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THE PPACA’S HIGH RISK POOL REGIME: HIGH 

COST, LOW PARTICIPATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

APRIL 1, 2011 

Serial No. 112–29 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

(II)

(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

CLIFF STEARNS, Florida 

Chairman 

LEE TERRY, Nebraska 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

EDWARD J. MARKEY, Massachusetts 

GENE GREEN, Texas 

DONNA M. CHRISTENSEN, Virgin Islands 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Cliff Stearns, a Representative in Congress from the state of Florida, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 3 

Hon. Diana DeGette, a Representative in Congress from the state of Colorado, 

opening statement ................................................................................................ 4 

Prepared statement .......................................................................................... 6 

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

California, opening statement ............................................................................. 8 

Prepared statement .......................................................................................... 10 

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

prepared statement .............................................................................................. 58 

Hon. John D. Dingell, a Representative in Congress from the state of Michigan, prepared statement ...................................................................................... 59 

WITNESSES

Steve Larsen, Deputy Administrator and Director, Center for Consumer Information and Insurance Oversight, Centers for Medicare and Medicaid Services, Department of Health and Human Services ............................................. 11 

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

SUBMITTED MATERIAL

Letter of March 31, 2011, from John Barthell, submitted by Ms. DeGette ........ 60 

Early Retiree Reinsurance Program (ERRP) reports dated March 2, 2011, 

and March 31, 2011, respectively, submitted by Mr. Stearns .......................... 62 

Energy and Commerce Staff memorandum dated March 23, 2011, submitted 

by Mr. Stearns ...................................................................................................... 132 

Department of Health & Human Services (HHS) Chief Actuary report dated 

April 22, 2010, submitted by Mr. Stearns .......................................................... 143 

HHS response to Committee dated February 28, 2011, submitted by Mr. 

Stearns .................................................................................................................. 181 

New York Times article entitled, ‘‘G.E.’s Strategies Let it Avoid Taxes Altogether,’’ by David Kocieniewski, dated March 24, 2011, submitted by Mr. 

Stearns .................................................................................................................. 203 

www.HealthCare.gov Newsroom, posted February 10, 2011, submitted by Ms. 

DeGette ................................................................................................................. 209 

(1) 

THE PPACA’S HIGH RISK POOL REGIME: HIGH 

COST, LOW PARTICIPATION 

FRIDAY, APRIL 1, 2011 

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

The subcommittee met, pursuant to call, at 10:05 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Cliff Stearns 

(chairman of the subcommittee) presiding. 

Members present: Representatives Stearns, Terry, Sullivan, Murphy, Burgess, Blackburn, Myrick, Bilbray, Gingrey, Scalise, Gardner, Griffith, DeGette, Schakowsky, Markey, Green, Christensen, 

Dingell, and Waxman (ex officio). 

Staff present: Carl Anderson, Counsel, Oversight; Stacy Cline, 

Counsel, Oversight; Julie Goon, Health Policy Advisor; Todd Harrison, Chief Counsel, Oversight & Investigations; Sean Hayes, 

Counsel, Oversight & Investigations; Carly McWilliams, Legislative 

Clerk; Andrew Powaleny, Press Assistant; Krista Rosenthall, Counsel to Chairman Emeritus; Ruth Saunders, Detailee, ICE; Alan 

Slobodin, Deputy Chief Counsel, Oversight; Sam Spector, Counsel, 

Oversight; John Stone, Associate Counsel; Phil Barnett, Democratic 

Staff Director; Brian Cohen, Democratic Investigations Director 

and Senior Policy Advisor; Karen Lightfoot, Democratic Communications Director, and Senior Policy Advisor; Ali Neubauer, Democratic Investigator; and Anne Tindall, Democratic Counsel. 

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. STEARNS. Good morning, everybody, and let me welcome the 

members here, and our witness to the Subcommittee on Oversight 

and Investigations, and I will start with my opening statement. 

We convene this hearing of the Subcommittee on Oversight and 

Investigation today to gather information concerning the Patient 

Protection and Affordable Care Act High Risk Pool Regime. The 

Administration’s healthcare allocated $5 billion to provide 

healthcare coverage for individuals who have been locked out of insurance market. The President and the Democrats try to sell this 

law to the American people by telling us how many people were 

unable to get health insurance, and how this law was going to protect these individuals, while somehow saving the American taxpayers money. 

It has been 1 year since the healthcare law was forced on the 

American people. It has been 9 months since the high risk pools 

2 

became operational. The chief actuary of Medicare and Medicaid 

estimated that 375,000 people would enroll in these high risk pools 

by the end of 2010, but only 12,000 actually did enroll. CMS informed us that they have conducted a massive outreach campaign 

to try to advertise this program in order to get people to sign up. 

Who is paying for this advertising tour is a good question. The taxpayers. Through the $5 billion allotted to this program in the 

healthcare reform law, this means money that was allocated to 

help the uninsured is being used to help the Administration save 

face and rescue this program. 

This is on top of the previous Democrat majority spending an entire year talking about nothing but this healthcare law. If countless 

speeches by the President can’t advertise these high risk pools, how 

can a bureaucratic advertising campaign hope to accomplish the 

same goal? 

Just as alarming as the law enrollment numbers, this Committee 

has learned through its investigation that low enrollment does not 

equal low costs. For example, California expects to accumulate $1 

billion in claims over the lifetime of this program, with approximately 70 percent of the tab paid for by the Federal Government. 

This means that California alone, one state, that is, expects claims 

to eat up almost one-fifth of the total cost of the program. Our investigation revealed that not a single state expects premium revenue to be near the cost of claims over the life of this program. 

Now back in December, The Washington Post reported that ‘‘New 

Hampshire’s plan has only about 80 members, but they have actually spent nearly double the $650,000 that the state was allocated 

for this program. HHS agreed to give New Hampshire more 

money.’’ So this is a program that must operate within a fixed 

budget of $5 billion. HHS has not explained how it intends to keep 

the program running through 2014 without additional funding. 

Our investigation has also uncovered problems with the implementation of the high risk pool. In order to get the program up so 

quickly, HHS used the CHIP formula to allocate money between 

the States. While the CHIP formula is used to determine the number of uninsured children in each State, we would think that HHS 

would use a formula that measures the number of uninsured children with preexisting conditions in each State, since this fund is 

supposed to help the uninsured with the preexisting condition. This 

program uses a non-relevant formula simply because it was easy 

and already available. This inequity could mean people in some 

states are getting more than they need, while people in others 

aren’t getting enough. We want to make sure that the money is 

being allocated fairly and properly. 

Obamacare was supposed to be the solution to our Nation’s 

healthcare ills, but here we are, 1 year later, and has a single 

promise made by the President and the healthcare plan that the 

Democrats passed—promises they made about this law come true? 

The high risk pool program is yet another promise that has fallen 

short, in our opinion. We were supposed to enroll over a quarter 

of a million Americans. We didn’t even reach 5 percent of that goal. 

Steve Larsen, the Deputy Administrator and Director of the Center for Consumer Information Insurance Oversight was before the 

Subcommittee back in February to talk about the waivers—you reVerDate Nov 24 2008 12:19 Nov 02, 2011 Jkt 037690 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-29 040111\112-29 CHRIS
3 

member that—that HHS has been granting to states and entities 

that can’t afford the Administration’s healthcare plan. Since he testified just 2 months ago, we have seen more states’ struggling companies all seek waivers. A big indicator to me that we are on the 

wrong track is the number of people in need of waivers to relieve 

them of the legislative and financial burdens of the Democrat 

healthcare plan. As we have seen through our investigations, this 

is a problem that is getting worse. We intend to hold HHS accountable today for what we see as low enrollment, skyrocketing costs, 

and poor implementation of a program that was promised to help 

support one of our most vulnerable populations. 

So I welcome Mr. Larsen returning, and recognize the ranking 

member, my colleague, Ms. DeGette from Colorado. 

[The prepared statement of Mr. Stearns follows:] 

PREPARED STATEMENT OF HON. CLIFF STEARNS

We convene this hearing of the Subcommittee on Oversight and Investigations 

today to gather information concerning The Patient Protection and Affordable Care 

Act’s High Risk Pool Regime. Obamacare allocated $5 billion to provide health coverage for individuals who have been locked out of the insurance market. Obama and 

the Democrats tried to sell this law to the American people by telling us how many 

people were unable to get health insurance and how this law was going to protect 

these individuals, while somehow saving the American taxpayer money. 

It has been one year since the health care law was forced on the American people. 

It’s been nine months since the high risk pools became operational. The Chief Actuary of Medicare and Medicaid estimated that 375,000 people would enroll in these 

high risk pools by the end of 2010. But only 12,000 actually did enroll. CMS informed us that they’ve conducted a massive outreach campaign to try to advertise 

this program in order to get people to sign up. Who is paying for that advertising 

tour? The taxpayers.through the $5 billion allotted to this program in the health 

care reform law. That means money that was allocated to help the uninsured is 

being used to help the administration save face and rescue the program. This is on 

top of the previous Democrat majority spending an entire year talking about nothing but this health care law-if countless speeches by the President can’t advertise 

these pools, how can a bureaucratic advertising campaign hope to accomplish this 

goal? 

Just as alarming as the low enrollment numbers, this committee has learned 

through its investigation that low enrollment does not equal low costs. For example, 

California expects to accumulate $1 billion in claims over the lifetime of the program, with approximately 70 percent of the tab paid for by the federal government. 

That means that California alone, one state, expects claims to eat up almost one 

fifth of the total cost of the program. Our investigation revealed that not a single 

state expects premium revenue to be near the cost of claims over the life of the program. 

Back in December, the Washington Post reported that ‘‘New Hampshire’s plan 

has only about 80 members, but they have already spent nearly double the $650,000 

the state was allotted. HHS agreed to give New Hampshire more money.’’ This is 

a program that must operate within a fixed budget of $5 billion. HHS has not explained how it intends to keep the program running through 2014 without additional funding. 

Our investigation has also uncovered problems with the implementation of the 

high-risk pool. In order to get the program up so quickly, HHS used the CHIP formula to allocate money between the states. While the CHIP formula is used to determine the number of uninsured children in each state, we would think HHS would 

use a formula that measures the number of uninsured children with pre-existing 

conditions in each state, since this fund is supposed to help the uninsured with preexisting conditions. This program uses a non-relevant formula simply because it was 

easy and already available. This inequity could mean people in some states are getting more than they need, while people in others aren’t getting enough. We want 

to make sure that the money is being allocated fairly. 

ObamaCare is supposed to be the solution to our nation’s health care ills but here 

we are, one year later, and has a single promise made by President Obama and the 

Democrats about this law come true? The high risk pool program is yet another 

4 

enormous promise that has fallen short: we were supposed to enroll over a quarter 

of a million Americans. We didn’t even reach five percent of that goal. 

Steve Larsen, Deputy Administrator and Director of the Center for Consumer Information and Insurance Oversight, was before the Subcommittee back in February 

to talk about the waivers that HHS has been granting to states and entities that 

can’t afford Obamacare. Since he testified just two months ago, we’ve seen more 

states and struggling companies seek waivers. A big indicator to me that we are on 

the wrong track is the number of people in need of waivers to relieve them of the 

legislative and financial burdens of ObamaCare. As we’ve seen through our investigations, this is a problem that is getting worse. We intend to hold HHS accountable today for what we see as low enrollment, skyrocketing costs, and poor implementation of a program that was promised to help support one of our most vulnerable populations. 

With that, I welcome Mr. Larsen, and recognize the ranking member, Congresswoman Degette. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you so much, Mr. Chairman. 

Before I give my opening statement, I would like to take a moment of personal privilege and introduce my sister Cathy and her 

family who have come here to visit and see how sausage is made 

all week long. 

Mr. STEARNS. Cathy, you are welcome. 

Ms. DEGETTE. Mr. Chairman, President Obama signed the historic healthcare reform legislation into law just 1 year ago. When 

the law’s full benefits have been implemented, every American will 

have access to affordable health insurance, and abuse of insurance 

industry practices like discrimination with people—against people 

with preexisting conditions will be banned entirely. Millions of 

Americans are already benefiting from the law, including Americans with preexisting conditions. Thousands of these individuals, 

thanks to the subject of this hearing, the preexisting condition insurance pools, or PCIPs, have access to affordable individual coverage for the first time. Prior to the passage of the Affordable Care 

Act, health insurance for people with illnesses like diabetes, asthma, cancer, arthritis, or HIV/AIDS was either not available on the 

individual market or was so expensive as to make it effectively unavailable. But the Affordable Care Act immediately banned the 

egregious practice of denying coverage to children with preexisting 

conditions. The Affordable Care Act also offered immediate benefits 

to adults with preexisting conditions through the PCIP program. 

These plans also offer individuals with preexisting conditions insurance at the standard individual market rate, not the exorbitant 

rates offered on the private market. These plans began accepting 

applications in late 2010, and over 12,000 people are now enrolled 

in them. 

One of the enrollees is John Barzel, who is a constituent of mine 

from Colorado. Mr. Barzel, a bartender who works on his feet all 

day long, suffered from a condition I am well aware of, severe arthritis in both hips and desperately needed two hip replacements 

to keep his job, but his employer doesn’t offer health insurance and 

he could not obtain health insurance on the individual market. 

When he learned about PCIP, he signed up immediately. He has 

since had two hip replacements and in his words to my staff, he 

5 

got a new lease on life. He says that, and I quote, ‘‘The health insurance coverage provided for me under the Affordable Care Act 

took me from chronic pain to free daily life and restored by ability 

to support myself.’’ Now Mr. Chairman, I wanted to have Mr. 

Barzel come here in person at this hearing, but we were told that 

he would not be allowed to testify, so I am disappointed by this decision, but I would at least ask unanimous consent that his letter 

to the Committee be included in the record. 

Mr. STEARNS. By unanimous consent, so ordered. 

Ms. DEGETTE. Thank you. 

Mr. WAXMAN. I would like to object, and I do so to inquire why 

he was not allowed to come. Here is a man who could tell us from 

his own experience what these high risk pools meant to him. Why 

wouldn’t we allow him to come, Mr. Chairman? 

Mr. STEARNS. Mr. Waxman, you understand that we are going to 

have continued hearings on this, and we will have another opportunity to bring your witness in. I thought as we started this process, dealing with one specific subject we would have just the government explain exactly what the status is, and so that is why we 

have just one witness. I think—— 

Mr. WAXMAN. How many hearings do you intend to call on this 

subject? 

Mr. STEARNS. Well, I would be glad to sit down with you at a 

later date. We are just in the early stages of this. As you know, 

we have got plenty of hearings on the healthcare plan, and this is 

just one of many. So at this point, by unanimous consent, so ordered the letter will be entered into the record. 

[The information appears at the conclusion of the hearing.] 

Ms. DEGETTE. Chairman, not to put too fine a point on it, this 

is the second hearing the Minority was denied their witness, so I 

hope we can work this out for future hearings. 

I know that we are going to hear—in fact, we already heard from 

the chairman that PCIP enrollment is lower than anticipated, and 

I appreciate that CCIIO, in recognition of these concerns, has outreaches—has improved its outreach efforts. I hope we will hear 

more about those efforts from our witness, but I find it a little ironic that my friends across the aisle would complain about low enrollment in a plan that every single one of them voted to repeal, because when I hear about stories like John Barzel, I find repeal efforts impossible to understand. These thousands of people who now 

have access to insurance for the first time would have it whisked 

away immediately. So it seems to me that the solution to the problem is to try to increase outreach efforts so that we can get a lot 

of people who are uninsurable because of preexisting conditions to 

be enrolled in insurance. 

Now, PCIP is not a permanent solution to the problems faced by 

people with preexisting conditions, that is for sure. It is a transitional benefit that will be superseded by the full panoply of the Affordable Care Act’s reforms in 2014. But what the program is right 

now is critically important to that slice of people who are and will 

be enrolled. That is why we should not repeal this law. Doing so 

would rob thousands of PCIP enrollees of the healthcare coverage 

they now have and take it away. 

6 

A more productive discussion would be a discussion about how 

we can enroll more people with preexisting conditions in this program until we transition to full coverage in 2014. 

Thank you. 

[The prepared statement of Ms. DeGette follows:] 

PREPARED STATEMENT OF HON. DIANA DEGETTE

President Obama signed the historic healthcare reform legislation into law just 

over 1 year ago. When the law’s full benefits have been implemented, every American will have access to affordable health insurance, and abusive insurance industry 

practices, like discrimination against people with pre-existing conditions, will be 

banned entirely. 

Millions of Americans are already benefiting from the law, including Americans 

with pre-existing conditions. Thousands of these individuals, thanks to the subject 

of this hearing—the pre-existing condition insurance pools (P–CIPs), have access to 

affordable individual coverage for the first time. 

Prior to passage of the Affordable Care Act, health insurance for people with illnesses like diabetes, asthma, cancer, arthritis, or HIV/AIDS was either not available 

on the individual market, or was so expensive as to make it effectively unavailable. 

But the Affordable Care Act immediately banned the egregious practice of denying 

coverage to children with pre-existing conditions. And the Affordable Care Act also 

offered immediate benefits to adults with pre-existing conditions through the PCIP 

program. PCIP plans offer individuals with pre-existing conditions insurance at the 

standard individual market rate—not the exorbitant rates offered on the private 

market. 

PCIP plans began accepting applications in late 2010, and over 12,000 people are 

now enrolled in them. One of those enrollees is John Barthell, a constituent of mine 

from Colorado. 

Mr. Barthell, a bartender who works on his feet all day long, suffered from severe 

arthritis in both hips and desperately needed two hip replacements to keep his job. 

But his employer doesn’t offer health insurance, and he could not obtain affordable 

insurance on the individual market. When he learned about PCIP, he signed up immediately. He has since had two hip replacements, and in his words to our staff, 

‘‘got a new lease on life.’’ He says that—and I quote—‘‘the health insurance coverage 

provided for me under the Affordable Health Care Act took me from chronic pain 

to a pain-free daily life and restored my ability to support myself.’’ 

I wanted to hear from Mr. Barthell in person at this hearing. I thought that it 

would be obviously worthwhile to learn about PCIP from the perspective of someone 

enrolled in the program. But we were told by the Majority that he would not be 

allowed to testify. I’m very disappointed by this decision, and I would at least like 

to ask that Mr. Barthell’s letter to the Committee be included in the record. 

I know that we will hear from my Republican colleagues today that PCIP enrollment is lower than anticipated. And I appreciate that CCIIO, in recognition of these 

concerns, has improved their outreach efforts. I hope we will hear more about those 

efforts from our witness. 

It is ironic, however, that my friends across the aisle would complain about low 

enrollment in a plan that every single one of them voted to repeal. When I hear 

stories about what that would mean to people like John Barthell, I find these repeal 

efforts impossible to understand. Repeal would mean that thousands of people who 

now have access to insurance for the first time will have it whisked away from them 

immediately. One of those people, Suzanne Hannon of Maryland, also spoke with 

our staff. 

Suzanne’s husband worked for Bethlehem Steel for decades, but when he turned 

65, they cancelled his health benefits, leaving her uninsured. She was unable to obtain affordable coverage because of a pre-existing condition: moderately high cholesterol. 

Then last fall, Suzanne heard about PCIP and enrolled. A month later, she went 

in for a check-up-something she would not have done without insurance-and learned 

she had uterine cancer. She caught it early, and her prognosis is good, as long as 

she can continue her treatment. She is terrified, however, that the Affordable Care 

Act will be repealed and that she’ll have to end her chemotherapy. In her words, 

the repeal of PCIP would be ‘‘a death sentence.’’ 

PCIP is not a permanent solution to the problems faced by people with pre-existing conditions. It is a transitional benefit that will be superseded by the full panoply 

of the Affordable Care Act’s reforms in 2014. 

7 

But the program is critically important to the people who are and will be enrolled. 

That’s why it would be shameful for Congress to repeal this law. Doing so would 

rob thousands of PCIP enrollees of the health coverage they now have, and take 

away their rights to even better coverage in the future. 

Mr. BURGESS [presiding]. The gentlelady yields back. I will yield 

myself 2 minutes, and then we will hear from other members on 

the Majority side. 

This hearing, once again, represents legitimate oversight of ongoing federal activities over this healthcare law, what we should be 

doing in this committee, and I would just address to the ranking 

member, we are doing it this year as opposed to last year, when 

we had not a single oversight hearing on the implementation of the 

healthcare law. 

And those with preexisting conditions was identified as one of 

the major reasons that the healthcare law was necessary, but I 

guess I would just simply ask the question, I don’t really recall the 

provision in H.R. 3200 that we marked up in this committee on 

preexisting conditions, but was it really necessary to spend $1 trillion to fix this problem, which after all, is what we have done with 

the Patient Protection and Affordable Care Act? We all want to 

help, but was it necessary to go to the lengths that we did and essentially upset the system that was working arguably for twothirds of the population in implementing this program? 

We have heard that the universe of people with a medical diagnosis who were locked out of the system was vast. We were led to 

believe that it was in the millions, at different times eight million, 

12 million were used by the President in his addresses during the 

summer of 2009. But at the end of the first year, 2010, we had 

8,000 people and then with a massive advertising campaign, we 

signed up 12,000 people. Well, why is that? Is it because the premiums were too high? Is it because we mandated that you had to 

go uninsured for 6 months to qualify? That is kind of risky. Is it 

because people don’t know we spent a lot of money in advertising, 

or was it because the problem just wasn’t as bad as we thought? 

Despite the low enrollment, the program’s finances are high. It 

begs the question, was this the proper path to take or could we 

have provided subsidized risk pools? 

The last Congress, the ranking member of the Health Subcommittee, Nathan Deal and I introduced H.R. 4019 and 4020, 

which actually attempted to get this population as locked out of the 

current system while providing the right incentives for those who 

have lost their jobs. 

At this point, let me yield 2 minutes to—1 minute to the gentleman from Nebraska, Mr. Terry. 

Mr. TERRY. Well, thank you, Mr. Chairman—acting chairman. I 

appreciate the opportunity to hear from this agency how we can remove waste and perhaps even abuse of funds under their control. 

So it concerns me that my friends on the other side of the aisle do 

not wish us to press to find wasteful use of taxpayer dollars or 

abuse. Hopefully we can get an explanation on the early retirement 

and insurance program where there has been, in the last day or 

two, several news articles that concern me about waste and possible abuse of $5 billion that seem to be going—sent to companies 

8 

that are quite healthy and wouldn’t need government subsidies for 

early retirees. 

For example, the United Auto Workers received the most this last year at $206 million. A healthy company, AT&T, received $140 

billion. Verizon received $91 billion. General Electric, I guess if you 

hug the President enough, you will get $36 billion. General Motors 

received an additional $19 billion. I would like an explanation of 

why these companies were even eligible for government subsidies 

for an early retirement program. 

I yield back. 

Mr. BURGESS. The gentleman’s time has expired. Yield the balance of our time to gentlelady from Tennessee, Ms. Blackburn. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. Yes indeed, if my 

colleagues are wondering why we are not calling or if we are going 

to call other witnesses on programs such as this early retirement 

program, I think we need to call the American taxpayer who is 

footing the bill for this and is livid with the lack of accountability 

and the lack of measurable results that they see coming from these 

programs. It is not hard to understand, in my book, why we would 

vote to repeal these programs. 

When you look at this program and the burn rate of this money, 

I am curious as to why you have flown through $1.3 billion over 

the last 21⁄2 months when you have a total of $5 billion which was 

supposed to last you for a few more years? You know, this is a little 

bit of a head scratcher. Why are you trying to get this money out 

the door? Why are there so few people enrolled in this program? 

Why is it not giving the results that are necessary, and of course, 

as I have said many times, there is no successful example of public 

option healthcare being implemented and achieving a savings, either a near-term or a long-term savings. The wasteful spending has 

to stop. The American taxpayer is growing ill and fatigued with the 

practices they see in Washington, DC. 

I thank the chairman for calling the hearing. I yield back. 

Mr. STEARNS. Gentlelady yields back, and the gentlelady from 

Colorado. 

Ms. DEGETTE. The gentleman from California—— 

Mr. STEARNS. The gentleman from California is recognized for 5 

minutes. 

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

Mr. WAXMAN. Thank you, Mr. Chairman. 

I have been involved in congressional oversight for decades. I 

have seen firsthand how oversight can, when it is done right, educate and inform the public and make government programs work 

better, but I have also seen how the oversight process can be 

abused for no purpose other than to fight partisan ideological battles, and that is what I see here today. 

This hearing is ironic because it is about the new state of federal 

preexisting condition insurance plans, or high risk pools, established under the Affordable Care Act. These plans are supposed to 

be a transition for people who couldn’t buy insurance. They can’t 

go to the individual market because insurance companies won’t 

9 

give them coverage because of preexisting medical conditions. So 

we set up some high risk pools for them until we get to the transition where we will insist that insurance companies cover those people at the same time that we are requiring everybody to be covered 

so that the costs are being spread so that everybody gets coverage. 

Not the kind of situation we have had up until now where it 

doesn’t make sense, but insurance companies will not give a policy 

to somebody with a preexisting condition because they are just very 

likely to be expensive. So the insurance companies want to exclude 

people, not cover people. 

This is ironic because this is exactly what the Republicans proposed instead of the bill that we passed. You would think the Republicans would love this idea. These high risk pools were the centerpiece of their health reform. They didn’t want to actually eliminate the insurance company discrimination against people with 

preexisting conditions. What they wanted to do was to let the insurance companies treat them differently in a high risk pool. 

Mr. Burgess, who I seem to believe is an outspoken opponent of 

the healthcare reform law, said ‘‘The programs to deal with preexisting conditions would involve risk pools to be sure.’’ Politico described high risk pools as one of the old GOP standbys. 

So when we have this high risk pool to give people care until we 

transition into the new healthcare system, suddenly Republican 

leaders decide they don’t like them anymore. Why don’t they like 

them? Well, they don’t like them because not enough people are 

taking advantage of these high risk pools. This hearing isn’t about 

why some are taking advantage and others not. We are not hearing 

from people, we are only hearing from the administrator of this 

program. Mr. Barthell, a constituent of Representative DeGette, 

who is enrolled in one of these preexisting condition insurance programs, was denied the ability to be here for this hearing. Now 

maybe in the next five or six hearings on the subject he will get 

a chance to come in and talk about it. But Republicans are attacking this program because it is not popular enough and it has too 

low an enrollment. Then they are attacking the Early Retiree Reinsurance Program for being too popular and having enrollment that 

is too high. There is just nothing you can do that won’t bring Republican criticism, because what they see is their job is to whine 

and complain and attack and confuse people about the health insurance law so that people won’t start realizing that it is a pretty 

good law. It ends the worst insurance company abuses. It helps 

seniors in Medicare. It helps small businesses afford healthcare 

coverage. It makes sure that all Americans have access to high 

quality, affordable healthcare. 

Now, they say they want to repeal and reform, repeal and replace. Well, we haven’t seen their replacement, but we do note that 

they did propose some ideas as alternatives, and one of the ideas 

they proposed were high risk pools. Now we are having a series of 

hearings on high risk pools and why they are not successful 

enough. High risk pools could have been the ones we would have 

adopted on a bipartisan basis, but they wouldn’t work with us to 

do anything on a bipartisan basis. 

This hearing is not a serious hearing. This hearing is not really 

trying to get facts that will help bring about some understanding 

10 

that could lead to reforms. This is just a partisan show. It is not 

a legitimate oversight hearing, and unfortunately, that seems to be 

par for the course for this committee, even though this subcommittee is called the Oversight Subcommittee. I think at some 

point we need to stop these partisan games, learn how to work together for the benefit of the American people. 

[The prepared statement of Mr. Waxman follows:] 

PREPARED STATEMENT OF HON. HENRY A. WAXMAN

I’ve been involved in congressional oversight for decades, and I’ve seen firsthand 

how oversight, when done right, can educate and inform the public and make government programs work better. And I’ve also seen how the oversight process can 

be abused, for no purpose other than to fight ideological battles. 

This kind of partisan oversight helps nobody, but it is apparently becoming the 

norm in this Subcommittee. 

Today’s hearing is about the new state and federal pre-existing condition insurance plans, or high-risk pools, established under the Affordable Care Act. These 

plans are a good example of the immediate benefits provided by the landmark 

health care reform law. They have allowed thousands of individuals desperately in 

need of health care coverage to purchase insurance. They have provided an essential 

lifeline to individuals who were shut out of the market for individual health insurance. 

Thanks to the Affordable Care Act, discrimination by insurance companies against 

individuals with pre-existing conditions will be banned. In 2014, everyone will have 

a wide variety of choices of health care plans through state-based exchanges. Families will receive subsidies to help pay for coverage if they cannot afford it. 

Until then, the high-risk pools available in every state will serve as a bridge to 

these state-based exchanges, allowing individuals with pre-existing conditions to 

purchase coverage at market-based rates. 

You would think Republicans would love this program. In fact, these high-risk 

pools were the centerpiece of Republican health care reform proposals. Last Congress, Republicans introduced 11 bills creating state-based high-risk pools. One 

Committee member, Mr. Burgess, an outspoken opponent of the health care reform 

law, said: ‘‘The programs to deal with preexisting conditions would involve risk pools 

to be sure.’’ Politco has described high-risk pools as one of ‘‘the old GOP standbys.’’ 

But when these high-risk pools were included in the health care reform law, suddenly Republican leaders in Congress decided they don’t like them anymore. 

We have one excellent witness today, Steve Larsen from HHS. He’s responsible 

for administering the program, and I’m glad he’s here to share his insights with us. 

But we asked Chairman Stearns for an additional witness: John Barthell, a constituent of Rep. Degette’s from Colorado who is enrolled in the pre-existing condition 

insurance program. We wanted to get his perspective on the value of the program. 

We heard Ms. DeGette read some of his testimony for the record. 

This request was denied. Apparently, the Committee does not want to hear from 

individual Americans who disagree with Republican orthodoxy. 

Last week, Committee Republicans put out a memo attacking one part of the 

law—the Early Retiree Reinsurance Program—for being too popular and having enrollment that is too high. In today’s hearing, they will attack the high-risk pools for 

exactly the opposite reason: they are not popular enough and have too low an enrollment. 

The Affordable Care Act is simply not going to get a fair hearing from the Republicans on this Committee. 

And that’s a shame, because it’s a good law. It ends the worst insurance company 

abuses, helps seniors in Medicare, helps small businesses afford health care coverage, and makes sure that all Americans have access to high-quality, affordable 

health care coverage. Americans of all ages in all 50 states are already benefitting 

from the health care reform law. 

Our country faces grave challenges. We need to grow our economy and create jobs. 

We need an energy policy that protects our national security and our environment. 

We need a health care system that provides quality, affordable coverage to all Americans. 

But to achieve these goals, we need to stop these partisan hearings and learn how 

to work together for the American people. 

11 

Mr. STEARNS. I thank the gentleman, and with that, there are no 

additional opening statements. At this point, we will ask Steve 

Larsen, the Deputy Administrator and Director of the Center for 

Consumer Information and Insurance Oversight, who is part of the 

Democrat administration, to stand before the committee. 

Mr. Larsen, you are well aware that the committee is holding an 

investigative hearing, and when doing so, has had the practice of 

taking testimony under oath. Do you have any objection to taking 

testimony under oath? 

Mr. LARSEN. No, I don’t. 

Mr. STEARNS. The chair then advises you that under the rules of 

the House and the rules of the committee, you are entitled to be 

advised by counsel. Do you desire to be advised by counsel during 

your testimony today? 

Mr. LARSEN. I don’t. 

Mr. STEARNS. In that case, if you please rise, raise your right 

hand. I will swear you in. 

[Witness sworn.] 

Mr. STEARNS. Thank you. You are now under oath and subject 

to the penalties set forth in Title 18, Section 1001 of the United 

States Code, and you may now give your 5-minute summary of 

your written statement. 

TESTIMONY OF STEVEN B. LARSEN, DEPUTY ADMINISTRATOR 

AND DIRECTOR, CENTER FOR CONSUMER INFORMATION & 

INSURANCE OVERSIGHT, CENTERS FOR MEDICARE AND 

MEDICAID SERVICES 

Mr. LARSEN. Thank you, Chairman Stearns, Ranking Member—— 

Mr. STEARNS. I think you should put the mic just a little closer, 

if you don’t mind. 

Mr. LARSEN. Is that better? 

Mr. STEARNS. I think that is. Yes, that is good. 

Mr. LARSEN. Chairman Stearns, Ranking Member DeGette, 

members of the subcommittee, thank you for the chance to appear 

before you this morning. I have submitted my full testimony for the 

record. 

As was mentioned, I serve as Deputy Administrator and Director 

of the Center for Consumer Information and Insurance Oversight, 

or CCIIO, within CMS. I have been involved in implementing many 

of the provisions of the Affordable Care Act, including overseeing 

private health insurance reforms, working with States to establish 

exchanges, and ensuring that consumers have access to information 

about their rights and coverage options. 

At this time last year, Congress passed and the President signed 

into law the Affordable Care Act, which will expand access to affordable quality coverage to over 30 million Americans, and ensure 

individuals have coverage when they need it most. Just 1 year 

after the Affordable Care Act became law, many reforms have 

taken effect, including eliminating preexisting condition exclusions 

for children, prohibiting insurance companies from rescinding insurance policies simply because a consumer may have made an 

error on a form, ending lifetime dollar limits on health benefits, 

12 

and enabling many young people to stay on their parent’s insurance plans up to the age of 26. 

The Affordable Care Act also established new programs to expand and support coverage options as a bridge to 2014. In 2014, 

everyone will have access to affordable health insurance choices 

through the new competitive marketplaces, the exchanges which 

prohibit discrimination based on preexisting conditions. 

The bridge to 2014 includes the Preexisting Condition Insurance 

Plan, or PCIP. The Affordable Care Act created PCIP to make 

health insurance available to people whom private insurance companies denied coverage because of their preexisting conditions. The 

presence of a preexisting condition is one of the major barriers to 

obtaining health insurance for individuals, and the fact that so 

many people are denied coverage for these conditions is yet another 

reason why healthcare reform is so important. 

PCIP provides health coverage options for people who have been 

uninsured for at least 6 months, have a preexisting condition, or 

have been denied health coverage because of a condition, and are 

U.S. citizens or residing in the U.S. legally. The program covers a 

broad range of health benefits, including primary and specialty 

care. PCIP eligibility is not based on income, and the plan does not 

charge people higher premiums because of their medical condition. 

Previously, many states have run high risk pools or other programs that offer insurance to people with preexisting conditions. 

While the PCIP and existing state pools cannot be combined, states 

have the option to build on their current programs and choose to 

run the new program under contract with HHS, or elect to rely on 

HHS to provide PCIP coverage in their State. Twenty-seven states 

run PCIP programs, and HHS, along with the Office of Personnel 

Management and the Department of Agriculture’s National Finance Center, are running the federal PCIP programs, which cover 

23 states and the District of Columbia. The Federal Government is 

contracting with the National Finance Center to administer benefits in those states covered by the federal PCIP program, and we 

are flexible about how each state chooses to implement the state 

program, allowing every State-administered PCIP to be uniquely 

tailored to their local market. 

The law appropriates $5 billion of federal funds to support PCIP 

beginning on July 1, 2010, through July 1, 2014, and an allocation 

of these funds was made across the states based on the CHIP formula that takes into account the population of the State, the number of uninsured in the State, and local cost factors. A 10 percent 

cap limits administrative expenses in the PCIP program over the 

life of the program, and CCIIO and the states work together to 

monitor expenditures to ensure we are maximizing the value of the 

program while staying within the 10 percent administrative cost 

limit, and within the total funds that were allocated. 

Based on the data released in March, PCIP has 12,437 members. 

Of this total, over 8,000 people have been enrolled in the State-run 

PCIPs in the 27 States, and over 3,000 have been enrolled in the 

federal PCIP in the 23 States. I am very pleased that enrollment 

in the PCIP program increased by over 50 percent in the last few 

months, and we expect it to continue to grow between now and 

2014. 

13 

I am proud of all that we have accomplished over the past year 

and look forward to 2014 when Americans will have access to more 

affordable, comprehensive health insurance plans without worrying 

about preexisting conditions. PCIP is an important part of the 

bridge to the exchanges in 2014. Until then, I look forward to continuing to implement the Affordable Care Act and strengthening 

CCIIO’s partnership with Congress, the States, consumers, and 

other stakeholders across the country. 

Thank you so much for the opportunity to discuss the work that 

CCIIO has been doing to implement the Affordable Care Act and 

to help people with preexisting conditions, and I look forward to 

your questions. 

[The prepared statement of Mr. Larsen follows:] 

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Mr. STEARNS. Mr. Larsen, thank you very much. I will take the 

opportunity to ask the first set of questions. 

As you know, as everybody in the room knows, this is an oversight investigation committee that is looking at high risk insurance 

program, and I thought I would, before we start on that, a recent 

AP story just came out this morning indicating that your office has 

given out large sums of money under the Early Retiree Healthcare 

Program. You are familiar with that program? 

Mr. LARSEN. I am. 

Mr. STEARNS. And you were cited as the person who was involved with this. So we wanted to just, in passing, ask a few questions, that it appears that a lot of corporations, including General 

Electric, got $36 million for their early retirees. It appears that 

United Auto Workers got over 200 million, Verizon Communications got 91 million, AT&T got 140 million, and so the list goes on 

and on. It is a huge amount of money that you are giving out to 

subsidize retirees—early retirees. I guess the question is how can 

you justify giving out so much of taxpayers’ money to these corporations? 

Mr. LARSEN. Well, these—— 

Mr. STEARNS. These are profitable corporations. 

Mr. LARSEN. The Early Retiree Reimbursement Program in fact 

has been an incredibly successful program in accomplishing the 

goals that we set out to accomplish. The fact is that history has 

shown that the rate in which large companies are dropping coverage—insurance coverage for early retirees—— 

Mr. STEARNS. But these are corporations that are profitable, and 

when you talk about AT&T and General Electric and Verizon Communications, United Auto Workers, why would they need taxpayers 

to subsidize them, and why do—I mean, you have Northrop-Grumman, Boeing Company, the State Teachers Retirement System 

Ohio. If this is a healthcare program that is going to work, why 

would you be taking taxpayers’ money and giving so much out to 

companies that are very successful and have a very good profitable 

history? 

Mr. LARSEN. Well, those companies are companies that, in fact, 

continue to offer retiree benefits, health benefits for early retirees—— 

Mr. STEARNS. But shouldn’t they have the responsibility of taking care of that themselves and not asking for the taxpayers— basically giving them free money? 

Mr. LARSEN. Well, the program allows them and positions them 

to continue to offer this critical benefit to early retirees, because I 

will tell you, early retirees, folks that are between 50 and 65, when 

they are put out into the individual market, are the ones that are 

the most at risk for not being able to get insurance. 

Mr. STEARNS. Well I understand that, but that was part of when 

they got to work for GE or AT&T or Verizon, this is part of the 

package they understood. I guess are you going to give money out 

like this to all major corporations, all the unions, all the public employee retiree systems? I think the point would be that if you think 

the healthcare system that the Democrats passed is so successful, 

why in the flip are you giving out so much money of taxpayers so 

freely and overwhelming to companies that are very profitable? 

24 

Mr. LARSEN. Well, I would respond with a couple points. 

First of all, there are a number of different types of recipients. 

Certainly, State and local governments are also one of the main recipients so that employees and retirees of State and local governments can continue to have retiree benefits. 

Mr. STEARNS. OK, but Mr. Larsen, I have a statement from you. 

You said, ‘‘The overwhelming response to this program demonstrates exactly how broken the current healthcare system is, exactly why we needed reform in the first place.’’ Is the reform you 

are talking about is taking taxpayers’ money and giving it out to 

successful, profitable corporations? Is that your definition of why 

we need the Democrat healthcare bill? 

Mr. LARSEN. We think the program is successful because it has 

allowed these companies and State and local governments and nonprofits and commercials to continue to be able to offer coverage for 

early retirees. 

Mr. STEARNS. Now, you followed the recent publicity with General Electric paying no taxes on the huge amount of money they 

paid, so I understand you gave General Electric $36 million to help 

their early retirees. Do you think it was absolutely necessary the 

taxpayers fund early retirees for General Electric? Is that your position today? 

Mr. LARSEN. Well, when a sponsor in the program receives the 

money, it must apply the money to the benefits that are received 

by the retirees or to the costs that the company incurred—— 

Mr. STEARNS. OK, I understand. Let me—my time is almost expired, but let me just move on to what we are here for also is the 

high risk insurance program. 

Enrollment in the high risk pool was supposed to be about 

375,000 in the first year, according to the chief actuary of Medicare. Is that correct? 

Mr. LARSEN. That is my understanding, yes. 

Mr. STEARNS. OK. You know, based upon what we have seen so 

little, as you saw in my opening statement, how can you justify 

those costs if you have only done so little at this point? Where are 

you going to get the money to do this high risk for everybody? 

Mr. LARSEN. Well, it has been a fact across the country as States, 

and certainly for the federal high risk pool, that the pools are generally slow to start up. When the bill was passed, we devoted our 

efforts to standing the program up—— 

Mr. STEARNS. I will just close by saying if you have only got 

12,000 in the program today, and you have indicated 375,000 people is your goal, and you spent this huge amount of money on 

12,000, you won’t possibly have enough money to do 375,000. 

Wouldn’t you and I agree that you won’t have the money to do 

375,000, based just upon the 12,000 you have done? 

Mr. LARSEN. I don’t think, respectfully, we agree because we 

have not spent a large amount of money on the program to date. 

Mr. STEARNS. OK. All right, my time is expired. 

The gentlelady from Colorado. 

Ms. DEGETTE. Thank you, Mr. Chairman. 

Mr. Larsen, how much money has the program spent to date? 

Mr. LARSEN. For outlays or incurred expenses associated 

with—— 

25 

Ms. DEGETTE. Either one. 

Mr. LARSEN. The federal program and the state program combined is about $33 million as of February 28. 

Ms. DEGETTE. OK, and how much was set aside in the 

healthcare for this program? 

Mr. LARSEN. Five billion. 

Ms. DEGETTE. Five billion. So you have spent several hundred 

million of the 5 billion? 

Mr. LARSEN. Well, not—we have spent about $33 million on what 

I will call program costs, and then additional funds on administrative costs, but together it is less than $100 million. 

Ms. DEGETTE. OK, it is less than $100 million of the $5 billion, 

correct? 

Mr. LARSEN. That is correct. 

Ms. DEGETTE. Now, you are making efforts to try to enroll more 

people with preexisting conditions in this program, correct? 

Mr. LARSEN. In fact, I think they have been successful. 

Ms. DEGETTE. And why do you think that? 

Mr. LARSEN. Well, we had several phases of enrollment initiatives. The second phase started from January to March in which 

we conducted outreach with staff, by the way, just—hitting nine 

cities, talking with providers, and we have seen enrollment double—well, increase by 50 percent between November and February. 

So we have made those efforts and enrollment is going up. 

Ms. DEGETTE. So is your projection you are going to wildly exceed this $5 billion before the 2014? 

Mr. LARSEN. I don’t think we are prepared to say that yet. 

Ms. DEGETTE. OK, thank you. Well, that is what the chairman 

is implying, but you have spent less than $100 million. 

Mr. LARSEN. We will work within the appropriation. 

Ms. DEGETTE. Thank you. Now, let me just ask you one question. 

I know the topic of this hearing is about the PCIP program, but 

let us talk about this early retirement reinstatement program for 

a minute. That was—what was happening was a lot of employers 

who had early retires, retirement programs, were cutting those 

healthcare problems when the economy turned down, right? 

Mr. LARSEN. Correct. 

Mr. DEGETTE. So then what would happen would be people between the ages of 50 and 65 wouldn’t have insurance and they 

would have to go out on the individual market, right? 

Mr. LARSEN. Correct. 

Ms. DEGETTE. And so then those people couldn’t get insurance, 

right? 

Mr. LARSEN. Correct. 

Ms. DEGETTE. So that is what this is designed to help, is that 

correct? 

Mr. LARSEN. Correct. 

Ms. DEGETTE. And that program is also going to phase out by 

2014, right? 

Mr. LARSEN. Yes. 

Ms. DEGETTE. But at this moment, it is helping—Congress can’t 

require these companies to continue these programs for their early 

retirees, can we? No. And so therefore the people that these proVerDate Nov 24 2008 12:19 Nov 02, 2011 Jkt 037690 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-29 040111\112-29 CHRIS
26 

grams are helping are those early retirees who have no other way 

to get insurance, right? 

Mr. LARSEN. And there are millions of people who are conversed 

in the retiree programs that have been helped by this program. 

Ms. DEGETTE. Right, and it helps them get insurance. 

Mr. LARSEN. It helps them keep their coverage. 

Ms. DEGETTE. Now, let us talk about the subject of this hearing, 

again the PCIP program. 

Before the healthcare bill became the law of the land. Let us say 

that somebody was diagnosed with cancer, and they wanted to by 

health insurance on the private insurance market. What sort of options would those people be offered? 

Mr. LARSEN. Well, they are generally limited to the individual 

market, which they would be either offered exclusionary riders or 

denied coverage. 

Ms. DEGETTE. So you mean the individual market would say we 

are not going to cover you for your cancer because it was preexisting, right? 

Mr. LARSEN. That is correct. 

Ms. DEGETTE. Let us say they wanted to get coverage for the 

cancer. How much will that cost them? 

Mr. LARSEN. Well, I don’t think they could get coverage for that, 

without going to a state higher risk pool. 

Ms. DEGETTE. OK, and let us talk about the state high risk 

pools. How many states had high risk pools? 

Mr. LARSEN. I think there are about 35 that had state high risk 

pools. 

Ms. DEGETTE. OK, and where in those 35 states were they providing affordable coverage to anybody who needed it? 

Mr. LARSEN. Well, the difference between the PCIP program and 

the state high risk pools is they often have a standard rate that 

is up to 150 percent or 200 percent of some—— 

Ms. DEGETTE. The state program? 

Mr. LARSEN. The state program, which is not the way the PCIP 

program is structured. 

Ms. DEGETTE. OK. How is the PCIP program—— 

Mr. LARSEN. The PCIP program has a cap of no more than 100 

percent of the standard market rate. So the state programs, although available, are often viewed as not affordable for some people. 

Ms. DEGETTE. OK. I just have one last question. What would 

happen to these PCIP plans if the Affordable Care Act was repealed? 

Mr. LARSEN. You would have a lot of people that have no good 

option to get coverage, and these are the sickest of the sick, in 

many cases. 

Ms. DEGETTE. Their plans would be cancelled, right, and then 

they would have to go to these other options that you talked about, 

right? 

Mr. LARSEN. That is correct. 

Ms. DEGETTE. Thank you. 

Thank you, Mr. Chairman. I yield back. 

Mr. STEARNS. Gentlelady yields back. 

Gentleman from Texas, Mr. Burgess, is recognized for 5 minutes. 

27 

Mr. BURGESS. Thank you, Mr. Chairman. 

I don’t want to spend too much time on this, but I feel obligated 

to answer the ranking member of the committee. It always seems 

that they want to paint Republicans as a friend of the insurance 

companies. Just a quick review by a simple country doctor on his 

iPhone app tells me that Cigna and Aetna have done extremely 

well in the year since the passage of the Patient Protection and Affordable Care Act. Apparently when people are required to buy insurance, the companies that sell insurance seem to be able to manage OK. 

Let us talk for just a minute, because you were giving Ranking 

Member DeGette some information about the amount of money you 

spend in the program. You said about $100 million, is that correct? 

Mr. LARSEN. No, I said no more than that. The approximate 

number on her sleeve would be the program spending of about $33 

million, and then administrative costs of about $25, which includes 

a significant portion of startup costs that you incur anytime you 

start up a major program. 

Mr. BURGESS. Yes, I will accept that, but that seems a little bit— 

$33 million in benefits, is that correct, did I understand—— 

Mr. LARSEN. Well remember, these are the amounts that are 

paid to the states or to fund the federal program beyond the premiums that are collected from the folks that are covered in the programs. But that is the level of federal spending for the program 

combined for both the state and federal. 

Mr. BURGESS. So that is combined help for people against a backdrop of $25 million of administrative costs, is that correct? 

Mr. LARSEN. Well again, the 25 million, there are at least 10 million of kind of one time—— 

Mr. BURGESS. Yes. This would all be easier—— 

Mr. LARSEN [continuing]. Startup costs. 

Mr. BURGESS. We talked about this before. Boy, if we had a 

breakdown of your budget, it would just be so helpful and you 

promised that to us, and I am having to ask these questions because I don’t have that information yet. 

Mr. LARSEN. It is my hope and expectation that you will have 

that next week. 

Mr. BURGESS. Next week, OK. So we will mark the calendar and 

we are all anxiously awaiting that. 

Now you previously testified that you added 300 new jobs to implement the program, is that correct? 

Mr. LARSEN. Not just this program, that is—— 

Mr. BURGESS. For all of society. 

Mr. LARSEN. For all of society, yes, that is correct. Less than 300. 

Mr. BURGESS. Do you know how much you spent on salaries for 

those 300 people? 

Mr. LARSEN. I am sorry, could you repeat the question? 

Mr. BURGESS. The amount you spent on salaries for those 300 

jobs? 

Mr. LARSEN. I don’t know off the top of my head. 

Mr. BURGESS. Well, is that money coming out of the administrative or the non-administrative funds? 

28 

Mr. LARSEN. Oh, you mean the salaries that administer—that 

would be in the administrative portion. It is a very lean and small 

staff that administers the PCIP program. 

Mr. BURGESS. Now on the issue that has come up, and unfortunately, we haven’t had a lot of time to work though it because of 

the retiree program information that has come through this morning. But eight of the 17 companies had more than $10 billion in 

profit last year. I mean, are those not companies that could have 

afforded to do some of this on their own? 

Mr. LARSEN. Well, I can’t speak to their capability, I can only say 

that, as I mentioned earlier, when they receive funds through the 

ERRP program, they are required to devote those funds to either 

reducing their own costs or reducing the costs of the beneficiaries, 

and I think 80 percent direct the funds to directly lowering the 

costs of people that participate in the programs, so we think that 

is a success. 

Mr. BURGESS. Yes, but you have got a big company whose initials 

I won’t mention, but they haven’t paid any taxes this past year, 

they post an enormous profit, and you are providing them $36 million. You know, the only problem with that—and I want to help 

people, too, but we are borrowing 42 cents of every dollar we spend, 

so was there perhaps a way to tighten this up and run it just a 

little bit leaner? You know, even Karl Marx said ‘‘Each according 

to his disability, each according to his need.’’ 

That is a non-response response. It is very difficult for the recording clerk to record that. 

Let me just ask you one more question. Was it—I have no problem with risk pools. I think the state risk pools, although they were 

underfunded, certainly provided good help, and when I would do 

town halls and talks in my district, and even in talking to doctor 

groups around the State, someone would always come forward and 

say, you know, don’t do anything to mess up what I have got with 

this risk pool. But at the same time, why was it necessary to reinvent the wheel? You already said that you have 35 of the states 

with something up there in a risk pool arrangement. You have additional states that have reassurance programs, so you are already 

getting to a pretty significant number of the states already. Now 

we come and overlay a federal program. Hailey Barbour, when he 

was here, actually testified that he had 3,600 people on his risk 

pools in the State of Mississippi, and with the infusion of—he did 

not participate at the federal level, but what the additional federal 

funds at a significant cost were able to provide additional benefits 

to 58 new people. That almost seems like we are not being smart 

about how we are spending this money. 

Mr. LARSEN. I guess I have two responses. First, I would say that 

this is a compliment to the state pools because it has different design elements. For example, often the state pools have waiting periods before they start to cover—— 

Mr. BURGESS. Yours is 6 months. 

Mr. LARSEN. Well, it is a little different for the federal program. 

That is you can’t have been insured for 6 months, because we 

didn’t want people migrating across pools. So in the state pools, 

you often have a waiting period, so that even if you come into the 

pool, you don’t have coverage necessarily right away. 

29 

Mr. BURGESS. Six months seems like a waiting period. 

Mr. LARSEN. And then as we discussed earlier, typically the 

standard rate for the state pools is 125 percent, 150 percent or 

higher, and so there are features of the federal program that complement what is going on at the state level. 

Mr. BURGESS. I get that. It just seems like it would have been 

better to streamline those two together, rather than reinvent the 

wheel. 

Mr. STEARNS. Gentleman’s time has expired. 

The gentleman from Michigan, the emeritus of the committee, 

Mr. Dingell is recognized for 5 minutes. 

Mr. DINGELL. Thank you. Thank you, Director Larsen—— 

Mr. STEARNS. I think you will have to pull the mic a little—— 

Mr. DINGELL [continuing]. For implementing the Affordable Care 

Act. You have a large task before you, including the critical patient 

bill of rights and State-based exchanges, as well as today’s focus, 

the Preexisting Condition Insurance Plan. I appreciate the work 

that you have done in getting the pool up and running in Michigan, 

including the work you have done to make a difference in the lives 

of Michiganders like Jerry Garner, who you pointed out in your testimony. 

Now, as my colleagues on the other side of the aisle question the 

effectiveness of high risk pools, I think it would be useful to remind 

them of the strong support of these pools as a way to expand coverage. In fact, members of this committee offered their own legislation appropriating far more money than laid out in the—or expended in the Affordable Care Act to implement high risk pools nationwide. 

Now, Director Larsen, a few questions. Please answer yes or no. 

The PCIP was designed to be a temporary program to help the 

sickest of the sick and those most in need to have access to coverage until health insurance exchanges are up and running in 

2014. You point out that more than 12,400 individuals have enrolled in these programs across the country. In your experience, 

have the states been able to set up affordable premiums for individuals in need? Yes or no. 

Mr. LARSEN. Have states been able to set up affordable programs? No, they have not completely. 

Mr. DINGELL. They have not. 

You point out in your testimony that CCIIO recently adjusted the 

federal PCIP program to reduce premiums and to add two plan 

choices. You point out that the enrollment in PCIP programs has 

increased by 50 percent from November to January—rather, November to February. In your opinion, will increased plan choices in 

the PCIP program encourage further enrollment? Yes or no. 

Mr. LARSEN. Yes. 

Mr. DINGELL. Now, you also discussed in your testimony the outreach efforts in CCIIO that have been used to encourage enrollment, working with Social Security Administration, American Cancer Society, Diabetes Association, and other agencies. It is my opinion it seems to be a very targeted approach in enrolling individuals. 

In your opinion, do you believe this targeted approach is working? 

Yes or no. 

Mr. LARSEN. We think it is showing results and working, yes. 

30 

Mr. DINGELL. Now, how do you know that this targeted approach 

is working? 

Mr. LARSEN. Well, as I mentioned and referenced, we have seen 

significant increases in the rate of enrollments in the period between November and February, in addition to the overall enrollment. There were several states in which the number of individuals 

in the program doubled, five or six states that doubled their enrollment in that period, so it is very encouraging. 

Mr. DINGELL. Thank you. 

Now, is every PCIP program conducting a public campaign to recruit eligible individuals? Yes or no. 

Mr. LARSEN. Yes. 

Mr. DINGELL. Now, has CCIIO shared the best practices with the 

states who have lower enrollments than others to help them recruit 

eligible individuals they may be missing? Yes or no. 

Mr. LARSEN. Yes, we are in constant contact with the States. 

Mr. DINGELL. Is—in your opinion, has CCIIO learned some best 

practices in terms of enrolling eligible individuals that will help to 

ensure successful enrollment of individuals in the exchange beginning in 2014? Yes or no. 

Mr. LARSEN. Yes. 

Mr. DINGELL. Now, am I fair in observing that when the situation in 2014 when everybody is covered in the exchanges, am I assuming correctly that at that point it will no longer be necessary 

to have this high risk pool? 

Mr. LARSEN. That is correct. 

Mr. DINGELL. OK. Now, would you like to comment, if you 

please, sir, in the very brief time that we have on what are the best 

practices or any other comments that you might like to make with 

regard to the previous questions? 

Mr. LARSEN. Well, as you mentioned we have learned that it 

really is a targeted outreach campaign. This is not necessarily 

mass marketing so that you work closely with high volume providers, hospital associations, medical associations. We have worked 

with the insurance companies that issue denial notices to take note 

of the availability of the PCIP program—— 

Mr. DINGELL. One very quick question. The companies that you 

have helped have had no responsibility, other than their contractual responsibilities to cover either their active employees or their 

retirees, is that correct? 

Mr. LARSEN. Yes. 

Mr. DINGELL. Thank you. 

Thank you, Mr. Chairman. One second left. 

Mr. STEARNS. Thank the gentleman from Michigan. 

The gentlelady from Tennessee is recognized for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

Mr. Larsen, I am going to cut right into this. What are the standards on your application, and what does your application look like 

for these companies that apply for this many—for the early retiree 

process? 

Mr. LARSEN. Well, first they have to submit an application to be 

a planned sponsor, requiring basic information about the plan, 

about the company and their retiree plan, and then in the process 

31 

of submitting claims, then they have to submit claims information. 

As you may know—— 

Mrs. BLACKBURN. OK. Let me—OK. They submit a claim to be— 

they submit an application to be a planned sponsor, so do they 

need to show financial need when they submit an application to 

you, that they need this money, that they are short of money, that 

they are not going to be able to cover the cost of those that are enrolled in the plan that they are choosing to sponsor? Do they have 

to demonstrate that financial need? 

Mr. LARSEN. The statute doesn’t require a need—— 

Mrs. BLACKBURN. How long is the application they submit? 

Mr. LARSEN. It is not particularly long. I don’t recall exactly. 

Mrs. BLACKBURN. OK, so they don’t have to demonstrate any financial need, they just need to show that they want to set up a 

plan for their early retirees, is that correct? 

Mr. LARSEN. They need to demonstrate that they have a current 

program to cover their early retirees. 

Mrs. BLACKBURN. So they have a current—that they have a current program. 

OK, let me ask you this. Some of these companies have early retirees that they may have incentivized to take early retirement. Do 

you ask them how they achieved their universe of early retirees? 

Did they incentivize these people, give them early parachutes— 

early retirement parachutes, give them extra benefits if they chose 

to retire? Did you ask them if they are doing that? 

Mr. LARSEN. I don’t believe that is part of the application. 

Mrs. BLACKBURN. It is not part of the application, so therefore, 

in order to make their bottom line look better, they could actually 

go to a universe of employees and say we are going to incentivize 

your early retirement, and then move them into this plan that they 

are going to submit an application to sponsor, then come to you 

with their hand down and say hey, we need your millions, Federal 

Government. Do you not see why the American people are so frustrated with what you all are pouring out of these bureaucracies 

every day on the American taxpayer? I mean, does this—is this lost 

on you? 

Mr. LARSEN. Well first of all, I don’t think we have seen—— 

Mrs. BLACKBURN. You have spent $100 million in setting up a 

program we don’t want for services we don’t need, giving money to 

corporations that are profitable corporations, giving money to people like GE who are exporting their power job growth, giving 

money to people like GE who are no longer making light bulbs in 

the United States, but have shipped all those jobs to China, and 

you think this—you think we should be happy and pleased and applaud you for creating new federal jobs to take money out of the 

taxpayer’s pocket? 

Let me ask you something else. Let me move to the PCIP. Let 

me move to the PCIP program. I don’t want to run out of time. Did 

you have any existing program that you used for a model when you 

set up PCIP? Was there any program in existence that you went 

to? You already said you didn’t think the states were doing a very 

good job with their high risk pools, so—— 

Mr. LARSEN. Well, I don’t think that is quite what I said. I said 

that there are 35 state programs—— 

32 

Mrs. BLACKBURN. You said it was incomplete. 

Mr. LARSEN. I am sorry? 

Mrs. BLACKBURN. I think you said they were incomplete. 

Mr. LARSEN. No, they have different sets of standards, and the 

federal standard is different. So we certainly looked to the way that 

the high risk pools were administered. 

Mrs. BLACKBURN. Yes, yours has a different design element, were 

your exact words. 

Mr. LARSEN. That is right. 

Mrs. BLACKBURN. OK. Is there any program that you have looked 

at that you think has been successful? When you have a State like 

Tennessee, and you and I have discussed Tennessee before, we 

have been down this road. We know public option healthcare does 

not work, that it breaks the bank, and we know where some of the 

pitfalls are, but you all are not willing to listen to some of that 

guidance. So, did you work from a model that has actually yielded 

a savings? 

Mr. LARSEN. Well, high risk pools by definition will not yield savings. They—— 

Mrs. BLACKBURN. They should reduce costs. 

Mr. LARSEN. Well, here is the problem. When you are insuring 

sick people, you can’t collect enough premiums to cover the costs, 

and so high risk pools are always subsidized in some way. Typically in States, it is subsidized through assessments on insurance 

companies or general revenue. In this case, it is subsidized through 

the PCIP program for the federal and State—— 

Mrs. BLACKBURN. Do you think that putting a federal program 

along side a state program, even though it has, in your words, different design elements, is redundant? 

Mr. LARSEN. No, I don’t. 

Mrs. BLACKBURN. You don’t? 

Mr. LARSEN. I do not. 

Mrs. BLACKBURN. You don’t see a problem with the duplications? 

Mr. LARSEN. No, because I said I think we attracted a different 

element of the population that has preexisting conditions, so it is 

complimentary to the program. 

Mrs. BLACKBURN. So in other words, you think the Federal Government needs to pick these programs up and pull them to the federal level, not trust the states for oversight, and then turn around 

and out of your $5 billion, give it to corporations who don’t need 

the money who are firing American workers and shipping the jobs 

overseas? 

I yield back. 

Mr. STEARNS. Gentlelady yields back. 

The gentlelady Jan Schakowsky is recognized for 5 minutes. 

Ms. SCHAKOWSKY. Well, I am just loving this debate. I particularly appreciate Dr. Burgess quoting Karl Marx in his rationale on 

why this program really doesn’t work, and I appreciate hearing the 

fury about companies that don’t pay taxes and then outsource jobs. 

I would certainly endorse those concerns and would certainly welcome an opportunity to work with my colleagues across the aisle 

to address just that. The problem we have is that these greedy 

companies that legally don’t pay any taxes also are not going—are 

33 

not providing, are increasingly dropping early retirees from these 

healthcare programs. Is that not true, Mr. Larsen? 

Mr. LARSEN. That is correct. 

Ms. SCHAKOWSKY. So we have seen that while all of this outrage 

may be going on with no solutions, you know, we could sit down 

and establish criteria for companies that, when they make a certain amount of money, must provide this kind of coverage for early 

retirees. I welcome that conversation. 

But in the meantime, are we going to sit here and say the burden, then, will be on the shoulders of those very retirees who, in 

many cases in the past, used to get help from their companies who 

aren’t. And the problem is that these are, in fact, you know, expensive people to insure, these high risk people, and that is precisely 

why we passed the Affordable Care Act, and why, in 2014, we are 

going to prevent discrimination. Is this not a bridge program, Mr. 

Larsen? 

Mr. LARSEN. That is exactly right. 

Ms. SCHAKOWSKY. And what would happen to those retirees if we 

did not provide that? 

Mr. LARSEN. I think they would have great difficulty finding coverage in the individual market. 

Ms. SCHAKOWSKY. So if there is another solution that my Republican colleagues would like to find to require corporations to pay 

their fair share of taxes, to come up with a way to force them to 

cover their retirees, then why don’t we talk about that? I haven’t 

heard anything like that, except to criticism now in Marxian language of what these nasty, outsourcing corporations are doing. 

Would the Chairman—— 

Mr. STEARNS. I would be glad to, I think, repeal Obamacare and 

start anew and try to come up with a healthcare plan that every 

American would support. 

Ms. SCHAKOWSKY. And put every American at risk again, when 

we have a plan that we would be happy to look at various ways 

to make it better. 

In the meantime, Mr. Larsen, I congratulate you on this program 

to make sure that we aren’t setting adrift the victims of some of 

these very corporations that the Republicans have supported. 

In the Medicare—let me find it—there was a loophole created in 

2003 with the Medicare Modernization Act that allowed companies—this was a Republican initiative—to receive a 28 percent subsidy from taxpayers to help cover the cost of prescription drugs for 

retirees without counting the money as income. When they spent 

the money, then the companies were allowed to turn around and 

get a deduction for it on their taxes, even though the money was 

a gift from taxpayers. There was no outrage from the Republicans 

who wrote that provision into the legislation that the Obama Administration saw as a double subsidy from the taxpayers. But now 

at the very moment we are looking how to get these vulnerable employees to make it to 2014, now we are looking at these rich corporations and how are we letting them get away with it? Well, if 

there is a way that they suggest that we can get GE and AT&T 

to cover those, I welcome that, and until that point, we are not 

going to set those employees adrift with no healthcare coverage. 

I yield back. 

34 

Mr. STEARNS. Gentlelady yields back. 

Mr. Gingrey is recognized for 5 minutes. 

Mr. GINGREY. Mr. Chairman, thank you. 

Mr. Larsen, Ms. Blackburn was just trying to point out something to you in regard to a lot of these companies and one in particular, I won’t name the company, but the initials are GE, in regard to these early retirement incentive packages that they give to 

their advantage to the advantage of their bottom line. That is the 

only reason why a company would do something like that. But 

what it amounted to was a lump sum early retirement bonus worth 

75 percent of their annual pay, and her outrage, of course, was over 

the fact that when these companies do that and then they come to 

you, to the Federal Government with this ERRP program and say, 

oh, sign us up for the money to help us now pay these same people 

for their health retirement benefits. So that is where the outrage 

is coming from. 

CMS just released a new report yesterday announcing that this 

program, Early Retiree Reinsurance Program, ERRP, created 

under Obamacare, spent nearly $1.8 billion in reimbursements 

which have helped preserve the availability of health benefits for 

early retirees and reduce increases in plan participant costs. In deference to my limited time, I have a series of questions, and if you 

don’t mind, please try to answer yes or no on these, Mr. Larsen. 

Number one, does the Center for Consumer Information Insurance Oversight oversee this Early Retiree Reinsurance Program for 

CMS? 

Mr. LARSEN. Yes. 

Mr. GINGREY. And you are the deputy administrator and director 

of the Center for Consumer Information? 

Mr. LARSEN. That is correct. 

Mr. GINGREY. Was the Early Retiree Program created in PPACA, 

otherwise known as Obamacare, was it created? 

Mr. LARSEN. It was part of the what we call the Affordable Care 

Act. 

Mr. GINGREY. The answer is yes, thank you. Next question. The law appropriated $5 billion to pay the claims for early retirees, correct? 

Mr. LARSEN. Yes. 

Mr. GINGREY. That is the same amount appropriated to the high 

risk pools for people who cannot obtain insurance. Is that correct? 

Mr. LARSEN. Yes, there is a separate appropriation—— 

Mr. GINGREY. It is essentially the same amount. CMS just released a report yesterday announcing that it has spent nearly $1.8 

billion of the 5 billion appropriated to date, is that correct? 

Mr. LARSEN. For the Early Retiree program? 

Mr. GINGREY. Yes. 

Mr. LARSEN. That is correct. 

Mr. GINGREY. Next question. I would like you to go over some of 

the payments made in the $5 billion Early Retiree Program with 

you. My staff has presented you with a copy, and—thank you, Robert—tabbed, numbered, highlighted. Again, a simple yes or no answer, please. Did AT&T receive $140 million from this retiree 

fund? 

Mr. LARSEN. That is my recollection from—— 

35 

Mr. GINGREY. Are you aware that AT&T filed a billion-dollar loss 

with the SEC on March 26 of last year, and in papers accompanying the filing charged the losses stemmed from the passage of 

Obamacare? 

Mr. LARSEN. I am not familiar with the reference. 

Mr. GINGREY. Well, the answer is yes, they did. 

Are you also aware that AT&T stated in its March 26 SEC filing 

that it would be forced to evaluate prospective changes to the active and retiree health plan benefits offered to their employees? 

Mr. LARSEN. Again, what we focused on is trying to make sure 

that these companies that get this money continue to—— 

Mr. GINGREY. Mr. Larsen—— 

Mr. LARSEN [continuing]. Provide it to retirees. 

Mr. GINGREY [continuing]. In the interest of my time, the answer 

to that question is yes, they did. 

Did Valero Energy Corporation receive over $1 million from this 

retiree fund? You have got the information in front of you. 

Mr. LARSEN. If you want me to flip through the list, I can. I don’t 

have all the recipients memorized. 

Mr. GINGREY. Well in the interest of time, I will answer that one 

for you, too. Yes, they did. 

Are you aware that Valero Energy Corporation filed a 15 to $20 

million loss with SEC on the same day as AT&T, once again citing 

Obamacare as the reason? And the answer to that, since you are 

a little slow on it, is yes, they did. 

The whole point here of my line of questioning, Mr. Larsen, is 

this system, this ERRP, Early Retiree Reinsurance Program, to me 

is just a makeup for the money that was taken away from corporations that was given at the time of the Medicare Part D prescription plan was put in place to keep them from dropping their retiree 

health insurance plans. It is a kiss and make up, which is ridiculous. They should have left that program as it existed, but they had 

to have money to generate and a score from the CBO to pay for 

this whole new entitlement program. So that is the line of my questioning and the point of it. 

I am over time now, so unfortunately I will have to yield back. 

Mr. STEARNS. Gentleman yields back. 

The gentleman from Texas, Mr. Green is recognized for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman, and I am glad my good 

friend from Georgia pointed out two Texas companies. Valero is 

headquartered in San Antonio and AT&T used to be San Antonio. 

Now they are Dallas, somewhere up there, but they got that assistance. 

I served on this committee in 2003 when we considered the prescription drug plan, and you know, it is almost like de ́ja vu all over 

again because the same issues were brought up then, that a lot of 

companies has retiree prescription drug plans were all of a sudden 

benefiting from this. So I just want to point that out, but the shoe 

is on a different foot this time. I appreciate you being here, Mr. 

Larsen. Thank you for appearing. 

I am from the State of Texas, as I said, and we already have a 

high risk pool that has been operational since 1992 and covers 

36 

27,000 Texans. How many states currently operate their own separate pool from those established by the PPACA? 

Mr. LARSEN. Right, I believe it is about 35 States. 

Mr. GREEN. OK. Were these states given the option to move the 

individuals currently in their high risk pool program over to the 

new high risk pool established by PPACA? 

Mr. LARSEN. Because of the different rules between the state and 

the federal, it runs in parallel to the state pools, but states can set 

up a PCIP pool. 

Mr. GREEN. And if the states set up a PCIP pool, they would not 

have to have their own pool? 

Mr. LARSEN. Well, they have their own pool which has one set 

of rules, and they have the federal—they have the PCIP pool that 

they run under a contract with HHS, and they design, subject to 

the standards in the ACA, the rates and the benefit design. So 

there are—there is a State-run pool and then a different type of insured, if you will, is eligible for this pool. 

Mr. GREEN. One of the concerns I have is the slowness in the 

number of people who are signing up for high risk plan, and I will 

give you my understanding what happens in the State of Texas. 

Texans are given the option to establish the high risk plan under 

health reform, and our governor declines, citing a financial burden 

on the amount of federal funds received and Texas continues to operate its own high risk program. Last year, a number of us sent 

a letter to Secretary Sebilius asking states who opt out of PPACA 

to establish high risk pools that we would have a similar to exchange in Texas. We would have an option for PPACA in Texas, 

and I will go into that in a few minutes on the benefit. 

In 2009, before we passed the Affordable Care Act, Texas received $10.5 million to run their current high risk through grant 

program funding through Congress. That is nearly 6 million more 

than any other State to fund their program. What we found out 

under the state program, the average program for a Texan participating in the high risk program must be twice the average premiums for healthy individual in the market. Is that true with the 

other 29 States, if they have something like that? 

Mr. LARSEN. Something like that. Not all of them are 200 percent 

or twice as much, but they are generally substantially above the 

market rate, and that can create affordability issues. 

Mr. GREEN. And that is the problem we have. For example, the 

premium for a 40-year-old woman in Houston, where I represent, 

under the Texas high risk pool is about $750. Under the PPACA 

plan, that same woman would only pay $387 a month. Why would 

anybody sign up for a state plan when they can actually save almost 300 or $400 a month? 

Mr. LARSEN. Yes, well there is one limitation that was in the 

ACA regarding the PCIP program, that is that you not have insurance for 6 months. So the people that are eligible for the PCIP program are people that have had nothing up until the implementation of the program. 

Mr. GREEN. So if somebody was under the state plan, they would 

have to wait 6 months before they could apply for PCIP? 

Mr. LARSEN. That is correct. 

37 

Mr. GREEN. How many states have that 6-month plan, do you 

know, in their current program and their separate program? Do 

you have to be without insurance for 6 months? 

Mr. LARSEN. Well, every State that administers a PCIP pool has 

to abide by that same 6 months. 

Mr. GREEN. But what about their separate state plan? Do they 

have—do states have something comparable to that—— 

Mr. LARSEN. Typically it is more that there are waiting periods 

or exclusionary periods so that you can sign up right away, but you 

may not have coverage. That is to avoid people circulating in and 

out of the pool when they are sick, so there are waiting periods for 

coverage for your high risk condition. 

Mr. GREEN. Well, I understand, although, you know, I have folks 

on Social Security disability, once they receive disability they have 

to wait 24 months before they can get Medicare, so 6 months is a 

long time, but not near 24 months like we have under Medicare for 

disabled folks. 

Under the PCIP, Texas would have benefited by about 493 million to run a high risk pool, is that true? 

Mr. LARSEN. I am sorry—— 

Mr. GREEN. Four hundred ninety-three million under the PCIP 

program, Texas, would have benefited by received about 493 million to run a high risk pool from the Federal Government. 

Mr. LARSEN. Well, that may be the allocation to Texas across the 

life of the program. I would have to go back and look at the numbers that you are referring to. 

Mr. GREEN. OK. 

Mr. STEARNS. Gentleman’s time has expired. 

Mr. GREEN. Thank you, Mr. Chairman. I was just asking some 

information because it is—so we can find out what we need to do 

to make sure our constituents get the cheapest program in the high 

risk pool. Thank you. 

Mr. STEARNS. I advise all the members, we have a series of votes. 

We will reconvene right after the votes, probably between 12:00 

and 12:15. Mr. Larsen, we are going to continue with another series of questions, and then we will reconvene—recess and come 

back. 

Mr. Bilbray is recognized for 5 minutes. 

Mr. BILBRAY. Thank you, Mr. Chairman. It was interesting, the 

reference you made right off, I think it was the second or third 

paragraph where you were pointing out that U.S. citizens or otherwise those who are legally residing in the United States, and I 

think you clarify that all U.S. citizens reside in the United States 

are legally present. But my question is about the verification. 

First of all, let me back up. You made a reference to the fact that 

there were how many states that were allowing you to administer 

their program? 

Mr. LARSEN. Twenty-three states and the District of Columbia. 

Mr. BILBRAY. OK. Do you realize that about 65 percent of those 

states are states that have basically told us to go to hell and are 

engaged in the blocking, so a lot of that participation, 65 percent 

of the participation, looks like it does not trust in the Federal Government to administer the program, but basically a position that 

they don’t want to participate in the program in any form? 

38 

Mr. LARSEN. Well, I can’t speak to their motives for not participating, but I know that we administer in 23 States. 

Mr. BILBRAY. But 65 percent sounds—— 

Mr. LARSEN. Yes, I don’t know. 

Mr. BILBRAY. OK. The verification system, you made a statement 

that only those legally in the country are to participate in the system. Is there a reason why we didn’t use the same verification that 

we use for all other programs—benefit programs in this country? 

Mr. LARSEN. I am not sure what your question is. 

Mr. BILBRAY. My question is why aren’t we using the verification 

systems for this benefit that we use in other benefits in the federal 

system? 

Mr. LARSEN. I am not sure that we aren’t. 

Mr. BILBRAY. OK, let me double-back here. Do you require biometrics for identified foreign nationals to participate in the program? 

Mr. LARSEN. I would have to get back to you on the details of 

the verification. 

Mr. BILBRAY. OK, I would—— 

Mr. LARSEN. What we work through—— 

Mr. BILBRAY [continuing]. Question the fact that because we 

don’t, you say no, there is no biometrics. Now, I understand that 

U.S. citizens or people who claim to be U.S. citizens just have to 

state their name, their Social Security number, and their date of 

birth, right? 

Mr. LARSEN. I think we still verify that information. 

Mr. BILBRAY. You verify them through which documents? 

Mr. LARSEN. I will have to confirm with you exactly how we—— 

Mr. BILBRAY. OK. I am just saying that you don’t use biometrics 

on the United States, but you do not use—are you aware you are 

not using biometrics for stated foreign nations to participate in this 

program? 

Mr. LARSEN. I don’t know the answer to that question. 

Mr. BILBRAY. OK. Well let me just say for the record, there is no 

reason why anyone who says they are a foreign national of the 

United States that we should not have biometrics as a requirement, because every foreign national that I know of—and somebody 

correct me—but at least the overwhelming majority of foreign nationals in this country have biometric confirmable identification, 

and we are not using that technology right now. This is one of 

those issues of someone saying just because you say that somebody 

legally in the country is not participating, if you don’t have appropriate verification, you can’t sit here before this committee and 

make a statement like that with any degree of certainty. It is what 

you may think might happen or you hope may happen. 

But I think we need to clarify, without the verification systems, 

we are lying to the American people. I don’t care who it is, the guy 

at the top or the guy at the bottom, to look at the American people 

and say that I can assure that people illegally in this country are 

not participating—— 

Mr. LARSEN. I will be happy to follow up with you on that. 

Mr. BILBRAY. OK, I appreciate that. 

Mr. Chairman, I yield back. 

Mr. STEARNS. OK. Will the gentleman allow me just to—— 

39 

Mr. BILBRAY. To the gentleman. 

Mr. STEARNS. We are going to recess, but I just have a question 

for Mr. Larsen. If it turns out a company gets—or a State gets a 

waiver from Obamacare, would you still give money to early retirees, even thought they got a waiver from all the healthcare provisions? Just yes or no. 

Mr. LARSEN. Well, I don’t—which waiver are—— 

Mr. STEARNS. Let us take—— 

Mr. LARSEN. There is only really one—— 

Mr. STEARNS. Like the State of New York got $47 million, so the 

question is, the State of New York is putting in for a waiver. Did 

they get their wavier yet, the State of New York? 

Mr. LARSEN. You mean the waiver from their annual limits—— 

Mr. STEARNS. Yes. 

Mr. LARSEN [continuing]. Requirement? I am not sure. 

Mr. STEARNS. OK, but let us say hypothetically if the State of 

New York got the waiver, would you still go ahead and give money 

to early retirees who are—— 

Mr. LARSEN. Right, but the waiver that they get or a state can 

get on behalf of insurance carriers in the state is not a waiver from 

the provisions of the Affordable Care Act. It is a waiver from that 

one narrow provision—— 

Mr. STEARNS. OK, I understand. 

Mr. LARSEN. So they wouldn’t be ineligible, for example. 

Mr. STEARNS. So the waiver does not apply then—extend to the 

requirement—— 

Mr. LARSEN. Yes, it is a very narrow provision. 

Mr. STEARNS. Thank you for that clarification. 

With that, the subcommittee will recess and come right after the 

votes, which hopefully is between 12:00 and 12:15. 

[Recess.] 

Mr. STEARNS. The subcommittee will reconvene, and if the witness will come to the table, I think our next member is Ms. 

Christensen. You are recognized for 5 minutes. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman, and thank you, 

Mr. Larsen, for not only being here, but the work that you are 

doing to make sure that our—those who could not receive insurance otherwise are receiving it. 

I just want to say for the record, though, that I really regret that 

we were unable to include the Territories in this, because we are 

U.S. citizens and there are many of our constituents in the Territories who are unable to get insurance because of preexisting disease. 

Before they had even heard your testimony, the majority of this 

committee was already attacking the PCIP program for being too 

expensive, but the fact of the matter really is that it is going to run 

very efficiently, as I see it. In fact, it is my understanding that the 

administrative costs for the program are capped at 10 percent over 

the life of the program. Is that correct? 

Mr. LARSEN. That is correct. 

Mrs. CHRISTENSEN. And do you expect to stay within that cap? 

Mr. LARSEN. We will stay within the cap, and we are ensuring 

that the states will stay within the cap as well. 

40 

Mrs. CHRISTENSEN. Thank you. There have also been some concerns that the startup costs have pushed the initial costs above 

projections. So can you give us some perspective on these startup 

costs and how they compare to startup costs for other programs, 

like Medicare Part D? 

Mr. LARSEN. Well, first let me clarify that I am not concerned 

that the startup costs will push us over any projections, it is simply 

that they represent in the first 6 months of a program a disproportionate amount, but over the life of the program, which is the statutory standard for the 10 percent, we will be within the 10 percent. 

Mrs. CHRISTENSEN. Thank you. 

Mr. LARSEN. But the startup costs are things you might imagine 

programming, hiring people initially, getting the scripts ready for 

the call center, so there are a lot of one-time things that you have 

to put into place. 

Mrs. CHRISTENSEN. Can you compare them, your setup costs with 

the Medicare Part D program? 

Mr. LARSEN. I am probably not in a position to do that because 

I am not as familiar with those startup costs. 

Mrs. CHRISTENSEN. And how does a 10 percent administrative 

cost compare with what we would see in the private insurance market? 

Mr. LARSEN. Well, in fact, under the medical loss ratio standard, 

we provided, you know, headroom, if you will, for a 20 percent of 

administrative costs and 80 percent, so it is quite a bit tighter than 

what we are even requiring for the private insurance market. 

Mrs. CHRISTENSEN. Right. So this sounds like an example of government-run healthcare working pretty well, and it is providing 

critical access to health insurance for people with preexisting conditions, and doing so in what I think is a lean and efficient way. 

There have been certain media accounts of the program, as well 

as some of the comments I have heard from across the aisle that 

suggest that at the current rate, the PCIP plans in some states will 

run through their funding before the program ends in 2014. Are 

you concerned about that happening? 

Mr. LARSEN. I am not concerned about it. We have the ability to 

address the specific rates that states draw down on their initial allocation. Certainly, as I think we announced, New Hampshire was 

a State that was running ahead of projections, but we have other 

states that are running behind projections, and again, we have the 

ability to manage the funds within the allocations and within the 

5 billion, so I am not concerned about the fact that there may be 

one state or a small number of states that are ahead of projections. 

Mrs. CHRISTENSEN. So thank you, Mr. Larsen. It sounds to me 

like the program enrollees and the American people will be getting 

a substantial bang for their buck with this program. 

In your testimony, you talked about the thousands of Americans 

who were locked out of the accessible private insurance coverage 

before the Affordable Care Act, and then you talked about the difference in what they would have had to pay in the regular high 

risk pools versus what they pay for us. You talked about Mr. Garner, who was reported on in the New York Times and how his insurance might have cost, you know—been prohibitive, but this proVerDate Nov 24 2008 12:19 Nov 02, 2011 Jkt 037690 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-29 040111\112-29 CHRIS
41 

gram helped him. Do you have any other examples that you would 

like to share with us? 

Mr. LARSEN. Well, I don’t have a specific example. I can only tell 

you that for people that have conditions like diabetes, heart conditions, heart diseases, cancer of course, that if coverage is available, 

and in some cases, it simply isn’t other than through a State-run 

high risk pool, they are going to pay a lot either way, and that creates significant affordability issues for individuals. So they are 

really in a no-win situation, and that is why this program is so important. 

Mrs. CHRISTENSEN. Thank you. Mr. Chairman, I yield back the 

balance of my time. Thank you for your quick answers. 

Mr. STEARNS. Gentlelady yields back the balance of her time. 

Mr. Gardner is recognized from Colorado for 5 minutes. 

Mr. GARDNER. Thank you, Mr. Chairman, and thank you, Mr. 

Larsen, for your time here today. 

I just wanted to talk a little bit more about this issue of the 

Early Retiree Reinsurance Program. You previously stated your position, and I just want to double check on that. Is it really your position that these corporations that you have listed on your Web 

site, who have billions of dollars in profits needed to get taxpayer 

money in order to fund their early retiree program? 

Mr. LARSEN. My position is we want to make sure that companies that are currently providing early retiree benefits continue to 

do so, and this program helps ensure that they do that. 

Mr. GARDNER. This is all programs in the United States, or just 

a few that you have listed on your Web site? 

Mr. LARSEN. Well, these—this program helps the sponsors who 

come in for reimbursement requests to be able to continue their retiree program, so this helps cover the costs that they would otherwise incur. 

Mr. GARDNER. So companies like Shell Oil Company that had a 

contractual obligation that they would otherwise incur were given 

$4.4 million too? 

Mr. LARSEN. Well, ultimately the money is for the benefit of the 

retirees. 

Mr. GARDNER. But it is money that taxpayers have that we are 

just giving to Shell Oil Company? 

Mr. LARSEN. Well, we are helping make sure that Shell Oil and 

other companies continue their retiree program. 

Mr. GARDNER. So other companies like General Electric, the Boeing Company, AT&T, Verizon, DuPont, Mars, those kinds of companies? 

Mr. LARSEN. Well, there are many other smaller companies, I 

think if you look through the list, there are a large number of companies that got, you know, $1 million or less in reimbursements. 

So it is not all just big companies, and in fact, the biggest recipients are state and local government for this program. 

Mr. GARDNER. Do you think they should have had to pay for 

their own? 

Mr. LARSEN. I think that we want to make sure that retirees of 

the ages between 50 to 65 before Medicare have an option for coverage, because if they don’t, they are in a very hard place in the 

marketplace. 

42 

Mr. GARDNER. Do you think it is the government’s responsibility, 

then, to pick up the obligations of a privately-agreed to contract? 

Mr. LARSEN. Well, I don’t know in which cases there are specific 

obligations or not, but we, in any case, want to make sure that 

there are funds available to make sure that these programs are 

continued. 

Mr. GARDNER. Was that part of the discussion, though, in who 

got this bailout, was which companies had an obligation or a contract to do that, or did it just—the money came because they 

asked? 

Mr. LARSEN. No, the way the program is established under the 

ACA is they apply as a sponsor, we review it, and once approved 

as a sponsor, then they submit the claims for reimbursement. 

Mr. GARDNER. So you would know which of these companies were 

contractually obligated to make these payments anyway? 

Mr. LARSEN. That is not part of the, you know, the provisions of 

the ACA. 

Mr. GARDNER. So you just gave this money without knowing 

whether or not they may be under contractual obligation? So the 

United Auto Workers, who got $207 million, weren’t contractually 

obligated to pay for these healthcare costs? 

Mr. LARSEN. Well, it is actually—and I think we have corrected 

that. It is the United Auto Workers Trust Fund, so the United 

Auto Workers didn’t get the money, the trust fund that administers 

the early retiree benefits gets it. But whether or not they are contractually obligated to do it, it just provides benefits to the early 

retirees. 

Mr. GARDNER. So what standards were many of these Fortune 

500 companies had in order to get this free money? 

Mr. LARSEN. Well, they have to demonstrate that they have 

claims experienced between the threshold that is set up in the Affordable Care Act, so the ACA requires or provides that under this 

program, 80 percent of the costs for retirees between the $15,000 

and $90,000 limit is reimbursed under the reimbursement program. 

Mr. GARDNER. So pretty much anybody who applied was accepted 

in this program for free money? 

Mr. LARSEN. Well, I wouldn’t say that, although I think that 

the—most of the companies that applied were approved as sponsors. There were some that weren’t. 

Mr. GARDNER. So if—you issued the regulations for this program, 

correct? 

Mr. LARSEN. CCIIO issued the regulations, yes. 

Mr. GARDNER. Was there a need for more restrictive regulations, 

or—— 

Mr. LARSEN. Well, we issued the regulations that were called for 

under the language in the Affordable Care Act for the program. 

Mr. GARDNER. Do you think they needed to be more restrictive? 

Mr. LARSEN. I think the program is working well as it is. If Congress wanted to revisit the program, we would be happy to work 

with people to make sure that we continue to be able to provide 

ongoing retiree benefits. 

Mr. GARDNER. I mean, do you think it is right, though, that the 

taxpayers gave free taxpayer money to GE, that is making billions 

43 

of dollars, not paying any taxes, needed another $36 million of Federal Government money? 

Mr. LARSEN. Well, I think it is hard to look at this program in 

isolation. I mean, we have got a number of bridge programs in 

place. We have got the PCIP program, we have got ERRP, all of 

which help get us to 2014 that avoid uncompensated care, avoid 

the burden that some particularly sick or vulnerable populations 

may experience if they don’t have coverage. 

Mr. GARDNER. Now, you said get us to 2014, but you are ending 

the program soon, correct? 

Mr. LARSEN. Well, not soon. It could—the money could run out 

in fiscal year 2012. 

Mr. GARDNER. So the money is going to run out soon, and then 

what happens? 

Mr. LARSEN. Well then that is the end of the program, unless 

Congress appropriates additional money to the program. 

Mr. GARDNER. Is it your opinion that Congress ought to appropriate, and will you be asking for more money? 

Mr. LARSEN. We would be happy to work with Congress, you 

know, should they choose to look at other options to extend the program. 

Mr. GARDNER. But you think continuing these bailouts is the 

proper role for the Federal Government? 

Mr. LARSEN. Well again, I think we disagree on the bailout terminology, but we think this is a good program. 

Mr. GARDNER. Mr. Chairman, I yield back. 

Mr. STEARNS. The gentleman’s time has expired. Before I go to 

the next speaker, I just ask unanimous consent to put into the 

record the ERRP memos that are issued by CCIIO on March 2 and 

March 31, our staff memo of March 23, the Chief Actuary report 

of April 22, HHS response to the committee on high risk pools February 28, and the New York Times article on GE. No objection, it 

is agreed upon. 

[The information appears at the conclusion of the hearing.] 

Mr. STEARNS. And at this point, we recognize the gentlelady, Ms. 

Myrick, for 5 minutes. 

Mrs. MYRICK. Thank you. I really have a lot of similar questions 

to what Mr. Gardner asked because of the same type of concerns 

that this $5 billion in money in the Early Retiree Reinsurance Program has gone to corporations and unions. Again, I just have a 

hard time understanding when companies like one of them that 

made $20 billion in profit can’t afford to do their own programs. 

And if the healthcare plan wasn’t there, that they can dump their 

employees on anyway if they chose to do that. I mean, all of this 

just doesn’t make any sense to me, and so I guess how do you justify—you said and I heard you when you answered Mr. Gardner, 

that you say well, it is because you want them to continue to have 

coverage. But it just doesn’t make any sense that we are using taxpayer money to fund their early retirement program so they are 

making huge profits. And he mentioned the United Auto Workers 

Trust Fund, which you clarified, but they reported assets last year 

of over $1 billion, and only 4.5 million liabilities, so why was it necessary to give it to them? 

44 

Mr. LARSEN. Well, and as we have, I think, discussed earlier, history shows that the number of large employers that are even offering retiree benefits, health insurance coverage for their early retirees has dropped dramatically from, I think, two-thirds to about 

one-third. So I don’t know whether those companies were profitable 

or not. I am sure many of them were, and yet, many of them continued to drop their retiree coverage. So this provision of the ACA 

is a way to ensure, as best we can, that that rate of dropping of 

retiree coverage does not continue. 

Mrs. MYRICK. Well again, I just go back to the fact that I am 

willing to bet that people in my district who—our unemployment 

is 11.1%, and they are having a heck of a time making it today, 

and they are giving their tax money to the Federal Government 

and now that tax money has gone to these corporations to pay for 

their retirement programs. I don’t think they think very highly of 

that, and it really aggravates me, too, quite frankly. 

Mr. LARSEN. Well again, as I have said earlier, the benefit of this 

is for the retirees themselves and to ensure that they have continued coverage. The money can only be used to reduce the costs for 

the retirees, like coinsurance, or the cost of the company as it relates to the provision of the retiree benefits. 

Mrs. MYRICK. But there really weren’t any real specific guidelines they had to follow to apply for this program? I mean, pretty 

much most of them—you said a few of them didn’t get it but most 

of them—— 

Mr. LARSEN. Well, they had to send in a list of how many people 

they covered, who their retirees were, so there’s documentation certainly that goes along with becoming an approved sponsor in the 

program. 

Mrs. MYRICK. To me, again, this program proves that the notion 

that healthcare reform—the law is going to lower the cost is just 

preposterous. You take $5 billion to allocate for what I think is a 

dubious program, because the Administration is just anxious to 

give it away, and it already looks like it won’t last until, you said 

2012. I thought it was 2014. There are commitments made to like 

5,000 entities already, $1,8 billion has been paid out, so how is that 

$5 billion going to be nearly enough for the corporations and the 

unions that you are giving it to? 

Mr. LARSEN. Well, at the rate now, it is unlikely that it will last 

until 2014, certainly. I think we did announce yesterday that we 

would stop taking new applications for approved sponsors after— 

I think at the end of April, so we are going to stop the pipeline, 

if you will, of eligible companies and State and local governments 

that can apply. 

Mrs. MYRICK. I know you have already talked and I am sorry I 

was unable to be here earlier. I was in another hearing about the 

high risk pools, but I did have a question particularly relating to 

North Carolina, because they have had a functional high risk insurance pool in operation prior to the passage of the health reform 

law, and when the new law went into effect, they were required to 

set up a new pool alongside the state pool they already have which 

is functioning. It is very confusing to consumers, but it just seems 

kind of odd that the federal program would essentially require the 

operation of these two separate pools, and why couldn’t North 

45 

Carolina just have had the option to take the federal money and 

expand the pool that was already working, because it has been 

working for them? 

Mr. LARSEN. Well, there is certainly no requirement that they set 

up a separate pool. For the states that declined to do so, HHS 

through our contractors operates pools in 23 states and the District 

of Columbia, and the statutory provisions relating to the federal 

PCIP are different than the terms that apply under state law for 

the state high risk pools. 

Mrs. MYRICK. Right. 

Mr. LARSEN. So for example, there is no waiting period for coverage for a high cost condition in the federal program, so it really 

serves as a compliment to the existing state programs. And states 

have been able to leverage off their state pools in terms of advertising and knowledge about this pool as another alternative for individuals to be able to go into if they have been denied coverage 

for preexisting conditions. 

Mrs. MYRICK. I am a little confused. What I was told in North 

Carolina, a person must go without insurance for 6 months before 

he is eligible for federal coverage—— 

Mr. LARSEN. Correct. 

Mrs. MYRICK [continuing]. But the state pool doesn’t have this 

requirement. 

Mr. LARSEN. It is a little confusing, because they sound the same 

but they are different requirements. For the federal pool, you are 

not eligible if you have had insurance for the preceding 6 months. 

Typically in a state pool, there isn’t a requirement like that, but 

there are often requirements that when you come into the pool that 

you may have coverage for your preexisting condition excluded or 

there is a ‘‘waiting period’’ for coverage for your condition. So they 

each have different provisions relating to waiting periods and insurance coverage. 

Mrs. MYRICK. Yes, I—— 

Mr. STEARNS. I think the gentlelady’s time has expired. 

Ms. DEGETTE. Mr. Chair, I move to strike the last word. I just 

have—— 

Mr. STEARNS. The gentlelady is recognized. 

Ms. DEGETTE. Thank you. I think that my colleague from North 

Carolina is onto something, but—and maybe we can work to figure 

this out. Here is the problem. She is absolutely correct, and Mr. 

Chairman, you are correct and everybody is correct. These large 

companies and unions that have very high assets and profits are 

taking advantage of this program. The problem is there is no legal 

requirement that these companies offer insurance to their early retirees, and so what is happening is as the economy went down, people took early retirement, then the companies discontinued their 

health insurance. And we can’t make them offer health insurance, 

it is a contractual obligation that they have with their employees 

so if they don’t have that, then they can’t make their—we can’t 

make them give their early retirees health insurance. So then they 

won’t have health insurance. But I think maybe something we can 

work on, especially since this program is running out of money, is 

maybe we can find some other way to incentivize employers giving 

46 

health insurance to their early retirees that doesn’t consist of just 

simply subsidizing it. 

Short of that, what we would have to do is we would have to pass 

some kind of legal requirement that they offer insurance to early 

retirees, and I don’t think that is going to be acceptable to Republicans or most Democrats. That is—I am just brainstorming, because I think we can probably modify the program so that we 

wouldn’t just be paying out the money, but maybe some kind of incentive. I would love to work with—— 

Mr. STEARNS. Well, I am very glad the gentlelady, the ranking 

member is also as outraged as we are that taxpayers’ money is 

being spent on large corporations who are very profitable who—— 

Ms. DEGETTE. Mr. Chairman, you don’t need to characterize 

what I just said. 

Mr. STEARNS. Certainly I can characterize what you just said, so 

I am glad you agree with us that this is obscene. Let us see. The 

next—you mentioned before that companies were rejected from the 

ERRP program. Will you be kind enough to submit this list for us 

for the record? 

Mr. LARSEN. For applications that weren’t accepted? 

Mr. STEARNS. Yes. 

Mr. LARSEN. I will. 

Mr. STEARNS. OK. We are going to Mr. Scalise, the gentleman 

from Louisiana, is recognized for 5 minutes. 

Mr. SCALISE. I thank the chairman for yielding, and I thank the 

gentleman, Mr. Larsen, for coming before us to testify. 

One of the things, as I look through this list, back during the beginning of this whole debate, I think everybody recognized there 

were problems with the cost of healthcare and problems that needed to be fixed, like preexisting conditions being discriminated 

against, that those of us that supported alternative legislation addressed directly without these taxes and mandates that are creating all of these problems. In fact, our bill was scored to lower the 

cost of healthcare by 10 percent. What we are seeing now, and I 

think one of the reasons you are seeing so many of these companies 

on this list come to the Federal Government saying give me taxpayer money so that I can fund early retiree programs is because 

what these companies are seeing is since Obamacare passed, the 

cost of healthcare has dramatically increased. It is something we 

have seen. There is a consolidation in the industry. We have already seen a number of other problems from it, but you, yourself, 

just testified earlier that some of these companies that got millions 

of dollars, tens of millions of dollars in some cases, could have just 

been giving early retirement to their employees that otherwise 

would have been still working for the company, but because of the 

high cost of healthcare and the things that they had to do to contract, they pushed some people into early retirement. I will ask you 

to clarify if I am incorrect, but you did say there is nothing you saw 

in the reports that you got, the requests for these companies, could 

they have done that? Could the companies have said because of the 

high cost of healthcare and these new burdens and mandates and 

taxes because of Obamacare, we are now going to have to squeeze 

some of our employees out into early retirement? And if they did 

that and they packaged those employees and put them into early 

47 

retirement and asked for money from you from this program, they 

could have gotten the money. Is that correct? 

Mr. LARSEN. What I said was that we didn’t evaluate as part of 

the process—— 

Mr. SCALISE. So they could have done that, is that correct? Or 

did you prohibit them from doing that? 

Mr. LARSEN. We didn’t evaluate the process by which they have 

an early retiree program. If they have a program—— 

Mr. SCALISE. So if they did what I just said, if they moved some 

employees that would today be working but now were pushed into 

early retirement because the company couldn’t afford the higher 

cost of healthcare because of Obamacare, and then they pushed 

them and sought State—federal taxpayer money for the ERRP program, they could have gotten it, and some probably did. Right? 

Mr. LARSEN. Well, I don’t know. If it cost money to provide them 

health insurance and as employer it is going to cost money to provide them early retiree health insurance—— 

Mr. SCALISE. You didn’t even ask that question when they asked 

for the money. If they did what I just categorized, they could have 

gotten the money and you would have no way of knowing that. Is 

that correct? 

Mr. LARSEN. If I am understanding what you are saying, we 

didn’t evaluate the process by which they ended up with—— 

Mr. SCALISE. That is exactly right, so basically if a company said 

because of the higher cost of healthcare due to Obamacare, we have 

got to consolidate—— 

Mr. LARSEN. Well, that is where we part company. 

Mr. SCALISE. Well, but I mean, the marketplace has shown that 

healthcare has gone up, and in fact, you are seeing consolidation 

of health insurance providers—— 

Mr. LARSEN. It has been going up for decades. 

Mr. SCALISE [continuing]. Who are saying it happened specifically, but the consolidation that is occurring right now they will tell 

you is because of Obamacare. Talk to business owners, I mean, 

maybe you don’t ask those questions when you review these forms. 

I talk to businesses every day. Small businesses will tell you, medium size and even large companies will tell you that the mandates 

and new taxes from Obamacare is one of the things that is pushing 

them to have to cut costs in other ways, including pushing people 

into early retirement. 

And so when I look at this list, first of all, the largest—unless 

you have got somebody higher, the largest recipient was 206 million to the United Auto Workers Trust Fund. Was there anybody 

that got more than that? 

Mr. LARSEN. Well collectively state and local government was the 

largest recipient. 

Mr. SCALISE. Well right, you bailed out the State of California to 

the tune of $57 million, you bailed out the State of New York for 

47 million. 

You talked earlier in your testimony that you categorized this as 

a successful program. I mean, the program is going bankrupt because you are giving away so much money to bail out states and 

unions. I mean, did you really think it was going to be hard to give 

that money away? I mean, how was that a successful program 

48 

when companies who were making big profits and corporations and 

unions and states took tens and hundreds of millions of dollars 

from you? How is that successful? 

Mr. LARSEN. The program is not going bankrupt. Congress allo- cated $5 billion—— 

Mr. SCALISE. You said in the press yesterday that you have allo- cated $1.8 billion—— 

Mr. LARSEN. I don’t think that is the word—— 

Mr. SCALISE [continuing]. Already and that you are going to have 

to close the enrollment period earlier than expected because you 

are going to run out of money. 

Mr. LARSEN. Sure, but that is not a bankrupt program. 

Mr. SCALISE. Well, it is a program that is running out of money. 

Let me ask you this. Do you know how much money we spend 

every day that is borrowed money? 

Mr. LARSEN. I don’t know the answer to your question. 

Mr. SCALISE. OK. Forty-two cents—from the numbers I have 

seen, 42 cents of every dollar that the Federal Government spends 

is borrowed money, and when you look at this program, I don’t 

know if you can appreciate how offended some of us are, that you 

are giving away $57 million to bail out a State like California. You 

are giving away $206 million to bail out United Auto Workers 

Trust Fund. I understand you gave $5 million of taxpayers’ money 

to BP. Is that correct? 

Mr. LARSEN. You can’t lose sight of the millions of—— 

Mr. SCALISE. Did you give $5 million to BP? 

Mr. LARSEN. If it is on the list, then we did. 

Mr. SCALISE. I mean, my God, you wonder why people are offended by this program when they are seeing all of this money 

going out the window, money that we don’t have, 42 cents of every 

dollar, and correct me if I am wrong on that number. But this 

shows that the program is broken and that the law itself has created more problems. We have already seen companies are dumping 

prescription drug programs because of the taxes in Obamacare 

where you increased taxes on them, so people are dumping their 

prescription drug programs because of the law. 

Mr. LARSEN. This program will help—— 

Mr. SCALISE. And so again, you have got a program here—— 

Mr. LARSEN [continuing]. Them continue that for retirees. That 

is exactly right. 

Mr. SCALISE. Right, and so now we are seeing that companies are 

pushing more people into early retirement because of the higher 

costs due to Obamacare, and now you are giving them taxpayer 

money, 42 cents of every dollar which we don’t have. Maybe you 

don’t understand why that offends some of us, but it is very offensive. 

I yield back. 

Mr. STEARNS. Gentleman’s time has expired. 

The gentleman from Virginia, Mr. Griffith, is recognized for 5 

minutes. 

Mr. GRIFFITH. I might be the last, I might not. Who knows. But 

hopefully it is. 

Let me ask you a question. You were talking earlier and you said 

you can’t look at this in an isolated situation, that there are lots 

49 

of things going on out there. That was in response to a question 

related to the money given to GE. Has GE gotten more money from 

you all under different programs? 

Mr. LARSEN. No, no. I just meant that we have a number of 

bridge programs to get us from kind of the broken market, the 

preexistent healthcare to 2014. This is one of them. PCIP is one of 

them until we have full reform implemented in 2014. 

Mr. GRIFFITH. All right. Here is my problem with this program 

as I have been listening to the testimony here today. It sounds like 

that as long as you provided employees with—retirees with health 

insurance plan, you were eligible to get money. I am just wondering, you all set up the regulations for this. Why wasn’t there a 

requirement that there at least be some indication that the company, following what you have said was the reason for it—that the 

company was not going to provide it? Because it sounds like to me 

from what I have heard that what you all have said is if they provide the benefits, they get the money, but we did it because we 

were afraid they were going to discontinue. So we may very well 

as taxpayers have given an awful lot of money to big companies 

like GE and AT&T and all of the other ones that have been mentioned here today who had no intentions. But like any good business, if the Federal Government is handing out candy for free, they 

are going to take it, and they have the people who are able to go 

out there and look for it, where we may have actually shortchanged—if this is what you were trying to do—some small businesses or micro-businesses even that might have been wanting to 

do this but had no clue there was a program like this. 

I am just wondering why you didn’t have regulations that it 

would have at the very minimum required that the company state 

they were going to discontinue their program if they didn’t receive 

assistance within 90 days? 

Mr. LARSEN. Yes. Well, we tracked the statutory provisions when 

we put the regulations together, but I am not sure we would have 

been able to get those representations in advance of the program. 

Mr. GRIFFITH. So we were so—in such a big hurry to get 

Obamacare on the books, to get Obamacare into place that we 

didn’t bother to take a look at what was going to happen to the taxpayers? Is that what I just heard you tell me? 

Mr. LARSEN. We—— 

Mr. GRIFFITH. We had to get the program started. We couldn’t 

take time to make sure that we weren’t just giving money to giant 

corporations who had no intentions of discontinuing their health insurance to retirees. That is what I heard your answer say. 

Mr. LARSEN. Well, we had statutory deadlines under which we 

wanted to get the program operational, but that is not why we 

didn’t do as you suggested. We implemented the program as it was 

set out in the provisions of the Affordable Care Act. 

Mr. GRIFFITH. How much notice was there—you said that most 

of the beneficiaries were state and local governments, and I am 

just wondering, did the Virginia VRS get any of this money? 

Mr. LARSEN. I can—I would have to go back and look at the list. 

I am not sure if they did. 

Mr. GRIFFITH. I am just wondering, because, based on your criteria they would have qualified. 

50 

Mr. LARSEN. I think all—— 

Mr. GRIFFITH. That is all right. They will get me an answer later. 

Other than just looking at the bill itself—and I am glad you 

found yourself constrained by the bill, because we have had some 

other agencies in here that seem to think they can make up the 

rules as they go—but in that regard, you don’t think you had the 

ability to create a regulation or rule that would say that you had 

to be getting ready to discontinue your benefits in order to hand 

out these checks? 

Mr. LARSEN. I will confirm back to you, but I don’t believe—and 

I wasn’t here when we drafted those regulations—but I don’t believe that we saw the statute as creating the type of program that 

you just described. 

Mr. GRIFFITH. OK. 

Mr. LARSEN. But I will—we will confirm that with you. 

Mr. GRIFFITH. And you just came in in what, December or January? 

Mr. LARSEN. Well, as the head of the CCIIO. I was running oversight but not ERRP. 

Mr. GRIFFITH. OK. So these regulations would have been the previous initialed name, which what was that, CCIIO before they 

changed the name? 

Mr. LARSEN. OCCIIO. 

Mr. GRIFFITH. OCCIIO, and so that would have been—the regulations would have been created by that administrator at that 

time? 

Mr. LARSEN. Well, it was the same individual. I am just saying 

I wasn’t personally involved in the regs at that point. I am just 

saying I believe that we did not conclude that we could have created a—kind of a needs-based program as you just described. 

Mr. GRIFFITH. That would have been the same fellow who got 

hired 5 weeks before the bill passed but was hired under the authority of the bill that had not yet passed, would it not? You were 

here for that testimony earlier. I was too, so I am correct, am I not? 

Mr. LARSEN. I think I know who you are referring to. I am not 

sure I agree with the characterization. 

Mr. GRIFFITH. I am just repeating what he said. 

All right, Mr. Chairman, I yield back my time. 

Mr. STEARNS. I thank you, and—my colleagues, we are going to 

go one more round here, so Mr. Larsen, I appreciate your patience 

staying until we voted. 

Following up with what Mr. Griffith just said, is there any way 

you can confirm that all these companies that my colleagues have 

talked about, that when they said that they are going to drop their 

coverage, do you have the ability to go back and certify what they 

say is correct? 

Mr. LARSEN. Well under the current program, they did not—they 

are not required to certify—— 

Mr. STEARNS. My question is GE comes to you and said that we 

cannot pay for all these employees that are doing an early retirement and we need 36 million. And you say OK, you look at it and 

you give them the money, but you certified that—— 

Mr. GRIFFITH. Mr. Chairman—— 

Mr. STEARNS [continuing]. All these people would lose—yes? 

51 

Mr. GRIFFITH. Mr. Chairman, if you would yield for just a second. 

My concern was and I think his testimony was was that they didn’t 

even ask that question. 

Mr. STEARNS. Right, so I am following up—— 

Mr. GRIFFITH. Oh, OK. 

Mr. STEARNS. Not only did they not ask, the question is do you 

have anything in statute that says you should have certified this 

and you didn’t? So my question is is there something in statute 

that says you have to certify that they will lose their coverage—— 

Mr. LARSEN. No. 

Mr. STEARNS [continuing]. And did you do that? 

Mr. LARSEN. There is nothing—— 

Mr. STEARNS. So there is nothing in statute that says you have 

to certify that they will indeed lose their—— 

Mr. LARSEN. No, the only thing—the CEO has an attestation 

that the information that they are providing in connection with the 

application—— 

Mr. STEARNS. So the CEO does this and that—— 

Mr. LARSEN. No, just to be clear, the CEO doesn’t attest nor does 

the statute provide for a requirement—— 

Mr. STEARNS. Well how do you prevent somebody from telling 

you that these employees are going to lose it—— 

Mr. LARSEN. No, all they have to do is tell us that they have an 

early retiree program—— 

Mr. STEARNS. Right. 

Mr. LARSEN [continuing]. And provide the documentation for the 

claims that satisfy the statutory threshold. They, of course, must 

continue the program—— 

Mr. STEARNS. Can an outside source or anybody that confirms in 

your office that what they provide in these papers is accurate? 

Mr. LARSEN. Oh, yes, we audit and validate the claims data that 

they provide, but again, they are not representing to us nor does 

the statute require them to represent that if they don’t get the 

money, they won’t continue their program. 

Mr. STEARNS. I mean, is it possible that a lot of companies will 

come in and say they need the money—after they see this list will 

come in and say I need the money, they will submit the papers to 

you, and they really have a profit that they can cover it themselves. How do you know that they can’t cover it themselves is my 

question. 

Mr. LARSEN. Well, the premise of the program is that the best 

way to ensure that these programs continue is to provide the assistance that is set out in the program, because again, we know 

that many companies have continued to drop this—— 

Mr. STEARNS. Let me interrupt you. 

Mr. LARSEN. Probably many that were profitable—— 

Mr. STEARNS. Mr. Larsen, you told the press yesterday that you 

are closing enrollment for this program, and you just said it to Mr. 

Griffith and Mr. Scalise. 

Mr. LARSEN. Right. 

Mr. STEARNS. You reported that you have already spent $1.8 billion, is that correct? 

Mr. LARSEN. Right, that is correct. 

52 

Mr. STEARNS. OK. Is that all that is accounted for today, or are 

there additional claims that have not yet been included in that report? 

Mr. LARSEN. You mean of the 1.8 billion? 

Mr. STEARNS. No, no. OK, you have already spent that. 

Mr. LARSEN. Right. 

Mr. STEARNS. But are there other claims out there that have not 

been included in this report that you are going to approve and are 

going to make the list longer? Yes or no. 

Mr. LARSEN. Yes. 

Mr. STEARNS. OK. 

Mr. LARSEN. But can I—may I—— 

Mr. STEARNS. Has all the $5 billion of the program already been 

obligated? 

Mr. LARSEN. No. 

Mr. STEARNS. And how much is left? 

Mr. LARSEN. Well, that is what I am trying to say. So we—— 

Mr. STEARNS. Just approximately. 

Mr. LARSEN. I am going to tell you. 

Mr. STEARNS. OK. 

Mr. LARSEN. We have gotten 1.8 billion in paid claims—— 

Mr. STEARNS. Right. 

Mr. LARSEN. At any given point, we can tell you what has been 

paid, and then there are claims being processed that we know 

about but haven’t yet been paid. They have to be verified. The decision that we made to close—it is not to enrollees, but it is to plan 

sponsors. So all of the companies that have been approved as plan 

sponsors—and sponsors just means you are eligible to—— 

Mr. STEARNS. Are you going to have enough money? 

Mr. LARSEN. What is that? 

Mr. STEARNS. Are you going to use up all the $5 billion? 

Mr. LARSEN. Oh, I think we will use up the $5 billion. 

Mr. STEARNS. OK. 

Mr. LARSEN. But I think that will happen—— 

Mr. STEARNS. How many have not been verified and are waiting? 

Mr. LARSEN. It is a small number. We have—— 

Mr. STEARNS. One hundred, 50, 10? 

Mr. LARSEN. It could be. 

Mr. STEARNS. One hundred? It could be 100? 

Mr. LARSEN. It is not 100. I think it is—— 

Mr. STEARNS. It could be 1,000? 

Mr. LARSEN. I don’t think it is 1,000, no. 

Mr. STEARNS. How much money is left or waiting to be verified? 

Mr. LARSEN. I just want to be clear, when you say waiting to be 

verified, do you mean claims or applicants? Applicants to me is a 

company. 

Mr. STEARNS. Claims. 

Mr. LARSEN. Oh, it is not a large amount. 

Mr. STEARNS. OK. 

Mr. LARSEN. I mean, we can get that to you, but it is not like 

there is another billion dollars in claims that are out there. We 

have reported what claims are out the door. There is always going 

to be a small amount of claims that are in progress. 

53 

Mr. STEARNS. You are really in a position of being Santa Claus, 

and here we are at Easter. So I think a lot of us just find this unbelievable that you can just hand out this kind of money based 

upon a criteria that is not clear and based upon not certifying, except through your staff, their word of mouth that they cannot pay 

these early retirees. 

I think you said you are going to close this down, but refresh my 

memory. Wasn’t this program supposed to go to 2014 originally? 

Isn’t that true? 

Mr. LARSEN. Yes, ideally. 

Mr. STEARNS. OK. So the fact is that you have run out of money, 

so that is why you are forced to close it. So I mean, isn’t this a bad 

reflection on this program that the fact is that you are running out 

of money that is supposed to—— 

Mr. LARSEN. I think it is a reflection of the success of the program, because there are a lot of companies that have—— 

Mr. STEARNS. Well, can I tell you an honest—— 

Mr. LARSEN. Yes. 

Mr. STEARNS [continuing]. Secret? Everybody takes free money. 

If you get free money—I think you and your friends and your 

neighbors would take the money if it is free, so you are going to 

always run out of money if it is free. 

With that, my time is expired. I will recognize the ranking member. 

Ms. DEGETTE. Thank you, Mr. Chairman. 

So the title of this hearing today is ‘‘The PPACA’s High Risk Pool 

Regime: High Cost, Low Participation.’’ So really, the entirety of 

the questions on the other side have been about the Early Retiree 

Reinsurance Program, so I guess we can stipulate that the 

PPACA’s high risk pool regime is in pretty good shape. 

So the first thing I want to do, Mr. Larsen, is thank you for answering all of these questions that I don’t know how prepared you 

were to come and answer them, but I certainly had not been brief 

by the Majority staff that they would be focusing this hearing on 

this topic. So I think you have done an admirable job trying to answer these questions about this other program. 

I want to try to clarify some things for some of the members who 

perhaps don’t understand the basic facts of the Early Retiree Reinsurance Program, and maybe even for my own edification, what is 

the purpose of the program, briefly, Mr. Larsen? 

Mr. LARSEN. The purpose is to ensure the continued availability 

of health benefits for early retirees that are provided by the range 

of applicants that we see. 

Ms. DEGETTE. OK, and that is people between 50 and 65—— 

Mr. LARSEN. Typically, yes. 

Ms. DEGETTE [continuing]. Who have retired from their jobs? 

Mr. LARSEN. That is right. 

Ms. DEGETTE. Many of them are employed by large corporations 

or—correct? 

Mr. LARSEN. But many are not. 

Ms. DEGETTE. Many are not. About how many individuals have 

enrolled in this early retiree program? 

Mr. LARSEN. Well to clarify, we don’t enroll individuals, per se. 

Ms. DEGETTE. Right, you enroll the companies, but how—— 

54 

Mr. LARSEN. There are about 5,000 plus, maybe 5,900 sponsors. 

Ms. DEGETTE. And how many people—how many employees are 

involved in—— 

Mr. LARSEN. Well, I think at least four million early retirees are 

in programs that have benefited from ERRP. 

Ms. DEGETTE. Right, so by—— 

Mr. LARSEN. Millions of people. 

Ms. DEGETTE. The way the law was set up as this bridge program until 2014 is that the companies and the union trust funds 

and others could sign up for the program and then they would use 

that to insure the employees. So there is like four million people 

who might not have insurance right now who are getting insurance, right? 

Mr. LARSEN. Yes. 

Ms. DEGETTE. And if those four million—and as far as you know, 

the companies are not obligated to offer insurance to those early retirees. You don’t know one way or the other, right? 

Mr. LARSEN. We don’t know, but I also believe that even profitable companies are known to stop providing retiree benefits, health 

insurance benefits to their retirees. 

Ms. DEGETTE. Right. So you know, this program is modeled on 

the Part D Medicare drug benefit that Republicans passed last 

time they were in the Majority, which gave $70 billion to companies to provide drug benefits to seniors. Isn’t that correct? 

Mr. LARSEN. There can be parallels there, yes. 

Ms. DEGETTE. OK. Now, do you know that large firms who provide workers with retiree health coverage dropped from 66 percent 

in 1988 to 29 percent in 2009? 

Mr. LARSEN. Yes, it is a big problem. 

Ms. DEGETTE. It is a big problem because it leaves people between 50 and 65 who are not eligible for Medicare yet, but many 

of whom have preexisting conditions or health problems going out 

into the individual insurance market and trying to buy policies, 

right? 

Mr. LARSEN. That is correct. 

Ms. DEGETTE. So if we hadn’t have done some kind of a bridge 

like this, then that would have potentially left millions of Americans out there with—it would have added to the number of uninsured until 2014 when they can enroll in the exchanges and so on, 

right? 

Mr. LARSEN. That is exactly right. 

Ms. DEGETTE. Now look, I am not sure that—even though maybe 

this is modeled on the Part D program which just gave $70 billion 

to companies, maybe the way we have got it structured is not perfect. Maybe as we go forward, since it has been so popular, we 

should require employers to certify somehow that they are not 

going to be able to offer these benefits. But the bottom line is, the 

benefits ultimately inure to the employees, not to the employers, 

correct? 

Mr. LARSEN. Correct. 

Ms. DEGETTE. And that is four million people that might not otherwise have health insurance, correct? 

Mr. LARSEN. That is right. 

Ms. DEGETTE. Thank you. 

55 

Thank you, Mr. Chairman, I yield back. 

Mr. STEARNS. All right, gentlelady yields back. 

The gentleman from Virginia for the second round of questioning. 

Mr. GRIFFITH. Thanks. Well, I thought I was going to be last, but 

we are going to do a couple more rounds, apparently. 

I think that in response to my colleague, I think that the reason 

you have gotten so many questions today is that the news didn’t 

break until yesterday about the other program, and so a lot of folks 

were a little bit surprised that we were giving away the free money 

so to speak, and that was the concern that you have heard a lot 

today. But I do think that there are some concerns that overlap 

with the program that initially this hearing was about, and that— 

and what I am hearing in this is that you said that the program 

for the retirement money, you know, it will go until the 5 billion 

is used up and then it is over with. But for the high risk pools, 

however, it looks like you all are spending money on that to a point 

where it may actually—that 5 billion may not be able to survive, 

and I look—— 

Mr. LARSEN. Not able to survive, meaning run out? 

Mr. GRIFFITH. Run out of the 5 billion before—— 

Mr. LARSEN. For the PCIP program? 

Mr. GRIFFITH. For the PCIP program, because you have got—I 

mean, I am looking—— 

Mr. LARSEN. We are going to work within that, but we are off 

to a slower start than was projected. But we believe that we are 

going to continually increase the rate of enrollment. 

Mr. GRIFFITH. Well, let us touch on that before we get back to 

the money issues. 

Mr. LARSEN. OK. 

Mr. GRIFFITH. You are off to a slower rate than anticipated, and 

in fact, wasn’t it anticipated that there would be about 375,000 

people who would be involved in that program in 2010 alone, but 

there were only 12,000? So isn’t it, in fact, at least for 2010 and 

even into early 2011, isn’t it, in fact, the program has been a failure? 

Mr. LARSEN. No, I wouldn’t at all characterize it that way. 

Mr. GRIFFITH. Well, OK, I disagree but that is OK. That is what 

life is about. 

Now that being said, let us go back to the money issue because 

it appears, according to—and I am looking at some notes here that 

say Washington Post reported on December 27 that New Hampshire has only about 80 members but they spent double the 

$650,000, and then HHS agreed to give New Hampshire more 

money and is basically taking it out of money that they anticipated 

that they would be spending in later years—— 

Mr. LARSEN. That is right. 

Mr. GRIFFITH. California has indicated that they think they will 

spend over the life of the program $1 billion, and Alaska, while 

only anticipates having 132 enrollees, anticipates spending $7 million or $56,000 per—56,000 plus per enrollee. Looking at those 

numbers is why it looks like to me that even with the failed numbers coming into the high risk pools, that you are not possibly 

going to be able to do it on $5 billion. Isn’t that a fair assessment? 

56 

Mr. LARSEN. I understand your point, but I don’t agree and here 

is why. 

Mr. GRIFFITH. You don’t agree, but it is a fair assessment. Reasonable people can disagree, but you would agree it is a fair assessment coming from my philosophical position, would you not? 

Mr. LARSEN. I would not. 

Mr. GRIFFITH. All right, well go ahead with your position. 

Mr. LARSEN. So it is very early in the program, and there are 

certainly some states that are running ahead of their projections. 

Every state had to provide within their allocation projections regarding the number of members and the costs, and that was part 

of the contract. There are certainly some states that are running 

ahead of projections, meaning like New Hampshire. The people 

that they have are much more costly than they projected, so they 

are running through their money faster. There are many other 

states that are not running ahead of projections, so we will continue to monitor exactly how they do with monthly reports that we 

get from the states each month where they are in terms of their 

costs and their enrollment, and we will work within the $5 billion 

appropriation through the cycle that we have. 

Mr. GRIFFITH. So then doesn’t that mean that if you are one of 

the states that is looking at this thing that you are much better 

to spend your money now and get your up front money, because at 

some point you are going to have to marshal the funds and not give 

as much to the states that might come in late? 

Mr. LARSEN. Well—— 

Mr. GRIFFITH. Isn’t that what you just said? 

Mr. LARSEN. States can’t run ahead and spend the money. It is 

a function of at what rate people come in to the program. 

Mr. GRIFFITH. So if New Hampshire is spending more money 

than they were allocated in the first year and you allow them to 

have more money coming in, and if a few other states start doing 

that, isn’t it possible that if enrollees in a state that is not doing 

that right now come in too late in the process, there may not be 

money there to take care of them? Isn’t that accurate? 

Mr. LARSEN. Not to be argumentative, I suppose it is theoretically possible. We don’t envision that happening, though. 

Mr. GRIFFITH. Yes, if you envisioned that happening, you would 

have put more money in the program. 

Mr. LARSEN. We are limited to the 5 billion. 

Mr. GRIFFITH. It is not only theoretical, but based on the early 

data it is possible. 

Mr. LARSEN. I don’t think it is likely. 

Mr. GRIFFITH. All right. I yield back my time. 

Mr. STEARNS. Gentleman yields back. I am going to ask some 

more questions, and certainly give the ranking member, if she 

wants additional questions. 

She brought up the fact that the hearing was really scheduled 

dealing with the high risk pools, and I think it is important also 

to recognize that we have been asking for all this information on 

the Early Retirement Reinsurance Program. We just got it, so—the 

breaking news on it, so we thought since you are here you could 

accommodate both. But I think her point is well taken that we are 

57 

also here because of the high risk pool, so I have a few questions 

for you before you go. 

How many people are enrolled in the high risk pools today? 

Mr. LARSEN. I believe that the number that we posted in March 

as of February 1 was 12,000 plus, and since that time there have 

been additional enrollments. Enrollment continues to grow at a 

pretty fast clip, so—— 

Mr. STEARNS. How many people enroll solely in the plan that is 

run by the Health and Human Services? 

Mr. LARSEN. I think it is over 3,000 of the 12,000. 

Mr. STEARNS. OK. Does HHS publicly disclose the number of individuals enrolled in each State’s high risk pool? Do you publish 

that? 

Mr. LARSEN. Yes. 

Mr. STEARNS. OK, and is it easy to get access to find—go to each 

state and find—— 

Mr. LARSEN. I will confirm, but I believe that we do. 

Mr. STEARNS. So I could go—I could find in the State of Florida—— 

Mr. LARSEN. Yes, actually, I am sorry. Of course we do, yes. We 

do. In the posting that we put up in November and the posting that 

we put up in March for February, it lists the state enrollments and 

then it lists the number for the federal PCIP enrollment. So you 

can go back and you can see what is happening in each State. 

Mr. STEARNS. And towards that end, will HHS please submit a 

detailed breakdown of the number of individuals currently enrolled 

in each state pool and the federal high risk pool for the record? 

Mr. LARSEN. We can, but I am pretty sure that is what posted 

on the Web site. 

Ms. DEGETTE. If the chairman will yield, healthcare.gov—I have 

got the listing right here and I would ask unanimous consent to 

put it in the record. 

Mr. STEARNS. All right, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. STEARNS. Now we have been talking on this side, obviously, 

and you have admitted that you are going to run out of funds dealing with the Early Retirement Reinsurance Program, isn’t that correct? 

Mr. LARSEN. It is likely at the pace that we are going. 

Mr. STEARNS. And in fact, you are going to—you indicate you are 

going to shut down the program? 

Mr. LARSEN. No, just to be clear, we will—— 

Mr. STEARNS. I mean, if you run out of money you are going to 

shut down the program. 

Mr. LARSEN. Well, if I can just clarify. We announced we would 

stop taking new applications for new sponsors. 

Mr. STEARNS. Which is an indication you are slowing down or 

stopping the program. 

Mr. LARSEN. But for existing sponsors we will continue to process 

claims until the $5 billion appropriation runs out. 

Mr. STEARNS. OK. Dealing with the high risk pool program, you 

have about $5 billion in funding, is that correct? 

Mr. LARSEN. Correct. 

58 

Mr. STEARNS. OK. To date, how much funding has been spent of 

this 5 billion? 

Mr. LARSEN. I think that was the number that we were discussing earlier, which is the 33 million and roughly 25 million 

minus the startup costs, so it is in the $60 million range total. 

Mr. STEARNS. It is safe to say that this program is going to run 

out of money before 2014? 

Mr. LARSEN. I don’t think so. I don’t think so. 

Mr. STEARNS. But you are not sure? 

Mr. LARSEN. Well, I don’t think we are going to run out of 

money. 

Mr. STEARNS. We have asked you for a number of documents related to creating a waiver process, and we have had previous hearings. Your response has been very slow in this process. Will you 

commit to getting these documents and e-mails to us next week? 

Is that—Mr. Larsen, can that be possible? 

Mr. LARSEN. We are committed to continuing to produce the 

records that you have requested. We have continued to prioritize 

our production in response to requests from the committee. I know 

we have responded to many of them but not all. I will do my best 

to get them to you as soon as we can. I am not sure for those particular records I can commit under oath that I will have them next 

week. 

Mr. STEARNS. Do you know it has been over 2 months since we 

requested them? 

Mr. LARSEN. We have had many, many requests from you and 

others that we are really trying to work on. We respect the committee’s ability to get this information and we will continue to push 

to get it to you. 

Mr. STEARNS. We have also asked for Medicare fraud estimates. 

Is that in your—— 

Mr. LARSEN. I will take it back to my colleagues. 

Mr. STEARNS. OK, you can ask them. 

OK. Let me say thank you for your attendance here, and ranking 

member, would you like to close with anything additional? 

Ms. DEGETTE. No, just thank Mr. Larsen for coming. 

Mr. STEARNS. OK. We appreciate again your forbearance here as 

we went through our voting process, and again, it is very helpful 

for us to have you here to answer our questions. 

And so with that, nothing further, the subcommittee is adjourned. 

Mr. LARSEN. Thank you. 

[Whereupon, at 1:52 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Thank you, Chairman Stearns, for holding this hearing on the high risk pools included in last year’s health care law. We all know the administration rushed to 

push the bill over the finish line with a very narrow margin of support. Apparently 

in that haste, there was not time to conduct studies on the economics of their plan. 

For this program and others, the numbers just don’t add up. 

am troubled by how this program seems to have been vastly oversold. Shortly 

after passage of the health care law, the administration’s own Chief Actuary for 

Medicare and Medicaid Services estimated that in the first year alone 375,000 indiVerDate Nov 24 2008 12:19 Nov 02, 2011 Jkt 037690 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 P:\MY DOCS\HEARINGS 112\112-29 040111\112-29 CHRIS
59 

viduals would enroll in this program. Today, only approximately 12,000 have enrolled. 

This is a shocking difference from what was originally promised, and it raises a 

number of questions: Was the need for this program oversold, perhaps as a way to 

strong-arm moderate Democrats into voting for a trillion dollar expansion of the 

government? Or is the need for the program real, and it was the ability of the federal government to understand and administer such a system that was oversold? 

What should concern everyone in this room is that even though only four percent 

of those expected to enroll in this program have actually done so, it appears that 

this program will still have no problem spending the entirety of its $5 billion budget 

between now and 2014. If we expected 375,000 enrollees and only got 12,000- 

shouldn’t we be getting some of that money back? I am interested in hearing whether our witness can explain this today. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

PREPARED STATEMENT OF HON. JOHN D. DINGELL

Today’s hearing offers a great opportunity for this Subcommittee to learn more 

about how Director Larsen and the Center for Consumer Information and Insurance 

Oversight or CCIIO is implementing the temporary high-risk insurance pools created in the Affordable Care Act. 

These high-risk insurance pools are designed to help those most in need in our 

society—those with cancer, diabetes or asthma—who are routinely denied insurance 

in the private market. For those not denied in the private market, they often find 

that the cost of insurance still makes health coverage out of their reach. 

Starting in 2014 insurance companies will no longer be able to deny coverage to 

any individual with a pre-existing condition, but until then the Pre-Existing Condition Insurance Plan is serving as a temporary bridge to help those receive coverage 

until the Exchanges open in 2014. 

CCIIO faced an enormous task in front of them in setting up the PCIP programs, 

and I would commend Director Larsen and CCIIO for meeting the 90-day deadline 

and for aggressively working with the states to assist them in setting up PCIP programs. 

Enrollment in PCIP is now over 12,400 and has grown 50 percent from November 

2010 to February 2011. While this is an achievement, there is much more we need 

to do. 

I am pleased to see CCIIO conduct a unique and targeted outreach campaign to 

help enroll individuals most in need. The Center has reached out on the grassroots 

level through the American Cancer Society and the American Diabetes Society, and 

partnering with government agencies such as the Social Security Administration. In 

addition, the Center has offered webinars and has met with various stakeholders 

including providers, hospitals, and consumer groups, among others. These steps are 

necessary to target eligible individuals, and I believe these steps show CCIIO’s commitment to bridging the gap for the sickest of the sick. 

Now I know some of my friends on the other side of the aisle are critical of PCIP. 

I would remind them that the creation of high risk pools was proposed by Congressional Republicans. In fact, Members of the Energy and Commerce Committee have 

offered their own legislation appropriating far more money than laid out in the Affordable Care Act to implement high risk pools nationwide. 

High risk pools and PCIP are designed to ensure that our constituents across the 

country suffering from chronic disease are not bankrupt due to their medical bills 

or forced to foreclose their home to pay for the medical bills that continue to stack 

up. This vulnerable population deserves our help. 

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