Majority Statement

• Senator John D. (Jay) Rockefeller IV

  Chairman

  U.S. Senate Committee on Commerce, Science, and Transportation
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  Majority Statement

  Senator John D. (Jay) Rockefeller IV

  Prepared Opening Statement – Senator John D. (Jay) Rockefeller IV, Chairman

   

  Almost four years ago, this Committee held a hearing on the many challenges consumers faced when trying to buy health insurance.  At that hearing, we heard that shopping for health insurance was a confusing, exasperating, and stressful experience.  Consumers had no easy way to learn about, or compare, different health insurance policies.  They could get slick marketing materials from the insurance companies, but they couldn’t get straight answers about what services health insurance plans did or did not cover.  When they asked for further information about health insurance plans, consumers usually got bulky disclosure documents, written in incomprehensible legal jargon and small print.  And there was no standard terminology in health insurance.  Terms like “copay,” “hospitalization,” or “out-of-pocket limit” meant different things in different plans.

   

  Consumers were in the dark, and that is exactly where the health insurance companies wanted to keep them.  A former CIGNA executive named Wendell Potter testified before this Committee that health insurance companies purposely made their materials incomprehensible to their customers.  Mr. Potter told us that the industry’s goal was to make their disclosure materials so impenetrable and confusing that consumers would give up and throw them away.  As long as consumers couldn’t understand how the policies worked, they wouldn’t understand the bad deal they were getting.

   

  While the market we heard about in 2009 was profitable for health insurance companies, it could be disastrous for families dealing with a serious illness or injury.  Consumers assumed that if they paid their health insurance premiums every month, they were protected.  Only too late would they discover that the fine print in their health insurance plan stuck them stuck them with thousands of dollars in unexpected medical bills.  A complicated pregnancy, a cancer diagnosis or even a broken limb, could push families well beyond their tight budgets.  In fact, medical debt had become the leading cause of personal bankruptcy filings, even for families with insurance.

   

  After hearing too many of these stories, some of us in Congress got serious about bringing more transparency to the health insurance market.  We created a new “clear labeling” requirement in the 2010 health care reform law.  We required health insurance companies to clearly and accurately disclose to their customers what their policies cost and what services they cover.  Instead of 20 or 40 or even 100-page disclosure documents, the law required insurers to give consumers a 4-page “Summary of Benefits and Coverage” (SBC) document.  The SBC had to be written in plain English and printed in a font consumers could actually read.  The law also called for the development of industry-wide standard definitions, so consumers could clearly understand words like “co-pay” or “hospitalization.”  

   

  With clearly presented plan features, described using standard terms, consumers could finally make “apples-to-apples” comparisons between health insurance products and find the one that best met their health coverage needs.  To help consumers understand how the policies would work in a real-life situation, the law also required insurers to give examples of how their plans would cover the expenses of a major health care event, such as having a baby or treating a chronic disease.  After extensive discussion and consumer testing, insurance companies began issuing SBCs in the fall of 2012.  While there may still be room for improvement, these forms represent a major step forward in in helping consumers make informed decisions about their health care coverage.  

   

  With this new transparency, health insurance companies have a new incentive to compete on the value of their products, not on their ability to confuse and mislead consumers.  Our witnesses today are going to tell us about how the SBC was developed and what they think of the SBC as a tool for creating transparency and improving consumers’ health plan shopping experience.  I hope they will also share their thoughts on other steps to improve transparency in this market.  What other information do consumers need to make good decisions? Are there better ways to present or format this information to maximize its effectiveness?  I look forward to our discussion today.

   

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Minority Statement

• Senator John R Thune

  Ranking Member

  U.S. Senate Committee on Commerce, Science, and Transportation
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  Minority Statement

  Senator John R Thune

  Thank you, Mr. Chairman, for holding this hearing, and I appreciate all of the witnesses for being here today to provide testimony.

  Today’s hearing follows hearings this Committee conducted in 2009, which explored the connection between how health insurance companies share information about the benefits and coverage of their plans and the ability of consumers to make informed choices in the marketplace. Mr. Chairman, I applaud your dedication to these issues.

  Anyone who has had to compare healthcare plans and make decisions for themselves or their families likely shares the goal of improving the transparency and clarity of the plans’ descriptions, particularly in the individual and small group markets. 

  We are here to examine how healthcare plans share information with consumers in the health insurance market, and, what changes have been made since 2009, specifically with regard to the implementation of the Summary of Benefits and Coverage provision, or SBC, championed by the Chairman.

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

  It is no surprise that Americans appear to embrace the idea that health insurance companies should provide easy-to-understand plan summaries.  [As the Chairman noted,] polling by the Kaiser Family foundation in 2011showed that nearly 84 percent of respondents in its tracking poll held “very favorable” or “somewhat favorable” views on this idea.

  As we explore the SBC today, which has yet to be fully implemented, it is my hope that the Committee will find that actual user experiences are likely to match consumers’ high expectations.

  Health insurance is complicated, given the many variables that influence the actuarial assessments upon which coverage and premiums are based.

  Provisions such as the SBC should help simplify the process, but at the same time, they must be implemented in a way that provides an accurate picture of what consumers can truly expect.

  The goals of clarity and transparency are ones we all share – but we should not underestimate the ability of the government to implement good ideas in ways that create additional confusion for consumers.

  While some provisions of the healthcare law offer promise, I am concerned that they pale against the backdrop of unwelcome changes we have yet to fully realize.  I am especially concerned about how the multitude of regulations mandated by the Affordable Care Act will affect premiums.

  A recent study by Oliver Wyman found that the President’s health law will greatly increase the cost of insurance for those in the individual market by an average of 10 to 20 percent.

  Taken as a whole, the regulatory burden of Obamacare is crushing.  Since its enactment, there have been more than 18,000 pages of regulations issued.  The SBC provision is just a small part of this, and it is my hope the discussion today will provide an opportunity to explore ways in which we can increase its utility.  But, as we seek to protect consumers, we cannot ignore the larger law’s likely impact on premium increases.

  Perhaps our laws, like health plans, should come with a straightforward summary of their likely costs and benefits to taxpayers – it might be refreshing on both counts.

  Thank you all and I look forward to hearing your testimony.

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Testimony

• Ms. Margaret O'Kane

  President

  National Committee for Quality Assurance
  Download Testimony (216.07 KB)

• Ms. Lynn Quincy

  Senior Policy Analyst

  Consumers Union
  Download Testimony (96.63 KB)

• Mr. Michael Livermore

  Executive Director

  Institute for Policy Integrity
  Download Testimony (237.08 KB)

• Mr. Neil Trautwein

  Vice President, Employee Benefits Policy Counsel

  National Retail Federation
  Download Testimony (70.38 KB)