[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
 THE IMPACT OF THE HEALTH CARE LAW ON THE ECONOMY, EMPLOYERS, AND THE 
                               WORKFORCE

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

                                HEARING

                               before the

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, FEBRUARY 9, 2011

                               __________

                            Serial No. 112-2

                               __________

  Printed for the use of the Committee on Education and the Workforce



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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Dale E. Kildee, Michigan
Judy Biggert, Illinois               Donald M. Payne, New Jersey
Todd Russell Platts, Pennsylvania    Robert E. Andrews, New Jersey
Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Duncan Hunter, California            Lynn C. Woolsey, California
David P. Roe, Tennessee              Ruben Hinojosa, Texas
Glenn Thompson, Pennsylvania         Carolyn McCarthy, New York
Tim Walberg, Michigan                John F. Tierney, Massachusetts
Scott DesJarlais, Tennessee          Dennis J. Kucinich, Ohio
Richard L. Hanna, New York           David Wu, Oregon
Todd Rokita, Indiana                 Rush D. Holt, New Jersey
Larry Bucshon, Indiana               Susan A. Davis, California
Trey Gowdy, South Carolina           Raul M. Grijalva, Arizona
Lou Barletta, Pennsylvania           Timothy H. Bishop, New York
Kristi L. Noem, South Dakota         David Loebsack, Iowa
Martha Roby, Alabama                 Mazie K. Hirono, Hawaii
Joseph J. Heck, Nevada
Dennis A. Ross, Florida
Mike Kelly, Pennsylvania
[Vacant]

                      Barrett Karr, Staff Director
                Mark Zuckerman, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on February 9, 2011.................................     1

Statement of Members:
    Hinojosa, Hon. Ruben, a Representative in Congress from the 
      State of Texas, prepared statement of......................    66
    Kline, Hon. John, Chairman, Committee on Education and the 
      Workforce..................................................     1
        Prepared statement of....................................     3
        Additional submissions:
            Letter, dated February 7, 2011, to Hon. Kathleen 
              Sebelius, Secretary, U.S. Department of Health and 
              Human Services, from 21 States' Governors..........    85
            Article, ``Bay State Health-Care Blues,'' by Paul 
              Howard, National Review, August 5, 2010............    88
            Article, ``Judge Rejects Health Law,'' by Janet 
              Adamy, Wall Street Journal, February 1, 2011.......    89
            Article, ``An ObamaCare Appeal From the States,'' by 
              Mitch Daniels, Wall Street Journal, February 7, 
              2011...............................................    91
    Miller, Hon. George, senior Democratic member, Committee on 
      Education and the Workforce................................     3
        Prepared statement of....................................     5
        Additional submissions:
            J. Kelly Conklin and David Borris, on behalf of the 
              Main Street Alliance, prepared statement of........    68
            John Arensmeyer, founder & CEO, Small Business 
              Majority, prepared statement of....................    71
            Letter, dated January 26, 2011, from 250 economists 
              in support of the Patient Protection and Affordable 
              Care Act of 2010...................................    77

Statement of Witnesses:
    Howard, Paul, Ph.D., senior fellow and director, Center for 
      Medical Progress, Manhattan Institute for Policy Research..     7
        Prepared statement of....................................     9
    Johnson, Gail, president/CEO, Rainbow Station, Inc...........    15
        Prepared statement of....................................    17
    Trautwein, Neil, vice president and employee benefits policy 
      counsel, National Retail Federation........................    23
        Prepared statement of....................................    25
    Van de Water, Paul N., senior fellow, Center on Budget and 
      Policy Priorities..........................................    20
        Prepared statement of....................................    22


                   THE IMPACT OF THE HEALTH CARE LAW
                       ON THE ECONOMY, EMPLOYERS,
                           AND THE WORKFORCE

                              ----------                              


                      Wednesday, February 9, 2011

                     U.S. House of Representatives

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The committee met, pursuant to call, at 10:01 a.m., in room 
2175, Rayburn House Office Building, Hon. John Kline [chairman 
of the committee] presiding.
    Present: Representatives Kline, Biggert, Platts, Foxx, Roe, 
Thompson, Walberg, DesJarlais, Hanna, Rokita, Bucshon, 
Barletta, Noem, Roby, Heck, Ross, Kelly, Miller, Kildee, Payne, 
Andrews, Woolsey, Hinojosa, McCarthy, Tierney, Kucinich, Wu, 
Holt, Davis, Grijalva, Bishop, Loebsack, and Hirono.
    Staff present: Kirk Boyle, General Counsel; Casey Buboltz, 
Coalitions and Member Services Coordinator; Ed Gilroy, Director 
of Workforce Policy; Jimmy Hopper, Legislative Assistant; 
Marvin Kaplan, Professional Staff Member; Barrett Karr, Staff 
Director; Ryan Kearney, Legislative Assistant; Brian Newell, 
Press Secretary; Molly McLaughlin Salmi, Deputy Director of 
Workforce Policy; Ken Serafin, Workforce Policy Counsel; Linda 
Stevens, Chief Clerk/Assistant to the General Counsel; Loren 
Sweatt, Professional Staff Member; Joseph Wheeler, Professional 
Staff Member; Aaron Albright, Minority Press Secretary; Tylease 
Alli, Minority Hearing Clerk; Jody Calemine, Minority General 
Counsel; Brian Levin, Minority New Media Press Assistant; 
Jerrica Mathis, Minority Legislative Fellow; Megan O'Reilly, 
Minority Labor Counsel; Julie Peller, Minority Deputy Director 
of Policy and Planning; Meredith Regine, Minority Policy 
Associate, Labor; Melissa Salmanowitz, Minority Press 
Secretary; Michele Varnhagen, Minority Labor Policy Director; 
Daniel Weiss, Minority Special Assistant to the Chairman; and 
Mark Zuckerman, Minority Staff Director.
    Chairman Kline [presiding]. A quorum being present, the 
committee will come to order. Well, good morning, everyone, and 
welcome. Today's hearing is the first opportunity for this 
committee to take a close look at the consequences of the 
health care reform bill that was signed into law last year. It 
has been less than a year, and already this 2,700-page law has 
led to more than 4,000 pages in new government regulations.
    A proposal designed to reduce health care costs will 
instead increase national health care spending by $311 billion. 
And during a time of stubbornly high unemployment, job creators 
are forced to wrestle with the uncertainty of what the law and 
its new regulations mean and how that all fits into their plans 
for the future.
    Employers already struggling to keep their doors open now 
must choose between higher health care costs or costly 
penalties. To suggest this doesn't undermine job creation is, I 
believe, to deny reality.
    Recently, a number of small-business owners were asked how 
they are adjusting to the new health care law. Their answers 
help provide a snapshot of what our economy is facing and will 
continue to face if the law isn't replaced.
    Blake Haynie, resident of Georgia and owner of Action 
Signs, Incorporated, said, ``I will lay off the necessary 
number of employees to cover the extra costs.'' Gary Crosby, 
who owns Gary Crosby Construction in my home state of 
Minnesota, said he will ``have fewer employees.'' Catherine 
Marsh of Botkins, Ohio replied, ``reducing staff, cutting 
benefits.''
    And Darcy Gunn of Loveland, Colorado declared, ``I have 
never laid off any employees. The last thing I need is more 
expenses. This is the wrong time to hurt small-business owners. 
I will have to pull the plug.''
    These are honest responses to a government takeover of one-
sixth of the economy. Behind every story of a small-business 
owner struggling to meet the demands of the law's mandates and 
penalties is the reality of a workforce with fewer jobs and 
opportunities for workers and families.
    I anticipate supporters of the law with have their own 
stories to share as they seek to convince the American people 
that meaningful health care reforms are only possible as part 
of this costly government takeover. The American people reject 
this false choice, and we are here today to begin fulfilling 
our promise to find a better way.
    Today we will also examine what changes the law is imposing 
on employer-sponsored health care plans. This committee has 
broad jurisdiction over health insurance provided through the 
workplace, coverage that affects roughly 170 million Americans. 
By the administration's own estimates, up to 69 percent of all 
business health plans and 80 percent, 80 percent of small 
business health plans will soon see significant changes to the 
benefits they provide. This has a potential to undermine the 
health care coverage of tens of millions of Americans.
    We need to understand what those changes are and how 
insurers, employers and individuals are responding.
    If there is one business that has benefited from the new 
law, it is the blooming waiver business, operated at the 
Department of Health and Human Services. HHS has issued 733 
waivers that exempt the health care plans of various 
businesses, organizations and unions from the law's 
requirements.
    No one can be faulted for seeking an exemption. It is, 
however, interesting to see so many who extolled the virtues of 
this health care law now seeking relief from it. This is one of 
the many areas of this vast law that calls for further 
exploration.
    I want to thank our witnesses for being here today. We look 
forward to your testimony.
    [The statement of Chairman Kline follows:]

Prepared Statement of Hon. John Kline, Chairman, Committee on Education 
                           and the Workforce

    A quorum being present, the Committee will come to order.
    Good morning everyone and welcome. Today's hearing is the first 
opportunity for this Committee to take a close look at the consequences 
of the health care reform bill that was signed into law last year.
    It has been less than a year and already this 2,700 page law has 
led to more than 4,000 pages in new government regulations. A proposal 
designed to reduce health care costs will instead increase national 
health care spending by $311 billion. And during a time of stubbornly 
high unemployment, job creators are forced to wrestle with the 
uncertainty of what the law and its new regulations mean and how that 
all fits into their plans for the future.
    Employers already struggling to keep their doors open now must 
choose between higher health care costs or costly penalties. To suggest 
this doesn't undermine job creation is to deny reality.
    Recently, a number of small business owners were asked how they are 
adjusting to the new health care law. Their answers help provide a 
snapshot of what our economy is facing and will continue to face if 
this law isn't replaced.
    Blake Haynie, resident of Georgia and owner of Actions Signs, Inc., 
said ``I will lay off the necessary number of employees to cover the 
extra costs.''
    Gary Crosby, who owns Gary Crosby Construction in my home state of 
Minnesota, said he will ``have fewer employees.''
    Catherine Marsh of Botkins, Ohio replied: ``Reducing staff, cutting 
benefits.''
    And Darcey Gunn of Loveland, Colorado declared, ``I have never laid 
off any employees. The last thing I need is more expenses. This is the 
wrong time to hurt small business owners. I will have to pull the 
plug.''
    These are honest responses to a government takeover of one-sixth of 
the economy. Behind every story of a small business owner struggling to 
meet the demands of the law's mandates and penalties is the reality of 
a workforce with fewer jobs and opportunities for workers and families.
    I anticipate supporters of the law will have their own stories to 
share as they seek to convince the American people that meaningful 
health care reforms are only possible as part of a costly government 
takeover. The American people reject this false choice and we are here 
today to begin fulfilling our promise to find a better way.
    Today we will also examine what changes the law is imposing on 
employer-sponsored health care plans. This committee has broad 
jurisdiction over health insurance provided through the workplace, 
coverage that affects roughly 170 million Americans.
    By the administration's own estimates, up to 69 percent of all 
business health plans and 80 percent of small business health plans 
will soon see significant changes to the benefits they provide. This 
has the potential to undermine the health care coverage of tens of 
millions of Americans. We need to understand what those changes are and 
how insurers, employers, and individuals are responding.
    If there is one business that has benefited from the new law it is 
the booming waiver business operating at the Department of Health and 
Human Services. HHS has issued 733 waivers that exempt the health care 
plans of various businesses, organizations, and unions from the law's 
requirements. No one can be faulted for seeking an exemption. It is, 
however, interesting to see so many who extol the virtues of the 
Democrats' health care law now seeking relief from it.
    This is one of the many areas of this vast law that calls for 
further exploration. I want to thank our witnesses for being here 
today; we look forward to your testimony. I will now recognize my 
distinguished colleague George Miller, the senior Democratic member of 
the committee, for his opening remarks.
                                 ______
                                 
    Chairman Kline. I will now recognize my distinguished 
colleague, George Miller, the senior Democratic member of the 
committee, for his opening remarks.
    Mr. Miller. Thank you very much, Chairman Kline, for 
calling this hearing.
    And I want to welcome our witnesses to this hearing and 
look forward to their testimony. There have been many 
predictions about the new health care law, how the new health 
care law would affect our nation's economy. The debate has been 
heated. Misinformation about the law has bred fear and division 
among the public.
    I hope that we can put rhetoric and misinformation aside, 
that we will openly and honestly examine the law that is now in 
effect but still has several years to go before it is fully 
implemented. The Affordable Care Act is not perfect. It does 
not contain everything that I wanted. And it includes many 
things that some of my colleagues oppose. That is the nature of 
lawmaking.
    But the new law has unquestionably begun to deliver 
positive results for small businesses, for large employers, for 
individuals, children, their families and the elderly. It has 
begun to work for small businesses.
    Dr. Odette Cohen, who runs a small pediatrics practice in 
Willingboro, New Jersey has testified in recent hearings that 
the small-business tax credit is keeping her employees covered. 
Thanks to the lower health care costs, Dr. Cohen is hiring 
another nurse practitioner and upgrading her business with 
electronic recordkeeping system.
    And she said that she was eagerly awaiting the creation of 
the state-based health insurance exchanges in 2014, which will 
allow her to pool together with other small businesses to 
improve choices and drive down the costs, just the way large 
companies do. And hopefully, she will get rid of that 18 
percent more she is paying for the same plans as large 
businesses offer.
    Dr. Cohen is not alone in benefiting from the new law. The 
recent Kaiser Family Foundation survey found that the number of 
small businesses offering insurance has increased by 30 percent 
this last year.
    The new law works for large employers, too. Helen Darling, 
the president of the National Business Group on Health, that 
represents more than 300 large employers, including 65 of the 
Fortune 100, has said that our nation's businesses would be 
worse off if the law was repealed. The new law benefits working 
people. Workers are already enjoying new rights and protections 
that put them in charge of their health care.
    Never again will they have to worry about losing their 
health insurance if they lose or change their job or decide to 
start their own business. The new law is literally keeping 
people alive.
    More than a million young adults have been able to join 
their parents' health plans. Nearly 16 million Americans are no 
longer vulnerable to the insurance companies dropping them from 
coverage when they need it the most. That is when they are 
sick.
    And 165 million people no longer are subject to the annual 
and lifetime benefit caps that rob them of coverage at the 
exact time that they need it. Children with preexisting 
conditions are no longer denied coverage. And in 2014, the same 
will be true for adults.
    And the new law also works for the overall economy. Since 
President Obama signed the Affordable Care Act, 1.1 million 
private sector jobs have been created, more jobs than in the 
entire 8 years of the Bush administration.
    The Wall Street Journal recently reported that the IPO 
market is gaining momentum. Seven of the 11 companies going 
public last week were in the health care-related industries, 
taking advantage of the new opportunities to make health care 
more efficient with new technologies and new systems guidance.
    The Health Care Act is now the law of the land. And it is 
working. It reigns in the power of the insurance companies that 
have unfairly wielded over ordinary Americans' lives. If 
Congress were to repeal this law, small businesses, families 
with children, workers and elderly would be harmed immediately. 
Their taxes would go up, the rights and benefits overturned, 
and their access to quality, affordable care taken away.
    I look forward to today's hearing. And I yield back the 
balance of my time.
    Mr. Chairman, I would like to just take a moment before we 
get into the hearing. Today's hearing will be the last hearing 
for the committee's Democratic staff director, Mark Zuckerman. 
Where is Mark? Right here, right behind us.
    Mark will be joining the White House staff as the new 
deputy to Melody Barnes in the domestic policy council. Mark 
has been a trusted adviser and a friend. Since 1996, Mark has 
been through every labor and education battle with me, helping 
to keep our promise to America's working families.
    Student loan programs are more reliable. Workers are 
afforded more rights. Patients are protected because of the 
work that Mark has done. I know his wife, Paula, and his 
children, Naomi and Noah, are as proud of him as I am and that 
he is taking this next step on his journey.
    Thank you, Mark, for all of your dedicated service to the 
committee on both sides of the aisle and for the committee's 
work on behalf of families. [Applause.]
    Mr. Miller. Stand up for a minute. Just stand up. 
[Applause.]
    Thank you. Thank you, Mr. Chairman.
    [The statement of Mr. Miller follows:]

  Prepared Statement of Hon. George Miller, Senior Democratic Member, 
                Committee on Education and the Workforce

    Thank you Chairman Kline for calling this hearing.
    There have been many prediction ns about how the new health care 
law would affect our nation's economy. The debate has been heated. 
Misinformation about the law bred fear and division among the public. I 
hope we can put rhetoric and misinformation aside. We should openly and 
honestly examine the law that is now in effect, but still has several 
years to go before it is fully implemented.
    The Affordable Care Act is not p perfect. It does not contain 
everything that I wanted, and it includes things that some of my 
colleagues opposed. That is the nature of lawmaking.
    But the new law has unquestionably begun to deliver positive 
results, for small businesses, large employers, individuals, children 
and families, and the elderly.
    It has begun to work for small business.
    Dr. Odette Cohen runs a small pediatrics practice in Willingboro, 
New Jersey. She testified at a recent hearing that the small business 
tax credit is keeping her employees covered.
    Thanks to lower health care costs, Dr. Cohen is hiring another 
nurse practitioner and upgrading her business with an electronic 
recordkeeping system. And she said she's eagerly awaiting the creation 
state-based health insurance exchanges in 2014, which will allow her to 
o pool together with other small businesses to improve choices and 
drive down costs, just the way large companies do.
    Dr. Cohen is not alone in benefiting from the new law. A recent 
Kaiser Family Foundation survey found that the number of small 
businesses offering insurance increased by 30 percent last year.
    The new law works for large employers, too.
    Helen Darling, president of the National Business Group on Health 
that represents more than 300 large employers including 65 of the 
Fortune 100, said that our nation's businesses would be worse off if 
the law is repealed.
    The new law works for working people.
    Workers are already enjoying new rights and protections that put 
them in charge of their own health care. Never again will they have to 
worry about losing health insurance if they lose or change their job or 
decide to start their own business.
    The new law is literally keeping people alive.
    More than a million young adults have been able to join their 
parent's health plan. Nearly 16 million Americans are no longer 
vulnerable to an insurance company dropping them from coverage when 
they need it most--when they get sick. And, 165 million people are no 
longer subject to annual or lifetime benefit caps.
    Children with pre-existing conditions can no longer be denied 
coverage, and in 2014, the same will be true for adults.
    And the new law also works for our overall economy.
    Since President Obama signed the Affordable Care Act, 1.1 million 
private sector jobs have been created--more than the entire eight years 
of the Bush administration.
    The Wall Street Journal recently reported that the IPO market is 
gaining momentum. Seven of the eleven companies going public last week 
were in health care related industries.
    The Affordable Care Act is now the law of the land. It is working. 
It reins in the power insurance companies have unfairly wielded over 
ordinary Americans' lives.
    If Congress were to repeal this law, small businesses, families 
with children, workers, and the elderly would be harmed immediately. 
Their taxes would go up, new rights and benefits overturned, and their 
access to quality, affordable health care taken away.
    Mr. Chairman, I look forward to today's hearing and I yield back my 
time.
                                 ______
                                 
    Chairman Kline. Mark, thank you for your service, your 
years of service to the committee. And congratulations on your 
new assignment. I am sure that will be a great adventure. Well, 
I hope it will be a great adventure for you. And anyway, 
congratulations.
    Pursuant to committee rule 7-C, all members will be 
permitted to submit written statements to be included in the 
permanent hearing record. Without objection, the hearing record 
will remain open for 14 days to allow statements and other 
extraneous material referenced during the hearing to be 
submitted for the official hearing record.
    It is now my pleasure to introduce our distinguished panel 
of witnesses. And I will go through and sort of introduce each 
of you, a little bit of bio before we get into the testimony.
    Dr. Paul Howard is a senior fellow at the Manhattan 
Institute and serves as director of the institute's Center for 
Medical Progress. He has written on a wide variety of medical 
policy issues, including health care reform, medical 
malpractice and Medicare policy initiatives. He received his 
Ph.D. in political science from Fordham University, is a 
graduate of the College of the Holy Cross in Worcester, 
Massachusetts.
    Ms. Gail Johnson is the president and CEO of Rainbow 
Station, Incorporated, a nationally accredited preschool and 
school-age recreation franchise based in Richmond, Virginia 
that offers backup daycare for mildly ill children on-site. 
Before starting her own business, Ms. Johnson worked as a 
pediatric nurse for almost 25 years and served as a faculty 
member of the Maternal Child Nursing Departments at the Medical 
College of Virginia, Virginia Commonwealth University. She 
continues to serve as the vice president of the Medical College 
of Virginia Foundation Board of Trustees.
    Dr. Paul Van de Water is a senior fellow at the Center on 
Budget and Policy Priorities, where he specializes in Medicare, 
Social Security and health coverage issues. He formerly served 
as assistant deputy commissioner for policy at the Social 
Security Administration and worked for over 18 years at the 
Congressional Budget Office. Dr. Van de Water holds an A.B. in 
economics from Princeton University and a Ph.D. in economics 
from Massachusetts Institute of Technology.
    Mr. Neil Trautwein is the vice president and employee 
benefits policy council at the National Retail Federation. As 
such, he leads National Retail Federation's work on health care 
reform and other benefits-related legislation and regulatory 
issues. He holds a bachelor's degree in political science from 
the University of Louisville and a law degree from George 
Washington University.
    Okay. You have in front of you--I think some of you have 
been here before and certainly seen this. You have the little 
box there. And it has a light system. When you start your 
testimony, the little green light will come on. And 4 minutes 
into your testimony, assuming that Ken's finger and timing is 
exactly correct, it will turn yellow. And that gives you about 
a 1-minute heads up that your 5 minutes is coming to a close.
    And when your 5 minutes is up, a red light will come on. I 
have no intention of dropping the gavel in the middle of any 
sentence, but please, try to wrap up your testimony. And be 
aware that your entire testimony will be included in the 
record.
    And while I am on it, when we get to questions, I want to 
remind my colleagues that we will be under the 5-minute rule. 
And out of fairness to our colleagues, I will be a little bit 
more prompt in dropping the gavel. Let us try to keep our 
questions and answers to 5 minutes.
    Okay. I think we are ready to go. We will start with Dr. 
Howard.
    Sir, you are recognized.

  STATEMENT OF PAUL HOWARD, SENIOR FELLOW, MANHATTAN INSTITUTE

    Mr. Howard. I would like to thank Chairman Kline, Ranking 
Member Miller and the other honored members of the committee 
for the opportunity to speak this morning on the economic and 
employment effects of the Patient Protection and Affordable 
Care Act. I am speaking today from my experience studying 
health care policy, speaking with providers, patients and 
employers from across the country and from my own research on 
health care as director and senior fellow at the Manhattan 
Institute's Center for Medical Progress.
    First of all, I would like to state that real health care 
reform that lowers costs and improves access to affordable 
coverage is a critical national priority for employers, for the 
uninsured and for taxpayers. Unfortunately, the Patient 
Protection and Affordable Care Act doubles down on many of the 
worst aspects of our current system while adding new cost 
pressures that will serve as a drag on economic growth and job 
growth for years to come.
    In turn, I will discuss why the Affordable Care Act is much 
more likely to increase the deficit than to lower it, explain 
how the mandates and penalties that it imposes on insurers and 
employers will increase health care costs and decrease 
employment and conclude by explaining the negative effects of 
regulatory uncertainty at a time when companies are sitting on 
trillions of dollars in cash that could be used for job 
creation.
    Even if we take the Affordable Care Act at face value, many 
experts believe that it has not done nearly enough to address 
current and project entitlement spending. The CBO does score 
the Affordable Care Act as reducing the deficit by $143 billion 
in its first decade. However, current savings estimates double-
count $52 billion in Social Security payments and $70 billion 
in premium payments for a new long-term care program as 
revenues. It also gears up to $115 billion in discretionary 
costs, including $10 to $20 billion in direct implementation 
costs.
    Defenders of the act like to point to the increased savings 
in the second decade of the legislation. The problem with this 
defense is that the Office of the Medicare Actuary has noted 
that most of these cuts will be unsustainable. We should also 
note that states will face $21 billion in new Medicaid costs 
from 2014 to 2019, not including up to $12 billion in new 
administrative outlays. Many state budgets face significant 
budget deficits today and cannot afford any new spending.
    The Affordable Care Act also imposes a number of new 
minimum benefit requirements on insurers. These provisions may 
result in what is perceived to be a richer benefit package, but 
at the cost of higher insurance premiums that employers will 
have to offset to reduce employee wages and fewer jobs.
    New taxes on drug companies, insurance companies and 
medical device companies are all likely to be passed----
    Chairman Kline. Dr. Howard, let me--I am sorry to 
interrupt. But we are having microphone difficulties. And it 
has been suggested that maybe you move the microphone away from 
you just a little bit. And we can hear what you are saying, but 
it is a mechanical problem. So I didn't mean to interrupt. We 
will try again. And then we will just power through.
    Mr. Howard. Would you like me to start again? Or----
    Chairman Kline. No.
    Mr. Howard. Okay. The Affordable Care Act also imposes a 
number of new minimum benefit requirements on insurers. These 
provisions may result in what is perceived to be a richer 
benefit package, but at the costs of higher insurance premiums 
that employers will have to offset through reduced employee 
wages or fewer jobs. New taxes on insurers, drug companies and 
medical device companies are all likely to be passed through 
directly onto employers.
    The administration has repeatedly promised that if you like 
the coverage you have today, you will be able to keep it. But 
current estimates are that 69 percent of all employers and up 
to 80 percent of small employers will lose their grandfathered 
plans over the next several years.
    The mandate is apt to have a variety of negative effects on 
coverage and employment decisions. For employers with 50 or 
fewer employees who do not offer coverage, it will be a 
disincentive to grow beyond the cap and incur the penalty. 
Other mid-sized firms will likely hire fewer lower wage 
workers, more part-time workers or become more automated in 
order to reduce their exposure to the penalty.
    Of course, many companies may rationally decide that the 
price of dropping coverage is more than offset by the savings 
recouped from ending employer-based coverage. The decision to 
end coverage will also be encouraged by the fact that the 
Affordable Care Act offers significantly larger subsidies 
through the state exchanges than many employees will receive 
through employer-based coverage.
    Employers will face tremendous uncertainty over the next 
several years as they try to understand their exposures to the 
costs associated with the federal and state insurance 
requirements, creating a substantial drag on job creation. 
Employers are already struggling with the unintended 
consequences of the legislation.
    To date, the Department of Health and Human Services had to 
issue over 700 waivers from minimum benefit requirements under 
the Affordable Care Act. Over 200 economists have also sent a 
letter to the House leadership on January 18th discussing the 
enormous costs of the legislation and its negative effect on 
employment. A different, better approach for the U.S. is to 
rely on incremental reforms to expand coverage to those with 
greatest need, implement tax reforms to equalize the tax 
treatment of insurance purchased on the individual market or 
through employers and institute health care and insurance 
reforms that utilize competition and consumer choice to drive 
health care costs down.
    Members of the committee, I thank you for the opportunity 
to be here today. And I look forward to answering your 
questions.
    [The statement of Mr. Howard follows:]

 Prepared Statement of Paul Howard, Ph.D., Senior Fellow and Director, 
  Center for Medical Progress, Manhattan Institute for Policy Research

    I'd like to thank Chairman Kline, Ranking Member Miller and members 
of the Committee for the opportunity to speak this morning on the 
effects of the Patient Protection and Affordable Care Act on the 
economy, employers and the workforce.
    I'm speaking today from my experience studying health care policy; 
speaking with providers, patients, and employers from across the 
country; and from my own research on health care as director and senior 
fellow at the Manhattan Institute's Center for Medical Progress.
    First of all, I'd like to state that there is a critical need for 
real health care reforms that improve access to affordable health 
insurance; protect individuals and families from the risk of 
catastrophic health care expenses; lower the unsustainable rate of 
health care cost growth for private and public payers; and create 
better incentives for health care providers to offer more cost 
effective care.
    Creating truly portable individual health insurance would reduce 
the incidence of job-lock, encouraging entrepreneurship and allowing 
employees to changes jobs without fear of losing valuable health 
insurance. Slowing the rate of insurance premium growth for employer-
based coverage would allow employers to shift scarce capital to other 
critical business operations (including job creation) and/or increase 
employee compensation in the form of higher take home pay.
    Without significant health care reforms, rising employer health 
insurance premiums will continue to sap business capital and erode 
employee take home pay. More businesses (especially small employers) 
will drop coverage as insurance becomes unaffordable, leading to an 
ever growing number of uninsured. Entitlement spending for Medicare and 
Medicaid will swamp state and federal budgets, threatening economically 
crippling tax increases or devastating spending cuts.
    Unfortunately, the Patient Protection and Affordable Care Act is 
not the solution to our health care woes. If anything, the Affordable 
Care Act ``doubles down'' on many of the worst aspects of our current 
system, while adding new cost pressures and problems that will serve as 
a drag on economic growth and job creation for years to come.
    I believe that the negative economic impacts of the Affordable Care 
Act can be separated into three broad categories:
     PPACA will Increase the Deficit, Not Reduce It
     PPACA will Increase Insurance Costs and Reduce Employment
     Regulatory Uncertainty under PPACA will Hinder Job 
Creation
    In turn, I will discuss why the Affordable Care Act is much more 
likely to increase the deficit than reduce it; explain how the 
mandates, taxes, and penalties that it imposes on insurers and 
employers will increase health care costs and decrease employment; and 
conclude by exploring the negative effects of regulatory uncertainty at 
a time when companies are ``sitting'' on trillions of dollars in cash 
that could be used for job creation.
PPACA will Increase the Deficit, Not Reduce It
    From an economic perspective, reducing the federal deficit to 
sustainable levels would be an enormous boon for U.S. economic 
competitiveness and job creation. If we continue spending at current 
projected levels, the U.S. economy will be exposed to the risk of a 
sovereign debt crisis that would force economically crippling tax 
increases or sudden and severe cuts in government spending that would 
have long lasting negative consequences for U.S. economic growth and 
employment.
    Slowing the rate of excess health care cost growth for government 
health care entitlement programs like Medicare and Medicaid would be a 
significant step towards addressing the U.S.'s long term structural 
deficit. However, the Affordable Care Act creates a new middle class 
entitlement for the purchase of heavily subsidized private health 
insurance, and approximately doubles the size of the Medicaid program. 
This is hardly the best way to ``bend the curve'' of health care 
spending, since it creates large new constituencies for increased 
health care spending and increased demand is likely to put significant 
upward pressure on the cost of health care goods and services.
    The Affordable Care Act does contain what MIT economist Jonathan 
Gruber calls (approvingly) a ``spaghetti approach to cost control''.\i\ 
This includes a grab-bag of Medicare pilot projects and payment reforms 
including Accountable Care Organizations, bundled payment systems, and 
pay-for-performance initiatives. The strategy, insofar as it can be 
called a strategy, is to throw ``a bunch of stuff at against the wall 
[to] see what sticks.''
    Unfortunately, these programs are underpowered, and are likely to 
be cut short whenever they work too effectively, and threaten the 
interests of one or another powerful health care interest group.
    The Affordable Care Act's focus on top-down planning also ignores 
the myriad unintended consequences that follow when bureaucracies with 
limited information attempt to control the behavior of hundreds of 
thousands of physicians, and thousands of hospitals, who have powerful 
financial incentives to find ways to maximize revenue from 
administratively favored activities and procedures and avoid painful 
cuts to disfavored ones.
    Even if we take the Affordable Care Act at face value, it has not 
done nearly enough to address current and projected entitlement 
spending. Just two months after the Affordable Care Act passed, the 
director of the Congressional Budget Office (CBO) noted that:
    Rising health care costs will put tremendous pressure on the 
federal budget during the next few decades and beyond. In CBO's 
judgment, the health legislation enacted earlier this year does not 
substantially diminish that pressure.\ii\
    Nonetheless, it has been endlessly repeated that the Affordable 
Care Act will actually reduce the deficit by a small amount in its 
first ten years and by trillions of dollars thereafter. How is this 
circle squared? The federal government is clearly committed to spending 
hundreds of billions more on Medicaid, the State Children's Health 
Insurance Plan (or SCHIP), and new subsidies for middle- and upper 
income-uninsured to buy health insurance on newly created state health 
insurance exchanges beginning in 2014.
    Still, the CBO does score the Affordable Care Act as reducing the 
deficit by about $143 billion in its first decade (including $19 
billion from its education related provisions). However, the CBO also 
notes that the federal government will spend about $401 billion more on 
health care programs in the Affordable Care Act's first decade, while 
increasing federal revenues, through taxes and fees, by an even greater 
amount, $525 billion.\iii\
    Consequently, half-a-trillion dollars will be shifted out of the 
private economy and directed largely towards new health care spending. 
Not only will this reduce funds available for private sector job growth 
and innovation, but the funds are also lost for any future deficit 
reduction efforts. Estimates that the Affordable Care Act reduces the 
deficit by $143 billion seem reassuring, but only if we ignore the fact 
that we are shifting substantial new revenues from non-health care 
sources to meet new health care obligations--hardly ``bending the 
curve'' by any plausible definition.
    The passage of the Affordable Care Act also set a new low in 
Washington's perennial fiscal shell games. First of all, the 
legislation double-counts $53 billion in Social Security payments and 
$70 billion in premium payments for a new long term care insurance 
program (CLASS) as revenues. It also ignores up to $115 billion in 
discretionary costs associated with the Affordable Care Act, including 
$10-20 billion in direct implementation costs,\iv\ including:
     $5-10 billion for the IRS associated with ``the 
eligibility determination, documentation, and verification processes 
for premium and cost-sharing credits''
     $5-10 billion in costs for a variety of federal agencies 
including CMS, the Office of Personnel Management, Medicaid and CHIP
    Many more costs loom just over the horizon. The infamous ``doc 
fix'' for the sustainable growth rate (SGR) formula under Medicare 
threatens large cuts to physicians fees every year. Congress passed the 
latest SGR patch in December and deferred cuts for 2011, without 
offering any permanent resolution. Ultimately the SGR has to be 
addressed, but the fiscal cost is staggering: estimated at $276 billion 
over 10 years. The CBO also estimates that costs for the new insurance 
subsidies and Medicaid expansion under the Affordable Care Act will 
grow by approximately 8% annually beginning in 2019.
    Defenders of the Affordable Care Act may concede that the near term 
prospects for the bill to control costs are poor. Instead, they point 
to the increased savings in the second decade of the legislation, and 
to the 2010 Medicare Trustees report, which estimates that the 
Affordable Care Act will extend Medicare's hospital insurance trust 
fund an additional 12 years (from 2017 to 2029), and cut trillions from 
Medicare's long-term expenditures.
    The problem is that these figures assume that Congress will 
tolerate large cuts to payments for Medicare providers or that such 
cuts will have no effect on services for Medicare beneficiaries. The 
office of the Medicare Actuary has published what amounts to a dissent 
from the 2010 Trustees report, noting that:
    [T]he financial projections shown in this report for Medicare do 
not represent a reasonable expectation for actual program operations * 
* * the statutory reductions in price updates for most categories of 
Medicare provider services will not be viable.\v\
    Medicare actuaries estimate that by 2019, Medicare payment rates 
would be lower than those currently paid for Medicaid (which already 
pays providers much less than private insurance). In the long run, 
Medicare payments would dip to ``one-third of the relative current 
private health insurance prices and half of those for Medicaid,'' 
according to the actuaries' memorandum. Under these projections, a full 
15% of Medicare providers would be unprofitable by 2019, 25% by 2030, 
and 40% by 2050.\vi\ Needless to say, it is unlikely that Congress 
would actually allow these cuts to go into effect, since they would 
have dire consequences for Medicare beneficiaries.
    Other analysts, after discounting the double-counting of revenues 
and cuts that are likely to be unsustainable, put the true deficit 
costs of the Affordable Care Act during its first 10 years at over $562 
billion and second decade at over $1.5 trillion.\vii\ Meeting these 
obligations will require significant new tax increases or spending 
cuts, draining funds from the private sector or reducing investment for 
other critical priorities like public education and infrastructure.
    We should also not ignore the serious impact that the Affordable 
Care Act will have on already strained state budgets. The new law would 
bring 16 million Americans--one-half of the estimated 32 million who 
will receive new insurance coverage--into Medicaid, covering Americans 
making up to 133 percent of the federal poverty level.
    Medicaid spending currently consumes about 20 percent of state 
budgets, crowding out spending on everything from education to 
infrastructure. The federal government will pick up 100 percent of new 
Medicaid costs for the first several years after 2014, when the law 
goes into effect, paring back to 90 percent in 2020. Still, states will 
face $21 billion in new Medicaid costs from 2014-2019,\viii\ not 
including up to $12 billion in new administrative costs.\ix\ While this 
pales besides the $443 billion in new Medicaid costs for the federal 
government, many state budgets are in such poor condition that they 
can't afford any new outlays; they need, in fact, to cut spending.
    States will also be responsible for the approximately 11 million 
uninsured Americans who are currently eligible for Medicaid but have 
never bothered to enroll. In 2014, once the Affordable Care Act takes 
effect, many of these eligible but not enrolled people will presumably 
sign up for Medicaid coverage. Unfortunately for the states, these 
enrollees would be covered not under the higher federal matching rate 
that the Affordable Care Act establishes but under the pre-PPACA rate, 
which varies by state but is much more onerous. These trends will only 
increase Medicaid pressures on state budgets, leading to more 
economically damaging tax increases, budget cuts, or state employee 
layoffs.
PPACA will Increase Insurance Costs and Reduce Employment
    While the full deficit effects of the Affordable Care Act are not 
likely to be felt for several years after full implementation begins in 
2014, the Act also contains a number of other provisions including new 
insurance mandates, taxes, and employer penalties that will have a 
direct and more immediate effect on the cost of health insurance 
coverage and employer decisions to hire (or not hire) additional 
employees.
    The Affordable Care Act imposes a number of new requirements on 
insurers, including extending dependent coverage for adult children 
until they are 26; eliminating the lifetime cap on health insurance 
coverage and gradually increasing and then eliminating annual coverage 
limits; forbidding companies from excluding children with pre-existing 
conditions from child-only coverage policies; and eliminating cost-
sharing for preventive services in Medicare and private plans. These 
provisions may result in what is perceived to be a ``richer'' benefit 
package, but at the cost of higher insurance premiums that employers 
will have to offset through reduced employee wages or job creation.
    New taxes on insurance companies, pharmaceutical companies, and 
medical device companies are all likely to be passed through directly 
onto employers and employees in the form of higher insurance premiums. 
(Some of these new costs can, of course, also be passed along to 
consumers in the form of higher prices for goods and services.)
    The administration has also repeatedly promised that ``if you like 
your plan, you can keep it, and thus that ``grandfathered'' plans would 
not be subject to new insurance regulations, and new costs. However, 
the government has since revealed that up to 69 percent all employers 
(and up to 80 percent of small employers) will lose their grandfathered 
status over the next several years and be subject to new regulatory 
requirements and costs.\x\
    Massachusetts' experience with health insurance reform, the 
template for the Affordable Care Act, suggests that health insurance 
costs will rise for employers and for small firms in particular. A July 
2010 study by health economists John Cogan, Glenn Hubbard, and Daniel 
Kessler found that premium trends for employer-provided health 
insurance rose faster in the Bay State after reforms were implemented, 
particularly for individual coverage and for small businesses.
    The authors found that ``health reform in Massachusetts increased 
single coverage employer-sponsored insurance premiums by about 6 
percent in aggregate and by about 7 percent for firms with fewer than 
50 employees. * * * For small employers, the differential 
Massachusetts/US growth in small group [family] premiums from 2006-
2008, over and above the growth from 2004-2006, was 14.4 percent.'' 
\xi\
    The Affordable Care Act also contains a play or pay mandate that 
penalizes companies with more than 50 employees who do not offer 
coverage, or offers ``unaffordable'' coverage if one or more employees 
at the firm purchases subsidized coverage on a state health insurance 
exchange beginning in 2014.
    The consulting firm Mercer predicts that ``more than a third of the 
nation's employers--38%--have at least some employees for whom coverage 
would be considered `unaffordable' under [PPACA].'' The penalty is 
equal to $3,000 per full-time employee receiving subsidized coverage, 
or $2,000 per FTE excluding the first 30, whichever is less. (Although 
Mercer found that more small companies would be affected by the 
penalty, 31% of employers with 500 or more employees would be at risk, 
along with 20% of employers with 20,000 or more employees.)
    The ``play or pay'' mandate is apt to have a variety of effects on 
coverage and employment decisions. For employers with 50 or fewer 
employees who do not offer coverage, it will be a disincentive to grow 
beyond the ``cap'' and incur the penalty--reducing employment. One 
labor economist notes that the $2,000 penalty will amount to 15% of 
average wages in the restaurant industry and nearly 10% of wages in the 
retail sector--providing an incentive for firms to hire fewer lower-
wage workers or become more automated. (In general, firms will also 
prefer to hire full-time workers as the cost of benefits per-hour of 
labor is lower.) \xii\
    For employers who do not offer ``affordable'' coverage, they can 
avoid the penalty by increasing spending on health care benefits to 
reduce the employees' share of health insurance costs below the 9.5% 
threshold of household income. However, these expenditures would 
compete with total employee compensation or other employment decisions. 
(How, exactly, firms will go about learning their employees' household 
income for purposes of determining if their coverage is 
``affordable''--household income may fluctuate throughout the year--is 
another question entirely, with potentially troubling privacy 
implications.)
    Of course, many companies may rationally decide that the ``price'' 
of dropping coverage (along with any increase in an employees' salary 
or other compensation) is more than offset by the savings recouped from 
ending an employee insurance policy that costs $11,000 or more 
annually.\xiii\
    The decision to end employer-based coverage will also be encouraged 
by the fact that the Affordable Care Act effectively creates a ``most 
favored subsidy'' group, insofar as individuals and families in the 
exact same income bracket may qualify for very different tax subsidies 
based on whether or not they are offered employer-based insurance 
coverage.
    The subsidies and cost sharing support available on the state 
health insurance exchanges are significantly more generous than the 
current insurance tax exemption for employer provided health 
insurance--at least for households earning less than 200-250 percent of 
the federal poverty level--providing an additional incentive for low-
wage employees to migrate into the exchange. (Higher-wage employees who 
do not qualify for subsidies on the exchanges, or who would still face 
substantial out of pocket costs, will want to ``stay put'' in employer-
based coverage.)
    The Affordable Care Act does contain a tax credit to offset the 
costs of insurance coverage for small firms. The credit, however, 
phases out for firms with between 10-25 employees and as average wages 
approach $50,000. Proprietors and their family members are also 
excluded from claiming the credit, even though many small firms are 
family-run. Given these limitations, the National Federation of 
Independent Businesses estimates that only 35 percent of firms with 
fewer than 25 employees will be able to qualify for the credit. In any 
case, the premium is only available for a total of six years (2010-13, 
plus a two year credit beginning in 2014).
    Although it is difficult to predict the exact magnitude of the 
Act's effect on employment-based coverage, CBO does expect that as many 
as 3 million people would lose employer based coverage, noting that 
``firms that would choose not to offer coverage as a result of the 
proposal would tend to be smaller employers and employers that 
predominantly employ lower wage workers.'' \xiv\ Other sources estimate 
that far more lower-wage employees may be ``dropped'' into the state 
exchanges than has been previously estimated--perhaps as many as 43 
million, substantially increasing taxpayer obligations and driving up 
the cost of the program.\xv\
    Firms are therefore most likely to end coverage for lower wage 
employees, and/or outsource or automate their functions to both avoid 
paying a fine and to shed health insurance costs. In sum, the tax 
advantage on the exchanges for many households is likely, over the long 
term, to undermine coverage in the employer-based market, increase 
taxpayers' exposure to subsidy costs, and reduce demand for low-wage 
labor.
    (Many low-income employees may also find themselves enrolled in 
Medicaid, a joint-federal state program that offers comprehensive 
insurance coverage on paper, but which has serious access problems due 
to low and slow reimbursements for physicians' services. Medicaid also 
seems to have worse outcomes for serious illnesses like cancer and 
heart disease.)
    One small business owner (an IHOP franchisee in New Jersey) 
anticipates that Affordable Care Act penalties for his 140 uninsured 
workers (up to $220,000) will force him to raise prices or possibly lay 
workers off. ``We are still figuring out how to deal with this,'' he 
told the Cleveland Plain Dealer in July. ``Ultimately, either 
businesses will close or consumers will pay more.''
Regulatory Uncertainty under PPACA Will Hinder Job Creation
    The Patient Protection and Affordable Care Act is likely to 
increase insurance premiums for employers by mandating richer benefit 
packages; penalize firms that do not offer insurance or do not offer 
``affordable'' insurance; and increase incentives for employers to find 
ways to reduce insurance coverage for, or reliance on, low-wage labor. 
Overtime, the Affordable Care Act will significantly undermine the 
employer-based insurance coverage and leave millions more Americans in 
insurance markets that are government controlled.
    Still, much of the regulation that will affect insurance costs and 
firms' allocation of wages and employment will be written over the next 
several years. As a result, employers face tremendous uncertainty as 
they try to understand their exposure to costs associated with federal 
and state insurance requirements; calculate potential penalties for 
going without coverage or exceeding maximum allowable household costs; 
and prepare to navigate the thicket of regulations that will emerge 
piecemeal from the Department of Health and Human Services, state 
departments of insurance, and state health insurance exchanges.
    Employers are already struggling with unintended consequences of 
the legislation. To date, the Department of Health and Human Services 
has had to issue 733 waivers from minimum insurance requirements under 
the Affordable Care Act, including 182 issued to plans provided under 
union collective bargaining agreements.
    While HHS should be commended for acting to minimize the loss of 
coverage or large premium increases for millions of enrollees in these 
plans, it does underscore the potential for political pressures to be 
brought to bear that will make the transparent implementation of the 
Affordable Care Act extraordinarily difficult. Indeed, we have already 
seen how union pressures on Congress and the White House pushed back 
the ``Cadillac Tax'' in the Affordable Care Act to 2018 (and 
substantially raised the threshold at which the tax takes effect), 
raising the question of how many other provisions may be selectively 
enforced or not enforced at all.
    At least until 2014, firms will proceed very cautiously before 
committing themselves to new investment or employment decisions. Given 
persistently high unemployment, and a fragile recovery from the worst 
financial crisis since the Great Depression, the Affordable Care Act 
will remain a drag on the economy until many of these questions are 
resolved--and beyond. The Congressional Budget Office currently 
estimates that the Affordable Care Act will reduce labor in the U.S. by 
approximately .5 percent, primarily because it will ``affect some 
individuals' decisions about whether and how much to work, and some 
employers' decisions about hiring workers.'' \xvi\
    This may seem to be a modest amount (although it may represent 
hundreds of thousands of lost jobs). And private firms can and do adapt 
themselves to a variety of regulatory environments. But a glance at our 
European competitors shows that universal health insurance is not, in 
itself, a boost to employment or global competitiveness. Many European 
countries have persistently higher overall unemployment than the U.S. 
The French economist Guy Sorman puts it as follows:
    France's costly national health insurance is mostly financed by 
taxes on labor. A Frenchman making a monthly salary of 3,000 euros will 
pay approximately 350 of them (deducted by his employer) for health 
insurance. Then the employer will add approximately 1,200 euros, making 
the total monthly cost to the employer of this individual's services 
not 3,000 euros but 4,200.
    High labor costs in France affect not only consumer prices but also 
unemployment rates, since employers are reluctant to pay so much for 
low-skill workers. Economists agree that unemployment rates and the 
cost of national health insurance are directly related everywhere, 
which partly explains why even in periods of economic growth, the 
average French unemployment rate hovers around 10 percent.\xvii\
    A different, and better approach for the U.S., would've relied on 
incremental reforms to expand coverage to those with the greatest 
medical and financial need; implemented tax reforms to equalize the tax 
treatment of insurance purchased on the individual market or through 
employers; and instituted health care and insurance reforms that 
utilize competition and consumer choice to drive health care costs 
down.
    Instead, we've created a new open-ended federal entitlement, 
mandated even more expensive, comprehensive insurance coverage, and 
instituted a massive new regulatory process that will generate 
unintended consequences for years to come.
    Members of the Committee, thank you for the opportunity to be here 
today. I look forward to answering your questions.

                                ENDNOTES

    \i\ Cost Questions Could Lead to Further Debate on Health Care 
Reform. California Healthline, April 26, 2010. http://
www.californiahealthline.org/articles/2010/4/26/cost-questions-could-
lead-to-further-debate-on-health-care-reform.aspx
    \ii\ Douglas Elmendorf, Director, Congressional Budget Office, 
Presentation to the Institute of Medicine, Health Costs and the Federal 
Budget, May, 26 2010. Slide 2. http://www.cbo.gov/ftpdocs/115xx/
doc11544/Presentation5-26-10.pdf
    \iii\ Congressional Budget Office, The Budget and Economic Outlook: 
An Update. August 2010 (p. 6). http://www.cbo.gov/ftpdocs/117xx/
doc11705/08-18-Update.pdf
    \iv\ Letter from Congressional Budget Office Director Douglas W. 
Elmendorf to the Hon. Jerry Lewis, ranking member of the House 
Committee on Appropriations. May 11, 2010 (p. 2). http://www.cbo.gov/
ftpdocs/114xx/doc11490/LewisLtr--HR3590.pdf
    \v\ 2010 Annual Report of the Boards of Trustees of the Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds. ``Statement of Actuarial Opinion'', p. 282. https://www.cms.gov/
ReportsTrustFunds/downloads/tr2010.pdf.
    \vi\ Projected Medicare Expenditures under an Illustrative Scenario 
with Alternative Payment Updates to Medicare Providers. Centers for 
Medicare and Medicaid Services, Office of the Actuary, August 10, 2010 
(p. 6). http://www.cms.gov/ActuarialStudies/Downloads/
2010TRAlternativeScenario.pdf.
    \vii\ Douglas Holtz-Eakin and Michael J. Ramlet, Health Care Reform 
is Likely to Widen Budget Deficits, Not Decrease Them. Health Affairs, 
June 2010:1136-41. http://www.ncpa.org/pdfs/health-care-reform-likely-
to-add-billions-to-deficit.pdf
    \viii\ Health Reform Issues: Key Issues About State Financing and 
Medicaid. Kaiser Family Foundation, May 2010 (p. 2). http://
www.kff.org/healthreform/8005.cfm
    \ix\ Obamacare: Impact on States. Edmund F. Haislmaier and Brian C. 
Blase, Heritage Foundation. July 2010 (p. 5). http://thf--
media.s3.amazonaws.com/2010/pdf/bg2433.pdf
    \x\ HHS Urged to Ease Requirements for Maintaining `Grandfathered' 
Status. Commonwealth Fund, August 17, 2010. http://
www.commonwealthfund.org/Content/Newsletters/Washington-Health-Policy-
in-Review/2010/Aug/August-23-2010/HHS-Urged-to-Ease-Requirements-for-
Maintaining-Grandfathered-Statu.aspx
    \xi\ John F. Cogan, R. Glenn Hubbard, and Daniel Kessler (2010) 
``The Effect of Massachusetts' Health Reform on Employer-Sponsored 
Insurance Premiums,'' Forum for Health Economics & Policy: Vol. 13: 
Iss. 2 (Health Care Reform), Article 5. http://www.bepress.com/fhep/13/
2/5
    \xii\ Health Care's Impact on the Low-Skilled Worker. Diana 
Furchtgott-Roth, RealClearMarkets.com, May, 6, 2010. http://
www.realclearmarkets.com/articles/2010/05/06/healthcare--and--low-
skilled--workers--98451.html
    \xiii\ Documents reveal that AT&T, Verizon, others, thought about 
dropping employer sponsored benefits. Shawn Tully, CNN Money, May 6, 
2010. http://money.cnn.com/2010/05/05/news/companies/dropping--
benefits.fortune/
    \xiv\ Cost estimate for the amendment in the nature of a substitute 
for H.R. 4872, incorporating a proposed manager's amendment made public 
on March 20, 2010 (p. 10). http://www.cbo.gov/ftpdocs/113xx/doc11379/
AmendReconProp.pdf
    \xv\ The Patient Protection and Affordable Care Act: Labor Market 
Incentives, Economic Growth, and Budgetary Impacts, Douglas Holtz-
Eakin, January 26, 2011 (p. 14). http://waysandmeans.house.gov/
UploadedFiles/HoltzEakin--Testimony--1--5.pdf
    \xvi\ See Congressional Budget Office, Director's Blog, October 22, 
2010. http://cboblog.cbo.gov/?p=1478
    \xvii\ Paying for Le Treatment, Guy Sorman, City Journal, August 
24, 2009. http://www.city-journal.org/2009/eon0824gs.html
                                 ______
                                 
    Chairman Kline. Thank you, Dr. Howard.
    Ms. Johnson?

STATEMENT OF GAIL JOHNSON, PRESIDENT AND CEO, RAINBOW STATION, 
                              INC.

    Ms. Johnson. Good morning, Chairman Kline, Ranking Member 
Miller and the rest of the committee. I am delighted to be able 
to speak with you today and grateful for the opportunity to 
discuss some of the ramifications of the new health care law 
facing employers and the workforce. In my remarks today, I will 
share my experience as an employer purchasing insurance 
coverage for our teachers and staff under the Affordable Care 
Act.
    While this law includes important insurance reforms and 
increased coverage to many more people, taken as a whole, the 
law is biased towards mandating coverage rather than providing 
meaningful cost control. Over the next 3 years, it will force 
employers to decide between absorbing rising premiums versus 
paying tax penalties. This will ultimately slow or stall the 
growth of small and mid-sized businesses as we struggle with 
the new cost requirements.
    Throughout my career, I have focused on women's and 
children's issues and founded a business, as mentioned before, 
focusing on quality early education school-age recreation and 
mildly ill backup care, backup care that provides on each of 
our Rainbow Station campuses about a thousand productive work 
days for parents who would otherwise have to stay home with an 
ill child. We do impact the economy with our business.
    As a pediatric and small-business owner, I strongly support 
the reform of our health care system. It is desperately needed. 
As a whole, the new law increases access to coverage without 
controlling costs. Rainbow Station is only beginning to feel 
the impact of this new law.
    Since 1992, we have provided health insurance for faculty 
and staff. And I have worked diligently to minimize out-of-
pocket health care expenses for our employees. I have made a 
concerted effort each year to keep co-pays low and ensure no 
deductibles for my staff. I want my employees to access the 
health care system with minimal financial barriers.
    Last month, everything changed. This year, we will insure 
84 lives at a cost of $502,000. If I changed nothing and 
renewed our policy from 2010, our premium would increase 18 
percent. This increase would drive my premium to over $593,000. 
Due to the economic climate of the past 2 years, I just could 
not afford to absorb this increase and further impact our 
bottom line.
    For similarly-sized workforces, our broker informed us that 
the baseline increase, or trend, as she called it, is 12 
percent per year. This increase encompasses rising insurance 
costs due to advances in technology as well as rising medical, 
pharmaceutical and legal costs throughout the insurance, health 
care industry.
    Additionally, our broker informed us that 3 to 5 percent of 
our scheduled increase was a result of the new mandates and 
administrative costs caused by the Affordable Care Act of this 
year. I had hoped that this law would indeed help my premiums 
to lower, when, in fact, sadly, it did not.
    To avoid this premium increase, I made the difficult 
decision to add an employee deductible of $500. For the first 
time in our nearly 20-year history, our employees will now pay 
a deductible. Their premiums will not rise, but we sacrificed 
our goal of minimizing out-of-pocket expenses and 
unfortunately, increased a financial barrier to accessing 
health care services.
    This change resulted in forfeiting our ability to 
grandfather our plan. Moving forward, our plan must now comply 
with all the mandates required by the Affordable Care Act each 
year as the law is implemented.
    For example, my policy now has--will have to have no dollar 
limits on durable medical equipment. I employ young teachers, 
fortunately, healthy, young teachers. They do not have a need 
for durable medical equipment. But because I now have to 
include this in my policy, it's causing my premium to increase.
    To help keep up with these essential benefits, we will have 
to eventually pass on to employee--increase our employee cost 
sharing. The law has transformed health insurance into an 
obligation rather than a benefit that I can use to supplement 
salary and attract and retain quality faculty and staff. In the 
future, I will have even harder decisions to make.
    Do I continue to provide insurance coverage to my teachers? 
Or do I drop insurance coverage altogether and just pay a 
penalty? The penalty may cost me anywhere from $168,000 to 
$252,000. Choosing to forego providing insurance coverage 
could, indeed, save Rainbow Station about $300,000. But at what 
price?
    Will I be able to retain and attract the highest quality 
early child educators and nurses and staff without providing a 
quality benefits package? If compelled to eliminate our 
insurance coverage, I worry what my employees will face in the 
individual marketplace. There is great uncertainty out there 
regarding the availability of affordable, quality insurance 
products for our employees in the exchanges.
    The situation is more unsettling when considered that many 
businesses just like mine are facing the same decision. The 
decision to offer health insurance will strictly be about 
costs: rising insurance premiums versus tax penalties. 
Therefore, I fear more employers will choose to drop coverage 
and instead, pay the tax penalties.
    I believe the new health care law will discourage economic 
growth among small and mid-sized companies. Our government 
should be encouraging job growth and recovery. But this law 
disincentivizes for higher wages, new hiring and robust 
employee benefits. Employers will be compelled to devote more 
capital resources towards operating costs rather than investing 
in jobs growth.
    Thank you so much for the opportunity to speak with you 
today. And I look forward to any questions you may have.
    [The statement of Ms. Johnson follows:]

  Prepared Statement of Gail Johnson, President/CEO, Rainbow Station, 
                                  Inc.

    Good morning Chairman Kline, Ranking Member Miller and members of 
the committee. My name is Gail Johnson, and I am grateful for the 
opportunity to address some of the ramifications of the new health care 
law facing employers and the workforce.
    In my remarks today, I will share my experience as an employer 
purchasing insurance coverage for our teachers and staff now that the 
Patient Protection & Affordable Care Act (PPACA) is the law of the 
land. While this law includes important insurance reforms that increase 
access to coverage for many more people, taken as a whole, the law is 
biased toward mandating coverage rather than providing meaningful cost 
control. Over the next three years, it will force employers to decide 
between absorbing rising premiums versus paying tax penalties. This 
will ultimately slow or stall the growth of small and midsized 
businesses as we struggle with the costly new requirements.
    Throughout my career, I have been focused on women and children's 
health and education issues. Before becoming an entrepreneur, I worked 
as a pediatric nurse for nearly 25 years. As a nurse, I held many 
roles, including visiting public health and home healthcare nurse; 
maternity, pediatric and nursery staff; Lamaze instructor; and faculty 
member of the Maternal Child Nursing Departments at the Medical College 
of Virginia (MCV)/Virginia Commonwealth University (VCU) and J. 
Sergeant Reynolds Community College. I continue to be engaged with the 
MCV/VCU School of Nursing as the Chair of the Nursing Advancement 
Council and serve as Vice President, Medical College of Virginia 
Foundation Board of Trustees.
    I am the founder and CEO of Rainbow Station, Inc., a nationally 
accredited preschool and school-age recreation franchise that offers 
emergency backup care for mildly ill children on site. We provide 
developmentally appropriate early education and school-age recreation 
to 325 children on each campus. There are three corporately owned 
Rainbow Station campuses in Richmond, Virginia. In 1999, I created 
PRISM, the franchising company for Rainbow Station, and there are 
currently franchises operating in Virginia, North Carolina and Texas. 
All Rainbow Station schools are accredited by the National Academy of 
Early Childhood Programs and/or the National Afterschool Association's 
Council on Accreditation as soon as they become eligible for 
accreditation. Some schools are accredited by the Southern Association 
of Colleges & Schools.
    My corporate Rainbow Station campuses employ 225 employees with 
annual wages for teachers ranging from $23,000 to $35,000. Currently, 
there are a total of nine schools open, with a capacity for 3,131 
children. Fully enrolled, each campus will generate $2.5-$3.5 million 
in revenue annually, depending on geographic location. There are eight 
additional locations in development, along with several sales pending.
    Within Rainbow Station facilities, we have the capacity to provide 
backup care for mildly ill children. This care is overseen by a 
pediatric nurse and results in approximately 1,000 productive workdays 
each year at each Rainbow Station campus being returned to parents and 
their employers. We provide these parents with the option to leave 
their child with a nurse, if they choose to go to work. Rainbow Station 
provides flexibility to working parents who would normally be forced to 
miss work in order to stay home with a mildly ill child. Using the 
franchise business model, we hope to continue growth and provide these 
work/family support solutions and services to more communities across 
the United States. Unfortunately, growth of our business is being 
significantly challenged by a lack of access to credit and the 
uncertainty created by the Patient Protection and Affordable Care Act 
(PPACA).
    My franchise system is an active member of the International 
Franchise Association (IFA). As the largest and oldest franchising 
trade group, the IFA's mission is to safeguard the business environment 
for franchising worldwide. IFA represents more than 90 industries, 
including more than 11,000 franchisee, 1,100 franchisor and 500 
supplier members nationwide. According to a study conducted for the IFA 
Educational Foundation, there are more than 800,000 franchised 
establishments in the U.S., creating 18 million American jobs and 
generating $2.1 trillion in economic output.
    The findings of the study, Small Business Lending Matrix and 
Analysis, prepared for the IFA Educational Foundation, support the 
notion that meaningful economic recovery and meaningful job creation 
will start with small business lending. In fact, the study determined 
that for every $1 million in new small business lending, the franchise 
business sector would create 40.4 jobs and generate $4.2 million in 
economic output.
    Franchised businesses play an important role in the economic health 
of the U.S. economy, and they are poised to help lead the economy on 
the path to recovery. IFA Educational Foundation reports show that the 
franchise industry consistently outperforms the non-franchised business 
sector, creating more jobs and economic activity in local communities 
across the country. Franchising grew at a faster pace than many other 
sectors of the economy from 2001 to 2005, expanding by more than 18 
percent. During this time, franchise business output increased 40 
percent compared to 26 percent for all businesses.
    The IFA continues to seek solutions to ensure that health insurance 
is more affordable for franchised businesses and their employees. We 
support proposals that strengthen consumer-oriented, affordable health 
insurance options and promote small business health plan legislation. 
Such legislation will allow owners of franchise businesses to pool 
together across state lines and purchase affordable health coverage. We 
also support medical liability reform that focuses on reducing 
litigation that has lead to higher costs. Unfortunately, the 
legislation signed into law last year contains a framework that will 
encourage further shifting of health costs onto the backs of small 
franchised businesses--in the form of a mandate on employers--and 
impose new taxes and fees that will be passed along by health insurance 
providers to consumers.
    As a pediatric nurse and small business owner, I understand the 
need for health care reform. However, increasing access to health 
coverage and forsaking measures to control health care costs will lead 
to negative repercussions in the small business community. Franchising 
encompasses businesses of all sizes, from small single unit locations 
to multi-unit international brands. Systems such as mine--fast-growing, 
midsized businesses--are the country's strongest job creators. Small 
and midsized businesses that are growing are able to do so by 
reinvesting income from their operations to expand. These businesses 
have limited margins for increased labor and operating costs. Complying 
with the requirements of the new law will force entrepreneurs to invest 
less into growing their business. I am here today to inform the 
Committee on Education and the Workforce that the new health care 
reform law will slow or stall the growth of small and midsized 
businesses as we struggle to absorb its new costs.
    Several aspects of the new law will add costs and regulatory 
burdens for small business owners. It establishes an employer mandate 
to provide health insurance coverage to employees. If employers do not 
purchase coverage, they will be subject to a penalty of $2,000 per 
full-time worker. The law further restricts workplace flexibility by 
defining a full-time employee as one who works at least a four day per 
week schedule. Furthermore, small businesses will now be required to 
calculate on a monthly basis the variable schedules of hourly employees 
to determine requirements under the new law and the associated 
penalties.
    Congress empowered the federal bureaucracy to determine an 
``essential benefits package,'' ultimately requiring employers to 
contribute toward a package they otherwise may not have been able to 
afford. As crafted, I believe the new law will eliminate all 
flexibility for employers to design an affordable benefits package. 
This inflexible, one-size-fits-all approach betrays a bias toward 
mandating coverage rather than curbing costs. This represents a 
significant government intrusion into the benefits decisions of 
employers. In order to comply, small employers will be faced with 
decisions such as cutting back wages, forgoing new hiring and raising 
prices for services. These measures will further stunt any economic 
recovery and curtail future job growth.
    The new law took care to provide exemptions only to certain 
businesses--those employing less than 50 full-time equivalent 
employees--this creates a disincentive to hire or expand beyond this 
level. As is the case of my business, it plants the cost of compliance 
squarely on the backs of small and midsized firms employing more than 
50 people. It is important to note that in a business like Rainbow 
Station, we must adhere to required ratios of faculty to children in 
order to maintain state licensure as well as to earn and maintain 
national accreditation. The only option my business would have to avoid 
the employer mandate is to cut back on enrollment; and, therefore, 
services to the community.
    Under the new law, starting in 2014, we will be required to offer 
coverage or pay a tax penalty. To keep up with the law's mandated 
essential benefits, we will have to increase the amount of employee 
cost-sharing. This will drive our health insurance costs higher than we 
are able to provide today. We also must be mindful that our employee's 
share of the plan does not exceed 9.5 percent of their household 
income. Otherwise, they will be eligible for subsidies and would 
trigger penalties of up to $3,000 per employee who receives a subsidy. 
How are employers supposed to determine the household income of each 
employee? This is private information that employees would certainly 
not expect their employers to ascertain in most cases.
    The new law emphasizes access to coverage over curbing rising 
health care costs. The federal government has forced the hands of 
employers and transformed health insurance into an obligation, rather 
than a benefit of employment, a benefit that I use to supplement salary 
and wages in order to attract and retain quality faculty and staff. 
Essentially, the decision to offer health insurance coverage will 
strictly be about cost--insurance premiums versus tax penalties. Health 
insurance coverage will cease being a benefit of employment or part of 
a competitive compensation package.
    Rainbow Station is already beginning to feel the impact of the new 
health care law. Since 1992, Rainbow Station has provided health 
insurance for faculty and staff. Because we are a preschool with 
relatively low wages--although, I am proud to report that our wages are 
in the upper quartile for our industry--I have worked diligently to 
minimize out of pocket healthcare expenses for my teachers and staff. 
Currently we pay 70 percent of the insurance premium for our faculty 
and staff. I make a concerted effort each year to keep employee co-pays 
low and ensure no deductibles. I want my employees to be able to access 
the health care system with minimal financial barriers.
    Having just completed the renewal process for our insurance policy, 
I would like to share with the Committee one example of what small and 
medium-sized employers are struggling with across the United States. If 
I did nothing and just renewed our policy from 2010, I would face a 
premium increase of 18 percent. Our insurance broker informed us that 
the annual trend increase is 12 percent, and businesses with insurance 
plans and employee pools similar to our business can expect a 12 
percent increase each year moving forward. That increase encompasses 
continually rising insurance, technology, medical, pharmacy and legal 
costs across the entire health care industry. An additional 3 to 5 
percent of the increase is attributed to the new mandates and 
administrative costs caused by PPACA that are effective in 2011.
    Last month, everything changed. This year we will insure 84 lives 
at a cost of approximately $502,000. The 18 percent increase would have 
driven the cost of my premiums to nearly $593,000. Due to the economic 
climate of the past two years, unfortunately, I could not afford to 
absorb this increase to our bottom line. Therefore, my choices were to 
either pass this cost on to my teachers and staff or make changes to 
the plan. Specifically, we chose to add an employee deductible of $500 
to keep our insurance premium costs nearly flat and so our employees' 
premium will also not rise. For the first time in our nearly 20 year 
history, our employees will pay a deductible for their health care. We 
have sacrificed one of our goals in providing employee benefits by 
unfortunately increasing a financial barrier to accessing health care 
services.
    This change resulted in forfeiting our ability to ``grandfather'' 
our health insurance plan. Moving forward, our plan must comply with 
all of the mandates required by PPACA each year as the law is 
implemented. While the Administration provided some flexibility to its 
initial grandfather rules--by allowing small businesses to shop for 
comparable coverage from different carriers--there remain many hurdles 
to successfully keeping the health plan our employees like. In the 
future I will have even harder choices to make. Our insurance plan must 
now comply with new requirements. For example, my policy must have no 
dollar limits on durable medical equipment. The majority of my teachers 
and staff are young females. Traditionally, the demographics of my 
workforce allowed me to avoid the higher cost of a plan that had no 
limits on durable medical equipment. The new law prevents me from 
purchasing a policy that meets the specific health care needs of my 
workforce. This will continue to drive up our costs each year. My young 
faculty and staff, thankfully, are healthy adults that do not need 
wheelchairs, oxygen tents or catheters. I am being compelled to 
purchase an expensive policy that provides coverage for medical care my 
workforce does not require.
    In January 2014, I will have a very difficult decision to make. Do 
I continue to provide insurance coverage to my teachers and staff or 
drop coverage altogether and pay the penalty? The penalty would cost me 
anywhere from $168,000 to $252,000 per year and is dependent upon how 
many of my staff enter the exchange to purchase insurance and qualify 
for subsidies. Choosing to forego providing health insurance coverage 
to my employees may ``save'' Rainbow Station's bottom line as much as 
$300,000. Will I be able to retain and attract the highest quality 
early-childhood educators, nurses and staff without providing a 
competitive employee benefits package?
    I am also concerned that if we are compelled to eliminate our 
health insurance coverage, what will my employees face in the 
individual marketplace? There is great uncertainty regarding how the 
exchanges will function and the quality of insurance products our 
employees will find available to purchase. Furthermore, the situation 
is even more unsettling when you think about how many other franchisees 
and small businesses across the country reach the conclusion that their 
business will no longer be economically viable due to the rising cost 
of insurance coverage. Unfortunately, more businesses will drop 
coverage and try to ``save'' money by instead paying the tax penalty.
    Supporters of the law point to the small business tax credit as a 
benefit for some employers, but the tax credit is entirely inadequate. 
For a growing company like ours, which provides an important service to 
the community, the thresholds are entirely too small to be of any 
assistance. In order to qualify for the tax credit, we would have to 
cut hours for our full-time staff to ensure we were under the 25 full-
time equivalent employee threshold. As I noted earlier in my statement, 
Rainbow Station must adhere to state mandated staff to children ratios. 
There is not much we could do to meet the requirements of the tax 
credit. Encouraging companies to cut back hours or eliminate staff is 
the wrong message our government should be sending small businesses--
particularly during a recession. It is clear that the tax credit is too 
narrowly restricted to be of any benefit to small businesses.
    As I review the new health care law I see a structure designed to 
discourage economic growth among small and midsized companies. At a 
time when our government should be doing everything in its power to 
encourage job growth and recovery, I see a federal requirement that 
creates disincentives for higher wages, new hiring and robust employee 
benefits. This law will direct my business decisions in such a way that 
forces me to devote more of our capital investment resources toward 
operating costs rather than growth.
    I want to thank the members of the Committee on Education and the 
Workforce for the opportunity to participate in today's important 
hearing on the effects of the health care law on employers. It is my 
hope that we can work together to fix the unworkable aspects of the new 
law that will harm our economy. Moving forward I would encourage 
Congress to pass legislation that balances the need to improve access 
to coverage together with controlling the rising costs of care. We must 
enact new legislation that incentivizes consumer-oriented solutions to 
health insurance and finally enable my franchise system to band 
together across state lines to purchase affordable coverage for our 
employees.
    Thank you and I look forward to answering any questions you may 
have.
                                 ______
                                 
    Chairman Kline. Thank you very much.
    Dr. Van de Water?

  STATEMENT OF PAUL N. VAN DE WATER, SENIOR FELLOW, CENTER ON 
                  BUDGET AND POLICY PRIORITIES

    Mr. Van de Water. Mr. Chairman, Mr. Miller and members of 
the committee, I appreciate the invitation to appear before you 
today. My testimony draws on a letter that I and over 250 other 
economists recently submitted to the committee.
    The Affordable Care Act will significantly strengthen our 
nation's economy over the long haul. The law takes essential 
steps to slow the growth of health care costs, which are 
consuming an ever-increasing share of our economic output. And 
it contributes to the stagnation in workers' real wages.
    The Congressional Budget Office estimates that health 
reform will slightly reduce premiums for employer-sponsored 
health insurance in the near-term. For employers with more than 
50 workers who account for 70 percent of the total insurance 
market, CBO estimates that the law will reduce average premiums 
by up to 3 percent in 2016. Small business will pay less for a 
given package of benefits. Qualified small businesses are also 
eligible for federal tax credits for their health insurance 
contributions.
    Even if health reform were to impose some costs on 
employers, economic principles strongly suggest that the impact 
on business hiring decisions would be small. Because the major 
impact of health reform does not begin until 2014, businesses 
will have time to adjust, increasing the likelihood that any 
impact will be primarily on workers' after-tax compensation, 
not on hiring. And in the following years, as health reform 
begins to slow the growth of health care costs, workers will 
see larger increases in their take-home pay.
    All in all, the short-term economic effects of health 
reform will be quite small. One major financial research firm 
termed the law's economic impact minor and said, ``any 
disincentives from higher taxes and fees will hardly make a 
difference.''
    CBO foresees a small net reduction in labor supply because 
some people who now work mainly because they need to obtain 
health insurance will choose to retire earlier or work somewhat 
less, not because employers will eliminate jobs. Over the long 
haul, health reform will have many positive effects on the 
economy.
    First, CBO estimates that health reform will reduce the 
budget deficit, modestly in the first decade, but substantially 
thereafter. The lower budget deficits stemming from health 
reform will hold down interest rates, free up more capital for 
private investments and boost long-term economic growth.
    Second, health reform will increase labor markets' 
flexibility. The new law will reduce job loss when workers stay 
in the job just because they are afraid of losing their health 
insurance. As a result, Americans will be more able to switch 
jobs and open new businesses. The result will be a more 
productive economy.
    Third, expanding health coverage to 32 million uninsured 
people will improve health outcomes by helping people obtain 
preventive and other health services and improving continuity 
of care. This, too, will enhance economic productivity.
    Finally and most important, the Affordable Care Act 
contains almost every cost-containment provision that policy 
analysts have considered effective in reducing the growth of 
medical spending. These include payment innovations that will 
reward providers based on the value of their care and not on 
the volume of their procedures, an excise tax on high-cost 
insurance plans, independent payment advisory board, a center 
for Medicare and Medicaid innovation, measures to inform 
patients and payers about the quality of health care providers, 
more funding for comparative effectiveness research and steps 
to promote wellness and prevention.
    Slowing the growth of health care costs is one of our 
nation's most pressing economic challenges. And success will 
benefit employers, workers and taxpayers. The effort will 
require an ongoing process of testing, experimentation and 
rapid implementation of what is found to work. Health reform 
begins that vital process.
    Thank you very much.
    [The statement of Mr. Van de Water follows:]

       Prepared Statement of Paul N. Van de Water, Senior Fellow,
                 Center on Budget and Policy Priorities

    Mr. Chairman, Mr. Miller, and members of the committee, I 
appreciate the invitation to appear before you today to discuss the 
impact of health reform on the economy, employers, and the workforce. 
My testimony draws on a letter that I and over 250 other economists 
have submitted to the committee (a copy of which is attached).
    The Affordable Care Act (ACA) will significantly strengthen our 
nation's economy over the long haul, although initially its effects 
will be modest. The law takes essential steps to slow the growth of 
health care costs, which are consuming an ever-increasing share of our 
economic output and have contributed significantly to the stagnation in 
workers' real wages in recent years.
    The Congressional Budget Office (CBO) estimates that health reform 
will slightly reduce premiums for employer-sponsored health insurance 
in the near term. For employers with more than 50 workers (who account 
for 70 percent of the total insurance market), CBO estimates that the 
law will reduce average premiums by up to 3 percent in 2016. For small 
employers, the estimated change in premiums ranges from an increase of 
1 percent to a reduction of 2 percent.\1\ Many small businesses will 
pay less for a given package of benefits and are likely to provide more 
comprehensive health coverage than they do today. Qualified small 
businesses are also eligible for federal tax credits for health 
insurance contributions. The early retiree reinsurance program will 
provide interim financial relief to employers for the cost of covering 
retirees between ages 55 and 65.
    Even if health reform were to impose some costs on employers, 
economic principles strongly suggest that the impact on business hiring 
decisions would be small. Any such effect would instead ultimately be 
passed on to workers in the form of slower growth in their after-tax 
compensation. CBO draws that conclusion with respect to both the 
Affordable Care Act's excise tax on high-cost health insurance plans 
beginning in 2018 and its penalty on firms with 50 or more employees 
that do not offer affordable health insurance.\2\ And because the major 
impact of health reform does not begin until 2014, businesses will have 
time to adjust, increasing the likelihood that any impact will 
primarily be on employees' after-tax compensation, not on hiring. In 
the following years, as health reform begins to slow the growth of 
health care costs, workers will see larger increases in their take-home 
pay.
    All in all, the short-term economic effects of health reform will 
be quite small. Moody's Analytics terms the law's economic impact 
``minor'' and says that any disincentives from higher taxes and fees 
``will hardly make a difference.'' \3\ CBO foresees a small net 
reduction in labor supply, because some people who now work mainly to 
obtain health insurance will choose to retire earlier or work somewhat 
less, not because employers will eliminate jobs.\4\ That effect could 
be partly offset, however, by increased incentives to work for people 
who now face losing Medicaid coverage if they work more.
    Over the longer run, the health reform law will have many positive 
impacts on the economy. First, CBO estimates that health reform will 
reduce the budget deficit--modestly in its first ten years, but 
substantially in the following decade.\5\ In a letter to Speaker 
Boehner a few weeks ago, CBO stated that repealing the ACA would add 
$230 billion to the federal deficit between now and 2021.\6\ According 
to Moody's Analytics, the lower budget deficits stemming from health 
reform will hold down interest rates, free up more capital for private 
investment, and potentially boost long-term economic growth.
    Second, health reform will increase labor market flexibility. 
Moody's Analytics also points out that ``there is the potential for the 
new law to reduce `job lock,' when workers stay in a particular job 
because they are afraid of losing their insurance. * * * If the bill 
works as planned, Americans will be more able to switch jobs and open 
new businesses.'' \7\ As CBO says, ``making it easier for some workers 
to obtain health insurance outside the workplace * * * enabl[es] 
workers to take jobs that better match their skills.'' \8\ The result 
will be a more productive economy.
    Third, expanding health coverage to 32 million uninsured people 
will improve health outcomes by helping people obtain preventive and 
other health services and improving continuity of care.\9\ CBO suggests 
that this could also enhance the nation's economic productivity.
    Finally, and most important, the Affordable Care Act contains 
almost every cost-containment provision that policy analysts have 
considered effective in reducing the growth of medical spending. These 
include:
     Payment innovations, such as bundled payments and 
accountable care organizations, to reward providers based on the value 
of their care, not just the volume of their procedures;
     An excise tax on high-cost insurance plans to make 
consumers more cost-sensitive and discourage excess utilization;
     An Independent Payment Advisory Board that will develop 
and submit proposals to reduce cost growth and improve quality in both 
Medicare and the health care system as a whole;
     A Center for Medicare and Medicaid Innovation that will 
test, evaluate, and foster rapid expansion of new ways to increase the 
value of care;
     Measures to inform patients and payers about the quality 
of health care providers;
     Increased funding for comparative effectiveness research; 
and
     Promoting wellness and prevention.
    Slowing the growth of health care costs is one of our nation's most 
pressing economic challenges, and success will benefit employers, 
workers, and taxpayers. Health care experts agree that the effort will 
require an ongoing process of testing, experimentation, and rapid 
implementation of what is found to work. The health reform law begins 
that process.

                                ENDNOTES

    \1\ Douglas W. Elmendorf, Director, Congressional Budget Office, 
Letter to the Honorable Evan Bayh, November 30, 2009.
    \2\ Congressional Budget Office, ``Box 2-1: Effects of Recent 
Health Care Legislation on Labor Markets,'' The Budget and Economic 
Outlook: An Update, August 2010, pp.48-49.
    \3\ Augustine Faucher, ``Healthcare Reform Doesn't Alter the 
Outlook,'' Moodys' Analytics, March 26, 2010.
    \4\ CBO, Box 2-1.
    \5\ James R. Horney and Paul N. Van de Water, Health Reform Will 
Reduce the Deficit, Center on Budget and Policy Priorities, March 25, 
2010, http://www.cbpp.org/cms/index.cfm?fa=view&id=3134.
    \6\ Douglas W. Elmendorf, Director, Congressional Budget Office, 
Letter to the Honorable John Boehner, January 6, 2011.
    \7\ Faucher.
    \8\ CBO, Box 2-1.
    \9\ Jill Bernstein, Deborah Chollet, and Stephanie Peterson, How 
Does Insurance Coverage Improve Health Outcomes?, Mathematica Policy 
Research, April 2010, http://www.mathematica-mpr.com/publications/PDFs/
Health/Reformhealthcare--IB1.pdf.
                                 ______
                                 
    Chairman Kline. Thank you.
    Mr. Trautwein?

   STATEMENT OF NEIL TRAUTWEIN, VICE PRESIDENT AND EMPLOYEE 
      BENEFITS POLICY COUNSEL, NATIONAL RETAIL FEDERATION

    Mr. Trautwein. Thank you, Mr. Chairman, Ranking Member 
Miller and honored members of the committee. My name is Neil 
Trautwein. And I am a vice president with the National Retail 
Federation.
    As I have noted before, the retail community is one of the 
toughest populations to cover with health insurance. We may, in 
fact, be the canary in the coalmine when it comes to health 
insurance coverage.
    We have high turnover rates, admitting first-time job 
holders. We have a high percentage of part-time employees. 
Stores and restaurants often serially share employees. Many 
otherwise coverage-eligible employees opt out of the coverage 
we offer.
    One common element in the retail industry are our profit 
margins, which are wafer thin. We have to manage everything in 
our stores very, very tightly, particularly the cost of labor 
because we are a labor-intensive industry. And benefits is 
included in that cost of labor.
    In our view, the last Congress' health care reform debate 
was needlessly divisive. There was a broad consensus for reform 
that addressed cost savings in the health care system. We 
proposed--the National Retail Federation proposed a reform 
platform in 2007 and 2008. We worked very diligently in multi-
stakeholder groups to try to reach consensus on reform. We 
supported reform until it was clear we could no longer support 
the reform bills in Congress.
    We continue to strongly support what we wish you would have 
started with in the first place, which is job-friendly health 
care reform that starts with reducing the costs of medical 
care, which in turn, drives the health care increases in our 
economy. We supported the repeal and replace efforts in the 
Congress, not because we have opposed reform, but because we 
absolutely need it.
    The Patient Protection and Affordable Care Act was not what 
we needed in terms of reform. Passage of health care reform is 
already complicating life for many retailers today. There is a 
lot of confusion over the law. And we haven't even gotten to 
2014, which is the year that really scares my members. 
Nevertheless, it remains the law of the land.
    We have worked hard to brief our members on both the 
opportunities under the law and their coming obligations. We 
have worked with the Obama administration to help smooth the 
impact of the law wherever possible. We appreciate their 
efforts to do so.
    We are working hard to find and recommend ways to help 
improve the law and make it work better. First and foremost, we 
urge you to get rid of the employer mandate penalties for 
failure to offer coverage, to failure to offer affordable 
coverage based on family income and the so-called free choice 
vouchers in the law.
    Ironically, it may prove less expensive for many employers 
to stop offering coverage than to continue to offer that 
coverage under the law. For example, an employer with 52 full-
time employees would pay, according to Kaiser Family Foundation 
estimates, between $520,000 and $780,000 to cover their 
workforce. It could also additional penalties based on family 
income for unaffordable coverage.
    The same employer would pay a penalty amount for not 
covering those 52 employers of $44,000 under PPACA. While the 
difference between $780,000, $520,000 and $44,000 is pretty 
substantial, it may not be enough of itself for employers to 
make that decision. There are other factors that come to play 
in terms of offering benefits or not. But nevertheless, this 
factor is significant by any business measure.
    NRF has created a health care mandate cost calculator on 
our Web site. It is freely available. We take no data from 
that. And no password is required. It allows you to model 
different size businesses and how the mandate penalties 
potentially will apply.
    These mandate penalty provisions are already affecting 
hiring decisions in today's marketplace. Our members have just 
come out of recession. If that, people are not fully back in 
the stores. So, you know, the question of whether to hire or 
not is particularly difficult for our members right at the 
moment.
    My written testimony contains four case study examples of 
the effect of PPACA on their workforce. And I encourage their 
review. I also include several recommendations to add 
additional flexibility to the law to help employers to continue 
to make that transition over time.
    One additional area I would encourage you to watch. We urge 
Congress to resist any temptation for the states to look for 
waivers from PPACA to displace the law in their local areas. 
There is no quicker way to break the back of employer-based 
health care, multi-state employers, than to harm ERISA.
    Again, I appreciate the chance to appear before you today. 
And we look forward to working with you to help bring more 
meaningful health care reform in the future.
    Thank you, Mr. Chairman.
    [The statement of Mr. Trautwein follows:]

   Prepared Statement of Neil Trautwein, Vice President and Employee 
          Benefits Policy Counsel, National Retail Federation

    Mr. Chairman, Ranking Member Miller and honored members of the 
Committee, I thank you for the opportunity to appear before you today 
and to share our views regarding the new health care reform law--the 
Patient Protection and Affordable Care Act (PPACA). My name is Neil 
Trautwein and I am Vice President and Employee Benefits Policy Counsel 
of the National Retail Federation (NRF).
    As the world's largest retail trade association, the National 
Retail Federation's global membership includes retailers of all sizes, 
formats and channels of distribution as well as chain restaurants and 
industry partners from the U.S. and more than 45 countries abroad. In 
the U.S., NRF represents the breadth and diversity of an industry with 
more than 1.6 million American companies that employ nearly 25 million 
workers and generated 2010 sales of $2.4 trillion.
    The retail industry has one of the hardest workforces of any to 
cover with health insurance. We have a fairly young workforce (but also 
have a growing senior cohort) coupled with a high turnover rate. We 
employ half of all teenagers in the workforce and a third of all 
workers under 24 years old. More than a third of our workforce is part-
time. Two-thirds of our part-time employees are women. Frequently, 
qualified retail workers opt-out of the coverage we offer because they 
already have alternative coverage through another family member or 
another job. Many are second wage earners, mainstays of family 
economies. Smaller retailers often experience problems making health 
insurance plan participation requirements because too many employees 
opt out.
    As a labor-intensive industry, retailers are strong advocates of 
high quality and affordable health coverage in order to help keep our 
employees healthy and productive. In fact, a retailer (Montgomery Ward) 
was one of the first businesses to offer medical coverage in the U.S. 
As an industry that frequently endures wafer-thin profit margins or 
worse, we are also well acquainted with the need to manage the 
collective cost of labor (including benefits) in as cost-effective a 
manner as is possible. Maintaining balance between these two 
imperatives is not always easy. Even in the best of times, it can 
border on the impossible--and these are still far from being the best 
of times.
    The previous Congress' health care reform debate was highly and, in 
our view, unnecessarily divisive. The retail industry proposed in 2008 
and strongly supported comprehensive health care reform (see NRF's 
Vision for Health Care Reform, www.nrf.com/healthcare) that would 
reduce health care costs and extend coverage to the uninsured. We 
proposed building from the voluntary base of coverage by lowering the 
cost of medical care and coverage in order to extend coverage to those 
without. I testified before this Committee's Subcommittee on Health, 
Employment, Labor and Pensions in March 2009 to share our reform 
platform.
    Instead, Congress enacted--over our strong objections--a reform law 
that fails to quickly reduce health care and coverage costs. It will 
also impose unwarranted penalty mandates on employers in 2014 that are 
already deterring job growth today. NRF strongly opposed both the House 
and Senate-passed reform bills and the modified Senate bill that became 
law.
    We continue to oppose this law today. NRF supported the successful 
passage of H.R. 2 in the House on January 19, 2011. NRF also supported 
the unsuccessful repeal vote in the Senate on February 2, 2011. We took 
these actions not because we oppose reform, but because we absolutely 
must have it. Unfortunately, rather than moving us forward, passage of 
PPACA has made providing coverage more difficult for today's retailer.
    Nevertheless, PPACA remains the law of the land. NRF has worked 
hard to alert our members to the staged implementation of PPACA and 
increasing employer obligations under the law. We have also worked to 
identify and suggest improvements. We have worked closely and 
cooperatively with the Obama Administration wherever possible to help 
smooth implementation of the law. We continue to work with the 
Administration to flesh out missing or contradictory provisions of 
PPACA, especially as regards the penalty mandate provisions effective 
in 2014.
    We strongly support what we needed to start with in the first 
place: more job-friendly health care reform that will concentrate first 
on reducing the cost of medical care. Toward that end, we also support 
efforts like H.R. 4, which that would repeal the expanded Form 1099 
reporting requirements under PPACA.
    Requiring reporting for all non-credit card transactions over $600 
in a year will create a blizzard of reports that will needlessly bog 
down commerce while also swamping the IRS. This provision has no 
relevance to our health care system and should be promptly repealed. 
This necessary change to PPACA rightly enjoys broad bipartisan 
support--and received an overwhelming Senate vote of 81-17 February 2, 
2011 on a dispositive procedural motion. We look forward to its prompt 
approval in the House as well.

Employer Penalty Mandate
    The PPACA penalty mandates effective in 2014 differ from more 
traditional employer mandates by not directly mandating the provision 
of coverage. Instead, it penalizes the failure to do so for full time 
employees, defined as working 30 or more hours per week. Employees with 
fewer than 30 hours per week are not counted for penalty purposes, 
though their hours are aggregated to determine whether an employer 
meets the 50 full-time equivalent employee threshold for coverage. 
Employers with fewer than 50 full-time equivalent employees are exempt.
    PPACA also penalizes an employer who provides coverage to full-time 
employees if the cost to an employee exceeds 9.5 percent of his or her 
family income. The penalty for failure to provide coverage to full-time 
workers is $2,000 per uncovered full-time employee minus the first 30 
full-time employees. The penalty for providing ``unaffordable 
coverage'' to a full-time employee is $3,000 for each full-time 
employee with unaffordable coverage, up to a cap of $2,000 times every 
full-time employee, minus the first 30.
    Ironically, it may prove less expensive for many employers 
(including some public employers) to pay the penalty than to pay for 
coverage and any possible penalties for ``unaffordable care.'' For 
example, an employer with 52 full-time employees would pay an average 
of $520,000 to $780,000 for coverage (based on Kaiser Family Foundation 
estimates). The employer could also owe penalty amounts as noted above 
for the failure to provide affordable coverage even though he or she is 
providing the same coverage to all employees. That same employer would 
owe a penalty for failure to provide any coverage to full time 
employees of $44,000 (52 employees minus the first 30 times $2,000).
    While the substantial difference between coverage cost and penalty 
amounts is not dispositive in itself--other considerations will factor 
into each employer's determination--it certainly is significant by any 
measure. PPACA may thus ultimately succeed in dismantling employer-
based health coverage. We strongly urge repeal of the employer penalty 
mandate provisions.
    Many retailers have been astounded by the prospect of being 
penalized for providing coverage that exceeds a factor largely beyond 
their knowledge or control: an employee's family income. They have also 
been shocked by the ``free-choice'' vouchers in which certain low-
income employees can opt out of the employer plan taking their 
employer's contribution with them in the form of a voucher. Employer 
costs could greatly increase as younger, healthier entry level 
employees opt out. Finally, retailers of all sizes oppose shifting our 
health care system from voluntary to mandatory through penalty 
mandates.
    NRF has created a special web-based Health Mandate Cost Calculator 
to help illustrate the penalty mandates to various sized employers. The 
NRF Calculator is intended to be an open modeling tool and no data is 
collected from it. I attach several screen prints of the calculator in 
action at the end of this statement. I also encourage the members of 
this Committee, their staff and the general public to see it in action 
for themselves at www.nrf.com/healthcare. No password is required.

Effect on the Retail Community
    The penalty mandate provisions are already affecting hiring 
decisions in advance of their effective date in 2014. We have heard 
reports from across the retail community (including our restaurant 
members) that the penalty mandates are affecting expansion, franchising 
and hiring decisions today. We respectfully urge Congress to reassess 
and repeal the penalty mandate to help encourage needed growth in jobs 
and our economy.
    We collected a number of examples from our chain restaurant 
division (National Council of Chain Restaurants) in late 2010. Please 
note the four examples below:

Example 1
    One of the nation's largest quick service restaurant (QSR) chains 
has estimated the incremental cost to comply with the new health care 
law to be $10,000 to $15,000 annually per restaurant. Across this 
chain's entire franchised system, that would equate to $50 to $75 
million in incremental costs, annually. These costs would wipe out up 
to one-third of this system's profits per year, potentially causing 
hundreds of restaurants in the system to go out of business, 
eliminating up to 12,500 jobs.
    Most of the restaurants in this chain's system are locally-owned 
and operated by small business franchisees. These franchisees typically 
own just a handful of restaurants, and these new costs could cause them 
to lose some or all of their stores. The reasons are two-fold.
    First, there are limited options for restaurants in this chain to 
try and offset these dramatic new costs. In this economy and 
competitive environment, raising prices has not been an option 
(although higher prices may ultimately result economy-wide given the 
game-changing nature of this law). Second, laying off employees to 
reduce costs is also not an option because these stores already keep a 
minimum number of hourly team members on the clock as required to best 
serve customers. Some of the restaurant owners in this system may 
consider dramatically lowering each full-time team member's weekly 
hours to less than 30 hours in order to avoid full-time classification.
    The only option left for many restaurants in this system will be to 
close their doors. In fact, this chain projects that 10 percent of its 
small business franchisee owners will not be able to absorb the new 
costs of the health care law and will shut down restaurants. Each 
restaurant employs between 12 and 25 team members. In a system with 
5,000 restaurants, the loss of 500 restaurants translates into a loss 
of between 6,000 and 12,500 jobs.

Example 2
    A second chain--a large franchised system with multiple casual/
family dining restaurant concepts--projects that the average cost per 
restaurant in their system would be $237,000. That equates to a system-
wide cost of providing health insurance benefits to full time employees 
of almost $806 million per year. If all of the chain's small business 
franchisee owners elected to pay the employer penalty instead of 
providing insurance, the cost would be reduced to just over $84,000 per 
restaurant, or a savings of $286 million system-wide.
    As each restaurant in this system is owned and operated by an 
individual small business person, it is impossible to predict how each 
would react to such dramatic cost increases. To cope with these cost 
increases, these owners could reduce the number of employees per 
restaurant, reduce the number of hours worked, or reduce the number of 
full time employees and rely on more part time labor.
    If every franchisee reduces the number of full time employees to 
the bare minimum required, over 100,000 employees who are currently 
full time would be shifted to part time. If the franchisees elected to 
provide health insurance benefits to the remaining full time employees, 
the cost per restaurant would be $69,000 (versus $237,000 per 
restaurant with the existing number of full time workers). The cost 
savings under this scenario would be $571 million system-wide. However, 
if the franchisees elected instead to just pay the employer penalty for 
the remaining full time employees under the skeleton crew scenario, the 
cost per restaurant would be $24,470, or just over $83 million system-
wide.

Example 3
    Another casual dining chain, also franchised, currently offers all 
its employees, regardless of hours worked, limited benefits health 
insurance plans that cost employees as little as $1 a day. The chain 
spends almost $9 million a year on this plan. Under the new health care 
law, this company anticipates it will reduce the number of jobs it 
offers by 15 to 23 percent, or 5,000 to 8,000 jobs.
    The choices, as this chain sees it, are three-fold. It could choose 
not to provide insurance to full time employees and simply pay the 
penalty, which would cost $56 million per year. This figure exceeds 
this company's profit last year by almost $11 million. Or, it could 
keep its current number of full time and part time employees and 
provide insurance, which would cost the system over $27 million 
annually. This cost would consume 42 percent of last year's profits.
    Finally, the company could reduce the number of full time employees 
and eliminate the benefits that are currently offered to part time 
employees, which is an unattractive option because it could result in 
higher turnover and higher training costs. This company believes all 
three options are unattractive, and that the most rational choice for 
them is to maintain its reliance on a workforce that is primarily full 
time, but to reduce the number of jobs overall by between 5,000 and 
8,000.

Example 4
    A mid-sized quick service restaurant chain that employs nearly 
60,000 workers does not believe that the health care law is 
economically feasible. This chain owns and operates approximately 1,100 
restaurants, and their independent franchise owners operate an 
additional 1,100. They currently offer health insurance to all 
employees, including restaurant crew members who are offered a range of 
coverage options including a limited benefit ``mini-med'' plan.
    This chain has carefully reviewed the requirements placed upon 
employers in the new healthcare law, and has worked with their 
insurance brokers and actuaries to determine what the potential cost of 
compliance might be. They are disappointed that more cost control 
measures were not included in the law, and that no consideration was 
given to the possibility that some employers might continue to offer 
limited benefit plans to hourly workers.
    They believe the cost associated with offering the full benefit 
health insurance plans that the law requires is excessive, and they do 
not believe that they will be able to offer such coverage to all 
workers. They are analyzing many options as they prepare to comply with 
the law, including the possibility that many of their restaurant 
employees that would currently qualify as full-time workers might see a 
reduction in their hours of work such that they would be considered 
part-time workers.

Priority Workforce Changes to PPACA
    I have previously noted the harmful workforce effects of PPACA 
compliance. Central to these concerns is the lack of flexibility that 
will constrain retail's ability to manage our high turnover rate. I 
note that many states have expressed similar concerns over the lack of 
flexibility under PPACA, most recently expressed in a February 7, 2011 
letter to Secretary Sebelius from 21 Governors.
    Our preference would be for an outright repeal of PPACA to be 
replaced by legislation that places top priority on reducing the cost 
of medical care and coverage. Short of that, we advocate the following 
initial nonpartisan steps to help expand employer flexibility and to 
help lower the cost of providing coverage:
    1. Repeal employer mandate penalties, including the penalties for 
providing ``unaffordable'' coverage and the ``free-choice'' vouchers.
    2. Define a full-time employee as working 40 hours per week, 
determined on at least a 120-day basis.
    3. Expand waiting periods to at least 120 days.
    4. Repeal auto-enrollment or delay onset of auto-enrollment for at 
least 120 days, consistent with maximum waiting periods.

ERISA
    Given this Committee's jurisdiction, we would be greatly remiss in 
not mentioning our continued strong support for ERISA. ERISA allows 
employers to offer common coverage across state boundaries--an ability 
crucial to multi-state employers. We strongly oppose any effort to 
weaken ERISA's preemption of inconsistent state laws for health plans 
(also known as welfare plans under ERISA).
    We urge Congress to resist any entreaties by the states to waive 
ERISA preemption in favor of a competing state reform scheme. We cannot 
afford to dismantle the backbone ERISA provides to employer-based 
coverage. ERISA has worked well and continues to work well to help 
provide coverage to millions of working Americans. NRF continues to 
believe in addition that smaller employers could also benefit from 
ERISA preemption through small business health plans or association 
health plans.

Conclusion
    Again, NRF greatly appreciates the opportunity to appear before you 
today. In sum, we urge you to work to create a value-oriented health 
care system that promotes lower cost and higher quality care and 
coverage for employers of all sizes and individuals from all walks of 
life. That will require stepping away from PPACA--either through 
repeal, as the House has done, or through wholesale change to PPACA, 
especially as regards the penalty mandates. We look forward to working 
with you to help promote the enactment of positive health care reform.







                                 ______
                                 
    Chairman Kline. Thank you.
    I thank all the witnesses for their testimony.
    We will move to member questions now. I am going to put 
myself on the clock as well. I start off optimistically always. 
As then we will move through each side and ask questions.
    There has been an ongoing debate, and we heard it here 
today. And I suppose we will continue to hear it, about whether 
or not this health care law reduces medical costs and health 
care costs. It has been my understanding, my belief, having 
listened to many economists, many witnesses that it does not 
reduce costs. So let me start with Dr. Van de Water.
    You are one of those who claim that this law will reduce 
the growth of medical spending or help reduce costs. Yet, just 
recently in a presentation to the Institute of Medicine, 
actually last May, CBO Director Elmendorf concluded that, 
``Rising health costs will put tremendous pressure on the 
federal budget during the next few decades and beyond. In CBO's 
judgment, the health legislation enacted earlier this year does 
not substantially diminish that pressure.''
    Do you disagree with----
    Mr. Van de Water. [OFF MIKE].
    Chairman Kline. Yes.
    Mr. Van de Water. As I stated in my testimony, that 
controlling health care costs is not a simple, short-run 
proposition. And certainly, in the near-term, we are not going 
to see a major change in the cost trend. But as CBO Director 
Elmendorf has indicated, that the health reform act does 
contain several important provisions which hold great promise 
in the longer term for slowing health care cost growth.
    And Director Elmendorf, I think, has particularly cited the 
payment innovations that I mentioned, of the sort that would 
encourage--that would reward providers, not simply because they 
do more stuff, because they carry out more procedures, but 
because the procedures that are done provide more value for 
money. And secondly, also, but something which doesn't begin 
for several years and which I know is controversial, but most 
economists think is a good idea, namely, the excise tax on 
high-cost health plans, which will discourage the offering of 
plans which are overly generous and encourage excess use of 
health care services.
    You see the result of all of this in the national health 
expenditure projections, which the Center for Medicare and 
Medicaid Services actuary puts out. In the near-term, there 
will be some very modest increase in total national health 
spending as we cover 32 million more Americans. But later in 
the coming decade, the rate of cost growth, according to the 
Medicare actuary, is projected to slow as the various cost-
containment provisions in the Affordable Care Act begin to kick 
on.
    Chairman Kline. Okay. Thank you.
    Dr. Howard, would you care to comment? We will have 
battling economists here, I am pretty sure.
    Mr. Howard. I think that the substantial savings that is 
anticipated by the act in its second decade comes from across-
the-board cuts to provider rates under Medicare that the 
Medicare actuary in a dissent to the 2010 report said were 
going to be unsustainable because most of the easy productivity 
gains have already been taken out of the system. And the 
actuary estimates that most of those cuts would be repealed. So 
we are going to lose that money.
    I think what we are talking about here is the downside 
financial risk of taking what is essentially a trillion dollar 
gamble that, while we don't think that the law is going to 
reduce spending in the short-term, as a matter of fact, it is 
going to go up by about $300 billion during the first decade, 
but in the second decade, we are hoping that some of these 
other things will kick in. I think that is quite a gamble to 
take, given the enormous deficit problems the U.S. is already 
facing.
    Chairman Kline. I am going to continue the--well, I guess I 
am not going to continue. If I am going to be consistent here 
in trying to maintain the 5-minute rule--I was going to get 
into another ongoing debate. And that is the discussion about 
whether or not this actually reduces the deficit.
    And I know that that probably somebody else will get to 
that. There are a number of factors, one of which that you 
talked about. And that is Medicare reductions in payments to 
physicians and so forth, which may very well not occur.
    But in order to set the example for my colleague, Mr. 
Miller, I will yield--you do? I will yield back.
    Mr. Miller. Thank you, Mr. Chairman, very much for the 
hearing. To continue the discussion you just started, I find it 
interesting that this discussion started out suggesting that a 
lot of people were going to not--in the future, not going to 
offer insurance. And we see the New England Medical Journal 
telling us that they expect coverage will increase from 84 
percent to 94 percent as a result of these reforms. And we see 
the Rand Corporation estimating that the exchanges will allow 
small employers to increasingly offer health care coverage 
because they will have the same purchasing power as large 
employers.
    Currently, there is about an--a 13 percent difference in 
the cost of those because small employers don't have the 
ability to organize in that fashion. Rand expects to offer 
rates to increase for employers with 50 or fewer employees from 
57 to 80 percent. So that small employers under 50--it is 
interesting that that projection is now--we see Forbes and the 
L.A. Times commenting 2 weeks ago that the insurers are stating 
that they are covering more employees since the enactment of 
this act.
    The UnitedHealth Group, which, I think, is one of the 
largest, added 75,000 new customers working in businesses of 50 
or fewer employees. Coventry Health added 115,000 new workers 
in 2010, an 8 percent jump. Blue Cross/Blue Shield in Kansas 
City reported that--somewhere. I lost my paper here--an 
increase of 58 percent in the number of small businesses 
purchasing coverage since April of 2010.
    So I appreciate all of the speculation. But the fact of the 
matter is on the ground, small businesses are starting to 
extend coverage to their employees at rates we haven't seen in 
the past.
    The question about costs--we have seen a doubling of costs. 
We have seen more than a doubling of premiums to businesses and 
to families and to others. And we have had businesses coming to 
the Capitol for 10 or 15 years telling us that this is crushing 
them.
    And yet, we see the Business Roundtable telling us if we do 
the things in the act that are, in fact, part of this act, that 
they would expect by 2019--so if you look at this decade, 
compared to the previous decade, where it all doubled, that 
they expect that large employers will save some $3,000 per 
employee on health care costs by 2019. That is not me. That is 
the Business Roundtable.
    Why did they say that? Because what is, in fact, in this 
bill is a challenge to the Congress of the United States and to 
everybody on this committee and every policymaker in the 
Congress. And that is because in this legislation are the 
reforms that have been proposed as a matter of cost containment 
for many years, never accepted by the Congress prior to this, 
the reforms on bundling, on readmission policy, on accountable 
care organizations, on strengthening primary care and 
prevention and wellness.
    And we see major organizations on the employer side and on 
the benefits side of offering the annual checkup, the 
preventative care for people to try to avoid those health care 
costs. We are already seeing small improvements in some of the 
organizations that started with the pilots on readmission 
policy.
    So the fact on the ground is contrary to the political 
speculation under the dome of the Capitol. Small employers are 
voting with their dollars. Employees are voting with the desire 
to have care. And I think one of the most important one is I 
opened with the testimony of Dr. Odette Cohen. And the fact is 
that they expect much of this because of the exchanges that go 
into effect in 2014, where small employers will have the 
ability to have the same leverage in choosing policies that 
large employers have today.
    So again, the prospects of the actual legislation, not the 
speculation, the prospects of the actual language, not the 
speculation, suggest that already institutions of delivery, 
institutions of insurance, institutions of employers are 
already adapting and, in fact, expanding health care coverage 
as the economy recovers. And I appreciate all of the discussion 
about all of the uncertainties that this has created in the 
community. And yet, today we see that the survey of small 
businesses is more confident than any time in recent history, 
even with this passed of health insurance on the horizon.
    So I hope that helps to stimulate the debate for the rest 
of the morning. Thank you. And I yield back the balance of my 
time.
    Chairman Kline. I am so impressed. It is just excellent. I 
thank the gentleman.
    Mr. Thompson, you are recognized for 5 minutes.
    Mr. Thompson. Thank you, Mr. Chairman.
    Thanks to the panel for being here and lending their 
expertise. You know, according to analysis of--backed up by 
former CBO Director Doug Holtz-Eakin, the health care law, ``My 
strong sense from employers with the agreement of their 
employees to drop employer-sponsored health insurance for as 
many as 35 million Americans.''
    And this is far from being a partisan suggestion. Outgoing 
Tennessee governor from the state of my colleague sitting next 
to me, Governor Phil Bredesen, a Democrat, expands on the same 
perverse incentive in the Wall Street Journal editorial 
entitled, ``Obama-Care's Incentive to Drop Insurance,'' 
published in October of 2010.
    You know, during the debate over the health care reform 
last year, there were a lot of promises made. One, that health 
insurance costs would decrease. But according to CBO analysis, 
individual health insurance payments will rise by an average of 
$2,100 per family.
    And this increase comes despite President Obama's frequent 
promises that his health care plan would lower premiums by 
$2,500 per year for an average family. And, two, another 
promise of many, if you like your health care plan, you can 
keep your health care plan, despite indications that insurance 
companies are now dropping everything from children's insurance 
to mini med plans.
    Dr. Howard, when the rubber meets the road and the bottom 
line that we are looking at is obviously controlling costs and 
preserving patient choice, what are some suggestions that you 
have to--that you can make to achieve those goals?
    Mr. Howard. I would very seriously consider starting over 
again and devolving more power to states to experiment with 
health care reforms each in their own way. Massachusetts will 
go its way. And that is an experiment that is ongoing. In 
Massachusetts, we have seen costs rise after the health care 
reforms there, particularly for small businesses. There was a 
study done by Cogan, Hubbard and Kessler that found that for 
small businesses, insurance premiums rose by 14 percent over 
and above what they had been--the rate had been prior to health 
care reform in that state.
    But I think having different states take different 
approaches and see what works is a better way to go than trying 
to commit the entire nation to one one-size-fits-all program at 
the present time. I would also think seriously about 
frontloading our efforts to control costs and not expanding 
coverage to large populations until we have established that we 
have, in fact, controlled costs and can use those savings to 
expand coverage to people who need it the most.
    So I think a cost-first approach that trusted, but verified 
our attempts to control costs and could pass on those savings 
to small businesses, to employers and to employees through 
higher wages would be a better approach than the approach we 
are taking right now, which is basically we are going to spend 
about a trillion dollars over the next decade with the hope in 
the second decade we will recoup substantial savings.
    Mr. Thompson. Thank you.
    Ms. Johnson, thoughts?
    Ms. Johnson. Pardon?
    Mr. Thompson. Any thoughts in terms of suggestions to--
looking at controlling costs and preserving patient choice?
    Ms. Johnson. Obviously, my experience is that the costs 
aren't being contained. I think that, again, perhaps to start 
over and to try a new bill that really looks at controlling the 
actual costs of health care, which, in fact, impacts the cost 
of insurance that employers are making. And I think also if you 
are looking at the actual to get the bottom line of what it is 
going to cost the individual insured are, in my case, my 
teachers are going to have to pay. It is all about the premiums 
that the cost of the insurance costs.
    So unless those premiums are held in check, which is not 
happening, and they are continuing to go up because of the 
rising costs of health care period, as well as the impact of 
the Affordable Care Act, then we just need to stop, start, 
restart and try again.
    Mr. Thompson. All right.
    Dr. Van de Water, before I came here, I spent 28 years 
managing in rural hospitals, always looking at the pending, 
looming Medicare cuts since 1997, the Balanced Budget Act. And 
you contend that health care reform will reduce the budget 
deficit. As you know, the new law relies on over a trillion 
dollars in tax increases and Medicare reductions.
    In your testimony to the Budget Committee last week, you 
said that the record demonstrates that Congress has repeatedly 
adopted measures to produce considerable savings in Medicare 
and has let them take effect. Well, since the new health care 
law did not reform the scheduled reductions in Medicare 
physician payments, the so-called doc-fix as we have always 
known it, do you support the current reduction of 28 percent in 
Medicare physician payments?
    Mr. Van de Water. Certainly, not.
    Mr. Thompson. So how do we--doesn't that just speak to 
the--I think, the credibility and the reality of half a 
trillion cuts that were as a part of the health care act of 
whether--it speaks to the reality of whether they will really 
be imposed going forward?
    Mr. Van de Water. No, those are two entirely different 
things. The sustainable growth rate formula existed before the 
enactment of health reform. It is still in law. Even if health 
care reform were repealed, the sustainable growth rate cuts 
would still be scheduled to take effect. They do represent the 
problem and issue that has to be dealt with. But it is quite 
distinct, and it is separate from health reform.
    Chairman Kline. The gentleman's time has expired.
    Mr. Andrews?
    Mr. Andrews. Thank you, Mr. Chairman.
    Thank the witnesses for their excellent presentations this 
morning.
    Mr. Trautwein, welcome back to the committee. An 
overwhelming majority of Americans believe that if you have had 
breast cancer or diabetes, you shouldn't be denied insurance 
coverage and you shouldn't be charged more for it because of 
your preexisting condition.
    As you know, one of the problems with that change, though, 
is if you don't have more people in the insurance pool, those 
changes would, in fact, drive up premiums dramatically for 
businesses and for individuals. One of the ways that has been 
discussed to avoid that problem is to have an individual 
mandate to buy health insurance coverage. Do you favor that?
    Mr. Trautwein. We have backed away from--in our vision for 
health care reform, we called for consideration of an 
individual precisely because of that problem. We backed away 
from that because of the--what we thought were a lack of short-
term cost savings, quicker and----
    Mr. Andrews. Now, I understand that. But let me--because 
the time is limited. You did say to this subcommittee of this 
committee about 2 years ago that you would urge consideration 
of an individual mandate to obtain basic coverage and leverage 
voluntary employer contributions. So if we are starting with a 
clean slate, which we are with the repeal, would you include an 
individual mandate in the replacement bill?
    Mr. Trautwein. I think the politics have demonstrated that 
that is a highly controversial element. And----
    Mr. Andrews. Okay.
    Mr. Trautwein [continuing]. Highly--a much litigated 
element.
    Mr. Andrews. Everything is controversial in politics. On 
the merits--because I am sure you care about the merits--would 
you include that in the replacement bill?
    Mr. Trautwein. I would not.
    Mr. Andrews. Okay.
    Mr. Trautwein. I would go about it differently.
    Mr. Andrews. So you have changed your position from 2 years 
ago?
    Mr. Trautwein. That context for that was in the--in 
relation to the NRF platform for forward--and not in the 
context of----
    Mr. Andrews. Okay. So you don't favor it now, but you did 
favor it then?
    Mr. Trautwein. That is correct.
    Mr. Andrews. Okay. The second thing I wanted to ask you was 
there are at least two members of your association, Macy's and 
the Kroger Company, that have taken advantage of the early 
retiree health care payments. Would you repeal those, or would 
you keep them?
    Mr. Trautwein. There is not a lot of retiree health care in 
retail. And certainly, that would be an issue to look at if--in 
a new bill. Certainly, as it is still part of the current law, 
that is not something that we have----
    Mr. Andrews. But again, because the presumption of this 
hearing is we don't have the new law. It has been repealed. So 
if we were starting to write on a clean sheet of paper a new 
health care law, would you or would you not include the 
subsidies for early retirees for employers?
    Mr. Trautwein. I probably would not include that by reason 
of the cost of those provisions.
    Mr. Andrews. Okay. The third question I want to ask you--
you testified clearly that you think that an employer mandate 
is destructive of jobs, particularly in the retail sector. I 
want to read to you from a letter dated March 19, 2010. I am 
quoting, ``We need to introduce clear standards for shared 
responsibility that provide stable insurance coverage and 
prevent cost shifting from the uninsured to those with 
coverage. We believe that individuals, employers and government 
must all take responsibility for managing and financing health 
care.''
    The letter goes on to say that the signatories urge and 
expect Congress to take the first essential step and pass 
meaningful health reform this year. That was the day before the 
vote on the bill.
    One of the signatories was the Wal-Mart Company, to that 
letter. Do they misunderstand the retail business? Or why are 
they wrong in taking that position?
    Mr. Trautwein. I don't represent that company. The National 
Retail Federation does not represent that company. We had a 
difference of opinion on that particular issue.
    Mr. Andrews. But on substance, why are they wrong?
    Mr. Trautwein. I think on the substance, based on the 
breadth of the retail industry and the difficulty we have in 
managing the cost of labor because we have a lot of people in 
our industry, it is destructive to that. Now, why they took 
their position is in their own counsel. And I encourage you to 
ask them.
    Mr. Andrews. Well, unfortunately, none of them were invited 
as witnesses today to talk about why they support the employer 
mandate. But I am sure that they will come in the future.
    Thank you. I yield back the balance of my time.
    Chairman Kline. I thank the gentleman.
    Mr. Barletta?
    Mr. Barletta. Thank you, Chairman Kline.
    Dr. Howard, the Patient Protection and Affordable Care Act 
that we are examining here today contains a massive expansion 
of the Medicaid program in order to reduce the number of 
uninsured, leaving states to foot the bill. As someone from a 
commonwealth that is home to more than 2 million medical 
assistant recipients, and as someone whose commonwealth is 
facing serious budget issues, won't these costs place an even 
greater burden on the states and resulting in an even higher 
unemployment rate?
    Mr. Howard. Congressman, I think that is absolutely 
correct. The states right now face severe budget crises, in no 
small measure due to Medicaid. Medicaid currently counts for 
about 20 percent of state budgets, crowding out spending from 
everything to education to infrastructure.
    Although the federal government will be picking up, over 
time, about 90 percent of the costs of the Medicaid expansion, 
that still leaves about $21 billion in new costs for states, 
along with $12 billion in new administrative costs, forcing 
either other large cutbacks in programs or sharp tax increases. 
Medicaid is also a deeply flawed program where recipients have 
worse access to doctors and poorer outcomes for diseases like 
cancer and heart disease.
    There is a very short-term increase in the Affordable Care 
Act for physician payments under Medicare for 2 years. But then 
it goes away. I don't know who is going to pick up the spending 
for that provision. Perhaps it will be the states, another 
unfunded liability that is placed on their books. So I 
completely agree that half of all insured Americans under the 
Affordable Care Act will be pushed into a Medicaid program that 
is deeply flawed, tremendously expensive and a real burden on 
state budgets.
    Mr. Barletta. Thank you.
    Ms. Johnson, first I want to thank you for your hard work 
taking care of our children.
    Ms. Johnson. thank you.
    Mr. Barletta. Three years from now, the health care law 
will force employers with more than 50 employees to provide 
government-sanctioned coverage to their employees under a 
penalty of $2,000 per employment--employee tax. Ms. Johnson, 
our country has experienced an unemployment rate that is at or 
above 9 percent for 21 consecutive months. How will your 
company adjust to this new provision? And how will it 
potentially effect the unemployment of your employees?
    Ms. Johnson. I think that is the big unknown. I think there 
is so much unknown about what happens in 2014. I know that, 
based on what I have been told, that I can expect the increase 
that I was hit with this year, next year and the next year and 
the next year, which will position me in a place to say can I 
pay the costs of the premiums that are already a half a million 
dollars. Can I pay that rising cost?
    Or do I have to say, okay, do I save my bottom line and 
keep my business flourishing and thriving and say to my 
employees, go and buy--you have a chance now to buy individual 
insurance, you have a chance to go the exchanges? But what does 
that mean? And what will they be able to buy? And what will 
that mean to my ability to attract the quality teachers that we 
have?
    We have functioned for years and priding ourselves on being 
the employer of choice in the early education business. So I am 
in a real conundrum because the costs of the premiums is eating 
away at my bottom line. But at some point, you have to make a 
business decision and say, if there is an option for you, this 
is the option.
    It may not be as good an option as you have for health care 
now as far as out-of-pocket costs. But it is available for you. 
And we will have to do it that way. I don't know is, I guess, 
the answer. I just have to weigh the impact of the cost of the 
premiums and the availability of the exchange.
    Mr. Barletta. And quickly, Mr. Trautwein, how will the 
employer mandate effect retailers, especially smaller growing 
retailers, near the 50 employee threshold?
    Mr. Trautwein. Well, I think it is causing many retailers 
to consider whether they grow beyond that. Under PPACA, there 
is a provision where you aggregate part-time employees, which 
is very important to my industry, and use those to determine 
whether you hit the 50 full-time equivalent threshold or not. 
So I think it is going to have an effect, particularly as we 
get towards 2014, when the mandate is effective, in terms of 
their hiring practices.
    Mr. Barletta. And do you believe that the reverse can also 
happen, where employees--employers around the 51 mark, 52, may 
actually lay people off to get under the 50 employee threshold?
    Mr. Trautwein. It could very well. I use the example of 
that employer with 52 full-time employees and very substantial 
cost implications for that employer.
    Mr. Barletta. Thank you.
    Chairman Kline. I thank the gentleman.
    Mr. Kildee?
    Mr. Kildee. Thank you, Mr. Chairman.
    Dr. Van de Water, what effect or effects with the early 
retiree reinsurance program have on employers in both the 
short-term and the long-term?
    Mr. Van de Water. The early retiree reinsurance program 
that you ask about is the provision that helps employers that 
do offer health coverage to early retirees by paying for a 
portion of the more expensive claims that those employers have. 
Clearly, doing so will make it much easier for employers to 
continue offering that type of coverage, which has been eroding 
in many cases up to now. So that should have a very positive 
effect.
    Mr. Kildee. Many employers in my district have expressed 
interest of getting into that program. Again, do you find that 
they are doing so because they find a benefit in so doing?
    Mr. Van de Water. Absolutely. Of course, yes, sir.
    Mr. Kildee. Could you speak of what benefits a business 
might have?
    Mr. Van de Water. Let us say the early retirees, that is 
people between ages 55 and 65, are often the most expensive 
insured--or members in employers' insurance pool because 
unfortunately, as we get older, our health care needs increase. 
And, of course, some of those early retirees may also be early 
retirees simply because their health status forced them out of 
the workplace. So that this reinsurance pool, which helps the 
employer bear the costs of the more expensive early retirees, 
can save that employer a substantial amount of money and can 
make it possible to continue offering health coverage, not just 
for the early retirees, but for the employer's entire 
workforce.
    Mr. Kildee. So in this instance, we find something that is 
liked or beneficial to the employer and also to the early 
retirees.
    Mr. Van de Water. Absolutely. And I would say the small-
employer tax credit is another example of that.
    Mr. Kildee. I thank you very much, Doctor.
    Chairman Kline. I thank the gentleman.
    Dr. Heck, you are recognized.
    Mr. Heck. Thank you, Mr. Chairman.
    Thank you to the panel members for being here this morning. 
As an emergency medicine physician, which provides the ultimate 
safety net in health care, taking care of everyone, regardless 
of ability to pay, time of day or chief complaint, I echo the 
nearly universal sentiment that we need to improve our health 
care delivery system.
    Likewise, as a former small-business owner, I was gravely 
concerned about the impact of the Affordable Care Act on my 
business and those of other businesses in Nevada, a state that 
already suffers from the highest unemployment rates in the 
nation. Claims of benefits from the small-business tax credit 
and the increased number of employees covered failed to address 
what happens when that credit expires and the businesses are 
caught in a catch-22 of continuing the benefit that they have 
been provided with a credit or decreasing the size of their 
workforce.
    I also spoke with larger businesses. A medical staffing 
company, primarily physicians, with 2,800 employees that 
previously had seen single-digit premium increases over the 
course of years was hit with a 40 percent increase this year; a 
food retailer that provides coverage to both full-time and 
part-time employees within my district is concerned about the 
90-day coverage requirement, a timeframe that is shorter than 
what they currently provide, even though they provide insurance 
and what that impact is going to have on their ability to 
continue to provide coverage.
    Dr. Van de Water, you stated that the ``impact will be 
primarily be on employees' after-tax compensation,'' and 
implied that that impact would be short-term. Hardly a 
consolation to residents of Nevada, which also suffers from the 
number one rates in foreclosures and bankruptcies.
    Ms. Johnson, a question for you. Dr. Van de Water also 
stated that the short-term economic impacts will be ``quite 
small.'' Would you characterize your premium increase of 18 
percent as quite small? And could you please tell us about your 
employees' reaction to the addition of a deductible to their 
policy?
    Ms. Johnson. No, in a word, it is not quite small. And it 
has been a gradual response. I think you--at our open 
enrollment this month, it was, ``Oh, okay.'' But now as they 
begin to go and access health coverage and the reality of the, 
``Oh, okay,'' becomes apparent, it is like, ``Oh, no.''
    I am in preschool business. And we are at the, as I often 
say, the bottom of the educational food chain, which means our 
wages are, too. We are proud to pay in the upper quartile of 
preschool teacher wages. But that is still not a lot, which 
means that there is a little less--there is very little 
leftover dollars for them to use to pay for health care, even 
if insured.
    So this was, I think, something that I wrestled with. And 
what I really wrestle with is what about next year. Okay, we 
have added a deductible this year. Based on what I understand, 
we will have an increase similarly or maybe more next year. 
What will I have to do then? Will I have to raise their 
premiums, too, and have a deductible? This is something that 
doesn't seem like we are cutting costs at all, particularly to 
the insured.
    Mr. Heck. Thank you, Ms. Johnson.
    Dr. Van de Water, after hearing that impact of the 18 
percent premium increase and the impact on the employees and 
the deductible and how that is further decreasing their after-
tax compensation by having to lay out more for health care, 
would you still characterize those impacts as quite small?
    Mr. Van de Water. Absolutely. If one listened carefully to 
Ms. Johnson's statement, her insurance broker made it quite 
clear that the very large preponderance of the increase had 
nothing to do with the Affordable Care Act. Now, according to 
the Congressional Budget Office and most independent actuaries, 
the expectation is that the additional costs of the 
requirements in the Affordable Care Act will be minimal.
    As I listened to Ms. Johnson's statement, it appears that 
her company offers quite comprehensive coverage and that any 
additional requirements--any additional costs in order to meet 
the requirements of the Affordable Care Act, whether it be 
first dollar preventive coverage, which it sounds like her plan 
may already have, that these costs are minimal. So again, if 
one--the 18 percent is not the effect of the Affordable Care 
Act. And the cost increases that are expected next year, again, 
that is not attributable to the law. So I don't think that 
causes me to change what I said one bit.
    Mr. Heck. Well, what about the impact on the employees who 
are now having to shell out additional dollars because of the 
implementation of a deductible from their already low-end 
compensation?
    Mr. Van de Water. Well, two points about that. First of 
all, most health economists, including a lot of members on your 
side of the aisle, have long been advocating larger deductibles 
to make health care consumers more cost-sensitive. So from an 
overall cost-control point of view, actually, I think having 
modest deductibles for other than preventive services, is 
actually a good idea.
    But putting that aside, the 18 percent cost increase is not 
the result of the Affordable Care Act. Neither is the 
deductible which Ms. Johnson felt necessary to add to her plan 
to offset what otherwise had been a very large premium 
increase. So we are talking about apples and oranges here.
    Mr. Heck. Thank you, Mr. Chair.
    Chairman Kline. The gentleman's time is expired.
    Mr. Grijalva?
    Mr. Grijalva. Thank you, Mr. Chairman.
    And let me thank the panel for your comments today. I find 
it kind of ironic the whole discussion is centered around the 
fact that health care costs are rising as though that was a new 
concept in the last--let me start--if I may, Ms. Johnson, you 
suggested, among--you suggested that if this trend continues 
that we are talking about, premium increases in particular, 
that you would have to shift to the penalty because that would 
not--that would be something that would be--you would have to 
be required in order to continue to provide the health care to 
your employees. But I thought the comment that you made about 
the most important thing is to hold premium increases at check.
    One of the mechanisms--and I--to me, this kind of 
reinforces your comment. The idea that a robust exchange with a 
robust, strong public option as a competitive offset to premium 
increases and private insurance would be a good suggestion down 
the road to save money for you and for your employees. How do 
you feel about that competitive issue with private insurance?
    Ms. Johnson. I am all about competition. I think 
competition is what drives prices down. So that is just a 
bottom line how I think as a business owner.
    I don't think we understand completely about what the 
exchanges really are going to play out to be.
    Mr. Grijalva. Okay.
    Ms. Johnson. And so, that--it is the unknown that adds the 
complexity to the situation.
    Mr. Grijalva. But the concept of competition is the bottom 
line for you?
    Ms. Johnson. Yes.
    Mr. Grijalva. Thank you.
    Mr. Van de Water, who carries--we are talking about costs. 
Who carries the costs right now of the 35, 45 million uninsured 
that are--who carries the effects of those costs right now?
    Mr. Van de Water. Well, those costs show up in various 
ways. The uninsured, as you know, do receive some health care. 
Dr. Heck referred to the care that is available to people who 
come to emergency rooms. So the uninsured do get some care, but 
they don't get as much care as insured people do. So increasing 
coverage is extremely important.
    But the costs of that care is paid for by other people, 
either by other--by people who are insured through paying 
higher premiums to offset the costs that are incurred by 
hospitals for the----
    Mr. Grijalva. Okay. Somebody pays for that?
    Mr. Van de Water. Some of it by taxpayers. We have special 
payments through Medicare and Medicaid to assist hospitals for 
that kind of care that they provide.
    Mr. Grijalva. Okay.
    Mr. Van de Water. So that the care is ultimately paid for 
by others.
    Mr. Grijalva. Okay. Thank you.
    And, Mr. Trautwein? Thank you. The effects we--you talked a 
lot about hiring--how the health care reform could be a 
constrictor to hiring. What are the effects--what would be the 
effects of hiring if there was no reform?
    Mr. Trautwein. I am sorry, sir?
    Mr. Grijalva. What would be the effect on the hiring 
picture among the--the people you represent, the small 
businesses, the retailers, if there was no health care reform 
act?
    Mr. Trautwein. If there was no health care reform act, 
those retailers who offer coverage would continue to struggle 
to offer that. Because of the rising costs, fewer smaller 
retailers would be able to do that. We still have a lot of 
uncertainty, as Ms. Johnson said, in terms of what the exchange 
is going to look like, how effective it will be ultimately. But 
again, we were strong proponents of reform and for good reason.
    Mr. Grijalva. Okay. So we have talked a lot about costs. 
You have. And I would suggest that part of the discussion--and 
that is what I asked Mr. Van de Water and Ms. Johnson--has to 
do with benefit as well. And in that analysis, I think, if I 
may say, you are leaving out a significant portion about what 
the long-term benefit is of health reform. And that would--has 
been the goal all along.
    With that, I yield back, Mr. Chairman.
    Chairman Kline. I thank the gentleman.
    Ms. Roby, you are recognized.
    Mr. Roby. Thank you, Mr. Chairman.
    Thank you to each of you who are here today. I want to take 
a moment, if I might, and just expand on the discussion that 
Mr. Heck had a few minutes ago. Clearly, our economy needs job 
growth and expansion of industries and ideas in the workforce 
and not federal regulations that place such a heavy burden on 
them.
    At the same time, we do need to implement common-sense 
health care changes that are free market solutions, tax code 
reform, medical malpractice reform and increase competition 
across state lines. And I have recently shared some examples as 
it relates to a Pizza Hut owner in Headland, Alabama that is 
going to be forced to shut his doors because he can't afford 
this as well as an owner of pharmacies throughout the Southeast 
who has the ability to create jobs but is fearful to do so 
because he doesn't know what the federal government is going to 
do to him next.
    So expanding on the discussion before, Ms. Johnson, your 
testimony, if I did nothing and just renewed our policy, due to 
the 18 percent increase, I simply cannot afford to absorb this 
increase to the bottom line. And then Dr. Van de Water said 
even if health care reform were to impose some costs on 
employers, economic principles strongly suggest that the impact 
on business hiring decisions would be small.
    So my question is to you, Dr. Howard, is if you could help 
reconcile--I mean, clearly, there is two very different, 
differing opinions from Dr. Van de Water and Ms. Johnson. And I 
would like to hear your take on the real economic impact on job 
growth when you hear from small-business owners like the Pizza 
Hut owner, like the owner of the pharmacies and certainly, the 
testimony of Ms. Johnson, which seems to be in conflict with 
Dr. Van de Water's position.
    Mr. Howard. Well, I think that small businesses are in an 
environment where they direly need relief from health care 
costs. The purported exercise of health care reform was to 
``bend the curve of health care costs.'' The defense apparently 
is now costs will go up, but they will be small. But I would 
like to point out that for small-business owners and mid-size 
business owners, those new costs are unchosen. They are being 
forced on them.
    They will have to pass those costs along to their employees 
in the form of lower wages. That may seem to be a minor impact, 
but I think given the rest of the economy and all the other 
cost pressures we are facing, I think that that is not the 
right message to send to employees, that you are going to take 
the hit now in the hopes that 10 or 15 years down the line, 
maybe we will see health care costs slow.
    And we also have to understand that this is in the context 
of everything else that we are asking small employers to do, 
that small employers are trapped in very dysfunctional state 
insurance markets where they face dozens of state mandates on 
insurance that drive up the cost of insurance. So their choices 
are limited.
    We are limiting their choices even further. And we are 
asking them to pay more costs. So I think that that is the 
central problem here, is we have put more problems on their 
plate rather than taking them away.
    Mr. Roby. Thank you very much.
    Mr. Chairman, I yield back.
    Chairman Kline. I thank the gentlelady.
    Mr. Kucinich, you are recognized.
    Mr. Kucinich. Thank you very much, Mr. Chairman, members of 
the committee. Two of the main concerns I hear from businesses 
when it comes to health care are predictability and costs. They 
want predictability because without it, it is hard to make 
long-term decision and investments.
    The Affordable Health Care Act provides some protection 
from the unpredictability of wild leaps in health care costs 
for those in small insurance pools. It does that by putting 
more people in the same risk pool, by providing ways to 
challenge excessive rate increases and by capping the amount of 
money insurance companies can spend on things other than your 
health care. It is not perfect, but it is much more than we had 
before the bill passed.
    I also hear from businesses that they want lower health 
care costs for their employees. The lower the costs, the easier 
it is to attract talented workers. It is especially true for 
small businesses, who are competing against larger businesses 
for talent. And many businesses want lower costs because they 
are at huge competitive disadvantage compared to their 
competition overseas.
    The per-person health care costs in the U.S. in 2008 were 
$7,538; in the U.K., $3,129; in Canada, $4,079; in Holland, 
$4,063; in Spain, $2,902. In fact, among our OECD competition, 
no one is even close to us in health inefficiency. And who 
bears the burden of that? Our businesses.
    The Affordable Care Act, again, provides some help there 
with tax credits and also because it insulates people from the 
highly expensive individual insurance market by pooling them 
together. It makes sense. The more people in the pool, the 
lower everyone's cost because the costs are spread among more 
people.
    Now, Mr. Van de Water, if part of the reason small business 
would get more predictability is because their employees can 
band together with others in a bigger risk pool, would their 
costs be even more predictable if everyone in the U.S. was in a 
single risk pool, the very definition of a single payer plan?
    Mr. Van de Water. Mr. Kucinich, that is a difficult 
question. I think there is always going to be unpredictability 
in health insurance markets. But I think that your general--the 
general thrust of your question is correct, that the--you know, 
the larger the pool, the less likely premiums are to change by 
very large amount from one year to the next due to modest 
changes in the makeup of the risk pool. I think your general 
idea----
    Mr. Kucinich. Well, let me follow-up on that. Thank you, 
Mr. Van de Water. If businesses get relief from health care 
costs under the Affordable Care Act, would they get even more 
relief from the tremendous burden of inflated per-capita health 
care costs under a single payer plan?
    Mr. Van de Water. Quite possibly.
    Mr. Kucinich. Well, I just wanted to use this opportunity 
to suggest to my colleagues, who want to dramatically change 
the Affordable Care Act or perhaps dismantle it, that this--
these hearings are also a good opportunity to look forward. 
Thank you.
    I yield back.
    Chairman Kline. I thank the gentleman.
    Dr. Roe, you are recognized.
    Mr. Roe. Thank the gentleman for yielding.
    Thank the panel for being here.
    And I will start by looking at my own experience of 30-plus 
years of small-business owner, like Ms. Johnson. We started out 
by providing 100 percent of the health care coverage for all 
the families and people who worked for us. We now have over 300 
employees who get insurance in our business, in our practice.
    And we are at the process of looking at if we dropped the 
coverage that we had and paid the penalty, we could save our 
practice almost a million dollars a year. This is real-world 
stuff. I haven't been here but 2 years. This is real-world 
stuff.
    And Dr. Van de Water mentioned a moment ago about the 
impact being minor. Well, let me give you just an example of 
what health care reform did in the state of Tennessee. We 
started a reform in 1993 called TennCare. And we had the 
problem with the health care system in America, as has been 
pointed out many times and I saw in my patients, that it costs 
too much money to come to the doctor and to enter the health 
care system. There is no question about that.
    The second problem we have was we had a segment of our 
population that didn't have affordable coverage, that couldn't 
afford it. So they are out there. We know who they are. And 
lastly, which hasn't been mentioned, is that there is a huge 
liability crisis in America that is adding to the cost of the 
care.
    I just spoke to the CEO of Mount Sinai Hospital Monday. 
Sixty-million his hospital system pays in liability insurance. 
In our state, we started with a $2.6 billion program. We have a 
lot of uncovered people. This is going to compete the hold the 
health care costs down.
    Ten budget years--in just 10 short years, that had gone to 
$8.5 billion, taken up about 33 or 4 percent of the entire 
state budget. We have essentially paid for the health care 
increase in the state of Tennessee by not adding any new 
dollars to our higher education system in 20 years. We have 50 
less highway patrolmen than we had 30 years ago. And we have 2 
million more people that live in the state.
    So it has not held the costs down. And our Democratic 
governor, who just was turned out, Governor Bredesen, called 
this new plan the mother of all entitlements because he as a 
state CEO or governor, executive, understood that. And how we 
managed the costs in Tennessee was we rationed care. We 
basically cut people off, and we limited the number of visits 
that they have.
    Let us look forward, also, at Medicare, which started as a 
$3 billion program in 1965. The estimates--there wasn't a CBO 
then. But the government estimates were this would be a $15 
billion program in 25 years. Now, the actual number--does 
anybody know what it was 25 years later? Over a hundred billion 
dollars. And today it is over $500 billion.
    So I don't see anywhere in there that these costs are being 
held down. And the way you are going to haul costs down in 
America is personal responsibility and disease management and 
liability reform. That is how you are going to do that, not 
through this plan.
    And I want to--I am going to stop after making that 
statement and just--Ms. Johnson, to you, in your own business, 
you are a real-world businessperson and owner. I have heard 
this story over and over again. The other thing, before I 
finish, is the great secret in government programs is they 
never cover the costs of the care.
    In our state, TennCare pays about 60 percent of the costs. 
And Medicare pays about 90 percent in our state. So guess what 
happens? That cost is shifted to private insurers. And you not 
only have the cost of your increase with technology liability, 
you also are paying for the costs that the government isn't 
paying for. So what they just did was expanded massively a 
Medicaid program that is already failing. And it is going to 
shift more costs.
    So you are absolutely right. Your costs are not going to go 
up 8 or 10 or 12 percent. They are going to go up 20 percent 
when this happens. And to say that with a straight face that 
this is going to hold costs down, I don't see any way it can 
possibly do that.
    Mr. Miller. Would the gentleman yield?
    Mr. Roe. No, I want to finish my time.
    Ms. Howard (sic), yes, ma'am?
    Ms. Johnson. To respond to that, I agree wholeheartedly. 
Just because the particular changes in the Affordable Care Act 
that impacted my policy this year has 3 to 5 percent does not 
speak to the whole question because the health care industry 
and the costs to insurance companies that is impacting my 
premiums is still reeling out of control.
    And it had been my hope that whatever bill, health reform 
bill, we had would be hauling those costs under control as 
well. And I don't see that happening. So it is not just the 
specific 3 to 5 percent that increased directly related to 
removing the caps on durable medical equipment, et cetera, et 
cetera. It is also the fact that there are increasing health 
care costs that this reform bill is not curtailing.
    Mr. Roe. Dr. Howard, any comments?
    Mr. Howard. Well, I think that is a good observation that 
the costs are shifting substantially. I know that in many 
states in general, Medicare pays 80 percent of what private 
insurers pay. And Medicaid pays about 60 percent, I believe. So 
it is a tremendous cost shift and a tremendous problem for 
physicians and why more and more physicians are simply refusing 
to see patients.
    Chairman Kline. The gentleman's time has expired.
    Mrs. McCarthy is recognized.
    Mrs. McCarthy. Thank you, Mr. Chairman. And thank you for 
having this hearing.
    It has been interesting listening to the testimony. And I 
guess--I spent the majority of my life as a nurse before I got 
here. And I think one of the things that we have to 
understand--you know, I have heard statistics going all over 
the place. They mentioned the 1960s.
    As a nurse in the 1960s, I earned $25 a week. My health 
insurance at that particular time was probably about $1.30, 
$1.40 because we did pay into our health care, as we do here. 
You know, everybody keeps thinking that we as federal employees 
get free health care. We pay into it.
    And we also, by the way, in my opinion, for what I pick 
out--we are talking about the exchange. I picked the insurance 
company that I wanted. Someone else on my staff, especially the 
younger ones on my staff, they pick out the insurance that they 
want. But the difference is we do not have a cap. If I get 
sick, I will be covered. And that is what we are trying to give 
to the American people.
    Costs have gone up. Health care has gone up to the point of 
where small businesses, large businesses could no longer 
sustain it. So something had to be done.
    Now, no one is going to say this has been a perfect bill. 
But it is a start--and hopefully improve upon it as we go 
forward.
    You know, I heard again a number of times on the small 
businesses, you know, that are exempt from the responsibility 
requirement of expanding their insurance coverage under the 
bill from 46 percent of companies offering coverage in 2009 to 
almost 59 percent of companies offering coverage in the year 
2010. I do believe that once people get over this fear of what 
the health care bill can do and we bring everybody in--because 
there was mention before--our hospitals are paying for people 
that don't have insurance.
    And if you don't have care, preventative care--this country 
is basically a very unhealthy country. And they are. And yet, 
with medical technology, with what--certainly if you have the 
access to a doctor and they discover you have high cholesterol 
at the age of 40, you are going to take medication, hopefully, 
that will prevent a stroke or a heart attack down the road. 
That is the whole idea of what this bill is.
    But the truth of the matter is if we had done nothing, your 
small business wouldn't be eligible for health care. Your large 
corporations would not be able to afford health care. And this 
is the debate that will continue to go on. But to say we should 
repeal and stop and don't do anything, in my opinion, is the 
wrong way to go.
    So, Mr. Van de Water, I wish that you would talk a little 
bit more on the cost savings from preventative care. We are 
already seen some of the estimates from CBO, which is unusual 
for them. They don't like to do anything that they don't have 
hard facts on. But also spreading the coverage across the whole 
country so that people that don't have health care will have 
health care and how that helps the pool.
    And hopefully, Ms. Johnson could be able to have cheaper 
insurance or at least sustain the costs. I am not going to say 
she is going to get cheaper insurance. I will say she will 
sustain the costs so they are not going up high.
    Mr. Van de Water. Happy to do that, Mrs. McCarthy. But if I 
might, I would like to amplify on a point that you made earlier 
on in your remarks suggesting that there was--I forget the 
exact term you used, that there are unnecessary concern, fear, 
anxiety about the effects of the health reform legislation.
    As we listened to some of these individual stories, I think 
we seem to lose sight of the big pictures, which is that, in 
fact, the vast preponderance of employers already offer health 
insurance coverage, which is, in fact, substantially more 
generous than that that would be required by the Affordable 
Care Act. Ninety-five percent of employers with more than--with 
50 to 199 workers--even for firms with between 25 and 49 
workers, 92 percent of those firms already offer coverage. And 
like, with Ms. Johnson's firm, that coverage, in general, is 
already more generous than would be required to meet the 
requirements of the Affordable Care Act.
    So the additional costs that would be imposed on those 
firms is truly minimal. And that is not a matter of 
speculation. You know, that is a matter of fact.
    In terms of the cost controls which you asked about, it 
would be nice if we could start to slow the growth of health 
care costs substantially right away. But I don't think that any 
of the supporters of this legislation--or, I hope, of any 
other--had ever promised that that difficult task could be 
accomplished right away. We have been faced with year-in, year-
out double digit, in my cases, increases in health care costs.
    And I want to emphasize that those are not unique to public 
programs. Those increases have been both in the private 
insurance--people buy, again, as we have heard from Ms. Johnson 
and Mr. Trautwein's examples. So what we will need to do is to 
make major reforms. What most analysts believe is we will need 
to make major reforms in the health care delivery system to 
develop ways of delivering care that are more cost-effective. 
This law begins, but it will take some time to do.
    Chairman Kline. Thank you, sir.
    The gentlelady's time has expired.
    Mrs. McCarthy. Thank you.
    Dr. Des Jarlais?
    Mr. DesJarlais. Thank you, Mr. Chairman.
    As I sit and listen to the debate today and hear my 
colleagues tell us that we should not be afraid to move forward 
and be afraid of what is in this bill, as a physician, I can 
tell you that that is not the sensation and the feeling I am 
getting as I sit here listening.
    We look at the federally run programs in our health care 
system today, which encompass over half of the covered lives in 
America through the Medicare, Medicaid and veterans system. And 
I don't think anybody is going to sit here today and give gold 
stars and A ratings to the success and the state of these 
programs.
    So the thought of moving forward with this Affordable 
Health Care Act without apprehension causes me great pause as a 
physician. And I guess I would like to ask Dr. Van de Water--
you had mentioned that we have 32 million uncovered lives right 
now that will be addressed with this act. And there is roughly 
330 million people in our country.
    It should be noted that before this health care bill was 
passed, if you study the polls, 75 percent of Americans rated 
their health care as good or excellent. It is hard to get that 
many people in this country to agree on anything.
    So we have 25 percent that are dissatisfied. And I assume 
that the 32 million that you speak of are in this group. Can 
you break down that group of 32 million? Because that was 
always kind of a moving target during the debate.
    Mr. Van de Water. When you say break down, you mean in 
terms of how these people would achieve coverage?
    Mr. DesJarlais. Are these people that don't qualify for 
Medicaid? Are they people that are here legally or illegally? 
Are they people that are willfully uninsured?
    Mr. Van de Water. Thirty-two million figure is the number 
of additional people who would receive coverage under the 
Affordable Care Act. And that number is not exactly, but more 
or less evenly divided between people who would achieve 
coverage under Medicaid and those who would achieve coverage 
through the new health insurance exchanges.
    Mr. DesJarlais. Do you know approximately how many?
    Mr. Van de Water. I could look it up and----
    Mr. DesJarlais. Okay. But somewhere, there is a portion of 
those that would qualify for an existing plan?
    Mr. Van de Water. Some of the Medicaid people would qualify 
under existing law. But that number I don't have at my 
fingertips.
    Mr. DesJarlais. Okay.
    Dr. Waters (sic), could you comment on how we can expand 
coverage to 32 million people and yet reduce costs and preserve 
quality of care?
    Mr. Van de Water. That is exactly what----
    Mr. DesJarlais. Okay, go ahead.
    Mr. Van de Water. Yes, that is exactly--we do that through 
the Affordable Care Act. That is exactly what the Congressional 
Budget Office and the Medicare actuary project is what is going 
to happen. As I said, that in the near-term, as we bring 
coverage to 32 million more people, of course, there will be a 
modest increase, which, I believe, at its peak is only about 3 
percent of national health spending.
    After that, the rate of growth of costs will slow. And in--
early in the next decade, if one extrapolates the actuary's 
projections, the level of spending will be less than it would 
have been without the Affordable Care Act. And the reason for 
that--the reasons for that are among the things that I 
mentioned, the provisions in the law that change reimbursement 
practices to focus on the value rather than volume, the 
provisions that eliminate the over-payments for Medicare 
Advantage plans, the excise tax on high-cost health plans and 
so forth.
    Mr. DesJarlais. And you feel this can be done while 
maintaining quality of care, despite what my colleague from 
Tennessee spoke of in terms of the failed TennCare plan?
    Mr. Van de Water. The gentleman knows more about--being 
from Tennessee, knows more about the details of TennCare than I 
do. But our quality of care leaves a lot to be desired. The 
most studies show that even in our--while many people get 
excellent care for certain purposes, that is still in--I forget 
the precise number, but about 40 percent of people who are in 
the medical care system don't get all of the recommended care 
that they should.
    That was a recent analysis by the Rand Corporation that, I 
think, appeared in Health Affairs Magazine. So there is a lot 
of room for improving quality while reducing costs.
    Mr. DesJarlais. Thank you, Dr. Van de Water.
    Dr. Howard, would you comment on whether or not you feel 
that we can expand coverage while reducing costs and 
maintaining quality?
    Mr. Howard. I think it is going to be extraordinarily 
difficult. I think that a number of the programs that Dr. Van 
de Water talked about could very well increase quality. But 
they are likely also to increase costs.
    That may be something we should do. But if you are giving 
people more services or preventative services, costs are going 
to go up. The thing that CMS scored as having the largest 
impact on health care spending was going to be the across-the-
board provider cuts that are happening in the latter decades of 
the Affordable Care Act.
    And that means that at long-term, Medicaid rates are going 
to drop below those of Medicaid. And we already know there are 
serious access problems there. There are going to be serious 
access problems for seniors if that happens. So that is not 
likely to happen.
    So I think in the short-term, we are going to see costs go 
up in the hopes that costs will go down at some point. But 
since we can't predict what the economy is going to look like 
in 6 months or a year, I think trying to figure out what the 
health care system is going to be in 15 or 20 years is 
impossible.
    Mr. DesJarlais. All right. Thank you.
    Chairman Kline. The gentleman's time has expired.
    Mr. Holt?
    Mr. Holt. Thank you, Mr. Chairman.
    Before I get to my questions, I just wanted to underscore 
something that Mr. Miller raised earlier, which is, in fact, 
there has been a significant increase in small businesses 
offering health care benefits to their employees in the last 
year. UnitedHealth Care Group, the nation's largest insurer, 
added many tens of thousands of new customers, mostly small 
businesses. I am quoting from that well-known Socialist organ, 
Forbes Magazine.
    Blue Cross/Blue Shield of Kansas City, an astounding 58 
percent increase in the number of small businesses purchasing 
coverage; Coventry Health Care, more than 100,000 new workers, 
an 8 percent jump. Thirty-eight percent of these Kansas City 
Blue Cross/Blue Shield businesses had not offered health care 
benefits before.
    Says the writer, ``If you are all about beating up on 
President Obama, you can conveniently forget this bit of data 
as if it never really happened. However, if your interest is to 
make health care available to more Americans, this should be a 
happy day for you, no matter what your ideological beliefs.''
    Let me turn to some other details here.
    Mr. Van de Water, not much has been said this morning about 
the medical loss ratio. When this committee, particularly Mr. 
Tierney, pointed out to the country that most insurance 
companies were spending maybe 75 percent of an employee's 
health insurance premiums on actually providing health care, 
they were astonished. And now under the health care law, there 
is a requirement that the medical loss ratio increase, in some 
cases, to 85 percent and that there be auditing.
    In other words, insurance companies would be required to 
spend more of the collected premiums on actually providing 
health care. What effect do you think that will have on the 
issues that we are discussing today?
    Mr. Van de Water. Clearly, Congressman, the provision 
requiring that insurance companies spend 80 or 85 percent of 
the premium dollar on health care is going to mean that 
employees or individuals who buy insurance on their own are 
going to be getting considerably more insurance value for their 
dollar. There has been some--was some talk earlier this morning 
about waivers which HHS has been granted to allow some firms to 
offer these so-called mini-med policies during the interim 
between now and 2014 before the exchanges come into effect.
    If anyone has ever looked at those policies, the value that 
is received for those is extremely poor, that in many cases, we 
read the one offered by McDonald's to some of its employees 
only about 60 cents of the premium dollar is spent on health 
care.
    Mr. Holt. Well, thank you. I venture to say that as the 
auditing proceeds, the public will be astonished once again 
about how these companies are doing business.
    Ms. Johnson, your premiums have gone up, and they are 
proposed to go up for the subsequent year. Did you bring with 
you the figures for the past 10 years?
    Ms. Johnson. No, I did not. But they have been 
progressively going up.
    Mr. Holt. Is it more or less than the national average of a 
doubling of policies from 1999 to 2009?
    Ms. Johnson. I couldn't speak to----
    Mr. Holt. Was it comparable--it was probably a doubling?
    Ms. Johnson. I couldn't speak to the exact. I wouldn't want 
to say something that would not be truth.
    Mr. Holt. Well, for most businesses around the country, it 
was a doubling, which I take as evidence of the need for this 
health care legislation, not an argument against it. These 
happened before the health care bill was passed. The premium 
notices that you are getting in the mail these days are 
independent, as Mr. Van de Water has said, and so, independent 
of the health care legislation.
    Now, in the few seconds I have remaining, let me ask a very 
quick question, then, to Mr. Howard. You say that small 
businesses need relief. I would ask whether a 35 percent tax 
credit for doing what they want to do and are doing is 
considered relief.
    I would also ask, secondly, whether you believe that having 
patient-centered primary care, bundled payments, required 85 
percent medical loss ratio, payments that record--reward 
accountable provider groups and assume the responsibility for 
continuum of patients' care, more emphasis on outcome rather 
than procedures, independent payment advisory board, new 
innovative center within CMS for streamlining testing and rapid 
communication and expansion of successful models, enhanced rate 
review, price transparency will, in fact, bring down the 
costs--put downward pressure on the costs of medicine.
    Chairman Kline. Yes, Dr. Howard, if you think you can 
answer that in, you know, 20 or 30 seconds----
    Mr. Holt. A yes or no.
    Chairman Kline [continuing]. Please do. Otherwise, we will 
need to move along.
    Mr. Howard. Out of that laundry list, I think that a lot of 
things are going to increase costs. The tax credit you referred 
to----
    Mr. Holt. Will increase costs?
    Mr. Howard [continuing]. Is going to go--the tax credit you 
referred to is going to go away. And then employers are going 
to be left in state insurance exchanges, where there are going 
to be very expensive plans available to them.
    Chairman Kline. The gentleman's time has expired.
    Mrs. Biggert?
    Mrs. Biggert. Thank you, Mr. Chairman. And thank you for 
having this hearing. I have to state for the record that I am 
not a doctor on this side of the aisle. But I am a lawyer, so I 
want to turn to a little--something a little bit different.
    And, Dr. Howard, what has happened to ERISA? You know, this 
was a really voluntary--so that companies, employers could 
voluntarily offer health care benefits. And I think there was 
on the other side of the aisle talking about the states making 
all these different things. But this--ERISA is kind of what 
held it all together.
    And then I want to go something else. So if you could 
answer that briefly.
    Mr. Howard. I think that ERISA has been a tremendous 
benefit for large firms. It has helped them to design employee 
benefits they thought best fit their mix of needs and the needs 
of their employees. Obviously, even large companies are seeing 
health insurance increases and need to find better ways.
    There are some very innovative things happening at 
companies like Safeway and Whole Foods, where they are working 
with their employees to find ways to hold down costs through 
innovative disease management programs. I think that kind of 
experimentation, giving more ability to companies to experiment 
with those types of plans, is a very valuable way to go.
    Mrs. Biggert. But under the--this new law, will they be--
will ERISA exist?
    Mr. Howard. I think that there is going to be a gradual 
erosion of ERISA, both because of the incentives for 
individuals to drop out of employer-based coverage because of 
the larger subsidies that are available on the exchanges, but 
also because the ability of states under--in the state 
insurance exchanges to make broad changes to plans that are 
available in their state markets--of course, ERISA is not 
affected by that. But I think there is going to be more of a 
push, particularly on states, to try and get ERISA-based 
companies into the insurance pool and to alter ERISA to make it 
possible for them to get at the--the companies' employees into 
those pools.
    Mrs. Biggert. Thank you. Then you said that that were, 
like, 700 waivers already, based on----
    Mr. Howard. Seven hundred and thirty-three.
    Mrs. Biggert. What about--I got a company, employer, a 
restauranteur in my district. He has 100 employees. He is not 
able right now to offer insurance. So with the new law, he is 
going to have to put all of his employees on--in the exchanges. 
And then he is going to have to pay a $2,000 penalty every year 
for each employee, which is $200,000. He doesn't make that 
much. So his conclusion was, ``Who wants to buy a restaurant?''
    And yet, there are all these waivers for large companies 
and things. Why are the waivers being given when the law was 
written in such a way that they should have to comply under 
that, too?
    Mr. Howard. Well, I would defer to some of my colleagues 
with experience in the small-business environment. But I would 
say very briefly that the administration has recognized that 
there will be a substantial decrease in coverage or a 
substantial increase in premiums if the waivers had not been 
given to those companies.
    Mrs. Biggert. Okay. Then the other issue is the court cases 
in 26 states having filed to repeal this law or to make certain 
changes. And it seems like it is two to two now with some 
states saying they want to keep it and other states saying let 
us do away with it.
    But their latest decision that has come out from, I guess 
it is, Florida with the district judge saying that, not only is 
the individual mandate that individuals have to purchase health 
care unconstitutional, but because there is no separability 
clause in there, that the whole law should be repealed. And 
what do you think of that? Or how do you----
    Mr. Howard. Well, I think that the individual insurance 
mandate is deeply troubling. You are forcing individuals to buy 
plans or buy kinds of plans they wouldn't necessarily choose 
for themselves and are going to face, in many cases, higher 
costs as a result of it.
    In Massachusetts, as I recall, 200,000 people, I think it 
was, who were exempted from the individual mandate because the 
costs were so high. I think a number of people after the 
mandate goes into effect are going to look at the cost of 
insurance. They are going to opt not to buy it and sit out. And 
that is going to raise the risk of adverse selection in those 
pools and raise the cost of insurance.
    So I think it is extremely problematic. And we need to look 
at better ways of incentivizing people to purchase the kinds of 
insurance that fit their needs, particularly consumer-driven-
types of insurance.
    Mrs. Biggert. Thank you.
    Would anybody else like to comment on that briefly?
    Mr. Van de Water. I would just like to point out that the 
insurance exchanges will offer a range of policies. And, in 
fact, that the lowest level required has an actuarial value of 
60 percent, which is well below the level offered by the 
typical high-deductible plans with the health saving account. 
So, in fact, the notion that people are going to be forced to 
buy one particular kind of insurance that doesn't suit their 
needs is, I think, fundamentally off-base.
    Mrs. Biggert. Well, even those that have been--have 
waivers, it is very strict, the terms of how they can keep that 
waiver.
    Chairman Kline. The gentlelady's time has expired.
    Ms. Hirono?
    Ms. Hirono. Thank you, Mr. Chairman.
    There is no question that health care costs have been 
rising and the premium costs to businesses have been increasing 
year by year, often by double digits long before we ever passed 
the Affordable Care Act. And so, just slowing the ever-rising 
costs of health care, which already represents one-sixth of our 
gross national product--totally unsustainable, no end in sight. 
Just to slow that down, never mind bending the curve, I think, 
is a huge accomplishment for us.
    Now, Dr. Howard, you said something that was really 
interesting in response to the question of what would be your 
approach to how we could slow the ever-rising costs of health 
care in our country, unsustainable. You said that we should 
encourage the states to experiment with health care reform. You 
mentioned Massachusetts. And as a matter of fact, Hawaii, for 
over 35 years, has had probably the most progressive and 
comprehensive health care law in the entire country.
    It is an employer-mandated--mandate law, where there is no 
exception for small businesses. All businesses in Hawaii that 
have full-time employees must provide health care for which the 
employee pays only 1.5 percent of their wages. Which means that 
most of the employers in Hawaii who have full-time employees 
pay 100 percent of the coverage. There is no discrimination for 
preexisting conditions. There are no lifetime limits.
    And, in fact, the largest health care provider in Hawaii 
moved very quickly to provide an option for--opportunity, I 
should say, for the parents of children to put their kids on 
the policies until 26, before that requirement even kicked in. 
You know, things did not fall apart as a result of Hawaii's 
prepaid health care law. And, in fact, Hawaii's people live the 
longest, partly because we have early access to health care. 
That means prevention.
    So you would think with all of this that when we were 
discussing health care reform and the Affordable Care Act that 
I would be hearing from businesses all across Hawaii to 
eliminate Hawaii's prepaid health care law. Quite to the 
contrary. What the businesses in Hawaii were saying is please, 
please exempt Hawaii's law from whatever you folks are doing 
because they--our law works.
    Now, when you say that states should be given that 
opportunity, if the states go and follow the direction of 
Hawaii. So I think that would be great. Do you have any 
awareness of Hawaii's law, Dr. Howard?
    Mr. Howard. I am sorry to say that I don't. I mean, I think 
the central point to make is is that no two states are exactly 
alike. And so, Massachusetts or Hawaii may have found a set of 
arrangements that works well for their given populations, their 
given circumstances. The circumstances aren't the same for 
California or Texas or Oklahoma, Florida or any other state. 
Each state has to find its own way.
    There may be a mix of state programs that will work. One, I 
think, very interesting parallel was to welfare reform during 
the 1990s, where one state, Wisconsin, took the lead, found a 
workable program for welfare reform that later became a model 
for the nation and was extraordinarily effective.
    So I think there is a tremendous aspect to state 
experimentation, as it has often been said. Use the states as 
laboratories of experimentation before we commit the entire 
United States to one program, however attractive it may seem in 
Massachusetts or in Hawaii.
    Ms. Hirono. Well, given that, though, I don't think that we 
should all be reinventing the wheel. We should learn from other 
states' experiences.
    Dr. Van de Water, do you have any awareness or familiarity 
with Hawaii's prepaid health care law? Would you like to--and 
if you do, would you like to comment?
    Mr. Van de Water. Well, I have some familiarity, Ms. 
Hirono, with it. Recently I worked--I was the study director 
for a study panel of the National Academy of Social Insurance, 
which was examining administrative issues that would be 
involved in implementing health reform. And, of course, the 
administration of mandates is one of the things we looked at.
    And, of course, the employer mandate in Hawaii, which, as 
you say, has been in effect for 35 years, is an important 
example that we looked at. And I think I am personally quite 
pleased that you brought it up because it does show, as you 
said, that if a requirement is imposed broadly so that all 
employers have to meet it, then it should be quite successful.
    Clearly, if one particular employer by itself, say, in the 
retail market might be able to--because of competitive 
pressures, it might not be able to provide health insurance to 
its workers. But if it knows all of its competitors are going 
to have to do the same thing, as is the case in Hawaii, the 
whole situation is different. And, as you said, as far as I 
understand, Hawaii still has fast food restaurants. It still 
has daycare centers. The world----
    Ms. Hirono. Well, the world certainly has not come to an 
end in Hawaii. And, in fact, I would say that the business 
community in Hawaii pretty much uniformly want us to be able to 
continue this kind of a law, which is not to say it is perfect, 
of course, because health care costs in Hawaii also go up. But 
an economist I talked to in Hawaii, who one of his specialties 
is looking at Hawaii's law, said that premium increases in 
Hawaii has been lower because--in large part, because of the 
prepaid health care law.
    And I would also say that those states that have actually 
in place processes that allow for rate review, those states 
have a better chance for controlling health care costs, 
especially those that require prior approval. Thank you.
    I yield back.
    Chairman Kline. The gentlelady's time has expired.
    Dr. Bucshon?
    Mr. Bucshon. Thank you, Mr. Chairman.
    And thank you, witnesses.
    This is directed at Dr. Van de Water. Would you agree that 
when CBO scores a bill, they have to go on the assumptions that 
are in the bill to--and they can't--they don't have much leeway 
in interpreting what the law says, they just have to score it 
based on what the assumptions are? Yes or no?
    Mr. Van de Water. No.
    Mr. Bucshon. Okay. Then tell me why that would be.
    Mr. Van de Water. CBO estimates the effect of the law, 
evaluates the legislative language of the law. But the sponsor 
of the legislation does not have the opportunity to specify 
what economic and technical and other estimating assumptions 
the CBO uses in estimating what the effects of that legislative 
language would be.
    Mr. Bucshon. Okay. Then in the case of the Affordable Care 
Act, would you agree or disagree that some of the cost savings 
are the projected decrease in Medicare outlay of funds, 
decreasing reimbursement in the past and that was used as part 
of the cost savings in the Affordable Care Act?
    Mr. Van de Water. Yes, there are reductions in Medicare 
payments.
    Mr. Bucshon. Okay. And then would you also, I think, said 
earlier when someone asked the question about Medicare cuts and 
it is most universally believed that, especially the ones 
relating to the doc-fix-type of cuts, most likely will never 
occur. Then would you agree that the CBO's estimate of the 
repeal bill most likely is incorrect, based on the assumption 
that the Medicare cuts will occur and that--because from the 
direction I see it, you can't have it both ways.
    Mr. Van de Water. I guess I would make about three points 
in response to this. First, as I said in response to an earlier 
question that the sustainable growth rate formula is not an 
element of health reform as following the preceded health 
reform and that will continue after----
    Mr. Bucshon. But that is always reversed with the doc-fix, 
which is part of the assumption of your savings in the 
Affordable Care Act. Is that correct or incorrect?
    Mr. Van de Water. But the second point that I believe has 
also been referenced is that I and a colleague looked at all of 
the payment, Medicare payment reductions that were required by 
Medicare recent legislation over quite a number of years. And 
we found that with--in almost all cases, with a sustainable 
growth rate formula being the primary exception, that those 
payment reductions were allowed to go into effect. So that if 
one based--generalizes based on past experience, that one 
should not necessarily conclude that the payment reductions 
contained in the Affordable Care Act will not go into effect.
    Thirdly, even if Congress decided to change those 
provisions in the future, those changes would have to be paid 
for and would not add to the deficit. So that does not--none of 
that suggests that the CBO's scoring is in any sense incorrect.
    Mr. Bucshon. Well, history will tell us, but past history 
has told us that the effects of the decreasing reimbursement 
have always been reversed, historically, and that those savings 
and assumptions in the Affordable Care Act will ultimately 
prove not to be true.
    Mr. Van de Water. But actually, sir, that is not correct. 
Even looking at the sustainable growth rate formula by itself, 
that some of the reductions required by that did go into 
effect. Moreover, many of the recent changes have been offset 
and have been paid for and have, therefore, not up to this 
point, added to the deficit.
    Mr. Bucshon. Okay. Thank you.
    Mr. Trautwein, many people believe that there will be a 
large number of employers that will drop their private health 
insurance and have their employees go on the exchanges or 
Medicaid. If a large number of employers, more than the 
expected number, drop their health insurance coverage, what 
effect will this have on the cost projections for the 
Affordable Care Act, going forward?
    Mr. Trautwein. I think it could vastly increase the federal 
outlays for subsidies in the exchanges that could cause costs 
to greatly increase. Now, I don't think there is going to be a 
bottom dropping off in January 1, 2014. But I think you will 
see--but partly because of the differential item I showed in my 
oral testimony, between the cost of providing care versus the 
penalty amounts, you are going to gradually see an increasing 
movement away from employer-sponsored plans, not all at once. 
But accumulatively, I think that is going to increase.
    Mr. Bucshon. So over the course of the, say, the next two 
or three decades, you see that occurring? And then your 
projection on the overall federal government expense for health 
care would see a dramatic increase, compared to what the 
current estimates are?
    Mr. Trautwein. In my opinion, yes.
    Mr. Bucshon. Thank you.
    Chairman Kline. The gentleman's time has expired.
    Mr. Tierney?
    Mr. Tierney. Thank you, Mr. Chairman.
    Ms. Johnson, I feel your pain, as a former small-
businessperson who represented a lot of small businesses, was a 
president of a local chamber of commerce. I agree that our 
private insurance companies were jacking up our premiums over 
and over again. Every quarter, the price would go up, and it 
was difficult.
    And I think in part we are trying to make the private 
insurance companies more accountable for it, or at least 
provide some relief for consumers here. And that is a part of 
the act on that.
    We have had some talk about cost containment. So I want to 
talk about what most health economists, about 250 that I am 
knowledgeable about, thought was a bill that had in it almost 
every cost-containment provision that policy analysts have 
considered effective in reducing the growth of medical 
spending. And that is referring to the ACA, the Affordable Care 
Act.
    So, Mr. Trautwein, I want to ask you. If you had your 
druthers and we are starting from scratch, would a bill that 
you were drafting include payment innovations like bundled 
payments and accountable care organizations that reward 
providers based on the value of their care, and not just the 
volume of their procedures?
    Mr. Trautwein. Certainly, many of the----
    Mr. Tierney. Okay, so you would?
    Mr. Trautwein. I would.
    Mr. Tierney. Okay. Would a bill that you were drafting put 
in an excise tax on high-cost insurance plans to make consumers 
more cost-sensitive and discourage excess utilization?
    Mr. Trautwein. I might not do that.
    Mr. Tierney. You might not do that? But you might also do 
it? You are uncertain?
    Mr. Trautwein. It is among the universe of cost reduction 
strategies that we and others have----
    Mr. Tierney. Okay. An independent advisory board that would 
develop and submit proposals to reduce cost growth and improve 
quality in both Medicare and the health care system as a whole, 
would you provide for one of those in your bill?
    Mr. Trautwein. Again, these are part of the universe----
    Mr. Tierney. But would you or would you not? Or you are 
uncertain?
    Mr. Trautwein [continuing]. That we work with the Finance 
Committee, Congressman.
    Mr. Tierney. Okay. A center for Medicare and Medicaid 
innovation, that is a center that would test, evaluate and 
foster rapid expansion of new ways to increase the value of 
care, would you think that would be a good thing to put in your 
bill?
    Mr. Trautwein. I think it is a positive idea----
    Mr. Tierney. Measures to inform patients and pay as to what 
the quality of health care providers, would that be something 
you would put in your bill?
    Mr. Trautwein. We have supported that as well.
    Mr. Tierney. Okay. Increased funding for comparative 
effectiveness research so people would know which procedures 
work better than others?
    Mr. Trautwein. I am less sure of that.
    Mr. Tierney. Okay. Promote wellness and prevention, 
provisions that do that, would you include those in your bill?
    Mr. Trautwein. Not in their present form----
    Mr. Tierney. Well, but would you have provisions in there 
for----
    Mr. Trautwein. First dollar coverage for preventative care. 
But preventative care----
    Mr. Tierney. But you would put provisions in there with 
respect to wellness and prevention?
    Mr. Trautwein [continuing]. Itself is very important. I am 
sorry, sir?
    Mr. Tierney. You would put provisions in there regarding 
wellness and prevention?
    Mr. Trautwein. Most----
    Mr. Tierney. All right. Would you consider an exchange, a 
group of insurance companies that would participate and 
compete, that would lower costs with their competition, 
increase innovation, would that be something you would consider 
putting in your bill?
    Mr. Trautwein. Their group purchasing has been a common--
this committee has worked on association health plans and 
small-business health plans for a year. How the exchanges under 
the Affordable Care Act actually are going to work in progress, 
that is the unknown.
    Mr. Tierney. Would you provide for some sort of way to 
increase competition, innovation on that so that companies 
would compete against each other?
    Mr. Trautwein. I would. I am reluctant on the exchange 
structure.
    Mr. Tierney. But you would have something in there that----
    Mr. Trautwein. Certainly. Certainly.
    Mr. Tierney. Okay. The medical loss ratio provisions, where 
we finally say to small-business carriers and large-business 
carriers that no less than 80 or 85 percent of your premium 
dollar has to be spent on actual health services. They no 
longer can keep jacking up your CEO salaries, your bonuses, 
your dividends and all of that and your management costs at the 
expense of the consumer. And if you don't do it, you get a 
rebate, which in this case, the health and human services 
estimates that about $322 rebate per average will come out for 
people in the individual market, and $164 for people in the 
small-business market.
    So the companies have to tell us what they are spending 
their money on. It has to be transparent. Consumers will see 
it. And if they don't meet those marks of 80 to 85 percent of a 
premium dollar spent on health services, they are getting a 
rebate. Would that be something you would consider in there?
    Mr. Trautwein. Not in its present form. It has been a very 
crude instrument. And greater transparency, absolutely.
    Mr. Tierney. Would you--do you think that insurance 
companies ought to have at least some benchmark where they 
spend money on health services as opposed to all the other 
things I mentioned?
    Mr. Trautwein. I am reluctant----
    Mr. Tierney. Lobbyists and, you know, bonuses and things of 
that nature?
    Mr. Trautwein. I am reluctant to see that sort of a 
government fiat.
    Mr. Tierney. So you are okay with those things?
    Mr. Trautwein. But generally, transparency is very helpful.
    Mr. Tierney. Okay. So what is it that--what cost provision 
aspect that most health care analysts and policy analysts have 
would you put in that you don't find already in the bill?
    Mr. Trautwein. For one thing, as has been mentioned, 
medical liability reform would be helpful. I would also----
    Mr. Tierney. So would that two-tenths of a percent of the 
costs of health care in the world here, in the country?
    Mr. Trautwein. A lot of--under the Affordable Care Act, a 
lot of the cost controls are directed through Medicare as its 
role as a market leader, which will help bring that. I would 
have brought those earlier to the private market and tried to 
more quickly reduce the cost of medical care in order to bring 
costs down.
    Mr. Tierney. So you would have the federal government 
impose these on private companies?
    Mr. Trautwein. Not impose those, but make those more widely 
available and encourage those.
    Mr. Tierney. Well, so, you just want to wish they would do 
it as opposed to require it?
    Chairman Kline. The gentleman's time has expired.
    Dr. Foxx?
    Mrs. Foxx. Thank you very much, Mr. Chairman. I would like 
to yield my time to Dr. Roe.
    Mr. Roe. I thank the gentlelady for yielding.
    I would like to pose a question. Does anyone on the panel 
think that seeing a doctor is part of health care? A show of 
hands. You think seeing your physician has anything to do with 
health care?
    Mr. Trautwein. Yes.
    Mr. Roe. Well, thank you. Because that is what the 
sustainable growth rate does. If we don't pay our physicians--I 
just talked to a medical oncologist in downtown Manhattan 
yesterday who is barely able to keep his practice open because 
of the reimbursement he is getting from Medicare. So what did 
we do with this plan? And we do need health care reform. Let me 
make that very clear. I am all for that and have many ideas 
about it, none of which were listened to during the debate. But 
I have many ideas.
    We are taking $500 billion out of an already under-funded 
Medicare plan, and we are adding 3 million people per year to 
that plan. And the boomers start this year. So I can promise 
you, going over time, when you have got more people chasing 
fewer dollars, you are going--and you are paying your doctors 
less, your providers less, you are going to decrease access, 
increase costs and decrease quality. I can promise you that is 
absolutely what will happen.
    We are seeing in Tennessee right now we are having a very 
difficult time getting our Medicare patients seen and almost 
impossible in some specialties to get our TennCare, or 
Medicaid, patients seen, which we have just expanded. If we had 
taken the $500 billion and shored up the Medicare system, 
certainly with SGR--and a lot of people don't know what that 
is. It is a formula about how doctors are reimbursed. Also in 
the Medicare plan, we are going to reduce payments to 
hospitals, to outpatient care, to hospice care and so on.
    The other question, Mr. Trautwein, I want to ask you--if 
this plan, if this health care plan is so great, why did 700 
plus companies opt out of it?
    Mr. Trautwein. I think in terms of the--in terms of HHS and 
the waivers, this has to do with a corner of the Affordable 
Care Act, which in two aspects impinged upon limited benefit 
plans, both the restrictions on annual benefit limits as well 
as the medical loss ratio standards. Had the law been devised 
better, you might not have had that problem of taking coverage 
off the table for 1.4 million American lives.
    But, you know, I would not have written the law that 
direction. But the steps that the administration has taken to 
deal with this coverage, both in terms of insurers who issue 
this coverage on a fully-insured basis in the market, which is 
where most of the mini-med coverage comes in the market, there 
are some companies who self-fund that coverage. And that is 
where some of this amount goes. But they really backed 
themselves into a corner and have created a process, though 
generally not suspect, it creates an appearance of a problem.
    Mr. Roe. I think the other thing that we noticed in 
Tennessee was is that half the people that got on TennCare had 
private health insurance coverage and dropped it when the 
public plan came out there. And we also noticed when we cut 
off--when the governor had to, because of cost constraints, 
half the people went back on their private health insurance. So 
they dropped it, which is exactly what is going to happen in 
this exchange. I have already seen that occur already in our 
state.
    I think one of the things that disturbs me about this is 
when government decides what I as an individual need as health 
insurance, what--and I can't make that decision for myself, my 
family or my business. The government decides that. I think you 
have just empowered--I don't think it was intentionally done.
    But I think you empower the very people you didn't want to, 
which are the lobbyists, because they are going to come to me 
and say, ``Look, I have got the greatest knee replacement,'' 
or, ``I have got the greatest procedure,'' or whatever. It may 
not help me as a consumer, but I have got to pay the extra 
costs, either as a business or as an individual.
    And one of the things you could do to make health insurance 
much cheaper--one of the years for me was letting me as an 
individual deduct my premium, just like a business does. That 
would have been very simple. You could have lowered my costs by 
35 percent by doing that.
    Dr. Howard?
    Mr. Howard. Well, I think that medical malpractice reform 
is also tremendously important because it changes how doctors 
practice. Their perception that they have to provide tests or 
services or even hospitalization that they don't think are 
medically necessary out of the fear of getting sued is an 
enormous problem that even outweighs the direct cost of the 
medical malpractice premiums that you face.
    And I would also take issue with the idea that the SGR is 
something that could be left out of health care reform. It is 
the most critical--as you put it, the most critical aspect of 
health care is getting to see a doctor. So putting, you know, 
doctors outside of the health care reform and then saying, ``We 
are going to fix this later,'' I think, is the wrong approach.
    Mr. Roe. Thank you.
    Chairman Kline. The gentleman's time--gentlelady's time has 
expired.
    Mr. Payne?
    Mr. Payne. Thank you very much.
    Ms. Johnson, you are the one where the rubber meets the 
road. I understand you are a very successful entrepreneur with 
your daycare business and doing very well. And although my 
colleagues have asked you some questions, I was not in the 
room. So I would just like to once again--because I think you 
are probably the most important person at the table, in 
deference to the men here, all due respect.
    In your testimony, you state that a renewal of your 2010 
policy would have resulted in about an 18 percent premium 
increase. And you attribute this, of course, to the new mandate 
and administrative costs associated with the new health care 
provisions taking effect this year. Now, however, it is my 
understanding that the costs for individual and employee--
employer premiums have skyrocketed in the past decades, which 
underscores the need for the Affordable Health Care Act, in my 
opinion.
    Now, a Kaiser Family Foundation study found that between 
1999 and 2009, the premiums for health care more than doubled. 
And I have a son who is in local government. And he says that 
the cost of health care with your employees and city 
participants is just going through the roof. So the costs of 
health care seem to continue to go up.
    On the other hand, preliminary studies of the impact of the 
affordable health care have already reported a growth of health 
care coverage among small businesses, including those not 
mandated under the new law as a result of the cost-saving 
provisions. Now, I know my ranking member from New Jersey, Mr. 
Holt, asked the question, they tell me. But it seems that the 
findings match reports from insurers who share that the number 
of small businesses purchasing coverage has increased nearly 60 
percent in some areas.
    Insurers and the Department of Health and Human Services 
report that the new provisions have only contributed to 1 to 2 
percent of the premium increases this year with expected 
reductions over time. Now, although these provisions make 
health insurance coverage more affordable and will level the 
playing field for companies such as your company, Rainbow 
Station, who currently provide health care--and I really 
commend you for that, because, as we know, all companies of 
your nature do not--and have historically subsidized the un-
offsetted care for those who do.
    So just take into account these reports and the fact that 
health care reform was not the leading cause of your 18 percent 
increase, but rather, the way we see it, will curb and reduce 
the premiums over the next 3 years. If that could be proven to 
you, would you have a different attitude towards this health 
care reform bill?
    Ms. Johnson. I guess we are talking about several things 
here. The increase in access that you referenced a 6 percent 
increase, there are some small businesses that have increased 
access to care, probably the very small businesses that were 
impacted with the tax credit that has been referenced several 
times. I am not eligible for that. I have more than 50 
employees. In order to access the tax credit, you have to have 
less than 50 employees and an income limit of $25,000. I don't 
get that. I am not eligible.
    So I think that, in effect, worked. And I am saying that I 
don't think we need to throw the baby out with the bathwater. 
And there are some things that worked. And as we go forward and 
maybe take it off the table and pick what worked and what 
didn't work, then that is a good thing.
    The other thing that we are talking about is cost. And it 
would assume, from the business owner on the street, that this 
Affordable Care Act would impact the costs of health care. My 
rates went up for two reasons, once because of just the rising 
costs of health care, but also because of this--the impact of 
this Affordable Care Act and provisions that I had to add to my 
policy that I had not had prior.
    So I think there is so many things that are here that we 
are talking about. I don't think that this Affordable Care Act 
really has addressed, as we have had in many conversations, the 
actual cost of health care, which will continue to cause my 
premiums to rise, much like they have over the last years since 
I have been in business.
    I think that the Affordable Care Act has increased some 
access. But I do think that businesses like mine, which are the 
mid-sized small businesses, the ones that are really providing 
jobs on the street, that are growing and adding jobs, we are 
the ones that are hit by the costs of this increasing, albeit 
whatever nature it is, 1 to 2 percent for me. It was 3 to 5 
percent directly related to the Affordable Care Act--that it is 
on the backs of mid-sized businesses.
    And it seems to me if we are the job creators, if we are 
the ones that are going to provide jobs and help us pull out of 
this economic slump that we have been in, then burdening us 
with more operating costs to the--that will take money from our 
bottom line and give us less money to grow our businesses, less 
money to provide jobs, then something is wrong. So I don't know 
how to fix it. I am just telling you that it is a problem.
    Chairman Kline. The gentleman's time has expired. Thank 
you.
    Ms. Woolsey?
    Ms. Woolsey. Thank you, Mr. Chairman.
    And thank you to the panel. We have heard a lot of things. 
We have heard about reeling premium costs. We have heard about 
reeling health care costs. We have heard let us start over. The 
Patient Protection Affordable Care Act was--it put in place in 
order to address these reeling costs. And it was supposed to be 
a start, not a finish. And there is a lot we could do, 
including the--a robust public option that would save more 
money, that would provide the competition we need in the 
exchanges and bring down costs all the way around.
    But instead, I hear a lot of you talking about let us get 
rid of it, and a lot of my colleagues on the other side of the 
aisle. I want to ask you who do you and where do you think the 
impetus would have come to stop this--these reeling costs of 
benefits and health care premiums and health care costs. Was it 
going to start at the state level? Was it going to start in the 
insurance--the private insurance industry?
    Were the employers going to insist that it happen? When and 
where was this going to begin, if it didn't start here, now 
with a program that--and a policy and a plan that was actually 
flexible enough that we could improve it?
    Dr. Van de Water?
    Mr. Van de Water. Ms. Woolsey, I think you make an 
excellent point, that the things that have to be done to slow 
the rate of health care costs are things that are not always--
are not in many cases going to be simple or easy. They are 
things like imposing an excise tax on high-cost health 
insurance plans.
    They are things like reducing over-payments to Medicare 
Advantage plan. Had we not done those--taken those steps at the 
same time as we were also bringing coverage to an additional 32 
million people, I think there is a strong reason to believe 
that those steps never would have been taken at all.
    Ms. Woolsey. Thank you. Let us go down to the head of the 
line here, Doctor.
    Mr. Howard. Thank you, Congressman. I think I would make a 
couple of different points, one of which is that----
    Ms. Woolsey. No, where would it have started? That is my 
point. That is my point.
    Mr. Howard. All of the above, and bipartisan. I think I 
would have started with bringing everyone to the table and 
having a real bipartisan effort to create health care reform 
because the history shows that successful social policies have 
to have a lot of bipartisan support, which this did not have.
    I think I would have----
    Ms. Woolsey. Well, why didn't that happen under the Bushes, 
then, when the Republicans had the White House?
    Mr. Howard. You are referring to things like the Medicare 
Modernization Act in 2003 or in----
    Ms. Woolsey. I am referring to the Patient Protection 
Affordable Care Act.
    Mr. Howard. Or in 2007 when President Bush proposed 
creating a uniform tax credit for health insurance that was----
    Ms. Woolsey. It did not bring down the costs in premiums 
and health care costs? No. So where would it have started to 
get where we need to go so that you wouldn't think it was 
reeling out of control?
    Mr. Howard. There were a number of initiatives that the 
Bush administration did undertake at--pardon me--HHS and other 
places to increase transparency in the marketplace, offer 
health savings accounts to Americans, which have been 
tremendously popular. I think that we should have started with 
a much more bipartisan process at the beginning of this current 
administration.
    Ms. Woolsey. Okay. Then you just said you want it to be 
partisan because what you just proposed is the most partisan 
thing that we could--that could have been on the table, savings 
accounts. Do you mind if we move on to Ms. Johnson?
    Ms. Johnson. I would say, had we started--we are having a 
debate, and there is lots of things on the table that we are 
discussing. But have we really made progress to where we want 
to go? I would question that.
    I think that there has been something on the table for me. 
And this is my experience. When I became a franchisor and 
franchised my business, I was really excited, naively, to think 
that as I grew my business, I could lower my health care costs 
because my pool would be larger by adding schools across the 
country. Sadly, that was not the case because insurance cannot 
be transported across the state lines.
    And I think that, which has been on the table for some 
time, would be a really positive step to add the 
competitiveness to the marketplace, allow me to insure my 
entire franchise and lower my premiums. So that is something 
that has been on the table. And maybe that is a start that is 
really has not crossed the finish line.
    Ms. Woolsey. Thank you.
    Neil Trautwein?
    Mr. Trautwein. We have seen a lot of efforts in the private 
sector, Civil Business Group on Health, for one example. Peter 
Lee from PBGH is now in the administration and is giving us 
some hope that we are going to be able to make some progress on 
it. Employers have been a force for reducing the cost of care, 
particularly from a preventative health care standpoint and a 
lot of the growth in looking at, not only self-professed health 
risks, but also getting into actual monitoring and targeting 
populations. So I think--in answer to your question, I think 
the private sector is overlooked as a source for reducing the 
cost of medical care.
    Chairman Kline. The gentlelady's time has expired.
    Mr. Hinojosa?
    Mr. Hinojosa. Thank you, Chairman Kline. I would ask 
unanimous consent that the statement that I have--a four-page 
opening statement on health care reform's impact on the economy 
be made a part of the record.
    Chairman Kline. Without objection.
    [The statement of Mr. Hinojosa follows:]

Prepared Statement of Hon. Ruben Hinojosa, a Representative in Congress 
                        From the State of Texas

    Chairman Kline and Ranking Member Miller, thank you for convening 
today's hearing on Health Care Reform and its impact on our workforce, 
employers and economy.
    As it stands, some of health care reform's most critical pieces 
have not been implemented. However, the pieces of the law that have 
gone into effect have proved critically important for my constituents. 
Children that are 26 and under can stay on their parent's health 
insurance policy.
    Seniors are receiving rebates as they enter the donut hole and 
struggle to afford to their costly medications on a fixed-income.
    Small businesses that offer health insurance to their employees are 
taking advantage of tax credits that make health insurance affordable 
and provide employers a competitive edge.
    Over a million young adults are now on their parent's health plan. 
In my district there are 66,000 young adults that can now stay on their 
parent's plan as they transition from school to their careers.
    About 11,000 small businesses in my district qualify for tax 
credits to help them pay for the cost of covering their employees
    In the short time these credits have been available there has been 
a 13% increase in small employers offering coverage. Now 59% of small 
businesses are able to provide coverage to their employees
    The CBO has estimated that that health reform will lower the cost 
of a given plan in the small employer market by 1 to 4 % in 2016.
    The American health care system, its attendant inefficiencies, and 
the debilitating effect it had on American competiveness required this 
Congress to act in the 111th Session by enacting law that would expand 
the risk pool, contain costs, especially for small businesses, and make 
coverage more affordable.
    I believe as the law is rolled out, as the administration works 
with businesses to help them understand their obligations and benefits, 
and as we in Congress improve on components of this bill, our economy 
will continue to strengthen, aided by the major provisions of the 
Affordable Care Act.
                                 ______
                                 
    Mr. Hinojosa. I would like to go right into the questions 
and ask Dr. Van de Water--in your testimony, you state that 
health reform will increase labor market flexibility because 
the Affordable Care Act could reduce job lock. Many of my 
constituents in the 15th Congressional District that I 
represent in Texas have asked for more affordable health 
insurance and for more economic certainty in situations where 
they lose their employer-based health insurance. Please expand 
on how the Affordable Care Act will reduce job lock and whether 
it will result in a more robust economy.
    Mr. Van de Water. Certainly, Congressman. I think there are 
two simple examples or major cases to cite. First of all, for 
someone who is--looking at someone who is currently working for 
an employer that does offer health insurance, now if he wanted 
to take another job that doesn't offer health insurance, that 
person, he or she, will be able to obtain health insurance as 
an individual through the new health insurance exchanges with 
guaranteed issue that the person won't be able to be turned 
down because of his or her health condition.
    And the person will also pay rates that are not higher, 
depending upon his health status. So that will enable a person 
to change jobs.
    Similarly, if a person would--for example, someone age 63 
who might have liked to retire from the workforce, but isn't 
yet eligible for Medicare. That person might be able to stop 
working or to cut back his or her hours and, again, take a job 
that didn't offer insurance and obtain it through the health 
insurance exchange. So it would give a person a lot more 
flexibility.
    Another key example is a person who want to go off and set 
up his or her own business as a self-employed individual. That 
person could also now get a health insurance when under current 
arrangements, it might be unavailable and unaffordable.
    Mr. Hinojosa. I would like to now ask Mr. Neil Trautwein. 
The National Retail Federation recognizes that increasing 
access to health insurance will spread risks and reduce costs. 
Part of NRF's vision for health care reform recommends that 
Congress consider requiring individuals to obtain insurance, 
but not to require the employers. The Affordable Care Act 
implemented both employer and individual responsibility 
provisions that built upon our existing employer-based health 
insurance system in attempts to fairly balance responsibility 
among the individuals and the employers.
    Given that the employer mandate exempts small businesses 
and, according to CBO, applies to only--to 4 percent of 
employers nationwide, those with 50 or more full-time 
employees--question: Do you still propose to exempt all 
businesses and increase the burden even more on the 
individuals?
    Mr. Trautwein. The National Retail Federation does not 
support at present an individual mandate. We encouraged 
consideration of one to deal with the problem of risk selection 
at that time. We also proposed building from the existing base 
of employer-based coverage, not by mandating it, but by making 
it easier for employers to continue to provide this.
    The problem with the particular architecture of the 
Affordable Care Act is that there are substantial incentives to 
pay the lesser penalty amount rather than pay for coverage and 
face the possibility of additional penalties for providing 
coverage that exceeds an income threshold for some workers, the 
family income threshold. And also, there is a provision in 
there for folks slightly above that level that will let them 
exit the employer plan and take the employer contribution with 
them, the so-called free choice voucher.
    So I think, in our view, the architecture of the Affordable 
Care Act is flawed, and it may undercut the employer-based 
system in a much more substantial way after 2014 than would be 
wise under this--would have otherwise been wise.
    Chairman Kline. Thank you. The gentleman's time has 
expired.
    I want to thank--in fact, we have reached the end of the 
hearing. I want to thank the witnesses for their great 
testimony and for their forthright answers to the questions and 
for your patience as we are shifting back and forth.
    Mr. Miller and I were just talking about one of the 
outgrowths, one of the consequences, if you will, of the new 
plan to protect committee time so we didn't have to get up and 
walk away for votes, is every committee is having hearings at 
the same time. So I thank you very much for your patience.
    I now recognize Mr. Miller for any comments he would like 
to make.
    Mr. Miller. I thank the gentleman. Again, Mr. Chairman, 
thank you for having this hearing. I think this is a good 
airing of a lot of the subjects and concerns that have been 
raised.
    And I want to thank the witnesses for participating and the 
members. I would like to introduce into the record a paper from 
the Main Street Alliance and also from the Small Business 
Majority. Both of these items have been given to the majority 
prior to my request.
    Chairman Kline. Absolutely. Without objection.
    [Additional submissions of Mr. Miller follow:]

        Prepared Statement of J. Kelly Conklin and David Borris,
                 on Behalf of the Main Street Alliance

    Chairman Kline and Members of the Committee: We appreciate this 
opportunity to provide written testimony on behalf of the business 
owners in the Main Street Alliance network for the February 9 hearing 
on the health care law's impact on the economy, employers, and the 
workforce.
    The Main Street Alliance is a national network of small businesses 
dedicated to ensuring that small business owners have the opportunity 
to speak for ourselves on issues that impact our businesses, our 
employees, and our local economies. In 2009, we both had the 
opportunity to testify before congressional committees on the topic of 
health care, sharing our personal stories and speaking about the 
urgency of reforming health care to make it work for small businesses.
    The February 9 hearing was called to explore the impact of the new 
health care law on the economy, employers, and the workforce. From our 
perspective as small business owners, this impact is clear and 
positive: from the new small business tax credits to new protections 
like rate review and a value for premiums requirement, the health law 
is already throwing a lifeline to small businesses and creating 
opportunities for businesses to offer health coverage, save money on 
premiums, and plow those savings back into business investment and job 
creation.
    While some may raise concerns about the employer responsibility 
requirement for businesses with more than 50 workers, the fact remains 
that over 95 percent of our nation's businesses have less than 50 
workers (and so would not be subject to this requirement), and 95 
percent of businesses with more than 50 workers already offer health 
coverage. Indeed, this provision only reinforces what the vast majority 
of larger employers already do, and ensures that responsible employers 
who offer good-paying jobs with health benefits aren't undercut by 
competitors who shun these responsibilities.
    A much bigger issue--indeed, a true threat to small businesses and 
our ability to create jobs--is runaway health insurance costs. For 
example, in early 2010 (before the health care law was passed), one of 
us received a letter from our insurer offering to renew our current 
coverage at an increase of 124 percent. The escalation of health 
insurance rate increases is simply not sustainable for small 
businesses. Thankfully, the health care law includes a series of 
provisions that will begin to rein in these increases and cut costs for 
small businesses like ours. These provisions include:

Small Employer Health Premium Tax Credits
    Business owners in our network from Portland, Maine to Portland, 
Oregon are already benefiting from the new tax credits effective for 
tax year 2010. Jim Houser, owner of Hawthorne Auto Clinic in Portland, 
Oregon with 15 employees, expects to receive a credit of between $5,000 
and $10,000 on his health insurance bill. That's serious savings for a 
small business. Jim has described the tax credit as a ``time machine,'' 
turning the clock back on his insurance rates.

Premium Rate Review
    After years of enduring double-digit rate increases with no 
recourse, small businesses like ours are encouraged that our states 
have new tools and new resources to review insurance rates and require 
insurers to provide justification for unreasonable rate increases. This 
is one of the most direct ways to protect small businesses and help us 
do our part to create jobs and grow the economy. There is a high level 
of market concentration in the health insurance industry and true 
competition--competition based on consumer value rather than 
competition based on cherry-picking risk pools--is largely absent. That 
is why we need robust rate review--to ensure that we're getting a fair 
shake.

Medical Loss Ratio Requirements
    As small business people, we understand that the most important 
thing about a business is the value you provide to your customers. Yet 
the insurance industry has lost sight of that. The new minimum medical 
loss ratio requirements will restore a focus on providing us with value 
for our premium dollars. And if insurers fail to meet this basic 
standard, insurance customers like us will receive cash rebates 
starting next year--potentially to the tune of hundreds of millions of 
dollars.

State Insurance Exchanges
    The state insurance exchanges due to come online in 2014 will level 
the playing field for small businesses. By creating a mechanism whereby 
we can band together and shop for coverage in one large pool, the 
exchanges will give us bargaining power, risk pooling, and greater 
choice.
    The repeal of the health law or the undermining of its core 
provisions would cause serious harm to small businesses (see attached 
fact sheet). Certainly, there are improvements that can and must be 
made to the law. For example, the 1099 reporting provisions and the 
paperwork burden they would create demand immediate attention. We were 
heartened that a majority of House members voted to fix this problem 
last summer (HR 5982, 7/30/2010), and we are confident that the current 
Congress will get this problem fixed with appropriate speed. We are 
also confident these types of improvements can be made without 
undermining the core cost containment provisions and other protections 
contained in the Affordable Care Act.
    The year 2010 saw a dramatic uptick in the percentage of small 
businesses offering health coverage: among businesses with 3-199 
employees, the offer rate increased by 9 percentage points; among those 
with 3-9 employees, the offer rate increased 13 points, from 46 percent 
to 59 percent. This is a promising trend, and we need to keep forging 
ahead, not return to the flawed health care system of the past.
    With proper implementation of the health care law, we can truly 
level the playing field for small businesses like ours. The law 
promises to benefit small businesses and the American economy by 
stabilizing our health insurance costs and allowing us to focus on what 
we do best: creating jobs and providing important goods and services to 
communities across America.
            Thank you,
                                   J. Kelly Conklin, Owner,
                      Foley-Waite Associates, Inc., Bloomfield, NJ.
                                       David Borris, Owner,
                            Hel's Kitchen Catering, Northbrook, IL.

             Bad for the Bottom Line: How Rolling Back the
            Affordable Care Act Would Harm Small Businesses

Small Businesses are Moving Forward on Health Care
    The percentage of small businesses offering health coverage to 
their employees rose significantly in 2010. For businesses with 3-199 
employees, the health insurance offer rate increased 9 percentage 
points. This increase was driven by an even greater spike among the 
smallest businesses: the offer rate among businesses with 3-9 workers 
rose 13 percentage points, from 46 percent to 59 percent.\1\
---------------------------------------------------------------------------
    \1\ Kaiser Family Foundation and Health Research & Educational 
Trust, ``Employer Health Benefits: 2010 Annual Survey,'' September 
2010, p. 38, http://ehbs.kff.org/pdf/2010/8085.pdf.
---------------------------------------------------------------------------
Repeal of the Affordable Care Act Would Harm America's Small Businesses
    Attempts to cast repeal of the Affordable Care Act (ACA) as ``good 
for small businesses'' obscure what repeal would actually do. Here are 
the facts:
    Repeal would raise taxes for small businesses that qualify for the 
new premium tax credits.
     Starting for tax year 2010, small businesses may be 
eligible for health premium tax credits valued at $38 billion over a 
ten year period.\2\ As many as 4 million businesses may qualify for a 
credit, and about 1.2 million businesses could qualify for the maximum 
credit of 35 percent of their insurance contributions (increasing to 50 
percent in 2014).\3\
---------------------------------------------------------------------------
    \2\ Congressional Budget Office letter to Senate Majority Leader 
Harry Reid, December 19, 2009, p. 6, http://www.cbo.gov/ftpdocs/108xx/
doc10868/12-19-Reid--Letter--Managers--Correction--Noted.pdf.
    \3\ Families USA and Small Business Majority, ``A Helping Hand for 
Small Businesses: Small Business Tax Credits,'' July 2010, pp. 3-4, 
http://www.familiesusa.org/assets/pdfs/health-reform/Helping-Small-
Businesses.pdf.
---------------------------------------------------------------------------
     Up to 16.6 million people are employees of small 
businesses that will be eligible for the credit between 2010-2013.\4\
---------------------------------------------------------------------------
    \4\ S. R. Collins, K. Davis, J. L. Nicholson, and K. Stremikis, 
``Realizing Health Reform's Potential: Small Businesses and the 
Affordable Care Act of 2010,'' The Commonwealth Fund, September 2010, 
p. 7 [hereinafter Collins].
---------------------------------------------------------------------------
    Repeal would leave small businesses vulnerable to continuing price 
gouging by insurers.
     The ACA gives states new tools and resources to require 
insurers to justify their rate increases.
     Without robust rate review, insurers will continue to 
raise rates at their whim. The most recent example: Blue Shield of 
California, which recently announced combined rate hikes of up to 59 
percent, and then thumbed its nose at the state's insurance 
commissioner when he attempted to delay the hikes.\5\
---------------------------------------------------------------------------
    \5\ Bobby Caina Calvan, ``Blue Shield stands by California health 
care premium hikes,'' Sacramento Bee, January 15, 2011, http://
www.sacbee.com/2011/01/15/3325248/blue-shield-stands-by-
california.html.
---------------------------------------------------------------------------
    Repeal would eliminate the guarantee of a basic standard of value 
for premium dollars.
     Under the ACA, if insurers fail to meet new minimum 
medical loss ratios (MLR), they'll owe a rebate to customers.
     Projections for the small group market give a mid range 
estimate of $226 million in rebates, or about $312 per person receiving 
a rebate, for 2011. Individual market estimates add another $521 
million.\6\
---------------------------------------------------------------------------
    \6\ Federal Register / Vol. 75, No. 230 / Wednesday, December 1, 
2010 / Rules and Regulations, pp. 74907-74908, http://
edocket.access.gpo.gov/2010/pdf/2010-29596.pdf.
---------------------------------------------------------------------------
    Repeal would gut consumer protections for small business owners, 
employees, and their families.
     The ACA puts in place important consumer protections: for 
example, a ban on pre-existing condition exclusions, new limits on 
insurance caps, and the ability to keep children covered up to age 26. 
These protections directly benefit health insurance customers in the 
small group and individual markets where small businesses get coverage.
    Repeal would renege on the promise of choice, bargaining power, and 
risk pooling in insurance exchanges.
     Starting in 2014, small businesses with up to 50 employees 
(100 in some states) and self-employed people will be able to band 
together to shop for coverage in state insurance exchanges, gaining 
bargaining power and leveling the playing field with insurers. An 
estimated 29 million people will get coverage through the exchanges by 
2019 (5 million in small businesses that buy in as a group, and 24 
million more buying in on their own).\7\
---------------------------------------------------------------------------
    \7\ Congressional Budget Office letter to House Speaker Nancy 
Pelosi, March 20, 2010, p. 9, http://www.cbo.gov/ftpdocs/113xx/
doc11379/AmendReconProp.pdf.
---------------------------------------------------------------------------
    Repeal would be bad for our national bottom line.
     The Congressional Budget Office estimated the repeal bill 
would add $230 billion to the federal deficit over 10 years, and much 
more over the following decade.
    The final word on health care repeal: It's bad business for small 
business.
                                 ______
                                 

         Prepared Statement of John Arensmeyer, Founder & CEO,
                        Small Business Majority

    This testimony is submitted in support of the small business 
perspective on the Patient Protection and Affordable Care Act and its 
impact on America's 28 million small businesses and the economy as a 
whole.
    Small Business Majority is a nonprofit, nonpartisan small business 
advocacy organization founded and run by small business owners and 
focused on solving the biggest problems facing small businesses today. 
We represent the 28 million Americans who are self-employed or own 
businesses of up to 100 employees. Our organization uses scientific 
opinion and economic research to understand and represent the interests 
of small businesses.
    We are testifying in support of the Affordable Care Act, which will 
help reduce the cost of insurance and medical care while making 
coverage affordable, fair and accessible. Our research shows that 
reforming our broken healthcare system has been and still is one of 
small business owners' top concerns, and that the majority of small 
employers believe reform is needed to fix the U.S. economy. It also 
shows that small businesses support key provisions in the law, 
specifically ones that help them better afford insurance, such as tax 
credits and insurance exchanges, and those that contain costs. 
Controlling skyrocketing costs is essential to ensuring small 
businesses' ability to obtain high-quality, affordable healthcare for 
themselves, their families and their employees. Our research also shows 
that absent reform, these costs would continue to escalate, undermining 
small businesses' success and our economic recovery. The new law goes a 
long way toward fixing our broken system and stemming these spiraling 
costs, while helping to create jobs and stimulate the economy.
    Our research, which is discussed in more detail below, shows the 
impact this legislation will have on small businesses and reveals that 
small businesses support many provisions in the law, especially those 
that benefit them immediately, such as the small business tax credits. 
In July 2010, Small Business Majority partnered with Families USA to 
determine the number of small businesses eligible for a tax credit on 
their 2010 tax returns, one of the key provisions of the Affordable 
Care Act.
     We found that more than 4 million small businesses would 
be eligible to receive a tax credit for the purchase of employee health 
insurance in 2010.\1\
    We also recently commissioned a national survey of 619 small 
business owners to determine their views on the tax credits and 
insurance exchanges, another crucial provision of the Affordable Care 
Act for small businesses. The survey, which was released on Jan. 4, 
2011, found that:
     Both the tax credits and the exchanges, once they take 
effect, make small business owners more likely to provide healthcare 
coverage to their employees;
     One-third of employers who don't offer insurance said they 
would be more likely to do so because of both the small business tax 
credits and the insurance exchanges;
     31% of respondents who currently offer insurance said the 
tax credits and the exchanges will make them more likely to continue 
providing coverage.\2\
    However, the poll also found that the vast majority of small 
business owners don't know the tax credits or exchanges exist to help 
them afford coverage.
    As Congress considers measures to repeal the Affordable Care Act, 
it's important to understand the consequences this would have on small 
businesses and our fragile economy.
     Repealing the law would mean small businesses would lose 
$4 billion per year in healthcare tax credits and many small business 
protections, including a ban on denying coverage for preexisting 
conditions. This provision will provide much-needed help to many 
Americans, including the legions of self-employed individuals--many who 
currently can't get coverage because of this reason;
     Repeal would rob small businesses of their ability to pool 
their buying power through state insurance exchanges, and the various 
cost controls the ACA puts in place would also be lost;
     Repeal would mean an end to the tough enforcement measures 
in the law, which are saving billions in Medicare waste, fraud and 
abuse. This would result in higher taxes for employers and employees to 
fund Medicare, and higher taxes mean fewer jobs.
    These are just some of the disastrous consequences repeal of the 
Affordable Care Act would have on small businesses--consequences that 
are too severe on our nation's primary job creators. Small businesses 
create 70% of new jobs in our country. Spending less on health 
insurance will help them generate larger profits, which will help speed 
our journey down the road to economic recovery.
    My testimony highlights the issues of greatest importance to small 
businesses in the Affordable Care Act. It explains what we have learned 
from our scientific research about both the opinions of small employers 
and the economic impact of reform on small businesses, including the 
consequences repealing the Act would have on them and the economy 
overall. The key issues are:
     Why healthcare costs are killing small businesses and 
sapping our economic vitality;
     How the ACA is already helping small businesses afford 
insurance and provide their employees with coverage;
     Small businesses' No. 1 priority: Controlling the 
skyrocketing cost of health insurance and how the ACA tackles this 
problem;
     What the price of repeal is for small businesses and the 
economy;
     Why sharing the responsibility will strengthen our small 
businesses, their employees and the economy.

Healthcare Costs are Killing Small Business and Sapping Our Economic 
        Vitality
    National surveys of small business owners consistently show that 
the cost of health insurance is their biggest overall problem. In fact, 
the crushing costs of healthcare outranked fuel and energy costs and 
the weak economy for 78% of small business people polled by the Robert 
Wood Johnson Foundation in 2008.\3\
    Small businesses are at a disadvantage in the marketplace largely 
because our small numbers make rates higher. According to research 
supported by the Commonwealth Fund, on average we pay 18% more than big 
businesses for coverage.\4\ Small businesses, including the self-
employed, need a level playing field to succeed and continue as the job 
generators for the U.S. economy.
    We hear stories every day from small business owners who can't get 
coverage because they've been sick in the past or the health plans they 
are offered are outrageously priced. Louise Hardaway, a would-be 
entrepreneur in the pharmaceutical products industry in Nashville, had 
to give up on starting her own business after just a few months because 
she couldn't get decent coverage--one company quoted her a $13,000 
monthly premium.
    Many other businesses maintain coverage for employees, but the cost 
is taking a bigger and bigger chunk out of their operating budgets. 
It's common to hear about double-digit premium increases each year, 
eating into profits and sometimes forcing staff reductions. Small 
business owner Walt Rowen, owner of Susquehanna Glass Co. in Columbia, 
PA, was quoted a 160% premium increase from his carrier last year, 
forcing him to find a new plan. These rising bills frequently force 
business owners to hack away at the insurance benefit to the point 
where it's little more than catastrophic coverage. That leaves 
employees with huge out-of-pocket expenses or a share of the premium 
they can't afford, forcing them to drop coverage. That concerns Larry 
Pierson, owner of a mail-order bakery in Santa Cruz, California, who 
says ``the tremendous downside to being uninsured can be instant 
poverty and bankruptcy, and that's not something my employees 
deserve.''
    Small business owners want to offer health coverage, and our 
surveys show that most of them feel they have a responsibility to do 
so. Small Business Majority conducted surveys of small business owners 
in 17 states between December 2008 and August 2009.\5\ Our key findings 
included:
     An average of 67% of respondents said reforming healthcare 
was urgently needed to fix the U.S. economy;
     An average of 86% of small business owners who don't offer 
health coverage to their employees said they can't afford to provide 
it, and an average of 72% of those who do offer it said they are 
struggling to afford it.
    It should be noted that respondents to these surveys included an 
average of 15% more Republicans (39%) than Democrats (24%), while 27% 
identified as independent.
    The exorbitant cost of insurance means that many small businesses 
are forced to drop coverage altogether. According to the Kaiser Family 
Foundation, 54% of businesses with fewer than 10 employees don't offer 
insurance.\6\
    This makes small business employees a significant portion of the 
uninsured population. Of the 45 million Americans without health 
insurance in 2007, nearly 23 million were small business owners, 
employees or their dependents, according to Employee Benefit Research 
Institute estimates.\7\ And nearly one-third of the uninsured--13 
million people--are employees of firms with less than 100 workers.\8\
    With staffs of 5, 10 or even 20 people, small businesses are tight-
knit organizations. Owners know their employees well and depend on each 
employee for their businesses' success. They don't want to see their 
valuable employees wiped out financially by a health problem, or ignore 
illnesses because they can't afford to go to the doctor.
    The Affordable Care Act addresses all these issues and more. 
Without reform, we will impede our overall economic growth. Small 
businesses with fewer than 100 employees employ 42% of American 
workers.\9\ Traditionally, small businesses lead the way out of 
recessions. Continuing to address the healthcare crisis by implementing 
the Affordable Care Act is essential to our vitality as a nation. A 
repeal of this landmark legislation would send our primary job creators 
back into in a broken system that threatens their competitiveness, 
discourages entrepreneurism and jeopardizes our economic recovery.

The Affordable Care Act Is Already Helping Small Businesses Afford 
        Insurance and Provide Their Employees with Coverage
    Our research shows that small business owners are more likely to 
provide insurance to their employees because of the tax credits and 
exchanges provided through the new healthcare law. As I mentioned in my 
introduction, our most recent research includes a national survey of 
619 small business owners that was conducted from November 17-22, 
2010.\10\ We wanted to gauge how entrepreneurs view two critical 
components of the Affordable Care Act: the small business tax credits--
a provision allowing businesses with fewer than 25 employees that have 
average annual wages under $50,000 to get a tax credit of up to 35% of 
their health insurance costs beginning in tax year 2010--and health 
insurance exchanges--online marketplaces where small businesses and 
individuals can band together to purchase insurance starting in 2014. 
The survey's key findings include:
     One-third (33%) of employers who don't offer health 
insurance said they would be more likely to do so because of the small 
business tax credits;
     31% of respondents--including 40% of businesses with 3-9 
employees--who currently offer insurance said the tax credits will make 
them more likely to continue providing insurance;
     One-third (33%) of respondents who currently do not offer 
insurance said the exchange would make them more likely to do so;
     The same is true for those who already offer insurance, 
with 31% responding that the exchange would make them more likely to do 
so;
     However, most respondents are not familiar with the 
exchange or the tax credits; only 31% of respondents are familiar with 
the exchange and 43% are familiar with the tax credits.
    We believe that once the public, and small business owners in 
particular, become more familiar with the new law, they will understand 
the financial benefits and cost savings it provides. In fact, a Kaiser 
Family Foundation study conducted in January 2010 found that although 
the public was divided overall about reform, they became more 
supportive when told about key provisions. After hearing that tax 
credits would be available to help small businesses provide coverage to 
employees, 73% said it made them more supportive, and 63% felt that way 
after learning that people could no longer be denied coverage because 
of preexisting conditions.\11\
    The huge number of small businesses eligible for a credit on their 
2010 tax returns shows how wide-ranging the benefits of the ACA are: 
Small Business Majority and Families USA's study on the number of small 
businesses eligible for a tax credit on their 2010 tax returns shows 
that more than 4 million small businesses are eligible.\12\ That 
equates to 83.7% of all small businesses in the country. Perhaps even 
more encouraging is that more than 90% of small businesses in 11 states 
are eligible to receive the tax credits, with nearly 1.2 million small 
businesses nationally eligible to receive the maximum credit.
    A recent RAND Health study also examined the impact of the 
Affordable Care Act on health insurance coverage for workers at small 
companies. It found that once the new law takes full effect, the 
percentage of employers that offer insurance will increase from 57% to 
80% for firms with fewer than 50 employees, and from 90% to 98% for 
firms with 51 to 100 employees.\13\ Additionally, a study released Jan. 
24, 2011 by the Urban Institute (funded by the Robert Wood Johnson 
Foundation) also shows the positive benefits of the ACA on America's 
employers. The study debunks claims that the ACA would erode employer-
sponsored coverage by providing incentives for employers to stop 
offering coverage, or that businesses would face increased costs as a 
result of reform. To the contrary, the study found that overall 
employer-sponsored coverage under the ACA would not differ 
significantly from what coverage would be without reform, but that in 
fact employer-sponsored insurance premiums will fall noticeably, by 
nearly 8%, and total spending on healthcare by small businesses will 
also decrease by nearly 9% because of healthcare exchanges and other 
provisions of the new law.\14\
    Analysis after analysis shows that the new healthcare law holds 
significant promise toward empowering small businesses to provide their 
employees with health insurance, and to be able to do so without 
breaking the bank. Instead of repealing the small business health care 
tax credit, Congress should be examining how to expand it in order to 
provide more support to small business.

Small Businesses' No. 1 Priority: Controlling the Skyrocketing Cost of 
        Health Insurance, and How the Affordable Care Act Tackles this 
        Problem
    Small business owners are deeply concerned about the exponentially 
rising cost of health insurance. As Harvard University economics 
professor David M. Cutler notes, while family health insurance premiums 
have increased 80% in the past decade after adjusting for inflation, 
median income has fallen by 5%.\15\ When people have less disposable 
income to spend at local small businesses, small business owners feel 
the squeeze.
    We know from our opinion surveys that small business owners want 
reform to lower these skyrocketing costs and believe it will be good 
for the economy overall.\16\ The Affordable Care Act includes many 
provisions to contain costs. These measures will be felt throughout the 
entire healthcare system, lowering premium costs to small business 
owners and consumers alike. The Congressional Budget Office estimates 
the new law will lower federal deficits by more than $143 billion over 
the next 10 years, and by more than $1 trillion in the following 
decade. While there is still more that can be done to contain costs 
within the system, the new law is a great start. It moves our 
healthcare system toward greater financial stability and provides 
improved access to affordable, quality care for small business owners 
and their employees.
    Along with small business tax credits and insurance exchanges, the 
ACA controls costs by reining in administrative costs for small 
businesses. As previously noted, small businesses pay 18% more on 
average than large businesses for comparable health policies. This is 
largely due to high administrative costs, which can be up to 30% of 
premiums. The law includes administrative simplification programs, 
helping to put the country on a path to lower-cost, standardized 
administrative transactions, processes and forms. Additionally, it 
establishes insurer efficiency standards that require 80% of premium 
dollars be spent on care, not administrative overhead and executive 
compensation, for small group and individual plans. For large groups 
plans, the standard will be 85%. All of these measures will lower the 
time doctors have to spend on paperwork.
    The ACA also includes numerous reforms in Medicare that will reward 
value of care, not the volume of care. It requires the Department of 
Health and Human Services (HHS) to adopt value-based purchasing and 
payment methods for Medicare reimbursements for both physicians and 
hospitals, and move away from the fee-for-service system that is so 
costly and inefficient. What's more, cost containment measures made to 
Medicare will have a ripple effect to other areas of the system, 
further reducing costs. Harvard professor David Cutler points out the 
steps the Affordable Care Act takes to cut these costs:
     Payment innovations including greater reimbursement for 
preventive care services and patient-centered primary care; bundled 
payments for hospital, physician, and other services provided for a 
single episode of care; shared savings approaches or capitation 
payments that reward accountable provider groups that assume 
responsibility for the continuum of a patient's care; and pay-for-
performance incentives for Medicare providers;
     An Independent Payment Advisory Board with the authority 
to make recommendations that reduce cost growth and improve quality in 
both the Medicare program and the health system as a whole;
     A new Innovation Center within the Centers for Medicare 
and Medicaid Services, or CMS, charged with streamlining the testing of 
demonstration and pilot projects in Medicare and rapidly expanding 
successful models across the program;
     Profiling medical care providers on the basis of cost and 
quality and making that data available to consumers and insurance 
plans, and providing relatively low-quality, high-cost providers with 
financial incentives to improve their care;
     Increased funding for comparative effectiveness research;
     Increased emphasis on wellness and prevention.\17\
    Rather than focusing on repeal, lawmakers should focus on improving 
healthcare reform, especially when it comes to cost containment. While 
the new law is a good start toward fixing our system and strengthening 
our economy, we should be bolstering it even more by including 
additional cost containment provisions. This will bring health 
inflation down and help businesses create more jobs.

The Price of Repeal for Small Businesses and the Economy
    The shock of repeal would reverberate throughout the U.S. economy. 
The nonpartisan Congressional Budget Office (CBO) projects repeal would 
add $230 billion over the next 10 years to the federal budget deficit, 
and more than $1 trillion in the decade to follow. The national debt is 
already at its limit, and expanding the deficit would only cause 
additional lack of confidence in our nation's ability to recover from 
the recession.
    When you examine what repeal would mean financially for America's 
28 million small businesses, the picture is even bleaker. In June 2009, 
Small Business Majority commissioned noted economist and Massachusetts 
Institute of Technology professor Jonathan Gruber to apply his 
healthcare economics microsimulation model to the small business 
sector. He focused on businesses with 100 or fewer employees.\18\ Our 
research showed that without reform:
     Small businesses would pay nearly $2.4 trillion over the 
next 10 years in healthcare costs for their workers;
     A staggering 178,000 small business jobs, $834 billion in 
small business wages, and $52.1 in profits would be lost due to these 
healthcare costs;
     Nearly 1.6 million small business workers would continue 
to suffer from ``job lock,'' where they are locked in their jobs 
because they can't find a job with comparable benefits. This represents 
nearly one in 16 people currently insured by their employers.
    In a recent article he wrote for the Center for American Progress, 
Gruber again addressed the issue of job lock.\19\ He noted that ``such 
a system significantly distorts our labor markets by forcing 
individuals to stay in jobs that offer health insurance rather than to 
move to newer and more productive positions where coverage is not 
available. Millions of U.S. workers are not moving to better jobs or 
starting new businesses because there is nowhere to turn for insurance 
coverage should they leave their jobs.''
    The Affordable Care Act remedies this problem and levels the 
playing field to support entrepreneurs willing to take a risk and start 
a new enterprise. Insurance reforms provided in the new law protect 
these entrepreneurs, and the insurance exchanges established by the law 
allow the self-employed and small businesses to pool together for lower 
premium rates.
    The Center for American Progress has also weighed in on what small 
businesses would lose if the Affordable Care Act were repealed. The 
percentage of small businesses offering coverage has decreased from 68% 
in 2000 to 59% in 2007; repeal would ensure that this downward spiral 
would continue. Since 40% of small employers spend more than 10% of 
their payroll on healthcare costs, repeal would cause those already 
providing insurance to do so at the expense of increased wages. This 
would result in less profits, business investment and job creation. 
Additionally, repeal would mean small businesses would continue to pay 
on average 18% more for health insurance than large firms. And they 
won't get the financial relief tax credits and insurance exchanges will 
provide.\20\
    Healthcare reform will also reduce the ``hidden tax'' associated 
with health insurance. Repeal would keep this tax in place. The 
uninsured often delay treating their health problems until they become 
severe, and public and charity programs pick up a share. However, a 
portion remains unpaid. To cover the cost of this uncompensated care, 
health providers charge higher rates when the insured receive care, and 
these increases get shifted to consumers and small businesses in the 
form of higher premiums. This creates a ``hidden health tax'' that 
inflates the cost of premiums.\21\
    Instead of helping us move forward, a repeal of the healthcare law 
would send us back to the status quo and ensure that small businesses 
will be unable to play their historical role as the country's primary 
job creators. In fact, Harvard professor David Cutler projects repeal 
would destroy 250,000 to 400,000 jobs annually over the next decade, 
increase medical spending by $125 billion by the end of this decade and 
add nearly $2,000 annually to family insurance premiums.\22\ His 
summary of what repeal would do to the country is as dismal as it is 
succinct: ``It would hurt family incomes, jobs, and economic growth.''

Sharing the Responsibility: Strengthening Our Small Businesses, Their 
        Employees and the Economy
    The Affordable Care Act requires that all residents purchase 
insurance--a requirement that, while not uniformly popular, is 
necessary in order for reform to be successful. It will ensure a broad 
distribution of health risks in the market and help bring down costs. 
While this requirement has spawned contentious debates, we found that 
many small businesses are willing to help share the responsibility of 
providing insurance if it means lower costs overall and better quality 
insurance. Opinion polling we conducted shows that:
     Small businesses are willing to share the responsibility 
for making health insurance affordable along with insurers, healthcare 
providers, individuals and government, according to an average of 66% 
of respondents. By state, those agreeing with the concept of shared 
responsibility ranged from 59% to 72%.\23\
    We've also found that because so many small businesses are 
bombarded with misinformation, it has made it increasingly difficult 
for them to determine what the law actually requires of them. Most 
small business owners are surprised to learn that they won't be 
required to provide insurance. Businesses with fewer than 50 employees, 
which accounts for 96% of small businesses,\24\ are exempt from all 
requirements in the law. Businesses with 51 employees or more will be 
required to provide insurance, however 96.5% of these businesses 
already cover their workers.\25\
    The provision that all Americans purchase insurance was included in 
the law because businesses and the American people made it clear that 
they wanted to continue an employer-based health insurance system, not 
a government healthcare system, such as Medicare for all or Canadian-
style healthcare insurance. Because 96% of employers with 51 or more 
employees are providing health insurance as well as paying federal 
taxes, it would not be fair to let 4% of employers have a free ride at 
the expense of the 96% of employers currently offering insurance, and 
at the same time have their employees covered by taxpayer funds to 
provide health insurance. Additionally, without the free-rider 
provision large employers would have an incentive to stop providing 
health insurance and let taxpayers provide coverage for their 
employees.
    Small businesses today offer health benefits to attract and retain 
good employees and to be competitive with large businesses. This will 
continue under reform, except that now these small businesses will have 
the benefit of buying health insurance through the state insurance 
exchange--creating market leverage like that of big companies, while 
driving down and stabilizing costs for their employees.

Conclusion
    Healthcare reform is not an ideological issue; it's an economic 
one. Small business owners know this, which is why they overwhelmingly 
support reforming our broken system and containing the skyrocketing 
cost of insurance.
    Without healthcare reform, small businesses will once again be 
mired in a system that drains their coffers and stunts their growth--
disabling them from playing their vitally important role as the 
nation's jobs creators. Harvard professor David Cutler is right when he 
concludes that repeal is ``bad economic policy. The effort to repeal 
health reform will make our current problems worse.'' \26\ We hope 
Congress will spend its time focusing on ways to make implementation of 
the Affordable Care Act as smooth as possible, and instead of trying to 
dismantle it, fix the parts that need improvement. Our small businesses 
and our economic recovery depend on it.

                                ENDNOTES

    \1\ Families USA and Small Business Majority, A Helping Hand for 
Small Businesses: Health Insurance Tax Credits, July, 2010, http://
smallbusinessmajority.org/small-business-research/tax-credit-study.php.
    \2\ Small Business Majority, Opinion Survey: Small Business Owners' 
Views on Key Provisions of the Patient Protection and Affordable Care 
Act, Jan. 4, 2011, http://smallbusinessmajority.org/small-business-
research/small-business-healthcare-survey.php.
    \3\ Robert Wood Johnson Foundation, Study shows small business 
owners support health reform, 2008, http://www.rwjf.org/coverage/
product.jsp?id=36558.
    \4\ J Gabel et al, Generosity and Adjusted Premiums in Job-Based 
Insurance: Hawaii is Up, Wyoming is Down, Health Affairs, May/June 
2006, http://content.healthaffairs.org/content/25/3/832.full.
    \5\ Small Business Majority, State Surveys Highlight Small Business 
Support for Healthcare Reform, August 2009, http://
www.smallbusinessmajority.org/small-business-research/opinion-
research.php.
    \6\ Kaiser Family Foundation/HRET, Employer Health Benefits Annual 
Survey, 2008, http://ehbs.kff.org/2008.html.
    \7\ Employee Benefit Research Institute, Sources of Health 
Insurance and Characteristics of the Uninsured: Analysis of the March 
2008 Current Population, http://www.ebri.org/publications/ib/
index.cfm?fa=ibDisp&content--id=3975.
    \8\ Center for American Progress, What Will Happen to Small 
Business if Health Care Is Repealed, July 23, 2010, http://
www.americanprogress.org/issues/2010/07/small--biz--reform.html.
    \9\ U.S. Bureau of Census, 2006 County Business Patterns
    \10\ Small Business Majority, Opinion Survey: Small Business 
Owners' Views on Key Provisions of the Patient Protection and 
Affordable Care Act, Jan. 4, 2011, http://smallbusinessmajority.org/
small-business-research/small-business-healthcare-survey.php..
    \11\ Kaiser Family Foundation, Americans Are Divided About Health 
Reform Proposals Overall, But the Public, Including Critics, Becomes 
More Supportive When Told About Key Provisions, Jan. 22, 2010, http://
www.kff.org/kaiserpolls/kaiserpolls012210nr.cfm.
    \12\ Families USA and Small Business Majority, A Helping Hand for 
Small Businesses: Health Insurance Tax Credits, July, 2010, http://
smallbusinessmajority.org/small-business-research/tax-credit-study.php.
    \13\ RAND Corporation, ``How Will the Affordable Care Act Affect 
Employee Health Coverage at Small Businesses?'' 2010, http://
www.rand.org/pubs/research--briefs/RB9557/index1.html.
    \14\ Urban Institute, ``Employer-Sponsored Insurance Under Health 
Reform: Reports of Its Demise Are Premature,'' Jan. 24, 2010, http://
www.rwjf.org/coverage/product.jsp?id=71749&cid=XEM--749842.
    \15\ D Cutler, Repealing Health Care Is a Job Killer, Center for 
American Progress, 2010, http://www.americanprogress.org/issues/2011/
01/jobs--health--repeal.html.
    \16\ Small Business Majority, State Surveys Highlight Small 
Business Support for Healthcare Reform, 2009, http://
smallbusinessmajority.org/small-business-research/opinion-research.php.
    \17\ David Cutler, Repealing Health Care Is a Job Killer, Center 
For American Progress, Jan. 7, 2011, http://www.americanprogress.org/
issues/2011/01/jobs--health--repeal.html.
    \18\ Small Business Majority, The Economic Impact of Healthcare 
Reform on Small Businesses, July 2009, http://
www.smallbusinessmajority.org/small-business-research/economic-
research.php.
    \19\ J Gruber, Be Careful What You Wish For, Repeal of the 
Affordable Care Act Would Be Harmful to Society and Costly for Our 
Country, American Progress, Jan 2010, http://www.americanprogress.org/
issues/2011/01/aca--repeal.html.
    \20\ Center for American Progress, What Will Happen to Small 
Business if Health Care is Repealed, 2010, http://
www.americanprogress.org/issues/2010/07/small--biz--reform.html.
    \21\ Kathleen Stoll and Kim Bailey, Hidden Health Tax: Americans 
Pay a Premium (Washington: Families USA, May 2009).
    \22\ D Cutler, Repealing Health Care is a Job Killer, Center for 
American Progress, 2010. http://www.americanprogress.org/issues/2011/
01/jobs--health--repeal.html
    \23\ Small Business Majority, State Surveys Highlight Small 
Business Support for Healthcare Reform, August 2009, http://
smallbusinessmajority.org/small-business-research/opinion-research.php.
    \24\ U.S. Small Business Administration, Office of Advocacy, based 
on data provided by the U.S. Census Bureau, Statistics of U.S. 
Businesses, 2006.
    \25\ Medical Expenditures Panel Survey, Insurance Component, Table 
I.A.2, 2008, available online at http://www.meps.ahrq.gov/mepsweb/
data--stats/summ--tables/insr/national/series--1/2008/tia2.pdf.
    \26\ D Cutler, Repealing Health Care is a Job Killer, Center for 
American Progress, 2010. http://www.americanprogress.org/issues/2011/
01/jobs--health--repeal.html
                                 ______
                                 
                                                  January 26, 2011.
Hon. John Kline, Chairman; Hon. George Miller, Ranking Member,
U.S. House of Representatives, Education and the Workforce Committee, 
        Washington, DC 20515.
    Dear Chairman Kline and Representative Miller: Congress this week 
is holding hearings on the economic impact of health care reform. We 
write to convey our strong conclusion that leaving in place the Patient 
Protection and Affordable Care Act of 2010 will significantly 
strengthen our nation's economy over the long haul and promote more 
rapid economic recovery in the immediate years ahead. Repealing the 
Affordable Care Act would cause needless economic harm and would set 
back efforts to create a more disciplined and more effective health 
care system.
    Our conclusion is based on two economic principles. First, high 
medical spending harms our nation's workers, new job creation, and 
overall economic growth. Many studies demonstrate that employers 
respond to rising health insurance costs by reducing wages, hiring 
fewer workers, or some combination of the two. Lack of universal 
coverage impairs job mobility as well because many workers pass up 
opportunities for self-employment or positions working for small firms 
because they fear losing their health insurance or facing higher 
premiums.
    Second, the Affordable Care Act contains essentially every cost-
containment provision policy analysts have considered effective in 
reducing the rate of medical spending. These provisions include:
     Payment innovations such as greater reimbursement for 
patient-centered primary care; bundled payments for hospital care, 
physician care, and other medical services provided for a single 
episode of care; shared savings approaches or capitation payments that 
reward accountable provider groups that assume responsibility for the 
continuum of a patient's care; and pay-for-performance incentives for 
Medicare providers.
     An Independent Payment Advisory Board with authority to 
make recommendations to reduce cost growth and improve quality within 
both Medicare and the health system as a whole
     A new Innovation Center within the Centers for Medicare 
and Medicaid Services charged with streamlining the testing of 
demonstration and pilot projects in Medicare and rapidly expanding 
successful models across the program
     Measures to inform patients and payers about the quality 
of medical care providers, which provide relatively low-quality, high-
cost providers financial incentives to improve their care
     Increased funding for comparative effectiveness research
     Increased emphasis on wellness and prevention
    Taken together, these provisions are likely to reduce employer 
spending on health insurance. Estimates suggest spending reductions 
ranging from tens of billions of dollars to hundreds of billions of 
dollars. Because repealing our nation's new health reform law would 
eliminate the above provisions, it would increase business spending on 
health insurance, and hence reduce employment.
    One study concludes that repealing the Affordable Care Act would 
produce job reductions of 250,000 to 400,000 annually over the next 
decade. Worker mobility would be impaired as well, as people remain 
locked into less productive jobs just to get health insurance.
    The budgetary impact of repeal also would be severe. The 
Congressional Budget Office concludes that repealing the Affordable 
Care Act would increase the cumulative federal deficit by $230 billion 
over the next decade, and would further increase the deficit in later 
years. Other studies suggest that the budgetary impact of repeal is 
even greater. State and local governments would face even more serious 
fiscal challenges if the Affordable Care Act were repealed, as they 
would lose substantial resources provided under the new law while 
facing the burdens of caring for 32 million more uninsured people. 
Repeal, in short, would thus make a difficult budget situation even 
worse.
    Rather than undermining health reform, Congress needs to make the 
Affordable Care Act as successful as it can be. This would be as good 
for our economy as it would be for the health of our citizens.
            Sincerely,

Henry J. Aaron, Senior Fellow, The Brookings Institution
Jean Marie Abraham, Assistant Professor, University of Minnesota School 
        of Public Health
Randy Albelda, Professor of Economics, University of Massachusetts, 
        Boston
Sylvia A. Allegretto, Economist, University of California, Berkeley
Stuart Altman, Sol C. Chaikin Professor of National Health Policy, 
        Brandeis University
Elizabeth Oltmans Anant, Assistant Professor of Public Policy and 
        Economics, Duke University
Rania Antonopoulos, Director, Gender Equality and the Economy Program, 
        Levy Economics Institute
Kenneth J. Arrow, Professor of Economics Emeritus, Stanford University
Michael Ash, Associate Professor of Economics and Public Policy, 
        University of Massachusetts, Amherst
David Autor, Professor and Associate Head, Department of Economics, 
        Massachusetts Institute of Technology
Susan L. Averett, Charles A. Dana Professor of Economics, Lafayette 
        College
Christopher Avery, Roy E. Larsen Professor of Public Policy, Harvard 
        University, Kennedy School of Government
Rojhat B. Avsar, Assistant Professor of Economics, Columbia College
M.V. Lee Badgett, Professor of Economics, University of Massachusetts, 
        Amherst
El-hadj Bah, Lecturer, University of Auckland
Ron Baiman, Director of Budget and Policy Analysis Center for Tax and 
        Budget Accountability
Asatar Bair, Professor of Economics, City College of San Francisco
Dean Baker, Co-Director Center for Economic and Policy Research
Radhika Balakrishnan, Professor, Women's and Gender Studies, Rutgers, 
        The State University of New Jersey
Nesecan Balkan, Department of Economics, Hamilton College
Erol Balkan, Professor of Economics, Hamilton College
Steve Balkin, Professor of Economics, Roosevelt University
Nina Banks, Associate Professor of Economics, Bucknell University
William Barclay, Adjunct Professor, University of Illinois at Chicago
Drucilla K. Barker, Professor and Director, Women's and Gender Studies, 
        University of South Carolina
David Barkin, Profesor de Economia, Universidad Autonoma Metropolitana-
        Xochimilco
Anirban Basu, Associate Professor, Department of Health Services, 
        University of Washington
Francis M. Bator, Lucius N. Littauer Professor of Political Economy 
        Emeritus, Harvard University, Kennedy School of Government
Charles M. Becker, Associate Chair and Research Professor, Department 
        of Economics, Duke University
Marc F. Bellemare, Assistant Professor, Duke University
Gunseli Berik, Professor of Economics, University of Utah
Carole Biewener, Professor of Economics, Simmons College
Cyrus Bina, Distinguished Research Professor of Economics, University 
        of Minnesota
Christine E. Bishop, Atran Professor of Labor Economics, Brandeis 
        University
Josh Bivens, Economist, Economic Policy Institute
Heather Boushey, Senior Economist, Center for American Progress
Roger Even Bove, Department of Economics & Finance (retired), West 
        Chester University
James K. Boyce, Professor of Economics, University of Massachusetts, 
        Amherst
Elissa Braunstein, Associate Professor, Colorado State University
Clair Brown, Professor of Economics, University of California, Berkeley
Thomas Buchmueller, Waldo O. Hildebrand Professor of Risk Management 
        and Insurance, Ross School of Business, University of Michigan
Colin Cameron, Professor of Economics, University of California, Davis
Jim Campen, Professor of Emeritus, Economics University of 
        Massachusetts, Boston
Kathleen Carey, Associate Professor, Boston University School of Public 
        Health
Ann M. Carlos, Professor, Department of Economics, University of 
        Colorado
Frank Chaloupka, Distiguished Professor of Economics and Director, 
        Health Policy Center, University of Illinois at Chicago
Richard Chapman, Professor of Economics, Westminster College
John Dennis Chasse, Professor Emeritus, State University of New York, 
        Brockport
Howard Chernick, Professor of Economics, Hunter College and the 
        Graduate Center, City University of New York
Raj Chetty, Professor of Economics, Harvard University
Kimberly Christensen, Joanne Woodward Chair of Public Policy, Sarah 
        Lawarence College
Betsy Jane Clary, Professor of Economics, College of Charleston
Paul D. Cleary, Dean of Public Health, Yale School of Public Health
Jonathan Conning, Associate Professor of Economics, Hunter College and 
        the Graduate Center, City University of New York
Karen Smith Conway, Professor of Economics, University of New Hampshire
Philip J. Cook, ITT/Sanford Professor of Public Policy, Duke University
Paul Cooney, Associate Professor, Federal University of Para, Brazil
Richard R. Cornwall, Professor of Economics, Emeritus, Middlebury 
        College
J. Kevin Crocker, Undergraduate Program Director, University of 
        Massachusetts, Amherst
David Cutler, Otto Eckstein Professor of Applied Economics, Harvard 
        University
Rada K. Dagher, Assistant Professor, University of Maryland
Anita Dancs, Assistant Professor, Department of Economics, Western New 
        England College
Charles Davis, Professor, Labor Studies, Indiana University
Susan M. Davis, Associate Professor, Department of Economics and 
        Finance, Buffalo State College
Partha Deb, Professor of Economics, Hunter College and the Graduate 
        Center, City University of New York
Gregory E. DeFreitas, Professor of Economics, Hofstra University
Brad DeLong, Professor of Economics, University of California, Berkeley
Timothy M. Diette, Assistant Professor of Economics, Washington and Lee 
        University
Marisa Elena Domino, Associate Professor of Health Economics, The 
        University of North Carolina
David E. Dowall, Professor, University of California, Berkeley
Arindraijit Dube, Assistant Professor, Department of Economics, 
        University of Massachusetts, Amherst
Niev Duffy, President, Eastern Economic Research
Mark Duggan, Professor of Economics, University of Maryland
Randall P. Ellis, Professor of Economics, Boston University
Elizabeth Elmore, Professor of Economics, Richard Stockton College of 
        New Jersey
Christopher L. Erickson, Professor, UCLA Anderson School of Management
Jose Escarce, Professor of Medicine, David Geffen School of Medicine at 
        UCLA
Loretta Fairchild, Professor of Economics, Nebraska Wesleyan University
Sasan Fayazmanesh, Professor Emeritus of Economics, California State 
        University, Fresno
Steven Fazzari, Professor of Economics, Washington University
Judy Feder, Professor of Public Policy, Georgetown University
Susan Feiner, Professor of Economics, University of Southern Maine
Deborah M. Figart, Professor of Education and Economics, Richard 
        Stockton College of New Jersey
Kade Finhoff, Assistant Professor of Economics, University of 
        Massachusetts, Boston
Jason Fletcher, Assistant Professor of Public Health, Yale University
Nancy Folbre, Professor of Economics, University of Massachusetts, 
        Amherst
Austin Frakt, Assistant Professor of Health Policy and Management, 
        Boston University School of Public Health
Jeffrey Frankel, Harpel Professor of Capital Formation and Growth, 
        Harvard University
Gerald Friedman, Professor of Economics, University of Massachusetts, 
        Amherst
Bianca Frogner, Assistant Professor, The George Washington University
Bill Ganley, Professor of Economics and Finance, Buffalo State College
Lorenzo Garbo, Professor of Economics, University of Redlands
Irwin Garfinkel, Mitchell I. Ginsberg Professor of Contemporary Urban 
        Problems, Columbia University School of Social Work
Paul J Gertler, Li Ka Shing Professor of Health Policy and Management, 
        University of California, Berkeley
Mwangi wa Githinji, Assistant Professor of Economics, University of 
        Massachusetts, Amherst
Devra L. Golbe, Professor of Economics, Hunter College and the Graduate 
        Center, City University of New York
Heather Taffet Gold, Associate Professor of Public Health, Weill 
        Cornell Medical College
Claudia Goldin, Henry Lee Professor of Economics, Harvard University
Don Goldstein, Professor of Economics, Allegheny College
Jose A. Gomez-Ibanez, Derek C. Bok Professor of Urban Planning and 
        Public Policy, Harvard University, Kennedy School of Government
Joshua Goodman, Assistant Professor of Public Policy, Harvard 
        University, Kennedy School of Government
Neva Goodwin, Co-Director, Global Environment and Environment 
        Institute, Tufts University
Elise Gould, Economist, Economic Policy Institute
Ulla Grapard, Associate Professor of Economics and Women's Studies, 
        Colgate University
Daphne Greenwood, Professor of Economics and Director, Colorado Center 
        for Policy Studies, University of Colorado, Colorado Springs
Tai Gross, Assistant Professor, Department of Health Policy and 
        Management, Mailman School of Public Health, Columbia 
        University
Michael Grossman, Distinguished Professor of Economics, City University 
        of New York Graduate Center
Jonathan Gruber, Professor of Economics, Massachusetts Institute of 
        Technology
Kwabena Gyimah-Brempong, Professor and Chair, Department of Economics, 
        University of Souh Florida
Jack Hadley, Professor and Senior Health Services Researcher, George 
        Mason University
Paul Hancock, Professor of Economics, Green Mountain College
Jeffrey S. Harman, University of Florida Research Foundation Professor, 
        University of Florida
Oliver Hart, Professor of Economics, Harvard University
John T. Havey, Professor of Economics, Texas Christian University
Gillian Hewitson, Department of Political Economy, University of Sydney
Richard Hirth, Professor of Health Management and Policy, University of 
        Michigan School of Public Health
Vivian Ho, Baker Institute Chair of Health Economics and Professor, 
        Rice University
Joan Hoffman, Professor and Chair, Department of Economics, John Jay 
        College of Criminal Justice, City University of New York
Ann M. Holmes, Associate Professor, Indiana University-Purdue 
        University, Indianapolis
Barbara Hopkins, Associate Professor of Economics, Wright State 
        University
Jill R. Horwitz, Professor of Law, Co-Director, Program on Law and 
        Economics, University of Michigan Law School
Candace Howes, Professor of Economics, Connecticut College
Hilary Hoynes, Professor of Economics, University of California, Davis
Dorene Isenberg, Professor and Chair, Department of Economics, 
        University of Redlands
Ken Jacobs, Chair, Labor Center University of California, Berkeley
Joyce P. Jacobsen, Andrews Professor of Economics, Wesleyan University
Sanford M. Jacoby, Professor of Management and Public Policy, 
        University of California, Los Angeles
Habib Jam, Associate Professor of Economics, Rowan University
Russell A. Janis, Senior Lecturer in Economics, University of 
        Massachusetts, Amherst
Arjun Jayadev, Assistant Professor of Economics, University of 
        Massachusetts, Boston
Neil Jordan, Assistant Professor and Director, Health Economics Center, 
        Feinberg School of Medicine, Northwestern University
Ted Joyce, Professor of Economics and Finance, Baruch College, City 
        University of New York
Geoffrey Joyce, Director of Health Policy, Schaeffer Center for Health 
        Policy & Economics, University of Southern California
Kyoungrae Jung, Assistant Professor, Health Policy and Administration, 
        Pennsylvania State University
Daniel Kahneman, Professor of Public Affairs, Emeritus, Princeton 
        University
Rajani Kanth, Professor of Economics (Visiting), Loras College & 
        Washington College
Ethan Kaplan, Visiting Professor of Economics, Columbia University
Lawrence Katz, Allison Professor of Economics, Harvard University
Donald Katzner, Professor of Economics, University of Massachusetts, 
        Amherst
Paula M. Kazi, Assistant Professor, Bucknell University
Valerie K. Kepner, Assistant Professor of Economics, King's College
Farida Khan, Professor of Economics, University of Wisconsin-Parkside
Marlene Kim, Associate Professor, Department of Economics, University 
        of Massachusetts, Boston
Steven J. Klees, Professor of Education and Economic Development, 
        University of Maryland
Andrew I. Kohen, Professor Emeritus of Economics, James Madison 
        University
Brent Kramer, City University of New York
Brent Kreider, Professor of Economics, Iowa State University
Jill Kriesky, Economist, West Virginia Center on Budget and Policy
Karl Kronebusch, Associate Professor, City University of New York
Alan Krueger, Professor of Economics, Princeton University
David Laibman, Professor (retired), Deparment of Economics, City 
        University of New York
Melaku Lakew, Professor of Economics, Richard Stockton College of New 
        Jersey
Thomas Lambert, Economics Lecturer, Indiana University Southeast
Robert Lawrence, Albert L. Williams Professor of Trade and Investment, 
        Harvard University, Kennedy School of Government
Arleen A. Leibowitz, Professor, School of Public Affairs, University of 
        California, Los Angeles
David I. Levine, Trefethen Professor of Business Administration, Haas 
        School of Business, University of California, Berkeley
Frank Levy, Rose Professor of Urban Economics, Massachusetts Institute 
        of Technology
Peter M. Lichtenstein, Emeritus Professor of Economics, Boise State 
        University
Jeffrey B. Liebman, Malcolm Wiener Professor of Public Policy, Harvard 
        University, Kennedy School of Government
Peter H. Lindert, Distinguished Research Professor of Economics, 
        University of California, Davis
Richard C. Lindrooth, Associate Professor, Colorado School of Public 
        Health, University of Colorado
Victor D. Lippit, Professor of Economics, University of California, 
        Riverside
Linda Loubert, Assistant Professor, Economics Department, Morgan State 
        University
Harold S. Luft, University of California, San Francisco
Catherine Lynde, Associate Professor, Economics, University of 
        Massachusetts, Amherst
Sean P. MacDonald, Assistant Professor of Economics, City University of 
        New York
Diane J. Macunovich, Department of Economics, University of Redlands
Mark Maier, Professor of Economics, Glendale College
Ann Markusen, Professor, Humphrey School of Public Affairs, University 
        of Minnesota
Eric S. Maskin, A.O. Hirschman Professor of Social Science, Institute 
        for Advanced Study
Thomas Masterson, Research Scholar, Levy Economics Institute of Bard 
        College
Julie Matthaei, Professor of Economics, Wellesley College
Peter Hans Matthews, James Jermain Professor of Political Economy, 
        Department of Economics, Middlebury College
Kathleen McAfee, Associate Professor, Political Economy and 
        International Relations, San Francisco State University
Elaine McCrate, Associate Professor, Economic and Women's and Gender 
        Studies, University of Vermont
Thomas G. McGuire, Professor of Health Economics, Harvard Medical 
        School
Ellen Meara, Associate Professor, Darmouth Institute for Health Policy 
        and Clinical Practice
Michael Meeropol, Visiting Professor, Economics, John Jay College of 
        Criminal Justice, City University of New York
Martin Melkonian, Adjunct Associate Professor, Economics, Hofstra 
        University
David Meltzer, Associate Professor, Department of Medicine and 
        Associated Faculty Member, Department of Economics, University 
        of Chicago
Peter B. Meyer, Professor Emeritus of Urban Policy and Economics, 
        University of Louisville
Marcelo Milan, Assistant Professor of Economics, University of 
        Wisconsin-Parkside
Lawrence Mishel, President, Economic Policy Institute
Alan C. Monheit, Professor of Health Economics, School of Public 
        Health, University of Medicine and Dentistry of New Jersey
Taryn Morrissey, Assistant Professor of Public Administration and 
        Policy, American University
Karoline Mortensen, Assistant Professor of Health Services 
        Administration, University of Maryland
Tracy Mott, Associate Professor and Department Chair, Department of 
        Economics, University of Denver
Alicia H. Munnell, Peter F. Drucker Professor, Carroll School of 
        Management, Boston College
Richard J. Murnane, Professor, Harvard University
Jason Burke Murphy, Department of Philosophy, Elms College
Ellen Mutari, Professor of Economics, Richard Stockton College of New 
        Jersey
Reynold F. Nesiba, Associate Professor of Economics, Augustana College
David Neumark, Professor of Economics and Director of Graduate Studies, 
        University of California, Irvine
Len M. Nichols, Director of the Center for Health Policy Research and 
        Ethnics, Professor of Health Policy, George Mason University
Laurie Nisonoff, Professor of Economics, Hampshire College
Brendan O'Flaherty, Professor of Economics, Columbia University
Albert A. Okunade, Professor of Health Economics, University of Memphis
Oladele Omosegbon, Professor of Economics, Indiana Wesleyan University
Shaianne T. Osterreich, Associate Professor, Economics, Ithaca College
Zhaochang Peng, Department of Economics, Rollins College
George Perry, Senior Fellow, The Brookings Institution
Mark A. Peterson, Professor of Public Policy and Political Science, 
        UCLA School of Public Affairs
Karl Petrick, Assistant Professor of Economics, Western New England 
        College
Kathryn A. Phillips, Professor of Health Economics and Health Services 
        Research, University of California, San Francisco
Steven D. Pizer, Associate Professor, Boston University School of 
        Public Health
Harold Pollack, Helen Ross Professor of Social Service Administration, 
        University of Chicago
Daniel Polsky, Professor of Medicine, University of Pennsylvania
Paddy Quick, Professor of Economics, St. Francis College
Matthew Rabin, Professor of Economics, University of California, 
        Berkeley
Sarah Reber, Assistant Professor of Public Policy, University of 
        California, Los Angeles
Jim Rebitzer, Professor of Management, Economics and Public Policy, 
        Boston University School of Management
Michael Reich, Professor of Economics, University of California, 
        Berkeley
Uwe Reinhardt, James Madison Professor of Political Economy, Princeton 
        University
Dahlia Remler, Professor, School of Public Affairs, Baruch College, 
        City University of New York
Alice M. Rivlin, Senior Fellow, The Brookings Institution
Charles P. Rock, Professor of Economics, Rollins College
Christina D. Romer, Class of 1957, Professor of Economics, University 
        of California, Berkeley
Samuel Rosenberg, Acting Vice Provost for Faculty and Academic 
        Administration, Roosevelt University
Meredith Rosenthal, Associate Professor of Health Economics, Harvard 
        University School of Public Health
Roy J. Rotheim, Professor of Economics, Skidmore College
Anne Beeson Royalty, Associate Professor of Economics, Indiana 
        University, Purdue University, Indianapolis
Cristopher J. Ruhm, Professor of Public Policy and Economics, 
        University of Virginia
Emmanuel Saez, E. Morris Cox Professor of Economics, University of 
        California, Berkeley
Harwood D. Schaffer, Research Assistant Professor, University of 
        Tennessee
John Schmitt, Senior Economist, Center for Economic and Policy Research
Charles L. Schultze, Senior Fellow Emeritus, Economic Studies, The 
        Brookings Institution
Eric A. Schutz, Professor, Economics, Rollins College
Joseph M. Schwartz, Professor of Political Science, Temple University
Charles R. Sebuharara, Visiting Assistant Professor of Finance, Pamplin 
        College of Business, Virginia Tech
Eric Seiber, Assistant Professor of Health Services Management and 
        Policy, The Ohio State University
Janet Seiz, Associate Professor of Economics, Grinnell College
Bisakha Sen, Associate Professor, Department of Healthcare Organization 
        and Policy, University of Alabama, Birmingham
Mark Setterfield, Professor of Economics, Trinity College
Anwar Shaikh, Professor of Economics, New School for Social Research
Nina Shapiro, Professor of Economics, Saint Peter's College
Judith Shinogle, Senior Research Scientist, Maryland Institute for 
        Policy Analysis
Peter Skott, Professor of Economics, University of Massachusetts, 
        Amherst
Timothy Smeeding, Arts and Sciences Distinguished Professor for Public 
        Affairs, University of Wisconsin-Madison
Eugene Smolensky, Professor of the Graduate School, University of 
        California, Berkeley
Bryan Snyder, Department of Economics, Bentley University
Eswaran Somanathan, Visiting Professor, Princeton University
Paula H. Song, Assistant Professor, Health Services Management & 
        Policy, The Ohio State University
Neeraj Sood, Associate Professor, Schaeffer Center for Health Policy 
        and Economics, University of Southern California
Janet Spitz, Associate Professor of Business, College of Saint Rose
James Ronald Stanfield, Emeritus Professor of Economics, Colorado State 
        University
Sally C. Stearns, Professor of Health Economics, University of North 
        Carolina at Chapel Hill
Bruce Stuart, Professor, University of Maryland School of Pharmacy
Paul Swanson, Professor of Economics, William Paterson University
Katherine Swartz, Professor of Health Economics and Policy, Harvard 
        University School of Public Health
Donald H. Taylor, Jr., Associate Professor of Public Policy, Duke 
        University
Mark Thoma, Professor of Economics, University of Oregon
Chris Tilly, Professor and Director of the Institute for Research and 
        Employment, University of California, Los Angeles
Mariano Torras, Professor of Economics, Adelphi University
Pravin K. Trivedia, J.H. Rudy Professor of Economics, Indiana 
        University-Bloomington
Jennifer Troyer, Associate Professor of Economics, University of North 
        Carolina at Charlotte
Laura Tyson, S.K. and Angela Chan Chair in Global Management, Haas 
        School of Business, University of California, Berkeley
Robert Otto Valdez, Robert Wood Johnson Foundation Professor, Family & 
        Community Medicine and Economics, University of New Mexico
Paul N. Van de Water, Senior Fellow, Center on Budget and Policy 
        Priorities
Courtney Harold Van Houtven, Associate Professor, Duke University
Lane Vanderslice, Editor, Hunger Notes, worldhunger.org
Elizabeth Richardson Vigdor, Research Scholar, Duke University
Anca Voicu, Assistant Professor of Economics, Rollins College
Mark E. Votruba, Associate Professor of Economics and Medicine, Case 
        Western Reserve University
Geetha Waehrer, Research Scientist, Pacific Institute for Research and 
        Evaluation
Jane Waldfogel, Professor of Social Work and Public Affairs, Columbia 
        University
Kenneth E. Warner, Avedis Donebedian Distinguished University Professor 
        of Public Health, University of Michigan
David Warner, Wilbur Cohen Professor of Public Affairs, LBJ School of 
        Public Affairs, University of Texas at Austin
Mark Weisbrot, Co-Director Center for Economic and Policy Research
Thomas E. Weisskopf, Professor Emeritus of Economics, University of 
        Michigan
Charles K. Wilber, Emeritus Professor of Economics, University of Notre 
        Dame
Michael Wilson, Instructor, Harvard Medical School
Cecilia Ann Winters, Associate Professor of Economics, Manhattanville 
        College
Jon D. Wisman, Professor of Economics, American University
Barbara Wolfe, Professor, Economics and Political Science, University 
        of Wisconsin-Madison
Justin Wolfers, Associate Professor of Business and Public Policy, The 
        Wharton School, University of Pennsylvania
Robert S. Woodward, Professor of Health Economics, University of New 
        Hampshire
Vivian Wu, Assistant Professor, University of Southern California
David Zalewski, Professor of Finance, Providence College
Joshua Graff Zivin, Associate Professor of Economics, University of 
        California, San Diego
                                 ______
                                 
    Chairman Kline. And again, I just want to thank all the 
witnesses for their participation, everybody in the audience, I 
suppose, for joining us today. We are adjourned.
    [Additional submissions of Chairman Kline follow:]

    
    
    
    
    
    
    
    
                                ------                                


               [From the National Review, August 5, 2010]

                      Bay State Health-Care Blues

                             By Paul Howard

    The costly Massachusetts experiment has strangled small businesses. 
Now it is going national.
    It's no secret that the template for President Obama's health-
reform legislation was the Massachusetts health-care plan enacted in 
2006. And it's likely that many of the problems now cropping up in the 
Bay State will reappear at the national level when key provisions of 
Obamacare go into effect over the next several years. While the legal 
fights over Obamacare are grabbing the headlines--on Tuesday, Missouri 
voters resoundingly rejected the individual mandate--voter approval 
will ultimately swing on the economy, where the new law will be a lead 
weight, particularly for small businesses.
    When it comes to health-care costs, small businesses are the canary 
in the coal mine. Lacking the bargaining power to demand lower rates 
from insurers, small businesses face higher health-insurance costs--and 
thus are much less likely to offer their employees coverage to begin 
with. They are also much more likely to drop coverage when costs rise.
    In Massachusetts, small-business owners ``are giving up out of 
frustration,'' an insurance broker recently told the Boston Globe. More 
and more small businesses ``simply can't afford health insurance any 
more.'' Prices are certainly going up in Massachusetts's small-group 
insurance market. The Retailers Association of Massachusetts reports 
that insurance premiums have risen by about 15 percent annually over 
the last five years.
    Earlier this year, insurance companies asked for large rate 
increases (up to 32 percent) in the small-group and individual-
insurance markets (which were merged into one market as part of the 
2006 reforms). The state's response has been to strike back at the 
insurers: On April 1, in an unprecedented move, the Massachusetts 
Department of Insurance denied 235 of 274 increases requested by 
insurers.
    Bashing insurers may make for good politics, but it's bad policy. 
In a leaked email, Robert G. Dynan, the official charged with keeping 
insurers solvent, wrote that caps (set at 2009 rates) ``have no 
actuarial support'' and could lead to ``a train wreck'' for the state's 
insurers. Dynan may have a point: The four largest state insurers 
posted first-quarter losses of over $150 million, which they attributed 
to rate restrictions imposed on premiums.
    Defenders argue that Massachusetts was a high-cost state before the 
2006 health-care reforms took effect (which is true), and that those 
reforms have made insurance more affordable for low-income individuals 
even if they haven't kept a lid on overall costs.
    The reforms, however, may also have shifted costs to small 
businesses. A July study by health economists John Cogan, Glenn 
Hubbard, and Daniel Kessler suggests that state reforms may have 
increased premium trends for employer-provided health insurance, 
particularly for individual coverage and for small businesses. The 
authors found that ``health reform in Massachusetts increased single 
coverage employer-sponsored insurance premiums by about 6 percent in 
aggregate and by about 7 percent for firms with fewer than 50 
employees. * * * For small employers, the differential Massachusetts/US 
growth in small group [family] premiums from 2006-2008, over and above 
the growth from 2004-2006, was 14.4 percent.''
    What implications does this have for national health-care reforms 
and the economy?
    For starters, Obamacare makes Massachusetts's expensive, heavily 
regulated insurance market the model for the rest of the country. New 
regulations on insurers--including no caps on annual or lifetime 
coverage and a requirement to cover ``children'' until they are 26--
will drive up costs for small businesses.
    Obamacare is also worse than its Massachusetts precursor in several 
respects. At least Massachusetts was able to finance its insurance 
expansion largely from existing revenue sources (in fact, about half of 
the initial funding came from the federal government). Congressional 
Democrats, however, don't have a rich uncle they can borrow from. So 
Obamacare includes large new taxes on prescription drugs, health 
insurance, and medical devices. All of these costs will be passed on to 
businesses and their employees in the form of higher premiums.
    Obamacare also imposes penalties on any firm with more than 50 
employees that doesn't offer coverage and has at least one employee 
receiving a premium tax credit to purchase coverage from one of the 
state health-insurance exchanges starting in 2014. The fines would be 
levied as a set fee per employee (excluding the first 30 employees). A 
new study from the American Action Forum, by former Congressional 
Budget Office director Douglas Holtz-Eakin and policy analyst Michael 
Ramlet, explains the implications for job creation:
    Hiring one more worker to raise employment to 51 will trigger a 
penalty of $2,000 per worker multiplied by the [number of workers above 
30]. In this case the fine would be $42,000 [21 workers multiplied by 
$2,000]. How many [firms] will choose not to expand?
    Firms with more than 50 employees--those with, say, 55--could also 
decide to lay off workers or outsource jobs to avoid the penalty.
    To be fair, Holtz-Eakin and Ramlet note that the health-care law 
does include a tax credit for firms that offer employee coverage--but 
the credit can only be claimed by very small firms (those employing 
fewer than 25 workers) with average wages below $50,000. Proprietors 
and their family members are excluded from claiming the credit, even 
though many small firms are family-run. The value of the credit also 
gradually phases out as businesses expand beyond ten employees, or as 
average wages approach $50,000. Given these limitations, the National 
Federation of Independent Businesses estimates that only 35 percent of 
firms with fewer than 25 employees will be able to qualify for the 
credit.
    The Bay State's frustration is likely to spread nationwide in 
coming years, as Obamacare drives costs up and more small businesses 
drop coverage and slow down hiring to avoid potential penalties. One 
small business owner (an IHOP franchisee in New Jersey) anticipates 
that Obamacare's penalties for his 140 workers (up to $220,000) will 
force him to raise prices or possibly lay workers off. ``We are still 
figuring out how to deal with this,'' he told the Cleveland Plain 
Dealer in July. ``Ultimately, either businesses will close or consumers 
will pay more.''
    Small businesses are one of the primary engines of American job 
creation. Imposing Massachusetts's expensive reforms on the entire 
nation is likely to put a drag on that engine for years to come.

    Original Source: http://article.nationalreview.com/438971/bay-
state-health-care-blues/paul-howard
                                 ______
                                 

            [From the Wall Street Journal, February 1, 2011]

                        Judge Rejects Health Law

                             By Janet Adamy

    A federal judge ruled that Congress violated the Constitution by 
requiring Americans to buy insurance as part of the health overhaul 
passed last year, and said the entire law ``must be declared void.''
    With his ruling, U.S. District Judge Roger Vinson set up a clash 
over whether the Obama administration still has the authority to carry 
out the law designed to expand insurance to 32 million Americans.
    A Florida federal judge on Monday ruled that a key plank of the 
health overhaul passed last March violates the Constitution, in a 
decision that could threaten the Obama administration's ability to 
implement the law. Janet Adamy has details.
    David Rivkin, an attorney for the plaintiffs, said the ruling meant 
the 26 states challenging the law must halt implementation of pieces 
that apply to states and certain small businesses represented by 
plaintiffs.
    But the Obama administration said it has no to plans to halt 
implementation of the law. Already, it has mailed rebate checks to 
seniors with high prescription drug costs, helped set up insurance 
pools for people with pre-existing medical conditions and required 
insurers to allow children to stay on their parents' insurance policies 
until they reach age 26.
    ``We will continue to operate as we have previously,'' a senior 
administration official said.
    In a pre-emptive move, the Justice Department, which represents the 
administration, is considering whether to seek a stay while its appeal 
against the decision is pending, spokeswoman Tracy Schmaler said.
    The legal morass is the biggest blow yet to the law since President 
Barack Obama signed it in March. Most of the plaintiffs--governors and 
attorneys general in 26 states--are Republicans seeking to knock down 
Mr. Obama's signature legislative achievement.
    The ruling by Judge Vinson, a Republican appointee in Pensacola, 
Fla., is the second of four to find that at least part of the law 
violates the Constitution's Commerce Clause by requiring citizens to 
carry insurance or pay a fee. But in asserting that the whole law is 
unconstitutional, it went much further than an earlier ruling in a 
Virginia case.
    Thus far, the court decisions are breaking down along party lines, 
with two Democratic appointees to the federal bench having upheld the 
law and two Republican appointees ruling against it. The matter is 
expected to be settled by the U.S. Supreme Court.
    The possibility that a court could ultimately unravel the law 
underscores just how difficult it is to enact universal health 
insurance--a goal that had eluded presidents dating back to Theodore 
Roosevelt. Mr. Obama's law, signed after a long-fought partisan battle, 
has been hailed by supporters as a historic achievement. But it is also 
one that cost Democrats seats in this fall's midterm elections, as the 
public was still divided in its support of the legislation.
    The court battle against the law--once seen as a long-shot strategy 
by the Republicans--has emerged as the greatest threat to the overhaul. 
While the Republican-led House has voted to repeal the law, that effort 
is expected to die in the Democratic-controlled Senate, and in any case 
would face President Obama's veto pen.
    Now even some Democrats who voted for the overhaul are 
contemplating whether Congress should strip out the so-called 
individual mandate, a once unthinkable scenario since the provision is 
seen as the backbone of the law. Since the law requires insurance 
companies to accept all comers, even people who are already sick, it 
requires healthy people to buy coverage as well.
    Otherwise, economists say, insurance premiums would likely rise 
sharply because people would wait until they were sick to seek 
coverage.
    The victories are emboldening Republicans in Congress who see 
attacking the law as a key strategy for retaking the White House in 
2012. ``This ruling confirms what Americans have been saying for 
months: The health spending bill is a massive overreach,'' said Senate 
Minority Leader Mitch McConnell (R., Ky.)
    In his 78-page ruling, Judge Vinson wrote that the entire law must 
be voided because the individual insurance mandate is ``not severable'' 
from the rest of the law. Some laws contain what's known as a 
severability clause that says the rest of the law stands should a judge 
strike down a piece of it. But Democrats left it out.
    The judge said he didn't believe an injunction to stop the health 
overhaul was appropriate, because it is generally understood that the 
executive branch will obey a federal court. The government, however, 
doesn't believe the ruling requires it to stop implementing the 
overhaul.
    In court filings and testimony before the judge, the Obama 
administration argued that requiring Americans to carry insurance was 
within its constitutional powers, particularly those of the Commerce 
Clause that allows it to regulate economic activity. It argued that the 
health-care market is unique since all Americans receive medical care 
at some point. Requiring them to buy insurance is just a way of 
regulating how they pay for it, the administration said.
    The ruling also said that the entire law ``must be declared void,'' 
because the mandate to carry insurance is ``not severable'' from the 
rest of the law. Above, an imaging technician prepares a CAT scan 
machine at Timpanogos Regional Hospital in Orem, Utah.
    Judge Vinson rejected that view. Under the Obama administration's 
logic, he wrote, ``Congress could require that everyone above a certain 
income threshold buy a General Motors automobile--now partially 
government-owned--because those who do not buy GM cars (or those who 
buy foreign cars) are adversely impacting commerce and a taxpayer-
subsidized business.''
    Judge Vinson ruled in favor of the Obama administration on a 
secondary part of the suit, saying that the law's expansion of the 
Medicaid federal-state insurance program for the poor doesn't violate 
the Constitution.
    The states argued that the law's addition of 16 million Americans 
to the Medicaid rolls violates the Spending Clause of the Constitution 
by burdening them without giving them room to opt out of the program.
    But Judge Vinson said states clearly have the option to withdraw 
from the program, even though states ``have little recourse to 
remaining the very junior partner in this partnership.''
    Critics say the law's implementation has been undercut by waivers 
the administration granted to various parties to avoid aspects of the 
law. For example, the administration has temporarily exempted some 
companies that provide bare-bones ``mini-med'' insurance plans from 
meeting a requirement in the law that says insurers must spend a 
certain portion of premiums on medical care.
    The Obama administration says such waivers are only a bridge until 
2014, when the full law takes effect and employers have more options 
for providing affordable coverage.
    In addition to the House vote for repeal, Republicans are drafting 
a series of bills targeting particularly unpopular pieces of the law, 
including its requirement that larger employers provide coverage or pay 
a fee. They're also laying plans to choke off funding to hire federal 
workers to implement the law.
    Under the law, most Americans who do not carry insurance starting 
in 2014 will pay a penalty. It eventually tops out at $2,085 a year for 
families lacking insurance.
    Health policy experts say one alternative to the provision would be 
to make insurance more expensive for those who wait to buy coverage, 
providing an incentive for the uninsured to get covered early. But 
lawmakers from both parties agree that it would be complicated, and 
risky, to pull out such a central piece of the law without driving up 
insurance premiums.
                                 ______
                                 

            [From the Wall Street Journal, February 7, 2011]

                  An ObamaCare Appeal From the States

Twenty-one governors representing more than 115 million Americans have 
                               written to
  Kathleen Sebelius asking for more flexibility on health-care reform.

                            By Mitch Daniels

    Unless you're in favor of a fully nationalized health-care system, 
the president's health-care reform law is a massive mistake. It will 
amplify all the big drivers of overconsumption and excessive pricing: 
``Why not, it's free?'' reimbursement; ``The more I do, the more I 
get'' provider payment; and all the defensive medicine the trial bar's 
ingenuity can generate.
    All claims made for it were false. It will add trillions to the 
federal deficit. It will lead to a de facto government takeover of 
health care faster than most people realize, and as millions of 
Americans are added to the Medicaid rolls and millions more employees 
(including, watch for this, workers of bankrupt state governments) are 
dumped into the new exchanges.
    Many of us governors are hoping for either a judicial or 
legislative rescue from this impending disaster, and recent court 
decisions suggest there's a chance of that. But we can't count on a 
miracle--that's only permitted in Washington policy making. We have no 
choice but to prepare for the very real possibility that the law takes 
effect in 2014.
    For state governments, the bill presents huge new costs, as we are 
required to enroll 15 million to 20 million more people in our Medicaid 
systems. In Indiana, our independent actuaries have pegged the price to 
state taxpayers at $2.6 billion to $3 billion over the next 10 years. 
This is a huge burden for our state, and yet another incremental 
expenditure the law's authors declined to account for truthfully.
    Perhaps worse, the law expects to conscript the states as its 
agents in its takeover of health care. It assumes that we will set up 
and operate its new insurance ``exchanges'' for it, using our current 
welfare apparatuses to do the numbingly complex work of figuring out 
who is eligible for its subsidies, how much each person or family is 
eligible for, redetermining this eligibility regularly, and more. Then, 
we are supposed to oversee all the insurance plans in the exchanges for 
compliance with Washington's dictates about terms and prices.
    The default option if any state declines to participate is for the 
federal government to operate an exchange directly. Which got me 
thinking: If the new law is not repealed by 2013, what could be done to 
reshape it in the direction of freedom and genuine cost control?
    I have written to Kathleen Sebelius, secretary of Health and 
Services (HHS), saying that if her department wants Indiana to run its 
program for it, we will do so under the following conditions:
     We are given the flexibility to decide which insurers are 
permitted to offer their products.
     All the law's expensive benefit mandates are waived, so 
that our citizens aren't forced to buy benefits they don't need and 
have a range of choice that includes more affordable plans.
     The law's provisions discriminating against consumer-
driven plans, such as health savings accounts, are waived.
     We are given the freedom to move Medicaid beneficiaries 
into the exchange, or to utilize new approaches to the traditional 
program, instead of herding hundreds of thousands more people into 
today's broken Medicaid system.
     Our state is reimbursed the true, full cost of the 
administrative burden to be imposed upon us, based on the estimate of 
an auditor independent of HHS.
     A trustworthy projection is commissioned, by a research 
organization independent of the department, of how many people are 
likely to wind up in the exchange, given the large incentives for 
employers to save money by off-loading their workers.
    Today's Rasmussen poll finds that Americans still favor repeal of 
the President's health-care reform. Senior editorial writer Joseph Rago 
has the latest. Also, Opinionjournal.com columnist John Fund on the 
unanswered questions about the Gipper.
    Obviously, this is a very different system than the one the 
legislation intends. Health care would be much more affordable, minus 
all the mandates, and plus the consumer consciousness that comes with 
health savings accounts and their kin. Customer choice would be 
dramatically enhanced by the state's ability to allow more insurers to 
participate and offer consumer-driven plans. Through greater 
flexibility in the management of Medicaid, the state might be able to 
reduce substantially the hidden tax increase that forced expansion of 
the program will impose.
    Most fundamentally, the system we are proposing requires Washington 
to abandon most of the command-and-control aspects of the law as 
written. It steers away from nanny-state paternalism by assuming, 
recognizing and reinforcing the dignity of all our citizens and their 
right to make health care's highly personal decisions for themselves.
    So why would Ms. Sebelius and HHS agree to this de facto rewrite of 
their treasured accomplishment? A glance at the recent fiasco of high-
risk pools provides the answer. When a majority of states, including 
Indiana, declined to participate in setting up these pools, which cover 
those with high-cost, existing conditions, the task fell to HHS. As 
widely reported, it went poorly, with costs far above predictions and 
only a tiny fraction of the expected population signing up.
    If the feds can't manage this little project, what should we expect 
if they attempt it on a scale hundreds of times larger and more 
complex? If it were only Indiana asking, I have no doubt that HHS would 
ignore us. But Indiana is not alone. So far, 21 states--including 
Pennsylvania, Texas and Louisiana--have signed the same letter. We 
represent more than 115 million Americans. Washington's attempt to set 
up eligibility and exchange bureaucracies in all these places would 
invite a first-rate operational catastrophe.
    If there's to be a train wreck, we governors would rather be 
spectators than conductors. But if the federal government is willing to 
reroute the train to a different, more productive track, we are here to 
help.

    Mr. Daniels, a Republican, is the governor of Indiana.
                                 ______
                                 
    [Whereupon, at 12:29 p.m., the committee was adjourned.]

                                 
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