[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]


                   THE DELAY OF THE EMPLOYER MANDATE

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 10, 2013

                               __________

                          Serial No. 113-HL06

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON HEALTH

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   JIM MCDERMOTT, Washington
PAUL RYAN, Wisconsin                 MIKE THOMPSON, California
DEVIN NUNES, California              RON KIND, Wisconsin
PETER J. ROSKAM, Illinois            EARL BLUMENAUER, Oregon
JIM GERLACH, Pennsylvania            BILL PASCRELL, JR., New Jersey
TOM PRICE, Georgia
VERN BUCHANAN, Florida
ADRIAN SMITH, Nebraska

                            C O N T E N T S

                               __________

                                                                   Page

Advisory of July 10, 2013 announcing the hearing.................     2

                               WITNESSES

Avik Roy, Senior Fellow, Manhattan Institute for Policy Research.     7
James C. Capretta, Senior Fellow, Ethics and Public Policy 
  Center, and Visiting Fellow, American Enterprise Institute.....    26
William J. Dennis, Jr., Senior Research Fellow, National 
  Federation of Independent Business.............................    37
Sean Falk, President and Owner, WolFTeaM LLC, and Nachogang LLC, 
  on behalf of the International Franchise Association...........    44
Timothy Stoltzfus Jost, Robert L. Willett Family Professor of 
  Law, Washington and Lee University School of Law...............    48

                       SUBMISSIONS FOR THE RECORD

Associated Builders and Contractors, statement...................    86
University of Minnesota, statement...............................    88

 
                   THE DELAY OF THE EMPLOYER MANDATE

                              ----------                              


                        WEDNESDAY, JULY 10, 2013

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

    The Subcommittee met, pursuant to notice, at 10:04 a.m., in 
Room 1100, Longworth House Office Building, Hon. Kevin Brady 
[Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE ON HEALTH

                                                CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Wednesday, July 3, 2013
No. HL-06

                  Chairman Brady Announces Hearing on

                   the Delay of the Employer Mandate

    House Ways and Means Health Subcommittee Chairman Kevin Brady (R-
TX) today announced that the Subcommittee on Health will hold a hearing 
on the Obama Administration's recent decision to delay the information 
reporting requirements and penalties associated with the employer 
mandate in the Affordable Care Act until 2015. This hearing will allow 
the Subcommittee to focus specifically on the Administration's ability 
to make regulatory enforcement decisions on statutory provisions in 
law. The hearing will take place on Wednesday, July 10, 2013, in 1100 
Longworth House Office Building, beginning at 10:00 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 appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.

      

BACKGROUND:

      
    On Tuesday July 2, 2013, a posting on the U.S. Department of the 
Treasury's (Treasury) tax blog announced that the employer reporting 
requirements and the employer mandate tax penalties ``will not apply 
until 2015.'' The announcement came as a surprise to opponents and 
proponents of the law, and it raises new questions about how the shift 
will affect other aspects of the Affordable Care Act. The Ways and 
Means Committee has raised significant concerns about implementation 
status of all aspects of the Affordable Care Act, with a particular 
emphasis on the impact of the employer mandate on jobs and the economy. 
The Obama Administration repeatedly testified to the Committee that 
implementation of the law is on track, and Administration officials 
emphasized that no delays were expected. The hearing will examine what 
led to the decision to delay the employer mandate, what authority 
Treasury is relying on to delay statutory provisions with clear 
implementation dates and Treasury's analysis of how the delay will 
impact other aspects of the healthcare law.

      
    In announcing the hearing, Chairman Brady stated, ``The employer 
mandate is a flawed provision that has resulted in lost jobs, fewer 
hours and a loss of wages, while doing nothing at all to make health 
insurance more affordable--which is what individuals, employers and 
workers want and need. A 1-year delay will not undo this damage. I want 
to know why, after repeated assurances that everything was on track and 
that no more deadlines would be missed, that the Administration has 
taken this action. It is time for the Administration to explain to the 
American people why it's acceptable to grant this delay, while at the 
same time taking no action whatsoever to provide any relief from the 
individual mandate.''

      

FOCUS OF THE HEARING:

      
    The hearing will focus on the Obama Administration's decision to 
delay the employer mandate and the employer information reporting 
requirements under the Affordable Care Act.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
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for the hearing record must follow the appropriate link on the hearing 
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for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
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by the close of business on Wednesday, July 24, 2013. Finally, please 
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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 
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    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
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relies on electronic submissions for printing the official hearing 
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with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
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    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                

    Chairman BRADY. The Subcommittee will come to order. We are 
examining the Treasury Department's strangely timed 
announcement that it is delaying the enforcement of ObamaCare's 
employer mandate for 1 year.
    For the last several months, we have heard the White House 
repeatedly pledge to Congress and the American people that the 
President's Affordable Care Act will be ready on schedule; 
absolutely taken to the bank.
    In fact, Secretary Sebelius recently insisted before this 
very Committee that the White House would not miss another 
ObamaCare deadline, not one, not again.
    Shortly thereafter, the Nation learned in a blog post of 
the embarrassing failure by the White House to have this major 
pillar of the new law in place on schedule.
    The Treasury Department's announcement confirms our 
concerns. ObamaCare is simply not ready. This Committee has 
serious questions about how and why this alarming decision was 
made and the effect that delaying this key provision will have 
on other provisions of the law, specifically the directive that 
individuals purchase either Government-approved health care or 
pay a tax.
    There are also questions about the unprecedented manner in 
which it was announced on an obscure Treasury blog site just 2 
days before the 4th of July holiday.
    We invited Treasury officials to testify today to explain 
to the American people the rationale for the delay and how they 
announced this major setback. However, they declined to appear.
    Let me be clear. This Committee intends to get an 
explanation and will plan on Treasury officials appearing at a 
date in the near future.
    Let's also be clear about what this decision means. This 1-
year reprieve does not solve the problems of local businesses 
struggling to comply with ObamaCare. The consequences of the 
mandate still remain.
    Employers are still required to provide Government-mandated 
coverage or pay a substantial tax. Many local businesses 
continue to cut workers' hours and workers' paychecks as they 
grapple to meet the Affordable Care Act's definition of a 
``full-time employee.''
    Many businesses are laboring to find more money for rising 
healthcare costs for themselves and their workers as costs 
increase, and jobs are still at risk, up to 3.2 million in the 
franchise industry alone, as local companies struggle with the 
onerous ObamaCare requirements.
    For patients, families and their children, you have to 
wonder. If ObamaCare is not ready for business, is it ready for 
my family? A lot of lives are at stake. Quality health care is 
critical.
    Everyone is aware the White House has missed almost every 
key deadline in preparing this healthcare law for individuals 
and families as well.
    The White House says it is listening to the concerns of our 
Nation's businesses, but are they ignoring the voices of 
American families and taxpayers.
    Unlike businesses and labor unions, which have been granted 
a reprieve, there have been no delay of the individual mandate, 
forcing average Americans to buy Government-approved health 
insurance or pay a tax.
    These families and individuals are also facing higher costs 
and sky rocketing premiums. They have no relief from the new 
taxes in ObamaCare.
    Today, 3 years after the passage of the President's 
signature healthcare law, the majority of Americans disapprove 
of this law. Who is listening to them?
    If the Government mandate to buy insurance has been 
postponed for businesses and labor unions, out of fairness, 
should it not be postponed for families and individuals as 
well?
    While the White House continues to suggest ObamaCare will 
be ready on October 1, the stunning delay of the employer 
mandate calls that into question.
    Look at the pattern of delays and failures that have 
occurred since implementation began. The Class Act proved 
unworkable and was abandoned. The onerous 1099 reporting 
mandate was overwhelmingly repealed. The exchanges promised for 
small businesses failed to be ready on time and were delayed. 
Significant parts of the law were found unconstitutional, 34 
States have chosen not to build State exchanges.
    The technology intensive data hub that is key to ObamaCare 
is not ready. The navigator grants have not gone out to local 
communities. On and on, the list is growing, not shrinking, as 
we get closer to October 1.
    Clearly, the roll out of ObamaCare is in disarray and 
experts question whether the White House is competent enough to 
administer its own massive healthcare law.
    The employer mandate delay also can have profound impact on 
the Federal budget and raises numerous questions. How much less 
will the Government collect because of the delay?
    How many more people will end up being forced into the 
exchanges? Without employer reporting requirements, how can we 
ensure subsidies are only going to those without offers of 
affordable insurance?
    Again, it is unfortunate that no Treasury officials are 
here to answer these important questions. The American people, 
Congress and this Committee deserve these answers and we will 
get them.
    What we do know is ObamaCare is making health care more 
expensive, costing Americans their jobs, shrinking their 
paychecks, and preventing families from keeping the health care 
they have and they like.
    Instead of simply delaying enforcement of certain 
provisions of ObamaCare, it is clear this law must be repealed.
    Before I recognize the Ranking Member, Dr. McDermott, for 
the purposes 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 Dr. McDermott, Ranking Member, for his 
opening statement.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. I suppose we could 
spend the morning talking about how and why the policy was 
changed and how it was announced. I might have preferred a 
different approach, but it is not my job to speculate on best 
practices for the White House.
    It is my job, it is our job actually, to continue to shape 
and guide reform so that it best serves the American people, to 
focus on policy, not on politics.
    There has been a lot of noise on both sides of the aisle 
over what this shift means but nobody really knows. I did not 
spend my 4th of July combing over the implications of the 
change and I doubt there is anybody on the dias that did.
    I am trying to adjust and dissect this plan on the back of 
a galloping horse before we have a chance to properly consider 
it, which is completely unwise. We are back in session 2 days 
and here we are having a hearing on something that was 
announced before the 4th.
    I am sure it is tempting for those who stood against reform 
and progress from the beginning to see this as a chance to rip 
ObamaCare apart again yet another time. The irony of objecting 
to the delay of a program you have been trying to stop is no 
doubt lost on this room.
    We are even going to get a 38th vote shortly to repeal it, 
so you know where one half of this room is coming from. The 
fact is ObamaCare is largely unaffected by the delay. It was 
always designed to be built on current coverage and fill in the 
gaps. The employer responsibility requirements are just a piece 
of that puzzle that make up universal coverage.
    The marketplace exchanges are on track to open on March 1 
(sic). My State is well out there. I have been talking to 
people over the 4th of July and they are raring to go. There 
are many places in this country that have geared up for this. 
Places like Texas have not, and that is another issue.
    Premium filings are coming in lower than expected in 
Washington, California, and other States. Oregon's 2014 filings 
show premiums slashed by as much as 35 percent.
    Reality dramatically contradicts the rhetoric that you hear 
in here.
    We do not know exactly what the landscape will look like in 
January, but it is entirely possible this decision will 
actually help the consumers. They will have a chance to have 
access to the exchanges. Employees who remain uncovered will be 
able to find assistance through tax credits and other subsidies 
in the Federal marketplace or the State exchange.
    The delay will also give businesses time to adjust and for 
the community to work with Treasury to work out the most 
efficient and effective way to comply for the law. For 95 
percent of the employers who already offer coverage to their 
employees, we have every reason to believe they will continue 
to do so.
    Microsoft, Amazon, Boeing, they are not going to stop 
offering to their people.
    Massachusetts saw no drop in employer coverage under 
Romneycare. In fact, in the 7 years since its implementation of 
universal health insurance, employer coverage has actually 
increased slightly, but more importantly, it is better for us 
to delay this and get it right than to rush and get it wrong.
    I would like to put it in a little historical context here. 
In 1966, when I was beginning my medical practice, medical 
workers were traveling door to door--Medicare workers were 
traveling door to door trying to enroll seniors with 100 
million leaflets that were printed before the bill was signed 
into law or passed out of the Congress.
    They were already up and running. They got a jump start. 
They printed it without appropriated funds, and usually those 
doors were slammed in their face.
    The American Medical Association denounced the program as 
the first step towards socialism, and agency administrators 
wondered if hospitals would be overrun with the sick and the 
elderly patients stretching out for blocks.
    You can read this in the history. I am not making this up. 
This is what was going on in 1966.
    The Bureau of Health Insurance began operating without 
oversight and often without regard to formal requirements of 
rulemaking simply hoping things would fall into place. Forty-
seven years later, Medicare is the bedrock of our social safety 
net. It is the standard bearer of a Government that works, and 
a big part of what saved us then was everyone was working 
together to get it off the ground.
    Congress intentionally wrote flexible conditions and the 
Administration was allowed to make changes as they saw fit. 
They were willing to take chances to ensure success.
    Let's consider the path before us. Before we burn the 
bridge behind us, the President is not going to reverse this 
decision so nothing that happens today is going to make any 
difference, so let's see where it goes.
    More importantly, let's remember to whom we are 
accountable. It is not pollsters or cable news anchors or the 
President's campaign team.
    Our only job in this Committee is to fulfill the promise to 
American citizens of affordable health care. We are having this 
hearing to hear from you why this is not going to work. That is 
what it is all about. The supposition of this hearing is that 
it is all over, it is dead.
    Let's see if that is true. I yield back the balance of my 
time.
    Chairman BRADY. Today we will hear from five witnesses. 
Avik Roy, Senior Fellow from the Manhattan Institute. James 
Capretta, Senior Fellow with Ethics and Public Policy Center. 
William Dennis, Jr., Senior Research Fellow at the National 
Federation of Independent Business. Sean Falk, President and 
Owner of WolFTeaM LLC, and Nachogang LLC, and Timothy Jost, the 
Robert L. Willett Family Professor of Law, Washington and Lee 
University School of Law, who is accompanied by his wife, Ruth, 
today.
    Mr. Roy, you are recognized for 5 minutes.

             STATEMENT OF AVIK ROY, SENIOR FELLOW, 
            MANHATTAN INSTITUTE FOR POLICY RESEARCH

    Mr. ROY. Chairman Brady, Ranking Member McDermott, and 
Members of the Health Subcommittee, thanks for inviting me to 
speak with you today with the Affordable Care Act employer 
mandate.
    My name is Avik Roy. I am a Senior Fellow at the Manhattan 
Institute for Policy Research in which capacity I conduct 
research on health care and entitlement reform.
    In my remarks today, I will focus on three questions. 
First, does the employer mandate the Affordable Care Act 
achieve its goals?
    Second, what are the ramifications of the White House's 
decision to delay the mandate by 1 year?
    Third, what would be the policy impact of H.R. 903, the 
American Job Protection Act, which would repeal the employer 
mandate in its entirety?
    While the Affordable Care Act strives to achieve many 
things, the law's primary goal is to move the United States as 
close as possible to universal health insurance coverage. Does 
the employer mandate help to achieve this goal? My view and the 
view of many others across a spectrum is it does not.
    According to the Medical Expenditure Panel Survey, 97 
percent of firms with 50 or more workers already offer health 
benefits. Now, 97 percent is not 100 percent, of course, and 
not all firms that offer coverage offer it to every employee.
    The ACA's employer mandate perversely incentivizes 
employers to avoid hiring low-income workers, precisely the 
type of workers who tend to be uninsured. As the Center on 
Budget and Policy Priorities put it in 2009, in essence, 
affected firms would pay a tax for hiring people from low or 
moderate-income families.
    The penalties associated with the employer mandate are only 
triggered if a worker is not offered what the ACA deems 
``affordable coverage,'' and if the worker then gains 
subsidized coverage on an ACA-sponsored insurance exchange.
    As a result, employers have three incentives. First, to 
hire fewer full-time workers. Second, offer so-called 
``unaffordable coverage'' for which the penalties are lower. 
Third, hire illegal immigrants or workers from high-income 
families who are not eligible for exchange subsidies.
    For the Affordable Care Act, low-income individuals would 
still be able to gain subsidized health insurance but they will 
be tagged with a Scarlet ``S'' for gaining those subsidies, 
because to employers, hiring subsidized individuals will be far 
more costly than hiring unsubsidized ones.
    A 1-year delay of the employer mandate does give the 
Administration more time to implement the law, but a delay does 
not fundamentally alter the perverse incentives I have just 
described. It simply gives employers an additional year to 
restructure their workforces accordingly.
    A 1-year delay does, however, impact other important 
provisions of the ACA. In order to gain eligibility for 
exchange subsidies, an individual must prove he has not been 
offered ``affordable coverage'' from his employer.
    Now that the reporting requirements of the employer mandate 
have been delayed, it may be difficult for him to establish 
that. Hence, it appears that CMS will rely on applicants' 
attestations, the so-called ``honor system,'' to dispense 
subsidies in some cases.
    Similarly, the ACA's individual mandate only works if the 
Government can verify whether or not a worker is full-time or 
part-time, whether he has been offered affordable or 
``unaffordable coverage,'' or none at all.
    H.R. 903, the American Job Protection Act, is a bipartisan 
bill that was introduced last February by Dr. Boustany and 
others and referred to this Committee. It would repeal the 
employer mandate by striking the relevant sections of the 
Internal Revenue Code and the Affordable Care Act.
    Repealing the employer mandate would eliminate the perverse 
incentives I described earlier. Most importantly, it would 
encourage the transition away from costly, inefficient 
employer-sponsored coverage, and towards portable, individually 
owned insurance policies.
    As you all know, economists have long advocated for this 
transition and repealing the employer mandate would go a long 
way toward achieving it. In this way, H.R. 903 could emerge as 
a major policy advance.
    Some analysts have raised concerns that such a transition 
would be costly due to the increased spending on exchange 
subsidies that would result. However, in March 2012, the CBO 
estimated that if an additional 14 million workers moved from 
employer based to exchange based coverage, the deficit would 
actually decrease by $13 billion over 10 years. This is because 
the increase in exchange subsidies is offset by a reduction in 
lost revenue from the tax exclusion for employer-sponsored 
insurance.
    It will be important for H.R. 903 to be adjusted in order 
to take into account its impact on the disbursement of 
subsidies in the individual mandate.
    The individual mandate, for example, could be replaced with 
a more limited open enrollment period for participating in ACA 
certified insurance plans. This would achieve the individual 
mandate's goal of curbing adverse selection without the 
mandate's intrusiveness or constitutional injury.
    I will conclude by recalling that Scarlet S. We all want an 
economy in which those at the bottom of the ladder have the 
opportunity to find gainful employment and good health. The 
employer mandate harms those it is intended to help. Instead of 
delaying it, we should repeal it.
    Thanks again for having me. As an addendum to my written 
testimony, I have included three articles from Forbes in which 
I further expand on these issues. I look forward to your 
questions and to being of further assistance to this Committee.
    [The prepared statement of Mr. Roy follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
                                
    Chairman BRADY. Thank you.
    Mr. Capretta.

   STATEMENT OF JAMES C. CAPRETTA, SENIOR FELLOW, ETHICS AND 
PUBLIC POLICY CENTER, AND VISITING FELLOW, AMERICAN ENTERPRISE 
                           INSTITUTE

    Mr. CAPRETTA. Mr. Chairman, Ranking Member McDermott, and 
Members of the Subcommittee, thanks for the opportunity to be 
here today.
    The decision by the Administration to abandon the employer 
mandate for 2014 and to allow applicant income attestations in 
some instances were only announced last week. It will take some 
additional time before the full implications are known.
    Nonetheless, in my testimony, I will try to provide some 
initial observations about what they might mean. Technically, 
the Administration did not announce a delay in the employer 
mandate. What was announced was an 1-year delay in the 
reporting requirements necessary to enforce the mandate.
    The Administration simply noted in its announcement that 
the delay in collecting the relevant data would necessarily 
mean a simultaneous delay in determining which employers owed 
shared responsibility payments. Thus, the entire employer 
mandate structure was put off for a year through the back door 
of an administrative decision to not collect information.
    Some have questioned the Administration's legal authority 
to take this action. It is certainly clear that what the 
Administration is doing is not consistent with the intent of 
the statute Congress put in place to mandate and a reporting 
system to enforce it to begin in 2014, not 2015.
    I am not a lawyer. I will leave it to others to debate 
whether the Administration can stretch the meaning of the words 
in the statute to justify what they are doing.
    I would only note that no one has yet disputed that it is 
clearly inconsistent with what Congress intended.
    The employer debate is terribly flawed policy. It is 
harmful to lower-income workers, to job growth, and to the 
strength of the broader economy. The structure of the mandate's 
effects on employment and job growth are well known. They were 
obvious even before enactment.
    For starters, the law exempts any employer with under 50 
workers from the mandate's requirements. Not surprisingly, 
firms are adjusting to stay beneath this 50-worker threshold. 
Exactly what we do not need in the current economy.
    The structure of the mandate's penalties, as already 
mentioned, provides powerful incentives for employers to avoid 
hiring lower income workers.
    For instance, if you are a restaurant and you have the 
option of hiring a worker who you were going to pay low wages 
to from a middle-class neighborhood or a lower-income 
neighborhood, you might pick the middle-class neighborhood 
because the probability is they would be less likely to draw 
subsidies under the exchange and therefore induce a penalty on 
the employer. It creates a terrible bias in the law.
    The law also exempts part-time workers from the penalty 
structure and establishes 30 hours per week as the upper limit 
for determining which workers are considered part-time.
    We have seen story after story around the country now about 
firms adjusting and even local governments adjusting to push 
their workers below this 30-hour per week threshold.
    In addition, it was known in advance of enactment that the 
employer mandate as designed in the healthcare law would be 
terribly burdensome to enforce.
    Former Congressional Budget Office Director Robert 
Reischauer made this point publicly to a meeting of journalists 
in 2009, stating it would be an immense hassle on the 
administrative front as he urged a different approach. Last 
week's announcement made it clear that he was absolutely right.
    The Administration's decision not to enforce the mandate 
does not alter these problematic effects. Employers that are 
today hesitant to hire workers to go above the 50-worker 
threshold or to move their part-time workers above 30 hours a 
week are not going to turn their plans upside down based on an 
1-year delay.
    The recent unilateral decisions by the Administration will 
have significant budgetary consequences. CBO estimated that the 
employer penalties were supposed to generate $10 billion in 
2015 based on reporting in 2014. It is hard to imagine they are 
going to collect that $10 billion now. In fact, I assume it is 
gone.
    Moreover, it is quite clear that the whole structure for 
enforcing the employer requirements has now been put into 
question. If you listen to the employer community, they say it 
is basically unworkable and will never generate the income it 
was supposed to generate.
    In CBO's original estimate, they assumed $140 billion from 
these employer payments. Does anyone believe we are going to 
collect that much money from something that is so 
controversial?
    Finally, the reliance on income attestation, in some 
instances in the exchanges, is very likely to result in more 
erroneous payments.
    In 2012, according to the Treasury Inspector General for 
Tax Administration, the Federal Government paid out up to $13.6 
billion in erroneous EITC payments, a system that has many more 
data checks, also has been in place for more than two decades, 
and has lots of enforcement tried to be built into it, and 
probably less complicated than the premium credits in the 
healthcare law.
    Relying on the ``honor system'' is very likely to result in 
numerous and large scale erroneous payments.
    The Administration's recent decision to delay significant 
parts of the healthcare law is an invitation to Congress to 
revisit the law, too.
    I would urge this Committee and this Congress to consider 
statutory delay of the employer mandate, a simultaneous 
statutory delay in the individual mandate, and a strong look at 
delaying the entire exchange process until it is clear that the 
data systems protect taxpayers.
    Thank you.
    [The prepared statement of Mr. Capretta follows:]
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    Chairman BRADY. Thank you.
    Mr. Dennis, you are recognized.

     STATEMENT OF WILLIAM J. DENNIS, JR., SENIOR RESEARCH 
      FELLOW, NATIONAL FEDERATION OF INDEPENDENT BUSINESS

    Mr. DENNIS. Thank you, Mr. Chairman. My name is William 
Dennis. I am a Senior Research Fellow at the NFIB Research 
Foundation.
    When you are ill prepared, as a general rule, it is 
advisable to delay, postpone or even cancel. In this case, 
small business people, small business owners certainly are 
receptive to the delay.
    There has certainly been no information or certainly 
inadequate information for them to make the decisions, which 
are necessary to operate under this program.
    The delay, however, changes nothing, just kind of delays 
it, moves it back a year, including small business reticence to 
hire and to invest.
    The exception, of course, is the diminished confidence in 
the ability of this Administration and perhaps any 
administration to get something of this size done correctly or 
even to do it at all.
    Let's assume for a moment that everything gets straightened 
out next week. There is guidance, rules, and all that sort of 
thing, and obviously that is not going to happen, but let's 
make that assumption.
    Small business still has a major information problem. Small 
business owners get their information generally through 
secondary channels. Secondary channels are accountants, 
lawyers, and Websites of trade associations, so on and so 
forth.
    That means that in order to inform the small business 
population generally, it is a two-step process. You have to 
educate the educators. The educators then in turn will educate 
the population.
    Quite frankly, if we are looking at 2015, January 1, 2015, 
they are still going to have to hustle to get information out 
to small businesses that will help them with compliance issues. 
That says nothing for any recordkeeping that they are going to 
have to start with on January 1, 2014, depending on how the 
rules are subsequently interpreted.
    As I mentioned, the substantive issues really have not 
changed. They are the same, they are just moved back a year. I 
have identified five that I would just like to mention, 
although there are some others I am sure others would 
highlight.
    The first obviously is the full-time/part-time issue, the 
35 hours/30 hours. I am not sure I know of anyone who disagrees 
this has become a real problem and a real disincentive to 
hiring.
    Parenthetically, some would argue that only 3 percent of 
small businesses are affected by this employer mandate. This 
provision alone shows that number is silly because this 
provision will affect literally hundreds of thousands if not 
millions because those with and those without are going to have 
to consider this when they make their decisions on health 
insurance.
    The second is the so-called ``look back rules.'' This 
effectively is going to require enormous amounts of paperwork 
because they are going to have to start keeping hourly records 
on salaried employees.
    Fifty-five percent of small businesses have at least some 
salaried employees. They are not keeping hours now. They do not 
have systems in place. They would not normally have systems in 
place to do this.
    Clearly, if we were going to look at these people on an 
hourly basis to qualify as full-time employees, they are going 
to have to have hourly records, which is a massive new 
recordkeeping problem.
    The determination of affordability is number three. I am 
not really sure what to say because we never had any rules, 
proposals, and it looks like it may be difficult but who knows. 
That is really up in the air.
    Number four are the business aggregation rules, and this is 
the sleeper. This is the one that I think has huge potential 
significance and for two reasons. Many owners have more than 
one business, many businesses have more than one owner. What 
combination or combinations constitute a single entity?
    Now we get to the second problem. This has been answered by 
putting these combinations under the ERISA rules. The ERISA 
rules are some of the most complicated rules known to mankind. 
In fact, there is only a very small segment of the legal 
population, employee benefit group that can even interpret this 
thing.
    Here you may have as many as 100,000 businesses needing 
some type or should have some type of interpretation, 
understanding or whatever, and only a very, very small 
community is going to be there to satisfy that.
    Last, five, the mandate per se, it is a relic in a sense. 
It is tied to health insurance. It ties health insurance to 
employment. We should be going exactly in the opposite 
direction. Effectively, we are freezing the past when we should 
be looking to the future.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Dennis follows:]
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    Chairman BRADY. Thank you, Mr. Dennis.
    Mr. Falk, you are recognized.

STATEMENT OF SEAN FALK, PRESIDENT AND OWNER, WOLFTEAM LLC, AND 
    NACHOGANG LLC, ON BEHALF OF THE INTERNATIONAL FRANCHISE 
                          ASSOCIATION

    Mr. FALK. Chairman Brady, Ranking Member McDermott, and 
Members of the Subcommittee, thank you for your invitation to 
testify at today's hearing.
    I am honored to speak with you regarding the Affordable 
Care Act. I believe my role as a franchise/small business owner 
gives me an unique perspective that is not heard often enough 
in Washington.
    Franchise/small businesses have been particularly affected 
by the Affordable Care Act, and I hope to express the concerns 
of myself and that of our industry as a whole.
    My name is Sean Falk and I own and operate 12 franchise 
business units. As a former United States Marine, I understand 
the demand for hard work. As a business owner, I had the luxury 
of working any 80 hours of the week that I choose. With 43 
full-time-equivalent employees, I am a proud participant in a 
diverse franchise community, which supports nearly 18 million 
jobs.
    You may recognize some of the businesses I operate, 
Salsarita's Fresh Cantina, Great American Cookies, Mrs. Field's 
Cookies, and Pretzelmaker.
    I bought my first franchise in 1998, and through 2008, I 
was opening on average more than one location per year. I am 
also a member of the International Franchise Association, and I 
am here today to represent the Association and the entire 
franchise community.
    Government actions play an important role in my business 
decisions. As a business owner, I cannot make future business 
plans when Congress plans and extends regulations for only 1 
year at a time or changes them with only 6 months before 
implementation.
    While my fellow small business owners and I applaud the 
Administration for delaying the implementation of the employer 
mandate due to the continued ambiguity of the law and its 
compliance requirements, it does not solve the fundamental 
problems associated with the ACA and its impact on business 
operations and future job growth.
    We have to plan well in advance for significant changes in 
the law. Receiving key regulations less than 3 months before a 
new requirement goes into effect does not provide ample time 
for employers and small business owners to successfully adapt 
their businesses to remain economically stable.
    Implementation of the Affordable Care Act has presented an 
enormous challenge to me as a small business owner. Navigating 
the constant changes, waivers, extensions, regulations and 
clarifications of an already cumbersome law has diverted my 
focus from developing my business and creating new jobs. I am 
facing the legalities of healthcare exchanges, the employer 
mandate, and full-time equivalents, whether it is in 2014 or 
2015, all of these tasks take me away from my core mission of 
growing my business.
    There are very few Government resources to guide small 
business owners through this process.
    The franchise industry has two specific changes that could 
be made to the ACA to help small business owners like myself 
comply with the law without hurting our businesses.
    Number one, increase the 30-hour threshold that qualifies 
an employee as full-time to 40 hours a week. Second, increase 
the 50 full-time-equivalent employee threshold that requires 
employers to provide coverage to full-time employees.
    Currently, I employ 43 full-time-equivalent employees. If 
my business grows and I create jobs, I will also drastically 
increase my costs due to the employer mandate. This has an 
undeniable impact on my bottom line, which is my livelihood as 
a business owner, and it is making me reconsider opening new 
locations.
    Also, I may be forced to reduce my employees' hours to less 
than 30 hours per week so that they do not require full-time 
status when I do expand.
    With these challenges and changes, I fear it may be a 
struggle just to keep the doors open on my 12 existing 
businesses.
    I would relish the opportunity to grow my business, but the 
recent Government regulatory burdens placed on my small 
businesses and the uncertain economic climate have given me 
reason for pause.
    I have to weigh the pro's and con's of the ACA before 
deciding on future growth. I hope policymakers will consider 
focusing their energies on addressing the burdens small 
business owners face within the employer mandate, whenever it 
is implemented.
    It is time to address these fundamental challenges facing 
our industry that are keeping small business owners and 
entrepreneurs on the side lines and from creating new jobs.
    Thank you for the opportunity and I look forward to 
answering any questions you may have.
    [The prepared statement of Mr. Falk follows:]
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    Chairman BRADY. Thank you.
    Mr. Jost, you are recognized.

 STATEMENT OF TIMOTHY STOLTZFUS JOST, ROBERT L. WILLETT FAMILY 
 PROFESSOR OF LAW, WASHINGTON AND LEE UNIVERSITY SCHOOL OF LAW

    Mr. JOST. Thank you for this opportunity to address you 
today. You have now heard 20 minutes of criticism of the 
Affordable Care Act and I have 5 minutes to respond. I wish I 
had 20 minutes to respond because a lot of what has been said 
is inaccurate and a lot of questions that have been raised have 
answers. I will try to confine my remarks.
    On January 1, 2014, millions of uninsured and uninsurable 
Americans will become eligible for coverage under the 
Affordable Care Act. The ACA expands coverage through five 
major mechanisms.
    These are the premium tax credits, which will make care 
affordable to millions of lower- and middle-income Americans, 
expand Medicaid for lower-income Americans, which in spite of 
the Supreme Court's decision will still extend Medicaid 
coverage to millions next year.
    Provisions that protect Americans from preexisting 
conditions from being denied insurance or charged higher 
premiums, the individual responsibility provision that asks 
Americans who cannot afford health insurance to purchase it or 
pay a tax, and finally the employer mandate, which requires 
large employers to offer affordable and adequate coverage to 
their full-time employees or risk facing a tax penalty to 
offset the cost the public will incur of covering their 
employees.
    Ninety-five percent of employers with 50 or more employees 
already offer health coverage in the absence of a mandate, but 
this mandate is there to encourage employers to maintain or 
expand coverage and discourage them from dropping it.
    On January 2, 2013, the Treasury Department announced it 
was delaying for 1 year the ACA employer and insurer reporting 
requirements. Treasury had heard from businesses, and I think 
we have heard this morning, that they needed more time to 
comply.
    Because it is impractical to implement the mandate without 
the reporting, enforcement was delayed until 2015. This 
decision raises four issues. First, was it legal.
    ACA's employer responsibility provisions do have an 
effective date of January 1, 2014. The reporting requirements, 
however, apply ``At such time as the Secretary may prescribe.''
    Also, the ACA requires the IRS to assess and collect 
penalties in the same manner as penalties under Chapter 68 of 
the Internal Revenue Code, and the IRS frequently abates 
Chapter 68 penalties.
    The IRS claims authority under Section 7805 and points to a 
long history of both Republican and Democratic Administrations 
delaying implementation of tax provisions when time and 
resource constraints have made immediate implementation 
impractical.
    A second question is whether delay jeopardizes the 
implementation of other ACA requirements, particularly 
provisions dealing with eligibility for premium tax credits.
    The law was never intended--exchanges were never intended 
to rely on insurer and employer reports, which are supplied 
long after tax credits are granted, to determine an applicant's 
employer coverage.
    In a final rule released last Friday, the Administration 
set out a system for gathering and verifying information needed 
to determine individual eligibility. It is described in my 
written testimony. I would be happy to explain it in as great 
length as you would please.
    It is not an honor system. Much of our tax reporting system 
is a honor system. This is not an honor system. Furthermore, 
false reporting carries a $250,000 fine and is a felony.
    The third question is whether the delay is justifiable from 
a policy perspective. The announcement was greeted favorably by 
a wide range of business and insurance interests who were 
concerned about the complications of reporting. The moratorium 
should allow employers and insurers to adjust their IT systems 
to make reporting possible beginning in 2015.
    In the meantime, employers will know how many of their 
employees if any are getting premium tax credits and will have 
time to adjust their coverage offering's to make sure they are 
in compliance by 2015.
    There is little evidence that employers will rush to exit 
employee coverage in the meantime. All the many reasons 
employers have for offering coverage today will continue to 
exist and the lack of one more incentive is not going to drive 
them to drop coverage.
    Finally, will the delay otherwise impede the implementation 
of the ACA. Congress in 2010 gave the Administration an 
enormous task, preserving our current employment and private-
insurance-based system while modifying it to serve all 
Americans.
    This Congress has made that task immensely more difficult 
by starving the Administration of the resources they need to do 
this task. The Administration continues to reiterate that the 
most important reforms, the premium tax credits and the 
exchanges, will be fully functional by January 1, 2014, and I 
know of no evidence to the contrary.
    Delaying the less essential employer mandate will make the 
Administration's job easier, not harder, and is likely to 
minimize potential confusion for employers and employees alike.
    If you actually care whether ACA implementation will help 
your constituents, take action immediately to appropriate the 
money needed to get the job done. If you are not willing to 
help with the job of ACA implementation, you have no standing 
to complain of delays.
    Thank you.
    [The prepared statement of Mr. Jost follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Chairman BRADY. Thank you. I have questions for Mr. 
Capretta, Mr. Roy and Mr. Falk. Mr. Capretta, you talked about 
fairness in your testimony that you submitted to us, that if 
the employer mandate is going to be delayed, it will only seem 
fair if the individual mandate is as well. Why should large 
companies be relieved of the responsibilities but not workers.
    You talk about is it fair to threaten tax penalties on the 
uninsured under these delays.
    Can you explain why you feel that way?
    Mr. CAPRETTA. Yes. Certainly the law requires that 
individuals beginning in 2014 sign up with the Government 
approved insurance, either through their employer or through 
the exchanges, or they pay a penalty of the greater of $95 or 1 
percent of their household income. That will be enforced in the 
tax system through what they are filing in taxes probably early 
in 2015.
    Look at the situation we have now, where you have many 
employees potentially not getting an offer of coverage from 
their employers because the employer requirements have now been 
suspended for a year. Moreover, we do not know if they were 
offered coverage through their employer.
    Moreover, in many of the exchanges around the country, in 
at least one State, only one plan is being offered, and in many 
States, maybe two plans being offered, so the choices are going 
to be quite limited.
    Is that the circumstances upon which you want to start 
imposing on many lower income families a tax for not signing up 
for coverage? They made the judgment that the employer system 
was not ready to be enforced in 2014. It is quite obvious to me 
that the individual mandate is also not ready to be enforced in 
2014.
    I would absolutely urge this Committee and the Congress 
that if you are going to delay one, you should delay both.
    Chairman BRADY. Thank you. Mr. Roy, if ObamaCare is not 
ready for businesses, is it ready for our families? You are a 
healthcare expert. Let's assume it is your family, your child 
is ill, your spouse needs treatment, is ObamaCare ready for 
your family in your opinion?
    Mr. ROY. No, I would not only echo Mr. Capretta's points 
but I would point out that the cost of coverage on the ACA 
exchanges is going to be much higher than what currently exists 
in the individual market for health insurance. Not only are we 
requiring through the individual mandate that individuals and 
families purchase insurance coverage, we are requiring them to 
buy coverage that in many cases is two to three times the cost 
of coverages available today.
    Chairman BRADY. For some, their healthcare costs will go up 
dramatically?
    Mr. ROY. That is correct.
    Chairman BRADY. Mr. Falk, you were not here a few years 
ago, but you are hearing history rewritten today. A few years 
ago, the employer mandate was taunted as one of the twin 
pillars of ObamaCare upon which this massive new law depended 
upon, and every effort by Republicans on this dias to eliminate 
the employer mandate was greeted with outrage, and claimed we 
were trying to gut ObamaCare.
    Today, you hear a different story, that the employer 
mandate, no big deal, really just an after thought that has no 
impact on businesses like yours. In fact, what we hear today is 
this 1 year reprieve is the greatest thing since sliced bread.
    Is the employer mandate impacting your business and your 
ability to hire, and is this reprieve what you seek, this 1 
year temporary reprieve, is that what you think is the 
solution?
    Mr. FALK. I think the 1 year reprieve really does not do 
anything to address the problems of the mandate itself. The 
mandate does affect me, although I am not under it right now, 
it does prevent me from growing my business to become even 
larger. As I told you, for 10 years, I opened up about 1.5 
locations per year on average, and I want it to grow forever. 
Since 2008, I have really slowed that down.
    Chairman BRADY. For every one of those, how many people are 
you hiring when you have a new franchise?
    Mr. FALK. Each location is anywhere between 10 and 25 
people, probably about three of those people on average are 
full-time, the rest are part-time. I am in a business where I 
have a lot of first-time employees, high school or college 
people or people who are 
just trying to make ends meet by getting a part-time job. The 
full-timers are not as numerous as the part-timers.
    Chairman BRADY. For you, the employer mandate is not a 
small thing?
    Mr. FALK. It is not a small thing at all. I have been 
nominated and selected as Franchisee of the Year many times, 
and I am very engaged with my franchise system. I am very 
engaged with the IFA. I am very engaged in business in general.
    I am embarrassed to say that I really have no idea about 
the employer mandate and where to find information. I do not 
know how to report, where to report, what the requirements are. 
It is coming up, I know that. I still do not have any 
information on it. I am upset to know that I have to worry 
about all these things rather than just grow my business and 
provide jobs. This takes up all my time now.
    I do not want to call out Mr. McDermott but he said on the 
4th of July, he did not spend his 4th of July worrying about 
the announcement and the changes, well, I did, as a business 
owner, I worked on the 4th of July. I worried about it. I 
fielded calls from other franchisees asking what this meant on 
the 4th of July.
    Chairman BRADY. Thank you. I would just point out, I 
appreciate Mr. Jost being here, but the IRS, the tax system, is 
not an honor system. At least the IRS uses $10 billion a year 
to enforce that honor system.
    The claim that the Administration has been starved just has 
no basis in fact. In fact, HHS used $8 billion to create out of 
thin air a bonus program for Medicare Advantage, to postpone 
the cuts before the election. I just wonder if they would like 
to have that $8 billion that they squandered back, now that 
they are claiming they do not have the ability to implement.
    Mr. JOST. Can I respond to that?
    Chairman BRADY. Sure.
    Mr. JOST. With respect to the first question about the tax 
system being an honor system, certainly some parts of our tax 
system are covered by reporting, but many parts are not.
    I would remind you that this Congress repealed the 1099 
requirement, which was supposed to take small businesses, or 
businesses off the honor system with respect to reporting 
purchases of goods of more than $600, and the CBO projected 
that lost $22 billion in revenue by putting businesses on the 
honor system.
    The tax gap in the United States in 2006 was estimated to 
be $385 billion of uncollected taxes. Those taxes were 
uncollected because we do essentially have an honor system for 
many parts of our----
    Chairman BRADY. What we are learning from the IRS 
investigations is our agents apparently are spending all their 
time pursuing political agendas rather than enforcement of our 
current law.
    Again, ObamaCare and HHS squandered $8 billion on a program 
they made out of thin air and got hammered on because they 
squandered that.
    Again, back to the issue here, is it fair to demand that 
businesses--that workers and their families have a Government 
mandate when we have given a reprieve for businesses.
    Dr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. It strikes me that 
the issue here is basically not about the delay because the 
businesses asked for the delay and the Government gave it to 
them. That is off the table.
    The real issue here is whether you want ObamaCare or not 
and are you going to do it, and are you going to have any kind 
of mandates in it.
    From the very start, everybody has understood that for a 
system to work, you have to have everybody in. Justice Scalia 
in his oral questioning on this case in the Supreme Court when 
talking about the mandatory coverage provisions said, ``My 
approach would be say if you take the heart out of the statute, 
the statute is gone. There is going to be a deficit that is to 
be made up by the mandatory coverage provisions.''
    All that money has to come from somewhere, so you just are 
put to a choice, I guess, bankrupting the insurance companies 
and the whole system comes tumbling down, or else enacting a 
Federal subsidy program which is what the insurance companies 
would like.
    It is clear there is a difference between the employer 
mandate and the individual mandate. The individual mandate is 
the core of the issue. If we do not require Americans, we are 
going to continue to have people who are free riders, who walk 
into the emergency room, get taken care of, and you and I who 
have insurance pay for it, $1,000 a year. What this system is 
doing is saying let's everybody pay what we can.
    I listened to Mr. Falk and I am really sorry that you had 
such a bad weekend. Healthcare.gov is on the computer. You can 
look in there. There is a section for small business. I am sure 
you have looked at it already and you can read, obviously, so 
you know what is there.
    Mr. Jost, explain what is really going to happen to 
individuals when this law is implemented or in January, as 
people enroll from September or October 1 to January, what is 
going to happen to them?
    Mr. JOST. Thank you. One thing I would like to point out to 
begin with is the individual mandate is already being phased 
in, so if we are trying to level the playing field that is what 
HHS is doing.
    The first year of the sanction for not complying with the 
individual mandate is $95, and again, that is only if you do 
not fit into one of the many exemptions to the rule or you can 
afford health insurance otherwise.
    It then phases up over 3 years. Well, we are essentially 
doing the same thing now for businesses. We are saying you do 
not have to comply the first year, but you do have to get 
serious about compliance after that.
    As far as leveling the playing field, that is in a sense 
what the Administration is doing, although I am not sure I 
appreciate the way they did it.
    In terms of what happens now, on October 1, the exchanges 
are going to open their doors. People who cannot afford health 
insurance, people who find insurance unaffordable, people who 
are ineligible for Medicaid, can show up at the exchanges and 
sign up. There are going to be many insurers, insurance agents 
and brokers and navigators and community assistors, enrollment 
counselors and others trying to get them in that door.
    I have a good friend at church who a week ago discovered 
that she had a big lump on her back. She went to see a doctor 
in the emergency room. The doctor said it could be cancer, I 
can operate on it, but you will have to pay me a quarter of my 
fee up front. She is uninsured. As of January 1, she is going 
to be able to get health insurance. She is going to be able to 
get health insurance she can afford. She will be able to get 
medical care. That is what is going to happen.
    On the individual mandate----
    Mr. MCDERMOTT. How will they go about verifying whether she 
is eligible for a subsidy or not?
    Mr. JOST. She will go to the exchange, and this is what 
came out in the rules, and I frankly spent 18 hours on Saturday 
reading the 600-page rule.
    Mr. MCDERMOTT. Thank you.
    Mr. JOST. If anybody wants to know what it says, you can go 
to my blog at HealthAffairs.org, and it is there.
    The way the verification system works for income is the 
first thing, the exchange will log into the data hub, which 
will have information from the IRS, from Social Security, from 
Homeland Security. It will verify that the person is a citizen 
or legal resident, and the amount of income they reported the 
prior year.
    If the income is essentially the same, there is not a 
problem. If they are reporting now my income has significantly 
decreased, the Federal exchanges, which will operate in two-
thirds of the States, will ask for verification of that.
    The State exchanges for the first year have the flexibility 
of instead doing a statistical sampling, so they will for a 
sample of the people in the exchange, they will ask for 
verification of income, but the rest, they will not for the 
first year, to relieve the burden from the State exchanges.
    Chairman BRADY. Thank you. Mr. Jost, perhaps we can return 
to you in another line of questioning. Time has expired. Mr. 
Johnson.
    Mr. JOHNSON. Thank you, Mr. Chairman. I hate to see a 
dictatorship come into this country, but it sure looks like 
that is what is happening with health care.
    Mr. Capretta, many have raised a concern of the impact of 
ObamaCare on the Federal Government and our budget and the 
criticism was there was over $1.8 trillion in spending, and 
many of the pay-fors were in fact budget gimmicks. They claimed 
the Class Act would raise $80 billion. The Administration shut 
it down because they admitted it was fiscally unsustainable. 
Congress repealed it.
    The 1099 reporting requirement, an outrageous reporting 
requirement on business, raised $22 billion. Congress repealed 
that.
    Both the House and Senate have voted to repeal the medical 
device tax because it is costing jobs and hurting medical 
innovation. That tax raised over $30 billion.
    Now the employer mandate is delayed, lost at least $10 
billion in 2014 alone in penalties. As you point out, if this 
never goes into effect, that is another $140 billion.
    With the lack of employer reporting, there will be more 
errors and more subsidies so the cost of ObamaCare is just 
going up and up and up.
    Mr. Capretta, is ObamaCare now officially a fiscal time 
bomb and can it be considered a drain on our economy and the 
American family?
    Mr. CAPRETTA. Yes, the short answer is yes. It was always a 
fiscal time bomb. It has been made more so by the fact that the 
Administration is implementing something that was not passed. 
As you indicated, you enumerated many of the instances. There 
are a few more.
    There is a health insurance tax that was enacted as part of 
this law that applies only to fully insured products but not 
self insured plans. It is a huge distortion in the insurance 
marketplace, pushing a lot of people that probably should not 
self insure towards self insurance to avoid the tax. Another 
bad idea, it probably will not survive the long term.
    You mentioned the employer mandate. Obviously, at $140 
billion, it looks to be in question. The individual mandate is 
tied to it in a lot of ways. They are thinking they are going 
to collect about $45 billion over the next decade from the 
individual mandate payments. At least in the first year, I very 
much question whether they can collect $2 billion.
    You now have a system that it is hard to figure out whether 
people have an affordable offer of coverage from their 
employer. There is going to be a lot more people presumably in 
the exchanges getting subsidies that actually got an affordable 
offer of coverage.
    Finally, you know they cut about $700 billion out of the 
Medicare program as part of this. They essentially double 
counted the money. They spent the money in this new entitlement 
program and they are counting on those reserves to pay future 
Medicare claims.
    The whole thing was built on a house of cards. It is not 
fiscally sustainable. This is one more element, I think, the 
announcement last week that shows it was built on financing 
that we cannot count on.
    Mr. JOHNSON. Docs like to get paid, you know. I am not sure 
they are going to under this system. I remember when I was 
stationed in England in the Air Force, as you know, they have 
that system over there. I walked into the doc's office with my 
son and they said are you paying. I said yes. Come right in, 
ahead of about 100 people that were waiting out there. That is 
the way you make health care work.
    Mr. Capretta, I think it is officially a fiscal time bomb. 
You said that. Can it be considered a drain on our economy and 
the American family?
    Mr. CAPRETTA. I think last week's announcement by the 
Administration was a concession that it was. One thing that 
strikes me, it is quite clear that employers are going to the 
Administration and saying hey, this is costing jobs, if you 
look at the recent data, there is lots of evidence that small 
businesses are not growing as fast, they are moving people into 
part-time work.
    The Administration, I am sure, is hearing this from lots of 
people around the country, their allies that are trying to 
promote the law.
    If it was a bad idea to enforce this in 2014, I cannot 
imagine it is going to be a good idea in 2015. They are going 
to have a real problem, I think, justifying making this a 
permanent part of the law going forward.
    Yes, it is a burden on the economy and frankly I think the 
Administration conceded as much.
    Mr. JOHNSON. Thank you, sir. Thank you, Mr. Chairman. I 
yield back.
    Chairman BRADY. Thank you. Mr. Thompson is recognized.
    Mr. THOMPSON. Thank you, Mr. Chairman. Thank you for having 
today's hearing and thanks to all the witnesses for being here.
    I do not think you can claim that anybody is excited about 
this delay. I do not like the delay any more than anybody else. 
I would suggest it is better to do the delay and to get this 
right than not do the delay and get it wrong.
    This is important stuff. I think it is important to point 
out that we did not do healthcare reform because we did not 
have anything else to do one day. We did not wake up and say 
nothing is going on, let's do healthcare reform.
    Healthcare reform was in response to a national crisis. I 
do not think we can downplay that. We had folks who were not 
insured. We all know that. We had people that were a layoff 
away from having no insurance at all or a sickness away from 
having no coverage at all. That is devastating to everybody, 
including the business community.
    We had a system where we had uncompensated care costs in 
every hospital and every district across this country. Every 
one of us had millions of dollars of annual uncompensated 
healthcare costs to our medical providers and to our hospitals. 
The system was broken, and that is what we tried to fix.
    It is important that we get it right. It is important that 
we insure folks. I believe that we are going to hit other snags 
along the way. I do not think there is any program of any 
importance where this is not going to be the case.
    I know that people across this country, people in my State, 
in particular in California, are working very hard to make sure 
that affordable health care and healthcare insurance are 
available to people who need it.
    Mr. Dennis, you talked about some business issues. What is 
your business? What business do you own?
    Chairman BRADY. Could you hit that microphone?
    Mr. THOMPSON. What business do you own?
    Mr. DENNIS. Excuse me. I'm a Senior Fellow with the NFIB 
Research Foundation. So I----
    Mr. THOMPSON. But you had mentioned some of the challenges 
that businesses were facing. I can tell you without question 
the businesses in my district want this to work.
    And, Mr. Falk, you talked about the lack of information. 
Does your association not provide its members with help in 
regard to many different programs, including healthcare reform?
    Mr. FALK. Absolutely. I have been to 15 to 20 different 
conferences that we have had.
    Mr. THOMPSON. I know that local Chambers of Commerce do it. 
I know that other business associations do it.
    Mr. FALK. Yes, yes.
    Mr. THOMPSON. I have had a number of town hall meetings in 
my district for business folks.
    Mr. FALK. Yes.
    Mr. THOMPSON. For small owners to come in and get answers 
to these questions.
    Mr. FALK. But the problem, Mr. Thompson--excuse me--is that 
it----
    Mr. THOMPSON. Excuse me. Let me. I have got a limited 
amount of time.
    It is important that you do have these answers, and it is 
important for all of us to make sure that we work to provide 
those.
    Mr. Jost, do you see this delay in the employer 
responsibility provision impacting access to healthcare 
insurance in States like California who have been working 
diligently to set up their exchanges?
    Mr. JOST. I do not think this will have a significant 
impact. I think the delay of the individual mandate would have 
a significant impact.
    I am a consumer representative to the National Association 
of Insurance Commissioners and talk to a lot of regulators and 
insurers, and they would be very, very worried if the 
individual mandate would be delayed because as weak as it is, 
it is what is going to keep insurance markets from collapsing 
once we open the door to people with preexisting conditions and 
offer Federal tax credits to help people get insured.
    Mr. THOMPSON. Mr. McDermott had mentioned that one of the 
reasons this was postponed was in response to business 
requests. I know you are not privy to discussions at Treasury, 
but do you believe it is fair to say that one of the reasons is 
that they have been hearing from businesses that they need it?
    Mr. JOST. Absolutely, and I included in my testimony 
statement by, I think, six major associations, like AHIP, like 
the Employee Benefits Council, that came out strongly affirming 
this when it was announced.
    Mr. THOMPSON. And is this unprecedented? Have 
Administrations delayed implementation?
    Mr. JOST. Not at all. The Administration, in fact, has 
released a list of times when other Administrations, including 
the previous Administration, have delayed effective dates for--
--
    Chairman BRADY. Thank you. Your time has expired.
    Mr. Ryan.
    Mr. RYAN. Thank you.
    If this is not a case for the need to simplify government, 
I do not know what is. This law is literally just unraveling 
before our eyes. I do not know how you can conclude that this 
is not a total fiasco.
    Mr. Falk, I want to give you a chance to respond in a 
second, but, Mr. Capretta, you are a well-known budget and 
policy fiscal expert, healthcare expert. Give me a sense of 
what the Administration was looking at as they saw this 
employer mandate unfolding from a perspective of what it was 
going to do to the economy and what it was going to do to 
health insurance markets.
    What were the actuarial estimates, the various ranges? I 
know Deloitte put out a big study as to what would have 
happened to people with employer-sponsored health insurance 
once this mandate came about. If you recall, the law was sold 
on the premise that if you like what you have got, you can keep 
it.
    And so, you know, for those of us who were here when this 
law was written, this is a law that was written which was never 
intended to go into law. I mean, the law as written was a 
Senate bill written basically on Christmas Eve with the intent 
to get into conference, then rewrite the law, fix it with the 
House, and then pass a final version.
    But because they lost a Senate race in Massachusetts, 
because they did not have the ability to go back to the Senate 
again and pass an improved version, they took the bill that 
they wrote in duress on Christmas Eve and shoehorned that into 
law, which is what we have today.
    And so we see all of these shoes dropping, all of this 
happening. What do you think the Administration was looking at? 
Because we will have Treasury here. We want to dig into their 
actuarial models and the rest. What were they looking at 
happening in the employer-sponsored health insurance market 
from your judgment because you look at the same numbers?
    Mr. CAPRETTA. I think they were looking at two things. If 
you go back and look in 2009 and read what Dr. Reischauer said 
about the design of this particular employer mandate, I think 
the Treasury Department working with the employer community 
figured out it is essentially unenforceable because of the 
massive data requirements they are imposing on employers all 
across the country.
    So they figured out, number one, this thing was way, way 
too much of a burden just to comply with it, with employers 
having to file these forms, filling out details about the 
insurance they were offering. It is a massive new burden, and 
employers are going to them saying, ``You have got to be 
kidding me. We have to change every IT system in the country to 
comply with this thing. It ain't going to work.''
    I think the Treasury Department kind of figured that out, 
and they said, ``Look, we cannot do this. It is going to be 
devastating. It will be a total mess.''
    The second thing I think they figured out is what you are 
alluding to, which is that, you know, they are kind of stuck at 
this point though because they have this massive subsidy system 
going in through the exchanges, and the reason the employer 
mandate was there in part was because they wanted to make sure 
there was not a huge exodus out of the employer system. Okay?
    So they put this massive system in place to say, hey, if 
you are of a certain size, you have go to report. You have got 
to provide the coverage.
    Now that that is gone at least for 1 year, they may be 
stuck with actually it is easier for employers just to dump 
their people into the exchanges. Now, you know, I am not sure 
that that is what they are--you know, there is a lot of 
cynicism going around about what they are up to here, but I 
really do not know if that is their game plan, but certainly 
the employer mandate was put in there in part to create a 
firewall, as they called it, around the employer system and not 
allow leakage into the exchanges, which would drive up the 
budgetary cost.
    Treasury has probably figured out that, look, the burden we 
are going to impose for 1 year on the employer system was so 
much it was going to cost jobs. It was going to be very 
disruptive. It was going to probably explode and actually not 
work. Therefore, you know, they were stuck between a rock and a 
hard place, and they picked the easy way out.
    Mr. RYAN. Yes, and so we see estimates where anywhere from 
20 to 60 million people could have lost their employer-
sponsored health insurance over a long period of time and 
gotten dumped into the exchanges, and so we have the exchanges 
where we are, as Mr. Roy pointed out, in some cases doubling 
and tripling the cost of health insurance. So through the 
regulations we are imposing much, much higher health insurance 
costs on people, but we will subsidize them with taxpayer 
dollars. So make health insurance more expensive, and then 
subsidize it so the consumer does not feel the price as much. 
The taxpayer bears the burden. The employer has a mandate. The 
employer has a greater incentive to just stop offering health 
insurance to their employees.
    Most employers are sitting around the table thinking, 
``Well, if my competitor is going to drop health insurance and 
put their employees in the exchange, all I have got to do is 
pay a $2,000 per person, you know, tax indexed at inflation 
versus, you know, $10 to $20,000 a family plan.''
    Once the employer makes that decision, it is not long after 
that their competitors will have to make the same decision and 
dump their employees into the exchange, and the costs are going 
to explode.
    Mr. Johnson walked you through the charade of the Pay-Fors. 
I cannot see that this ruling right here will do nothing more 
than further explode the cost of this thing.
    There is so much more I could get into, but in the interest 
of time, I will not.
    Thank you.
    Chairman BRADY. Thank you. Your time has expired.
    Mr. Kind is recognized.
    Mr. KIND. Thank you, Mr. Chairman.
    I want to thank the panelists for your testimony here 
today. I think it is always helpful for us to have these 
discussions.
    And, Mr. Falk, I especially appreciated your testimony 
today, you know, the challenges that you are facing as a small 
business owner, but to my good friend from Wisconsin, I mean, 
the same point could be made on the opposite side.
    I was back home last week, as we all were, for the 4th of 
July, and I met with a small business owner with 55 employees. 
He says, ``Ron, I am glad there is an employer mandate as part 
of it because as a small business owner, when I first created 
this business I bent over backwards to make sure that my 
employees had affordable healthcare coverage, and yet right now 
I look down the street, and I have got competitors who are not 
doing it.''
    And he is providing affordable coverage with 55 employees 
because he thinks it is the right thing to do. It helps with 
recruitment. It helps with retention, and he feels it is the 
right thing to do for his employees.
    And, in fact, over 95 percent of businesses over 50 are 
already providing coverage even though there is no requirement 
for them to do so because they have made a business calculation 
that it is in their best interest for recruitment and for 
retention and because it is the right thing to do to try to 
provide healthcare coverage.
    So I think the same argument can be made on the other side. 
Mr. Falk, you said you have 43 employees. Are you right now 
providing healthcare coverage for them?
    Mr. FALK. Actually I have over 100 employees. It is 43 
full-time equivalents, and, yes, I do provide for my full-time 
employees. I do not think the argument is there, the argument 
that you made. I think the argument is more the Band-Aid and 
the reporting requirements.
    Mr. KIND. But you are currently providing coverage for 
yours?
    Mr. FALK. For the full-timers, yes.
    Mr. KIND. Let me just ask the panel right down the line a 
simple question. Mr. Roy, what is your recommendation for this 
Congress, to fully repeal the Affordable Care Act or to fix 
certain features of it to make it work better?
    Mr. ROY. I think that repealing and replacing the 
Affordable Care Act would be an optimal policy outcome.
    Mr. KIND. Mr. Capretta, what is your recommendation, to 
fully repeal or to fix?
    Mr. CAPRETTA. I am for repealing and replacing it.
    Mr. KIND. Mr. Dennis, what is your recommendation to the 
Congress?
    Mr. DENNIS. Repeal and replace.
    Mr. KIND. Mr. Falk.
    Mr. FALK. If it does not get replaced enough, repeal it.
    Mr. KIND. Mr. Jost.
    Mr. JOST. I think that there are some things that need to 
be fixed, and I think they can be fixed if this Congress would 
set its mind to that task.
    Mr. KIND. My dad probably gave me the best political advice 
as a young kid growing up. He said, ``Son, you are going to 
face two critics in life, people who criticize you because they 
want to see you do better and those who criticize you because 
they want to see you fail.''
    I think that is the major obstacle that the Affordable Care 
Act faces today, is there is so much opposition for political 
reasons alone to see that this thing fails and not whether it 
is going to help small business or help Americans throughout 
the country, and that is the real tragedy with these type of 
hearings and the discussion that we are having under the 
Affordable Care Act today.
    Mr. Dennis, you are a representative of the NFIB. Every 
year I introduce the SHOP Act, which became the basis of the 
health insurance exchanges. The NFIB was fully supportive of 
it. We did not have an employer mandate as part of the 
legislation, but when I introduced the bill there were an equal 
number of Republicans and Democrats that supported it.
    And now, Mr. Jost, we have had seven States now report back 
on what the rates would be for small businesses entering the 
SHOP exchanges, and they are coming in below what current rates 
are, and it is because what the exchange does is it sets up 
competition and transparency, finally empowering small 
businesses to have the same type of leverage that large 
businesses have today.
    Mr. Dennis, do you know what percentage of your membership 
at NFIB have 50 or fewer employees?
    Mr. DENNIS. Fifty or fewer?
    Mr. KIND. Yes.
    Mr. DENNIS. Probably dealing with about 85 percent, 
something like that.
    Mr. KIND. I have got a chart. I guess we ran it off, your 
membership list in that, but it showed those with 40 or more 
employees is roughly a little bit less than 7 percent of your 
members.
    Mr. DENNIS. Yes.
    Mr. KIND. So around 93 percent of them are below 50 
employees.
    Mr. DENNIS. That is correct.
    Mr. KIND. So they are not even going to be impacted right 
now on the employer mandate; is that right?
    Mr. DENNIS. No, that is not correct.
    Mr. KIND. And what type of information are you sending out 
to those members in regards to the Affordable Care Act today?
    Mr. DENNIS. Well, we have basically a whole series of 
programs where we try and disseminate information to the 
members, printed as well as calling and conference type things. 
We send staff out.
    Mr. KIND. Good. I am glad you are doing that because there 
is a whole lot of misinformation being sent out misinforming 
people, I think, deliberately again to scare them and to make 
sure that this legislation fails.
    Mr. Falk, are you also a member of NFIB?
    Mr. FALK. No, I am not.
    Mr. KIND. Okay.
    Mr. FALK. Sorry.
    Mr. DENNIS. That is all right.
    [Laughter.]
    Mr. KIND. I did not want to put you on the spot next to Mr. 
Dennis at all now, but Mr. McDermott did point out we have got 
healthcare.gov. We have got SBA.gov. There are a lot of sites 
that small businesses can go to get just the facts, and that is 
what I am hearing from folks back home more than ever. We just 
want the facts of what is happening and what we need to do to 
prepare for what is coming up.
    And so if we can just focus on that and have honest 
conversations like we are trying to have today, I think all of 
us would be much better off.
    Thank you, Mr. Chairman.
    Chairman BRADY. Your time has expired.
    Mr. Nunes.
    Mr. NUNES. Thank you, Mr. Chairman.
    I will just say that Republicans want health care to be 
successful. They want the American people to have good quality 
health care, and what we see this as is not about some 
political issue about having the bill fail. We see this as 
definitely something that leans toward socialism, and socialism 
has been known around the globe to fail time and time again.
    So I remind my friends on the other side of the aisle, as 
you may remember from the 2010 debate, these were the claims 
that we were making, was this was trying to centralize the 
healthcare system in Washington which has failed around the 
globe.
    We want to improve health care. Now, I have a question that 
I am going to give to Mr. Capretta and to Mr. Jost. I do not 
know what part of the law the Administration is using to allow 
to just say that this mandate on the employer side can just be 
ignored, and I do not know why my friends on the other side of 
the aisle are not insisting that the letter of the law is 
followed.
    So Mr. Capretta, do you know what waiver that they used, 
what part of the Affordable Care Act or ObamaCare was used? 
What are they citing to essentially waive this requirement?
    Mr. CAPRETTA. In the blog post that has been referenced, 
they cite the reporting requirements is where they are going 
for a delay. So they are not actually going into the structure 
of the mandate itself to say it can be delayed. They are going 
to the section that requires employers to report on what they 
are doing regarding health insurance.
    But there has been an inquiry sent by your leadership in 
the House to the President and his team asking that very 
question. I think they have been asked by the press, and they 
have not responded yet. So I do not know. There has been no 
official response from the Administration about their legal 
reasoning about how they could do this.
    Mr. NUNES. What is your personal opinion, Mr. Capretta?
    Mr. CAPRETTA. My personal opinion is that--well, I am not a 
lawyer. Let me stipulate that. Mr. Jost is a lawyer. So he can 
answer some of the questions about the legal part of it, but I 
think it is quite obvious on its face this is not what Congress 
intended. Whatever the legal, you know, however they might 
stretch some of the statute to say, ``Well, you know, we can 
interpret this,'' this is not what was intended.
    I mean, obviously the employer mandate was supposed to go 
into effect in 2014. They established a reporting system that 
was supposed to go into effect in 2014. If you read the 
statute, it is pretty obvious that is what was intended, but 
you know, I do not know whether they can stretch the language 
to do something different.
    Mr. NUNES. Thank you, Mr. Capretta.
    Mr. Jost.
    Mr. JOST. There was a CRS report on this yesterday, and it 
referenced an earlier CRS report that referenced the Trap case, 
which is the leading case in this area.
    The IRS is relying on its general rulemaking authority, and 
what the Trap case said, which is a D.C. Circuit case which is 
the leading case in this area, is that when a question rises as 
to whether an Administration can delay enforcement of a law, it 
is subject to a rule of reason. Where Congress had provided a 
timetable or other indication that may supply content, although 
in the D.C. Circuit and several other circuits the courts have 
held that that does not make an absolute requirement.
    But other things that can be considered are whether it 
would damage human health and welfare, whether the court should 
consider the expediting delayed action or other agency 
activities of the higher and competing priority, in other 
words, resource constrained; what are the interests that would 
be prejudiced by the delay.
    So I think looking at the judicial legal authority here, I 
think that they do have some room.
    Mr. NUNES. Okay. So unions have been granted waivers. Other 
special interests have been granted waivers. Now you have done 
an employer waiver. Why can you not do an individual mandate 
waiver?
    Mr. JOST. Well, in fact, in the first place, I am not sure 
what you are referring to with respect to unions. There was a 
waiver that was included in the statute for a delay of the 
annual limits requirement, and some unions received a delay 
under that, although a lot of businesses did as well.
    Mr. NUNES. So let me----
    Mr. JOST. Can I just finish?
    Mr. NUNES. Can the White House grant an individual waiver? 
That is my question.
    Mr. JOST. The statute----
    Mr. NUNES. For an individual mandate.
    Mr. JOST. The statute permits a hardship waiver and in 
regulations that were published about a week or two ago, the 
Administration interpreted that very broadly. There will be 
many, many people who will qualify for a hardship waiver, but 
of course, there are already, I think, seven or eight other 
exemptions, including an exemption for everybody who cannot 
afford coverage.
    So the individual mandate has been very widely 
misunderstood. It is not a requirement that applies to 
everyone.
    Mr. NUNES. So why not just do an individual mandate waiver 
also at the same time?
    Mr. JOST. Because people who can afford health insurance 
ought to buy health insurance. They ought not to wait until 
they get sick and then assume that their neighbors will take 
care of them. It is an individual responsibility requirement, 
is what it is called.
    Mr. NUNES. Mandated by the government. That is not 
individual----
    Mr. JOST. Yes, just like--just like----
    Mr. NUNES [continuing]. Responsibility or individual 
liberty. That is socialism.
    Mr. JOST. Just like government requires that you get car 
insurance.
    Mr. NUNES. Yield back.
    Chairman BRADY. All time has expired.
    Mr. Pascrell.
    Mr. PASCRELL. Yes, Mr. Chairman.
    When all else fails, then you have got to send up the red 
flags: socialism, apocalypse now. And we heard it again just 
recently.
    Well, I resent the fact that, first of all, you accused 
those folks who sat hour after hour in putting the legislation 
together of doing a Christmas Eve swing. Months after months, 
listened to many people on this issue.
    Is this perfect? There is not a piece of legislation that 
ever came through this body that was perfect. So we need 
change. You cannot deny that ObamaCare--we will use your term--
is helping millions of Americans. Do you want chapter and 
verse? I will give it to you.
    You cannot deny that most employers offer health insurance 
even without a mandate, and small businesses will be exempt.
    You have no ideas on health reform yourself. In fact, those 
you put before the Congress your own party rejected. So you 
cannot have it both ways.
    More important, more important, it is better to be right 
than fast. And, Sam, you know that better than anybody on this 
panel.
    Things change. Things need to be corrected. So, Mr. Falk, 
when you say that the information is not existing, I will give 
you the information. We have got it in print now.
    Mr. FALK. I did not say it did not exist, sir.
    Mr. PASCRELL. Well, it is here.
    Mr. FALK. I agree.
    Mr. PASCRELL. It is interesting. In fact, on the first page 
of the regulations that you referred to, you have not looked at 
anyway. It is a very interesting part of this legislation, the 
medical loss ratio. Do you know what that is, sir?
    Mr. FALK. No, I do not, sir.
    Mr. PASCRELL. Let me tell you what the medical loss ratio 
is, and that is insurance companies now must provide and spend 
a specified percentage of premium dollars on medical care, 
which they never had to do before. This is very critical to 
everybody.
    There are a lot of good things in this legislation. I am 
glad you are the only panelist on the left of Mr. Jost. That 
said, well, if it cannot be fixed enough, then maybe I would 
repeal it.
    This is all about repeal. They do not want to change it. 
They want to do away with it. The election is over. The Supreme 
Court decision has been rendered. But we are going to continue 
to try to do away with this entire piece of legislation, which 
is reforming health care.
    Now, Mr. Roy, the more than 95 percent of businesses are 
small businesses. They have got fewer than 50 employees that 
would not be subject to this mandate. Do you agree with me so 
far?
    Mr. ROY. Not subject to this mandate is not a static term 
because businesses grow and----
    Mr. PASCRELL. Do you agree with me or disagree with me.
    Mr. ROY. I disagree with you.
    Mr. PASCRELL. Good. An approximately 200,000 large 
businesses with more than 50 employee are subject to the 
employer responsibility requirement. Of these 200,000 large 
employers, at least 95 percent already offer health insurance 
to their employees.
    Do you agree with that statement, Mr. Jost?
    Mr. JOST. Yes.
    Mr. PASCRELL. You agree.
    Do you agree with Mr. Jost?
    Mr. ROY. I do agree, but as I mentioned that does not mean 
that all of those employees are covered.
    Mr. PASCRELL. And what do you mean by that?
    Mr. ROY. Ninety-five percent or 97 percent, as I mentioned 
in my remarks, 97 percent of businesses with greater than 50 or 
more employee do offer health benefits, but not necessarily to 
all employees. A significant number of the uninsured are 
actually people who are employed by those firms.
    Mr. PASCRELL. Mr. Jost, do you think that it seems likely 
that employers who currently offer coverage right now would 
start dropping their health insurance all of a sudden?
    Mr. JOST. No.
    Mr. PASCRELL. Why not?
    Mr. JOST. Particularly if they know that it is going to 
come back in 2015.
    Mr. PASCRELL. This is all I have been hearing over here, 
but why do you not think so?
    Mr. JOST. Well, number one, the main reason employers offer 
health insurance to their employees is for recruitment and 
retention. Employees expect health insurance.
    Another reason is that there are huge tax subsidies that 
are already there, which was mentioned by Mr. Capretta and Mr. 
Roy.
    Mr. PASCRELL. Yes.
    Mr. JOST. If we wanted to have the largest tax increase in 
American history by abolishing the employer tax deductions and 
exclusions, we could talk about that. I am not sure that many 
Members on this Committee want to do that.
    Mr. PASCRELL. I would.
    Mr. Roy, do you agree with Mr. Jost?
    Mr. ROY. I do agree that it would be desirable to move away 
from an employer-sponsored system to an individually-sponsored 
system.
    Mr. PASCRELL. Thank you very much, Mr. Chairman.
    Chairman BRADY. Thank you.
    Mr. Roskam.
    Mr. ROSKAM. Thank you, Mr. Chairman.
    So are we looking for perfect in response to my friend from 
New Jersey? We are not looking for perfect. We offered 30 
amendments when we were in the minority that were swatted away 
by the majority late into the night, not considered, not 
adopted. Many of them were thoughtful attempts to improve the 
bill. So we are not looking for perfect.
    What we are looking for is even a reasonable 
characterization of what was promised. What was promised to the 
American public by the President of the United States was you 
get to keep your physician. If you like him, you get to keep 
him. Do you remember that? That is not true.
    Average healthcare costs per family are going to go down 
$2,500 a year. Do you remember that? That is not true.
    So we are looking for a reasonable assimilation of the 
representation to the public by the President of the United 
States and his Administration during the course of the debate. 
That is long gone. That is far in the distance. That is never 
going to happen.
    And so now here we are, and we are debating and we are 
considering what is clearly an embarrassment. And it is an 
embarrassment that we could see a foreshadowing of it when then 
Speaker of the House Nancy Pelosi said this out loud. She said, 
``We have to pass this bill so that you can see what is in 
it.'' Wow, she just does not disappoint.
    And here we are. So now we have got a situation where 
essentially the Administration for years has been pumping 
sunshine. For years the Administration when asked, ``How are 
you doing this exactly? How is this great feat coming to 
fruition?'' and this Committee and in all sorts of public 
representations has been told, ``It is fine. It is great. We 
have got it under control. In fact, we have got a wonderful 
plan for your life, and it is going to be absolutely 
terrific.''
    And now what happens? Later before a holiday weekend the 
Administration on a blog post essentially whispers, ``It is not 
working. Oops. This is a mess.''
    Yeah, but you know what? You may not be able to hear me, 
but the whole country heard that whisper, and it was a blog 
post. We were admonished a couple of minutes ago to go check 
Websites. Go check Websites? It is ridiculous.
    So now here we are, and I have a prediction to make. My 
prediction is this, that the ObamaCare statute, the Affordable 
Care Act as it has been enacted is unsustainable. It is 
unsustainable because of a whole host of reasons. The 
architecture is fundamentally flawed, and it is an edifice that 
is now wavering.
    And one of two things is going to happen. Many of the 
proponents, not all, but many of the proponents of ObamaCare, 
actually their heart's desire is the single-payer system, and 
they will tell you that. They admitted that during the course. 
They could not get single-payer. Their fallback position was 
the public option. Could not get the public option. Fallback 
position was ObamaCare. That is their heart's desire, a single-
payer system.
    That is one way that this could go. The other way it could 
go, and it is my hope that it goes in a very different 
direction, and that is toward a consumer-oriented healthcare 
system. So do we want to repeal this? You bet your life. Caught 
red-handed, we absolutely want to repeal this. We want to 
replace it.
    The red herring argument that we heard a couple of minutes 
ago from my friend from Wisconsin, Mr. Kind, was that somehow a 
desire to see something fail is somehow unjust. No, what we 
want, as Mr. Nunes said, is we want to see health care 
improved, but we have got a far different vision, a vision that 
was blocked out during the debate in this Committee in this 
room late at night during the debate on ObamaCare, but now it 
is coming to fruition, and we have got an opportunity to remedy 
this.
    And my sense is that the public is waking up. The public 
has an awareness there was a false claim, and they want to 
redeem now that false claim and revisit the false 
representation that was made to them, and it is their hope that 
this Congress is part of that solution, and I have every 
confidence that we can do this, that we can have patient-
oriented, consumer health care that empowers patients and 
physicians to meet one another and have an absolutely terrific 
system without big government telling us what is right and what 
is wrong.
    I yield back.
    Chairman BRADY. Thank you.
    Mr. Rangel.
    Mr. RANGEL. Thank you, Mr. Chairman, for the courtesy that 
you have extended in allowing me to participate in these very, 
very important hearings.
    And to my friend and colleague, Mr. Roskam, I join with the 
sunshine pumpers, and I think that is what all of us are. We 
really try hard to improve the quality of life for Americans, 
and we have these hearings to see whether or not there are 
storms or impediments, to see whether or not we are doing the 
right thing.
    And so I want to welcome all of you to come to help us to 
make certain that if we are on the wrong track, you can help us 
by improving the work that we are doing as a Congress.
    Now, it is my basic understanding that with the exception 
of Mr. Jost, the other four witnesses support repeal. So there 
are no sunshine pushers there. You believe that we ought to get 
rid of this, and I assume out of the four, with the exception 
of Mr. Falk, right now none of you have a small business. You 
do not make payrolls and you do not have responsibilities for 
healthcare and pension benefits for anybody; is that correct?
    And I would assume further that you are not just 
volunteering your thoughts. The three of you are experts in 
what you do unlike Mr. Falk, and you get paid for what you do 
the same way doctors and lawyers get paid. Calling you 
lobbyists would not be a stigma. It would be just a label as to 
what your business is. Am I correct in that assumption, Dr. 
Roy?
    Mr. ROY. No. I am not a lobbyist. I am a Senior Fellow with 
the Manhattan Institute, which is a nonpartisan policy research 
institute, where I have actually articulated alternatives to 
the Affordable Care Act that would provide universal coverage.
    Mr. RANGEL. So you do not get any compensation--no, no. You 
are extremely qualified in research. I read that, but you do 
not get paid to take a position? In other words, you would not 
be here, your firm, the research outfit, if you were supporting 
or trying to improve the health care. You are here basically, 
your income is based on the fact that that is your professional 
position. I mean, you are not a doctor. You are not----
    Mr. ROY. I would strongly, strongly disagree with you. I 
have articulated----
    Mr. RANGEL. Do not disagree. Just say what it is.
    Mr. ROY. Yes, I am sorry. My position----
    Mr. RANGEL. I am asking.
    Mr. ROY. My positions are on the record. I write them every 
day on the Internet. I have not only advocated----
    Mr. RANGEL. I am asking you whether you get paid for 
advocating your position. That is all. I do not doubt that you 
are professional with it.
    Mr. ROY. I do not get paid to advocate any particular 
position. I----
    Mr. RANGEL. Well, when you were working for the person that 
was running for President, did you get paid for advocating a 
health position with him?
    Mr. ROY. No, I did not.
    Mr. RANGEL. You are a volunteer professional.
    Mr. ROY. I volunteered for the Romney campaign, yes.
    Mr. RANGEL. But I mean in the positions that you take on 
health care, you do not get compensated for it.
    Mr. ROY. I do not get compensated for taking any particular 
position on any particular piece of legislation.
    Mr. RANGEL. So what you are doing is volunteer contribution 
you are making to help us on the Committee and others to 
understand your position. You are not a doctor, but you do have 
a professional position, right?
    Mr. ROY. I have articulated my view about the Affordable 
Care Act. I have done so here today
    Mr. RANGEL. And you have done it eloquently, but the only 
person I am concerned with is Mr. Falk because it appears to me 
that it is his opinion that would help us understand better 
what we have done and how we can do it better.
    And incidentally, I am an infantryman and my son is a 
Marine, and so I cannot say anything unkind except Semper Fi 
because you guys in the Marines, I want to thank you for your 
service, but whatever they put in your water, I can understand 
that you are just as excited about your business as you have 
been for serving our great country. I want to thank you for 
your service.
    Now, with all of the people that you hire, approximately 
part-time and full-time, what is the breakout of that? I know 
you have more part-time than full-time.
    Mr. FALK. Absolutely. Probably about 15 percent of my 
employees are full-timers, but that is by choice. Most of the 
people that I employ are first time employees. They are high 
schoolers, college kids.
    Mr. RANGEL. No, I know, but if you needed full-time, you 
would hire full-time.
    Mr. FALK. Absolutely, and I offer most of my employees----
    Mr. RANGEL. Supply and demand.
    Mr. FALK [continuing]. As many hours as they want.
    Mr. RANGEL. Okay. But you said that those who work full-
time, the 15 percent, they get health care.
    Mr. FALK. I offer health care to them.
    Mr. RANGEL. They accept it.
    Mr. FALK. Not all the time.
    Mr. RANGEL. But you offer health care not because you are a 
nice guy. It is a part of good business, is it not, to make 
certain that the workers have access to health care?
    Mr. FALK. It is because I am a nice guy, and it is good for 
business. It is about providing an opportunity for my 
employees. I want to take care of them because they are very 
valuable to me.
    Mr. RANGEL. So if we----
    Chairman BRADY. Thank you. All time has expired, Mr. 
Rangel.
    Mr. RANGEL. Could I just ask one concluding question, Mr. 
Chairman?
    Chairman BRADY. Perhaps we can follow up or we can submit 
in writing.
    Mr. RANGEL. That means that I cannot ask the question.
    Chairman BRADY. That would be the correct assumption.
    Mr. RANGEL. All right. Thank you, Mr. Chair.
    Chairman BRADY. I would also like to point out for the 
record, your qualifications, none of yours are in question 
today. You may have different views and different beliefs, but 
you are here because you care about the issue. You are expert 
in the issue. You are impacted by the issue, and on behalf of 
the Committee we are pleased that you are here with us today.
    Mr. RANGEL. And I want to join with the Chairman in his 
observation.
    Chairman BRADY. Thank you.
    Mr. Gerlach.
    Mr. GERLACH. Thank you, Mr. Chairman.
    First, Mr. Roy and Mr. Capretta, a macro questions if we 
can. We have not talked too much about this during this 
hearing, but since the enactment of ObamaCare to this point 
when this employer mandate has been temporarily suspended for a 
year, what do you think the overall impact of the enactment has 
had on GDP growth relative--and also add in Mr. Dennis as well 
for NFIB--what is your thought on the impact of the slow growth 
we have had in the GDP over the past few years relative to the 
implementation or the proposed implementation of this 
enactment?
    What impact has it had on the decisions of our business, 
our job creators relative to their decisions to hire and 
expand?
    Mr. CAPRETTA. Well, I do not think I have seen an academic 
estimate of that. So, you know, it is necessarily a subjective 
kind of responsive I am going to have to give.
    There has been a lot of information coming through the 
system even at the Federal Reserve level where they have noted 
that employers are responding to the incentives of the 
healthcare law by limiting the hiring they are doing. So if the 
direction is clear, it is negative, but the size and quantity 
of it, you know, that is a little bit harder for me to put a 
number on that.
    I would say that there have been many reasons why the 
economy has performed poorly in a certain sense in this post-
recession period, but this is certainly one of the reasons.
    Mr. ROY. I would add that what we have seen is a 
substantial shift from full-time employment to part-time 
employment. So we have record high numbers of people who are 
part-time workers and lower and lower numbers of full-time 
workers, and that is a transition I would expect to continue as 
small- and medium-sized employers wrestle with the employer 
mandate, another reason why it would be a great policy to 
repeal the employer mandate.
    Mr. GERLACH. Mr. Dennis.
    Mr. DENNIS. Now, we keep data and produce it monthly on the 
status of the small business economy, and it has been quite 
clear that over the last few years things have not gone well. 
The difficulty is--and that is all since 2010--the difficulty 
is trying to pull out what is actually the macro economic 
issues from the problems put forward by ObamaCare. We simply 
just cannot tear them apart as to which is which.
    Clearly, it has had some impact on their general view of 
the requirements that are before them and the costs that are 
before them. We do have some data suggesting recently that they 
are becoming increasingly concerned about political issues 
rather than economic issues as an impediment to their growth.
    Political is a very wide term and it could be a whole 
series of things.
    Mr. GERLACH. Mr. Falk, you indicated that you think it is 
important to provide health insurance to your full-time 
employees, and you also indicated that your part-time employees 
are offered the opportunity to work more hours if they want to.
    Does that working more hours at some point lend to the 
prospect that you might get to a point where you would hit the 
50 full-time employee threshold, and if so, what that then 
means in terms of your ability to conduct your businesses, your 
12 units?
    Mr. FALK. Well, it definitely is something I take into 
consideration. At my current size, I do not think that I will 
go over that threshold immediately.
    Mr. GERLACH. And what has been happening with your current 
insurance premiums over the past few years for the health 
insurance you are providing your full-time employees? Has that 
been steady?
    Mr. FALK. No.
    Mr. GERLACH. Have they been going down?
    Mr. FALK. Every year it has gone up. I mean, it is true. I 
mean, it is not a myth out there that my insurance premiums for 
my employees that we share the premium, where I still pay the 
majority, it costs me more and it costs them more every year.
    Mr. GERLACH. And can that be tied to the continuing 
pressures of the ObamaCare requirements that the health 
insurance industry continue to pay a billion dollars' worth of 
assessment to the Federal Government each year, which in turn 
gets passed on to the employers that pay those premiums to the 
insurance company, the lifting of the policy cap part of the 
enactment, the extension of coverage to those 26 years of age; 
do you think all of those factors as they continue under 
ObamaCare lend themselves to increasing premiums for the job 
creator on the street?
    Mr. FALK. No, Mr. Gerlach, I do not know. Mr. Rangel is 
very good in pointing out that all of these other panel members 
are experts in what they do in health care. If I were to tell 
them that they have, you know, until July to get 12 businesses 
up and running and there was a Website out there that they 
could go to figure it out, I am sure they would be overwhelmed 
as well.
    So this takes up all of my time right now.
    Mr. GERLACH. Very good. Thank you. I appreciate it.
    Chairman BRADY. Thank you.
    Dr. Price.
    Mr. PRICE. Thank you, Mr. Chairman, and I want to commend 
you for holding this hearing.
    This is a remarkably important topic as we move forward 
with the calamity that is confronting the country right now.
    Just to set the record straight, Republicans are for health 
reform. We are for positive health reform. We are for reform 
that recognizes that patients and families and doctors ought to 
be making medical decisions and not Washington, D.C. So there 
are wonderful, positive solutions. I am sorry my friend from 
New Jersey has left, but I will remind him once again, as I did 
in our last hearing, that H.R. 2300 is there for his perusal, 
and I would encourage him to take a peek at it. It embraces 
those positive solutions.
    Mr. Kind talked about this being all about politics. Well, 
now, you talk about politics. Here is an announcement from the 
Administration coming out on a blog post from the IRS, a blog 
post. So now we have governance by blog post, I guess, that 
delays the reporting requirements. It does not delay the law. 
It delays the reporting requirements for employers for a year 
that just so happens to fall after the 2014 election. Talk 
about politics.
    I would encourage my friends to open their eyes to the 
political activity of the Administration.
    Mr. Jost, you said, ``If you actually care'' you would 
throw more money at this program. Well, with all due respect, 
if the individuals who wrote this law actually cared about the 
health care of this country, they might have investigated the 
consequences for physicians taking care of those patients, as I 
did for over 20 years. They might actually have talked to folks 
like Mr. Falk, who are out there trying to run a business and 
create jobs instead of doing what we have clearly identified 
and has been actually admitted to by folks on the other side of 
the aisle when they are honest behind closed doors that this 
was not to be the final product, as Mr. Ryan talked about 
again.
    This is a delay in the reporting requirement. This does not 
change the law one iota, not one iota, and so, Mr. Falk, I want 
to commend you for what you are trying to do out there, to 
navigate the remarkable waters of this destructive law.
    You mentioned in response to Mr. Thompson, and I had a 
question. You said there was some concern about getting 
information and you were having difficulty doing that, and he 
did not allow you to respond. I would like to give you an 
opportunity to present the challenges that you have got in 
getting information.
    Mr. FALK. Right. One of the things I wanted to respond to 
him about was I have been to 15 to 20 different conventions, 
and we have had a briefing about health care every time, but 
every time it is a different briefing. That target continues to 
move, and with every new policy or extension or waiver or 
consideration that they are giving to somebody else, I still do 
not know what to do.
    And he is right. Yes, there is a Website out there, 
healthcare.gov. It just got announced publicly a couple of 
weeks ago. I understand that, and I will go there, and I will 
look up all of the information I can.
    But, see, I am engaged. I am here. I do all of these 
events. I do all of these conferences on business. There is 
probably 75 percent of small business owners who have no idea 
what is going on. They do not know about healthcare.gov.
    Mr. PRICE. I can say I have been to healthcare.gov. It is 
wonderful, beautiful site, but it does not do a thing to assist 
you in trying to figure out how you are supposed to comply with 
the reporting requirements that have now been delayed.
    When you spend all of this time trying to comply with 
government regulations like this and rules that are 
incomprehensible, what is the consequence to your employees and 
to your business and to job creation?
    Mr. FALK. Well, again, all of these guys are experts, but 
they really are not creating any jobs. I am trying to create 
jobs and grow my business, but right now I am fortunate enough 
to be a large enough small business owner that I have an 
operations manager and I have an administrative assistant, but 
I do not have a government relations person on my staff, like 
maybe Microsoft or Boeing has as Mr. McDermott talked about 
earlier. So I have to shoulder all of these burdens to find out 
what is going on with health care and how it is going to affect 
me, my employees and my business.
    My business is what provides me an income for my family, 
the profit that I make. So if these costs continue to take out 
the profit, I am going to decide either to not grow or to close 
some of my lower-performing units because they are just not 
going to make enough money, and therefore, it is going to take 
jobs away.
    Mr. PRICE. Take jobs away, exactly.
    Mr. FALK. Yes.
    Mr. PRICE. Mr. Roy, I want to touch on the point that you 
were making about part-time workers. I have had employers in my 
community tell me they are decreasing the number of full-time 
workers to part-time workers because of this law. In fact, 
322,000 increase in part-time workers, involuntary part-time 
workers to 8.2 million in June.
    Can you describe the consequences that are happening in the 
real world, bringing about increasing part-time workers and how 
destructive that is to jobs?
    Mr. ROY. You know, we have heard a lot of talk today about 
what the right thing to do is or what employers would do if 
they care. We have not heard a lot about what the incentives 
are, and the incentives are very clear with the employer 
mandate. It is to restructure to part-time workers because then 
you do not have to offer coverage to those part-time workers. 
That is just the plain as day economic incentive in this law 
and that is what will drive activity.
    Chairman BRADY. The time has expired.
    Mr. PRICE. Thank you, Mr. Roy.
    Thank you.
    Chairman BRADY. Thank you.
    Mr. Buchanan.
    Mr. BUCHANAN. Yes, thank you, Mr. Chairman.
    I wanted to mention as someone who has been in business 30 
years before I got here that we have two chambers in our area, 
about 2,000 each in Sarasota and Manatee Counties. Ninety-three 
percent, 90 percent are 50 employees or less. The Florida 
chamber, I was very active with them, 137,000 businesses in 
that chamber, 93 percent or less 50 employees or less.
    The number one issue, not in the last 3 years; I would say 
in the last 13 to 15 years, and I would be interested in your 
comment on this, Mr. Dennis; the number one issue is the rising 
cost of health care. In our area, we had one employer that has 
been somewhat successful. His costs last year, a larger 
employer, went up $1.5 million.
    But the other end of that spectrum that I deal with mainly 
when we do town halls, and we all do town hall meetings, one 
woman stood up and she said, ``I have six employees. My 
healthcare cost has gone from $1,000 to $2,000 for a family of 
four.''
    That is the thing that is crazy. It is unbelievable. They 
said they were going to cut the cost 25 percent. I am just 
looking at reality with a lot of businesses. They get their 
bill every year. I had a pharmacist that I walked in the other 
day. His bill came in, 27 percent increase. He negotiated out 
12 percent. The employees are kicking in more. The coverage is 
not quite as good. So they get it down to about 12 percent, but 
that is the reality.
    This is doing nothing to bend the cost on health care in 
the last 3 years even though it was supposed to come down 25 
percent.
    Mr. Roy, I want to go to your point, one point that you 
made, because that is what I see in our area, and that is the 
uncertainty that people are feeling about not expanding, not 
growing, and not creating jobs.
    But you said that healthcare cost already has or is going 
to double or triple. Is that what you said or how did you say 
how healthcare costs are going up substantially? And then give 
me a little more background on where you are getting your 
information from.
    Mr. ROY. Well, healthcare costs, the cost of health 
insurance is increasing for everyone, but it is going to 
particularly increase for people who shop for coverage 
themselves, the so-called individual or non-group market. That 
is where the Affordable Care Act's heavy regulation of the 
individual insurance market will drive up the cost of insurance 
plans in that market by two to three times for some workers, 
and on an average it seems like it is----
    Mr. BUCHANAN. So you are saying a worker might pay what 
now, based on your numbers, and what are they going to pay in 
somewhat the future?
    Mr. ROY. So, for example, in the State of California where 
I have done extensive research, the average increase for 
unsubsidized individuals shopping for insurance in the non-
group market will increase by about 70 percent.
    Mr. BUCHANAN. That is what I am hearing.
    Mr. Falk, I want to just first applaud you because we need 
in this country to be competitive with China and India more 
start-ups, more entrepreneurs, more people willing to take 
risk, more people who are willing to sign a note at the bank 
and put everything at risk. So I applaud you and what you are 
doing.
    But you said something about planning, and everybody that 
is in business or I have always done some kind of planning, but 
one of the factors is the uncertainty factor. One of the 
factors is cost going forward for employees.
    It used to be someone said the other day in his business 22 
percent. Now when you hire someone for 50,000, you have got to 
figure almost on 40 percent in terms of his experience, but in 
terms of your business, how many jobs do you think maybe you 
have not created or businesses you might not open as a result 
of dealing with the uncertainty?
    Mr. FALK. Well, as I said, from 1998 to 2008, about one and 
a half locations per year on average; from 2008 until today, 5 
years, I have only opened up two locations, and that was just 
last year.
    So I would say that, you know, I probably could have opened 
up another six to eight locations. As I get bigger I can 
probably move a little bit more aggressively because I have 
more assets, but I have chosen not to do that because of the 
uncertain economy and all of the regulation changes that 
happened, not just with the ACA, but with taxation and 
everything else, but the ACA is the most important regulation 
right now that is on my mind.
    Mr. BUCHANAN. Thank you.
    Mr. Dennis, I was going to mention you said multiple 
entities. How many? Is that a huge issue within the NFIB or is 
that in a list of five or six things more at the bottom of the 
list?
    Because I have got a lot of people where their wife owns a 
business and they own a business and it is family related. 
Their son has a business, and they are very, very concerned, 
again, about the uncertainty.
    Mr. DENNIS. Well, the truth is we do not know exactly how 
big it is. I think it is what I call a sleeper issue because we 
just do not know exactly how broad this extends. For example, 
of all small businesses that have 20 or more employees, there 
is only about 35 percent of those that have a single owner. 
Most of them have multiple owners.
    And then you talk about business owners themselves, and 39 
percent of them own multiple businesses, and they do this in 
combinations, and of course----
    Chairman BRADY. Your time has expired. I am sorry, Mr. 
Dennis.
    Mr. BUCHANAN. Thank you, Mr. Chairman.
    Chairman BRADY. You are welcome.
    Mr. Smith is recognized.
    Mr. SMITH. Thank you, Mr. Chairman, and thank you to all of 
our witnesses today. I know that you have a great perspective 
and expertise on both sides of the issue, and these are 
discussions that I think are healthy and need to be had.
    We know that the American people want our healthcare 
systems to work. There is growing skepticism that the more the 
government gets involved, the more expensive it becomes, and 
actually people can be harmed, and that is a growing concern 
and one that I think we all share.
    Mr. Jost, you are an expert on the President's healthcare 
bill, and I appreciate that. I think you have probably studied 
that a great deal. This component that we have discussed here 
today we are told is not ready for enforcement, and do you 
think there are other components that might share the same view 
of yours or are there other parts that perhaps you think need 
to be delayed as well?
    Mr. JOST. Well, I think that the Administration right now 
is in a triage mode. Seriously, they do not have the resources 
to implement all of the provisions on time.
    Mr. SMITH. So it is a lack of resources?
    Mr. JOST. Much of it is a lack of resources. Another part 
of it is the way this law was intended to be implemented, the 
States were going to take much of the responsibility. For 
political reasons, the States have declined to do that. So the 
Administration has ended up with a much bigger job than they 
otherwise would have had.
    So I think they are under a lot of pressure. I think they 
are trying to decide what needs to be done right now, what can 
wait a little bit.
    There have been a couple of other provisions. Another 
provision that relates to business is the nondiscrimination in 
favor of highly compensated employees provision, which says 
that for businesses who are insured, they cannot offer a better 
package to their highly compensated employees than they can to 
their lower compensated employees. That raises a lot of 
difficult issues which we could probably spend another hearing 
talking about, but they have said that provision fortunately 
says nothing happens until they put out regulations.
    So they are trying to figure that out. That is going to 
interface with this one. So I think that they have decided--
they do not talk to me any more than they talk to you--but I 
think they have decided just from my observation that they are 
going to focus on what is absolutely essential, which is the 
premium tax credits, the individual mandate to keep the 
insurance markets from collapsing, getting the exchanges up and 
running, and things like the employee----
    Mr. SMITH. Now, when you say the premium tax credits, is 
that the small business tax credit that I constantly hear from 
folks back home that it is so complex?
    Mr. JOST. No, this is the individual tax credit. The small 
business tax credit is already out there.
    Mr. SMITH. Do you feel that a lot of small businesses are 
eager to take advantage of that and find it to be an efficient 
use of resources?
    Mr. JOST. A nonprofit that my wife is on the board of has 
taken advantage of that and has found that it has allowed them 
to extend insurance to their employees. A lot of other small 
businesses have, but you are right. Many have found that it is 
really limited to small business, very small business with very 
low wage employees. So it does not apply to a lot of small 
businesses.
    But I think the Administration is moving ahead with the 
resources they have and the time they have to do the essential, 
which is to get health insurance to people who are uninsured 
and who need health care.
    Mr. SMITH. Thank you.
    Mr. Dennis, if you could reflect a bit perhaps on the small 
business perspective on this small business tax credit, the 
feedback I get from constituents is that it is much more hassle 
than it is worth, and it only adds to the complexity of our 
already very overly complex Tax Code.
    Mr. DENNIS. Yes, the small business tax credit, I do not 
know whether I want to call it totally a fiasco, but it really 
has not done very much, and the good part of the reason was 
that it was not structured very well, I think, and it is very 
complex.
    The second one is that it is a bit of a bait and switch in 
the sense that it brings you in and gives you credit for a 
while, and after a while it goes away. So it gives you this 
incentive to make an obligation, if you will, and then once you 
have made the obligation and gone on for a year or two, then it 
is gone.
    So it has not been successful in the sense of very few 
people or very few businesses have taken advantage of it. There 
have been a few businesses that have taken advantage of it. In 
all likelihood they would have been offering health care 
anyway, but it was apparently enough of a stimulus to help out 
a little bit.
    Mr. SMITH. Okay. Thank you. I yield back.
    Chairman BRADY. Thank you.
    Mr. Kelly is recognized.
    Mr. KELLY. Thank you, Mr. Chairman, and I thank the panel 
for being here.
    I especially want to talk to Mr. Falk, because I am also a 
small business person, but I think that when you look at this 
whole activity that is taking place right now, and I think the 
piece that is missing more than any other is the relationships 
that you build with the folks that work with you. Being an 
employer and having associates, we have about 110, 115 people 
at any one given time, but the relationship is a lot different. 
I am an automobile dealer. It is not a front end machine. It is 
not a piece of equipment. It is a person, and what we are 
talking about today is people.
    We are talking about is it fair for everybody. Does it make 
sense for the American people? Is it really providing what it 
was supposed to provide? And because the infrastructure cannot 
be put in place, now it is being delayed, and being delayed. It 
is not being waylaid. It just being delayed.
    Because people need to understand. You as an individual, 
and Mr. Rangel said something about you. You are a good guy, 
and I am sure the people that you paid--we pay every 2 weeks, 
on the 6th and 21st actually--they think I am a good guy, but 
only if I can pay them, and they do not work for me because 
they like me. They work for me because they like me, but they 
additionally can provide for their families.
    This piece of legislation though has made it so difficult 
for people that get up every day and do not walk into Congress, 
but walk into their business, that have to worry about payday 
and have to worry that you have got to sign the front half of 
the check so that your employee can sign the back half of the 
check, and doggone it, that had better be able to work.
    I think what is missing here, and I really find it unusual 
that an outfit that is running $17 trillion in the red is able 
to sit down and give anybody business advice. Give me a break.
    Now, most of the things that we run, small businesses are 
not only family-owned. They are family-operated. Tell me about 
the people because I have got to tell you. I have been to 
baptisms. I have been to first communions. I have been to 
weddings. I have also been to funerals. So we follow each other 
the whole way through life. These are people. These are people 
that we get to know. They are part of who we are, and that is 
what makes us successful.
    But this law separates you. You are no longer able to be a 
good guy. You are a guy now that is keeping them from attaining 
something because the government mandated that it be done. Now, 
you do not want the employee mandate? No, you do not have to 
worry about that. Why? It is not because small businesses asked 
for it. It is because there is no infrastructure in place to 
handle it. Come on. Be a little bit honest about this, right?
    And I think the American people have witnessed this, and 
they now know that if it waddles like a duck and quacks like a 
duck, it is a duck. This is a bad piece of legislation that 
does not serve its purpose, and some of my colleagues said 
ahead of time if you like what you have, you can keep it. If 
you like your doc, you can keep it. I am 65 now, and if I want 
to sit down with my kids and decide what my medical future is, 
forget that deal. That is not going to happen.
    But now the individual mandate is still in place. My 
question to you because you live with these folks; you work 
with them every day, and when you said you worked how many 
hours a week?
    Mr. FALK. In the 80 hours.
    Mr. KELLY. Eighty, and I know on 4th of July because we are 
open 4th of July, too.
    Mr. FALK. Yes.
    Mr. KELLY. But it is not just about that because we know 
when you run your own business you do work half days, and it 
does not matter whether it is the first 12 or the second 12.
    Mr. FALK. Right.
    Mr. KELLY. And some days you have to work a little 
overtime, but you live it. That is my point. You live it, and 
we have driven a wedge between you and the people who work with 
you, who work for you, who work towards your mutual success.
    Tell me how hard it is, and, Mr. Roy, maybe you can chime 
in. There is so much uncertainty with this. This is what makes 
it difficult, and we do not know tomorrow. What is the next 
shoe to drop? What else are they going to hold back on?
    Mr. ROY. Yes. So it is not just because there is regulatory 
uncertainty because the law makes so many dramatic changes to 
the way employers deliver health insurance. It is also that the 
regulations have been coming out piece by piece and 
contradicting each other.
    So, for example, and this is not even about small business, 
but this is about States, the States that have been trying to 
roll out these exchanges, I mean, they are usually Democratic 
States, right? So these Democratic States, these exchanges 
directors are saying, you know, ``We designed the exchange. We 
built the exchange, and then HHS comes along and completely 
changes all of the regulations about how the exchange must be 
designed, and we have to go back and start over and rebuild our 
systems from scratch.''
    And that happened so many times in the last 12 to 24 months 
that at a certain point, a lot of these State exchange 
directors said, ``We give up. We are going to ignore HHS and 
just set up the exchange because if we do not, we will not meet 
the October 1 deadline to get the exchange going.''
    So it is not merely that the laws are poorly designed and 
that businesses are facing this. Individuals are facing this. 
State governments are facing this, the regulatory uncertainty 
because the law is so complex and so difficult to administer, 
and the employer mandate is Exhibit A.
    Mr. KELLY. And I understand, and that is why I wanted Mr. 
Falk, because it is about a relationship that exists between 
the owner of the business and those folks that work with them 
in a common effort to be successful. Both parties participate 
in it and both parties benefit from it.
    I know it is going to be hard on you.
    Chairman BRADY. All time has expired. I would like to thank 
our witnesses for their testimony today. It has been an eye-
opening discussion. Clearly we need to get real answers also 
from the Treasury Department, and we will do so next week.
    Just as a reminder any Member wishing to submit a question 
for the record will have 14 days to do so. Any questions 
submitted I would ask the witnesses to respond in a timely 
manner, which I know you will.
    With that, thank you again, and so the Committee is 
adjourned.
    [Whereupon, at 12:04 p.m., the Subcommittee was adjourned.]
    [Submissions for the Record follow:]
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