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95–186 PDF 2015

S. HRG. 113–663 

A NEW, OPEN MARKETPLACE: THE EFFECT OF 

GUARANTEED ISSUE AND NEW RATING RULES 

HEARING 

OF THE

COMMITTEE ON HEALTH, EDUCATION, 

LABOR, AND PENSIONS 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

ON

EXAMINING AN OPEN MARKETPLACE, FOCUSING ON THE EFFECT OF 

GUARANTEED ISSUE AND NEW RATING RULES 

APRIL 11, 2013 

Printed for the use of the Committee on Health, Education, Labor, and Pensions 

( 

Available via the World Wide Web: http://www.gpo.gov/fdsys/ 
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS 

TOM HARKIN, Iowa, Chairman 

BARBARA A. MIKULSKI, Maryland 

PATTY MURRAY, Washington 

BERNARD SANDERS (I), Vermont 

ROBERT P. CASEY, JR., Pennsylvania 

KAY R. HAGAN, North Carolina 

AL FRANKEN, Minnesota 

MICHAEL F. BENNET, Colorado 

SHELDON WHITEHOUSE, Rhode Island 

TAMMY BALDWIN, Wisconsin 

CHRISTOPHER S. MURPHY, Connecticut 

ELIZABETH WARREN, Massachusetts 

LAMAR ALEXANDER, Tennessee 

MICHAEL B. ENZI, Wyoming 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

RAND PAUL, Kentucky 

ORRIN G. HATCH, Utah 

PAT ROBERTS, Kansas 

LISA MURKOWSKI, Alaska 

MARK KIRK, Illinois 

TIM SCOTT, South Carolina 

PAMELA J. SMITH, Staff Director 

LAUREN MCFERRAN, Deputy Staff Director and Chief Counsel 

DAVID P. CLEARY, Republican Staff Director 

(II) 
CONTENTS 

STATEMENTS 

THURSDAY, APRIL 11, 2013 

Page 

COMMITTEE MEMBERS

Harkin, Hon. Tom, Chairman, Committee on Health, Education, Labor, and 

Pensions, opening statement ............................................................................... 1 

Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee, opening 

statement .............................................................................................................. 2 

Baldwin, Hon. Tammy, a U.S. Senator from the State of Wisconsin .................. 15 

Scott, Hon. Tim, a U.S. Senator from the State of South Carolina ..................... 17 

Franken, Hon. Al, a U.S. Senator from the State of Minnesota .......................... 19 

Roberts, Hon. Pat, a U.S. Senator from the State of Kansas .............................. 21 

Murphy, Hon. Christopher, a U.S. Senator from the State of Connecticut ........ 49 

WITNESS—PANEL I 

Cohen, Gary, J.D., Director, Center for Consumer Information and Insurance 

Oversight, Centers for Medicare and Medicaid Services, Washington, DC .... 4 

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

WITNESSES—PANEL II 

Counihan, Kevin, CEO of the Connecticut Health Insurance Marketplace, 

West Hartford, CT ................................................................................................ 26 

Prepared statement .......................................................................................... 28 

Corlette, Sabrina, Research Professor and Project Director, Georgetown 

Health Policy Institute, Center on Health Insurance Reform, Washington, 

DC .......................................................................................................................... 31

Prepared statement .......................................................................................... 33 

Cook, Stacy, Carroll, IA ........................................................................................... 38 

Prepared Statement ......................................................................................... 40 

Carlson, Chris, Principal and Consulting Actuary, Oliver Wyman Consulting, 

Milwaukee, WI ..................................................................................................... 41 

Prepared Statement ......................................................................................... 43 

ADDITIONAL MATERIAL 

Statements, articles, publications, letters, etc.: 

Response by Gary Cohen to questions of: 

Senator Harkin .......................................................................................... 64 

Senator Alexander ..................................................................................... 64 

Senator Sanders ........................................................................................ 66 

Senator Whitehouse .................................................................................. 67 

Senator Baldwin ........................................................................................ 69 

Senator Enzi .............................................................................................. 72 

Response by Kevin Counihan to questions of: 

Senator Alexander ..................................................................................... 73 

Senator Franken ........................................................................................ 74 

(III) 
(IV) 

Response by Sabrina Corlette to questions of: 

Senator Alexander ..................................................................................... 74 

Senator Whitehouse .................................................................................. 75 

Response by Chris Carlson to questions of: 

Senator Alexander ..................................................................................... 76 

Senator Enzi .............................................................................................. 76 
(1) 

A NEW, OPEN MARKETPLACE: THE EFFECT 

OF GUARANTEED ISSUE AND NEW RATING 

RULES 

THURSDAY, APRIL 11, 2013 

U.S. SENATE, 

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS, 

Washington, DC. 

The committee met, pursuant to notice, at 10:07 a.m. in room 

SD–430, Dirksen Senate Office Building, Hon. Tom Harkin, chairman of the committee, presiding. 

Present: Senators Harkin, Alexander, Franken, Whitehouse, 

Baldwin, Murphy, Roberts, and Scott. 

OPENING STATEMENT OF SENATOR HARKIN

The CHAIRMAN. The Senate Committee on Health, Education, 

Labor, and Pensions will come to order. 

We meet today for the eighth in a series of hearings in this committee on the Affordable Care Act. 

We have been through a trying political season since we last met 

about this law. As everyone here is keenly aware, the law was a 

major topic of discussion during the Presidential campaign, as well 

as the campaigns of many House and Senate colleagues. But, hopefully, that political season is over. Our priority now must be implementing the law as smoothly and quickly as possible so that all 

Americans can share in its benefits. 

For the last 3 years, millions of Americans have been protected, 

for the first time, against some of the most notorious and abusive 

practices of the insurance industry. Thanks to the health reform, 

Americans now have the same protections that every Senator on 

this dais has had for years. 

Before the Affordable Care Act, millions of Americans had health 

insurance policies with lifetime limits. The health reform law permanently eliminated these limits for 105 million Americans. It 

phases out annual limits by 2014. 

The law requires every insurance plan to cover evidence-based 

preventative services that will head-off many illnesses. Over 105 

million Americans have already taken advantage of these protections. 

These preventative services are of particular importance to 

women, who can now receive well-woman visits, contraceptive services, and gestational diabetes screenings without co-pay. The law 

guarantees 27 million women access to these vital services at no 

charge. 

Before the Affordable Care Act, millions of young adults went 

without health insurance because their jobs did not offer it, or be-
2 

cause they were ineligible for coverage on their parents’ policy. 

Now, health reform allows young people—more than 3.1 million so 

far—to stay on their parents’ policy through age 26. 

This is a record, I think, to be proud of. It is a record to build 

on. Even with all of this progress, the best is yet to come. Starting 

in 2014, the Act’s most fundamental and significant reforms will 

become effective. 

These reforms will finally deliver on a long overdue promise to 

all Americans. The promise that if you work hard, play by the 

rules, and pay your fair share, you will never have to stay awake 

at night worried that you cannot pay your family’s medical bills. 

The primary mechanism for these changes is a new Health Insurance Marketplace in every State, open for business on October 

1st of this year. Most importantly, the almost 130 million Americans who have a pre-existing condition will, at long last, have 

peace of mind. Their health status will never again be a factor 

when they apply for insurance. 

In addition, the new rules prohibit insurers from denying coverage or charging more based on gender. No longer will women be 

charged more than men simply because they are women. And the 

law limits insurers’ ability to charge more based purely on age, 

making coverage accessible and affordable for folks closer to my 

age, but who are not lucky enough to have the same coverage that 

I do. 

These protections are vital for Carol from Ankeny, IA, who wrote 

me this. She said, 

‘‘My daughter is 19 years old and was diagnosed with Type 

I diabetes 9 years ago. Now I don’t have to worry about her 

pre-existing condition, and she can stay on my health care 

after she graduates from college, giving her a bridge to finding 

a job with benefits. In addition, the lifetime cap won’t be an 

issue.’’ 

I should add, that her daughter will never be charged more just 

because of her condition and her gender. 

For millions of people across our country, these reforms are 

transformational. They are making profound, practical differences 

in the lives of ordinary people, and I look forward to hearing the 

witnesses’ perspectives on them. 

I want to thank our Ranking Member, Senator Alexander, for 

being here today. I will turn to him for an opening statement. 

But I want to request that the record remain open for 10 days 

from today for statements to be submitted to the record. 

With that, I recognize Senator Alexander. 

OPENING STATEMENT OF SENATOR ALEXANDER

Senator ALEXANDER. Thanks, Mr. Chairman. Thanks for the 

hearing. 

I look forward to the witnesses. I thank Mr. Cohen. Thank you 

for coming, and for the other witnesses. 

I welcome this oversight hearing on the new health care law. It 

is timely because on January 1st, rhetoric turns into reality and we 

will see just exactly what we have. 
3 

Here is what we know we have: with few exemptions, individuals must purchase insurance or pay a tax of $95 to nearly $700 over 

time. Unless the business has 50 employees or fewer, employers 

must provide a certain type of insurance or pay a penalty of $2,000 

per employee. There are $1 trillion new taxes as a result of the new 

health care law; that is according to the Congressional Budget Office and the Joint Tax Committee. 

We are hearing today about new rules for allocating costs, which 

means that I may pay less and a young person may pay more. 

More people are covered, as Senator Harkin has correctly pointed 

out, and some people will get subsidies to help pay for their insurance. All of that will become reality after January 1, 2014. 

Now, there are some results from this other than the expanded 

coverage, and the results include individual costs; premiums for individual insurance are going up. Costs for younger Americans are 

going up, especially to buy insurance. Costs to employers of providing health care insurance are going up. Many who are selfemployed, and those who have employer insurance—that is about 

half of us, half of Americans—will find they are not able to keep 

their current policy. In many cases, they will be thrown into the 

marketplace to buy a more expensive policy than they now have or 

they will go into Medicaid. 

And as employers struggle, there will be more part-time jobs. We 

are already hearing many, many stories of employers who are 

going to hire people for 30 hours or less, so they are not subject 

to the penalty requirements of the health care law, and there will 

be fewer jobs. 

I have said here in hearings before, the restaurant companies 

who have talked to me and said while before the health care law, 

their goal was to run their store with 90 employees, now their goal 

is to run it with 70 because of the costs of the law. 

And then as a former Governor, I am especially sensitive to 

States who are struggling with Medicaid. We do not see it from this 

end as well, but you certainly see it if you are a Governor. That 

is why I said that any Senator who voted for the health care law 

ought to be sentenced to serve as Governor for 8 years and actually 

try to administer it. Medicaid soaks up 26 percent of the Tennessee 

State budget; that is up from 7 percent at the time I was Governor. 

And it is soaking up money that ought to be used to help the University of Tennessee, and other community colleges, and public institutions in the State. 

And then there is one other result, and I have it with me here 

today. There are a lot of new regulations. This is a stack of the regulations that have been issued under the new health care law to 

date and it is 7 feet, 3 inches tall and still rising. And for a big 

or small business to think about how to deal with that number of 

regulations, that kind of complexity, has to be daunting. 

We have many things we agree on in this committee, and I compliment the chairman for the way we work together, but this law 

is not one of them. We have a difference of opinion about it. 

In my view, the law was an historic mistake. The reason was it 

focused on the wrong goal. Instead of expanding a health care delivery system that already costs too much, we should have worked 

to have as an overall goal reducing the total cost of health care and 
4 

expanding the consumers’ role in going step by step in that direction. 

I look forward to the testimony, and I will have some questions 

and I look forward to answers. I look forward to this coming period 

of time when America finds the rhetoric of the health care law 

turns into reality, I think there is going to be a number of shocked 

Americans, and it is going to start with what we call rate shock 

as the cost of individual insurance premiums go up. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Alexander. We have a vote 

coming up at 11 o’clock. We will do it the best we can. 

We have two panels, and we will start first with panel one and 

Mr. Gary Cohen, director of the Center for Consumer Information 

and Insurance Oversight at the Centers for Medicare and Medicaid 

Services. 

Mr. Cohen is responsible for implementing many provisions of 

the Affordable Care Act including the consumer protections reforms 

already in effect, and those that will start in 2014. His office also 

works with States to set up Health Insurance Marketplaces in the 

States. 

Mr. Cohen comes with a distinguished insurance background. He 

has led the Center’s Division of Insurance Oversight. He also returned to his home State of California to serve as general counsel 

for its Health Insurance Marketplace. 

Mr. Cohen served as chief of staff to Congressman John 

Garamendi, both here in Congress and when Mr. Garamendi was 

Insurance Commissioner of the State of California. 

Thank you for joining us this morning sharing your experience 

and expertise with the committee. Your statement will be made a 

part of the record in its entirety. If you could sum it up in 5 minutes or so, I would sure appreciate it. 

Welcome, Mr. Cohen. 

STATEMENT OF GARY COHEN, J.D., DIRECTOR, CENTER FOR 

CONSUMER INFORMATION AND INSURANCE OVERSIGHT, 

CENTERS FOR MEDICARE AND MEDICAID SERVICES, WASHINGTON, DC 

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

Alexander, members of the committee. 

CCIIO is working to transform the Health Insurance Market to 

protect consumers, provide new coverage options for them, and give 

them the tools and resources they need to make informed choices 

about their health insurance. 

Most Americans receive health insurance in connection with 

their jobs, and for many of those Americans, particularly those who 

work for larger employers, this system has worked well. But for the 

approximately 10 percent of Americans who do not have employersponsored coverage or do not have coverage through a Government 

program such as Medicare, Medicaid, or the Children’s Health Insurance Program, the system has been broken. 

I would like to describe for you a few of the ways the Affordable 

Care Act has already made it better and some others that will 

transform it beginning in 2014. 
5 

First, before the ACA, millions of Americans could not get health 

insurance in the individual market at all. If you became sick or if 

you had been sick some time in the past, insurers either would not 

give you a policy or they would charge so much that you could not 

afford it. Today, children cannot be excluded because of pre-existing conditions, and beginning in 2014, no one can. 

In the past, health insurers could place annual or lifetime limits 

on the amount of medical care they would pay for. Some of these 

limits were so low that if you became seriously ill, you would soon 

find you had no insurance at all. Now, most insurers are prohibited 

from placing annual or lifetime limits on coverage for essential benefits such as doctor’s visits, prescription drugs, or hospital stays. 

In the past, insurers could drop young adults over the age of 19 

from their parents’ insurance plans. Now, most health plans that 

have covered children must make coverage available up to age 26. 

Today, more than 3.1 million additional young adults are covered 

under their parents’ plans. 

In the past, often because of cost, Americans used preventive 

services at about half the recommended rate. We know that chronic 

diseases such as heart disease, cancer, and diabetes often are either preventable or, with early detection, treatable. Now, most 

plans must cover certain preventive services without applying any 

deductible co-insurance or co-pay, and nearly 71 million Americans 

have expanded access to preventive services at no charge through 

their private insurance plans, and 47 million women now have 

guaranteed access to additional preventive services without cost 

sharing. 

In the past, when consumers shopped for health insurance, they 

had to read a patchwork of confusing disclosures, making it hard 

to compare plans and make informed choices. Now, health insurers 

and group health plans are required to provide a clear summary 

of benefits and coverage in a uniform format and in plain language. 

Americans have been used to seeing their premiums rise faster 

than their wages, but for the past 2 years, premiums have gone up 

by the lowest amount in decades. Two provisions of the ACA have 

contributed to this. 

The law requires that insurance companies must justify rate increases of 10 percent or more, shedding light on arbitrary or unnecessary costs. The percentage of rate increases above 10 percent has 

dropped significantly, and Americans saved an estimated $1 billion 

in 2011 on their health insurance thanks to Rate Review. 

Rate Review works in conjunction with the 80/20 rule or the 

Medical Loss Ratio rule which requires insurance companies to 

spend at least 80 percent of premiums on health care and no more 

than 20 percent on administrative costs and profits. If they fail to 

do so, they must provide rebates to their consumers. Thanks to this 

provision of the Affordable Care Act, 15 million Americans received 

$1.1 billion in rebates from insurers in 2012. 

For some Americans, the cost of health insurance is even higher 

than for others. Today, women could be charged more for individual health insurance policies simply because they are women. A 

22-year-old woman can be charged 50 percent more than a 22-yearold man, and older Americans can be charged as much as 5 times 

the rate for younger Americans. 
6 

Beginning in 2014, health insurance companies will no longer be 

able to charge women more than men, and they will be limited in 

how much more they can charge older Americans than younger 

Americans. 

The Affordable Care Act will also guarantee that people get good 

value from the insurance they buy. Beginning in 2014, most health 

plans in the individual and small group markets must meet a certain actuarial value, which means the percentage that will be paid 

by the health plan of the estimated average total cost of health 

care. Plans will be assigned a tier-based level based on their actuarial value. What this means is that you can choose a plan based 

on what you expect your health care costs to be. If you are relatively healthy, you can buy what we call ‘‘The Bronze Plan,’’ 

which will pay a lower amount of your total costs, but will be less 

expensive. If you are older and you expect to have more health 

costs, you can buy a Silver or a Gold Plan, which will cost a little 

bit more, but will cover more of your expected costs of care. And 

you will still have the security, in any case, of knowing that if you 

become seriously ill that coverage will be there to pay for the cost 

of your care. 

Starting October 1, Americans will begin shopping for and enrolling in a wide variety of high quality health insurance plans for coverage in 2014. They will be able to use a single, streamlined application to determine whether they are eligible for Medicaid, or 

CHIP, or qualify for premium tax credits and reduced cost sharing 

for a qualified health plan purchased on the Marketplace. 

We have been working hard over the past 3 years to improve the 

Health Insurance Market for all Americans. We are very proud of 

what we have accomplished so far, and we are excited about the 

new consumer protections that will be in place beginning in 2014. 

Thank you. 

[The prepared statement of Mr. Cohen follows:] 

PREPARED STATEMENT OF GARY COHEN, J.D. 

SUMMARY

In March 2010, President Obama signed the Affordable Care Act into law. Over 

the past 3 years, Americans have benefited from insurance reforms that have already gone into effect. Today, more than 3.1 million additional young adults under 

the age of 26 are covered under their parents’ plans. Nearly 71 million Americans 

now have expanded access to preventive services at no additional cost through their 

private insurance plans, and 27 million women now have guaranteed access to additional preventive services without cost sharing. 

Now, health insurers and group health plans provide a clear summary of benefits 

and coverage in a uniform format and in plain language that is designed to be easily 

compared across health plans by the millions of Americans shopping for private 

health insurance coverage. 

Now, insurers must provide clear information so consumers can understand the 

insurer’s reasons for significant rate increases. Since the rule on rate increases was 

implemented, the number of requests for insurance premium increases of 10 percent 

or more plummeted from 75 percent to an estimated 14 percent. 

Today, in most States, adult consumers with pre-existing conditions can be denied 

individual health insurance coverage, can be charged significantly higher rates 

based on their conditions, or can have benefits for pre-existing medical conditions 

excluded by insurance companies. In 2014, Americans will no longer need to worry 

about this. Non-grandfathered health insurers in the individual and small group 

markets will no longer be able to use health status to determine eligibility, benefits, 

or premiums. 
7 

1http://aspe.hhs.gov/health/reports/2013/PreventiveServices/iblprevention.cfm. 

Before the Affordable Care Act, women could be charged more for individual insurance policies simply because of their gender. Before the Affordable Care Act, premium rates charged to older Americans could be more than five times the rate for 

younger Americans. In 2014, new rules will help make health insurance more affordable for more Americans. 

At the same time that insurance prices become more fair, many individuals will 

also have new help paying for their health care coverage through premium tax credits and cost sharing reductions. When coverage through the Health Insurance Marketplace starts as soon as January 1, 2014, many middle and low-income Americans 

will be eligible for a new kind of tax credit that can be used right away to lower 

monthly health plan premiums. 

CMS has been working with States and private insurance companies to ensure 

the establishment of Health Insurance Marketplaces. When consumers start to visit 

the new Marketplaces on October 1, 2013, they will experience a new way to shop 

for health coverage. The Marketplaces will also make it easier than ever before to 

compare available qualified health plans based on price, benefits and services, and 

quality. 

Good morning, Chairman Harkin, Ranking Member Alexander, and members of 

the committee. Thank you for the opportunity to speak about our work implementing the Affordable Care Act to put in place strong consumer protections, provide new coverage options, and give Americans the additional tools to make informed choices about their health insurance. Thanks to the consumer protections 

and insurance market reforms in the Affordable Care Act, in 2014, millions of people without insurance will be able to obtain coverage, and millions more will have 

the peace of mind that the coverage they have cannot easily be taken away. 

In March 2010, President Obama signed the Affordable Care Act into law, putting 

in place comprehensive reforms to improve access to affordable health insurance for 

all Americans and protect consumers from abusive insurance company practices. 

Over the past 3 years, Americans have benefited from insurance reforms that have 

already gone into effect, such as allowing adult children up to age 26 to stay on 

their parents’ insurance, eliminating lifetime dollar limits on essential health benefits, and prohibiting rescissions of insurance because someone gets sick. 

In 2014, these protections will be greatly expanded. Discrimination by insurance 

companies against individuals with pre-existing conditions will generally be banned 

for Americans of all ages, and consumers will have better access to comprehensive, 

affordable coverage. Beginning on October 1, 2013, Americans may begin shopping 

for and enrolling in a wide variety of high-quality health insurance plans for coverage in 2014 through the Health Insurance Marketplaces (also known as Affordable 

Insurance Exchanges). Regardless of whether they plan to purchase their insurance 

through a Health Insurance Marketplace or are covered by insurance through their 

work, in 2014, more Americans will have access to more affordable health insurance. 

WHAT WE HAVE ALREADY ACHIEVED: BETTER ACCESS TO HIGH QUALITY COVERAGE

The Center for Consumer Information and Insurance Oversight (CCIIO) at the 

Centers for Medicare & Medicaid Services (CMS) has implemented strong consumer 

protections that hold insurance companies more accountable, give consumers more 

coverage options, and improve the value of that coverage. Today, more than 3.1 million additional young adults under the age of 26 are covered under their parents’ 

plans. Nearly 71 million Americans now have expanded access to preventive services 

at no additional cost through their private insurance plans, and 27 million women 

now have guaranteed access to additional preventive services without cost sharing.1

The Affordable Care Act has also helped provide consumers with more rights and 

protections. In the past, health insurers could refuse to accept anyone because of 

a pre-existing health condition, or they could limit benefits for that condition, but 

the Affordable Care Act will provide consumers with the security that their coverage 

will be there for them when they need it. 

Now, non-grandfathered individual health insurance plans and group health plans 

and group health insurance plans are prohibited from denying children coverage 

based on their pre-existing conditions, protecting 17.6 million children with preexisting conditions from coverage denials. Additionally, insurance companies cannot 

drop or rescind people’s coverage because they made an unintentional mistake on 
8 

2For an example see: http://www.healthcare.gov/law/features/rights/cancellations/index 

.html. 3 CDC Report: Chronic Diseases: The Power to Prevent, the Call to Control http:// 

www.cdc.gov/chronicdisease/resources/publications/aag/pdf/chronic.pdf. 4 Health Insurance Rate Review—Final Rule on Rate Increase Disclosure and Review: http:// 

www.gpo.gov/fdsys/pkg/FR-2011-05-23/pdf/2011-12631.pdf. 5 ASPE Research Brief: Health Insurance Premium Increases in the Individual Market Since 

the Passage of the Affordable Care Act http://aspe.hhs.gov/health/reports/2013/rateIncrease 

IndvMkt/rb.cfm. 

their application 2 and cannot place lifetime limits on the dollar value of essential 

health benefits. Group health plans, group health insurance plans, and non-grandfathered individual health insurance policies also are restricted in the annual dollar 

limits they can place on essential health benefits, depending on the plan year. We 

further protected consumers by establishing a set of uniform standards for external 

review of individual health plan decisions restricting an enrollee’s access to benefits. 

Now, consumers enrolled in non-grandfathered group health plans and group health 

insurance coverage and individual health insurance policies can ask for an independent third party to review decisions made by their plans and insurance companies to deny preauthorization or payment for a service. 

In the past, often because of cost, Americans used preventive services at about 

half the recommended rate. Yet chronic diseases, such as heart disease, cancer, and 

diabetes—which are responsible for 70 percent of deaths among Americans each 

year and account for 75 percent of the nation’s health spending 3—often are either 

preventable or, with early detection, treatable. Now, all non-grandfathered plans 

cover certain preventive services without any cost-sharing for the enrollee when delivered by in-network providers. This protection will help Americans gain easier access to services such as blood pressure, diabetes, and cholesterol tests; many cancer 

screenings; routine vaccinations; pre-natal care; and regular wellness visits for infants and children. 

In the past, when consumers shopped for health insurance, they had to read a 

patchwork of non-uniform and intricate disclosures about matters important to consumers, such as what benefits are covered under what conditions and the cost sharing associated with those benefits. That structure made the process inefficient, difficult, and time-consuming. Because of the difficulty in obtaining comparable information across and within health insurance markets, consumers had trouble finding 

and choosing the coverage that best met their health and financial needs, as well 

as the needs of their families or their employees. 

Now, health insurers and group health plans provide a clear summary of benefits 

and coverage in a uniform format and in plain language that is designed to be easily 

compared across health plans by the millions of Americans shopping for private 

health insurance coverage. If people are looking to buy private health insurance, 

they can compare plans at www.HealthCare.gov, which provides information about 

what public and private health insurance coverage is available to consumers based 

on where they live. Starting in October 2013, consumers will also be able to use 

www.HealthCare.gov to shop for coverage beginning in 2014 under qualified health 

plans and to determine whether they are eligible for premium tax credits and reduced cost sharing, through the Health Insurance Marketplace. 

Before the Affordable Care Act, Americans watched their premiums double over 

the previous decade, oftentimes without explanation or review. In an effort to slow 

health care spending growth and give all Americans more value for their health care 

dollars, the Affordable Care Act has brought an unprecedented level of scrutiny and 

transparency to health insurance rate increases by requiring an insurance company 

to justify a rate increase of 10 percent or more, shedding light on arbitrary or unnecessary costs. 

Now, insurers must provide clear information so consumers can understand the 

insurer’s reasons for significant rate increases. Since the rule on rate increases was 

implemented,4 the number of requests for insurance premium increases of 10 percent or more plummeted from 75 percent to an estimated 14 percent. The average 

premium increase for all rates in 2012 was 30 percent below what it was in 2010. 

Available data suggests that this slowdown in rate increases is continuing into 

2013.5 Americans have saved an estimated $1 billion on their health insurance premiums thanks to rate review. Even when an insurer decides to increase rates, consumers are seeing lower rate increases than what the insurers initially requested. 

More than half of the requests for rate increases of 10 percent or more ultimately 

resulted in issuers imposing a lower rate increase than requested or no rate increase at all. 
9 

6MLR Final Rule: https:www.federalregister.gov/articles/2012/05/16/2012-11753/medicalloss-ratio-requirements-under-the-patient-protection-and-affordable-care-act. 7 45 CFR Part 158: http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=5872c7e9a4bcec4584dd 

3255841e647a&rgn=div5&view=text&node=45:1.0.1.2.74&idno=45. 8 ASPE Report: At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans http:// 

aspe.hhs.gov/health/reports/2012/pre-existing/index.shtml. 9 Essential Health Benefits: http://www.gpo.gov/fdsys/pkg/FR–2012–11–26/html/2012– 

28362.htm. 

Furthermore, the rate review program works in conjunction with the 80/20 rule 

(or the Medical Loss Ratio rule),6 which requires insurance companies to spend at 

least 80 percent (85 percent in the large group market) of premiums on health care, 

and no more than 20 percent (15 percent in the large group market) on administrative costs (such as executive salaries and marketing) and profits. if they fail to do 

so, they must provide rebates to their customers. Insurers that did not meet the 80/ 

20 rule in 2011 have provided $1.1 billion in rebates that benefited about 13 million 

Americans, at an average of $137 per family.7

LOOKING FORWARD TO 2014

We are proud of the accomplishments of the last 3 years, and we look forward 

to the most promising reforms of the Affordable Care Act that are set to start in 

2014. Soon, a variety of consumer protections will take effect and will end many insurance practices that make health care coverage too expensive or unavailable for 

many consumers. 

END TO PRE-EXISTING CONDITION DISCRIMINATION AND LIMITS ON CARE

Today, in most States, adult consumers with pre-existing conditions can be denied 

individual health insurance coverage, can be charged significantly higher rates 

based on their conditions, or can have benefits for pre-existing medical conditions 

excluded by insurance companies. 

Beginning in 2014, new protections will help Americans of all ages maintain 

health insurance coverage, regardless of their health status. 

As many as 129 million non-elderly Americans have some type of pre-existing 

health condition, and up to 25 million of those individuals do not have health insurance.8 Pre-existing health conditions range from life-threatening illnesses such as 

cancer, to chronic conditions such as diabetes, asthma, or heart disease. Because of 

pre-existing condition discrimination by health insurers, many individuals with preexisting conditions today have limited choices. For example, individuals may not be 

able to change jobs, start their own businesses, or retire because of fear of losing 

health insurance coverage. People with pre-existing conditions could also lose coverage if they get divorced, move, or age out of dependent coverage. 

In 2014, Americans will no longer need to worry about this. Non-grandfathered 

health insurers in the individual and small group markets will no longer be able 

to use health status to determine eligibility, benefits, or premiums. With limited exceptions, all non-grandfathered plans and policies in the individual and group markets will be required to enroll individuals, regardless of health status, age, gender, 

or other factors and will be prohibited from refusing to renew coverage because an 

individual or employee becomes sick. 

In addition, some people with cancer or other chronic illnesses today run out of 

insurance coverage when their health care expenses reach a dollar limit imposed by 

their insurance company or group health plan. Beginning on January 1, 2014, group 

health plans, group health insurance plans, and non-grandfathered individual 

health insurance policies will be prohibited from imposing annual dollar limits on 

essential health benefits. This change will help ensure that Americans will no 

longer worry about hitting a prohibitive dollar amount, which could force a consumer to either pay out-of-pocket for health care costs above the dollar limit or forgo 

necessary care. 

GUARANTEED CORE BENEFITS AND COMPARISON SHOPPING

All non-grandfathered plans in the individual and small group markets will cover 

essential health benefits,9 which include items and services in 10 statutory benefit 

categories, such as ambulatory patient services (including doctors’ visits), hospitalization, prescription drugs, and maternity and newborn care. These benefits 

must be equal in scope to a typical employer health plan. To this end, the essential 

health benefits will be defined in each State by reference to a benchmark plan. 
10 

10Kaiser Family Foundation. Employer Health Benefits 2010 Annual Survey http://ehbs.kff 

.org/pdf/2010/8085.pdf. 11 Health Insurance Market Rules: http://www.gpo.gov/fdsys/pkg/FR–2013–02–27/pdf/ 

2013–04335.pdf. 12These include additional eligibility requirements, e.g., applicant is not incarcerated (45 CFR 

155.305(a)(2)). 

Soon, consumers will be able to select an insurance plan with confidence that it will 

cover key health care services when they need them. 

Beginning in 2014, non-grandfathered health plans in the individual and small 

group markets also must meet certain actuarial values: 60 percent for a bronze 

plan, 70 percent for a silver plan, 80 percent for a gold plan, and 90 percent for 

a platinum plan. Actuarial value means the percentage paid by a health plan of the 

total allowed costs of benefits. For example, if a plan has an actuarial value of 70 

percent, the average consumer would be responsible for 30 percent of the costs of 

the essential health benefits the plan covers. These tiers will allow consumers to 

compare plans with similar levels of coverage, which, along with comparing premiums, provider participation, and other factors, will help consumers make more informed decisions. 

MORE AFFORDABLE COVERAGE

Before the Affordable Care Act, health insurance premiums had risen rapidly, 

straining the pocketbooks of Americans for more than a decade. Between 1999 and 

2010, the cost of coverage for a family of four rose 138 percent.10 These increases 

have forced families and employers to spend more money, often for less coverage. 

Before the Affordable Care Act, women could be charged more for individual insurance policies simply because of their gender. A 22-year-old woman could be charged 

50 percent more than a 22-year-old man. Many young people and people with lowincomes often could not afford health insurance, leaving millions of Americans without coverage. Before the Affordable Care Act, premium rates charged to older Americans could be more than five times the rate for younger Americans. 

In 2014, new rules will help make health insurance more affordable for more 

Americans.11 Most health insurance companies will be prohibited from charging 

higher premiums to certain enrollees because of their current or past health problems. Most insurance companies will no longer be able to charge women more than 

men based solely on their gender. Most insurers will be limited in how much more 

they can charge older Americans than young Americans, so that insurance becomes 

more affordable for most Americans. 

At the same time that insurance prices become more fair, many individuals will 

also have new help paying for their health care coverage through premium tax credits and cost sharing reductions. When coverage through the Health Insurance Marketplace starts as soon as January 1, 2014, many middle and low-income Americans 

will be eligible for a new kind of tax credit that can be used right away to lower 

monthly health plan premiums. The tax credit is sent directly to the insurance company and applied to the premiums, so consumers pay less out of their own pockets. 

The amount of the tax credit for which an eligible individual qualifies depends on 

the individual’s household income. Individuals are eligible for premium tax credits 

if, among other things, they: 

• Are not eligible for affordable health insurance coverage designated as ‘‘minimum essential coverage’’ (e.g., government-sponsored coverage and employer-sponsored coverage); 

• Meet the requirements to enroll in a qualified health plan through the Health 

Insurance Marketplace 12; 

• Are citizens of or lawfully present in the United States; and 

• Have modified adjusted gross household incomes between 100 percent and 400 

percent of the Federal poverty level (e.g., $23,550 to $94,200 for a family of four in 

2013). 

Many people will find that they can now buy more comprehensive coverage at the 

same, or often even lower, out-of-pocket cost than they previously paid. Additionally, 

young adults and certain other people for whom coverage would otherwise be 

unaffordable may enroll in catastrophic plans, which have lower premiums, protect 

against high out-of-pocket costs, and cover recommended preventive services without cost sharing—providing affordable individual coverage options for young adults 

and people for whom coverage would otherwise be unaffordable. 

Additionally, CMS recently finalized a temporary reinsurance program designed 

to provide market stability and premium stability for enrollees in the individual 

market by reducing the impact of high-cost enrollees on plans. The temporary risk 
11 

13 Application Elements: http://www.cms.gov/Regulations-and-Guidance/Legislation/Paper 

workReductionActof1995/PRA-Listing-Items/CMS–10440.html. 14Per 45 CFR 155.220. 

corridor program will provide issuers additional protection against inaccurate rate 

setting. The permanent risk adjustment program will provide increased payments 

to health insurance issuers that attract higher-risk populations. Taken together, 

these premium stabilization programs will make coverage more affordable. 

SHOPPING IN THE HEALTH INSURANCE MARKETPLACE

CMS has been working with States and private insurance companies to ensure 

the establishment of Health Insurance Marketplaces through which millions of 

Americans will purchase affordable health care coverage. In order to build robust 

and competitive Health Insurance Marketplaces, CMS is working closely with 

issuers as they prepare qualified health plans that will be available to consumers 

within the Marketplaces. When consumers start to visit the new Marketplaces on 

October 1, 2013, they will experience a new way to shop for health coverage. The 

Marketplaces will make it possible for eligible consumers to use a streamlined application that can be completed online to apply for coverage through a qualified health 

plan, to qualify for premium tax credits and reduced cost sharing, or to apply for 

coverage through Medicaid or the Children’s Health Insurance Program (CHIP).13

The Marketplaces will also make it easier than ever before to compare available 

qualified health plans based on price, benefits and services, and quality. By pooling 

consumers together, reducing transaction costs, and increasing transparency and 

competition, the Health Insurance Marketplaces for individuals and small groups 

should be more efficient and competitive than the consumers’ current health insurance choices. 

CMS is working to ensure streamlined and secure access to a variety of information sources that will provide essential support to consumers as they fill out the 

streamlined application. Through these streamlined processes, consumers will be 

able to fill out the application, receive information about whether they are eligible 

for premium tax credits or cost-sharing reductions or Medicaid coverage, and begin 

shopping for qualified health plans, all in real time, in one sitting. Consumers will 

then be able to research and compare the available qualified health plan options in 

the Marketplace so they can make informed choices about their coverage. Consumers also can use either the Marketplace Web site or a toll-free call center to 

choose health coverage that best fits their needs. Marketplace Navigators and other 

consumer assistance programs will provide information to consumers in a fair, accurate, and impartial manner. Additionally, where permitted by the State,14 licensed 

agents and brokers, as well as online brokers, may help consumers and employers 

enroll in a qualified health plan through the Marketplace. 

CMS and our State partners are working hard to ensure that people are aware 

of the new tools that will soon be available to them. On www.HealthCare.gov, people 

can learn about the Affordable Care Act, review health insurance basics, such as 

understanding what their coverage costs, and access an interactive checklist to help 

prepare them to shop for coverage in the new Marketplaces. CMS also expects that 

other Federal agency partners and members of the private sector will be involved 

in efforts to reach, engage, and assist potential enrollees. 

CONCLUSION

CMS has worked hard over the past 3 years to improve the health insurance market for all Americans. We are very proud of what we have already accomplished and 

are excited about the new consumer protections that will help Americans in 2014. 

More work remains to ensure Americans have access to high quality, affordable 

health coverage. We look forward to continuing our efforts to strengthen health coverage options with the help of our partners in Congress, State leaders, consumers, 

and other stakeholders across the country. Thank you for the opportunity to discuss 

the work that CMS has been doing to implement the Affordable Care Act. 

The CHAIRMAN. Thank you very much, Mr. Cohen. 

We will now start a round of 5 minute questions. I want to first 

say thank you for your leadership at CMS on this and for really 

moving aggressively to make sure that we can have this up and 

going by October the 1st of this year. 

Mr. Cohen, I just want to get right to the nub of something here. 

I would like to start right off. Discuss the status of your depart-
12 

ment’s work to reach out to currently uninsured populations—I am 

talking about the young and the healthy; and encourage them to 

enroll in coverage. We keep hearing about, well premiums are 

going up. People say, ‘‘Well, there’s going to be a lot of young, 

healthy people that might have to pay more.’’ 

How is this campaign, how are these efforts you are doing being 

implemented in States where the federally facilitated marketplace 

is operating? What about States like my State of Iowa where the 

State and Federal Government are working together on a partnership-type marketplace? 

So focus a little bit of your comments on that, on the young and 

the healthy, those that are currently uninsured. 

Mr. COHEN. Thank you, Senator. I appreciate the opportunity to 

address that. 

I think it begins, first, with some pretty extensive market research we have done to identify the different types of people that 

we need to reach and what are the best ways of reaching them. 

Then what you will see, as we move closer to the time when people actually will be able to take action and sign up to get coverage 

beginning this summer, you will see a number of different types of 

activities happening ranging from a traditional media campaign to 

a social media campaign, again, geared at the specific types of target groups that we need to reach. 

In addition to that, we just announced the other day a grant program for the Navigator Program. There will be community organizations in every State. It will be church groups. It will be advocacy 

groups. It will be all kinds of community-based organizations who 

already have ties to their community, and connections with their 

community, and have been serving their community. And we really 

think that is the best way to find the people and get them informed 

about what this law can offer them. 

In addition to that, we are working very closely with the agent 

and broker community across the country to make sure that they 

understand the opportunity that this presents for them to bring 

millions of new people into coverage, and to make it possible for 

them to do that in a way that will be as simple and easy as possible. 

It is really a multifaceted approach that we are taking. But specifically, as you point out, Senator, to target the groups that we 

need to reach and come up with the messages that are going to be 

most resonant with them. 

The CHAIRMAN. Mr. Cohen, you mentioned this notice that came 

out the other day. I read it. I looked at it about grants to States 

to set up the Navigators. It is all well and good. Maybe I wish you 

hadn’t mentioned that because of how you are paying for that. 

This is above your pay grade, but I am sending a message to 

those above you through you. Robbing Peter to pay Paul, robbing 

the money from the Prevention Fund, the very thing that will really help to bend the cost curve in the future to keep people healthy, 

you mentioned that. To take money out of that to set up the Navigator system, to me, is illogical; totally illogical and self-defeating. 

So I don’t understand why those who implemented this, like I 

say, I am not talking at you. I just want to send a message that 

we are not going to accept that. 
13 

I believe the Navigators need to be funded. I believe that that 

needs to be done to help people get into the system, especially the 

young and the healthy that we are talking about; but to rob it from 

the Prevention Fund? That doesn’t go and it is not going to go. 

I just wanted to make that very clear. I agree on the goals, but 

not robbing that money from the Prevention Fund. 

I think we do have to be clear that young people who are healthy 

who say, ‘‘Oh, my gosh. Now I’ve got to buy insurance.’’ They have 

to understand that they are part of society too. They may have an 

accident. They may be riding a motorcycle without a helmet someday. They may get an illness. Who knows when cancer is going to 

strike or something like that? 

So these so-called free riders that we have had in the past need 

to understand that they are part of the health care system too, and 

they are going to get older some day, and they are going to need 

to have other people in the pool. 

As a former insurance salesman myself, a long time ago, there 

was one clear principle of insurance: people are better off the more 

people in the pool. The more you have in the pool, the better it is 

for everyone, whether it is car insurance, or life insurance, or 

health insurance. And young people need to understand that, that 

they are part of this system too. 

With that, I thank you very much, Mr. Cohen. I have used up 

all my time. 

I recognize Senator Alexander. 

Senator ALEXANDER. Thanks, Mr. Chairman. 

Mr. Cohen, welcome. I want to use most of my time to talk with 

you about the idea of churning. How do we stabilize those people 

who may be moving in and out of Exchanges in Medicaid? 

But you mentioned benefits; somebody has to pay for those benefits. I mentioned to the President at our Health Care Summit in 

2010 that the plan would, his plan, would increase individual insurance rates. He said it wouldn’t. But the CBO said it would, and 

that has turned out to be right. BlueCross BlueShield of Tennessee 

says rates for individual policies are going up 30 percent, may be 

in excess of 100 percent. 

The American Action Forum says premiums may triple if rates 

for older people like me are going to be stabilized, then younger 

people—my children or grandchildren—are going to be paying for 

it. If they are lower for women, they are going to be higher for men. 

Somebody has to be paying for it. 

The Society of Actuaries has said that we are going to experience 

rate shock because costs are allocated differently because coverage 

is expanded because policies are richer. So there are more benefits, 

but there are more costs. 

Now, let me turn to this subject of churning. I know that the Administration has had discussions, and been concerned, about people 

who might move in and out of the Exchanges and Medicaid. These 

would be the people who—maybe two groups of people, people who 

make 138 percent of poverty up to 150. These would be, what you 

might call, the working poor, lower income working people, but 

their income might go down and suddenly they will go into Medicaid, or they might go back from Medicaid; so back and forth. 
14 

The idea would be: is there some way to stabilize that to make 

it easier for those individuals to move back and forth, especially in 

those States that choose to expand Medicaid? 

I notice that Arkansas has made an interesting proposal to the 

Secretary, which she seems to have approved in concept. Do you 

think that shows promise? 

Mr. COHEN. I think, Senator, that one of the things that has 

been very encouraging throughout this process is that we do see 

very interesting approaches being taken by different States to try 

to solve some of these problems. 

We have tried, throughout the implementation of the Affordable 

Care Act, to be as flexible as possible and to give States the ability 

to try different approaches as long as, obviously, they are consistent with the law. 

I know we have had a lot of discussions with Arkansas about 

their proposal for premium assistance. There are some other States 

that are interested in that, and I think those discussions are ongoing. And I know there is an interest in seeing whether we can 

reach something that will make sense for Arkansas and for the 

other States. 

Senator ALEXANDER. If other requirements of the law could be 

met, one of the benefits of such a plan could be more stability for 

this lower income American who moves from Medicaid back to outside Medicaid. 

Is that not correct? 

Mr. COHEN. That is right, as long as, I mean, obviously the cost 

equivalency is a significant—— 

Senator ALEXANDER. And that is part of the waiver decision that 

you have—— 

Mr. COHEN. Correct. 

Senator ALEXANDER [continuing]. That the department has to 

make. But if that could be met, that would be an objective that is 

not inconsistent with the Administration’s own objectives, it seems 

to me. 

Mr. COHEN. That is true. 

Senator ALEXANDER. And I know that Governor Haslam of Tennessee has recently made a proposal, and has been in some discussions with the department for a similar kind of proposal, that 

would affect 175,000 Tennesseans, many of whom might be in that 

churning group, who move in and out of Medicaid to the Exchanges. 

Can you give me any status report on how well that proposal is 

being received by the department? 

Mr. COHEN. I don’t have a specific status report, but we certainly 

can look into that and get back to you. But I know there have been 

quite a number of conversations with Governor Haslam and the department. 

Senator ALEXANDER. Well, it is not so much that you get back to 

me as that—— 

Mr. COHEN. Get back to him. 

Senator ALEXANDER [continuing]. Get back to him. I think that 

is a good faith proposal by a Governor who, with his legislature, 

is trying to come up with a way to make sure these 175,000 Tennesseans, who otherwise would not receive Medicaid expansion, do 
15 

so in a way that, first, meets cost effectiveness. And, second, would 

meet the admirable goal, I think, of reducing the amount of churning. 

I have heard some estimates that the number of Americans who 

might find themselves going back and forth between Exchanges in 

Medicaid might be as high as 40 percent. 

Does that sound reasonable to you? 

Mr. COHEN. I am always hesitant to pass judgment on estimates, 

particularly when they are being made by actuaries, since I am not 

an actuary. But obviously, we have seen a range of estimates on 

a number of subjects and everyone is giving their best guess and 

their best prediction. But I would hesitate to endorse any particular one. 

Senator ALEXANDER. But it is a significant number. 

Mr. COHEN. It is an issue. 

Senator ALEXANDER. It is an issue. And financial literacy or literacy about how to purchase health care is always a problem for 

any of us of any station, but may be especially for some lower income people. And so, if they had a stable and secure insurance policy as they move back and forth from one part of the Government 

program to another, that might make their lives simpler, easier, 

and maybe even less expensive for the Government. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Alexander. 

Now I have Senator Baldwin, and then Senator Scott, Senator 

Franken, Senator Roberts. 

Senator Baldwin. 

STATEMENT OF SENATOR BALDWIN

Senator BALDWIN. Thank you, Mr. Chairman. I appreciate you 

and Ranking Member Alexander for convening this hearing. 

In order for our country to thrive, we need a vibrant and growing 

middle class. We need an economy that is built to last. And we 

need laws that reflect the common belief that if you work hard and 

you play by the rules, you should be able to get ahead. 

I was proud to work on and help pass the Affordable Care Act 

into law during my time serving in the House of Representatives 

because I believe it moves our country forward in these very regards. 

The Affordable Care Act strengthens the economic security of 

families and businesses in Wisconsin, and all across the country by 

ensuring that quality health insurance coverage will be there for 

them. 

And prior to passage of the health reform law, I heard from 

countless Wisconsin families and businesses about their struggles 

under the prior law. Far too many were squeezed literally out of 

the middle class because of health insurance prices that were too 

high or the inability to get comprehensive health insurance coverage. 

I think about the many families that have seen their economic 

security shattered because no insurance company would insure 

their child. I think about how many people have been trapped in 

a job where they could not look at other opportunities or advance 

because of the insurance situation. 
16 

How many potential entrepreneurs were dissuaded from starting 

a business of their own because they were afraid they would not 

be able to find coverage? The Affordable Care Act is changing all 

of that. 

And with many consumer protections already in place, and with 

the new guaranteed issue rule set to go into effect in just over 8 

months, our families and businesses will be more secure knowing 

that quality, affordable insurance will be there regardless of a preexisting medical condition, or sudden illness, or accident. 

The law also unrigs our health insurance system to provide everyone with a fair chance and a fair shake. It will no longer allow 

health insurance companies to write their own rules about who is 

covered and who isn’t, or who can be charged discriminatory premiums. I think about the fact that we now have 20 women serving 

in the U.S. Senate, and it is only fair that myself and our Chairman should be charged similar premiums. Being a woman is no 

longer going to be considered a pre-existing medical condition and 

it should not be treated as one. 

But as much as I supported the passage of the Affordable Care 

Act, it is just as important that we make sure that this law is fully 

and faithfully implemented. 

Mr. Cohen, I want to thank you for your work in enacting the 

laws, consumer protections, and overseeing the creation of Health 

Insurance Marketplaces. I have to imagine that your work has 

been greatly affected and, perhaps, frustrated by those States that 

have taken political, ideological stances against implementation of 

the law. 

I think about my own State of Wisconsin where there is participation in the lawsuit, and then turned back early adopter grants, 

and then opted out of a State Exchange or a partnership Exchange, 

decided not to expand Medicaid. 

Can you tell me how your work has been affected by the various 

States that have taken these other tracks? 

Mr. COHEN. Thank you, Senator. I would be happy to. 

I would say, first of all, that our approach to this all along has 

been to meet the States where they are, and provide them with the 

opportunity to do as much as they are willing and able to do. And 

I am heartened, actually. 

Recently, I attended a meeting that we held with State insurance 

department officials from the States that will have the Federally 

Facilitated Marketplace. And when you get down to that level, they 

understand two things. They understand, first, this is the law of 

the land and the time for debating it is over. And second, that they 

want to make this work for the citizens in their States. So we are 

working very closely with insurance departments, departments of 

health around the country to help get this law implemented. 

We have also begun a significant stakeholder outreach effort, 

which is separate and apart from anything that the State Government might be doing. We started with a national call that we had 

a couple of weeks ago with over 3,000 people on the phone, and we 

will be doing regional and State-by-State calls leveraging our presence at the 10 regional offices that CMS has around the country. 

So I am not going to sit here and tell you that it wouldn’t have 

been easier if everyone had fully embraced this from the beginning, 
17 

but I think we have made great progress. We are seeing now more 

of both a recognition that this is actually happening and a desire 

for it to succeed. 

Senator BALDWIN. I particularly appreciate the outreach to stakeholders because, I think, some of that communication has been 

frustrated, again, by those who are politically opposing the implementation. 

I guess I would ask you as a last question: what sort of differences in the Affordable Care Act benefits will be experienced or 

seen between States that are forging ahead with State Exchanges 

and those who will have to rely on the Federal Exchanges? 

Mr. COHEN. Senator, I really think that it is going to be of little 

to no consequence to the average consumer which type of Exchange 

they are seeing. The set of benefits does not vary. I mean, it varies 

State-by-State, but not depending on who is operating the Exchange. 

And when a consumer goes to a Web site and goes through the 

process of filling out the application, finding out if they are eligible 

for subsidies, and then choosing a plan, their experience will really 

be very much the same regardless of who is operating the Exchange. 

So I am hopeful that while the political rhetoric and debate may 

be going on, over here on the ground, people will really have the 

opportunity to receive the benefits of this law everywhere across 

the country. 

Senator BALDWIN. Thank you. 

The CHAIRMAN. Thanks, Senator Baldwin. 

Senator Scott. 

STATEMENT OF SENATOR SCOTT

Senator SCOTT. Thanks, Senator Harkin. I didn’t realize you 

were an insurance agent as well at one point in your career. 

The CHAIRMAN. Long time ago. 

Senator SCOTT. Long time ago? Like 5 years? Yes, sir. 

The CHAIRMAN. You are going to be a big member of this committee. 

[Laughter.] 

Senator SCOTT. Yes, sir, Mr. Chairman. I appreciate that, sir. 

Thank you, sir. Thanks, sir. 

Mr. Cohen, thank you for being here with us today. I know that 

we see ourselves sometimes from a partisan perspective, and I do 

not see the ACA from a partisan perspective. I see it as a perspective of an average person in our country having to absorb the additional costs that are going to be associated with the ACA. 

What we hear a lot about is the price tag is going down for the 

purchase of individual insurance. I am not quite sure that is accurate because, at some point, the price will be impacted by the actual cost. And when we look at the actual costs of the health care 

bill, it is actually going to have a major impact on every single taxpaying American in the country; every single taxpaying American 

in the country. 

There is $800 billion of new taxes and fees in the ACA. It includes a $123 billion excise tax, 3.8 percent, on high earners. That 

is on top of the tax reform that was just completed at the beginning 
18 

of the year. We are talking about an additional $29 billion on medical device taxes. We are talking about where does the $1.5 billion 

come for the Federal Government to help 33 States—33 States, 

more than half of our country—will need assistance in setting up 

these health Exchanges. 

The cost of it will include not actually pricing-in pre-existing conditions from an actuarial perspective. The cost will include eliminating agents. There is a cost when you have the Medical Loss 

Ratio at 85 percent, or you said 20 percent for Navigators. The fact 

of the matter is when you eliminate the professional that assists 

people in making their health care decisions on an individual basis, 

there is an unintended consequence and a higher cost of that to the 

country. 

There is an interesting concept that we are taking 10 years of 

premium and having 6 years of full benefits. There is an actual 

cost of a second decade for the actual expense of the health care 

mandate. 

The $700 individual penalty, there is a cost associated with that. Not just simply paying the $700, but what we will see is what we 

call, in the insurance business, ‘‘adverse risk selection.’’ Those folks 

who will pay the $700 penalty, the fine for not doing something in 

this country will actually not buy the insurance because it is cheaper to pay the penalty whether it is from the $95 or up to the $700. 

On an individual basis young, healthy Americans will say, ‘‘I’ll wait 

until I need the coverage.’’ It is just like jumping out of the plane 

and needing a parachute, and knowing that you can get it on the 

way down. There is a cost associated with a delayed purchase of 

health insurance for all Americans. 

The $2,000 penalty for employers, there is a cost associated. Because what it does for employers—having owned a small business, 

not for very long, for about 14 or 15 years and having paid for the 

health insurance for my employees—there is a cost associated with 

the $2,000 penalty which is heading toward a single payer system, 

which will add another burden on to all Americans. In my State, 

the cost is over 61 percent, as an average increase, is the estimate 

for buying health insurance. 

We are going to have fewer people in the pool, not more people 

because of adverse risk selection. The NFIB says that we will lose 

up to 262,000 employees by 2022. There is a cost associated with 

high unemployment. 

The lower reimbursement rates, we will have fewer doctors and 

fewer providers of health care because of the cost of the plan. In 

South Carolina, the Exchange, while the first 3 years or 100 percent subsidized, it would have cost our State over $5 billion from 

the year 4 to the year 10. 

The Oliver Wyman study shows that in the 10-year period beginning in 2014, we will see the cost of the average family for health 

insurance coverage go up by $6,800. Companies like Michelin are 

changing the way that they provide health insurance, from providing disincentives as well as incentives. There is a cost associated 

with this health care plan. 

So my question, sir, is how do we factor in not simply the price 

that is dropping for the average person who is buying health insurance according to your statistics? Mine say that the price is actu-
19 

ally going up. Mine also says that because of adverse selection, we 

will see the price go up even higher in the second decade. We are 

still writing the regulation, so no one really understands what it 

is that are in those pages 7 feet, 3 inches tall. 

So my question is: how do we factor in not simply the price, but 

the cost? 

Mr. COHEN. Thank you, Senator. 

I would make a couple of points. We are paying that cost now 

in uncompensated care. We are paying. Every small business in 

America today is paying that cost. They are paying more for their 

insurance because there are people who do not have insurance, and 

they are showing up at the emergency room, and they are getting 

care, but it is not compensated, and the hospital has to absorb that 

and pass that along to all of us. 

Second, we are paying more than we should be because people 

are not getting the kind of care that they should be getting. If they 

cannot afford to go to a doctor or to the hospital until they are really sick, it means they are not getting the preventive care that they 

will be getting and are getting now under the Affordable Care Act. 

They are not getting treatment. They are not getting managed 

care. And so, all of that is more expensive and we are paying that 

cost every single day. 

So I think that when you look at the system as a whole, it makes 

a lot more sense to make sure that people have access to coverage, 

can get preventive care, and can get the treatment that they need 

because that is going to bring the cost down for all of us. 

Senator SCOTT. I will just wrap it up with this, Senator Harkin. 

Having served on a couple of hospital boards, I have realized that 

the reimbursement rates are going down because of the ACA, not 

up. 

The CHAIRMAN. Thanks, Senator Scott. 

OK. I am trying to get everyone in before the 11 o’clock vote. 

Senator Franken. 

STATEMENT OF SENATOR FRANKEN

Senator FRANKEN. Director Cohen, thank you for your testimony. 

As you discussed, the State Health Insurance Marketplaces will 

offer millions of families and small businesses affordable, comprehensive health insurance for the first time. That is an extraordinary promise, but we also know that we have to implement the 

Marketplaces carefully to avoid unintended consequences such as 

punishing States that are ahead of the game. 

And as you know, I have worked closely with your agency to 

make sure that States like Minnesota would have an opportunity 

to offer a basic health program as we defined it in the health care 

law. 

Over the past several months, I have spoken with senior members of HHS and the White House. I have talked to the President 

about the importance of helping Minnesota maintain Minnesota 

Care, which is the name of our public insurance program for lowincome families, from the very families that the Ranking Member 

mentioned from 138 percent of poverty to 200 percent of poverty. 

We cover them in Minnesota. I have been talking to you, and to 
20 

the President, and the Administration about Minnesota being supported so we can implement the basic health plan. 

After much uncertainty over whether, and when, your agency 

would release regulations on the basic health program, I was very 

pleased when your agency committed to getting the regulations out 

in time for the program to be up and running by 2015, and to 

working with Minnesota to protect Minnesota Care as the Marketplace takes shape. And I just want to thank you, all of you, for your 

work on this. 

Mr. COHEN. Thank you. 

Senator FRANKEN. Minnesota has led the country in providing 

health insurance to people with pre-existing conditions as well. 

Minnesota’s State High Risk Pool, called the Minnesota Comprehensive Health Association, is both the oldest and the largest in 

the country with about 25,000 enrollees. The State has planned to 

carefully transition this group onto the Marketplace over 3 years 

in order to avoid driving up premiums or disrupting care for those 

in the high risk pool who are undergoing treatment. 

I was disappointed when HHS in its final rule on the reinsurance 

program chose to exclude State high risk pools from the program. 

It is essential that Minnesota gets the support it needs to carefully 

transition our high risk pool onto the Marketplace. 

How are you planning to support the Minnesota Comprehensive 

Health Association to prevent disruptions in care and help its enrollees transition smoothly to the marketplace? 

Mr. COHEN. Thank you, Senator. 

We certainly share your interest in making sure that that happens. And we have a plan set up to make sure that people who are 

in State high-risk pools become aware of the opportunities that will 

be available to them through the Marketplaces, obviously, to get 

coverage without pre-existing conditions. I would be happy to work 

with you with respect, specifically, to the Minnesota situation and 

see what solutions we can come up with. 

Senator FRANKEN. Thank you. Thank you. 

Many have expressed concerns that the health care law’s requirements to strengthen insurance coverage such as no longer allowing 

insurance companies to deny coverage for people with pre-existing 

conditions will increase premiums in the State Marketplaces. However, the health care law also includes requirements that will keep 

premiums down. 

For example, my Medical Loss Ratio provision, which you referred to in your testimony, requires that insurance companies 

spend 80 percent in the small group plans and individual plans, 

and 85 percent in large group plans of premium dollars be spent 

on actual health care. Not administrative costs, not profit, not marketing. 

Mr. COHEN. Right. 

Senator FRANKEN. Not on CEO salaries, but on actual health 

care. 

We have seen nearly 13 million Americans, 12.8 million Americans, benefit from rebates because the insurance companies have 

to rebate when they don’t get there. We have heard that insurance 

premiums cost more. Well, if they cost $1 more, they cost more. 
21 

But the fact of the matter is that they are costing less over the last 

3 years than they otherwise would have. 

Bending the cost curve does not mean that the President promised to bring premiums down. It means he said he was going to 

bring them down relative to what they otherwise would have been. 

And is it not true that over the last 3 years, we have seen premiums for health insurance go down relative to the way they have 

been in the last several decades? 

Mr. COHEN. That is true. 

Senator FRANKEN. Here are some of the statistics. The average 

premium increase for all rates in 2012 was 30 percent below what 

it was in 2010. 

We really have to remember what we are talking about here. We 

are talking about bending the cost curve. Nobody was saying, nobody was saying that the cost of health care per person was going 

to go down. What the President was saying is that it will go down 

relative to what it otherwise would have been. 

Do you have any comment on that? 

Mr. COHEN. No, I think that is absolutely right, and I think that 

we have seen a real shift in the rate of increase of premiums as 

a result of a number of the provisions of the Affordable Care Act. 

Senator FRANKEN. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Franken. 

Senator Roberts. 

STATEMENT OF SENATOR ROBERTS

Senator ROBERTS. Sorry, Mr. Chairman. I was trying to fill out 

my form here. 

The CHAIRMAN. Was that for your Government health insurance? 

[Laughter.] 

Senator ROBERTS. That is to join the Marine Corps, sir. I have 

been drafted. 

[Laughter.] 

I want to thank you for coming back, Mr. Cohen. Thank you for 

your previous answers on sub-regulatory guidance, and how we are 

to find out much more on how we are to comply with the Wilt 

Chamberlain-sized regulations here. 

I appreciate your effort to get back to us, more especially with 

regard to the comment period that we would like to now turn to. 

The CMS Administrator, the new administrator, Marilyn 

Tavenner, who we really appreciate in terms of her partnership, 

just told me that from now on we are going to try to do the 60- 

day comment periods and not go to the sub-regulatory guidance because it is almost impossible to let the rural health care delivery 

system or, for that matter, any health care delivery system know 

what is going on. 

Immediately after that, she issued an interim final rule, which 

we contacted her about, but we hope we can get to the committed 

60-days. And I know you are going to make an effort to do that. 

You mentioned throughout your testimony that the health reform 

law will allow for clear information—clear information—for consumers and make it easier for them when they purchase a plan. 
22 

But we also know about the application that CMS has drafted for 

folks to apply for coverage. I have it right here. It is 21 pages. 

I have to tell you, I went to a land grant college. I think I can 

usually fill out forms. This is equally as challenging, or more so, 

than your tax return. And I know that you are going to have people 

trying to help the 7 billion people you are trying to get health insurance for and I think they are going to be called navigators. 

Is that correct? 

Mr. COHEN. Yes. 

Senator ROBERTS. OK. And I asked the Secretary, who is a personal friend, ‘‘How are you going to do this? Are you going to hire 

30,000 more people for IRS?’’ She said, ‘‘No, we are going to have 

navigators.’’ ‘‘What do you mean by navigators?’’ ‘‘Well, some community organizations could be of help.’’ 

Well, this is, to start off here, it is 21 pages. This is just to apply. 

And if you apply, then you fill out 61 additional pages. And I defy 

anybody on this committee—and including yourself, any witness— 

to go through this and do it with any degree of efficacy, or efficiency, or knowledge that they have done the right thing. 

Why do we ask for so much information? You say, 

‘‘Well, we ask about income and other information to make 

sure you and your family will get the most benefits possible. 

We will keep all the information you provide private, as required by law.’’ 

And then you go in and say, it is sort of like a friendly person 

who is tapping you on the shoulder, ‘‘Tell us about yourself.’’ There 

are about six or seven things down here. And then, ‘‘Tell us about 

your family.’’ And then, ‘‘Tell us about the people who are in your 

family. Tell us about your spouse, partner, and children. Tell us 

about your job and your income. Tell us where you live for demographic purposes. Tell us if you come from Alaska or you are a Native American. Tell us,’’ and I could go on, and on, and on. 

Then there is a specific, if you get through this and you have a 

navigator, and I still don’t know where those navigators are going 

to come from for a small community. Say it is Dodge City, KS. That 

is where I am from. I don’t know which community organizations 

are going to help people with this, or if you have a navigator that 

has been trained to help people go through this, but I doubt it at 

this particular time. 

But you can go online and by going online, it is supposed to be 

very simple. Here is the individual questionnaire and the outline. 

Where do I get to what you dial? It is 1–800-XXX, because it is a 

draft. I understand that. But I know that when people, and I am 

talking about health care providers, try to access the Web page of 

the Department of Health and Human Services, they get into a lot 

of difficulty. 

At any rate, but there is one little item here that I am trying to 

find again that I was reading when the Chairman told me my time 

was now, and I am almost up on time here. 

Basically it says if a person says they do not want to apply for 

financial assistance in any of the questions, in other words they 

say, ‘‘No, no, no, no thank you.’’ The concept is to fill this out anyway, send it in, and they are going to capture a couple of responses 
23 

to assess whether or not it may be worth their time to apply anyway. 

So if a person says, ‘‘I don’t want to apply,’’ they have to apply 

to tell people why they do not want to apply. That does not seem 

to me to be very helpful either. 

I mention all this because I think we are really getting into a 

bramble bush here of regulations that I do not know how we are 

going to work through. I think the real answer is to provide a long 

enough comment period so people can really grasp what you are 

trying to do here, and have a transparent comment period, then 

have you folks pay attention to those comments, and then fix the 

things that you can. 

I know you are under a time line, and you told me last time that 

you thought that it was more important for the consumer to get information as opposed to meet time lines or have an extended comment period. 

Well, if they even get the information, I want to tell you one 

thing, they want to comment because with these two things I’ve 

mentioned, I do not know how we implement them; I really don’t. 

I know that you have a difficult task ahead of you. I am not trying 

to be overly critical. I am just worried about all of this. These two 

things, probably, what are they, 1-inch however tall that is. 

So there, that is my rant, and I apologize for it, but I can tell 

you that out there the providers—you said in reference to the distinguished Senator from South Carolina that there is a cost that 

is now being paid. 

The problem is that there is not going to be enough doctors and 

nurses to do this. We do not have enough doctors and nurses to 

handle this. And right now, there are a lot of doctors that are not 

serving Medicare patients because of this. I mean, you can have 

the best health care plan in the world, but if you do not have access to doctors and nurses and health care providers, I do not know 

what we do. 

The CHAIRMAN. Thank you, Senator. 

Senator ROBERTS. I would like for him—— 

The CHAIRMAN. Senator Whitehouse. 

Senator ROBERTS [continuing]. To at least have the opportunity 

to respond to all of my—— 

The CHAIRMAN. Well, I don’t know. Senator, we have to move on. 

I have another Senator. We have a vote coming up here. You took 

1 minute and 50 seconds over the 5 minutes. 

Senator ROBERTS. I understand that. I just feel bad that he cannot respond and that I have already picked on him. 

The CHAIRMAN. Senator Whitehouse. 

Senator Roberts. Sorry. 

The CHAIRMAN. I have to try to get through this. 

Senator Whitehouse. 

Senator WHITEHOUSE. Thank you, Mr. Chairman. 

Welcome, Mr. Cohen. 

Mr. COHEN. Thank you. 

Senator WHITEHOUSE. I represent Rhode Island. Rhode Island, as 

I am sure you are aware is a real leader State in trying to get the 

insurance Exchange up. We were the first State through to Level 

II funding. The Lieutenant Governor, Elizabeth Roberts, is doing a 
24 

terrific job of leading this effort and of bringing our entire community along with it through a very open, inclusive, and transparent 

process. 

For those of you who remember Senator Chafee’s days in the 

Senate, his old health care staffer, Christy Ferguson, is now leading the Insurance Exchange effort appointed by John Chafee’s son, 

Lincoln Chafee, who is now our Governor. And it is a very ambitious program. 

We don’t just want to set up a market. We also want to enable 

negotiations so that that market power can be brought through to 

the benefit of the consumers. We also want to set the conditions so 

that the critical outcomes information, the critical data that is so 

necessary as we try to squeeze the waste and inefficiency out of our 

colossally wasteful and inefficient health care system can be accomplished through this. 

My worry is that there is an institutional bias, and an understandable one, to put all the attention where the bulk of the States 

are, and where there are not a lot of States to not pay as much 

attention to them. 

What I would urge to you as a matter of policy is that you should 

put as much attention and resources as you can into the leadership 

States, because it is a lot easier to follow when somebody has 

forged the path. 

This is a problem we saw in Rhode Island with our information 

Exchange. I think we are probably the leading State in the country 

on a statewide information Exchange that automatically loads data 

from different providers, from laboratories, from MRI facilities, 

from specialists, all of that. And the attention is all to the people 

who are sort of back in the middle, way behind us, slugging 

through. I think stuff goes viral once it is really made to work. 

I would urge you when it comes to your organization—I know 

you are focusing on the insurance Exchange, so let’s focus on that— 

I would urge you to put disproportionate effort behind the folks 

who are out front because that will pay huge dividends across the 

board. Otherwise, you are left fighting a lot of stuff on your own. 

It is expensive to fight through a lot of the administrative issues 

that come up, and if you are not really heavily supported, then 

what you are doing is you are slowing down the lead dogs. When 

you slow down the lead dogs, you slow down the pack. You can pay 

a lot of attention to the rest of the pack and they are going to feel 

good about it, but the whole operation does not move forward as 

fast. 

So I would ask you to comment on that view of the world, and 

hope that my question has some influence on it. 

Mr. COHEN. Thank you, Senator, and I appreciate your comments. 

I agree with you completely that it is extremely important that 

the States that have chosen to move forward and operate their own 

Marketplaces be successful. And if they are, other States will follow, and they will learn from the experience of the States that have 

been out in front, as you say, and they will see the benefits of taking on this responsibility at the State level. We have said all along, 

we believe that is what provides the best opportunity for the Marketplace that will serve a State the best. 
25 

We do work very closely with each State ranging from Rhode Island to California and New York who are moving forward to have 

the State-based Marketplace. We have teams that work very closely with the States that are doing that. Obviously, as you know, we 

provide the grant funding. 

I very much take to heart your advice that we not lose sight of 

that. While we, obviously, take on the responsibility of making sure 

that there is a Marketplace in every State, which is our responsibility. 

Senator WHITEHOUSE. I am making an even more specific point 

and that is that within the group of States that have elected to go 

forward and build their own Exchanges, there is a bulge. There are 

a few in the lead, there is a bulge in the middle, and there are a 

few at the tail. 

I get the impression that just because there are more of them 

and they make more noise, the bulge soaks up the bulk of the effort 

and of the support. 

My point to you is: put the support at the front. As I said, let 

the lead dogs run faster and the whole pack will move faster. If you 

are spending all your effort in the middle, you are not going to 

move a lot faster than the lead dog. So please, think of it in those 

terms if you would. 

Mr. COHEN. Thank you. I will. 

Senator WHITEHOUSE. Thank you very much. 

The CHAIRMAN. I just want to echo that. I think Senator Whitehouse made a very salient, very good point and that is where, I 

think, the emphasis ought to be put on those few that are really 

out there in front. 

There is a 15-minute vote. We are going to recess for about 20 

minutes and we will come back for the second panel. 

Again, Mr. Cohen, thank you very much both for your knowledge, 

for your shepherding this, and for your great leadership on getting 

these Exchanges up and the navigators going. And I just want you 

to know that as the chair, I really appreciate what you are doing. 

Mr. COHEN. Thank you. I appreciate your support. 

The CHAIRMAN. Thank you. And you can stay, if you want, but 

you don’t have to. We will go to the second panel when we come 

back. 

Mr. COHEN. Thank you. 

[Recess.] 

The CHAIRMAN. The Committee on Health, Education, Labor and 

Pensions will resume as sitting. 

We are now moving to panel two. On the second panel, our first 

witness will be Kevin Counihan, chief executive officer of Access 

Health Connecticut, which we just heard about from Senator 

Whitehouse. No, it was not Senator Whitehouse; Senator Murphy 

who was supposed to be here but he is in another committee right 

now. 

Mr. Counihan was appointed to his position in July 2012 by Governor Malloy. He comes to the job with a wealth of experience. He 

previously was president of Choice Administrators in California, 

and before that, served as the chief marketing officer for the Massachusetts Health Insurance Connector. He has also served as sen-
26 

ior vice president for Tufts Health Plan and VP for Cigna. Thank 

you very much for being here, Mr. Counihan. 

Next is Professor Sabrina Corlette, a research professor and 

project director at Georgetown’s Health Policy Institute. At the Institute, Professor Corlette directs research on health insurance reform issues including regulation of private health insurance and 

the building of insurance Marketplaces. 

Prior to joining Georgetown, she directed health policy programs 

at the National Partnership for Women and Families, and right before that, I am happy to note, she worked for this committee. Welcome back to the HELP Committee on that side of the table. 

Stacy Cook—I want to extend a personal welcome—from Carroll, 

IA is here to tell her very moving and important personal story. I 

will not steal her thunder by summarizing it. Stacy is also a volunteer with the American Cancer Society’s Cancer Action Network. 

Thank you very much, Stacy, for taking your time off and being 

here from Iowa. 

Mr. Chris Carlson, a principal in the firm of Oliver Wyman Actuarial Consulting. Mr. Carlson has 18 years of experience in the 

health care actuarial field providing consulting services to health 

insurers, health care providers, employer, and State regulators. Before joining Oliver Wyman, Mr. Carlson worked as an actuary at 

Blue Cross Blue Shield. Thank you very much, Mr. Carlson, for 

being here today. 

All of your statements will be made a part of the record in their 

entirety. I will start with Mr. Counihan and go down. If you could 

just sum up in 5 minutes or so, we would certainly appreciate it. 

Mr. Counihan, welcome. Please proceed. 

STATEMENT OF KEVIN COUNIHAN, CEO OF THE CONNECTICUT HEALTH INSURANCE MARKETPLACE, WEST 

HARTFORD, CT 

Mr. COUNIHAN. Thank you and good morning, Chairman Harkin, 

Ranking Member Alexander, and members of the committee. 

Thank you for the opportunity to speak about the issues related to 

the new market reforms and rating rules under the Affordable 

Care Act. 

As one of 17 States implementing a State-based Exchange, these 

issues are of particular relevance to us. In Connecticut, our Marketplace is named Access Health CT and we have been particularly 

fortunate to have had broad-based support for our efforts to implement the ACA. 

This support has come from issuers, brokers, the advocacy community, our board of directors, State agencies, the legislature, our 

congressional delegation, and others. Further, we have received 

outstanding support from CCIIO and CMS, in particular from 

Amanda Cowly, Dawn Horner, Sue Sloop, and their teams. We are 

also very appreciative of the support of Commissioner Rod Bremby, 

from the Connecticut Department of Social Services and our board 

chair, Lieutenant Governor Nancy Wyman. 

We view these new marketplaces as free market, pro-competition 

means for individuals and small businesses to access health insurance in a simpler, more transparent way. We believe the market 

is the best way to assure price competition and high value for con-
27 

sumers. I have seen this work effectively in an earlier role at the 

Health Connector in Massachusetts. 

Access Health CT is committed to serving the needs of individuals and small businesses in Connecticut by facilitating access to 

qualified private health plans and to assist those eligible with access to premium subsidies and cost sharing reductions. 

Access Health CT is guided by the following objectives: first, create a user-friendly shopping and enrollment experience. Two, reduce the level of the uninsured. Three, reduce racial and ethnic disparities in access to health care. Four, promote innovation and 

competition. And five, facilitate a discussion to create more affordable health insurance coverage. These are longer term objectives of 

the Connecticut Marketplace and reflect the vision of our Board to 

improve access to care and to establish more affordable and predictable costs of health care. 

Access Health CT continues to make strong progress in implementing our Marketplace. We are one of the leading States in implementation and are in the midst of label and testing with the 

Federal Data Services Hub, which verifies consumer information 

with Social Security, Homeland Security, IRS, and other information sources. 

Our Board of Directors has made key policy decisions. We have 

completed our strategy to outsource all key operational functions to 

private sector firms such as for our call center and for the administration of our Small Business Health Options Program or SHOP. 

We are in the process of implementing our broker training and 

oversight program. We believe brokers represent one of the most effective ways to distribute our products, and educate the marketplace about the benefits and opportunities of health reform. 

Our Navigator and in-person assister programs are being built at 

present, and in conjunction with community-based nonprofit and 

philanthropic organizations, and which will enhance our direct 

marketing and outreach strategies. 

Finally, we have posted our qualified health plans solicitation for 

participation by issuers. Our strategy from the outset has been to 

work collaboratively with issuers and all major stakeholders to 

make participation in our Exchange as easy and minimally disruptive as possible. While we have much work to do, we are pleased 

with our results to date. 

The ACA introduces a number of significant reforms to the 

health insurance market. These are meaningful consumer protections to the residents and small businesses in Connecticut and include: No. 1, no underwriting for health status. No. 2, no pre-existing condition limitations. No. 3, title limits for age adjustment. No. 

4, no underwriting adjustment for gender. No. 5, guaranteed renewals for individuals and small group markets. No. 6, a minimum 

80 to 85 percent Medical Loss Ratios. And finally, inclusion of 10 

categories of essential health benefits. 

Each of these reforms benefits the residents and employees of 

small businesses in Connecticut. These reforms also come at a cost. 

Fortunately, there are a number of protections in the ACA which 

help to ameliorate the impact of these market adjustments. 

These protections include: No. 1, a risk adjustment program 

which transfers payments from issuers with lower risk enrollment 
28 

to those issuers with higher risk enrollees to adjust for risk selection. No. 2, a risk quarter program, which limits issuer underwriting gains or losses. And No. 3, a reinsurance program which 

reimburses issuers for higher than expected utilization. 

As a result, much of the uncertainty over the unknown morbidity 

of the uninsured and the potential migration of certain employee 

segments from employer-sponsored insurance to the individual 

market will be dampened. It is critical that issuers, consumers, 

small businesses, brokers and others understand the important 

roles these programs play. 

The implementation of the ACA is complex and makes special demands on States, issuers, and others. Like other States, Connecticut has benefited from an exceptionally dedicated staff who 

work hard to realize the dignity of health insurance coverage for 

all eligible State residents. 

The market reforms of the ACA represent important corrections 

to enhance access to more affordable coverage. The rate pressure 

from the removal of prior underwriting controls should be mitigated, in part, by new premium stabilization programs. 

The hallmark of health reform has been the concept of shared responsibility, the sense of shared ownership of a common value that 

our Nation benefits from more citizens realizing the peace of mind 

of health insurance coverage. Increasingly, shared responsibility 

must be accompanied by shared patience. We must have the patience to recognize that the implementation of the ACA will take 

time to be fully realized. The premium rate adjustments will stabilize, that enrollment and health plan choices will be enhanced, 

and that outreach and communication activities will be more effective. 

At Access Health CT, we believe health insurance is a right of 

citizenship and not just a privilege of employment. The ACA represents the best opportunity we have at present to expand access 

to health insurance since the introduction of Medicare in 1965. 

We are proud to be a leading State in the implementation of the 

ACA, and to provide a more affordable health insurance to our residents. 

Thank you. 

[The prepared statement of Mr. Counihan follows:] 

PREPARED STATEMENT OF KEVIN COUNIHAN

SUMMARY

We view these new marketplaces as free market, pro-competition means for individuals and small businesses to access health insurance in a simpler, more transparent way. We believe the market is the best way to assure price competition and 

high value for consumers, and I have seen this work effectively in an earlier role 

at the Health Connector in Massachusetts. Access Health Connecticut is committed 

to serving the needs of individuals and small businesses in Connecticut by facilitating access to qualified private health plans and to assist those eligible with access to premium subsidies and cost sharing reductions. 

Access Health Connecticut is guided by the following objectives: 

• Create a User-Friendly Shopping and Enrollment Experience 

• Reduce Level of Uninsured 

• Reduce Racial and Ethnic Disparities in Access to Health Care 

• Promote Innovation and Competition 

• Facilitate Discussion to Create More Affordable Health Insurance Coverage 
29 

Our Board of Directors has made almost all core policy decisions; we have completed our strategy to outsource all key operational functions to private sector firms 

such as our Call Center and the administration of our Small Business Health Options Program (SHOP). We are in the process of implementing our Broker training 

and oversight program. Our Navigator and In-Person Assistor programs are being 

built in conjunction with community-based non-profit and philanthropic organizations and which enhance our direct marketing and outreach strategies. Finally, we 

have posted our Qualified Health Plan solicitation for participation by issuers. 

The ACA introduces a number of significant reforms to the health insurance market. These are meaningful consumer protections to the residents and small businesses in Connecticut. The market reforms of the ACA represent important corrections to enhance access to more affordable health insurance and health care. The 

rate pressure from the removal of prior underwriting controls should be mitigated 

in part by new premium stabilization programs. 

The hallmark of health reform has been the concept of shared responsibility, the 

sense of shared ownership of a common value that our Nation benefits from more 

citizens realizing the peace of mind of health insurance coverage. Increasingly, 

shared responsibility must be accompanied by shared patience. We must have the 

patience to recognize the implementation of the ACA will take time to be fully realized, that premium rate adjustments will stabilize, that enrollment and health plan 

choices will be enhanced, and that outreach and communication activities will continue to be more effective. 

Good morning, Chairman Harkin, Ranking Member Alexander, and members of 

the Senate Health, Education, Labor, and Pensions Committee. Thank you for the 

opportunity to speak about the issues related to the new market reforms and rating 

rules under the Affordable Care Act. As 1 of 17 States implementing a State-based 

exchange, this issue is of particular relevance to us. 

In Connecticut, our marketplace is named Access Health CT, and we have been 

particularly fortunate to have had broad-based support for our efforts to implement 

the ACA. This support has come from issuers, brokers, the advocacy community, our 

board of directors, Connecticut State agencies, the legislature, our congressional delegation, and others. Further, we have received outstanding support from CCIIO and 

CMS, in particular from Amanda Cowley, Dawn Horner, Sue Sloop, and their teams. 

We are also very appreciative for the support of Commissioner Rod Bremby of the 

Connecticut Department of Social Services, and our board chair, Lieutenant Governor, Nancy Wyman. 

We view these new marketplaces as free market, pro-competition means for individuals and small businesses to access health insurance in a simpler, more transparent way. We believe the market is the best way to assure price competition and 

high value for consumers, and I have seen this work effectively in an earlier role 

at the Health Connector in Massachusetts. Access Health CT is committed to serving the needs of individuals and small businesses in Connecticut by facilitating access to qualified private health plans and to assist those eligible with access to premium subsidies and cost-sharing reductions. 

GUIDING OBJECTIVES

Access Health CT is guided by the following objectives: 

• Create a User-Friendly Shopping and Enrollment Experience • Reduce Level of Uninsured • Reduce Racial and Ethnic Disparities in Access to Health Care • Promote Innovation and Competition • Facilitate Discussion to Create More Affordable Health Insurance Coverage 

These are longer term objectives of the Connecticut marketplace and reflect the 

vision of our board to improve access to care and to establish more affordable and 

predictable cost of health care. 

IMPLEMENTATION—PROGRESS-TO-DATE

Access Health CT continues to make strong progress in implementing our marketplace. We are one of the leading States in implementation and are in the midst of 

Wave 1 testing with the Federal Data Services Hub, which verifies consumer information through connection to the Social Security Administration, Department of 

Homeland Security, the IRS and other information sources. 

Our board of directors has made almost all core policy decisions; we have completed our strategy to outsource all key operational functions to private sector firms 

such as our Call Center and the administration of our Small Business Health Op-
30 

tions Program (SHOP). We are in the process of implementing our Broker training 

and oversight program. We believe brokers represent one of the most effective ways 

to distribute our products and educate the marketplace about the benefits and opportunities of health reform to individuals and small businesses. Our Navigator and 

In-Person Assistor programs are being built in conjunction with community-based 

non-profit and philanthropic organizations and which enhance our direct marketing 

and outreach strategies. 

Finally, we have posted our Qualified Health Plan solicitation for participation by 

issuers. Our strategy from the outset has been to work collaboratively with issuers 

and all major stakeholders to make participation in our marketplace as easy and 

minimally disruptive as possible. While we have much work to do, we are pleased 

with our results to date. 

MARKET REFORMS AND COST IMPACT

The ACA introduces a number of significant reforms to the health insurance market. These are meaningful consumer protections to the residents and small businesses in Connecticut and include: 

• No Underwriting for Health Status 

• No Pre-Existing Condition Limitations 

• Tighter Limits for Age Adjustment 

• No Underwriting Adjustment for Gender 

• Guaranteed Renewals for Individual and Small Group Market 

• Minimum 80–85 percent Medical Loss Ratios 

• Inclusion of 10 categories of essential health benefits 

Each of these reforms benefits the residents and employees of small businesses 

in Connecticut. These reforms also come at a cost. Fortunately, there are a number 

of protections in the ACA which help to ameliorate the impact of these market adjustments. These protections include: 

• Risk Adjustment Program which transfers payments from issuers with lowerrisk enrollment to those issuers with higher-risk enrollees to adjust for risk selection. 

• Risk Corridor Program which limits issuer underwriting gains or losses. 

• Reinsurance Program which reimburses issuers for higher than expected utilization. 

As a result, much of the uncertainty over the unknown morbidity of the uninsured 

and the potential migration of certain employee segments from employer-sponsored 

insurance to the individual market will be dampened as a result of these programs. 

It is critical that issuers, consumers, small businesses, brokers, policymakers, and 

other stakeholders understand the roles these programs play to mitigate excessive 

rate increases. 

CONCLUSION

The implementation of the ACA is complex and makes special demands on States, 

issuers, and others. Like other States, Connecticut has benefited from an exceptionally dedicated staff who works hard to realize the dignity of health insurance coverage for all eligible State residents. 

The market reforms of the ACA represent important corrections to enhance access 

to more affordable health insurance and health care. The rate pressure from the removal of prior underwriting controls should be mitigated in part by new premium 

stabilization programs. 

The hallmark of health reform has been the concept of shared responsibility, the 

sense of shared ownership of a common value that our Nation benefits from more 

citizens realizing the peace of mind of health insurance coverage. Increasingly, 

shared responsibility must be accompanied by shared patience. We must have the 

patience to recognize the implementation of the ACA will take time to be fully realized, that premium rate adjustments will stabilize, that enrollment and health plan 

choices will be enhanced, and that outreach and communication activities will continue to be more effective. 

At Access Health CT, we believe health insurance is a right of citizenship and not 

just a privilege of employment. The ACA represents the best opportunity we have 

at present to expand access to health insurance since the introduction of Medicare 

in 1965. We are proud to be a leading State in the implementation of the ACA and 

to providing more affordable health insurance to our residents. 

The CHAIRMAN. Thank you very much, Mr. Counihan. 
31 

I think that last part of your statement, and I underlined it 

when I read it last evening, is really something that we have to always keep in mind, this shared responsibility especially when talking about young people and these young free riders getting them 

on these policies. 

Professor Corlette, please proceed. 

STATEMENT OF SABRINA CORLETTE, RESEARCH PROFESSOR 

AND PROJECT DIRECTOR, GEORGETOWN HEALTH POLICY 

INSTITUTE, CENTER ON HEALTH INSURANCE REFORM, 

WASHINGTON, DC 

Ms. CORLETTE. Thank you. 

Mr. Chairman, Ranking Member Alexander, and members of the 

committee, I want to thank you for the leadership of this committee in drafting key provisions of the ACA, and for the ongoing 

oversight that you are conducting. This hearing today is a timely 

one as we are now less than 6 months away from enrollment into 

health plans that will meet sweeping new standards for access, affordability, and adequacy. 

In my testimony, I am going to focus on how the individual 

health insurance market works today for consumers, and how it 

will change under the ACA’s market reforms. 

The ACA has a particular focus on the individual market because 

of its well-documented systemic problems which include a lack of 

access to coverage, inadequate coverage, unaffordable coverage, and 

a lack of transparency and accountability. 

Today, 48 million Americans are uninsured and 19 million have 

individual health insurance coverage. Those who buy insurance on 

their own are self-employed entrepreneurs, farmers, ranchers, early 

retirees, part-time workers, and young people aging off their parents’ plans. 

What does the Health Insurance Marketplace look like today for 

these folks, particularly for someone who might not be in perfect 

health? 

In today’s marketplace, one of the ways that health insurers 

manage costs is to make use of aggressive underwriting to deny 

coverage to individuals with pre-existing conditions. People with 

even minor health issues, such as hay fever, may be turned down 

for coverage. And recent studies have found that these types of underwriting practices are only growing more aggressive. 

Under the ACA’s guaranteed issue and renewal provisions with 

limited exceptions, health insurers must accept all applicants regardless of their health condition, health history, or that of a family member. For many individuals, even if they are offered a policy, 

premium surcharges based on their health can cause them to forgo 

coverage completely. 

Beginning next year, insurers will no longer be able to charge 

somebody more because of their health status, the work that they 

do, or their gender. And they will be limited in the amount that 

they can differentially charge based on age or use of tobacco products. And through the new health Insurance Exchanges, low and 

moderate income individuals will be eligible for premium tax credits that will help make coverage more affordable. 
32 

As for the adequacy of coverage in this market, in many States 

insurers are permitted to permanently exclude from coverage any 

health problems that a consumer discloses when they apply for a 

policy. Under the ACA, these pre-existing condition exclusions were 

prohibited for children in 2010, and will be for all individuals beginning in January. This means that people will be able to access 

the care they need from their very first day of coverage. 

In addition, in today’s marketplace, insurers selling individual 

insurance often sell stripped down policies that do not cover benefits such as maternity, prescription drugs, or mental health. And 

individual policies often come with high deductibles, $10,000 or 

more is not uncommon. In fact, deductibles in these polices can be 

as much as three times what they are in an employer-based plan, 

and that these policies have fewer covered services and they cover 

a smaller share of the cost. It is not surprising, then, that 57 million Americans live in families struggling with medical debt and 75 

percent of these families have health insurance. 

For the first time, the ACA sets new standards for benefits and 

out-of-pocket spending to ensure that insurance coverage does what 

it should: provide real financial protection to individuals and families. 

The individual market also suffers from a lack of transparency. 

Prior to the ACA, individuals attempting to buy coverage faced confusing choices with little information about pricing or what their 

policy would actually cover and what it would not. 

The ACA ushers in a number of critical changes to improve consumers’ ability to shop for and compare plans, and purchase one 

that meets their needs. 

Mr. Chairman and members of this committee, the evidence is 

pretty clear. This current market does not work for the people who 

need it the most. Anyone with just about any health issue could 

face difficulty obtaining coverage. What we have today is a system 

of haves and have-nots. And remember, even if you happen to be 

a ‘‘have,’’ like the young and healthy people who can access this 

coverage, you still cannot have peace of mind. 

It is an unfortunate fact of life that all of us get older, and most 

of us will have some sort of health problem at some point in our 

lives, yet today’s market cannot even provide people with the most 

basic obligation of insurance, which is to help people access health 

care and protect them financially. 

Congress, led by this committee, recognized the fundamental injustice in our current Health Insurance Marketplace. It enacted 

sweeping reforms that will improve access to adequate and affordable coverage. These changes will involve some disruption, undoubtedly, particularly for those in the health insurance industry 

that have benefited from the inequities of the current system. 

The reform is the right thing to do and I thank this committee 

for taking it on. 

Thank you. 

[The prepared statement of Ms. Corlette follows:] 
33 

PREPARED STATEMENT OF SABRINA CORLETTE

SUMMARY

Access Issues: In today’s marketplace, one of the ways health insurers manage 

costs is to make use of aggressive underwriting practices to deny coverage to individuals with pre-existing conditions. Under the ACA, these denials will no longer 

be permitted. Under the ACA’s guaranteed issue and renewal provisions, with limited exceptions health insurers must accept applicants, and continue to renew their 

policies, regardless of their health condition, health history, or that of a family member. 

Affordability Issues: Health insurance is an expensive product, and it is particularly expensive for people trying to buy it on the individual market. For those in 

less than perfect health, those premiums can cause them to forego coverage completely. Beginning January 1, 2014, insurers will no longer be able to charge someone more because of their health status, the work they do, or their gender. And they 

will be limited in the amount they can differentially charge because of someone’s 

age or use of tobacco products. Through the new health insurance exchanges, lowand moderate-income individuals will be eligible for premium tax credits that will 

help make coverage more affordable. 

Adequacy Issues: Pre-existing condition exclusions or riders. In many States, insurers are permitted to permanently exclude from coverage any health problems that 

a consumer discloses on their application for a nongroup policy. Under the ACA, 

these pre-existing condition exclusions were prohibited for individuals under the age 

of 19 in 2010, and will be prohibited for all individuals beginning in January 2014. 

This means people will be able to access the care they need from their first day of 

coverage. 

Lifetime and Annual limits. Prior to enactment of the ACA, it’s estimated that 

about 102 million people were in plans with a lifetime limit on benefits and about 

20,000 people hit those limits every year. And 18 million people are in plans with 

annual limits on their benefits. Thankfully, the ACA brought in a ban on lifetime 

limits, and put immediate restrictions on annual dollar limits (banning them completely in 2014). 

High Out-of-Pocket Costs. Nongroup policies often come with high deductibles and 

high cost-sharing. In fact, deductibles can be about three times what they are in 

employer-based plans. One study in California found that nongroup policies pay for 

just 55 percent of the expenses for covered services, compared to 83 percent for 

small group health plans. For the first time, the ACA sets new standards to ensure 

that insurance coverage does what it should: provide real financial protection to individuals and families. 

Transparency and Accountability Issues: Prior to the ACA, individuals attempting 

to buy coverage in the nongroup market-faced confusing choices, with little transparency regarding pricing or what their policy would actually cover—and what it 

would not. 

The ACA ushers in a number of critical changes to improve consumers’ ability to 

shop for and compare plans in a manner that allows them to make informed choices 

and select a plan that best meets their needs. 

Good morning, Mr. Chairman, Ranking Member Alexander, members of the committee. I am Sabrina Corlette, a research professor and project director at Georgetown University’s Center on Health Insurance Reforms. I am responsible for directing research and analysis on health insurance, health insurance markets, and implementation of the Patient Protection and Affordable Care Act (ACA). 

I thank you for the opportunity to testify before you today, for the leadership of 

this committee in drafting key provisions of the Patient Protection and Affordable 

Care Act (ACA), and for the ongoing oversight you have conducted to assess its implementation. This hearing today is a timely one, as we are now slightly less than 

6 months away from open enrollment into health plans that will meet sweeping new 

standards for access, affordability, and adequacy. 

In my testimony, I will focus on how the nongroup health insurance market works 

today for consumers, and how it will change upon implementation of the ACA’s market reforms, some of the most significant of which go into effect on January 1, 2014. 

The ACA has a particular focus on the nongroup market because of its well-documented systemic problems, which include: 

1. Lack of access to coverage because of health status discrimination. 

2. Inadequate coverage. 

3. Unaffordable coverage. 
34 

1 U.S. Census Bureau, ‘‘Income, Poverty, and Health Insurance Coverage in the United States: 

2011,’’ September 2012. 2 U.S. House of Representatives, Committee on Energy and Commerce, ‘‘Memorandum: Coverage Denials for Pre-Existing Conditions in the Individual Market,’’ October 12, 2010. 3Karen Pollitz, ‘‘How Accessible is Individual Health Insurance for Consumers in Less-thanPerfect Health?’’ Kaiser Family Foundation, June 2001. 4Supra, n. 2. 5 Id. 6Sarah Lueck, ‘‘Seeking Insurance, Individuals Face Many Obstacles,’’ Wall Street Journal, May 31, 2005. 7General Accounting Office, ‘‘Private Health Insurance: Data on Application and Coverage Denials,’’ March 2011. 8Girion, L., ‘‘Health insurer tied bonuses to dropping sick policyholders,’’ Los Angeles Times, November 9, 2007. 

4. Lack of transparency and accountability. 

Today, approximately 48 million non-elderly Americans are uninsured, and approximately 19 million non-elderly Americans have insurance coverage in the 

nongroup market, meaning they do not have coverage through their employer or 

public programs such as Medicare and Medicaid.1 Anyone can find themselves at 

any time in the position of being uninsured, or in the nongroup market. Those who 

buy insurance on their own can be self-employed entrepreneurs, farmers and ranchers, early retirees, part-time workers, widows, and young people ‘‘aging off’’ their 

parents’ plans. This market tends to be the option people turn to as a last resort 

when they do not have an employer offer or insurance and are ineligible for public 

coverage. 

What does the health insurance marketplace today look like for these individuals 

and families, particularly those who might be in less than perfect health? 

ACCESS ISSUES

In today’s marketplace, one of the ways health insurers manage costs is to make 

use of aggressive underwriting practices to deny coverage to individuals with preexisting conditions.2 A seminal Georgetown study from 2001 found that even people 

with minor health conditions, such as hay fever, may be turned down for coverage, 

and more recent studies have found that these practices have only increased over 

time.3 4 Health insurers maintain underwriting guidelines that can list as many as 

400 medical conditions as reasons to trigger a permanent denial of coverage.5 At 

Georgetown, we hear stories every day of people struggling to access coverage in the 

nongroup market. For example, we were recently contacted by a young man who 

was turned down for coverage not because of his own health status—he is a healthy 

30-year-old running his own successful consulting business. Rather, he was turned 

down because his wife is expecting a baby. Even though her prenatal care is covered 

through her own, student health plan, the insurer turned him down because of the 

risk that they might have to pay for care for the newborn. 

There’s also the story of John Craig, a 46-year-old software consultant in Orem, 

UT, who plays racquetball twice a week, doesn’t smoke or drink and isn’t overweight. When he tried to buy an individual insurance policy, however, he was denied. The insurance company cited sinus infections and depression, even though he 

hadn’t experienced symptoms of either condition for years.6

According to a GAO study, average denial rates in the individual market are 19 

percent, but they can vary dramatically market-to-market and insurer-to-insurer.7

For example, GAO found that across six major health insurers in one State, denial 

rates ranged from 6 to 40 percent. 

Unfortunately, access is probably even more difficult for people with health conditions than these data suggest, because of a common industry practice known as 

‘‘street’’ underwriting, in which an insurance company agent asks a consumer questions about their health history and steers them away from the plan before they fill 

out or submit an application. 

Under the ACA, these denials will no longer be permitted. Under the ACA’s guaranteed issue and renewal provisions, with limited exceptions health insurers must 

accept applicants, and continue to renew their policies, regardless of their health 

condition, health history, or that of a family member. 

The ACA also prohibits the practice of rescissions. Prior to the enactment of this 

provision, which went into effect in September 2010, insurers in many States would 

investigate individual policyholders who make claims in their first year of coverage. 

If the company found evidence that their health condition was a pre-existing one, 

and not fully disclosed during the initial medical underwriting process, the company 

could deny the relevant claims, and in some cases cancel or rescind the coverage.8

Thanks in large part to this committee’s leadership, this practice is now illegal, ex-
35 

9Katie Keith, Kevin W. Lucia, and Sabrina Corlette, ‘‘Implementing the Affordable Care Act: 

State Action on Early Market Reforms,’’ The Commonwealth Fund, March 2012; Kevin W. 

Lucia, Sabrina Corlette and Katie Keith, ‘‘Monitoring Implementation of the Affordable Care Act 

in 10 States: Early Market Reforms,’’The Urban Institute, September 2012. 10Michelle M. Doty, Sara R. Collins, Jennifer L. Nicholson, and Sheila D. Rustgi, ‘‘Failure to 

Protect: Why the Individual Insurance Market is not a Viable Option for Most U.S. Families,’’ 

The Commonwealth Fund, July 2009. 11Melinda B. Buntin, M. Susan Marquis, and Jill M. Yegian, ‘‘The Role of the Individual Insurance Market and Prospects for Change,’’ Health Affairs, November 2004. 12 Supra, n. 3. 13Fredric Blavin, Matthew Buettgens, and Jeremy Roth, ‘‘State Progress Toward Health Reform Implementation: Slower Moving States Have Much to Gain,’’ the Urban Institute, January 

2012. 14Michelle M. Doty, Sara R. Collins, Jennifer L. Nicholson, and Sheila D. Rustgi, ‘‘Failure to 

Protect: Why the Individual Insurance Market is not a Viable Option for Most U.S. Families,’’ 

The Commonwealth Fund, July 2009. 15Supra n. 10. 16 Cathy Schoen, Michelle M. Doty, Ruth H. Robertson, and Sara R. Collins, ‘‘Affordable Care 

Act Reforms Could Reduce the Number of Underinsured U.S. Adults by 70 percent,’’ Health Affairs, September 2011. 

cept in a clear case of fraud by the policyholder. And since this provision was made 

effective in 2010, Georgetown research has found that insurers have generally come 

into compliance without much incident.9

AFFORDABILITY ISSUES

Health insurance is an expensive product, and it is particularly expensive for people trying to buy it on the individual market. Unlike those with employer-sponsored 

coverage or in public programs like Medicare or Medicaid, people with individual 

insurance must pay their full premium. 

For those in less than perfect health, those premiums can cause them to forego 

coverage completely. One national survey found that 61 percent of people seeking 

individual coverage but failing to ultimately buy a policy cited the high cost of premiums as the reason.10 Health insurers manage costs by segmenting their enrollees 

into different groups and charging them different prices based on their health status 

or other risk factors.11 In practice, this means that people can be charged more because of a pre-existing condition (and even if, like John Craig, they’ve been symptom-free for years), because of their age, gender, family size, geographic location, the 

work they do, and even their lifestyle. A Georgetown study of rating practices in 

unregulated markets found rate variation of more than ninefold for the same policy 

based on age and health status. 12 People in their early sixties can be charged as 

much as six times the premium of people in their early twenties, based on age 

alone. I had one gentleman call my office last year, in his early sixties. He told me 

he couldn’t find a policy for less than $1,300 per month. Unfortunately, at the time 

all that I could tell him was that things would get better in 2014. 

They will get better. Beginning January 1, 2014, insurers will no longer be able 

to charge someone more because of their health status, the work they do, or their 

gender. And they will be limited in the amount they can differentially charge because of someone’s age or use of tobacco products. 

Of course, through the new health insurance exchanges, low- and moderate-income individuals will be eligible for premium tax credits that will help make coverage more affordable. An Urban Institute analysis estimates that over 8 million 

people will take advantage of the tax credit, with an average per-recipient tax credit 

of $4,553.13

ADEQUACY ISSUES

Currently, the insurance coverage available to individuals buying on their own 

falls considerably short of the comprehensive health coverage that you, as Members 

of Congress, and I, as a Georgetown professor, have come to expect. In addition to 

paying more in premiums, people buying individual policies face much higher 

deductibles and other forms of cost-sharing, limited benefits, and spend a much 

larger share of their income on health insurance and health care than those of us 

with employer-sponsored coverage.14 A recent Commonwealth Fund survey found 

that 60 percent of people with health problems found it very difficult or impossible 

to find a plan with the coverage they needed, compared to about 1⁄3 of respondents 

without a health problem.15

Indeed, the number of ‘‘underinsured’’ individuals has risen dramatically over the 

last decade, to an estimated 29 million adults in 2010.16 These are people with 
36 

17 Jon R. Gabel, Ryan Lore, Roland D. McDevitt, Jeremy D. Pickreign, Heidi Whitmore, Michael Slover, and Ethan Levy-Forsythe, ‘‘More than Half of Individual Health Plans Offer Coverage that Falls Short of What Can Be Sold Through Exchanges as of 2014,’’ Health Affairs, June 2012. 18Supra, n. 10. 19Sabrina Corlette, Kevin W. Lucia, and Max Levin, ‘‘Implementing the Affordable Care Act: 

Choosing an Essential Health Benefits Plan,’’ The Commonwealth Fund, March 2013. 20 JoAnn Volk, ‘‘Martin Addie: ACA Ban on Lifetime Limits has Ended his Coverage Circus,’’ 

CHIRblog, November 14, 2012. 21 Roland McDevitt, Jon Gabel, Ryan Lore, et al., ‘‘Group Insurance: A Better Deal for Most 

People than Individual Plans,’’ Health Affairs, January 2010. 

health insurance, but with high out-of-pocket health expenses relative to their income. Underinsurance is particularly prevalent in the nongroup market. In fact, a 

recent University of Chicago study found that over half of all nongroup plans currently in the market do not meet the minimum standards for coverage set by the 

ACA.17 Coverage in the nongroup market today can be woefully inadequate for 

many reasons, including: 

Pre-existing condition exclusions or riders. In many States, insurers are permitted 

to permanently exclude from coverage any health problems that a consumer discloses on their application for a nongroup policy. This is an amendment to the policy 

contract called an ‘‘elimination rider.’’ In addition, once coverage begins, if a consumer makes claims under the policy, he or she can be investigated to see whether 

the health problem was pre-existing. In many States, it’s not necessary for a health 

condition to have been diagnosed before the consumer bought the policy for it to be 

considered ‘‘pre-existing.’’ And insurers can look back for up to 5 years into a person’s health care history to determine whether the current condition was pre-existing. This is sometimes called ‘‘post-claims underwriting.’’ For example, in Alabama, 

a consumer applying for nongroup coverage might have a known pre-existing condition permanently excluded from his policy. In addition, if he makes a claim for 

health care services during the first 2 years of his coverage, the health insurer can 

look back at his medical history dating back 5 years to look for evidence that the 

current health problem existed before he bought the policy. If such evidence is 

found, the insurer can refuse to pay for care associated with the condition. 

Under the ACA, these pre-existing condition exclusions were prohibited for individuals under the age of 19 in 2010, and will be prohibited for all individuals beginning in January 2014. This means people will be able to access the care they need 

from their first day of coverage. 

Limited Benefits. Insurers selling health insurance in the nongroup market often 

sell ‘‘stripped down’’ policies that do not cover benefits such as maternity care, prescription drugs, mental health, and substance abuse treatment services. For example, 20 percent of adults with individually purchased insurance lack coverage for 

prescription medicines, but only 5 percent of those with employer coverage do.18

To improve the value of coverage, the ACA sets minimum standards that insurers 

must cover. This ‘‘essential health benefits’’ package requirement is designed to ensure that consumers have comprehensive coverage that meets their health needs 

and protects them from financial hardship. The essential health benefits are expected to be included in the coverage of up to 68 million Americans by 2016 and 

will include—at a minimum—10 categories of benefits: ambulatory patient services; 

emergency services, hospitalization; maternity and newborn care; mental health and 

substance abuse disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; 

preventive and wellness services and chronic disease management; and pediatric 

services, including oral and vision care.19

Lifetime and Annual limits. Prior to enactment of the ACA, it’s estimated that 

about 102 million people were in plans with a lifetime limit on benefits and about 

20,000 people hit those limits every year. And 18 million people are in plans with 

annual limits on their benefits. These limits can be a matter of life and death. For 

example, Georgetown faculty recently documented the story of Martin Addie, a gentleman with severe hemophilia.20 His body produces less than 1 percent of the clotting factor he needs, so he must administer clotting factor every other day to prevent bleeding. This costs approximately $60,000 per month. Prior to the ACA, he 

had blown through lifetime limits with three different health plans, causing incredible stress and worry—and putting his health at significant risk. Thankfully, the 

ACA brought in a ban on lifetime limits, and put immediate restrictions on annual 

dollar limits (banning them completely in 2014). 

High Out-of-Pocket Costs. Nongroup policies often come with high deductibles— $10,000 or more is not uncommon—and high cost-sharing. In fact, deductibles can 

be about three times what they are in employer-based plans.21 As a result, many 
37 

22Supra, n. 17. 23 Jon Gabel, Jeremy Pickreign, Roland McDevitt, et al., ‘‘Trends in the Golden State: Smallgroup Premiums Rise Sharply While Actuarial Values for Individual Coverage Plummet,’’ 

Health Affairs Web Exclusive, July/August 2007. 24Peter J. Cunningham, ‘‘Tradeoffs Getting Tougher: Problems Paying Medical Bills Increase 

for U.S. Families, 2003–2007,’’ Center for Studying Health System Change, Tracking Report No. 

21, September 2008. 25 ehealth, Inc., ‘‘New Survey Shows Americans Lack Understanding of Their Health Coverage 

and Basic Health Insurance Terminology,’’ January 3, 2008. 26Lynn Quincy, ‘‘Early Experience With a New Consumer Benefit: The Summary of Benefits 

and Coverage,’’ Consumers Union, February 27, 2013. 

have very low actuarial values, below the minimum standard in the ACA of 60 percent for a ‘‘Bronze’’ level plan.22 One study in California found that nongroup policies pay for just 55 percent of the expenses for covered services, compared to 83 percent for small group health plans.23 Thus, these policies have fewer covered services 

AND cover a smaller share of the costs associated with the services they do cover. 

It is not surprising that approximately 57 million Americans live in families struggling with medical debt and 75 percent of those families had health insurance.24

For the first time, the ACA sets new standards to ensure that insurance coverage 

does what it should: provide real financial protection to individuals and families. 

The law sets coverage tiers, with Platinum plans being the most generous (enrollees 

will pay, on average, 10 percent of the out-of-pocket costs) and Bronze plans being 

the least generous, with enrollees paying, on average, 40 percent of the out-of-pocket 

costs. In addition, the ACA sets new limits on the total amount of out-of-pocket 

spending consumers must incur, based on their income. 

And, for individuals earning up to 250 percent of the Federal poverty level, the 

ACA provides cost-sharing subsidies that will reduce the cost-sharing amounts and 

annual out-of-pocket limits. These subsidies have the effect of increasing the overall 

actuarial value of coverage, on a sliding scale basis, so that people between 100– 

150 percent of poverty will be responsible for only 6 percent of their out-of-pocket 

costs, rising to 22 percent for people at 250 percent of poverty. 

TRANSPARENCY AND ACCOUNTABILITY ISSUES

Last, transparency and accountability are critical to a well-functioning insurance 

marketplace. Shopping for health insurance is a complex and confusing task for consumers, most of whom do not understand important components of the products 

being sold to them or how it works. As one study noted, most consumers rate reading their health insurance policy as a less appealing activity than preparing their 

income taxes or going to the gym.25

Prior to the ACA, individuals attempting to buy coverage in the nongroup marketfaced confusing choices, with little transparency regarding pricing or what their policy would actually cover—and what it would not. For example, one woman contacted 

a colleague of mine when she was attempting to switch to a higher deductible plan 

last December. The insurer told her that they could not quote her a monthly premium until she actually enrolled in the plan. And when questions arise about these 

confusing choices and the lack of transparency, consumers have few places to go to 

get unbiased, impartial advice on the plan that would best suit them and their family. 

The ACA ushers in a number of critical changes to improve consumers’ ability to 

shop for and compare plans in a manner that allows them to make informed choices 

and select a plan that best meets their needs. 

One of the most talked about are the State-based health insurance exchanges 

(now called ‘‘marketplaces’’) that will help consumers make apples-to-apples comparisons among health plan options, and allow them to shop with confidence, knowing that all of the participating plans have met minimum quality standards. 

Less talked about, but in polling one of the most popular provisions of the ACA, 

are the new ‘‘Summaries of Benefits and Coverage,’’ (SBC) which insurers are now 

required to provide to individuals and employees seeking coverage. These standardized, easy to read summaries of the benefits, cost-sharing, limitations and exclusions 

in a plan can help consumers understand their coverage and make better choices. 

Recent consumer testing by Consumer Reports has found that consumers rated the 

SBC as more helpful than other sources of plan information, such as employer 

guides and health insurers’ brochures.26

The ACA also includes new expectations for accountability for insurers. The law 

improves State rate review practices, and authorizes the Federal Government to review unreasonable rate increases if a State is unwilling or unable to do so. Insurers 

proposing new premium rate increases must provide detailed and public justification 
38 

27 Healthcare.gov, ‘‘The 80/20 Rule: Providing Value and Rebates to Millions of Consumers,’’ 

June 21, 2012. 

for those increases. Insurers must also comply with new medical loss ratio (MLR) 

standards, meaning they must spend at least 80 percent of nongroup premiums on 

health care and improving heath care quality. If insurers’ MLRs go below 80 percent, they must issue rebate checks to enrollees. The MLR was in effect for 2011, 

and in 2012 nearly 12.8 million Americans received rebates totaling more than $1.1 

billion.27

CONCLUSION

The evidence is clear and unequivocal: the current nongroup market does not 

work for the people who need it most. Anyone with just about any health condition 

could face difficulty obtaining coverage in the individual market. What we have 

today is a system of ‘‘haves’’ and ‘‘have nots.’’ And remember—even if you happen 

to be a ‘‘have,’’ such as those young and healthy individuals who can access this 

market—you cannot have peace of mind. Just because you are young and healthy 

today does not mean you will remain so. It is an unfortunate fact of life that all 

of us will get older and most of us will have some health problems at some point 

in our lives. Yet today’s nongroup market can’t even provide people with the most 

basic obligation of insurance, which is to protect people from bad, unexpected 

events. And remember those of us who are happy with our employer-based coverage 

cannot be guaranteed it will last forever. A bad economy—a bad election—and any 

one of us could be subject to the nongroup market and all of the risks that come 

with that. 

Congress, led by this committee, recognized the fundamental injustice of the current health insurance marketplace. In the ACA it enacted sweeping reforms that 

will improve Americans’ access to adequate, more affordable health insurance coverage that allows them to get the care they need and protect them financially. This 

kind of change will be transformative and disruptive, particularly for those who 

have benefited from the inequities of the current system. But it is the right thing 

to do. 

Thank you, Mr. Chairman, Ranking Member Alexander, and members of the committee, for the opportunity to speak before you today. I look forward to your questions. 

The CHAIRMAN. Thank you very much, Professor Corlette and 

welcome back, as I said. 

And now, we will turn to Stacy Cook from Carroll, IA. Stacy, welcome. Please proceed. 

STATEMENT OF STACY COOK, CARROLL, IA 

Ms. COOK. Chairman Harkin, Ranking Member Alexander, and 

members of the committee. 

Thank you for inviting me to share my story about the positive 

impact, I believe, that health insurance reforms that were included 

in the Affordable Care Act will have on me. 

I am a volunteer for the American Cancer Society Cancer Action 

Network, which advocates on behalf of millions of cancer patients 

nationwide. It is both an honor and a privilege to have the opportunity to address the Health, Education, Labor, and Pensions Committee and have my voice heard. 

My name is Stacy Cook and I live in Carroll, IA. I am 36 years 

old and in December 2004, I was 28 and diagnosed with breast cancer in my right breast. I was fortunate. At that time, I had adequate health insurance through my job, so I was able to receive the 

care that I needed. 

In November 2009, I moved from Iowa to Arizona and in March 

2012, I found another lump in my breast. I immediately made an 

appointment to get it looked at. I got the call about a week later 
39 

that confirmed it was cancer again, except this time, it was in my 

other breast. 

The CHAIRMAN. That’s all right. Take your time. It’s no problem. 

These are not easy. 

[Pause.] 

Ms. COOK. And I was scheduled to see an oncologist on April 3d, 

and I went to see the oncologist and he confirmed that I would 

need to have chemotherapy. He also told me that I would need to 

see a surgeon. 

As I was checking out of the oncologist’s office, my oncologist 

came and told me that the surgeon wanted to see me right away. 

I thought to myself, ‘‘Wow, this is happening fast.’’ My aunt was 

with me, so we went straight over to the surgeon’s office and within a few minutes of examining me, he told me he was going to do 

a mastectomy the next morning. 

I was overwhelmed. Everything was happening so fast. And I 

had my mastectomy the next day. In the midst of all of this, I was 

informed that my insurance would not cover any procedures such 

as the mastectomies and hysterectomy I would need, would not 

cover the chemotherapy treatment I would need, and would only 

pay for five doctor visits a year. So not only did I have all these 

emotions from being diagnosed and having a mastectomy, now I 

had to worry about how I was going to get the treatment that I 

needed. 

I applied for the Arizona State Health Insurance and was denied. 

I searched and searched for any other insurance that would help 

me, and I tried the pre-existing condition insurance plans, but 

found out that I would have to be without health insurance coverage for 6 months to be able to qualify, which would have been 

after my treatment had been completed. 

I was told that in order to be able to have my chemotherapy 

treatments, I would need to pay for them up front before they 

would administer them. Because of the kindness of friends and 

family, I was able to pay for three out of six chemotherapy treatments that were recommended by my oncologist. 

I was only working 28 hours a week and was not able to take 

any more hours on because of the effects of my treatment. I got to 

where I could not afford my rent or pretty much anything else, so 

I made the decision to move back to Iowa. 

At 36, I was moving back in with my parents and I felt like a 

failure, but I had no other option. After I had moved back to Iowa, 

I continued my search to try and identify health insurance coverage that would allow me access to lifesaving cancer treatments 

I needed. 

I looked into the Iowa State Health Insurance Plan and found 

that because of my breast cancer, I would have qualified for the 

program if I had been diagnosed in Iowa. Since I was diagnosed in 

Arizona, I was denied health insurance coverage again. But thanks 

to the hospital and the town where I live, I was able to get the rest 

of the chemotherapy treatments I needed without having to worry 

about paying for them up front. The hospital has a policy of treating patients first and then worrying about how they will get paid 

after. 
40 

Currently, I am seeing my oncologist every 3 months for followup 

visits, and I am also paying out-of-pocket for my prescription cancer drug Tamoxifen. However, I am now so far in debt because of 

my medical bills that I feel I will likely need to file bankruptcy in 

2013. My medical debt is most likely near $40,000. I now have the 

peace of mind knowing that in 2014, I will no longer be denied coverage because of my pre-existing condition, cancer, and having access to affordable insurance coverage and quality medical care will 

give me a better peace of mind for the future. 

My future is much brighter today than before the enactment of 

the Affordable Care Act, and for that I am very grateful. 

Thank you very much for your time. I will be happy to answer 

any questions. 

[The prepared statement of Ms. Cook follows:] 

PREPARED STATEMENT OF STACY COOK

SUMMARY

In December 2004, I was 28 and was diagnosed with breast cancer in my right 

breast. I was fortunate that, at the time, I had adequate health insurance through 

my job, so I was able to receive the care that I needed. 

In November 2009, I moved from Iowa to Arizona. In March 2012, I found another 

lump in my breast. I immediately made an appointment to get it looked at. I got 

the call about a week later that confirmed it was cancer again; I had my mastectomy the next day. 

In the midst of all of this, I was informed that my insurance wouldn’t cover any 

procedures such as the mastectomies and hysterectomy I would need, would not 

cover the chemotherapy treatment I would need, and would only pay for five doctor 

visits a year. 

I applied for the Arizona State Health Insurance Program and was denied. I 

looked into the Preexisting Condition Insurance Plan but, by the time I would have 

been eligible for the program, I would have completed my treatment. 

I was told by the hospital where I was receiving my care that in order to be able 

to have my chemotherapy treatments, I would need to pay for them up front before 

they would administer them. Because of the kindness of friends and family, I was 

able to pay for three of the six chemotherapy treatments that were recommended 

by my oncologist. 

After I moved back to Iowa, I continued my search to try and identify health insurance coverage. I looked into the Iowa State Health Insurance Plan but, since I 

was diagnosed in Arizona, I was denied health insurance coverage again. 

I am seeing my oncologist every 3 months for followup visits. I am also paying 

out-of-pocket for my prescription cancer drug. Unfortunately, I am now $40,000 in 

debt because of my medical bills, and I feel that I will likely need to file bankruptcy

2013. 

I now have peace of mind knowing that, in 2014, I will no longer be denied coverage because of my pre-existing condition—cancer. Having access to affordable insurance coverage and quality medical care will give me a better peace of mind for 

the future. My future is much brighter today than before the enactment of the Affordable Care Act, and for that I am very grateful. 

Chairman Harkin, Ranking Member Alexander, and members of the committee, 

thank you for inviting me to share my story about the positive impact I believe the 

health insurance reforms that were included in the Affordable Care Act will have 

on me. I am a volunteer with the American Cancer Society Cancer Action Network 

(ACS CAN) which advocates on behalf of millions of cancer patients nationwide. It 

is both an honor and a privilege to have the opportunity to address the Health, Education, Labor, and Pensions Committee, and have my voice heard. 

My name is Stacy Cook, and I live in Carroll, IA. I am 36 years old. In December 

2004, I was 28 and was diagnosed with breast cancer in my right breast. I was fortunate that, at the time, I had adequate health insurance through my job, so I was 

able to receive the care that I needed. 

In November 2009, I moved from Iowa to Arizona. In March 2012, I found another 

lump in my breast. I immediately made an appointment to get it looked at. I got 
41 

the call about a week later that confirmed it was cancer again; except this time, 

it was in my other breast. I was scheduled to see an oncologist on April 3d. I went 

to see the oncologist and he confirmed that I would need to have chemotherapy. He 

also told me that I would need to see a surgeon. As I was checking out of the 

oncologist’s office, my oncologist came and told me that the surgeon wanted to see 

me right away. I thought to myself, wow this is happening fast! My aunt was with 

me so we went straight over to the surgeon’s office. Within a few minutes of examining me, he told me that he recommended that I have a mastectomy the next morning. I was overwhelmed—everything was happening so fast. I had my mastectomy 

the next day. 

In the midst of all of this, I was informed that my insurance wouldn’t cover any 

procedures such as the mastectomies and hysterectomy I would need, would not 

cover the chemotherapy treatment I would need, and would only pay for five doctor 

visits a year. So not only did I have all of these emotions from being diagnosed and 

having to have a mastectomy, now I had to worry about how I was going to get the 

treatment that I needed. I applied for the Arizona State Health Insurance Program 

and was denied. I searched and searched for any other insurance that would help 

me. I looked into the Preexisting Condition Insurance Plan but found out that I had 

to be without health insurance coverage for 6 months to be able to qualify. By the 

time I would have been eligible for the program, I would have completed my treatment. 

I was told by the hospital where I was receiving my care that in order to be able 

to have my chemotherapy treatments, I would need to pay for them up front before 

they would administer them. Because of the kindness of friends and family, I was 

able to pay for three of the six chemotherapy treatments that were recommended 

by my oncologist. I was only working 28 hours a week and was not able to take 

on any more hours because of the side effects from my treatments. It got to where 

I could not afford my rent or pretty much anything else, so I made the decision to 

move back to Iowa. At 36, I was moving back in with my parents. I felt like a failure, but had no other option. 

After I moved back to Iowa, I continued my search to try and identify health insurance coverage that would allow me to access the lifesaving cancer treatments I 

needed. I looked into the Iowa State Health Insurance Plan and found that because 

of my breast cancer, I would have qualified for the program if I had been diagnosed 

in Iowa. However, since I was diagnosed in Arizona, I was denied health insurance 

coverage again. Thanks to the hospital in the town where I am living, I was able 

to receive the rest of the chemotherapy treatments I needed without having to worry 

about paying for them up front. The hospital has a policy of treating patients first, 

and then worrying about how they will get paid. Currently, I am seeing my 

oncologist every 3 months for followup visits. I am also paying out-of-pocket for my 

prescription cancer drug, Tamoxifen. 

Unfortunately, I am now so far in debt because of my medical bills, I feel that 

I will likely need to file bankruptcy in 2013. My medical debt to date is near 

$40,000. 

I now have peace of mind knowing that, in 2014, I will no longer be denied coverage because of my pre-existing condition—cancer. Having access to affordable insurance coverage and quality medical care will give me a better peace of mind for 

the future. My future is much brighter today than before the enactment of the Affordable Care Act, and for that I am very grateful. 

Thank you very much for your time. I will be happy to answer any questions. 

The CHAIRMAN. Thank you very much, Miss Cook for your very 

poignant, moving statement. I think that just pretty much sums it 

all up. 

Mr. Carlson, welcome. Please, please proceed. 

STATEMENT OF CHRIS CARLSON, PRINCIPAL AND CONSULTING ACTUARY, OLIVER WYMAN CONSULTING, MILWAUKEE, WI 

Mr. CARLSON. Thank you. Mr. Chairman and members of the 

committee, thank you for this opportunity to testify on the impact 

of guarantee issue and new rating rules. 

My testimony will focus on the studies that I and other actuaries 

have prepared to assess the impact of changes in non-group pre-
42 

mium rates resulting from the ACA. There are three issues I will 

address specifically. 

First, the analysis that we and others performed to measure the 

impact of the 3 to 1 age rating limitation on non-group policies. 

Second, the estimates we have developed on the increase in premiums that will be required to fund the health insurer taxes beginning in 2014. Third, the report sponsored by the Society of Actuaries that measures the impact of newly insured on claim costs in 

the non-group market. In addition, I will touch on other issues that 

will both increase and decrease premiums. 

First, Kurt Geisa and I co-authored an article published in the 

American Academy of Actuaries magazine. The purpose of the article was to assess the impact of age-rated limitations required by 

the ACA. Currently in most States, health insurance premium 

rates are allowed to vary by a ratio of at least 5 to 1 based on age, 

however, actual costs may vary by as much as 6 or 7 to 1. Thus, 

insurers must compress the rates at the high and low ends to 

maintain the required ratio of premium rates by age. 

Our work was intended to measure the impact of age rating compression, but also includes an assumption for the impact of all 

other provisions of the ACA. For this, we relied upon the CBO’s letter to Senator Bayh in 2009 where the CBO estimated that nongroup premiums would increase by 10 to 13 percent relative to current law. This amount represents changes due to factors such as 

the increase in benefits, competitive factors, and guaranteed issue. 

In our analysis, we assumed that the overall change due to these 

other factors would be at the low end of this range or a 10 percent 

increase. Importantly, I note that our article illustrates the impact 

on premiums for those individuals that are not eligible for the subsidies. 

We showed that for individuals in the lowest age bracket, ages 

21 to 29, premiums would increase by 42 percent in total, of which 

29 percent is due to the age rating compression. Further, individuals at ages 30 to 39 would see an increase of 31 percent in total 

or 19 percent due to the age rating compression. 

The Urban Institute recently published a report that also researched the impact of age rating. They concluded that the premiums for individuals between the ages of 21 to 27 would increase 

by 21 percent due to age rating, consistent with our results. We 

also agree with their conclusion that this would not affect most 

young adults due to premium subsidies available through the Exchanges. However, there will be certain individuals who are not eligible for subsidies whose premiums will increase substantially due 

to the age rating limitations. 

Regarding the second topic, Oliver Wyman researched the impact 

of health insurer taxes. We, and others, including the CBO, believe 

that these fees will be passed through directly to policyholders in 

the form of higher premiums. Overall, we anticipate that these increases will affect premiums by roughly 2 percent in 2014, and as 

much as 3.7 percent by 2018. 

Third, the Society of Actuaries sponsored a report prepared by 

Optum that estimated the change in claim cost due to newly insured individuals in the non-group market. It is expected that in 

most States which currently do not require a guaranteed issue, 
43 

new entrants to the non-group market will have higher morbidity 

than those currently insured. Therefore, it is expected that the premiums in the non-group market will need to be increased in 2014 

due to the inclusion of a less-healthy population. 

On average, Optum estimated that the non-group claim costs 

would increase by 32 percent after inclusion of the new entrants 

into the market. The results, however, vary widely by State from 

a reduction of 13.9 percent in New York, which currently has guaranteed issue and community rating, to an increase of 80.9 percent 

in Ohio. Generally, the States that have more restrictive market 

rules prior to the ACA will see lower claim costs relative to current 

costs. 

Finally, I will briefly discuss other components expected to affect 

premiums in the non-group market. 

First, premiums will increase due to requirements to provide essential benefits and minimum actual values. For example, the CBO 

estimated that increases in premiums due to the amount of insurance coverage would be 27 to 30 percent. 

Second, the open marketplace created as a result of the Insurance Exchanges will put pressure on health plans to keep premium 

rates down in order to be one of the lowest cost options and to attract those that are eligible for subsidies. 

If a health insurers’ premium rate is greater than the second 

lowest Silver Plan, enrollees would have to pay more out-of-pocket 

in premium, which would not be reimbursed by the premium subsidies. 

Third, additional fees and taxes, including the exchange fees of 

3.5 percent for the Federally Facilitated Exchanges and the medical device tax, will also likely pass through to premiums. 

Fourth, and finally, the Temporary Reinsurance Program will reduce non-group premium rates by reimbursing health insurers for 

individual claims that exceed a threshold. The State of Vermont recently published post-ACA rate filings, one of which estimated that 

the reduction in costs for the non-group market, due to the Temporary Reinsurance Program, would be 9.6 percent in 2014. 

Mr. Chairman, again, I thank you for the opportunity to speak, 

and look forward to answering any questions. 

[The prepared statement of Mr. Carlson follows:] 

PREPARED STATEMENT OF CHRIS CARLSON

I. INTRODUCTION

Chairman Harkin, Ranking Member Alexander, and members of the committee, 

I am Chris Carlson, principal and consulting actuary at Oliver Wyman. I have nearly 20 years of experience as a health care actuary and have been actively involved 

the last few years in helping stakeholders, including clients, regulators and actuarial colleagues understand and implement the changes required by the Affordable 

Care Act (ACA). I am delighted to have this opportunity to testify on the effect of 

guarantee issue and the new ratings rules on the nongroup health insurance marketplace. 

My testimony will focus on topics that I and my firm of Oliver Wyman and other 

health actuaries have studied in preparation of implementing the new marketplace 

rules required by the ACA. These topics include: 

• The analysis that we and others performed to measure the impact of the 3 to 

1 age rating limitation of the ACA on nongroup policies. 

• The estimates we have developed on the increase in premiums that will be required to fund the health insurer taxes beginning in 2014. 
44 

1 Blumberg, Linda J. and Buettgens, Matthew, ‘‘Why the ACA’s Limits On Age-Rating Will 

Not Cause ‘Rate Shock’: Distributional Implications of Limited Age Bands in Nongroup Health 

Insurance’’, The Urban Institute, March 2013. 2 ‘‘Cost of the Future Newly Insured Under the Affordable Care Act (ACA)’’, Society of Actuaries, March 2013. 

• The report sponsored by the Society of Actuaries that describes the cost of 

newly insured individuals in the marketplace relative to the current nongroup marketplace participants. • Other factors that will impact the level of health insurance premiums in the 

nongroup marketplace after implementation of the ACA. 

Overall, we note that the age-rating limitations by themselves result in no change 

in the average premium. However, since current age-rating laws in most States 

allow for a 5 to 1 ratio or more in the highest to lowest rate, the change in the premium required for certain policyholders to compress to a 3 to 1 ratio is significant. 

Our study indicates that the impact of the age rating compression will increase the 

average premium for policyholders between ages 21 and 29 by 29 percent. The 

Urban Institute published a report 1 that assessed the impact of age rating compression but using a different methodology. Although the magnitude of their results is 

different, the results are consistent as they estimated that premiums for single 

adults between ages 21 to 27 would increase 21.3 percent due to the age rating compression. In both cases, this increase would only apply to individuals that are not 

eligible for any premium subsidies and have incomes above 400 percent of the Federal Poverty Level. 

Beginning in 2014, health insurers will be assessed additional premium taxes re- quired by the ACA. The amount to be collected in 2014 is $8 billion, increasing to 

$14.3 billion in 2018 and with trend thereafter. We estimate that the impact of 

these taxes will be to increase premium rates by 1.9 percent to 2.3 percent in 2014, 

and by 2.8 percent and 3.7 percent in years 2018 and later. 

The Society of Actuaries sponsored a study 2 of the newly insured individuals that 

will be enrolled in the nongroup market as a result of the ACA’s provisions related 

to guarantee issue. This report estimated that the nongroup cost per member per 

month across all ages would increase by 32 percent after the ACA compared to preACA. This would be in addition to the increases for the younger individuals aged 

21 to 29, described above. 

There are other factors that will drive changes, both increases and decreases, in 

the nongroup premium rates after implementation of the ACA. These include: 

• Increases: 

• Benefits required for essential benefits and actuarial value. • Additional fees and taxes including the Exchange fees of 3.5 percent and the 

medical device tax which will likely be passed through to premiums. • Decreases: 

• Competition created by the Exchange marketplace. • The temporary reinsurance program will reduce nongroup premium rates in 

the first 3 years post-ACA. 

II. AGE-RATING UNDER THE ACA

The ACA reforms the market rules that all health insurance providers must follow in the pricing of health premiums beginning on January 1, 2014. In general, 

premium rates are only allowed to vary by four criteria: geography, age, tobacco 

usage and actuarial value. Of these, there is a further restriction that the premiums 

may not vary by age by more than 3 to 1 from the highest age tier to the lowest 

age tier. In fact, the regulations that were promulgated by the Department of 

Health and Human Services mandated specific factors by age to be used, unless otherwise developed by an individual State. 

Kurt Giesa and I, actuaries at Oliver Wyman, co-wrote an article for Contingencies magazine, which is published by the American Academy of Actuaries, which 

estimated the impact of the age rating compression on different age cohorts in 

States that currently allow age rating beyond 3 to 1. The importance of this work 

is to help move beyond looking at premium changes based on broad averages, especially in a case where an average would mask substantial differences. We believe 

it is especially important to look at the age cohort from 21 to 29, since even after 

accounting for ACA’s provision requiring that adult children be allowed to remain 

on their parents’ coverage until age 26 this age group has an uninsured rate that 

is roughly twice the uninsured rate for the nonelderly population. 

To create our study, we used three primary data sources. The first was the 2011 

Current Population Survey (CPS) conducted by the U.S. Census Bureau (use of the 
45 

2011 CPS data takes into account the impact of the ACA’s adult child coverage provision, which became effective for plan years beginning on or after Sept. 23, 2010). 

For premium-level assumptions, we relied on Congressional Budget Office (CBO) estimates regarding selection and impact of increased benefit levels tied to actuarial 

values. We excluded the effects of medical cost trend because it’s assumed to occur 

regardless of the ACA. (CBO estimates of premium increases include growth in the 

underlying cost of coverage related to an increase in benefits over what is purchased 

today, positive selection due to an assumed improvement in risk pool mix, and lower 

prices due to greater market efficiencies.) Our estimates of the level of premium assistance are generous, as we based them on average premiums. Had we based them 

on estimates of premiums for the second lowest-cost silver plan (as will be the case 

under the ACA), the assumed levels of premium assistance would have been lower 

and consumer out-of-pocket costs for health insurance and the premium rate 

changes in 2014 would have been higher. 

To construct premiums by age in 2013, we relied on a set of proprietary rating 

factors maintained by Oliver Wyman. These rating factors are based on costs and 

are consistent with factors used in the industry. For 2014, we used the standard 

age curve that CMS put forward in its proposed Health Insurance Market Rules. 

We also collected data from two large health insurance issuers to verify our estimates derived from CPS data on demographic distributions and found similar results when looking at these carriers’ actual market data. 

While a range of ACA provisions will be implemented in 2014, perhaps the most 

important for young adult insurance premiums are the provisions for age band compression and the provisions related to advanced premium assistance tax credits and 

cost-sharing reduction assistance. The essence of age band compression is that 

younger people pay more for their coverage so that older people can pay less. As 

with many other issues that affect pricing, this is effectively a matter of the amount 

of cross-subsidization that will flow among different enrollees with respect to their 

health insurance premiums. We need to distinguish the cross-subsidies that are the 

result of age band compression from the general pooling of risk that underlies all 

insurance. While insurance generally provides a retroactive cross-subsidy among insured individuals to protect against unknown risks, age band compression is a prospective cross-subsidy from the young to the old. 

Our analysis shows that under the ACA, premiums for people aged 21 to 29 with 

single coverage who are not eligible for premium assistance would increase by 42 

percent over premiums absent the ACA. People aged 30 to 39 with single coverage 

who are not eligible for premium assistance would see an average increase in premiums of 31 percent. Those with single coverage aged 60 to 64 who are not eligible 

for premium assistance would see about a 1 percent average increase in premiums. 

Our estimates of these effects are shown in Chart 1 and reflect the assumptions described above. These estimates assume a starting age band of about 5 to 1, reflecting States where coverage currently is underwritten. 

Our core finding is that young, single adults aged 21 to 29 and with incomes beginning at about 225 percent of the FPL, or roughly $25,000, can expect to see higher premiums than would be the case absent the ACA, even after accounting for the 

presence of the premium assistance. Similarly, single adults up to age 44 with incomes beginning above approximately 300 percent of FPL can expect to see higher 

premiums, even after accounting for premium assistance. This is because in today’s 

market, younger enrollees can buy coverage that more closely reflects their expected 

actuarial costs based on their age, and this coverage is pooled with other similar 

risk classes in accordance with standard actuarial principles. In addition, the ACA 

requires that all nongroup coverage meet essential health benefit requirements, 

both with respect to the type of services covered and with respect to the actuarial 

value of the coverage. 

Consider, for example, a 25-year-old person with income at 300 percent of FPL, 

or $33,510. This person currently could purchase coverage for about $2,400 per year, 

or 7.2 percent of his or her income. Age band compression and the other changes 

to the ACA would result in premiums (before premium assistance) increasing by 42 

percent to $3,408. As shown in Chart 2, this person at 300 percent FPL will be required to pay 9.5 percent of his or her income, or $3,183, toward the cost of coverage. The cost of his or her actual premium would increase by $783, even with the 

$225 in premium assistance. (The impact of cost-sharing reduction assistance at 

these income levels is not relevant because the assistance completely phases out at 

household incomes above 250 percent of FPL.) 

While our analysis focused primarily on the impact of age band compression, the 

interaction of age band compression and the elimination of premium variation related to health status also deserves attention. Analysis of representative carrier 

data suggests that eliminating health status as a rating factor itself may increase 
46 

premiums by roughly 17 percent to 20 percent for those who have preferred rates 

because of lower-than-average health risks. Young adults often qualify for these preferred rates. These increases would be in addition to any premium rate change due 

to age compression, required increases to benefits, or other factors discussed above. 

On the flip side, older individuals often cannot get coverage in the nongroup market 

or afford coverage if it is offered. The ACA addresses many of these concerns for 

older persons separate from the issue of age band compression. It mandates that 

nongroup coverage be offered on a guaranteed-issue basis. The ACA’s prohibition on 

varying premiums based on health status will lower rates for older people. And the 

same arguments that apply with respect to premium assistance for younger individuals apply to those who are older—for anyone with household income up to 400 percent of FPL, the ACA makes premium assistance available that caps spending on 

coverage at 9.5 percent of income, or a lower amount for incomes less than 300 percent of FPL. The difference between young and old at similar income levels is that 

younger individuals at a given income level are much less likely to find it economically rational to purchase coverage if it takes up 9.5 percent of their income, while 

older individuals have a greater expectation of health care cost spending as a percentage of income. 

In light of these tradeoffs, it is important to consider ways of mitigating the effect 

on rates for younger people while leaving benefits of the ACA in place for older people in the pre-65 age cohort. 

Breadth of Impact 

Looking at the uninsured by FPL and age in 2011 shows that 11.2 million people 

(or almost 25 percent of the uninsured in 2011) were between the ages of 21 and 

29, and roughly 1.4 million of these individuals will not be eligible for premium subsidies because their household income exceeds 400 percent of FPL. At the same 

time, close to another 2.6 million uninsured individuals are estimated to have incomes above 225 percent of FPL, the crossover point above which those purchasing 

single coverage can expect to pay more out-of-pocket for coverage than they otherwise would, even after accounting for premium assistance. In total, this means that 

close to 4 million uninsured individuals aged 21 to 29—or roughly 36 percent of 

those currently uninsured within this age cohort (4 million/11.2 million)—can expect 

to pay more out-of-pocket for single coverage than they otherwise would, even given 

the availability of premium assistance. 

Roughly 7.6 million people, or 40 percent of those covered in the nongroup market 

in 2011, had incomes above 400 percent of the FPL and would be ineligible for premium assistance. Taking into account both the 400 percent FPL phase-out level and 

the 225 percent FPL crossover point, we estimate that almost 80 percent of those 

ages 21 to 29 with incomes greater than 138 percent of FPL who are enrolled in 

nongroup single coverage can expect to pay more out-of-pocket for coverage than 

they pay today—even after accounting for premium assistance. With a crossover 

point of about 300 percent of FPL for those aged 30 to 44, we estimate that about 

one-third of those older than age 29 with incomes greater than 138 percent FPL 

who currently are insured with individual contracts will see higher premiums even 

after accounting for premium assistance. 

Also of potential importance to the cost of coverage for young adults are two ACA 

provisions: the creation of a catastrophic plan option and coverage of adult children 

to age 26 through their parents’ group coverage. The ACA provides that beginning 

in 2014 issuers can offer a catastrophic plan option to those under age 30 and to 

others for whom the cost of coverage is deemed unaffordable. The ACA’s provisions 

on cost-sharing applicable to ‘‘metallic level’’ coverage and the actuarial value requirements do not apply to these plans. If they are substantially more affordable 

than other coverage, catastrophic plans may prove an important option for young 

adults to keep premiums affordable (though premium assistance will not be available to those purchasing the catastrophic coverage, regardless of income). The ACA 

also includes provisions allowing parents to keep adult children on their employersponsored group coverage up to age 26. This provision is already in effect, and early 

indications are that it has helped to cover more young adults. Because this coverage 

is by definition group coverage, however, increasing dependent coverage for young 

adults in this way does not improve the quality of the risk pools in the nongroup 

market. In fact, comparing the 2011 CPS data against earlier periods suggests that 

one effect of the adult child coverage provision on the nongroup market has been 

to increase the proportion of older enrollees in relation to younger enrollees. 

From a policy perspective, the issue of age band compression and whether its effect on the cost of coverage for young people is outweighed by the value of premium 

assistance matters for at least two reasons: 
47 

• Equity—While judging fairness and the tradeoffs implicit in age band compression raises subjective questions, technical analysis can help objectively unmask distributional differences relevant to this question. • Market Efficiency—If people aged 21 to 29 are asked to pay substantially more 

for their coverage than they otherwise would, will they choose to obtain or maintain 

coverage at all? 

This question has clear implications for insurance markets, which rely on the 

presence of balanced risk pools in order to provide affordable coverage. Younger people tend to be healthier and have expected health care costs that are lower than 

those of older people. An adult near retirement age, for example, is generally expected to have health care costs that are roughly six to seven times or more than 

those of the average male aged 21 to 29. If healthy young people choose to leave 

the risk pool or join in proportionately fewer numbers relative to those with immediate health care needs, the effect would be to create an unbalanced risk pool and 

higher prices for those seeking coverage. 

Our analysis raises questions as to whether younger individuals will perceive coverage as cost effective. In our analysis, we blended young males with young females 

to look at age 21 to 29 cohorts as a whole. Had we broken the analysis out by gender, it would show a greater impact on young males (meaning premium increases 

would be higher and the crossover point would occur at a lower FPL level) and less 

of an impact on young females. The CBO’s 2009 analysis of premiums under the 

ACA suggests that more young people would obtain coverage under the ACA than 

under current market conditions, leading presumably to the conclusion that risk 

pools for nongroup coverage in 2016 would be younger and healthier than today’s 

markets. More recent estimates at the State level by various parties have reached 

different results. These analyses have focused on factors such as the impact of guaranteed issue and the elimination of underwriting. Important to all these analyses 

are assumptions regarding the effectiveness of the individual coverage mandate, 

which could encourage young people to obtain and retain coverage even if it is not 

otherwise in their perceived economic interest to do so. In this regard, the ACA requires that every individual maintain coverage or pay a tax penalty that is equal 

in 2014 to the greater of $95 or 1 percent of modified adjusted gross income, with 

the penalties for not maintaining coverage gradually increasing over time—phasing 

up to the greater of $325 or 2 percent for 2015 and ultimately the greater of $695 

or 2.5 percent of income after 2016. The relatively low penalties associated with the 

individual mandate make the effectiveness of the mandate uncertain, particularly 

in the first few years of reform when stability is essential and the penalty can be 

expected to fall well below the annual cost of the minimum standard of coverage 

required under the ACA. This situation was given clarity in the June 2012 ruling 

from the U.S. Supreme Court—the law does not require maintenance of coverage, 

only maintenance of coverage or payment of the tax penalty. 

Given the significance of these issues, policymakers should assess how various 

ACA provisions affect the underlying affordability and cost of coverage for younger 

individuals, in order to better understand issues that may affect their decisions to 

obtain and/or maintain coverage. Understanding these issues requires analyses that 

go beyond consideration of broadly stated averages, which can mask the effects on 

important subpopulations. There are several options for mitigating the potential impact of age band compression. One approach, provided the ACA allows for this, 

would be to phase in the age band requirements over a period of years, thus allowing the market to stabilize with respect to other changes before full implementation 

of age band compression requirements. This might also bring about higher enrollment levels among young adults, which could lead to a healthier risk pool overall 

and help hold down premium rates for everyone—young and old. 

Another complementary possibility would be to ensure that the pricing rules for 

catastrophic coverage provide adequate flexibility to increase the likelihood that 

these policies will be affordable. This appears to be the approach that CMS had 

taken in its recently released ‘‘Notice of Benefit and Payment Parameters for 2014.’’ 

Affordability is especially important for young adults who have incomes that make 

them ineligible for premium assistance or are above the 225 percent FPL crossover 

point. For these individuals, an affordable catastrophic coverage plan could mean 

the difference between obtaining and going without coverage. Because these plans 

are not eligible for premium assistance and are limited to those age 30 and younger 

(and those for whom coverage is ‘‘unaffordable’’), there would be a natural limiting 

point with respect to the number of people who would be expected to enroll. As a 

result, the potential impact on coverage costs for older people because of the reduced 

level of cross-subsidy from those enrolled in catastrophic coverage would be limited. 

The Urban Institute prepared a similar study using their simulation model to assess the impact of the age rating compression. In general, the results of their model 
48 

are consistent with our results for the youngest ages. The Urban Institute estimated 

that the increase in premium rates due to the age rating compression would be 21.3 

percent for the ages 21 to 27, compared to our estimate of 29 percent. Further, we 

agree with the Urban Institute’s conclusion that ‘‘most young adults currently covered by nongroup insurance will be shielded from the full effects of the narrower 

age-rating bands.’’ However, we believe that some young individuals will be affected 

by the age-rating and will see substantial increases beginning in 2014. 

III. INSURER TAXES

The ACA, establishes an annual fee on the health insurance sector—effective in 

2014. The new fee applies with some exceptions to any covered entity engaged in 

the business of providing health insurance (including private plans that participate 

in public programs), but does not include self-insured employer-provided health 

plans. The amount of the fee will be $8 billion in 2014, increasing to $14.3 billion 

in 2018, and increased based on premium trend thereafter. The fees are non-deductible for Federal tax purposes. As we explain later, this feature implies that for each 

dollar assessed and paid in fees, more than a dollar in additional premium amounts 

must be collected (e.g., $1.54 for every $1.00 in fees, assuming a 35 percent Federal 

corporate income tax rate). In total, on a statutory basis, between 2014 when the 

fees are first imposed and 2019, the total amount assessed (and actually collected 

from health insurers) will be at least $73 billion. Net revenues to the Federal Government, however, will increase by a lesser amount as reflected in revenue effect 

estimates by the Joint Committee on Taxation (‘‘JCT’’) which show Federal revenues 

increasing by $60.1 billion over 10 years (2010–19). As highlighted below, both the 

JCT and CBO conclude that the new fee on health insurance plans would increase 

premiums. 

The CBO prepared an estimate of the impact of the market reforms required by 

the ACA in a letter to Senator Evan Bayh on November 30, 2009. However, in this 

document, the CBO made no explicit calculation of the impact of the insurer fees 

on average premiums in the market. Instead, they stated ‘‘these fees would largely 

be passed through to consumers in the form of higher premiums for private coverage.’’ 

In a June 2011 letter to Senator Jon Kyl, the JCT explained that the fee on 

health insurance providers is similar to an excise tax based on the sales price of 

health insurance contracts. They estimated that repealing the health insurance industry fee would reduce the premium prices of plans by 2.0 to 2.5 percent, and that 

eliminating this fee could decrease the average family premium in 2016 by $350 to 

$400. 

Our analysis quantified the impact of the fees imposed on health insurers under 

the ACA on the cost of health insurance coverage in both the commercial and public 

sectors. Our analysis estimates that the insurer fees will increase the costs of fully 

insured coverage by an average of 1.9 percent to 2.3 percent in 2014, further increasing over time such that by 2023, the fees will ultimately increase costs on average by 2.8 percent to 3.7 percent. This implies a material increase the average dollar cost of fully insured coverage, raising the average cost of such coverage by several thousand dollars over a 10-year period beginning in 2014. 

IV. COST OF NEWLY INSURED

The Society of Actuaries (SOA) sponsored a report that was prepared by Optum 

that estimated the impact on claim costs due to the expansion of the nongroup market. It is expected that in most States, which currently do not require guarantee 

issue, new entrants to the nongroup market will have higher morbidity than those 

currently insured. Therefore, it is expected that the premiums in the nongroup market will need to be increased in 2014 due to the inclusion of a less healthy population. On average, Optum estimated that the nongroup claim costs per member per 

month would increase by 32 percent after inclusion of new entrants in the market. 

The results vary widely by State from a reduction of 13.9 percent in New York 

(which currently has guarantee issue and community rating) to an increase of 80.9 

percent in Ohio. Generally, the States that have more restrictive market rules prior 

to the ACA will see lower claim costs relative to current costs. The full report can 

be found at http://cdn-files.soa.org/web/research-cost-aca-report.pdf. 

V. OTHER FACTORS

I briefly discuss other components expected to affect premiums in the nongroup 

market: 
49 

3http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/107xx/doc10781/11–30-premiums 

.pdf. 4http://www.dfr.vermont.gov/sites/default/files/MVPH–128956063.pdf. 

• Increase in benefits required for essential benefits and actuarial value: The 

CBO estimated that the increase in premiums due to the amount of insurance coverage would be 27 percent to 30 percent.3

• Competition created by the Exchange marketplace: It is expected that the open 

marketplace created as a result of the insurance exchanges will put pressure on 

health plans to keep premium rates down in order to be one of the lowest cost options and to attract those that are eligible for subsidies. If a health insurer’s premium rate is greater than the second lowest silver plan, enrollees would have to 

pay more out-of-pocket in premium that would not be reimbursed by the premium 

subsidies. • Additional fees and taxes including the Exchange fees of 3.5 percent in federally 

facilitated exchanges and the medical device tax which will likely be passed through 

to premiums. • The temporary reinsurance program will reduce nongroup premium rates in the 

first 3 years after January 1, 2014: Health insurers will receive reimbursement for 

individual claims that exceed a threshold. These reimbursements will decrease the 

insurers’ claims costs during 2014 to 2016, when this program in operational. The 

State of Vermont recently published post-ACA rate filings, one of which estimated 

that the reduction in cost for the nongroup market due to the temporary reinsurance program would be 9.6 percent in 2014.4

The CHAIRMAN. Thank you very much, Mr. Carlson, and thank 

you all for your testimony. 

I knew that Senator Murphy was delayed in getting here because 

of prior commitments, and I want to recognize Senator Murphy, 

who wanted to make some statements. 

STATEMENT OF SENATOR MURPHY

Senator MURPHY. Thank you very much, Mr. Chairman. I merely 

wanted to welcome Mr. Counihan to the panel; so glad that the 

committee selected him to join us. 

I am going to have to leave again, but we are very lucky to have 

him in Connecticut overseeing our Exchange. Despite the tough 

timelines, we are doing very well and he brings to this panel a 

wonderful combination of experience in the public sector having 

worked a similar job in the Massachusetts Connector, as well as in 

the private sector. He has been very articulate talking about the 

provisions of the health care bill that will help to ease some of the 

rate shock concerns that have been expressed by these panels 

today. 

And I wanted to thank the Chairman for having him be part of 

this panel and thank him for being here and for his great work in 

Connecticut. 

The CHAIRMAN. Thank you, Senator Murphy. 

We will now begin a round of 5-minute questions. Ms. Cook, 

Stacy, when you said you are now $40,000 in debt and may have 

to file bankruptcy this year. 

I think I saw someplace, and maybe staff or someone down there 

can help me, that one of the single largest causes of personal bankruptcies in America was health care debt. Am I saying it correctly? 

Professor Corlette. 

Ms. CORLETTE. I believe that is correct, Senator. 

The CHAIRMAN. I also saw that one of the reasons, the highest 

reason for bankruptcy and also for losing homes, not being able to 

pay mortgages, is because of high medical debt. 
50 

I think your story really does illustrate so much of what is going 

on in America. Unfortunately, there are hundreds of thousands of 

people in your same situation. It may not be cancer, but it may be 

something else. 

Ms. COOK. I agree. 

The CHAIRMAN. They just simply cannot get insurance coverage. 

I mean, I was struck by the fact that you moved back to Iowa and 

the Iowa State Health Insurance Plan would not help because you 

were diagnosed in Arizona. I just find that alarming: that because 

of moving from one State to the next, I mean, you were diagnosed 

in one State, but you cannot get the coverage in another State. 

That just is mindboggling. 

So now, you are doing your followup. But again, now you are preexisting, this won’t happen until, what, October 1st of this year, is 

that right? When the no pre-existing condition clauses start, is that 

right? 

Ms. CORLETTE. Miss Cook will be able to enroll in a plan starting 

October 1st, but the coverage does not actually start until January 

1st. 

The CHAIRMAN. She can enroll, but the coverage starts in January. 

Ms. CORLETTE. The open enrollment period begins in October. 

The CHAIRMAN. Oh, that is right. There is an open enrollment 

period. So, at least you have the peace of mind of knowing that—— 

Ms. COOK. Yes. 

The CHAIRMAN [continuing]. You will be able to get coverage that 

you can afford beginning next January. And you can seek the 

health care that you need. 

Ms. COOK. Yes. 

The CHAIRMAN. I just wish you didn’t have to go through that. 

I wish hundreds of thousands of Americans did not have to go 

through that. 

And then when I hear about young people now, free riders as we 

have called them in the past, that now they are going to have to 

sign up. They are going to have to pay more. Mr. Carlson pointed 

that out. It has been pointed out before. These young people have 

got to pay more. But I bet you when you were in your early 20’s, 

you were diagnosed at what age, 28? 

Ms. COOK. Yes. 

The CHAIRMAN. I bet before that, you probably thought you were 

just going to sail right through. 

Ms. COOK. I actually turned down cancer insurance not 2 months 

before I was diagnosed. I never thought that I—— 

The CHAIRMAN. Because you are young and you are healthy. 

Ms. COOK. Yes. 

The CHAIRMAN. Yes, you are invulnerable. I remember. I was like 

that once. Young, you’re invulnerable. 

I think what Mr. Counihan said, really brings it home that, how 

did you say that, again? I am going to remember that, Mr. 

Counihan. I just thought it was very profound. You said that, 

‘‘The hallmark of health reform has been the concept of 

shared responsibility, the sense of shared ownership, of a common value that our Nation benefits more from more citizens realizing the peace of mind of health insurance coverage.’’ 
51 

I think that is really it. I think that’s really it, that this is a 

shared sense of responsibility. 

As I said to the earlier panel that we all know, any of us who 

have been involved in insurance know that the best insurance coverage, the cheapest is when you have more people in the pool. Get 

more people in the pool. When you start dividing it up, there are 

going to be some winners, and there are going to be some losers. 

And therefore, then you put the responsibility, then you shift, you 

shift to those who are the least able to maintain health, or those 

who have been hit with a double whammy like Miss Cook. So I just 

see it in those terms of a shared value in this country. 

And as others have pointed out that we are paying for it one way 

or the other. We pay for it through uncompensated care. Sadly 

enough, we also pay for it through the suffering of people who cannot get insurance coverage. Is that not also something we care 

about, too, in our society? People should not have to. I mean, it is 

enough to be hit with a chronic illness or disease, cancer, other 

things, it is enough. But then to be double hit with the fact that 

you cannot even get health care. You cannot pay for it. You have 

to go into debt up to your eyeballs, have to file for bankruptcy. Is 

that what we are about as Americans? Is this the right system? Is 

that the right kind of system? 

I think, as I said, Miss Cook, I think you just brought it all home 

with your story about what this is all about. I will have some more 

questions maybe, but I just wanted to get that out. 

Senator Alexander. 

Senator ALEXANDER. Thanks, Mr. Chairman. 

I want to thank the witnesses for coming. Sorry, I was a little 

late getting back because of the vote. Miss Cook, thank you especially for coming. That cannot be easy to do. 

Mr. Carlson, I would like to ask you a couple questions. You 

mentioned the Congressional Budget Office report in 2009. It estimated, I think you said, that the President’s proposed health care 

plan would increase individual premiums by 10 to 13 percent. Is 

that what you said? 

Mr. CARLSON. That is correct. 

Senator ALEXANDER. Some of those people would then have subsidies, right, which would reduce the cost? 

Mr. CARLSON. Yes. 

Senator ALEXANDER. But not all of them, right? 

Mr. CARLSON. Not all. 

Senator ALEXANDER. Do you know what the percent was? 

Mr. CARLSON. I do not know those numbers offhand. 

Senator ALEXANDER. I think it was about half. 

Mr. CARLSON. But it was in our article, we do show the numbers 

there. 

Senator ALEXANDER. Right. That was a discussion that I happened to have with the President. I know that in 2008, he went 

around the country, and we have it in ‘‘The New York Times’’ saying that he would lower the country’s health care cost of premiums 

by $2,500 for a typical family. 

I was asked to speak at the Health Care Summit the President 

invited me to in 2010, which I did, and we had a difference of opinion when he said that individual premiums would go down 14 to 
52 

20 percent. I cited that CBO report saying they would go up, net, 

10 to 13 percent. He said I was wrong. I think I was right. The 

CBO was talking about an actual increase in premiums. Is that 

correct? 

Mr. CARLSON. That is correct, yes. 

Senator ALEXANDER. And in your study, the Society of Actuaries, 

one of the Obama administration officials said that was an insurance company report. Is that correct? 

Mr. CARLSON. The Society of Actuaries is an independent organization and they sponsored the report. It was written by Optum 

which may be owned by an insurance company, but from my perspective it is an independent report. 

Senator ALEXANDER. Your conclusion was that individual premiums would rise, how much? 

Mr. CARLSON. The SOA report expected that they would go up 

32 percent due to the new—— 

Senator ALEXANDER. This would be when the law takes effect, is 

that right, in 2014 through—— 

Mr. CARLSON. That is correct. 

Senator ALEXANDER [continuing]. 2017? 

Mr. CARLSON. Well, I think it is—— 

Senator ALEXANDER. Over what period of time? 

Mr. CARLSON. I do not know that they quantified the timing of 

that increase. 

Senator ALEXANDER. Yes. And do you recall what the reasons for 

the increase in the prices, the expected jump in rates were? What 

the principle, driving forces were? 

Mr. CARLSON. That was principally going to be driven by the individuals who are going to be entering the market who had preexisting conditions and needed the insurance for getting medical 

care. 

Senator ALEXANDER. Would another one be that the requirement 

that somebody my age would pay less and somebody my son’s age 

would pay more? 

Mr. CARLSON. That is actually not included in that 32 percent. 

Senator ALEXANDER. That is a cost in addition. 

Mr. CARLSON. For a young individual, that would be a cost in addition. 

Senator ALEXANDER. Do you have any idea how much individual 

premiums for young men may go up over the next several years. 

Have you done any estimate of that? 

Mr. CARLSON. We have not necessarily put the pieces together, 

but it is possible you can do that and kind of look at all the different components, and see how they add up, and it would be 

quite—— 

Senator ALEXANDER. But wouldn’t common sense say that unless 

coverage was reduced, which it has not been so far as I know, that 

if you reduce prices, costs for someone my age, they go up for someone my son’s age. That is the whole point of the rating, is it not? 

Mr. CARLSON. That is correct, yes. 

Senator ALEXANDER. Equalize that. In the equalization, it tends 

to keep this one down and raise this one up. Would another reason 

that the individual rates might be going up be that the require-
53 

ments that the policies have more benefits to them, that they are 

richer policies? 

Mr. CARLSON. That is correct. 

Senator ALEXANDER. What did the report say about that? 

Mr. CARLSON. The CBO report said it was 27 to 30 percent. I 

think it depends greatly on what State you are in. Some of the 

States have already significant mandates for providing benefits, so 

their increases may be significantly less than that. 

Senator ALEXANDER. Have you done any work to determine 

whether people who are self-employed, the policies they typically 

have, would be consistent with the requirements of the new law? 

Mr. CARLSON. I am sorry. I do not think I understand the question. 

Senator ALEXANDER. The people who are self-employed and have 

their own individual insurance plan, will then have to have a new 

plan that meets the requirements of the law. 

Mr. CARLSON. Absolutely. Yes. 

Senator ALEXANDER. Have you done any work to determine 

whether the new requirements are consistent with what most people already have? 

Mr. CARLSON. No, I mean, I think all of these, the factors that 

we are discussing will affect those individuals as well. 

Senator ALEXANDER. Mr. Chairman, there is no doubt that the 

law expanded coverage, but I think the point we are finding is that 

someone is going to be paying the cost. Individual rates are going 

up. 

The President said they would not. He said that at a meeting 

with Members of Congress, he was talking about actual increases 

in rates. He was, unfortunately, incorrect about that based upon all 

of the projections that I have seen from the Society of Actuaries, 

from BlueCross BlueShield in Tennessee, and others. But we will 

know for sure when the implementation of the law takes place fully 

beginning next year. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

Senator Franken. 

Senator FRANKEN. As I said in the first panel, the record is that, 

for over the last 3 years, we know that part of ACA has gone into 

effect. And now, if you have pre-existing conditions as a child, you 

have to be offered coverage. And we know that the growth in the 

cost of care has actually slowed down relative to what it has been 

in the last 50 years. 

The President never said it would go down as an absolute. It 

was—— 

Senator ALEXANDER. I have it here. I was at the meeting, Senator Franken. He was speaking to me and I have the text here if 

you would like to read it afterwards. 

Senator FRANKEN. I never heard him say it publicly. What he 

said publicly was that relative to what they would otherwise be, 

costs would go down. That is what I heard publicly. 

Senator ALEXANDER. I do not mean to interrupt your time. 

Senator FRANKEN. That is quite all right. That is in response to 

a private conversation you had with the President or a conversation you had with the President. What I heard publicly is that the 
54 

price, we were bending the cost curve. I do not know how often we 

heard that. I would like to take that time, though. 

The CHAIRMAN. I do not see a statement. 

Senator FRANKEN. I would like to take that time. 

Professor Corlette, as you discuss in your written testimony, the 

health care law includes new requirements for insurance companies that will help prevent premium increases, and I think they already have. 

For example, my Medical Loss Ratio provision—a provision that 

I based on a Minnesota State law that has been on the books since 

1993—requires insurance companies to spend 80 to 85 percent of 

your premium dollars on actual health care. And only 15 percent 

for large group policy, 20 percent for a small group policy, for an 

individual policy, on administrative costs, on profit, on marketing, 

CEO salaries, et cetera. If your insurance company goes over this 

ratio, you get a check back or your employer gets a check back. 

Over 13 million Americans benefited from that. 

In your analysis, how will these features of the health care law 

pressure insurance companies to keep premiums from going up? Do 

you think the Federal Government is doing a good job implementing this provision and is there room for improvement? 

Ms. CORLETTE. Thank you, Senator, for that question. As you know, last year, about 12.8 million Americans got over $1 

billion in rebates because of your MLR provision. So we thank you 

for that. 

I do think the Federal Government is implementing it well. I am 

sure there may be some tweaks that people might be advocating 

for, but in general, I believe it is being implemented well. 

I also think this provision of the law coupled with the rate review provisions will take on added importance as we go into 2014 

and the insurance market changes. Because it will be really important to have State insurance departments and the Feds examining 

the proposed rate increases that are coming in from the insurance 

companies, and looking at the assumptions they are making and 

the projections they are making to ensure that they truly are justified. And if they are not justified, thanks to the MLR provision, 

consumers will get that money back at the end of the year. 

So both of those provisions combined are critical. Thank you. 

Senator FRANKEN. Thank you. Miss Cook, thank you for your testimony. 

Ms. COOK. You’re welcome. 

Senator FRANKEN. This is why I ran. There is a woman in Fergus 

Falls, MN who has diabetes. When I was running in 2007–8, her 

son, 24 years old, had diabetes, pre-existing condition. He could not 

get insurance. So she shared her insulin with him. This is why we 

are doing this. 

What does it mean to you that you know that with a pre-existing 

condition, you will now be able to get coverage? 

Ms. COOK. It means a lot to me, because after having it twice, 

there is a good chance that possibly I could get cancer again. So 

at least I will be able to have insurance if it does happen again. 

Senator FRANKEN. I know I am out of time. I would love to have 

a second round. 

The CHAIRMAN. Senator. 
55 

Senator FRANKEN. I said I am out of time, but I would love to 

have a second round. 

The CHAIRMAN. I will try. We will have a second round. 

Senator FRANKEN. Thank you. 

The CHAIRMAN. Professor Corlette, I want to get to the essence 

of this. Mr. Carlson’s analysis, and I read it last evening—I looked 

at it again here—compares premiums for coverage now with projections for premiums for coverage after 2014. But again as Senator 

Alexander and I were just having a little conference here privately, 

that is not really comparing apples to apples, is it, because the benefits that are going to be provided will be a lot different than what 

they have right now. 

You described in your testimony some of the gaps and holes in 

the benefits in the current market. Could you elaborate on that, 

the kind of ‘‘Swiss cheese’’ coverage—that is my own term—that we 

have now that they would have to pay for out-of-pocket. But now, 

that is going to be a covered benefit. 

Could you elaborate on that? 

Ms. CORLETTE. Sure. Thank you, Senator. 

I think your analysis is dead-on and that premiums actually only 

tell you one part of the picture. People in today’s market frequently 

have to pay out-of-pocket when care is not covered under their 

plan. And it is the reason why 57 million Americans live in families 

struggling with medical debt and 75 percent of those Americans 

have health insurance. 

We are moving to a system that doesn’t just address the premiums that people pay, but the actual overall out-of-pockets that 

they pay. So when you look at the financial picture for an individual or a family, you have to be looking at both. 

The CHAIRMAN. OK. A followup then, this analysis Mr. Carlson 

compares premiums that would have been paid by uninsured 

adults before versus after ACA reforms are in effect. But doesn’t 

that miss the fact that many uninsured people in the market now 

have been turned down for coverage altogether, and then that they 

have to pay for medical costs out-of-pocket, Miss Cook being a primary example of that? I mean, isn’t that a fact that many of them 

have already been turned down? 

Ms. CORLETTE. Yes, Senator. And I think that those kinds of outof-pocket spending should—— 

The CHAIRMAN. So I asked Mr. Carlson, how can you compare, 

have an analysis that compares premiums that would have been 

paid by uninsured adults before versus after in-effect? Since a lot 

of the people that you are looking at there—I don’t know, maybe 

you can correct me—you did not separate out those that had been 

turned down for insurance. Did you? 

Are they not lumped in that same group? 

Mr. CARLSON. They are, yes, and I don’t disagree with what you 

are saying. I think as an actuary, our responsibility is simply to 

educate people on what the cost of this is going to be. That really 

is the purpose of the reports. 

The CHAIRMAN. There is no cost to Ms. Cook. She cannot pay 

anything. She gets turned down. So it is not a cost before versus 

a cost after. It is the cost after for full coverage because she has 

already been turned down. 
56 

We are not talking about someone who is paying in for insurance 

now and what they are going to pay afterward. We are talking 

about someone now who cannot even get insurance, who has medical bills, racking up debt compared to what is going to be afterwards. 

But your analysis does not take, the actuarial analysis, does not 

take that into account. 

Mr. CARLSON. Right. And you are correct. We are looking at people who are currently insured and what their expectations are 

going to be. 

The CHAIRMAN. Perfect. Thank you for your honesty. I appreciate 

that very much. We are not really looking at apples versus apples 

on this thing. 

Now, I must, of course I will be able to with my friend on this 

here, but we were looking at the statements by President Obama— 

he used to be a Senator—in regards to this going back and forth. 

And in my reading of it, I thought it was very clear that he pointed 

out this difference in his statement there. 

Do you mind if I read that? 

Senator ALEXANDER. No, but you have to read the whole thing. 

The CHAIRMAN. I can’t read the whole thing. 

Senator ALEXANDER. I don’t mind at all if you read it. 

Senator FRANKEN. I would love to hear the context. 

The CHAIRMAN. Well, no. That is not it. That was another one. 

Senator ALEXANDER. Well, here is the part. 

The CHAIRMAN. Of course, look, we are all—in this business 

sometimes we do say things that maybe we did not give full 

thought to or something like that, so I always excuse those. 

If someone in our position has said something that is not quite 

square, you have got to go back and say, ‘‘Is that what they really 

meant or did they mean something else?’’ People do get a lot—and 

this is a confusing topic sometimes, even for those of us that have 

been in it for years and years. Sometimes, I know I have said 

things I have to go back and say, ‘‘Did I say that? If I did, that 

is not what I really meant. I was thinking of something else, but 

it came out wrong.’’ 

Senator ALEXANDER. That is what he said to me. 

The CHAIRMAN. Yes, well, this just struck me that, I guess this 

is a transcript. 

Senator ALEXANDER. Right. 

The CHAIRMAN. He said, this is the President, 

‘‘So Lamar, when you mentioned earlier that you said premiums go up, that’s just not the case according to the Congressional Budget Office.’’ 

Senator Alexander came back and said, ‘‘CBO report says the 

premiums will rise in the individual market as a result of the senate bill.’’ The President says, ‘‘No, no, no, no. Let me, and this is 

an example of where we have got to get our facts straight.’’ Senator 

Alexander, ‘‘That’s my point.’’ This is a good reading. 

[Laughter.] 

And the President says, 

‘‘Well, exactly. So let me respond to what you just said, 

Lamar, because it’s not factually accurate. Here’s what the 
57 

Congressional Budget Office says, ‘The cost for families for the 

same type of coverage as they’re currently receiving would go 

down 14 to 20 percent.’ What the Congressional Budget Office 

says is that because now they’ve got a better deal because policies are cheaper, they may choose to buy better coverage than 

they have right now, and that might be 10 to 13 percent more 

expensive than the bad insurance that they had previously,’’— 

what I call the ‘Swiss cheese’ coverage—‘‘But they didn’t say 

that the actual premiums would be going up. What they said 

was that they’d be going down by 14 to 20 percent.’’—That is 

that apples-to-apples—‘‘I promise you, I’ve gone through this 

carefully with the Congressional Budget Office. I’d be happy to 

present this to the press, whoever is listening, because this is 

an important issue.’’ 

Well, anyway, it goes on and on, and on and on, and on and on. 

But I thought what the President was trying to do was to make 

the case that I was trying to just make is that, yes, premiums are 

going to go up because you’ve got better coverage. You’ve got more 

complete coverage. Before, if you were lucky enough to be able to 

buy it, you had ‘‘Swiss cheese’’ coverage or you are like Miss Cook, 

you don’t even have ‘‘Swiss cheese’’ coverage; you don’t have any 

coverage at all. I guess that is just the point I was trying to make, 

and I have used up way too much of my time. 

Senator Alexander. 

Senator ALEXANDER. So thanks, Mr. Chairman. And I won’t use 

up much of my time. And on one point, I do not disagree with you, 

on one of the main reasons that premiums are going to go up is 

because of expanded coverage. I don’t disagree with that. In fact, 

that is what the Society of Actuaries found. 

Is that right, Mr. Carlson? 

Mr. CARLSON. Yes, that is correct. 

Senator ALEXANDER. And you have found that the medical claims 

will go up by about one-third. 

Is that correct? 

Mr. CARLSON. Yes. 

Senator ALEXANDER. And as a result, the cost of the premiums 

would go up significantly. 

Mr. CARLSON. You can make that assumption, yes. 

Senator ALEXANDER. And then there were two other reasons that 

costs were going up. One is the costs are allocated differently. 

Is that correct? 

Mr. CARLSON. Well, the cost allocation would impact the younger 

individuals, but obviously—— 

Senator ALEXANDER. So for a younger individual it might go up 

more. 

Mr. CARLSON. Yes. 

Senator ALEXANDER. And then the third reason was what Senator Harkin said was that the policies are richer. I mean, if you’ve 

got more of a Buick or even a Cadillac, than a Chevrolet or a Ford, 

and so you are paying more for it. 

Mr. CARLSON. Right. 

Senator ALEXANDER. So those are all correct reasons, but the 

point is the costs are going up. 
58 

The discussion the President and I had, and without plowing it 

too much, I had said that the congressional—just what Mr. Carlson 

said. That under the President’s plan, the CBO said in 2009 that 

the premiums would actually go up 10 to 13 percent in the individual market. That is what it said. It did not say it would go up 

relative to anything other than what they were today, they would 

be that much higher. They also said that some people would get 

subsidies; that was about half the people, I think. 

And then the President interrupted me and said that I was 

wrong about that, and he pointed out that for a comparable policy, 

costs would go down. Correct. But we are not talking about a comparable policy. We are talking about policies that are richer, that 

cover more people, and that have different rating systems. 

The fact of the matter is, according to the Society of Actuaries, 

when this law is fully implemented—and most of it happens next 

year—costs are going up in the individual market. And BlueCross 

BlueShield of Tennessee says they are going to go up at the rate 

of about 32 or 33 percent. And for younger people, it may be 2 or 

3 times that. For them, that is rate shock. 

Now, that does not mean it is a bad idea to expand coverage, 

that a better policy is not better than a worse policy. It may mean 

that giving me more benefit than my son is something that we 

ought to talk about. 

We just need to be honest about the fact that when this hits, it 

is going to be a shock to a lot of people. It is going to be a rate 

shock, and we can take credit for the expanded coverage and the 

better policy. But somebody has got to pay the bill. That is what 

I am saying and that was the difference of opinion that the President and I had. 

Having said that, the President served a nice meal last night at 

the White House to a group of Senators, and I was privileged to 

be one of them, and I appreciated that very much. But I thought 

that was an instructive discussion. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thanks, Senator Alexander. 

Senator Franken. 

Senator FRANKEN. My point is the President kept saying, and 

said over and over again, he is going to bend the health care cost 

curve. Any discussion of whether—you said that discussion wasn’t 

relative to what it would otherwise be. Well, of course. 

So then it is meaningless because if the insurance premiums 

were going to go up anyway by more than that, then relative to 

what they were going to go up to, it was going to bend the cost 

curve and go down relative. And that is important because we 

know that in the past 3 years, relative to what insurance premiums were going to go up to, they have bent the cost curve. 

In Connecticut, Aetna, because of the Medical Loss Ratio cut premiums, did it not? Mr. Counihan. 

Mr. COUNIHAN. I do not know the details of that, Senator, but 

I know what you are saying. 

Senator FRANKEN. It is because the Medical Loss Ratio includes 

administrative costs. You have to hit 80 or 85 percent, depending 

on whether you are an individual policy or a large group policy. 
59 

Let me ask you this: in your actuarial study, the 3.5 percent, you 

said, is going to get passed to the consumer? 

Mr. CARLSON. Correct. 

Senator FRANKEN. Does that count as administrative cost? How 

is that used? 

Mr. CARLSON. I do not know the exact—— 

Senator FRANKEN. Well, you are the expert on the study, how 

was that 3.5 percent figured in, in the Medical Loss Ratio? 

Mr. CARLSON. It may not be a part of what is considered administrative costs. 

Senator FRANKEN. May not? What is it? I want to know. 

Mr. CARLSON. There are certain fees and taxes that are excluded 

from the calculation of the administrative expenses and they may 

qualify as one of them. 

Senator FRANKEN. I would like to know the context. Do you 

know, Professor? 

Ms. CORLETTE. I am afraid I do not offhand. 

Senator FRANKEN. OK. I think that is important. 

Here is the other point. Yes, Ms. Cook’s policy is cheaper than 

a policy that she might have now, but the policy did her no good. 

Doesn’t that mean something? Does it mean something to you, Ms. 

Cook? 

Ms. COOK. Yes. 

Senator FRANKEN. It means everything to you, doesn’t it? So yes, 

policies might increase. The cost of an average policy might go up 

because it includes basic coverage. 

I think that is the whole point. Half of the bankruptcies in this 

country have been because of medical costs; half. Do you know 

what the bankruptcies are in Germany and they don’t have a single payer? They have insurance. The bankruptcies because of medical costs are zero. 

That is the whole point of this thing is so that Ms. Cook can get 

treated for cancer when she is 28 years old. I cannot believe we are 

losing sight of that. So that the mother in Fergus Falls does not 

have to share her insulin with her 24-year-old son. That is the 

whole point of this. And yet, we have put things in place, like the 

Medical Loss Ratio that have actually bent the cost curve on the 

cost of insurance thus far. 

Isn’t that right, Professor Corlette? 

Ms. CORLETTE. It certainly has given insurers an incentive to 

price their products more accurately. 

Senator FRANKEN. OK. So this study was done by, you said they 

are owned by an insurance company? What insurance company are 

they owned by? 

Mr. CARLSON. I believe their parent company is United. 

Senator FRANKEN. OK. And most actuaries in this country, what 

percentage are employed by insurance companies? 

Mr. CARLSON. I don’t know that number offhand. 

Senator FRANKEN. OK. What you are talking about is mainly 

about what it costs for people. What age group did you mainly 

focus on? 

Mr. CARLSON. We looked at all age groups, but obviously the 

main bullet point is to look at the ages 21 to 39, basically, to see 

what the impact on their premiums would be. 
60 

Senator FRANKEN. And what percentage of those, say, 21 to 29 

would be eligible for subsidies? 

Mr. CARLSON. I don’t have the number offhand, but it is a majority. 

Senator FRANKEN. Professor? 

Ms. CORLETTE. I do not have that number offhand either, but I 

would also point out that they may be eligible for Medicaid. And 

they can also buy Bronze level or catastrophic plans, which would 

be cheaper than the Silver level plans. 

Senator FRANKEN. OK. My time is up. I would like to thank all 

the witnesses, and I would like to thank the Chairman and the 

Ranking Member for this hearing. 

I just want to say one more time, the President, when he talked 

about this time, and time, and time, and time, and time again 

talked about bending the curve, bending the cost curve. That is 

what he was talking about. 

Senator ALEXANDER. Mr. Chairman, if I am going to be contradicted, in ‘‘The New York Times,’’ July 23, 2008, Barack Obama 

said, ‘‘I will lower the health care costs of this country enough to 

‘‘bring down premiums by $2,500 for the typical family.’’ 

Senator FRANKEN. Yes, and may I say that you can quote someone, and then the next sentence could be, of course, that means relative to—— 

Senator ALEXANDER. Let me read the whole speech by him, Mr. 

Chairman. ‘‘In speech after speech, Senator Barack Obama has 

vowed that he will lower the country’s health care costs enough to, 

‘‘Bring down premiums by $2,500 for the typical family.’’ Moreover, 

Mr. Obama, the presumptive democratic nominee has promised his 

health care plan will be, ‘‘In place by the end of my first term.’’ 

I would not bring this up except for the fact that I was in the 

President’s Health Care Summit. I said, I repeated what the Congressional Budget Office said, which was that individual premiums 

would go up as a result of this law. The President said I was 

wrong. I was right about that. Now, there are reasons for that. 

Senator FRANKEN. No, he explained, though, that what they said 

was for if it was the same policy, it would go down. 

The CHAIRMAN. He did say that. 

Senator FRANKEN. We are both acknowledging that—— 

Senator ALEXANDER. Senator Franken, I was there and you were 

not, and I have the transcript and you don’t. 

Senator FRANKEN. I know, but you read the transcript. 

Senator ALEXANDER. I read the transcript and what I said was, 

‘‘Mr. President, the CBO says that the new health care law will 

raise individual premiums 10 to 13 percent,’’ and that is precisely 

what it said. 

He then explained that if there were comparable costs, well, we 

weren’t talking about comparable costs. We were talking about a 

new health care law that we were considering, and which is now 

the law, and which will have the effect of raising individual premiums by more than 10 to 13 percent. 

Now, I do not think we need to argue about that. That is just 

a fact. And there are reasons for it. We have discussed the reasons. 

The reasons are that expanded coverage, richer benefits, those two 
61 

are the principle reasons; more medical claims according to the Society of Actuaries. 

But he did say that and it is nothing to be ashamed of, he just 

said it. 

Senator FRANKEN. Well, look, I would note that he said this at 

a time when he also said it would be in place before the end of his 

first term. So it sounds like pretty early in the process. 

And what I have heard him say is, so many times, is that we 

would bend the cost curve, and that means relative to what health 

care costs would have gone up anyway. And I am saying that in 

the last 3 years since we have passed the Affordable Care Act, we 

have had the lowest increase in insurance premiums than we have 

had in about 50 years. 

So that tells me that we are bending the cost curve, and I am 

very proud of the Medical Loss Ratio provision I put in because 

that has helped bend the cost curve. 

Senator ALEXANDER. The only last word I would say, Mr. Chairman, is that the President’s Health Care Summit was in February 

2010. He was the President. This is when we were passing the law, 

and bending the cost curve is all of our objectives. 

But the fact was CBO said individual premiums will go up as a 

result of this law 10 to 13 percent. The law has not yet gone into 

effect in most parts, and when it does, it looks like it will cost, the 

premiums will cost more. 

The CHAIRMAN. Thank you, I guess, as chair, I do get the last 

word. 

The record will remain open for 10 days for other statements to 

be submitted to the record. 

I am listening to this and I am thinking we can go back and say, 

he said-she said, they were right-they were wrong. We can go back 

and look at all that stuff. 

I think where we are now, we just have to ask the question: will 

the general public, will the American citizens, writ large, be better 

off under this system than they were under the other system? 

Will we close some of these tragic, tragic cases like Miss Cook 

and others around that have been so tragically portrayed today and 

in other forums? Will we move beyond that? 

Will we recognize—I keep coming back to what Mr. Counihan 

said—will we recognize that what we are talking about is a sense 

of shared ownership of a common value? Shared ownership of a 

common value, that value is that our Nation benefits if we have 

more citizens covered by some form of health insurance that have 

that peace of mind, 

I think we are a better country for it. I don’t know, everybody 

keeps talking about bending this cost curve and stuff like that. I 

have said many times, the best way to bend that cost curve is keep 

people healthy in the first place. 

We keep forgetting about that, prevention, getting to people 

early, preventative health care services, wellness programs that we 

know work demonstrably. We have data on this from the Trust for 

America’s Health and other independent groups. 

It seems to be going forward since this is the law. As I stated 

in my opening statement, we have had a lot of political back and 
62 

forth on this in campaigns all over the country. I won’t be engaging 

in that any longer. 

But it seems that we have settled this. We have a law. The question is: how do we make it work best? Yes, how do we make it costeffective? What is the best cost-effective way of having this shared 

value of having everyone covered? Not having people that have preexisting conditions, of having that peace of mind that you won’t go 

bankrupt. 

What is the best way? We have the law. If there are suggestions 

on how to improve it, make it more cost effective without damaging 

Miss Cook, or damaging somebody else, or separating out this 

group from another group and saying, 

‘‘Well, you are young and healthy. You don’t need to pay anything. You can grab that parachute when you jump out of the 

plane,’’ so to speak. ‘‘When you get sick, you can run down and 

get coverage, but you don’t have to pay for anything now. 

You’re not part of our society.’’ I don’t think that is the way 

we want to go. 

From the very beginning of this, the priority in my mind is to 

put everybody in this pool, this insurance pool. Put everybody in 

this pool. Give everybody at least some basic coverage which they 

can rely on, cannot be excluded from no matter their age, or condition of health, their sex, their gender. I don’t care. 

We can go back and say, ‘‘Well, you said this.’’ I bet I have, over 

the last several years of working on this bill both as chairman and 

working on the health care bill, I bet there are a lot of things I 

have said that have been wrong. 

Maybe I just did not understand it at the time, or I was thinking 

of something else. Yes, we make mistakes and say things. OK, fine. 

We can go back. 

Right now, going forward, how do we make this work? What is 

the best way? If you have some ideas on making it more cost effective, I would like to know it. 

That is what I hope these hearings are going to show is that we 

are trying to move ahead to change the health care system and 

make it work for more people in this country. And to bring us all 

into this pool of shared values, of keeping everyone covered by 

health insurance. 

So I thank all the witnesses for being here. I thank my good 

friend, Senator Alexander, and he is a good friend. He knows that 

and I respect him highly. 

And I will say this publicly. Senator Alexander is always looking 

to see just what is the best way forward. What is the best way? 

Not going backward, he is going forward and I appreciate that. It 

is right to raise these questions. If there are things that need to 

be fixed and adjusted, OK, let’s figure out how we do that. 

I hope that moving forward, that is the spirit in which we can 

go forward, both on this committee and other committees, too, that 

have a part of this, like the Finance Committee and others. 

But it is going to happen. I mean, it is set in law. Nothing is 

changing it, but fine tuning it. I said before, if fine tuning needs 

to be done, then let’s figure out how to fine tune it and make it 

even better than what it is. I do not think that what we have is 
63 

the end-all and be-all of health care coverage in America. I think 

it is a heck of a lot better than what we have had. 

But I hope we go forward in that kind of spirit. 

With that, thank you all very much. The committee will stand 

adjourned. 

[Additional material follows.] 
64 

ADDITIONAL MATERIAL 

RESPONSE BY GARY COHEN TO QUESTIONS OF SENATOR HARKIN, SENATOR

ALEXANDER, SENATOR SANDERS, SENATOR WHITEHOUSE, SENATOR BALDWIN, AND

SENATOR ENZI

SENATOR HARKIN

Question. One of the most important of the set of consumer protections that will 

become effective in 2014 is the requirement that private insurance plans cover a 

comprehensive set of essential health benefits. Congress required pediatric dental 

services to be covered as part of this package, recognizing how important oral health 

is for children—as the Medicaid program has for years. I’m interested in your Office’s work on this issue. For children and families who currently have coverage, 

what is being done to ensure a smooth transition to 2014, without disruption of coverage? Could you describe the Federal Exchange’s outreach and enrollment efforts 

directed at families with children without dental coverage? 

Answer. CMS has been following a multi-step plan for outreach to individuals, 

families, and small businesses in preparation for open enrollment. This plan is 

aimed at identifying both individuals who are without coverage and individuals who 

have coverage who may transition to the Marketplace. Children and families who 

currently have pediatric dental coverage will be able to keep the coverage they have 

if they choose to do so. CMS is in contact with State Medicaid and CHIP programs 

to coordinate outreach and eligibility activities, and will incorporate information into 

our call center and consumer materials to direct individuals to this information. 

SENATOR ALEXANDER

Question 1a. Under the health care law, Medicaid eligibility will be based, as it 

is now, on monthly income at the time of application, while eligibility for premium 

tax credits in the exchanges will be based on yearly income. 

How is your office coordinating with Federally Facilitated and State-based Exchanges to ensure that taxpayer-funded subsidies are not over or under paid to enrollees? 

Answer 1a. The Affordable Care Act set up a system of coordinated, streamlined 

processes to determine eligibility for enrollment in a qualified health plan, advance 

payments of the premium tax credit, Medicaid, or CHIP. This system is designed 

to ensure that individuals and families are enrolled in the right coverage the first 

time. Marketplaces will be able to check authoritative data sources such as IRS income data for tax credit eligibility. On the application, individuals will be asked to 

attest to projected annual household income, as well as current income. If the attestation to projected annual household income is inconsistent with information that 

the Marketplace receives from the IRS and SSA, the Marketplace will take additional steps to verify the attestation, including requesting additional documentation 

from individuals in certain circumstances. This process is detailed in 45 CFR 

155.315(f) and 155.320(c). In addition, when presenting individuals with an eligibility determination for tax credits, Marketplaces will make individuals aware of the 

potential for reconciliation of advance payments of the premium tax credit, should 

their circumstances change. Marketplaces have flexibility to establish reasonable 

thresholds for the requirement to report changes in income. Finally, if an individual, 

receiving advance payments of the premium tax credit experiences a reduction in 

income over the year, they may be able to claim the difference on their tax return. 

Question 1b. Governor Haslam of Tennessee recently proposed expanding access 

to the new exchange in our State to individuals who would otherwise be eligible for 

Medicaid. His proposal would affect 175,000 Tennesseans and is similar to the plan 

put forward by Governor Beebe of Arkansas. Please provide a status report on how 

well Governor Haslam’s proposal is being received by the Department. 

Answer 1b. HHS remains committed to working with States as they consider the 

expansion of Medicaid. As we have outlined, we are interested in providing States 

with the flexibility within the law that they identify as helpful to the coverage of 

the new adult group made eligible by the Affordable Care Act. We are pleased that 

States have come to us with innovative ideas and we continue to work with each 

of them. Like other States, we are working directly with Tennessee on the ideas 

they have outlined and look forward to continuing those discussions. 

Question 1c. Have you considered that if CMS does not work with Tennessee to 

approve this request, lower-income Tennesseans could be denied access to health insurance? 
65 

Answer 1c. We believe the Affordable Care Act provides the opportunity and avenues to ensure health insurance for millions of Americans who currently lack it. 

Both through the availability of Medicaid coverage and coverage through the new 

Marketplaces, we want to make sure that currently uninsured Americans have an 

avenue to achieve coverage. As you are aware, the Supreme Court’s ruling left the 

decision to provide Medicaid coverage to the new adult group made eligible by the 

Affordable Care Act to the States. With that in mind, we are working hard with 

each interested State to identify how these coverage opportunities will work best in 

their State, to provide opportunities for coverage for currently uninsured Americans. 

Question 2. Have you done any analysis to determine the cumulative impact upon 

premiums of all the new mandates, taxes, and fees being imposed upon health plans 

operating in the new health insurance exchanges? If so, please provide the total 

cost. If not, please explain why. 

Answer 2. We do not have an aggregate estimate of the impact on premiums at 

this time because we do not know the rates or the numbers of enrollees. It will be 

up to the issuers to determine how to set their premiums. We expect that the Marketplace will be a competitive one, and we will evaluate premium information once 

we receive the qualified health plan certification packages from issuers. 

Question 3. Please detail your agency’s legal authority to use Prevention and Public Health funds to pay for implementation of the new health law, including the new 

navigator grant program and implementation of the health insurance exchanges. 

Answer 3. The purpose of the Prevention and Public Health Fund is to provide 

for expanded and sustained national investment in prevention and public health 

programs to improve health and help restrain the rate of growth in private and public sector health care costs. In fiscal year 2013, CMS will invest Prevention Fund 

resources to assist Americans in gaining affordable health care coverage which 

aligns with the purposes of Prevention Fund to be used for prevention, wellness, 

and public health activities. The Affordable Care Act-related activities funded with 

the Prevention Fund will include consumer engagement and education, eligibility 

support including support for appeals, assistance with enrollment, and the Navigator program to help individuals understand options available and enroll in health 

insurance. Implementing the Health Insurance Marketplace is the Administration’s 

top public health activity and will likely significantly improve prevention in the next 

year by enabling individuals to enroll in coverage through private health insurance. 

Increasing access to care, in particular to preventive services, is a component of our 

national efforts to restrain the cost of health care and ensure more Americans can 

lead healthy lives, which is also a key goal of the Prevention Fund. 

Question 4. In your agency’s recent budget, the outlays for the Federal Pre-existing Condition Insurance Program are projected to be greater than the amount of 

money left in the fund. Please detail how your agency will fill this shortfall so that 

those enrolled do not lose access to insurance before 2014. 

Answer 4. CMS is working to ensure that the limited amount of funding appropriated to the program is available to continue providing covered services to enrollees until 2014, when people will no longer be denied health coverage because of 

their health status. The fiscal year 2014 congressional Justification does not project 

that outlays in fiscal year 2014 will exceed the $5 billion provided in the Affordable 

Care Act for this program. CMS is aggressively managing costs in the Federal PCIP 

program to ensure that the remaining funds are sufficient to cover current enrollees, 

and will use all available cost-containment strategies to ensure that coverage continues through 2013 for current enrollees. 

For example, CMS has been monitoring PCIP enrollment and spending regularly 

and has made necessary adjustments to the program to ensure responsible management of the one-time $5 billion appropriation. We maintain low administrative costs 

and work to maximize the appropriation for patient medical care. 

Starting in 2014, health insurance issuers will no longer be able to discriminate 

against Americans with pre-existing conditions. All Americans—regardless of their 

health status or pre-existing conditions—will finally have access to quality, affordable coverage. On October 1, 2013, Americans with pre-existing conditions will be 

able to apply for affordable health insurance coverage through the new Health Insurance Marketplace. 

Question 5. We understand that insurers are in the middle of the submission process for plan submissions to the Federally Facilitated Exchange (FFE). Many are 

stating that the applications are quite complex. What are you doing to ensure a 

data-submission process that has no bumps in the road? 
66 

Answer 5. The submission process for the Federally Facilitated Marketplace 

began on April 1, 2013. The early response has been very encouraging and we expect to see robust competition for the business of millions of Americans who will 

be shopping for health insurance in the Marketplace. States that are operating their 

own Marketplaces have also begun accepting submissions from issuers as well. 

We have been committed to supporting the submission process for insurers. We’ve 

gotten feedback from States and issuers as they’ve accessed the system and we’ve 

addressed whatever issues have come up. CMS made available a draft letter to 

issuers about offering Qualified Health Plans in the Federally Facilitated Marketplace for comment. CMS made changes to the draft letter based on the comments 

received from a variety of stakeholders, including issuers, health and patient advocacy organizations, agents and brokers, and consumer groups. We have a Help Desk 

that responds by e-mail to anyone with questions about how to submit information 

to us, we hold regular phone calls and we regularly publish answers to frequently 

asked questions. I am extremely proud of the work the team is doing to make sure 

that we will have products on the shelves on October 1. 

Question 6. You’ve said time and time again that States will continue to regulate 

insurance markets. If that is the case, why are you requesting so much data be submitted to HHS, including data that duplicates what insurers have to submit already 

to the States? For example, any rate increase. Won’t this increase administrative 

costs? And what do you plan to do with all this data? 

Answer 6. Title XXVII of the Public Health Service Act (PHSA) assumes that 

States will exercise primary enforcement authority over health insurance issuers in 

the group and individual markets to ensure compliance with health insurance market reforms. CMS has confirmed that almost all States—including States where a 

Federally Facilitated Marketplace is operating—will enforce the market reforms of 

the Affordable Care Act. Where a State is enforcing these market reforms, CMS will 

not duplicate the State’s work, and will instead rely upon the State to ensure that 

issuers are in compliance. This includes the State’s review of whether individual 

and small group market health plans, and potential qualified health plans, cover essential health benefits and comply with actuarial value standards. 

To address your specific question about rate increases, section 2794(b)(2)(A) of the 

PHSA requires the Secretary of Health and Human Services to monitor premium 

increases of health insurance coverage offered both inside and outside the Marketplace beginning in plan year 2014. On February 27, 2013, CMS finalized a rule (78 

FR 13406) requiring that issuers offering health insurance coverage in the small 

group or individual markets report information about all rate increases. We have 

worked to minimize the administrative burden on issuers by simplifying the reporting template and coordinating with State processes. 

Standardizing the reporting process will reduce administrative burden and duplication over time, and enable both States and CMS to evaluate information about 

the single risk pool, actuarial value, essential health benefits, and other market reforms beginning in 2014. This reporting will also assist States and CMS in monitoring the health insurance market inside and outside the Marketplace for adverse 

selection. 

SENATOR SANDERS

Question. I would also like to ask about the guidance recently issued by CCIIO 

establishing criteria for Qualified Health Plans to contract with Essential Community Providers. When we are talking about safety net providers, and especially primary care safety-net providers, we need to consider access to care in addition to access to insurance. An insurance card is not worth very much if you cannot see your 

doctor. I am concerned that the guidance reduces the strength of congressional intent and that insurers in Vermont and across the country will not contract with all 

Essential Community Providers. If a Qualified Health Plan does not contract with 

an Essential Community Provider, such as a community health center, I want to 

be sure that low-income patients are not charged higher cost-sharing out of network 

for visiting their health center. Can you please explain how you plan to update this 

guidance and implement stronger standards in the future to protect low-income 

beneficiaries who are seeking the cost-effective, high quality care they deserve? If 

you do not currently have any such plans, could you please tell me about actions 

you will be taking to address this concern? 

Answer. The Exchange Establishment final rule at 45 CFR 155.1050 and 45 CFR 

156.230 sets forth network adequacy requirements for all Marketplaces. A QHP 

issuer must maintain a network that is sufficient in number and types of providers, 

to assure that all services will be accessible without unreasonable delay. Provider 

directories must be made available online (and in hard copy by request) and list pro-
67 

viders who are not accepting new patients. The State or CMS will use the QHP certification process to ensure network adequacy. Ongoing monitoring is typically handled by State insurance departments. In general, States enforce network adequacy 

as all issuers, both inside and outside the Marketplace, must meet the standards 

set forth in State law. Nothing prohibits States from applying more stringent standards or protections across their markets. 

In addition, 45 CFR 156.235 requires that a QHP issuer have a sufficient number 

and geographic distribution of essential community providers, where available, to 

ensure reasonable and timely access to a broad range of ECP providers for lowincome and medically underserved individuals in the QHP’s service area. Because 

the number and types of ECPs available varies significantly by location, CMS will 

evaluate QHP applications for sufficient inclusion of ECPs for the 2014 coverage 

year based on the Safe Harbor Standard articulated in the annual letter to issuers, 

released on April 5, 2013. Issuers that meet or exceed the standard will be presumed to meet the standard without additional documentation. Nothing prohibits 

States from applying more stringent standards or protections across their markets. 

Issuers that fail to meet the Safe Harbor Standard will be required to submit a narrative justification detailing how the issuer will provide access for low-income and 

medically underserved enrollees and how the issuer plans to increase ECP participation in the issuer’s provider network(s). 

This policy balances the need to include ECPs in issuer networks and affordability 

of coverage. CMS will continue to assess QHP provider networks, including ECPs, 

and may revise its approach to reviewing for compliance with network adequacy and 

ECPs in later years. 

SENATOR WHITEHOUSE

Question 1. I would like to ask about the guidance recently issued by CCIIO on 

March 1 and finalized on April 5 that establishes criteria for Qualified Health Plans 

(QHPs) to contract with Essential Community Providers (ECPs). I have heard from 

advocates in my State who are concerned that, under the guidance released by 

CCIIO, there may not be a sufficient number of ECPs included in QHP provider networks to ensure access to care for underserved populations. Please discuss how 

CCIIO arrived at the safe harbor requirement that a QHP that demonstrates that 

at least 20 percent of ECPs in the plan’s service area are included in the plan’s provider network will meet the regulatory standard in 45 CFR §156.235(a). Does CCIIO 

anticipate raising the safe harbor and minimum expectation thresholds in future 

guidance? 

Answer 1. The Exchange Establishment final rule at 45 CFR 155.1050 and 45 

CFR 156.230 sets forth network adequacy requirements for all Marketplaces. A 

QHP issuer must maintain a network that is sufficient in number and types of providers, to assure that all services will be accessible without unreasonable delay. The 

State or CMS will use the QHP certification process to ensure network adequacy. 

Ongoing monitoring is typically handled by State insurance departments. In general, States enforce network adequacy, as all issuers, market wide (inside and outside Marketplaces), must meet the standards set forth in State law. Nothing prohibits States from applying more stringent standards or protections across their 

markets. 

In addition, 45 CFR 156.235 requires that a QHP issuer have a sufficient number 

and geographic distribution of essential community providers, where available, to 

ensure reasonable and timely access to a broad range of ECP providers for lowincome and medically underserved individuals in the QHP’s service area. Because 

the number and types of ECPs available varies significantly by location, CMS will 

evaluate QHP applications for sufficient inclusion of ECPs for the 2014 coverage 

year based on the Safe Harbor Standard articulated in the Letter to Issuers, released on April 5, 2013. Issuers that meet or exceed the standard will be presumed 

to meet the standard without additional documentation; however, nothing prohibits 

States from applying more stringent standards or protections across their markets. 

Issuers that fail to meet the Safe Harbor Standard will be required to submit a narrative justification detailing how the issuer will provide access for low-income and 

medically underserved enrollees and how the issuer plans to increase ECP participation in the issuer’s provider network(s). 

We believe that this policy balances the need to include ECPs in issuer networks 

and affordability of coverage. CMS will continue to assess QHP provider networks, 

including ECPs, and may revise its approach to reviewing for compliance with network adequacy and ECPs in later years. 

Question 2. I’m proud that Rhode Island has been proactive in planning and implementing its exchange. Rhode Island was the first State in the Nation to receive 
68 

1http://aspe.hhs.gov/health/reports/2013/PreventiveServices/iblprevention.cfm. 

a Level II Exchange Establishment Grant to help with implementation. I’m also 

pleased to report that I’ve heard from folks in my State that CCIIO has been a great 

partner in working with Rhode Island to set up its exchange. However, I’m concerned that there hasn’t been sufficient focus on how to best set-up the exchanges 

so that they will be able to help drive delivery system reform and improve health 

and productivity outcomes. Rhode Island is committed to implementing an active 

purchaser exchange that will help drive delivery system reforms. But if we do not 

build the exchanges from the start in a way that gives them the tools to contribute 

to better delivery and outcomes, I think there are going to be very legitimate questions about the value of the investments we are making. What specifically is CCIIO 

doing to support and encourage States like Rhode Island that want to ensure they 

effectively use Federal support to build exchanges capable of supporting more systemic reforms in the future? 

Answer 2. CMS encourages States, such as Rhode Island, to develop and implement Marketplaces in a manner that best suits the needs of their residents. 

Through rulemaking, guidance and grant funding authorized by section 1311 of the 

Affordable Care Act, CMS has defined minimum Marketplace requirements that 

provide States with the maximum flexibility possible. Within the design of their 

Marketplaces, States have the flexibility and funding to design systematic health reforms. For example, State-based Marketplaces have the option to design QHP certification as an active purchaser or a passive facilitator of plan choices. We anticipate that States will continue to be on the vanguard in using the Marketplace to 

drive delivery system reform in the private insurance market. 

CMS has also worked to foster collaborative efforts that enable States to share 

knowledge and efficiencies that can contribute to improved delivery systems. Rhode 

Island is a member of the multi-State consortia led by the University of Massachusetts Medical School that received Early Innovator Grant funds. This grant benefited individuals and small businesses in Connecticut, Maine, Massachusetts, Rhode 

Island, and Vermont by creating and building a flexible Marketplace information 

technology framework in Massachusetts and sharing those products with other New 

England States. 

Question 3. What support has CCIIO offered States to help measure carrier and 

provider health and outcomes as well as the effects of coverage on the population? 

Answer 3. The Affordable Care Act includes a wide variety of provisions designed 

to expand coverage, provide more health care choices, enhance the quality of health 

care for all Americans, hold insurance companies more accountable, and lower 

health care costs. CMS is working across all programs and with States to improve 

population health outcomes. 

Section 1311 of the Affordable Care Act authorizes grant to States to implement 

Marketplaces. These Marketplaces will help consumers and small businesses buy 

health insurance in a way that permits easy comparison of available plan options 

based on price, benefits, and quality. CMS has supported States to design, test, and 

implement innovative designs to measure and improve enrollee health, compare 

quality of plans, and leverage the new marketplaces to improve the health care delivery system. Furthermore, as a requirement of their Applications and Blueprints, 

State Marketplaces are expected to have in place programs for monitoring the impact they are having in their markets. 

One of the first steps to improve health outcomes is to assure that all Americans 

get the care they need. Nearly 71 million Americans now have expanded access to 

preventive services with no additional cost sharing through their private insurance 

plans, and 27 million women now have guaranteed access to additional preventive 

services without cost sharing.1 In 2014, insurance companies will no longer be able 

to discriminate against those with pre-existing conditions. For the first time, all 

Americans will have access to high-quality, affordable coverage in the new marketplaces and if eligible, get financial assistance to help pay for the coverage. Coverage 

in 2014 will be comparable by different actuarial values, must cover the 10 categories of essential health benefits, and must not discriminate against those with 

high medical needs. 

Based on current estimates of the size of the individual market and the percent 

of enrollees in currently marketed plans without coverage for certain services, coverage of benefits in the individual market may expand as follows: 

• 8.7 million Americans will gain maternity coverage. 

• 4.8 million Americans will gain substance abuse coverage subject to requirements regarding parity with medical and surgical benefits. 
69 

• 2.3 million Americans will gain mental health coverage subject to requirements 

regarding parity with medical and surgical benefits. 

• 1.3 million Americans will gain prescription drug coverage. 

CMS will continue to work with our State partners to improve the health care 

system by combining support for State innovation, guaranteed access to insurance, 

financial assistance, and improved benefit designs that facilitate improved comparison on quality and price. 

SENATOR BALDWIN

Question 1. Some Wisconsin insurance companies have experienced trouble receiving timely answers to questions submitted on the CMS Enterprise portal. These 

companies would like assurances that the data they submit to the portal will be accepted as timely and accurate. What is CMS doing to address technical difficulties 

being faced by issuers in a way that will ensure robust plan participation in Wisconsin’s Health Insurance Marketplace? 

Answer 1. We have had a very encouraging response from issuers in the QHP application process so far, and we expect to see robust competition between issuers 

within the Marketplace. We have continued to improve our process since the portal 

opened on April 1. We have gotten feedback from States and issuers as they have 

accessed the system and we have addressed whatever issues have come up. We have 

a Help Desk that responds by e-mail to anyone with questions about how to submit 

information to us, and we hold regular phone calls and publish documents to answer 

frequently asked questions or address technical difficulties. 

Question 2. What protections are CMS enacting to prevent adverse selection within the Marketplace? 

Answer 2. The Affordable Care Act created and CMS recently finalized the rules 

establishing risk adjustment, reinsurance and risk corridors programs (referred to 

as the premium stabilization programs), the cost-sharing reductions program, and 

Marketplace affordability programs such as advance payments of the premium tax 

credit. These programs are designed to provide consumers with affordable health insurance coverage, to reduce incentives for health insurance issuers to avoid enrolling sicker people, and to stabilize premiums in the individual and small group 

health insurance markets inside and outside the Marketplaces. 

The permanent risk adjustment program makes it possible for issuers to price 

competitively without worrying that they will end up with more costly enrollees. 

Therefore, issuers will be able to provide coverage to individuals with higher health 

care costs and will help ensure that those who are sick have access to the coverage 

they need. The transitional reinsurance program is a 3-year program designed to 

reduce premiums and ensure market stability for issuers and for enrollees in the 

individual market with the implementation of new consumer protections in 2014. 

The temporary risk corridors program protects qualified health plans from uncertainty in rate setting from 2014 to 2016 by having the Federal Government share 

risk in losses and gains. Finally, the tax credits and cost-sharing reductions available to consumers will encourage young, healthy individuals to purchase insurance 

and, in doing so, balance risk in the market. 

Question 3. In States with Federally Facilitated Marketplaces, what more can be 

done to create collaborative structures to disseminate information, and to collect 

constructive feedback? Can formal or informal advisory committees be set up that 

include providers, medical professionals, health advocates, and other key opinion 

leaders? 

Answer 3. CMS has conducted robust outreach with stakeholders across the Nation regardless of whether their State is operating its own Marketplace, is 

partnering with CMS to operate its Marketplace, or whether they have the Federally Facilitated Marketplace. CMS recently held and I participated in a meeting of 

State Insurance Department officials from the States that will have the Federally 

Facilitated marketplace. We will continue to meet and work very closely with insurance departments and the departments of health around the country to help get this 

law implemented. 

We’ve also begun a significant stakeholder outreach effort, including a national 

call in March with over 3,000 participants, including State officials, issuers, and 

consumers. We also plan to hold regional and State-by-State calls, leveraging our 

presence with 10 CMS regional offices around the country. 

We are happy to work with your office to ensure that we are getting as broad participation in these outreach efforts in Wisconsin as possible as we move closer to 

the opening of the Marketplace there. 
70 

Question 4. Many individuals seem to misunderstand the decision about consumer 

choice, and believe small employers will not have access to exchanges. Is there a 

plan for enhanced public education for small businesses? In Wisconsin, the percentage of small employers offering coverage has dropped from 58 percent to 32 percent 

since 2000. 

Answer 4. CMS is conducting extensive outreach and education to raise awareness among consumers and small businesses about new options to access quality, 

affordable health care later this year when open enrollment in the Health Insurance 

Marketplace and its Small Business Health Options Program begins. This includes 

conducting consumer and small employer research and building infrastructure for 

customer service channels like the call center and Web site. 

We have begun offering educational sessions to staff and stakeholders to understand the SHOP program in particular and will have additional resources and materials available over the summer. A call center for employers will be available in August, specifically aimed at helping small employers take advantage of the new program. 

To specifically help educate small businesses, we are working with our regional 

offices to provide updates on recent rollouts and to conduct business outreach. We 

held meetings in March—in Dallas, TX and Atlanta, GA—and look forward to working with other regional offices to provide more specific information on the impact 

of the Affordable Care Act on businesses. Additionally, we are working with the 

Small Business Administration (SBA) to make resources available that provide key 

information about how the Affordable Care Act affects businesses so each can make 

the right decisions for its own particular circumstances. For example, the SBA recently launched a weekly webinar series for the small business community in collaboration with Small Business Majority, and CMS is serving as a partner on those 

webinars as well. Through these ‘‘Affordable Care Act 101’’ webinars, small business 

owners can learn the basics of the law and what it means for their company and 

employees, including insurance reforms, the small business health care tax credit, 

the Health Insurance Marketplace, and Employer Shared Responsibility. These 

webinars are held every Thursday from now through the opening of the Marketplace 

in October and are open to all small business owners. 

Question 5. For Essential Health Benefits benchmark plans in the exchange that 

do not include coverage for habilitative services, HHS has issued a rule that allows 

insurance companies to define the coverage it will provide for habilitative services 

and report that to HHS. For these types of plans, will HHS review the individual 

insurers’ submissions to make sure they do not discriminate on the basis of disability? 

Answer 5. As articulated in the Essential Health Benefits final rule at 45 CFR 

156.125, an issuer does not provide EHB if its benefit design, or the implementation 

of its benefit design, discriminates based on an individual’s age, expected length of 

life, present or predicted disability, degree of medical dependency, quality of life, or 

other health conditions. Subsequent to the release of that rule, CMS released a letter to issuers in Federally Facilitated and State Partnership Marketplaces on April 

5, 2013 that provided additional guidance and operational guidance to issuers to 

help them participate in Marketplaces. 

In that guidance, CMS stated that to ensure non-discrimination in benefit design 

it will identify outliers with respect to QHP cost sharing (e.g., co-payments and coinsurance) as part of its QHP certification reviews. Identification as an outlier does 

not necessarily indicate that a QHP benefit design is discriminatory; rather, CMS 

will use the outlier identification to target QHPs for more in-depth reviews. In addition, pursuant to 45 CFR 156.200(e) issuers will be required to attest that their 

QHPs will not discriminate against individuals on the basis of health status, race, 

color, national origin, disability, age, sex, gender identity or sexual orientation. 

Question 6. Will there be a process where individuals with disabilities or groups 

that represent individuals with disabilities can file a complaint with HHS if they 

believe an insurer’s plan discriminates on the basis of disability? 

Answer 6. Because States are primarily responsible for enforcement of EHB requirements for issuers in the individual and small group markets, individuals or 

groups who have complaints or concerns about a plan’s compliance with EHB requirements should contact their State Department of Insurance. 

Question 7. What advantages do you foresee for rural communities and providers 

within the new Marketplaces? 

Answer 7. Marketplaces will make purchasing private health insurance easier for 

all Americans, including those living in rural communities, by providing eligible individuals and small businesses with one-stop shopping where they can choose quali-
71 

fied health plans that best fit their needs. New premium tax credits and cost-sharing reductions will help ensure that eligible individuals and families can afford to 

pay for the cost of a private qualified health plan purchased through the Marketplaces. 

As more individuals and families get access to quality health insurance through 

the new Marketplaces, rural providers will have a broader and consistent pool of 

insured patients to care for, connecting them with more patients and helping to reduce the burden of uncompensated care on providers. 

Question 8. Are there any barriers to farmers giving up their expensive high deductible plans and entering into the Marketplaces? 

Answer 8. No, and we encourage farmers self-employed individuals and other 

small businesses to take advantage of the qualified health plans that will be available in the Marketplaces. Today, small employers and self-employed individuals like 

farmers have a tough time finding and affording coverage that meets their needs, 

and, because of the rising cost of health care, are forced to enter into plans that 

don’t meet their needs. Additionally, research has shown that the occupational hazards of farming make them an at-risk group so that farmers may face higher premiums and lower coverage than other individuals. 

Starting in 2014, farmers and other small businesses will have more consumer 

protections. Non-grandfathered health insurance issuers in the individual and 

small-group markets will be prohibited from charging higher premiums to enrollees 

because of their current or past health problems, gender, occupation, and small employer size or industry. All non-grandfathered health plans in the individual and 

small group markets must cover essential health benefits, which include 10 statutory benefit categories, such as ambulatory patient services (including doctors’ visits), hospitalization, prescription drugs, and maternity and newborn care. Nongrandfathered health plans in the individual and small group markets also must 

meet certain actuarial values. The required actuarial value levels are 60 percent for 

a bronze plan, 70 percent for a silver plan, 80 percent for a gold plan, and 90 percent for a platinum plan. Actuarial value means the percentage paid by a health 

plan on average of the total allowed costs of benefits. For example, if a plan has 

an actuarial value of 70 percent, the average consumer generally would be responsible for about 30 percent of the costs of the essential health benefits the plan covers. These tiers will allow consumers to compare plans with similar levels of coverage, which, along with comparing premiums and other factors, will help consumers make more informed health insurance coverage decisions. 

Small businesses will also have more choice and control over their health insurance through the Small Business Health Options Program (SHOP), a new program 

designed to simplify the process of finding health insurance for a small business. 

Because of the lack of competition and transparency in the current small group market, some small businesses have been locked into insurance plans that continually 

provide worse benefits at higher premiums. With the availability of the SHOP Marketplaces, small businesses will be able to choose among plans and make side-byside comparisons of important features, such as benefits, premiums, and quality. 

Thus SHOPs will expand options, increase competition, and reduce administrative 

hassle for small businesses across the country. Currently, if farmers provide insurance for themselves and their workers, they could have access to the Small Business 

Healthcare Tax Credit, worth up to 35 percent of their premium costs for eligible 

employers that have low- to moderate-wage workers. Beginning in 2014, for those 

farmers who choose to provide insurance through the SHOP, this tax credit is worth 

as much as 50 percent of an employer’s contribution toward employee premium 

costs for eligible employers who have low- to moderate-wage workers. Businesses 

with up to 100 employees will be eligible for SHOP, although States can limit participation to businesses with up to 50 employees until 2016. About 4 million small 

businesses across the country may be eligible for these tax credits. 

Additionally, the Affordable Care Act creates a new type of non-profit health insurer, called a Consumer Operated and Oriented Plan (CO-OP). CO-OPs are run by 

their customers. CO-OPs are meant to offer consumer-friendly, affordable health insurance options to individuals and small businesses. Ten CO-OPs, including the 

Common Ground Healthcare Cooperative in Wisconsin, have received approval from 

their State insurance regulators to operate in 11 different State markets. These COOPs will be able to offer coverage both inside and outside the Marketplaces, starting 

October 1. We are confident that these CO-OPs will be able to offer consumers in 

their areas an additional choice in affordable high quality insurance option. 
72 

SENATOR ENZI

Question 1. 1. States are expected to have fully operational Health Exchanges for 

consumers by January 1, 2014. Many States are expected to struggle with developing entirely new and comprehensive health information technology infrastructures. Many of the consumers that may need to navigate these Exchanges will be 

new and old Medicaid patients. However, a 2011 Health Affairs study estimates 

that 50 percent of all adults with family incomes below 200 percent of the Federal 

poverty level will experience a shift in eligibility from Medicaid to an insurance exchange, or the reverse, in just the first year of the Exchanges. What is being done 

to address potential coverage issues for the most poor and vulnerable populations 

that cross eligibility thresholds during all of these major health system changes? 

Answer 1. The Affordable Care Act and its implementing regulations set up a system of coordinated, streamlined processes to determine eligibility for enrollment in 

a qualified health plan, advance payments of the premium tax credit and cost-sharing reductions, Medicaid, or CHIP. This system is designed to ensure that individuals and families are enrolled in the right coverage the first time. We have established the beginnings of a streamlined system of coverage that will be supported by 

modernized eligibility and enrollment systems and a new, data-based eligibility 

verification system that relies on existing data sources to confirm eligibility rather 

than requiring applicants to produce paper documentation. All of these changes are 

fundamentally designed to minimize disruptions in coverage and to ensure smooth 

transitions between insurance affordability programs where appropriate. As you 

note, however, sometimes individuals experience changes in circumstances that will 

affect their eligibility. The Exchange Establishment final rule at 45 CFR 

155.330(b)(1) states that Marketplaces must require individuals to report changes 

in circumstances that would affect their eligibility within 30 days. Marketplaces 

have flexibility to establish reasonable thresholds for the requirement to report 

changes in income. Individuals enrolling in qualified health plans with advance payments of the premium tax credit will be advised at the time of enrollment about 

the requirements to report changes in factors that affect eligibility. Marketplaces 

must also periodically check the records of Medicaid and CHIP, if applicable, to see 

if individuals have been determined eligible for those programs. And States can take 

a variety of approaches across the Marketplace, Medicaid, and CHIP to smooth transitions, including working together to coordinate the availability of plans across all 

programs and providing information to consumers regarding plans that serve the 

Marketplace, Medicaid, and CHIP. 

Eligibility rules published on March 27, 2012 (77 FR 18310) create a strong alignment between Medicaid, CHIP, and the Marketplace. States and the Federal Government have already made great strides in identifying and enrolling eligible children in Medicaid and CHIP coverage and many of those successful strategies are 

being carried forward to apply to the other insurance affordability programs. For example, 12 months of continuous eligibility is a strategy that many States have already adopted for children and pregnant women in Medicaid and CHIP that could 

easily be carried over to the new expansion population of low-income adults in Medicaid through waiver authority. We are also entertaining States’ proposals and strategies for allowing individuals to remain in the same source of coverage, regardless 

of changes in circumstances. This approach is intended to promote continuity of coverage between Medicaid or CHIP and the Marketplace. More information about this 

policy is available in the December 20, 2012 frequently asked questions (#14) 

http://www.cms.gov/CCIIO/Resources/Files/Downloads/exchanges-faqs–12–10– 

2012.pdf. 

Additionally, CMS issued a letter to State health officials and State Medicaid directors on May 17, 2013 (http://www.Medicaid.gov/Federal-Policy-Guidance/down 

loads/SHO–13–003.pdf) describing five strategies to increase enrollment. Those five 

strategies are: 

1. Implementing the early adoption of Modified Adjusted Gross Income (MAGI)- 

based rules; 

2. Extending the Medicaid renewal period so that renewals that would otherwise 

occur during the first quarter of calendar year (CY) 2014 (January 1, 2014–March 

31, 2014) occur later; 

3. Enrolling individuals into Medicaid based on Supplemental Nutrition Assistance Program (SNAP) eligibility; 

4. Enrolling parents into Medicaid based on children’s income eligibility; and 

5. Adopting 12-month continuous eligibility for parents and other adults. 

Question 2. Mr. Cohen, States like Wyoming that have opted to have the Federal 

Government run their Exchange need to know that coverage won’t be disrupted for 
73 

thousands of their citizens on January 1st. When will the Administration issue a 

proposed rule on the federally funded Exchange? How much does the Administration estimate the Federal Exchange will cost? What type of outreach has CMS or 

HHS done to date with the Federal Exchange States to ensure that there won’t be 

disruptions in coverage? 

Answer 2. The Exchange Establishment final rule published on March 27, 2012 

(FR 182309) fully details the standards for a Marketplace, whether it is run by the 

Federal Government, a State, or through a partnership between the two. We have 

also provided technical information and specific details about the Marketplaces 

through various guidance such as the General Guidance of Federally Facilitated Exchanges published on May 16, 2012, Exchanges, Market Reforms and Medicaid Frequently Asked Questions released on December 10, 2012, and the Guidance on State 

Partnership Exchanges published on January 3, 2013. As implementation continues, 

we have worked closely with States and other stakeholders to ensure all questions 

are answered and guidance is available when needed. 

We will continue the close contact with States to ensure that everyone has the 

information they need so that they can be ready for enrollment to begin on October 

1, and to ensure that there are no disruptions in coverage. Keep in mind, if a person 

receives their insurance through their large employer, like most people, their insurance will not be affected. If a person works for a small business, then that small 

business may be able to choose from plans in a side-by-side comparison through the 

SHOP Marketplace. This expanded Marketplace will increase competition and lower 

individual costs. Small businesses may also be eligible for tax credits to make offering insurance more affordable, so people whose employers do not offer insurance 

now could possibly enroll in employer-sponsored insurance in the future. If a person 

does not currently have insurance, then the Affordable Care Act and the Marketplaces make it easier than ever before to find and afford insurance. Starting October 

1, people are going to be able to buy comprehensive insurance without discrimination based on gender or pre-existing conditions. 

Many of these people will qualify for premium tax credits to help lower their 

monthly insurance premiums, and will benefit from increased transparency and 

competition in the Marketplace. The Marketplaces will not disrupt coverage, instead 

they will make insurance coverage more available and affordable for everyone. 

As for the cost of the Federally Facilitated Marketplace, the President’s fiscal year 2014 budget requests $1.5 billion for costs related to Marketplaces, including operations of a Federally Facilitated Marketplace in each State that will not have its 

own Marketplace by January 1, 2014, oversight of State-based and Partnership 

Marketplaces, and to carry out the Secretary’s duties on behalf of all Marketplaces, 

such as operation of a data services hub. These functions will be operational in fiscal 

year 2014 beginning with open enrollment in October 2013. In addition, CMS will 

collect user fees from all issuers offering qualified health plans in the Federally Facilitated Marketplaces starting in January 2014. CMS anticipates collecting $450 

million in user fees in 2014. The cost of implementation of Wyoming’s Federally Facilitated Marketplace for fiscal year 2014 is included in this budget request. For Wyoming, the Federally Facilitated Marketplace will be completely funded out of Federal funds and user fees, at no cost to the State for fiscal year 2014. 

RESPONSE BY KEVIN COUNIHAN TO QUESTIONS OF SENATOR ALEXANDER

AND SENATOR FRANKEN

SENATOR ALEXANDER

Question 1. I recognize that many of the rating rules imposed by the new health 

care law were already in existence in your State, but one we discussed during the 

hearing—age rating bands—could have a significant impact for younger individuals. 

Are you concerned at all about adverse selection leading to an unbalanced risk pool 

in your State? Have you done any actuarial analysis about how premiums will be 

affected in your State, particularly for young people? 

Answer 1. At present, CT has an age rating band of essentially 6:1. We are cognizant of the impact on both younger and older individuals of reducing the age rating band to 3:1. We have developed a comprehensive marketing and outreach plan 

to raise awareness of the ACA and of Access Health CT among individuals and 

small businesses in our State, and we have elements of this plan which focus in particular on the 18–35 age band segment. 

Question 2. The media has quoted you as saying you need more time to implement 

the law. Why? And if Congress were to grant you another year to get Connecticut’s 

exchange up and running, what benefits do you believe that would provide consumers? 
74 

Answer 2. Implementation of a State-based marketplace is complex and largely 

unprecedented. Like all States, we are focused on providing the best customer experience possible for CT consumers. Our implementation plan includes contingencies 

in case we have service interruptions at either the State or Federal service levels. 

Obviously, the more time any State has to implement and communicate the benefits 

and obligations of the ACA would be helpful, but we are prepared to begin open enrollment on October 1. 

Question 3. Even with open enrollment periods, there is concern that young, 

healthy individuals will wait until they have a serious medical need to purchase insurance. To mitigate this issue, have you given thought to limiting individuals to 

bronze level plans if they wait to buy insurance? 

Answer 3. We have not given consideration to that option as CT wishes to give 

consumers as much choice in plan design and carrier options as possible. Further, 

the risk of adverse selection is ameliorated largely through the limits of an annual 

enrollment period. 

SENATOR FRANKEN

Question. The medical loss ratio provision, which I authored and which was included in the health care law, requires that insurers spend 80 to 85 percent of the 

premium dollars they receive on actual health care services, and only 15 to 20 percent on administrative costs. In your role as the CEO of Access Health CT, can you 

tell us how the medical loss ratio has changed the insurance market? How has the 

provision benefited consumers? 

Answer. The medical loss ratio provision provides significant benefits to consumers through the dedication of a specific percentage of premium to the payment 

of medical services. While most carriers in CT are consistently pricing their plans 

to meet these rations, we have examples of consumers receiving rebates from carriers who did not meet the MLR requirements. 

RESPONSE BY SABRINA CORLETTE TO QUESTIONS OF SENATOR ALEXANDER

AND SENATOR WHITEHOUSE

SENATOR ALEXANDER

Question 1. In Medicare Parts B and D, CMS pairs an open enrollment period 

with a late enrollment fee to incentivize seniors to enroll when they are first eligible. This encourages younger, healthier people to enroll earlier and makes the overall risk pool stronger. For States that are worried about their risk pools in 2014, 

would a similar system be beneficial for exchange-based plans? 

Answer 1. The Affordable Care Act includes several mechanisms to ensure a balanced risk pool and mitigate market disruptions. These include: 

• Premium tax credits and cost-sharing reductions to make coverage more affordable for individuals between 100–400 percent of the Federal poverty level. • A requirement that individuals maintain a minimum standard of coverage or 

face a penalty (often called the ‘‘individual mandate’’). • A reinsurance program. • A risk corridor program. • A risk adjustment program. 

The Affordable Care Act also requires exchanges to create a navigator program. 

Navigators are charged with conducting outreach and enrollment activities, and providing consumers with assistance enrolling in Marketplace coverage. Many of these 

outreach and education activities are targeting young adults and encouraging them 

to enroll. 

Question 2. On page 7 of your written testimony, you state, 

‘‘And, for individuals earning up to 250 percent of the Federal poverty level, 

the ACA provides cost-sharing subsidies that will reduce the cost-sharing 

amounts and annual out-of-pocket limits.’’ 

Is it your belief that individuals with incomes between 250 and 400 percent of 

the Federal poverty level will end up paying more out-of-pocket than they would 

have without the law? 

Answer 2. Under the Affordable Care Act, individuals between 250–400 percent 

of the Federal poverty level are eligible for premium tax credits but are not eligible 

for cost-sharing reductions. However, the law requires insurers to limit annual outof-pocket costs for consumers, including copayments, coinsurance, and deductibles, 

to the level established for high-deductible health plans that qualify for health savings accounts ($6,350 for an individual, $12,700 for a family in 2014). For individ-
75 

uals with high health care needs, this provision provides critically important financial protections that were not widely available in the individual market, prior to enactment of the law. 

SENATOR WHITEHOUSE

Question 1. Experts have said that, over the long-term, the exchanges could play 

an important role in coordinating payment incentives with other State payers to encourage more comprehensive delivery system reforms. What are some specific examples of steps exchanges could take to help encourage system-wide reforms and what 

lessons can they learn from States that have gone forward with multi-payer delivery 

system reform initiatives? 

Answer 1. Currently, only a small number of States have decided to authorize 

their exchanges to selectively contract with insurers in order to provide greater 

value to consumers. But those that have chosen a selective contracting or ‘‘active 

purchaser’’ approach have been working to encourage insurers to work with their 

provider networks to improve health care quality and efficiency in the delivery of 

care. For example, Massachusetts is requiring insurers to transition from traditional 

fee-for-service payments to providers to alternative payment models such as global 

or bundled payments. California is requiring participating insurers to participate in 

the eValu8 survey, a data collection tool used by large employers to assess health 

plans’ efforts to drive quality and efficiency improvements. Plans are also judged 

based on their use of mid-level providers and physician extenders to drive cost efficiency and expand access to care, their use of delivery system models of care such 

as Accountable Care Organizations (ACOs) and Patient-Centered Medical Homes 

(PCMH), and their support of shared decisionmaking. In Vermont, insurers, including qualified health plans, are required to participate in the State’s existing ‘‘Blueprint for Health’’ as condition of doing business in VT. Specifically, they must provide reimbursement to all recognized Blueprint Medical Homes and designated 

Community Health Teams. 

Question 2. As States work toward finalizing their exchanges, what lessons can 

they learn from the Medicare Part D program, including how to apply Part D best 

practices to the exchanges and how to avoid some of Part D’s early mistakes? 

Answer 2. In implementing the ACA, State and Federal officials and other stakeholders can draw on the Federal Government’s successful launch of Medicare Part 

D, a major national health coverage program that became law in December 2003 

and started enrollment just 2 years later. The program, which now includes 35 million beneficiaries, represented the first Medicare coverage of outpatient prescription 

drugs to be implemented and the first Medicare benefit delivered exclusively 

through private plans. 

Like the exchanges, Part D required extensive outreach and education in a short 

timeframe. And, like the exchanges, Part D also required ongoing coordination 

among Federal and State agencies and private plan sponsors. 

Although the officials implementing Part D encountered significant technical, educational, and coordination difficulties at first, 8 years later, many of the initial difficulties have been forgotten. The public generally views the program as a success. 

There are numerous areas in which current policymakers can learn from the Part 

D experience. One key area is eligibility and enrollment. Beneficiaries had two initial decisions before acquiring drug coverage in Medicare Part D: whether to enroll 

and which plan to select. Many had a third choice as well: whether to apply for the 

LIS. Individuals and families eyeing exchanges must make a more complicated set 

of assessments about their financial and health situations and the benefits and costs 

of making a change, due in part to new tax implications of certain decisions under 

the ACA. 

It was initially hard for potential Part D enrollees to understand the value of the 

new benefit. Many factors, including an unpopular late-enrollment penalty, provided 

a reason for beneficiaries to enroll. As a result, many initially uncertain about enrollment, including those taking few drugs, did sign up. The ACA also includes incentives for people to enroll in coverage, such as significant premium tax credits and 

cost-sharing subsidies for those with low and moderate incomes. More controversially, the law requires that individuals who do not maintain coverage pay a tax 

penalty. It remains unclear whether these incentives will be sufficient to encourage 

people, particularly healthy people, to enroll. 

Another issue Medicare beneficiaries faced was confusion about plan choices. For 

many, selecting a plan among a set of alternatives was a new experience. The considerable array of choices made it challenging to compare plans effectively, and 

many chose plans that were not optimal for their personal circumstances. There is 

early evidence in the new Marketplaces that, at least in some markets, consumers 
76 

are facing challenges comparing plan premiums, benefits, networks, and cost-sharing arrangements. 

RESPONSE BY CHRIS CARLSON TO QUESTIONS OF SENATOR ALEXANDER

AND SENATOR ENZI

SENATOR ALEXANDER

Question 1. In your testimony, you provide evidence that many individuals participating in the exchange will pay more out-of-pocket to purchase health insurance 

than they otherwise would if the law had not passed. Is it your belief that this problem will only grow larger as more employers shift employees to the exchanges? 

Answer 1. At this time, the impact of employers shifting their employees to the 

exchanges is unclear. On one hand, if the individuals that are shifted to the exchanges are from groups that have a higher concentration of younger employees, 

those employees may find themselves purchasing policies that are more costly than 

they otherwise would have paid in the group plan. However, individuals that are 

fully employed tend to have lower morbidity and thus could actually provide improvement in the individual risk pool. 

Question 2. An Obama administration spokesperson recently dismissed the Society of Actuaries study, claiming it was done by an insurance company. Would you 

comment on that assertion? 

Answer 2. The Society of Actuaries is an independent organization that maintains 

high professional standards for its members. As credentialed actuaries, we are required to comply with the Code of Professional Conduct in all areas of our work. 

Specifically, Precept 7 addresses conflicts of interest and states that, ‘‘An Actuary 

shall not knowingly perform Actuarial Services involving an actual or potential conflict of interest unless the Actuary’s ability to act fairly is unimpaired.’’ 

Question 3. You note in your testimony that the age 21–29 group has an uninsured rate that is roughly twice the uninsured rate for the nonelderly population. 

Would giving States some flexibility to establish age bands in a way that wouldn’t 

negatively impact risk pools help alleviate some of the pressure facing young adults? 

Are there other viable options? Why is it so important to get this right? 

Answer 3. Giving flexibility to the States to establish age bands would certainly 

help to alleviate potential rate shocks to young adults. However, it is important to 

recognize that any flexibility that still requires States to maintain the 3 to 1 ratio 

on age bands will have a very limited effect. One potential option would be to allow 

States to phase in the age rating over several years. While this would not change 

the ultimate outcome, that young adults will subsidize older adults, the impact of 

the rate shock would not be evident immediately and it could produce greater participation in the non-group market. As Senator Harkin discussed in the hearing, 

this issue is important because the non-group market needs to have the risk spread 

to as many consumers as possible. Any limitation in the participation in the market, 

especially by those at younger ages that are likely to be of better health, will spread 

the cost across a smaller population thus increasing the rates for everyone. 

Question 4. Your testimony touches on another important subject—an excise tax 

on health insurers. Can you tell me what benefit the consumer gains from these 

taxes on health plans? 

Answer 4. It is my understanding that the tax’s purpose is to offset the costs of 

the Affordable Care Act, which mostly is represented by the premium subsidies that 

will be available to individuals below 400 percent of the Federal poverty limit who 

purchase non-group coverage on the health insurance exchanges. Otherwise, there 

is no discernible benefit to the consumer for paying the taxes. 

SENATOR ENZI

Question. Mr. Carlson, you have talked about a number of actuarial studies related to the impact of the health care law. For example, the Society of Actuaries 

estimates that health insurance premiums in the individual market will increase by 

32 percent on average nationally and in Wyoming specifically. The National Association of Insurance Commissioners, in a paper released last week, concluded that 

States ‘‘should begin evaluating these and other strategies immediately in order 

to mitigate rate increases when the major market reforms take effect in 2014.’’ 

What should the Administration be doing to better address the risks identified by 

these and other reports? What can Congress do to better monitor this risk? 

Answer. Although there are provisions of the ACA that will reduce premiums, 

since the focus of this question is rate increases, I will limit my response to that 
77 

1http://www.actuary.org/files/PremiumlChangelACAlIBlFINALl050813.pdf. 

side of the equation. Specifically the issues that I will discuss that may increase premiums are guaranteed-issue, expansion of benefits, and limits on rating. 

Guaranteed-issue will increase rates because individuals that can currently not 

obtain insurance because of underwriting restrictions will now be able to obtain coverage with no restrictions. These individuals will be more expensive than those currently insured. The ACA’s reinsurance provision attempts to mitigate the increase 

in cost for these individuals, and carriers’ rate filings indicate that rates in the nongroup market may be as much as 10 percent lower as a result of the temporary reinsurance program. An extension and expansion of the reinsurance program could potentially limit the rate increases as a result of guaranteed-issue. 

The other concern with guaranteed-issue is that individuals will forgo health insurance until they become sick, at which point they will purchase coverage. The individual mandate and the premium subsidies attempt to lessen this risk as individuals will be compelled to purchase insurance because of the mandate, and the premium subsidies will make the actual premiums paid by individuals below 400 percent of poverty more affordable. However, the premium subsidies are not available 

to everyone, and further, the individual mandate may not be sufficient to compel 

healthy and younger individuals to enroll in coverage. 

In response to these issues, the American Academy of Actuaries suggested in their 

May 2013 issue brief 1 on premium changes under the ACA: 

Strengthening the individual mandate would help mitigate premium increases 

due to a less healthy enrollee population. Approaches could include less frequent 

open enrollment periods, penalties for late enrollment, more generous premium 

subsidies, and enhanced public outreach and consumer education. 

I would concur with these suggestions. 

The expansion of benefits has a significant impact on premiums because many 

non-group policies have high deductibles and cost-sharing and also limit or exclude 

the coverage of certain benefits, such as prescription drugs and maternity. From an 

out-of-pocket perspective, the addition of these benefits generally does not increase 

total costs (premiums plus cost-sharing) since individuals will not pay less when 

they do require services. However, the premium rates that individuals will see in 

the market will be higher as a result, and consumers may not be knowledgeable 

enough to understand the tradeoff. Instead consumers may be turned off by higher 

premiums. Without the obvious solution of relaxing the essential benefits requirements, consumers will need to be better educated about the premium increases due 

to essential benefits will be offset by higher levels of benefits. 

Finally, limits on rating, such as requiring age-rating to be 3 to 1, increases the 

premiums for one group while decreasing the premiums for another group. Assuming that the limitations on rating do not affect the composite premiums, the only 

way to mitigate the rate increases for certain policyholders would be to remove or 

relax the limitations on the rating. For example, moving from a 3 to 1 age-rating 

limits to 4 to 1 limits would negate almost all of the impact of the age-rating compression and resulting rate shock. 

[Whereupon, at 12:41 p.m., the hearing was adjourned.] 

Æ