[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
REGULATIONS, COSTS, AND UNCERTAINTY
IN EMPLOYER PROVIDED HEALTH CARE
SUBCOMMITTEE ON HEALTH,
EMPLOYMENT, LABOR AND PENSIONS
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. House of Representatives
ONE HUNDRED TWELFTH CONGRESS
HEARING HELD IN WASHINGTON, DC, OCTOBER 13, 2011
Serial No. 112-44
Printed for the use of the Committee on Education and the Workforce
Available via the World Wide Web:
Committee address: http://edworkforce.house.gov
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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
Bob Goodlatte, Virginia Lynn C. Woolsey, California
Duncan Hunter, California Ruben Hinojosa, Texas
David P. Roe, Tennessee Carolyn McCarthy, New York
Glenn Thompson, Pennsylvania John F. Tierney, Massachusetts
Tim Walberg, Michigan Dennis J. Kucinich, Ohio
Scott DesJarlais, Tennessee Rush D. Holt, New Jersey
Richard L. Hanna, New York Susan A. Davis, California
Todd Rokita, Indiana Raul M. Grijalva, Arizona
Larry Bucshon, Indiana Timothy H. Bishop, New York
Trey Gowdy, South Carolina David Loebsack, Iowa
Lou Barletta, Pennsylvania Mazie K. Hirono, Hawaii
Kristi L. Noem, South Dakota Jason Altmire, Pennsylvania
Martha Roby, Alabama
Joseph J. Heck, Nevada
Dennis A. Ross, Florida
Mike Kelly, Pennsylvania
Barrett Karr, Staff Director
Jody Calemine, Minority Staff Director
SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS
DAVID P. ROE, Tennessee, Chairman
Joe Wilson, South Carolina Robert E. Andrews, New Jersey
Glenn Thompson, Pennsylvania Ranking Minority Member
Tim Walberg, Michigan Dennis J. Kucinich, Ohio
Scott DesJarlais, Tennessee David Loebsack, Iowa
Richard L. Hanna, New York Dale E. Kildee, Michigan
Todd Rokita, Indiana Ruben Hinojosa, Texas
Larry Bucshon, Indiana Carolyn McCarthy, New York
Lou Barletta, Pennsylvania John F. Tierney, Massachusetts
Kristi L. Noem, South Dakota Rush D. Holt, New Jersey
Martha Roby, Alabama Robert C. ``Bobby'' Scott,
Joseph J. Heck, Nevada Virginia
Dennis A. Ross, Florida Jason Altmire, Pennsylvania
C O N T E N T S
Hearing held on October 13, 2011................................. 1
Statement of Members:
Andrews, Hon. Robert E., ranking minority member,
Subcommittee on Health, Employment, Labor and Pensions..... 4
Roe, Hon. David P., Chairman, Subcommittee on Health,
Employment, Labor and Pensions............................. 1
Prepared statement of.................................... 3
Statement of Witnesses:
Donahue, Dennis M., on behalf of the Council of Insurance
Agents and Brokers......................................... 14
Prepared statement of.................................... 15
Piper, Robyn, president, Piper Jordan........................ 25
Prepared statement of.................................... 27
Pollack, Ron, executive director, Families USA............... 19
Prepared statement of.................................... 21
Turner, Grace-Marie, president, Galen Institute.............. 6
Prepared statement of.................................... 8
Article, ``Misrepresentations, Regulations and Jobs,'' by
Bruce Bartlett, New York Times......................... 54
Press release, ``Kaiser Report''......................... 57
Letter, dated Oct. 28, 2011, from Joyce A. Roberts, AARP. 65
News release, the Henry J. Kaiser Family Foundation,
Sept. 27, 2011......................................... 66
Report, U.S. Chamber of Commerce, ``Q3 Small Business
Outlook Survey,'' Oct. 12, 2011........................ 59
Thompson, Hon. Glenn, a Representative in Congress from the
State of Pennsylvania:
Article, ``New Study Underlines Unfulfilled Promises of
Health Care Bill,'' Sept. 29, 2011..................... 41
Article, ``New Survey Projects Higher Employee Health
Premiums,'' New York Times, Oct. 2, 2011............... 43
REGULATIONS, COSTS, AND UNCERTAINTY
IN EMPLOYER PROVIDED HEALTH CARE
Thursday, October 13, 2011
U.S. House of Representatives
Subcommittee on Health, Employment, Labor and Pensions
Committee on Education and the Workforce
The subcommittee met, pursuant to call, at 10:02 a.m., in
room 2175, Rayburn House Office Building, Hon. Phil Roe
[chairman of the subcommittee] presiding.
Present: Representatives Roe, Thompson, Walberg,
DesJarlais, Hanna, Bucshon, Andrews, Kucinich, Kildee,
Hinojosa, Tierney, Altmire, and Holt.
Staff present: Jennifer Allen, Press Secretary; Andrew
Banducci, Professional Staff Member; Casey Buboltz, Coalitions
and Member Services Coordinator; Ed Gilroy, Director of
Workforce Policy; Benjamin Hoog, Legislative Assistant; Marvin
Kaplan, MemberWorkforce Policy Counsel; Ryan Kearney,
Legislative Assistant; Brian Newell, Deputy Communications
Director; Krisann Pearce, General Counsel; Molly McLaughlin
Salmi, Deputy Director of Workforce Policy; Todd Spangler,
Senior Health Policy Advisor; Linda Stevens, Chief Clerk/
Assistant to the General Counsel; Alissa Strawcutter, Deputy
Clerk; Aaron Albright, Minority Communications Director for
Labor; Daniel Brown, Minority Junior Legislative Assistant;
Jody Calemine, Minority Staff Director; Brian Levin, Minority
New Media Press Assistant; and Michele Varnhagen, Minority
Chief Policy Advisor/Labor Policy Director.
Chairman Roe. A quorum being present, the Subcommittee on
Health, Employment, Labor and Pensions will come to order.
Good morning, everyone. I would like to welcome our guests
and thank our witnesses for being with us today. We have
assembled a fine panel and look forward to your testimony.
It has been stated time and again, if you like your current
health plan, you will be able to keep it. Let me repeat that;
if you like your plan, you will be able to keep it.
Those remarks were delivered by President Obama and similar
sentiments were expressed during the many months of Congress'
effort to reform health care. The promise was made to the
public, a public concerned about the changes a government
takeover of health care would impose on their businesses and
As it turns out, there was reason for concern. Rules
released by the Obama administration contradict that statement.
The health care law allows Americans to keep their health care
coverage, so long as their health care plan doesn't make any
significant changes. The reality is health care plans
constantly change out of necessity. And now when they change,
Americans will be at risk of losing their existing health care
plan, like it or not.
I think the 31 years I was in practice, I don't recall a
year that we didn't change our health care plan some. It
changed almost every year.
As I have learned through many years of practicing
medicine, health care is an extremely personal matter. Though
most people recognize the importance employers play in the
delivery of health care, they prefer to keep the details
between themselves and their doctors.
The idea of a federal government intervening in that
relationship between the patient and his or her health care
provider is downright terrifying to many individuals.
Perhaps that is why the president promised so adamantly
that reform would not disrupt the health care millions of
Americans rely upon and wish to keep. The linchpin of this
promise was an exemption or grandfathered provision in the law.
This was intended to provide relief from new rules and
regulations for insurance plans in effect the day the president
signed the bill into law. Unfortunately, in just 3 months, the
administration defined the terms of the grandfather provision
so narrowly that it became meaningless.
By the administration's own estimates, up to 80 percent of
small-employer plans and between 34 and 64 percent of large-
employer plans will not retain their grandfathered status,
meaning millions of workers face significant changes to their
Employers have confirmed this startling fact. In May of
2011 survey by Price Waterhouse Coopers, 51 percent of the
employers surveyed did not expect their plans would keep their
Each year, as employers grapple with the constraints
brought on by an unsustainable health care costs, they must
choose from a range of difficult options, including reduced
benefits and lower wages. The ability to adjust and manage the
benefit plans of their workers has offered employers an
opportunity to minimize disruption and modify care to best meet
the needs of the workplace.
That flexibility is severely undermined by the new law and
its flawed grandfather regulation. Today, even a modest change
can trigger a loss of a benefit plan's exempted status.
Employers are faced with an impossible decision: pay more
to keep their current coverage, buy higher-cost insurance that
is subject to the law's new mandates, or drop coverage
entirely. As is often the case, good intentions can lead to bad
This is certainly true for much of the law's complex scheme
of rules, mandates, and price controls. Take, for example, the
medical loss ratio provision, which was designed to limit the
corporate profits of insurance companies to ensure consumers
received the most value for every dollar they spend.
However, the regulation implementing this provision
actually creates a disincentive for insurance providers to
attack waste and abuse, leading to higher premiums and co-pays
for American consumers. If these regulatory challenges weren't
creating enough uncertainty in our workforce, employers and
workers continue to confront higher health insurance costs.
Despite the president's promise that his reform plan would
lower premiums by up to 2,500 dollars for the average family,
the facts reflect a different reality. A recent study by the
Kaiser Family Foundation reports that premiums increased by 9
percent this year. A separate study estimates employer health
care costs will increase by 8.5 percent next year.
It is clear our system of employer-provided health care is
experiencing dramatic changes due in large part to a deeply
flawed health care law. Today's hearings provide members of the
subcommittee an important opportunity to examine these changes,
their impact on workers and employers, and to discuss the
solutions our nation needs to chart a better course.
Again, I look forward to the witnesses' testimony.
I now yield to Mr. Andrews, the senior Democrat member of
the subcommittee, for his opening remarks.
[The statement of Mr. Roe follows:]
Prepared Statement of Hon. David P. Roe, Chairman,
Subcommittee on Health, Employment, Labor and Pensions
Good morning, everyone. I would like to welcome our guests and
thank our witnesses for being with us today. We have assembled a fine
panel and we look forward to your testimony.
It was stated time and again: ``If you like your current [health
care] plan, you will be able to keep it. Let me repeat that. If you
like your plan, you will be able to keep it.'' Those remarks were
delivered by President Obama and similar sentiments were expressed
during the many months of Congress' effort to reform health care. The
promise was made to a public concerned about the changes a government
takeover of health care would impose on their businesses and families.
And it turns out, there was reason for concern. Rules released from
the Obama Administration contradict that statement. The health care law
allows Americans to keep their health care coverage--so long as their
health care plan doesn't make any significant changes. The reality is,
health care plans constantly change out of necessity, and now when they
change, Americans will be at risk of losing their existing health care
plan--like it or not.
As I have learned through many years of practicing medicine, health
care is an extremely personal matter. Though most people recognize the
important role employer play in the delivery of health care, they
prefer to keep the details between themselves and their doctors. The
idea of the federal government intervening in the relationship between
a patient and his or her health care provider is downright terrifying
to many individuals.
Perhaps that is why the president promised so adamantly that reform
would not disrupt the health care millions of Americans rely upon and
wish to keep. The linchpin of this promise was an exemption or
``grandfather'' provision in the law. This was intended to provide
relief from new rules and regulations for insurance plans in effect the
day the president signed his bill into law.
Unfortunately, in just three months, the administration defined the
terms of the grandfather provision so narrowly that it became
meaningless. By the administration's own estimates, up to 80 percent of
small-employer plans and between 34 to 64 percent of large-employer
plans will not retain their grandfathered status, meaning millions of
workers face significant changes to their health care. Employers have
confirmed this startling fact.
In a May 2011 survey by Price Waterhouse Coopers, 51 percent of the
employers surveyed did not expect their plans would keep their
Each year, as employers grapple with the constraints brought on by
unsustainable health care costs, they must choose from a range of
difficult options, including reduced benefits and lower wages. The
ability to adjust and manage the benefit plans of their workers has
offered employers an opportunity to minimize disruption and modify care
to best meet the needs of the workplace.
That flexibility is severely undermined by the new law and its
flawed grandfather regulation. Today, even a modest change can trigger
a loss of a benefit plan's exempted status. Employers are faced with an
impossible decision: pay more to keep their current coverage, buy
higher-cost insurance that is subject to the law's new mandates, or
drop coverage entirely.
As is often the case, good intentions can lead to bad consequences.
This is certainly true for much of the law's complex scheme of rules,
mandates, and price controls. Take, for example, the Medical Loss Ratio
provision, which was designed to limit the corporate profits of
insurance companies to ensure consumers received the most value for
every dollar they spend.
However, the regulation implementing this provision actually
creates a disincentive for insurance providers to attack waste and
abuse, leading to higher premiums and copayments for American
If these regulatory challenges weren't creating enough uncertainty
for our workforce, employers and workers continue to confront higher
health insurance costs. Despite the president's promise that his reform
plan would lower premiums by up to $2,500 for the average family, the
facts reflect a different reality. A recent study by the Kaiser Family
Foundation reports that premiums increased by 9 percent in 2010 and are
expected to increase by an additional 8.5 percent next year. Democrats
in Washington got their government-run health care, and the American
people are left with broken promises.
It is clear our system of employer-provided health care is
experiencing dramatic changes due in large part to a deeply flawed
health care law. Today's hearing provides members of the subcommittee
an important opportunity to examine these changes, their impact on
workers and employers, and to discuss the solutions our nation needs to
chart a better course. Again, I look forward to the witness testimony,
and will now yield to Mr. Andrews, the senior Democrat member of the
subcommittee, for his opening remarks.
Mr. Andrews. Well, good morning, Mr. Chairman. Thank you
for your courtesy for assembling such a fine panel.
The chairman talks about dramatic changes. He is right. The
middle class of this country has seen a lot of dramatic changes
in the last couple years. Fifteen million people are without
This is another day that is--for many people, this is going
to be the day the foreclosure is executed and they lose their
home. Half the people in this country surveyed this year said
the American dream is either dead or on life support.
That is the problem we should be talking about,
unemployment. The president came before the Congress more than
1 month ago and put forward a proposal to put people back to
work, to put construction workers back to work building roads
and bridges and wiring schools for Internet access, a proposal
to put people back to work by cutting taxes for small business
who hire people, a proposal to put people back to work by
stimulating consumer demand, by avoiding a 1,500 dollar tax
increase that will hit middle class families on January 1, if
Congress doesn't act.
To put forth a plan that would keep police officers and
firefighters on the job and teachers in the classroom. This
committee, this majority has not spent 1 hour on that proposal
in the last month. That is what the committee should be doing.
Instead, what we are doing is relitigating, regurgitating,
rearguing the same old argument about the health care bill. Now
I understand that part of the catechism from the other side is
the health care bill is a job killing health care bill, filled
with job killing regulations, and that job killing regulations
are the reason why America's economy is stagnant and the middle
class' American dream is dying.
That is not true. A survey by the Small Business Majority
this July asked 1,257 small business owners to name the two
biggest problems they face; 13 percent of them said government
regulations; 50 percent said lack of demand.
The Bureau of Labor Statistics looked at layoffs that
occurred last year in 2010 around the country. And they looked
at the cause of those layoffs, as to why they occurred.
Here is what they found: 2,971 of those layoffs, 0.2
percent, were attributable to government regulation; 384,505
layoffs, 30 percent, were due to lack of demand for the service
or product the business was selling.
The job killing health care bill, since President Obama
signed the law in March of 2010, the economy has added 2.4
private sector jobs--2.4 million private sector jobs. Five
hundred thousand of them have been in the health care industry.
We should be having a hearing today about how to have the
economy create jobs for the American people, not relitigating
the same old tired argument about the health care bill. Now
chairman, I look forward to an exchange on the issues about the
health care bill.
But I would urge Chairman Klein and you and Speaker Boehner
to put on the floor of the House of Representatives the
president's jobs proposal, amended as you wish. But let it come
up for a vote. That is the business we should be doing for the
country here this morning.
I yield back.
Chairman Roe. I thank the gentleman for his opening
Pursuant to Committee Rule 7-C, all members will be
permitted to submit written statements to be included in the
permanent hearing record. And without objection, the hearing
record will remain open for up to 14 days to allow such
statements and other extraneous material referenced during the
hearing to be submitted for the official hearing.
Now it is my pleasure to introduce our distinguished
guests. We have a great panel today.
Grace-Marie Turner is president of the Galen Institute, a
public policy research organization that she founded in 1995 to
promote an informed debate over free market ideas for health
reform. She is the editor of ``Empowering Health Care Consumers
Through Tax Reform,'' and produces a widely read weekly
electronic news letter, ``Health Policy Matters.''
Dennis Donahue is the national practice leader for employee
benefits at Wells Fargo Insurance Services. He is a member of
the Council of Insurance Agents and Brokers, and a Trade
Association for Commercial Insurance and Employee Benefits
Brokers. Mr. Donahue has over 30 years in the benefits
Mr. Ron Pollack is the founding executive director of
Families USA. Families USA's mission is to achieve high quality
affordable health coverage for everyone in the U.S. Prior to
his current position at Families First, Mr. Pollack was the
dean of the Antioch School of Law.
Robyn Piper is the founder and president of Piper Jordan, a
San Diego based consulting firm that helps Fortune 1,000
companies craft employee benefit solutions. She has overall
responsibility for the firm's business operations, including
its regional operations at several business units, life,
disability and health care consulting, voluntary work site,
limited benefit health, and franchise solutions.
Welcome. Before I recognize you to provide your testimony,
let me briefly explain our lighting system. You have 5 minutes
to present your testimony. When you begin, the light in front
of you will turn green. With 1 minute left, the light will turn
yellow. And when your time is expired, the light will turn red,
at which point I would ask you to wrap up your remarks.
I won't gavel you. I will let you finish your thoughts.
After that, members will each have 5 minutes for questioning
and the chairman will attempt to stay with the 5 minutes.
I will now start with Ms. Turner.
STATEMENT OF GRACE-MARIE TURNER, PRESIDENT,
Ms. Turner. Thank you, Chairman Roe, Ranking Member Andrews
and members of the committee for the opportunity to testify
today about the impact of regulations on costs and uncertainty
in employer provided health coverage.
The Affordable Care Act's potential impact on jobs and
economy has been a subject of debate and controversy from the
start, as Mr. Andrews pointed out. Yet a recent U.S. Chamber of
Commerce study found that 33 percent of business owners cited
uncertainty about the health law as either the biggest or
second biggest reason they are not hiring new workers.
Dennis Lockhart, the president of the Federal Reserve Bank
of Atlanta, said in a speech recently, ``We have frequently
heard strong comments to the affect my company won't hire a
single additional worker until we know what health insurance
costs are going to be.''
So I think this uncertainty of future regulations and costs
is a huge factor impacting job creation. The new health law
will add new costs, by forcing employers to either provide
workers with expensive, government approved insurance or pay a
fine. Many employers anticipating these costs are simply
unwilling to add new workers.
The health law also discourages small businesses from
becoming mid size businesses because of the mandate that they
provide health insurance kicks in when they have 50 or more
employees. Small businesses are the engine of job growth in our
But a recent survey found that 70 percent have no plans to
increase hiring in the next year. Certainly lack of demand is a
big factor. But also the uncertainty of future regulations and
health costs is a big factor.
As for those companies that have more than 50 workers, the
burden of having to buy government approved health insurances
discourages them from hiring all but essential staff. Larger
companies are already pairing back on entry level jobs and are
using automation to avoid adding the costs of mandatory health
insurance for lower income workers.
McDonalds and CVS, for example, are replacing some human
order takers and cashiers with electronic systems. This
especially harms entry level jobs for those who need to get the
skills to enter the workforce. It is not the surprising then
that the unemployment rate among teenagers is about 25 percent.
The jobs they need are evaporating.
Many people argue that the Affordable Care Act's
regulations are necessary to keep employers from cutting
benefits or imposing higher health costs onto their employees.
But employees actually pay a price for higher health costs. The
cost of health coverage are part of employee compensation.
A recent Rand study found that most of the pay increases
that employees have received over the last 10 years have been
consumed by health costs.
I would like to briefly mention two particular regulations
resulting from the Affordable Care Act, grandfathering and the
medical loss ratio, which others will discuss today as well.
While most companies hoped they would be able to preserve much
of their existing coverage under the grandfathering provisions,
the administration's own estimates indicate, as you said, Mr.
Chairman, that most employers will not be able to maintain
their grandfathered status.
The grandfathering rules really block employers into a
corner. They can't make changes other than minor modifications
to their health plans in order to keep costs down, without
being forced to comply with expensive Affordable Care Act
regulations that increase their health care costs, a real Catch
Health care costs are directly related to the creation of
new jobs. Higher health care costs put additional pressures on
the employers' bottom line and increase the cost of hiring new
workers, in turn discouraging job creation.
This is bad news for the economy and bad news for
unemployed workers. The ACA already is costing jobs in the
health broker community because of misguided regulations
concerning the medical loss ration requirements. 21 percent of
independent health insurance agency owners have already been
forced to downsize their businesses. And many are anticipating
even more cuts in the future.
HHS rules require that their commissions be counted against
insurers' allowable administrative costs, even though they are
independent and none of their commissions actually go to the
insurers. Bipartisan legislation has been introduced, as well,
to address this issue.
Chairman Roe, your leadership on health reform is
particularly important because of your experience as a
physician and because you have first hand experience with the
damage that government controlled health care can do through
Your support for repeal of the Independent Payment Advisory
Board, for example, shows your commitment to control of doctors
and patients over medical decisions. You have made it very
clear that this is a priority.
And I know Doctors Bucshon and Dr. Desjarlais and Dr. Heck
on this committee, as well as, of course, the others on the
committee, are also concerned about making sure that we keep
doctors and patients in control of medical decisions. That
means less government control and less regulation.
Thank you for the opportunity to testify.
[The statement of Ms. Turner follows:]
Prepared Statement of Grace-Marie Turner, President, Galen Institute
The unemployment rate is stuck at 9.1 percent, and there
is good reason to believe that PPACA is a major contributor to the jobs
picture. Employers fear the costs, mandates, and regulations of hiring
new workers as a result of PPACA.
While most companies initially hoped they would be able to
preserve much of their existing group health plans under the new
grandfather provisions of the law, a survey by Aon Hewitt Consulting
found almost all will not. The administration's own estimates indicate
most employers will not be able to maintain grandfathered status.
The grandfathering rules box employers into a corner. They
cannot make changes, other than minor modifications, to their health
plans to keep costs down without being forced to comply with expensive
PPACA regulations that increase their health costs.
Health costs are directly related to creation of new jobs.
Higher health costs put additional pressures on the employer's bottom
line and increase the cost of hiring new workers, in turn discouraging
job creation. This is bad news for the economy and for unemployed
Many people argue that PPACA's restrictions are necessary
to keep employers from cutting benefits or imposing higher health costs
onto their employees. But employees actually pay the price for rising
A recent RAND study found that most of the pay increases
that employees have received over the last ten years have been consumed
by health costs. The typical family had just $95 a month more to devote
to non-health spending in 2009 than a decade earlier. Had the rate of
health care cost growth kept pace with general inflation, the family
would have had $545 more per month in spendable income--a difference of
$5,400 per year.
PPACA already is having a direct impact on jobs in the
health broker industry because of misguided regulations concerning the
Medical Loss Ratio requirements in the law.
Health costs are a jobs issue. It is in the interest of both
employers and employees to keep health costs down, and the
grandfathering and MLR regulations issued by HHS restrict their ability
to do that.
Regulations, Costs, and Uncertainty in Employer Provided Health Care:
Saving Jobs from PPACA's Harmful Regulations
Committee on Education and the Workforce Subcommittee on Health,
Employment, Labor, and Pensions October 13, 2011 By Grace-Marie Turner,
Thank you Chairman Roe, Ranking Member Andrews, and members of the
Committee for the opportunity to testify today about the impact of
regulations on costs and uncertainty in employer-provided health
coverage and particularly the impact of provisions in the Patient
Protection and Affordable Care Act (PPACA) on employers, employees, and
job creation in America.
Impact on job creation
PPACA's potential impact on jobs and the economy has been the
subject of debate and controversy from the start. The president
promised it would be a boon to both; former Speaker Nancy Pelosi said
the law would create 400,000 jobs ``almost immediately.'' Others
argued, however, that the law's costs and mandates would make
businesses much less likely to hire new workers.
That debate should now be over.
The Heritage Foundation's James Sherk, a senior policy analyst in
labor economics, recently released a paper\1\ comparing the rate of net
job growth before and after PPACA's passage in March of 2010. The
findings show that job creation came to a virtual halt after the health
law was enacted.
The low point of the recession came in January 2009, when U.S.
employers shed 841,000 jobs in just that one month. But the economy
slowly started to recover over the next 15 months; private employers
began hiring workers at an average rate of 67,600 per month (net of
layoffs). The economy's high point came with the April 2010 report,
when 229,000 jobs were added.
But the health law was signed into law in late March, and the
hiring freeze began. In the following months, the economy added an
average of just 6,500 net private sector jobs per month--less than a
tenth of the pre-ObamaCare average.
This doesn't prove that the health law is a major cause of the
problem. But there is no question that the jobs recovery stalled after
ObamaCare passed, with no new jobs created in August and unemployment
stuck at 9.1 percent. There's good reason to believe that the health
law is a major contributor to the hiring halt.
In a recent U.S. Chamber of Commerce study, 33 percent of business
owners cited uncertainties about the health law as either the biggest
or second-biggest reason they're not hiring new workers.
Those findings were backed up by the words of Dennis Lockhart,
president of the Federal Reserve Bank of Atlanta, in a speech: ``We've
frequently heard strong comments to the effect of `My company won't
hire a single additional worker until we know what health-insurance
costs are going to be.' '' \2\
The health law discourages hiring in several ways. First, it adds
unknown costs to hiring new workers. Companies already must consider
the cost of taxes for Social Security, Medicare, unemployment
insurance, and workers' compensation when hiring new staff. Combined
with health benefits, these costs explain why a $50,000-a-year employee
costs a company $62,500 to $70,000 (according to MIT business professor
Joseph Hadzima).\3\ The health law will add new costs by forcing
employers to either provide workers with expensive, government-approved
insurance or pay a fine. Employers anticipating these costs are simply
unwilling to add new workers.
The health law also discourages small businesses from becoming mid-
size businesses because the mandate to provide insurance kicks in once
you reach 50 or more employees. This is profoundly wrongheaded. Small
business is the engine for job growth in America, but a recent survey
found that 70 percent have no plans to increase hiring in the next
As for those companies that already have 50 or more workers, the
burden of having to buy expensive government-approved policies or pay
penalties discourages them from hiring all but essential staff. Indeed,
larger companies are doing everything they can to pare back on entry-
level jobs and are using automation to avoid the added cost of
mandatory health insurance for lower-income workers. McDonald's and CVS
drug stores, among many other large companies, are replacing some human
order-takers and cashiers with electronic systems.
This especially hurts entry-level would-be workers who need jobs so
they can get the skills to enter the workforce. Is it any surprise that
teen unemployment has now hit 25 percent? The jobs they need are
evaporating because of the president's health overhaul law.
Employees pay the price of higher health costs
Many people argue that the PPACA's regulations are necessary to
keep employers from cutting benefits or imposing higher and higher
health costs onto their employees. But employees actually pay the price
for these higher health costs.
The cost of health coverage is part of employee compensation. A
recent RAND study found that most of the pay increases that employees
have received over the last ten years have been consumed by health
Between 1999 and 2009, a median-income family of four that received
health insurance through an employer saw their real annual earnings
rise from $76,000 to $99,000 over the ten year period. But nearly all
that gain was consumed by rising health care costs, according to the
paper by David Auerbach and Arthur Kellermann of RAND.\4\
After taking into account the price increases for other goods and
services, they said the typical family had just $95 a month more to
devote to non-health spending in 2009 than they had a decade earlier.
By contrast, the authors say that if the rate of health care cost
growth had not exceeded general inflation, the family would have had
$545 more per month in spendable income instead of $95--a difference of
$5,400 per year. Workers are paying the price for higher health costs.
Many companies have introduced plans that engage their employees as
partners in managing health costs, giving them more control over health
care and health spending decisions. These companies have had success in
holding down health cost increases. A 2011 survey for the National
Business Group on Health on ``purchasing value in health care'' found
that companies that offered account-based health plans, such as Health
Savings Accounts or Health Reimbursement Arrangements, had coverage
costs that were $900 lower than average for employee-only coverage and
$2,885 lower for Preferred Provider and Point of Service (PPO/POS)
plans.\5\ ``The cost of [account-based health plan] coverage is
considerably more affordable than either PPO/POS plan or HMO plan
coverage in 2011,'' the survey found. These premium savings benefit
both employers and employees.
The number of people with HSA/HDHP (high-deductible health plan)
coverage rose to more than 11.4 million in January 2011, up from 10
million in January 2010, 8 million in January 2009, and 6 million in
Of course consumer-directed plans are only one option of the wide
array of policy choices offered in the private marketplace. But many
employees and employers value this choice. Flexibility, rather than the
top-down regulations PPACA is imposing, is essential for employers and
employees to find ways to hold down health costs.
Grandfathered health plans
Many employers said that assurances their health plans would be
``grandfathered'' was a key reason that led to their support or to
their taking a neutral stance on passage of the PPACA.
People who have and value their health coverage were also
reassured. Surveys have shown that 88 percent of Americans are
satisfied with their health coverage.\7\ While most companies initially
hoped they would be able to preserve much of their existing group
health plans under the new grandfather provisions, a survey by Aon
Hewitt Consulting found almost all will not.\8\
``If you like your health insurance, you can keep your health
insurance,'' the president repeatedly promised. Even administration
experts now admit this promise will not be kept. The Department of
Health and Human Services expects that, by 2013, between one-third and
two-thirds of the 133 million people with coverage through large
employers will lose their grandfathered status. And up to 80 percent of
the 43 million people in small employer plans will lose their
grandfathered protection. Up to 70 percent of those with coverage in
the individual market would be forced to comply with expensive new
federal rules within a year.\9\ Few of them are likely to lose coverage
in the short term, but most will lose the coverage they have now.
The grandfathering rules box employers into a corner. They cannot
make changes, other than minor modifications, to their health plans to
keep costs down without being forced to comply with expensive PPACA
regulations that increase their health costs.
Health costs are the issue
The human resources consulting firm Towers Watson released a survey
of large employers regarding health costs.\10\ Seven out of ten of the
employers surveyed expect to lose grandfathered health status in 2012--
subjecting them to all of the new regulations and mandates under the
new health law. Of even greater concern, nearly three in ten employers
(29 percent) are unsure whether or not they will continue offering
coverage to their current workers after all of the provisions of the
new health law take effect.
Towers Watson reports that overall health plan costs are projected
to rise at a 5.9 percent rate in 2012, continuing to rise faster than
the rate of overall inflation. Because of rising health insurance costs
and the other cost pressures that employers face, a majority of firms
say they will be forced to increase the employee share of premiums in
2012. Only one percent of firms say they will be able to decrease the
employee share of premium contributions next year.
Health costs are directly related to creation of new jobs.
Employers continue to face a fragile economy. Higher health costs put
additional pressures on their bottom line and increase the cost of
hiring new workers, in turn discouraging job creation. This is bad news
for the economy and for unemployed workers.
What all employers must cover
Under the Affordable Care Act, all health plans--whether or not
they are grandfathered plans--were required to provide certain benefits
for plan years starting after September 23, 2010, including: \11\
Restrictions on lifetime limits on coverage for all plans.
Starting in 2014, insurance plans must provide coverage without
imposing any annual or lifetime limits on the amount paid to individual
beneficiaries. During the transition years between now and 2014,
however, insurance firms can impose annual limits, subject to HHS
rules. The HHS regulations issued last June dictated how high these
limits must be. In 2011, insurance companies can continue to impose an
annual limit, but it must be at least $750,000 per enrollee. In 2012,
the limit will have to be at least $1.25 million, and in 2013, $2
million. In 2014 there can be no limit on payouts for any individual's
care.\12\ This is the particular regulation that has led to at least
1,578 waivers being issued by HHS, primarily covering limited benefit
plans offered by employers such as McDonald's who said the higher cost
could force them to drop the coverage altogether.\13\
No rescissions. Plans may not rescind coverage after
enrolling a participant, except in the case of fraud or limited
No coverage exclusions for children under age 19 with pre-
existing conditions, and no pre-existing condition exclusions for
anyone starting in 2014.\14\
Group health plans that provide dependent coverage are
required to extend coverage to adult children up to age 26 with no
conditions on dependency.
A recent employer survey said that 28 percent of employers believe
that compliance with PPACA rules already is increasing their health
Restrictions on plans hoping to keep grandfathered status
What do plans have to do in order to maintain their grandfathered
status? A Health and Human Services Department fact sheet describes the
Compared to policies in effect on March 23, 2010, employers:
cannot significantly cut or reduce benefits
cannot raise co-insurance charges
cannot significantly raise co-payment charges
cannot significantly raise deductibles
cannot significantly lower employer contributions
cannot add or tighten an annual limit on what the insurer
cannot change insurance companies. (This rule was later
amended to allow employers to switch insurance carriers as long as the
overall structure of the coverage does not violate other rules for
maintaining grandfathered plan status. The amended rule specifically
directs that the new insurance carrier must precisely match the same
terms of coverage that were previously in place.)
These rules mean, for example, that health plans and employers with
plans in effect on March 23, 2010, lose their exempt--or
grandfathered--status if they were to raise co-payments by the greater
of $5 or a medical inflation rate plus 15 percent. Deductibles couldn't
go up more than medical inflation plus 15 percent. In addition,
employers couldn't cut the amount of the premium that they contribute
by more than 5 percent.
Plans that lose their grandfathered status become subject to all of
the requirements in PPACA, including first-dollar coverage for
preventive care, required coverage for certain clinical trials, quality
reporting requirements, and implementation of internal and external
A survey by Aon Hewitt Consulting found that ninety percent of
companies said they anticipate losing grandfathered status by 2014,
with the majority expecting to do so in the next two years. The study
found that among those companies with self-insured plans, 51 percent
expect to first lose grandfathered status in 2011 and another 21
percent expect to lose it in 2012. The survey
found that ``Most employers would rather have the flexibility to
change their benefit programs than be restricted to the limited
modifications allowed under the new law.'' \17\
Why employers need flexibility
The employment-based health system in the United States has evolved
from decisions made during World War II that gave favored status to
health insurance offered through the workplace. Our system of employer-
based health insurance is underpinned by generous tax incentives that
allow employers to deduct the cost of health insurance as a part of
their employee compensation costs and through a separate tax provision
that shields the value of the policy from being taxed as income to the
worker. These dual tax incentives have provided strong incentives for
people to get their health insurance at work and have led to the system
in which 158 million Americans get health insurance through the
Employers work very hard to find the balance in keeping the cost of
health insurance as low as possible while offering the benefits that
employees want and need. Part of the way they are able to do this is by
seeking bids from competing insurers and amending and adjusting benefit
structures. But under the grandfathering rules, employers are very
limited in their ability to adjust current benefits without losing
their grandfathered status. This also means they are limited in what
they can do to help keep costs down.
The U.S. Chamber of Commerce, the largest U.S. business advocacy
group, presented written comments on the grandfathering rules in August
2010, saying its first concern is with the restriction on cost-sharing.
``By so severely restricting changes in cost-sharing, the regulations
will effectively force plans to lose grandfathered status in order to
remain solvent,'' the Chamber wrote.\18\
Medical Loss Ratio regulations as job killers
PPACA already is having a direct impact on jobs in the health
broker industry. Janet Trautwein, Executive Vice President and CEO of
the National Association of Health Underwriters (NAHU), reported in
recent testimony before the House Energy and Commerce Subcommittee on
Health that ``the economic outlook for many health insurance agents and
brokers across the country continues to be bleak. As health insurance
companies renew and revise their agent and broker contracts for the
coming year, it is clear that the financial situation for many of these
business owners is getting worse.'' \19\
She reported that: ``NAHU recently surveyed its members and found
that 21 percent of independent health insurance agency owners have been
forced to downsize their businesses, including laying off employees.
Twenty-six percent have also had to reduce the services they provide to
their clients * * * Five percent of respondents who were not principals
in their agencies have already lost their jobs due to producer revenue
reductions caused by the MLR regulation, and agency owners report that
if their compensation continues to plummet more job loss will follow.''
The main reason for this is a rule imposed by the Department of
Health and Human Services involving the Medical Loss Ratio (MLR) which
mandates that health insurance carriers spend 85 percent of their
premiums for large groups and 80 percent of their premiums for
individual and small group policies on direct medical care.
The HHS rule requires health plans to treat independent agent and
broker compensation as part of health plan administrative costs--even
though they aren't employed by health insurance carriers. Brokers and
agents run their own businesses, hire their own employees, and pay all
of their own office expenses, working for their clients to find the
best and most affordable health insurance, usually from a range of
None of the compensation goes to the health insurer, yet HHS rules
require that it be counted against the insurer's allowable
Agents bring a great deal of value to their clients, yet this
clumsy rule is shoving them aside. Not only do they help individuals
and small businesses find the most appropriate and affordable policy
from many competing carriers, but they also help companies find and
establish wellness and disease-management programs and navigate the
often-complex claims process. They are a crucial element in the
equation of helping businesses find the most appropriate and affordable
health policies for their employees.
Agents and brokers often act as an external human resources
department for companies. Many smaller companies do not even have an HR
department so, as the Congressional Budget Office has noted, agents and
brokers often ``handle the responsibilities that larger firms generally
delegate to their human resources departments--such as finding plans
and negotiating premiums, providing information about the selected
plans, and processing enrollees.''
Janet Trautwein testified that NAHU ``members are spending
significant amounts of time educating their clients about the new law's
provisions and helping them comply with its resulting regulations.
Regardless of what the final outcome of PPACA may be, the need for
licensed, trained professionals to help individuals, employers and
employees with their health insurance needs will always be there. So we
need to make sure this industry survives.'' She made it clear that
``PPACA-related regulations * * * are costing American jobs and
hindering American business owners every single day. In every state, as
a direct result of the new law's MLR provisions, agency owners are
reporting that they are reducing services to their clients, cutting
benefits and eliminating jobs just to stay in business. In some
instances, they are simply closing their doors.'' NAHU recommends
``eliminating independent producer commissions from the MLR
calculation,'' adding that this ``will go a long way toward providing
uniform and needed relief to all health insurance markets--and the
consumers who reside within them--during the transitional period as
PPACA requirements are fully implemented over the next three years.''
Relief from the grandfathering regulation
It is in the interest of both employers and employees to keep
health costs down, and the MLR and grandfathering regulations issued by
HHS are just two examples of rules that are restricting their ability
to do that. Health costs and jobs are at stake.
I understand that legislation is being drafted to reverse the
interim final regulation issued by HHS addressing grandfathering.
Reversing this regulation would give employers the flexibility they
need to manage their health costs and find the balance between health
costs, wages, and hiring new workers. In addition, Reps. Mike Rogers
and John Barrow of Georgia have introduced legislation, the Access to
Professional Health Insurance Advisors Act of 2011, to remove
independent health insurance producer commissions from what is
currently defined as premiums for MLR calculation.
Chairman Roe, your leadership on health reform issues is
particularly important because of your experience as a physician and
because you have first-hand experience with the damage of government-
controlled health care through TennCare. Your support for repeal of the
Independent Payment Advisory Board is both important and relevant. You
have made it very clear in your work that you believe health care is
best provided when doctors and patients--not Washington bureaucrats--
are in charge of decisions. It is fortunate that Drs. Bucshon,
DesJarlais, and Heck are also serving with you on this committee to
provide physician leadership in Congress to restore the proper control
over health care decisions to doctors and patients.
Thank you for the opportunity to testify today, and I will be happy
to answer your questions.
\1\ James Sherk, ``Economic Recovery Stalled After ObamaCare
Passed,'' The Heritage Foundation, July 19, 2011, http://thf--
\2\ Dennis Lockhart, ``Business Feedback on Today's Labor Market,''
Federal Reserve Bank of Atlanta, November 11, 2010, http://
\3\ Joseph G. Hadzima, Jr., ``How Much Does an Employee Cost?''
Boston Business Journal, http://web.mit.edu/eclub/hadzima/pdf/how-much-
\4\ David I. Auerbach and Arthur L. Kellermann, ``A Decade Of
Health Care Cost Growth Has Wiped Out Real Income Gains For An Average
US Family,'' Health Affairs, September 2011, http://
\5\ ``Shaping Health Care Strategy in a Post-Reform Environment:
2011 16th Annual Towers Watson/National Business Group on Health
Employer Survey on Purchasing Value in Health Care,'' Towers Watson/
National Business Group on Health, March 2011, http://
\6\ ``January 2011 Census Shows 11.4 Million People Covered by
Health Savings ccount/High-Deductible Health Plans (HSA/HDHPs),''
America's Health Insurance Plans, June 2011, http://
\7\ Ruth Helman and Paul Fronstin, ``2010 Health Confidence Survey:
Health Reform Does Not Increase Confidence in the Health Care System,''
Employee Benefit Research Institute, September 2010, http://
\8\ ``Employer Reaction to Health Care Reform: Grandfathered Status
Survey,'' Aon Hewitt, August 2010, http://www.aon.com/attachments/
\9\ ``Fact Sheet: Keeping the Health Plan You Have: The Affordable
Care Act and 'Grandfathered' Health Plans,'' U.S. Department of Health
and Human Services, HealthReform.gov, Accessed September 13, 2011,
\10\ ``Employers Committed to Offering Health Care Benefits Today;
Concerned About Viability of Insurance Exchanges,'' Towers Watson,
August 24, 2011, http://www.towerswatson.com/press/5328.
\11\ ``Fact Sheet: Keeping the Health Plan You Have: The Affordable
Care Act and 'Grandfathered' Health Plans,'' U.S. Department of Health
and Human Services, HealthReform.gov, Accessed September 13, 2011,
\12\ John Hoff and John E. Calfee, ``The Contradictions of
ObamaCare,'' The American, February 10, 2011, http://www.american.com/
\13\ ``Annual Limits Policy: Protecting Consumers, Maintaining
Options, and Building a Bridge to 2014,'' The Center for Consumer
Information & Insurance Oversight, Accessed September 13, 2011, http://
\14\ PPACA was misdrafted, and the law did not explicitly require
insurers, starting last year, to sell health insurance to families with
children under age 19 who have pre-existing conditions. But health
plans told Department of Health and Human Services Secretary Kathleen
Sebelius they would voluntarily comply with the HHS rules requiring
them to cover these children. For more information: Robert Pear,
``Insurers to Comply With Rules on Children,'' The New York Times,
March 30, 2010, http://www.nytimes.com/2010/03/31/health/policy/
\15\ ``US employer health plan enrollment up 2% under PPACA's
dependent eligibility rule,'' Mercer LLC, August 1, 2011, http://
\16\ ``Fact Sheet: Keeping the Health Plan You Have: The Affordable
Care Act and 'Grandfathered' Health Plans,'' U.S. Department of Health
and Human Services, HealthReform.gov, Accessed September 13, 2011,
\17\ ``Employer Reaction to Health Care Reform: Grandfathered
Status Survey,'' Aon Hewitt, August 2010, http://www.aon.com/
\18\ ``Comments on the Grandfathered Health Plan Status
Regulations,'' U.S. Chamber of Commerce, August 16, 2011, http://
\19\ Janet Trautwein, Testimony for the United States House of
Representatives Committee on Energy and Commerce Subcommittee on Health
Hearing ``Cutting the Red Tape: Saving Jobs from PPACA's Harmful
Regulations,'' September 15, 2011, http://
Chairman Roe. Thank you, Ms. Turner.
STATEMENT OF DENNIS M. DONAHUE, MANAGING DIRECTOR, WELLS FARGO
INSURANCE SERVICES USA, INC., TESTIFYING ON BEHALF OF THE
COUNCIL OF INSURANCE AGENTS AND BROKERS
Mr. Donahue. Chairman Roe, Ranking Member Andrews and
members of the committee, good morning. Again, my name is
Dennis Donahue. I am the managing director and national
practice leader of employee benefits for Wells Fargo Insurance
Services USA. And I am testifying today on behalf of the
Council of Insurance Agents and Brokers.
The Council represents the nation's leading commercial
insurance agency and brokerage firms, with members in over than
3,000 locations, placing more than $200 billion of U.S.
insurance products and services, including group health
The Council's members help employers provide their
employees with the health coverage they need at the cost they
can afford, serving tens of thousands of employer-based health
insurance plans, covering millions of American workers.
We appreciate the opportunity to testify today. And I will
focus my comments on two particularly troubling aspects of the
Patient Protection and Affordable Care Act, compliance with
grandfathering and the medical loss ratio, MLR, provisions.
With respect to grandfathering, under PPACA, a core
objective was to allow everyone who had coverage the law was
enacted to keep that coverage. To this end, group health plans
that existed on March 23, 2010, are grandfathered, and are,
therefore, exempt from some of the law PPACA requirements,
provided that these grandfather plans comply with certain
constraints on their evolution that have been imposed by HHS,
DOL and the Treasury Department.
To retain grandfathering status, for example, a plan cannot
increase the percentage of co-insurance changes, significantly
increase a planned participant co-pays, decrease the employer
contribution by more than a specified amount or impose new or
decreased annual dollar benefit limits. A grandfathered plan
must also satisfy extensive record keeping and disclosure
obligations to preserve its status.
As straightforward as some of these rules and limitations
might seem, it is never that simple for an employer that is
trying to maintain their grandfathered plan. For practically
any contemplated change in the design of a health benefit plan,
the sponsor of that plan must seek some type of professional
guidance if they wanted to ensure that the change does not
jeopardize the plan's grandfathered status.
This will likely have been done annually, because, as you
mentioned before, the plan tends to make changes every year.
And all of it costs employers time and money. It is naive to
think that employee benefit plans are stagnant elections made
Plans change historically. And they evolve as the markets
evolve, with new cost containment measures, plans designed to
promote more cost effective treatments, the changing of those
insurance companies, their networks, deductibles, covered
expenses and so forth.
As consultants advising employers on compliance, we have
received countless questions on the grandfathering rules alone.
And many employers now hesitate to make any changes for fear
for running afoul of these rules.
All of this complexity costs employer health plans time and
money. The clients with which we work, particularly those
between 50 and 100 employees, do not have the administrative
resources and the expertise to make the requisite
Many of those client employers are now actively evaluating
whether to abandon offering these benefits at all, as they see
the cost of compliance sky rocketing.
There is also a number of other changes that would be
implemented starting in 2014. Employers are equally concerned
about how they and their employees would be able to absorb the
cost of these additional requirements.
With regard to the MLR, the medical loss ration
requirements, our clients have also expressed concern about the
effect of the MLR provision, that it may have on health
insurance premiums in areas where health insurance carriers are
leaving the marketplace because they are unable to meet the MLR
In addition, the imposition of the MLR requirement creates
some counterintuitive disincentives. For example, insurance
carriers are discinentivized from negotiating better deals with
medical providers and from developing new wellness programs
because of all the associated expenses of such initiatives. And
those will fall on the bad side--on the denominator side of the
While any potential benefits that reduce their medical
costs will actually further exacerbate the administrative cost
issues in the short term. And they will certainly stifle
More parochially, there is concern among health insurance
agents and brokers about the impact of MLR. It will have on our
business and on our jobs,.as carriers cut back and restructure
commissions in order to meet MLR's administrative cost caps.
Employers, too, are concerned, because they do not want to
lose the readily access that they have to professional advice.
And some have to come to rely upon their agents and brokers,
particularly in light of the difficult of navigating new PPACA
requirements, as discussed earlier.
For these reasons, the council supports H.R. 1206, the
Access to Professional Health Insurance Advisers Act of 2011, a
bill introduced by Representative Rogers to help ensure that
the MLR does not lead to the loss of agent or broker jobs, thus
depriving consumers of the expertise that agents and brokers
Thank you, again, for the opportunity to testify today. And
I am happy to answer questions.
[The statement of Mr. Donahue follows:]
Prepared Statement of Dennis M. Donahue, on Behalf of the
Council of Insurance Agents and Brokers
The Council of Insurance Agents & Brokers (``The Council'') is
grateful to Chairman Roe, Ranking Member Andrews, and other members of
the Subcommittee for holding this hearing to examine the impact of
regulations, costs, and uncertainty on employer-provided health care.
We appreciate the opportunity to testify, in particular, concerning
compliance with the grandfathering and minimum medical loss ratio
(``MLR'') provisions of the Patient Protection and Affordable Care Act
Specifically, I will share my knowledge regarding some of the costs
to employer-based health plans to comply with these provisions, based
on my experience as a professional employee benefits consultant and
health insurance broker to mid-sized employers who offer health
coverage to their employees. The costs and burdens of compliance are
My job title is Managing Director, National Practice Leader for
Employee Benefits, for Wells Fargo Insurance Services USA, Inc. I am
testifying today on behalf of The Council, of which I am a member as
well as former Chairman of the Council of Employee Benefit Executives.
The Council is the premier association for commercial insurance and
employee benefits intermediaries in the United States. The Council
represents leading commercial insurance agencies and brokerage firms,
with members in more than 3,000 locations placing more than $200
billion of U.S. insurance products and services, including group health
insurance. The Council's members help employers provide their employees
with the health coverage they need at a cost they can afford, serving
tens of thousands of employer-based health insurance plans covering
millions of American workers. As such, our membership has a thorough
understanding of the group health insurance market, and has had a
unique opportunity to observe the challenges group health plans have
faced thus far in the PPACA implementation process.
Wells Fargo is the fourth largest insurance broker in the United
States and the fifth largest in the world. The majority of our
commercial insurance customers are small and mid-sized employers,
typically 50 to 500 employees. On a personal note, I have 34 years in
the employee benefits industry and I am a national resource for
approximately 1,000 employee benefit professionals within our firm.
Recognizing that the grandfather and MLR provisions were included
in PPACA with a view toward helping consumers of health insurance, I am
here today to tell you that these provisions, as they have been
implemented, are not cost-free. This is especially so for smaller
employers and health plans that lack the staff and resources to devote
to ensuring that their plan complies with the myriad restrictions on
grandfathered plans, which range from limits on changing co-payment
amounts, co-insurance charges and other cost-sharing amounts, to making
changes in the types of benefits that are offered. This may sound more
straightforward than it is. However, for practically any contemplated
change in the design of a health benefit plan, the sponsor of that plan
must seek some type of professional guidance if they want to ensure
that the change does not jeopardize the plan's grandfathered status.
This will likely have to be done annually because plans tend to make
changes each year, and all of it costs employers money and time.
At the same, these health plans may lack the resources to pay the
higher premium costs that may be associated with losing grandfathered
status. In particular, loss of grandfather status means a plan may have
to provide new benefits such as preventive services for free. These
plans may also have to implement new or different claims appeal and
external claims review processes. And there are a number of other
changes that would have to be implemented starting in 2014. Employers
are concerned about how they and their employees would be able to
absorb the costs for these additional requirements.
Our clients have also expressed concern about the effect that the
MLR provision may have on health insurance premiums in areas where
health insurance carriers are leaving the market because they are
unable to meet the MLR requirements.
And finally, there is concern among health insurance agents and
brokers about the impact the MLR will have on their businesses and
their jobs, as carriers cut back and re-structure commissions to meet
the MLR's administrative cost caps. Employers too are concerned,
because they do not want to lose ready access to the professional
advice they have come to rely upon from their agents and brokers. For
these reasons, The Council supports H.R. 1206, the Access to
Professional Health Insurance Advisors Act of 2011, a bill introduced
by Rep. Rogers to help ensure that the MLR does not lead to the loss of
agent and broker jobs, thus depriving consumers of the expertise agents
and brokers offer.
I. The Impact of PPACA Grandfathering Provisions on
Employer Health Plans
Under PPACA, group health plans that existed on March 23, 2010 (the
law's enactment date) are ``grandfathered'' and are, therefore, exempt
from some of the law's new requirements. The U.S. Department of Health
and Human Services, Department of Labor, and Treasury Department
(collectively, the ``Departments'') issued a rule last year to
implement the grandfather provision, and that rule basically
establishes a list of things a health plan can and cannot do while
remaining grandfathered, in addition to imposing new recordkeeping and
notification requirements. I think of the requirements as a list of
``do's and don'ts,'' as follows:
A Grandfathered Group Health Plan:
Eliminate all benefits to Change carriers
diagnose or treat a particular condition
Increase percentage co-insurance Change premiums
Increase co-pays, fixed amount Make sure
cost-sharing ``significantly'' (med. structural changes to plan
infl. +15%) (e.g., self-insured to
Decrease employer contribution Change provider
New or decreased annual dollar Change prescription
benefit limits formulary
Switch employees' plans or engage Make changes to
in mergers, etc. to avoid compliance comply with other laws
The Departments' rule characterizes the permitted changes as ones
that are ``routine'' in nature for health plans. It is naive to think
that employee benefit plans, especially the medical, are stagnant
elections made by employers. Our clients have multi-year objectives
that attempt to ward off the rate of continued medical inflation. Plan
changes historically evolve as the markets evolved with new cost
containment measures, plan designs to promote more cost-effective
treatments, the changing of carriers, networks, deductibles, covered
expenses, and so forth. But in today's economic environment, it is not
unusual for our clients to contemplate cost structure changes beyond
those the rule treats as ``non-routine.'' When faced with a decision
whether to keep offering insurance to employees or whether to give up
in an age of incredible health cost increases, employers do contemplate
the possibility of having to increase the employee's contribution by
more than 5%, for example, a change that will cause loss of grandfather
And as straightforward as some of these decisions might seem, it is
never that simple for an employer that is trying to maintain a
grandfathered plan. As consultants advising these employers on
compliance, we have received countless questions from our clients in
the year since the grandfather rule was adopted. Employers now hesitate
to do something as basic as moving a group of employees from one health
plan to another if the company is re-aligning its staff among different
geographic locations or has undergone a corporate re-structuring, for
fear of running afoul of the grandfather rule. They seek our advice for
this and nearly every other type of change they consider making to
their health plans, just to make sure they do not unwittingly end up
affecting the plan's status.
The grandfather rule includes recordkeeping and disclosure
obligations, as I previously mentioned. These include a requirement
that health plans maintain the records necessary to prove their
grandfathered status, which entails keeping the paperwork describing
each and every health plan benefit and each and every cost or
contribution as they existed on March 23, 2010, and for any and every
change, for an indefinite period of years thereafter. This is a
dichotomy as health plans, and employee benefits in general (as a
condition of one's overall compensation package), are viewed by
employers as prospective, not retrospective. Tied to employee's
compensation, they are unique and employer-specific in their design.
These new recordkeeping rules will be especially burdensome and
expensive for employers that have multiple locations and employee
classes, all with varying benefit levels for purpose, that continue to
evolve as our U.S. healthcare delivery system evolves.
All of this complexity costs employer health plans time and money.
And many of our clients say they are daunted by the grandfather rule's
requirements. The companies we work with, particularly those with 50 to
100 employees, do not have the administrative resources and expertise
to make assessments about whether changes will cause loss of
grandfather status, or when it becomes uneconomical to even try to
maintain grandfather status. Admittedly, their inquiries and their
resulting challenges mean business for my employer; but there is no
doubt that our clients spend money on consulting fees for
grandfathering compliance matters that they did not have to spend two
years ago. That's an administrative expense that does not grow their
business, and the Subcommittee is probably aware of the well-known data
indicating that small businesses create more than 60% of the new jobs
in our country.\1\
\1\ U.S. Small Business Administration fact sheet, available at
One might ask why plans do bother attempting to maintain
grandfathered status? The reason is because they may also be unable to
afford the cost of the plan if they lose grandfather status. This is
the case because a non-grandfathered plan may have to provide new
benefits the plan sponsor did not anticipate (having to offer when it
sought to design a plan that the employer and its employees could
actually afford). Our clients are most concerned about the cost of
needing to provide preventive services for free rather than with a co-
pay, and the cost of having to implement new or different claims appeal
and external claims review processes. Both of these new requirements
would have to be implemented now if a plan loses grandfathered status.
There are several other new requirements that go into effect for non-
grandfathered plans starting in 2014, including having to provide a
mandated benefits package and minimum 60% employer contribution for
company plans with fewer than 100 employees. Thus, there can be
considerable new costs involved if a plan loses grandfather status,
especially for small businesses.
II. The Impact of the Medical Loss Ratio
From my perspective as a consultant to employers and as a
professional insurance broker, the minimum MLR, which caps the amount
of non-claims-related expenses a carrier can have at 15% or 20%
depending on the market, is raising concerns among employers about what
the MLR may ultimately do to their insurance premiums, and raises
concerns about the impact on agents and brokers and the services we
provide to employers.
A. IMPACT ON EMPLOYERS
Our employer-clients have expressed concern that the MLR mandate
will lead to less carrier competition and higher healthcare costs in
some markets. In smaller markets where carriers do not enjoy the
economies of scale that allow them to meet the administrative caps
under the MLR mandate, carriers are abandoning the market altogether.
As evidence, we have already seen the exodus of two prominent insurance
carriers, The Guardian Life and The Principal, both of which have
provided medical benefits to small employers for many decades, have
withdrawn their medical plan offerings altogether. Both have signed
agreements with their former competitor, United Healthcare, to
transition employee coverages. Under the law, carriers must calculate
their MLR in each market in each state where they operate. Recent
reports, including a U.S. Government Accountability Office study from
July 2011, reveal that more carriers are pulling out of, or plan to
pull out of, some markets because they cannot meet the MLR mandate in
\2\ U.S. Government Accountability Office Report to Congressional
Requesters, ``Private Health Insurance: Early Experiences Implementing
New Medical Loss Ratio Requirements,'' GAO-11-711 (July 2011), at 19
(hereafter, ``GAO Report''). And these revelations pertain to carriers
selling policies in the individual market, a market for which states
can at least ask HHS for temporary relief on the minimum MLR where they
fear the requirement will destabilize the market. No such relief is
available for the small group insurance market that small employers
rely on, so there are fears about what may be on the horizon for that
Stories like these mirror the concerns our clients are expressing
to us, about the future of competition and choice among quality health
plans. As we have seen in so many other industries, the simple law of
economics tells us here that diminished competition may lead to higher
premium prices for employers seeking to provide healthcare for their
B. IMPACT ON HEALTH INSURANCE AGENTS AND BROKERS
The Council's agent and broker members are generally paid for their
services by insurance carriers on a commission basis. The MLR
calculation obviously affects these arrangements because it requires
commissions paid by carriers to agents and brokers to be categorized as
``other non-claims costs.'' Since a carrier will now pay rebates to
subscribers if the carrier fails to limit its non-claims costs to 15%
or 20% of premium revenue (depending on the market), the MLR
requirement has put stress on agent and broker commissions. The 2011
GAO report found that ``almost all insurers [GAO] interviewed were
reducing brokers' commissions and making adjustments to premiums in
response to the PPACA MLR requirements.'' \3\
\3\ GAO Report at 18.
My experience bears this out, as we are seeing carriers cut
commissions or try to move to models that shift some or all of the
administrative cost directly to the policyholder so that these amounts
do not get counted as administrative and distribution costs for the
carrier. This is particularly true for brokers servicing the individual
and small business markets, which are already seeing their compensation
slashed by 20-to-50 percent. It also happens that these markets are
where agent and broker services are desperately needed by consumers and
entrepreneurs, who find it difficult to navigate a complicated health
insurance marketplace that will become even more complicated,
unfortunately, as we approach 2014 and small businesses have to figure
out what to do in the Exchange context.
Despite what some observers might suggest, for employers,
purchasing health coverage is not like buying an airline ticket. There
are a host of variables to be considered that are unique to each
employer. Company size, specific workforce health care needs, financial
resources, available options, coverage costs, and the need or desire
for additional programs such as wellness measures, are among the many
factors that must be balanced by employers attempting to find health
coverage. Thus, for many employers the personalized needs for
compliance, communications and enrollment, can only provide limited
support with toll-free telephone numbers and websites. That will remain
true even when the Exchanges start operating in 2014. Without the
professional advice of agents and brokers to guide them in the
complicated process of selecting health coverage, employers may simply
throw up their hands and not offer coverage, or settle for coverage
that is less than a good fit for their employees.
Prior to MLR, our services were covered within a component of the
premium. While it may seem simple to just assume that small businesses
can pay more in fees in lieu of carrier commissions, these new line
items may be difficult for small businesses to take on in such
challenging economic times. This may also adversely affect employers'
willingness and ability to work with agents and brokers for services
they have historically outsourced to us.
The foregoing reasons highlight the importance of continuing to
have a robust agent/broker presence in the group health market. It is
important for policymakers to consider the costliness of regulatory
measures that create downward pressure on commissions paid by carriers
to agents and brokers, such as the MLR mandate. These measures can lead
to fewer agents and brokers in business, fewer employer-broker
relationships, lower quality and less tailored health care for
employees, and potentially severe PPACA compliance problems and costs
for employers that are left to navigate the system without the
assistance they need.
All of these concerns have prompted The Council to support H.R.
1206, the Access to Professional Health Insurance Advisors Act of 2011,
which was introduced by Rep. Rogers and presently has 129 co-sponsors.
By excluding agent/broker compensation from the MLR calculation, H.R.
1206 will help to ensure that the MLR does not lead to the loss of
agent and broker jobs, thus depriving consumers of the expertise agents
and brokers offer.
It is very important for policymakers to understand the costs and
burdens associated with laws and regulations for all parties involved.
I hope this hearing and my testimony contributes to that understanding
as it relates to PPACA's grandfathering and MLR provisions. Again, I
appreciate the Committee's willingness to examine these important
issues and the opportunity to testify on behalf of The Council's
Chairman Roe. Thank you, Mr. Donahue.
STATEMENT OF ROB POLLACK, EXECUTIVE DIRECTOR, FAMILIES USA
Mr. Pollack. Thank you, Mr. Chairman, Dr. Roe, Ranking
Member Andrews, distinguished members of this panel.
I am delighted to testify at today's hearing, because I
believe that Affordable Care Act improves America's jobs and
job markets. Health care, as you know, is one of the fastest
growing job sectors in America's economy.
And with 30 to 40 million people projected to gain health
care coverage as a result of the Affordable Care Act, it will
give a boost to that sector. According to the Bureau of Labor
Statistics, as Congressman Andrews indicated, more than 500,000
jobs were created in the health care and social assistance
sector since the Affordable Care Act was enacted into law.
The Bureau of Labor Statistics projects that nearly four
million jobs will be created in that sector over the course of
the next decade. And it will aid the job market because it will
end job lock, people who cannot leave a job because they or a
family member have a health condition, and they can't become
entrepreneurs because they are afraid they are not going to be
able to get health care coverage.
So I want to make three points with respect to my
testimony. First, by making insurance companies more
accountable, the Affordable Care Act is improving the cost
effectiveness of health coverage for employers and consumers.
Number two, in contrast to a variety of cost shifting
proposals offered in the House this year, most notably the Ryan
Plan, the Affordable Care Act initiated significant steps to
decelerate the rise of health care costs, rather than shifting
costs onto those people who can't bear that load.
And third, the Affordable Care Act provides very
substantial and direct cost relief to small businesses and
Now one quick area of background; over the course of the
last 10 years, 2000 to 2010, we have seen a big decrease in the
portion of the American public that have employer sponsored
insurance. From 2000 to 2010, even though the population
increased by 26.6 million people, we have seen a decrease of
12.6 million people with employer sponsored insurance.
So in 2000, over 65 percent of the American public had
employer sponsored insurance. In 2010, it was about 55
And why is that happening? Because, of course, premiums
have sky rocketed during that period. In the year 2000, the
average premium for family coverage, employer sponsored
insurance, was $6,772. By 2010, it was $13,871. And as we
learned from the Kaiser Foundation, it is now over $15,000.
So here is how the Affordable Care Act is going to improve
that. First, it improves that accountability of insurance
companies, so that we get greater cost effectiveness on the
premium dollar. And that is what the medical loss ratio system
When I buy insurance, either for myself or as the director
of a small business--we have 50 employees--I want to make sure
that my dollars are spent as cost effectively as possible. And
from my perspective, having more of the dollars spent on
advertising, marketing, administration and profits, as opposed
to really providing health care, that is not efficiency.
And so the medical loss ratio is going to improve that. And
we have seen that it has already had a significant improvement
in a number of states.
And by making sure that excessive premium rates proposed by
insurance companies get reviewed by the states--and they now
have the wherewithal to do that--that too is going to improve
Second, the House has offered a variety of cost shifting
proposals, but not anything with respect to diminishing and
decelerating costs. The Affordable Care Act does that. I have
outlined how it does that. So I am not going to repeat that
Last, the Affordable Care Act provides significant
subsidies to help make coverage more affordable, both for small
businesses and for individuals. With respect to small
businesses, it provides tax credit subsidies for businesses
with fewer than 25 workers, with average wages below $50,000.
There are more than four million businesses who are eligible
for those tax credits. And those tax credits will increase in
Eighty percent of all small businesses with up to 25
workers are eligible for the tax credit. For individuals and
families, they will receive tax credit subsidies. Those between
133 percent of poverty and 400 percent of poverty for a family
of four is $90,000. They will be eligible for tax credit
subsidies that will help to make premiums more affordable.
And lastly, let me just say that as more and more people
gain health care coverage, that 32, 34 million that CBO
projects will occur, it is going to decrease the hidden health
tax that all of us who buy insurance have to pay because we
ultimately experience a cost shift to pay for the costs of the
Thank you, Mr. Chairman.
[The statement of Mr. Pollack follows:]
Prepared Statement of Ron Pollack, Executive Director, Families USA
Mr. Chairman and Members of the Committee: Thank you for inviting
Families USA to testify today at this very important hearing about
health care reform, employers and consumers. Since 1982, Families USA
has worked to promote high-quality, affordable health care for all
Americans. We are pleased to be invited to testify about how the
Affordable Care Act will offer concrete help to employers, their
workers and their families. The strength of the U.S. labor market is
inextricably linked to the scope and size of America's health care
industry. According to the Bureau of Labor Statistics, more than
500,000 jobs have been created in the health care and social assistance
sector since the passage of the Affordable Care Act. According to
Bureau of Labor Statistics projections, nearly 4 million jobs will be
added to the health care and social assistance sector between 2008 and
The Affordable Care Act Will Spur Job Growth
Our economy needs a jolt and policymakers should do as much as
possible to encourage hiring and spur growth. When fully implemented,
the Affordable Care Act will help promote economic growth by giving
workers the freedom to move to new jobs at small firms and start-up
companies without hinging their decision solely on the ability of the
new employer to provide health care coverage to workers. In our current
health care system, people with health conditions have a difficult time
finding coverage in the individual market. Uncertainty about whether
they'll be able to find affordable coverage leads many Americans to
make decisions about which job to choose or whether to stay in a job
based on whether the job provides health coverage. This phenomenon is
known as ``job lock.''
Workers who have health problems are less likely to leave a job
that offers health coverage. One study found that chronically ill
workers who rely on their employers for health coverage are about 40
percent less likely to leave their job than chronically ill workers who
do not rely on their employers for coverage. Another study found that
workers with a history of health problems such as diabetes, cancer or
heart disease, and those who have substantial medical bills, stay at
their jobs significantly longer because of their job-based health
coverage. And job lock has a particularly strong effect on workers who
have family members with chronic illness. Research has shown that
workers who rely on their employer to provide insurance for chronically
ill family members stay in jobs they might otherwise leave. One study
found that women with job-based coverage who have a chronically ill
family member who depends on that coverage are 65 percent less likely
to leave their job than women with job-based coverage who have a
chronically ill family member who does not depend on that employer
The fear of going without health coverage discourages individuals
from leaving their existing jobs and starting new businesses on their
own, especially if they have pre-existing conditions or if they have a
family member with a health condition. Productivity is hurt when the
new ideas, new products and competitiveness that new businesses bring
to the economy are lost. The Affordable Care Act will reduce the
problem of job lock: individuals will no longer have to base their
employment decisions on whether a job offers health coverage.
Employer-Based Health Coverage Declining Due to Rising Insurance
The number of Americans who receive their health insurance through
their employer has dropped precipitously in recent years. In the year
2000, approximately two-thirds of the population (65.1 percent, or
181.9 million) had employer-based health coverage. Ten years later, in
2010, a little more than half of the population (169.3 million, or 55.3
percent) had coverage through their job or the job of a family member.
Once implemented, the help provided by the Affordable Care Act to
employers and consumers is likely to change this trend.
This trend is driven, in large part, by rising health insurance
premiums. Between 2000 and 2010, premiums for job-based family coverage
more than doubled, increasing from $6,348 to $13,770. These premiums
continue to rise, growing to $15,073 by 2011. As premiums rise, it
becomes more challenging for employers to offer quality, affordable
health coverage to their workers, and employers are forced to make
difficult decisions about such coverage.
Employers often respond first with efforts to control their health
care costs without eliminating benefits entirely. Some employers
attempt to control health care costs by ``thinning'' health benefits--
offering plans with higher deductibles, copayments, and co-insurance,
as well as plans that cover fewer benefits. Others cut costs by placing
limits on which employees are eligible for coverage or by asking
employees to pay more for coverage for spouses and children of
employees (dependent coverage). In addition, many employers have
stopped offering coverage to part-time, temporary, or seasonal workers.
The decline in employer-based coverage has been further exacerbated
by the economic downturn that began in 2007. Millions of Americans lost
their jobs during the recession and, for many, the loss of a job also
meant the loss of health insurance coverage. And while the safety net
of public health insurance programs, including Medicaid and the
Children's Health Insurance Program (CHIP), provides coverage to some
who lose their job-based coverage, current eligibility rules limit who
qualifies for coverage based on income and family status. Because of
these eligibility rules, Medicaid and CHIP act as a highly effective
safety net for children during economic downturns but do not work
nearly as well for adults.
Evidence of the critically important role that Medicaid and CHIP
have played in protecting children can be seen in data from the Census
Bureau. Between 2000 and 2010, enrollment in Medicaid and CHIP
increased by 20.5 million, growing from 28.1 million to 48.6 million.
More than half of this increase in enrollment was among children.
Between 2000 and 2010, the number of children enrolled in Medicaid and
CHIP rose from 14.9 million to 26.1 million, an increase of more than
Faced with the loss of job-based health coverage, those who don't
qualify for public health coverage must make a tough decision: Those
who are eligible for COBRA continuation coverage under federal law (or
``mini-COBRA'' continuation coverage under state law) may be able to
keep their job-based health coverage. Those who do not qualify for
COBRA may be able to purchase coverage on their own through the
individual market. However, COBRA premiums are often unaffordable, and
the cost of individual market coverage is often prohibitive, as well.
In addition, in most states, insurers are currently free to deny
coverage or charge people more in premiums based upon their age, health
status, and even gender. As a result, many who lose their job-based
coverage remain uninsured.
Accordingly, the number and percentage of uninsured Americans has
risen substantially in the last decade. Between 2000 and 2010, the
number of uninsured grew by 13.3 million, rising from 36.6 million to
49.9 million. During this same period, the proportion of the population
who went without health insurance grew by 3.2 percentage points.
The Affordable Care Act will help cut the cost of health care and
lower costs for employers and consumers in three ways: First, the law
will make insurance companies more accountable, giving states and the
federal government more tools to hold down the cost of insurance
premiums. Second, the Affordable Care Act contains a range of tools to
control ever-escalating health care costs that will improve quality and
make care more efficient. Third, the Affordable Care Act will provide
concrete help to employers, in the form of tax credits and new
regulated marketplaces to purchase insurance, and help to health care
consumers, in the form of premium subsidies and out-of-pocket spending
The Affordable Care Act Will Make Insurance Companies More Accountable
The Affordable Care Act includes critical protections to hold
insurance companies accountable for consumers' and businesses' premium
dollars. The medical loss ratio (MLR) standards in the law ensure that
a reasonable share of premiums go toward medical care and quality
improvement, instead of marketing, administration, and excessive
profits. This measure to cut out wasteful spending is particularly
important for small businesses and individuals who buy coverage on
their own, since they do not have sufficient negotiating power with
major insurance companies to ensure fair premiums.
Without the Affordable Care Act, insurers could continue to raise
rates for consumers regardless of how little they spend on medical
care. Under the new law, if a company spends less than a set share of
premiums delivering care, it will owe rebates to enrollees. Starting in
2012, up to 9 million Americans could be eligible for rebates worth up
to $1.4 billion. These rebates will average an estimated $164 a year
The MLR requirements are already helping families. For example,
effective last month, 15,000 Aetna enrollees in Connecticut's
individual market received a 10 percent decrease in their premiums due
to the Affordable Care Act's MLR requirements. Aetna implemented this
change because its MLR in Connecticut was just 54.3 percent in 2010,
far below the 80 percent standard that individual and small group
market insurers must meet under the Affordable Care Act. (This standard
is set at 85 percent for large group carriers).
Connecticut is not the only state where carriers have demonstrated
unacceptably low MLRs in recent years. A quarter of the 16 plans listed
in Minnesota's individual market reported MLRs of less than 60 percent
for 2010, with one company reporting a MLR of only 41 percent. That
means, for every $10 this company collected in premiums, just a little
over $4 was spent on medical care. For 2009, Anthem Health Plans of New
Hampshire reported a MLR of just 63 percent in the individual market
and Anthem Health Plans of Virginia reported a small group MLR of 67
percent. (Note that before the implementation of a national MLR
standard, states may have used different methods for calculating
carriers' MLRs. The state figures cited here may not include quality
improvement as a medical expense.)
The rate review provisions are also essential to holding insurers
accountable and keeping premiums reasonable for consumers. Carriers
cannot increase rates by 10 percent or more without providing
justification. The law also makes information on rate increases more
transparent, including through a new section on HHS' healthcare.gov
website that gives the public to access rate justification information
for any rate increase of 10 percent or more.
Further, the rate review funding has already had a significant
impact on affordability. For example, when Regence BlueCross BlueShield
of Oregon proposed a 22.1 percent rate increase for individual
enrollees in the spring of 2011, the state used grant funding from the
Affordable Care Act to hold its first public rate hearing in 20 years
and to scrutinize the underlying assumptions and calculations used by
the insurer to formulate its proposed increase. As a result, the state
determined the 22.1 percent proposed rate increase was unjustified and
approved only half of the proposed increase (12.8 percent). In
Connecticut, a 19.9 percent Anthem BlueCross BlueShield proposed rate
increase in the individual market was denied outright, due to rate
review at the end of 2010. Last month, the state's insurance department
found another of the company's proposed rate increases unjustified and
is granting only a 3.9 percent increase for the plan's rates, instead
of the 12.9 percent hike the company sought to impose. The rate review
provisions, along with MLR requirements, are holding insurers
accountable for how they spend consumers' dollars and keeping premium
increases in check.
The Affordable Care Act Will Help Slow the Growth of Health Care Costs
In addition to holding insurance companies accountable, the
Affordable Care Act authorizes multiple initiatives and demonstration
projects designed to improve quality and reduce the rise in health care
costs. The law seeks to reduce costs through a range of solutions
focused on doctors, hospitals, insurance companies, employers, and
Unlike other approaches to reducing health care costs, these
provisions do not resort to simply reducing payments for health care
services or shifting costs to consumers through higher deductibles and
copayments. Rather, the aim of these provisions is to provide higher-
quality care more efficiently and with less waste. These provisions
fall into the following categories:
Provisions designed to test ways that doctors and hospitals can
better coordinate care, especially for people with chronic health
problems: The current fragmented nature of our health care system
leads, for example, to the unnecessary duplication of tests and
procedures. Through better care coordination, much of the excess costs
can be prevented.
Provisions that promote preventive services so costly complications
can be avoided: The Affordable Care Act eliminates deductibles and
copayments for preventive services in Medicare and private coverage.
Preventive services include tests such as mammograms, Pap tests,
colorectal cancer and diabetes screenings, autism screenings for
children, as well as wellness check-ups and immunizations. If problems
are identified early, and treated before they become serious, dollars
can be saved.
Provisions that promote the sharing of unbiased information about
which medical treatments work and which do not: Every day, new drugs
and treatments are identified; they may be life-saving breakthroughs or
they may have little benefit to patients. But busy doctors struggle to
stay abreast of new developments. The law creates a new independent,
nonprofit entity charged researching what drugs and treatments work
best, so doctors have the information they need to provide the best
possible care to patients.
Provisions that promote real competition among health insurance
companies in more transparent insurance marketplaces: The Affordable
Care Act will help people shop for the best health care plan for the
price, and it will promote competition among different health care
plans. Beginning in 2014, the establishment of state exchanges will
provide regulated marketplaces where small businesses, the self-
employed and eligible consumers can choose from a range of health
insurance plans. In the new exchanges, insurance companies will have to
clearly explain what care is covered and at what cost.
The Affordable Care Act Will Help Employers and Workers with the Cost
of Health Care
Along with slowing the growth of health care costs and holding
insurance companies accountable, the Affordable Care Act will provide
much-needed financial relief to millions of small businesses, families,
and large employers.
While small businesses are the backbone of America's economy, our
health care system has been failing them. The current system makes it
difficult, if not impossible, for small business owners to provide
their workers with quality, affordable coverage. The Affordable Care
Act provides small businesses with fewer than 25 workers and average
wages of less than $50,000 with a tax credit for employee coverage.
More than 80 percent of all American small businesses (those with up to
25 workers) were eligible for this tax credit in 2010.
Other provisions of the Affordable Care Act will also provide
critical assistance to small businesses struggling to afford health
coverage. For example, the SHOP exchanges will create a new competitive
marketplace where small employers and their workers will be able to see
transparent information about health plans on a user-friendly website.
In the SHOP, employers and workers will be able to choose from a
variety of plans that meet strong quality standards so that they know
they're getting good value for their money. In addition, new consumer
protections, such as those that prohibit insurers from imposing
lifetime or annual dollars caps on how much they'll pay for enrollees'
care, will ensure that the coverage that small employers buy actually
works for them and their workers when illness strikes.
Lower- and middle-income individuals and families will get help
with the cost of care in two ways: 1) a new tax credit to assist with
the cost of health insurance premiums; and 2) protections on how much
they spend on out-of-pocket costs.
The new premium tax credits will help both insured individuals who
struggle to pay rising premiums and uninsured individuals who need help
to be able to purchase coverage. Generally, the premium tax credits
will be available to individuals and families who have incomes between
133 and 400 percent of poverty (between about $30,000 and $90,000 for a
family of four in 2011). The credits can be used to purchase insurance
in the new health insurance exchanges. People who have an offer of
health coverage from their employer may be eligible for a premium tax
credit if their employer's plan would be unaffordable for them.
Approximately 28.6 million Americans will be eligible for the tax
credits in 2014; more than half (52 percent) are currently insured.
The Affordable Care Act will also protect how much consumers must
spend out of pocket each year on health insurance deductibles and
copayments for covered benefits. It is estimated that the number of
people who are ``underinsured,'' that is, who have high medical costs
as a share of their income, will be cut by 70 percent due to this
provision in the Affordable Care Act. Too many lower- and middle-class
families are only one health crisis away from financial devastation.
For example, the average hospital charge nationally for a stay
associated with a heart attack is nearly $63,000, and for people with
inadequate coverage, their share of these costs can quickly drive them
into bankruptcy. The law will mean that insurance coverage actually
covers the medical bills. A family of three with an income between 100
and 200 percent of poverty (or about $18,500 and $37,000) would not
have to pay more than $3,967 out of pocket for their care in one year.
Moreover, the law will provide some additional cost-sharing subsidies
for low-income families who purchase insurance in the new exchanges.
The Affordable Care Act Does Not Shift Costs to Consumers
Many of the deficit reduction proposals under discussion this year
in Congress do nothing to address the underlying causes in the rise in
health care costs. Instead, many deficit plans merely shift the burden
of health care costs from the federal government either to states, or
to consumers, or to both. For example, cutting federal Medicaid
spending--either through a block grant or reduced funding for states--
would ultimately increase the number of uninsured Americans. That would
raise health care costs for the rest of us. Family coverage costs an
extra $1,000 or more a year, on average, to pay for health care costs
for the uninsured. A growth in the uninsured results in an increase in
the ``hidden health care tax'' for those who have insurance, because
health care providers must pass along the costs of caring for the
uninsured. Repealing the tax credits in the Affordable Care Act would
effectively increase taxes on middle class families and leave them with
no assistance to purchase health insurance. If the tax credits were
repealed, the increased tax burden on these families would total $777
billion between 2012 and 2021. The Affordable Care Act is designed to
slow the growth in health care costs while providing concrete
assistance to businesses and families to pay for the cost of insurance.
Chairman Roe. Thank you, Mr. Pollack.
STATEMENT OF ROBYN PIPER, PRESIDENT, PIPER JORDAN
Ms. Piper. Thank you, Chairman Roe and Ranking Member
Andrews and members of the committee for the opportunity to
I would like to start by stating that I am in a privileged
position to represent primarily Fortune 1000 employers.
However, my firm itself is a small employer. So my testimony
today is going to bring forth the challenges that are
experienced by both large and small employers.
Flexibility is a key element in a successful employer
sponsored benefits program. Although it has been said that
grandfathering allows plans to innovate and contain costs by
allowing insurers and employers to make routine changes without
losing grandfather status, we have recognized the opposite
In evaluating plan design, employers who wished to maintain
grandfathering have many limitations that must be followed. Is
it very important to note that these limitations are not
applied annually and further restrict employers.
Plan modification is the main method applied by benefits
professionals in order to control costs and to improve health
of the employees, by customizing around the demographics and
around abuse and utilization. Although the administration has
shown support for such value based insurance design, a pursuit
in maintaining grandfather status restricts the employer from
applying such techniques to drive improvements within the plan.
An example; one of our large employers made the decision to
lose grandfathering very recently. They did so partially based
on the fact that their outpatient service costs were 9 percent
higher than national trend, benchmarked by their issuers
benchmark, primarily due to non-emergency E.R. costs.
There were 47 claimants with three or more E.R. visits, two
with nine visit in 1 year, more than $1,000 in costs. To
protect that plan from the abuse and utilization of non-
emergency related E.R. visits, we had to increase the
deductible, to protect the entire population that is on that
plan, not just the 49 people that I am referring to.
Loss of grandfathering took place. Grandfathering
restrictions do limit the ability for benefits professionals to
properly protect the plan for all participants.
To maintain status requires acceptance of necessary rate
increases and budget increases for employee benefit spending.
And such acceptance stands contrary to what PPACA's supporters
wish to accomplish
In weighing this decision whether to lose grandfather
status or not, employers must consider the additional
requirements that come along with non-grandfather status. While
some of these requirements simply are not problematic for
employers, others have caused concern.
First of all, an employer will have to deal with cumbersome
appeals provision. Any flip in compliance can cause
consequences, which is a significant issue that needs to be
considered by every single employer.
For a small employer, the compliance with appeals could
require addition of staff, as well as to the planned cost
Secondly, there is a consequence for discrimination
testing, although the effective date and related sanctions have
been delayed. Without clear guidance, an employer will attempt
to comply at this point. But even that attempt may fail to
comply once those regs are set.
Lastly, preventive care must be covered without cost
sharing. Large employers really have not had a tremendous issue
with this. However, small employers and employees with hourly
employees who are covered under a limited plan have struggled.
For employers maintaining grandfather status last year,
primarily large--and again, depending on the type of employer
group, PPACA provisions added an additional one to 4 percent to
the premium cost. For non-grandfathered plans, the steepest
increases and continue to be received by small employers,
myself included, and employers offering limited benefit health
As many employers are financially incented to lose
grandfather status in order to control costs, this has resulted
in higher deductibles and higher cost shift to those employees.
These design changes are necessary to control unnecessary
utilization, to control employer premium spending, and to
reduce the risk of penalties in 2014.
Job stability and continuation will be an issue for hourly
employees. While the IRS Notice 2011-36 proposes safe harbor,
whereby employers could use a look back period to determine for
old time employees for a coverage period, there is still a
significant risk to employers who do not strictly define hours
Many employers right now are entertaining the
implementation of specific job hour limits in order to protect
the organization from penalties. Hour limits will reduce the
employees' take home pay.
A well circulated Q&A document posted on HealthReform.com
tells the consumer that the new insurance regulation will not
drive up health insurance costs. This Q&A is still posted. And
we know that this statement is not entirely true.
PPACA provisions, employer burdens and general health care
trends have caused loss of grandfather status and have most
certainly caused health insurance costs to increase. It has
been said that the grandfather provision was put in place to
keep employers offering insurance and to prevent employers from
Contrary to popular debate, a mass majority of employers
want to continue to offer meaningful benefits. And
grandfathering was not needed to enforce that measure. The
grandfather provision has created cumbersome restriction on
many employers and added unnecessary costs to many plans,
creating an adverse scenario than desired by the
A number of thoughtful considerations have been provided to
the administration as it relates to unduly restrictive rules
and the need for clarification, for example, on wellness
programs. To date, employers and advisers have not been
provided with a response.
Employers have been forced to operate under good faith that
we are in compliance and understand that there is risk to such
an assumption. There is tremendous need for guidance from the
Grandfather provisions have not rewarded the most generous
employers. In many instances, employers finding the great ease
of compliance right now are those that offer the least generous
Thank you for the opportunity to testify.
[The statement of Ms. Piper follows:]
Prepared Statement of Robyn Piper, President, Piper Jordan
The goal of grandfathered status was to preserve the
ability of American people and employers to keep their current plan if
desired. Unfortunately, many employers did like the health plan they
offered but have been forced to either lose grandfathered plan status
due to restrictive limitations or are seriously considering losing
status in the near future.
The impact of maintaining grandfathered plan status, in
addition to the loss of grandfathered plan status, has had significant
impact on American workers. As many employers have been challenged with
maintaining status, plan enhancements and cost-containing measures have
been delayed. For those workers employed by organizations that have
chosen to lose grandfathered status, many have witnessed increased
premiums and cost-shifting.
The decision to maintain grandfathered plan status or to
lose grandfathered plan status brings numerous burdens to employers.
Many of these employers were already offering generous plans to their
employees. These burdens include additional time needed for already
lengthy renewal cycles and significant consideration around additional
procedures, rules, and reporting that would be required if status is
Employers have recognized financial impact in maintaining
grandfathered status. Additional PPACA enhancements, the inability to
apply value-based insurance designs, and the inability to continue
appropriate cost-sharing measures with employees have added to an
already heavy burden on employers. Unfortunately, employers anticipate
health plan increases from year to year. However, PPACA, especially for
small and midsize employers, has created substantial financial burdens.
Employers and advisers are making plan status decisions
without firm guidance; operating under ``good faith'' that they are in
compliance with PPACA. Operating under these conditions causes legal
expense over the constant pursuit of answers and great concern over
making a decision that will cause detriment to the company once final
guidance is received.
Thank you Chairman Roe, and members of the Committee for the
opportunity to testify today about the impact recognized by employers
and employees under the ``grandfathering'' provisions of the Patient
Protection and Affordable Care Act (PPACA).
It is important to note that we must distinguish between types of
employer groups and the unique challenges they face under PPACA. To
overgeneralize will be a disservice to this hearing. PPACA has impacted
the following employer structures: large employers which primarily
employ full-time employees and currently offer employer-sponsored
coverage; multi-size employers which have a full-time and benefit-
eligible population but also have a significant hourly, non-benefit
eligible employee population; and, small employer groups. Examples of
their unique challenges will be included in this testimony.
Grandfathered regulations were issued to make good on a promise
that individuals and businesses could keep their current plan, to
provide consumer protections to Americans in order for them to control
their own health care and to provide stability and flexibility to
insurers and to businesses.\1\ Unfortunately, and especially in the
group market, these promises have not been widely recognized and,
instead, we have experienced a near opposite effect. This is especially
true when reviewing the initial assumptions made as to which employers
would maintain or lose grandfathered plan status. It was assumed that
large employers would likely maintain status for Due to many factors
such as increased employer burdens and cost, the opposite result has
\1\ ``Fact Sheet: Keeping the Health Plan You Have: The Affordable
Care Act and 'Grandfathered' Health Plans,'' U.S. Department of Health
and Human Services, HealthReform.gov, http://www.healthreform.gov/
PPACA burdens are felt by many employers and certainly through many
provisions of the law. According to the HR Policy Association, the
Administration is recognizing these burdens and has expressed a
willingness to work with employers in minimizing burdens under PPACA.
As stated in a recent press release, on a Health Care Policy Committee
call, several regulatory proposals were described which attempt to
streamline the massive information swap between employers, exchanges,
and the federal government. Yvette Fontenot, Deputy Director of the
Office of Health Reform at HHS, noted that large multi-state employers
simply ``may not have the capacity to deal with that many reporting
requirements.'' Fontenot recognized that allowing state exchanges to
regulate employer ERISA plans would cause problems for plan sponsors
and that the administration is trying to minimize potential burdens
because it ``wants employers to continue to offer coverage.'' \2\ Such
recognition is greatly appreciated but it is only one step towards many
\2\ ``Administration Wants to Work With Employers to Minimize
Burdens Under PPACA, HR Policy Association, http://www.hrpolicy.org/
Flexibility is a key element in a successful employer-sponsored
benefits program. Although it has been said that grandfathering allows
plans to innovate and contain costs by allowing insurers and employers
to make routine changes without losing grandfathered status 1, again,
we have recognized the opposite impact. In evaluating plan design,
employers who wish to maintain grandfathering must not raise co-
insurance charges, nor may they ``significantly'' raise comore than 5
percent. It is very important to note that these limitations are not
applied annually which further restricts employers. Modifying plan
deductibles, co-insurance, co-payments and contributions is the main
method applied by benefits professionals in order to control costs and
to improve the health of their employees by customizing plans around
demographics and abuse in utilization. The Administration has shown
support for such value-based insurance design. A pursuit in maintaining
grandfathered status restricts the employer from applying value-based
design techniques to drive improvements within the plan. One of our
large employers, who made the decision to lose grandfathered plan
status this year, did so partially based on the fact that their
outpatient service costs were 9% greater than the issuer's benchmark
primarily due to usage of emergency rooms (ER). There were 47 claimants
with three or more ER visits and two claimants with pain-related
conditions who had nine visits each averaging over $1,000 in claims
each visit (over $18,000 in total costs for only two claimants).
Clearly, our employer needed to protect the plan for all participating
employees and, therefore, has elected to increase the deductible for ER
visits. Grandfathering restrictions do not allow benefits professionals
to properly protect the plan for all participants.
The term ``health insurance'' has received little other than poor
press over the past two years and this has placed pressure on employers
to make careful decisions that create the least amount of employee
noise. This has added length to the renewal process as it has been
difficult for employers to make final program decisions. Typically, for
large employers, the renewal process begins approximately six months
prior to the actual renewal date. For most of our sponsors, that
process now begins approximately eight months prior to renewal which
taps into employer made the difficult decision to lose grandfathered
status in exchange for protecting the plan itself and making
appropriate and necessary plan changes. Their next challenge is to
develop a careful communication campaign around changes and loss of
grandfathering. Employees have been well-advised that loss of
grandfathering means that the plan they are being offered either
significantly reduces their benefits or increases their out-of-pocket
spending above what it was when PPACA was enacted1. Employers and
advisers must spend money and resources in developing a positive
campaign. Although annual communication strategy has always been a part
of the renewal process, the task is even tougher in terms of receiving
a positive employee response.
Employers need to be in a position of strength for 2014 to avoid
the stiff penalties that PPACA has indicated. Most of our employers
offer plans ranging between a 70% to a 90% actuarial value. PPACA
states that a 60% actuarial value is the minimum in order to avoid
penalty exposure. Advisers and employers are working with 60% actuarial
models to run penalty analysis. Ultimately, most employers will begin
to offer a 60% actuarial plan in order to protect themselves from high,
and still slightly vague, penalties for ``unaffordable'' plans. It
seems unfair for the Administration to set the standard at 60% but
penalize employers with loss of grandfathered plan status as employers
make necessary plan changes that will eventually lead to their 2014
It has been frequently noted that the pursuit to maintain
grandfathered status does not allow for normal annual plan evaluation
or the ability to implement value-based design methods. To maintain
status requires acceptance of necessary rate increases and budget
increases for employee-benefit spending. Such acceptance seems contrary
to what PPACA's supporters wished to accomplish.
In weighing the decision of whether to lose grandfathered status or
not, employers must consider the additional requirements that come with
Comply with additional standards for internal claims and
appeals and external review.
Not discriminate in favor of highly compensated
individuals for insured health plans.
Cover emergency services without pre-authorization and
treat as in-network.
Allow designation of gynecologist, obstetrician or
pediatrician as primary care provider.
Cover immunizations and preventive care without cost-
The requirements related to emergency services and designation of
primary care providers have not been significant issues for employers.
However, the other requirements have been significant. First of all, an
employer will have to deal with the cumbersome appeal provisions. This
requires attention to strict time zones. It also requires a number of
other administrative tasks including timely notices which, for a small
benefits department, even in large organizations, is cumbersome. For a
small employer, all this could require the addition of staff as well as
add to plan cost administratively. Some companies do not want to give
up the ability to handle appeals to a carrier/TPA organization. This is
due to the fact that they do not want to relinquish control. Any slip
could result in compliance consequences. This is a expanded standards
for appeals adds an additional burden to an already tasked human
resource area. Secondly, there is the consequence of discrimination
testing although the effective date and related sanctions have been
delayed. Without clear guidance, an employer will attempt to comply at
this point, but even with an attempt, the effort may not comply.
Lastly, preventive care must be covered without cost-sharing. Large
employers have not had much difficulty adapting this into their plan
design. However, employers with hourly employees, and offering limited-
benefit health plans, have had significant issue. Even with a waiver on
annual limits, employers wishing to make plan enhancements to their
limited-benefit health plan, resulting in loss of grandfathered status,
have been met with 11% to 22% premium increases to accommodate the
unknown usage that may occur once cost-sharing measures are removed.
Although claim history will illustrate that, even when preventive care
is included in limited-benefit health plans, the member claim frequency
is low--regardless of the strength of the benefit. However, as carriers
are preparing for the unknown with removal of cost-sharing, we have
seen premium increases as high as 22% for preventive care. Small
employers are also at risk for premium increases due to loss of cost-
sharing. As a small employer who received a 25% increase at renewal, I
can strongly testify that PPACA and loss of grandfathering status can
have a profound effect on certain employer groups.
It has been well-noted that PPACA provisions and loss of
grandfathered status has caused an increase to health insurance
premiums. For employers maintaining grandfathered status last year,
depending on type of employer group and plan, PPACA provisions added an
additional 1% to be, received by small employers and employers offering
limited-benefit health plans. For both small and large employers last
year, some struggled with removing lifetime limits. For a majority of
employers, this made very little impact. However, there were some
employers that were required to continue care for members that had
exceeded their lifetime maximum. While employers felt good about
bringing members back into a plan, it is important to understand some
of the consideration that took place between issuers, employers and
advisers in order to handle increases in claim spending. One example is
a very large employer of ours with a member who had exceeded their
lifetime maximum due to hemophilia. This member's medicine was more
than $35,000 a month. Significant work was done in an attempt to reduce
the employer's increased pharmacy exposure. Unfortunately, tremendous
relief was not available. Employers need help in controlling these
costs. Financial burdens have been placed on employers but we have not
recognized an increase in resources to reduce these burdens.
Impact to Employees
As many employers are financially incented to lose grandfathered
status in order to control costs, this has resulted in higher
deductibles and higher cost-shift to employees. This is primarily
happening with the large employer sector. These design changes are
necessary to control unnecessary utilization, to control employer
premium spending and to reduce the risk of penalties in 2014. However,
these design strategies have had a financial impact to the employee
typically in the form of increased out-of-pocket costs.
Job stability and continuation will be an issue for hourly
employees. As many hourly employees work unpredictable schedules, and
have enjoyed the ability to do so, there is risk to an employer who has
an hourly employee that consistently increases and decrease hours
worked. While IRS Notice 2011-36 proposes safe harbor whereby employers
could use a look-back period to determine full-time employees for a
coverage period, there is still a risk to employers who do not strictly
define hours and position. Many employers are entertaining the
implementation of specific job hour limits in order to protect the
organization from penalties. Hour limits will reduce the employee's
take home pay which most certainly will negatively impact employees.
A well-circulated Q&A document posted on HealthReform.gov\3\ tells
the consumer that the grandfathered rule will allow them to keep their
current coverage if they like it. Further, they are told that the new
insurance regulation will not drive up health insurance costs. This Q&A
is still posted on HealthReform.gov even though we know these two
statements to not be entirely true. PPACA provisions, employer burdens
and general health care trend have caused loss of grandfathered status
and has most certainly caused health insurance costs to increase.
\3\ Questions and Answers: Keeping the Health Plan You Have: The
Affordable Care Act and ``Grandfathered'' Health Plans,
It has been said that the grandfathered provision was put in place
to keep employers offering insurance and to prevent employers from
cutting benefits. Contrary to popular debate, a mass majority of
employers want to continue offering meaningful benefits and
grandfathering was not needed as an enforcement measure. The
grandfathered provision has created cumbersome restrictions on many
employers and added unnecessary costs to many plans, creating an
adverse scenario than desired by the Administration. A number of
thoughtful considerations have been provided to the Administration as
it relates to concerns around the grandfathered provision. Such
considerations include the unduly restrictive rules and the need for
clarification on wellness programs. To date, employers and advisers had
not been provided with a response. Employers have been forced to
operate under good faith that they are in compliance and understand
that there is risk to such an assumption. There is tremendous need for
guidance from the Administration. Grandfathered provisions have not
rewarded the most generous employers. In many instances, employers
finding the greatest ease with compliance are those who offered the
least generous plans.
Thank you for the opportunity to testify today. I will be happy to
answer your questions.
Chairman Roe. Thank you, Ms. Piper.
Mr. Andrews. Thank you, Mr. Chairman. I agree with you that
the witnesses were very well prepared, did a very nice job
today. And we appreciate all four of you.
Ms. Turner, my understanding of the word freeze is that
things stay the same; numbers don't change. So if there is a
freeze in a number, it doesn't change. You say on page three of
your testimony that when the health care law was signed into
law in late March of 2010, a hiring freeze began in the
Are there more private sector jobs today or fewer than
there were in March of 2010?
Ms. Turner. I think it is sort of a term of art, hiring
freeze. And it is essentially you begin to see the trend in
hiring going in a much different direction.
Mr. Andrews. It is a term of art? How would you define the
Ms. Turner. Well, the term freeze would basically mean no
new jobs. But when you talk about----
Mr. Andrews. No new jobs.
Ms. Turner. But when you talk about 6,000 new jobs in 1
month in an economy that needs 14,000 new jobs in order to
begin to get people back to work, that hardly seems to be----
Mr. Andrews. Well, I think most people would agree with
your definition of no new jobs. But, of course, the facts are
from the Bureau of Labor Statistics that in March of 2010, when
the law was signed, the economy had 106,916,000 private sector
jobs. And in September of 2011, the last month for which there
are data, it had 109,349,000 jobs.
That is an increase of 2.433 million private sector jobs.
Is that a freeze?
Ms. Turner. But when you have to also account the new
workers that have entered the workforce----
Mr. Andrews. But is it--no, I understand that. That is
about the percentage and the rate. Is it a freeze?
Ms. Turner. Well, you have to look at it in terms of the
number of jobs that are required to move the unemployment rate.
And the fact that the unemployment rate has been stuck at 9.1
percent shows that we are not creating enough new jobs to even
keep pace with the new workers that are entering the workforce.
Mr. Andrews. But you would admit that there are 2.4 million
new private sector jobs since the health care law was signed?
Ms. Turner. But there are also----
Mr. Andrews. Is that yes or no?
Ms. Turner [continuing]. Entered the workforce----
Mr. Andrews. But is it yes or no?
Ms. Turner. There are new workers entering the workforce,
but not enough to account----
Mr. Andrews. I understand. I understand. Let me ask you
this; you make the comment that there is good reason to believe
that the health care law is a major contributor to the hiring
halt. That is the halt that added 2.4 million new jobs.
So on what basis do you believe there is good reason to
believe that the health care law has led to this hiring halt?
Ms. Turner. This was a study done by James Sherk at the
Heritage Foundation, looking at hiring patterns between the
beginning of the Obama administration and the point that the
Affordable Care Act was enacted, and then, from then until 15
months later, when the study was done.
There was an increase of about 67,000 jobs, net private
sector jobs, a month being created before the Affordable Care
Act was enacted. After that, only 6,500 a month.
Mr. Andrews. I know. I read your testimony. I know that you
How would you respond to the Wall Street Journal's July
survey of business economists--and I am quoting--``the main
reason the U.S. companies are reluctant to step up hiring is
scant demand, rather than uncertainty over government policies,
according to the majority of economists.''
Are they wrong?
Ms. Turner. There is a faltering economy. People don't have
money, many of them because they don't have jobs. It is a very
Mr. Andrews. I absolutely agree. Would more people have
jobs if we hired construction workers to build roads and
Ms. Turner. Absolutely, but----
Mr. Andrews. Would more people have jobs if small
businesses got a tax cut when they hire people?
Ms. Turner. Absolutely, as long as----
Mr. Andrews. Would more people have jobs if we didn't have
a $1,500 tax increase on middle class families on January 1st?
Ms. Turner. As long as it is not being pushed onto future
Mr. Andrews. Would more people have jobs if we stopped the
layoffs of police officers and teachers?
Ms. Turner. As long as we are not pushing the cost of----
Mr. Andrews. Under the health care law, if a business has
50 or fewer full time employees, what do they have to do?
Ms. Turner. They don't have to provide health insurance.
Mr. Andrews. They don't have to do anything, do they?
Ms. Turner. Well, certainly many other regulations they
must comply with.
Mr. Andrews. No, but under the health care law, is there
anything a business with fewer than 50 or more full time
employees has to do?
Ms. Turner. No, but each one of the individuals in that
business all must have health insurance.
Mr. Andrews. I understand.
Ms. Turner. So even though the employer----
Mr. Andrews [continuing]. An employer's ad. So if you have
fewer than 50 people, you don't have to do anything, right?
Ms. Turner. As far as mandatory health insurance, no. But
that is on the employer. It still is on the individual employee
to have health insurance.
Mr. Andrews. I fully understand that.
Thank you, Mr. Chairman.
Chairman Roe. Dr. Bucshon?
Mr. Bucshon. Thank you, Mr. Chairman. Thanks to Chairman
Roe for holding this hearing, which I see directly related to
job creation and retention in the United States.
The fact of the matter is about 65 percent of the American
people want us to be having this discussion about the
Affordable Care Act. In fact, since enacted in March 2010, it
is becoming increasingly less popular with the American people,
now that we are, as was famously quoted, we found out what is
Businesses in my district are telling me that the
Affordable Care Act and what will happen in 2014 is one of the
top concerns they have with their ability to expand their
business, start a new business or create jobs. So I think this
is a very good hearing to discuss that.
Ms. Turner, in your opinion, the overreaching scope of the
grandfather regulation, do you think that is an attempt by the
administration to effectively eliminate the possibility of
grandfather status, forcing all the plans to be subjected to
the insurance market mandates in the Affordable Care Act?
Ms. Turner. Dr. Bucshon, it is difficult to know the
administration's motivations. But you can certainly look at the
impact. Many businesses, many employers supported passage of
this Affordable Care Act, or at least were neutral, because
they were told, don't worry, this is not going to affect you;
you are going to be able to be grandfathered in; your plan will
And when the rules and regulations were written, many of
them were shocked to find out how difficult it would be. And
even the administration's own estimates indicate that between
51 percent of large employers and 80 percent of the small
employers would lose their grandfather status before the
Affordable Care Act triggers in.
So I do think there is an effect in--the cause and effect
is very clear.
Mr. Bucshon. One of the biggest concerns I have about the
MLR is not the MLR itself, but a precedent being sent about I
think the federal government telling private businesses how to
manage their finances. And from what I am hearing, the brokers,
the people that are actually selling health insurance and
stuff, are the ones being affected significantly by this.
Again, the intent of the MLR is really not happening, about
what the--I think the original intent.
So, Mr. Donahue, do you have any comments about that, about
how that is, you know, affecting the industry in general?
Mr. Donahue. I agree with your assessment that yes,
historically, insurance companies selling medical coverage have
not had their own sales force. And they have outsourced that
distribution responsibility to agents and brokers.
Within that MLR, part of the operations that they need to
contain is regarding that cost for distribution, and as a
result, putting pressure on the insurance companies to dissect
various elements of administration, their own retention, the
cost of their doing business.
The cost of doing business is distribution of their product
and services. As a result, many insurance companies are
reducing the commissions payable to agents and brokers.
It is not that we just provide the transaction and the sale
of that. But it is the value that we serve in representing the
customer as part of the overall remuneration we receive from
insurance companies, which is actually the premium paid for by
So employers are, indeed, paying for our engagement. But it
is more than just the transaction. We are there with our
customers, who are very thin in their operations, providing
them with communications, compliance, enrollment, all those
backroom services that human resources pushes off their desk
And it is going to be very, very difficult for us to
continue to provide that value added service in the way MLR is
Mr. Bucshon. Thank you very much.
I yield back.
Chairman Roe. Thank you.
Mr. Tierney. Thank you very much. Thank the witnesses as
Mr. Pollack, I just want to clarify something with you. I
know that premiums have gone up about 9 percent, according to
the Kaiser Family Foundation. Is that correct, in the last
But only 1 to 2 percent of that increase is attributable to
the Affordable Care Act? Would that also be accurate?
Mr. Pollack. Yes. I think yes. Kaiser Family Foundation
said that they estimated that only 1 to 2 percent was related
to the Affordable Care Act. And the provisions, of course, they
were talking about was that it enabled young adults to stay on
their family policies up to their 26th birthday. And there are
no longer lifetime limits.
And mind you, these are extraordinary benefits for families
across the country. And yet for the cost implications to be so
small is remarkable.
Mr. Tierney. I guess, Ms. Turner, you were talking with Mr.
Andrews about the job creation on this. And I think you finally
agreed with, after some back and forth, that about 2.4 million
private sector jobs have been created since the enactment of
I wonder if you knew that over 500,000 jobs have been in
the health care sector. Did you know that?
Ms. Turner. Yes, sir.
Mr. Tierney. And I know that particularly, because a lot of
them are in Massachusetts, where we have, as my friends and I
say, Romney-care, which has been just wonderful for that state.
And most people there highly favor it.
And it has created a lot of jobs. Of the 10 million
projected jobs--of the four million projected jobs over the
next 10 years, we are expecting a lot of them to be in
Massachusetts as well. So it is too bad we couldn't spend some
time here concentrating on the creation of jobs, as opposed to
fantasizing about what might be, what is never going to happen,
in terms of any of these laws passing that are being proposed.
Mr. Donahue, let me talk to you a little bit about the
medical loss ratio. Do you think it is a good thing or a bad
thing that the law requires transparency and accountability for
Mr. Donahue. Oh, I think it is a very good thing. And----
Mr. Tierney. Do you----
Mr. Donahue. We have historically been transparent, as far
as the components of where----
Mr. Tierney. Who is we?
Mr. Donahue. We? Sir, the representation that I have.
Mr. Tierney. Right. But I am talking about insurance
companies, because they notoriously have not been transparent
and accountable on this. Unless of course--I don't know. Do you
think it is a good idea for insurance companies, say some in
Georgia or in other places, to pay 50 cents or more towards
administrative costs, and less than 50 cents on actual health
care costs to people?
Do you think that is a good idea?
Mr. Donahue. I can't speak on behalf of the insurance
company perspective. I can assure you, though, from the
broker's standpoint, we have full transparency.
Mr. Tierney. Right. Now the National Association of
Insurance Commissioners did not recommend that brokers be
allowed to be counted in that 80 to 85 percent. Isn't that
correct? They did not make that recommendation to the
Mr. Donahue. I am not sure that was a recommendation. I
Mr. Tierney. All right, well then we will----
Mr. Pollack. Mr. Tierney, may I just say that National
Association of Insurance Commissions looked into the very issue
that Mr. Donahue addressed earlier. And I like brokers.
But what they found is that they--and I am quoting--``we
have not observed any problem with consumer access to insurance
or producers as a result of the medical loss ratio.''
So while I understand the fears that might exist within the
industry, the National Association of Insurance Commissions,
made up of Democrats and Republicans--it is not intended to be
a partisan arm--found there was no evidence to that.
Mr. Tierney. Well, look, the General Accountability Office
did a study and they questioned like three people, some portion
of whom decided that they thought it might be a problem. And
people have started using that.
But, in fact, employment of agents/brokers is up 5,500 over
the last year, since--but the fact is what medical loss ratio
is supposed to do is make these insurance companies pay more
towards health care, or we call it medical expense of the bill,
for your premium. I think that is what consumers expect.
And we expanded it a little bit out when it got over to the
Senate, because they are who they are. And they added in
quality improving activity. But also, that was to be based on
or grounded on evidence based practices that would increase the
likelihood of desired health outcomes. So that is the aspect on
I am not sure, Mr. Donahue, where I see brokers and agents
as anything other than administrative cost, and how you make
the argument that it is a medical expense. Can you tell me how
you think brokers and agents qualify as a medical expense?
Mr. Donahue. If you think about it from the employer's
perspective, and the employers desire to help.
Mr. Tierney. No. I want to think about it from the
consumer's perspective, all right? Is that a medical expense
for me,that the company's sales agent or broker is out there on
the job selling for the--for the company?
Mr. Donahue. Is it is an expense associated with your
participation in that medical program.
Mr. Tierney. But it is not a medical expense. It is not
going to make me healthier. It is not going to fix my diabetes.
It is not going to fix my pneumonia or anything of that nature.
That is what we mean when we say medical expense.
Mr. Donahue. From the consumer's perspective, employer and
employee participants, they are not distinguishing between
whether it is a claim for a medical provision or it is part of
the overall administration in getting that plan done correctly.
Mr. Tierney. But the law is distinguishing that. The law is
saying you can no longer spend money on lobbyists and CEO
bonuses and huge salaries and other administrative costs, and
take that out of the premium, instead of giving health care to
Do you have a problem with that?
Mr. Donahue. Again, I can't answer on behalf of the
insurance company. I can speak from our role as advisers and
advocates on behalf of the workforce and the employers that
sponsor those health benefits.
Mr. Tierney. Look, again, as Mr. Pollack says, we are all
friends of agents and brokers. The question is why should the
person get less health care because the company tries to push
that off in a different direction?
Chairman Roe. I thank the gentleman for yielding.
Mr. Thompson. Thank you, chairman.
Mr. Donahue, I want to pick up on health insurance agent
and broker commissions, because my perspective, having grown up
in a small business--not insurance, let me clarify, sporting
goods--that those individuals actually really play a key--have
always, in my experience, played a key role of finding the best
policies, finding the best buy, of actually controlling health
care costs, because they are shopping it.
You know, they are working in their broker role. Would you
agree with that? Or am I completely off base?
Mr. Donahue. I certainly agree with that. And as I
referenced before, we are very much the back room on behalf of
our customers, regardless of their size. We provide them
guidance on compliance and help them navigate the myriad of the
obligations that are in front of them at this point.
We are involved on problem resolution at every degree, even
to the individual claimant, helping them navigate the
sophisticated health system. And from a layman's standpoint, if
you don't understand, you are usually at a disadvantage.
Mr. Thompson. It seems PPACA--the provisions of that are
going to take away that important toll, which has been somewhat
of a safety check, or a check of getting the best prices for
Ms. Piper, the grandfather regulation improves
extraordinary limits on the kinds of changes employers can make
to their health plans without triggering insurance mandates.
Have you encountered a situation where this regulation has
proven very disruptive to normal planned administration?
Ms. Piper. As benefit professionals, you know, we are
trained to look at many factors when we are handling any
medical plan renewal. And traditionally, we started maybe 6
months prior today. For the groups that we represent, we are
talking 8 months prior.
There is a tremendous amount that needs to be thought
through as it relates to health care reform. And that has
increased the time.
And I make that point because many companies have to make
decisions before we receive guidance. And that was particularly
true last year. You know, first of all, you grab as much data
as you possibly can.
Secondly, there are budget meetings that have to happen at
the employer level. And you walk a fine line between balancing
the corporate budget and avoiding employee noise when you make
any benefit changes.
To not be allowed to follow standard protocol--and again,
in my testimony, I identified this is what you do ever year.
You look at your deductibles. You look at your co-pays. You
look at the co-insurance. You look at the claims that come in.
As an employer, I sit here. And last year, I didn't have
the opportunity to choose whether I remained grandfathered or
not. It was made for me by my insurance carrier.
We had a 24.99 percent increase. And we were told that much
of it had to do with PPACA provisions. But that choice was
taken away from us.
And I did. I moved us to a high deductible health plan. And
was there noise? Yes, there was. And do I know that a couple of
employees had claims that year that incurred more out of pocket
costs? I did. I see it.
So to not be allowed to operate and have that standard
protocol is contrary to everything that we have talked about
with value based design. So yes is my answer. I am a tremendous
advocate for health and wellness programs.
We are waiting for information to come back on how we can
operate with those wellness programs within the restrictions of
grandfathering rules. We have to understand that employees have
to be a part of the solution.
And I see trends all day long. And I see what is brewing. I
look at how much we try to get people to get their wellness
screenings. And very few people do. And that is just fact.
And to not be able to function and to be able to try to get
employees in that group where they take responsibility for
their own health--and we will need that as a nation, regardless
of what happens out of these hearings or regardless of what
happens over the next couple of years.
Citizens have to take responsibility for their own health
care. And grandfathering has restricted that protocol.
Mr. Thompson. Thank you.
Are we going to be able to do a second round, do you think?
I will ask my question then.
Oh. Well, the Kaiser Foundation survey was referenced by
one of my colleagues. And you know, the 2011 Kaiser Family
Foundation survey found only that half, 56 percent of workers,
were in plans that predate Obamacare's enactment.
And the loss of employees pre-Obamacare coverage is
occurring even faster than the administration's own estimates.
It was concluded half of all employers, and as many as 80
percent of small businesses will be forced to give up their
current coverage by 2013.
And just as important, by giving up their pre-Obamacare
plans, both employers and employees will be subject to costly
new mandates that increase premiums. As a reminder, candidate
Obama said repeatedly his bill would cut premiums by an average
of $2,500 per family, meaning premiums would go down, not
merely just go up by less than projected.
The campaign also promised that those reductions would
occur within Obama's first term. A New York Times article
entitled ``Health Plans From Obama's First Debate,'' dated July
23rd, 2008, includes a quote from Mr. Obama's campaign economic
adviser, Mr. Jason Furman, stating, ``We think that we could
get to $2,500 in savings by the end of the first term, or be
very close to it.''
And it appears the administration is now doubling down,
whereas on September 29th, ABC News reports that the White
House Deputy Chief of Staff Nancy-Ann DeParle insists families
will see savings by now 2019. Quote--``Many of the changes in
the Affordable Care Act are starting this year and in
succeeding years. And by 2019, we estimate that the average
family will save around $2,000.''
Well, this is obviously not what we were hearing about,
this administration health care plan, for the past 3 years. It
just appears that the president's promise just isn't holding
Chairman Roe. Hold that thought. And we will get back to
Mr. Hinojosa. Thank you, Mr. Chairman.
And thank you to the panelists for coming to be with us
My first question is to Mr. Pollack. And the reason that I
am concerned about this is because the area that I represent is
about 10 percent younger than the average nationally. And so I
am talking about--I am concerned about the 30 percent of young
adults which are uninsured, representing more than one in five
of our total uninsured population.
Young adults have the lowest rate of access to employer-
based insurance, often because they have entry level or part
time jobs, or jobs in small businesses. The ACA has started to
increase access to insurance for young adults by allowing young
adults to remain on their parents' health plan until age 26.
According to the Census Bureau, 2011 current population
survey, the ACA is working. So Republicans' proposal to repeal
the Patients' Bill of Rights, what would happen to the advances
we have achieved for these young adults?
Mr. Pollack. Well, you know, I appreciate your focus on
young adults, because, as you know, young adults have for many
years been the part of the age cohorts that are most likely to
be uninsured. And the Affordable Care Act is going to help that
group in a very significant way.
Now you, of course, mentioned one of the key ways. And we
have already seen the evidence of this. And this is that young
adults, up to their 26th birthday, can stay on their parents'
And the current population survey tells us that 1.2 million
young adults gained health care coverage over the course of the
last year. That is very impressive.
But starting in 2014, beyond the ability to stay on a
parent's to your 26th birthday, young adults, as you mentioned,
are the ones who have the greatest difficulty getting jobs.
They are more likely to be in entry level jobs. They are likely
to be paid lower than others.
And they are likely to have fewer fringe benefits like
health care coverage. And they now can go into this new
marketplace, the so-called exchange. And because of their
modest income, they will receive tax credit subsidies that will
make insurance premiums far more affordable.
As I said, those premium subsidies will go up for with
families of four, up to $90,000. So a lot of these folks are
going to be eligible for those tax credit premium subsidies.
But in addition to that, they will get significant
protection in terms of their out of pocket costs when they seek
health care. Because people with incomes up to 250 percent of
the federal poverty level--and for a family of four, we are
talking about annual income of $56,000. There will be a
significant limitation on how much they have to pay out of
pocket when they get care.
So the group that you are referring to is really going to
helped disproportionately by the Affordable Care Act.
Mr. Hinojosa. Thank you.
My next question is for Dennis Donahue. On page eight of
your written testimony, you relate a story of one of your
clients, a large employer dealing with an employee who exceeded
their lifetime limit because of hemophilia. And their medicine
costs the plan more than $35,000 a month.
What kind of tremendous relief were you looking for? The
ability to drop the coverage of that employee in the middle of
treatment, or to reinstitute any arbitrary limit for that
What would happen to the worker if he or she couldn't get
the medicine they needed to stay alive?
Ms. Piper. I am glad that you brought this up, because what
you just asked me is not the intent of that example at all.
The intent of the example that I used for this particular
employer--and this employer had probably about 35,000
employees. You have about 5,000 that are eligible for the
employer sponsored plan. And then you have another 30,000,
35,000 that are eligible for a limited benefit plan.
In going through the renewal last year, when we took a look
at lifetime limits--and this is the only client that I had that
was impacted. There was a hemophiliac that had exceeded their
maximum. There was no complaining about taking that employee
The problem was the medicine was $35,000 a month, or
$33,000. I am not looking at it currently. The relief that I
talked about was what do we do in situations like that? That is
a high ticket item. You know, employers have a certain bucket
of money, and it doesn't grow every year.
You have employers that have seen huge decreases to their
profit margins. They are trying to keep coverage out there for
their employees. They are trying to--every employer that I have
tries to keep the same percentage of contribution.
It is not this game where everybody just tries to just dump
on to the employees. In this particular example that I laid out
for you, it was a 6 hour meeting with the insurance carriers.
We sat there and went through their specialty pharmacy.
We simply couldn't find any relief. Maybe $8,000, $9,000--
and I don't have that stat in front of me that we actually
gave, that I could actually provide you.
But it had to be absorbed into the plan. So again, there
was no complaining about taking that person back in. It is
simply a statement out there that where are the resources that
we can try to reduce the drug costs or help people like that,
instead of simply passing along that high of an amount on to an
So that was my point on that.
Mr. Hinojosa. I wish that thethat last point you made would
be taken very seriously by my friends on the other side of the
aisle. And that is, reducing the cost of prescription
medication. I think that that is a very serious problem for
young and senior citizens.
With that, I yield back.
Chairman Roe. Thank you. I thank the gentleman for
Mr. Hanna. I would like to yield my time to Mr. Thompson.
Chairman Roe. Gentleman yields his time to Mr. Thompson.
Mr. Thompson. I thank my neighbor from up north for
Mr. Chairman, I want to ask unanimous consent to enter into
the record two articles that basically, you know, provides what
President Obama said in his campaign and, frankly, what the
administration has recently said, moving the bar in terms of
that $2,500 cost number to 2019.
[The information follows:]
Mr. Thompson. Ms. Turner, obviously costs are just one
aspect where Obamacare is falling short. Can you elaborate on
other points that may put employer based coverage at risk?
Ms. Turner. The cost of health coverage was the main issue
that employers were concerned about. That was one of the
reasons that they supported health reform.
So if we don't get costs down, then I think employer
coverage is increasingly at risk. One of the other provisions
that I think puts employer coverage at risk is the employer
mandate, oddly, because employers are required to pay for
incredibly expensive government required health insurance,
which may cost as much as $15,000 to $20,000 for a family.
And their option is to pay a $2,000 fine or a $3,000 fine
if their employees go to the exchange. The economics--and we
have seen from a number of independent studies, McKenzie and
others, Towers Perrin, who have said that employers are
seriously considering dropping employer based coverage, because
they see the economics are just so much more attractive.
So I think that is a very big risk that many more employees
could lose their health insurance as a result of this law,
because the mandates are so perverse.
Mr. Thompson. And I think the administration, as I have
read, is banking on saving $77 billion from computerized
medical records. Frankly, I don't think, having worked in
health care and worked around computerized medical records,
there is always a legacy cost to that.
I don't think the administration realized that it is just
not a one time thing. And also reducing administration costs in
insurance industry would yield up to $46 billion. I would argue
that most health care providers I know, at least 50 to 60
percent of their overhead cost is compliance with Medicare
So that is not something we are talking about, but that may
be something we could do about. And then improving prevention
programs and chronic disease management, $81 billion is the
numbers I have read.
You know, that is just one side of health care. I am
curious, panel, for health care providers, what are the
variables under PPACA that may drive up costs of delivering
care? And specifically two things I would like your opinion on;
one is compliance costs, which are significant, 150--I think my
last count over 150--at least over 100 new bureaucracies were
Ms. Turner. One hundred fifty nine,
Mr. Thompson. Yes. You would, you know--and then also the
fact that we are going to put 18 million more Americans on
Medicaid, that only pays 40 to 60 percent of cost. That is a
huge cost driver, my opinion. But I want to get the experts'
opinions on those two issues, compliance and expanded Medicaid.
What does that do to the costs of delivering care?
Ms. Turner. If I might start, with Medicaid, the Affordable
Care Act will add as many as 16--some estimates say 25 million
more people to Medicaid. And with the additional incremental
growth or expected growth in the program, that is going to mean
that between 85 and 90 million people are going to be on
Medicaid, which is one of the lowest paying health plans in the
And those costs have traditionally been shifted to
employers. So the cost shifting is a huge issue. Obviously,
compliance costs, but maybe Ms. Piper or Mr. Donahue could talk
more specifically about those.
Mr. Thompson. Mr. Donahue?
Mr. Donahue. Compliance from the employers' standpoint is
quite arduous. As I reference before, most of our customers are
spread very thin now dealing with an additional layer of
compliance. Just in the current environment, pre-health care
reform, our customers are dealing with over 2,100 different
And if they are an employer of multi-sites, they have got
to look at the variations of benefits from region to region,
coincide and comply with those benefits that states mandates.
And what we are also concerned with is once essential benefits
are designed, how will the states weigh in relation to state
mandated benefits, in comparison with essential benefits?
And how many special interest groups will be lined up
making sure that their coverages, their diseases, their
equipment is indeed covered. This will add a tremendous of
complexity to the whole scenario, and the cost burdens
associated with that.
Mr. Pollack. Mr. Thompson, you raised the question of
Medicaid. I know that this committee does not have jurisdiction
But as I was citing earlier in my testimony, there has been
a sharp drop in the number of people, and certainly the
percentage of people who get their coverage through an
employer. And this occurred over the course of the last decade.
It has nothing to do with the Affordable Care Act. This is
what occurred between 2000 and 2010. Had it not been for
Medicaid, we would have a huge increase, far above what we have
already seen, in terms of the number people who are uninsured.
Mr. Thompson. But----
Mr. Pollack. And what is important about that point that
you raised is that that is where the cost shift takes place,
when we have more and more people joining the ranks of the
Mr. Thompson. Just reclaiming my time, and I understand
that, but I also see that that has shifted--cost shifted back
to commercial insurance. That is one of the primary drivers.
Just a point of clarification, a quick question, yes or no
answer, if the chairman will give me a little leniency here.
It was part of your testimony. I just want to clarify I
heard what you said, that under PPACA that an individual who
makes $90,000 a year--trust me, in the Pennsylvania Fifth
Congressional District, that is a whole lot of money--depending
on family size, is now under PPACA, is eligible for taxpayer
Mr. Pollack. Yes. And I said for $90,000,that is for a
family of four.
Mr. Thompson. A family of four, that is a whole lot of
money. So thank you.
Chairman Roe. I thank the gentleman for yielding.
Mr. Donahue. If I may make one more comment about----
Chairman Roe. Actually, we will get to that. I will give
you a chance, Mr. Donahue, in just a minute.
Mr. Kildee. Thank you, Dr. Roe.
Mr. Pollack, some claim that the immediate consumer
protections included in the health care reform law, such as the
coverage of young adults up to age 26 and the coverage of
preventive care, are an enormous burden on health plans and
employers. Could you talk about the benefits, not just to the
individual, but the societal benefits of those provisions?
Mr. Pollack. I think all of us, and I presume that is true
of the physicians on this panel, know that we want a health
care system, not a sickness system. And by promoting preventive
care, we promote a health care system, so that people get exams
each year. They get tests so that at the outset of a pain, or
the outset of a disease, we can detect what is wrong before the
disease spreads and becomes a whole lot worse.
So certainly from the perspective of improving America's
health care system, this is something we should savor. I think
all of us have said at one time, to one another, we want to
promote preventive care.
Now there are some additional costs, obviously, that are
associated by people going to a physician and getting a check
up and having tests. But the real costs in America's health
care system are for people with major illnesses and especially
for people with chronic illnesses.
And you want to maintain these folks' health before the
problems get a whole lot more serious and you need a heroic
intervention, which is going to be very costly and is not good
for somebody's health.
And I would say since this panel cares about employment and
jobs, the more we are able to keep people in the job because
they are healthy, that is going to be significant help to our
Mr. Kildee. You know, it is interesting, the first wave of
thanks I got--as you know, the bill was quite controversial,
the division in the Congress. But the first wave of thanks came
to me from the young people and their parents who were being
carried up to age 26.
That touched their lives immediately, made it easier, by
the way, for them to seek employment, too, made it easier for
many of their employers. It seemed to have a pretty strong
societal positive effect.
And it is just refreshing when you go back home, because
sometimes you don't get thanks. You get some other expression
Mr. Pollack. And Mr. Kildee, I have to say that since I am
no longer in that age group under 26--just barely above that
now--I think about my children. And as a parent whose
thankfully has three children, to know that they have health
care coverage makes me sleep a whole lot better.
So it is not just those young adults who no doubt are
grateful. And I am glad you are being thanked for it. But for
all of us who are parents who can sleep better at night because
we know that our children have health care coverage, this is an
Mr. Kildee. Thank you very much, Mr. Pollack.
Mr. Andrews. Will the gentleman yield? Will the gentleman
Mr. Kildee. Be happy to yield.
Mr. Andrews. I wanted to ask Ms. Piper a question. I was
alarmed when I heard about the 24.99 percent increase that you
in your own firm had. And your broker told you it was because
of the ACA.
What exactly about the ACA was the problem that caused the
increase? Did they tell you?
Ms. Piper. A little. I am probably--you know, because I do
represent employers, of course, I don't ask many questions. I
go straight to the source.
I am my own broker in many cases. But there was a broker
involved here. You know, certainly they said that--and I did
see it in smaller employers. 1 to 2 percent was where we really
were with large employers. Some of my small employers say they
have an increase----
Mr. Andrews. But what reason did they give you for your
Ms. Piper. Well, up to 8 percent was for age 26. And I am a
California employer, lifetime limit.
Mr. Andrews. How many employees do you have?
Ms. Piper. I have got 13.
Mr. Andrews. Do you have anybody with kids under 26?
Ms. Piper. My business partner is the only one that has
children under age 26.
Mr. Andrews. And didn't California law already require
Ms. Piper. I don't write any other business in California.
I write large groups.
Mr. Andrews. I think it did.
Ms. Piper. I would be a bad case.
Mr. Andrews. How did that change boost your premium? I
don't understand. I thought California already requires.
Ms. Piper. Well, I can only tell you what I was told. It
was up to 8 percent for certain provisions. And then I was told
that the biggest piece of itm the 24.99, was not all attributed
to PPACA, first and foremost.
Mr. Andrews. Right.
Ms. Piper. So there was standard trend there, which was 9
Mr. Andrews. Right.
Ms. Piper. Then you had 4 to 8 percent. Now remember in
California, you are pretty much a small employer. You are all
in one bucket.
Mr. Andrews. Right.
Ms. Piper. So there was a fairly fair amount that was
applied for certain provisions. Then wellness, we are moving
cost share. I have been told over and over and over again that
that was the biggest----
Mr. Andrews. No, that is a different point. What other ACA
reasons attributed to 24 percent? That is what I am asking.
Ms. Piper. 24.99 percent was the total overall. So they
didn't give me a breakdown of what percentages applied. They me
not random numbers, but they gave me 4 to 8 percent for
lifetime maximum. Right?
They gave me 11 to 15 percent for cost share removal on the
preventive. And the rest of it being standard trend.
Mr. Andrews. Did you ever have an employee hit the lifetime
Ms. Piper. Did I ever have anyone that exceeded? No, I have
not. In fact----
Mr. Andrews. A little odd that they would charge you with
Ms. Piper. Only one that I----
Chairman Roe. Thank the gentleman for yielding.
I will finish the questioning by making a brief statement.
The problem with the American health care system, after
practicing medicine for over 30 years, was that it cost more
and more and more for patients to come and see me, to go to the
hospital to get the care they need. Cost is number one.
Number two, we have a group of people in our country that
didn't have access to affordable health insurance coverage.
They couldn't afford it. Let us say a carpenter in my area that
worked and maybe the wife worked in a diner. And they make
$35,000, $40,000 a year together.
They can't pay $1,000 a month in health insurance coverage.
That is a problem I saw in my state.
Thirdly, we have a liability issue in America, forcing up
the costs. And I can assure you as an obstetrician, when I saw
my health care--when my liability insurance went from $4,000 a
year when I started practice in 1977 to $74,000 a year, with no
top in sight, when I left practice, that is a huge problem in
And lastly, health care decisions should be made by a
patient, their family and a doctor, not an insurance company
and certainly not the federal government mandating what should
be done. That should be a decision made by them.
Having said that, I looked at this. And I have read the
bill. And I know Mr. Andrews has read the bill. Twenty seven
hundred pages and now 10,000 pages of rules that I am not going
to read. I am going to--I plead ignorance on the first 2,700
pages. But I am not going to read the next 10,000 pages of
rules that we have to abide by to do this.
The simplest financial transaction on the Earth is a
patient coming to see me. I perform a service and they pay me.
It didn't get any more complicated than buying a loaf of bread.
That is how hard it is to come to the doctor.
All this extraneous stuff has added cost without value to
the patient. When I get to the examining room and see that
patient, it hasn't added any value. I could have taken two
paragraphs and done what the 2,700 pages has done by doing two
The 26 year old, I agree with that. I have had three kids,
as you have Mr. Pollack, that when they got out of college,
they didn't have health insurance coverage. And I bought them
The problem with this is this bill changed for someone my
age. I used to have to pay six times what it was actuarially to
a young person who was healthy. Now it is three to one. For
those who don't have a parent paying for that, their costs have
So you have actually made it more expensive for some young
people to get affordable health insurance coverage.
Number two, and Mr. Foster at CMS said this, we think it
will expand Medicaid by as much as 25 million people. The
estimates of CBO were 15 million. That is where that number
came from. And the 24.5 million came from CMS, their estimates,
because I asked Secretary Sebelius when she was here in front
of our committee.
So those two things could have done that without all this
complicated stuff that we are talking about. What I think we
need to do--and Ms. Piper, you have said this clearly--is we
have got to change the incentives in medicine.
We have to change the way we pay for it or you will never
get control. And I think a high deductible plan with a health
savings account does it. I used that; 84 percent of my 300
employees in my practice used that.
It has helped hold the costs down. We have been innovative
in how to do that. This will be taken away from us with the
Affordable Care Act. We are not going to be able to move and
help hold our costs down.
Another company in my district has been able to use some
very, very innovative things. And they have had one small
premium increase in 5 years. And they have done this by doing
if--let us say you were a hypertensive, diabetic, smoking obese
patient. You were a train wreck waiting to happen.
What they did was they paid you if you lowered your
hemoglobin A1c, if your nicotine level was normal, if you went
on a weight loss program. They switched the incentives from
sickness to wellness.
And it absolutely made a difference. There is no question
about that. We need to get--and back to Mr. Donahue, I am going
to give you a chance to answer. You wanted to.
For 30 years, I have used your business. It was very
helpful to us to use a broker to be able to help us wade
through this insurance every--we didn't have an HR department,
so we used you.
So you wanted to answer a question a minute ago and I cut
Mr. Donahue. Thank you.
No, I was just going to weigh in about the Medicaid
expansion that was referenced by a number of the speakers here.
It is one thing that we are not considering, though, although
Medicaid provides very cost effective reimbursement in the way
physicians are reimbursed, our concern with the movement into
Medicaid expansion, that there will be enough providers to
cover that kind of population, considering potentially the lack
of interest of those providers entering into Medicaid-based
So it is very disconcerting. Where are those providers?
Chairman Roe. 31 percent or 32 percent of primary care
providers, as I am, are not accepting Medicare.
Mr. Donahue. Yes. So if you look at current statistics as
to how many are actually embracing Medicare patients, it is
especially disconcerting with the potential Medicaid expansion.
And how are those individuals going to be serviced?
Chairman Roe. Let me clarify what I said, new Medicare
Mr. Donahue. Yes, yes.
Chairman Roe. My time has expired.
Mr. Andrews, for any----
Mr. Andrews. Mr. Chairman, Mr. Holt has arrived here. And I
wanted to know if he wants to take question time.
Chairman Roe. Dr. Holt?
Mr. Holt. With the chairman's permission.
Mr. Andrews. Thank you, Mr. Chairman.
Mr. Holt. It is an important hearing as much for what it
doesn't bring as for what it does. But, you know, I would like
to ask something about these claims that I keep hearing from
constituents that this health care reform is responsible for
the increase in premiums.
I have looked and I have looked. And in the letters that
the insurance companies send for why premiums are going up and
that sort of thing, if they ever cite specifics, it is things
that haven't even taken effect yet, and won't for a long time.
And so it seems to me that the increase in premiums that
are real, that our constituents are feeling, are the best
argument I have seen yet for why this legislation was and is
necessary. So Mr. Pollack, let me ask you--and I know you have
addressed this to some extent, but let me ask you how much of
the premium increases that people are seeing around the country
can be attributed to the law, as passed?
Mr. Pollack. I appreciate your asking that question. A
number of members of this distinguished panel raised the Kaiser
Family Foundation study, which showed that premiums increased
over the course of the last year. By the way, if you look at
the history of the past decade, this was an extraordinary
It was larger than the year before, to be certain. But as I
cited earlier in the testimony, in the year 2000, average cost
of premiums for family coverage purchased through an employer
was $6,772, in the year 2000.
In the year 2010, it was almost $14,000. And in the
previous year, it went up to $15,000. So it is not a
significant change in the pattern at all.
But most importantly, the Kaiser Family Foundation, which
released the numbers that so much--you know, so much of this
discussion is based on, said that only 1 to 2 percent of the
increase in premiums is attributable to the Affordable Care
And they asserted two things that occurred with respect to
the Affordable Care Act. One that we have discussed at great
length here, is that young adults can now stay on their
parents' policy up to their 26th birthday.
Of course, that does increase premiums. But it is a very
cost effective purchase and we have seen tremendous benefits
for those young adults as a result; 1.2 million young adults
were added to health insurance coverage over the course of the
And the other is there is no longer a lifetime limit in the
payout by an insurance company. And when you have a lifetime
limit, it is insurance that doesn't insure. Because what you
want to be protected against is that you are going to be
bankrupted from very high costs.
And if you have a lifetime limit, for those people who need
insurance the most, all of a sudden they have got no insurance,
even though they have paid premiums for a long period of time.
Those were the two factors that increased premiums by 1 to
2 percent, according to the Kaiser Family Foundation. And I
would say that was well worth it.
Mr. Holt. Thank you.
Ms. Piper, when you say that all--that is actually the word
you use, I believe--of the large employers have made a decision
to drop the grandfather coverage, how many employers does that
Ms. Piper. All of my large employers, not nationally
Mr. Holt. Yes, all of yours, which is one or two or----
Ms. Piper. No, we represent probably 40. I also represent
franchise organizations. So when you get to that level and when
you drill down, I would consider those to be more small
Mr. Holt. Large enough sample that you probably can
understand something of their motivation. If the cost of
complying with the additional provisions of the Affordable Care
Act are so cost prohibitive and burdensome to the clients,
should we believe that employers chose to accept these
additional burdens and costs rather than make the modest
adjustments that would be appropriate perhaps to their existing
Ms. Piper. Well, when we have gone through renewals,
especially on the large employer side--and I understand that to
be your question, acceptance--yes, you laid out the law and we
are following it. To make the small adjustments that were
allowed is not reasonable in a renewal, not if you are trying
to contain costs.
Mr. Holt. Why not? Why not reasonable?
Ms. Piper. Well, you know, looking at the example that I
gave earlier--and I am not sure that you were here at the time.
But we had a large employer who was 8 to 9 percent above the
national trend on outpatient expenses.
Forty seven employees went to the E.R. for non-emergency
related issues. Three times a piece we had two that were
abusive to the point of nine times a piece. There is a $75 co-
pay on the--or deductible on the plan design.
To meet the allowances that we were provided, you simply
can't. We could not maintain grandfathering. And overall, this
is a very large employer. I have to get them into a position of
strength for 2014.
They have 26,000 hourly workers that are very low wage.
When you look at the penalties that could be assessed against
them for unaffordable penalties, that is large. So all large
employers that we represent----
Mr. Holt. Go ahead and wrap up your answer, if you would,
Ms. Piper [continuing]. Are looking at high deductible
health plans, which is a cost shift. It is a cost shift,
because we need to get them to that position of strength, so
they can look at a 60 percent actuarial value to minimize their
penalty risk in 2014.
Mr. Holt. Thank you, Mr. Chairman.
Chairman Roe. Thank you, Dr. Holt.
Mr. Andrews. I would again like to thank the panel for
obviously a lot of time preparing for this morning and very,
very good testimony. Thank you for taking time out of your
businesses and your work to do this work.
We talked about two Americans today. And we didn't talk
about one American. We talked about the American who has a
$33,000 a month drug bill who is hemophiliac, which is just
stunning. And the question in the air was what to do about that
And the Affordable Care Act does provide an answer. It says
that if that person works for a very small employer, they will
be able to go into the exchange, buy health insurance as good
as mine, at at a price that is affordable given their income,
and not run into an annual or a lifetime policy limit, and have
the insurance cover the cost of the drug.
And that cost will be spread upon all the participants in
the exchange of that state. In my state, that will be about a
million people, which is a cost that has to be borne. But
spreading it over a million people is a pretty rational
A person works for a larger employer, that larger employer
is in a more difficult situation, unless they can get into the
exchange. And I predict to you that by 2017, one of the issues
will be whether Congress should encourage states to open up
their exchanges to more people, because they are going to want
to spread those costs that way.
The second person we talked about--Dr. Roe talked about his
constituent who is a carpenter, whose spouse is waitress at a
diner, making $35,000 a year. What this law says for them is if
they work for a business with more than 50 employees, they are
going to get covered at work, with coverage as good as mine.
If they work for a smaller business--I think they would in
his case--they would be able to go into the exchange, buy a
policy with a contribution from themselves that is reasonable
given their income.
Now whether this is good for the country or bad for the
country is debatable and yet to be seen. But the American we
didn't talk about today is the unemployed carpenter, the
unemployed waitress, the unemployed teacher, and the unemployed
real estate sales person.
And that is who we should be talking about. I will tell
you, the president has put forward a plan that addresses what
we hear is the consensus among the real job creators in this
country, which are small business people. Employers with 50 or
fewer employees create two thirds of the jobs created in
America, two thirds.
And what they are telling us and what they are telling
researchers is lack of demand is the main problem in their
business. The president has put forward a plan that would put
demand in the economy by employing construction workers,
putting them back to work.
But we haven't taken a vote on that. And he has put forward
a plan that says we will cut the taxes of that small business
if they hire an employee. But we haven't taken a vote on that.
It says that we will avoid a shock to the demand in the
economy by postponing a tax increase on middle class families
of $1,500 a year January 1st. But we haven't taken a vote on
It says that we will avoid a shock to demand in the economy
by not laying off more teachers and police officers and
firefighters. But we haven't taken a vote on that.
This is the issue affectingeffecting the country. If you
want to vote no, vote no. If you want to amend the plan, to
come up with a better idea, that is the way the legislative
But I think it is the height of irresponsibility to deprive
the House the chance to vote on that plan. And with all due
respect, that is the American we should be talking about today,
in addition to the ones that we did.
Mr. Chairman, I appreciate the scope of this hearing. I did
ask unanimous consent to include in the record two articles,
one ``Misrepresentations, Regulations and Jobs,'' by Bruce
Bartlett, an alumnus of the Bush and Reagan administrations.
And the second is the ``Kaiser Report'' press release that has
[The information follows:]
Chairman Roe. Without objection, so ordered.
I thank the gentleman. And I think this panel has been very
informative. And I will finish or conclude by saying that I
agree with Mr. Pollack. What I would like to see in this
country is that all Americans have affordable health insurance
coverage, or as close to 100 percent as we can get.
I share that. I came to Congress to try to do that.
Unfortunately, I wasn't included in the discussion of it very
much. But I still want that aim and that goal is there, to
provide affordable coverage with quality health care for all
I would love to see that in my lifetime. A few things that
I think we can do--and I have mentioned, we held a hearing--and
Mr. Andrews had an opening statement--in Evansville, Indiana.
It is the only health care hearing that has been held outside
And there was some very enlightening things that happened
there when we talked about jobs. And I absolutely agree that
the number one issue in America today are jobs and putting our
people back to work, because that solves a lot of our problems,
if you have a job.
An IHOP owner testified there and said, look, I have 12
IHOPs and about 700 employees. He said, I gross $58,000 per
employee. And I net $3,000. And I found out in the restaurant
industry, that is pretty good. Because a McDonald's franchisee
came in and said he nets $1,200.
So $3,000 per employee, says I have over 50 employees. I
have 700. So now if I drop my people into the exchange, if I
pay for this insurance that is mandated by the government,
because I have got over 50 employees, I am upside down $7,000
If I then pay the fine, which is not tax deductible, I have
just spent all my profit, $2,800. He said, I either make no
profit or I am $7,000 short. What do I do, Dr. Roe?
I said, well, the best thing I can tell is you charge me
$10 for a pancake that nobody will buy and you will lose jobs.
I think that is what will happen.
And there is a real issue out here, the consequences of
what we did, instead of letting the market work. In a high
deductible consumer plan--I have this right here, which is a
health savings account. I don't call the insurance company if I
need to get health care. I don't ask for some clerk on the
phone to approve my care.
I go in and do this. And in Indiana right now, Mitch
Daniels, the governor there, is trying to do the same thing. He
is trying to put consumers in charge of these decisions, not
the government and certainly not an insurance company. I
couldn't agree more with every one of you.
So I totally agree with that. That is how a health savings
account works. And Mr. Pollack, you should look at that for
I will finish by thanking the ranking member and also point
out a survey that just came out yesterday from the United
States Chamber of Commerce, Third Quarter Small Business Study.
Despite its passage more than a year and a half ago, the
challenges presented by the Patient Protection and Affordable
Care Act continue to grow, with 51 percent of respondents
citing the bill as a top concern in October, an increase from
39 percent in July.
And the president's jobs plan--certainly it is not the time
to go into all that. But small business owners say there's
little to be excited about in President Obama's jobs plan. More
than three in four small business owners have an unfavorable
opinion of the plan. And two thirds have a strongly unfavorable
view of the plan.
So businesses out there are not excited about that. I think
both sides--we have differing opinions--want to get our people
back to work. And Mr. Andrews is absolutely right I think that
demand drives it.
And just to give you a very simple view of that is if I go
to church on Sunday and people say Dr. Roe, I can't get an
appointment with you for 4 months, and I go back to my office
and ask the receptionist; all the doctors are booked for 4
months; it is time to hire a new doctor.
But if I go back to my office on Monday and I have got
appointments on Friday, I don't care how many tax cuts, breaks,
everything else you give me, I don't have any demand for my
services. I am not going to hire a new doctor.
That is just the way it works. You are correct about that.
I appreciate this great panel. And you all have done a
wonderful job. I hope that you will continue. We hope to have
And without further, this meeting is adjourned.
[Additional submission from Dr. Roe follows:]
[Additional submissions of Mr. Andrews follow:]
Washington, DC, October 28, 2011.
Hon. John Kline, Chairman; Hon. George Miller, Ranking Member,
House Education and Workforce Committee, U.S. House of Representatives,
Washington, DC 20510.
Hon. Phil Roe, Chair; Hon. Robert Andrews, Ranking Member,
Health, Education, Labor and Pension Subcommittee, U.S. House of
Representatives, Washington, DC 20510.
Dear Representatives Kline, Miller, Roe and Andrews: I am writing
to you on behalf of AARP's millions of members and the millions of
older Americans and their families who may benefit from recently
enacted consumer protections in health plans that will enable
individuals to have access to affordable, quality healthcare. AARP
believes these provisions can promote more cost-effective care, improve
pricing transparency, and increase health insurance companies'
accountability for quality health care.
Grandfathered Plans' Status
In order to minimize the impact on current plans, Sec. 1251 of the
Patient Protection and Affordable Care Act (ACA) provides that certain
plans or coverage in effect as of March 23, 2010 (the date of the law's
enactment), will be exempt from certain provisions of the Act. These
plans, which may be either insured or self-insured group health plans
or health insurance coverage purchased from health insurance issuers by
individuals or groups, are referred to as grandfathered plans or
coverage. The provisions that these plans or coverage are exempted from
include (but are not limited to): prohibition of lifetime limits,
prohibition on annual limits, prohibition on rescissions, extension of
dependent coverage to children up to age 26, medical loss ratio
provisions, prohibition of pre-existing condition exclusions, and
prohibition of waiting period beyond 90 days (effective in 2014).
Currently, a grandfathered plan must not make a substantial change to
the plan or coverage benefits, cost-sharing, employer contributions, or
access to coverage in order to maintain its grandfathered status; if a
plan change exceeds those thresholds, the plan must then adhere to the
patient protections from which they were previously exempt.
AARP is concerned that the elimination of the change threshold that
would cause a plan or coverage to relinquish its status would deny
patient protections even if substantial changes are made to the plans.
The ACA was designed to provide patient protections and insurance
reforms that safeguard individuals from practices that lead to limited
access to covered services and significant out-of-pocket costs.
Allowing grandfathered plans to make substantial changes to their plans
and still avoid consumer protections indefinitely would eliminate
important protections for large segments of the population. Repealing
this provision would effectively create two tiers of insurance rules
that will continue indefinitely, undermining risk pooling as well as
Medical Loss Ratio (MLR)
Section 1001 and Section 10101 of the ACA establish standards for
the MLR. These sections require insurers or plans to spend 80 percent
(individual and small group market) or 85 percent (large group market)
of the premium revenue on medical services and quality improvement
activities. Insurers or plans that do not meet these standards are
required to provide consumers with a rebate of the difference. The
intent of the ACA's MLR requirements is first, to establish greater
transparency and accountability among health insurance issuers and
second, to help ensure that consumers receive better value for their
premium dollars. We urge you to retain the MLR provisions that help
maximize the value of health insurance for consumers while at the same
time recognizing issuers legitimate administrative costs.
According to Sec. 1513, Sec. 10106, and Sec. 1003 of the ACA,
employers with at least 50 employees are required, beginning in 2014,
to offer affordable minimum essential coverage or be subject to a
penalty. AARP believes this requirement will help ensure adequate
funding--including for individual subsidies--to make coverage more fair
and affordable for everyone.
AARP therefore urges Congress to maintain these provisions that
were designed to provide access to affordable, high quality care. If
you have any questions, please feel free to call me or have your staff
contact Leah Cohen Hirsch on our Government Affairs staff at 202-434-
Joyce A. Rogers,
Senior Vice President, Government Affairs.
[Whereupon, at 11:38 a.m., the subcommittee was adjourned.]