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




 
IMPACT OF OBAMACARE ON JOB CREATORS AND THEIR DECISION TO OFFER HEALTH 
                               INSURANCE

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

                                HEARING

                               before the

                SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF
               COLUMBIA, CENSUS AND THE NATIONAL ARCHIVES

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 28, 2011

                               __________

                           Serial No. 112-89

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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                      http://www.house.gov/reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

   Subcommittee on Health Care, District of Columbia, Census and the 
                           National Archives

                  TREY GOWDY, South Carolina, Chairman
PAUL A. GOSAR, Arizona, Vice         DANNY K. DAVIS, Illinois, Ranking 
    Chairman                             Minority Member
DAN BURTON, Indiana                  ELEANOR HOLMES NORTON, District of 
JOHN L. MICA, Florida                    Columbia
PATRICK T. McHENRY, North Carolina   WM. LACY CLAY, Missouri
SCOTT DesJARLAIS, Tennessee          CHRISTOPHER S. MURPHY, Connecticut
JOE WALSH, Illinois


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 28, 2011....................................     1
Statement of:
    Puzder, Andrew, CEO, CKE Restaurants; Grady Payne, Connor 
      Industries, Inc.; Will Morey, president and CEO, Morey's 
      Piers; Victoria J. Braden, president and CEO, Braden 
      Benefit Strategies, Inc.; Michael J. Brewer, president, 
      Lockton Benefit Group; and Terry Gardiner, vice president, 
      Small Business Majority....................................     5
        Braden, Victoria J.......................................    44
        Brewer, Michael J........................................    50
        Gardiner, Terry..........................................    60
        Morey, Will..............................................    38
        Payne, Grady.............................................    33
        Puzder, Andrew...........................................     5
Letters, statements, etc., submitted for the record by:
    Braden, Victoria J., president and CEO, Braden Benefit 
      Strategies, Inc., prepared statement of....................    46
    Brewer, Michael J., president, Lockton Benefit Group, 
      prepared statement of......................................    52
    Gardiner, Terry, vice president, Small Business Majority, 
      prepared statement of......................................    62
    Morey, Will, president, and CEO, Morey's Piers, prepared 
      statement of...............................................    40
    Payne, Grady, Connor Industries, Inc., prepared statement of.    35
    Puzder, Andrew, CEO, CKE Restaurants, prepared statement of..     8


IMPACT OF OBAMACARE ON JOB CREATORS AND THEIR DECISION TO OFFER HEALTH 
                               INSURANCE

                              ----------                              


                        WEDNESDAY, JULY 28, 2011

                  House of Representatives,
Subcommittee on Health Care, District of Columbia, 
                  Census and the National Archives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:35 a.m., in 
room 2154, Rayburn House Office Building, Hon. Trey Gowdy 
(chairman of the subcommittee) presiding.
    Present: Representatives Gowdy, Gosar, DesJarlais, Davis, 
Norton, Clay, Murphy, and Cummings.
    Staff present: Brian Blase, professional staff member; 
Robert Borden, general counsel; Drew Colliatie and Mike 
Whatley, staff assistants; Adam P. Fromm, director of Member 
liaison and floor operations; Christopher Hixon, deputy chief 
counsel, oversight; Sery E. Kim, counsel; Justin LoFranco, 
press assistant; Jeff Solsby, senior communications advisor; 
Jaron Bourke, minority director of administration; Yvette 
Cravins, minority counsel; Ashley Etienne, minority director of 
communications; Carla Hultberg, minority chief clerk; and Paul 
Kincaid, minority press secretary.
    Mr. Gowdy. Welcome, everyone. I apologize for being late; 
we had a conference that ran a little longer than normal, 
discussing some things you may have been reading and hearing 
about lately.
    This is a hearing on the Impact of Obamacare on Job 
Creators and Their Decision to Offer Insurance.
    The committee will come to order. Consistent with the 
policy of the Oversight Committee, I will read the mission 
statement. We exist to secure two fundamental principles: 
first, Americans have a right to know the money Washington 
takes from them is well spent and, second, Americans deserve an 
efficient, effective government that works for them.
    Our duty on the Oversight and Government Reform Committee 
is to protect these rights. Our solemn responsibility is to 
hold government accountable to taxpayers because taxpayers have 
a right to know what they get from their government. We will 
work tirelessly in partnership with citizen watchdogs to 
deliver the facts to the American people and bring genuine 
reform to the Federal bureaucracy. This is the mission of the 
Oversight and Government Reform Committee.
    I will now recognize myself for an opening statement. I 
will recognize the gentleman from Illinois for his opening 
statement while I am in the process of finding mine.
    Mr. Davis. Thank you very much, Mr. Chairman.
    Before I begin, let me take the opportunity to acknowledge 
the presence of a dear friend of mine and certainly a friend to 
all of the people who have been in the House and in the Senate, 
a former distinguished Member of this body who was also 
chairman of the Small Business Committee and a Member of the 
U.S. Senate. Senator Jim Talent is with us and I am pleased to 
see you, Jim. I must confess that I had two bills that Jim and 
I co-sponsored that were passed into law, so he represents some 
of the proudest moments of my tenure here, so I am delighted to 
see him.
    Thank you, Mr. Chairman. For several years I have been a 
supporter of a national health plan. Good quality, affordable 
health care should not be a privilege afforded to just a few. 
The Patient Protection and Affordable Care Act provided a 
pathway to bring affordable health care for the masses. It 
balances the needs of businesses and workers with accessibility 
and affordability. Large and small businesses consistently 
express their concerns about rising health care costs. The 
Affordable Care Act addresses this concern with cost 
containment measures for the employer such as small business 
tax credits, insurance market reforms, rate reviews, price 
transparency, and the creation of health marketplace exchanges, 
just to name a few.
    The anticipated reductions on health premiums enabled job 
creators to hire more workers, increase salaries to maintain 
their work forces, and to reinvest in new technologies for 
their business growth. The Center for American Progress 
estimates that health care reform that reduces premium growth 
will add 250,000 to 400,000 jobs annually over the next decade.
    The Affordable Care Act also addresses the needs of 
workers. The act eliminates job lock, which discourages workers 
from seeking new opportunities for fear of losing health 
coverage. The ACA supports the entrepreneurial spirit of the 
American work force, as nearly 10 million self-employed 
Americans have the ability to purchase insurance for their 
families. Additionally, the act makes health insurance 
affordable with premium assistance for eligible employees.
    Last, a recent Harvard study estimated that one American 
family filed for bankruptcy every 90 seconds in the aftermath 
of an illness. Three-quarters of them had health insurance at 
the time of the precipitating health event. In addition, 
medical debt burdens families with the inability to pay for 
other expenses, contributes to credit card debt, and causes 
people to delay necessary medical care. The Affordable Care Act 
ensures that these nightmare scenarios will no longer be 
common.
    In my district there are many Medicare and Medicaid 
recipients that have established community health centers as 
their medical home. Medicaid beneficiaries that rely on health 
centers for usual care were 19 percent less likely to use the 
emergency room at a hospital than other providers for non-
emergency and usual care services. Overall, health centers save 
the health care system between $9.9 billion and $17.6 billion 
annually. Community health centers provide high quality health 
care regardless of the ability to pay, and health centers in 
Illinois have a tremendous impact on our economy and 
employment.
    In 2008, 40 health centers operated over 350 sites, 
contributed almost $1 billion to the Illinois economy, and 
directly employed almost 6,000 Illinoisans. Indeed, for every 
10 people employed by an Illinois health center, an additional 
four jobs were created in their surrounding communities. 
Illinois health centers served over 1.1 million patients, 
nearly 80 percent of whom had no health insurance, helping them 
cope with chronic health conditions and general health issues 
to be able to work and care for their families. Repeal of the 
health care law would eliminate $11 billion in support for our 
community health centers over the next 5 years. Funding that 
would nearly double the number of patients served today and 
greatly strengthens Illinois's economy.
    I know a little bit about health care, given the fact that 
my congressional district has more than 20 hospitals, 21 to be 
exact; four medical schools; a large number of community health 
centers and other outlets. And I can tell you that health care 
is the lifeblood of our community.
    Simply put, the Affordable Health Care Act is indeed 
progress.
    I thank you for this hearing and yield back the balance of 
my time.
    Mr. Gowdy. I thank the gentleman from Illinois.
    First I want to thank all of our distinguished witnesses 
for your patience and for your willingness to lend us your 
insight and your perspective on what all of us agree is a very 
important issue.
    As we sit here this morning, Washington is debating the 
relative merits and demerits of deals or plans or solutions, 
whatever euphemism you want to use, averting the short-term 
debt crisis. However, our country continues to face long-term 
fiscal crises, some of which is rooted in the calls that we 
need substantive reform and return to our founding principles.
    Quite simply, government is too big. Out of control 
spending and over-regulation have threatened America's credit 
rating and crippled business's ability to create jobs. When 
asked what the single greatest impediment to job growth is in 
the United States today, and I hasten to add I come from a 
State with about 10 percent unemployment and some counties are 
as much as 20 percent, but when asked what the greatest 
impediment to job growth is in the United States, the founder 
of Home Depot simply responded, the U.S. Government. That is a 
stinging indictment.
    Our dire economic situation requires us to take a hard look 
at every dollar we spend and fundamentally reform programs 
headed down the wrong path to fiscal insolvency. At the same 
time, we must be enacting pro-growth policies, paving the way 
for American companies to grow and expand, creating the jobs 
that will spark a broader economic resurgence, which brings us 
to why we are here today.
    The current health care law was marketed to the American 
people as a means to provide high quality, low cost health 
coverage options to every citizen in the country, while 
ensuring that those who like their current coverage can keep 
it. However, time and time again we have discovered examples 
exposing this political myth. The uncertainty surrounding the 
law's broader implementation and the expectation of future 
taxes have worsened an already dreary economic picture.
    While we often hear about the looming debt crisis, we are 
also in the midst of a job crisis, one that Obamacare has done 
nothing to ameliorate and, in many instances, has served to 
exacerbate. From new taxes to increased government mandates and 
regulations, to picking winners and losers based on arbitrary 
criteria, the new legislation burdens businesses with confusion 
and uncertainty, the exact wrong prescription for turning 
around our floundering economy.
    Further, as the full impact of certain sections become more 
clear, we are uncovering myriad disincentives and hidden taxes 
embedded within the law that served to negatively impact 
businesses' bottom line, while CBO estimates the law will 
reduce the number of jobs by 80,000 by the end of the decade. 
Finally, instead of allowing employees to keep the coverage 
they currently have, tax subsidies in Obamacare will cause many 
employers to drop workplace health coverage, forcing workers to 
purchase their own insurance, all the while skyrocketing costs 
and further deepening our Nation's budget deficit.
    In a recent survey, McKinsey & Co. found that 30 percent of 
employers will definitely or probably drop health insurance in 
2014, a scenario not contemplated when the initial costs were 
calculated in a rushed, predominantly hidden, legislative 
process. Thus, the Federal Government will yet again pick up 
the tab, an outcome that is simply unacceptable and untenable, 
given the current fiscal climate.
    So we are here today to examine the true impact of 
Obamacare on you, America's job creators, and whether employees 
across the country will be dropped from their current coverage 
based on Obamacare's arcane requirements.
    With that, on behalf of all of us, other Members will have 
7 days to submit opening statements and extraneous material for 
the record.
    We will introduce our distinguished panel. From my left to 
right, your right to left, Andrew Puzder is the CEO of CKE 
Restaurants, which I have a parenthetical that says Hardee's 
and Carl's Jr. My history could very well be wrong. I think 
Hardee's may have its origin in the upstate of South Carolina 
and specifically perhaps in Spartanburg, with Mr. Richardson 
and Mr. Bradshaw, but if I am wrong on that, as I frequently 
am. Sir?
    Mr. Puzder. [Remarks made off mic.]
    Mr. Gowdy. Okay, good. Well, as usual, I am close, but 
wrong. [Laughter.]
    I hope my wife is listening.
    Grady Payne is president of Connor Industries. Welcome.
    Mr. Will Morey is the president and CEO of Morey's Piers. 
Welcome.
    Victoria Braden is the president and CEO of Braden Benefit 
Strategies, Inc. Welcome.
    Mr. Brewer is the president of Lockton Benefit Group. 
Welcome, Mr. Brewer.
    Mr. Terry Gardiner is the vice president of Small Business 
Majority. Welcome.
    Consistent with committee rules, all witnesses must be 
sworn before they testify, so I would ask you to please rise 
and raise your right hands.
    [Witnesses sworn.]
    Mr. Gowdy. May the record reflect all witnesses answered in 
the affirmative.
    There should be a series of lights, which mean what they 
traditionally mean in our culture; green means go, yellow means 
speed up and try to get under the light, and red means stop.
    We will now recognize you for 5 minutes. The yellow light 
or amber light means you have about a minute left and the red 
light means stop. So we will begin with Mr. Puzder and go from 
left to right.

STATEMENTS OF ANDREW PUZDER, CEO, CKE RESTAURANTS; GRADY PAYNE, 
CONNOR INDUSTRIES, INC.; WILL MOREY, PRESIDENT AND CEO, MOREY'S 
 PIERS; VICTORIA J. BRADEN, PRESIDENT AND CEO, BRADEN BENEFIT 
STRATEGIES, INC.; MICHAEL J. BREWER, PRESIDENT, LOCKTON BENEFIT 
   GROUP; AND TERRY GARDINER, VICE PRESIDENT, SMALL BUSINESS 
                            MAJORITY

                   STATEMENT OF ANDREW PUZDER

    Mr. Puzder. Chairman Gowdy, Ranking Member Davis, and 
members of the subcommittee, thank you for inviting me to 
testify today on the impact of the Patient Protection and 
Affordable Care Act on job creation. As the chairman noted, my 
name is Andrew F. Puzder. I am CEO of CKE Restaurants. With me 
today are Cheryl Soper, our vice president of benefits, in case 
you have any really difficult questions for me; Louis Fareous, 
who is our vice president of Government relations; and also my 
sons, Matt and John.
    CKE owns and franchises 3,182 restaurants in 42 States and 
23 foreign countries under the Carl's Jr. and Hardee's brand 
names. With our franchisees in the United States, we employ 
about 70,000 people. Our company is a job creation machine. We 
create jobs by building new restaurants. Each restaurant 
employs about 25 people and we invest over $1 million in the 
community where we construct the restaurant.
    But our job creation goes way beyond our building of 
restaurants. Last year we spent over $1.25 billion for job 
creating capital projects, media and advertising, supplier 
products and services. For example, we spent $1 billion on food 
and paper products, which gives jobs to everybody from the 
farmer who plants the seeds or tends the herds to the people 
that process and manufacture our products to the guy who drives 
the truck and delivers it to the back door. We spent $175 
million on media advertising, employing people in television 
stations, radio stations, and newspapers. We spent $30 million 
on repairs and maintenance, employing people that wash the 
windows, cut the lawn, fix the air conditioner, and slurry the 
blacktop.
    Our franchisees own 70 percent of the restaurant, so they 
spend, you would assume, about $70 million in addition to that 
30. We spent $60 million on capital expenditures; building 
restaurants, remodeling restaurants, and investing in our 
infrastructure. The people we employ in these concentric 
circles that really grow out from our restaurants went to 
grocery stores, went to the movies, spent their kids to school, 
bought cars, bought houses; just creating jobs on a very broad 
basis, which is the way free enterprise system works. And you 
can see other businesses with concentric circles growing out 
from them that overlap and really drive the greatest economy 
the world has ever known.
    I am very concerned that in the coming years we will be 
unable to create as many jobs as we could like due to the 
increased expenses necessitated by laws such as the PPACA. I 
will start with the law's menu labeling provision. That 
requires disclosure of the caloric content of our products on 
our menu boards.
    Now, as a company, we support nutritional disclosure, we 
have and have for years had comprehensive, effective, and 
economic nutritional disclosure in our restaurants and broadly 
available online at our Web site. We estimate that should we 
have to replace the menu boards in all of our restaurants, the 
cost would be approximately $1.5 million. That is 17 percent of 
the $8.8 million we invested last year on job-creating new 
restaurant construction.
    Independent research done to date demonstrates that caloric 
menu labeling has no impact on consumers' eating habits. In 
other words, this was a politically correct solution that is 
ineffective and imposes unnecessary costs on American 
businesses that could better spend their money and their time 
creating jobs and economic prosperity. Nutrition disclosure can 
be accomplished effectively, comprehensively, and economically. 
The current law simply fails in all three of these respects.
    Now on to the ACA's mandatory medical coverage provisions. 
I am not an expert on health care law other than how it impacts 
our company. I also know that there are people who believe 
universal health care coverage is beneficial, and I am not here 
to debate that. However, there is a sacrifice that must be made 
to gain that benefit. The question is whether the costs are 
worth the benefits.
    The ACA will eliminate job creation and opportunity. Our 
best estimate, the ACA will increase our health care costs 
approximately $18 million per year, should it be implemented, 
as we currently understand the regulations. That is a 150 
percent increase from the $12 million we spent on health care 
last year and approximately double the $8.8 million we spent on 
job-creating new restaurants. At this point, we do not intend 
to drop coverage for our employees, but the money to comply 
with the ACA must come from somewhere.
    We use our revenue to pay our bills and expenses, to pay 
down our debt, and we reinvest what is left in our business. 
That is how we create jobs. There is no corporate pot of gold 
we can go to to cover increased health care costs. New unit 
construction will cease if we have to allocate the moneys for 
that construction to the ACA, and building new restaurants is 
how we create jobs.
    We would also have to reduce our other capital spending, 
and capital spending not only creates jobs, but is important to 
maintaining and growing our business. We would need to reduce 
the number of our full-time employees and increase the number 
of our part-time employees. We would need to automate positions 
where we could and reduce compensations for the positions that 
we retain.
    As I speak with franchisees and encourage them to build new 
restaurants, I am constantly met with concern about their 
economic futures. They are concerned about poorly conceived 
government regulations as the ACA's menu labeling provision. 
They are concerned about the ACA's mandatory health care 
coverage provisions, stifling growth and possibly requiring 
that they close restaurants that are marginally profitable now, 
but which would be unprofitable once the ACA comes into effect. 
The result is stagnation.
    The simple fact is that regulations such as those growing 
out of the ACA do impose costs, and those costs do result in 
reduced growth, stifling both job creation and prosperity. 
Prosperity is neither Republican nor Democrat, it is neither 
liberal nor conservative; it is a bipartisan issue. People are 
unsure about their futures. American people are suffering 
because they don't have jobs. American businesses want to 
create jobs, and we respectfully request that Congress review 
the ACA to determine which provisions can be administered in a 
way that reduces costs for the businesses they impact.
    We would further request that Congress review the ACA's 
provisions to determine which provisions, on balance, are 
detrimental to our Nation's economic prosperity and eliminate 
such provisions. If done effectively, this review would 
encourage job creation and prosperity, as well as better 
government.
    Thank you.
    [The prepared statement of Mr. Puzder follows:]

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    Mr. Gowdy. Thank you, Mr. Puzder.
    Mr. Payne.

                    STATEMENT OF GRADY PAYNE

    Mr. Payne. Thank you, Chairman Gowdy, Ranking Member Davis, 
and members of the committee for this opportunity to testify. I 
am Grady Payne, CEO of Connor Industries, with our headquarters 
in Fort Worth, Texas. We have plants in Texas, Oklahoma, 
Mississippi, Tennessee, Georgia, Florida, South Carolina, and 
Virginia. We supply cut lumber and assembled wood products to 
manufacturing companies for their shipping and crating needs, 
as well as logistics and supply chain management services.
    Our company was started in 1981 with five people. Tody we 
are celebrating our 30th anniversary with 450 employees and 11 
plants. Over 120 of our people today have been with us over 5 
years, and 22 of those over 15. Ours is a commodity business 
which works off low margins. In each of our markets we compete 
against companies that have fewer than 50 employees, as well as 
importing crating companies that we compete against. These 
companies will not be subject to the penalties imposed under 
the new law; it will give them an unfair cost advantage over 
our locations.
    According to the SBA, we are a small business, but not so 
by the Affordable Care Act. We are caught in the no-man's land 
between assistance and exemptions for smalls and waivers for 
large corporations and other powerful entities.
    We started our medical plan in the 1990's and offered 
coverage to all employees. Most of our production line 
employees opted out due to cost. To meet Federal discrimination 
laws, we were forced to create groups of employees and 
significantly reduce the number to whom insurance was offered. 
This remains today. We offer coverage to approximately 140 
employees and struggle each year to get 75 percent 
participation. The company pays approximately 55 percent of the 
total premium cost.
    Ours is a fully insured plan. The new discrimination rules 
created by the law have the effect of pushing us immediately 
into a self-insured alternative or face a fine of up to 
$500,000. The IRS has just delayed enforcement of the new 
nondiscrimination testing until regulation can be written; 
however, our plan can be tested and penalized as early as next 
year. Without changes in these harsh penalties, we may be 
forced to drop our plan completely, prior to the State-based 
exchanges even becoming available.
    In 2014, we will be faced with an even more difficult 
choice: Option one is to expand coverage to all our employees 
and pay the full premium cost. To do this, the additional cost 
would be approximately $1.5 million over the $750,000 we spend 
today on premiums. Option two is to expand coverage to all our 
employees and have employee-contributed cost set at affordable 
amounts based on the law's affordability rates and each 
employee's household income. If all employees stayed in the 
plan, our additional cost under this option would be estimated 
at over $1 million. Option three is to discontinue all policies 
and pay a non-tax-deductible penalty of $2,000 for each 
employee for our 450 employees, plus some portion of a penalty 
for employee turnover during the year. The cost of this penalty 
option is well over $1 million and it is not tax deductible.
    The impact of this law will cost our company $1 million or 
more no matter which option we take and, worse, some of the 
extra costs, if not all of it, may be classified as a penalty 
and not tax deductible. We would owe income tax plus the 
penalty. Today, these estimates total more than the company 
makes.
    We have been very blessed to be a profitable company, even 
in these hard times. We have had to make many sacrifices and 
pay bonus programs and people. We have no tax loopholes; we are 
a tax paying company.
    We are a company caught in the middle. As the law stands 
now, our 30-year business is at risk of being legislated out of 
business. How can this be? Our lives are in this company. We 
have done a good job for our customers, our employees, and all 
our families. We understand the goal of getting everyone 
medical coverage, and we agree that it is a worthy goal, but 
the massive cost hits us right between the eyes. We are too 
small to get favorable group rates or self-insured contracts, 
and too large by statute to be exempt, even though our profit 
centers are less than 50 employees in each location. There has 
to be a more equitable way to achieve this goal than to cripple 
a small business like ours. The ratio of cost to earnings is 
overwhelming for a company our size.
    We have seen bad markets before, though none as bad as this 
one. Our current capital expansion and business development 
plans are and will be stopped by this law because expansion and 
hiring requires cash. The impact of the law robs us of our 
needed growth capital. Our goals turn from hire and grow to cut 
and survive.
    I thank all of you for your service to our great Nation and 
for allowing me to plead the case of Connor Industries.
    [The prepared statement of Mr. Payne follows:]

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    Mr. Gowdy. Thank you, Mr. Payne.
    Mr. Morey.

                    STATEMENT OF WILL MOREY

    Mr. Morey. Yes, sir. Good morning, Chairman Gowdy and 
Ranking Member Davis. Thank you for the opportunity to speak 
today on this important matter. My name is Will Morey. I am 
president of Morey's Piers.
    Morey's Piers is a family business that began in 1969. It 
began with very humble beginnings, a single giant slide on a 
postage-stamp piece of property along the boardwalk along the 
sea in Wildwood, New Jersey. It now consists of three piers, 
two water parks, and 120 rides or attractions.
    Our operating season is primarily from Memorial to Labor 
Day; however, we operate shoulder seasons weekends, starting 
Easter and concluding on Halloween. We have 110 year-round 
benefited staff members and we grow to an additional 1,500 
seasonal staff members during that time.
    I am privileged also to be the Vice Chair of our 
International Association of Amusement Parks and Attractions, 
which represents 3,000 fixed site supplier and individual 
members in the United States, and I will be chairman of that 
organization in 2013.
    By way of perspective on the industry, our total domestic 
economic impact is approximately $53 billion. We employee 
700,000, of which 600,000 are seasonal employees, typically 
young people in their first jobs, retirees, school teachers, 
and others supplementing their incomes during the summer 
months.
    Now, there is a tremendous amount of uncertainty related to 
this bill, from my perspective, but there is one thing that I 
know at Morey's Piers we can be certain about, and that is the 
inclusion of seasonal workers and the definition of full-time 
employee, and the lack of suitable recognition of seasonal 
employees within our industry will cause severe negative 
consequences to our business.
    Now, I am here to be constructive and I would really like 
to be a part of the solution, but the fact is, as it stands, 
the law will have a substantial negative impact to our 
industry, on our seasonal employees, and our permanent 
employees as well. From our point of view, the law is a large 
expense; it is an administrative nightmare. It is hard to see 
any appreciable benefit to anyone working at Morey's Piers, but 
it is easy to see the negative impact on our ability to provide 
jobs and run our business productively.
    Now, it is important to note that our industry seasonal 
workers are hired for short, temporary periods. They have very 
different set of expectations and responsibilities than full-
time employees, and they were clearly an element of the work 
force that Congress did not pay close attention to in drafting 
the bill. The law will force businesses like Morey's Piers to 
provide health insurance to seasonal workers and, as a result, 
we have the following concerns:
    Immediate loss of jobs, including full-time positions due 
to decreased profitability; negative economic impact on the 
communities' surrounding attractions such as ours as operating 
schedules are adjusted and employment is curtailed; and the 
promotion of a seasonal labor society that schedules employees 
under 30 hours per week or terminates employment before 90 
days. This will happen across the entire country, hurting both 
seasonal businesses and seasonal employees. And very 
importantly and close to my heart is the ability to be able to 
reinvest. Capital is an incredibly important part of the 
attraction industry, and reinvesting in our businesses is 
critical to creating growth and future jobs.
    Additionally, the administrative and compliance issues are, 
simply put, extreme. The majority of these workers are employed 
5 months or less. By the time the 90-day administrative period 
passes, they will have insurance for less than 2 months, at 
most. Many of these seasonal workers get their health care from 
other sources--parents, university, their primary full-time 
positions--and will opt out of our coverage. Yet, we still have 
to do the following: ensure compliance, track work days, track 
average hours per week, offer the insurance, educate and 
present the insurance program, auto enroll into the insurance 
program, get declinations to the program, and maintain records 
for all of the above.
    Consider a work force that swells from 110 to 1,600 
employees, with individuals starting and ending their 
employment every day of the week throughout the season. Just 
imagine tracking and managing this information. This is 
unreasonably burdensome and will provide little to no benefit 
to the seasonal employees.
    Now, the bottom line is the inclusion of seasonal workers 
in the definition of full-time employee will needlessly cause 
severe negative consequences to businesses like Morey's Piers, 
to seasonal and full-time employees and to their communities. 
Ultimately, if this law is to go into effect, it should be 
amended to properly recognize the real world of seasonal 
employees and their tremendous importance to our industry and 
to our national economy.
    I would like to conclude just by mentioning that we really 
want to be a great business. We want to grow. We want to 
support our community. We want to create as many career 
opportunities we can. That is what life in America is about. So 
please don't burden us with a needless compliance and other 
issues that come along with this bill.
    Thank you for your attention and consideration of this 
important matter.
    [The prepared statement of Mr. Morey follows:]

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    Mr. Gowdy. Thank you, Mr. Morey.
    Ms. Braden.

                STATEMENT OF VICTORIA J. BRADEN

    Ms. Braden. Thank you. Chairman Gowdy, Ranking Member 
Davis, thank you for inviting me here today and to testify. My 
name is Victoria Braden. I am president and CEO of Braden 
Benefits Strategies. We are truly a small business. My business 
at this point has three full-time employees and two interns. 
And we deal with small businesses; that is our client base. We 
deal with companies that have 20 to 300 employees.
    In 2002, I started Braden Benefits Strategies with one 
employee in the basement of my home. Our business model was to 
be a resource for small businesses headquartered in Georgia, 
advising them on employee benefits, specifically group health 
insurance. My business plan was to expand our small group 
market base and then to grow a large individual market 
practice.
    In 2008, I moved the company into a building, took the 
risk, rented a space based on my long-term plan. At the end of 
our move, I was employing three full-time people, one part-time 
person, one intern, and myself. In addition, we sold our 
backroom services to three other health insurance agents, which 
kept their business viable. I had visions and a business plan 
to grow to 8 to 10 full-time employees; however, in December 
2009, we looked at that and it was time to add our individual 
health product, which is what we had looked at for our 
expansion, put in a call center, hired a full-time person, and 
put an aggressive marketing campaign together.
    On March 24th, the day after PPACA passed, I had looked at 
my business plan before, knowing that it could be coming, and I 
made sweeping changes to my business. I eliminated our 
expansion to the individual health market, which I still, to 
this day, believe was a good decision since individual market 
will most likely go to the exchange; I terminated that full-
time person; I lost revenue from the sales we already had, 
which accounted for $35,000 annually. And to these other 
gentlemen that is just a small amount; to me it is a person, it 
is huge. I also terminated a part-time claims administrator and 
then I terminated my part-time accountant and outsourced that. 
The law eliminated my plans to grow and now have turned me into 
what could possibly be no business at all in 2014.
    On top of that, we advise small businesses on their health 
insurance options, and that has become very expensive. My 
company has had to go out and educate ourselves on the health 
insurance. When we get bad information or conflicting 
information, because the bill is so intensive, we have to hire 
a lawyer, have to ask the lawyers for the differences, and 
oftentimes we go between three law firms, again, trying to 
figure out what it is that the law exactly says and how to 
advise our clients.
    It has also taken a huge financial toll on my business from 
the value of my business. With my business in 2007, I was 
looking at a value of $1.2 million, two times my annual 
revenue, and now I am looking at a business worth of zero. And 
the reason it is worth zero is because our declining business 
will then be worth nothing at the end when PPACA goes into 
effect.
    On January 1, 2014, and I think this is probably the basis 
of why I am here, we expect 22 of our 65 clients to immediately 
drop their group health insurance. The size of the clients that 
we service will have no cost to the employer to not have 
insurance; there will be no penalty and no fine. Of those 
companies, I expect 769 people to be added to the exchange 
rules.
    Through PPACA, the taxpayer is now subsidizing the cost 
when that happens, of small business employees' health 
insurance. Our conservative estimate of 462 will be the first 
year, and other businesses will leave shortly after that.
    We always said the young and the healthy would take this 
bill and make it worthwhile. It will not, because the young and 
the healthy will find a way around the bill. We have already 
seen that through the self-funded small business pieces that 
are being developed.
    I would just ask you to reconsider not only the job loss of 
the bill, but the cost of the bill both to employers and to the 
unexpected consequences of what it is going to cost the U.S. 
Government. Thank you.
    [The prepared statement of Ms. Braden follows:]

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    Mr. Gowdy. Thank you, Ms. Braden.
    Mr. Brewer.

                 STATEMENT OF MICHAEL J. BREWER

    Mr. Brewer. Chairman Gowdy, Ranking Member Davis, my name 
is Mike Brewer. I am president of Lockton Benefit Group of 
Lockton Companies, LLC in Kansas City. On behalf of Lockton and 
our clients, I thank you for the opportunity to appear here 
today.
    Lockton is the largest privately held insurance brokerage 
and consulting firm in the world. Most of our 2,500 employee 
benefits clients are middle market clients, those with 500 to 
2,000 employees. Our professionals are experts on last year's 
health reform laws provisions affecting employer group health 
plans. They have been instrumental in educating our clients 
regarding the law and analyzing its impact on our clients' 
employee benefits programs and their budget.
    In May of this year, we also conducted a survey of our 
clients, soliciting their views on the costs and other 
implications of the reform law. We do believe that we are 
uniquely positioned to articulate the law's effect on employer-
based health insurance plans.
    Mr. Chairman, the employer community is the single largest 
employer of health insurance in America. The majority of our 
clients want to continue to supply health insurance, but they 
struggle with the cost and the federally imposed complexity of 
plan administration. Health care reform adds to, rather than 
mitigates, the cost and complexity of providing employer-
sponsored health insurance.
    For example, the Federal Government requires 52 separate 
notices, disclosures, and reports to enrollees in health 
insurance programs; 19 of these, and that is just so far, were 
added by health reform. This frustrates our clients immensely. 
They question why, during a recession, when employers are 
struggling mightily just to stay afloat, much less supply this 
valuable fringe benefit, Congress would make the process more 
expensive, more onerous, and more complicated. They tell us the 
additional cost, complexity, and uncertainty wrought by the law 
affects their ability to hire additional workers or even retain 
current full-time employees.
    Clients find it difficult to plan strategically in light of 
the uncertainty the law brings to their world. One client in 
our survey summed up the view of many regarding this law, 
calling it a job killer. Nearly 20 percent of our survey 
respondents said they will consider terminating their group 
insurance plan in 2014, and they cite cost and complexity as 
the main reasons that they will consider doing this.
    In our survey, 63 percent of respondents said they were 
concerned or very concerned about the cost of the law's 
immediate benefit mandates. Seventy-one percent said they were 
concerned or very concerned about the cost of implication of 
the pay-or-play mandate on employers and 60 percent about the 
cost of automatic enrollment. Our actuarial modeling of over 
250 middle market clients validates our clients' concerns. 
Taken together, the law's immediate benefit mandates, waiting 
period limits, and auto enrollment requirements, on average, 
add 6.3 percent to our clients' health insurance costs, on top 
of current health insurance inflation, and it is more in 
certain industries.
    The employer pay-or-play mandate in 2014 poses additional 
problems for employers because of the sizable difference 
between what most employers pay to supply coverage for an 
employee and the penalty they would pay if they terminated 
coverage, the vast majority of our clients have a significant 
financial incentive to exit the group insurance market in 2014. 
On average, our clients outside the retail, restaurant, and 
hospitality industries would save 44 percent off their current 
health care budget by terminating their group plans, leading 
nearly 20 percent to tell us they would consider doing just 
that in 2014.
    About 80 percent of our clients indicate they don't expect 
to consider terminating coverage, but the reason they give is 
the perceived need to provide health insurance to attract and 
retain clients. We are concerned that the moment they see they 
don't have to offer competitive health insurance, that 80 
percent number could drop significantly. This would result in 
huge increases in exchange participation and subsidy liability 
for taxpayers.
    Seventeen percent of our survey respondents said they would 
work to avoid play-or-pay penalties by substituting more part-
time employees for full-time workers. Forty-four percent said 
they would reduce the employer subsidy toward employee coverage 
and 43 percent they said they would reduce the employer's 
subsidy toward dependent coverage. That does not bode well for 
working Americans.
    Thank you for the opportunity to appear before you today. 
In assessing the impact of this legislation, I urge you to 
place yourselves not only in the shoes of those Americans who 
need and deserve access to affordable health care coverage, but 
also in the shoes of the employers who supply valued coverage 
to 160 million of us. As one of our survey respondents wrote, 
this plan doesn't fix the health care problems, but shifts the 
burden to employers to take care of the issue without any type 
of assistance in covering the increase in cost.
    We look forward to answering your questions and working 
with you to address the issues raised by our employer clients. 
Thank you.
    [The prepared statement of Mr. Brewer follows:]

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    Mr. Gowdy. Thank you, Mr. Brewer.
    Mr. Gardiner.

                  STATEMENT OF TERRY GARDINER

    Mr. Gardiner. Good morning, Chairman Gowdy, Ranking Member 
Davis, and members of the subcommittee. Thank you for the 
opportunity to testify on the number one problem facing small 
business, the ever-rising health care cost. I am Terry 
Gardiner. I am vice president of policy at Small Business 
Majority.
    Small Business Majority is a national nonprofit small 
business advocacy organization founded and run by small 
business owners. I myself have spent most of my career, I was 
kind of shocked to add it up and to think I started my first 
business 40 years ago as a self-employed commercial fisherman 
in Alaska, where I grew up. Went on to create a seafood 
processing company that grew over 22 years, and when I retired, 
it had 1,000 employees with over $100 million in sales, 
exporting to 22 countries.
    Other members of our senior team at Small Business Majority 
are also entrepreneurs. And as business owners we are well 
aware that government policies can take either of two courses, 
they can help promote job creation and help promote business, 
and, at the same time, there can be other laws and regulations, 
in our experience, that can definitely be a burden on business 
and discourage growth. So we are not unaware of those 
situations from our own personal experience.
    But the problem facing small businesses, those 22 million 
self-employed out there, one-third of whom don't have coverage, 
and the nearly 6 million small businesses with under 100 
employees, they keep saying that health care costs, ever-
rising, are their number one problem. We have done a lot of 
polling, scientific polls across the country, national and in 
many, many States between December 2008 and August 2009, 67 
percent of respondents said reform was urgently needed to fix 
the economy. An average of 86 percent of those companies who do 
not provide coverage said they couldn't afford it. Seventy-two 
percent of those offering health benefits said they were 
struggling to do so and cited the cost as the reason they were 
struggling. So this simply paints a status quo that is 
unacceptable for small business.
    We have also done some economic research that was conducted 
by MIT economist Jonathan Gruber to look at the scenarios. Our 
country then and now does face alternatives, we could do 
nothing about our health care system or we could try to change 
it so it works better. So we looked at those alternatives.
    Doing nothing is a job killer. Gruber's projection showed 
that over the next decade small employers would pay $2.4 
trillion in health care costs, there would be a loss of 178,000 
jobs. There would be negative impacts for employees, too; $834 
billion in reduced business wages and a reduction in profits. 
So doing nothing is not a great scenario.
    So that moves us to where we are at now, where we have the 
Affordable Care Act as the law in the country that we are here 
today discussing, projected by CBO that it would have the 
benefit of reducing the Federal deficit by $200 million over 
the next 10 years and $1 trillion over the following decade, 
which is a positive for all businesses and all citizens. But 
the point for small businesses is to reduce their cost so that 
they can keep more money in their bank account, which is what 
they use as fuel to expand and create jobs.
    And there are many provisions in the ACA that are going to 
help small businesses, many of which do not offer health 
coverage now, and many self-employed simply can't afford it. So 
there are new mechanisms here in the ACA; tax credits for small 
employers. There are health insurance exchanges that will be 
established in the 50 States. Some States have already moved 
forward; Massachusetts, Utah. We have exchanges that have been 
in effect for 15 years in Connecticut and provides a lot of 
insurance to small groups.
    So we know there are problems. You have heard about some of 
them here today with the ACA. We are not here to say they are 
perfect, but we think focusing on these and fixing them would 
be a better course of action than going backward.
    Thank you.
    [The prepared statement of Mr. Gardiner follows:]

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    Mr. Gowdy. Thank you, Mr. Gardiner.
    I will recognize myself for 5 minutes of questions.
    I will direct this to the first three witnesses to my left. 
What should the Federal Government do or stop doing to enable 
you to create more jobs?
    Mr. Puzder. The Government now is doing a lot to create a 
high degree of uncertainty in the business community. We are 
uncertain about what tax rates are going to be; we are very 
uncertain about health care costs, and the only thing we are 
certain about is that they are going to go way up. We are 
uncertain what is going to happen with energy, with the EPA. We 
are uncertain about unionization with the NLRB. There is a lot 
of uncertainty out there. When businesses are going to invest 
and create jobs, they generally want to come up with a 5-year 
business plan which shows you get a return on your investment 
at about 20 percent a year, and at the end of 5 years you have 
gotten a return on your initial investment.
    If you can't do a forecast because you don't know your 
costs, you don't know your expenses, and what you do know you 
don't like, you are not going to invest. And American 
businesses are stalled. I think that chart shows it up there. 
People are not investing because they can't show a profitable 
return of their investment. And if you think your expenses are 
going to go way up and you have two choices on what to do with 
your money, retain it so you can cover your expenses, or invest 
it to grow and create jobs, you are going to hold on to your 
cash.
    So we are not seeing the kind of investment we should be 
seeing, and if the Government would just work to create some 
certainties, some positive certainty for the business 
community, I think you would see an explosion of job creation.
    Mr. Gowdy. Some of us like to say that our tax, regulatory, 
litigation structures create the uncertainty that stifle job 
creation. Is that a fair statement; tax, litigation, 
regulation?
    Mr. Puzder. I think that is a very fair statement.
    Mr. Gowdy. Mr. Payne, what employees, what categories of 
employees are most likely to be adversely impacted by the 
implementation of Obamacare?
    Mr. Payne. Well, in our company, it is going to impact all 
of us; it spreads completely out through the organization. We 
can't necessarily cut sections out; we are kind of a complete 
pie. So if you cut part of it down somewhere, you have to 
equally pull out the support structure that goes with it across 
the lines. It is going to impact every area that we are 
involved in.
    I agree with everything that was just said. In our case, 
our plants that we put in are about $1 million investments. We 
add people less than 50 generally and we pump about $1 million 
in payroll into those plants on an annual basis. We cannot add 
any more plants not knowing what the cost structures are going 
to be going forward. Will we cut people? We are trying to cut 
people now. So it has an impact on all of us.
    Mr. Gowdy. Mr. Morey, the President famously said that if 
you like your health insurance, you will be able to keep it. 
With respect to your company, is that statement true?
    Mr. Morey. Back to the comment that was made later about 
uncertainty, that is one of our great concerns. We would like 
to offer our private plan essentially to out staff members; 
they are very important to us, we want to see that they have a 
great plan and they are well taken care of in that area. But it 
is unclear to us whether or not that is going to be the case or 
not. And when we look at things like the burden of the seasonal 
issue that I have been speaking of and what that means to us in 
terms of cost and compliance, that endangers our ability to be 
able to provide the coverage that we are providing now.
    Mr. Gowdy. Mr. Gardiner, I only have a little bit of time 
left, so if I could get just a yes or no response from you on 
whether or not you support some other initiatives that might--
some of our health care woes. Do you support incentivizing 
health savings accounts?
    Mr. Gardiner. I am not sure what you mean by incentivizing.
    Mr. Gowdy. Through our tax structure, flexible spending 
accounts.
    Mr. Gardiner. I think they work too.
    Mr. Gowdy. Do you support creating the same tax treatment 
for employees who want to purchase health insurance as the 
employer has?
    Mr. Gardiner. You mean self-employed?
    Mr. Gowdy. No, I mean an employee. If they want to purchase 
health insurance on their own, should they enjoy the same tax 
benefits as employers?
    Mr. Gardiner. Well, this is a particular problem for self-
employed now. We have the 1-year provision that needs to be 
extended that self-employed don't have the same tax.
    Mr. Gowdy. I am not talking about self-employees, I am 
talking about individual employees. Individuals who want to 
purchase health insurance, should they have the same favorable 
tax treatment as employers?
    Mr. Gardiner. Yes.
    Mr. Gowdy. Medical malpractice reform, does your 
organization support that?
    Mr. Gardiner. Yes, and we did during the ACA. We are on 
record as supporting that.
    Mr. Gowdy. Thank you. My time has expired and I will 
recognize the gentleman from Maryland, the ranking member of 
the full committee--do we go to Mr. Davis? I will recognize the 
gentleman from Illinois, ranking member of the subcommittee, 
Mr. Davis.
    Mr. Davis. Thank you very much, Mr. Chairman.
    Let me thank our witnesses. I must say that I was seriously 
impacted by all of your businesses, your courage, your 
determination, the tenacity, the fact that you have been able 
to make conscious use of yourselves to build strong businesses 
and provide opportunities for other people to work.
    Mr. Gardiner, can I ask you have you ever had any employees 
who didn't earn enough money to pay for health insurance?
    Mr. Gardiner. Yes.
    Mr. Davis. Mr. Brewer, have you ever had any employees who 
didn't earn enough money to pay for health insurance?
    Mr. Brewer. Yes, sir.
    Mr. Davis. Ms. Braden, have you ever had any who didn't 
earn enough to pay for health insurance?
    Ms. Braden. No.
    Mr. Davis. No?
    Ms. Braden. No.
    Mr. Davis. Mr. Morey, have you ever hired anybody that 
didn't make enough money to pay for health insurance? You have?
    Mr. Payne, have you ever had any who didn't earn enough?
    Mr. Payne. I am not sure that I know the answer to that 
because I don't know what costs would be. But I have people 
that have turned down insurance before because of cost.
    Mr. Davis. Mr. Puzder, have you ever hired anyone who 
didn't have enough money when they got through to pay for 
health insurance?
    Mr. Puzder. Well, we have a number of part-time employees 
who may not have enough, but we do offer them a very low mini-
med affordable plan. I really can't say that I have ever done 
any research on that, but we probably have part-time employees 
who couldn't afford the plan.
    Mr. Davis. Well, let me ask you this question. Can you 
think of anything in life more important than being healthy?
    Mr. Puzder. No. Well, your family, belief in God.
    Mr. Davis. That is a good point, especially belief in God. 
I happen to be a practicing Christian, and I notice at my 
church that everybody wants to go to heaven, but nobody wants 
to die. That sort of reminds me of Frederick Douglas sometime 
when they were talking about the abolition of slavery, and 
every time somebody would come up with a way to do it, there 
would be a reason why it couldn't get done, and he ended up 
saying that there are those who reminded him of people who 
might have wanted the rain, but without the thunder and the 
lightning, or they wanted the crops without plowing up the 
ground, or they may have even wanted the ocean without the roar 
of the mighty waters. So it seems to me that there are things 
that we want to happen, but somehow or another we can't bring 
ourselves to the point of doing what is necessary.
    Do we believe in tax credits? Let me ask. Have any of you 
ever used tax credits in any facet of your businesses?
    Mr. Puzder. I am sure that whenever they are available we 
use them.
    Mr. Davis. And so if tax credits are made available for 
small businesses to help provide health insurance for 
employees, that might be one way of helping some of those 
individuals who had no other way of being insured.
    Mr. Puzder. I think it would, Congressman, but I will tell 
you that we offer all of our employees health care coverage 
inexpensively, and I think of our 17,000 part-time employees, 
about 6 percent choose to take the health care coverage over 
the cash. So it is 94 percent would rather have the job and the 
compensation.
    Mr. Davis. Oh, I would certainly agree. And I guess when 
you say small business, it would be kind of difficult for one 
to suggest that your company was a small business, I mean by 
pretty much any standard.
    Mr. Puzder. But, Congressman, we deal primarily with larger 
employers, but I fundamentally believe that the same advantages 
that are available for larger employers ought to be available 
to smaller employers as well.
    Mr. Davis. Well, let me ask you do you believe that health 
care should be a right, and not a privilege?
    Mr. Puzder. That is a difficult question. You know, we have 
created a system where people don't have to buy health care to 
get health care. I would certainly like to believe that it is a 
right. I think that there are fundamentally some better ways 
that we could go about some of this. And I will tell you that 
our firm has been historically pro on health reform. It is 
exactly what you said, it is just the form that that takes.
    Mr. Davis. Well, see, I think that at the base of the 
discussion is what we believe in terms of individuals who live 
in our society.
    Ms. Braden, you were about to say something?
    Ms. Braden. I was. I am the person that actually deals with 
the small, small businesses I think that you were referring to, 
and on the tax credit that we have on the floor right now, the 
$25,000 of income and you could do that, I don't have but a 
handful of employers out of my group that can actually take 
advantage of that, and those employers are all nonprofits, so 
they are taking advantage of it against their FICA taxes. So 
that piece of it I don't see.
    As far as health insurance being a fundamental right, so is 
being healthy, and people have a responsibility to that, and we 
are not seeing that in any of our small groups; we are not 
seeing folks going out and actually working to be healthy, 
which would then bring down the health insurance costs.
    Mr. Davis. Well, I think we could debate that a great deal, 
but my time is up.
    Mr. Gowdy. I thank the gentleman from Illinois.
    We now recognize the gentleman from Tennessee, Dr. 
DesJarlais.
    Mr. DesJarlais. Thank you, Mr. Chairman.
    And thank you, panel, for appearing here today. There are 
so many questions in so many directions I would like to go 
today, after hearing your testimony, and I don't think I have 
ever sat through a hearing where the testimony was almost so 
self-explanatory that a lot of the questions I had to ask have 
already been answered to some extent.
    Mr. Payne, you had laid out three options for your company 
in terms of health care. When we discuss Obamacare now, 
sometimes we get chastised for using that term, Obamacare; it 
is known as the Affordable Health Care Act. After laying out 
your three options, do you agree that it is affordable?
    Mr. Payne. It is not affordable to us. The way it is 
structured, and talking about the credits for small business, 
we consider ourselves a small business and some of the 
exemptions for less than 50 employees really hurt us; we don't 
get those exemptions, yet we are competing against the people 
that do. So it ought to be more of a level playing field.
    But to answer your question, no, it is not affordable. Is 
the current system good? I won't say that the current system is 
good, but we are surviving and making a profit and growing and 
hiring people with the current system, dealing with year-to-
year increases in the programs, dealing through the insurance 
companies. Under the new program it could be that we may not 
have a business to grow. So it has definitely changed.
    Mr. DesJarlais. Thank you.
    Mr. Gardiner, today the Center for Medicare and Medicaid 
Services' actuary stated health care costs will double by 2020. 
Considering President Obama passed Obamacare to reduce health 
care costs now, will your business be able to cope with these 
increased health care costs?
    Mr. Gardiner. Well, fortunately for me, I have reached that 
retirement age and don't own a business today.
    Mr. DesJarlais. But you represent several.
    Mr. Gardiner. Yes. And I think that there is more that 
needs to be done about cost containment. I think that was very 
evident during the whole debate of the Affordable Care Act. 
More needs to be done and we have faced these kind of racing 
costs. If you look at a graph, as I did when I retired and got 
into health care, these costs have been going up like a rocket 
for decades.
    Mr. DesJarlais. Okay, but we as a Congress, I wasn't here 
at the time, but we then passed massive sweeping health care 
reform that we didn't ask for, we don't want, and apparently we 
certainly can't afford. So here we are moving forward with what 
did then Speaker Pelosi say, we need to pass this bill so we 
can find out what is in it?
    From what I am hearing from this panel up here today, I 
doubt that anybody sat down with business folks like this and 
listened to what they have to say before this bill was 
constructed, and I can tell you as a physician I don't think 
they sat down with health care professionals either to see 
whether or not this was feasible.
    So now we have this problem. You are sitting here wondering 
how we are going to continue to employ people in this Nation. 
The greatest crisis facing our country right now is 
unemployment and spending, and everything about this bill that 
I can see is nothing but driving up cost and government 
spending, and, frankly, government spending is nothing more 
than taxes. Our government doesn't generate any revenue outside 
of taxes. So, anyway, I wanted to ask a few more questions.
    Mr. Brewer, the CBO has estimated that as many as 12 
million employees could be forced into the exchanges. Do you 
find this number accurate?
    Mr. Brewer. No. I think the CBO is made up of smart, 
hardworking, well-intentioned people. I don't know how much 
interaction they have with people who have employees and 
payrolls and have to make these decisions, but I can tell you 
we dealt with about 3,000 of them last year and the year before 
that and the year before that. So I think the incentives that 
we uncovered in our actuarial studies, as well as the 
information we got as a result of our survey, would suggest to 
me, I don't know how many renewals CBO did last year, but, as I 
said, we did about 3,000, and we are coming to a much different 
conclusion based upon that information.
    Mr. DesJarlais. Okay. Thank you.
    Mr. Puzder, will the health care law lead you to automate 
more services or replace full-time workers with part-time 
staff?
    Mr. Puzder. Thank you, Congressman. Absolutely. People who 
are currently full-time employees we will have to make part-
time employees, which means they will have to have two jobs to 
get a full-time salary. We will automate positions such as the 
cashier. Right now they have those ordering kiosks like the ATM 
or what you see at the gas station where you pay with your 
credit card. We haven't used those because we like the personal 
touch and they are a little expensive, but once you implement 
this health care bill, I think those kiosks are going to become 
much more desirable. So I will be reducing labor force and also 
automating positions.
    Mr. DesJarlais. Well, I am out of time, but just quickly, 
do you believe most of your workers prefer a job or government 
health insurance?
    Mr. Puzder. Absolutely. And I think the fact that only 6 
percent of the 17,000 part-time employees we offer insurance to 
take it would be a very strong indication that that is true.
    Mr. DesJarlais. Thank you.
    I yield back.
    Mr. Gowdy. I thank the gentleman from Tennessee.
    The Chair would now recognize the gentleman from Maryland, 
the ranking member of the full committee, Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman. I want to 
thank you for calling this hearing. As I was sitting here 
listening, I could not help but think about my days as an 
employer of a small law firm. We provided insurance for our 
employees and it took away from our profit, but we did it. We 
did it because we believe that it was the right thing to do. 
There were only three lawyers, but we had about five clericals 
and we did it.
    Let me also say this. I am not here to chastise anybody 
about anything, but I take great offense when I hear the word 
Obamacare. There is no such thing. Members of this Congress 
voted for this legislation and many of us have very strong 
feelings about it because we are seeing people in our districts 
without insurance; we are seeing people literally die, and that 
is a very serious thing.
    So there has to be a balance here, and I appreciate your 
comments, because I can look at this thing from a small 
business employer for 20 years, but I can also look at it from 
the standpoint of a legislator who has seen the results of 
people who end up in emergency rooms and we are paying a lot 
more through emergency room care, and we all end up paying for 
that.
    But you said something, Ms. Braden, that I found very 
intriguing and very interesting, and correct me if I am wrong. 
You said something to the effect that you saw people that were 
not, you said, not seeing anyone trying to be healthy. What did 
you mean by that and how do you know that?
    Ms. Braden. Because I deal every day with the people inside 
the companies that I work with. Thank you for asking. If you 
look at people and healthy, we are not talking health 
insurance. When you go to the emergency room, you are receiving 
health care. And we sort of have taken those two subjects and 
melded them together, and really I think what we need to do is 
separate them apart.
    If you take health insurance, what it does is support 
people in health care. If people are getting health care, that 
is one thing; but if they are not taking care of themselves, 
then they are driving up the cost of health care, which does 
drive up the cost of insurance.
    Mr. Cummings. I guess what I am saying to you is that there 
are a lot of people who, first of all, part of the Affordable 
Care Act, one of the driving forces was to keep people well, 
and another thing that we were trying to do was to try to drive 
down the cost that these insurance companies were charging for 
these policies. It is a hard thing to control.
    Ms. Braden. Well, in insurance it is really easy. It is 
premium paid in, claims paid out. So if you want to control 
health care costs, you have to control claims paid out. I mean, 
insurance isn't hard, it is a pass-through. The reason we have 
insurance was to make deals with doctors and hospitals at a 
reduced cost so that every individual company didn't have to go 
do those negotiations.
    Mr. Cummings. I understand. But did you realize that when 
we were going through this there were insurance companies 
literally out in California went up on their rates 30 percent? 
Thirty percent.
    Ms. Braden. When I looked at some of those policies, 
because we heard about BlueCross BlueShield out there, and I 
called some of my folks out there that I work with, there was 
one policy that they said 59 percent. Well, that was five 
people on it and the policy was very rich and had been 
constructed over 20 years ago.
    Mr. Cummings. Well, that is one, but I am just saying, 
well, I don't want to get caught up in this, but what I am 
trying to say to you is there is one thing, when we talk to 
health care insurance people, it is not as simple as you are 
making it sound, in and out. That sounds nice, and if that were 
true, that would be nice, but part of the Affordable Health 
Care Act was to try to say to these companies that were 
spending, say, for example, insurance companies spending 35 
percent on overhead, 40 percent on overhead, that they had to 
control that and they had to put more into medicine.
    Another part of the Health Care Act was to try to address 
this thing of preexisting conditions. You know, there are 
people who, and God forbid it happen to any of you all, you get 
a scare with cancer, and if you have a gap in your insurance 
right now, you will never get insurance. I have had people in 
my family in that situation. If they had $100,000 to pay for 
insurance they couldn't get it.
    So I think we have to be careful when we are looking at 
this because there are parts of the bill that you might like 
and there are other parts that you might not like, but I think, 
again, we have to be careful, well, again, we are trying to 
bring down the costs so that people will stay well, because we 
are going to pay one way or another.
    I realize I have run out of time, but thank you, Mr. 
Chairman.
    Mr. Gowdy. I thank the gentleman from Maryland.
    The Chair would now recognize the distinguished gentleman 
from Arizona, Dr. Gosar.
    Mr. Gosar. Thank you, Mr. Chairman.
    I am a health care provider, I am a dentist, and I am a 
small businessman, so there is theory and then there is 
application. So a lot of things look great on paper, and I know 
every single one of you hear it in your board meetings every 
day. But then there comes the reality of how does it actually 
be implicated.
    Mr. Gardiner, I know you cite a model, you show that the 
small businesses actually benefit from government takeover 
health care. I prefer that term because I can tell you, and 
back that up, that that is what it is. However, the model 
assumes much smaller growth in health care costs, an assumption 
both the CBO and CMS have rejected as being highly implausible. 
And I think we have seen a lot of that discussion and looking 
back at equations and numbers making that.
    Instead of relying on an academic model, and with faulty 
assumptions, how many businesses are you aware of that are 
enthusiastic about this health care plan?
    Mr. Gardiner. Many. And we could have some of them call you 
or write you, if you would like.
    Mr. Gosar. Oh, I would love to. Can you pull off a couple 
off the top of your head?
    Mr. Gardiner. Yes. I think some of them are cited in my 
written testimony. I am just thinking of one right here in the 
greater metro area, Mike Ray, with the Hobby Shop. He has come 
on his own and testified.
    Mr. Gosar. How about something in Arizona? I don't like 
examples in the Beltway. How about something out in Arizona?
    Mr. Gardiner. I don't have one off the top of my head in 
Arizona.
    Mr. Gosar. Mr. Brewer, do you think that you are real happy 
with the assumptions based off what I just asked Mr. Gardiner?
    Mr. Brewer. You mean the CBO assumptions?
    Mr. Gosar. Yes.
    Mr. Brewer. No, not at all.
    Mr. Gosar. Is it going to create jobs?
    Mr. Brewer. No. Everything that we see indicates the 
incentive to a cattle drive to the exchanges.
    Mr. Gosar. Oh, I like that. Now, I am going to skip you for 
just a second because I am coming back to you, okay?
    Mr. Morey, how about you?
    Mr. Morey. I do not see the opportunity for job creation 
out of this bill, no.
    Mr. Gosar. How about you, Mr. Payne?
    Mr. Payne. None.
    Mr. Gosar. How about you, Mr. Puzder?
    Mr. Puzder. It is a job killer, it is not a job creator.
    Mr. Gosar. So my colleague on the other side talked about 
the administrative costs. Mr. Puzder, tell me where the 
administrative costs many times are linked, is it in less 
government regulations or more?
    Mr. Puzder. Less government regulation will drive down 
administrative costs.
    Mr. Gosar. Thank you.
    Mr. Payne.
    Mr. Payne. Same thing. Regulation costs a lot of money.
    Mr. Gosar. Mr. Morey.
    Mr. Morey. I would echo those comments.
    Mr. Gosar. How about you, Mr. Brewer?
    Mr. Brewer. Certainly.
    Mr. Gosar. I am not being disrespectful, because I have 
something special for you. [Laughter.]
    Mr. Gardiner.
    Mr. Gardiner. Less is more.
    Mr. Gosar. Okay. I love that.
    So my colleagues on our side have been talking about, or 
the opposite side, have been telling us that the Republicans 
have been never proposing any jobs, and what we are really 
trying to do is get to the core matter of it. We are not trying 
to put a band aid on it, we are trying to streamline the red 
tape.
    Mr. Brewer, you made the comment of a cattle call. Okay?
    Mr. Brewer. Cattle drive.
    Mr. Gosar. Cattle drive? Cattle call.
    Mr. Brewer. They are different things. [Laughter.]
    I am a Texas boy.
    Mr. Gosar. I am from Wyoming, so you use one to get to the 
other.
    Mr. Brewer. Yes.
    Mr. Gosar. So, Ms. Braden, you made some wonderful 
comments, and that is there is a responsibility. I am a 
believer we need reform, but not the reform I saw. Okay? 
Because you hit it, and that is there is personal 
accountability, personal responsibility. And I do believe there 
was a little company in Iowa that actually had a concept like 
this, if I am not mistaken, and what they basically did is they 
invested in the employee. And they said, listen, we are going 
to make you see your family doctor, and that preventative 
service, whatever they come up with, we are going to give you 
time during that workday to be able to do that, but you have to 
stay on that preventative model.
    And if I am not mistaken, then they made another caveat. 
They said that as long as you stay on that caveat, we will pay 
100 percent of your claims. They said if you fall off, you are 
going to pay 25 percent co; fall off again it is 50 percent co; 
fall off a third time, it is 75 percent co; and so forth and so 
on. And guess what?
    Ms. Braden. Everybody went to the doctor.
    Mr. Gosar. Everybody went to the doctor. And guess what? 
You died with that company. What a job creation that was. 
Because what happened is you had investment from the patient 
and the employer and the health care benefit, all the way 
across the board, minimizing the red tape. So thank you very 
much for making sure that we understood that we are not here 
about job stymieing, we are here about building jobs and 
reducing red tape.
    Thank you.
    Mr. Gowdy. I thank the gentleman from Arizona.
    The Chair would now recognize the distinguished gentleman 
from Missouri, Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman.
    And let me, too, welcome two of my friends, former 
colleague and friend, the former Senator Jim Talent from my 
home State of Missouri. Thank you for being here. As well as my 
friend, Mr. Puzder, who runs a significant operation out in 
Missouri. Thank you for your testimony today.
    Let me start out by saying that the Patient Protection and 
Affordable Care Act is the law of the land, and it is a good 
law, and, like any law, it could be improved. However, my 
colleagues on the other side of the aisle are not interested in 
honestly examining the positive and negative aspect of the law, 
and I think they are just interested in repealing it; it is 
scoring a political victory over President Obama.
    This health care reform law is good for Americans, it is 
good for businesses, and especially small businesses. And it is 
very good for young businesses, which are actually the ones 
that create the most jobs. And I am so glad to hear the phrase 
job creation; first time I have heard it in over 6 months in 
this committee.
    Some have raised concerns that businesses won't be able to 
afford compliance with the ACA. Ninety-eight percent of 
employers will be exempt from the insurance mandate, and 95 
percent of the businesses that are not exempt already offer 
health insurance to their employees. This misleading premise of 
this particular hearing is that the ACA hurts so-called job 
creators.
    Let me start with Mr. Gardiner. Thanks to the ACA, starting 
this year, consumers will receive more value for their premium 
dollar because insurance companies will be required to spend 80 
to 85 percent of premium dollars on medical care and health 
care quality improvement, rather than on administrative costs. 
If they don't, the insurance companies will be required to 
provide a rebate to their customers starting in 2012. This 
provision is known as the medical loss ratio.
    Mr. Gardiner, do you believe that the combination of the 
medical loss ratio requirements and the shop exchanges will 
make it easier for employers to offer quality affordable health 
insurance to their employees?
    Mr. Gardiner. In terms of the MLR, we have looked at the 
data. There are a lot of States before the ACA passed and 
currently were under those rates in those States already, and 
the world didn't come to an end. So we just see it as this 
means it is feasible for insurance companies in other States to 
do it, and the 22 million self-employed who buy insurance today 
in the individual market are certainly going to be protected, 
the 4.8 million companies that have under 10 employees, who are 
paying a lot more for insurance than other businesses that have 
more than 10 employees, are going to benefit from this too 
because they are in the small group market.
    And we think the exchanges are really the critical part for 
putting small businesses on a level playing field; they don't 
have the option to really be self-insured if you are 10, 20 
employees, 50, where the bulk of small businesses are. And 
these exchanges can work and they have been proven to work, and 
we think that is going to be the driving force for making it 
more available and more affordable for small business.
    Mr. Clay. Thank you so much for that response.
    Mr. Puzder, I have heard your concerns about providing the 
nutritional information for the products that you sell. Other 
than that requirement, do you think that this law will help 
shave cost on health care for your employees? And when I say 
shave costs, will it help reduce the cost of prescription 
medicine? Will it make the delivery of health care more 
efficient for your employees?
    Mr. Puzder. I don't believe that it will. As I said early 
on, I am not a health care expert. I can tell you how it 
impacts our company from a financial perspective, but right 
now, I went into our restaurants when the health care debate 
was going on and I said to some of the employees, why do so few 
of you buy this insurance that we offer that is so inexpensive, 
and the response was, Mr. Puzder, we get it for free at the 
emergency room. So I don't know how much better they are going 
to do than free.
    Mr. Clay. Well, that is why we are trying to connect people 
with health care providers and to cut down the cost of people 
showing up at the emergency room for a cold.
    Mr. Puzder. I agree with that. I think that the employee is 
not going to be positively impacted, but there should be 
something done to cut those emergency room costs. You have a 
very good point there.
    Mr. Clay. Thank you.
    I yield back.
    Mr. Gowdy. I thank the gentleman from Missouri.
    With the indulgence of our panel and my colleagues on both 
sides, we would like to have a second round, which we sometimes 
refer to as a lightening round. My colleagues do not need to 
feel the need to take their full 5 minutes if they don't want 
to, but I will start with the distinguished gentleman from 
Tennessee, Dr. DesJarlais.
    Mr. DesJarlais. Thank you, Mr. Chairman, and thank you, Mr. 
Clay, for shortening the term to HCA or Health Care Act, and 
dropping the Affordable. That is a little easier for me to 
pallet. But you mentioned that this bill was brought about and 
it is the law of the land, and you are glad to hear us mention 
job creation; and I think we are all here today talking about 
the detriments to job creation, and I think that point has been 
very strongly made.
    In terms of the last question on shaving cost, I worry 
more, as a physician, about shaving quality because we are 
trying to increase the number of people into a health care 
market with really no means to pay for it. But that is not 
entirely true because our friends on the other side of the 
aisle believe that Obamacare's taxes, which includes the 
employer mandate tax penalty, an increase in the Medicare Part 
A tax, a new tax on investment income, a new tax on health 
insurance providers, a new tax on drug manufacturers, and a new 
tax on medical device manufacturers are paid by firms out of 
their massive profit buckets. Moreover, they believe taxes only 
impact the top 2 percent of taxpayers.
    Based on your experience, is this a fair portrait of 
reality? And I will just open that to whoever would like to 
grab it.
    Mr. Brewer. No, it is not. There is no way you add all 
those taxes in and reduce the cost to health care, period.
    Mr. Puzder. Mr. Cummings had mentioned how his firm had 
been profitable, Congressman Cummings, how his firm had been 
profitable and they gave those profits into paying for 
insurance. I think part of what we are all saying here is we 
can take those profits and put them into insurance, but if we 
do that we can't invest them to grow our businesses and create 
jobs.
    So we are not really in conflict on that, but you can't--
like I said, there is no corporate pot of gold to go to to pay 
for this stuff; we have to take it from someplace, and it is 
going to come from growth and job creation.
    Mr. DesJarlais. So again, as you stated, it is a job 
killer.
    Mr. Puzder. A job killer.
    Mr. DesJarlais. Does the rest of the panel, for the most 
part, agree with that?
    Mr. Gardiner. I think part of the solution of getting more 
dollars in the system is that everyone, as has been talked 
about here, every citizen has to be responsible, and I think 
that is why there was an individual mandate put in. You can't 
have a bunch of people who don't pay, but yet can show up and 
get coverage and doing what people are talking about here. So I 
don't think anybody has ever looked at this and said that you 
could have a sustainable health care system and not have 
everybody in the system and everybody paying their fair share.
    Mr. DesJarlais. So basically forced health care?
    Mr. Gardiner. I don't think you can have a system with 
freebies. It doesn't work.
    Mr. DesJarlais. There has always been a big debate about 
exactly who was uninsured in this country. Now, I heard numbers 
early on that there was 30 million uninsured. We have asked 
people to define who those 30 million were; apparently up to 
half may have been here illegally and not eligible for health 
care, perhaps half of the remaining 15 million are folks that 
would qualify for Medicare but just haven't signed up, and then 
the other half are some of the workers that are young and 
bulletproof and just opt not to have health insurance.
    So, in essence, this new law of the land that was imposed 
upon people against their will, and clearly the majority of 
people in this country still do not want this, is what we are 
stuck with at this point, and I think that is why we are having 
hearings to show the detriment of this health care law and what 
it is going to do to impact the economy and yet not really 
resolve the health care problem. It was a poorly conceived, it 
was passed in the middle of the night, and people maybe have 
forgotten about how that occurred, but let's get back to some 
more questions.
    Mr. Puzder, did Hardee's need a government mandate to add 
salads to its menu?
    Mr. Puzder. No. Actually, at Carl's Jr. we have had salads 
since the 1970's; used to have salad bars.
    Mr. DesJarlais. A government mandate to add turkey burgers?
    Mr. Puzder. No, not at all. They tested well and sold well.
    Mr. DesJarlais. Okay. So you have managed to do things to 
help keep people healthy without government mandates.
    Mr. Puzder. We love it if people buy healthy products; we 
are happy to sell them.
    Mr. DesJarlais. Right. So now Federal mandates of sign 
changes to help people understand what it is they are buying, 
do you think that is going to impact their habits or do people 
just kind of do what they want?
    Mr. Puzder. No, I don't think it is other than--well, there 
have been a number of studies on this, and I have included in 
my written testimony that show that, in fact, that has no 
impact on people's eating habits. In fact, anecdotally, we have 
noticed, in some of the restaurants where there is already menu 
labeling required, people think that fast food has more 
calories than it does, and they actually end up ordering higher 
calorie products once they see what the caloric content 
actually is. So it has been a very interesting experiment so 
far that clearly hasn't worked.
    Mr. DesJarlais. My time is up. I yield back.
    Mr. Gowdy. I thank the gentleman from Tennessee, would now 
recognize the gentleman from Illinois, the ranking member of 
the subcommittee, Mr. Davis.
    Mr. Davis. Thank you very much, Mr. Chairman. I was 
thinking, when you walk into my home, my wife has a sign that 
says, welcome to the Davis Household, and then it says, Please 
know that the opinion of the husband is not necessarily that of 
management. [Laughter.]
    And I am so pleased that opinions don't necessarily manage 
what we do all of the time. I am amazed at some of the things 
that I hear. Job killer? If you create an opportunity for more 
than 30 million people in this country to have health insurance 
and go to the doctor on a regular basis, and stay out of the 
emergency rooms of hospitals, and to live longer, the only 
business that I could see that gets hurt by this is the 
undertaker. And he doesn't get hurt too much because eventually 
he is going to get you anyway; I mean, it takes a little bit 
longer.
    Could someone please share with me how creating opportunity 
for 30 million people, over 30 million to get decent health 
care that creates the need over the next 10 or 15 years for 
150,000 additional doctors, more than 250,000 nurses, could 
someone tell me how that kills jobs?
    Mr. Puzder. I think I can, Congressman. Let's just assume 
that there is this benefit as you have outlaid it, and I don't 
know if it is a health care benefit or a health insurance 
benefit, because I think the law requires health insurance; 
they already get health care.
    But let's just talk about the health insurance benefit. 
Benefits have costs. The money to pay for those benefits has to 
come from somewhere. Our business makes a profit. All of that 
profit is reinvested in the business. When the profit is 
reduced, you invest less in the business. If the profit is 
eliminated, you have nothing to invest in the business. If you 
don't have anything to invest, you can't grow and you can't 
create jobs.
    So there is a benefit, and I am not here to argue about 
that. I just want you to know that there is a cost associated 
with the benefit, and I think the businesses that are at this 
table here are telling you in some instances it might put them 
out of business.
    Mr. Davis. But if I am dead because I couldn't get health 
care, can I come to your business?
    Mr. Brewer. No, but there will be somebody to replace him. 
Congressman, your passion is evident and commendable, and your 
conviction is commendable, but he is right. Anything you do 
that erodes profits in an organization, impedes their ability 
to create jobs. And right alongside the cost implications of 
the Affordable Care Act are the administrative complexities 
that makes it easier for an employer just to throw up their 
hands and say, heck, I am out; let's send these folks to the 
exchanges and then they can be subsidized by the taxpayers.
    I am all for everybody having health care. I totally agree 
with you on that. I think we disagree fundamentally on how you 
get there.
    Mr. Davis. But, see, I think that the realities are if you 
even just deal with the question of fairness, if you ask a bird 
is it fair for birds to eat worms, and you turn around and ask 
the worm the same question, chances are you are going to get a 
different answer. So if you ask the thousands of employees in 
my congressional district who provide health care for people 
all over the world if somehow or another their ability to 
provide these services will drive down jobs or take away jobs, 
they would probably disagree vehemently.
    Mr. Brewer. I am sorry, that is not what our survey results 
tell us.
    Mr. Davis. They would disagree. Well, ask the 21 hospital 
administrators in my congressional district if they would 
agree.
    Mr. Gardiner. Congressman Davis, there is another impact 
aspect of job creation, and that relates to job lock, and job 
lock has two impacts: one, employees at a company who don't 
want to leave because they go somewhere else, maybe they 
wouldn't have health coverage and it is very vital for they and 
their family members; the other is who is going to start those 
new companies.
    And those are people in the work force working at a job, 
and they go through this same system, and the harder it is for 
them to see their way to go out and launch in the first step, 
to be a self-employed person, to found a company, and they 
can't get benefits for them and their family and they are a 
responsible person, they are going to stick with their job.
    So it is more complicated than just surveying existing 
companies. There is a whole bunch of other factors about who 
starts businesses and how they grow at the bottom.
    Mr. Davis. Thank you very much, Mr. Chairman. I certainly 
agree in terms of our health delivery system, we have much more 
of a sickness care system than we do a health care system, so I 
would certainly agree with you, Ms. Braden, on that point, and 
I yield back.
    Mr. Gowdy. I thank the gentleman from Illinois.
    The Chair would now recognize the gentleman from Arizona, 
Dr. Gosar.
    Mr. Gosar. My colleague, Mr. Davis, really brings it 
forthright. First of all, life isn't fair, never has, never 
will be. If you are a business, you should never complain about 
a profit. That is what you should do; that is what has to 
happen in order to create jobs and to have the ability to 
employ more.
    The other thing that we have to look at is when government 
impedes itself or impugns itself into any type of parts of our 
life, to the degradation of that industry, we see it flounder. 
Give you a good example. You don't have to look very far with 
government intrusion in health care to look at the Native 
Americans. Boy, there is a great unemployment rate there, 60 
percent at the Navajo Nation, 75 percent in the Apache 
reservation, all because of dictations by government.
    And why do I bring that up? Well, because this program is 
based on a flawed system that flawed it from the very get-go, 
as it demanded that you had to go to the emergency room; you 
couldn't turn anybody away. You couldn't even ask the questions 
where are you from, how do you look. You couldn't turn them 
away.
    So what we have done is we have restricted care, and 
medicine did that. I am happy to say I am from dentistry. We 
never went down that road. And the reason I say that is that 
today, for every dollar spent in dentistry, 50 percent comes 
out of the patient's pocket. So they have risk. They find 
value. That is why you see lots of dentists. Of course, we are 
not doing so good right now because we don't have a good 
economy, but there is something inherently right about that.
    So I kind of want to continue that by saying in 2014 
employers who employ at least 50 person full-time employees 
will face a penalty for failing to provide minimum essential 
coverage. How is this going to affect businesses specifically 
in respect to hiring? Mr. Brewer.
    Mr. Brewer. Well, people who have 49 employees are going to 
keep 49. I think there is a fair number of our survey 
respondents that suggested that they would go to more part-time 
employees so they wouldn't have to offer coverage. There is no 
way that helps in their hiring practice.
    Mr. Gosar. So what we are doing is we are cost-shifting 
again; we are making it go back to the government so that the 
government is going to have to streamline them, just like they 
did in the Medicare roles, where what we did is we look at the 
equations and we take away certain benefits so that we set them 
on Medicaid. This whole system is based on a flawed system; it 
doesn't work anywhere along the line for job creation.
    Ms. Braden.
    Ms. Braden. If you really look at what the cost of health 
care is to an employer, there is not one employer sitting here 
that can tell you that it costs less than $3,000, which is the 
fine, per year. Every one of us pays, on an individual basis, 
pays more than $3,000 for our health care for our employees per 
year. So now we have a fine that is less than what we are 
currently paying. It doesn't take a rocket scientist to figure 
out what we are going to do.
    Mr. Gosar. And let me ask you the next thing. You talked 
about the administrative costs. A lot of that administrative 
cost, is it not true, that it has to do with tort?
    Ms. Braden. Yes.
    Mr. Gosar. And did you see anything in this bill, any one 
of you, do you see anything about tort reform in this bill? In 
fact, it was refused. I wonder why. I guess I am a dentist, not 
an attorney. That is where the American people need to stand up 
and businesses need to stand up.
    Mr. Morey, how do you see this is going to affect those 
people, those businesses that are under 50 jobs?
    Mr. Morey. I see it very much the same way. I would like to 
mention that the issue of tort reform, to me, is gigantic.
    Mr. Gosar. Paramount, right?
    Mr. Morey. I would like it to go beyond medical, into 
general tort reform, if possible, from our business perspective 
as well. But ultimately we want to employ people; we want to 
provide them great coverage. We just don't want mandates shoved 
down our throat in how to do it. And ultimately I think that 
the free enterprise system does a pretty good job. The 
marketplace does a pretty good job of attracting; the better 
employers attract better staff members. The marketplace does 
work.
    Mr. Gosar. Mr. Puzder, you really drive my attention 
because equations. You know, when you are in business, you are 
looking at all the parameters and what possibly could do. Have 
you run all the numbers? Are you comfortable with all the 
numbers based upon this bill and how it is going to impugn job 
creation?
    Mr. Puzder. No, Congressman. In fact, we hired an expert in 
this area, Mercer. They are one of the national experts on 
health care costs, and while their best estimate is that our 
health care costs will increase $18 million, which is that 150 
percent, the range runs from $7.3 million to $35.1 million. 
Now, I have to tell you in any other aspect of my business, if 
one of the people who works for me came to me with an estimate 
that ran from $7 to $35 million, I would tell them to go back 
and sharpen their pencils. But nobody can figure it out.
    Mr. Gosar. One last question, just a quick indulgence.
    If you have a program in your business that is failing, 
what do you do?
    Mr. Puzder. Terminate it, replace it, try and figure out 
what the next best thing is.
    Mr. Gosar. That is exactly what this law is, and it should 
be terminated. We should have the guts to say that. Thank you.
    Mr. Gowdy. I thank the gentleman from Arizona and would now 
recognize the ranking member of the full committee, the 
gentleman from Maryland, Mr. Cummings.
    Mr. Cummings. Thank you very much.
    I want to just reference something that Dr. Gosar said, and 
I was meeting with staff and I may have missed it, so correct 
me if I am wrong, that he was glad that dentists can turn away 
people, unlike emergency rooms; dental care people pay 50 
percent, an average of calls, and they have some skin in the 
game. Is that accurate? I will yield to the gentleman.
    Mr. Gosar. Did I say that?
    Mr. Cummings. I am just asking you what did you say about 
it is okay?
    Mr. Gosar. [Remarks made off mic.]
    Mr. Cummings. I just wanted to say that I spend a 
phenomenal amount of my time working on my case called the 
Deamonte Driver case. This was a 12-year-old boy who had a 
tooth infection, he was on Medicaid, and he couldn't find a 
dentist because he was being turned away. Twelve years old. And 
this was 3 years ago. So because a dentist would not accept 
him, and this was in Maryland, my State, the infection from an 
$80 tooth decay problem, it would cost $80 to treat it, he 
died. Twelve years old. Because a dentist turned him away. And 
they spent $250,000 trying to save his life at the end.
    So, I guess with regard to dental care and care, period, I 
just say that our country is better than that. We are better 
than that.
    And I understand, believe me, to all of you, I understand 
what you are saying. I understand it is hard being in business. 
For you all who have your own businesses, a lot of people don't 
realize what you go through. They don't realize all the folks 
you have to deal with; the IRS, you have to deal with making 
sure the lights are on, you have to make sure, if you have 
grass, you have to make sure the grass is cut, everything. You 
have to pay for every toothpick, every pen, every pencil; you 
have to make sure employees are okay; you have to deal with 
absenteeism. You have to deal with all kinds of stuff.
    But at the same time I think that we have to also balance 
that. If we are talking about our people, people, of course, 
are who make our businesses go, and if they are not healthy, 
that is a problem. That is a real big problem. And there are 
those who may not see health care as a right, I still happen to 
think so, but I do believe that when we get to a point where we 
feel that it is okay to, if I am a skilled lawyer and somebody 
comes in to me and they have a problem, but that is a little 
different because I am not talking about life and death. That 
is different.
    But if I have a skill and like the doctors in my State, not 
in Arizona, but in my State, who turned this little boy away, 
and I am talking about a whole lot of them turned him away, and 
you die at 12, I don't know how many of you have children, but 
if you have a child who dies at 12, you don't forget it. So 
what we have done is spent a lot of time, I spend a phenomenal 
amount of my time trying to make sure that that never happens 
to another child in our State again. As a matter of fact, 
because of Diamonte Driver, we have now been able to take 
Maryland from one of the worst States with regard to having 
dentists work with kids on Medicaid to one of the top, I think 
it is even number one or number two, in a matter of 2 or 3 
years.
    So the reason why I mention that is because my staff had 
mentioned to me, like I said, I was with a staff member, that 
that statement was made, and maybe I misunderstood it or 
misquoted it, I am sorry I didn't hear it, but I just want to 
make it clear that there is something that I think should 
always be above profit, and that is life, health and safety; 
and I think that is what the Affordable Care Act was about and 
is about. And as somebody said a little bit earlier, no, it is 
not perfect, but a lot of its imperfections were because of 
people trying to satisfy both sides of the aisle to get a 
decent bill, and it did not come out perfect. It is not a 
product, it is a project; that means it can ever get better.
    So, with that, I yield back.
    Mr. Gowdy. I thank the gentleman from Maryland.
    My father is a physician. The only two things that kept me 
from following in his footsteps were math and science. If it 
weren't for those two, I might have become one as well. And I 
was sitting here while Mr. Cummings was talking, who is one of 
the most eloquent Members of Congress and somebody that I have 
a lot of personal affection for. I remember always being the 
last ones to leave church because folks wanted to ask my dad 
questions. I remember holidays being interrupted.
    But the thing I remember the very most are the people who 
would call at night and say my kid has been sick all day, can 
you come see him tonight? That is frustrating, when somebody 
has been sick all day, why you didn't take advantage of the 
office hours? Why you waited until the evening. And my mom 
would say why don't you charge more? And he never would do it.
    So my question to you all is what is the role of personal 
responsibility in our health care system? Do we incentivize the 
right conduct? And we have all these different models from what 
we have now to what is perceived as radical, which is 
decoupling health insurance from employment. It is perceived as 
radical, but that is the way we existed.
    Up until 1944 we didn't get our health insurance from our 
employer; we got it ourselves. I am not smart enough to know 
the difference between a right and a privilege; I just know 
this: personal responsibility has to be part of the equation or 
we are not going to make it as a Republic.
    So I would ask you this, in conclusion, and I will let you 
go from left to right, give you all the last word, although we 
only have about 3 minutes, so apportion it accordingly. What is 
the role of personal responsibility and how can our country 
better incentivize the right conduct and penalize the wrong 
conduct in our health care system?
    Mr. Puzder. When you said right to left, does that mean you 
are starting with me? That was your right or my right?
    Mr. Gowdy. Your right to left, my left to right. I always 
like to start on the right.
    Mr. Puzder. Okay, I guess it is me. I think private 
enterprise and State governments are the best place to make 
determinations as to health care. I think there are many things 
that the Federal Government could do that would contribute to a 
better health care system. I don't know if health care is a 
right or not, Congressman, but I know it is the law. I know an 
emergency room cannot turn you away. What we are talking about 
here is health insurance, not health care. Health care people 
get now. This is why they don't take up our offer on health 
insurance when we offer to pay even 60 percent. They are 
getting health care. This is about health insurance and how you 
allocate those costs. The way they are allocated now, they will 
destroy our ability to create jobs and prosper.
    That doesn't mean that profits will go down, but profits 
are what we reinvest to grow. And if we can't reinvest to grow, 
we can't create jobs and we can't create prosperity, which is 
what American business has done for over 200 years.
    Mr. Gowdy. Mr. Payne.
    Mr. Payne. I agree with that completely. I think there is 
some personal responsibility that has to go into the medical 
cost. I agree with the skin in the game program. Years ago, 
programs that I was in, you had to pay for the coverage, turn 
it in and get reimbursed. Well, I understand people may not 
have money to pay to start with. In our districts, every plant 
that I have I have gone around and checked, our people get 
medical coverage, it is there. Our property taxes, everything 
is paying for it already. I haven't had a single complaint of a 
person in our organization that comes back to us and says, hey, 
we have an employer or somebody in their family that has a 
serious problem; we don't have that problem at all.
    It is not a question of whether people have the right to 
have the insurance or the coverage. Everybody wants that for 
them, there is no question. It is where does the cost lie. In 
our company, it is throwing all the cost to the employer to pay 
these new expenses, and where does that cash come from? It is a 
big burden on companies in the middle, on all companies, I 
suspect, but certainly on our company it is a burden that is 
bigger than we have. That is the problem.
    Mr. Gowdy. I have 45 seconds left to split between four of 
you.
    Mr. Morey. Yes. We provide $100 incentive for folks to go 
get a physical. That is cover-to-cover in the program. We 
provide a smoking cessation program that is for both the staff 
member and for their spouse. These are the kind of things we do 
to try to help people help themselves. That is where I think 
much of that responsibility lies and that is on the individual 
person.
    Ms. Braden. When I look at it, it can go so much farther, 
and we all have a story, and I respect that, because I have 
them just in my practice alone, with people that were offered 
health care and health insurance, and didn't take it. That is a 
private decision. What exactly is our responsibility and does 
the government regulate it? I am not sure. I think if these 
guys really looked at their businesses, they would say that the 
reason they offer the wellness that they do is because they 
know it improves their work force and they get more out of it.
    If we really wanted to look at health care, we would start 
with dentistry and we would say, if you don't have your teeth 
cleaned twice a year, you are not entitled to basic and major 
dental, because everything starts in the mouth. So we are 
looking at health care and we are looking at wellness and we 
are looking at health insurance, three different things.
    Mr. Gowdy. Mr. Brewer.
    Mr. Brewer. One of the things that ACA did get right was 
increasing the opportunity for employers to incent people to 
well behavior. We have a pretty sophisticated practice in our 
firm of helping clients design programs that incent people to 
live healthier lifestyles and make better lifestyle decisions. 
So in this morass of things that we don't like in ACA, 
certainly that aspect of it was welcome.
    Mr. Gardiner. I think there are three things I will 
mention. One is I think you have to have an individual mandate 
so everybody pays their fair share and gets coverage. I think 
employees need to know the total cost of insurance, including 
what the employers are paying. Most of the time they don't 
realize how much it really costs.
    And we have seen in all our surveys and meetings with small 
businesses, where 42 percent of Americans work, that small 
businesses would like wellness and prevention programs that fit 
small business, and they don't have access. We hope that it 
changes; run by States can do this. And I agree that dentistry 
has some good models. I know I don't have to pay any copay if I 
get in there, and I think that is a good incentive and it has 
been proven to work.
    Mr. Gosar [presiding]. Well, on behalf of the chairman, I 
would like to thank you very much for your indulgence for two 
rounds, and thank you so very, very much. Thank you.
    Our meeting is adjourned.
    [Whereupon, at 12:03 p.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]

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