[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
FULL COMMITTEE HEARING ON
HEALTH CARE REFORM
IN A STRUGGLING ECONOMY:
WHAT'S ON THE HORIZON
FOR SMALL BUSINESS?
=======================================================================
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
February 4, 2009
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 111-003
Available via the GPO Website: http://www.access.gpo.gov/congress/house
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
DENNIS MOORE, Kansas
HEATH SHULER, North Carolina
KATHY DAHLKEMPER, Pennsylvania
KURT SCHRADER, Oregon
ANN KIRKPATRICK, Arizona
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
MELISSA BEAN, Illinois
DAN LIPINSKI, Illinois
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
JOE SESTAK, Pennsylvania
BOBBY BRIGHT, Alabama
PARKER GRIFFITH, Alabama
DEBORAH HALVORSON, Illinois
SAM GRAVES, Missouri, Ranking Member
ROSCOE G. BARTLETT, Maryland
W. TODD AKIN, Missouri
STEVE KING, Iowa
LYNN A. WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
BLAINE LUETKEMEYER, Missouri
AARON SCHOCK, Illinois
GLENN THOMPSON, Pennsylvania
MIKE COFFMAN, Colorado
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Karen Haas, Minority Staff Director
.........................................................
(ii)
STANDING SUBCOMMITTEES
______
Subcommittee on Contracting and Technology
GLENN NYE, Virginia, Chairman
YVETTE CLARKE, New York AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
PARKER GRIFFITH, Alabama
______
Subcommittee on Finance and Tax
KURT SCHRADER, Oregon, Chairman
DENNIS MOORE, Kansas VERN BUCHANAN, Florida, Ranking
ANN KIRKPATRICK, Arizona STEVE KING, Iowa
MELISSA BEAN, Illinois TODD AKIN, Missouri
JOE SESTAK, Pennsylvania BLAINE LUETKEMEYER, Missouri
DEBORAH HALVORSON, Illinois MIKE COFFMAN, Colorado
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine
______
Subcommittee on Investigations and Oversight
JASON ALTMIRE, Pennsylvania, Chairman
HEATH SHULER, North Carolina MARY FALLIN, Oklahoma, Ranking
BRAD ELLSWORTH, Indiana LOUIE GOHMERT, Texas
PARKER GRIFFITH, Alabama
(iii)
?
Subcommittee on Regulations and Healthcare
KATHY DAHLKEMPER, Pennsylvania, Chairwoman
DAN LIPINSKI, Illinois LYNN WESTMORELAND, Georgia,
PARKER GRIFFITH, Alabama Ranking
MELISSA BEAN, Illinois STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania GLENN THOMPSON, Pennsylvania
BOBBY BRIGHT, Alabama MIKE COFFMAN, Colorado
______
Subcommittee on Rural Development, Entrepreneurship and Trade
HEATH SHULER, Pennsylvania, Chairman
MICHAEL MICHAUD, Maine BLAINE LUETKEMEYER, Missouri,
BOBBY BRIGHT, Alabama Ranking
KATHY DAHLKEMPER, Pennsylvania STEVE KING, Iowa
ANN KIRKPATRICK, Arizona AARON SCHOCK, Illinois
YVETTE CLARKE, New York GLENN THOMPSON, Pennsylvania
(iv)
C O N T E N T S
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OPENING STATEMENTS
Page
Velazquez, Hon. Nydia M.......................................... 1
Graves, Hon. Sam................................................. 2
WITNESSES
Ratner, Mr. Dave, Owner, Dave's Soda & Pet City, Agawam,
Massachusetts, On Behalf Of The National Retail Federation..... 4
Davis, Ms. Janette, CPA, President And CEO Southeast American
Financial Group, Inc., Pembroke Pines, Florida, On Behalf Of
The U.S. Women's Chamber Of Commerce........................... 6
Haynes, Mr. Thomas, Executive Director, The Coca-Cola Bottlers'
Association, Atlanta, Georgia.................................. 8
Fox, Ms. Alissa, Senior Vice President, Office Of Policy And
Representation, Bluecross Blueshield Association............... 9
Beene, Mr. R. Michael, Senior Health Advisor, National
Association For The Self-Employed.............................. 11
Clark, Mr. Dirck, Chief Business Development Officer, Heartland
Regional Medical Center, Saint Joseph, Missouri................ 14
APPENDIX
Prepared Statements:
Ratner, Mr. Dave, Owner, Dave's Soda & Pet City, Agawam,
Massachusetts, On Behalf Of The National Retail Federation..... 32
Davis, Ms. Janette, CPA, President And CEO Southeast American
Financial Group, Inc., Pembroke Pines, Florida, On Behalf Of
The U.S. Women's Chamber Of Commerce........................... 44
Haynes, Mr. Thomas, Executive Director, The Coca-Cola Bottlers'
Association, Atlanta, Georgia.................................. 48
Fox, Ms. Alissa, Senior Vice President, Office Of Policy And
Representation, Bluecross Blueshield Association............... 58
Beene, Mr. R. Michael, Senior Health Advisor, National
Association For The Self-Employed.............................. 74
Clark, Mr. Dirck, Chief Business Development Officer, Heartland
Regional Medical Center, Saint Joseph, Missouri................ 82
Statements for the Record:
National Funeral Directors Association........................... 84
National Federation Of Independent Business...................... 94
American Optometric Association.................................. 97
The Small Business Coalition for Affordable Healthcare........... 101
The Main Street Alliance......................................... 104
Small Business United for Health Care Coalition.................. 111
American Society of Association Executives....................... 115
(v)
FULL COMMITTEE HEARING ON
HEALTH CARE REFORM
IN A STRUGGLING ECONOMY:
WHAT'S ON THE HORIZON
FOR SMALL BUSINESS?
----------
Wednesday, February 4, 2009
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:05 a.m., in Room
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez
[Chair of the Committee] Presiding.
Present: Representatives Velazquez, Moore, Dahlkemper,
Schrader, Altmire, Sestak, Bright, Griffith, Graves, Gohmert,
Buchanan, Luetkemeyer, Schock, and Thompson.
Chairwoman Velazquez. Good morning. I call this hearing of
the House Small Business Committee to order.
My colleagues, the "American Recovery and Reinvestment Act"
will go a long way in helping entrepreneurs weather the storm
of recession. But even after it is enacted, the new stimulus
won't clear every cloud. The rising cost of health care
continues to be a major stumbling block for small firms, an
obstacle that threatens to restrict their ability to create new
jobs for American workers. Until that roadblock is cleared,
these businesses will be unable to grow and unable to help lead
the path to economic recovery.
Most of the country's attention is now fixed on the
faltering economy, but that does not make health care reform
any less urgent. In fact, reining in health care costs is as
critical to financial recovery as restoring accountability on
Wall Street. As soaring premiums cut deeper and deeper into
profit margins, many entrepreneurs are slashing coverage for
their employees and families. Still others are dropping it
altogether. But perhaps worst yet, countless businesses have
been forced to scale back their workforce. With unemployment at
a 16-year high, we simply cannot afford to lose more small
businesses' jobs, especially considering that entrepreneurs are
the country's greatest job creators.
Clearly, health care reform for small firms is more than a
moral obligation; it is an economic imperative. In today's
hearing, we will discuss the rising cost of small business
health care and the barriers it creates for financial recovery.
We will also explore ways to break down those barriers and to
bring the economy back on track.
In the last 2 years, health care costs have climbed at
twice the rate of inflation. For small firms, premiums have
jumped 80 percent since the year 2000. As a result, coverage
for small-business workers has dropped off significantly. In
less than a decade, it has declined by 16 percent for some of
the smaller firms. Today, in the face of growing economic
challenges, small businesses can no longer absorb these
outlays. With lending down and credit tightening, few
entrepreneurs have the resources to meet basic obligations like
payroll, let alone provide health insurance.
Clearly, the current health care system is unsustainable
for employers, as well as their employees. As Congress
discusses health care reform, one of the issues before us is
that of employer mandates. I understand there is significant
concern about whether health care reform will include mandates
that small firms offer coverage. This issue must be addressed
in a way that will not unduly burden small businesses. The
reality is that reform cannot work if it does not meet the
needs of our Nation's entrepreneurs.
Beyond mandates, this Committee has been working to find
consensus on the broader health care reform issues. Last
Congress, working in a bipartisan manner, members of this
Committee introduced the CHOICE Act, legislation that would
have gone a long way in addressing small employers' health care
needs. Today, along with Mr. Graves, I am reintroducing the
bill. It is our hope that it will make health care more
accessible for small businesses.
As the country continues to consider recovery legislation,
it is critical that health care reform play a role in the
process. Yes, the "American Recovery and Reinvestment Act"
promises billions of dollars in tax relief to entrepreneurs,
and, yes, it will help unfreeze credit markets. But unless we
can find a way to make small business coverage more affordable,
the benefits of the stimulus may be blunted by health care
costs.
How can we expect entrepreneurs to lead the way out of
recession when they cannot afford to insure their employees?
The more money that small firms are forced to pour into health
care, the less capital they have for bringing on new workers.
And, at the end of the day, that is what a stimulus should be
about: creating jobs. Small businesses can do it, but they are
going to need all the means necessary, beginning with increased
capital through health care reform.
I am pleased our witnesses could join us today, and thank
them in advance for their testimony.
With that, I now yield to Ranking Member Graves for his
opening statement.
Mr. Graves. Thank you, Madam Chair.
And I, too, would like to echo the chairwoman's thoughts on
thanking you all for coming today. I appreciate it. I
appreciate her having this hearing to give us some more insight
on health care and how it is affecting our businesses.
Forty-seven million Americans are uninsured. By itself,
that is a staggering number. Unfortunately, given the Nation's
economic crisis, we can expect that that number is going to
rise and rise significantly unless we work together to find
some reforms that are practical, efficient, and realistic.
The United States has the best health care system around,
but a wasteful and inefficient system for delivering that care.
According to the Institute of Medicine, the United States
spends nearly $100 billion per year to provide the uninsured
with health care, often for preventable diseases that
physicians could treat more efficiently with earlier diagnosis.
Clearly our system of health insurance and health care is
financially unstable and threatens the health and financial
security of small-business owners, their employees, and their
families. Several consecutive years of double-digit premium
increases have hit the business community pretty hard,
especially small firms. An employee in a firm with fewer than
10 employees pays 18 percent more for health insurance than a
worker in a firm with 200 or more employees. And disturbingly,
health care costs are continuing to rise for small businesses.
As a result, a significant number of the uninsured, 60 percent,
are workers or dependents of workers in small companies.
Health care reform should make the market for health
insurance more competitive, resulting in greater access to
affordable health care. Many Members in Congress, including me,
supported associated health plans, or AHPs, which would permit
small-business owners to pool together to purchase their health
insurance at lower rates. These arrangements could increase
negotiating leverage and administrative efficiencies and help
to ensure more consistent benefits among the States.
Another area to explore as we attempt to fix this problem
is the way health benefits and spending are taxed. Federal tax
treatment of health insurance is widely understood as a
fundamental element in achieving affordable health care. It is
arguably the most important factor shaping the health insurance
markets and, thus, a key driver of the incentives that dominate
health care financing and delivery.
Beneficial initiatives like health savings accounts need to
be expanded and made more affordable through the Tax Code.
Additionally, we must eliminate the inherit inequity within the
Tax Code when it comes to the treatment of self-employed
individuals, by allowing them to deduct their health insurance
expenses when calculating their payroll tax returns. I also
believe that changing the Tax Code to allow everyone to deduct
non compensated health expenses on their taxes would provide a
significant benefit in making health care delivery more
affordable.
To this end, as Chairwoman Velazquez pointed out, I have
decided to be an original cosponsor on the "Small Business
CHOICE Act," which she will be introducing shortly. The bill
tackles two of the most significant challenges facing small
employers: the high cost of providing comprehensive health
insurance and the volatility of insurance premiums.
The bill would allow small businesses to form health
insurance cooperatives, which would function similar to risk
pools and provide insurance against high-cost or catastrophic
claims. Additionally, the bill offers a key incentive in the
form of a refundable tax credit to small businesses that choose
to join a cooperative.
This is a good start, Madam Chair, and I look forward to
working with you on it.
There are many ways to tackle this problem, however I
firmly believe that mandating employers to offer coverage to
their employees is not a workable option. Just last week, the
National Federation of Independent Business released a study
measuring the economic impact of a national employer health
care mandate and what it would do on small businesses. The
study conducted business simulations to measure the effects of
a hypothetical national mandate requiring employers to offer
private health insurance to all employees starting in 2009 and
to finance a minimum of 50 percent of the cost. Among other
findings, the research found that a mandate could lead to more
than 1.6 million jobs lost between 2009 and 2013, and small
businesses would account for more than 1 million, or 66
percent, of those lost jobs. Additionally, small businesses
would lose roughly $113 billion in real output and account for
56 percent of all real output that is lost. Labor-intensive
industries with 20 to 99 employees would experience the most
job-loss.
There is no way to fix a problem as big as this. We must
continue working towards a solution because America's small
businesses can't wait any longer.
And I look forward to working with you, again, Madam Chair.
And I appreciate, again, the witnesses for being here and for
everybody that has worked on this bill that you are getting
ready to introduce.
Chairwoman Velazquez. Thank you, Mr. Graves.
And it is my pleasure to welcome our first witness this
morning, Mr. Dave Ratner. He is the owner of Dave's Soda & Pet
City, a small chain of four pet stores in Springfield, Amherst,
and Northampton, Massachusetts.
He is here to testify on behalf of the National Retail
Federation. The NRF protects the interests of the retail
industry and represents an industry that has more than 1.6
million U.S. retail companies and more than 25 million
employees.
Welcome, Mr. Ratner. You have 5 minutes to make your
presentation.
STATEMENT OF DAVE RATNER
Mr. Ratner. Thank you very much. Madam Chairwoman and
members of the Small Business Committee, my name is Dave
Ratner. I am pleased and actually pretty honored to appear
today on behalf of the National Retail Federation.
And I have got to say this right away. They didn't know I
was going to say this. I love the National Retail Federation.
They really look after little guys like me. It is a great
organization.
I am the owner of Dave's Soda & Pet City--yes, I sell soda
and I sell pet food--a four-store business in greater
Springfield, Massachusetts. My business has been named the
Greater Springfield Chamber of Commerce Small Business of the
Year. We are the habitual winners of the People's Choice Award.
We sponsor every little league team. We sponsor every church,
every cheerleader. Every everything that has anything to do
civically in western Massachusetts, we are involved with. I am
sure that all of you in your communities have a business like
Dave's Soda & Pet City, and I am in the 20-to-99-employee group
that is really nervous about what is going on.
The retail industry, as you know, is one of the biggest
supporters of the employer-based health insurance system,
despite not having an easy workforce to cover. We are strong
supporters of health coverage in spite of these challenges. It
is not that we don't want health care for everybody, we just
want to do it right and equitably.
As an industry that frequently endures wafer-thin profit
margins, we are also well-acquainted with the need to manage
the collective cost of labor in as an effective manner as
possible. And maintaining the balance between these two
imperatives is not always easy. It is borderline impossible, as
you said, even in the best of times. And Lord knows, these
ain't the best of times.
We hope to work with you and other Members of the U.S.
House and Senate to bring about a meaningful relief from rising
health care costs. And, to be honest, I am almost elated to
just hear you two talk about what you think. It is fabulous.
The key, in our view, to reaching universal health care is
getting rid of the high costs. The NRF has proposed a
comprehensive solution to increase access to more affordable
health coverage in our vision of health care reform. And I ask
that it be included at the end of my written testimony. I would
like to touch on just a couple of points.
Retailers who don't offer consistent value to their
customers simply don't survive. Amazingly, the same is not true
in our health care system. We need to develop consumer-friendly
comparative cost and quality information. My customers know
more about the pet products on my shelves than they do about
the doctors or the health plans that they do. People should be
able to select the best quality care just as they choose
between me and my competitors on a daily basis.
And you do need competitors in order to have real
competition. This was the first year in 20 years when my
renewal came up that my health care costs didn't go up at least
15 percent. Why? Because there was a new legitimate player that
came into western Mass, and they came in with a better plan at
the same rate. It is amazing. Auto insurance in Massachusetts,
when they finally let that get competitive, auto rates went way
down. It is really about good competition.
Reducing the health care costs should be a central goal in
all health care reform. Employer mandates, as you said, they
add costs. The NRF particularly looks forward to working with
the Committee on the Chairwoman's proposal to create a market
for high-risk claims. I think it is a fabulous idea. When it
comes to increasing access to coverage, we believe we can reach
universal coverage without mandating that employers provide
coverage.
The problem with employer mandates either to provide
coverage or to provide specific coverages is that they directly
increase the cost of coverage and, hence, the cost of labor.
Here is the real-world deal: It will kill jobs. Employers
simply will not bring on new employees if they get mandated. It
is just basic common sense. Employer-mandated health insurance
will leave everybody unhappy and ton of people unemployed. Who
is going to pay the doctor bills if these people don't have
jobs?
Yes, we urge policymakers to be wary about doing what
Massachusetts did. I will tell you, it has not worked. Rates
have skyrocketed, and many people are still unemployed. It
didn't work.
And I understand one of the biggest challenges you will
face will be building a consensus around the reform. And I
would venture to guess that there isn't an industry or any
American who doesn't have an idea about how it should be done.
We hope that the NRF vision will help add to the growing
consensus around reform. And it is time to get it done now with
only the right reforms enacted into law.
I thank the Committee. I look forward to your questions.
And let me just say, I am so elated to hear what you guys are
saying. It is great.
[The statement of Mr. Ratner is included in the appendix in
page 32.]
Chairwoman Velazquez. Thank you, Mr. Ratner.
Our next witness is Ms. Janette Davis. She is the president
and CEO of Southeast American Financial Group, Inc. Her firm is
a residential and commercial real estate lending firm based in
Pembroke Pines, Florida.
Ms. Davis is testifying on behalf of the U.S. Women's
Chamber of Commerce. The Women's Chamber of Commerce was
founded in 2001 to increase economic growth opportunities for
women.
Welcome.
STATEMENT OF JANETTE DAVIS
Ms. Davis. Chairwoman Velazquez, Ranking Member Graves,
members of the Committee, thank you for giving me the
opportunity to share with you my challenges.
I am a small-business owner who is a president and CEO of
Southeast American Financial Group, which is owned and operated
by my husband and I. Through the years, I have employed as many
as a dozen employees and subcontractors. However, during this
economic downturn, we had to reduce our staff to one and a
half.
The expensive cost of health care makes it extremely
difficult for us to continue to afford, especially during this
current economic crisis. Currently, I pay 50 percent of the
monthly health insurance payment for my employee. To keep costs
down, I chose an HSA, but this becomes a challenge for an
employee who has a pre-existing health condition earlier in the
year before they are able to see their deductible. And for
small businesses like mine, it is very important that our
employees get the health care they need so that they can
proactively manage their care and be available for our business
needs.
Like many husbands and wives who work together, my husband
and I have to purchase individual policies instead of a family
policy. In 2007, the insurance coverage increased for us to
$1,400 per month. To continue to carry insurance, I switched my
company to a high-deductible HSA policy. Now we pay $881
monthly for just both of us. However, we have to cover the
first $3,000 of our expenses, and prescriptions are covered
only after we exceeded these deductibles.
While our policies include preventative care, the insurance
company almost always excludes something and sticks us with a
co-pay. My doctor recommended a preventative procedure. I
verified with my insurance company that the procedure would be
covered 100 percent. During the procedure, the doctor
discovered a minute issue and recommended two additions to my
diet. Consequently, my health insurance company changed the
preventative classification and charged me $562.50.
The families of small-business owners bear the brunt of the
inequalities in our health care system that is heavily skewed
in favor of big business. When I worked for a larger business,
I had a more affordable family policy, which also covered my
husband. Because I am younger and healthier, our coverage was
cheaper because it was issued to me as the primary. My husband
had an eye emergency that resulted in a bill in excess of
$80,000. The insurance company paid 25 percent of the street
price based on its discounted arrangements with the hospital.
Why is it that the hospital services have to be priced at
such exorbitant sums for the cash-paying customer who, in most
cases, cannot afford to pay these astronomical bills? If we
could reduce those costs to reasonable amounts, individuals
could then afford to pay their bills.
We need affordable solutions now. I ask that you put health
care back in the hands of the doctors and prevent insurance
companies from dictating the care we receive. Remove the fine
print and provide clarity so that we know what we are getting.
Health insurance companies shouldn't be able to wiggle out
of paying for health care services. The restrictions should be
lifted as to what doctor or hospital that you may be able to
use.
Allow small businesses to pool together to purchase
insurance under a national group umbrella policy. Provide tax
credits to small business that purchase coverage. Remove the 7
1/2-percent-of-AGI threshold on income tax for medical
expenses. Do not mandate that small business provide coverage.
Remove the 75-percent threshold for business to cover employees
before they can get coverage.
Divide insurance into medical and catastrophic care. Allow
tax credits to individuals for direct pay to their doctor; then
they can purchase insurance coverage for surgery and other
catastrophic illnesses.
In conclusion, it is time to end the stranglehold health
insurance companies have on American citizens. Small-business
owners and their employees have been forced into paying
exorbitantly high premiums, risking high deductibles, and then
being nickel-and-dimed by the insurance companies. We need to
wrestle the control of our health out of their hands and put it
back into the hands of individuals and doctors.
Get rid of the endless administrative overhead, which is
often aimed at finding ways to reject payment care. Help
America's small businesses to pool together to leverage our
scale and bring the cost of care down.
Thank you. I am open to any questions after.
[The statement of Ms. Davis is included in the appendix in
page 44.]
Chairwoman Velazquez. Thank you, Ms. Davis.
Our next witness is Mr. Thomas Haynes. He is the executive
director of the Coca-Cola Bottlers' Association. Mr. Haynes
previously served as president of the Association Health Care
Coalition, which helped improve the health care options
available to their small-business members.
Established in 1914, the Coca-Cola Bottlers' Association
assists its members in reducing costs and improving efficiency
by meeting their needs in numerous areas.
Welcome back.
STATEMENT OF THOMAS HAYNES
Mr. Haynes. Well, thank you, Chairwoman Velazquez, and
thank you, Ranking Member Graves, for the invitation to address
this Committee again. As Chairwoman Velazquez referred to, this
is my third appearance before this Committee.
I won't go into quite as much detail about what the Coca-
Cola Bottlers' Association does and some of our own history as
a result of a lot of it is laid out in my statement. What I
will say is that we are in the business of serving our members
in every way we can, and a particular focus of that service is
on our smaller members.
Our members range in size from the largest, which has
50,000 employees, down to a number of bottlers that are much
like Mr. Ratner's companies, have 50 or fewer employees. So
approximately half of our remaining 73 members have less than
150 employees, so they qualify as small businesses.
We serve them in every way that we can, and we are
successful in almost every arena, in providing the same level
of service to them and getting their cost to the same level as
the largest members, ranging from liability insurance to
employee benefits to purchasing to any number of other areas.
The one place we cannot provide that service in the way we need
to is in the health care arena. And I think that speaks volumes
about the problems facing small business. Because it alone,
among all of our challenges, is the one that we need help from
Washington in solving.
Our small members were once part of a pool that the
Bottlers' Association managed. Yet, in 2000, shortly before I
joined the Bottlers' Association, we were forced to abandon
that pool because of the administrative cost associated with
compliance with State mandates, State regulations, and a number
of other administrative issues. And, as a result of that, our
members' costs went up astronomically very quickly.
What happened to them is reflective, I think, of what is
happened in the small-business community in general. And why we
have such a challenge with the uninsured is that a number of
the members cut back on their policies. Many of them
discontinued family coverage and offer only individual
coverage. And, frankly, a lot of their employees have lost
their health insurance, either because they can't afford the
co-pays, they can't afford the share that our members have to
charge in order to be economically viable, or the benefits have
been cut in a way that they choose not to participate because
of the remaining costs.
Now, why is that? Well, as I said, part of the issue is
State regulation, but it is not the entire issue. I have
attached to my testimony a study that Mercer did for us that
looks at the sources of the 18 percent disparity that
Congressman Graves referred to. And what it shows is there are
three primary drivers of that. One is higher administrative
costs. The second is the significant difference in the premiums
paid for shifting the risk. And the third is what I believe is
some differences in terms of the effectiveness of chronic
disease management by the employer.
The issue is, quite simply, that large employers operate in
a self-insured environment, have efficient plans with scale in
their administration, and don't pay a profit-driving premium to
carriers to take on risk because they are largely self-insured.
If we were in a position to create the same kind of pooling,
the same kind of scale for our smaller members, we could
achieve the same savings and reduce that disparity to a
significant degree, even leaving State regulation in place.
So where does that leave us? Well, what that leaves us
with, in my view, are three basic needs that small businesses
have in order to solve the challenge they are facing relative
to providing health care. One is an uneven playing field, so we
need Congress's help in making the playing field even. Second
is an opportunity do risk pooling and, in the process of doing
risk pooling, do risk retention. And the third is to create a
system where incentives between the employer, the employee, the
people who are likely to be driving decisions as to health care
utilization, are aligned in terms of the economic interest.
I believe that the bill that the Congresswoman Velazquez
and Congressman Graves are introducing today, the CHOICE Act,
will achieve all of those objectives, from our perspective, by
creating a tax credit to facilitate the formation of the
cooperative pools and by providing a sufficient tax credit to
make the playing field more even.
In our case, our members will be able to offer affordable
health care once again. It is the only solution, frankly, that
our members need. If it were enacted by Congress, we would have
no reason to oppose mandates, because our members would be able
to provide coverage.
Now, I am not about to speak for every other small business
and say that this is all they need. But, in our situation,
based upon the way we do business, it is all we need to restore
coverage and restore affordable health care for our smaller
members.
[The statement of Mr. Haynes is included in the appendix in
page 48.]
Chairwoman Velazquez. Thank you, Mr. Haynes.
Our next witness is Ms. Alissa Fox. She is the senior vice
president of the Office of Policy and Representation for the
BlueCross BlueShield Association. BCBSA is a national
federation of 39 independent and locally operated BlueCross
BlueShield companies that provide health care coverage for more
than 102 million Americans.
Welcome.
STATEMENT OF ALISSA FOX
Ms. Fox. Thank you very much, Madam Chairwoman, Ranking
Member Graves, and other distinguished members of the
Committee. Thanks for being here. I am Alissa Fox, senior vice
president of the BlueCross BlueShield Association.
As you mentioned, the BlueCross BlueShield Association
represents 39 BlueCross BlueShield plans across the country,
and, collectively, we provide coverage to 102 million people.
We are unique in that we provide coverage in every ZIP code, in
every part of the country. And all Blue plans offer coverage to
small employers, a sign of our strong commitment to the small-
employer market. We believe that expanding coverage and
improving affordability for small employers must be a
centerpiece of health care reform.
Today I would like to focus on three areas. First, I would
like to talk a little bit about how States regulate health
insurance sold to small employers today; second, highlight what
Blue plans are doing to increase coverage for small employers;
and third, outline our recommendations for Federal legislation.
Today, State and Federal law require insurers to offer
coverage to every small business regardless of their employees'
health. It is called guaranteed issue. Every insurer has to
offer coverage to small employers, and the small businesses
can't have their coverage turned town or cancelled if one of
their employees becomes sick. That is both Federal and State
law.
In addition, State law requires health plans today to pool
all their small employers together when establishing premiums.
And they limit the extent to which insurers can vary the
premiums today based upon the health status of individual
employees. These reforms spread the medical costs of all small
employers more evenly to generate more affordable premiums for
employers with less healthy members. However, this does result
in higher premiums for the healthiest employers.
As you have heard this morning, affordability is a central
challenge facing small employers. To help address these
challenges, our plans across the country have been pursuing two
strategies.
First, we are working on a variety of initiatives to rein
in costs for everyone. Everyone is facing health care costs
that are growing at much too high a rate. The initiatives we
are pursuing range from changing the way we pay providers, to
promote better care, not just more services; and to focusing on
prevention, wellness, and managing chronic illnesses. We have a
Web site we just put online that highlights many of the
BlueCross BlueShield initiatives under way in each of these
areas.
Second, our plans are developing special programs designed
to make coverage more affordable for smaller employers. My
formal statement includes several examples. I would just like
to highlight one.
BlueCross BlueShield of Oklahoma worked closely with their
State legislature to develop Insure Oklahoma, a program that
provides subsidies to low-income workers in small businesses to
help cover the cost of health insurance. This program has been
very successful. To date, nearly 4,000 small employers are
participating in the program and more than 11,000 employees and
their families receive subsidized coverage from the program.
According to a recent survey, 56 percent of new enrollees were
previously uninsured and 37 percent of employers offered
coverage for the first time.
While these types of programs are making a difference,
Federal action is needed to address the problems facing the
small-employer health insurance market as part of comprehensive
health reform. We have three recommendations for your
consideration.
First, we are recommending legislation to encourage States
to establish what we are calling State insurance marts, to
simplify shopping for small employers, increase competition
among insurers, and help educate small employers on potential
subsidy options. These marts would make it easier to shop for
coverage by, for the first time, creating a central point in
every State where a small employer knows they could go to
identify what insurance options are in their marketplace and
apply for coverage and for subsidies.
Our vision is that you go to the one site; if you want to
get--you fill out an application, one application, regardless
if you are applying for Aetna or BlueCross--you can check boxes
that you want Aetna, BlueCross, etcetera, price quotes, push a
button and get quotes pretty instantaneously. And then you
could actually find out what subsidies might be available, and
also enroll online.
Second, we are recommending four types of targeted
subsidies. I am including one patterned after the Oklahoma plan
that I mentioned earlier that would provide tax credits to
small employers for their low-wage workers.
And third, we believe the underlying cost drivers in our
current health care delivery must be addressed. And we have
very specific recommendations in our "Pathways to Covering
America."
I would like to close by saying reforming how we pay for
and deliver care won't be easy, but it is the only way that
affordability challenges facing small employers can be solved
over the long term. We look forward to working with you, this
Committee, other Members of Congress, the new administration,
and other stakeholders to enact health care reform that works
for everyone.
Thank you.
[The statement of Ms. Fox is included in the appendix in
page 58.]
Chairwoman Velazquez. Thank you, Ms. Fox.
And now I yield to the ranking member and recognize him for
the purpose of introducing our next witness.
Mr. Graves. Thank you, Madam Chair.
Madam Chair, our next witness is Michael Beene. He serves
as the senior health advisor and general counsel for the
National Association for the Self-Employed.
The National Association for the Self-Employed is a
national membership association, and they represent 250,000
micro-businesses. Those are businesses with 10 or less
employees. As a senior health advisor, Mr. Beene works with the
NASE's legislative staff. They educate policymakers on the
health coverage issues faced by the self-employed and health
policy options that would assist the micro-business community
in gaining access to affordable health care coverage.
Thank you, Mr. Beene, for being here and for testifying.
STATEMENT OF R. MICHAEL BEENE
Mr. Beene. Well, thank you.
Thank you to the Committee for visiting this important
issue early in the session. And we do support the CHOICE bill,
and I am pleased to hear that it is going to be introduced
again.
The plight of micro-business owners, those with 10 or less
employees, is becoming more challenging as our employee
continues to decline. The pool of money these entrepreneurs
have to draw upon for both business and family expenses has
been dwindling, forcing many self-employed to make tough
choices. Most distressing, many of the self-employed are
scaling back their health coverage, and some are dropping
coverage completely in order to keep the doors of their
business open.
As discussions on health reform progress, the National
Association for the Self-Employed would like to emphasize that
proposals must address two key issues, affordability and
choice--those two issues being key in order to approve the
ability of micro-business owners to obtain quality health
coverage.
The common denominator for all small businesses is that
they must pay taxes. Thus, the Tax Code is an excellent vehicle
to provide financial relief to micro-business. A key step
forward in addressing the affordability issue faced by the 21
million self-employed would be to tackle the current
inequalities in the Tax Code that this segment of the business
population faces as they purchase health coverage. And several
of those things have been mentioned; I believe Mr. Graves
mentioned in his remarks.
All business entities, except sole proprietors, receive a
business deduction for health insurance premiums. Employees and
owners pay for their health insurance premiums pretax, and,
therefore, they are not subject to FICA taxes. However, a sole
proprietor's premiums are not paid with pretax dollars, and
they are exposed to the 15.3 percent self-employment tax.
The most recent Kaiser Family Foundation study indicated
that the self-employed pay, on average, $12,000 a year annually
for family health coverage. Because they cannot deduct these
premiums as an ordinary business expense, that would require
them to pay an additional $1,800 in taxes that no other
business pays. Removing this inequity would be a significant
economic stimulus for the self-employed and just a fair
leveling of the playing field.
Discrimination against the self-employed also persists in
health reimbursement arrangements, HRAs. HRAs, distinguishing
from HSAs, HRAs are a flexible benefit option that allow small-
business owners to reimburse employees for out-of-pocket
medical expenses, including health insurance premiums. An HRA
gives an owner of a business predictability when it comes to
benefit costs, since the owner determines the maximum amount of
annual reimbursement each employee will receive. It has to be
the same across the board for the owners and employees. The
reimbursements are tax-deductible for the business and tax-free
for the employees.
An important component of HRAs is the nondiscriminatory
rules that apply to them. If an HRA is set up, the benefits
must apply equally to all employees. At present, self-employed
persons are not eligible to participate in an HRA. Expansion of
HRAs to allow the self-employed business owner to participate
in the plan would likely significantly increase the number of
businesses that use HRAs. And HRA reimbursements would likely
be more generous if the owner also got to put his or her health
coverage in that. So we would like to see that inequity
removed.
As we look at our health insurance markets, it is important
to consider the potential impacts of market reform on micro-
business. The self-employed micro-business can purchase health
insurance in two markets: the small-group market, which was
referenced, and the individual market. We have seen a
definitive shift of micro-businesses from the small-group
market to the individual market in the past 3 years. Thus, for
health reform to be beneficial to the micro-business sector,
proposals must tackle cost issues in the individual market.
The creation of pooling mechanisms can be utilized to begin
addressing the high costs and lack of negotiating power faced
by the self-employed. In current reform proposals, discussion
has centered on creating a national pool managed by the Federal
Government to allow small businesses and individuals to
purchase coverage. Micro-business owners are evenly split in
their opinion on whether a government-run health option is the
right approach. Chief concerns expressed are the quality of
their health care, would it be as good or not, would they have
as many choices. And there also is a worry among micro-
businesses that taxes would significantly increase.
The establishment of mandates, either for individuals or
employers, has been a hot topic. The NASE does not support the
mandating of health coverage at this time. In particular, an
employer mandate to purchase and provide health coverage that
does not exempt micro-business, 10 employees or less, would put
millions of owners out of business and would leave millions of
workers unemployed. The NASE believes that an individual
mandate would be harmful in this current climate. This is not
the time to do more harm to business.
As you look to reform the system, don't forget that the
needs of the 10-or-less-employee micro-business may be very
different than the 200-employee small business.
Thank you.
[The statement of Mr. Beene is included in the appendix in
page 74.]
Chairwoman Velazquez. Thank you, Mr. Beene.
And now, again, I recognize the ranking member for the
purpose of introducing our next witness.
Mr. Graves. Thank you, Madam Chair.
Our next witness is Dirck Clark, and Dirck serves as the
chief business development officer for Heartland Health Systems
in Saint Joe, Missouri. His responsibilities include strategic
planning, advocacy, regional development, and medical student
education.
Prior to coming to Heartland, Mr. Clark spent 7 years
working in the United States Senate with Senator Kit Bond. Most
of his tenure with Senator Bond was spent working on health
care and rural development issues.
Originally from Savannah, Missouri, he received his
bachelor's degree in business administration and master's
degree in health care administration from the University of
Missouri. In addition, Mr. Clark serves on the Board of
Governors of Missouri Western State University, the Board of
the Missouri Chamber of Commerce, and the Executive Council of
the Boy Scouts of America there in St. Joe.
So thanks for being here, Dirck.
STATEMENT OF DIRCK CLARK
Mr. Clark. Thank you.
Madam Chair, members of the Committee, I appreciate the
Committee's interest in the effect of health insurance of small
business and this opportunity to testify.
As background, St. Joseph is a town of about 75,000 people,
located an hour north of Kansas City. Heartland is comprised of
the only hospital in St. Joseph. We also have a small rural
insurance company and a physician group practice of about 110
physicians.
Heartland is the only tertiary hospital between Kansas
City, Omaha, and Des Moines. Like many hospitals in rural
areas, we are the largest employer in town. It is in that role,
as an employer, that I am here today. Fifty-one percent of our
costs, of our expenses, are related to labor, and 10 percent of
that goes to health care costs.
As a health care provider, we have an understanding of the
effect of health status on health care cost and insurance
rates. We have a team that works with local employers to help
them keep their health care costs down.
My main focus today is on the subject of individual
responsibility and the role an employer can have in improving
employee health, ultimately impacting health care expenses.
With our employees at Heartland, we have implemented some
ambitious programs to help employees with their health status,
at the same time giving them an incentive as a reward for
helping keep their health care costs down.
Some examples would be the following. If you are an
employee of Heartland and on our insurance program and are
injured in an automobile accident, we will only pay 60 percent
of the health care costs associated with that accident. I would
note that Missouri is a mandatory seat-belt State, and so all
employees would have to do is comply with the law.
Like many other businesses, we offer a 10 percent health
insurance differential incentive for employees who choose not
to use tobacco products, along with reimbursement for smoking
cessation programs and free nonsmoking classes.
This year, based on research showing an increased medical
cost for those whose body mass index, or BMI, is above certain
benchmarks, we started a program to offer a premium discount
for lower BMIs. If you are a Heartland employee and on our
insurance plan and have a BMI below 35, you receive a premium
discount of 10 percent. In this first year, if an employee has
a BMI above 35 and wants to improve, we will offer the
incentive to the employee if they agree to participate in
wellness programs.
In order to help the employees earn this benefit, we have
built an on-site fitness center that is free to employees and
spouses. Along with the fitness center, we offer free classes
on weight loss, nutrition, and exercise, to name a few. Our
hope is to break ground this spring on a daycare that will
allow employees to exercise before work and after work and have
their children nearby.
This first year, the BMI threshold is 35. However, each
year the BMI threshold will be decreased until it reaches 29.
Our goal is to work with employees to help them stay below the
threshold as it decreases.
The result has been that 92 percent of eligible employees
have signed up for the benefit; 84 percent of those who signed
up have earned the discount outright; and an additional 12
percent are earning the discount through participation in
wellness programs.
As this is the first year of the BMI incentive, we don't
yet have trend data showing its impact. However, the effect of
these programs has been a dramatic increase on participation in
the self-help programs and a fitness center that is nearing
capacity 4 months after it opened. This was the second fitness
center; we had to expand the first one.
When the fitness center initially opened, as you would
guess, it was populated primarily with employees who were
already in good physical condition and enjoyed exercise. What
we are finding now is that more employees are showing up to
exercise and participate who have higher BMIs. Our hope is that
we can continue to work together with the employees to improve
their overall health risks and keep their BMI under the
insurance threshold as it decreases.
My hope, as you look at health insurance challenges for
small business, that you also look at programs that provide
workers incentives to improve their health and help keep health
care costs down.
I thank you for the opportunity to testify and look forward
to your questions.
[The statement of Mr. Clark is included in the appendix in
page 82.]
Chairwoman Velazquez. Thank you.
I would like to address my first question, if I may, to Ms.
Davis.
You mentioned that you offer high-deductible coverage for
your employees. For many here in Congress, these plans were
supposed to be the answers to all the problems in the small-
group market. And while these plans may be lower-priced, can
you talk to us about some of the shortcomings of these plans in
controlling health care costs?
Ms. Davis. The major shortcoming with the high-deductible
policy--Congresswoman Velazquez, the major shortcoming with the
high-deductible policy is that for the employee who, say, for
example, has a pre-existing condition and they have not yet
saved that deductible, that becomes an issue for them in terms
of they may have to scale back on their care because they
cannot afford to pay all the funds up front to pay for
themselves.
That is a major issue that employees face. Face it, not
everyone can find $3,000 up front right away if they become
sick early in the year. Maybe, say, after 12 months of saving,
that money is there. But that is a major issue that they have.
Chairwoman Velazquez. Ms. Fox, this Committee held a series
of hearings last Congress focusing on consolidation of the
health care industry. What we have learned is consolidation has
left small businesses with fewer insurance carriers to choose
from and higher prices.
According to your testimony, State-based connectors or
exchanges are better for small businesses than national ones.
Given that consolidation threatens to eliminate competition in
the State insurance markets, why would the State-based
connector be better?
Ms. Fox. Thank you.
Well, first of all, we don't think that consolidation has
really reduced the number of insurers in the marketplace in a
significant way. GAO looked at this back in 2005, and what they
estimated was that, on average, there are 28 insurers in most
States, which is a lot of competition. I think when we--
Chairwoman Velazquez. Down from how many?
Ms. Fox. I am not sure, but I think still 28--
Chairwoman Velazquez. Well, that is the real question.
Ms. Fox. I don't know that. I would be happy to look for
that. But I think 28 insurers in a State is a significant
number of competitors.
I would say that, when you look at the States where there
have been a lot of competitors leaving the market, the reason
has not been consolidation; it has been the regulation has been
very, very tight. You look at places like Maine, Massachusetts,
New Jersey. That is where you have seen a lot of insurers leave
the marketplace. And our perception--and I think it is best to
ask them--is that they have left because the rules have been
very tight.
Chairwoman Velazquez. Well, perception is not fact.
Ms. Fox. Right. I understand. That is only our perception.
Mr. Haynes. If I could interject, in another life I was an
antitrust lawyer, and the one thing I would say is you never
measure competition by counting competitors. You have to
measure it by share.
And I think, you know, you have looked at that issue, and
there are definitely some issues in terms of shares that would
suggest from an antitrust perspective that there might be
market power in at least some markets.
Ms. Fox. Well, I would add to that that the Federal
Government has looked at this. And they have--where there has
been consolidation, and, you know, when insurers get to a
certain size, they use it to get leverage with hospitals and
doctors, and it directly benefits the consumers. So this is
something that has been examined very closely. And, you know, I
will just be candid. On our market share, we have about a third
across the country in market share.
And State connectors, we think State connectors would be
better because it would be piggybacked on the existing State
infrastructure. There are State regulators who have excellent,
long-term expertise in protecting consumers, and we don't think
that it makes sense to reinvent that at the Federal level when
we have State experts there.
So what we designed is a program to get the benefits of
what we have heard of from a national exchange, which is to
simplify shopping for small employers. I think when you go and
you try to shop as a small employer--I used to be a small
employer, and it is very difficult to shop for insurance. So we
designed this to really simplify the process, make it easier.
And I think it would also reduce the administrative costs for
us, as well as small employers.
Chairwoman Velazquez. But don't you agree that a national
exchange will provide more transparency, and that consumers
care more about what is out there for them to see and to choose
from?
Ms. Fox. We agree 100 percent that we need transparency,
but we think you can get all that transparency at the State
level and having State connectors; and require every insurer to
be listed on that site, so it is not just some, but everybody,
so you know everybody in the market. I think it will really
increase competition.
Chairwoman Velazquez. So why do you think that--you know,
the real issue here in terms of cost, bringing down cost, that
the rising health care costs is a systemic one. So how could
you explain that the premium cost has not come down, even after
you talk about putting together a strategy that will have the
effect or the goal of bringing costs down?
Ms. Fox. I agree. You know, bringing costs under control is
a huge problem facing this country, and we all need to work
together. We have strategies in place, but we can't do it
alone. We need to partner with the Federal Government. And we
have very specific recommendations on how, working with the
Federal Government, that we need to be looking at changing the
incentives, for example, for providers. Right now, the way we
and the government pay is that the more you do, the more money
you make. We need to change those incentives.
And I will give you just one example of a program that we
have under way where we think it is really making a difference.
Our plan in Pennsylvania is now paying hospitals to reduce
their infection rates. And what they have shown is that,
through giving them coaches to help them in the hospital and
giving financial incentives, they were able to bring the
infection rates, where people were getting sick unnecessarily,
way down. We think these are the kinds of initiatives that need
to be pursued.
Chairwoman Velazquez. Anybody else who would like to
comment?
Let me ask you, Ms. Fox, why do you think that the
Massachusetts experience has not been able to bring costs down?
Ms. Fox. Well, I forgot who--I think it was Mr. Ratner who
was talking about that. I think that they focused on expanding
access first, and controlling costs is something that they are
now working on. And we think you need to do both together. We
think everybody needs to be covered, but you need to attack the
rising costs at the same time. And I think they did the
expansion first. And I think that is--you know, we would do
them together.
Chairwoman Velazquez. Thank you.
Mr. Haynes, one of the reasons small businesses find it
hard to maintain coverage is affordability. If pooling risk is
part of the solution, what other kinds of reforms should we be
discussing that will help move us in that direction?
Mr. Haynes. Well, going back to, sort of, the core issue
and what caused the abandonment of our small-group program, it
was variability in State regulation. Particularly, mandates
created so much complexity. That group had probably about 2,500
employees in 40-some-odd different States. So we had a lot of
States where we might have 15, 20, 25 employees, and having to
write unique coverages with unique rules in that kind of a
program just drove the administrative costs up.
So if we could figure out a way to make State regulation
more consistent--I mean, one example that I think probably
added no value was, at one point, we had eight different rules
to administer as to the age at which and the circumstance at
which dependents had to come off the coverage. Because there
are eight, nine, 10 different State rules on something as
simple as that: 18, 19, 20, full-time student, part-time
student. And just the complexity of managing that with a
relatively small group across multiple States is a real
problem.
Chairwoman Velazquez. Thank you.
Mr. Ratner, we are working here, both in the House and in
the Senate, on this stimulus package that will have the goal of
getting the economy back on track. And, to get this economy
growing again, we need to create jobs. And, of course, we all
know that the backbone of our economy are small businesses that
creates all the new jobs, between 70 and 80 percent.
In yesterday's New York Times, there was a story about how
small firms were choosing between laying off workers and
providing health insurance. So, with the current economy, how
have the additional costs of health coverage affected your
ability to hire or provide additional wages to your workers?
Mr. Ratner. I think I am probably the luckiest guy in the
business world right now that I am in a business, the pet
business, that has not gotten whacked with the recession. So I
have not had to lay off people or to deal with that.
What I will tell you is that every person that we look to
hire is a a part-time person so that we don't have to pay the
benefits, especially in light with what our State wants to add
on on top of what they already added on.
So I will speak for a few friends of mine who have small
businesses. They literally have laid off people solely for the
reason of the health insurance. And they have laid off some
people my age so the rates are even higher and they just
couldn't do it, or they cut their hours to part-time. And it is
happening.
Chairwoman Velazquez. Yeah.
Mr. Clark, to a lot of people in this country, you know,
when presidential candidates were running, they were discussing
health care reform as an important issue, especially for small
businesses. But now we are dealing with the economic crisis
that we are facing in this country.
Your firm not only provides medical services, but you also
provide insurance to many small firms. Can you talk to us about
how health insurance coverage can be critical to the economic
wellbeing of this country?
Mr. Clark. I think the answer we just heard a minute ago is
the most important one: because of layoffs. We are seeing that
in our communities, layoffs with small business.
One of the things that we do is we sit down with the small
employers and look at their health care costs. We do a health
risk assessment on their employees to help them determine what
their issues are, and then we try to provide programs for them
to help them keep their employees healthier and then help them
keep their costs down.
Chairwoman Velazquez. Thank you.
Now I recognize Mr. Graves.
Mr. Graves. My question is to Mr. Clark now, and I might
open it up to some of you who represent associations or your
own business.
But out of curiosity, health care savings accounts--which
we created, I don't know, what was it, 5 years ago or 6 years
ago, something like that--I am hearing mixed feelings. You
know, they were created as a possible alternative for small
businesses to be able to create a health care savings account
for their employees, rather than the expense of full-blown
health insurance. But I have heard some small business saying
it is too expensive or it is too tough to get them going.
Are you seeing any of that as a provider, more health care
saving accounts, or are you seeing any at all?
Mr. Clark. Virtually none in our rural area at all right
now.
Mr. Graves. How about anybody--yes?
Mr. Haynes. We have had some firsthand experience with
that. We have encouraged some of our members who are in our
health care plan to look at health care savings accounts. And
the take rate is tiny.
Mr. Graves. Really.
Mr. Haynes. Virtually zero.
And I think the reason is, frankly, making financial
decisions about health care without knowing what is going to
happen is very difficult for people. I think folks are simply
reluctant to set aside money or to completely understand the
tradeoffs between coverage and a health care savings account
because of the uncertainty aspect of it.
And I just think, as it has been discussed with both our
modelers and their employees, I think there is an uncertainty
and fear factor that is a significant impediment, particularly
for folks who may not be highly educated.
Mr. Graves. Ms. Fox?
Ms. Fox. I would just add that, according to Kaiser Family
Foundation, 13 percent of workers in small firms are now in
high-deductible health plans. And many of our plans do sell
HSAs with high-deductible health plans. And they have found,
one plan has reported that 20 percent of its enrollment in
their products are from people that were previously uninsured.
And what our plans do is we give our customers a range of
products, so that they could pick what best meets their needs.
So it is not that we are favoring one versus another. But we do
find that some previously uninsured workers, small employers
have found that very attractive.
Ms. Davis. I would like to add for the HSAs, I have an HSA
with my company. But as the economic times get tougher and
tougher, the employee tends to pull back the coverage, the
money that they will be contributing, to use for something
else.
Mr. Graves. Kind of a--
Ms. Davis. It is a Catch-22 situation.
Mr. Graves. We all think we are going to be healthy
forever, and so we don't worry about it.
Mr. Ratner. And with my company, we have a lot of young
employees. You couldn't get them to sign up for that. They want
every nickel to come home. They are young. "Nothing is going to
happen to me. I don't need to contribute to it."
Mr. Beene. You know, the good side of the HSAs is that they
do allow more comprehensive coverage for catastrophic events
for less money. And so, all of this is such a tradeoff between
what does it cost to get coverage.
And, you know, we want to avoid this underinsured
situation, as well. And I understand the people that say, well,
the HSA may keep you from going to the doctor when they need
to. But there are ways with the PPO that I think it can be
structured well. But, obviously, it needs more education and
more examination.
Chairwoman Velazquez. Mr. Schrader?
He is not here.
Mr. Moore?
Mr. Moore. Thank you, Madam Chair.
I would like to direct my first question to Ms. Fox and Mr.
Beene.
Last summer, President Obama proposed a new tax credit for
small businesses that offer quality health care to their
employees. Specifically, under his proposal, small businesses
would be offered a refundable credit of up to 50 percent on
premiums paid on behalf of their employees.
Some have recently expressed questions about whether or not
such a tax credit would be sufficient, given the dire
circumstances that most small businesses currently find
themselves in and the difficulties associated with restraining
costs and maintaining cash flow.
Given your policy expertise in this area and your
understanding of the circumstances that many small businesses
currently find themselves in, do you think that a tax credit
would do enough to encourage small businesses to provide health
care coverage for their employees, or would additional
incentives need to be offered?
Ms. Fox. We are very supportive of the tax credit proposal
that is in President Obama's plan. We think that it would go a
long way. EBRI did a survey on that and surveyed small
employers that didn't offer coverage. Seventy-one percent said
they would be interested in offering benefits. That was a
little while ago before the economic downturn. But 71 percent
said it would make a big difference.
We are finding in Insure Oklahoma that that really is being
very successful, having some assistance to provide benefits. So
we do think it would be helpful, but we think it needs to be
more. We need to rein in costs across the board. So it needs to
be a multiplicity of approaches.
Mr. Moore. Good.
Mr. Beene?
Mr. Beene. Yes, well, we believe tax credits are really
probably the key help that we can give small business. And we
would like the tax credits to be refundable, and I think that
they need to come monthly. They need to come at a time when a
business can use them. Be refundable, I support and we agree
with the concept.
And, specifically, I think we--most small businesses in our
surveys want to provide health coverage for their employees,
and they think they need to from a competitive standpoint,
because often they are competing with a big company. You put
these things together. If you can just give some financial help
so that it is not a question of paying the mortgage at home or
getting some health coverage for the employee, and I think the
one way you can really get an effect and help small businesses
with the refundable tax credit issue.
Mr. Moore. Anybody else care to comment?
Mr. Haynes. Yeah, if I could comment briefly, I think tax
credits are a good idea. I think it is necessary. But they only
achieve one of the objectives that I think ought to be the
focus, and that is to get more people covered.
I think a targeted tax credit--and I think it needs to be
larger than 50 percent because, after all, that is not a whole
lot more than simply making it deductible--I think a targeted
tax credit that works against market forces is very important.
I think we need a tax credit that has enough effect on the
market to reduce overall cost.
And that is one of the reasons I would, frankly, prefer the
CHOICE Act solution over a simple 50 percent tax credit.
Mr. Moore. Anybody else?
Okay. More broadly, do any of you have thoughts on various
options that are out there that are designed to ensure that a
higher percentage of small businesses are able to provide their
employees with health insurance? Should the Federal Government
be encouraging the development of purchasing groups, which
would increase plan choice and lower administrative costs?
Subsidize insurance coverage for high-cost individuals?
Subsidize insurance coverage for low-income individuals?
Any thoughts about any of those proposals?
Mr. Beene. I would say yes to all three of those.
Mr. Moore. Consensus, huh?
Mr. Beene. We think that supported groups for certain
individuals is one way to deal with the small business problem
of the unhealthy individual. We don't want to see--I know the
law is everybody hires equitably and doesn't base things on
health, but you wonder out there--we have to give options to
businesses, because we can't bankrupt businesses, especially
now when things are tight. And I think all of those proposals
have appeal to the small-business community.
Mr. Moore. Any other comments?
Mr. Ratner. I think that is a huge deal. I think it would
help immensely, between the tax credits and the pooling.
You know, no one here has had the problem of if you have
four or five employees in their 30s and you have one who is in
his 50s, the rate just goes right through the roof. Or you have
someone who has a pre-existing condition, forget it, they won't
write the policy.
So I think that would be a huge deal to get more people
signed up. And, again, you know, we still have to address the
issue of controlling costs. That has to go along with it.
Mr. Clark. I would just add from the providers standpoint,
anything we can do to see more coverage. We are seeing a
dramatic increase in our bad debt, as you would imagine. We are
at a point now where 50 percent of the babies born in our OB
unit are born into the Medicaid program. So anything you can do
would be helpful.
Mr. Moore. Thank you all. Thank you, Madam Chairman.
Chairwoman Velazquez. Mr. Thompson.
Mr. Thompson. Thank you, Madam Chairwoman and ranking
member Graves. I very much appreciate your leadership on these
issues. I am new here by about 5 weeks. I come from the
hospital floor to the House floor, where for 26 years, these
have been very important issues to me. I represent one of the
more rural districts in the country. So small businesses are
our backbone and having employers growing those jobs and health
concerns are obviously very important for our economy and to me
in my former profession, and now as a Member of Congress.
Mr. Clark: In terms of rural America, rural residents rely
more heavily on the individual and small group market and
because these economies are dominated by small business and
self-employed, they are less likely to be offered health
insurance through an employer. Could you explain how much more
difficult this makes things for people from rural areas, from
rural America?
Mr. Clark. We are seeing two things: We are seeing, one,
fewer people insured obviously; but number two, more and more
people that are underinsured. So they show up at the emergency
room with a card that says they have got insurance only to find
out it doesn't cover much. So it is causing, as I mentioned
earlier, a tremendous increase in our bad debt and we are
seeing it more and more every month.
Mr. Thompson. Mr. Haynes, you stated that some form of
financial support for the small business community is needed to
create fundamental fairness. How would the Federal Government
fairly distribute financial assistance to small businesses when
given the situation with State by State, the small business
community faces significantly different mandates and
regulations?
Mr. Haynes. Well, the issue with the mandates is not simply
the cost of the individual mandates; it is the collective cost
of the difference between the mandates. So it is simply a part
of our Federal regulatory system when you have got a bunch of
different regulations, it makes it much more expensive to
comply with all of them. I was a supporter of the HP
legislation but understand that there was concern about the
federalism principles of it, and I respect and support that.
A tax credit that recognizes the uneven playing field is
really what I am talking about, and the uneven playing field is
basically good because big businesses don't have to comply with
these mandates. They simply create a self-funded program that
is not treated as insurance for purposes of State rules and
they don't comply with them.
So all small businesses face pretty much the same issue.
There may be differences in magnitude, but because they are not
large enough to have an individually self-funded plan, they
can't therefore take advantage of the ERISA preemption. They
are in a position where economically the only way they can put
together a viable plan is by pooling themselves with other
businesses. I think the reality of a tax credit targeted to
small businesses is it simply compensates for the extra costs
that they pay because of an uneven regulatory system.
Mr. Thompson. Thank you. Would anybody else like to comment
on that?
Mr. Beene. Well, just briefly, the mandates in certain
States often--I mean there is a lot of good that comes from it.
Often it is political. Obviously people in different interest
groups want to have--it's easy, let's put it in, it's paid for.
But then you look up and you are in a small business situation
and you are completing with someone who has got ERISA plans. So
you are faced with just that situation where on the one hand,
regulation makes it impossible. On the other hand, some of it
is just too expensive because there are things you don't need
that you are having to pay for.
Mr. Thompson. Thank you, Madam Chairwoman. I yield back the
balance of my time.
Chairwoman Velazquez. Mr. Griffith.
Mr. Griffith. Thank you, Madam Chairman. I appreciate so
much being here and hearing the comments. I do believe that we
are trying to figure this out from within the box, and I
appreciate all the calisthenics that we are going through to
exist within a structure that, over the last four or five
decades, have proven intractable to lowering costs, and
although we are figuring out various ways to increase the
deductible or a tax credit, it has nothing to do with lowering
the cost of health care. I think we are not addressing the
problem. I think maybe some stakeholders that need to be at the
table are not at the table.
Less than 2 percent of all of our medical school classes
are going into primary care. A third of all of our primary care
physicians are 55 years of age and older. We have a huge, huge
deficit of primary care providers and that is what we need to
preventative care. A child born today in America that does not
smoke and is reasonably well informed about nutrition is going
to live to be 100 years old. We now have the ability to cure
many, many major diseases that are or at least allow the
patient to live with them.
My concern from business, and I am hearing the insurance
industry, the small business hospital industry, etcetera. We
are all advocates for our industry, but there are no patient
advocates here. And I think that America is faced with a huge
crisis that unless we come to grips with the fact that there
are no primary care providers and they are distributed when we
do have them so unevenly that we are going to have to look for
other solutions, and one of those solutions is that we need
traditional medicine, the American Medical Association and
State medical associations, to allow our nurse practitioners
who are certified in multiple specialties to be in touch and
help us care for America.
It is an artificial restraint, and I think that would go a
long way to preventative care when we realize that half of all
lives lost in the next century will be life-style-related
disease, whether it be obesity, hypertension, and what have
you. We have the solutions to affordable health care, but they
are not going to be within the traditional boxes that we are
looking in right now.
Thank you, Madam Chair for allowing me to make that
comment.
Chairwoman Velazquez. Sure. Thank you. Mr. Gohmert.
Mr. Gohmert. Thank you, Madam Chair. And I appreciate
having the hearing. I appreciate the work in this area because
this is something affects everybody and during the time I left
the bench to run for Congress and the time I got elected, I
learned some valuable lessons about health care. I also had
learned them as when I was in a small business myself as an
attorney. But they became more pronounced. For one thing, I had
a relative who was in a car accident, the fault of the another
driver; so I agreed to help this person with their 2 days of
medical expense, make a claim from the other guy's insurance
company. And we did so. And the way the practice goes, you
gather all available medical receipts. We did that. Supply
those to the car insurance company. And we had a settlement.
And then under Texas law, once that is done, you can't
distribute any proceeds until you pay back all of the medical,
which I contacted the hospital, ambulance, doctors, MRI, all
that procedures, and we had about $10,000 in medical bills.
They all said we have been taken care of pursuant to our
contract with the health insurance company.
So once I had all those agreements in, that they had all
not been taken care of pursuant to their agreement with the
health insurance company, all I had to do was pay the health
insurance company, and for the $10,000 in bills their total out
of pocket was about $800. So it brings me to wondering if there
wasn't some way to get total truth about what procedures cost
in cash.
I am told, and I have not allowed to see actual contracts,
but I am told in some perhaps Blue Cross contracts there are
provisions that do not allow hospitals or health care providers
to charge a cash price that is as low as what the insurance
company could get. I had a daughter that needed a procedure. We
got a $200 discount for $2,300 or $2,400 procedure, but I am
told that the health insurance companies pay a fraction of that
but they couldn't charge us that little because of their
agreement.
So it just seems that what we have in this country,
everybody talks about health insurance, but we most of what we
have other than the catastrophic care is not health insurance.
We have the insurance companies and we have the government
running health care. And I also think for those who want to be
entrepreneurs, since health care insurance has taken off so
well, you could do the same thing with gasoline. The price is
up; it is down. Tell America you pay us, you know, a big wad of
money every month and we will give you a copay and a deductible
and we will pay your gasoline bill every month.
It is the same type thing. It is not insurance as much as
it is management. So I would love to see us get back to the
place where we were when I was younger when you could have
catastrophic care. Insurance did a phenomenal job of taking
their monthly payments, depositing them, making them grow, and
then covering catastrophic events instead of managing health
care. I would love to see us get back to a doctor/patient
relationship that we don't have anymore. It is either patient/
government/doctor or patient/insurance company/doctor. I want
to see the health insurance companies do well and take care of
us on catastrophes.
The HSAs seem like an avenue to address that, especially if
it is pretax money, goes into an account, can't be spent on
anything else, can be rolled over and not one of these if you
don't use it you lose it. It could even be inherited. We could
provide for future generations. I have had seniors say I am to
too old and I am too sick to ever have an HSA. So we looked at
numbers. We looked at 2006 and were told that the Federal
Government spent the average for households in America of
around $6,100 per household of America of tax dollars, that
State governments spend around $2,200 or $2,300, about $8,400
per household. Heck, for that much money, we could tell
everybody here is your HSA. If you are too sick and too old or
out of work, here is your HSA, here is your catastrophic care,
you are covered. And we would save $3,000 or $4,000 worth of
tax dollars for everybody in the country and it would be back
to a doctor/patient relationship.
So I am open to any proposals but I am not sure that we are
back to where we should be where we can have a doctor/patient
relationship. I saw socialized medicine in the Soviet Union
when I was an exchange student there. I don't want to go there.
Socialized medicine needs people to die before they get their
care so it doesn't cost too much. I don't want to go there.
So thank you, Madam Chair.
Chairwoman Velazquez. Thank you. I don't know who is
proposing that because even the President is talking about tax
credits for small businesses. That is not socialism. But Mr.
Ratner I would like to--Mr. Nye. I am sorry.
Mr. Nye. Thank you. Just a quick question.
Mr. Ratner, I am interested to hear from you if you
wouldn't mind commenting from a small business owner. Clearly
right now we are very focused on trying to create jobs. Small
businesses we are counting on to create most of those jobs. And
I just wanted to hear your input on how our treatment of health
benefits from a tax perspective impacts your ability to hire
people and to grow your business.
Mr. Ratner. It is part of the package. Every time--if there
is a mandate, every time there is an added cost to bringing on
a new employer, it is one more thing in the liability column
when you look at should I hire someone or should I not? So it
is not 100 percent that I am not going to hire someone but you
really have to have a real strong desire or need to hire that
person. If not, you are just not going to hire them. There is
no need to. There are too many costs. Frankly, what we are
going through, and I should have said this before, is now
instead of hiring new people we will just give our regular crew
more hours and give them more overtime. It is cheaper to pay
them overtime than it is to hire new people. So it kills job
creation.
Mr. Nye. I want to allow anybody else that had another
comment if they want to join in.
Mr. Haynes. If I could just add a little bit to that too
because I hear a lot of this from my members, the smaller guys.
Most of my small members compete with big public companies. It
is just the way the system is configured. There are large
bottlers and small bottlers throughout the country. They often
can compete with each other. What they tell me basically, the
smaller members, because they can't offer the same level of
insurance is they keep losing people to big business. They keep
losing people who are good employees and having to go through
this cycle of hiring new employees and training them. So it
drives up their costs from multiple perspectives. I don't think
it should be lost on this committee that the Fortune 500
companies are engaged in a fairly large-scale job reduction. It
is going to happen.
When a big public company misses an earnings report, they
have a--they both have reduced needs for people but they also
have unfortunately incentives to take one-time write-offs and
have large-scale job reductions. And last week, I think the
number between eight companies was over 100,000 job cuts,
eight, nine public companies. And small business does have to
scale down its employees when the needs change, but I don't
think they have quite the same pattern of behavior in terms of
eliminating people because there is an expectation they do so.
And that is something that concerns me and I think would
concern the members of this committee and Congress.
Mr. Nye. I yield back the remainder of my time.
Chairwoman Velazquez. Thank you.
Mr. Ratner, I will recognize Mr. Sestak; then I will come
back to you.
Mr. Sestak. Madam Chair, maybe most of these questions have
been asked.
Mr. Ratner, if I could follow up with a mandate question. I
think it was your testimony or, sir, it might have been yours
of Coca-Cola, talking about the direct cost of a mandate. I
understand the direct cost of a mandate. But the indirect cost
of a mandate bodes in many studies a real benefit to--not
directly to your cost, but to the Nation's cost for health
care. So how do we take that on board when one-fifth of all
uninsured in America earn more than $50,000 or above? Generally
the youth of America that have a great job don't bother to
spend the couple of thousand bucks out there for health
insurance. They are in a car accident, and now we have to take
care of the TBI with the Nation's money, which basically taxes
you anyway.
How do you measure the days off of your sick person, sir,
down there that, yeah, you have got 10 employees, you don't
want to raise another one, but you've got to give them some
sick leave, but generally--but you lose that and there are a
lot of studies that show that mandating--let us just say it is
the Massachusetts health care plan way. You are from
Massachusetts; correct?
Mr. Ratner. Right.
Mr. Sestak. That in the social cost, and I don't mean
goodness, I just mean as a business, that mandating that
everyone is involved drives the risk down for those pools when
the healthy are in it as well as unhealthy, and by mandating
that everybody is in it, people actually go in for your
preventative care. For example, the unemployed--the young woman
who testified here on the unemployed and self-employed. I read
her testimony. Is she here? Was that you? I mean you didn't go
in for some preventative care or I guess you went in and they
switched it on you--
Ms. Davis. I do have insurance.
Mr. Sestak. There was one woman here--I can't remember who
it was--that had testimony--
Ms. Davis. But I had preventative care that I went in
before and I got a bill after the fact.
Mr. Sestak. Let me read get back. I probably just misread.
My question is then why not mandate if we all benefit from it?
Mr. Ratner. Well, that is the problem. We don't all benefit
from it. If I was sitting here and I am from Massachusetts and
it is mandated and I said to you, you know what, guys? My
premium has dropped 20 percent. Everyone has got coverage.
Everyone is healthy. Let us go for it. But that didn't happen.
Mr. Sestak. But the Urban Institute study last June said
that the Massachusetts health care plan seems to be working.
Yes, it is costing a bit more, but so is doing nothing.
Probably the premiums would have gone up even more than what
Massachusetts tried to do.
So my question is, overall, when you take direct and
indirect costs, mandates--when we look at mandating it--and I
am not saying single payer at all. I am not a single payer
type--appear to say that we all benefit as a Nation with
greater savings than if we don't mandate.
Mr. Ratner. You know, I guess the devil is in the details,
which is what everyone is struggling with here . If it came out
in Massachusetts and you know, again, if the rates had dropped
and if her business with two employees was paying--the playing
field was level and she was paying the same as the guy with 200
people and everything was level and all premiums were level, I
don't know how much of an argument you would get from me, but
the problem is getting all that stuff to work with you.
And here is the other problem: We keep hearing that the
small business, the entrepreneurs, are the backbone of the
country. It is so out of whack that every time you add one of
these costs to these micro businesses, you just literally
cripple them. So if you came to me and said, listen, we are
going to have this mandate but there is going to be a tax
credit for the micro businesses and we are going to level that
out so the cost doesn't cripple them, that is what I am afraid
of.
Mr. Sestak. I have to agree with you, how we do this. It
just seems that so many people's testimony--and I am sorry, I
had another hearing on Pakistan. It just seemed to me, as you
said, how the mandate is done because there seems much good in
getting those people who are healthy and uninsured into the
risk premium pools.
My second question, if I could ask one more, is I am very
attracted to the idea of pooling and Massachusetts kind of goes
head off, and the chairwoman has the CHOICE Act, but that is
kind more of risk retention, as I believe her Act does. And one
of you testified on that, or has it in written testimony, how
do you compare risk retention to an assoc cooperative versus--
what I found also attractive, at least as it was supposed to
have been done, was this quasi government connector that
actually, with a mandate, then puts them in these same 20
insurance plans theoretically that Congress has access to, the
Federal Government. Is one better than the other of that
pooling?
Mr. Haynes. I can speak--I am not sure I can speak to
superiority. I have an opinion on superiority. I can speak to
what you can do with pooling because, as I indicated in my
testimony--that may be my testimony you are referring to. We
have a pooled captive-based program with our liability
insurance. It works beautifully. We have got large members, we
have got small members, and we take 100 percent of the risk or
nearly 100 percent of the risk even though there is an admitted
insurer that writes the paper, but we do the reinsurance. We
take the money that goes into the lost fund and invest it. We
have active claims management people. We have active loss
control programs to reduce the cost. We are totally motivated
to reduce the total cost.
And we work very hard on that, sharing best practices. And
that program delivers--we have been at it for 5 years. We
deliver about a 25 percent reduction to our members that
participate in that. So it works beautifully in the liability
area, and I don't know why it wouldn't work just as well in the
health insurance.
Mr. Sestak. Can I make one last statement, Madam Chair?
My prejudice, so you know, is I was in the military up to
about 3 years ago, and only about 23 percent of high school
graduates every year can qualify to go in the U.S. Military
because physically and healthwise they don't qualify. So to
some degree we get healthy kids. But once you are in it, there
is this mandate that everybody and their families are covered.
Now, it is a different health care plan. All that said, we
don't deploy overseas; so everybody has 99 percent dental
readiness. It sounds funny, but in a real sense, we are a real
healthy force out there with this. Then I was quite struck when
my daughter had a brain tumor and I needed to get out to take
care of that by the failure to have transparency first off and
who is the right doctor to go to, which is why fee for service
has to change in Medicare and all. I mean, I love Medicare.
Number two, that I could go to an 11-month war and my mind
was strictly on the mission because I knew my family was there
and I wasn't away from work, for this Nation's work at the
time. So to my mind that model, and I understand TRICARE is
different and all, bodes to me that if cost for the economy
overall is to be something having healthy preventative care
with everybody involved, the healthy as well as the unhealthy,
and how you do that it seems to me is one of the most critical
pieces that we can have, to have the most proficient economy we
have because you do have people who wouldn't get sick if they
had the preventive care.
I am sorry to go on, but I think this is one of the most
important hearings we can have. Thank you, and I am sorry I was
late.
Chairwoman Velazquez. Thank you, Mr. Sestak. Mr. Graves, do
you have any questions? Mr. Moore?
So let me thank all of you for your insight on this issue.
Mr. Graves. I have one. Mr. Ratner, what came first? The
soda pop or the pet food?
Mr. Ratner. I was wondering if I should put that in the
testimony and decided not to. I started selling all different
brands of soda in an empty gas station in 1975 and about a year
later I bought a dog. And I walked into a grocery store to buy
dog food for Bentley, and I looked down the aisle and I said,
holy smokes, there is more pet food in here than there is soda.
So I bought dog food for Bentley and went back to my store and
called 9Lives and Purina and went into the pet food business.
Mr. Haynes. If I could just comment, as the owner of seven
dogs and a representative of the soft drink industry, I think
it is a marriage made in heaven.
Mr. Ratner. Except soda is now 2 percent of my business. We
can't compete with Costco, Wal-Mart, and these guys.
Chairwoman Velazquez. I have just one.
Mr. Beene, the issue of national mandates requiring
employers to offer private health insurance, everybody has an
opinion about that. But let me ask you to what extent do you
think that the small employer will support such mandates?
Mr. Beene. I think at this point, there is a lot of
hesitancy from the small employer because of the fear of the
unknown, especially in this economic time. We are talking at a
time that people are--I think generally across the board things
are pretty tight, and while I think as time goes, people will--
perhaps the ideas will come around because I do think there are
some benefits to it. It is certainly one way to look at things.
But I think that right now the reaction is from what will this
do to me? How much is this going to cost? Will it ruin my
business? So I think right now we have got issues with support
of that from small business.
Chairwoman Velazquez. Do any of you have an opinion as to
being able to structure a mandate that could address concerns
over costs?
Mr. Beene. I think bringing the tax credit into it at the
same time would be probably the place to start.
Chairwoman Velazquez. Mr. Ratner.
Mr. Ratner. I think the mandate, unless there are very good
tax credits in it, would cripple the micro business. The guys
with two and three folks like her, it would be a disaster.
Chairwoman Velazquez. Ms. Fox?
Ms. Fox. I would just add that we are supportive and I
think there is becoming more broad support for an individual
mandate. I know there is a lot of concern in the business
community about--especially small employers and large employers
have lots of concerns about the mandate but I am hearing a
growing consensus that an individual mandate might make sense
especially if we can address the affordability and provide
reining in costs and provide appropriate subsidies because I
think the issue we have heard about young people not purchasing
coverage is a real serious issue. I know I have a 23-year-old
son, and he would rather buy fancy phones than his insurance.
So they tend to feel invincible and we need to get them in the
system to make sure that everything works best for everyone.
Ms. Davis. I think the mandate has to be on the individual
as opposed to the small business owners because putting the
burden just on the small business owners and not on the
individuals to take care of themselves is not going to work.
Chairwoman Velazquez. Mr. Haynes.
Mr. Haynes. I have got a concern about individual mandates,
and the question is how do you price it? The reality is that
young person--the pricing on that insurance to be fair to that
person is going to have to be very, very small, and so you
can't have any kind of, you know, what typically happens in
insurance markets, which is ratings and community ratings and
all that kind of stuff. Otherwise, we are going to impose costs
on our young people who are already paying a lot of costs
associated with the aging of the population, that just isn't
fair. So if there was a pricing mechanism that was fair to me
and made that cost containable I could see it. But I think a
lot of young people are making individually rational decisions
not to be insured.
Chairwoman Velazquez. Thank you.
Mr. Sestak. Madam Chair, would you yield?
Chairwoman Velazquez. Yes.
Mr. Sestak. If I could, though, don't we end up paying
anyway, you businesses, for that youth who decides not to be
insured, and even on the tax credits; don't you pay anyway
because you are going to pay it out of your income tax the
Federal Government to give it? So anything great that is done
is hopefully done in a bipartisan, shared responsibility
between individual business and society. Can we really, in
something like this that is so dramatic to our future, exclude
one of those three?
Mr. Haynes. The way I would put it is it should be an
objective to have as many people insured as possible because it
is correct that we all pay the cost for the uninsured. It is
the reason why there is such a difference between the quoted
price and what might be negotiated as part of a network.
On the other hand, what I see as what should be your
objective is to find a way to adopt policies that both provide
coverage and affect the marketplace. And if your focusing is
entirely on getting coverage you're not going to decrease the
total costs that our society pays for health care, and that has
to be at least as important an objective as obtaining universal
coverage. So focus on things that will change the marketplace.
Chairwoman Velazquez. Mr. Ratner, in terms of the
Massachusetts experience, how much of an economic burden is
imposing upon the State government?
Mr. Ratner. At this level--imposing on the government?
Chairwoman Velazquez. Yes.
Mr. Ratner. That I don't know. I can tell you that at this
level, it is tolerable by the employers, but there is a new
wrinkle that they are trying to put in, which is insane. Now
they want to take all your part-time employers and use them as
full-time equivalents. So if you are not paying 33 percent of
your full- time equivalents' insurance premiums, they are going
to whack you another mandate, another fine of $275--this is the
nuts part--even if that employee is covered somewhere else. And
these are the costs that you don't think about. It is the other
costs to the businesses and they want you to pay it four times
a year. So now we have to hire--because we can't figure it out-
- we have to hire someone else to figure that out. So the cost
goes up and that will have a real detrimental effect to
everyone who has a seasonal business because this is not just
for guys like me who are year round. Now you are talking
seasonal businesses who just hire kids who may have coverage
elsewhere. So I don't know what it is doing with the government
but...
Chairwoman Velazquez. Well, we will continue to have a
discussion on this issue. It is a very important issue that has
such a direct impact on our economy and particularly small
businesses. So I want to thank all of you for coming here this
morning.
I ask unanimous consent that members will have 5 days to
submit a state statement and support materials for the record.
Without objection, so ordered.
This hearing is now adjourned.
[Whereupon, at 11:45 a.m., the committee was adjourned.]
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