[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




 
                       FULL COMMITTEE HEARING ON
                    COMMON GROUND: FINDING CONSENSUS
                           ON HEALTH REFORM,
                     THE SMALL BUSINESS PERSPECTIVE

=======================================================================

                                HEARING

                               before the


                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                              June 3, 2009

                               __________

                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               

            Small Business Committee Document Number 111-026
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

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Graves, Hon. Sam.................................................     2

                               WITNESSES

Wordsworth, Mr. Jim, Owner, J.R. Goodtimes, Inc., McLean, VA, On 
  behalf of the U.S. Chamber of Commerce.........................     3
Burkholder, Ms. Joan M., Owner, Crist Instrument Co., Inc., 
  Hagerstown, MD, On behalf of the U.S. Women's Chamber of 
  Commerce.......................................................     6
Castiblanco, Mr. Freddy, Owner, Terraza Cafe, Jackson Heights, 
  NY, On Behalf of Main Street Alliance..........................     7
Nicholson, Mr. John, Co-Owner, Company Flowers & Gifts Too!, 
  North Arlington, VA, On Behalf of the National Association of 
  Independent Business...........................................     9
Thompson, Mr. Bradley L., President, Inland Press, Detroit, MI, 
  On behalf of Printing Industries of America....................    11

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    24
Graves, Hon. Sam.................................................    26
Wordsworth, Mr. Jim, Owner, J.R. Goodtimes, Inc., McLean, VA, On 
  behalf of the U.S. Chamber of Commerce.........................    28
Burkholder, Ms. Joan M., Owner, Crist Instrument Co., Inc., 
  Hagerstown, MD, On behalf of the U.S. Women's Chamber of 
  Commerce.......................................................    35
Castiblanco, Mr. Freddy, Owner, Terraza Cafe, Jackson Heights, 
  NY, On Behalf of Main Street Alliance..........................    42
Nicholson, Mr. John, Co-Owner, Company Flowers & Gifts Too!, 
  North Arlington, VA, On Behalf of the National Association of 
  Independent Business...........................................    49
Thompson, Mr. Bradley L., President, Inland Press, Detroit, MI, 
  On behalf of Printing Industries of America....................    60

                                  (v)

  


                       FULL COMMITTEE HEARING ON
                    COMMON GROUND: FINDING CONSENSUS
                           ON HEALTH REFORM,
                     THE SMALL BUSINESS PERSPECTIVE

                              ----------                              


                        Wednesday, June 3, 2009

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in Room 
2360 Rayburn House Office Building, Hon. Nydia Velazquez 
[chairman of the Committee] presiding.
    Present: Representatives Velazquez, Moore, Dahlkemper, 
Altmire, Clarke, Ellsworth, Bright, Griffith, Halvorson, 
Graves, Luetkemeyer and Coffman.
    Chairwoman Velazquez. Good afternoon. This hearing is now 
called to order.
    Whether it is in political discourse, the nightly news, or 
conversation around the dinner table, Americans consistently 
use the same word to describe health care: ``broken,'' and that 
is exactly what it is. With 47 million people uninsured, there 
is no question that the status quo is unsustainable, but where 
do we go from here? How do we chart a new path moving forward?
    Today, it seems everyone has different thoughts for doing 
so, but regardless of those varying ideas, one thing is very 
clear. If we are going to fix health care, we have to start 
with small businesses.
    There is a reason we call small firms the backbone of our 
economy. They employ half of the private sector work force. 
When these businesses do well, the whole country does well.
    On the flip side, however, obstacles for entrepreneurs mean 
challenges for American workers. In the case of small business 
health care, the challenges are significant. Already the 
overwhelming majority of America's uninsured are small business 
employees and their families.
    In the last several years, this Committee has held several 
health care hearings, but today's will be different. That is 
because both Congress and the administration are committed to 
change, and the ball is officially rolling towards reform. 
Today we will discuss ways to make sure it is rolling in the 
right direction.
    The call for health care reform is nothing new. For decades 
Americans have waited for a solution that is both comprehensive 
and sustainable. It was not until recently, however, that 
reform took on new urgency. For entrepreneurs the clock is 
truly ticking. Already their coverage costs are 74 percent 
higher than they were in 2001, and those rates are not leveling 
off.
    As a general rule, small business premiums shoot up between 
eight percent and 16 percent annually. That means they will be 
even more expensive next year. For small businesses already 
battered by the recession, these costs have become impossible 
to absorb.
    As rates continue to climb, entrepreneurs are facing tough 
choices: cut health care or cut job. According to the National 
Business Association, ten percent of small firms may drop 
coverage in the next year. That is not a decision an 
entrepreneur should have to make. After all, a small business 
work force is a close-knit community. Already coverage within 
micro firms, those with ten employees or fewer, has dipped to 
35 percent.
    In the last few months, Congress has taken steps to help 
firms survive the recession. We have made credit less expensive 
and capital more accessible. But until we have made health care 
affordable, these provisions can only go so far.
    That is why Ranking Member Graves and I have introduced the 
Small Business CHOICE Act of 2009. That bill has the potential 
to rein health care expenses. By cushioning costs and giving 
entrepreneurs better bargaining power, it promises small firms 
the best range of possible options.
    While there is no silver bullet solution to America's 
health care woes, there is opportunity for improving the 
system. At the end of the day, small businesses need options, 
and there are several out there. Whether it is pooling 
mechanisms, insurance exchanges, or refundable tax credits, the 
one thing we know will not work is the status quo. That has 
become abundantly clear.
    In the coming weeks, Congress will begin laying the 
groundwork for real and lasting reform. It is about time. 
Entrepreneurs cannot afford to wait any longer, and neither can 
our economy. It is critical that we come to a consensus on 
small business health care because until we do small firms will 
continue to struggle, and so will our recovery efforts.
    At a time when we are counting on entrepreneurs to lead us 
out of recession, we cannot afford to hold them back.
    I would like to take this opportunity to truly thank all 
the witnesses for being with us today and look forward to 
hearing from them.
    With that I would like to yield to Ranking Member Graves 
for his opening statement.
    Mr. Graves. Thank you, Madam Chair.
    And good afternoon, everyone, and thank you for 
participating in today's hearing.
    The rapid rise in the cost of health care is placing a 
strain on many working families and small businesses. Nearly 46 
million Americans are without health insurance, and of those, 
an estimated 26 million are small business owners, employees or 
their dependents.
    For those who do have health insurance and can afford to 
pay the premiums, costs are rising and there does not seem to 
be any end in sight.
    On the other hand, the United States is the leading 
innovator of newer and more effective treatments for a variety 
of conditions and diseases that are improving the quality of 
life for people. Unfortunately, millions of our citizens cannot 
take advantage of these innovations because they cannot afford 
good health insurance or are finding that the insurance that 
they do have does not fit their needs.
    As Congress gets set to consider comprehensive health care 
legislation, my principal objective is to make health care more 
affordable without sacrificing access to quality care. Price is 
often the primary barrier to care, and to that end, keeping 
frivolous lawsuits in check, any of the tax code's 
discrimination against the self-employed and allowing business 
to pool together and negotiate better rates will all be helpful 
to keeping prices affordable.
    We should also focus on more preventive tools and 
incentives that help providers keep people healthy rather than 
reimbursing them to treat people when they are sick. Wellness 
programs like those mentioned in previous hearings are a great 
way to decrease health care costs, reduce absenteeism, and 
increase productivity.
    Lastly, I am a strong opponent to a national employer 
health care mandate, especially one administered by the federal 
government. As I have mentioned in previous hearings, mandating 
employers to offer coverage is a very costly option. According 
to an NFIB study, a national employer health care mandate could 
cost our economy roughly 1.6 million jobs with small businesses 
taking on the brunt of those losses.
    It is apparent that fixing our health care system will be a 
challenge, but I look forward to the hearing and the 
challenges, Madam Chair, and I appreciate you bringing up the 
bill that we have sponsored.
    I do want to thank our witnesses for coming here today. 
Some of you come a ways to be here, and again, I appreciate the 
opportunity.
    Chairwoman Velazquez. Thank you.
    And I welcome our first witness, Mr. Jim Wordsworth. He is 
the owner of JR's Good Times, Inc., located in McLean, 
Virginia. JR's Good Times is made up of a number of small 
companies delivering a wide range of hospitality services to 
the Washington, D.C. area. Mr. Wordsworth is testifying on 
behalf of the U.S. Chamber of Commerce.
    The U.S. Chamber of Commerce is the world's largest 
business federation representing three million businesses.
    Welcome, sir. You will have five minutes to make your 
opening remarks, testimony.

 STATEMENT OF JIM WORDSWORTH, JR'S GOOD TIMES, INC., ON BEHALF 
                OF THE U.S. CHAMBER OF COMMERCE

    Mr. Wordsworth. Good afternoon, Chairwoman Velazquez, 
Ranking Member Graves, and distinguished members of the 
Committee. Thank you for asking me to testify before you today.
    I am Jim Wordsworth, president of JR's Good Times, Inc., a 
250-seat restaurant located in Tyson's Corner, Virginia. I also 
own several other small businesses, and I'm here to speak to 
you today on behalf of the U.S. Chamber of Commerce.
    I am currently on the Chamber's board of directors and 
serve as Chairman of the Council on Small Business and also as 
the Chairman of the Labor Relations Committee.
    On health reform, as you know, small businesses have a hard 
time finding affordable health insurance. Insurers may not want 
to contract with a small group or premiums may be astronomical. 
Small businesses must purchase coverage that complies with 
state mandate laws that raise the cost of insurance. The same 
insurance policy might cost twice as much in one state as in 
the next, but small businesses generally cannot purchase 
policies across state lines.
    Even worse, small businesses lack a streamlined way of 
pooling together to spread risk or negotiate with insurers. 
There are positive steps. Congress is currently considering 
many good strategies to combat rising health care costs. The 
Chamber applauds these efforts, especially proposals to pay for 
performance and not just quantity of care, to improve care 
coordination, and to explore bundling payments, reduce hospital 
re-admissions, and more.
    We support robust implementation of health information 
technology, increased transparency of quality and cost 
information, and efforts to support administrative 
simplification which will necessitate Congress stepping in and 
creating some national standards that override state rules.
    Some changes will be beneficial to small business almost 
immediately. Among these is fair regulation of insurance 
companies through the creation of a national health insurance 
exchange. By setting national rules that require health care's 
insurers to issue policies to all comers preventing drastic 
variances in the cost of coverage, putting an end to pre-
existing condition restrictions and changing insurer's 
incentives from avoiding risk to managed care, Congress will 
make health insurance much more affordable to small business.
    The exchange will be a powerful tool for connecting 
individuals and small businesses with insurers and helping them 
to shop smart and find the best fit policies, but it should be 
up to the employer whether or not to participate, and employees 
should not get tax incentives to leave employer plans.
    Ideally, employees should be able to join ERISA-like plans 
through the exchange. Chairman Velazquez, the CHOICE bill that 
you have sponsored would be an excellent step in the right 
direction in creating a pooling of reinsurance mechanism that 
could help small business control cost, manage risk, and build 
more predictability into the premium structure.
    Small businesses are also grateful that Congress is 
considering subsidies for small business to insure their 
employees and to create wellness programs. These subsidies, 
because of the tax structure, and strategies of many small 
businesses should be refundable, flexible and apply to a large 
swab of small businesses, not just the smallest micro business.
    There are steps in the wrong direction as well. Referred to 
as shared responsibility, many in Congress are insisting on the 
creation of a mandate that employers sponsor insurance coverage 
or be force to pay into a fund. Employers do want to provide 
insurance, but many are precluded doing so by high costs, low 
profit margins or insurance market problems.
    The idea that an employer mandate will increase coverage is 
illusory because new rules will not change financial realities 
for small business, but could cost hundreds of thousands of 
jobs and prevent businesses from hiring new workers.
    Congress might propose to carve out some small businesses 
from an employer mandate, but in the end these carve-outs tend 
to shrink and disappear. A proposal in the Senate attempting to 
target only medium to large employers would be devastating to 
small employers, and would have damaging effects even on some 
micro businesses. In effect, smaller employer would still be 
swept up by these new mandates.
    A better option would be to create an individual obligation 
to obtain health insurance. This would bring market forces to 
bear on employers. Employers who wanted the best talent and to 
be competitive at all would have to do their best to offer 
benefits that satisfy individual obligations of potential 
employees, and these employees they want to keep.
    Ideally, if Congress puts in place aggressive insurance 
market reforms and robust exchange, a government run health 
insurance company would be unnecessary. Employees of all sizes 
have serious concerns about the consequence that it would have 
on the insurance marketplace or employer sponsored coverage as 
the nation's finances.
    The Chamber also has concerns about proposals to tax 
employee benefits. Congress should keep in mind that capping 
the employee exclusion has been a long time goal of policy 
wonks, who believe that a national standardized cap will lead 
to reducing regional variations and lowering the cost of health 
care and insurance coverage.
    However, proposals to cap or eliminate the exclusion only 
for high income earners represent a soak the wealthy mentality 
that is unhealthy for the nation's fiscal policy as well as 
useless from the standpoint of a health car policy perspective.
    In conclusion, the Chamber is eager to work with the 
Congress to enact this year a comprehensive health form 
legislation. That being said, the business community will not 
support reform for the sake of reform. As Congress continues to 
work on health care reform, the Chamber looks forward to 
working with you to insure that these goals and priorities of 
small business are taken into account.
    I thank you.
    [The prepared statement of Mr. Wordsworth is included in 
the appendix.]

    Chairwoman Velazquez. Thank you.
    Our next witness is Ms. Joan Burkholder. She's the owner of 
Crist Institution in Hagerstown, Maryland. The company 
primarily specializes in the design and manufacturing of 
biomedical research equipment.
    Ms. Burkholder is testifying on behalf of the U.S. Women's 
Chamber of Commerce with over 500,000 members. The Women's 
Chamber of Commerce works to create economic and leadership 
opportunities for women through networking and advocacy.
    Welcome.

STATEMENT OF JOAN M. BURKHOLDER, CRIST INSTRUMENT CO., INC., ON 
         BEHALF OF THE U.S. WOMEN'S CHAMBER OF COMMERCE

    Ms. Burkholder. Chairwoman Velazquez, Ranking Member 
Graves, and members of the Committee, I am here today as a 
member of the U.S. Women's Chamber of Commerce representing 
over 500,000 members and millions of American small businesses 
who are struggling to provide health insurance for themselves, 
their families, and their employees.
    The employer based health care system in this country has 
become a travesty. It particularly disfavors small and medium 
size businesses that do not representing a large risk pool of 
insured employees, and it leaves out the self-employed who 
either go without coverage or are left to seek individual 
policies where premiums are exorbitant.
    Costs. Costs have been spiraling for small businesses for a 
number of reasons. Small business premium costs are based upon 
size, the average age, and the historical health care cost of 
the employee group. As the employees age, overall health care 
costs increase and small businesses bear increasingly heavy 
burdens.
    The effect on small businesses and their employees as a 
result of spiraling health coverage cost is multifaceted. Many 
firms simply drop out, no longer able to provide employee 
health insurance due to cost. This leads to an exodus of good 
employees seeking employment where health insurance is offered.
    In the case of my company, we continue to provide coverage, 
but have asked employees to pick up more of the cost. We are 
not alone in this practice. As the employees' share of premiums 
has increased, more employees are opting out of coverage. Today 
only 73 percent of our employees are covered under our company 
policy. This year we have asked the employees to pay 60 percent 
of the premium payment, thus decreasing their real income. If 
we ask them to cover even more next year, fewer will remain 
covered, shrinking the size of our group and thus driving costs 
up even more, as only those with chronic conditions will opt to 
continue coverage.
    Last year the total cost of coverage for only 11 employees 
of our company was a whopping ten percent of our gross 
revenues. It ate up every bit of the profit that we should have 
made and then some. The rate increase last year was a whopping 
22 percent. Even worse, we had been informed as of this morning 
that the rates are set to increase by another 19 percent in 
August of this year.
    How can health insurance be affordable when an employee 
earning three to $500 per week pays premium coverage for their 
family at $1,500 per month with a $2,400 deductible and copays 
as well?
    How can a small business owner afford $1,500 per month for 
each of their employees and still stay in business? Frankly, 
short of any catastrophic health issue our firm could pay for 
normal health maintenance for all of our employees for less 
than we are paying for 73 percent of our staff now.
    Age and size discrimination. Small businesses are being 
forced to discriminate in their hiring practices to continue 
health insurance coverage for employees as insurance rates 
begin to increase dramatically for persons over 40, 
substantially increasing and unpredictable health care costs 
for small businesses to delay or cancel new hires.
    Ideally, the whole existing system should be scrapped and 
rethought. As it is not practical or politically feasible, I 
recommend the following:
    One, major reductions of premiums by requiring insurance 
companies to honestly pool risk among all insured individuals 
and families. The plan proposed by Senator Baucus, as an 
example, implementing a national insurance exchange, including 
a public option, would be a good way to make this happen.
    However, the public option should be in addition to the 
private insurance to provide choice and competition.
    Two, insuring all Americans are covered to spread the cost 
is desirable, as it would potentially drop rates. However, 
mandates are not an option as it would force many small 
businesses to close their doors completely. Affordability is 
essential and tax incentives for small businesses should be 
included.
    Three, streamline the processes through information 
technology.
    Four, limit the ability of insurance companies to deny 
coverage. Primary physicians and specialists know their 
patients; they know their history and know what best care they 
should receive.
    Finally, over the past several years, the competition 
between health insurance companies has decreased as a result of 
mergers. Fewer health insurance companies create less 
competition, resulting in higher premiums. It is government 
responsibility to establish guidelines for equality for the 
good of all, small businesses, health care providers, and 
insurance providers, as long as the system we currently have 
continues to be utilized.
    Thank you very much.
    [The prepared statement of Ms. Burkholder is included in 
the appendix.]

    Chairwoman Velazquez. Thank you.
    Our next witness, Mr. Freddy Castiblanco. Mr. Castiblanco 
is the owner of Terraza Cafe in Jackson Heights, New York. Mr. 
Castiblanco employs six people in his cafe, and his employees 
are all uninsured. He is testifying on behalf of Main Street 
Alliance, a network of state small business coalitions building 
a new voice for small business and health care.
    Welcome.

  STATEMENT OF FREDDY CASTIBLANCO, TERRAZA CAFE, ON BEHALF OF 
                      MAIN STREET ALLIANCE

    Mr. Castiblanco. Thank you.
    Chairwoman Velazquez, Ranking Member Graves, and members of 
the Committee, I thank you for the opportunity to testify on 
ways to make health care reform work for small businesses.
    My name is Freddy Castiblanco. I am the owner of Terraza 7 
Train Cafe, a small business located in the Jackson Heights/
Elmhurst neighborhood of Queens, New York, one of the most 
diverse places in the country. We have been in business for 
over eight years.
    When I immigrated to America nearly a decade ago from 
Colombia, where I had practiced as a physician, I wanted to 
achieve the American dream and open a small business. With my 
own hands and a team of employees, I built a cafe in a formerly 
abandoned storefront which has become a vibrant center of 
neighborhood life, where the community members gather and where 
local artists show their work.
    We have built our business to employ 11 dedicated 
employees, five full time and seven part time, and I am proud 
to create jobs for my community.
    As my business grew, I wanted to find health coverage for 
my employees and their families. However, my hopes were closed 
when I consulted a broker and I found the premium for a decent 
benefits package would be over $700 a month for each employee. 
This would make health care the largest expense for my business 
after wages, over 18 percent of my payroll. That is more than 
my rent and any other operating expenses.
    I considered purchasing a less expensive plan, but the high 
deductible seemed unfair and ultimately not worth the cost 
because my employees would not be able to afford the out-of-
pocket costs. I had to make the hard decision to forego health 
insurance.
    I have lost some of my most talented employees because I 
could not provide health insurance for them. I have witnessed 
employees avoid necessary medical treatment. Because they fear 
a large hospital bill, what would have been a small problem 
turned into a large crisis because my workers do not have 
health coverage.
    Others have gone without regular checkups and preventive 
care for many years now and have no regular physician. It pains 
me as an employer, and as a doctor, that my employees, their 
families cannot get routine care that would help them lead a 
healthier and more productive life.
    I share my story because I believe it is emblematic of the 
larger health care crisis, which small businesses have been on 
the front lines of for years. Our health care is not working 
for small businesses. To fix this we must consider the 
following four points: affordable cost; quality coverage; 
shared commitment; and real choice.
    I will focus the rest of my comment in the last two points, 
shared commitment and real choice. You may not hear consensus 
on these points today, but I encourage you to talk to the real 
business owners in your home districts. You may find they have 
different views than what you hear from groups based here in 
Washington.
    This issue of shared commitment is sometimes put to us. "Do 
small businesses like the idea of mandate?" I believe this is 
asking the wrong question. Nobody likes the word ``mandate.`` 
That's not a surprise, but ask a small business do we want good 
health insurance for our workers. Yes, we do. Do we feel a 
responsibility to help our employees afford health care? Yes, 
we do. Do we want to be part of the solution? Yes. Are we 
willing to contribute? Yes.
    There seems to be an assumption that if we don't have a 
mandate, we won't have to pay for health care. This ignores the 
reality that we are paying already. We are all paying the cost 
of our broken health care system in the horrible premiums for 
those who have coverage and in lost employees, lower 
productivity, and financial insecurity for those who do not.
    As a cafe owner, maybe it is my job to remind us all that 
there is no free lunch in health care. So we are willing to 
contribute. To make that possible we need real affordability 
and real choices. Now, a central question is "should the reform 
include the public health insurance option?" I say yes. Let the 
small business owners decide what works for us, to keep what we 
have if it is working or choose something new if we have no 
good choices, no good options.
    This will give us greater bargaining power and of course 
competition among insurers to make coverage affordable. Some 
argue we ought to leave health reform to private insurers, but 
I ask why put all of your eggs in one basket? It is hard for 
small business owners to trust the insurance companies. Why 
should we after so many years of frustration? Insurers have 
been unable or unwilling to contain cost increases and cannot 
offer real coverage we can afford. So why put all of our eggs 
in one basket, especially when the basket is broken?
    In closing, I want to say I admire the American 
entrepreneurial spirit. I am proud to be an example of that 
spirit in action, and I know other immigrant business owners 
share that pride. I know small business will help us regain our 
economy vitality. We need to fix health care to make this 
possible. A common sense compromise that we can reach gives us 
more choices, including a public health insurance option to 
ignite competition, drive down cost, and make good coverage 
supportable.
    And you will find small business owners on Main Streets 
across America not only willing to contribute, but ready to 
serve.
    Thank you.
    [The prepared statement of Mr. Castiblanco is included in 
the appendix.]

    Chairwoman Velazquez. Thank you, Mr. Castiblanco.
    Our next witness is Mr. John Nicholson. Mr. Nicholson is 
the co-owner of Company Flowers & Gifts Too in Arlington, 
Virginia. After 30 years of being a newspaper editor, executive 
of a national trade association, and federal official, Mr. 
Nicholson retired to promote and support his family's company.
    He is testifying on behalf of the National Federation of 
Independent Business. Founded in 1943, the NFIB represents over 
600,000 small and independent businesses across the country.
    Welcome.

 STATEMENT OF JOHN NICHOLSON, COMPANY FLOWERS & GIFTS TOO, ON 
   BEHALF OF THE NATIONAL FEDERATION OF INDEPENDENT BUSINESS

    Mr. Nicholson. Thank you, Madam Chairman and the Ranking 
Member and members of the Committee.
    My name is John Nicholson, and I am co-owner with my wife 
of Company Flowers & Gifts Too. We have been in business in 
Northern Virginia for more than 18 years and currently provide 
floral and gift services throughout Northern Virginia and, of 
course, here in Washington, D.C. Our floral business is my 
retirement occupation, as you pointed out, which I own and 
operate with my wife.
    We are all too familiar with the ever increasing costs of 
providing health care. From a cash flow perspective, each month 
we must generate cash to pay for health insurance at a rate 
that is roughly half the amount needed to pay the rent, and 
usually slightly more than that is needed to pay the 
outstanding sales tax due on the previous month's sales, and it 
is also roughly equal to the amount of cash needed for the 
payroll related expenses, such as federal tax withholdings, 
Social Security and Medicare.
    So in short, health insurance is a huge expense associated 
with our business. We have 15 part-time and full-time 
employees. Of the nine full-time employees that are eligible, 
seven of our employees obtain their health insurance through 
our business. We used to pay 100 percent, but then with the 
cost increases we have made adjustments of the years so that 
with our employees sharing now an additional percentage of 
costs, we pay half and they pay half.
    In addition to the expense maintaining coverage in a market 
where flexibility and choice are limited is also extremely 
tough. We have difficult medical histories, and they are very 
reluctant to shop around for new plans because we would be 
subjected to new underwriting processes, and that would 
increase our costs, I am sure.
    But at the end of this year that may all change and not for 
the better. At the end of this year, we anticipate our rates 
are going to skyrocket because what has happened is our small 
groups and the experience of just the small groups have been 
told to us that they are probably going to double the rates at 
the end of the year.
    Depending on just how bad the sticker shock is, we would 
have to stop paying for half of the coverage all together or 
shift out of our current plan and start looking for another one 
hopefully at a lower cost. I doubt it.
    At NFIB we have three Cs, cost, choice, and competition. We 
want to lower the costs for small business. We want to provide 
easier ways to shop for insurance, and competition among the 
number of choices when buying plans. Let me suggest three 
policies that we ought to focus on.
    One is pooling. NFIB has long advocated that small 
businesses have the ability to pool their resources in 
purchasing insurance. Pooling shows individuals to have honest 
power and administrative costs reduce the risks which in turn 
decrease the costs.
    Secondly, insurance market reform. National insurance 
rating rules are long overdue and will provide small employers 
with a marketplace that more closely reflects the large 
competitors that they get. For instance, the reforms are 
especially crucial for small group marketplace because they 
experience the greatest lack of choice and the most significant 
premium volatility.
    Take our plans, for example. Individual coverage through 
our PPO operation has increased from 406 a month to 747 a month 
in 2008.
    Let me introduce this. My insurance consultant came up with 
this. I think you all have it. Let's introduce that into the 
record here if we might.
    Chairwoman Velazquez. Without objection.
    Mr. Nicholson. Family coverage is even worse. In 2004, the 
coverage was $1,157 a month. Today it is $2,092. So you can 
imagine that very few pick up that plan. None of our employees 
do
    The third point is the tax based incentives. Tax incentives 
can come in a variety of ways, including our tax credits and 
equalizing tax treatments. Currently, we do not have equal tax 
treatment as the employer's family. We do not get to deduct the 
cost of our health insurance the way we are able to deduct the 
cost of our employees' insurance.
    The SHOP Act is one approach that NFIB suggests. The Small 
Business Health Options Program is an incremental approach that 
includes pooling, insurance for form and some tax based 
incentives.
    As Congress works on these reforms, it is important to 
suggest how new approaches can hurt rather than help. NFIB has 
identified four potential roadblocks, but for time purposes I 
want to cover only three. One is employer mandates. We oppose 
employer mandates in any of these forms.
    Secondly, public option, NFIB has long advocated that 
Americans ought to continue to receive their health insurance 
and health care through the private sector so that opposition 
to a public option is a direct reflection of the NFIB members' 
belief that coverage should be obtained in a better private 
section. I just do not want my health coverage operation run by 
efficiency like the Post Office or IRS with its police attitude 
or even the huge Amtrak costs. Those do not add up to what we 
want out of health insurance.
    And finally, caution. Do not put coverage ahead of cost 
containment. What we are going to be talking about today has to 
do with how we can work our side of the issue, but the most 
important thing, without question is to have cost containment. 
You have the power; we do not have the power. You have the 
power to lean on the whole process, the doctors, the hospitals, 
all the rest of that side of cost containment. It is most 
important.
    Thank you.
    [The prepared statement of Mr. Nicholson is included in the 
appendix.]

    Chairwoman Velazquez. Thank you, Mr. Nicholson.
    And now the Chair recognizes Mr. Graves for the purpose of 
introducing our next witness.
    Mr. Graves. Thanks, Madam Chair.
    Madam Chair, I would like to introduce Brad Thompson, who 
is the president of Inland Press located in Detroit, Michigan, 
and he is testifying today on behalf of the Printing Industries 
of America.
    He was born and raised in Michigan. He is the fifth 
generation of his family to lead this publicly traded Michigan 
company, and thanks, Brad, for being here today. I appreciate 
it.

 STATEMENT OF BRADLEY L. THOMPSON, II, INLAND PRESS, ON BEHALF 
             OF THE PRINTING INDUSTRIES OF AMERICA

    Mr. Thompson. Thank you.
    Chairwoman Velazquez, Ranking Member Graves, and members of 
the Committee, good afternoon, and thank you for inviting me to 
testify today.
    I am Brad Thompson and the president of Inland Press, a 
Detroit company engaged in both the commercial printing and the 
newspaper businesses. I am also here as Labor Policy Chair of 
the Printing Industries of America. Printing Industries is 
proudly headquartered in Congressman Altmire's district
    Inland Press has been in operation for 114 years. We have 
provided health insurance to our workers since 1934. Today we 
employ 115 full-time employees, 25 of whom are union workers. 
We provide family coverage to all of them.
    While health benefits are a tool to attract and retain a 
qualified work force, many small business owners feel a moral 
obligation to provide health insurance. I strongly agree. In 
April our annual health insurance renewal was nearly a 12 
percent increase, the fifth year of double digit increases.
    To put this in historical perspective, in 2003 our health 
benefit costs averaged $4.86 per employee per hour. this year 
it will be nearly $11 per hour. That translates to nearly $600 
per month for single coverage and almost $1,600 per month for 
family coverage.
    Our union employees are paying more than ever. Their 
contributions range from 55 to $70 per month. In comparison, 
average printing company employees are now contributing at a 
much higher, 90 to $350 per month.
    In 2007, we paid more in health care premiums than our 
printing company earned in profit. The fallout from this has 
been that we have frozen hiring just because the employee 
benefit costs are just too high. Like many, we have tinkered 
with adjustments in higher copays, but minor adjustments are 
just not enough any longer. Real reform and solutions are 
necessary.
    I would like to comment on four policy solutions I hope you 
will keep in mind. The first is pooling. The idea of small 
companies pooling together to achieve greater economies of 
scale is valid and it works. I encourage Congress to keep the 
pooling concept alive. Ideally, this would include the ability 
to pool across state lines.
    Tax credits as an incentive to small businesses to provide 
health benefits is a great idea, and our industry would 
strongly support this. As you examine these credits, I urge 
consideration of the following: number of employees. I have 
seen 100 floated as a cap on the number of employees for 
eligibility of a tax credit, which would render Inland and 
other printers my size ineligible. Increasing this number to 
200 or 250 would insure more workers and prevent small firms in 
our industry from choosing between job growth and losing a tax 
credit.
    Wellness programs. While connecting a wellness program to a 
potential tax credit is a good, common sense idea, it is 
important to consider the burdens this might have on small 
firms. The tiniest printers may not have the resources 
necessary to implement a program, and are often the ones most 
in need of a tax incentive to provide health benefits.
    Other space operational hurdles. In our newspaper 
operation, I have 60 employees spread out over ten locations 
which could make it challenging for us to implement and 
administer a program. There is probably a solution there, and I 
urge Congress to consider these practical questions.
    Hours of work week. Recent studies cite that the majority 
of employers use a 30-hour work week as a cutoff for health 
insurance eligibility. So I would encourage the same standard 
to apply as regards tax credits. Again, this would lead to more 
insured workers.
    I hope Congress will consider the need for increased 
competition in the products offered in the health care 
marketplace. It is key that both owners and workers at small 
printing companies have flexibility and choice in what 
insurance best fits their needs and budgets. When it comes to 
competition and choices, more, more and more.
    The three policies suggestions I have given are positive 
ones, but I must address one proposal which most small printers 
are very wary: government mandated health insurance. Whether it 
would be state mandates, mandated minimal levels of coverage, 
or pay or play structures, there is a real concern about cost 
increases outweighing the noble goal of insuring more 
Americans. It also creates serious barriers to entry for very 
small and start-up companies.
    Again, thank you for holding today's hearing and inviting 
me to testify. I look forward to answering any questions you 
may have.
    [The prepared statement of Mr. Thompson is included in the 
appendix.]

    Chairwoman Velazquez. Thank you very much, Mr. Thompson.
    Mr. Castiblanco, I would like to address my first question 
to you. The economy has placed significant strain on small 
businesses and many are barely able to keep their door open, 
let alone provide health insurance. How would you respond to 
critics who claim that an employer mandate would cause job 
losses and put firms completely out of business?
    Mr. Castiblanco. About a mandate, I feel if you provide 
good choices, really good options, options that would decrease 
the prices of the insurance and options that can guarantee 
long-term solutions, I think we are going to recover the truth 
in the system. I think the word ``mandate'' is a word that 
nobody likes, but if you push us to trust the system, a system 
that is going to guarantee that the cost is not going to 
increase again in the future, we are willing to contribute.
    I think when I talk about shared compromise, we are talking 
about we as employers we have to do our part, and employees, 
and the government, too, and we have to regulate the market. 
How are you going to make sure that the rates are not going to 
increase later? I think if we have a public option, we can 
control. We can provide that competition.
    We as small business, we do not believe in the private 
insurers. So that is the way to recover that word ``trust.''
    Chairwoman Velazquez. Thank you.
    Mr. Nicholson, as an employer who offers coverage, can you 
discuss your concerns about an employer mandate for small 
business?
    Mr. Nicholson. For unemployment coverage as we now provide?
    Chairwoman Velazquez. As an employer who is offering health 
insurance now, can you discuss your concerns about an employer 
mandate?
    Mr. Nicholson. Oh, an employer mandate, yes. You know, we 
believe that an employer mandate problem would exist much in 
the way that I look at, for instance, the Social Security 
system, always in favor of it, but over a period of time where 
there are benefits.
    Not this group of politicians, but prior ones and others to 
come will have the opportunity to change. That changing is very 
difficult for us to accept in the long term.
    Secondly, as I outlined, the government run mandate would 
be probably quite difficult to handle, and secondly, you know, 
if I get angry at Aetna or somebody of that nature, they do not 
throw me in jail. When I get angry at IRS, they can throw me in 
jail, a big difference.
    Chairwoman Velazquez. Okay. So let me ask you. If we fail 
to have some type of health care reform, the consequences could 
be severe, and if premiums go up by over 100 percent in the 
next decade, as they did in the last decade, what will be the 
impact on small businesses and job creation?
    Mr. Nicholson. Oh, tremendous, no question about it. But 
that is why I concluded my statement by saying we look to you 
because we are unable to do it, look to you all to lean on cost 
containment, and we believe that if the costs are kept 
relatively level, not increasing this huge amount that you 
point to, if they can be kept that way, then we can work with 
private insurers to get the best competitive rates possible.
    Chairwoman Velazquez. Okay. Mr. Thompson, nearly all of the 
reforms being discussed include the creation of a health 
insurance exchange. One of the debates in Congress is whether 
there should be a public plan. Do you think that an exchange 
without a public plan option can be structured in a way to make 
insurers compete?
    Mr. Thompson. I am not entirely familiar with that 
proposal. What I would think, that with the right direction 
from Congress, that the private industry should be able to and 
the private insurers should be able to provide that sort of 
thing.
    Our emphasis is on choice in allowing the employers and the 
employees to make proper levels of choice. I guess I would sum 
it up that way.
    Chairwoman Velazquez. Mr. Wordsworth, do you have any 
comment on that?
    Mr. Wordsworth. Yes, I do from the standpoint of mandates, 
and in my particular company I can speak to that. We are a 
hospitality company. We have a low profit margin, and three and 
a half percent nationally is what hospitality companies pay 
restaurants, prior to the last couple of years.
    But in my company we pay 25 percent of premiums for the 
first six months, and we have a transient kind of business, but 
we do. After one year, we pay 50 percent of the premiums, their 
choice of premiums, and they can include vision and hearing and 
life insurance, and then after that, ten percent each year up 
to 80 percent max, including my wife and I.
    So if we already pay 80 percent, and it is a great program 
because it helps us in our retention, and we just do not lose 
employees; there are many 25-year employees; why would a 
mandate be a good thing? Mandate equals forced, equals 
required.
    Chairwoman Velazquez. Are there ways to increase coverage 
without some kind of mandate, individual or otherwise?
    Mr. Wordsworth. Are you talking about nationwide?
    Chairwoman Velazquez. Yes.
    Mr. Wordsworth. Or within my company?
    Chairwoman Velazquez. And in terms of the health care, yes.
    Mr. Wordsworth. Yes. Cost is just enormous. I have not 
heard anybody say anything about lawsuits and malpractice 
costs, and if you are doing a comprehensive reform, you have to 
include the cost of malpractice, and so cost is the biggest 
issue. It certainly is for me, and I think it is for most other 
people.
    In a small business, you know, your employees are like your 
extended family. They are not your family, but they are like 
your extended family, and so it is in your best interest to do 
everything you can to keep a symbiotic relationship.
    Chairwoman Velazquez. Thank you.
    Ms. Burkholder, you noted that your health care costs went 
up 22 percent in the last year and now make up ten percent of 
your gross revenue.
    Ms. Burkholder. That is correct.
    Chairwoman Velazquez. What will you do if reform fails and 
this trend continues over the next few years?
    Ms. Burkholder. We may be forced to cut employees, cut 
their time, go out of business because there is a limit to what 
we can charge our customers, and you know, at that point we may 
just drop insurance altogether, and that would not necessarily 
be good for our company because seven of the members of this 
company are all family.
    [Laughter.]
    Ms. Burkholder. We believe in nepotism. And so in addition 
to caring about our extended family, as Mr. Wordsworth 
mentioned, which we do very much, you know, we really do have 
immediate family members who would be suffering as well. So it 
would be a very serious thing for us.
    Chairwoman Velazquez. Thank you.
    Now I recognize the Ranking Member. I will come back with 
some more questions.
    Mr. Graves. Thank you, Madam Chair.
    You all mentioned, everybody here has mentioned that you 
want to provide health insurance for your employees. In some 
cases you can; in some cases you cannot. But cost is obviously 
the number one issue out there, and you know, we hear about 
mandates and you all have kind of touched on it a little bit, 
about what a mandate would do to you, do to your company.
    And then we also hear about maybe the possibility that if 
there is some sort of government option, that it is going to 
provide an opportunity to be lower. But if we look at the way 
the government has run Medicare and the way the government has 
run the VA health system, you know, we hear complaints in my 
office all day long coming in about the problems associated 
with the coverage from Medicare or even throw Medicaid in 
there, too.
    And look what the cost of that is. The VA system alone in 
the last decade, you know, we have doubled the expenditure, 
more than doubled the expenditure at least in the last eight 
years, over the last nine years, to the VA system, and the 
costs just continue to go up. There is a government run health 
care system right there.
    So if you have a situation where, and I will ask all of 
you, if you have a situation where you are mandated to provide 
that coverage and those costs continue to go up, you know, in 
even the government system, obviously what is that going to do 
to you?
    And I guess some of you have already answered that. You 
know, it is unfortunate, too, because we have not really gotten 
a chance to talk about the Chairwoman's bill and my bill with 
pooling because I think it offers great opportunity. If you 
have got a business with ten employees or seven employees, it 
is pretty hard to go out and get health insurance, but if you 
can pool together with 100 other businesses with seven 
employees or ten employees, your buying power just got a whole 
lot better.
    It was touched on, obviously, too, when you talked about 
medical malpractice reform, which is a huge cost driver, but I 
guess, you know, we are kind of talking today about these 
mandates, and I just want, you know, what is the one thing it 
is going to do. Are you going to be able to stay in business or 
are you just going to quit business? Are you going to drop 
employees? What are you going to do? just the quick answer, if 
you are mandated to do this.
    And I do not see any reason why costs are going to be 
contained just because the government has an option out there. 
I think it is just going to make it worse.
    We will start with you, Mr. Thompson.
    Mr. Thompson. Yes, Ranking Member. I think that we would 
continue to do everything in our power to keep our head count 
down, reduce our employment levels. We may invest in more 
technology than we already have, but obviously as health care 
costs rise, we just look at every other way we could continue 
to maintain our business and keep reducing the employee cost, 
which means we are going to hire less people or lay people off 
and reduce our head count on a continuing basis.
    I do not want to do that. I have been in my community for, 
you know, nearly 115 years. May family started the business. I 
mean, I have deep, deep ties. I want to hire people. I want to 
hire a lot of people. It is one of the stakes in our business. 
You know, I have shareholders that I have as stakeholders. I 
have the community. They are stakeholders.
    So we want to do this, but we do not have any choice. I 
have to be profitable. I have to report to shareholders the 
demand that we be profitable or do not lose money. So we will 
do whatever we can, and if it means cutting head counts, that 
is what we will have to do, but it pains me terribly. I mean, 
that is the worst thing I can possibly do in my business, and I 
do not want to do that.
    Mr. Graves. Mr. Nicholson.
    Mr. Nicholson. Yes, I guess we are talking about mandates 
without getting into the details of how you administer the 
mandates, and I think we have to look at some of those if we 
are going to examine a mandate program.
    But one of the things, for instance, that we have done when 
we ran into a similar situation where we were going to take a 
government contract, which we eventually decided not to. One of 
the problems was that we realized we had to go out and hire 
independent contractors to get accomplished what we were going 
to do, and that took them off our payroll so that we could then 
meet some of the federal restrictions on payroll and cost plus 
and so on and so forth.
    I suspect that if we end up with some sort of an employer 
mandate, there is going to be an awful lot of looking closely 
at all of the little, tiny details, and to me the way you 
handle that, if I were in your shoes, would be to require the 
private insurers to have the mandate restrictions, but let them 
negotiate with us employers so that we can then not get into 
trying to find a way around this or that and make them 
responsible for getting the various objectives accomplished by 
what you want to have done.
    Mr. Graves. Mr. Castiblanco.
    Mr. Castiblanco. Well, I believe before we get a mandate, 
if we keep the private insurers working like they are working 
until now, we will have to close our business, our small 
business. I would not be able to afford that mandate in that 
way.
    But I want to insist that the public option would be one 
extra choice. I mean, I want competition for private options, 
and I think if we can lower the cost of insurance, 47 million 
people would be recruited to the system, and I think that would 
be good not only for the public option, but also for the 
private insurers. This would be really good business for 
everybody.
    Well, in that case, a mandate would be possible. We would 
be willing to put up part of the funding in this process as 
small businesses, but if we do not have real choices, that 
would be catastrophic.
    Mr. Graves. Ms. Burkholder, yes.
    Ms. Burkholder. Okay. Well, you know, we could probably 
live within a mandate as long as the prices did not increase, 
but I do not think that is a guarantee that, you know, those 
costs for health care are going to be maintained at a 
reasonable rate unless there is a regulation covered that sets 
that.
    And short of that, you know, our company cannot afford what 
we are paying now, let alone paying more. and, yes, you know, 
our company is in the medical business, not the insurance side 
of it because what we are making are the leading edge devices 
that are used by researchers for scientific advancement and in 
particularly the medical field and particularly in the 
neurological area.
    If we cannot keep our engineering staff and our existing 
shop staff to manufacture new devices, let alone continuing to 
make the existing ones, then you know, our purpose and our 
service to this country and the rest of the world is basically 
voided.
    Mr. Graves. Mr. Wordsworth.
    Mr. Wordsworth. I think one of the great things about this 
country and regarding what I do in hospitality and food service 
is the great quality and diversity and safeness of our food and 
the way we serve it. I think in my business, not necessarily 
mine, we use all fresh ingredients and we prep there. Locally 
we use our staff. I think you would find people either cutting 
services, perhaps cutting quality, perhaps losing attention to 
safety, now not in my business, but I think those things would 
happen.
    Now you have got drive-in, carryout, home delivery, walk-
up, sit-down, fine dining. I think you would find a great 
consolidation of all those things in products and services, and 
our variety would be lost, I think, secondary to just cutting 
employees.
    I mean, where you today have eight employees doing a job, 
you would spend all of your time finding a way to have five do 
it, have it automated, or to outsource it. Nobody likes 
outsourcing, but you know, the math is just the math, and 
hopefully this is not the only focus of the Small Business 
Committee. I know this is not a health care discussion, but I 
just feel compelled to bring it in. Hopefully you would look at 
the holistic things that are happening in small business right 
now. Many of the proposals, including card check and those 
kinds of things, I mean, they have merit on your consideration 
on just how much weight a small business can take.
    And health care is a high, high cost. I am very proud of 
the health care we provide. Like I say, I do not have any 
pilferage. My employees stay with me. I get my money back. It 
is a great investment to invest in the employee versus the 
building. But I think you will find a real suffering in the 
quality and delivery and safety in a national plan.
    Mr. Graves. Thank you.
    Chairwoman Velazquez. Ms. Clarke.
    Ms. Clarke. Thank you very much, Madam Chairwoman, for 
holding this very timely, important and relevant hearing on 
addressing comprehensive health care reform from the small 
business perspective.
    And it is just so interesting sitting here because I guess 
walking into the room I thought I was going to hear sort of a 
uniform response, but I feel even more confused now than I did 
when I walked in, quite frankly, but that is what this debate 
is all about, to try to find the win-win solutions to what is 
really a challenge for our small entrepreneurs.
    And I think at the heart of it are all of the concerns that 
each of you have raised, and so I just want to raise a couple 
of questions with each of you because, again, I am hearing 
different perspectives, and I guess every business is as unique 
as the person who has started them or the family that runs it, 
and the people that they employ.
    On the one hand, I have heard concern about health care 
remaining in the domain of the private insurer, and it is my 
understanding that the private insurer has been part of the 
challenge in terms of the cost containment.
    So the question becomes with an expansion of health care 
choices or option, I think that in listening I heard commentary 
about concern about government, I guess, running the public 
option. That is not what I have necessarily heard about a 
public option. I have heard about public investment in a health 
care option.
    And I was wondering if anyone had any ideas about how that 
public investment in a health care option could be employed in 
a way in which it creates win-win. Because I am not sure that I 
would want government, you know, handling my health care 
either. I have health care insurance through the federal 
government, but I go to a private insurer to have that health 
care delivered to me.
    Has any of you, and I would like to get all of your 
feedback on that, given any consideration to that just very 
quickly, about if there were public investment for health care, 
how it would best be utilized as opposed to the government 
actually, you know, giving the service itself, but working as 
we do in most areas as a contractor that subcontracts out that 
health care benefit to the benefit of small business?
    Mr. Nicholson. I could try to answer. I think I mentioned 
when we were talking about mandates that if you define what it 
is that we are talking about in the mandates, get some of the 
specifics, I think it might make sense to then package those 
specifics and lay them on the private insurer table and say, 
``Okay, guys. We want to have this objective, that objective,'' 
whatever, that are part of what we are talking about as a 
mandate, and then get a reading as to, all right, some of that 
is going to cost money. How much public funds are we really 
talking about and do we really want to have, do you all as 
politicians, frankly, want to have subsidy going to private 
insurance companies to make sure that some of those mandates 
get accomplished?
    Ms. Clarke. And I know someone else may want to respond to 
this. What about the nonprofits that as a deliverer of health 
care and how would you see that?
    I am just trying to get small business to be a part of how 
we make this happen versus, oh, government cannot do this or 
whatever. Do you know what I am saying? I am just trying to see 
how we create as many choices as possible, and my time is 
winding down. So whatever may be coming from your mind 
creatively, please let me know.
    Mr. Nicholson. Let me amend that. When I say ``private,'' I 
mean also the nonprofits.
    Mr. Thompson. I think that, you know, there are ways to 
bring health care costs down, you know, technology investment 
and that sort of things that the government could well do 
perhaps to help bring the tools into the health care arena to 
help bring costs down. That would be good.
    Part of the problem we have now is that government 
regulations do not allow us to shop our insurance in areas we 
may want to go shop or, you know, the pooling concepts that we 
have talked about earlier. So we feel like we are a little 
handcuffed by government regulation. So if some of that was 
changed, we might be able to get more aggressive in the 
marketplace.
    But I do think that the government could provide tolls to 
either the insurance companies or the health care industry 
overall that could help bring those costs down that would then 
benefit all of us and bring our insurance rates down through 
the insurance companies that we are currently utilizing.
    Chairwoman Velazquez. Would the gentle lady yield?
    Mr. Thompson, do you believe that small businesses should 
have the ability to pool together, be part of any legislation?
    Mr. Thompson. Yes.
    Chairwoman Velazquez. Okay. Thank you.
    And the time has expired. I recognize Mr. Coffman.
    Mr. Coffman. Thank you Madam Chairman.
    And thank you all so much for coming here today. This is 
such an important topic, and having been a small business 
owner, I remember the struggles of trying to fund a health care 
plan. I got up to 50 percent, but only for the employee and not 
for the family. It did not cover the families. They had to make 
up the difference for that, and that was unfortunately the best 
I could do.
    Mr. Wordsworth--I said it right--you said something in your 
testimony about that you do not think that the government, and 
I might have misinterpreted this, ought to have incentives for 
the individual to steer them away from an employer based 
system.
    Am I right in that interpretation or did I get that wrong?
    Mr. Wordsworth. No, that is what I did say. If the 
government has a program; and there are discussions about the 
government either having an insurance company, or having 
government programs, if those programs or any kind of 
government incentives took it away from the employer or 
actually paid employees, you could have paid by reduced 
premiums or whatever, away from the concept of employer-based 
insurance coverage, I think that would be damaging to the 
system.
    Mr. Coffman. Okay, and maybe somebody else may want to 
comment on this. I am not clear on why it would be damaging. If 
we gave tax incentives, say, to the individual to purchase 
their own insurance, to make their own decisions and not to be 
relying upon the employer, what do you think would be wrong 
with that?
    Mr. Wordsworth. If they were incentives to the individual?
    Mr. Coffman. To the individual.
    Mr. Wordsworth. I think that would require a little bit of 
study, and I do not feel qualified on that very question.
    Mr. Coffman. I understand. Okay. Would anybody else like to 
comment on that? Yes, Mr. Nicholson.
    Mr. Nicholson. Are you talking about individuals being 
mandated?
    Mr. Coffman. No. Following tax incentives to the 
individual, even tax credits to those who do not have the 
capacity to purchase insurance due to their income, but 
shifting from an employer based system to a system whereby the 
incentive resides with the individual. It could still reside 
with the employer, but right now we really do not have 
incentives to the individual to purchase their own insurance, 
and maybe if any of you would like to comment on that, please.
    Mr. Nicholson. I think it is a grand idea. We looked into 
it and tried to figure out a way to do it. The problem, of 
course, is that our youngest employees would much rather spend 
$120 a month on beer than on health insurance.
    Mr. Coffman. No question about that.
    [Laughter.]
    Mr. Castiblanco. I would say the problem that concerns me 
is who is going to control the increases in the cost of 
insurance. We need that long-term solution. So I think those 
tax credits are not going to be the real solution. The prices 
are going to increase eventually.
    Mr. Coffman. Let me say I think the problem with having a 
public option is that what happens with everything in 
Washington is the government just runs red ink. We just borrow, 
and that is how we fund it, and so somebody else is paying for 
it.
    But I do think that there is not competition in the 
marketplace right now because there is not transparency and 
there is not an apples-to-apples comparison, and maybe the 
exchange issue will help with that.
    Would anybody else like to comment? Yes, ma'am.
    Ms. Burkholder. Okay. I do not see a huge problem with 
having a system similar to the one that the federal government 
uses for its health care program because there is a group that 
goes out on the marketplace and bids on contracts to cover 
various aspects. Even that has been increasing I know.
    The other issue is that what we have been talking about 
today do not necessarily over the problem that occurs when an 
employee leaves a particular job for another one either because 
they choose to and they are going to a new employer or because 
they have been laid off because of the economy. And you know, 
one of the issues here that we have been talking about today is 
that in small businesses dropping the coverage or delaying 
hiring, that is going to prevent our economy from recovering, 
and that is something that we need to do right now.
    Mr. Coffman. Okay. Yes.
    Mr. Nicholson. And I think we are generally agreed that 
well-being, taking care ahead of time is an ultimate goal. I am 
not sure that as a small businessman I can perform a nanny 
service on just a few employees. Now, if I had 150 or 200, I 
could afford to get a gym facility, you know, that kind of 
thing.
    So I think if we are going to shoot toward wellness 
coverage, which makes a great deal of sense, I think we have 
got to really figure out how to get the individual assistance 
worked out properly.
    Mr. Coffman. Thank you very much.
    Thank you, Madam Chairwoman.
    Chairwoman Velazquez. Mr. Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Chairwoman.
    Thank all of you for being here as well. As a small 
business owner, Mr. Burkholder, as a family-owned business, we 
face that situation every day. So I understand your dilemma.
    You know, small business owners are the ones that make this 
country what it is today, and it is interesting that we seem to 
continue to pile more situations onto small business folks, and 
this is just one of those. You know, small businesses really 
are hanging on by a thread. It is a very tenuous situation for 
them in general right now, and this is a situation where 
hopefully with this bill that is being proposed by the 
Chairwoman and Ranking Member, with pooling we will be able to 
hopefully find a way to minimize some of the impact of these 
increasing costs.
    Through the day we have got to find a way to control costs. 
I mean, that is the general objective here, and to do that, you 
know, we have all got our ideas, and I am concerned about some 
of them, but I think, you know, we are here today to discuss 
the bill itself to an extent, and I was just curious. I assume 
that all of you are for it or is anybody against it, have any 
reservations about pooling for small business folks?
    We will start with Mr. Wordsworth.
    Mr. Wordsworth. Well, I do not know how you would relate 
this to the old association health plan proposals if you are 
one of those AHPs, but the concept is a terrific concept 
because it does allow you to gather critical mass and get the 
attention of the insurance companies. Large companies can do 
that, even the companies that are not large enough to self-
insure, and we small business just cannot do it.
    I mean, an insurance company is uninterested with someone 
who has, say, seven employees as they are with someone with 
700, and I liked it organized by industry. If you pooled by 
industry, let's say, in food service, it gives the insurance 
companies much better data to get their arms around to even bid 
on it, rather than mixing me with an aircraft company and, 
let's say, a landscaper. The risks and those kinds of things 
are so much different industry to industry.
    The other thing I will just add is I do not hear any reward 
for wellness, and I really believe the future of our health 
care system is not on the back end, in repair, but I think it 
is on the front end in prevention. And I think that is also 
time for the government. A great term I love to use is 
``meddle.'' The term is ``meddling.'' I think the government 
should meddle in rewards to help facilitate this approach.
    Chairwoman Velazquez. I am with you, sir.
    Mr. Wordsworth. Good.
    Chairwoman Velazquez. I am with you.
    Mr. Luetkemeyer. Thank you.
    Ms. Burkholder.
    Ms. Burkholder. Okay. There again, I think if we do not 
pool, then what happens is that the size of the group is 
greatly diminished. For example, with small businesses right 
now, that group is the size of that business. We employ a total 
of 15 employees. Six months ago we had 18, but because of the 
economy, we have had to cut back.
    Now, the other thing is that in terms of pooling, we need 
to have larger groups because if you look at what is happening 
in the western Maryland area, there are now only two companies 
that provide health insurance coverage. There is no 
competition. And if there is not going to be any competition, 
then we as small business owners need to have a means of 
fighting back against that.
    Mr. Luetkemeyer. Very good.
    Mr. Castiblanco, I was just curious whether you were 
supporting the bill that we are discussing here today or 
getting information as far as pooling of like businesses to try 
and find a way to cut costs. Is it something that will work for 
you?
    Okay. That is fine. Mr. Nicholson.
    Mr. Nicholson. I am not sure that I want to comment on a 
specific bill.
    Mr. Luetkemeyer. How about the concept?
    Mr. Nicholson. The concept of pooling is okay, but let me 
ask to that. First of all, there is an insurance company that 
provides coverage for courts, and for a while that was quite 
advantageous, but then the trial lawyers entered the scene, and 
we got someone who all of a sudden said that they had an 
allergy to their flowers, and the next thing you know the cost 
of the insurance went skyrocketing.
    So you have to be careful about how you define your pool.
    Secondly, we have been a member of a pool for actually 
longer than we have had the flower shop, and when we entered 
after we passed the underwriting test, we have been a member of 
that pool ever since, which has been very advantageous for us.
    During that last 20 years, I have had two heart attacks. My 
wife has had breast cancer, and we have stayed the same because 
we have not had to change our underwriting because of being 
members of that pool. But the difficulty was that this pool was 
composed of very small businesses just like ours, and as a 
result, it had a very good experience, and as a result its 
rates did not go up quite as much as everybody else, until two 
years ago because of competition, the consulting industry 
looked at it and said, ``Hey, you, Mr. Employee, with 20 
employees can drop your insurance and join this pool, and it 
will be a lot cheaper for you.''
    And so in the past year, we have had lots and lots of 
members joining that pool, but our experience has gone right 
through the roof because all of a sudden much worse.
    And that is why come December my rates are probably going 
to double. So be careful about the pooling process.
    Mr. Luetkemeyer. Okay. My time is really up. I will yield 
back to the Chair. Thank you, Madam Chairwoman.
    Chairwoman Velazquez. Mr. Graves, do you have any other 
questions?
    Well, let me thank the members of the panel and let me just 
say, Mr. Luetkemeyer, our bill, Graves and myself, the 
legislation that we introduced, the CHOICE Act, basically what 
it does is it establishes a pooling mechanism that addresses 
two elements that are responsible for helping insure costs go 
up, and that is risk and catastrophic cost, and we believe that 
in any health care reform legislation those elements should be 
address and that a pooling mechanism should be part of any 
health care reform that will serve the small business 
community.
    Let me add that I have met with the Committee of 
Jurisdiction on health care reform; that I have been raising 
the issues that are unique to small business; the fact that out 
of the million of uninsured Americans are employees who work 
for small businesses; and that in a way the health care problem 
that we are facing in this nation or the lack of health 
insurance is the small business issue.
    And I encourage the members of the Committee of 
Jurisdiction to continue to listen to the small business 
community concerns when it comes to health care reform.
    So with that let me again thank all of the member of the 
panel for being here today, and I ask unanimous of consent that 
members will have five days to submit a statement and to 
furnish material for the record. Without objection, so ordered.
    This hearing is now adjourned.
    Thank you.
    [Whereupon, at 2:38 p.m., the Committee meeting was 
adjourned.]

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