Nor will they want to 

spend a lot of time evaluating plan choices. By structuring choices properly using 

choice architecture, shoppers will not need to understand every detail and still end 

up in high-value plans. 

Report Cards and Web Portals: Exchanges Web portals and other tools will help 

shoppers evaluate plans. How Exchanges craft these tools can have an enormous 

impact on whether shoppers choose high-value plans. 

Exchanges should ‘‘feature quality information as prominently as costs,’’ says Informed Patient Institute Executive Director Carol Cronin. Cronin analyzed 70 

health plan report cards for AARP and found that the most useful ones ‘‘roll up’’ 

quality measures into a single score that consumer can interpret ‘‘at a glance.’’ 11

They also offer more details for consumers who want to dig deeper. 

To ensure that Web portals and report cards promote value, Exchanges should: 

• Present easy-to-understand plan ratings that combine quality and cost rankings 

(e.g., through the to-be-developed Federal Quality Rating System). 

• Provide detailed (but easy to understand) plan ratings (e.g., how well plans help 

enrollees ‘‘Stay Healthy,’’ ‘‘Get Better’’ and ‘‘Live With Illness’’). 

• Make it easy to see which plans are better at providing high-quality care, like 

prevention and care management, so consumers can avoid care they do not 

want, like preventable hospital stays and surgeries. (This information is included in HEDIS data.) 

• Estimate total costs for care of common chronic conditions, like diabetes, and 

high-cost situations, like childbirth, so low premiums do not lure people into 

plans with high cost sharing. 

• Create tools to recommend high-value plans based on consumer preference (e.g., 

doctors they want to keep, plans that manage a specific chronic condition well). 

25 

12For more information on ratings and decision support, see ‘‘Exchange Quality Solutions: 

Ratings and Decision Support Tools.’’ http://www.ncqa.org/LinkClick.aspx?fileticket=RNqdqGjOnU%3D&tabid=61 13 Early Consumer Testing of the Coverage Facts Label: A New Way of Comparing Health Insurance http://www.consumersunion.org/health.html 14http://www.hsph.harvard.edu/faculty/katherine-baicker/ 

• Recommend high-value plans or automatically enroll people in high-value plans 

if they do not choose a plan on their own. Default enrollment is a powerful financial incentive for plans to improve their ratings.12

Choice Architecture: Marketers have long used choice architecture to influence 

shoppers, which is why candy bars and other impulse-purchase items are in checkout lanes. School cafeterias are now using choice architecture to promote healthier 

choices: making it easier to reach fruits and vegetables than French fries and desserts sells more fruits and vegetables, even though fries and desserts are still available. Exchanges that make high-value plans ‘‘easier to reach’’ will also see more 

shoppers choose high-value plans, even with other options available. 

Consumers Union’s Lynn Quincy says Exchange planners should ‘‘abandon the 

image of a careful shopper capable of weighing the myriad costs and benefits of 

their health insurance options.’’ Her research on how consumers make health plan 

choices shows they want value information, but need help finding it.13 Exchanges 

should provide shortcuts that make it easy to compare value and avoid jargon and 

complex math. 

Understanding how people make choices is critical when designing Web portals 

and report cards to promote value. The standard economic assumption that rational 

self-interest guides choice is often not the case, says Harvard School of Public 

Health professor, Katherine Baicker. Consumers instead ‘‘have fallible judgment, 

malleable preferences, make mistakes, and can be myopic or impatient.’’ 14

Choice architecture considers these realities in order to present information better, to ensure that information is meaningful and to make high-value options an 

easy choice. This is especially important for Exchanges that let all qualified plans 

participate. Baicker says presenting too many options can lead to ‘‘choice paralysis’’ 

that causes people to either give up or make choices based on bias or bad information. 

Conclusion: While we are making great strides in using transparency to improve 

quality and value in health care, we still have a long way to go. We must build on 

the substantial progress to date, including the recent advances with the standardized Summary of Benefits and Coverage and performance-based bonuses in Medicare Advantage. Transparency in delivery system reforms is crucial to their success; 

we must be vigilant in using transparency to its greatest potential. We must also 

work together to ensure that state health insurance Exchanges make the most of 

their potential for using market forces to promote better value. 

Transparency and consumer choice are tools that should be part of a multifaceted 

strategy that includes payment and delivery system reforms and greater emphasis 

on patient engagement in their own health and health care. 

Of course, success depends on thoughtful implementation, on tailoring to local 

preferences and on building strong stakeholder consensus for the best approach in 

each state and for each program. But the value of health care provided in the U.S. 

will not improve without employing the strategies discussed above. 

The CHAIRMAN. Thank you very much, Ms. O’Kane. 

And now, Neil Trautwein. We’re very happy that you’re here, sir. 

STATEMENT OF E. NEIL TRAUTWEIN, VICE PRESIDENT AND 

EMPLOYEE BENEFITS POLICY COUNSEL, NATIONAL RETAIL 

FEDERATION 

Mr. TRAUTWEIN. Thank you, Chairman Rockefeller, Ranking 

Member Thune, members of the Committee. I appreciate the opportunity to appear before you today. 

I’m a Vice President with the National Retail Federation, and 

I’m pleased to appear on behalf of NRF, which is the voice of all 

channels of retail distribution. 

Retail supports one out of every four jobs in the American economy. We support effective implementation of the Affordable Care 

26 

Act, despite our continued concerns on the law, itself. We’ve met, 

numerous times, with the administration on specific regulatory 

issues, and we have submitted written comments on key issues. We 

appreciate the administration’s attention to retail concerns. Many 

retail employees don’t fit neatly into full-time or part-time categories, and so, the—certainly, the flexibility issues are important. 

Our members are struggling to keep abreast of all the different 

requirements that are coming up to that 2014 deadline. This is 

where we really find the hard intersection between the promise of 

transparency and the burden that employers are carrying, in terms 

of coming up to speed on compliance on the Affordable Care Act. 

I fear there’s a danger of crowding out employer enthusiasm for 

movements toward greater focus on quality and cost consciousness 

in healthcare as a consequence of this. I hope not, because I think 

the initiatives that NCQA and others have taken in this area, 

which employers have long been involved in, are very important to 

driving lower cost, better quality healthcare. 

We think it’s important that we strengthen these efforts even in 

the midst of implementation of the ACA. It’s not going to be easy. 

We’re seeking to retrain people to seek out the quality options in 

healthcare. Sometimes less care, or more effective care, is better 

than more care. And that’s a tough lesson for a lot of people to 

learn. Unfortunately, people are very stubborn in our habits, and 

we don’t change quickly or easily. 

Transparency and awareness of better interests, quality and cost, 

both, are likely the best impetus to changing consumer behavior. 

Still, it’s not easy. We employers have conducted employee briefings, we’ve brought in outside experts, we’ve tried to explain the 

coverage, and we’ve really gone the extra mile. Many of us weren’t 

sure, on first impression, whether the Summary of Benefit and 

Coverage provision made sense as an addition to that, and was not 

just duplicative of the existing Summary Plan Description. Still, 

the SBC, with coverage examples and the uniform glossary, can be 

helpful tools for employers and employees toward employee education. 

Flexibility in the distribution of the SBC is important. Availability is one issue, comprehension is another issue. How do we entice employees to read the information we provide, we deliver in 

the SBC, or make available in other contexts? So, transparency is 

clearly important, but it’s not sufficient. 

Retailers and other employers are particularly concerned by one 

element of the SBC, and that is the penalties attached to the SBC 

for employers who willfully miss delivery of that document. It’s 

very important to get it out to consumers as part of their owner’s 

manual. It’s very important to post it where they can get to that 

when they need it. But, the particular penalties are causing concern in the employer communities. We encourage you to rethink 

this element of the SBC. 

We’ve received a lot of guidance on the ACA—as Ranking Member Thune indicated, almost 18,000 pages of regulations through 

this. Two significant regulations just came out last week on the essential health benefits and the insurance market reform. Both will 

add cost of coverage, perhaps even significantly to coverage. That’s 

a real problem, because people have to be able to afford the covVerDate Nov 24 2008 06:08 Jun 27, 2014 Jkt 075679 PO 00000 Frm 00030 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\88434.TXT JACKIE
27 

1Departments of Health and Human Services, Labor and Treasury. 

erage we offer. We’re working hard to help our members over this 

communication gap and to figure out how they manage to provide 

coverage. 

In sum, I ask you to continue to encourage greater transparency 

in healthcare. I think it’s a positive element to help drive betterquality and lower-cost care. At the same time, I urge you to be 

wary and cognizant of the regulatory burden that employers are laboring over as we meet the transition in 2014. Retailers and other 

employers should be, and can be, powerful advocates for positive 

change, but the ACA’s going to put some pressure on that ability 

and that willingness to move in that direction. We hope to work 

with you to help mitigate those effects, and hope to help improve 

the implementation of the ACA. 

Thank you, and I look forward to your questions. 

[The prepared statement of Mr. Trautwein follows:] 

PREPARED STATEMENT OF E. NEIL TRAUTWEIN, VICE PRESIDENT AND EMPLOYEE

BENEFITS POLICY COUNSEL, NATIONAL RETAIL FEDERATION

Chairman Rockefeller, Ranking Member Thune and honored members of the Committee, I thank you for the opportunity to appear before you today and to share our 

views regarding the Affordable Care Act (ACA), the need for greater transparency 

and the ACA’s Summary of Benefits and Coverage (SBC), Coverage Examples and 

Uniform Glossary provisions. My name is Neil Trautwein and I am a vice president 

and Employee Benefits Policy Counsel with the National Retail Federation (NRF). 

As the world’s largest retail trade association and the voice of retail worldwide, 

NRF represents retailers of all types and sizes, including chain restaurants and industry partners, from the United States and more than 45 countries abroad. Retailers operate more than 3.6 million U.S. establishments that support one in four U.S. 

jobs—42 million working Americans. Contributing $2.5 trillion to annual GDP, retail is a daily barometer for the Nation’s economy. NRF’s Retail Means Jobs cam- paign emphasizes the economic importance of retail and encourages policymakers to 

support a Jobs, Innovation and Consumer Value Agenda aimed at boosting economic 

growth and job creation. www.nrf.com 

NRF supports effective implementation of the Affordable Care Act, despite our 

continued concerns about the law itself. We remain greatly worried by the fast-approaching deadlines for key issues affecting coverage in every market, especially in 

light of the steady torrent of regulations from the Administration. Our nation cannot afford for the ACA to stumble out of the starting gate. We fear that as time 

diminishes between now and January 2014, a cascade of last minute regulations 

will create confusion and thus could encourage more employers to back out of coverage. 

NRF and ACA Implementation 

NRF has been closely engaged in the regulatory process ever since the ACA was 

signed into law. We have met numerous times with regulators and have submitted 

written comments on key concerns. We have assisted in submitting joint coalition 

comments as well. We have not been litigants against the ACA and also did not submit amicus comments in the ACA case before the Supreme Court. 

We credit the regulatory agencies 1 for working hard and fairly cooperatively to 

implement the ACA, a difficult task by any measure. The Administration has been 

properly solicitous of the greater retail industry, both because of our industry’s important role in the economy as well as the nature of retail employment. Many retail 

and restaurant employees do not fit neatly into full and part-time categories and 

compliance with the unprecedented levels of change under the ACA will be particularly challenging. 

This is where we find the hard intersection between the promise of transparency 

to help employers and consumers find better value in health care and coverage and 

employers straining to their new responsibilities under the ACA, some beginning as 

soon as June this year. There is the danger of crowding out employer enthusiasm 

for driving better quality and lower cost health care through initiatives from the Pacific Business Group on Health, along with my fellow panelist from NCQA and 

28 

2September 12, 2012 

many others. NRF strongly supports these initiatives. It is important in our view 

to preserve and strengthen these employer-led reform efforts, even as implementation of the ACA continues. 

Changing Behavior 

Change at any level is difficult. We are attempting to retrain people to seek the 

better quality health care options. Sometimes, less (but more effective) care is better 

than more care. I recall the frustration of a former member of mine in a different 

association (Francois de Brantes, then of GE, now of Bridges to Excellence) saying 

that he could place neon exit signs leading to better quality health care providers, 

but most employees would rather stick with their old, inferior quality and more expensive providers instead. 

We humans are stubborn in our habits, good or bad. Transparency and awareness 

of better interest—quality and cost both—is likely the best tool toward building better consumers of health care and coverage. 

Summary of Benefits and Coverage 

Health benefits are the biggest component (next to wages) in employee compensation. Employers have struggled mightily to help employees understand and get the 

best value from their benefits. Distribution of Summary Plan Description (SPD) documents are just the beginning. Employers have conducted countless employee briefings (both by company staff and outside experts, such as agents and brokers) among 

other efforts to help educate eligible employees. Many employers have built webbased resources to help guide employees through benefits issues. 

The new Summary of Benefits and Coverage (SBC) requirement and Uniform 

Glossary are the latest manifestation of this employer objective: to help employees 

and dependents understand the content and extent of their coverage options. Employers were not entirely sure that the SBC was necessary and not just duplicative 

of the SPD. Still, the SBC with coverage examples and Uniform Glossary can be 

helpful tools for employers toward employee education. 

Flexibility in distribution of the SBC is helpful. The ability to post electronically 

and to e-mail SBC’s (subject to notice and on-demand availability of paper copies) 

is efficient. Nevertheless, availability is one issue and comprehension is entirely another. How do we entice or compel employees and dependents to read and understand their benefits? 

Some benefit designs seek to use financial interest—our wallets—to help lead our 

brains to better health care decisions. Results are encouraging but inconclusive. Ultimately though, we may need to look to our children and grandchildren to take this 

closer to heart and better interest. That awareness just might be forged in a 

generational crucible built as a consequence of the graying of America. It will not 

be a pain free process, unfortunately. 

Retailers and other employers are particularly concerned by one element of unwarranted SBC compulsion: employer penalties for willful failure to distribute 

SBCs. These penalties are expensive—at $1,000 per willful failure with daily penalties of $100—and when added to myriad other potential penalties and fees under 

the ACA, could tend to discourage employers from offering coverage. We recommend 

that this Committee and the Congress rethink this portion of the SBC requirement. 

In addition, we are concerned by the SBC requirement that SBC be made linguistically appropriate for populations where 10 percent or more are literate in a nonEnglish language. This is an expansion of an old SPD requirement and in practice 

employers have adapted where necessary, for example to hold Spanish language 

briefings. Still, we fear that the new SBC requirements will add to carrier cost and 

thus to coverage cost, too. 

Affordable Care Act and Employers 

Change is coming to employer-sponsored health plans at a torrential pace. In testimony 2 last year to the House Ways and Means Subcommittee on Health, I warned 

that definitive regulatory guidance was needed at least by the first quarter of 2013. 

The regulatory pace has definitely picked up after November 2012. 

We have received a lot of regulatory guidance—some 18,000 pages of regulations 

by some estimates—with two significant regulations on essential health benefits and 

health insurance market reform coming out just last week. Both the EHB and market reform provisions (especially the compression of age bands) very likely will add 

to coverage costs. 

NRF has worked hard to help our members understand what their options and 

future responsibilities will be. I provided both majority and minority staff with a 

29 

3www.ehbcoalition.org 

4www.choiceandcompetitioncoalition.org 

copy of the slides from a recent NRF webinar presentation on ACA compliance. Another is planned for March and likely will continue throughout the year. I spend 

a lot of time speaking to diverse retail and other employer audiences as well. The 

learning curve among retailers and other employers is steep and still growing. 

NRF, Allied Coalitions and the Affordable Care Act 

NRF has actively encouraged the fair and effective implementation of the ACA, 

despite our continued opposition to the law itself. We see no inconsistency between 

the two positions; we owe it to our members to help make the law as workable as 

possible so long as it remains the law of this land. We stand ready to assist any 

effort to improve upon implementation of the ACA. 

We are engaged in a number of allied coalition efforts on ACA implementation. 

For example, NRF chairs the Essential Health Benefits Coalition 3 (EHBC) and participates in the leadership of the Coalition for Choice and Competition 4 (CCC) and 

Employers for Flexibility in Health Care (EFHC). The number of coalitions addressing aspects of ACA implementation has grown so much as to require a degree of 

coordination between them. NRF established and chairs the Employers’ Health Care 

Clearinghouse, which meets on a monthly basis to do just that. 

These coalitions are deeply substantive and deal with specific ACA implementation concerns. They also have served a useful role in developing and coordinating 

views and comments among allied employer interests. 

Conclusion 

Again, NRF greatly appreciates the opportunity to appear before you today. In 

sum, we urge this Committee and Congress to continue to encourage transparency 

in health care to help drive better quality and lower cost care and coverage. 

At the same time, we urge you to guard against the pace of ACA implementation 

and the consequent potential to drive employers away from providing coverage. Retailers and other employers can and should be powerful advocates for positive 

change. But, in most cases, health care and health benefits are not our stock in 

trade or business. It is in our best interest to keep our employees healthy and at 

work, but not at any cost. The ACA will—at a minimum—pressure our ability to 

continue to provide coverage and help drive positive change. 

We hope to work with you to help mitigate these effects. NRF stands ready to 

help the Administration and Congress make the ACA more workable, so long as it 

remains the law of this land. 

The CHAIRMAN. Thank you very much, sir. 

It seems to me that, in preparing for this, I read that—and you 

were concerned, Ms. Quincy—that we have to get to 170 million 

people. And we’re not. And I think that’s partly because it’s still 

new, and, you know, all this kind of stuff. But, my impression was 

that, if you took the cost, which you referred to, of doing all of this 

transparency, et cetera, it is large and burdensome—I think that 

it came out that it was about 50 cents a person per year. And that 

actually does add up to $70 million, or whatever it is. But, in terms 

of the individual, if that’s what it costs, it would seem to me that 

the tradeoff for knowing more about what you’re getting—I mean, 

I really get an amazing feeling, just looking at this thing. 

Senator Thune, I’ve been doing this. 

And you—you know, it just—it’s just so sensible. You look down 

at—well, having a baby. And you get the sample care costs. Now, 

I assume—and it gives—it says, the amount owed to providers is 

going to be 7-and-a-half-thousand dollars; plan pays 5,000-and-ahalf, patient pays 2,000. But, it gets all—radiology, prescriptions— 

it gets all those things. And then it says what the patient has to 

pay—and it says ‘‘deductibles,’’ gives the amount; ‘‘copays,’’ gives 

the amount; ‘‘coinsurance,’’ and gives the amount. What it does not 

say, and what I want to bring up in a question, is—and I don’t 

30 

know why it’s left out—is that we don’t include premiums. And it 

seems to me that premiums ought to be a part of the SBC. It’s— 

I think it’s only fair. And so, therefore, it doesn’t show up here, 

and, therefore, it’s a—that’s, I think, one area where we could be— 

we could improve. 

But, I understand your point, and I—I had a—spent an hour and 

a half yesterday, somebody, in HHS, who had just put out 600 

pages of new rules and regulations for something, and I was just 

flying around the ceiling, in anger. And, of course, there was a 

strong defense on her side, which she felt was OK, and I just 

didn’t. So, I mean, I think that’s constantly a problem. 

I think it’s going to—I think it’s going to be a problem, too, as 

we settle into—I mean, in effect, it was last year—October 31, I 

think—when the Affordable Care Act actually went into business, 

became operational. But, in fact, it isn’t, and it’s really 2014. 

Now, there’s a lot that’s already been done, but it’s when you— 

when you get the exchanges, and getting them set up, and having 

the states figure out what they’re going to do about that. And some 

things—again, medical loss ratio and, you know, preexisting conditions—those things are already in play and in effect. But, I suspect 

that there will be a period, probably of a decade or so, where we 

will be adjusting this bill according to, you know, common sense 

and reasonableness, while still driving toward the purpose of transparency. 

I don’t have much time left. 

The—I really like the idea, I have to say, of real-life examples, 

because I think if somebody picks this up, and they look at having 

a baby or diabetes 2, et cetera, and they really get a sense of what 

it is—and I mentioned, in my opening statement, breast cancer. 

And the breast cancer was excluded as part of this list by, oddly 

enough, IRS, the Department of the Treasury, and Department of 

Labor. I have absolutely no idea of how they got to do that. Do any 

of you? Because, to me, breast cancer is something that has to be 

faced by so many people that it would really be good, as a real-life 

experience, in the cost of care. And—— 

Yes, ma’am. 

Ms. O’KANE. Well, I’m speculating, but breast cancer, as you’re 

probably aware, it depends on how serious the breast cancer is, 

what the costs are going to be. So, it’s probably hard to have sort 

of a generic example of what it would cost. That’s—that would just 

be my speculation. You know, so if you’re—if you were—had your 

breast cancer on a mammogram at a very early stage, there would 

be a lumpectomy, there might not be any chemo, there might not 

be any radiation. And that would be a—sort of a low-cost event. 

Whereas, if it were something more advanced, there would be 

much higher costs of treatments, and so forth, so—— 

The CHAIRMAN. Well, it would be my assumption—and then I’ll 

go right to you, Ms. Quincy—that this would be based upon the average cost. This wouldn’t be individual breast cancer, but writ 

large, and then cut right across the middle. 

Ms. O’KANE. I just think, because there’s a big range of variation 

that feeds into that average, it might not be as useful as having 

a baby. I’m just—— 

The CHAIRMAN. Yes. 

31 

Ms. O’KANE.—thinking out loud, here—— 

The CHAIRMAN. Yes, ma’am. 

Ms. QUINCY. We are so fortunate, with this particular provision 

of the law, because we have so much evidence. We did test a breast 

cancer example when we were testing the form. It was for a year’s 

treatment that totaled to about $100,000. And two things I might 

mention. One, it’s—this was the most persuasive example, because 

that’s where it really reminded people that, ‘‘Oh, a very expensive 

and unexpected medical event could happen to me.’’ Even the men, 

who can’t get breast cancer. Still, it reminded them why they need 

to go out and buy health insurance. And, frankly, I said to the 

health plans, ‘‘This is—should be your marketing tool. You know, 

drum up some business with these examples.’’ 

And it doesn’t matter if it is your exact breast cancer experience. 

What matters is, you can compare it across health plans, because 

it was calculated in the same way—just like EPA’s miles-per-gallon 

sticker on cars. That’s what is important, at the end of the day. 

And hope that an expensive example, like breast cancer, will be 

brought back. So, thank you for mentioning it. 

The CHAIRMAN. Thank you. My time is up. 

The Ranking Member, Senator Thune. 

Senator THUNE. Mr. Chairman, thank you. 

And thank you all for sharing your thoughts and your insights. 

I very much appreciate that. 

I’d like to direct this question, if I might, to Ms. Quincy. And it 

has to do with the agency’s final rule, which was jointly issued by 

HHS, Labor, and Treasury, which does not require that the SBC 

include premium disclosures or additional facts that may affect 

premium rates. The only way that an issuer can comply with other 

sections of Federal law and premium rate changes is to issue disclosures on multiple forms. 

Now, we’ve heard, today, that multiple disclosures can add to 

consumer confusion. So, to your knowledge, as a consumer representative with the National Association of Insurance Commissioners, tell me about NAIC and any efforts they made to consolidate these disclosure requirements. And is this a concern that the 

agency should revisit as they work to improve the SBC disclosure 

process? 

Ms. QUINCY. Thank you very much for that question. 

When the NAIC was working to develop the form, it included a 

line—the very first line on page 1 was for the premium, because 

that’s the natural thing that you would want to know, in addition 

to how much coverage you’re getting, if you’re trying to compare 

health plans. And that’s the intent of this form. 

So, we did test a premium line on there. And that was, as you 

can imagine, very well received. The NAIC had extensive discussions about how to accommodate the fact that, when there is underwriting, you might not actually know the final premium, and 

they provided, to HHS, a set of rules for how to accommodate those 

circumstances. 

Just as an example: on Healthcare.gov, you don’t see your specific 

premium, you see a standard premium rate. That’s one of the ways 

you could fill in that line. 

32 

I think this would be an excellent area for some statutory revision, because I think consumers would love to see premium on that 

form. 

And let me know if that didn’t answer your question. 

Senator THUNE. How do you take into consideration regional differences, in the disclosure process? Getting treated in someplace 

like Sioux Falls, South Dakota, is very different than getting treated in New York City. I hope implementation of this provision 

doesn’t have the unintended effect of confusing consumers. Can you 

explain how regional differences in the cost of care are going to be 

addressed? 

Ms. QUINCY. Absolutely. The—first of all, I—for what it’s worth, 

I have no concerns that it would confuse consumers. You already 

have regional differences in the coverage provisions; you know, so 

you already are designing an SBC form for the exact product that’s 

be licensed—been licensed in South Dakota, as opposed to—I forgot, was New York the other state?—as opposed to the second 

State. So, you’re already preparing a form that reflects the product 

that you had approved by your local State insurance department. 

But, that—your question is still a valid one, because we know, 

in 2014 and forward, there are still some remaining premium rating factors, such as geography and age. And I think the question 

is, How do you accommodate them? And I think there are a number of things that can be done: 

One, you can put the premium line back on the form, label it as 

‘‘Premium,’’ and leave it blank, to be filled in. If—let’s say a consumer’s working with a broker. Sooner or later, a premium will be 

calculated for that person, and it can be written on the form so 

that they can take it home and compare it to other plans. 

There’s a number—this is the exact question the NAIC dealt 

with, and I would be happy to send to the Committee their proposal for how that would be addressed, if—rather than go on and 

on—if—would that be helpful? 

Senator THUNE. That’d be fine, yes, thank you. 

Mr. Trautwein, in your testimony today, you mentioned your concern with the pace of implementation of provisions in the Affordable Care Act. And specifically, you state your concern that lastminute regulations, on top of penalties and regulatory burden of 

existing ACA regulations, might cause of your members to, and I 

quote, ‘‘back out of coverage.’’ This a very troubling suggestion. Provisions, such as the SBC, are intended to increase choice and competition in the healthcare insurance industry, with insuring benefits to the consumer. But the way in which the statute and other 

mandates fund the law, or implement it, could drive employers 

away from offering health benefits altogether. It would seem that 

the opposite could be true. I wonder if you could expand on that 

statement that you made in your remarks. 

Mr. TRAUTWEIN. Thank you, Senator. 

There is a lot of frustration out there in the employer community 

as they look forward across the horizon to 2014. I’m spending a lot 

of time on Webinar presentations and other methods of explaining 

this to them. 

When they look at the combination of different factors—they look 

at the size limitations, the redefinition of the ‘‘full-time employee,’’ 

33 

some of these concerns—then it gets to be—there’s—there starts to 

be some focus on, ‘‘Well, is it—can I look to offload my employees 

onto the exchange? Is it mathematically cheaper? Does it make 

sense, in today’s economy, to do that? Or do I continue to soldier 

through and continue to offer coverage?’’ 

So, what I particularly fear—one of the things employers hate 

more than anything is having multiple requirements put on them 

at once so they’re trying to do a bunch of different things at the 

same time. That’s what the quick horizon to 2014 threatens—I 

fear, threatens—because we don’t want to undercut employer-sponsored coverage, but I think that could be the practical effect. 

Senator THUNE. I see my time has expired, Mr. Chairman. 

Thank you. 

The CHAIRMAN. All right. 

Senator Pryor. 

STATEMENT OF HON. MARK PRYOR, 

U.S. SENATOR FROM ARKANSAS 

Senator PRYOR. Thank you, Mr. Chairman. 

And I’d like to start with you, Ms. Quincy, if I could. One of the 

amendments that I offered, and it was adopted into the ACA, was 

an amendment on a customer satisfaction survey. And I’m assuming, you know, it’ll take a little time, maybe a year or so, before 

the exchange is running, and all that, before the surveys really 

mean a lot. But, do you think that information will be helpful to 

consumers as they are weighing their various options in the exchange? 

Ms. QUINCY. Yes, I do. And just so I give you a responsive answer, are you talking about satisfaction with the exchange or with 

health plans? 

Senator PRYOR. Well—— 

Ms. QUINCY. Or both? 

Senator PRYOR. What—I was thinking about with the health 

plan. 

Ms. QUINCY. OK. In the testing and discussions we’ve had with 

consumers, they’re very interested in what other people, like themselves, think of a given health plan, a given doctor, a given hospital. This is a primary piece of information that they’re interested 

in. And I think that, referring back to Peggy’s testimony, if we can 

do the survey and convey the results in a way, to consumers, so 

that it’s usable and they feel this reflects people who are just like 

them, they would find it very, very valuable. 

Senator PRYOR. Right. 

Mr. Livermore—oh, yes, ma’am. Ms. O’Kane. 

Ms. O’KANE. Just on that point. We accredit health plans, and 

every health plan has to submit results of their consumer satisfaction survey, which is then used to benchmark and compare, and it 

leads into the rating that the plan gets. And then we take the data, 

and we do ratings with Consumer Reports. 

Senator PRYOR. Oh, good. Seems to me that it’s—that’s a good 

way to go. It, you know, lets consumers get a read of, you know, 

how the plan is actually working in the real world. 

Mr. Livermore, let me ask you a question. And it’s really a concern I have. And that is—my concern would be that there will be 

34 

a lot of people, especially in the early days of this, that aren’t really 

familiar with shopping for their own healthcare plan, and they may 

just look at the premium, and then nothing really beyond that. You 

know, they may not look at all the copays and all the other—what 

folks who know about it wouldn’t consider ‘‘hidden expenses,’’ but, 

if you’re not careful, they might be considered hidden expenses. So, 

do you share that concern? And, kind of, what are our best practices that we can implement that would make sure that that’s not 

a big problem? 

Mr. LIVERMORE. Yes, I absolutely—thank you for the question— 

I absolutely do share that concern. I think that it really points to 

the need for evidenced-based models and testing of how the label 

actually works. In the abstract, as experts, you can look at it and 

say, ‘‘This is all perfectly clear; it’s obvious,’’ but that doesn’t mean 

that that’s how consumers are responding to it. So, I think that 

that really, I see, is the key—a key feature for improving and continually, you know, expanding this—the use of this label, is that 

ongoing testing and procedure. 

Now, there are certain things that you can do to make sure 

you’re using best practices. Right? So, information that you present 

first is going to have a large cognitive impact, you know, on someone that’s interacting with this document. So, you know, you can 

use color, simplify language, not overwhelm the consumers with too 

much information, so you have the most salient information. Coverage examples are an important—can be an important counterbalancing influence. So, all of these are features. But, at the end of 

the day, testing is what we ultimately—and improving, based on 

that information—is ultimately how we answer that concern. 

Senator PRYOR. One of the things that you mentioned in your 

testimony is ‘‘low health literacy’’ in the U.S. And apparently 

there’s a pretty substantial cost connected with the illiteracy, I 

guess you can say, of—in healthcare, for Americans. So, what’s the 

low hanging fruit there? What can we do to make the American 

public more literate when it comes to choosing healthcare? 

Mr. LIVERMORE. Well, I think that, in terms of steps forward, expanding the coverage examples are a very useful low hanging fruit; 

in particular, a high-impact event, because that’s something that 

consumers are not going to be familiar with, by its very nature. 

These are low-probability events, and then they’re extremely highimpact. And, you know, a consumer making the decision is not familiar with that. They might not even have family members that 

are—where they can utilize that experience. So, I think that that 

is a simple thing that can be done, and it’s low hanging for us. 

Senator PRYOR. Yes, ma’am. 

Ms. O’KANE. We heard a presentation from somebody that was 

experimenting with how to present the information to consumers, 

and they found that just giving a little tutorial up front about, you 

know, what to think about before you get into it was helpful. And 

then, there are choice tools, as well, that help you calculate what 

your total expenditure for the year might be. Those have been 

used. 

So, I think that, actually, the experience of shopping in exchanges can be something that will improve people’s health literacy 

just in time, if we do it the right way. 

35 

Senator PRYOR. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Pryor. 

Senator Cruz. And welcome. 

STATEMENT OF HON. TED CRUZ, 

U.S. SENATOR FROM TEXAS 

Senator CRUZ. Thank you, Mr. Chairman. And it is a pleasure 

to be at that—the first hearing that I’ve had the opportunity to 

serve on this committee. 

Of all of the economic data that swirl about, the one I find most 

troubling is 0.8 percent, which is what our economic growth has 

been, each of the last 4 years. It seems to me, if we’re going to 

make progress, in terms of restoring our economic strength, if we’re 

going to make progress, in terms of seeing the 23 million people 

struggling to find work, getting back to work, we’ve got to restore 

economic growth, we’ve got to get back to historic levels of 

growths—3, 4, 5 percent—and not sub 1 percent economic growth. 

And so, Mr. Trautwein, I would like to ask you a question about 

the impact of the President’s healthcare law on small businesses, 

in particular. There have been a number of estimates that small 

businesses typically produce two-thirds of all new jobs. And the 

House Energy—Commerce Committee has recently estimated the 

compliance cost of Obamacare has exceeded 127 million man hours. 

And the question I’d like to ask is if you could share your experience, and the experience of your members, in terms of the impact 

of compliance costs, and how that is affecting their ability to survive in this challenging economic times, and their ability to create 

and maintain jobs. 

Mr. TRAUTWEIN. Thank you for the question, Senator. 

The small business is struggling to understand their responsibilities under the new law. They’re coping with questions about how 

you’re defining ‘‘full-time employee.’’ How many employees can you 

have before you’re over the top? Do you count partial employees to 

get up to that 50 limit of full-time-equivalent employees? So, there 

are a lot of issues, at present. 

We do know that it’s had an effect of discouraging growth at 

companies near that threshold, and it may have an effect—in fact, 

somebody called them the ‘‘29ers’’—of redefining many employees 

below that threshold. And that could be an issue, as well. 

Counterposed against that are the small business tax credit, limited or—and complicated though it be. And there are also subsidies 

potentially available, by income, in the exchange, though those 

ramp out pretty quickly. 

So, it’s—so, to sum, there’s a lot of frustration with the complexity of the Affordable Care Act. It may be having an effect on 

job growth, particularly in small business. And they’re very nervous about this transition. 

Senator CRUZ. What has been the experience of your members, 

to date, in terms of small businesses dropping coverage altogether? 

Have you seen that as a significant pattern since the passage of 

this law? 

Mr. TRAUTWEIN. It’s been more of a episodic adventure, Senator—or feature. From what I can tell, the—even though we’re in 

36 

2013, as of June, counting back for the look-back period, really that 

the penalties are not effective until 2014, forward. So, I’ve encouraged many employers, some who are grandfathered status and 

some who are not, to ride it out, for now, and to keep coverage intact. But, there are a lot—as I mentioned, there’s a lot of frustration, a lot of—particularly in small business—who say, ‘‘My business is X, not healthcare.’’ And so, there’s a lot of frustration there. 

Senator CRUZ. My last question concerns the cost of coverage; 

and, in particular, the cost for those struggling to climb the economic ladder—young people coming out of school, getting their first 

jobs. 

A recent study by the American Academy of Actuaries found that 

insurance premiums in the individual insurance market will increase, on average, by 10 to 20 percent, and approximately 4 million uninsured individuals age 21 to 29, or roughly 36 percent of 

those currently uninsured, can expect to pay more out of pocket for 

single coverage than they otherwise would have. 

Has that been the experience you’ve been seeing in the market? 

That the impact has been coverage costs increasing and impacting, 

in particular, those struggling to climb the economic ladder? 

Mr. TRAUTWEIN. There’s been some, but a limited, increase already reflected in the market. One of the things I worry about is 

the regulation released on Friday on health insurance market reform, and the compression of age rating bands from, commonly, 5- 

to-1 to 3-to-1. That’s going to increase premiums for younger, 

healthier employees, the kind that you want in your group, three 

times or more. And that could have an effect on overall group coverage. 

We advocate—and the administration said they lacked authority 

to do this—but, a more effective way might be to allow the States 

to come up a plan—with a plan, maybe 5-year plan, to get to that 

target amount. But, hopefully that’s something that the Congress 

will come back to, because that potential rate shock could be an 

issue—substantial issue in 2014 and beyond. 

Senator CRUZ. Thank you very much, Mr. Trautwein. And thank 

you, to all of the witnesses. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator McCaskill. 

STATEMENT OF HON. CLAIRE MCCASKILL, 

U.S. SENATOR FROM MISSOURI 

Senator MCCASKILL. Thank you. 

I know that there are competing arguments on the rate-shock argument, also. I mean, we have a huge number of our young people 

that are now on parents’ policies until they’re 26 years old. Obviously, if this reform went away, they would be back on the market. 

That’s quite a rate shock. 

And also, the catastrophic—if any of you want to speak to the 

catastrophic coverage that will be available to young people, that 

currently has not been readily to consumers, and what impact you 

think that might have on this reputed rate shock that’s going to 

occur for young people. 

Ms. Quincy? 

37 

Ms. QUINCY. I’d be happy to speak very briefly. I mean, excellent 

comments. But, the Wyman study and the Society of Actuaries 

study—there are some other studies out there that show that this 

rate shock concerns are going to be mitigated by the availability of 

subsidies to help afford coverage and, as you mentioned, by the 

availability of a catastrophic plan. And this catastrophic plan is essentially going to be full of young people. They’re their own pool; 

they’re not pooled with others. So, this is going to mitigate, greatly, 

the impact of the rate shock, because—some of the other studies 

didn’t take that into account; like, I don’t think the Wyman study 

did. 

I’d be very happy to send over to this committee a study by the 

Kaiser Family Foundation and another one by the Urban Institute 

showing that maybe we don’t need to be quite as worried as some 

have suggested. 

Ms. QUINCY. And I’m not trying to say that there will not be 

some people for whom their rates go up. Sometimes it’s because 

their coverage was so much better. But, I don’t think the problem 

is necessarily as great as some of the reports show. 

Senator MCCASKILL. Thank you. 

I have also read the Time magazine article, and I will tell you, 

I think that there is a rebuttal that is—needs to be put out there 

on some of the things that are in that article. You know, points 

were well made in the article, but there is another view on some 

of these issues around the not-for-profits, especially those that are 

serving the most difficult populations, in terms of underinsured 

and uninsured. And I want to make sure that the policy discussions around this are fair and measured. 

Now, one thing that was in that article that is fascinating is the 

charge master. The charge master, obviously, came about for a 

purely commercial reason, and that was: insurance companies 

wanted to go to employers and say, ‘‘We’re getting you a big discount.’’ So, in order for them to get a big discount, the charge master had to increase what the charge was for the service. So, let’s say an MRI was going to be $400. That’s what the costs 

really were going to be. And the insurance company said to the 

hospital, ‘‘Well, we really need to tell our employers that we’re getting you a better price, so we need to say we got you a discount,’’ 

and they said, ‘‘OK, we’ll have a charge master say the charge was 

$800, and you’re getting a 50-percent discount.’’ So, it was all illusory. It was all kind of made up. And—— 

But, the point that the article wasn’t very good about pointing 

out is that that is really only being used for outliers now, because 

the vast majority of the charges now are, in fact, for procedures. 

There is a set amount for procedures. 

And if any of you would comment on what we need to do, in the 

transparency world, to get companies out of the habit of creating 

discounts that totally jack around with the ability of a consumer 

to ever figure out what something really costs. And, you know, 

maybe we need to look at this issue of—I think they’ve outlived 

their usefulness, charge masters; I don’t think they are being used 

as often as they were when this first began as a practice. And I 

would like any of you who feel knowledgeable about this subject to 

speak to that. 

38 

Ms. O’KANE. I don’t think I’m an expert on this, but I think— 

your point is really well taken. It’s really hard to figure out. Right? 

And different payers pay different amounts, which have nothing to 

do with the underlying value of the product. We have markets 

where there’s so much consolidation in the provider sector that 

they kind of name their prices, and that goes right through to the 

consumer. 

So, I think that there is a big issue around price. There’s a big 

issue around what we do, as well. But, you know, the issues that 

he identified in the article, I think really do call for some publicpolicy response. And, you know, there’s a range of possible responses, like you could set prices. That seems sort of—kind of politically unlikely, to me. But, certainly, I think that the current—— 

Senator MCCASKILL. We have set prices for Medicare and—— 

Ms. O’KANE. Yes, exactly. 

Senator MCCASKILL.—Medicaid, right? 

Ms. O’KANE. Exactly. 

Senator MCCASKILL. I mean, that’s what they’ve done—— 

Ms. O’KANE. Yes. But, then—— 

Senator MCCASKILL.—is set prices. 

Ms. O’KANE. But, then we find that providers then shift those 

costs over to the private sector, driving up the cost of private 

health insurance. And—— 

Senator MCCASKILL. Yes. I mean, I believe that if you look at 

it—if you back up, you’ve got a population that’s paying 70 percent 

of what the costs actually are, and another population that’s paying 

130 percent of what the costs actually are. 

Ms. O’KANE. Right. 

Senator MCCASKILL. Well, that’s certainly not fair to the people 

who are paying 130. 

Ms. O’KANE. Right. 

Senator MCCASKILL. But, it’s a great value for the government, 

that’s getting the 70. 

Ms. O’KANE. Yes. 

Senator MCCASKILL. And so, how we figure that out—and people 

who are in large companies that have lots of employees are getting 

the 70. 

Ms. O’KANE. Well, no, actually, they’re—they’re paying higher— 

they’re paying higher rates, because they’re buying—I mean, 

they’re self-insured, but they’re only able to get the rates that their 

intermediaries are able to negotiate, which are not as low as Medicare rates. They do better, though, than the small businesses—— 

Senator MCCASKILL. Right. 

Ms. O’KANE.—which are really at the end of the—— 

Senator MCCASKILL. They’re not at the 130, but they’re not at 

the 70. 

Ms. O’KANE. Right. 

Senator MCCASKILL. They’re somewhere in between. 

Ms. O’KANE. Right. Right. But, I think it’s a mess, and it’s certainly—you can’t have a market that actually works, when you 

have this kind of disinformation out there. 

Senator MCCASKILL. Well, I’m a big—I know my time is up, and 

I appreciate you being here—I’m a big believer that one of the most 

important things we have to do in the healthcare area is unleash 

39 

the American consumer. I mean, we are good shoppers. We know 

how to shop. I mean, you give me enough coupons, and I’ll drive 

15 extra minutes and get that value. 

You know, look at Groupon. I mean, look at the successes that 

we’ve had by—you know, I mean, look at Wal-Mart, for gosh sakes. 

So, I think we’ve got to figure out a way that the American consumer feels entitled to consumer information about buying 

healthcare. Right now, they just see it as something they either get 

for free or they don’t have it and somebody else is going to pay for 

it—— 

Ms. O’KANE. Right. 

Senator MCCASKILL.—instead of really feeling invested in a consumer-based decision. And a lot of that is just around the area of 

can they get enough information to become a good consumer? 

So, I think this is a great hearing, Mr. Chairman, and I’ll look 

forward to hundreds of other great hearings, with—under your 

leadership, over the next several years. 

The CHAIRMAN. Hundreds. 

Senator MCCASKILL. Hundreds. 

[Laughter.] 

The CHAIRMAN. Senator Schatz. 

STATEMENT OF HON. BRIAN SCHATZ, 

U.S. SENATOR FROM HAWAII 

Senator SCHATZ. Thank you, Mr. Chairman. And thank you for 

holding a hearing on this—OK, excuse me. Here we go. 

Thank you, Mr. Chairman, and thank you for holding a hearing 

on this important topic. 

I want to thank the witnesses for being here. 

And I share your view, Mr. Chairman, that greater transparency 

in health insurance policies is needed for consumers to better make 

choices. 

I have a couple of questions that have to do with the process of 

making choices. Mr. Livermore, in particular. 

According to Census data, approximately 25 million adults in the 

United States don’t speak English well. And in Hawaii, limitedEnglish-proficiency individuals account for almost 12 percent of the 

State’s population, including my mother- and father-in-law. Health 

insurance companies have to communicate effectively with this percentage of the population in order for this enterprise to work. So, 

what steps can be taken to make sure that those folks who are 

having difficulty with English can get access to plain and simple 

information so they can make the right choices? 

Mr. LIVERMORE. Yes. Well, thank you very much for that question. 

I think there are two elements to this. One is making sure that 

we’re providing the information in the languages that people speak 

and they can actually understand, but the second part has to do 

with making sure that folks are aware, within these communities, 

that this information exists and is accessible to them. So, there’s 

the provision, but there’s also, kind of, outreach—there’s an outreach element to that. And, actually, Ms. Quincy mentioned, earlier, that an unfortunately low percentage of people are aware that 

the SBC exists. I don’t have data on this; she may. But, my—I susVerDate Nov 24 2008 06:08 Jun 27, 2014 Jkt 075679 PO 00000 Frm 00043 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\88434.TXT JACKIE
40 

pect that, within particular linguistic communities, that number is 

even worse. Right? And so, we have to think about how to do that 

outreach. 

That would be my primary recommendation, would be, not just 

the provision of information, but making sure that folks are aware 

that the information is out there and accessible. 

Senator SCHATZ. Ms. Quincy? 

Ms. QUINCY. An excellent question. I think—a couple of additional observations. One, the fact, with the SBC, that we’re talking 

about a standard form helps, because even if you struggle a little 

bit with—maybe it’s—hasn’t been translated into your language, 

you can learn, because it’s always standard, where the given information is. Somebody could help you with that. So, we’re a little bit 

ahead of the game by having a standard form. 

I would pile onto what Mr. Livermore said by saying, in addition 

to translating these documents, we need to test them with people 

who speak that language, because you never know what cultural 

references may not come through. 

I did a study, years ago, and they were trying to explain what 

‘‘radiology’’ was to someone who didn’t speak English, and they 

said, ‘‘It’s like a fire going through your body,’’ and that did not go 

over well. 

So, there you go. 

Senator SCHATZ. Thank you very much. And I appreciate the cultural-competency layer to this, because it’s not just language translation, but it’s understanding the dialects within ethnic communities, and just understanding that there may be different attitudes 

toward healthcare and the provision of health services, that all 

needs to be baked into this process. 

I have another question about accessing this information. You 

know, the first draft of SBC is in print format. And, as you know, 

many low-income individuals, and individuals at all income levels, 

are going to be accessing this decisionmaking process via the Internet. So, I’d like you to talk a little bit about the usability thought 

process, not just for the Internet, generally, but also the potential 

differences between desktop and laptop computers and PDAs. Increasingly, especially in low-income communities, because they 

don’t want to pay the monthly for their Wi-Fi or their Ethernet 

connection, the only way they’re going to get information such as 

this is via an iPhone or some other Smart phone. 

So, what thought process is being undertaken to making sure 

that this information, which is extraordinarily complicated, gets 

distilled into this little 2x4 screen? 

Mr. LIVERMORE. Just as an initial take, I think that distilling information is, at some level, the first cut—getting it down into, you 

know, the compact information you want to—that you want to communicate to consumers, and then making sure that it’s available on 

a wide range of platforms. All right? So, this is kind of a two-step 

process, and I think we’re in the midst of that second stage of making sure that it’s, kind of, platform availability, in addition to the 

information. 

Ms. QUINCY. If I can pile on—my favorite occupation—I think— 

I may just not be creative enough, but I can’t conceive of how you 

would actually get, like, the full content, that you would expect to 

41 

see, for example, at an exchange, on a little phone. But, I think 

that it could play a very useful role, in terms of raising awareness 

and providing preliminary information that then links people to 

help. You know, it links them back to a full Website, it links them 

to live assistance. And that’s what I see as the role for this very 

small screen. 

Senator SCHATZ. Right. I—and I agree. I actually think the Webbased and the PDA-based decisionmaking tools ought to be used as 

an interactive decisionmaking tool, because, you’re right, you can’t 

load all the information onto one or several pages. But, in a way, 

it could be even more useful, because you could take someone 

through their decisionmaking process in a way that is step-by-step, 

and, therefore, more user-friendly, rather than giving them a document and asking them to digest it. 

Thank you. 

Thank you, Mr. Chair. 

The CHAIRMAN. Thank you very much, Senator. 

I’d like to make a comment or two, I guess, emanating out of 

some of the things that Senator Cruz said, and also that you have 

said, Mr. Trautwein. 

And I think we’ve all been through this before. You get the situation where—Senator Thune and I are working on this—that— 

called cybersecurity, when it’s the greatest national security threat, 

it is greatly in advance of terrorism of 11—you know, 9/11s, et 

cetera, but somehow it doesn’t get through to the American people, 

so we’re trying to do something about it. And then you get a deluge 

from the Chamber of Commerce, the—by their paid lobbyists, here 

in Washington, which crushes any attempt to get any amendments 

passed. We couldn’t get anything done. 

So, I wrote a letter to 500 of the top, you know, individual companies in America, and the majority of them said, ‘‘No, we’re not 

protected. We don’t know what to do. We need help.’’ These are big 

companies. ‘‘And we don’t know where to turn.’’ 

And then, the Chamber of Commerce turned on them—you know, 

the GEs of this world, or whatever—and said, ‘‘Well, they don’t 

really know what they’re talking about.’’ 

And I have, a little bit, this feeling on this healthcare discussion, 

that this behemoth—I think you have to start with the knowledge 

of what an absolute disaster of cost, waste, fraud, and abuse, of duplication, that our present healthcare system is. Let’s start with 

what we’ve got. 

I still remember Richard Darman. Do you remember Richard 

Darman? Yes. He was head of OMB under Ronald Reagan, and he 

came and testified for the Finance Committee, and he went into 

sort of a seclusion for a week before he testified, and he appeared, 

sheet white, not because he wasn’t feeling well, but because of 

what he’d learned. And he basically told us—this was, what, 15– 

20 years ago—that healthcare was going to decimate the American 

economy; it was just going to eat it up; there would be no money 

left for even a single Tootsie Roll. And I always remember that, because the healthcare system was in a mess then; it’s in a greater 

mess now, while, at the same time, not providing insurance for a 

whole lot of people who really need it. 

42 

So, when people start talking to me about, ‘‘This is just going to 

be the downfall’’—I was very intimately involved with the writing 

of this bill, and there certainly are areas where we can make improvements, but, you know, where—you were talking about small 

business. Ninety-six percent of the businesses in this country with 

more than 50 employees already offer health insurance to their employees. And RAND, the Urban Institute, the CBO, and Mercer, 

which is a county in West Virginia—and otherwise, I guess, a research firm—have found that the vast majority of those employers 

will continue to offer their employees health insurance in 2014. In 

other words, they listened to all of these comments about—the endof-the-world comments, and—but then they look at what they have, 

and they said, ‘‘My gosh, it can’t be worse than what we’ve got.’’ 

Plus, they aren’t providing health insurance to the people that they 

would like to. 

Then you look at the law, at the Act. Starting in 2014, businesses 

with fewer than 50 employees will have a new option available to 

them. To all of them. And it’s called the state exchanges. So, anybody can go get health insurance; again, using these new slimmeddown reading materials and information. And then, if you’re—if 

you have fewer than 25 employees, you already get a—you already 

get a deduction—a credit, I guess it is, isn’t it?—for 30 percent of 

the cost of—the government helps, in the bill, already law, with 

the—with 30 percent of the cost of providing health insurance. And 

in 2014, that goes to 50 percent. And it stays there. 

And then I think of the fact that, well, there’s going to be 32 million uninsured Americans—which doesn’t get to the underinsured 

Americans—who are going to be plowing money into the insurance 

companies, because they’re—they now have insurance coverage— 

they have health insurance coverage; and all kinds of things happen. And then, I think of, oh, yes, and they’re going to take those 

Medicaid doctors, who everybody says are going to stop serving 

Medicaid patients, but, lo and behold, what does the Act do? The 

Act brings it—for practitioners out there, it—Medicaid, and particularly in rural areas, which would be of interest to South Dakota 

and West Virginia, their payment levels will go up where Medicaid 

is now—Medicare is now. So, that may not sound sensational, but 

if you’re getting Medicaid reimbursement levels, that’s just about 

the best news you’ve ever heard. 

And we’re—there’s—money’s already in there, already paid for, 

for building—is it 1,000 or 10,000 new healthcare centers? 1,000, 

OK. Nuts. 

[Laughter.] 

The CHAIRMAN. But, in other words, when I went to West Virginia as a VISTA volunteer, I’d—and the people I was working 

with lived off of a rural healthcare center, across a couple of swinging bridges in a neighboring rural county. And there they got 

grassroots—you know, an old Wal-Mart, except it wasn’t as big as 

that, but, you know, ground-floor stuff, like Vet Centers for veterans—ground floor. Not VA hospitals; they don’t like that. Go to 

a ground-floor thing, they’re—you get friendly folks there. 

And so that all these—you know, ways to be helpful. And the fact 

that people who are finding healthcare difficult to navigate, even 

with this four-page thing that I’m overtouting—there’s going to 

43 

be—there are going to be people who help, people specifically provided for in the bill who help people work their way through getting healthcare. That can be to a company—small company, large 

company—that can be do an individual. They’re a part of the 

healthcare bill. 

So, I just—I would just say that, before we just obliterate an Act 

which has been validated by the Supreme Court and is going to 

stay—I always kind of prefer to get on the side of what makes 

things better. And, yes, when you do something as big as this, affecting 16–17 percent of the economy, there’s going to be some 

sticker shock and some changes that have to be made, and everybody gets nervous, because it hasn’t happened yet. 

But, all those folks who aren’t getting nervous, in the business 

community, about something called cybersecurity, when they get 

attacked—which most of them have been, actually—when they get 

attacked in a major way, and we shut down air traffic control systems and towers and grids and things of that sort, then people are 

saying, ‘‘Oh, my heavens, why didn’t we pay attention to this when 

we had a chance to do something about it?’’ 

Now, that sounds a little bit like a lecture, and I apologize for 

that. That’s—is that my nature? 

[Laughter.] 

The CHAIRMAN. But, I really mean that. It’s not just what— 

where we’re going, it’s where we are; and you have to look at both 

of those things. And I would just beg for that kind of—it’s sort of 

automatic opposition. I think there’s going to be a far simpler way 

of doing the healthcare system. 

My time is way over. 

Senator Thune. 

Senator THUNE. Mr. Chairman, if I might—I think the one area, 

although you and I have different positions on the Affordable Care 

Act, in its passage—one thing that I think we all agree on is that 

more transparency is a good thing. I think the efforts that you’ve 

made to try and get more information out there is good, because 

it does help consumers make informed decisions. 

I’ve always believed that the more the consumers have an opportunity to weigh what the competitive opportunities are out there, 

they will choose the lowest-cost option that still gives them the coverage, if it’s insurance, or in the case of healthcare itself, the 

healthcare that they want, that delivers the quality product at the 

most affordable price. That’s why I do think more information 

transparency is a good thing. And I think that having more skin 

in the game, so to speak, is a good thing, too, because it forces less 

utilization. 

One of the things, I think, that really drives healthcare costs in 

this country is that we have an insatiable demand for healthcare. 

We’ve got some great technology out there, the best in the world. 

And people want to take advantage of that technology and that 

healthcare. But, we also have some duplication out there. A lot of 

things can be improved upon, in terms of delivery of healthcare. I 

do believe that transparency and disclosure is helpful, with regard 

to trying to keep prices affordable, something that most people in 

this country can appreciate. 

44 

Let me if I might, seek just one final comment and reaction from 

Mr. Trautwein—because I do think that, notwithstanding some of 

the elements, like the transparency provisions that you fought to 

get in here, and some of the things that we’re addressing today, 

there are a lot of mandates in the bill, and a lot of requirements. 

I think Mr. Trautwein addressed a few of those. This is one requirement, which I think is very popular, and one which I think, 

in the end, will get more information out there. But, there are 

other mandates that I believe are also going to put upward pressure on the cost and the price of healthcare in this country. There 

are about 60 percent of American workers that are in self-insured 

plans, which are governed by ERISA. 

One of the things that I’m interested in knowing is whether Title 

I of ERISA already are mandates of distribution of Summaries of 

Plan Description. How are, I would say to Mr. Trautwein, your selfinsured members dealing with what could be duplicative mandates 

from both ERISA and the new healthcare law? 

Mr. TRAUTWEIN. Thank you, Senator. 

From—it’s not clear to me that they’re not required to produce 

both documents. And, in fact, all group health plans are required 

to produce an SBD as well as the new SBC requirement. So, that’s 

something that stretched beyond the self-funded plans, in terms of 

the obligation. 

Briefly addressing the Chairman’s remarks, I would note that 

the NRF was an opponent of this law. We were for reform before 

passage; we continued to be for reform. Once the ink was dried on 

the law, we’ve been working with the regulators, in good faith, to 

try to ease compliance, make it easier for our members to comply 

with the law. It’s a very complicated law, and some of the work 

with Treasury, or with HHS, in particular, in implementing it, 

there are going to be a lot of hoops to jump through, and employers 

don’t like that. 

But, from our perspective, we’re all about compliance. We didn’t 

sue anybody on the Affordable Care Act. We didn’t submit amicus 

comments in the Supreme Court. We’re all about compliance, right 

now, Mr. Chairman. 

The CHAIRMAN. Well, I appreciate that. 

And let me just say, in closing this—I had about 20 questions I 

wanted to ask, but didn’t—that what you’re going to see from Senator Thune and Senator Rockefeller is a fair and balanced leadership of the Commerce Committee, because we both have common 

values. We both come from the same kinds of States, with the same 

kinds of problems. But, we’re different, you know, and we view the 

Act differently. And so be it. That’s what democracy is all about. 

I remain optimistic on all of this. And I think sessions like this 

one, where people can voice their frustrations, and where others 

can come back and argue, where you have people, all of whom are 

very knowledgeable, and the fact that—are you in the Business 

Roundtable? Yes. And so the—and then—you’re for it; I didn’t 

know that, and so, I apologize to you for that. 

But, these are the struggles we will be going through. I mean, 

if we’re trying to figure out how to make a—how do you get a fair 

explanation of a deductible that crosses all healthcare—I mean, 

you know, there’s going to be hard stuff, and it’ll take time. And 

45 

let’s just try and be honest with each and do it the best that we 

possibly can. 

In any event, you’ve all been terrific, and I thank you very much. 

And this hearing is adjourned. 

[Whereupon, at 3:58 p.m., the hearing was adjourned.] 

(47) 

A P P E N D I X 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. JOHN D. ROCKEFELLER IV 

TO LYNN QUINCY

Question. Ms. Quincy, after the Summary of Benefits and Coverage (SBC) because 

law in March 2010, AHIP (American’s Health Insurance Plans) and then later AHIP 

together with the Blue Cross Blue Shield Association (BCBSA) paid for two separate 

consumer focus group studies to test early versions of the SBC forms. We have attached these studies to test early versions of the SBC forms. We have attaches these 

studies for your review. The first round of consumer testing AHIP did focused on 

how consumers interacted with the SBC forms. AHIP’s testing found that the SBC 

was ‘‘valued by consumers,’’ and that: 

The idea that there might be a standard form or common template that health 

insurance companies would use to summarize costs and benefits was universally 

hailed as a great move. All participants felt that they personally would benefit 

by having a quick read of any given plan and being better able to compare 

plans. A common template would provide consistency and uniformity. 

In their second round of testing AHIP and BCBSA focused on how consumers 

interacted with the SBC’s Coverage Examples. The researchers found that: 

[A] majority of participants felt the inclusion of examples was helpful in that 

it gave them a different way to view, compare, and understand the cost implications of various plans. 

Ms. Quincy, your organization, Consumers Union, also conducted focus group with 

consumers. Were the findings of your research consistent with the findings of AHIP 

and the BCBSA? 

Answer. Thank you for this question. I think it is remarkable how similar the 

findings were between the AHIP/BCBSA studies and the Consumers Union studies. 

This commonality underscores the robustness of the findings. All reports are public 

documents. In the case of Consumers Union’s testing, outside observers were invited 

to view the consumer testing, lending further transparency to the process and findings. 

Our written testimony and the study reports provide a strong written record of 

these findings. I will not reiterate the major findings here except to state that they 

comport with and even build upon the AHIP and BCBSA findings. Policymakers can 

act upon this information, increasing and extending consumer access to timely and 

accurately completed SBCs, with complete confidence that these new documents 

help consumers. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. AMY KLOBUCHAR TO

LYNN QUINCY

Question 1. I really believe in paying for quality. During the hearing in 2009, I 

asked how to incorporate quality measures into transparency materials and the response I got was that’s 300 level learning, we’re still at insurance 101. Was there 

any discussion during the development process to incorporate various quality measures? 

Answer. I don’t believe so. The NAIC felt it was all they could do to use their 

multi-stakeholder process to meet the statutory requirements for the SBC. These requirements don’t include quality measures, although the Affordable Care Act (ACA) 

clearly places great importance on quality measures in other sections. For example, 

core functions an Exchange must provide include assignment of a price and quality 

rating to plans and the presentation of enrollee satisfaction survey results. 

Question 2. With the lessons learned from the NAIC process, the feedback from 

focus groups and the industry, are there steps we can take to also start providing 

consumers with information on quality? 

48 

Answer. Absolutely! The new quality reporting requirements in the ACA, and 

heightened consumer awareness of new health plan options and ways to buy coverage, are a golden opportunity to put better measures in front of consumers. However, current research suggests that more consumer testing of quality measures may 

be needed to ensure wide-spread and appropriate use of the measures. 

While quality was not the focus of our own testing, we did solicit consumers’ views 

on quality directly and indirectly. Many consumers associate health plan quality 

with (a) comprehensive coverage and/or (b) high quality providers in the network. 

This doesn’t mean we can’t be successful build plan and provider quality measures 

in other domains, but it does caution us that such measures must be carefully tested 

and artfully named so that there use is intuitive and appropriate. 

We highly recommend a robust course of consumer testing to see which quality 

measures, broadly defined, will most benefit consumers. The broad range of measures to be tested should include a rigorous, standard way to measure provider network adequacy and a summary measure indicating how providers perform with respect to patient safety, as well as the conventional measures used today. 

Research has shown that the performance of individual physicians and hospital 

service lines is strongly preferred by consumers over performance information aggregated at physician group of hospital wide levels. Work should be done to overcome current barriers to the provision of this information. 

Getting quality information into the hands of consumers is critically important 

but much remains to be done to identify the best consumer facing measures and 

make these accessible, understandable, and relevant. 

Question 3. Do you think that this would be a useful addition to the summary 

of benefits and coverage documents? 

Answer. We recommend using consumer testing to rigorously answer this question. While we are confident that well tested quality measures will help consumers, 

the question of which ones and how to include would need to be answered. For example, it is possible that only one or two summary measures are appropriate to use 

in the SBC, with additional detail available on health plan comparison websites. 

Question 4. Are there other ways you think these documents can be strengthened? 

Answer. Yes! I strongly recommend the following 

• Getting the SBC form ‘‘designed’’ by a graphic designer versed in these types 

of communications. My written testimony includes an example of how design 

changes could improve the form. Consumer testing should be used to ensure 

that the revisions enhance the experience for the consumer, without reducing 

the value of the current version. 

• Bringing back a row for premium information on the first page, as was included 

in the original NAIC recommendations. These recommendations provided a robust mechanism for the provision of premium information on the SBC, and reflect input from a wide variety of stakeholders. 

• Including more coverage examples as soon as possible, and experimenting with 

moving this information forward in the document. 

• Abandon the use of national Medicare prices as the basis for the coverage example calculations and instead substituting realistic private sector prices; trended 

to accurate represent costs for the year that coverage will be effective. 

My written testimony contains further suggestions. 

RESPONSE TO WRITTEN QUESTION SUBMITTED BY HON. AMY KLOBUCHAR TO

MARGARET E. O’KANE

Question. I really believe in paying for quality. During the hearing in 2009, I 

asked how to incorporate quality measures into transparency materials and the response I got was that’s 300 level learning, we’re still at insurance 101. 

• Was there any discussion during the development process to incorporate various 

quality measures? 

• With the lessons learned from the NAIC process, the feedback from focus 

groups and the industry, are there steps we can take to also start providing consumers with information on quality? 

• Do you think that this would be a useful addition to the summary of benefits 

and coverage documents? 

• Are there other ways you think these documents can be strengthened? 

49 

1http://www.ncqa.org/Portals/0/Public%20Policy/CHCF%20ValueJudgmentQualityCostIn 

formation.pdf 

Answer. I also believe strongly in paying for quality and making quality information transparent and easy for consumers to use. Focus groups that we conducted 

with the California Healthcare Foundation found that with help, consumers quickly 

understand that quality does not necessarily cost more—and that it can cost less. 

Consumers generally do need help to understand this, as it is not intuitive for most 

people. However, once consumers do understand it, they want to use cost and quality information together to help them select a high quality, low-cost health plan or 

physician organization. We also found that the people most interested in this information are the uninsured who will be accessing health care coverage through State 

Health Insurance Exchanges. 

Our report on these focus group findings, Value Judgment: Helping Health care 

Consumers Use Quality and Cost Information, 1 includes important lessons on how 

to make this information meaningful to consumers and move beyond the ‘‘insurance 

101’’ stage. 

For example, most people prefer simpler formats that use a symbol to indicate 

overall value, and they want to know the source of the data in order to assess its 

credibility. 

It is not clear whether the standardized Summary of Benefits and Coverage would 

be a good place to provide consumers with quality information. Specific testing 

would be needed to determine if consumers wanted quality information there and, 

if so, how to make it useful to them. 

State Health Insurance Exchange web portals, however, are an ideal place to give 

consumers information on quality, along with total cost of care. Minnesota’s Exchange already has a specific work group focusing on this important opportunity. 

It takes time to measure and report on the actual quality of care that plans provide, 

so Exchange plans’ quality information at first will be limited to accreditation status 

and patient experience ratings for similar plans offered by the same sponsors. Once 

we can collect and report on performance measures for care provided in Exchange 

plans, we will be able to give consumers robust information on the actually quality 

of care, patient experience, and total costs of care in each Exchange plan. This will 

greatly increase consumers’ ability identify and enroll in plans that provide the best 

value for their health care dollars. 

To make the most of this opportunity, there are important principles Exchanges 

should follow to help consumers make the most of transparent cost and quality information. Exchanges need to: 

• Apply lessons from the science of behavioral economics and ‘‘choice architecture’’ 

to help guide consumers to plans offering the best value. 

• Present information to consumers as simply as possible. Studies and experience 

shows that too much information can bog down the enrollment process or prevent someone from choosing a plan. 

• Build from existing measures and collection systems to ensure straightforward, 

efficient implementation. 

• Limit collection to data that has a clear use; there is considerable cost for reporting unused data. 

• Add more information, new measures and quality improvement and assurance 

strategies over time. Give stakeholders the opportunity to comment on direction, and give plans and states the opportunity to implement system changes. 

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