[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
FULL COMMITTEE HEARING ON
LIMITED HEALTH CARE OPTIONS
FOR SMALL BUSINESSES IN THE
SMALL GROUP MARKET
=======================================================================
COMMITTEE ON SMALL BUSINESS
UNITED STATES HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JANUARY 23, 2008
__________
Serial Number 110-67
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
HEATH SHULER, North Carolina STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona TODD AKIN, Missouri
MICHAEL MICHAUD, Maine BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas STEVE KING, Iowa
DAN LIPINSKI, Illinois JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa DEAN HELLER, Nevada
YVETTE CLARKE, New York DAVID DAVIS, Tennessee
BRAD ELLSWORTH, Indiana MARY FALLIN, Oklahoma
HANK JOHNSON, Georgia VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania JIM JORDAN, Ohio
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Kevin Fitzpatrick, Minority Staff Director
______
STANDING SUBCOMMITTEES
Subcommittee on Finance and Tax
MELISSA BEAN, Illinois, Chairwoman
RAUL GRIJALVA, Arizona DEAN HELLER, Nevada, Ranking
MICHAEL MICHAUD, Maine BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana STEVE KING, Iowa
HANK JOHNSON, Georgia VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania JIM JORDAN, Ohio
______
Subcommittee on Contracting and Technology
BRUCE BRALEY, IOWA, Chairman
HENRY CUELLAR, Texas DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania TODD AKIN, Missouri
MARY FALLIN, Oklahoma
.........................................................
(ii)
Subcommittee on Regulations, Health Care and Trade
CHARLES GONZALEZ, Texas, Chairman
RICK LARSEN, Washington LYNN WESTMORELAND, Georgia,
DAN LIPINSKI, Illinois Ranking
MELISSA BEAN, Illinois BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
JIM JORDAN, Ohio
______
Subcommittee on Urban and Rural Entrepreneurship
HEATH SHULER, North Carolina, Chairman
RICK LARSEN, Washington JEFF FORTENBERRY, Nebraska,
MICHAEL MICHAUD, Maine Ranking
GWEN MOORE, Wisconsin ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana DEAN HELLER, Nevada
HANK JOHNSON, Georgia DAVID DAVIS, Tennessee
______
Subcommittee on Investigations and Oversight
JASON ALTMIRE, PENNSYLVANIA, Chairman
CHARLIE GONZALEZ, Texas , Ranking
RAUL GRIJALVA, Arizona LYNN WESTMORELAND, Georgia
(iii)
C O N T E N T S
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OPENING STATEMENTS
Page
Velazquez, Hon. Nydia M.......................................... 1
Chabot, Hon. Steve............................................... 2
WITNESSES
Teske, Donn, Kansas Farmers Union, on behalf of the National
Farmers Union.................................................. 4
Eckstein, Scott, James Scott Custom Builders, on behalf of the
National Association of Home Builders.......................... 5
Sandman, Cathey, Sandman Family Daycare, on behalf of the
National Federation of Independent Businesses.................. 8
Lee, Richard, Lee's Flower & Card Shop, on behalf of the Society
of American Florists........................................... 10
Groza, Lee, Mountjoy & Bressler, LLP, on behalf of the American
Institute of Certified Public Accountants...................... 12
Eby, Dr. R. Stephen, on behalf of the American Academy of Family
Physicians..................................................... 14
APPENDIX
Prepared Statements:
Velazquez, Hon. Nydia M.......................................... 31
Chabot, Hon. Steve............................................... 33
Altmire, Hon. Jason.............................................. 34
Teske, Donn...................................................... 35
Eckstein, Scott.................................................. 42
Sandman, Cathey.................................................. 45
Lee, Richard..................................................... 51
Groza, Lee....................................................... 57
Eby, Dr. R. Stephen.............................................. 61
Statements for the Record:
National Cattlemen's Beef Association............................ 64
CompTIA.......................................................... 65
National Funeral Director's Association.......................... 74
Western PA Coalition for Single-Payer Healthcare................. 76
(v)
FULL COMMITTEE HEARING ON LIMITED
HEALTH CARE OPTIONS FOR SMALL
BUSINESSES IN THE SMALL GROUP
MARKET
----------
Wednesday, January 23, 2008
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
2360 Rayburn House Office Building, Hon. Nydia Velazquez
[chairman of the Committee] presiding.
Present: Representatives Velazquez, Cuellar, Clarke,
Ellsworth, Chabot, Akin, King and Gohmert.
OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ
Chairwoman Velazquez. This hearing on limited options for
small businesses in the small group market is now called to
order.
It is clear that our economy is facing many challenges, and
small businesses know this better than anyone. Whether it is
finding access to adequate capital during a credit crunch or
dealing with today's overall uncertainty, small businesses are
confronting many obstacles to success. Despite the growing list
of concerns, something that continues to top that list is
access to affordable health insurance.
Since 2001, small businesses have been confronted with
annual price increases for health insurance ranging from six
percent to over ten percent. During that time, the average
small business has seen their premiums double. This has forced
many entrepreneurs to decide whether they can continue to offer
coverage. These rising costs are clearly having an impact.
According to the small business administration, price is the
most significant factor influencing the decision of small firms
to offer health insurance.
But price is not the only factor. Today's hearing will
address the growing cost of health insurance for small
businesses, as well as highlight the variety of challenges
small firms face in offering health coverage. The panelists
before us will explain how difficult it is for small firms to
find, keep, and administer health insurance plans. Each of
these challenges influences whether a small firm will offer
coverage.
Unfortunately, the stories we hear today are not out of the
ordinary. Similar struggles could be told by nearly any
business in any town across the country. The first obstacle
small firms usually confront in offering coverage is
identifying health insurance options. There are no one stop
locations where these entrepreneurs can identify available
health care options and compare plans. This only adds to the
disproportionate administrative burden small firms face in
comparison to larger counterparts.
Small businesses in rural America often face greater
difficulty where physician shortages and limited access to
health services discourage insurers from offering coverage.
This can lead to one carrier being the only game in town, which
can drive up overall costs.
Because access to insurance is restricted, many small
business owners simply abandon the search for small group
insurance. Managing a plan also creates additional cost for
these companies. Small business owners must devote valuable
resources working with vendors, handling insurance, paper work,
and addressing employee claims issues.
Because small firms often do not have HR departments or
brokers, owners are forced to take time away from their
businesses to insure coverage for their employees.
Along with the challenges of offering insurance, small
firms regularly struggle with keeping their insurance plans
affordable. A major problem is the uncertainty created by high
cost claims. Too often minor surgeries, pregnancies, and other
basic health care treatment that are part of everyday life
result in double digit rate increases.
Small business owners quickly find themselves in the
position of having to choose between paying unreasonable
premium hikes or dropping coverage altogether. This explains
the findings in a recent study that found over 60 percent of
firms that already have health care options are shopping for
different coverage. The fact these businesses are looking
reveals one of the largest heating costs of health insurance.
The goal of this hearing is to bring into focus these and
other very real problems faced by small firms every time they
offer or consider providing insurance. This is the third
hearing this Committee has held on the issue of health
insurance access and affordability. The problem is complex as
it is severe for small businesses.
We have with us small business owners from around the
country. I want to thank you for taking the time away from your
firms to discuss these challenges. As Chairwoman of the Small
Business Committee, I plan on keeping this issue in the
spotlight because it is so important to firms across the
country.
There are many in this Congress that say that health care
reform will not be addressed until we have a new
administration. But one thing is sure. We need to keep this
issue in the forefront by bringing it to Capitol Hill, by
telling members of Congress that out of the 44 or maybe more
million of people in this country that do not have any kind of
health coverage, 62 percent, 62 percent of those are either
small businesses, their employees, and relatives.
So health insurance and access to health coverage is a
small business issue.
I now look forward to today's testimony and yield to the
Ranking Member for his opening statement, who is a year younger
today. Congratulations.
[Laughter.]
OPENING STATEMENT OF MR. CHABOT
Mr. Chabot. Thank you, Madam Chairwoman, for yielding and
noting how old I am and for holding this hearing on the limited
health insurance options for small businesses.
I appreciate our witnesses who in many instances have come
from far distances to share their testimony.
I want to especially thank Dr. Stephen Eby who is from
Cincinnati, Ohio, which happens to be the great community that
I represent in Congress, and I will be introducing him shortly.
Madam Chairwoman, 47 million people, as you indicated, in
our country do not have health insurance. According to the
National Federation of Independent Business, about 27 million
of the uninsured are self-employed or small business owners and
their families.
The uninsured are less likely to have access to preventive
care and chronic disease management, all of which would save
lives and save money in the long term, and for small businesses
that are able to offer their employees health insurance, the
cost of doing so continues to rise. Many of these small firms
are faced with double digit premium increases and have only one
or two insurance companies from which to choose.
When the members of this Committee travel back to their
districts, I know that we all meet small business owners every
day who are struggling to cope with the rising cost of
providing health care for their employees. Increasing
competition is one way to bring down these costs.
I, for example, support Association Health Plans, AHPs,
which would permit small business owners to pool together to
purchase health insurance at lower rates. These arrangements
could increase negotiating leverage and administrative
efficiencies and help to insure more consistent benefits among
the states.
I also want to mention that I have introduced over a number
of years now the Health Insurance Affordability Act, which is
legislation to allow individual taxpayers and small businesses
to deduct 100 percent of their health insurance premiums from
their annual tax returns. This would help bring more people
into the health insurance marketplace and ultimately increase
competition and reduce health insurance costs.
Today we will hear from small business owners who will
share their personal stories of the challenges in finding,
affording, administering, and keeping adequate health insurance
for their employees. I look forward to their comments and
continuing our work in developing health care solutions.
And I again want to thank you for holding this hearing, and
I look forward to hearing from the witnesses here this morning.
Thank you.
Chairwoman Velazquez. Thank you, Mr. Chabot.
And now I would like to introduce our first witness, Mr.
Donn Teske. He is the President of the Kansas Farmer Union in
McPherson, Kansas. Mr. Teske is the fifth generation to operate
his family farm in northwestern Kansas. He is testifying on
behalf of the National Farmers Union, which represents over
250,000 farm and ranch farmers.
Welcome, Mr. Teske. You will have five minutes to make your
testimony.
STATEMENT OF DONN TESKE, PRESIDENT, KANSAS FARMER UNION,
McPHERSON, KANSAS, ON BEHALF OF THE NATIONAL FARMERS UNION
Mr. Teske. Thank you, Madam Chairman and Ranking Member and
members of the Committee for allowing me to speak here today.
As the Chairwoman said, my name is Donn Teske, and my wife
Kathy and I live in northeast Kansas. I serve as President of
the Kansas Farmers Union, and today I am representing National
Farmers Union.
When I was asked if I would be willing to testify today, I
jumped on that because I, like many Americans have a personal
story to share with you, and so most of my testimony is
bellyaching instead of actual testimony.
[Laughter.]
Mr. Teske. My wife Kathy and I live in rural northeast
Kansas. The hometown where we live of Wheaton is 97 people. The
neighboring community of Onaga is where our health care system
is, where our kids go to school.
We are a fifth generation farm as you say. Our roots are
deep, and when Kathy finally decided that we had to go off the
farm to get health insurance, she went to the community
hospital to work, and she works there in insurance and in
reception, and she has been there for ten years.
She went to get health insurance, and literally all of her
health insurance goes to pay health care costs for the family,
and we have a very healthy family. We do not have big problems,
but our community hospital is a rural hospital. It is a very
large, very modern rural hospital and serves many of the
surrounding communities and employs almost 300, and our family
is insured through the group plan.
I was always concerned that the insurance was inadequate to
other policies, and regretfully we ran into this the last few
years. My wife Kathy had to have two partial knee replacements
over the past several years. After our deductible was met, we
were personally responsible for over $6,000 that we had to take
loans out and that we are paying hopefully off some day above
what the policy would cover.
And what really has my dander up now is that this past
summer when I was welding on the combine, I screwed up my back,
and I am one of those guys that you screw up your back and you
go to the chiropractor a couple of times and you get over it
and life goes on and you are fine. I could not throw it, and so
this fall I went in and had two epidurals done on my back. Come
to find out that farming is not covered under insurance policy.
That is right. If you are self-employed for profit, this
insurance policy does not even cover the spouse.
And so we may very well have another $4,000 we have got to
figure out how to pay from that.
The Onaga Community Hospital is a good hospital, and it is
desperately needed in the community. I have no problem with the
hospital, but there are many families like ours that the spouse
is just there working for the family's health insurance, and
now the spouse of the employee is not covered?
If this is the best health care policy that an entity like
the Onaga Community Hospital can offer to its employees, then
there is something wrong with the economics of rural America
and adequate health care because it is clashing.
Now, farmers are small business owners. We cannot get the
group rates like others can get. We end up paying higher
premiums. In 2006, I was asked by the Access Project out of
Massachusetts if we would be willing to participate in a study.
I agreed to a professional survey of my membership base. I had
no idea what the response would be when my staff sent out 600
surveys to randomly selected Kansas Farmers Union members.
To my great surprise, 47 percent of those surveyed
responded. Obviously, it is important to Kansas residents. The
study found that 29 percent of residents in rural Kansas under
the age of 65 have medical debt even though 95 percent of them
had some type of health care insurance. Like our family, their
coverage was not sufficient to offset the cost of treatment.
Even more disturbing was a study finding that 67 percent
had delay receiving primary medical care because of financial
concerns. As a result of this involvement, I became involved
with the KHCC, the Kansas Health Consumer Coalition in Kansas
whose mission is affordable health care for all Kansas.
Rural communities have difficulties providing adequate
health care. However, the challenges facing rural health care
are not insurmountable. There are successful examples:
Massachusetts, West Virginia, New York. They all have programs
that help small businesses.
Clearly, rural Americans need assistance to insure they
have access to the health care they need. As you move forward,
I urge you to consider the unique needs of rural Americans,
many of whom are small business owners, and draft legislation
that will help them to obtain quality health care at an
affordable price.
Thank you very much, and I welcome any questions.
[The prepared statement of Mr. Teske may be found in the
Appendix on page x.]
Chairwoman Velazquez. Thank you. Mr. Teske.
Our next witness is Mr. Scott Eckstein. He's the President
of James Scott Custom Builders in Bollingbrook, Illinois. James
Scott Custom Builders has provided custom home building in the
area for the last 15 years.
Mr. Eckstein is also President of the Home Builder
Association of Illinois and is representing the National
Association of Home Builders. The National Association of Home
Builders represents over 235,000 home builders and
professionals in related fields.
Welcome, sir.
STATEMENT OF SCOTT ECKSTEIN, JAMES SCOTT CUSTOM BUILDERS,
NAPERVILLE, ILLINOIS, ON BEHALF OF THE NATIONAL ASSOCIATION OF
HOME BUILDERS
Mr. Eckstein. Thank you.
Good morning, Chairman Velazquez and Ranking Member Chabot
and members of the Committee.
My name is Scott Eckstein. I am a 41 year old self-employed
custom home builder-remodeler from Naperville, Illinois, west
of Chicago. My wife Jackie and I work together in our family
business along with raising three daughters.
I have operated my two companies, Dupage Design and
Construction, Inc. and James Scott Custom Builders, for the
past 15 years.
I currently employ five full-time workers and my companies
have thrived in the northern Illinois market.
Currently, I serve as President of the Home Builders
Association of Illinois. The HBA of Illinois represents over
5,000 businesses throughout the state. Nearly 80 percent of our
members are small companies, such as mine, and have similar
issues and concerns.
During my presidency I have been traveling the state and
meeting with members. I have quickly learned that the issue of
health care and its affordability are overshadowed only by the
concerns for the state of the housing market in general. I find
it ironic that the very people that house our country's doctors
cannot afford proper health care coverage.
When my first daughter was born, I was employed in a
management job with a large national retailer. I had excellent
insurance coverage and paid less that $350 a month to insure my
young family. When my wife's pregnancy of our first daughter
required an emergency C-section, there was no discussion.
Doctors acted decisively and she was born.
Years later I realized my own dream to start my business.
Luckily, I kept my insurance through a COBRA extension. I
carried that insurance for years, each year experiencing large
increases, but never having an affordable option for change.
A few years later I went back to work for a mid-size
builder in the Chicago land area. The employer provided me with
health insurance coverage through an HMO program. Sixteen
months after starting this job, my wife and I found ourselves
expecting our second child.
This time the doctors advised us that a Caesarian was not
necessary. They were wrong. My daughter was injured during the
birth process, born with an APGAR score of 0, later
resuscitated, but suffered brain damage and cerebral palsy,
which still affects her today.
Because of this I have been unable to change my health
insurance for the past 16 years despite many arbitrary
increases.
My personal policy under COBRA that once cost me under $600
per month for my family was now as high as $1800 per month. I
currently pay in excess of $21,000 a year for two insurance
carriers to provide my family with unreliable health care
coverage. My wife spends, on an average, two to four hours a
week on the phone with our insurance companies fighting for
coverage, prescription refills, or payment of bills.
My daughter, with preexisting conditions as a result of her
birth injury, often misses scheduled therapy appointments
because of our carriers' inability to process referrals when
needed. This is the quality of health care coverage business
owners can expect for $22,000 a year?
My written testimony includes several examples of premium
increases up to 32 percent in a given calendar year. An
increase like this could cost a small company of six an
additional $18,0000 annually. If new home prices rose at this
rate, could you imagine the cost to shelter our nation?
My inability as an employer to provide adequate, affordable
health coverage over the past few years has directly resulted
in employee turnover and my inability to hire consistent,
qualified workers. Over the years many of my qualified
employees have left the company and I believe they could have
been retained if I was able to offer affordable health care
options.
I hear the rhetoric in regards to this issue in every
election. Yet when the polls close and the politicians are
elected, nothing ever changes and we are faced with a deeper
quagmire than before. It is time for the federal government to
stop talking and start acting on behalf of the small business
owners.
Following the tragedies of 9/11 and Hurricane Katrina our
industry carried the national economy through tough times,
preventing a deeper recession from taking hold. The building
community pulled together to help others, yet shamelessly many
of our people cannot afford health care coverage.
I am here today as a small business owner and a
representative of the home building community to ask for your
help in solving this crisis. This just does not affect home
builders. If affects everybody in America. It is up to you, our
elected leaders, to stop this runaway train before it derails
our American health care system altogether.
Association health plans that would allow organizations,
such as ours, to receive large group pricing and avoid
exemptions from pre-existing conditions would make health care
affordable and accountable to the consumer again.
Keep in mind that our members are small business owners.
They cannot take a day off of work for a cold or a sniffle
because they have a business to run. Generally, we are healthy
individuals performing active work, making us attractive
clients to any insurance carrier. Yet these are the individuals
who struggle to receive the same benefits that a bag boy at a
national grocery store can obtain through his company's plan.
In a country that encourages the entrepreneurial spirit,
health care must become affordable and available to our
businesses. Thank you for the opportunity to share my thoughts
and experience with this Committee today. I look forward to
answering any questions you might have.
[The prepared statement of Mr. Eckstein may be found in the
Appendix on page x.]
Chairwoman Velazquez. Thank you, Mr. Eckstein, for sharing
your personal story. Quite compelling, and I am really sorry to
hear what happened to your daughter.
I also want to share with you that in the last Congress I
was the lead sponsor of the Association Health Plan.
Now, I welcome Ms. Cathey Sandman. She is the owner of
Sandman Family Daycare in Lockport, New York. Ms. Sandman is
representing the National Federation of Independent Business,
NFIB. It is the national organization that has been
representing small businesses since 1943 and has over 600,000
members.
Welcome.
STATEMENT OF CATHEY SANDMAN, SANDMAN FAMILY DAYCARE, LOCKPORT,
NEW YORK, ON BEHALF OF THE NATIONAL FEDERATION OF INDEPENDENT
BUSINESSES
Ms. Sandman. Thank you.
On behalf of NFIB, I want to thank Chairwoman Velazquez for
inviting me to discuss the significant challenges facing small
businesses trying to access and afford health insurance.
My name is Cathey Sandman and I operate Sandman Family
Daycare, a home-based business located in Lockport, New York.
As a small business owner, mother, wife and child care
professional, I deeply believe that health care is at a
critical tipping point. Something must be done to improve
access to and affordability of health care.
The health care cost crisis affects two specific small
business sectors, those who are insured and struggling to keep
up with the 100 percent increase over the last six years, and
the 27 million in the small business community who are
uninsured.
NFIB members represent both of these sectors. I once was an
NFIB member with insurance. Today I am an NFIB member with no
health insurance for myself or my family. I have been an in-
home child care provider for 18 years. I personally service 13
families and up to 18 children in any given week, ranging from
six week old through 13 years.
My services are vital to these families and enable them to
go to work and be productive. Like most small business owners,
I work long hours, 12 to 14 hour days. I spend a great deal of
time when I am not working planning and organizing for the next
day.
Mr. Chabot. Ms. Sandman, I apologize for interrupting you,
but could you pull the mic a little closer. The folks in the
back may have trouble hearing you.
Thank you.
Ms. Sandman. This is one of the best aspects of owning your
own business. Is that better?
Mr. Chabot. I would pull it even closer.
Ms. Sandman. Thank you.
This is one of the best aspects of owning your own
business. You work for yourself, so the extra hours are not a
burden. I have a passion for the families and children in my
community and work to serve many of their needs.
Five years ago my husband joined my business as my
assistant and business partner. We then had to purchase our own
health insurance and found it expensive, but affordable. But
after multiple premium increases the cost began to threaten our
ability to maintain our insurance.
In October of 2007, my husband and I made the difficult
decision to give up our health insurance. It was not an easy
choice, but after the last few premium increases, the monthly
cost of our health insurance was the same as our monthly
mortgage payment.
Since I am self-employed and work out of my home, I felt
there was no other choice. I need a place to live and I need a
place to work. But I simply could no longer afford to pay the
equivalent of a second mortgage. So we terminated our coverage
as of October 1st, 2007, and tried to figure out what to do
next.
Unfortunately, time was not on our side. On October 13th,
less than two weeks after becoming uninsured, I became ill and
ended up in the hospital with appendicitis. I had to have
surgery and my appendix was removed. The hospital and doctor
bills totaled $10,000. Today I am on a payment plan with the
hospital.
While I appreciate their willingness to work with me, every
dollar I spend to pay off this bill I cannot use to purchase
health insurance.
Back home in Niagara County, I am not alone in this
struggle. There are about 125 in home child care providers in
my county, and I know many of them. I operate a training and
support group to assist all providers. The health care crisis
is on everyone's mind. I hear discussions about it constantly.
It is necessary, but unavailable to many, and it is a heavy
burden to many more. It is vitally important that something
changes and soon. As Congress works to develop specific policy
related solutions, please keep in mind that many small
businesses are looking for a balance, a balance similar to the
one outlined in NFIB's small business principles for health
care reform.
The principles are a foundation for health care reform that
achieves four goals: access to quality care, affordability,
predictability, and consumer choice. Those goals are achieved
by creating a system that is universal, private, affordable,
unbiased, competitive, portable, transparent, efficient,
evidence-based, and realistic.
NFIB will pursue legislative proposals that are reflective
of these ten principles.
Finally, Madam Chairwoman, I appreciate the work your
Committee has done with NFIB. I am hopeful that you will
continue working with NFIB and other groups that are committed
to developing effective solutions for small business owners,
employees, and their families as well as the broader
population.
Recognizing that many voices are stronger together, NFIB
joined Divided We Fail in 2007. The coalition, which includes
AARP, Business Roundtable, and the Service Employees
International Union, represents more than 53 million people.
These groups do not agree on many issues, but the coalition
does agree on the need to seek out and engage in a serious
dialogue to find broad based bipartisan solutions that address
what has become a national crisis for American job creators,
health care.
Thank you, again, for holding this hearing today and
shining a spotlight on the health care crisis facing small
businesses. I greatly appreciate your interest and your
willingness to listen to my story.
NFIB shares your desire to address the nation's health care
crisis. I am hopeful that working together, today's horror
stories can be transformed into tomorrow's success stories.
Thank you.
[The prepared statement of Ms. Sandman may be found in the
Appendix on page x.]
Chairwoman Velazquez. Thank you, Ms. Sandman.
Our next witness is Mr. Richard Lee. He is the President of
Lee's Flower and Card Shop in Washington, D.C. Mr. Lee is the
fourth generation to run the family owned business. It was
established in 1945.
Mr. Lee is testifying on behalf of the Society of American
Florists. The Society of American Florists represents over
15,000 retailers, growers, wholesalers, and importers in the
floral industry.
Welcome.
STATEMENT OF RICHARD S. LEE, PRESIDENT, LEE'S FLOWER & CARD
SHOP, WASHINGTON, D.C., ON BEHALF OF THE SOCIETY OF AMERICAN
FLORISTS
Mr. Lee. Thank you, very much, Chairman Velazquez and also
to the members of the Committee.
Good morning and thank you for this opportunity to present
testimony on behalf of the Society of American Florists and the
U.S. floriculture industry on this subject of limited health
care options for small businesses.
At the outset, I want to thank you, Chairwoman and the
other members of the Committee who have been particularly
supportive of the need for health care reform for so many
years. And thank you for holding this hearing and once again
being the voice of small business in the halls of Congress.
My name is Rick Lee. I am President of Lee's Flower and
Card Shop in Washington, D.C. The Society of American Florists
is the national trade association representing the entire
floriculture industry, a $19 billion component of the United
States economy. Membership includes about 10,000 small
businesses nationwide, and this issue is important to nearly
every one of them.
Lee's Flower and Card Shop has been in business for 62
years, since 1945. We are a full-time and full service retail
floral shop. As a family owned business we pride ourselves on
our service, both to our customers and to our community.
Community service is a family tradition started by my
parents, Winnifred and William Lee, when they founded the shop.
We have stood by our neighborhood, through its ups and downs,
and I am happy to say we are back in an upswing now.
Everyone knows about the U Street corridor and how it has
come back and the gentrification that is going on there. I
founded the neighborhood's first Jaycee chapter back in 1968
after the assassination of Martin Luther King, Jr.
My daughter, Stacey, who works in the business, donates a
substantial chunk of time to at least five civic and charity
groups.
So it is not only a disadvantage to us not to be able to
offer health insurance coverage to our employees. It goes
against my philosophy of community service.
There was a recent poll reported by HR News that
demonstrates the importance employees place on health
insurance. According to this poll, of 1,200 United States
adults, age 18 and older, 84 percent say health insurance is
the most important factor in choosing a job.
So offering health care in reality is a benefit that is
necessary for a business to succeed. We have seven full-time
employees plus many part-timers on a weekly basis, and more at
holiday and special events. The biggest enticement besides
salary in our repertoire of tools to attract and keep employees
is benefits, and the most important benefit is our ability to
offer health care.
There are very limited health care options for small
businesses in the small group market. I believe that cost is
the biggest impediment, but is also a lack of options and lack
of negotiating power that are also important.
Right now there does not seem to be any options in all of
the market for me. And I know from talking to others in my
industry the small businesses in many states are similarly
faced with the limited or no choice.
When I was in the market I had to rely on agents and
brokers to help me choose a plan, and some agents did not want
to deal with me because of my company being so small. I can
tell you first hand that small businesses do not have the same
market advantage that large businesses do. Small businesses
have no negotiating power.
So even if we can purchase insurance, if a year later we
have had one or two expensive claims, the premium costs go up
by double digits and the out-of-pocket costs go up also.
The last time I attempted to purchase insurance and offer
it to my employees I had to ask them to pay 25 percent of the
premiums. It was the best deal that I could get, but even then
the younger ones decided it was not viable for them. They said
they would rather roll the dice, pray, and cross their fingers
that they did not get sick or injured.
Our work force spans a range of ages from 20 years to a
driver in his 60's. They want and need different things in a
health plan, and I need to be able to find a policy that
provides adequate coverage but is affordable and responds to
their different needs.
Right now one of my long-term employees who has been with
us for 26 years--he is one of our drivers--just could not
afford the coverage and recently had an accident. He was
treated in the emergency room and could not pay. So now he has
had his wages garnished.
Another example is one of my employees who became pregnant.
She could not afford the health care so she went on public
assistance. If employees do not get affordable coverage through
the employer, they certainly are not going to hunt for coverage
in the non-group market where the costs are out of reach for
these workers.
The outcome is that the small business owners and the small
business employees are often not covered by any health
insurance. My two daughters also work in the business. Both
have spouses, fortunately, whose employers provide coverage so
they are covered. My wife, who retired from Verizon a number of
years ago, and I receive health insurance on her plan.
Unfortunately, my other employees have few options for
health insurance coverage. Three of them have spouses, but the
spouses do not have health insurance. So it is a vicious
circle. The higher the cost, the more workers are shut out or
priced out of the system.
Having uninsured workers has an impact on everyone who is
insured.
So in conclusion, I hope that my sharing with you these
experiences with trying to provide health insurance as a small
businessman has been helpful to the Committee in understanding
both the importance of my ability to do this and the urgency
that Congress create the solutions to this problem.
Please find a way to expand the availability of affordable
health care coverage. It is probably the number one problem
facing small businesses and their employees today.
Thank you very much.
[The prepared statement of Mr. Lee may be found in the
Appendix on page x.]
Chairwoman Velazquez. Thank you, Mr. Lee.
Our next witness is Mr. Lee Groza. He is a partner at
Mountjoy & Bressler, an accounting firm based in Louisville,
Kentucky. The firm has over 100 employees with four locations
throughout the state.
Mr. Groza is testifying on behalf of the American Institute
of Certified Public Accountants. AICP is a national
organization representing over 330,000 certified public
accountants.
Welcome.
STATEMENT OF LEE DAVID GROZA, MOUNTJOY & BRESSLER, LLP,
LOUISVILLE, KENTUCKY, ON BEHALF OF THE AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS
Mr. Groza. Thank you, Chairwoman Velazquez, Ranking Member
Chabot, and members of the Committee.
My name is Lee Groza. I am a CPA and one of several owners
of Mountjoy & Bressler, LLP, located in Kentucky. I am here
today representing the American Institute of Certified Public
Accountants. I include several of my own opinions based on the
experiences with my firm.
The topic of health care coverage has been an interest of
mine for a number of years and one that I have been able to
view from several different perspectives. Not only am I small
business owner who has spent a considerable amount of time
involved in considering coverages for our own employees, but as
a CPA, I am an advisor to many small businesses and have been
able to witness their health care challenges first hand.
Additionally, I am currently the President of the Kentucky
Society of CPAs and have served as a member and former
chairperson of the committee that oversees the association
sponsored health care plan that is offered to our nearly 5,000
members across the commonwealth.
At my CPA firm, we are annually faced with the challenge of
offering quality health care benefits at a manageable cost.
This delicate balancing act between benefits and affordability
has resulted in my own firm switching to three different
insurers in the last three years alone.
Like many small businesses, we significantly subsidize the
premium cost to our employees, but we do not cover 100 percent
of this cost. We have found that even though our offices lie in
the larger population centers of the state, our health
insurance options have been limited to just a few dominant
insurers.
While having just a few options may call into question the
competitive nature of this process, just two alone has resulted
in an experience where one insurer dramatically decreased their
bid in an effort to counter another's proposal to secure the
relationship. Truly, when competition does exist, we as
consumers of health care can benefit greatly. And as the number
of options increase, our potential benefit increases
accordingly.
As of the first of this year, our employees were offered
the option of a high deductible health plan coupled with a
health savings account feature. These new plans have now become
the lowest cost option for our employees and were intended to
provide a better way to manage and potentially gain from their
individual health care spending while assuming a manageable
amount of additional risk.
These plans encourage healthy behavior and efficient
spending while protecting our employees from escalating costs.
I am encouraged by the fact that nearly 30 percent of our
participants decided to make the switch to these HSA plans in
the first year alone.
My involvement with the Insurance Committee at our state
association pool has left me somewhat discouraged. As a
statewide membership organization, our association health plan
must be able to provide coverage to our CPA members who are
located in every corner of the state.
Consequently, we have been left with only one insurer with
a provider network that is sufficient enough to maximize our
coverage area. In this situation, there is no room for
negotiation, and our annual renewal meetings have become an
exercise in futility where the terms are clearly dictated by
the insurer.
As our association pool continues to evolve into one that
serves very small practitioners in the increasingly rural areas
of the state, there is no doubt that we are paying higher
premiums than our members who are served in larger areas and
have more options.
When developing the required annual premium for our pool,
the insurer will often rely on national trend rates that may
have no correlation of the cost trend based on our actual
claims' history.
In a clear show of dominance, they have gone so far as to
additionally assess an explicit profit charge among all other
administrative costs which appears to serve no other purpose
but to pad their profitability.
A few years ago we were able to add a risk sharing
arrangement to our association pool health plan that provides
for a refund of premium in the event that the initial estimates
used by our insurer were too high. Of course, this arrangement
brought with it an additional fee.
So we are now in a situation where we feel compelled to pay
an additional significant sum of money every year just to
ensure some degree of accuracy in the determination of our
health insurance costs. I cannot help but believe there is
something fundamentally wrong with a system that permits this
practice.
I have personally witnessed how competition in the area of
health care can work to our advantage, and I am a strong
believer that any step taken to increase competition is a
positive step for the American consumer. As an employee of the
federal government nearly 20 years ago, I fondly remember the
ability to select from a variety of plans and insurers to suit
my needs. Today most, if not all, small business employees do
not have that luxury.
Thank you, again, for the opportunity to testify before you
today.
[The prepared statement of Mr. Groza may be found in the
Appendix on page x.]
Chairwoman Velazquez. Thank you, Mr. Groza.
And now I will recognize the Ranking Member, Mr. Chabot,
for the purpose of introducing our next witness.
Mr. Chabot. Thank you, Madam Chairwoman.
And I have the honor of introducing our next witness who is
Dr. Stephen Eby, who is from the greatest city in America,
Cincinnati, Ohio. We are very pleased to have him here.
Chairwoman Velazquez. After New York.
Mr. Chabot. After New York, of course.
He is actually originally from Toledo, Ohio, and educated
at Ohio State University in Columbus. After completing his
residency in family practice at the University of Cincinnati,
Dr. Eby joined a multi-specialty group. He also worked as an
emergency room physician before starting his independent solo
practice.
Currently Dr. Eby is the senior partner and President of
Western Family Physicians, which is, I believe, a six-doctor,
independent family medical practice with 25 employees, serving
the west side of Cincinnati.
We are very pleased to have you here this morning, Dr. Eby,
and we look forward to your testimony.
STATEMENT OF R. STEPHEN EBY, M.D., M.D., CINCINNATI, OHIO, ON
BEHALF OF THE AMERICAN ACADEMY OF FAMILY PHYSICIANS
Dr. Eby. Thank you.
Well, thank you, Chairman Velazquez and Representative
Chabot. Happy birthday.
Mr. Chabot. Just to clear up the record, it was actually
yesterday, but--
[Laughter.]
Mr. Chabot. --who is counting?
Dr. Eby. And the members of the Committee, I thank you for
the opportunity to participate in this hearing.
As one of 93,800 members of the American Academy of Family
Physicians, I applaud your concern for how the cost of health
insurance impacts small medical practice. It makes it difficult
for these small businesses to provide health insurance benefits
for their employees.
My name is Dr. Steve Eby. My practice, Western Family
Physicians, is a small practice providing primary care health
services to families on the west side of Cincinnati, a practice
of six doctors, 25 employees.
To attract and retain good employees, since the inception
of our small business we have paid for our employees'
individual insurance. We have never been able to afford health
insurance for their families.
Between 2003 and 2008, the cost of a single policy has
increased 80 percent, an average of 16 percent a year. This
staggering escalation has occurred despite other steps we took,
such as increasing the deductibles to $500 and the co-pays by
33 percent.
The monthly premium for a family coverage in Cincinnati,
even with high deductibles, is $1,300. That amounts to over
half of our average office worker's monthly pay before taxes.
Because of these astounding expenses, one of our
receptionists, a single mom, is able to afford coverage only
for herself. Her children, therefore, went on Medicaid.
Our front desk coordinator has been with us for seven and a
half years. She was pregnant when her husband lost his job and
his health insurance. Our employee purchased individual
coverage, covered her in the delivery, but once born the infant
had no insurance coverage. Fortunately the necessary
immunizations are covered by the Ohio Vaccines for Children's
program, Physician Visits or Not.
The costs associated with well baby care and all shots
necessary through H2 equals about $2,200. This amount takes
into consideration no additional visits for acute illnesses.
Not only is it our employees who are struggling with these
insurance costs. My wife and I cannot obtain health insurance
through my practice because the premiums are unaffordable. She
is a registered nurse with a Master's degree. She was able to
take a second job with a large hospital system in order for us
to get affordable health insurance coverage.
Similarly, I am aware of medical practices in the
Cincinnati region which are not able to get health coverage at
any price because some of their employees have common chronic
conditions, such as diabetes, blood pressure, and heart
disease. I suppose when these people become ill they will have
to go to the emergency room and pray that the hospital bills
don't drive them into bankruptcy.
Affordability is a relative concept of both expenses and
revenues. I know this Committee is well aware of it, but I
would be remiss if I didn't mention the significant problem on
the income side particularly affecting small, primary care
practices like mine. And that problem is the statutory formula
for determining physician payment under Medicare. This formula,
known as the sustainable growth rate, is dysfunctional and
inaccurate.
Due to a cumulative nature of the SGR, payments rates have
not kept pace with medical inflation even as measured by the
government. Physicians are currently being paid at 2001 rates,
and if Congress does not intervene, a steep 10.6 percent cut
will take effect July 1 of this year.
The inability of even medical doctors to offer adequate
health insurance benefits to their employees or in some cases
even themselves is more proof that a health insurance crisis
exists today in this country, and this is occurring while
health plans are reporting record profits.
In closing, family physicians commend the Committee for
highlighting these issues associated with health insurance
coverage for employees and owners of small businesses and even
medical practices. And we urge Congress to give high priority
to actions that will provide affordable health coverage for
every American.
In addition, we would ask Congress to recognize and
appreciate the emergency situation that has been created by the
arcane Medicare payment formula that is incorporated in the
statute.
I thank you for the opportunity to share these views with
you, and I look forward to answering your questions.
[The prepared statement of Dr. Eby may be found in the
Appendix on page x.]
Chairwoman Velazquez. Thank you. Thank you very much to all
of the witnesses.
I would like to address my first question to Mr. Eckstein.
There seems to be no disagreement among small business
owners that health insurance is their number one concern. Mr.
Lee made reference to the fact that employees responded to a
survey by 84 percent, and when we look and watch the
presidential candidates' debate that is taking place in
America, we know that I guess at least they know that health
insurance or lack of health coverage is the number one concern
of the American public.
Additionally, it is also one of the most unpredictable
costs small firms face. Given the current housing market and
the financial challenges you must address, how do you cope with
this volatility while keeping your business afloat and
maintaining coverage?
Mr. Eckstein. Quite honestly, that is a situation that we
will continue to address as this unfolds and we see how far
this decline in housing takes us. In the past, I had one year,
one instance where I had to sell property, valuable real estate
at a loss in order to liquidate funds so I could send my
daughter to get the medical treatment she needed because the
insurance company wouldn't pay it.
If this continues the way it is, I will be forced to and I
have already been forced to relinquish my 401(k) in order to
meet my overhead obligations, but I have to keep my employees
insured.
I have got an incredible staff right now, and you know, I
fight every day to make ends meet to keep them around, but we
will see how this thing unfolds.
Chairwoman Velazquez. Mr. Groza, according to a recent
study, the majority of small businesses who already have health
insurance coverage continue to shop for new plans. As a small
business owner with a plan in place, how often do you search
for new insurance? How much time do you devote to identifying
new options for your firm?
Mr. Groza. We do it on an annual basis, and I suspect that
is common probably with most small businesses. The health
insurers typically will write the policy for a 12-month
coverage period, and then you know, around nine months into
that plan, they start contacting you to want to come in and
tell you how bad the news is for the next policy period.
So we do it on an annual basis. We enlist the use of a
broker to help us through that process, and we tell them to go
out and see who is on the market, tell us if there are new
options that we can consider, and price it for us.
Chairwoman Velazquez. What would be the average cost? How
much will you pay a broker?
Mr. Groza. Well, my experience is a little different in
that area. On the association side, I think typically the
commission rates have been in the range of five to ten percent,
but I do know that there's some health insurers out there that
on new business they're willing to pay commissions of upwards
of 30 percent. So 30 cents of every dollar goes to compensate
somebody for selling the policy as opposed to covering claims.
Chairwoman Velazquez. And when the insurer's called you and
say it is time for us to come and talk to you and give you the
bad news, what type of explanation will they give you as to the
cost? How do they explain the premiums going up?
Do you find any transparency in that process?
Mr. Groza. No. There is little transparency in the process,
but I would probably say that the explanation or the
justification that we hear more often than not is just because
medical costs in general are rising across the board. Drug
costs are rising in general across the board. We expect that
drug utilization increased. The prescription costs are going
up, and we have no choice but to take the premiums up.
Chairwoman Velazquez. Mr. Teske, in your testimony you
mentioned that your wife works at a local hospital for the
purpose of supplying health insurance to your family. If you
were not longer able to be insured under your wife's plan, what
insurance options would be available to your family?
And could your small business afford the costs?
Mr. Teske. That is the problem. When you are not under a
group payment plan, you end up paying higher premiums. There
are opportunities available. I consider Blue Cross in Kansas to
be the premier health care provider, and people that have that
are very happy that they have it.
My wife's employers decided that was too expensive and they
could not afford it for their employees. There are options, but
it is going to cost me more, and we are struggling at this
point to make our cash flow meet with the health care payments
under the employment.
And the hospital does co-pay. My wife's policy is $655 a
month. The hospital is co-paying 326 addition. So if we had to
take that all on as a farm operation, the cash flow would be
much tighter.
Chairwoman Velazquez. Thank you.
Dr. Eby, insurers tell us that increasing health care costs
are the primary culprit for rising premiums, and I would be
inclined to believe them if insurance profits were not also on
the rise.
In your estimation how much have your premiums increased in
recent years?
Dr. Eby. What is remarkable to me is how across the board
the story is the same. On a good year, it is ten percent. In a
bad year it is 30. We have seen jumps that high in one year.
Never does the coverage get better. It always gets worse,
higher co-pays, higher deductibles.
Probably in our practice from the business end, 20 percent
of our receipts come straight out of the pocket of the patient
in co-pays. That has gone up.
Chairwoman Velazquez. And during that time, have you seen a
significant increase in your reimbursement rates for medical
care that was provided?
[Laughter.]
Dr. Eby. Some increase some years. I talked with my
practice manager, two, three percent from the same company, in
fact, that jacked our rates. My payments go up 16 percent. My
receipts go up two or three.
Chairwoman Velazquez. Thank you.
Ms. Sandman, I am curious. I know that you participated in
New York's Healthy New York Program for Small Businesses.
Ms. Sandman. Yes.
Chairwoman Velazquez. And the goal of the program is to
make insurance more affordable and available to small
businesses like yours. In your opinion, why did the Health New
York Plan fail to work for you and your husband?
Ms. Sandman. Because the premium became oppressive. I
simply as a small business owner cannot afford a second
mortgage. Currently, because I do not have insurance and we are
constantly shopping around, the Healthy New York premium is
about $50 more than it was when I lost my coverage in October.
Chairwoman Velazquez. Okay. I now recognize Mr. Chabot.
Mr. Chabot. Thank you, Madam Chairman.
First of all, I'll address this to the whole panel, the
question, but before I do, let me just make a statement.
The Chairwoman had mentioned that she was the lead co-
sponsor of the association health care plan. I want to commend
her for that leadership, and I am a supporter of that as well.
Chairwoman Velazquez. With Mr. Johnson, Sam Johnson.
Mr. Chabot. Oh, yes, Sam Johnson as well, absolutely.
One of the more frustrating things that I have seen around
here in a number of years is we are obviously in opposite
parties, but when my party was in control for five or six times
in the last five years, we would pass association health plans
in the House, and then it would go over in the Senate, and over
there you do not just need a simple majority. You need 60 votes
for anything. The Democrats find that very frustrating now. The
Republicans found it very frustrating when we were in control.
But for whatever reason, we could not get 60 votes over in
the Senate. So we were unable to actually pass it into law. The
House did its job. The Senate could not. So we never got it
passed into law.
Unfortunately, this past year we obviously had a
changeover, and now that Democrats control, we did not get it
out of the House this time. Again, I want to commend the
Chairwoman because she is a supporter, but we just did not have
the votes in the House.
And all of your or many of you spoke favorably towards
association health plans. If we could maybe go down the line,
if you could just say one or two quick points about why you
think that would be helpful to small businesses in the country
if we had association health plans.
And, Mr. Teske, I guess we'll begin with you.
Mr. Teske. If I understand it correctly, I would think that
if we could qualify under some type of association group rates
as individual farmers, it would have to be better premiums than
what we get.
Mr. Chabot. Mr. Eckstein.
Mr. Eckstein. In a situation mine where my daughter has
preexisting conditions, putting everything on a group level
playing field definitely has to help from a premium standpoint.
You know, in the event that this recession or, sorry, slowdown
in the market--
[Laughter.]
Mr. Eckstein. --slowdown in the market stays and I have to
relinquish my health insurance, I have no options. I do not
know what I will do. I am forced to. That is the last bill I
have to pay.
Mr. Chabot. Ms. Sandman.
Ms. Sandman. Well, I believe that pooling would give us
some real leverage and negotiating power to lower our premiums.
It would directly change my life.
Mr. Chabot. Thank you.
Mr. Lee.
Mr. Lee. Well, in my personal opinion, I am for universal
health care. I believe that health care should be available to
every American citizen. You know, that is representing my own
personal view.
Mr. Chabot. But short of that, would you support
association health plans?
Mr. Lee. Yes, I would.
Mr. Chabot. Okay. Mr. Groza?
Mr. Groza. I am very favorable to association health plans
for a couple of reasons. One is I have seen on our member side
that it tends to decrease the volatility in their insurance
costs because under association plans typically you only have a
range in which you can increase premiums instead of just
letting it ride as it may.
The other benefit that association plans have provided our
members is it provides a guaranteed benefit. So as our other
panelists said, you cannot deny client coverage for an
association, at least our association, and preexisting
conditions are covered after a 12-month waiting period. So that
provides another alternative.
The most important thing about associations is I feel if we
can get the numbers into an association to properly provide
leverage against those costs and to further dampen the
volatility, I think the prices are going to continue to drop,
but I think that leverage has to be accomplished across state
lines and not contained within a single state because we just
can't get the numbers that are needed.
Mr. Chabot. Thank you.
And finally Dr. Eby.
Dr. Eby. I think as independent practitioners we are in
kind of a bind because if we collude for things, we are in
restraint of trade, and in order to have a close enough
association to legally do that, you have to give up your
independence. A group rate I think would be excellent, but I do
not think that is available to independent doctors.
You know, the whole point of insurance is to spread the
risk so that nobody gets hit too hard. I think that the concept
of spreading the risk universally makes sense.
Mr. Chabot. Okay. Thank you.
In my opening statement I had mentioned a bill that I have
introduced a number of times, and we have gotten support, but
not sufficient to get it passed into law yet, which would allow
small businesses and individuals to fully deduct their health
care premiums from their taxes.
Could I just see a show of hands perhaps so that we do not
have to take the time to go down the line? How many believe
that that would be a good idea? If I could just see that.
One, two, three, four. Okay. So four out of six, five out
of six. Okay. Pardon me?
Mr. Teske. I meant to raise a point.
Mr. Chabot. Yes, feel free to if you would like.
Mr. Teske. I think maybe twice in the last 25 years I have
paid income tax. It only helps you if you actually pay income
tax. Farming has not been that good of a business.
Mr. Chabot. But there are many that do pay income tax. So
you would not, I assume, hold it against them that they would
get a break on their taxes. You do not have to answer that
question.
Mr. Eckstein. I may need to change my vote, next year.
Mr. Chabot. Okay. Let me get another question real quickly.
Mr. Lee had indicated that he was supportive of universal
health care or what many would term, you know, socialized
medicine similar to a Canadian or plan that they would have in
Great Britain.
Now, our country has chosen not to go down that path.
Again, to be fair here, is there anybody else who thinks that
this nation should go that far and do that?
Two out of six.
Dr. Eby. Anything is better than what we have, sir.
Mr. Chabot. But, Doctor, would you want to go to a Great
Britain type plan or Canadian plan where you have essentially
socialized?
Dr. Eby. Strictly speaking, from my personal opinion,
anything is better than what we have.
Mr. Chabot. Okay.
Dr. Eby. I would be willing to take that hit.
Mr. Chabot. You think that is reflective of the majority in
the medical community at this time?
Dr. Eby. No.
Mr. Chabot. No?
Dr. Eby. I do not.
Mr. Chabot.
Thank you.
What city are you from again? No, I am just kidding.
Dr. Eby. I am so conservative I am past conservative.
Mr. Chabot. Okay, okay.
[Laughter.]
Mr. Chabot. The Chairwoman just reminded me that is why we
call Ohio a swing state.
[Laughter.]
Mr. Chabot. Not necessary red or blue, but purple now.
And finally, Dr. Eby, how much, if any, of the problem do
you see in high medical cost, insurance cost to be the fact
that there have been, arguably, or have there been I guess I
should say, not to tilt this one way or the other, medical
malpractice cases, frivolous lawsuits which have had a tendency
to perhaps put doctors in a position where, and insurance
companies as well, where their rates have gone up as a result
of those particular lawsuits?
Would you want to comment on that?
Dr. Eby. Thank you.
Especially being an ER doc in my past life, it is a
significant problem. If everybody had a medical home with a
family doctor who knew who they were, knew their background,
was accessible, I think we would all be happy, doctors and
patients alike, and efficient use of specialists.
On the contrary, when folks go to the ER, the ER doc's
perspective, they do not know the patient, and they cannot
afford to miss anything. You know, if you walk into the ER with
a headache, you are going to get a CAT scan. Almost guarantee
it. If you walk in with a sore throat, you will probably get a
blood count, and that is rational in that setting because they
have to practice defensive medicine.
Mr. Chabot. Right.
Dr. Eby. They have to. It is a huge problem.
Now, if they could get in to see their family doctor who
knows them and get a rapid strep test and be done, it would be
$86 instead of $860. Yes, it is a big problem.
Mr. Chabot. Thank you very much, Doctor. I appreciate it.
And thank you for the whole panel. I think your answers and
your testimony was excellent really. Thank you.
I yield back the balance of my time, Madam Chair.
Chairwoman Velazquez. Thank you.
Mr. Ellsworth.
Mr. Ellsworth. Thank you, Madam Chair.
Mr. Teske, you were raising your hand and trying to get a
point. I am going to let you get that in on my time, and then I
will make my comments, if you remember what you were going to
say.
Mr. Teske. Well, I do. It was the part about one payer
health care. With all of the American public that is on
Medicare now and Medicaid and other social programs, I have
seen statistics that we have 47 percent of the American public
now under some type of socialized medicine, and so I think it
is getting beyond the point of debate. I think society is going
that way so fast that it is a matter of when do you
appropriately address these.
Mr. Ellsworth. Thank you.
Mr. Teske. Thank you.
Mr. Ellsworth. Madam Chair, I am not sure I have a
question. I find myself over here getting to, oh, I do not
think I am going to need medical care, but just over the
situation. I look at this and I see the different backgrounds
of the folks, and I do ont see Republicans and Democrats. I do
not think this issue is Republican-Democrat. It is American.
And somebody said it on TV tonight. We are better than
this. And I can remember several months ago, and I think Mr.
Eckstein brought up the presidential debates, and I can
remember when the different candidates on both sides were
bringing up their plan for the health plans, and they said,
``We are going to announce this tomorrow,'' and before they
ever said what the details were of the plan, the other side was
already saying, ``Here is what it is going to be, and here is
why it is bad.''
And if we continue that debate, and it has become, I guess,
politically dangerous to think out loud and to throw things
out, and that is what is, I guess, so sad about this situation;
that when we think out loud, somebody is there to cut your head
off and feed it to you.
We have got to do better than this. You know, doctors
deserve better. Lawyers are not going away, and I do not think
they should. So I see the backgrounds here, and America is
better than this, and it is going to take debate, and it is
going to take honesty and it is going to take not being afraid
to throw an idea out there and cast out.
It may not be a good idea, but it has got to be one that
says, ``Hey, could this work?'' and be willing to do that and
not be afraid to look stupid and/or, like I said, get your head
chopped off.
So this is a crisis. When this background of folks is
saying it is a crisis and Dr. Eby is saying anything is better
than this, we have got to do something. And I commend you and
Ranking Member Chabot for your willingness to take this on, and
I would just say that this Committee needs to push and push and
push until we get something through, and if we start with small
business and get it through for them, maybe they will take that
as an example and go with the rest of our country and
businesses.
And so that is not a question, but thank you all for your
testimony. It has enlightened me, and when I fly back through
your great city to another great city in Indiana--so I am
surrounded by good friends in the Midwest all around--I will
have some good things to tell the folks of Indiana.
Thank you.
Chairwoman Velazquez. Thank you.
Mr. Gohmert.
Mr. Gohmert. Thank you, Madam Chair.
And I appreciate the panel all being here. I am also a
supporter of the Associated Health Plans, but to me that is
just a Band-Aid fix. That will give you a little more leverage
with the insurance companies. That will help a little bit. We
are still going down the road to socialized medicine. That may
help us pull off in a rest area for a little while, but we are
still headed down the same road.
And I was an exchange student of the Soviet Union back in
1973. I saw true socialized medicine. With all due respect, Dr.
Eby, I do not want to go there. You know, when you are paying
your physicians $200 a year and it is nine to five and too bad
if you are sick and you leave sicker, I do not want to go
there.
But having been in private practice and had to pay those
premiums and seeing them going up like you all are talking
about, ten percent in a good year, 30 percent, actually I think
we went up 50 to 60 percent one year; it is just devastating,
and then you want to reward your employees by giving them a
raise, but then they cannot see that you have already given
them a huge raise and they do not even benefit because their
co-pay went up.
I also appreciate everybody, and this seems to be the
terminology in Washington. We want to see everybody with good
health care coverage. Well, I am sorry. I do not. I want to see
everybody with good health care.
Now, the fact that it seems like most people want to make
sure that the insurance companies make plenty of money and that
is what you get when you make sure everybody has good
insurance. The insurance companies are in the business to make
a profit, and they are going to.
So I am not sure I want to see everybody with good health
coverage. I want to see everybody with good health care that
they can afford.
You know, one of the reasons I had not gotten personally
into the health savings account before recently was because
until the last Congress, you could have money pulled out pre-
tax and put in a health savings account, but if you did not use
it, you lose it. And I did not want to run the risk of losing
money at the end of the year.
Well, then in the last Congress we passed a bill that would
allow it to roll over. So I am now in the health savings
account, and I understand the idea of socialized medicine. I
know there are a lot of folks here in Washington, the
bureaucrats that would look forward to all of the additional
jobs where they would get to tell doctors and patients what
coverage you can have and what care you can get and who you can
see. I would really rather avoid that. I would rather avoid
giving insurance companies more employees.
I would like to return people to where they got control,
and I appreciated my friend, Mr. Ellsworth, saying we need to
have people not afraid to be embarrassed throwing ideas out,
and I have never been afraid to be embarrassed. You know, it is
one of the benefits, I think, of being a Texan, but--
[Laughter.]
Mr. Gohmert. But with a health savings account, it seems
like that is a possibility there where whether it is a union
worker, where instead of putting $5,000 a month into some
insurance company with the big profits, you put it in their
health savings account. And it gets me to keep calling this
medical insurance. I mean, because we all pay for gasoline, and
I am thinking, well, dadgum, if it has worked so well for
health care that you just call it insurance where they pay for
everything, maybe we need gasoline insurance where everybody
pays this huge amount every month into this gasoline insurance,
and then they will pay for your gasoline and the company will
make a big profit on top of that.
I mean that is basically what it is. It is not insurance if
it covers everything. So I am thinking if we can get to that
deductible and people have got $5,000 that are in the account,
I think it would even do the government good and be better off
just to spot people that cannot afford it that have health care
problems. Put 5,000 in their account so that they have got the
deductible. Then they get to choose their doctor. They get to
say, ``No, I do not want that procedure. It is too expensive,''
or, ``you are charging too much. The doctor down the road will
do it for half that.''
That is when we finally get some responsibility and get
some power back in the hands of the patient. Because I am tired
of going to the doctor and not having a doctor-patient
relationship because my insurance does not cover that procedure
or it does not cover that medication. I want power back in the
hands of the patient and the doctor, and the bureaucrats and
the insurance companies not profit so much, and I have got more
control.
I would just throw that out. I got here late, and I
apologize because we appreciate your time, but has anybody
looked at possibly like unions, demanding HSAs where you have
got the power instead of the insurance company?
Yes, Mr. Groza.
Mr. Groza. We did. I touched on it briefly. We started
offering an HSA, and it worked out fairly well for our
employees.
The problem is they are not all the same flavor. They do
not come in the same shapes and sizes. So HSAs are only
attractive to the extent that the insurer is really going to
give you a break on the high deductible health plan that is
associated with the HSA.
In my personal example as someone who is in an HSA, I got a
considerable break in the premium by going to an HDHP with an
HSA, and I took that money, set it aside in an account, and
since our utilization fortunately has been low, I have got a
little bit of money there to spend. It has built up and
otherwise would have gone off to an insurance company and added
to the bottom line.
But I have seen other insurers that did not give you that
much of a price increase for going to an HSA, and in that
instances I would say--
Mr. Gohmert. Do you mean decrease?
Mr. Groza. Right. I am sorry. There is not that much of a
decrease.
Mr. Gohmert. Yes.
Mr. Groza. So why take on the additional risk if you are
not going to get a price break?
Mr. Gohmert. Right. You would have to get the break.
And if I could throw this in, it looks like to me right now
a problem with the HSAs that I have encountered is, you know,
the price you are quoted by a hospital or a doctor is not what
Blue Cross pays. It is not what the government pays, but right
now if you pay cash, you are paying more than those folks.
And so it seems like that was something that we would need
to do so that you could negotiate more effectively. I had a
relative who was in a car wreck, and the other side's insurance
company obviously owed it. Her health care had paid it. So I
was trying to get that back, and she had $10,000 in health care
bills. The other insurance company settled, and I did not take
a fee as a relative. This is before I came to Congress and when
I was not a judge, and anyway, the law requires that you pay
back anything the health care provider has paid.
And so I said, ``All right. We have got the settlement.
Show me exactly what you paid and I will cut you a check
today.'' Ten thousand dollars in bills, and there was $800 was
all that health care insurance had paid in full and final
payment of all that.
So we need to get that kind of power back in the hands of
the people.
Chairwoman Velazquez. Your time has expired, Mr. Gohmert.
Mr. Gohmert. Thank you, Madam Chair.
Chairwoman Velazquez. I now recognize Mr. Akin.
Mr. Akin. Well, I appreciate Louie's passion and his
interest in solving problems, and I cannot match a sermon like
that, but just a quick question. I did not have a chance to
hear your testimonies. They schedule us in multiple hearings at
the same time, and we have not figured out how to be in
multiple places.
But my question is: do you see a pattern of the insurance
companies developing almost a monopoly in various markets? And
it may be from one city to the next. Is that pattern out there,
and is that something that legislatively could be dealt with?
Dr. Eby. Yes.
Mr. Akin. Doctor?
Dr. Eby. Well, I cannot speak to the second half of that as
far as the legislation.
Mr. Akin. yes.
Dr. Eby. Not my area of expertise. But clearly, the number
of plans out there is shrinking as acquisitions and mergers and
whatnot, and in Cincinnati, we have still got a number of
plans. I do not think in our practice any one plan is above 25,
30 percent. That is still an 800 pound gorilla in your living
room.
I think there are other markets where there is probably one
or two carriers.
Mr. Akin. That is what I have heard, is that there are some
markets, some cities where you have got basically one type of
car. It is a black Ford and that is all you have a choice of.
Dr. Eby. You had better like it.
Mr. Akin. You had better like it, yes, right or worse, yes.
Okay. A second question. I think it was the Wall Street
Journal not too long ago carried an article that I thought was
kind of scary. It was basically one of these hard luck stories
about some guy who does not feel too well, goes to see a
doctor. The doctor is not a very competent doctor. He has some
kind of an infection that the doctor does not correctly
diagnose. He starts spinning down, gets in worse shape, finally
gets to a decent hospital. They say, ``Hey, you are pretty
sick, you know.''
``Well, that is what I have been trying to tell people.''
But anyway, so he almost dies. He goes into septic shock.
Finally they manage to save his life, and they blow through the
top of their insurance, which I think they had a $2 million
insurance policy, and this guy had $3.5 million bills.
So after the two million, the insurance that their little
business had cut and ran, and now you have got a husband-wife,
a very sick husband and a wife at home, and they are due for a
million and a half worth of bills.
Well, it is all of this monopoly money. It is this funny
money, and the hospitals try and collect from anybody who has
got some money. They just about had this woman selling her
house and extra mortgages and putting them in the poor house,
and finally, when the newspaper and media shined a light on it,
the hospital backed off and said, ``Well, we will settle for a
couple hundred thousand,'' or something like that, maybe even
less than that, in fact.
So it was one of these things where the hospitals in order
to make their bottom line, they are just basically fleecing
anybody it looks like they can get money from, but there is not
really any consistency. They have got an $800 pair of stockings
to help protect you from swelling or something and you could
buy them at Wal-Mart, you know, for $1.30 or something.
So do you see that same kind of pattern happening where we
are getting our costs complete out of line just because people
are trying to figure out how to make the bottom line?
Ms. Sandman. I would like to address that if I may, Mr.
Akin. I think that what we really need is transparency. I think
that that would just open the window to a lot of people to be
able to shop around for a doctor that they have heard about or
call someone and ask them what their record is.
I also think that everybody in America needs to be
responsible for some part of health care. I do not think it
should be automatically an employer's responsibility. I think
they need to shop around for it like you do car insurance. Do
you know what I mean? It is something that everyone is going to
have some responsibility for.
And when that happens, then the transparency can fall right
into play, and I think it will improve overall health care. I
mean not only health care insurance, but health care for
everyone.
Mr. Akin. Thank you.
Ms. Sandman. You are welcome.
Chairwoman Velazquez. Thank you.
Ms. Sandman, do you think that if we offer like a one stop
shop that will provide information to small businesses as to
health care options, how much it will be, the differing
information that will empower small businesses to make the
right choice in terms of what is good for them based on the
nature of their businesses, the number of employees and so on,
that that will be a great tool for small businesses?
Ms. Sandman. Absolutely. I think that it is an intimidating
process. You go out looking, and you hear an outrageous rate,
and you can go through the Chamber of Commerce in your area and
there is no easy way to access it.
I think it will open doors for everyone. There is no easy
way to shop for health care in my community.
Chairwoman Velazquez. Well, let me just mention the fact
that the Small Business Committee as part of the SBA
Reauthorization, we passed legislation in this Committee that
passed through the House that will direct the Small Business
Administration through the networks of SBDCs, small business
development centers, to create a resource center with the type
of information that will enable small businesses so that they
know where to go.
We have, between SBDCs and sub-centers across this
country, close to 1,100 centers. So our position is that that
will be a great way and a very effective way for the Small
Business Administration and the SBDCs to help small businesses.
Ms. Sandman. Absolutely.
Chairwoman Velazquez. To know what options are there, and
we all know, Mr. Groza, you know, when small businesses do not
have a human resources department or the resources, the
manpower to do the research. This will be then a great tool for
them to have.
Ms. Sandman. It would be, and I know that people in my
community would use it.
Chairwoman Velazquez. Okay. Mr. King, would you want to ask
any questions?
Mr. King. Yes. Thank you, Madam Chair.
As the Committee members know and I think a lot of the
people here in this room know that I have spent my life in
small business, and I recall a time that my Congressman came to
my community. It was the first time anyone had ever entered
into a small community like that that came from Washington, and
it drew quite a crowd, 70 to 80 people
And he asked the question of the 80 people that were
roughly in the room, ``How many of you are employers?''
Twelve of us were employers in that room.
``How many of you provide health insurance for your
employees?'' And I was the only one out of that room that did.
And so you will know that I have shopped for premiums, and
I have tried to put together packages, and I have run into a
number of obstructions. One of them is the inability to
purchase group insurance if you're a small employer, and
another one would be the lack of flexibility of being able to
purchase individual policies for your employees because of
federal restrictions that prohibit us from being able to shop
and pick a policy that fits one employee's family and then find
another policy from a different company that fits another
employee's family.
Because the federal government seems to believe that
employers want to discriminate against employees, and so
therefore, you must have a one size fits all.
And as I look at this and I wonder where can we go to solve
this problem, one is association health care plans, which I
thoroughly support. Another approach is to be able to allow
that flexibility for employers to be able to go out on an open
market and buy individual policies for individual employees
that are tailor made for those employees.
Now, if you have got one or two or five or ten or 20
employees, you know them. You know their families. You have
their interests in mind. And so why is the federal government
intervening into this kind of a relationship, this contractual
relationship between an employer and an employee?
Then another component that I think would be
extraordinarily valuable to give us the flexibility would be to
expand the deductible contributions into HSAs. Why do we have a
cap on that? I would at least double that.
And if we could double the HSAs and we would see young
couples that enter into the job market. Let's just say even at
today's standard if they entered into the job market when they
are 20 years old--I pick that number because it is a round
number--and they work for 45 years and qualify for Medicare at
45 years of work at age 65, even under today's numbers and if
you spend $2,000 a year in real dollars, that comes out to be
almost a million dollars a year in HSA.
Well, what a wonderful tool to have to have the flexibility
to be able to manage your health care, and a lot of this
problem that we have is lack of the freedom to make decisions,
and I think that as small employers you recognize that.
I am watching the most empathy from Ms. Sandman, and I
would ask you if you would want to comment on some of those
remarks that I made.
Ms. Sandman. I like what you are saying, and it makes a
whole lot of sense, but one of the things that comes to my mind
immediately is that I need to be able to purchase my insurance
or put money into an account pre-tax dollars. Currently my
money that I spend, I am not now covered by any health
insurance, but when I was paying my premiums, it was after
taxes. That would help small businesses a lot.
Mr. King. I left that part out. Let's double emphasize that
point because that has been one of my frustrations, too, that
big business can do this, corporations can do this and the
government can do this, but small employers, sole
proprietorships cannot, not in the fashion necessary for
themselves.
Ms. Sandman. I think also we need to educate the public to
what health savings would be cause there is a terror of being
uninsured out there, and people are terrified of the $860
compared to $86 that you could spend. The education and the
transparency is so important at the same time so that people
have a sense of what it really costs and what their power is.
Because we have no power now. There is no control on a
small business level.
Mr. King. And I think you.
And, Mr. Eckstein, would you care to comment on those
points that have been made?
Mr. Eckstein. Well, my thought goes to I hear the federal
government talking about writing checks, $800 to every
taxpayer, and I question that, but why couldn't that money be
directed into health savings accounts to encourage people to
spend money on health insurance to get coverage where they need
and get us back to some kind of national fiscal responsibility
instead of just foregoing our children's health care, which is
just crazy?
Mr. King. Let me weigh in on that since our light is still
green, Mr. Eckstein. Looking at the magnitude of this proposal
that the federal government, the White House, seems to be
floating out there that hopefully will float for a while so
that we can get our senses here, I remember when Bill Clinton
came in as President, and he rode in on the concern about there
being a recession. I do not know that there actually was one,
but in order to cure that problem, he went to Congress and
asked for $30 billion and an economic incentive plan.
The Democrat Congress negotiated that down to 17 billion
and finally decided that it was not enough money to make a
difference, and so here we are now with 145 or $150 billion,
and that is borrowed money, borrowed money that adds to our
national debt or reduces the amount of the Social Security
trust fund, which is only in bonds, and we simply cannot spend
our way into prosperity.
All of you in small business know that, and so I am
concerned about where we are going with all of this, but to
maximize the freedom, make sure that there is deductibility for
sole proprietors to have everybody in America be able to deduct
their health insurance except sole proprietors is an atrocity
against your business.
Ms. Sandman. It is, and what it does is it takes the bottom
line away. It takes away my ability to expand, to improve my
business, to go place where I would like to go with my business
because there is not enough funds.
Mr. King. And it positions you to where one day a
government job is going to look attractive just for the health
care.
Thank you very much. I appreciate the testimony. Madam
Chair, I appreciate the privilege to ask some questions.
Chairwoman Velazquez. Mr. Chabot?
Mr. Chabot. Yes, just one final question, if I could throw
it back to you again, Dr. Eby. You know, obviously, I sense the
level of frustration in your testimony, and I hear that
frustration oftentimes when I am talking to doctors and medical
personnel back in Cincinnati, and I am sure this is true all
over the country. So many of them tell me that especially those
that are perhaps considering retiring, they apparently decided,
yes, they are going to retire or I have heard some act like
they wish perhaps they had gone into something else because
there seems to be much more control over what they can do, what
medicines they can provide, whether it is covered or not
covered by kind of, for lack of some better term, some
insurance bureaucrat who is making those decisions about
whether they are going to pay for the procedure or not.
So there just seems to be a real sense of frustration in
the medical community, and that is reflected in everything we
have heard here as well.
Is that true and would you want to comment on that?
Dr. Eby. Are you sure?
Mr. Chabot. Yes, go ahead.
[Laughter.]
Dr. Eby. I would say that is very accurate. We spend a huge
amount of our time doing things that really are not what we are
trained to do in providing medical care, which is evaluate
somebody and find out how you can help them. Filling out a
prior authorization form because the insurance company does not
want to pay for Allegra D for your chronic sinus, particularly
in Cincinnati is not what I went to school for, but yet that is
one of the things I did Monday, and that is just the tip of the
iceberg.
Yes, there is an awful lot of wasted time and trouble, and
certain there is good intent. Prior authorizing of expensive
imaging tests like MRIs, patients have some responsibility,
too. They come in with a back ache because they are out of
shape. They strained it, and they want an MRI, and it may not
be necessarily if you look at the research appropriate in that
case. That is 1,000-odd dollars. Well, actually they charge
two, but they only get paid 800.
Yes, there is a lot of wasted time, and you have to call
the insurance company, explain to somebody that is a low level
clerk why when you do feel it is medically indicated, why it
should it be covered. Because their leg is going to be
paralyzed? Well, but do they have this, that or that?
Frustration is a mild term.
Mr. Chabot. Thank you very much.
I want to again thank the panel for their testimony here
today. I think it has been very helpful to this Committee.
Thank you.
Ms. Sandman. It was a pleasure.
Chairwoman Velazquez. And I, too, want to thank you for
taking time and being here with us today. I know this is a very
complex issue, and there are not easy solutions or easy
answers, but one thing is clear. This Committee will continue
to address this issue and in ways where we can provide input
into the different candidates.
And we know that each one of us are supporting someone who
is running for President of the United States, but if it takes
the route that we must not do anything during this session, at
least we are getting the information, the stories to be able to
share this with those presidential candidates.
But you have to help us in keeping this issue in the front
burner. It is an important issue as and, Mr. Ellsworth, Mr.
Chabot said, clearly, this is just not an issue of one
particular sector. This is an issue that affects every person
in this country, and the ripple effect of the lack of health
coverage is incredible. It not only affects the public health
of the American people, but also the impact in terms of our
economy.
So I want to thank you all, and let me ask unanimous
consent that members will have five days to submit a statement
and supporting materials for the record. Without objection so
ordered.
This hearing is now adjourned.
[Whereupon, at 11:36 a.m., the Committee was adjourned.]
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