[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
OBAMACARE: WHY THE NEED FOR AN INSURANCE COMPANY BAILOUT?
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HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 5, 2014
__________
Serial No. 113-89
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas TAMMY DUCKWORTH, Illinois
DOC HASTINGS, Washington ROBIN L. KELLY, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia PETER WELCH, Vermont
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan Vacancy
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
C O N T E N T S
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Page
Hearing held on February 5, 2013................................. 1
WITNESSES
The Hon. Marco Rubio, U.S. Senator, Florida
Oral Statement............................................... 6
Mr. John C. Goodman, Ph.D., President and CEO, National Center
for Policy Analysis Washington, D.C.
Oral Statement............................................... 8
Written Statement............................................ 11
Mr. Doug Badger, Former Senior White House Adviser for Health
Policy to President George W. Bush
Oral Statement............................................... 19
Written Statement............................................ 21
Professor Timothy S. Jost, Washington and Lee University
Oral Statement............................................... 36
Written Statement............................................ 38
APPENDIX
5 Devastating Obamacare Facts from CBO's Latest Economic Report,
by Sean Davis.................................................. 74
Statement of Cori E. Uccello, MAAA, FSA, FCA, MPP, Senior Health
Fellow American Academy of Actuaries........................... 78
Hon. Gerald E. Connolly, a Member of Congress from the State of
Virginia, Opening Statement.................................... 82
CRS Report submitted by Rep. Farenthold.......................... 84
Letter from the U.S. Chamber of Commerce submitted by Rep.
Connolly....................................................... 87
For the Record Statement by America's Health Insurance Plans,
submitted by Rep. Horsford..................................... 89
OBAMACARE: WHY THE NEED FOR AN INSURANCE COMPANY BAILOUT?
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Wednesday, February 5, 2014
House of Representatives
Committee on Oversight and Government Reform
Washington, D.C.
The committee met, pursuant to call, at 9:35 a.m., in Room
2154, Rayburn Office Building, Hon. Darrell E. Issa [chairman
of the committee] presiding.
Present: Representatives Issa, Mica, Turner, Duncan,
Jordan, Walberg, Lankford, DesJarlais, Gowdy, Farenthold,
Woodall, Massie, Collins, Meadows, Bentivolio, DeSantis,
Cummings, Maloney, Norton, Tierney, Connolly, Speier, Kelly,
Horsford, and Lujan-Grisham.
Also Present: Mr. Griffin and Mr. McHenry.
Staff present: Ali Ahmad, Professional Staff Member; Brian
Blase, Senior Professional Staff Member; Molly Boyl, Deputy
General Counsel and Parliamentarian; Joseph A. Brazauskas,
Counsel; David Brewer, Senior Counsel; Caitlin Carroll, Press
Secretary; Sharon Casey, Senior Assistant Clerk; John Cuaderes,
Deputy Staff Director; Brian Daner, Counsel; Adam P. Fromm,
Director of Member Services and Committee Operations; Linda
Good, Chief Clerk; Meinan Goto, Professional Staff Member; Ryan
M. Hambleton, Senior Professional Staff Member; Christopher
Hixon, Chief Counsel for Oversight; Mark D. Marin, Deputy Staff
Director for Oversight; Aryele Bradford, Press Secretary;
Susanne Sachsman Grooms, Deputy Staff Director/Chief Counsel;
Jennifer Hoffman, Communications Director; Chris Knauer, Senior
Investigator; Una Lee, Counsel; Juan McCullum, Clerk; Dave
Rapallo, Staff Director; and Mark Stephenson, Director of
Legislation.
Chairman Issa. The committee will come to order.
I first ask unanimous consent that our colleague from
Arkansas, Mr. Tim Griffin, be allowed to participate in today's
hearings. Without objection, so ordered.
The Oversight Committee exists to secure two fundamental
principles. First, Americans have a right to know that the
money Washington takes from them is well spent. And second,
Americans deserve an efficient, effective Government that works
for them. Our duty on the Oversight and Government Reform
Committee is to protect these rights. Our solemn responsibility
is to hold Government accountable to taxpayers because
taxpayers have a right to know what they get from their
Government. Our job is to work tirelessly in partnership with
citizen watchdogs to bring the facts to the American people and
bring genuine reform to the Federal bureaucracy. This is our
mission.
And today we continue our mission with a hearing as the
American people confront ObamaCare. They are faced with a
complex web of taxes, subsidies, mandates, regulations, and
price controls. Yet, they are receiving little upfront
information from the administration.
Our hearing today is one of many that we have had and many
more we will have, but it is that important. 18 percent of our
economy is in healthcare, and today we are seeing healthcare
costs grow and the Affordable Care Act exceed expectations in
job loss and in cost.
Four months ago, when ObamaCare opened for business, the
administration had to that date refused to release complete
enrollment data or how we were going to get it. Today we still
do not know how much it has cost, how many people have signed
up, what coverage is there because it is, in fact, one of the
most opaque government programs to date.
What little enrollment data we have is, in fact, not good
news. For the numbers to balance, the administration officials
originally claimed that 39 percent of enrollees needed to be
young adults. As of January, only 24 percent of enrollees were
young adults, and many of those young adults may be highly
subsidized. Affordable Care depends on healthy young people
buying a plan to subsidize the cost of the aged and the sick.
It needs enrollment to balance. It is not something you can
force. It is something that must be chosen.
In just the last few days, the administration announced
hundreds of millions of dollars will be spent trying to
advertise for and recruit those people to sign up for a program
that we were told people would flock to because it was good and
they needed it. The fact is the Affordable Care Act is not
working and the numbers are not working.
Just yesterday, the Congressional Budget Office released
figures that showed dramatic adverse effect on total enrollment
and a cost of $2 trillion over the next decade, a trillion
dollar difference in their estimates. The fact is the act is
not performing. CBO is now being forced to recognize, not as
the White House would say, that we would--not what the White
House would say that people are choosing not to work as much
and they have flexibility, but in fact, people who want full-
time jobs are finding themselves with less than full-time jobs
and often without health care.
Additionally, the GDP of this country, the engine that
creates jobs, is likely to slow by as much as 1 percent over
the next decade. That is a long-term bad news for our economy.
This does not mean that the goals of the Affordable Care
Act are, in fact, to be given up. This committee and all
committees of the Congress have an opportunity to seize better
choices in how we fashion health care opportunities for the
American people. Health care insurance companies make money off
of the Affordable Care Act, and the profit is theirs to keep.
In fact, although they are not villains, they certainly were an
organization--many organizations that were previously vilified,
vilified in a big way until it became convenient to get them on
board with the Affordable Care Act. The Affordable Care Act
guarantees subsidies and higher enrollment for the health care
companies.
Today we will take a number of items, including our first
witness who will speak to one of the flaws in the system, which
is in fact a guarantee of profit for the health care providers,
one that may cause them to price their product in a way that is
not in the best interest of competition. This program is called
``reinsurance.''
A key question we will ask today is what will trigger the
bailout provisions and how will it take effect. Under
ObamaCare's risk corridor program, if an insurance company
cannot cover the losses of its less successful plans, the
Treasury will use taxpayer funds to cover up 80 percent of the
loss.
Yesterday, the Congressional Budget Office estimated
ObamaCare's risk corridor would give Government a gain of $8
billion in profits. It is important to note that that is based
on another program in which every year the American people have
found themselves overpriced relative to a shrinking cost of
prescription drugs. It is not necessarily a valid model. It
certainly has one critical difference, which is Medicare Part D
was a program which, by definition, was new and did not have a
large pool of history. In the case of the Affordable Care Act,
most of the carriers are providing exactly the same type of
insurance to the exact same pools as they always have.
CBO's projections also concluded that the Affordable Care
Act will cost the economy 2.5 million job equivalents. The
agency report found the negative impact effects of the law
would be substantially larger than had been believed. When they
say ``substantially larger,'' let us understand. According to
the then-Speaker, Nancy Pelosi, the Affordable Care Act was
going to create 4 million jobs. It is now going to cost us 2.5
million jobs.
CBO is a respected, nonpartisan agency on which the ranking
member, Mr. Cummings, and I rely daily. But even CBO can only
make projections based on information available and on hand,
and in fact, the Affordable Care Act continues to migrate. It
is well known that at the time the Affordable Care Act was
being projected, CBO was much more optimistic as to what would
occur. In 2011, CBO estimated, as the law was being
implemented, that it could cost 800,000 full-time job
equivalents. Again, today they now estimate 2.5. CBO's revised
estimate is based on a better understanding of the law.
Remember, this is a law that we had to pass before we could
find out what was in it. More importantly, out of the 2,400
pages of the original law, we have now mushroomed into over
70,000 pages of regulations and they are still being made.
The law's reinsurance program levels a fee on health
insurance consumers to subsidize plans in the exchange, meaning
people who already had a plan that they wanted to keep that
they may or may not be able to keep are being taxed as part of
the Affordable Care Act. Most, if not all, Americans were
unaware that they would be taxed for a program even if they had
a program they liked, meaning that the programs they are in
cost more because of an ObamaCare tax.
The noble aspirations are not enough to make ObamaCare
cost-effective or fair, and it is driving up the cost of
insurance and driving up the cost of providing health care. Its
implementation has been marked by arbitrary and unilateral
delays made by the White House, many of them beyond any fair
interpretation of the four squares of the law.
In closing, I think my colleagues are aware that no one on
my side of the aisle voted for the Affordable Care Act. We did
not believe in element after element after element of it, even
though we would have liked to have done a few of the elements
of this law. Therefore, we are not neutral observers.
But CBO is a neutral observer, and I believe that the
testimony that is going to be given today by our distinguished
Senator from Florida, Senator Rubio, who has proposed a bill to
repeal the risk corridors in the President's health care law,
comes both with a timely proposal and with the recognition that
after you guarantee that insurance companies cannot lose money,
it is little surprise that when the President makes changes,
which will adversely affect the profit projections of insurance
companies, you hear not a word. You hear not a word because, in
fact, the taxpayer is paying for the arbitrary decisions of the
President and, in fact, not the health care providers.
And with that, I recognize the ranking member, Mr.
Cummings, for his opening statement.
Mr. Cummings. Thank you very much, Mr. Chairman.
I welcome you, Senator Rubio, to this hearing, and it is
certainly good to have you here.
Today's hearing is our committee's 24th--2, 4--24th--on the
Affordable Care Act. And after this hearing ends, we will be
holding our 25th this afternoon. I am not sure what the line is
between oversight and obsession, but our committee has
obviously crossed it.
I will begin, as I do, at all of our ACA hearings by
highlighting the single most important fact before us today.
Millions of Americans are now receiving critical medical care
they did not have before. I know that is important to you,
Senator Rubio, and it should be important to all of us. People
who are sick, trying to get well, people who are well trying to
stay well are getting care that they could not receive before.
No more discrimination against people with cancer,
diabetes, and other preexisting conditions. That is so
important. No more discrimination against women. Free
preventative care for millions of people. Billions of dollars
in rebate checks sent to consumers across the country in all of
our districts and in Florida. And the lowest growth in health
care costs in 50 years.
These amazing results are not happening because of
Republican efforts. They are happening in spite of them.
Republicans have done every single thing they could do in their
power to repeal, defund, and eviscerate the Affordable Care
Act. And sadly, so sadly, today's hearing is just the latest
example.
According to press reports, while House Republicans were at
their retreat last week they were desperately searching for
something, anything to attach to the debt ceiling legislation.
They could not simply pay our Nation's debts. They had to come
up with something, anything to politicize the issue.
At first they discussed the Keystone Pipeline, but then
they settled on the issue before us today, the so-called
Affordable Care Act bailout of insurance companies. They seized
on several provisions in the ACA designed to distribute risk
across insurance companies and prevent the artificial inflation
of premiums for consumers. Under one of these provisions called
the ``risk corridor program,'' the Government collects funds
from insurers with large financial gains and uses those funds
to make payments to insurers with large losses.
The irony of this Republican attack is that the Republicans
first proposed these measures as part of the 2003 law to create
the Medicare Part D drug benefit. It was a Republican idea.
Senate Minority Leader Mitch McConnell and House Speaker
John Boehner both voted in favor of these provisions, and so
did Paul Ryan, the chairman of the Budget Committee, as well as
our chairman, Chairman Issa. And at the time, Republican
Senator Chuck Grassley described the risk corridor program as
one of the, ``incentives that the Secretary can use,'' to get
new plans started, ``in a strong way.'' He said ``these plans
are enabling many beneficiaries to lower their out-of-pocket
costs substantially, and that is particularly true for
beneficiaries with chronic illnesses.'' I did not say that.
Senator Grassley said that.
The risk corridor program was a good idea during the Bush
administration, and it worked. Rather than a bailout for
insurance companies, the program has resulted in $7 billion in
net gains to taxpayers. But now since these same mechanisms are
part of the Affordable Care Act, Republicans argue that they
are a bailout for insurance companies.
Senator Rubio, who I have great respect for, calls them--
and I ``Government favoritism and corporate cronyism at its
worst.'' He claims that we are getting, closer to the reality
that billions of dollars in taxpayer money is going to be used
to bail out these exchanges.'' And he introduced legislation to
repeal this program.
Just this week, however, the nonpartisan Congressional
Budget Office issued a new report that completely obliterates
this argument. CBO projects that the ACA risk corridor program
will result in net gains to taxpayers of $8 billion over the
next 10 years. So where is the bailout? There isn't one.
Just as in the Medicare Part D program, the Affordable Care
Act risk corridor program will save taxpayers money, and if we
were to adopt legislation to eliminate this program, billions
of dollars in savings would simply disappear.
I ask unanimous consent, Mr. Chairman, that the CBO report
be entered into the official hearing record.
Chairman Issa. Without objection, so ordered.
Mr. Cummings. Thank you, Mr. Chairman.
Finally in conclusion, I am surely no advisor to the
Republican Party, but if you are trying to create a new image
for yourselves, one of truly caring for people facing hardship,
why in the world would you eliminate a program that you
invented that has been working for nearly a decade and that
saves taxpayers billions of dollars? And why would you increase
premiums for Americans across the country in the process? This
approach makes no sense unless you are putting politics ahead
of people.
So for the next week, I would like to make a suggestion.
Rather than holding our 26th hearing on yet another false
criticism of the Affordable Care Act, I ask that we turn to
more constructive efforts. Let us hold a hearing to help our
constituents, not just the constituents from my district, from
all of our districts. Let's get ourselves involved in
constructive efforts to help our constituents learn about the
health care coverage they can now obtain and let us help them
enroll. That would benefit them more than anything we will do
today.
And with that, Mr. Chairman, I yield back.
Chairman Issa. I thank the gentleman.
Members may have 7 days to submit opening statements for
the record.
Chairman Issa. We now go to our first panel. After Senator
Rubio, we will immediately go to a second panel.
And I would advise all witnesses that it is not customary
to interview Members of the House or the Senate afterwards. And
I say this because we did have our counterparts from the Senate
for a very long back and forth just a few weeks ago, but that
was an exception.
Senator Rubio comes today to give testimony specifically on
his proposal but, more broadly, on his study of the ongoing
implementation of the Affordable Care Act. Senator Rubio, we
appreciate your being here. You will be welcomed back for the
26th and the 27th and the 28th hearing, if it becomes
necessary, in order to do appropriate oversight of this new
law. Senator, you are recognized.
STATEMENT OF HON. MARCO RUBIO, UNITED STATES SENATOR, FLORIDA
Senator Rubio. Thank you, Chairman Issa and the ranking
member, Mr. Cummings, for holding this hearing and for inviting
me here today. I am a frequent watcher. I am a loyal viewer of
this committee on C-SPAN. So I appreciate the invitation to be
here with you today.
My focus of my remarks this morning is going to be on
section 1342 of ObamaCare, which I, in partnership with your
colleague, Tim Griffin of Arkansas, have introduced legislation
to repeal.
Now, section 1342 deals with what has already been
described as risk corridors. Now, under normal circumstances,
risk corridors are a valid program. They provide insurers
insurance against unanticipated major losses caused by
anomalies that may occur in a competitive insurance market.
This prevents disruption in services, for example, for patients
and for customers.
They are budget-neutral, by the way. These risk corridors
can actually protect taxpayers from assuming too much of the
risk.
The problem with the risk corridor in ObamaCare is that
this is not a normal circumstance. First of all, its failures
are not anomalies. They are across the board. It is not one or
two companies that are miscalculating on ObamaCare's long-term
prospects; it is the entire industry that is being affected by
its failures.
And, by the way, ObamaCare and its exchanges are not a true
competitive insurance market. In fact, it has increasingly
become more like a high-risk pool.
The risk of a bailout has always been high. As many of us
predicted, these exchanges have not attracted enough young and
healthy people to sign up, but the chances of the bailout have
increased significantly in the last few months due to several
unilateral actions taken by the President and by his
administration.
For example, this past November, in response to a public
backlash from people who were losing their health plans and
providers, President Obama delivered a speech in which he
announced his unilateral action to, quote, fix his broken
promise that if you like your plan, you can keep your plan.
That same day, however, the Department of Health and Human
Services issued a press release to go with the President's
speech. And in that press release, they added a critical detail
that was missing in the President's remarks. And here is what
the press release said. ``Though this transitional policy was
not anticipated by health insurance issuers when rate-setting
for 2014, the risk corridor program should help ameliorate
unanticipated changes and premium revenue.''
Now, what this means is pretty straightforward. The rates
being charged by the insurance companies in the exchanges were
based on a certain number of young and healthy people signing
up, but because that is not happening, companies in the
exchange will not be able to offset the costs of insuring older
and less healthy individuals. And as a result, the risk
corridor will be needed to bail out the companies for their
losses.
Now, the administration and the law's supporters deny that
this is where we are headed, but the proof already exists that
a bailout will be required.
For example, earlier this year, health insurance companies
had to file their key disclosure documents with the Securities
and Exchange Commission. In it, they had to explain to their
shareholders what ObamaCare will mean for their bottom line in
the coming year, and here is what it said. It will mean losses.
That is why, based on these filings, the credit rating agency
Moody's has downgraded the outlook for American health insurers
to negative status.
So health insurers are leveling with their shareholders
about how ObamaCare's failures will affect their bottom lines,
and credit rating agencies are leveling with investors about
how ObamaCare's failures affect the health insurance industry.
Now it is time for the President, for Secretary Sebelius,
and for ObamaCare supporters to level with taxpayers about the
fact that their hard-earned tax dollars will soon be needed to
bail out the ObamaCare exchanges.
The supporters of ObamaCare have defended the risk
corridors by citing how it has worked for Medicare Part D, but
these are two fundamentally different programs. Medicare Part D
deals with a defined, a limited and a predictable population of
seniors. Insurers knew who was going to sign up, and they had a
pretty good idea of how much they were going to cost to insure,
and so they could price for it accordingly. But ObamaCare
exchanges deal with an open-ended, broad, and unpredictable
group of enrollees. No one knew who was going to sign up, how
many would sign up, and how much they would cost. But what they
are now finding out is that the pool of enrollees that is
signing up is smaller, older, and unfortunately sicker than
what they had priced for. And soon they will be coming to
Washington for their bailout to cover their losses as a result.
Now, the law has a host of other problems. For example, as
the chairman has already pointed out, just yesterday the
Congressional Budget Office found that ObamaCare will cost
millions of Americans their jobs, and it will add trillions in
additional deficits. That, by the way, is why a growing number
of Americans have come to realize that this law has so many
flaws that it cannot be fixed.
Now, I respect the fact that there are some who still hold
out hope that ObamaCare will work, just like there were some in
Denver this Sunday still holding out hope that the Broncos
could come back and win in the fourth quarter. But no matter
how you may feel about the law, we should all be able to agree
that the American people should not have to pay for another
taxpayer-funded bailout.
Refusing to take that possibility off the table is like
basically telling the American people that some are so devoted
to protecting ObamaCare that they do not care how much it will
cost taxpayers.
The bottom line is that it is not right to allow a powerful
industry to use its influence here in Washington to protect
itself from the consequences of ObamaCare, and it is not right
that hard-working Americans are forced to pay for it.
So, Mr. Chairman, Ranking Member, I appreciate the
opportunity to testify before you today, and I look forward to
coming back. Thank you.
Chairman Issa. Senator, we thank you for your input. We
thank you for your insight in this area, and we thank you for
being a loyal watcher.
We will take a short recess and set up for the next panel.
[Recess.]
Chairman Issa. We now welcome our second panel of
witnesses. Mr. John Goodman is President and CEO of the
National Center for Policy Analysis and Senior Research Fellow
at the Independent Institute. Mr. Douglas Badger is a former
Senior White House Adviser for Health Policy to George W. Bush,
and Mr. Timothy Jost, is Professor of Law at Washington and Lee
University. I want to thank all of you for being here and,
pursuant to the committee rules, would ask that you please rise
to take the oath and raise your right hands.
[Witnesses sworn.]
Chairman Issa. Please be seated. Let the record reflect
that all individuals answered in the affirmative.
Since we have a full panel and the committee rules call for
5 minutes for opening testimony, I would ask that you observe
the lights and stay as close to the 5 minutes, recognizing that
your entire opening statements will be placed in the record,
along with additional, extraneous materials, should you choose
to add it.
And with that, we go to Mr. Goodman.
WITNESS STATEMENTS
STATEMENT OF JOHN C. GOODMAN, PH.D.
Mr. Goodman. Mr. Chairman, members of the committee, the
people who created the health insurance exchanges were
apparently of good intention, but they created perverse
incentives for those at the bottom. And when people act on
those perverse incentives, they are doing things that create
perverse outcomes.
The insurers are prevented from pricing risk accurately in
the health insurance marketplace. As a consequence, people who
are relatively healthy are overcharged at the point of
enrollment and people who are relatively sick are undercharged.
This gives every insurer an incentive to attract the healthy
and avoid the sick because they make profits on the healthy and
they make losses on the sick.
The way they behave, in the face of this incentive,
contrasts markedly with insurers in other markets. All of you
have seen casualty insurers advertising on TV. You have seen
the actor in front of the town that was wiped out in 2 minutes
telling you with Allstate you will be in good hands. You have
seen advertisements with car accidents. You have seen the Aflac
ads, the Chubb ads. And every one of these ads pictures some
bad thing that could happen to you, and the message in these
ads is if the bad thing happens, the insurer will be there for
you. You are never, ever going to see an ad like this by
insurers selling insurance in the exchange. You are never going
to see an ad that says if you get cancer, we are going to be
the health plan for you, or if you get heart disease, come to
us because they are running away from the sick instead of
trying to attract them.
Now, the insurers have their benefits regulated down to the
smallest items. Yet, they are free to choose their own networks
and their own premiums. What they are doing is they are
selecting premiums and networks in order to attract the healthy
and avoid the sick. They have become convinced that the healthy
buy on price and that only sick people look really closely at
networks. And so we are getting a race to the bottom on the
networks. Blue Cross, for example, of California has only about
a third as many doctors in its exchange network as it does in
its normal network. We are seeing these networks leave out the
best hospitals and the best doctors.
Now, on the buyer side, it makes sense if insurance is
guaranteed issue. If it has nothing to do with health
condition, why would I not buy on price? And then if I get
sick, if I get heart disease, I will look around for a better
plan. If I get cancer, I will look around for a better plan.
And what we all forget is that if everybody is chasing the
healthy person, when I do get cancer, there may not be a plan
there that provides decent cancer care.
In the exchange, people who are overcharged will tend to
under-insure. People who are undercharged will be inclined to
over-insure. People with serious health problems will choose to
go on platinum plans. People who are healthy will chose the
bronze plan, or more likely, they will simply stay uninsured
and wait until they get sick to enroll at all.
To make these conditions even worse, we have outside groups
who are allowed to do things that I regard as unconscionable.
The Federal risk pool is about to dump all the enrollees in the
risk pool into the State exchanges. All of the State-level
exchanges are about to end their risk pools and dump high-cost
enrollees into the exchange. We have cities and towns
throughout the country that have unfunded post-retirement
promises, and they are getting ready to unload on the
exchanges. The City of Detroit is sending 10,000 retirees, who
are older and therefore more costly, to the exchange. We have
businesses thinking about doing the same thing, ending their
post-retirement health care plans. We have all the people who
are characterized as job lock employees who are working only
because of the health insurance, and they will leave their jobs
and enter the exchange. And then, as I understand it, hospitals
now are allowed under the Affordable Care Act to actually sign
people up in the hospital bed with the hospital paying the
premium.
In my written testimony, I do not talk about all the things
that employers might do, but if you would for me to get into
it, I think that there are many things they can do to game the
system and we are going to see it happen.
In summary, I think that we have underestimated the costs
that are being piled onto the exchange, not overestimating. I
think that this is a potential large strain on the taxpayer,
and the remarkable thing is this is a small market, less than
10 percent of the private insurance population. It was working
reasonably well. And what we have done is unconscionable, bad
policy, and bad ethics.
[Prepared statement of Mr. Goodman follows:]
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Chairman Issa. Mr. Badger?
STATEMENT OF DOUG BADGER
Mr. Badger. Thank you, Mr. Chairman, Ranking Member
Cummings, and distinguished members of the committee. Thank you
for inviting me to appear today to discuss the provisions of
the health care law that have been characterized as insurance
company bailouts.
People generally understand that the health care law
includes subsidies for individuals who buy insurance. It should
not provide subsidies to corporations that sell it. It has been
argued that insurers cannot make a profit without such
subsidies. CBO's most recent estimate on risk corridors suggest
that in the aggregate issuers in the exchanges will realize
premium revenue that substantially exceeds their projected
costs. Their expected profitability is attributable to powerful
tools contained in the law. These provisions help companies
that sells through the exchanges prosper without the need for
various corporate welfare provisions.
The law has handed such insurers enormous opportunities to
increase their revenues and attract more customers, including
healthy ones. It subsidizes the cost of their product. It
penalizes people who do not buy their product.
Regulators have required the cancellation of non-
grandfathered individual and small group policies and will
cancel more later this year, leaving these people with little
choice but to obtain insurance coverage through the exchange.
It is an enormous Government effort that involves driving
business to that segment of health insurers that sells through
the exchanges.
Collectively, these provisions should be sufficient to
induce millions of people into plans sold through the exchanges
without the need for additional Government intervention.
The law's premium stabilization provisions raise concerns
because they create the possibility of back-door assistance
from taxpayers to insurance companies and the moral hazards
that result. The law's risk corridors are among these
provisions. CMS's decision to permit risk corridor
disbursements in excess of receipts is what I find troubling.
It creates the possibility that Government will use public
money to mitigate losses incurred by insurers who improperly
price their products.
CBO's estimate that risk corridors will save the Government
$8 billion over 3 years offers some comfort, but CBO, as we all
know, is often wrong and its new estimate is accompanied by a
number of caveats. There is simply too much uncertainty
surrounding the law's implementation for Congress to rely
exclusively on this latest CBO estimate, which is subject to
change without notice.
Instead, I believe we should amend the act either to repeal
risk corridors or, in the alternative, to stipulate that
aggregate risk corridor disbursements cannot exceed receipts.
If CBO is correct, then the Government will get its $8 billion
in deficit reduction. If it is wrong, taxpayers will be
protected against unforeseen spending.
Now, some might argue that even a change this small and, in
my view, this prudent should not be taken because insurers were
not expecting the change when they established their 2014
premiums last spring. That is not a line of argument that
Government has found terribly persuasive when applied to
individuals and small firms. Millions of individuals and small
businesses were expecting to renew their coverage. They did not
expect to have it canceled, but that did not stop the
Government from ordering the cancellations.
More cancellations will come later this year, according to
CBO, meaning that people will lose their coverage. That is not
their choice but it is their fate. Put on a personal note, my
mother-in-law expected to continue to receive care from the
area's largest health system. She did not expect her Medicare
Advantage plan to drop the system from its network, but that is
one consequence of the Medicare cuts in the law.
Millions of Americans have been asked to adjust, adapt,
evolve, to endure adverse consequences without complaint and
without relief. They are dealing with the unexpected. Congress
should ask no less of insurance companies. Insurers should be
able to make a profit in Government marketplaces even if
Government repeals risk corridors or prohibits expenditures to
exceed receipts. The law's combination of mandates, subsidies,
cancellations, and tax penalties can be expected to induce or
compel millions of people in relatively good health to buy
their product. Individual competitors will suffer losses if
their costs exceed their revenues. That is not the taxpayers'
problem. The Government has established its marketplaces. Let
the insurers compete.
[Prepared statement of Mr. Badger follows:]
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Chairman Issa. Mr. Jost?
STATEMENT OF TIMOTHY S. JOST
Mr. Jost. Thank you, Mr. Chairman, Ranking Member, members
of the committee.
The Affordable Care Act's risk corridor program is not a
bailout. It is a rational approach to risk sharing in a public/
private insurance partnership.
The ACA's premium stabilization programs have arguably
already saved consumers and the Federal Government billions of
dollars, and as we have heard several times today, the CBO is
now projecting that the program will produce $8 billion in
revenue for the Federal Government over the next 3 years. A
very strange bailout.
But the risk corridor program is moreover a commitment of
the Federal Government to private businesses, and breaking this
commitment would not only be a breach of contract, it could
possibly be an unconstitutional taking. The Federal Government
must honor its debts and it must honor its contracts.
The ACA's risk corridors are modeled after the risk
corridor program in the Bush administration's Medicare Part D
drug plan. The Bush administration used risk corridors and
reinsurance to get private insurers to offer a product that
they had not offered before and did not know how to price.
Insurers that offered Medicare Part D drug plans would price
their premiums based on actuarial estimates of what providing
the coverage would cost. If actual costs were higher than
expected spending, the Government would absorb part of the
loss. Conversely, if actual expenses fell below expected
spending, the Government would recover excess gains.
Additionally, the Bush prescription drug legislation reinsured
80 percent of all drug costs above a catastrophic threshold.
These provisions, still in effect today, have been a key to the
success of the Part D drug plan. Moreover, the Part D risk
corridor program has turned out to be a net moneymaker for the
Federal Government in every year it has been in effect.
There is a long history of the Federal Government sharing
risks with private insurers. Federal subsidies to the national
flood insurance program, which Senator Rubio voted to extend
last week, have for 35 years enabled private individuals to
purchase flood insurance through the Federal Government. The
farm bill passed by this body last week included Federal
reinsurance for crop insurance.
The ACA encourages private insurers to offer individual
market coverage without underwriting for preexisting conditions
through the exchanges. Congress built on the experience of the
Medicare drug plan, creating a permanent risk adjustment
program and temporary reinsurance and risk corridor programs.
The Affordable Care Act risk corridors are, in fact, less
generous than the Bush administration's programs, even though
the risk that these companies are taking on is much greater,
but they are intended for the same reason: to achieve stability
for insurers and lower premiums for enrollees. In fact, because
insurers did not have to charge a risk premium for this new
product, premiums for 2014 came in 16 percent below CBO
projections, saving the Federal Government billions of dollars.
A bailout occurs when the Government intervenes to save a
business from its own unwise decisions without a legal
obligation to do so. With the risk corridor program, however,
the Government has encouraged insurers to take a risk by
sharing, not assuming the risk. The Federal Government has
entered into a contract with insurers to provide coverage
through the exchange. Insurers relied on the premium
stabilization program in setting their premiums.
But most importantly, removing the backstop of the risk
corridor program would put private insurers at higher risk,
possibly leading to insolvencies that would need to be covered
at great expense by the State and Federal governments. It would
lead to fewer participants and higher premiums in 2015. Since
the full cost of premiums in the exchange is borne by the
Federal Government, once lower and middle income enrollees pay
a set percentage of their income, the cost of this program to
the Federal Government would increase dramatically.
The risk corridor program is a commitment of the United
States Government to private businesses, which it has partnered
with to offer a public service. It is modeled after a
successful program created by the Bush administration. Just,
again, as the United States must not default on its debts for
narrow political purposes, it must not breach its promises.
Doing so is not only a breach of trust, it is also a foolish
and short-sighted public policy.
Thank you.
[Prepared statement of Mr. Jost follows:]
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Chairman Issa. Thank you.
I will now recognize myself for a series of questions, and
I have a lot of questions.
Mr. Jost, just so you understand--and you can comment back
for the record, but I read the elements of the bill. The
insurance companies are entitled to absolutely nothing unless
Appropriations appropriates money. So technically we can take
the tax, take all $16 billion of the tax, and pay none of the
$8 billion. Statutorily we say we do it, but it is subject to
appropriations. So I know the President is a constitutional
scholar. I would appreciate it if you would answer for the
record on your view of it after researching it.
Chairman Issa. Mr. Goodman, I want to ----
Mr. Jost. Can I respond to that or will I have time later?
Chairman Issa. No. You helped write the bill. So the fact
is that is what the bill says.
Mr. Badger and Goodman, I have got a bunch of questions and
very little time. Let me just understand a couple of things
that the public needs to understand that are tangential but are
part of this.
There is an estimate of $16 billion to be gotten from
overpayments, meaning I pay too much because I am in ObamaCare.
I pay too much. The Government does not get it rebated when, in
fact, I paid too much for my--I think it is a gold plan that we
are required to buy. I pay too much. The Government takes that
money. They do not let me get the discount for overpayment. Is
that correct?
Mr. Goodman. I think that is right.
Chairman Issa. They then--let us just say the Blues, United
Health, any of them. They have another one that is a loss
leader that they charge too little on. They get my money for
the one when they were trying to buy market share. Is that
right?
Mr. Goodman. That is right.
Chairman Issa. Now, it could be the reverse. I could be
getting the loss leader and somebody else could be paying.
So this whole balancing act includes the assertion that you
take from one group of people who pay too much and give it to
another, give it back to the companies.
Additionally, are they not taking $63 from every insurer in
the way of a tax so that every American is paying $63 to fund
exchanges?
Mr. Goodman. For the next 3 years, yes.
Chairman Issa. For the next 3 years. So Americans who are
losing the health care plan they wanted, the doctor they
wanted, and so on, but have a private plan are paying $63 to
run these exchanges. It is just another tax, a hidden tax.
Is there not another $100 billion or so in health insurance
taxes that are also being paid that are funding ObamaCare?
Mr. Goodman. Yes. Everybody is being taxed, even the
Medicare Advantage plans, the Medicaid managed care plans. They
are all being taxed.
Chairman Issa. Okay. So Americans are seeing part of their
health care costs going up, in fact, for taxes that are being
paid for subsidies like the underwriting here in this bill.
Mr. Goodman. Yes.
Chairman Issa. It is amazing that they passed a bill that
could hurt so many people, including the people who already
were paying out of their own pocket for their insurance.
Mr. Badger, you were active in Medicare Part D and you saw
it. Is it true that Medicare Part D has a substantial
difference in what we did or did not know about Medicare Part D
versus what we did or did not know about these plans?
Mr. Badger. Yes.
Chairman Issa. And in the case of Medicare Part D, it has
been giving us revenue. Is that correct?
Mr. Badger. That is correct.
Chairman Issa. And is that revenue not essentially from
overcharging for Medicare Part D?
Mr. Badger. It is revenue that derives from the fact that
insurers' actual revenues exceeded their costs by more than
they expected.
Chairman Issa. So the source that CBO was scoring--and I am
not going to get into as many things as some other members
might, but the source of this revenue that we are talking about
coming to the Government as a good thing is, in fact, taxing
our senior citizens. Whenever there is an overpayment, too much
for the insurance, instead of rebating it back to the senior,
we are taking it as tax revenue. Right?
Mr. Badger. The revenue is collected and it is not
distributed ----
Chairman Issa. So our seniors are being taxed on their
paying too much for Medicare Part D. Right?
Mr. Badger. It has to calculate that way.
Chairman Issa. So it is not all that good a program when it
goes on in perpetuity. Is it?
Mr. Badger. A risk corridor program? I would agree. It is
not one that goes on in perpetuity.
Chairman Issa. So if we were going to do a risk corridor
program, would it not be fair to make sure that at least the
excesses in the reductions are fairly distributed back to the
insured rather than going to the Federal Government as just
another tax on people trying to buy necessary health insurance?
Mr. Badger. I had not thought about that approach, Mr.
Chairman, but at the very least, I would say that the
Government should not pay out more in disbursements to
insurance companies than it collects.
Chairman Issa. You know, being a bleeding heart
conservative I guess here, I am trying to figure out why
people's necessary health care should be increased in price,
called a revenue, so that if CBO is right, what we are really
doing is taxing their health care and making it more expensive.
And if they are wrong, what we are doing is taking the American
people's hard-earned tax dollars to bail out insurance
companies. We really lose either way as buyers of insurance. Is
that not true, Mr. Goodman?
Mr. Goodman. I would say so, yes.
Chairman Issa. Mr. Jost, the one item I wanted to have you
respond for the record. But any of the questions I ask now if
you could briefly comment on them. I am certainly happy to hear
it.
Mr. Jost. Well, the purpose of the Affordable Care Act was
to cover people in ----
Chairman Issa. No. My questions, please, were all about are
we not causing seniors to pay too much, are we not taxing
health care. I mean, you helped write this thing, and I am
seeing a series of taxes on hard-working Americans to pay for
this that hard-working Americans did not know about. If you
want to comment on that, that was my question.
Mr. Jost. I actually had nothing to do with writing this
legislation.
Chairman Issa. You have previously testified on a number--I
thought you were more involved.
With that, I yield to the gentleman from Maryland for his
questions.
Mr. Cummings. Mr. Jost, please--first of all, thank you for
clearing up that you did not write the legislation, you were
not involved in that. And I want to thank you for your
scholarly work.
Now, would you now respond? I think you wanted to respond
to something that you did not get a chance to respond to that
was asked by the chairman.
Mr. Jost. Yeah. An issue that I thought would come up
today--and the chairman just raised it obliquely--was a CRS
report that was made public yesterday that was actually passed
on to the majority 10 days ago, but it was leaked to the press
yesterday and first seen by minority staff and myself, claiming
that appropriations are necessary before the risk corridor
program can be operationalized. And I would just refer this
committee to the case of Salazar v. Ramah Navajo Chapter from
the Supreme Court in 2012 in which the Supreme Court said the
United States are as much bound by their contracts as are
individuals. Although the agency itself cannot disburse funds
beyond those appropriated to it, the Government's valid
obligations will remain enforceable in the courts.
For better or for worse, the Federal Government--Congress
through this statute has made a commitment to the insurers that
if you enter this risky market, we will share the risk. We will
not free you from the risk because the risk remains shared.
Companies that under-price their products will not make a
profit, but the Government is sharing the risk to draw them
into this market. And at this point, after the insurers have
set their rates after they have gone into the market, to turn
around and tell them that we are not going to honor the
obligation set out in the law I think would be unconscionable.
Mr. Cummings. Let me just ask you a few questions to follow
up on that.
Medicare Part D was one of President Bush's signature
legislative initiatives. It was supported by Senator Mitch
McConnell, John Boehner, Speaker Boehner, Majority Leader
Cantor, Budget Chairman Ryan, and Chairman Issa, all of whom
voted for the bill. Medicare Part D included risk adjustment,
reinsurance, and risk corridor programs. Is that right,
Professor?
Mr. Jost. That is correct.
Mr. Cummings. Those are the same programs that Republicans
are now calling a bailout now that they are part of the
Affordable Care Act. I do not understand why Republicans were
for these provisions before they were against them.
But one real difference is clear. They are obsessed with
destroying the Affordable Care Act, and this is just a new
proposal to do just that.
Professor Jost, can you explain why these risk mitigation
programs were included in Medicare Part D? How did these risk
mitigation programs impact the participation of insurers in the
cost of premiums? And finally, do the Affordable Care Act risk
mitigation programs work in the same way to increase
participation of insurers and stabilize the cost of premiums?
You got those three questions?
Mr. Jost. Yes.
The problem that the Bush administration faced in 2003 is
that it was asking insurers to create a product that they had
not previously marketed, a prescription drug plan for senior
citizens. The three R's in the Bush drug plan served exactly
the same purpose that they do here. They provided reinsurance
for catastrophic costs. They provided risk corridors so that if
insurers who priced their products inappropriately to begin
with could have some comfort that they would not suffer great
losses, although they did it differently, but risk adjustment
to move profits from the insurers who ended up cherry-picking
to those who did not deal with the problem that Dr. Goodman
raised. Exactly the same thing happens under the Affordable
Care Act.
As the chairman pointed out, there are fees that are
imposed on insurers throughout the group market and the
individual market to move funds not just to the exchanges but
to all individual insurers to reinsure high-cost cases to try
to make the individual market work, which it has not in the
past. There is risk adjustment so that if insurers cherry-pick,
they will have to pay the ones who take on the high losses. And
then there are these risk corridors which again are there as
kind of a flywheel to stabilize the program.
It was mentioned that risk is going to be higher because of
the transition policy announced by the Obama administration.
The GAO factored that into account. It said that would decrease
the revenue of the Federal Government from the program from
$8.5 billion to $8 billion.
Mr. Cummings. And the risk corridor program for the
Affordable Care Act is 3 years. Is that right? It has a limit
of 3 years?
Mr. Jost. That is correct. It is only 3 years. So is the
reinsurance program.
Mr. Cummings. And what about the prescription drug program?
Mr. Jost. That has turned out to be indefinite.
Mr. Cummings. Indefinite?
Mr. Jost. Yes. I mean, it is still in effect. It is
actually still making money for the Federal Government.
Mr. Cummings. Very well. That is the same one that Senator
Grassley applauded as being so great.
Mr. Jost. That is correct.
Mr. Cummings. Very well.
Mr. Farenthold. [Presiding] Thank you, Mr. Cummings.
Mr. Jost, I was informed by the majority staff Mr. Jost
made a comment that they had had this for quite some time, and
they indicate our staff just got that yesterday as well. It was
originally requested by the Energy and Commerce Committee.
Without objection, I would like to enter the report into the
record so everyone has access to it.
Mr. Jost. I was informed that no minority staff of any
committee had heard it or seen it heretofore.
Mr. Farenthold. Thank you.
At this point we will go to the gentleman from Florida, Mr.
Mica.
Mr. Mica. Well, thank you, Mr. Chairman and members of the
committee.
First of all, you know, I have the greatest respect. We
have had a great working relationship with the ranking member,
Mr. Cummings. But I really have to disagree with him on some of
his opening comments. I made a few notes.
You know, he gave the soliloquy about how we are covering
all of these people. Actually if you look at the facts of the
impact of ObamaCare, I have to say this that the facts differ
with what the ranking member said in fact. Even if you took the
best estimates of 2 million sign up, you have got about 40
million people who we have left behind with health care.
Republicans want to find a way to provide health care in a
cost-effective manner in which we make affordable health care
available, and that was the intent of this. The 2 million they
have signed up--Mr. Badger just testified--did you not, Mr.
Badger--about how many people--it is just a big cost-shifting
scheme that we have got here. You told me Detroit--was it you
or Goodman? You said, Detroit, 10,000.
Mr. Goodman. Yes.
Mr. Mica. Yes. I am a victim. I did not want to sign up for
that. The chairman had--he has got the gold plan. I think I got
the bronze plan. I am getting screwed. Excuse the terminology
before the committee. I am paying more. My deductibles are
three times as much. I am forced on it.
But you are telling me here in the testimony we have heard
today we have got cities shifting pension plans. We have got
States dumping into the exchange. That is the great success,
shifting the cost? Is that what you testified to, Mr. Goodman?
Mr. Goodman. Yes, it is.
Mr. Mica. This was predicted to be a train wreck. This is a
massive train wreck. You know, you can only put so much--even
at Thanksgiving, you can only put so much parsley around the
turkey, and you have still got a turkey. This is sinful that we
are spending billions of dollars to set up this mess. The
Government is the worst in setting anything up, and we have
seen that from a technological standpoint. But from a coverage
standpoint, of signing up people.
Okay, here is CBO. The chairman started out today--this is
the great success. We have displaced 2.5 billion people in
work. Did you see this, Mr. Goodman?
Mr. Goodman. Yes.
Mr. Mica. I think that is an underestimate because if I was
in business--I was in the private sector. The first thing you
do--the 29 hours. He has forced already millions of people into
part-time employment. Would you agree with that?
Mr. Goodman. I would.
Mr. Mica. Yes. They have been doing it. They did it in
anticipation. These are full-time jobs--CBO.
Here. I want to put this in the record too. In 2024, there
will be 31 million people still uncovered in a decade. That is
sinful. That is a shame. And we are trying to cover people in a
decade. Did you agree with this, Mr. Goodman or Mr. Badger? Did
you see this?
Mr. Goodman. Yes.
Mr. Mica. Here is another point. Surprise. Millions of
people who liked their insurance plan will lose their plan.
They predict--and I have heard it is 5 to 6. They are
predicting 6 to 7 fewer million people will have employment-
based coverage. This is, again, CBO, not mine. This is not my
estimate.
And then a fourth point. I am going to make five of them
out of this report. ObamaCare reduces the incentive to find and
keep a job. Not my comment. Boy, this is great getting people
productive, employed, self-reliant, contributing to society and
they are being able to support their family. This is a shame.
And then finally, here people are struggling to put gas in
their car, pay their fuel bills, keep their kids in school,
trying to make it, and the CBO says their paycheck--wait,
listen--will be borne primarily by workers in the form of
smaller, after-tax compensation. Do you agree with that, Mr.
Goodman, Mr. Badger?
Mr. Goodman. I do.
Mr. Mica. This is a disaster for the working people of
America and people without health care who need health care who
should be covered by health care and then shifting the burden.
This is just a big scheme to shift costs that has failed. Is
that right, Mr. Goodman?
Mr. Goodman. Well, I do not know if I would use those exact
words.
Mr. Mica. I would. I did.
Well, you said insurance is a business game. Somebody has
to cover the costs. Right now we are shifting the costs. We are
dumping the costs on the taxpayers, and it is going to be a lot
to pay. And we are shifting the costs on people who had
insurance who will lose insurance or see higher premiums.
Gentlemen, Mr. Badger, Mr. Goodman, is that not the case?
Mr. Goodman. I believe it is.
Mr. Badger. Yes.
Mr. Mica. Thank you.
I yield back the balance of my time.
Mr. Farenthold. Thank you, Mr. Mica.
We will now go to the gentlelady from the District of
Columbia, Ms. Holmes Norton.
Ms. Norton. Thank you very much, Mr. Chairman.
Just to make it clear about the so-called 2 million jobs
being lost, the Affordable Health Care Act has apparently freed
2 million who wanted to retire, wanted to leave the workforce,
or perhaps get part-time work or to start their own businesses,
but did not do so because there was no other way to keep their
health care except to keep the jobs they did not want to hold.
Now, I want to ask about this risk corridor, Mr. Jost.
Actually I was totally unfamiliar with the risk corridor until
this hearing, and given the way in which it was framed, it
seems strange for me to hear that Democrats were protecting the
insurance companies. So I had to look further into it, and I
said to staff, go get me how conservatives would justify these
risk corridors that they are responsible for getting into Part
D. And so they came back with some remarkable commentary that I
would like to ask you about. I told them I wanted only to hear
about how Republicans, who after all authored this notion,
would justify this. And here is one they came back with.
Christopher Holt of the American Action Forum. The risk
corridor and reinsurance provisions in the Affordable Health
Care Act made policy sense at the time the law was drafted,
made policy sense today, and protect consumers. They do not
constitute a bailout. It is a refutation of the total theme of
this hearing.
Do you agree with that, Mr. Jost?
Mr. Jost. Yes. A number of conservatives ----
Ms. Norton. If you could withhold statements, Mr. Jost. I
just want to clarify where this came from and whether it is
still justified by the conservatives who were responsible for
it in the first place.
Go ahead, sir.
Mr. Jost. I would just say I assume you are going on, but
this has been said by quite a number of conservative
commentators, that this makes business sense.
Ms. Norton. Let us take the consumers. Democrats have not
been known for protecting insurance companies. They have been
known for beating up--forgive me--on insurance companies for
not protecting consumers. How do these provisions protect
consumers?
Mr. Jost. Well, the way in which they protect consumers is
that if I were an insurer--and I am a consumer representative
to the National Association of Insurance Commissioners. I have
been on a lot of calls with insurance actuaries discussing the
Affordable Care Act. This is a risk that is very hard to price.
If I were an insurance company without any of this backstop
that was put into the law, I would have priced premiums very
high to make sure that I covered my risk. But insurers could
look at it now and price their policies at a reasonable rate,
in fact 16 percent less than what the CBO had projected,
because they knew that if they were off the first year, there
was a backstop. Now, second year, third year, we are going to
have better estimates, and as in the Medicare Part D plan,
premiums are going to be closer to pricing as to what the
actual actuarial risk is. But these programs are very important
for consumers to make sure that premiums are priced without
charging a fortune to cover the risk that is there.
Ms. Norton. So the ultimate benefit is to the consumer.
Mr. Jost. Absolutely.
Ms. Norton. So could these risk corridors in your view be
characterized as a bailout in any sense of the word?
Mr. Jost. No, not any more than the flood insurance program
is a bailout, the crop insurance program is a bailout, the
terrorism risk insurance--they are all programs where there are
very high risks and actuarial uncertainties that the ----
Ms. Norton. Let me just quote another. I just cannot get
over what conservative commentators have said.
Here is another from the Manhattan Institute. Risk
adjustment mechanisms get you the buy-in of insurers, but they
also keep premiums at manageable levels while insurers develop
experience to properly price on their own. This helps encourage
people to enroll in these plans which, in turn, helps insurers
develop the necessary pricing experience, resulting in a
virtuous cycle.
Professor Jost, do you agree with the Manhattan Institute
statements?
Mr. Jost. I think for once they are right.
Ms. Norton. You said what?
Mr. Jost. For once they are right.
Ms. Norton. You know, it is interesting, Mr. Chairman,
where Republicans and Democrats have adopted the same mechanism
and there are things about this bill that I think both
Republicans and Democrats need to be fixed, but the very last
thing I would focus on is something that Republicans and
Democrats have agreed about in the first place.
And I thank you very much, Mr. Chairman, and I yield back
the remainder of my time.
Mr. Farenthold. Thank you very much.
We will now recognize the gentleman from Tennessee, Mr.
Duncan, for 5 minutes.
Mr. Duncan. Well, thank you very much, Mr. Chairman.
Mr. Mica referred to the train wreck quote, and as almost
everyone here knows, that quote about ObamaCare being a giant
train wreck came not from a Republican, but from Senator
Baucus, the chairman of the Senate Finance Committee and one of
the health care leaders for the Democratic Party.
And then, of course, Speaker Pelosi famously said we would
have to pass this legislation before we could find out what was
in it. And every week, the more we find out, the worse it gets
including, as the chairman mentioned briefly, the estimate by
the Congressional Budget Office that this is going to destroy 2
million jobs over the next 3 years.
But this was sold as being a law to get medical insurance
or health care for those who were uninsured. I heard a program
last night in which they said that the original estimates of 30
million or a little more maybe being uninsured was really
incorrect, that the number was more like 9 million or 10
million who actually did not have it, and some of those were
people who were between plans and were choosing not to have
coverage.
Dr. Goodman, I would be interested to know if you know what
was the accurate figure then. And also, I have two articles in
front of me that say that at least two-thirds of the people who
have signed up now already had coverage. I did not get to hear
your testimony. I was at another committee. Is it accurate that
at least two-thirds of the people who have signed up so far
already had coverage before this legislation was passed?
Mr. Goodman. There are estimates even higher than that,
estimates that only 11 percent in one survey were previously
uninsured. So that means 89 percent had previous insurance. So
we appear not to be doing a very good job at insuring the
uninsured.
Mr. Duncan. Would not the best way to get people--to get
our health care costs under control would be to give
individuals more control over their own medical spending either
through the vouchers or tax incentives or other ways?
Mr. Goodman. Well, the Affordable Care Act does some of
that. The problem is that it does a lot of things that should
not be done that I described in my testimony. It is allowing
pools with a lot of high-cost sick people to dump into the
exchange, to dump into the individual market which previously
was a market that worked pretty well, and now it is going to be
a very high-cost market.
Mr. Duncan. So I am told that Detroit and Chicago and
possibly other cities are considering or are in the process of
dumping their older, sicker retirees onto ObamaCare. Is that
correct?
Mr. Badger. I believe Detroit has done the deal. That is
about 10,000 retirees, and because they are older, they are
going to be higher-cost. Chicago is considering it.
But there are lots and lots of cities around the country
that have made unfunded promises about post-retirement health
care. So there are a lot of potential costs that could be going
toward the exchanges.
Mr. Duncan. Charles Krauthammer wrote this. He said the
whole scheme was risky enough to begin with, but things have
gotten worse. The administration has been changing the rules
repeatedly. First, it postponed the employer mandate. Then it
exempted from the individual mandate people whose policies were
canceled by ObamaCare. And for those who did join the
exchanges, Health and Human Services Secretary Kathleen
Sebelius is strongly encouraging insurers to, during the
transition, cover doctors and drugs not included in their
clients' plans. The insurers were stunned, told to give free
coverage, deprived of their best customers, forced off or
stripped down catastrophic plans to over 30 clients contrary to
the law. These dictates, complained their spokesman, could
destabilize the insurance market. Translation: how are we going
to survive this? End result: insolvency.
And I think most of us feel that he is one of the most
accurate and intelligent people on the scene today.
Mr. Badger, I was asked by the staff to ask--they think
that you may have some disagreement with Mr. Jost about the
necessity of these risk corridors or a little different view.
Mr. Badger. I have a different view. My concern has been
regulatory issuances and pronouncements from CMS that had been
repeated now throughout the time period that they could make
payments to insurance companies out of the risk corridor plan
that exceed the amount of money that other insurers have paid
in. If the risk corridors are merely, as they are in Part D,
and in the risk adjustment program both in Part D and in this
law, simply moving money from insurers that are doing well to
insurers that are struggling--I have no problem with that.
The problem I have with the way the risk corridors are
being applied by CMS is that it allows insurance companies to
say to the taxpayer we have a problem, I lost money. And that
is the behavior that I think should be of concern to Congress
and that it should correct.
Mr. Duncan. All right. Thank you. Unfortunately, I have run
out of time. Thank you.
Mr. Farenthold. The gentleman's time has expired.
We will now recognize the gentlelady from California, Ms.
Speier.
Ms. Speier. Mr. Chairman, thank you.
You know, I have a fantasy that I would like to share with
you, and it is a fantasy that we would have a new House rule
that would require members to wear Pinocchio noses every time
they make a statement that is not true because if they had to
walk around with Pinocchio noses on, they would be careful
about the kinds of statements they make.
Now, the statement that has been made by the leadership of
both houses in the last 24 hours is that we knew it was true,
it is true. The CBO now says it is true. 2 million jobs will be
lost as a result of the Affordable Care Act. And that statement
is just false.
The ``Washington Post'' fact checker gave the claim three
Pinocchio noses with a headline that read: ``No. CBO Did Not
Say ObamaCare Will Kill 2 Million Jobs.'' The fact checker
explains it like this.
First, this is not about jobs. It is about workers and the
choices they make.
He further explains, look at it this way. If someone says
that they have decided to leave their job for personal
reasons--they just decided they wanted to retire early--we
would not put them in the category of having lost their jobs.
The ``New York Times'' editorial board called this a
liberating result of the law.
So in other words, the report is about the choices workers
can make when they are no longer tethered to an employer
because of their health insurance. And there are so many
Americans that stay in jobs just because they have to keep
their health insurance.
So my question is to you, Professor Jost. Please do your
best to clear this up. Can you explain how the Affordable Care
Act frees individuals and how it does not kill jobs in this
country, but has actually the reverse effect?
Mr. Jost. Like you, I run into people all the time who tell
me I would love to quit this job, but I cannot because I have
to be here for health insurance.
About 15 years ago, my brother-in-law basically quit his
job. He had health insurance through his wife, fortunately, but
he went out on his own and started a company that is now a
household name that is worth billions of dollars. My wife and
her family all were part of that startup.
Ms. Speier. What is the name of it?
Mr. Jost. Rosetta Stone.
But he was able to do that because he did not have to worry
about health insurance, or at least he was able to go out there
on his own without it. There are many, many Americans like that
today who would like to go out and fulfill their dream, but
they are stuck in their job because of health insurance.
What the Affordable Care Act says, if you are making less
than 400 percent of poverty, which includes a lot of
entrepreneurs in this country, you can go out and you can
fulfill your dream or you can just stop working at 60 because
you are tired and you can get health insurance regardless of
your health status. That is a very liberating thing, and that
is what the CBO recognized yesterday.
In fact, they did say there are concerns about employers
cutting back on employment and cutting back on hours. That did
not figure into their calculation because they said there are
just too many unknowns there. There are reasons why employers
might expand their workforce. There are reasons they might cut
back.
But the 2.5 million full-time equivalents is people who are
stopping work because they have the freedom to do so or
reducing their hours.
Ms. Speier. Let me ask you a further follow-up question on
risk corridors. The risk corridors and reinsurance provisions
in the ACA are really the same McConnell-Boehner provisions
that were included in the Medicare Prescription Drug
Improvement and Modernization Act. I know Mr. Badger is shaking
his head no, but the truth is there is reinsurance in both
programs. And this reinsurance, unlike the reinsurance in the
Part D, is one that exists only to 2017, and there really is no
Federal dollars involved.
So my question, Professor Jost, is it is my understanding
that the Congressional Budget Office just this week released
its revised budget outlook for 2014 to 2024, and it scored the
reinsurance program as budget-neutral. Is that correct?
Mr. Jost. It is because under the statute, only the money
can be spent that is brought in under the program.
Ms. Speier. And is it not also true that in essence there
is a transfer of funds between insurers, and thus it has no
impact on the Federal budget?
Mr. Jost. That is technically correct, yes. I mean, it is a
tax that it has imposed on insurers in the group market
primarily to subsidize the individual market for 3 years, in
part because of these transfers from the group market to the
individual market that have already been discussed.
Ms. Speier. And when we talk about Medicare Part D, was
there not also reinsurance involved in that program?
Mr. Jost. Yes, there was.
Ms. Speier. And how did that work?
Mr. Jost. Well, there still is reinsurance. In fact, the
risks borne by Medicare Part D insurers is very, very small,
and up until recently it was very small because it was only up
to the point you hit the donut hole. At that point, there was
essentially reinsurance from Medicare beneficiaries who covered
the full cost up until you got to the catastrophic. When you
got to catastrophic, the Government picks up 80 percent of the
risk. The insurers only picked up 15 percent, and the
beneficiary picked up 5.
Ms. Speier. Mr. Chairman, thank you. I see my time has
expired.
Mr. Farenthold. Thank you very much.
I am up next. One of my least favorite times when I was in
the private sector was the time I had to redo the insurance for
my employees. I want to kind of step back a little bit and take
an overview about this. I will start with you, Dr. Goodman.
The way insurance works is they sell policies to a bunch of
people, and hopefully the money that comes in from that covers
the losses for the people in that group. So it ends up the
healthy people end up subsidizing the 52-year-old, overweight
Congressman with high blood pressure in a high-stress job. Is
that basically how insurance works?
Mr. Goodman. Well, that is true in every market. But in
most insurance markets, the premium that was charged at the
point of entry reflects the expected cost then.
Mr. Farenthold. Right. What we had in ObamaCare then was
the idea we have got a whole new market and the insurance
companies are concerned that they do not know how to price this
and what the actuarial risk is, how many unhealthy people
versus healthy people. Is that an accurate statement of part of
the problem?
Mr. Goodman. Yes, and we could be stronger than that. We
have built perverse incentives into the structure of the
market, and I think that is totally unnecessary.
Mr. Farenthold. All right. So as a result of this, part of
the deal that was struck in ObamaCare is we put these risk
corridors in so that taxpayers are potentially on the hook in
the event that the loss ratio is out of whack. Is that a fair
assessment of ObamaCare and what we are talking about today?
Mr. Goodman. Sure.
Mr. Farenthold. All right. So let me ask you a question.
The President has been under a lot of fire for his statement,
if you like your health insurance, you can keep it, and there
have actually been some changes made to ObamaCare as a result
of that. As a result, the policy offerings have changed. Is
that going to run up the cost potentially to insurance
companies and increase the amount taxpayers may be on the hook
under these corridors?
Mr. Goodman. Well, I think the way they have changed some
of the rules of the game within the last month or so has
increased the riskiness of the products in the market.
Mr. Farenthold. All right. Now, assuming you owned an
insurance company, would you have jumped into ObamaCare but for
these risk corridors? I mean, would you have said, all right, I
am out of the health insurance game or this is too risky, or
would you maybe have run your prices way up?
Mr. Goodman. Well, you got to understand I do not have a
problem with the risk corridor. What I have a problem with are
the poor design of the exchange which is then going to put
taxpayers at great risk to pay for those design mistakes. It is
not insurance company mistakes.
Mr. Farenthold. Mr. Badger, do you want to weigh in?
Mr. Badger. Yes. Again, I do have concerns with the way
risk corridors work in this law as opposed to Part D and
particularly with the way CMS said they would work, and that is
to say that because of the problems that are created for
insurance companies, CMS is going to give them direct subsidies
out of taxpayer funds, not out of revenues that come in.
Mr. Farenthold. All right. So let us go to this scenario.
Suppose we decide we are not going to do these corridors and we
pull them out. The insurance companies are going to be on the
hook for these losses. Is there a way they are going to be able
to reinvent their policies and stay in business? How do we get
out of this without bankrupting the insurance companies and
have no insurance market at all left and potentially end up
with the Government being the only insurer of last resort?
Mr. Badger. Well, that raises other questions about the
law's design that Dr. Goodman has raised.
But I guess the principle I would like to lay out is this.
If you cannot make a profit without corporate welfare, you
cannot make a profit, and we should not be putting taxpayers in
the position of having ----
Mr. Farenthold. But were insurance companies not making a
profit before ObamaCare?
Mr. Badger. Yes, they are. And they may well make a profit
in ObamaCare. CBO's announcement yesterday suggests that they
will do very well. If they are paying $16 billion in and only
taking $8 billion out of the risk corridors--I do not think
they are right about that, but if they are, CBO thinks they are
going to make a profit.
Mr. Farenthold. Dr. Goodman?
Mr. Goodman. There is a better way of doing this. We call
it change of health status insurance. But the fundamental
principle is the insurance pools do not get to dump their sick
people on other insurance pools. If we would just follow that
principle, the taxpayer would be far less at risk than they are
right now.
Mr. Farenthold. And you think this could be done as a tweak
to ObamaCare somewhere? We got such a big, massive law. Our
side, I think, wants to be done with it and start over. Can
this be done short of starting over and maybe get some of our
colleagues on the other side of the aisle to help?
Mr. Goodman. Yes, but I would not call it a tweak. It would
require a fundamental restructuring of the exchanges, and they
would probably, at the State level, have to be instructed to
move over time to a rational form of insurance.
Mr. Farenthold. We could talk about this a good bit longer,
but I see that my time has expired. Just because I am in the
chair does not mean I get to break the rules. So I will move
along and recognize Mr. Massie for 5 minutes.
Mr. Massie. Thank you, Mr. Chairman.
The chairman makes a good point. I would like to look into
it a little bit more.
Senator Rubio made the observation that when the President
tried to retroactively make good on his broken promise, his
empty promise that if you like your health care plan, you can
keep it, by unilaterally forcing insurance companies to
grandfather insurance policies that were not included in the
Affordable Care Act, he actually increased the likelihood that
the bailout provisions of the risk corridor program would be
invoked.
And I would like to give everybody on the panel here a
chance to answer this. Do you agree with Senator Rubio's
assertion that by changing the rules midstream that the
President actually increased the probability that the risk
corridor would have to be invoked?
Mr. Goodman. Well, if all the insurers price their products
on the assumption, let us say, by the end of this year, 80
percent of the people in the individual market would be in the
exchange and then we change the rules and say, no, if you are
healthy and you are in a plan that you like, you can stay
there, yes, of course that increases the cost and the riskiness
of the exchange.
Mr. Massie. Thank you.
Mr. Badger?
Mr. Badger. My understanding is that CBO quantified that at
about half a billion dollars in payments that would come out of
the risk corridor program to insurers.
Mr. Massie. Mr. Jost?
Mr. Jost. Yes, and therefore, it reduced the surplus to the
Federal Government from $8.5 billion to $8 billion, but yes,
that did increase the risk. It was, of course, a response to a
political firestorm over the cancellation issue, which I think
was largely a bogus issue, but that was the administration's
response.
Mr. Massie. Well, I am glad to hear that all the witnesses
agree that the President actually, by trying to change this law
midstream unilaterally without Congress, has increased the risk
that taxpayers will be on the hook for the insurance companies'
losses.
Mr. Badger, you have stated that--I think you have stated
in the past that the reinsurance provision and risk corridor
provisions limit insurer competition. Does the risk corridor
program, even if it worked as some people say it does by taking
a pool of money and distributing it among the insurance
companies, even if it worked that way and did not take taxpayer
money--does it not just reward unsuccessful competitors with
money it confiscates from successful ones?
Mr. Badger. Well, there is no question that the formula, in
effect, works that way so that if your losses exceed your
target amount by more than 3 percent, that you would be
entitled to payments out of the pool. So if it functions
properly, it is a redistribution from insurers who were
successful to those who were less successful.
Mr. Massie. Let me ask you another question. You have
argued that the individual mandate was put into place actually
to benefit insurance companies, I believe. Is that correct?
Mr. Badger. Yes. My point was, unlike Part D where we did
not have the IRS penalize seniors who did not sign up for drug
coverage, the argument here was that insurers could not succeed
unless there were, in addition to subsidies, both penalties on
people who did not buy and as well canceling policies that
people would have liked to renew. So, yes, the idea is these
were all provisions designed to help insurance companies
succeed despite some of the distortions that Dr. Goodman has
talked about.
Mr. Massie. Speaking of distortions, does this risk
corridor provision not incentivize the insurance companies to
offer artificially low sort of introductory rates because they
have a backstop? Would their first rates not be higher without
this risk corridor provision?
Mr. Badger. There is moral hazard. And understand again,
unlike Part D, everybody is offering the same benefit package.
So the only way to distinguish yourself really in the
marketplace, aside from provider networks, is by price. So if
we are both selling silver plans, chances are the person with
the lower price will get the most enrollees. So, obviously, if
you believe that the Government will share in your losses,
there is a moral hazard that you will price too aggressively in
order to drive competitors out and gain market share.
Mr. Massie. Thank you.
Mr. Goodman, in my remaining time, you mentioned in your
opening statements that employers could game the system, I
believe. Could you elaborate on that?
Mr. Goodman. Well, one of the techniques that they are
going to use is they are going to cover preventive care with no
lifetime cap, and that gets them out from under the $2,000
fine. But these could be mini-med plans. So if a worker gets
sick and goes to the exchange, then the company can be fined
$3,000. But if a worker goes to that length, his medical
expenses will probably be way in excess of $3,000. So this is a
way, just one--and we could talk about others--for employers to
move their sickest, most costly employees over to that exchange
when they have a health problem.
Mr. Massie. And this is one reason that the way this
program is set up it is just not going to work. Is it not?
Mr. Goodman. Well, there are many, many ways to game the
system, and if we do not deal with all of that, we are going to
have huge problems in the future.
Mr. Massie. Thank you. My time has expired.
Mr. Farenthold. Thank you very much.
We will now recognize the gentleman from Georgia, Mr.
Collins.
Mr. Collins. Thank you, Mr. Chairman.
I think one of the things that we get lost in many times
here is we lose--and I have tried to bring this to light over
time--is we lose the human face of what we are talking about.
It is easy to come up here and talk about bailouts, risk
corridors. Frankly, that does not mean anything.
And frankly, Mr. Jost, just a moment ago, you said that you
felt like that the dropping of insurance coverage was a bogus
issue. If you would like to come to the 9th District of
Georgia, I will be happy to show you people who have lost their
coverage who are dealing with this right now. I think that was
one of the most callous statements that I have heard today in
this hearing, and I think to say a bogus issue on people who
are actually losing insurance and having trouble with this plan
is not--there has been at least acknowledgement on both sides
of the aisle that there is a problem here. And I mean, to say
that is just, frankly, to me is just very callous to those who
are having to deal with the results of what has become a very
bad law.
Mr. Jost. I would be happy to explain the response, if you
want me to.
Mr. Collins. At this point, I think your response was clear
enough, Mr. Jost.
Reclaiming my time. One of the issues that I have seen and
one of the issues here dealing with insurance--and again, I
think the insurance companies--we can deal with that in this
risk corridor issue. We can deal with it from how the system
was set up. Mr. Massie made a great point on how we are
actually making it worse in some ways.
But mine is overall and dealing with a system in which
people are having to deal with. And one is a constituent of
mine I talked to yesterday, Rebecca Lambert. She is from
Stephens County. It is a little place up in northeast Georgia,
Martin. She runs a small business, Calico Country Store. It is
one of those one-stop shops. Up in my part of the world, you
get a lot of these. You can buy groceries. You can buy plumbing
equipment all in the same place.
She is recently widowed and she is struggling to run the
store. And in doing so, all of this for the first time, she
pays her bills, she pays her taxes, she works hard. And she was
not real thrilled to find out she was going to have to go
through ObamaCare and do this to start with. She did not want
the dictate of how she had to do it and went ahead. But being a
good citizen, she said, okay, I will do it. This is the way I
have got to do it because I do not want the penalty. She went
ahead and bought insurance because that was the law. She signed
up under healthcare.gov. She got a plan, she thought. She
received a bill, paid her premium, but has not received any
proof of insurance. 5 and a half hours on hold on Friday, 2 and
a half hours on hold on Monday, and has not been able to talk
to a soul. She is all paid up to her knowledge. She cannot even
get someone on the line to confirm she is covered. That means
she spent 8 hours over the course of the day trying to figure
this out through a program she did not want to be a part of to
start with, and at this moment, if she was to walk into a
hospital or an emergency room anywhere, she has no proof of
insurance that she has. And nobody can talk about it.
With all due respect for what we are doing here--and the
chairman has brought out--and there have been concerns on all
sides--I am concerned more about the welfare of my constituents
and how they are having to deal with this and how they are
having to go through it than the bottom line of the insurance
or anything else at this point.
Why are we going through this in a way that puts people in
positions of not understanding, of yes, losing the coverage
that they had, trying to find other coverage, or in the case of
many of the State employees in Georgia, paying more or equal
for less coverage?
I believe--and I will just say in a good-hearted effort--
for those trying to work this, there was an effort to help, but
many times in the rush to help, when you only have one, you get
tunnel vision. And what is happening is people like my
constituent Rebecca are the ones that get lost in the tunnel
vision. To help X, we do not realize what we hurt on the
outside. That is what is coming up here. And whether it is the
risk corridors or covering profits or going back and saying
this was capped or not, this is just the problem that we are
dealing with when you cannot get confirmation, when you cannot
get issues that are going on.
As I have said earlier from the floor of the House, I had a
lady who is going through cancer treatment, and she has issues.
It is not covered under her new plan. Her cancer treatments
were halted until proof could be provided. Are you kidding me?
This is what we are dealing with.
So I think really--and not personal to any witness, but to
be in a position where we are talking about this and removing
it from the people, that is the problem I have here.
I could question you and grill all three of you on many
things. My people just want to know why has such a bad system
been put on me and forced me to pay higher for less or forced
me to change or forced me to look at insurance companies in a
way that I had not looked at before or frustrated with before
in a way that is very unreasonable and callous.
With that, that is why we do these oversight hearings. It
is time to fix this. It is now time to do it and it needs to be
done away with.
With that, Mr. Chairman, I yield back.
Mr. Cummings. Would the gentleman yield?
Mr. Collins. Yes.
Mr. Cummings. I just want to give Mr. Jost a chance to just
respond to what you said.
Mr. Jost. Well, just very briefly, obviously there were
many people and are many people who are losing the coverage
that they had. They are all being offered alternative plans.
Some of them are more expensive. Some of them have higher cost-
sharing. Many of them are less expensive. Many of them have
lower cost-sharing. Many of those people are having access to
premium tax credits that are making their health care insurance
substantially less expensive.
I misspoke. I would have to say that. It is not a bogus
political issue. But to call these things cancellations instead
of what they were, which was non-renewals of the current policy
offering and an offer of an alternative, which happens all the
time in the individual insurance market--I think to make it
sound like these are people who are suddenly uninsured and have
no chance of getting insurance--every one of them can get
insurance, and many of them can get it for less than before.
Mr. Collins. Mr. Chairman, reclaiming my time on this.
Your first statement basically just summed up your last
statement. It was callous. It did happen. And to say that it
did not and it happens all the time is again a perpetuation of
what we are talking about here, of being very honest with
people. And yes, they have cancellations not because the
cancellations occurred and they could not get other insurance.
It was because the Government told them because of the ACA that
these were not going to be renewable policies, and they could
not have what they had. They do not have what they had. And to
really say that--with all due respect to the ranking member, I
appreciate him allowing--this is the problem we are talking
about. But your first statement was summed up by your last
statement.
And with that, I do yield back.
Mr. Farenthold. Thank you very much.
We will now recognize the gentleman from Michigan, Mr.
Walberg, for 5 minutes.
Mr. Walberg. I thank the chairman, and I thank Mr. Collins
for following up on that and pressing that issue because that
is a crucial issue that we are addressing here. We are talking
about real live people, and certainly we want to meet needs of
those, a frankly smaller number right now, that are having
better opportunity, and those are the people we could have
fixed with a far more simple system dealing with the issue of
cost.
Mr. Badger, just to make sure it is clear, is it correct
that the reinsurance provision is financed by a fee or a tax on
all non-exchange health insurance plans?
Mr. Badger. Yes, on group health insurance plans. That is
correct.
Mr. Walberg. Is it accurate that the vast majority of
individuals with health insurance will be paying higher
premiums to finance the reinsurance fund?
Mr. Badger. Yes.
Mr. Walberg. So essentially the reinsurance fund is a large
transfer from the vast majority of Americans without an
ObamaCare insurance plan to the few Americans with an ObamaCare
plan.
Mr. Badger. To their insurers. That is correct.
Mr. Walberg. To their insurers.
Moving on from that relative to cost, how do risk
corridors, as implemented in ObamaCare, impact the pricing of
health insurance, Mr. Badger?
Mr. Badger. Well, I think arguably they should induce
insurers to be willing to take on more risk. They also, as I
mentioned earlier, provide a moral hazard. If you know that the
Government, the taxpayer, will share in your losses and the
only way you are allowed to differentiate yourself is by price,
you may price more aggressively to gain market share. So there
are some perverse incentives that actually would hurt consumers
over the longer run.
Mr. Walberg. So relative to that moral hazard, expand, if
you would on the implications of companies under-pricing
exchange plans versus non-exchange plans.
Mr. Badger. Well, you know, to be honest, as the professor
has noted, basically non-exchange plans will soon be
nonexistent for all intents and purposes. But for those who are
selling compliant plans both inside the exchange and outside
the exchange, those issuers would participate in the risk
corridor program. They do not, however, outside the exchange
get subsidies for the coverage.
Mr. Walberg. Do you think that companies did this in order
to drive enrollment into the exchanges and the generous
subsidies that are there?
Mr. Badger. I do believe that the purpose of the policy
that required the cancellations, yes, was to move more people
into insurance policies sold through the exchanges.
Mr. Walberg. How do risk corridors, as implemented in
ObamaCare, impact the pricing of health insurance?
Mr. Badger. Well, again, as we talked earlier, there is --
--
Mr. Walberg. I am sorry. I missed it.
Mr. Badger. No. That is quite all right.
The issue there that we are concerned about is that
insurers would price so aggressively to gain market share
because of the fact they knew that the taxpayers would be on
the hook for some of their losses. And so there could be a
price effect in the near term that would be favorable, but it
could have long-term negative implications.
Mr. Walberg. So the longer it goes on, the more negative
the implications for the price for the consumer.
Mr. Badger. Potentially if it affects market share
substantially.
Mr. Walberg. And health care in general.
Mr. Badger. Yes.
Mr. Walberg. Thank you.
Mr. Chairman, I yield back.
Mr. Farenthold. Thank you very much.
I see Ms. Maloney has just arrived. Do you have some
questions?
Mrs. Maloney. I do, and I apologize to the chairman and
ranking member. I had a conflict.
Mr. Farenthold. That is all right. We will be happy to give
you your 5 minutes. We will give you a second to get settled,
and we will start the clock as soon as you start.
Mrs. Maloney. I want to thank all the panelists for joining
us today.
And I guess my question is for Professor Jost. It is my
understanding that the risk corridor program is a key element
of the Affordable Care Act that helps keep premiums in the
exchange affordable by reducing uncertainty to insurers. We
know if there is uncertainty, the price goes up. Right? So can
you explain why insurers face such uncertainty in new programs
like the Affordable Care Act and Medicare Part D and how the
risk corridors operate to reduce this uncertainty?
Mr. Jost. Yes. Again, the idea here is that insurers have
traditionally priced their products based on their assessment
of the health of the people that they were insuring. So they
charged low rates to healthy people and high rates--or totally
excluded, as they do in many instances, people who are
unhealthy or exclude their unhealthy conditions. Under the
reform law that this body adopted in 2010, they cannot do that
anymore. And so that puts them in a situation where it is much
harder for them to price their products. So there is this
temporary program for 3 years called the risk corridor program,
another temporary program for 3 years called the reinsurance
program that provides a backstop for them so that they can
price their products in a way that is affordable to consumers.
And that has been very successful.
Mrs. Maloney. That is wonderful.
Were the risk corridors successful in getting insurance
companies to participate in Part D?
Mr. Jost. Yes.
Mrs. Maloney. That did work that way. Well, thank you.
I would also like to ask about the effect of risk corridors
on premiums. Did the Part D risk corridor help stabilize
premiums in the opening years of the program?
Mr. Jost. Yes, and the premiums in the Part D program came
in under projections for the first year.
Mrs. Maloney. And what about the Affordable Care Act? I
understand that premiums came in 16 percent below CBO
projections. And is this in part attributable to the risk
corridor program?
Mr. Jost. Yes, and the CBO recognized that in its report
yesterday and it is.
Mrs. Maloney. Can you explain how the risk corridor program
protects enrollees who are signing up for health insurance
using the exchanges?
Mr. Jost. Well, the risk corridor program means that
insurers projecting their premiums for 2015 and 2016 and
deciding whether to enter the exchange or deciding to stay in
the exchange understand that for the first 3 years of the
program, there is this flywheel. There is this backstop so that
if their prices are off, they will get some help.
Now, again, it is a risk-sharing program. It is not a risk-
transfer program. If an insurer under-prices their product too
much, they are going to have no profit at all and possibly
become insolvent. So they have to be careful. But they can take
a little bit of risk there.
Mrs. Maloney. I also understand that the risk corridor
program reduces the risk for insurers participating in the
exchanges from both extreme gains and losses. And is that
accurate? And would that translate into saving taxpayer funds?
Mr. Jost. That is correct. And also, if their gains are
excessive, we still have the medical loss ratio program and
there will still be rebates to consumers. So this is not just
an open-ended profit for ----
Mrs. Maloney. Can you elaborate how this would benefit
taxpayers? How do they benefit from these risk exchanges?
Mr. Jost. Well, the CBO projected yesterday that the risk
corridor program will benefit taxpayers to the tune of $8
billion.
Mrs. Maloney. $8 billion?
Mr. Jost. $8 billion.
Mrs. Maloney. An $8 billion benefit to taxpayers?
Mr. Jost. Yes. Some bailout.
Mrs. Maloney. Wow, wow. Well, I think you made a strong
case. This in no way sounds like a bailout to me. And these are
CBO numbers. Right?
Mr. Jost. That is correct.
Mrs. Maloney. So these are independent numbers saying that
there will be a benefit of $8 billion to taxpayers.
Mr. Jost. That is correct.
Mrs. Maloney. Thank you very much.
Chairman Issa. [Presiding] Would the gentlelady yield just
for a question?
Mrs. Maloney. Yes, I will yield to the chairman.
Chairman Issa. Thank you. I was quick on the draw.
It is a benefit to taxpayers. What I am trying to
understand is are not the people who pay the excesses that are
then taken off--in other words, the excesses that are being
gotten are excessed as payments by taxpayers. I appreciate the
gentlelady's point that it has a scored revenue, but in fact,
as a taxpayer I am also a ratepayer, and as a ratepayer that is
where the money is coming from. So we tax people's health
insurance in order to get this $8 billion. Is that not true?
Mrs. Maloney. I would like Mr. Jost--usually adhering--it
is not the panelists that are answering the question, but I
would like Mr. Jost to answer this question.
Mr. Jost. Thank you. I would be happy to answer that.
No. The risk corridor program is funded--well, the $8
billion in revenue will be excess profits of the insurers that
are refunded to the Federal Government. There is also a second
benefit to the Federal Government because the Federal
Government is at risk for the premiums through the premium tax
credit. So because the premiums came in 15 percent lower than
expected, that is also going to save the Federal Government,
one estimate, $190 billion over 10 years, although the CBO said
that they could not determine the exact amount.
Chairman Issa. Does anyone else need to answer that for the
gentlelady?
Mr. Badger. Well, just I know it is a very technical
question. I am sorry. But, yes, what happens is, I think as
Professor Jost has pointed out and I think as the chairman
said, the money, that $8 billion, ultimately comes from the
people who bought insurance. So it was in their premiums. And
under the formula in the law, the insurers' actual cost
relative to their premium was lower than they had anticipated,
and as a consequence, they have to pay into the fund. What CBO
is projecting is that more insurers will pay in than take out.
I for one do not believe that, but I think Congress could, in
fact, codify that to capture the savings by merely saying that
CMS is not allowed to pay out any funds in excess of what they
take in, and that would lock in your $8 billion.
Chairman Issa. Thank you. Thank you all.
We now go to the gentleman ----
Mrs. Maloney. Mr. Goodman wanted to answer.
Chairman Issa. If the gentleman could hold for a second. If
you need to quickly answer on the gentlelady.
Mr. Goodman. Sure. I would just like to say that that
estimate is not based on our recent experience, and it is very
likely to be wrong. It is unlikely that taxpayers will gain and
most likely that they will lose.
Chairman Issa. Thank you.
The gentleman from North Carolina.
So insurers that lose money will be bailed out to some
degree by the taxpayers through the law's premium stabilization
program. Would you all agree?
Mr. Badger. I would agree, yes.
Mr. Jost. Yes, I would agree.
Mr. McHenry. Would you agree, Mr. Goodman?
Mr. Goodman. Yes.
Mr. Jost. That is the purpose of these programs, yes, to
stabilize premiums.
Mr. McHenry. But they will be bailed out to some degree--
the insurance companies. Right?
Mr. Jost. Well, the insurance companies are sharing risk
with the Federal Government.
Mr. McHenry. Right, but anyway, I am actually quoting you,
Mr. Jost, from your November editorial about this. Insurers
that lose money will be bailed out, to some degree, by the
taxpayers through the law's premium stabilization programs. I
could not have said it better. So this is just another shameful
part of ObamaCare.
Look, I serve on the Financial Services Committee.
Mr. Jost, you say that this risk corridor provision is very
similar to flood insurance. Right?
Mr. Jost. That is correct.
Mr. McHenry. Do you know that the taxpayers are on the hook
for over $50 billion in payouts? So the flood insurance program
is under water to the tune of $50 billion for a taxpayer
bailout.
The example, I think, is perhaps a good one
unintentionally. It is again a very problematic feature when
the Government gets into the marketplace.
And, look, I understand if you are a health insurer, this
is probably a very positive provision for you. So, thus, when
the administration makes their--I do not know how many
additional changes they have made in the last 2 years above and
beyond what they are really able to do under the law. Health
insurers are not complaining as much, though, about this ad hoc
rulemaking as perhaps they would be if they did not have this
bailout provision within the law.
Mr. Badger, is that approximately right? Is that how you
would see it?
Mr. Badger. Well, as I said before, when this announcement
was made that at least the Federal Government would not enforce
the law requiring cancellations, CMS responded with half a
billion dollars in payments to insurance companies out of the
risk pool, according to CBO's estimates.
Mr. McHenry. Where does the money come from in the risk
pools?
Mr. Badger. Well, out of the risk corridors, it is supposed
to come from payments from insurers who make, ``excessive
profits.'' So it should be totally internally distributed.
Unfortunately, CMS has indicated that they will throw taxpayer
money on the table if the receipts are not enough to cover
disbursements.
Mr. McHenry. Okay. So that I understand this, if I pick a
different policy in my exchange and that company is deemed to
make excessive profits, where do those excessive profits come
from?
Mr. Badger. Well, the excessive profits obviously come from
the premiums.
Mr. McHenry. The premiums. So, therefore, I made a bad
choice and perhaps I am paying a higher rate than someone else
who is in another company that is getting the bailout. Right?
Mr. Badger. Yes. It is certainly true that the money is
supposed to come exclusively from the premiums, although
sometimes taxpayers are implicated as well.
Mr. McHenry. So if you have three providers in the exchange
and you make a choice for one that is maybe the middle-priced
one, you might be subsidizing the lower-priced one.
Mr. Badger. The so-called excess premiums or excess profit
based on your premium may well be funneled through to that
other insurer, yes.
Mr. McHenry. Okay, interesting. So this could be a taxpayer
bailout in execution or it could actually be a bailout funded
by those that are obligated to buy insurance through the
exchange.
Mr. Badger. Yes. The money either comes from the premiums
that people pay or the taxes that people pay.
Mr. McHenry. So this is not like the Federal Reserve
printing money and making money from nowhere. Right?
Mr. Badger. No.
Mr. McHenry. Now, I asked this because it is a very common
question I have got at home from my constituents about this.
Look, the reason why we are talking about this is because
of this grave concern about the Government overreach. Look, if
you are health insurer, I see why this is a very positive--if
you are in the business of health insurance, it is probably a
pretty positive thing because it takes your risk away, and it
also means you are a little more compliant with the
administration when they make rules changes. So it benefits
this administration's ad hoc rulemaking. Right?
Mr. Badger. There are mutual interests there, yes.
Mr. McHenry. Thank you, Mr. Chairman.
Chairman Issa. I thank you.
We now go to the gentleman from Virginia, Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman.
Professor Jost--is it Jost?
Mr. Jost. Jost actually.
Mr. Connolly. Jost, okay.
I do not know if you are aware of the fact that the Chamber
of Commerce actually issued a statement warning against the
Rubio legislation, the repeal of the risk corridors. And it
says--``repeal would make it harder and less likely that
companies will offer products to small businesses and
individuals in the future and would certainly lead to
significantly higher premiums for coverage offered next year
without these protections. It would limit choice, increase
premiums, and hinder the development of a robust private
insurance market.''
Mr. Chairman, I would ask that this letter from the Chamber
of Commerce be entered into the record at this point.
Chairman Issa. Without objection, so ordered.
Mr. Connolly. I thank the chair.
Professor Jost, do you agree with the Chamber of Commerce
that repeal of the risk corridor might not only raise premiums
but would reduce insurer participation in the exchanges?
Mr. Jost. Yes, I think it would.
Mr. Connolly. Could you elaborate a little?
Mr. Jost. Well, again, the purpose of the risk corridors is
to stabilize premiums, to share risk between the insurers that
agree to participate in the exchanges and the Federal
Government so that insurers will be comfortable coming into the
exchange and charging reasonable premiums rather than to have
to charge a high premium for risk. I mean, this is a very
reasonable business decision, which is why the Chamber of
Commerce supports it.
Mr. Connolly. Speaking of that, the insurance companies
themselves are helping to finance these risk corridors. Is that
correct?
Mr. Jost. That is correct. Some insurers chip in when they
over-price their products and others receive subsidies when
they under-price their products. It is exactly the same way as
in Part D.
And by the way, it has been said several times that the
taxpayers are not on the hook for Part D. They are. Any
overages in the Part D risk corridor program--so far there have
not been any--would be paid out of the Medicare Trust Fund.
Mr. Connolly. So the ACA risk corridors actually are sort
of modeled on an existing program, the Medicare Part D risk
corridors. Is that correct?
Mr. Jost. They are less generous and they are temporary
rather than permanent, but they are modeled on that.
Mr. Connolly. But hardly a Government bailout.
Mr. Jost. Right.
Mr. Connolly. So one might even want--to sort of coin an
expression Herman Kane made famous in the 2012 Republican
primaries, I will do 16-8-8. The insurance companies, if I
understand it correctly, Professor, are going to finance this
to the tune of $16 billion. The estimated cost by CBO over the
next 10 years is half of that, $8 billion, and the Government
gets to essentially pocket the remaining $8 billion, thus
saving the Federal Government $8 billion. Is that correct?
Mr. Jost. That is correct according to the CBO.
Mr. Connolly. So other than that, these risk corridors seem
a terrible idea.
Mr. Jost. Well, once again, it is not only that. It is also
the fact that they have helped to lower premiums for
individuals which, in turn, has lowered the premium tax credits
for the Government, saving billions of dollars in that way as
well and billions of dollars to consumers.
Mr. Connolly. To consumers.
Mr. Jost. Yes.
Mr. Connolly. What is the intellectual thinking behind
establishing risk corridors?
Mr. Jost. Well, the premium stabilization programs, all
three of them--the idea behind them is that you create a market
in which private businesses will participate because they know
that their risk is going to be shared, at least initially until
they can figure out how to price these products and until the
market stabilizes. I mean, it has been said many times today
that there are only 2 million. Well, there are at least 3
million, probably many more by now. There will probably be 6
million by the end of March. But the CBO still projects 3 years
from now there are going to be 25 million. So it is going to
take a little while for this market to develop.
Mr. Connolly. And again, not something unique to the ACA.
We have done it before.
Mr. Jost. Right.
Mr. Connolly. And it is certainly something welcome in the
business community as something that can help smooth the bumps
while we figure out, with experience, just how big and elastic
the market is going to be.
Mr. Jost. Correct.
Mr. Connolly. Thank you, Professor Jost. Thank you for your
testimony.
Chairman Issa. The gentleman yields back.
We now go to the gentleman from Nevada, Mr. Horsford.
Mr. Horsford. Thank you, Mr. Chairman.
I appreciate the panel this morning and this hearing, but
one of the areas that I would like to focus on, since I am
towards the end of this hearing, is on the significant changes
within the Affordable Care Act dealing with preexisting
conditions and the fact that insurance companies are no longer
able to prohibit denying coverage to individuals with
preexisting conditions. They are also prevented from
discriminating against individuals with preexisting conditions
by charging them higher prices for coverage. And I think that
that is an important achievement in the underlying legislation.
But as, Professor Jost, you have talked about, this means
that insurers need to be able to provide people with
preexisting conditions, who are generally a sicker population,
affordable insurance. And one of the purposes of the
reinsurance program in the Affordable Care Act is to prevent
insurers from pricing their premiums too high at the outset due
to an influx of these new enrollees.
And so I would like to read just a quote from the
Association of Health Insurance Plans which stated that the
reinsurance program will help health plans meet the needs of
high-cost enrollees who previously have not had health
insurance coverage, while making individual market premiums
more affordable for consumers. It went on to say that the
Department of Health and Human Services estimates that the
reinsurance program will reduce premiums in the individual
market in 2014 by 10 to 15 percent compared to what they would
have been without this program.
So, Mr. Chairman, without objection, I would like to enter
the full statement on behalf of America's health insurance
plans into the record.
Chairman Issa. Without objection.
Mr. Horsford. Thank you.
Professor Jost, can you explain how the reinsurance program
helps insurers provide affordable insurance to these sicker
individuals?
Mr. Jost. Yes. The reinsurance program is a program where
if a person who has coverage under the Affordable Care Act in a
qualified health plan--in or out of the exchange, but in a
qualified health plan--presents claims of more than $45,000 in
a particular year, the Federal Government bears 80 percent of
the risk of those claims up to $250,000. The insurers is at
risk above that amount and also below the $45,000 amount. But
that provision was purposely put into the act, and it is
projected to reduce the cost of insurance by 10 to 15 percent
across the individual market because of the fact, as we are
seeing now, many of the people who sign up the earliest are
high-cost people. They are people who are coming from the State
and Federal high-risk pools. They are people who retirees who
have been without coverage. They are older people
predominantly, just as in the individual market now. And so
this reinsurance program was put there to make insurance
affordable to those people.
Mr. Horsford. And is the reinsurance program funded solely
by contributions from insurance companies?
Mr. Jost. That is correct.
Mr. Horsford. So it is not funded by taxpayers.
Mr. Jost. It is not funded by taxpayers. However, I think
it would be fair to say that some of those costs are being
passed on to consumers.
Mr. Horsford. So can you explain briefly why the insurance
premium reductions in the individual market in 2014 will
decline compared to what they are currently?
Mr. Jost. Because the reinsurance program is funded at $10
billion this year, I forget the exact amounts, but it is cut in
about half the following year and then reduced further in the
third year and then it goes away. It is basically a program for
the first year to cover the costs of this migration to the
individual market.
Mr. Horsford. Thank you for clarifying.
And, Mr. Chairman, I know it is just you and Mr. Lankford
here that are on the other side, and I listened to some of my
other colleagues, one that spoke prior to my question. And I
just find it remarkable that Republicans are calling this a
bailout, a bailout which helps individuals with preexisting
conditions, people who were previously unable to obtain
coverage and purchase affordable health insurance. So I really
think that we need to, again, get away from the rhetoric, look
at the facts, and if you want to refer to this as a bailout,
then I ask you is it a bailout for people with heart disease.
Is it a bailout for those with cancer or diabetes? Is it a
bailout to protect our constituents with preexisting conditions
from being gouged? Is that what we refer to as a bailout?
You know my circumstance, Mr. Chairman. Last year I had
six-way open heart bypass surgery. It is only because of the
grace of God that I am here and because I was able to access a
health insurance plan similar to one that my constituents are
being asked to enroll in. I am in the exchange as well, and it
is only because of that that I am not bankrupt.
And so this is important, and we continue to just have
these hearings that want to demagogue the issue rather than
work to repair it, to make it better or to implement it right.
And I yield back my time.
Chairman Issa. Will the gentleman yield?
Mr. Horsford. I yield back my time. My time has expired.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Oklahoma.
Mr. Lankford. Thank you, Mr. Chairman.
Mr. Horsford, I do understand, and we are grateful for a
very successful surgery for you. But also I have people in my
district and in my State that had a cancer doctor last year
that they can no longer access this year, and they are in the
middle of treatments. I have people that are in my district
that have to have two knee replacements, had one knee replaced,
and then they go back this year to get the second knee replaced
and find out, no, you cannot use this doctor because the plan
has changed. And part of the issue that we are faced with seems
to be extremely narrow provider networks to try to control the
premium costs, and then we have less access to doctors.
So I would ask Mr. Goodman or whoever maybe that wants to
be able to address this. What are you seeing in the provider
networks to be able to hit some of the target numbers?
Mr. Goodman. That we are getting a race to the bottom and
that the insurers are putting out fees that are very low and
taking all the doctors who would accept the low fees and not
taking any others. That often excludes the best doctors and
best hospitals.
Mr. Lankford. So the best care, the most experienced, the
greatest insight as far as treating multiple patients--those
individuals now have lost access to those doctors, and they are
getting new, young--which, great. I am glad they have been well
trained, but they are not getting access to maybe the doctor
they had or the one that they prefer.
Mr. Goodman. I do not know what all the profiles look like
because it is still early. But it is clear that the networks
are very narrow and you have to pay a lot more to have a
network that looks like the old network you were in.
Mr. Lankford. Mr. Badger, let me ask you about this concept
of picking winners and losers and some of the change that has
happened in some of the plans and grandfathering in health
plans and some of the transitions and the rollouts and
everything else. Do you have a perception that right now we are
picking winners and losers as far as insurance companies as
well?
Mr. Badger. Well, we are certainly preferring coverage in
the exchange to coverage outside the exchange.
And if I might, I know you are on the clock.
Mr. Lankford. We both are.
Mr. Badger. But it was said earlier that, well, you know,
if your plan is canceled, they just did not get it renewed. It
happened all the time. Prior to enactment of this law, there
was something called HIPPA that was passed by Congress in 1996
that guaranteed renewability in the individual and small group
market. The effect of this law, coupled with the regulations,
is it became illegal to renew that coverage, and the resulting
cancellations were precisely to push people into exchanges.
Mr. Lankford. So the question is on some of the rules and
what we are dealing with today as well. There seems to be a
preference to say if you played ball with the administration
and got involved in the exchange, we will make sure you are
taken care of. If you did not get involved in one of the
exchanges, then you are kind of outside this loop.
Mr. Badger. Insurers in the exchanges definitely enjoy
tremendous advantage under the law with respect to these
provisions.
Mr. Lankford. This is part of the struggle that we face as
a Federal Government, the cronyism and the fact that if you are
willing to come into the administration and play by the rules,
do it their way, then we are going to make sure that we protect
you. Otherwise then, no, you do not have those same
protections. So that pushes industry to say, well, we better
come to the table or else we will be on the table. And that is
a problem in a free market system and in a system where we want
there to be the greatest amount of transparency and the least
amount of interference from Government.
Mr. Goodman, do you want to comment anything on that?
Mr. Goodman. Well, I think all of the sectors were
pressured in that very same way. And what I heard was if you do
not come to the table, you are going to be the lunch, but it is
the same message. So here in this city, a lot of organizations
did a poor job of representing people out in the hinterland and
cooperated with something that now in retrospect looks like it
is very poorly designed.
Mr. Lankford. Mr. Badger, the insurance companies have
argued that it is unfair to change the rules now, that they
already have the parameters set. Please do not change the
rules. Do you consider that a fair argument?
Mr. Badger. It is an understandable argument. The problem
is, again, we have had a number of people, certainly people who
have benefited by this law, but people who were hoping to renew
their coverage, people that perhaps were able before to see a
particular doctor and no longer able--we changed the rules on
them.
Mr. Lankford. So how many times do you think CMS has
changed the rules during this process?
Mr. Badger. They have changed considerably. In the
reinsurance alone, as the professor said, they are still
changing the rules. They are not solid as yet.
Mr. Lankford. Which again goes back to our same issue. The
rules seem to change consistently and there does not seem to be
a consistent plan, and the consumer is very much out of
control. And for the American people that they just want to be
able to choose for themselves and be in control of their own
health care, now suddenly even the health care provider that
they go to is not in charge of their health care and is not
making decisions for them. And they make another phone call,
and they are not in charge of it either. And they are trying to
find out who is controlling my health care. How far do I have
to go to be able to find the person that is making the choice
on where I can go, what I am going to pay, what doctor I am
going to have access to, what treatment that I am going to
have? And it is very distant in this process and it is
continuing to frustrate Americans. Agree or disagree with the
policy change, Americans just want to have control back of
their own health care again and be able to make decisions.
So with that, I yield back.
Chairman Issa. I thank the gentleman.
Today we covered a number of subjects, some of which our
first and second panel were very critical to. Many of the
things that were covered were tangential to the hearing today.
On the board, in closing, you have the original projection
in 1967 dollars of the cost of Medicare and the actual cost of
Medicare. Again, these are 1967 dollars. They are very reduced.
Just yesterday, the CBO similarly is adjusting by threefold
the cost of jobs to America and, by seemingly double, another
trillion dollars the cost of this plan.
Today much of our discussion centered around a plus or
minus $8 billion bailout. Mr. Horsford wanted to know who was
being bailed out. The fact is that under this program, whether
it was done in the past or not, it guarantees that the health
insurance insurers will get their full 3 percent by over-
billing, and if they make an error on one of maybe a dozen or
two dozen policies and they lose, they will be covered out of
the excesses. In no case will the ratepayer--and since
ObamaCare has been ruled to be a tax, the taxpayer--who is
paying excess monies in for health insurance--in no case does
that health insurance payer get his or her money back. These
are undeniable truths. ObamaCare is getting much more expensive
both in jobs and in cost. ObamaCare's excess monies paid in by
people for their health care do not come back to the ratepayer,
and in fact, there are a number of embedded taxes.
As we continue to look at the Affordable Care Act, this
chair, along with our ranking member, have an obligation to
ensure that we do look at the cost drivers of health care and
the areas that are, in fact, in need of consideration. This was
a small area, although we touched on larger areas.
I want to thank our panel of witnesses for coming prepared.
I will hold the record open for 3 days for additional
thoughts that any of our witnesses may have and extraneous
material by members on the dais.
Chairman Issa. Does the ranking member have any closing
statements? The gentleman is recognized.
Mr. Cummings. Thank you, Mr. Chairman.
I want to thank the witnesses for being here today.
Clearly, as has been said earlier, it may seem like we are
in disagreement today, but the fact is that these risk
corridors were something that under Medicare Part D are still
in existence and will continue to be and has been for 10 years.
And under the Affordable Care Act, you are talking a 3-year
limit. Very interesting.
As I listened to Mr. Collins, I am concerned that--he said
that he had some constituents who are not able to have the type
of insurance policy that they had before. And I think that
those kind of issues ought to be addressed. It should be
addressed soon, and I am sure they will be. At the same time, I
could give him story after story of people who were suffering
from cancer, heart disease that had absolutely no way of
getting any kind of treatment. Period. Or if they got
treatment, it was an emergency room, and it was basically to
save their life but there was no follow-up. And so they were
basically out there on their own.
You know, Emerson said we should not be pushed around by
our problems and our fears, but we should be guided by our
hopes and our dreams. And I think one of the major things that
we need to concentrate on is how do we take care of all
Americans. Why do we leave anybody behind? And when we are
basing it on our hopes and dreams, our hopes and dreams should
be that we keep people well, and if they get sick, we do
everything in our power to help them get well. There are a lot
of people who suffer.
You know, it just seems to me that we need to move from
just criticism to actually making the repairs that are
necessary. Nobody said the law was perfect. This is a very
complex law, and it took many, many years to bring this about.
A lot of Presidents tried to do it. This President accomplished
it. And so hopefully, moving forward, we will be able to do
just that.
One of the things that I did want to ask Senator Rubio and
did not have a chance to--but I wanted to ask him, you know,
you got 850,000 people in Florida who have no insurance. And
still, the Governor down there has made a decision that he
would not open the door for them to enter into Medicaid, and
those are people--many are sick and are in need. Automatically
you put 850,000 people--give them insurance, provide them with
insurance. That is significant.
So, again, we have got work to do. I think all of us have
to pull together and, again, move forward, not based on our
fears, not based on our problems, but based on our hopes and
our dreams.
Thank you very much.
Chairman Issa. I thank the ranking member. I thank our
witnesses.
We stand adjourned.
[Whereupon, at 11:55 a.m., the committee was adjourned.]
APPENDIX
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Material Submitted for the Hearing Record
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