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



 
                HEARING ON THE INDIVIDUAL AND EMPLOYER 

               MANDATES IN THE DEMOCRATS' HEALTH CARE LAW

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


                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 29, 2012

                               __________

                            Serial 112-HL09

                               __________

         Printed for the use of the Committee on Ways and Means




                  U.S. GOVERNMENT PRINTING OFFICE
78-672                    WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001


                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana  MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania            EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   RON KIND, Wisconsin
VERN BUCHANAN, Florida               BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska               SHELLEY BERKLEY, Nevada
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York

                   Jennifer Safavian, Staff Director

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON HEALTH

                   WALLY HERGER, California, Chairman

SAM JOHNSON, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 MIKE THOMPSON, California
DEVIN NUNES, California              RON KIND, Wisconsin
DAVID G. REICHERT, Washington        EARL BLUMENAUER, Oregon
PETER J. ROSKAM, Illinois            BILL PASCRELL, JR., New Jersey
JIM GERLACH, Pennsylvania
TOM PRICE, Georgia
VERN BUCHANAN, Florida


                            C O N T E N T S

                               __________
                                                                   Page

Advisory of March 29, 2012 announcing the hearing................     2

                               WITNESSES

PANEL 1:

Carrie Severino Chief Counsel, Policy Director, Judicial Crisis 
  Network........................................................     8
    Testimony....................................................    11
  Steven G. Bradbury Partner, Dechert LLP........................    18
    Testimony....................................................    21
Joseph D. Henchman Vice President, Legal Projects, Tax Foundation    30
    Testimony....................................................    33
Neil S. Siegel Professor of Law and Political Science, Duke 
  University School of Law.......................................    41
    Testimony....................................................    43
PANEL 2:

Diana Furchtgott-Roth Senior Fellow, Manhattan Institute for 
  Policy Research................................................    84
    Testimony....................................................    86
Sylvester J. Schieber Consultant, Council for Affordable Health 
  Coverage.......................................................    93
    Testimony....................................................    95
Thomas J. Shaw President, Barton Mutual Insurance Company........   115
    Testimony....................................................   118
Stephen LaMontagne President and CEO, Georgetown Cupcake, Inc....   120
    Testimony....................................................   123

                   MEMBER SUBMISSIONS FOR THE RECORD

The Honorable Bill Pascrell......................................   139
The Honorable Jim McDermott......................................   154

                   PUBLIC SUBMISSIONS FOR THE RECORD

American Farm Bureau Federation, Statement.......................   158
Center for Fiscal Equity, Statement..............................   160
Chamber of Commerce, Statement...................................   165
NFIB and Small Business Coalition for Affordable Healthcare, 
  Statement......................................................   168


                     HEARING ON THE INDIVIDUAL AND


                  EMPLOYER MANDATES IN THE DEMOCRATS'


                            HEALTH CARE LAW

                              ----------                              


                        THURSDAY, MARCH 29, 2012

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                    Subcommittee on Health,
                                                    Washington, DC.

    The subcommittee met, pursuant to call, at 9:05 a.m., in 
Room 1100, Longworth House Office Building, the Honorable Wally 
Herger [chairman of the subcommittee] presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                Chairman Herger Announces Hearing on the

                Individual and Employer Mandates in the

                       Democrats' Health Care Law

March 29, 2012

    House Ways and Means Health Subcommittee Chairman Wally Herger (R-
CA) today announced that the Subcommittee on Health will hold a hearing 
to explore the constitutional concerns raised by the individual mandate 
and economic problems caused by the employer mandate which were created 
in the Democrats' health care law. The hearing will take place on 
Thursday, March 29, 2012, in 1100 Longworth House Office Building, 
beginning at 9:00 A.M.
      
    In view of the limited time available to hear from witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing. A list of witnesses 
will follow.
      

BACKGROUND:

      
    The ``Affordable Care Act'' (P.L. 111-148 and 111-152) imposes two 
highly coercive federal mandates on both individuals and employers. 
Beginning in 2014, the Federal Government will mandate that nearly 
every American purchase government-approved health insurance or pay a 
penalty. The United States Supreme Court will soon hear arguments in 
the days before the hearing about whether such a requirement is 
constitutional. Also, beginning in 2014, the Federal Government will 
mandate that many employers provide government-prescribed health 
insurance or pay a fine. Economists and employer groups have expressed 
concerns that the added costs associated with the employer mandate will 
impede their ability to hire and retain workers and result in lower 
wages. In announcing the hearing, Chairman Herger stated, ``The 
majority of Americans remain opposed to the Democrats' health care law, 
and an even larger number of Americans believe the individual mandate 
is a violation of their constitutional rights. The public remains 
concerned about the impact the law will have on their lives and with 
good reason. At its core, the Democrats' risky experiment relies on a 
federal mandate, forcing Americans to purchase a product--even if they 
can't afford it--or pay a fine. Furthermore, the law's new mandates and 
regulations are standing in the way of job creation at a time when 
unemployment remains high and our economy desperately needs more jobs. 
Although the courts are actively engaged, this hearing will allow for 
an open and candid discussion in Congress, where the law was passed, 
but where it did not receive the debate and dialogue that these issues 
deserve.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the constitutional questions surrounding 
the individual mandate and the economic impact of the employer mandate.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Thursday, April 12, 2012. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
                                 

    Chairman HERGER. The subcommittee will come to order. I 
want to apologize for Ranking Member Stark, who has been caught 
in traffic so we will move ahead. Without objection, his 
opening statement will be made part of the record.
    [The prepared statement of The Honorable Pete Stark 
follows:]
[GRAPHIC] [TIFF OMITTED] 78672A.001

[GRAPHIC] [TIFF OMITTED] 78672A.002

                                 

    Chairman HERGER. We are here today at the actual end of an 
extraordinary week in the history of the Democrats' health care 
overhaul. Last Friday marked the 2-year anniversary of the law 
and for 3 days this week the Supreme Court considered its 
constitutionality. Today, the subcommittee will examine two 
mandates at the center of the law.
    Beginning in 2014, the individual mandate will require 
Americans to buy government approved health insurance even if 
they can't afford it, or else pay a penalty. This mandate 
fundamentally changes the relationship between the individual 
and the Federal Government, and for the first time in history 
requires individuals to purchase a private product and enter 
into a private contract. Not surprisingly, the individual 
mandate is the subject of one of the most important and closely 
watched Supreme Court cases in modern times. The individual 
mandate is also deeply unpopular with the American people. A 
constitutionally suspect mandate that is opposed by the public 
is not a very stable cornerstone of a health reform plan, and 
yet, and yet, the administration claims it is essential.
    The individual mandate is unprecedented, unlimited, 
unnecessary, and dangerous. Never before has Congress required 
individuals to purchase a private product. If Congress has the 
power to compel commerce, then its power becomes virtually 
unlimited. Indeed, the Obama administration has not put forward 
any limiting principle.
    Finally, the individual mandate creates a Federal policy of 
police power, a power reserved in the Constitution for the 
States. This is dangerous because our dual system of 
sovereignty is essential to protecting individual liberty.
    Our first panel will examine the constitutionality of the 
individual mandate. Not everyone was able to secure a seat to 
hear oral arguments at the Supreme Court this week, but it is 
important that the public as well as Members of Congress 
understand the constitutional questions raised by this coercive 
mandate. We have a distinguished panel of attorneys, each of 
whom have authored or coauthored influential amicus briefs in 
this historic case.
    The second panel will discuss the economic problems created 
by the employer mandate. I can sum up those problems in one 
word. Jobs. The employer mandate places additional cost burdens 
on employers, which is the last thing job creators need during 
these tough economic times, and it would discourage the hiring 
of additional workers. In a recent U.S. Chamber of Commerce 
survey, over 1,300 small business executives found that 74 
percent say the recent health care law makes it harder for 
their business to hire more employees. Given how long we have 
suffered with high unemployment, the employer mandate makes 
absolutely no sense.
    In addition, the employer mandate will force employers to 
scale back their existing workforce, particularly workers at 
the lower end of the wage scale. Equally troubling, the mandate 
encourages employers to eliminate the health insurance they 
offer to their employees because the penalty associated with 
not offering coverage is far cheaper than the costs associated 
with offering and maintaining health insurance coverage.
    In summary, the cornerstones of the Democrats' health care 
law are crumbling under the weight of scrutiny. The entire law 
needs to be repealed and replaced with real constitutional 
reforms that reduce the price of health insurance.
    Before I recognize the minority for the purpose of an 
opening statement, I ask unanimous consent that all members' 
written statements be included in the record. Without 
objection, so ordered.
    I now recognize the gentleman from New Jersey for opening 
statements.
    Mr. PASCRELL. Just very briefly, Mr. Chairman. Let's make 
it clear before we start today that we are already paying, for 
the members of this committee who are here and who are not 
here, we are already paying for those folks who do not have 
insurance. Let's make the record clear on it. Let's not have 
confusion on that issue. And I think we do a disservice to the 
subject as well as to the American people to in any way infer 
or conclude that if we sustain the system that we are trying to 
move away from, that this will keep money in our pockets. We 
are going to continue to pay for those people who do not have 
insurance. There is no other way to pay the bills. And so I 
think that needs to be made very clear.
    And I would like to know, you know, you talk about 
frivolous lawsuits, let's talk about what will be accomplished 
from this hearing. I am trying to think about that, think into 
the future. What is going to be accomplished in this hearing as 
we await the June decision from the Supreme Court?
    And thirdly, when we say we need more constitutional 
reforms for health care, and if as many of the folks on your 
side of the aisle, in all due respect, reject the health care 
act, then what are you suggesting in its place? I would like to 
hear that before the end of the day. What are the 
constitutional reforms that you think are necessary in order to 
bring about a change to a system which both of us admit is not 
sustainable, which exists now? Then what do you suggest? And I 
would like those to be codified and sent to all the members, 
and then maybe we can have a debate on what you folks have been 
talking about. And I frankly don't know what you have been 
talking about, because I don't know that any of those 
constitutional reforms that you recommend have been put on the 
record.
    Many of the people on your side, Mr. Chairman, have picked 
out certain parts of the health care act and said that these 
aren't so bad. We certainly wouldn't vote against this. We 
wouldn't vote against that. But I don't know what you stand for 
yourself. And I think we need to know that before we get into 
this discussion, or perhaps the members of the panel would 
suggest that we should continue to sustain the old system that 
we are trying to get away from. I don't know what they think. 
And I know one thing, that we are paying for those people who 
are uninsured.
    Now, first, we have got to find out how many people are 
uninsured. Then we have to find out how much we have been 
paying, and we can calculate that. Right, Dr. Price, we can 
calculate that. How much the folks----
    Mr. PRICE. Will the gentleman yield?
    Mr. PASCRELL. Sure.
    Mr. PRICE. The fact of the matter is, many of us have put 
forward positive solutions. H.R. 3000 is the comprehensive one, 
Empowering Patients First Act, that we put forward. And I would 
just like to correct the gentleman, that the gentleman says we 
are already paying for those that aren't covered. In fact, what 
happens is that the people providing the care eat the cost for 
it. So the doctors and the hospitals are eating the cost. There 
is no more cost shifting, and so the gentleman is inaccurate.
    Mr. PASCRELL. Can I take back my time? That is off the 
wall, and you know it, Dr. Price. You know, you know who is 
paying these bills. It is no different than when Walmart, which 
part-timed its whole workforce, who paid--the question is, who 
paid for those folks that had to go and seek medical attention, 
be in the hospital, go to a doctor? The answer: You. You paid, 
and I paid. That is the only answer. When you say well, the 
insurance company.
    Mr. PRICE. Will the gentleman yield----
    Mr. PASCRELL. Which insurance? They don't have insurance.
    Sure.
    Mr. PRICE. Let me just ask you, please. When you are home 
over the next 2 weeks, please go visit a physician's office who 
sees patients.
    Mr. PASCRELL. I do it all the time.
    Mr. PRICE. Ask them how much bad debt they are unable to 
collect and that they are not being compensated for that care. 
Just ask them, that is all I ask you.
    Mr. PASCRELL. Reclaiming my time, I am very aware of the 
physicians in this country, and you being one yourself, I would 
appreciate that fact that you are trying to protect your 
profession in a professional way. I have no problems with what 
you just said. But we know why the debt is accumulated, when 
people aren't paying their bills. And why aren't people paying 
their bills, Dr. Price?
    Mr. PRICE. You want me to respond?
    Mr. PASCRELL. Sure.
    Mr. PRICE. I am happy to respond. I think it is because of 
the taxation of this society, the regulation, the regulatory 
burden and oppression that this administration puts on them so 
that we can't have a dynamic economy, and the lawsuit abuse 
that exists out there is astounding, astounding.
    Mr. PASCRELL. Reclaiming my time. I know you have accused 
this administration of everything but thunderstorms, and you 
will get to that some day, I am sure.
    Chairman HERGER. The gentleman's time is expired.
    Mr. PASCRELL. May I just finish my sentence? Thank you. 
Thank you, Mr. Chairman. But we are paying, my grandfather, may 
he rest in peace, said we pay. The average person pays, and 
they don't even know it.
    Chairman HERGER. The gentleman's time is expired. We will 
hear from four witnesses on our first panel. Carrie Severino, 
General Counsel, Judicial Crisis Network; Steven Bradbury, 
Attorney with Dechert LLP; Joseph Henchman, Vice President of 
Legal Projects, Tax Foundation; and Neil S. Siegel, Professor 
of Law and Political Science, Duke University School of Law.
    You will each have 5 minutes to present your oral 
testimony. Your entire written statement will be made part of 
the record. Ms. Severino, you are now recognized for 5 minutes.

 STATEMENT OF CARRIE SEVERINO, CHIEF COUNSEL, POLICY DIRECTOR, 
                    JUDICIAL CRISIS NETWORK

    Ms. SEVERINO. Thank you, Mr. Chairman, Members of the 
committee. If men were angels no government would be necessary. 
We have all heard the famous quote from James Madison in 
Federalist 51, but rarely do we hear the rest of the quote even 
though it is absolutely crucial. ``If men were angels, no 
government would be necessary. If angels were to govern men, 
neither external nor internal controls on government would be 
necessary. In framing a government which is to be administered 
by men over men, the great difficulty lies in this: You must 
first enable the government to control the governed; and in the 
next place oblige it to control itself.''
    I submit that the Patient Protection Affordable Care Act 
embodies precisely the type of uncontrolled government power 
that Madison and the founders recognized as a fundamental 
threat to our liberties. Having just fought in and won a 
revolution against a despotic central government, the framers 
of our Constitution were not about to tolerate the least slide 
back to tyranny. So they divided government power among three 
branches and were careful to limit Congress' legislative 
authority to a specific list of powers and no more.
    Congress explicitly invoked its power under the Commerce 
Clause as its authority for the health care law and its 
individual mandate in particular. It was wrong for three 
reasons:
    First, the individual mandate goes against 200 years of 
history and precedent. In every Supreme Court affirmation of 
Federal power under the Commerce Clause, from regulating home-
grown wheat to home-grown marijuana, you can always avoid 
government impositions by simply not participating in the 
regulated activity in the first place. But with the health care 
law, you are automatically subject to regulations simply, as 
Justice Breyer noted, by virtue of being born.
    Now, if the Federal Government has always had such a direct 
and unavoidable power over its citizens, it would have surely 
exercised it long ago and for emergencies far more pressing 
than health reform, such as during the Great Depression or 
World War II, but it did not. And that lack of historical 
support is strike one for the individual mandate.
    Strike two for the mandate is the fact that compelling 
individuals to buy a product is a far different thing from 
regulating an existing market. This is why the administration 
struggles mightily to blur this distinction by, for example, 
complaining that people who choose not to buy health insurance 
now can nevertheless be regulated now because they are likely 
to consume health care services sometime in the future.
    But there is a constitutional difference between actual and 
potential participation because after all we are potential 
participants in every single market that we consciously choose 
to avoid, where still bystanders forced into the health 
insurance market now will have only one legal exit, and that is 
moving to another country.
    The third problem with the administration's argument is 
that it lacks any limiting principle. The Supreme Court has 
repeatedly said that the Federal Government's power must have a 
stopping point because the structural limits on our government 
are central guarantees of individual liberty. The learning 
principle relied on by the administration really just boils 
down to a claim that health care is different. But the market 
for health insurance, or even health care is not unique. There 
are many other products in life like food, clothing, and 
shelter that every American must purchase now or some day and 
are just as, if not more, necessary to human happiness than 
health care. As Justice Kennedy noted Tuesday, the government 
is calling this unique today, but it will just call something 
else unique tomorrow. And if the Federal Government can force 
Americans to purchase insurance to lower National health care 
costs, there is nothing stopping it from issuing the broccoli 
mandates or compelled gym memberships in the name of lowering 
health care costs.
    But let's presume the administration is right and health 
care is somehow unique. That still isn't a limiting principle, 
but an invitation for government to label any grand scheme it 
wants to impose on Americans as unique, simply because it is 
grand. At that point the theoretical limit on the power of 
government will be the power of one's imagination.
    I think the administration recognizes these weaknesses in 
its argument, and it has hedged its bets by emphasizing the 
Necessary and Proper Clause in its most recent Supreme Court 
brief. But the Necessary and Proper Clause is not a 
freestanding grant of power. It merely gives Congress the 
authority for carrying into execution its other enumerated 
powers. The administration argues that the individual mandate 
necessarily flows from the need to cover the massive costs that 
will be imposed on insurers by other parts of the health care 
law. But that is simply not carrying into execution those 
provisions. It is avoiding the negative consequences of the 
same provisions. Otherwise, it would mean that the greater the 
harm caused by a piece of legislation, the more power Congress 
could claim as necessary to fix the self-created harms. This is 
the epitome of bootstrapping.
    As Members of Congress, you bear an independent 
responsibility to ensure that the Legislative Branch stays 
within its constitutionally enumerated powers. To once again 
summon Madison: Because government is not made up of angels, 
limits on governmental power are absolutely crucial. Because 
the individual mandate shatters these limits, it should be 
deemed unconstitutional by you and the Supreme Court.
    Thank you.
    [The prepared statement of Ms. Severino follows:]
    [GRAPHIC] [TIFF OMITTED] 78672A.003
    
    [GRAPHIC] [TIFF OMITTED] 78672A.004
    
    [GRAPHIC] [TIFF OMITTED] 78672A.005
    
    [GRAPHIC] [TIFF OMITTED] 78672A.006
    
    [GRAPHIC] [TIFF OMITTED] 78672A.007
    
    [GRAPHIC] [TIFF OMITTED] 78672A.008
    
    [GRAPHIC] [TIFF OMITTED] 78672A.009
    
    [GRAPHIC] [TIFF OMITTED] 78672A.010
    
                                 

    Chairman HERGER. Thank you. Mr. Bradbury, you are 
recognized for 5 minutes.

           STATEMENT OF STEVEN G. BRADBURY, PARTNER,
                          DECHERT LLP

    Mr. BRADBURY. Chairman Herger, Ranking Member Stark, and 
distinguished Members of the Subcommittee, it is an honor to 
appear before you today. I would like to focus on the economic 
realities behind the individual mandate as laid out in an 
amicus brief we filed in the Supreme Court on behalf of 215 
leading economists. Justice Alito alluded to our brief when he 
made the following points to the Solicitor General at oral 
argument this past Tuesday.
    Justice Alito noted that the Congressional Budget Office 
estimates that the average premium for a single health 
insurance policy in 2016 will be around $5,800 per year. He 
then observed, based on calculations presented in our amicus 
brief, which were derived from public HHS survey data, that the 
typical young, healthy individual who is the real target of the 
individual insurance mandate, incurs on average only $854 in 
annual health care costs. That is less than one-seventh of the 
medical costs incurred by the average American per year, a 
number frequently cited by those defending the mandate.
    Indeed, just focusing on emergency room costs the average 
annual emergency room costs for the young and healthy are only 
$56. Highlighting this dramatic difference between the 
insurance premium a young, healthy individual can be expected 
to pay in complying with the mandate and the relatively modest 
health care costs that that same individual can be expected to 
incur, Justice Alito pointed out the obvious: ``What this 
mandate is really doing is not requiring the people who are 
subject to it to pay for the services that they are going to 
consume. It is requiring them to subsidize services that will 
be received by somebody else.''
    The very same point was driven home by the Washington Post 
in its editorial earlier this week supporting the mandate. The 
Post was very candid when it wrote, ``Insurance companies would 
be unable to offer affordable coverage to those with 
preexisting conditions unless they also were guaranteed 
enrollment of the young and healthy customers who are less 
likely to consume health care services.''
    These economic realities show that the individual mandate 
has almost nothing to do with cost shifting in health care 
markets, since the people primarily targeted by the mandate, 
those who can afford health insurance but who voluntarily 
choose not to purchase it because they reasonably expect the 
cost of insurance to outweigh their foreseeable medical costs, 
account for only a small fraction of the $43 billion of 
uncompensated costs identified by the Solicitor General.
    Instead, the mandate was actually enacted not to stop cost 
shifting, but to compel millions of Americans to pay more for 
health insurance than they receive in benefits as a means to 
subsidize the insurance companies, and thereby to mitigate the 
steep rise in insurance premiums that would otherwise be caused 
by the guaranteed issue and community rating requirements 
created by the Affordable Care Act itself.
    The Act prevents health insurers from making the basic 
actuarial decisions made in every other insurance market. 
Insurers may no longer withhold health insurance from those 
with preexisting conditions or price insurance premiums to 
match customer's known actuarial risks. By requiring health 
insurers to cover the sick and set premiums based on average 
costs, these Federal requirements would dramatically increase 
health care premiums for all insured Americans unless Congress 
at the same time forces the young and healthy with relatively 
little need for comprehensive health insurance to enter the 
market on terms that are economically disadvantageous.
    Whether or not these regulatory requirements are good 
policy, what is clear as a constitutional matter is that 
Congress is not regulating how health care consumption is 
financed, as the Solicitor General has put it, but rather is 
compelling the voluntarily uninsured to purchase insurance at 
disadvantageous prices as a quid pro quo to compensate for the 
enormous costs imposed by the law's regulatory burden. The 
economic data proved the point and they belie any claim that 
the mandate is constitutional on the ground that it regulates 
economic conduct with a substantial effect on interstate 
commerce.
    The mandate is not a regulation of commerce. It is a forced 
subsidy meant to ameliorate the costs of Congress' own 
regulatory policies.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Bradbury follows:]
    [GRAPHIC] [TIFF OMITTED] 78672A.011
    
    [GRAPHIC] [TIFF OMITTED] 78672A.012
    
    [GRAPHIC] [TIFF OMITTED] 78672A.013
    
    [GRAPHIC] [TIFF OMITTED] 78672A.014
    
    [GRAPHIC] [TIFF OMITTED] 78672A.015
    
    [GRAPHIC] [TIFF OMITTED] 78672A.016
    
    [GRAPHIC] [TIFF OMITTED] 78672A.017
    
    [GRAPHIC] [TIFF OMITTED] 78672A.018
    
    [GRAPHIC] [TIFF OMITTED] 78672A.019
    
    [GRAPHIC] [TIFF OMITTED] 78672A.020
    

                                 

    Chairman HERGER. Thank you very much, Mr. Bradbury. Mr. 
Henchman is recognized for 5 minutes.

    STATEMENT OF JOSEPH D. HENCHMAN, VICE PRESIDENT, LEGAL 
                    PROJECTS, TAX FOUNDATION

    Mr. HENCHMAN. Mr. Chairman, Ranking Member, Members of the 
subcommittee. Thank you for the opportunity to speak to you 
today about the Tax Foundation's perspective on whether the 
health care law's individual mandate is within Congress' power 
to levy and collect--lay and collect taxes granted by Article 
1, Section 8 of the Constitution. Since our founding as an 
organization in 1937, we have advanced the ideas of simpler, 
more sensible tax policy with reliable research and principled 
analysis of tax issues at all levels of government. The 
government's primary argument, in this case to sustain the 
individual mandate, is that under the Commerce Clause it has 
the power to regulate interstate commerce, and that is a 
subject of much of the discussion in the briefs and of the 
court.
    But the government secondarily argues that the mandate is 
an exercise of Congress' power to levy taxes because it is 
projected to raise revenue. We authored our brief in the case 
because we are very concerned by this argument and by the 
reasoning associated with it. One of the primary goals of our 
legal program at the Tax Foundation is to keep vibrant an 
understanding of the differences between taxes, fees, and 
penalties. Taxes are exactions imposed for the primary purpose 
of raising revenue for general spending. Penalties are 
exactions imposed for the primary purpose of punishing for an 
unlawful or undesirable act.
    Now, we argue in our brief that the evidence shows that 
this is a penalty here. Everyone says that the primary purpose 
of the individual mandate is not for the revenue it is going to 
generate, but to discourage behavior. The statute calls it a 
penalty 12 times. It calls it a tax zero times. JCT calls it a 
penalty 24 times, and they include it under their regulatory 
provisions, not under their revenue provisions. The IRS cannot 
use liens and levies to enforce the mandate the way they can 
with taxes. The President told all of us when the bill was 
being considered that he absolutely rejects the notion that it 
is a tax. And the Justices this week seem very critical of the 
government's attempts to persuade them otherwise.
    Now, you may ask why this matters. I assure you, it is not 
just some obsession of the Tax Foundation but has a real impact 
in the real world. There is three reasons why it is very 
important to keep a distinction between taxes and penalties. 
First, there are countless laws at the Federal level and in 
every State that treat taxes with some level of heightened 
scrutiny that is not given to other laws, including fees and 
penalties. Some examples: The Federal law that says you can't 
challenge a tax until it is collected, so the governments can 
have the revenue they need to operate; tax uniformity 
requirements, which exist in every State; tax super majority 
requirements, which exist in 16 States; voter approval 
thresholds; multiple reading requirements, and so on. If these 
provisions are to do what they are meant to do, you have to be 
able to tell the difference between taxes and non-taxes.
    Second, the definition I outlined is not something we 
conjured up at the Tax Foundation. It is widely used and relied 
upon by courts across this country. Our brief lists five pages 
of cases from nearly every court in the land that has adopted 
this definition. And in fact, we have identified only four 
States that have departed from it. If the administration in 
this case were successful in getting the Supreme Court to adopt 
a completely new definition based on whether a revenue is 
raised, then that jeopardizes all of those taxpayer protections 
I mentioned and jeopardizes the ability of State and local 
governments to collect fees and fines they depend on.
    Third, it goes to the very heart of the conception of how 
we pay for government. Taxes are the things we pay so that 
there will be services for everybody. As Professor Randy 
Barnett put it this week, they are your duty in return for what 
government does to protect you and everyone else, and to equate 
that to a requirement to do business with a private company is 
to say that those are the same thing. That is very disturbing.
    Now I am a good lawyer so this is the part where I say, if 
you disagree with me on everything I have said so far, try 
this: If it is a tax, it is not one that is permissible. 
Article 1, Section 8 of the Constitution says that direct taxes 
must be apportioned by State population. Now, although the 
founders disagreed on precisely what a direct tax was in a case 
about tax on carriages, they did agree that a tax directly 
levied on an individual is a direct tax. Alexander Hamilton, 
not one usually suspicious of big government, called this 
provision that prohibits direct taxes unapportioned by 
population, the thing that would ensure that the government 
could not tax in an abusive way.
    So for all of these reasons, we think it is important that 
a meaningful distinction between tax and penalty is vital to 
give operation to all of those Federal and State provisions 
relating to tax policy, and we are hoping that the Supreme 
Court will agree with us.
    Thank you.
    [The prepared statement of Mr. Henchman follows:]
    [GRAPHIC] [TIFF OMITTED] 78672A.021
    
    [GRAPHIC] [TIFF OMITTED] 78672A.022
    
    [GRAPHIC] [TIFF OMITTED] 78672A.023
    
    [GRAPHIC] [TIFF OMITTED] 78672A.024
    
    [GRAPHIC] [TIFF OMITTED] 78672A.025
    
    [GRAPHIC] [TIFF OMITTED] 78672A.026
    
    [GRAPHIC] [TIFF OMITTED] 78672A.027
    
    [GRAPHIC] [TIFF OMITTED] 78672A.028
    

                                 

    Chairman HERGER. Thank you. Mr. Siegel is recognized.

  STATEMENT OF NEIL S. SIEGEL, PROFESSOR OF LAW AND POLITICAL 
             SCIENCE, DUKE UNIVERSITY SCHOOL OF LAW

    Mr. SIEGEL. Chairman Herger, Ranking Member Stark, and 
Members of the Committee. Good morning. I am honored to be 
here. For three independently sufficient reasons, the minimum 
coverage provision is within the scope of Congress' enumerated 
powers in Article 1, Section 8 of U.S. Constitution.
    First, the Necessary and Proper Clause gives Congress the 
power to pass laws that are necessary and proper to carry into 
execution Congress' other enumerated powers. All sides in the 
Affordable Care Act litigation agree that the Commerce Clause 
gives Congress broad authority to guarantee access to health 
insurance by requiring insurance companies to offer coverage to 
Americans with preexisting conditions.
    Under well-established law, the minimum coverage provision 
is necessary and proper to carrying into execution this 
undeniably valid regulation of insurers. The question in the 
Supreme Court's words is simply whether the means chosen are 
reasonably adapted to the attainment of a legitimate end under 
the commerce power, guaranteeing access to health insurance is 
a legitimate end for constitutional purposes, and the minimum 
coverage provision is reasonably adapted to the attainment of 
that end. Without the provision there would be a perverse 
incentive for people to wait until they are sick to obtain 
health insurance. This adverse selection problem would 
substantially undermine and indeed threaten to unravel 
insurance markets.
    Second, the minimum coverage provision is justified by the 
Commerce Clause standing alone. A Federal law is valid under 
the commerce power if it regulates economic conduct that 
substantially affects interstate commerce. The minimum coverage 
provision passes this test because it regulates how people pay 
for or do not pay for the health care they unavoidably consume 
and cannot be denied at a time they cannot predict, at a cost 
potentially so high that others may have to bear it. Cost 
shifting is undeniably an economic problem and its aggregate 
effects on interstate commerce are substantial.
    Third, the minimum coverage provision is also justified by 
Congress' tax power. Although Congress called the ACA's 
required payment for noninsurance a penalty, labels do not 
determine whether an exaction is a tax for constitutional 
purposes. As the Supreme Court has held since the 1930s, what 
matters constitutionally is whether a required payment to the 
IRS is ``productive of revenue'' and ``operates as a tax.'' The 
Congressional Budget Office estimates that 4 million Americans 
each year will choose to make the shared responsibility payment 
instead of obtaining coverage. The CBO further predicts that 
the required payment provision in the Act will produce $54 
billion in Federal revenue from 2015 to 2022. Because the ACA's 
required payment for noninsurance will operate as a tax, it is 
a tax for purposes of the tax power.
    Opponents of the minimum coverage provision insist that if 
the provision is upheld, then Federal power is limitless. That 
charge is incorrect. The minimum coverage provision respects 
five significant limits on Federal power.
    First, the provision addresses genuinely economic problems, 
not merely social problems that do not involve markets.
    Second, these problems are interstate in scope. Collective 
action failures at the State level, interstate externalities 
impede the ability of the State to guarantee access to health 
insurance by acting on their own.
    Third, the provision does not violate any individual 
constitutional right, including the right to bodily integrity, 
which would clearly be violated by mandates to consume certain 
vegetables or to exercise a certain amount each week.
    Fourth, unlike other purchase mandates, such as for food, 
clothing, and shelter, the provision combats the unraveling of 
a market that Congress has clear authority to regulate. In 
light of the adverse selection problem that I just mentioned, 
upholding the provision does not mean Congress can issue 
whatever purchase mandates it wants. Rather, a decision 
upholding the provision could hold narrowly that Congress may 
issue a purchase mandate when, but only when, such a mandate is 
needed to prevent the unraveling of a market that Congress is 
already regulating in undeniably constitutional ways.
    Fifth, the provision respects limits on the tax power. The 
difference between a constitutional tax and an unconstitutional 
penalty is the difference between the minimum coverage 
provision and a required payment of $10,000 that increases with 
each month that an individual remains uninsured. Unlike the 
minimum coverage provision, that exaction would raise little or 
no revenue because it would be highly coercive.
    For these reasons, Congress should conclude that the 
minimum coverage provision is within the scope of Congress' 
enumerated powers, and the Supreme Court should decline the 
invitation to issue what would without exaggeration be the most 
consequential invalidation of a Federal law on federalism 
grounds since the constitutional crisis of the Great Depression 
and the New Deal.
    Thank you.
    [The prepared statement of Mr. Siegel follows:]
    [GRAPHIC] [TIFF OMITTED] 78672A.029
    
    [GRAPHIC] [TIFF OMITTED] 78672A.030
    
    [GRAPHIC] [TIFF OMITTED] 78672A.031
    
    [GRAPHIC] [TIFF OMITTED] 78672A.032
    
    [GRAPHIC] [TIFF OMITTED] 78672A.033
    
    [GRAPHIC] [TIFF OMITTED] 78672A.034
    
    [GRAPHIC] [TIFF OMITTED] 78672A.035
    
    [GRAPHIC] [TIFF OMITTED] 78672A.036
    

                                 

    Chairman HERGER. Thank you.
    Mr. Bradbury, in his ruling, the 11th Circuit Court 
decisions wrote that, quote: ``Not only have prior 
congressional actions not asserted the power now claimed, they 
contain some indication of precisely the opposite assumption. 
Instead of requiring action, Congress has sought to encourage 
it.''
    Can you give some examples of how Congress has encouraged 
action, but not required it?
    Mr. BRADBURY. Yes, Mr. Chairman. There are many, many 
examples through history. The case of the wheat case, Wickard 
v. Filburn, that was a restriction on supply in order to prop 
up or promote the price of wheat to protect the farming 
communities. It would have been much more potent and direct if 
Congress believed it had the power to require every family in 
America to buy two loaves of bread a week. Increasing demand in 
the market would have been a more direct way to prop up the 
price.
    More recently, the Cash for Clunkers program. That is an 
incentive to try to get people to turn in older, polluting cars 
in order to buy newer, more energy-efficient vehicles. Rather 
than a direct mandate that people do it, it was a cash 
incentive.
    So there are many, many examples like that throughout 
history.
    Chairman HERGER. Thank you.
    Ms. Severino, I want to read a quote from the 11th Circuit 
Court decision ruling the individual mandate unconstitutional 
and get your reaction to it. ``The government's position 
amounts to an argument that the mere fact of an individual's 
existence substantially affects interstate commerce, and 
therefore Congress may regulate them at every point of their 
life. This theory affords no limiting principles in which to 
confine Congress' enumerated power.''
    As troubling as the individual mandate is, it seems the 
court is saying even worse things could happen in the future. 
What does the court mean by no limiting principles to confine 
Congress' power?
    Ms. SEVERINO. What the court is looking for is some way to 
say where the Commerce Clause ends, because if it doesn't have 
a limit then none of the constitutional limits on Congress are 
effective because the Congress could effectively regulate 
anything via the Commerce Clause power.
    To address some of the arguments against a limiting 
principle that was just brought up, this is clearly a 
regulation that violates all of these limits. If this is 
regulating something that is economic and not just social, he 
would say, but any social activity you engage in also has an 
effect on the economy, and I would say additionally on the 
interstate economy in a world that is not just nationalized but 
globalized. There is also the claims there are no individual 
rights violated doesn't answer the question about the Commerce 
Clause. We need limits not just from the Bill of Rights, but 
also on the Commerce Clause itself. And to allow Congress to 
regulate to any degree a market that is already regulating, 
well, I would submit that there are very few markets left that 
Congress doesn't have some degree of regulation on, so that 
also is not a limiting principle.
    I think the Supreme Court, even more so than the courts of 
appeals recognizes that they are the final backstop to ensure 
these limits on the constitutional powers of Congress, and so 
they are going to be very concerned as they consider this case 
to make sure that their argument, their final analysis affords 
such a limit.
    Chairman HERGER. Thank you.
    Mr. Henchman, throughout this debate over the health care 
law, we have seen the President and his Cabinet offer very 
inconsistent answers to the fairly straightforward question of 
whether the unpopular coercive penalty imposed on people who do 
not comply with the individual mandate is a tax. President 
Obama has denied that it is a tax. Secretary Sebelius told this 
committee that it ``operates as a tax, but is not a tax, per 
se.'' They argue in one part of the case it is not a tax, and 
in the individual mandate part they argue it is a tax.
    Is this just politics, or does it matter whether the 
individual mandate is considered a tax versus a penalty?
    Mr. HENCHMAN. Excellent question, Mr. Chairman, and it 
shows that we have more work to do at the Tax Foundation in 
explaining what a tax is to the American people. But 
ultimately, I think it is driven by legal strategy. The 
government feels that they might have a better case under the 
taxing power if they can't make the Interstate Commerce Clause 
argument, and that is why they have heavily relied on it.
    And indeed this came up on Monday. Justice Alito asked the 
Solicitor General, today you are arguing that the penalty of 
the tax for purposes of the Anti-Injunction Act and tomorrow 
you are going to be back and argue that it is a tax for 
purposes of the Constitution. And he asked whether the court 
has ever held that something is a tax for purposes of the 
taxing power and is not a tax for the Anti-Injunction Act, and 
they haven't. That has never happened. It is unprecedented.
    You know, speaking as a person who works at the Tax 
Foundation, I have to say that a tax is the same thing. If it 
is a tax under the Anti-Injunction Act, it is a tax under the 
Constitution, and it is a tax in the popular conception. It is 
splitting hairs to try to define differences between those 
things. We are very reliant on the view held, not only by us, 
but also by nearly every court in the land that a tax is not 
just something that generates revenue, but has the purpose of 
generating revenue.
    Professor Siegel's point that anything that generates 
revenue is a tax, the Oregon Supreme Court agrees with him, but 
that is about it. Everybody else disagrees with him, so that 
view is outside the mainstream.
    Chairman HERGER. Thank you. Mr. Stark is now recognized for 
5 minutes.
    Mr. STARK. Thank you, Mr. Chairman. Thank the witnesses for 
their efforts today. Ms. Severino, I just wanted to correct 
some of your testimony. You say that the only recourse to avoid 
the mandate would be to leave the country. First, you could pay 
the penalty and remain uninsured. And secondly, I am not sure 
there is any country in the world which does not have uninsured 
coverage and requiring the citizens to pay for it. So it would 
be interesting to know what country you might have in mind.
    Professor Siegel, you highlight the severe limitations that 
would be put on the Federal Government if the Supreme Court 
were to decide that the individual mandate in the health reform 
law was unconstitutional.
    Could you expand on that concern and list some of the 
actions by the Federal Government that you think might be 
impinged, and what that might mean to us?
    Mr. SIEGEL. Yes, I would be happy to. I think this is a 
case about limits. It is not just a case about limits for the 
Federal Government. It is a case about limits for those who 
want to undermine the powers of this Congress. What are the 
limits on the limits that the opponents of the Affordable Care 
Act want to impose on the Congress of the United States as an 
institution?
    So, for example, the argument is that Congress may not 
regulate so-called inactivity under the Commerce Clause. Think 
about the potential implications of this limit. Imagine a very 
real possibility, a public health emergency, a flu pandemic 
spreading around the country like wildfire. There is no doubt 
in my mind that this Congress would have the power under those 
very limited circumstances to quarantine, pursuant to the 
Federal Quarantine Authority, to impose mandatory vaccination 
to prevent widespread deaths. If Congress doesn't have the 
power then every American is at the mercy of a single State 
that doesn't mandate vaccinations.
    Do we really want to decide for now for all time that no 
matter how grave the circumstances, Congress can't mandate 
certain action under the commerce power. Think about the 
Necessary and Proper Clause, and take seriously the 
bootstrapping objection. The objection is that Congress under 
the Necessary and Proper Clause can't take action to help 
alleviate a problem that is partially of its own creation. That 
rewrites the Necessary and Proper Clause out of the 
Constitution. The Necessary and Proper Clause is explicit 
textural authority for bootstrapping. It gives Congress the 
power to take actions that would otherwise be outside of the 
scope of its other enumerated powers. If you take it seriously, 
it means that Congress may not criminalize terrorist attacks on 
military bases because the problem wouldn't exist if Congress 
hadn't first created the bases and created the targets. It 
means Congress can't prohibit mail robbery because there would 
be no mail to rob if Congress hadn't established a post office. 
And one could go on and on.
    Just like in medicine, sometimes in law, interventions have 
both socially beneficial consequences and unavoidable side 
effects. And the Constitution gives this institution the power 
to address both.
    Mr. STARK. Yield back.
    Chairman HERGER. Thank you. Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman. This is an 
interesting conversation, you know. You talk about post 
offices, but we don't need them. Fed Ex can do a better job and 
has admitted they can. The post office is way in debt. You 
know, I listened to the Solicitor General Tuesday. You sound 
just like him. The only difference is you are not drinking 
water about every two sentences. And I couldn't believe what he 
was saying; neither can I believe what you are saying.
    Ms. Severino, the 11th Circuit stated: ``Few powers if any 
could be more attractive to the Congress in compelling the 
purchase of certain products. Yet, if we focus on the modern 
era when congressional power under the Commerce Clause has been 
at its height, still Congress has not asserted its authority. 
Even in the face of a Great Depression, a world war, Cold War, 
recessions, oil shocks, inflation and unemployment, Congress 
never sought to require the purchase of wheat or war bonds, 
force a higher savings rate or greater consumption of American 
goods, or require every American to purchase a more fuel-
efficient vehicle.''
    Is the 11th Circuit correct? Is the individual mandate 
unprecedented, and are there any other examples that Congress 
requires the purchase of a commercial product, even in times of 
crisis?
    Ms. SEVERINO. No, you are correct, Mr. Congressman. There 
is no other example of this, and this is something that the 
Congressional Research Service and the Congressional Budget 
Office, both nonpartisan organizations, have found, that this 
is the first time the government has claimed this type of 
expansive power. So to say that this is just like everything 
else is, I think, more a matter of legal spin than actual 
effect. The fact of the matter is the government hasn't taken 
this step before.
    Now, some will claim that there is a very broad commerce 
power, and therefore it should be stretched one step further to 
encompass this, this authority. But the fact of the matter is 
that is not something that has ever been upheld under the 
Commerce Clause power before because it simply hasn't been 
tried before.
    Mr. JOHNSON. Just an obstruction of freedom to America, 
isn't it?
    Ms. SEVERINO. Yes, sir.
    Mr. JOHNSON. Ms. Severino, the 11th Court decision ruling 
also stated: ``Americans have historically been subject only to 
a limited set of personal mandates, serving on juries, 
registering for the draft, filing tax returns, and responding 
to the census. These mandates are in the nature of duties owed 
to the government attendant to citizenship and contain clear 
foundations in the constitutional text.''
    What is the difference between these kind of mandates and 
the Obamacare individual mandate?
    Ms. SEVERINO. Well, those mandates are found on other 
provisions in the Article 1 powers to the legislature. So for 
example, the draft being related directly to the power to raise 
an army. This is very different from the Commerce Clause power 
which allows the power to regulate something. Regulate does not 
mean to mandate it into existence. You can raise an army by 
mandating that people join the Army. You cannot regulate 
commerce by mandating that people enter into commerce. So there 
is a fundamental difference in the way these powers are 
conceived by the government. And I think that is why, as I said 
before, this has never been claimed as a power before.
    And finally, I think this goes back as well to the limiting 
principle. Because commerce is so broad and basically can cover 
every aspect of our life, you could say that brushing our teeth 
or not in the morning affects Congress because it is going to 
affect your market for dental care, et cetera. Everything 
Americans do can affect commerce down the line in some way. We 
can't claim that every aspect of American life is just going to 
be governed by any of these other powers. So there is no 
limiting principle because of the breadth of commerce itself.
    Mr. JOHNSON. Yeah, we can't hide behind that clause. The 
Constitution needs to mean something to all of us. Of the 
people, by the people, for the people.
    Thank you, Mr. Chairman.
    Ms. SEVERINO. Thank you, Congressman.
    Chairman HERGER. Thank you.
    Mr. Pascrell is recognized.
    Mr. PASCRELL. Mr. Chairman, the key purpose of individual 
responsibility requirement within the Affordable Care Act--by 
the way, Ms. Severino, before I continue, would you answer this 
question, please, if you can, yes or no? Does government have 
any specific responsibility to the indigent as far as health 
care is concerned? Yes or no.
    Ms. SEVERINO. Do you mean Federal Government or State?
    Mr. PASCRELL. The Federal Government. I am sorry.
    Ms. SEVERINO. I don't believe the Federal Government has a 
specific responsibility in that matter, but the State 
government does.
    Mr. PASCRELL. And if it did, where would that 
responsibility be edified, within the Constitution?
    Ms. SEVERINO. If the Federal Government had such a 
responsibility?
    Mr. PASCRELL. Yes.
    Ms. SEVERINO. I believe it would be embodied in the 
Constitution.
    Mr. PASCRELL. Thank you. I think that its presence keeps a 
lot of free riders who can afford to purchase health insurance 
from forcing everyone else to ultimately pay for their health 
care expenses. You need the mandate in order for things like a 
ban on preexisting conditions to work. And the mandate we will 
see whether it is constitutional or not. There is no such thing 
as inaction in the health care market. You are going to use the 
system eventually whether you like it or not. And we provide 
care for you even if you don't have insurance. There is 
precedent for this, and I believe it should be upheld.
    I think it is important to remember that the individual 
mandate was a bipartisan idea. That doesn't make it right. That 
doesn't make it constitutional, but it was bipartisan.
    It is interesting that only when the Democrats enacting 
comprehensive health reform that all of a sudden the other side 
became opposed to the idea of individual responsibility. I 
mean, you can chronologically check this out. You may differ 
with that chronology.
    In 1991 Mark Pauly, are you familiar, the panel, with Mark 
Pauly? Any of you?
    He is a scholar at the American Enterprise Institute. He 
developed an individual mandate for then President George H.W. 
Bush. I have a copy of one of his articles here. And I ask for 
a unanimous consent to submit into the record a Health Affairs 
article authored by Mr. Mark Pauly on the individual mandate. 
Mr. Chairman?
    Chairman HERGER. Without objection.
    [The article follows, The Honorable Bill Pascrell:]
    [GRAPHIC] [TIFF OMITTED] 78672A.037
    
    [GRAPHIC] [TIFF OMITTED] 78672A.038
    
    [GRAPHIC] [TIFF OMITTED] 78672A.039
    
    [GRAPHIC] [TIFF OMITTED] 78672A.040
    
    [GRAPHIC] [TIFF OMITTED] 78672A.041
    
    [GRAPHIC] [TIFF OMITTED] 78672A.042
    
    [GRAPHIC] [TIFF OMITTED] 78672A.043
    
    [GRAPHIC] [TIFF OMITTED] 78672A.044
    
    [GRAPHIC] [TIFF OMITTED] 78672A.045
    
    [GRAPHIC] [TIFF OMITTED] 78672A.046
    
    [GRAPHIC] [TIFF OMITTED] 78672A.047
    
    [GRAPHIC] [TIFF OMITTED] 78672A.048
    
    [GRAPHIC] [TIFF OMITTED] 78672A.049
    
    [GRAPHIC] [TIFF OMITTED] 78672A.050
    
    [GRAPHIC] [TIFF OMITTED] 78672A.051
    

                                 

    Mr. PASCRELL. Thank you. I agree with Mr. Pauly: ``Making 
sure everyone pays their fair share is essential to controlling 
health costs. The CBO estimates that if individual 
responsibility is repealed, premiums in the individual market 
will see an increase of 15 to 20 percent as compared to current 
law.'' That is what CBO said. That is not what the Democrats 
said; that is not what the Republicans said; that is not what 
the President said; that is what CBO said.
    Affordable Care Act is about keeping down costs and 
reducing the number of uninsured Americans. When it comes to 
health care, we are all in this together. I like to say that. I 
like to say that.
    Dr. Siegel, Professor Siegel, on Tuesday Justice Kennedy 
noted the unique nature of the health insurance market. He 
said, and I quote, ``but I think it is true that if most 
questions in life are matters of degree in the insurance and 
health care world, both markets,'' two markets we are talking 
about, ``the young person who was uninsured is uniquely 
approximately very close to affecting the rates of insurance in 
the course of providing medical care in a way that is not true 
in other industries.'' That is my concern in this case.
    He comments to the lack of inaction of the health care 
market. Professor Siegel, can you please discuss the idea of 
inaction in the health care act in the market?
    Chairman HERGER. Regrettably, the gentleman's time has 
expired, but if you could respond in writing we would 
appreciate it.
    Mr. PASCRELL. Seriously?
    Mr. SIEGEL. I think you are identifying a key part of----
    Chairman HERGER. Again, the time is expired. If you could 
respond in writing, please.
    Mr. SIEGEL. Oh, I am sorry, sir. I didn't hear you.
    Mr. PASCRELL. Can he give a response? Come on, Mr. 
Chairman.
    Chairman HERGER. Well, 5 minutes is what each of us is 
allowed. Mr. Reichert is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman. A quick question, 
Mr. Bradbury. In your testimony you say Mr. Siegel argues that 
if the individual mandate is unconstitutional, then the Federal 
Government could not respond to a flu epidemic by mandating 
vaccinations. How would you respond to that?
    Mr. BRADBURY. I actually don't accept that. I don't agree 
with that. In the hypothetical, the mandating of flu 
vaccinations would not be mandating commercial transactions. 
Yes, he is positing a very extreme situation, where there is a 
national or a multi-state regional pandemic that is a major 
threat to health and the economy, that falls within the 
definition of a national security problem. The Federal 
Government may respond to national security problems. We have 
biosecurity planning for pandemics.
    Actually, the way it would usually happen, of course, is 
the States would mandate vaccinations. The Federal role under 
existing statutes would be to support the States by ensuring 
the supply of vaccine, by assisting in maintaining quarantines, 
by assisting States in closing borders. But in the most extreme 
hypothetical case where the State's ability to respond is 
completely broken down, it becomes almost like an insurrection 
situation. The Federal Government certainly has authority to 
respond to protect national security in a situation like that.
    I think it is very different.
    Mr. REICHERT. Thank you. Mr. Henchman, I want to go back to 
your discussion about taxes and the question the chairman had 
posed a little bit earlier in the discussion. So the individual 
mandate must maintain a minimum essential coverage, but there 
are some exceptions to those. I am a former sheriff, and of 
course one of the exceptions is individuals who are in prison. 
And I am going to get right back to that. The penalties here 
for individuals, they begin at $95, and they go to $325, and 
then it goes to $695, and then it is indexed to CPI. There is 
also some penalties attached to the employer mandate. Is that 
not correct?
    Mr. HENCHMAN. Right. I believe the next panel is talking 
about that aspect, but yes.
    Mr. REICHERT. But just along the line of taxes, it is 
$2,000, I think, if they don't supply enough insurance. It is 
$3,000 if it is unaffordable insurance, and my question is, 
this is all about freedom, really. I mean, the burden on 
businesses and then the individual mandates, and I know this 
might be outside of your scope a little bit, but I think it is 
good for those out there who might be watching us today to 
think about what happens if the individual can't pay the 
penalty? Do you know?
    Mr. HENCHMAN. Right. Well, it is certainly not about 
revenue, and for this I will agree with Congressman Pascrell 
who started and talked about why we have this mandate. And he 
gave a very good reason. The reason he did not give is revenue. 
And that is not the reason why this mandate was adopted. It was 
adopted for some other purpose, some other primary purpose than 
to generate a bunch of revenue.
    Mr. REICHERT. Well, I know in my previous profession again 
that I spent 33 years at, if somebody has a fine that they 
haven't paid----
    Mr. HENCHMAN. Right.
    Mr. REICHERT [continuing]. The next step is jail. So, is 
that in the plan? Do you know? Does anyone on the panel know?
    Mr. HENCHMAN. Well, how it is structured, as you laid out 
is, let's take 2016 for instance. The mandate is kind of fully 
phased in at that point. People have a choice of either paying 
$695, or 2.5 percent of their income. That is whichever is 
higher above the filing threshold----
    Mr. REICHERT. Right.
    Mr. HENCHMAN [continuing]. Or getting insurance. The IRS is 
not permitted to use levies and garnishment the way they can 
with other tax obligations.
    Mr. REICHERT. Right.
    Mr. HENCHMAN. But it remains to be seen precisely how this 
will be enforced.
    Mr. REICHERT. Right, so let me just, because my yellow 
light has gone on here. So we play this out. The fines are 
added up. They get greater and greater. The person doesn't buy 
their insurance. And according to one of the exceptions here, 
if you go to jail you have health care. I know that because 
when we had the Kane County Jail in Seattle, if you got 
arrested we supplied health care. So I guess if you don't pay 
your fine and you go to jail, you can get health care.
    Mr. HENCHMAN. It remains to be seen how the IRS is going to 
enforce it. If they put it on the tax form, I should note the 
tax form has a perjury statement. If you say I have insurance 
and I don't owe this, you would be committing perjury.
    Chairman HERGER. Mr. Kind is recognized.
    Mr. KIND. Thank you, Mr. Chairman.
    Mr. Chairman, no fault of the witnesses who are here today 
trying to do a good job testifying, and out of respect for you, 
too, but I view this hearing as just a colossal waste of time 
for this committee.
    First of all, the Judiciary Committee, not the Health 
Subcommittee of the Ways and Means, has jurisdiction over 
constitutional law issues. And, secondly, unless you have been 
living under a rock this week, the United States Supreme Court 
is taking this very issue up to make a determination later this 
summer. So if you wanted to have a constructive hearing today, 
Mr. Chairman, we should have panel after panel of experts 
talking about how are we going to explain to the 39,000 
children in western Wisconsin with a preexisting condition that 
your effort to overturn or repeal the Affordable Care Act will 
leave them without adequate health insurance in their lives. Or 
the fact that 15,000 small business owners in western Wisconsin 
who qualify today for a tax credit for the health care that 
they are providing their employees today won't have that tax 
credit any longer. Or 9,000 seniors who are falling into the 
donut hole this year, receiving a 50 percent price discount, 
why they are going to have to pay all of that out of pocket 
again because of the repeal or overturning of the Affordable 
Care Act. Or how are we going to explain to citizens throughout 
the Nation that their insurance companies can once again drop 
them from coverage when they do get sick or injured, a policy 
of rescission which now is prohibited under the Affordable Care 
Act. Or reinstate lifetime limits on health insurance policies.
    So if you want to do something constructive in the Health 
Subcommittee of Ways and Means, we should be having panel after 
panel talking about what plan B is, what the alternative is to 
the Affordable Care Act, and the explanation we can give our 
citizens if the Affordable Care Act is overturned or if you are 
successful in repealing it.
    Or how are we going to address the 50 million Americans who 
are uninsured today because of the health care system?
    That is what we should be doing today, is talking about 
alternatives and plan B's. And my good friend, Mr. Price, said 
they do have some ideas. Let's get that out. Let us have a 
discussion about it. This Member of Congress is interested in 
one thing: making sure that every American in the country has 
access to affordable and quality health care. There may be 
other ways of doing it, but just by repealing this law sets us 
back to the status quo. And having this hearing on the 
constitutional law issues that the Supreme Court is determining 
themselves, doing their job this week, is in my view a colossal 
waste of time.
    But I will play along here with what time I have remaining.
    Mr. Henchman, I think it is astounding that time after time 
you are saying that whether you call this a penalty or tax, the 
purpose behind the penalty wasn't for us to raise revenue to 
help pay for the Affordable Care Act. As a member of the Ways 
and Means Committee, that is exactly what we were trying to do 
under the penalty, is to raise revenue, because one of the 
prerequisites to passing this bill that President Obama was 
demanding, and all of us agreed, by the way, who supported it, 
was that this bill had to be paid for. And in fact, it was. And 
under the Congressional Budget Office's analysis, not only was 
it paid for, but it will reduce the budget deficit by $1.2 
trillion over the next 20 years.
    So again, if you decide to repeal this and go back to the 
status quo, that blows another hole in our budget because this 
legislation would reduce it by $1.2 trillion based on the 
nonpartisan budget watchdog called the Congressional Budget 
Office. So, yes, this was the purpose behind it, as a member of 
the Ways and Means Committee, was to raise revenue.
    Mr. Siegel, let me ask you because I found it interesting 
listening to the Supreme Court questioning on Tuesday, Justice 
Kennedy asking the Solicitor General, and maybe I missed 
something, but it sounded like he was creating a whole new 
standard of Supreme Court review under the Affordable Care Act.
    Justice Kennedy to the Solicitor General: Assume for a 
moment, you may disagree, but assume for a moment that this is 
unprecedented. This is a step beyond what our cases have 
allowed, the affirmative duty to act to go into commerce. If 
that is so, do you not have a heavy burden of justification?
    And he went on in that line of questioning and again said 
to the Solicitor General: Do you not have a heavy burden of 
justification to show authorization under the Constitution?
    I thought it was a reasonable basis standard of the court. 
Am I missing something here? Is Justice Kennedy trying to 
establish a much higher burden of proof?
    Mr. SIEGEL. And if I had been arguing the case, I would 
answer it in the alternative. I would say: Justice Kennedy, you 
yourself just said in that colloquy there is a presumption of 
constitutionality. Congress gets a presumption of 
constitutionality as a coordinate branch of government, and 
that is what Madison is talking about in Federalist 51. He is 
not talking about judicial review, let alone aggressive 
judicial review. The presumption of constitutionality is how 
the law has always been. So if you impose a special 
justification now, you are moving the goalpost.
    Mr. KIND. Professor, really the crux of the individual 
mandate, why requiring it, is because those who choose not to 
participate in the health insurance market is driving up the 
cost for everyone else who is; isn't that the reason, the 
basis, under the Commerce Clause, for the individual mandate?
    Mr. SIEGEL. I think that is the basis under the Commerce 
Clause. And I think there is also the adverse selection problem 
under the Necessary and Proper Clause. All of the people in 
Wisconsin you just talked about, they fall into the nongroup 
market. And if they don't qualify for Medicaid or Medicare, and 
if they don't have employer-based insurance, then if they get 
sick and they don't have a job they and their families are in 
serious trouble.
    Guaranteed issue combats that problem, and the minimum 
coverage provision combats the adverse selection problem that a 
company is guaranteed issue in the absence of a mandate.
    Mr. KIND. Thank you.
    Mr. JOHNSON. [Presiding.] The gentleman's time has expired.
    Dr. Price, you are recognized.
    Mr. PRICE. Thank you, Mr. Chairman. I want to agree with 
Mr. Kind on one thing: the status quo is unacceptable. There is 
no doubt about it. We would simply suggest that the bill that 
has been adopted, the law that has been adopted moves us in 
absolutely the wrong direction, not for doctors but for 
patients. And it is patients that we ought to be concerned 
about.
    Mr. Siegel, you mentioned that you didn't know where the 
limits of Congress were. Well, I would suggest to you that the 
limits of Congress are well defined in the Constitution and the 
Bill of Rights, and the 10th Amendment that you are very 
familiar with, but it is important to remind ourselves, says 
that the powers not delegated to the United States by the 
Constitution nor prohibited by it to the States are reserved 
for the States respectively, or to the people. It is pretty 
clear what Congress' limits are. It is our contention that this 
bill/law has gone beyond the limitations of the constitutional 
provisions.
    I want to talk about the consequences of the individual 
mandate. Mr. Kind was concerned that we are talking more about 
the law here in the Health Subcommittee of the Ways and Means 
Committee, and I want to talk about, as a physician, to kind of 
parse out exactly what the consequences of the individual 
mandate are.
    Mr. Siegel, you know that there are 10 categories of 
essential benefits that are defined in the law. One of those, 
for example, is the ambulatory patient services. What are the 
minimum benefits required in this law for ambulatory patient 
services?
    Mr. SIEGEL. I don't know the answer to that question.
    Mr. PRICE. Who decides?
    Mr. SIEGEL. I think the Congress of the United States in 
the first instance decides, or as delegated to a relevant 
agency pursuant to Congress' authority to delegate.
    Mr. PRICE. And the law has delegated that to the Secretary 
of Health and Human Services?
    Mr. SIEGEL. Right. Under a doctrine that has existed for 
70-80 years.
    Mr. PRICE. So the Secretary of Health and Human Services is 
going to decide what is allowed to be ambulatory patient 
services, outpatient services for the country.
    Another category is maternity care. Is it correct that the 
Secretary of Health and Human Services is going to decide what 
is allowed for maternity care in this country; correct?
    Mr. SIEGEL. I would be happy to answer questions about 
whether that is constitutionally problematic.
    Mr. PRICE. Do you believe that it is constitutional for the 
Secretary of Health and Human Services to decide what the 
maternity services are covered under this bill?
    Mr. SIEGEL. The only possible objection I can see is a 
nondelegation doctrine law. This objection has not existed in 
constitutional law.
    Mr. PRICE. Accept my premise that the law provides that 
that definition is ceded to the Secretary of Health and Human 
Services. What if the Secretary of Health and Human Services 
said that midwifery weren't allowed in the minimum benefits 
package, would that be constitutional?
    Mr. SIEGEL. Tell me what the constitutional objection would 
be?
    Mr. PRICE. My question to you is would that be 
constitutional? In your opinion, would the Secretary of Health 
and Human Services under the current law as adopted by this 
Congress and signed by the President be allowed to define that 
midwifery is not included under maternity services?
    Mr. SIEGEL. I would need to know a lot more about what the 
basis for the decision was, and whether there was a basis and 
reason under the nondelegation doctrine.
    Mr. PRICE. The fact of the matter is that the Secretary of 
Health and Human Services, through the power that the 
legislative branch has given the executive branch, is now 
allowed to decide what is included in all of those services, 
which is our concern. And that is that patients are no longer 
the ones that are going to be allowed to decide what kind of 
health coverage that they are able to select; it is the Federal 
Government. That is our concern. That is the fundamental basis 
of the concern.
    Ms. Severino, I noticed that you were coming out of your 
bootstraps, no pun intended, when Mr. Siegel commented on your 
argument about bootstrapping. And I wish you would expand on 
what that means to real people and why it is such an important 
issue in this area.
    Ms. SEVERINO. Yes. I think it is kind of shocking that the 
Necessary and Proper Clause is the constitutional textual basis 
for bootstrapping because it is also part of limited powers. 
Our framers assumed the government was given limited powers, 
not unlimited powers. They weren't worried that we don't have 
not limits on the limits that we are going to impede on 
government power, they were worried about keeping government 
small and tethering it to its appropriate jobs.
    The Necessary and Proper Clause is supposed to carry into 
execution other powers. So to build a military base, it is 
clearly carrying into execution being able to raise an army or 
maintain a navy. Building post offices and criminalizing 
attacks on post offices and robbers is clearly carrying into 
execution the ability to have an efficient and effective mail 
service.
    Nothing about the individual mandate carries into execution 
the other provisions of the law. It doesn't carry into 
execution allowing guaranteed issue. You can have guaranteed 
issue without the individual mandate. Many States do. It 
doesn't carry into execution community rating. Again, other 
States have done this, and you can do it without the individual 
mandate.
    Now, what Congress found was when you do those without the 
individual mandate, they have negative consequences. But that 
is not the same thing as carrying into execution something. 
Having negative consequences, we are creating a law. Or even 
that we have created a law that says emergency rooms have to 
provide coverage for certain individuals under certain 
circumstances. That, while individual emergency rooms may want 
to do such a thing out of moral obligations, creating that 
requirement also creates a problem of cost shifting. Creating a 
problem does not then open wide the constitutional door for any 
solution Congress wants to create.
    Mr. JOHNSON. The time of the gentleman has expired.
    Doctor, you are recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Dr. Siegel, there is a tale of two States, Washington State 
and Massachusetts. Washington State in 1993 passed a 
comprehensive health care bill which had mandates in it and 
guaranteed issue, and all of the things that are in the 
Massachusetts law, essentially. Different format but basically 
the same.
    They then, in Washington State, in court lost the mandate. 
The mandate was taken out, but they were left with the basic 
guaranteed issue. In 1995, a woman coming in said I want 
insurance. She bought insurance. She had the baby, she canceled 
it; 1996 she came in, bought insurance, had the baby, and 
canceled it. They spent $1,000 on premiums and Primera, Blue 
Cross/Blue Shield spent $8,000. Primera lost $120 million in 
Washington State until they pulled out their individual 
coverage and we had no individual coverage in the State of 
Washington for a period of time until the State legislature 
repealed the guaranteed issue.
    Now, what I want to ask you: What other way can you control 
costs? Because clearly, you have to have both guaranteed issue. 
If you have guaranteed issue, that is preexisting conditions 
are out of the way, you must have universal coverage so you 
have a big enough pool to spread the cost. Otherwise the sick 
come in, do exactly what this woman did.
    I would like to enter into the record and ask unanimous 
consent, an article from the Seattle Times dated March 28.
    Chairman HERGER. Without objection.
    [The article follows, The Honorable Jim McDermott:]
    [GRAPHIC] [TIFF OMITTED] 78672A.052
    
    [GRAPHIC] [TIFF OMITTED] 78672A.053
    
    [GRAPHIC] [TIFF OMITTED] 78672A.054
    
    [GRAPHIC] [TIFF OMITTED] 78672A.055
    

                                 

    Mr. MCDERMOTT. Give me the other ways that you can control 
costs? If the Supreme Court is thinking if we don't go this 
private sector route through the health insurance industry, 
what other way will we have in this committee to do it?
    Mr. SIEGEL. I think the most prominent alternative that 
would both be effective in controlling costs, would also be 
substantially more coercive. I think everyone in the ACA 
litigation agrees that Medicare for all, a single payer, a 
government takeover, would be constitutional. It would be 
within the scope of the tax power. You would have to undo a lot 
of preexisting law in order for that to be unconstitutional.
    I think the Affordable Care Act alternative of guaranteed 
issue and a minimum coverage provision, the intent there is to 
respect concerns about liberty and choice to a greater extent 
than the single payer would by giving people options, 
alternatives about the insurance that they want, not just 
having the government provide it.
    So I think that would be an effective, clearly 
constitutional way to do it. The Affordable Care Act 
alternative is a way to preserve private markets.
    Mr. MCDERMOTT. So it is really preserving the private 
sector in the health care issue?
    Mr. SIEGEL. And that is why I think during the 1990s the 
minimum coverage provision was very prominent in conservative 
economic and political thought. It was an alternative to the 
single payer. It was an alternative to the employer mandate. 
People agreed or disagreed as a policy matter. No one made a 
Federal constitutional case out of it. And I think this speaks 
directly to the question of why is it that Congress hasn't done 
this before.
    So one theory that has been put on the table is that we all 
knew from the founding that this was unconstitutional, and then 
something happened. There was some kind of collective amnesia, 
where the Affordable Care Act was being debated and now 
something that had always been known to be unconstitutional was 
suddenly thought constitutional by one of the two major 
parties. In fact, I don't think that is a likely explanation. I 
think the likely explanation is no one thought of this being a 
real constitutional problem before this debate. In fact, more 
conservative thinkers thought it might even be advisable as a 
policy matter. But even if they didn't, they didn't think it 
was unconstitutional.
    Mr. MCDERMOTT. Do you think the individual mandate came 
from the Heritage Institute?
    Mr. SIEGEL. It was Heritage. It was AEI. It was 
conservative economists. It was Republicans in the Senate. At 
one point it was Newt Gingrich. At another point it was Mitt 
Romney. I believe Bob Dole for a while. Again, there was a 
robust debate about the policy merits; just like there could be 
a robust debate about whether we ought to have a post office.
    Mr. MCDERMOTT. I want to get one other thing on the record.
    Dr. Price suggested that Secretary Sebelius sits down there 
and picks and chooses whatever she wants. As I understand the 
law, there is a committee at the Institute of Medicine that 
makes recommendations to her, so she is not without 
recommendations when she makes her decisions; is that correct?
    Mr. SIEGEL. In truth, I do not know.
    Mr. MCDERMOTT. Okay. Well, that is the way that I read the 
law and the fact is that Congress can come in and change. So 
the idea that she is the czar is really kind of a myth, really.
    Mr. SIEGEL. I think it is another issue about which we can 
have a policy disagreement.
    Chairman HERGER. [Presiding.] The time of the gentleman has 
expired.
    Dr. Boustany is recognized.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    Mr. Bradbury, your testimony and the briefs you have 
written in this case have done an excellent job of explaining 
the purpose of the individual mandate. The Democrats' health 
care law has many provisions that make it more expensive, in 
effect, for insurance companies to offer health care. The law 
increases taxes on insurance. There are numerous other taxes, 
mandate benefit packages full of bells and whistles, and there 
are many new regulations on insurance companies. So to 
compensate the insurance companies, Congress creates millions 
of new customers by forcing individuals to buy their product, a 
very restricted product given all of the regulations that have 
come through. So the individual mandate is really in effect 
about making insurance companies whole.
    What is the difference between that and Congress forcing 
car companies to make electric cars and compensating them by 
mandating that Americans buy electric cars?
    Mr. BRADBURY. I really think fundamentally as a matter of 
economics there is not a difference. There has been a lot of 
talk about insurance is different or unique or health insurance 
is unique. But insurance is just a way, an overt mechanism, for 
spreading risk across a larger base of participating 
individuals. Well, that is true in any industry. The more 
people buy electric cars, the lower the price of each unit 
produced. If Congress imposes very strict and onerous 
requirements on car companies, saying they can only produce 
electric cars or super-efficient vehicles and the cost of those 
vehicles per unit is much, much higher than the average 
American is interested in paying, then under this theory 
Congress could turn around and require that every American 
family that can afford it must buy an electric vehicle and that 
would drive the unit cost down because supply would increase 
and production costs would go down on a unit basis. It is 
really no different, as a matter of economics, from what is 
being argued here.
    Mr. BOUSTANY. It really struck me, and I was at the Supreme 
Court on Tuesday and listened to the 2 hours of argument. There 
was a discussion about insurance as a financing mechanism for 
health care. But yet in listening to much of the discussion, it 
was a very narrow type of discussion because it was almost as 
if there was only one way to do this. For instance, in health 
care law, we know there are significant restrictions on health 
savings accounts which I as a physician believe health savings 
accounts are a good way to help individuals finance their 
health care needs. It promotes personal responsibility. It 
promotes a more informed consumer of health services. And 
knowing that health care, I don't call it a right or a 
privilege, I think it is a personal responsibility, and so 
things that we can do to promote that type of ownership of your 
own health care destiny are really important. So in this narrow 
view that I alluded to just a moment ago, it is interesting 
that you have government creating a very restricted, very 
regulated, even more so than now, marketplace, with the minimum 
benefits package, restrictions across the board, in effect 
narrowing choices for families, for individuals, for 
businesses, narrowing it down and recognizing, in doing so, you 
are forcing everybody like through a funnel into a one-size-
fits-all process, a more expensive process even by the 
Congressional Budget Office's own estimates. And so what 
happens, the individual mandate. I think you have highlighted 
that fairly well.
    Would anyone like to comment?
    Mr. BRADBURY. I would say obviously one alternative 
economically would be to open up the options for Congress to 
free the markets on an interstate basis from restrictions on 
what kinds of insurance can be offered. For example, from one 
State to another. To actually increase or make it almost 
unlimited what kinds of policies could be offered, and then 
there would be many, many choices from bare bones policies to 
Cadillac policies and people could pick and choose. I am not 
saying that would cover everybody in every instance. 
Preexisting conditions may always be a tough issue because that 
is not insurance when you are actually buying a policy that 
covers something you already have.
    Mr. BOUSTANY. It is sick care.
    Mr. BRADBURY. It is like an annuity. It is not an insurance 
policy, it is an entitlement. So there will be those costs. But 
over time as there are more options in the markets, then more 
people will have mix-and-match policies they can choose that 
are economically advantageous for them and get the coverage 
that they need, and government can take care, State governments 
can take care of the residual folks who can't get the coverage.
    Mr. BOUSTANY. So create a real market for all of us. And 
for those who have defined needs with very definable and 
problematic health considerations, it is not an insurance issue 
because insurance is bought to deal with risk. Once you are 
sick, you are sick. Now there needs to be a way to finance that 
separately.
    Thank you. I yield back.
    Chairman HERGER. Again, I want to thank our witnesses for 
your testimony, and at this time I would like to invite our 
second panel to step forward. While they do, I will introduce 
them in the interest of time.
    To better understand the impacts of the employer mandate, 
we will hear from Diane Furchtgott-Roth, Senior Fellow, 
Manhattan Institute of Policy Research; Sylvester Schieber, 
Independent Consultant; Tom Shaw, President, Barton Mutual 
Insurance Company; and Stephen LaMontagne, President and CEO 
Georgetown Cupcake.
    Ms. Furchtgott-Roth, you are recognized for 5 minutes.

 STATEMENT OF DIANE FURCHTGOTT-ROTH, SENIOR FELLOW, MANHATTAN 
                 INSTITUTE FOR POLICY RESEARCH

    Ms. FURCHTGOTT-ROTH. Thank you very much, Mr. Chairman, for 
inviting me to speak here today on this very important subject 
of how the Affordable Health Care Act affects employment. It 
was interesting listening to the preceding discussion. The 
views seem to be from some members that because health care was 
essential and because everyone might need it at some time, it 
was the role of the government to mandate it and employers to 
provide it.
    Well, there are many essential services--food, clothing, 
housing--but we don't ask employers to provide them. If we feel 
that low-income people need these services, food for example, 
we give them foot stamps. Housing, we give them housing 
vouchers. We don't ask employers to have a minimum provision of 
food. We don't require them to provide breakfast or lunch or 
snacks to their employees.
    And it is the same with health insurance. We don't ask 
employers to provide life insurance, auto insurance, other 
kinds of insurance. I agree that people should have access to 
health insurance. I don't agree that employers have to be the 
ones who provide it. Why? It creates a great disincentive for 
hiring.
    One reason we have such a high unemployment rate, over 8 
percent for more than 3 years in a row, well after the end of 
the recession, is because there is a big cliff moving from 49 
to 50 workers. If a employer moves from 49 to 50 workers, he 
has to pay $40,000 a year in penalties. That is because the 
first 30 workers are exempt. But moving from 49 to 50, you take 
off 30, you multiply it by $2,000, you get $40,000 a year, and 
that is a big disincentive to hiring. It especially hurts low-
skilled workers. $2,000 is 12 percent of the average earnings 
in the food and beverage industry, which is an industry where 
people often get their first jobs. I myself had my first job 
scooping ice cream in Baskin-Robbins. This also hurts franchise 
businesses, and I think this was probably not the intention of 
Congress. If you have four Dunkin' Donuts or four Baskin-
Robbins and they each have 15 workers, they are subject to the 
penalty because in all, the franchise would have 60 workers in 
all. This means that these franchise businesses are competing 
against smaller, nonfranchise businesses. So if there is a 
Baskin-Robbins that is part of a franchise and it is across the 
street from a Joe's Diner, for example, the Baskin-Robbins 
would have to pay the $2,000 per worker per year in penalty. 
Joe's Diner wouldn't, and this would be very hard on the 
franchise businesses.
    There are many franchise establishments. They are 
responsible for about $468 billion of GDP. They create 9 
million jobs. They employ many low wage, entry-level workers, 
as well as higher paid workers. And our unemployment rate for 
low skilled workers is about 14 percent right now. Our teenage 
unemployment rate is 25 percent. Our African American teen 
unemployment rate is even higher. This is not something that we 
want employers to have to do because it reduces employment and 
it slows GDP growth.
    In the previous panel, there was a discussion of what to do 
about the health care problem. We need to take it away from the 
employer. Any premium should be tax deductible so that private 
markets develop. You never hear anyone saying I am losing my 
job. I am going to lose my auto insurance. I won't be able to 
drive.
    There are many bills that suggest how to go. One of the 
best is Congressman Price's Empowering Patients First Act, 
which would mean that a worker would have portable health 
insurance. His employer could pay part of it and then if he 
moves jobs, changes jobs, his next employer could pay part of 
the same kind of insurance, just like an IRA or a 401(k) plan. 
If that individual wanted, he could buy health insurance 
outside of his employer also, and that is what we need to move 
to. We know how insurance markets work. We have made them work 
with auto insurance, life insurance, and home insurance, and we 
should make them work also for health insurance. We can do 
this. We know how to do it without penalizing employment, 
without penalizing workers, and especially without penalizing 
low skilled workers, the most vulnerable among us who need a 
job.
    Thank you very much.
    [The prepared statement of Ms. Furchtgott-Roth follows:]
    [GRAPHIC] [TIFF OMITTED] 78672A.056
    
    [GRAPHIC] [TIFF OMITTED] 78672A.057
    
    [GRAPHIC] [TIFF OMITTED] 78672A.058
    
    [GRAPHIC] [TIFF OMITTED] 78672A.059
    
    [GRAPHIC] [TIFF OMITTED] 78672A.060
    
    [GRAPHIC] [TIFF OMITTED] 78672A.061
    
    [GRAPHIC] [TIFF OMITTED] 78672A.062
    

                                 

    Chairman HERGER. Thank you very much.
    Mr. Schieber, you are recognized for 5 minutes.

  STATEMENT OF SYLVESTER J. SCHIEBER, CONSULTANT, COUNCIL FOR 
                   AFFORDABLE HEALTH COVERAGE

    Mr. SCHIEBER. Thank you, Mr. Chairman and members of the 
Committee. I appreciate the opportunity to testify today 
regarding some research that I have been working on recently. 
My prepared remarks summarize that work. The research that I 
have been doing with Dr. Steven Nyce shows that many workers 
have failed to get ahead in recent years, largely due to 
growing health care costs.
    Health reform has the potential to increase the demand for 
health care services and could exacerbate an already bad 
situation with adverse consequences for workers' economic 
prospects.
    Under ACA, many employers will be required to provide 
workers with health insurance or pay a penalty for not doing 
so. This will impose a significant fixed cost component into 
compensation. If employers cannot make offsetting adjustments 
to other compensation components, some workers will be unable 
to maintain their jobs. The most vulnerable workers, as we just 
heard, are those at the bottom end of the earning spectrum.
    Table 3 of my remarks shows the average share of increasing 
compensation required to finance health benefits over each of 
the past 3 decades for full-time, full-year workers at 10 
different earnings levels. Averages include those who did not 
receive health benefits from their own employers. Declining 
coverage, concentrated among lower waged workers, has mitigated 
some of the crowding out effect shown in the table. But workers 
who lost employer provided health insurance had to spend more 
out of pocket for their health care needs, a classic example of 
damned if you do or damned if you don't.
    Table 4 shows how benefit costs have risen relative to 
wages between 1980 and 2009 for workers actually enrolled in 
their employer health benefit plans. These costs have grown 
faster for the lowest paid workers than in Table 3. For 
example, benefit costs relative to wages for the second decile, 
these are people at the 20th percentile, were twice those for 
workers in the ninth decile in 1980, and three times more than 
in 2009. The lowest earners are most damaged by high health 
inflation.
    Peter Orszag and Ezekiel Emanuel, two of the architects of 
the Affordable Care Act, have estimated that health reform will 
have little affect on national health expenditures between now 
and 2030. Richard Foster, the Chief Actuary at CMS, suggests 
that health reform will provide little relief to the cost 
trajectory of employer-sponsored health benefit plans in coming 
years. That means that current inflation rates are going to 
persist.
    A full-time worker in the second earnings decile in 2009 
earned somewhere around $25,000 in total compensation. If his 
or her productivity goes up at the rate of growth that the 
Social Security actuaries estimate, by 2019 this worker will be 
earning around $36,600 in total compensation. But if current 
health inflation persists, nearly 75 percent of that gain will 
have been consumed by rising health benefit costs. If the 
worker has family coverage, the cost of health benefits will 
grow to consume more than his or her added productivity 
improvement.
    In 1980, employer contributions for health benefit plans 
were only 3.8 percent of total compensation paid to workers. By 
2010, they had risen to 9 percent. Excessive health inflation 
now applies to a much larger base than it did 20 or 30 years 
ago. For workers and plans, the cost issues are much worse than 
the average for all workers. For those in the second earnings 
decile taking coverage, the cost of health benefits rose from 
just under 10 percent of their pay in 1980 to 31 percent of 
their pay in 2009, so nearly a third of pay is being paid out 
of their compensation for health benefits.
    This ugly arithmetic suggests that employers cannot offer 
many workers both health benefits and growing wages and hope to 
remain competitive in a global economy. The mandate to provide 
health insurance coverage may be an admirable goal, but has a 
potential to limit employability of lower wage workers.
    Some analysts believe that most employers will stay in the 
game of offering health benefits even under these 
circumstances. Our analysis, however, suggests that many 
employers may eliminate their plans and let workers fend for 
themselves in the new exchanges because the economics of 
employing them simply doesn't work at current cost and 
inflation rate.
    At the margin, shifting an ever-larger share of low earners 
into publicly subsidized health insurance programs might seem 
desirable, but we cannot avoid the reality of a national health 
care marketplace and the costs with it. Shifting health costs 
from employer compensation packages to a mix of public 
subsidies and worker contributions will not reduce health care 
expenditures unless we bring medical inflation under control. 
If health reform is not expected to bend this cost curve, then 
I have to ask: Who is going to pay this bill?
    Thank you very much.
    [The prepared statement of Mr. Schieber follows:]
    [GRAPHIC] [TIFF OMITTED] 78672A.063
    
    [GRAPHIC] [TIFF OMITTED] 78672A.064
    
    [GRAPHIC] [TIFF OMITTED] 78672A.065
    
    [GRAPHIC] [TIFF OMITTED] 78672A.066
    
    [GRAPHIC] [TIFF OMITTED] 78672A.067
    
    [GRAPHIC] [TIFF OMITTED] 78672A.068
    
    [GRAPHIC] [TIFF OMITTED] 78672A.069
    
    [GRAPHIC] [TIFF OMITTED] 78672A.070
    
    [GRAPHIC] [TIFF OMITTED] 78672A.071
    
    [GRAPHIC] [TIFF OMITTED] 78672A.072
    
    [GRAPHIC] [TIFF OMITTED] 78672A.073
    
    [GRAPHIC] [TIFF OMITTED] 78672A.074
    
    [GRAPHIC] [TIFF OMITTED] 78672A.075
    
    [GRAPHIC] [TIFF OMITTED] 78672A.076
    
    [GRAPHIC] [TIFF OMITTED] 78672A.077
    
    [GRAPHIC] [TIFF OMITTED] 78672A.078
    
    [GRAPHIC] [TIFF OMITTED] 78672A.079
    
    [GRAPHIC] [TIFF OMITTED] 78672A.080
    
    [GRAPHIC] [TIFF OMITTED] 78672A.081
    
    [GRAPHIC] [TIFF OMITTED] 78672A.082
    
    [GRAPHIC] [TIFF OMITTED] 78672A.083
    

                                 

    Chairman HERGER. Thank you.
    Mr. Shaw is recognized for 5 minutes.

STATEMENT OF THOMAS J. SHAW, PRESIDENT, BARTON MUTUAL INSURANCE 
                            COMPANY

    Mr. SHAW. Good morning, and thank you, Chairman Herger and 
Ranking Member Stark, and members of the Ways and Means 
Subcommittee on Health, for the opportunity to testify today on 
the important topic of the employer mandate and the impact it 
will have on our business.
    Barton Mutual Insurance Company, located in Liberal, 
Missouri, is a single-state property casualty insurer. Our 
company was founded in 1894 to provide fire insurance to 
farmers in our county. We now provide insurance products for a 
wide variety of risks, including commercial risks. We employ 58 
people full time and have furnished health insurance for 
decades. I have been employed as the CEO since 1986.
    As health insurance costs rose, we adjusted accordingly and 
explored different options. First we raised deductibles. We 
examined self-insurance and purchasing reinsurance but 
determined that was unfeasible. When high deductible health 
plans were created, we jumped at the opportunity to place our 
employees in control of directing their medical care 
consumption. The practice of putting money in their HSAs, the 
health savings accounts, led them to seek out more affordable 
prescriptions and carefully plan and manage their doctors' 
visits. Within 60 days, the anecdotal evidence of savings 
buzzed around our office. Our employees enjoy the coverage and 
responsibility and believe it makes them better consumers of 
health care.
    Our annual costs today are about $7,394 per employee. We do 
not have a very healthy group. Last year, our costs increased 
by 7.3 percent. If we continue to incur the same increase, 7.3 
percent a year, when mandated coverage takes effect in 2014, 
our costs will be approximately $8,513 per employee. Costs and 
premiums continue to rise since the passage of the law with no 
relief in sight. In addition to the mandated coverage, there is 
the essential health benefits package and a tax on fully 
insured health plans that will increase the cost of insurance. 
Further, the lengthy regulatory process makes planning and 
forecasting costs even more difficult.
    The Patient Protection and Affordable Care Act promised 
lower costs and expanded coverage for all. We were told we 
could keep our current plan. Instead, the employer mandate 
forces employers with 50 or more full-time employees to provide 
expensive government-prescribed health insurance or pay a fine. 
We have witnessed higher costs and it is nearly a given we will 
drop our group HDHD plan and pay the $2,000 penalty per 
employee. The incentives are lined up in a manner that makes it 
nearly impossible to maintain coverage.
    This law does not fix any problems for small businesses of 
our size, those employers above the 50 full-time employee 
threshold, and the law makes it extremely unattractive for a 
smaller business to grow above the threshold. Although the 
savings from dropping would allow us to increase payroll to 
some extent, cost pressures on all fronts will lead us to hold 
those savings to tamp down overhead in what is a mature, 
competitive industry. The full savings will not go completely 
into taxable wages. We strive to meet market rates for salaries 
today, and savings garnered in any area of operations will go 
toward maintaining a viable business. We need to look for 
savings wherever we can find them.
    The new law is not helping my business. We worked for 
decades to provide good coverage for our employees and continue 
to work on doing so. However, there is little incentive to 
continue to provide coverage. For employers, there will be 
fewer choices of insurance products and self insurance 
underwriting will essentially be eliminated. Consumers will 
have fewer choices to make, which means decisions will be made 
from the top down. This is exactly the opposite of increasing 
choices and flexibility that could help small businesses 
continue to provide affordable coverage.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Shaw follows:]
    [GRAPHIC] [TIFF OMITTED] 78672A.084
    
    [GRAPHIC] [TIFF OMITTED] 78672A.085
    
    [GRAPHIC] [TIFF OMITTED] 78672A.086
    

                                 

    Chairman HERGER. Thank you.
    Mr. LaMontagne, you are recognized.

STATEMENT OF STEPHEN LAMONTAGNE, PRESIDENT AND CEO, GEORGETOWN 
                         CUPCAKE, INC.

    Mr. LAMONTAGNE. Mr. Chairman, Ranking Member Stark, and 
Members of the Committee, thank you for the invitation to 
appear before you today to discuss the implications of the 
Affordable Care Act on small and large employers.
    My remarks represent the views of Georgetown Cupcake and 
its owners. They are not necessarily representative of the 
views of the small business community as a whole. We are not 
economists. We are not constitutional scholars. We are business 
people, and my hope is that we can provide some insight into 
how some businesses think about health benefits as a component 
of employee compensation.
    Georgetown Cupcake was founded in 2008 by my wife Sophie 
and her sister Katherine and over the course of the past 4 
years, in a challenging economic climate, we have grown from 
one location to now three locations, in Washington, D.C., 
Bethesda, Maryland, and most recently New York City. We have 
launched a national shipping operation, and have two other 
planned locations coming online this year in Boston and Los 
Angeles.
    Also during this time, we have grown from a staff of two to 
a staff of well over 350 employees, including about 100 full-
time employees. So all this to say in a very short time we have 
experienced every stage in the maturation process of a 
business, from being a start-up to a small business to now a 
growing business that is continuing to evolve and innovate.
    As business owners, we strive to be a world class employer. 
And in a highly competitive environment, we believe it is 
necessary to offer a well rounded compensation package that 
includes competitive wages and salaries, paid vacation and sick 
leave, opportunities for growth within the company, a positive 
organizational culture, and affordable health insurance 
coverage. We believe that health insurance coverage is a 
necessary component of a well rounded compensation package not 
only because it enables us to attract and retain the very best 
employees, not only because it helps us to remain competitive, 
but also because we believe it is the right thing to do.
    We offer our staff, our full-time employees, a menu of 
coverage options through a major national insurance provider 
and pay 75 percent of the monthly premium. Nearly all of our 
full-time employees have enrolled in Georgetown Cupcake's plan 
or are covered by the plans of their spouses or parents. Of the 
employees who have enrolled in our plan, nearly all have chosen 
coverage that features in network services, a zero deductible, 
free well childcare, free physical examinations, mammograms, 
cancer screenings and other procedures, low copays for doctor's 
visits, free emergency room care and inpatient hospital 
services with no maximum lifetime benefit. We are proud to be 
able to extend this comprehensive coverage to our employees. 
And as a result, many of our full-time employees have been with 
the company since inception.
    Under certain provisions of the Affordable Care Act that 
come into effect in 2014, large employers, defined as those 
with over 50 full-time employees, or full-time equivalents, we 
are counted in that group, face potential penalties if they 
fail to provide affordable health insurance coverage to their 
full-time staff. Some studies have asserted that large 
employers will elect to drop health insurance coverage 
altogether because in certain cases the cost of the penalties 
may be less than the cost of providing coverage. I believe that 
these studies make oversimplified assumptions about the 
decision making processes of small and large businesses. In our 
case, we will continue to provide an option for our employees 
to obtain access to affordable, high-quality care even if it 
results in modest additional cost to us.
    Time will tell what the true impact of the Affordable Care 
Act will be on total enrollment in employer-sponsored health 
insurance plans. We certainly applaud the intent of the 
legislation to reduce the overall number of uninsured Americans 
and to lower the cost of health care without sacrificing 
quality of care, and we believe that all of the options on the 
table are worth considering, including health insurance 
exchanges designed to give consumers more educated choices 
about their own coverage. Yet it is difficult to predict how 
quickly these exchanges will be created, how effectively they 
will be administered, how transparent they will be to 
consumers, and how quickly consumers might transition to them. 
In theory, if they can alleviate upward pressure on the cost of 
insurance premiums while ensuring the same access to care and 
quality of care, and if employers are allowed to participate, 
then I think they could be a win/win for all involved. However, 
we will have to wait and see how this and other aspects of the 
legislation are implemented before being able to fully assess 
the costs and benefits relative to existing options for 
employer-sponsored coverage.
    In summary, we believe that being a world class employer 
means providing an option for affordable health insurance 
coverage for your staff. We support the goal of reducing the 
number of uninsured Americans, and we believe that employer-
sponsored coverage has been and will continue to be one 
important component of a multi-pronged strategy to address what 
is a multi-dimensional challenge of expanding coverage while 
controlling costs. Above all we believe that most employers, 
including and especially Georgetown Cupcake, want to do the 
right thing and want to be part of the solution, whatever that 
may be.
    Thank you.
    [The prepared statement of Mr. LaMontagne follows:]
    [GRAPHIC] [TIFF OMITTED] 78672A.087
    
    [GRAPHIC] [TIFF OMITTED] 78672A.088
    
    [GRAPHIC] [TIFF OMITTED] 78672A.089
    

                                 

    Chairman HERGER. Thank you.
    Ms. Furchtgott-Roth, the Democrats' health care law 
mandates that if you are an employer with at least 50 full-time 
equivalent employees, you must pay for government prescribed 
health care or pay a $2,000 per employee fine. Can you give 
some reasons why some employers today might not believe they 
can afford to offer health care to their employees?
    Ms. FURCHTGOTT-ROTH. Health care is going to be more 
expensive because of the qualified benefit plan. Plans such as 
catastrophic health care where you can have a health savings 
account to pay for routine expenditures, and then have health 
care to cover major expenditures such as getting cancer or 
falling off your bicycle in traffic, those won't be allowed 
anymore because they don't meet with the qualified benefit 
plan.
    So employers of low-wage workers are going to find that it 
adds a lot to compensation. They are going to substitute with 
other kinds of capital. We already see this happening in CVS 
with self-scanning checkout counters, and other supermarkets. 
We see many food trucks, for example, around the streets. This 
saves them the cost of wages for services because people line 
up to purchase the food. I have seen several cupcake trucks. I 
don't know if it is Georgetown Cupcake. There are many of these 
cupcake trucks, also.
    So the incentive will be not to provide health care for 
low-wage workers, to, in fact, drop these low-wage workers 
altogether because of the penalty. For higher wage workers, the 
employer can take it out of the salary and so we would expect 
to see a lower take-home wage and paying the penalty. But the 
burden is going to fall on low wage, low skilled workers.
    Chairman HERGER. Thank you. Republicans on this committee 
have long warned that the employer mandate will encourage 
employers to drop the current health insurance plan people have 
and like, is simple math. If an employer is currently paying 
more for health care coverage for its employees than it would 
pay in mandate penalties, it has an incentive to drop coverage 
to both save money and remain competitive. In fact, the 
nonpartisan Congressional Budget Office predicts that 3 to 5 
million Americans will lose their current employer-sponsored 
health insurance.
    Mr. Shaw, I read in your testimony that you have already 
made these calculations. How much do you expect your company to 
save by dropping health insurance coverage in 2014?
    Mr. SHAW. That is difficult to say since we don't know what 
the mandated cost for the group insurance is going to be. But 
if our situation is any indication, where we are not a very 
healthy group, we are paying $8,500 per employee now, it is 
going to be a lot cheaper to pay the $2,000 penalty plus the 
lower wage penalty that comes along with it. The math is so 
simple, why would we continue the group health. We know our 
employees can be taken care of because the government says they 
have to buy it at this point. They are going to find a way 
through the exchanges to get health insurance. The employer 
does not need to be in the middle of all of that and, with the 
extra expense, pay the penalty.
    Chairman HERGER. So does the difference between the $2,000 
and the $8,500 you are paying per employee, multiplying that 
out, would be the difference, particularly in a competitive 
market?
    Mr. SHAW. Approximately $300,000, I think. That wouldn't 
all be savings because I am sure we would do adjustments to 
payroll or somehow to make up some difference for the employee 
to go out and get their own health insurance. We would try to 
make those adjustments. But not fully, I don't anticipate.
    Chairman HERGER. So the ObamaCare actually encourages 
employers to drop health insurance?
    Mr. SHAW. It looks that way to me.
    Chairman HERGER. Mr. Schieber, you make the point that as a 
practical matter, employers cannot hire or retain workers whose 
total compensation rises faster than their productivity. You 
estimated that if workers enrolled in mandated employer health 
plans, the rise in employer premiums would absorb more than 100 
percent of the productivity gained for the bottom quarter of 
wage earners between now and 2030. You add ``the likely result 
will be fewer jobs or lower pay.'' Who is likely to be the most 
impacted by this loss of jobs, management or entry level 
workers?
    Mr. SCHIEBER.Well, it is going to be the entry level 
workers. If you think about somebody who is earning $20,000 or 
$25,000 a year, and their productivity is going up a little 
over 1 percent a year, that is what the Social Security 
actuaries estimate is the average in the economy, next year 
their added contribution to companies is around $250. If they 
have family coverage, if they are covered under this plan we 
just heard about, $8,000, $9,000, and the cost of that is going 
up about 5 percent a year because of this excessive health 
inflation, well, the cost of providing them health insurance 
then is going up at $500 a year, but they are only bringing in 
an added $250 to the table to pay for that. So the problem is 
that we live in a market-based economy. These companies have to 
cover the cost of their workers or they go out of business. And 
so, you know, sometimes they call economics the dismal science, 
and probably for a reason, but it does try to pay attention to 
the laws of arithmetic, not just the laws that Congress 
introduces.
    Chairman HERGER. Thank you. Mr. Stark is recognized.
    Mr. STARK. Thank you, Mr. Chairman. I thank the panel.
    Mr. LaMontagne, the critics of the Affordable Care Act have 
suggested that the increased cost of compensation by providing 
health care would impose a financial burden to employers and 
force them to cut staff and wages and stop giving pay raises. I 
presume that if you are in the franchise business, it doesn't 
make any difference. If you have got a Burger King here and you 
have one two blocks away and the minimum wage goes up, neither 
Burger King store has an advantage, right? They each raise the 
price of a hamburger to cover it or swallow it if they choose. 
But competitively when you are making a standard product it 
doesn't make a lot of difference. You may not like it, but it 
doesn't.
    Would employers have to cut staff and wages if there was an 
increase in compensation costs? What would be your first 
reaction? Stop putting frosting on your doughnuts?
    Mr. LAMONTAGNE. I can only speak for our business.
    Mr. STARK. You are the only person running a business, so I 
have to take your word for it.
    Mr. LAMONTAGNE. If there were an increase in compensation, 
either directly through an increase in the Federal or State 
minimum wage, or indirectly through an increase in the cost of 
total compensation to an employee, including health insurance 
coverage, in our case we would not reduce staffing levels 
because we staff based on the level of people that we need to 
run our operation smoothly. If we had to take people out, the 
cost to us in terms of inefficiency and loss of operational 
smoothness, if you will, would be greater than the savings that 
you would realize just by cutting one or two or three staff.
    Mr. STARK. Would your tendency be for small increases or 
decreases in your, ``production'' to either cut back hours for 
everybody a few hours or go to overtime if you had to go the 
other way rather than hire and train new workers every time 
there was a minor change in your production?
    Mr. LAMONTAGNE. I think Mr. Shaw made a great point, which 
is businesses face cost creep from all sides, not just labor 
costs, not just health insurance costs, but from every 
direction. We look at our budgets as a whole, and we have to 
make decisions on how to streamline looking at them as a whole.
    Again, in our case, we would not cut hours or shift to more 
of a part-time labor force because we are a growing business 
and we are investing in our employees because we want to 
promote people from within so that they can grow with the 
company. And you don't send a message to your staff that you 
want them to grow with you by transitioning to an all part-time 
work force.
    Mr. STARK. Thank you. Thank you very much. Thank you, Mr. 
Chairman.
    Chairman HERGER. Thank you. Mr. Reichert is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman. And thank you for 
your testimony today. In almost every health care hearing and 
Ways and Means hearing on health care, I have mentioned a list 
of things that have sort of been coming to light as we discuss 
this health care law further. And one of the things that the 
previous Speaker, Nancy Pelosi, said is we have got to pass 
this bill first to find out what is in it. And of course, that 
is what we are doing right now. We are finding out what is in 
it. And some of these things are very harmful to small 
businesses.
    We discovered that the 1099 requirement was very harmful to 
small businesses. The Democrats and Republicans together 
finally agreed with that, and it was repealed. The CLASS Act 
has been repealed. We discovered that we don't have the money 
to implement that plan. And Mr. Shaw, you mentioned in your 
testimony that you were frustrated because the promise was you 
could keep your health care if you liked to keep your health 
care, but I am not sure if you knew that the President himself 
said at an event that I happened to be at that when he was 
asked the question about whether or not this promise was really 
included in the law, he said, well, there might have been some 
language snuck into the health care law that runs contrary to 
that premise. So I wonder what else runs contrary to a promise, 
promises that were made about this bill, and we are finding out 
more and more and more what is running contrary.
    So I am interested in a couple of things here. So Mr. 
Schieber, with the employer mandate, would revenues of a 
business increase with the employer mandate?
    Mr. SCHIEBER. The revenues of some health care providers 
might increase because there could be substantially increased 
demand for health care services. I don't know why Walmart's 
revenues would increase or IBM's revenues would increase.
    Mr. REICHERT. Will the employer mandate improve a business' 
profit margin?
    Mr. SCHIEBER. Well, it depends a little bit. We just heard 
here, there might be a situation arise, and I actually believe 
there might be a lot of them, where companies go through a 
calculation where they can put some of their cost to the 
government. And so they could conceivably become more 
efficient, but that means that the government is going to face 
a higher cost than maybe are being anticipated for this bill.
    Mr. REICHERT. Where will businesses then find the money, 
though, to provide this health care coverage if there is 
additional cost, and they have this threat of $2,000 penalty 
and there is a $3,000 penalty if the health care offered is 
unaffordable.
    Mr. SCHIEBER. Well, the fact of the matter is that 
employers do evaluate whether or not workers are covering the 
cost that it takes to hire them. And if you paid attention to 
what has been going on in our economy in recent years, if you 
go to a grocery store today or you go to almost any kind of 
retail outlet today, they have now got these automated checkout 
lines where you scan your own stuff. What they are trying to do 
is they are trying to save money on labor costs, because those 
workers are no longer bringing in additional revenue that is 
recovering their costs. They are trying to get more efficient 
because we are operating in an extremely competitive world. If 
you go into any office building in almost any city this year 
that is being cleaned in the evening, it used to be that part 
of the staff of the company that operated that office cleaned 
that building. That is no longer the case. That has all been 
subbed out because those people are getting much lower pay. 
They are getting much lower benefits than the people that 
actually work in the office. There is a variety of ways that 
this takes effect. And I believe that the high unemployment 
rate that is concentrated in people without skills, people just 
coming out of school, people without training, people at very 
low wages is partly because some of these overburdened costs, 
or actually underburdened, you can't see them. Most people 
don't see them, but they are there and when you are doing your 
budget you have to cover them.
    Mr. REICHERT. Right.
    Mr. SCHIEBER. And I think that is why we have got a lot of 
the persistent unemployment rate at the lower end today that we 
do.
    Mr. REICHERT. I appreciate your answer, and thank you for 
your time, and I yield back.
    Chairman HERGER. Thank you. The gentleman from Washington 
is recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Mr. LaMontagne, it 
may be just my experience, but we also have a cupcake company 
in Washington in Seattle, Cupcake Royale. The woman who runs it 
has been back here and testified, and testified before 
committees in Congress. We also have a woman named Molly Moon. 
She runs a little ice cream operation. They give health care 
benefits to all of their people, just like the women who 
started your company give health care benefits to their people. 
Now, I think that must be because they think that there is some 
inherent value in it, that it is the right thing to do. And 
what I find difficult is to listen to the CEO of an insurance 
company say, well, if I could pay a penalty and pay less, I 
would throw my employees off the plan and put them into the 
exchange. And I would like to hear your own thinking about 
whether you would go to your employees in the cupcake company 
and say, it is cheaper for us, so we are not going to cover you 
anymore. Go down to the exchange and buy your insurance, and we 
will pay the penalty.
    Now, tell me how you think about that. Because I think this 
is a straw man that is put up here. We can't keep our coverage. 
What it means is that the management of companies will take it 
away from their employees by saying we are not going to pay any 
more, and it is not that there is anything in the law that says 
it can't be done. So I would like to hear you talk about how 
you think about your employees and whether you would rather 
involve yourself in their coverage or send them down the street 
to the exchange.
    Mr. LAMONTAGNE. As I mentioned previously, we believe that 
in the system that we have now health insurance coverage is a 
necessary component of a well-rounded compensation package. And 
it is something that as we grew from a small startup into a 
company that approached 30, 40, 50, full-time workers, our 
full-time staff asked us for it because it mattered to them. It 
is something that they wanted. And we thought that in order to 
make sure that we could keep them on board, again we are a 
growing company, we are making an investment in our staff. We 
want them to internalize our processes and procedures, and make 
a greater contribution in the future. We felt that it was 
necessary and certainly the right thing to do to add that to 
our total compensation package.
    Mr. MCDERMOTT. Was there anything besides staff morale 
involved in that decision? I mean, did you make any other kind 
of--was there any other level of decision-making that went into 
that?
    Mr. LAMONTAGNE. Certainly, staff morale and responsiveness 
was one element that went into the calculation. I think in a 
competitive environment, where other employers are offering 
health insurance as a part of their compensation packages, in 
order for us to remain competitive it is necessary to add that 
option as well. And also we personally believed that once we 
got to that stage in our growth, that it was the right thing to 
do to add coverage, and----
    Mr. MCDERMOTT. Do you think you would have lost any of them 
if you did not respond to that request?
    Mr. LAMONTAGNE. Yes, I think we would have.
    Mr. MCDERMOTT. The best people.
    Mr. LAMONTAGNE. And we would have lost some very good 
people.
    Mr. MCDERMOTT. That is the experience of a lot of small 
businesses. My son did a startup in the high-tech industry, and 
he said, Dad, we had to give benefits or we couldn't recruit 
anybody to our company, because if we didn't have a benefit 
package people wouldn't come. So it seems to me if you want the 
best people you have to have a benefit package, right?
    Mr. LAMONTAGNE. In the system that we have today, I believe 
that it is necessary, yes.
    Mr. MCDERMOTT. Are you familiar with anything in Hawaii? I 
mean, Hawaii has the system where every employer who has a 
full-time employee has to give benefits, right? Do you know 
about that?
    Mr. LAMONTAGNE. I am not familiar with the Hawaii----
    Mr. MCDERMOTT. It is true. And the question I have is, for 
anybody on the panel is, why does it work in Hawaii and it 
doesn't work here? Why would it not work in the United States 
on the continent when it works out in the island? How do they 
do that? I mean, is Hawaii so depressed or they have no 
business, or what is going on?
    Ms. FURCHTGOTT-ROTH. Well, I would be glad to answer that.
    Mr. MCDERMOTT. Sure. I would like to hear you.
    Ms. FURCHTGOTT-ROTH. So they take it out of the total well, 
it is part of the total compensation package. So the cost of 
health insurance comes at the expense of more take-home wages. 
So an employer provides the compensation package. It consists 
of health insurance, vacation, sick leave, and also a cash 
wage.
    Mr. MCDERMOTT. But no businesses are failing because of 
this, right?
    Ms. FURCHTGOTT-ROTH. What they are doing is providing----
    Mr. MCDERMOTT. Are businesses failing in Hawaii because 
they have to give health care?
    Ms. FURCHTGOTT-ROTH. I do not know the answer to that, but 
I know they are providing a lower cash wage than they would 
have otherwise if they did not have to provide the health 
insurance.
    Chairman HERGER. The gentleman's time is expired. Dr. Price 
is recognized.
    Mr. PRICE. Thank you so much, and I want to thank the 
panel. This has been very interesting because I think that the 
unintended, or maybe intended consequences of this law, are 
significant, especially in the employer/employee relationship. 
Mr. LaMontagne, I want to applaud you for providing health 
coverage for our employees. We did in my practice when I was in 
the private sector. My understanding is you have three 
different options available for your employees, is that right?
    Mr. LAMONTAGNE. Yes, that is correct.
    Mr. PRICE. And what are those?
    Mr. LAMONTAGNE. One is the option that I described in my 
statement which is the one that nearly all of our staff had 
enrolled in, which is a very comprehensive level of coverage 
for in-network services, and then, you know, small copays for 
out-of-network services. And then the second option is a 
slightly higher expense for out-of-network services, but 
generally the same level of coverage for in-network services.
    Mr. PRICE. Right.
    Mr. LAMONTAGNE. And then the third option that we had was 
one that involved health savings account option, which as it 
turns out was not one of the options that any of our staff 
selected. They opted for the most comprehensive coverage 
available.
    Mr. PRICE. So the choices that you put in place for your 
employees, however, were the ones that you selected, not that 
somebody else selected?
    Mr. LAMONTAGNE. I mean, these are choices that we met with 
a broker for the national insurance provider. We had a dialogue 
with our staff about what they were looking for, and----
    Mr. PRICE. But you selected it.
    Mr. LAMONTAGNE. Yes.
    Mr. PRICE. And in 2014, the bill will stipulate that you 
have got to pick. You don't get to pick. In fact, you have got 
to comply with what Washington tells you to comply with. Do you 
think that is fair? What if it is not what you want?
    Mr. LAMONTAGNE. I mean, in looking at the options that we 
have and how the legislation defines minimum essential coverage 
and affordable care, I think what we have available would 
satisfy those criteria.
    Mr. PRICE. What if it doesn't? What if they dictate 
something else to you? Is that fair?
    Mr. LAMONTAGNE. As long as we can provide coverage to our 
staff, and if employer-sponsored coverage is part of the system 
that will eventually, I think, lead to the outcomes that 
everyone hopes that we get, you know, we will look at all of 
the options that are available.
    Mr. PRICE. Do you think it is fair that the Federal 
Government can say that a health savings account is not 
something that ought to be available to folks even though your 
employees didn't choose to select it? Do you think that is 
fair?
    Mr. LAMONTAGNE. I think any action to limit options is one 
that I would not find--not find favor. I think----
    Mr. PRICE. I think that is very wise. Ms. Roth, you 
mentioned that a catastrophic plan that I just talked about, 
sense, wouldn't be available. Why is that?
    Ms. FURCHTGOTT-ROTH. Well, it wouldn't be allowed under the 
exchange. For this plan under the exchange you have to have a 
qualified benefit plan. That means no copayments for routine 
care, mandatory mental health, drug abuse. We found out last 
week free contraceptives, recently, all unlimited lifetime 
payments.
    Mr. PRICE. So any high deductible catastrophic plan 
wouldn't qualify?
    Ms. FURCHTGOTT-ROTH. Correct, because it doesn't have zero 
copayment for routine care.
    Mr. PRICE. So if an American wanted a high deductible 
catastrophic plan, but was forced into an exchange they 
wouldn't be able to select the kind of coverage plan that they 
wanted, is that correct?
    Ms. FURCHTGOTT-ROTH. That is correct and these health 
savings accounts with catastrophic health insurance have saved 
money. They have saved 11 percent to the State of Indiana, for 
example.
    Mr. PRICE. Absolutely. I want to revisit Burger King. We 
talked a fair amount about Burger King, and I think it was Mr. 
Stark that said that one Burger King had to comply with the law 
and another Burger King had to comply. What about Joe's Burger 
Shop across from the Burger King that doesn't have 50 
employees? What are the requirements? What are the competitive 
requirements on the Burger King because of Joe's Burger Shop 
and what are the consequences of that for the employees?
    Ms. FURCHTGOTT-ROTH. Joe's Burger Shop would not have to 
pay the penalty that had 49 or fewer employees, and by the way 
the Burger Kings, if they laid off all of their full-time 
workers and replaced them with part-time workers they wouldn't 
have to pay the penalty either. So the incentive would be to 
lay off full-time workers, replace them with part-time workers. 
Or if you had a Burger King across the street from the Wendy's, 
if they shared workforces and the workforce was at half-time at 
Wendy's, half-time at Burger King, then the Burger King and 
Wendy's would be competitive with Joe's Burger. Otherwise Joe's 
Burger would always be able to undercut the Burger King and the 
Wendy's, and the incentive should not be like that.
    Mr. PRICE. Exactly. So the perverse incentives in this bill 
actually harm the lower wage worker in this country.
    Ms. FURCHTGOTT-ROTH. Yes, precisely. And there is another 
incentive that also harms the low wage worker. Firms only have 
to provide affordable coverage for a single worker. They don't 
have to provide affordable coverage for a family. But if the 
worker gets affordable coverage from his employer as a single, 
the rest of the family is not allowed to get subsidized health 
insurance on the exchange. They are in limbo. They are 
uncovered. They can purchase full-priced insurance on the 
exchange, but many of them would not be able to afford to do 
so.
    Mr. PRICE. Thank you very much. Thank you, Mr. Chairman.
    Chairman HERGER. Thank you. Dr. Boustany is recognized.
    Mr. BOUSTANY. Thank you, Mr. Chairman. I think Dr. Price 
raised a bunch of very important points that illustrate how 
disruptive this is all going to be. Mr. Schieber, your 
testimony highlighted a number of critical points and I think 
it is fairly well-established in your testimony, and in general 
terms, that the increasing cost of health care is hurting both 
businesses and workers. I think that is fairly well-
established. And secondly, the problem of rising health care 
costs started before the passage of this health care law, yet 
those cost increases are continuing and we potentially will see 
some price shocks in the insurance market. That is what I am 
hearing from businesses, large and small, in my district and 
around the country.
    So I guess the remaining question then becomes, does the 
Democrats' health care law make this fundamental problem better 
or worse? So I have a series of questions for you. Does 
imposing the employer mandate raise or lower the cost of health 
care for employers?
    Mr. SCHIEBER.Well, it would raise the cost for any employer 
who is now required to cover a worker who is not covered. I 
mean, there has been some intimation here, I wouldn't want 
anybody to go away thinking that there is not an economic--
there is not a relationship between what people are paid and 
whether or not they are now getting health insurance.
    At the second decile in 2009, about 22 percent of full-
time, full-year workers were actually receiving health 
insurance from their employer. At the fifth decile it was about 
60 percent. At the eighth decile over 76 percent. There is an 
extremely strong economic relationship between payment. So at 
the bottom we are going to raise the pay of quite a lot of--the 
compensation costs of employing quite a lot of workers.
    Mr. BOUSTANY. All right. So also does the taxing health 
insurance plans--there is a tax in this new law taxing health 
insurance plans, does that raise or lower the cost of providing 
health insurance?
    Mr. SCHIEBER. It would raise the cost of providing health 
insurance.
    Mr. BOUSTANY. Right. What about mandating an essential 
health benefits package? Would that raise or lower the cost?
    Mr. SCHIEBER. If the package was richer than the package--
even if you had been offering a package, if the new package is 
richer than the package you have been offering, it has got to 
cost more.
    Mr. BOUSTANY. It will cost more. What about mandating 
employers to pay 60 percent of the actuarial value of the plan? 
Does that raise the cost?
    Mr. SCHIEBER. Again, it depends a little bit on what they 
have been doing. But if they have been paying less than 60 
percent, if it is a 50/50 plan, I pay half, you pay half, it 
would raise the cost of the plan.
    Mr. BOUSTANY. Okay. So now we have talked about a number of 
provisions in the health law which, as you have stated, will 
raise costs for employers. And I think you eloquently stated 
earlier that a business faced with a fixed cost, paying a 
penalty, or the variable cost, which we already know is higher 
than the penalty, and rising, and perhaps going to rise by you 
know, 5, 6, 7 percent or more. We don't know, but we know it is 
rising. It is a pretty simple business decision, it seems to 
me, and it is one of the things I am hearing from a number of 
business owners around my district; fixed cost, lower; variable 
cost and rising. What do you do?
    Mr. SCHIEBER. Well, I would assume this fixed cost will 
probably rise a bit over time. But it is not clear which one 
would rise faster, but if you--if your variable, what you 
characterize as the variable cost is higher than the fixed cost 
you are going to have to pay, you would probably pay the fixed 
cost.
    Business people are rational economic beings. They try to 
make decisions based on the arithmetic of running their 
business, and they look at differential cost rates, and they 
make decisions based on that in terms of how they run their 
business.
    Mr. BOUSTANY. And that same business person is going to 
want choices that would promote a competitive marketplace 
rather than simply a one-size-fits-all, this is it, take it or 
leave it, and accept the cost?
    Mr. SCHIEBER. Well, if you look in the retail industry, for 
example, you would typically find a much different benefit 
package than you would find in a computer engineering firm 
where you are going to have extremely high-skill versus low-
skill relatively mobile workers. You find significant 
difference. I worked in the benefits industry most of my 
career. I have worked with a lot of employers. There are 
definite differences, and when you look at those differences, 
you can understand them when you look at the economics of the 
business. These things vary by the economics of the businesses.
    Mr. BOUSTANY. And so a business looking at this fixed cost 
versus variable cost, will likely say, I am sorry, we are not 
going to provide this benefit. We know you will get it in the 
exchange, and yet we are seeing multiple problems with the 
establishment of exchanges, which seem to be falling behind. So 
again, it gets back to the point of the major disruptions in 
coverage, on top of the fact that, I know we didn't discuss 
this in this hearing today, but we have significant shortages 
of physicians and nurses and specialists, which will further 
lead to disruptions in health care as we know it, and 
disruptions for the worse, not for the better.
    Mr. SCHIEBER. You know, I don't think we can begin to 
anticipate all of the changes we might face. There is a section 
in my testimony about the implementation of Medicare in the 
mid-1960s. We thought prices were going to be relatively 
stable. We thought demand would be relatively stable. With the 
introduction of Medicare, prices started rising very rapidly. 
Demand exceeded considerably what was originally anticipated. 
There were significant spillover effects to the employer 
market.
    During the 1970s, when Medicare was really taking its full 
effect in the U.S. economy, employee-sponsored health benefit 
costs were going up 6.8 percent a year faster than 
compensation. So it can have spillover effect. So we can be 
introducing a whole variety of inflationary effects we haven't 
even begun to think of. And the people who have been costing 
this out have assumed, at best, that costs are going to be 
about the same as they were under the prior regime. So I think 
we have got some tremendous hidden risks here that we are 
really not talking about.
    Mr. BOUSTANY. Thank you. I see my time is expired. Thank 
you, Mr. Chairman. I yield back.
    Chairman HERGER. Thank you. Mr. Kind is recognized.
    Mr. KIND. I appreciate the additional information, Mr. 
Chairman. I appreciate it.
    Chairman HERGER. Well, with that, I would like to thank our 
witnesses and our panel for participating. I would like to 
respond to a comment that was made by my friend from Washington 
about Hawaii.
    I am looking at an Associated Press article that indicates 
that since its passage 35 years ago the cost-conscious business 
owners, and it is talking about Hawaii, have found an easy way 
to avoid the law by hiring more part-time workers who aren't 
required to be covered. It goes on to say if it weren't for 
that law the medical benefits are one area we could look to cut 
because this is a recession. It hurts the business. You can't 
pass it on to customers in this economy.
    And again, I would like to thank each of our witnesses.
    Mr. LaMontagne, I am one of the few small business people 
on this committee. My heart really goes out to you and 
gratitude goes out to you for obviously the hard work that you 
have put into, and your family, to running your business. But 
as a small business person, and as I talk to people in my 
northern California district, there is a big difference between 
those businesses that might be blessed to have a large margin 
and those who are much more competitive, that the difference 
between $2,000 and $8,000 can make a difference whether they 
are in business or not.
    But I want to thank you for running your business in such a 
way that you have that margin, and also for being generous 
enough and doing the right thing to continue with your 
employees. My concern is that you are more the exception than 
the rule.
    It is apparent to me in this hearing from the testimony 
presented today that the Democrats' health care law is 
unconstitutional and will rob Americans of their current health 
plan and further hinder economic growth. That is why I will 
continue to call for a full repeal. The goal of health care 
reform should be to make health care coverage more affordable 
for all Americans, not to reengineer the contract between 
private citizens and their government.
    As a reminder, any member wishing to submit a question for 
the record will have 14 days to do so. If any questions are 
submitted, I ask that the witnesses respond in a timely manner.
    With that, the Subcommittee is adjourned.
    [Whereupon, at 11:25 a.m., the Subcommittee was adjourned.]
    [Member Opening Statement follows:]
                        The Honorable Pete Stark

[GRAPHIC] [TIFF OMITTED] 78672A.090

[GRAPHIC] [TIFF OMITTED] 78672A.091


                                 

    [Member Submissions for the Record follows:]
                      The Honorable Bill Pascrell
[GRAPHIC] [TIFF OMITTED] 78672A.092

[GRAPHIC] [TIFF OMITTED] 78672A.093

[GRAPHIC] [TIFF OMITTED] 78672A.094

[GRAPHIC] [TIFF OMITTED] 78672A.095

[GRAPHIC] [TIFF OMITTED] 78672A.096

[GRAPHIC] [TIFF OMITTED] 78672A.097

[GRAPHIC] [TIFF OMITTED] 78672A.098

[GRAPHIC] [TIFF OMITTED] 78672A.099

[GRAPHIC] [TIFF OMITTED] 78672A.100

[GRAPHIC] [TIFF OMITTED] 78672A.101

[GRAPHIC] [TIFF OMITTED] 78672A.102

[GRAPHIC] [TIFF OMITTED] 78672A.103

[GRAPHIC] [TIFF OMITTED] 78672A.104

[GRAPHIC] [TIFF OMITTED] 78672A.105

[GRAPHIC] [TIFF OMITTED] 78672A.106



                                 
                      The Honorable Jim McDermott
[GRAPHIC] [TIFF OMITTED] 78672A.107

[GRAPHIC] [TIFF OMITTED] 78672A.108

[GRAPHIC] [TIFF OMITTED] 78672A.109

[GRAPHIC] [TIFF OMITTED] 78672A.110

                                 

    [Public Submissions for the Record follows:]
               American Farm Bureau Federation, Statement
[GRAPHIC] [TIFF OMITTED] 78672A.111

[GRAPHIC] [TIFF OMITTED] 78672A.112






                                 
                  Center for Fiscal Equity, Statement
[GRAPHIC] [TIFF OMITTED] 78672A.113

[GRAPHIC] [TIFF OMITTED] 78672A.114

[GRAPHIC] [TIFF OMITTED] 78672A.115

[GRAPHIC] [TIFF OMITTED] 78672A.116

[GRAPHIC] [TIFF OMITTED] 78672A.117









                                 
                     Chamber of Commerce, Statement
[GRAPHIC] [TIFF OMITTED] 78672A.118

[GRAPHIC] [TIFF OMITTED] 78672A.119

[GRAPHIC] [TIFF OMITTED] 78672A.120









                                 
 NFIB and Small Business Coalition for Affordable Healthcare, Statement
[GRAPHIC] [TIFF OMITTED] 78672A.121

[GRAPHIC] [TIFF OMITTED] 78672A.122

[GRAPHIC] [TIFF OMITTED] 78672A.123

                                 
