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






HEALTH CARE CHALLENGES FACING NORTH CAROLINA'S WORKERS AND JOB CREATORS

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

                             FIELD HEARING

                               before the

                        SUBCOMMITTEE ON HEALTH,
                    EMPLOYMENT, LABOR, AND PENSIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

              HEARING HELD IN CONDORD, NC, APRIL 30, 2013

                               __________

                           Serial No. 113-16

                               __________

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




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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Robert E. Andrews, New Jersey
Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Tom Price, Georgia                   Ruben Hinojosa, Texas
Kenny Marchant, Texas                Carolyn McCarthy, New York
Duncan Hunter, California            John F. Tierney, Massachusetts
David P. Roe, Tennessee              Rush Holt, New Jersey
Glenn Thompson, Pennsylvania         Susan A. Davis, California
Tim Walberg, Michigan                Raul M. Grijalva, Arizona
Matt Salmon, Arizona                 Timothy H. Bishop, New York
Brett Guthrie, Kentucky              David Loebsack, Iowa
Scott DesJarlais, Tennessee          Joe Courtney, Connecticut
Todd Rokita, Indiana                 Marcia L. Fudge, Ohio
Larry Bucshon, Indiana               Jared Polis, Colorado
Trey Gowdy, South Carolina           Gregorio Kilili Camacho Sablan,
Lou Barletta, Pennsylvania             Northern Mariana Islands
Martha Roby, Alabama                 John A. Yarmuth, Kentucky
Joseph J. Heck, Nevada               Frederica S. Wilson, Florida
Susan W. Brooks, Indiana             Suzanne Bonamici, Oregon
Richard Hudson, North Carolina
Luke Messer, Indiana

                    Juliane Sullivan, Staff Director
                 Jody Calemine, Minority Staff Director
                                 ------                                

        SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS

                   DAVID P. ROE, Tennessee, Chairman

Joe Wilson, South Carolina           Robert E. Andrews, New Jersey,
Tom Price, Georgia                     Ranking Member
Kenny Marchant, Texas                Rush Holt, New Jersey
Matt Salmon, Arizona                 David Loebsack, Iowa
Brett Guthrie, Kentucky              Robert C. ``Bobby'' Scott, 
Scott DesJarlais, Tennessee              Virginia
Larry Bucshon, Indiana               Ruben Hinojosa, Texas
Trey Gowdy, South Carolina           John F. Tierney, Massachusetts
Lou Barletta, Pennsylvania           Raul M. Grijalva, Arizona
Martha Roby, Alabama                 Joe Courtney, Connecticut
Joseph J. Heck, Nevada               Jared Polis, Colorado
Susan W. Brooks, Indiana             John A. Yarmuth, Kentucky
Luke Messer, Indiana                 Frederica S. Wilson, Florida
















                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on April 30, 2013...................................     1

Statement of Members:
    Hudson, Hon. Richard, a Representative in Congress from the 
      State of North Carolina....................................     4
        Prepared statement of....................................     6
    Roe, Hon. David P., Chairman, Subcommittee on Health, 
      Employment, Labor and Pensions.............................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Bass, Dave, vice president, compensation and associate 
      wellness, Delhaize America Shared Services Group, LLC......    31
        Prepared statement of....................................    34
    Conrad, Marshall ``Ken,'' Libby Hill Seafood Restaurants, 
      Inc., on behalf of the National Restaurant Association.....    15
        Prepared statement of....................................    16
    Haynes, Tina M., MS, SPHR, chief human resources officer, 
      Rowan-Cabarrus Community College...........................     9
        Prepared statement of....................................    11
    Horne, Chuck, president, Hornwood, Inc.......................     7
        Prepared statement of....................................     8
    Huff, Olson, M.D., FAAP......................................    39
        Prepared statement of....................................    40
    Searing, Adam, J.D., MPH, health director, North Carolina 
      Justice Center.............................................    12
        Prepared statement of....................................    14
    Silver, Bruce, president, Electronics Industries Corp.--TIA 
      Racing Electronics.........................................    41
        Prepared statement of....................................    42
    Tubel, Edmund, CEO, Tricor Inc., licensed franchisee, Sonny's 
      Real Pit Bar B Q Restaurants...............................    36
        Prepared statement of....................................    38

 
HEALTH CARE CHALLENGES FACING NORTH CAROLINA'S WORKERS AND JOB CREATORS

                              ----------                              


                        Tuesday, April 30, 2013

                     U.S. House of Representatives

        Subcommittee on Health, Employment, Labor, and Pensions

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The subcommittee met, pursuant to call, at 9:00 a.m., in 
room 106, Building 1000, Rowan Cabarrus Community College, 1531 
Trinity Church Rd., Concord, NC, Hon. David P. Roe, [chairman 
of the subcommittee] presiding.
    Present: Representatives Roe and Hudson.
    Staff Present: Casey Buboltz, Coalitions and Member 
Services Coordinator; Benjamin Hoog, Legislative Assistant; 
Brian Newell, Deputy Communications Director; Todd Spangler, 
Senior Health Policy Advisor; John D'Elia, Minority Labor 
Policy Associate
    Chairman Roe. A quorum being present, the Subcommittee on 
Health, Employment, Labor and Pensions will come to order.
    Good morning, everyone. First, let me take a moment to 
thank our witnesses for joining us. We know you all are very 
busy, and we appreciate the opportunity to hear your thoughts 
on the very important issue of health care. Second, I would 
like to thank the people of Concord, North Carolina and the 
community college staff for their hospitality.
    The Herald-Sun recently reported on a job fair organized by 
the North Carolina Technology Association. Dozens of local 
companies attended the job fair, which was visited by people 
like Bernita Nichols. For the first time in 28 years, Ms. 
Nichols is looking for work after her employer went out of 
business. She described the labor market as ``tight merely 
because of the number of people who are looking.'' Richard 
Corridore also attended the job fair and noted, ``The job 
market is not recovered; it's still very difficult.''
    These remarks underscore the job crisis we continue to 
face. Nearly 12 million Americans are unemployed. Approximately 
4.6 million have been out of work for six months or longer. The 
number of men and women in the labor force is at its lowest 
level in 35 years, indicating more people are giving up their 
search for work in this dismal job market.
    Though officials claim the recession ended almost four 
years ago, countless families and small business owners find 
that hard to believe. No doubt, many in the Tar Heel State feel 
the same way when roughly 1 out of every 10 workers in the 
state is unemployed.
    As policymakers, we have an obligation to make job creation 
our number one priority. Ending wasteful government spending, 
opposing unnecessary regulations, preserving the safety net for 
seniors and vulnerable families, and moving toward a balanced 
Federal budget are all part of an effort to get this economy 
moving and help put people back to work. Today's hearing is a 
small but important part of that effort.
    We can't talk about jobs and the workforce without 
discussing health care. Approximately 160 million Americans 
receive health care coverage through an employer. They and 
their families know all too well the challenge of rising health 
care costs, which can result in more than loss of coverage; it 
can also lead to lower wages and fewer jobs. That is why it is 
absolutely vital we put in place reforms that will bring down 
costs and expand access to affordable care.
    However, President Obama and his allies in Congress took 
our nation in an entirely different direction. Despite 
significant opposition from the American people, the President 
signed into law a government takeover of health care that is 
wreaking havoc on our workplaces. Instead of responsible 
solutions to strengthen our health care system, we have empty 
promises that have made a broken system even worse.
    For example, we were promised if we liked our current 
health care plan, we could keep it. But according to the Obama 
Administration's own estimates, millions of individuals will 
experience significant changes to their health care plan.
    We were promised the law would create 4 million jobs. Yet 
barely a week goes by that we don't learn of employers who 
might be forced to reduce their work hours or cut the size of 
their workforce due to the law's punitive mandates and tax 
increases.
    The President also promised his plan would reduce insurance 
premiums by $2,500. Instead, the premiums for the average 
family increased 4 percent last year and 11 percent the year 
before. Estimates suggest they will continue to rise in the 
years to come.
    Over the next decade, the law is expected to hit certain 
employers with $117 billion in higher taxes for failing to 
provide government-approved health insurance; levy $55 billion 
in new taxes on individuals who don't purchase government-
approved health insurance; and cost taxpayers close to $2 
trillion in new spending. It is no wonder proponents of the law 
are beginning to question whether this law is sustainable.
    This flawed law is simply not in the best interest of 
workers, employers, and families. However, Obamacare is the law 
of the land and we have to examine how it is affecting our 
families and workplaces. I want to thank our witnesses again 
for sharing their perspectives and their ideas for responsible 
reforms that will better address our health care challenges.
    Just to let you know, as Chairman of the Health, 
Employment, Labor Subcommittee, I am your next-door neighbor 
over in Tennessee, in the mountains of East Tennessee, and my 
district goes from Mountain City to Gatlinburg. So I border a 
lot of North Carolina, and I feel like as many times as I fly 
through Charlotte, I should have a zip code or an address here.
    I spent 31 years practicing medicine. I was an Ob/Gyn 
doctor in a group there. They started with four doctors, and we 
have grown that to 100 doctors, and now with 450 employees. So 
I spent my entire life as a physician practicing medicine. The 
problem with the American health care system is it costs too 
much, it is too expensive. Two, we had groups of people who 
didn't have access to affordable coverage. That was the 
problem. Thirdly, we had a liability crisis. And basically this 
health care plan did increase access by increasing the number 
of Medicaid patients, which is already a system that hasn't 
worked very well, and taking a lot of money out of Medicare, a 
system that is already in financial crisis.
    So that is why I am here. I have only been in Congress four 
years, and Richard, my friend here, Richard Hudson, has only 
been there for less than a year. So we are not career 
politicians. We are people that are trying to help solve 
problems of this country.
    I will now, without objection, I would like to yield to my 
good friend, Richard Hudson, for any opening remarks he would 
like to make.
    [The statement of Chairman Roe follows:]

           Prepared Statement of Hon. David P. Roe, Chairman,
         Subcommittee on Health, Employment, Labor and Pensions

    Good morning everyone. First, allow me to take a moment to thank 
our witnesses for joining us. We know you all are very busy, and we 
appreciate the opportunity to hear your thoughts on the very important 
issue of health care. Second, I would like to thank the people of 
Concord, North Carolina and the community college staff for their 
hospitality.
    The Herald-Sun recently reported on a job fair organized by the 
North Carolina Technology Association. Dozens of local companies 
attended the job fair, which was visited by people like Bernita 
Nichols. For the first time in 28 years, Ms. Nichols is looking for 
work after her employer went out of business. She described the labor 
market as ``tight merely because of the number of people who are 
looking.'' Richard Corridore also attended the job fair and noted, 
``The job market is not recovered; it's still very difficult.''
    These remarks underscore the jobs crisis we continue to face. 
Nearly 12 million Americans are unemployed. Approximately 4.6 million 
have been out of work for six months or longer. The number of men and 
women in the labor force is at the lowest level in 35 years, indicating 
more people are giving up their search for work in this dismal job 
market.
    Though officials claim the recession ended almost four years ago, 
countless families and small business owners find that hard to believe. 
No doubt many in the Tar Heel State feel the same way. Roughly 1 out of 
every 10 workers in the state is unemployed.
    As policymakers, we have an obligation to make job creation our 
number one priority. Ending wasteful government spending, opposing 
unnecessary regulations, preserving the safety net for seniors and 
vulnerable families, and moving toward a balanced federal budget are 
all part of an effort to get this economy moving and help put people 
back to work. Today's hearing is a small but important part of that 
effort.
    We can't talk about jobs and the workforce without discussing 
health care. Approximately 160 million Americans receive health care 
coverage through an employer. They and their employees know all too 
well the challenge of rising health care costs, which can result in 
more than loss of coverage; it can also lead to lower wages and fewer 
jobs. That is why it's absolutely vital we put in place reforms that 
will bring down costs and expand access to affordable care.
    However, President Obama and his allies in Congress took our nation 
in an entirely different direction. Despite significant opposition from 
the American people, the president signed into law a government 
takeover of health care that is wreaking havoc on our workplaces. 
Instead of responsible solutions to strengthen our health care system, 
we have empty promises that have made a broken system worse.
    For example, we were promised if we liked our current health care 
plan we could keep it. But according to the Obama administration's own 
estimates, millions of individuals will experience ``significant 
changes'' to their health care plan.
    We were promised the law would create four million jobs. Yet barely 
a week goes by that we don't learn of employers who might be forced to 
reduce their workers' hours or cut the size of their workforce due to 
the law's punitive mandates and tax increases.
    The president also promised his plan would reduce insurance 
premiums by $2,500. Instead, premiums for the average family increased 
4 percent last year and 11 percent the year before. Estimates suggest 
they will continue to rise in the years to come.
    Over the next decade, the law is expected to hit certain employers 
with $117 billion in higher taxes for failing to provide government-
approved health insurance; levy $55 billion in new taxes on individuals 
who don't purchase government-approved insurance; and cost taxpayers 
close to $2 trillion in new spending. It's no wonder proponents of the 
law are beginning to question whether this law is sustainable.
    This flawed law is simply not in the best interest of workers, 
employers, and families. However, ObamaCare is the law of the land and 
we have to examine how it is affecting our families and workplaces. I 
want to thank our witnesses again for sharing their perspectives and 
their ideas for responsible reforms that will better address our health 
care challenges.
                                 ______
                                 
    Mr. Hudson. Thank you, Chairman Roe. On behalf of the 
people of Concord and of this district, please allow me to 
extend a warm welcome and offer my sincere appreciation to you 
for holding this hearing here today. I am particularly thankful 
also for Rowan Cabarrus Community College. The president, Dr. 
Carol Spalding, is here with us. Thank you for allowing us to 
host this hearing here on our campus. It says ``their campus,'' 
but I am saying ``our campus'' because I served on the Board of 
Trustees here from 2002 to 2005 and I understand how important 
this community college is to our local community and how 
critical this college is and the colleges across North Carolina 
are to creating jobs and growing the businesses that we have 
here.
    To our witnesses, thank you for taking your time from your 
very busy schedules to be here with us today. It is important 
that this committee understand the real implications that the 
Affordable Care Act will have on jobs and on the industries you 
represent.
    North Carolinians are hard-working individuals who are 
extremely concerned with the ever-increasing role government 
plays in our daily lives. North Carolina currently has the 
fifth highest unemployment in the country. Some counties in my 
district have between 12 and 16 percent unemployment, and that 
is the reported unemployment. I tell folks all the time when 
they ask what are my top three priorities, they are jobs, jobs, 
and jobs. And so that continues to be my focus. Our priority as 
a state and a nation should not be implementing more mandates 
handed down by Washington, but doing all we can to roll back 
the regulations that are crushing small businesses and enable 
our employers to get back to creating jobs and hiring people.
    The problems facing America's economy and workforce are 
immense, and the current regulatory environment simply creates 
confusion, anxiety, and a culture of uncertainty among small 
businesses. The extremely detailed and complex regulations that 
make up the Affordable Care Act only add to the hesitation 
businesses have with hiring people in a climate that is already 
clouded with regulations. The U.S. Chamber of Commerce recently 
conducted a survey of small business owners in which 71 percent 
of the participants in the survey said that it will be harder 
to hire new people under the current health care law.
    I was recently talking to a business owner who owns a few 
oil change franchises, Quick Lube kind of places, and he told 
me that he bought land to build three new businesses, but he 
wasn't going to do it. When I asked him why, he said because it 
will add about 15 new employees, and that will put him over 50 
employees total, which would make the Affordable Care Act apply 
to him. While 15 jobs isn't enough to turn this whole economy 
around, I sincerely believe that we are going to turn this 
economy around 15 jobs at a time, or 5 jobs at a time, or a 
couple of jobs here and a couple of jobs there as business 
people take risks and hire and expand their business.
    Some of the original leading proponents of the Affordable 
Care Act are starting to vocalize just how detrimental the 
effects of this law will be. Democratic Senator Jay Rockefeller 
recently stated, ``I am of the belief that the Affordable Care 
Act is probably the most complex piece of legislation ever 
passed by the United States Congress,'' and he has been there a 
while, so he has seen a lot of legislation. ``It's just beyond 
comprehension,'' he concluded. Senate Democrat Max Baucus, who 
helped write the legislation, just a couple of weeks ago said, 
addressing the implementation of the law, said, ``I just see a 
huge train wreck coming down.'' Well, business people across 
this district have been telling me for a year now about this 
train wreck, but even the folks who wrote the law are starting 
to see it.
    I was not a member of Congress when the Affordable Care Act 
was passed into law. However, from the beginning, I joined the 
public debate in opposition to this government takeover of 
health care. Since being sworn in, I have taken numerous steps 
to stop or at least try and fix this dangerous health care law 
that will harm our job creators and workers if left in place. I 
recently co-sponsored legislation to repeal and defund the law 
entirely and have introduced legislation that takes an 
incremental approach to chip away at harmful provisions within 
the law.
    I know that good ideas don't originate in Washington, D.C. 
Therefore, it is important that we hear from real people out 
here in the real world. That is why I live in Concord and 
commute to Washington every week to vote, but I come home every 
weekend. That is also why I was grateful to learn that the 
subcommittee was willing to convene this field hearing here 
today. The way I talk about it, I fly to Washington every week 
and take common sense with me. But this is an opportunity to 
bring Washington to the common sense. And so we are very 
thankful to have this today.
    Today's hearing serves as an opportunity to examine the 
real-life effects of the Affordable Care Act's implementation 
and I am looking forward to an open discussion about how we can 
work toward common-sense solutions that help expand access to 
affordable care for the American people.
    I would yield back, Mr. Chairman.
    [The statement of Mr. Hudson follows:]

     Prepared Statement of Hon. Richard Hudson, a Representative in
               Congress From the State of North Carolina

    Thank you, Chairman Roe. On behalf of the people of Concord, please 
allow me to extend a warm welcome and offer my sincere appreciation for 
convening this hearing today. I am particularly thankful for Rowan 
Cabarrus Community College allowing us to host this hearing on their 
campus. I served on the Board of Trustees at this college from 2002-
2005 and I know what an integral part of the community it is.
    To our witnesses, thank you for taking the time out of your busy 
schedules to be here today. It is important that this committee 
understand the real implications that the Affordable Care Act will have 
on job creators like you.
    North Carolinians are hardworking individuals who are extremely 
concerned with the ever-increasing role government plays in our daily 
lives. North Carolina currently has the fifth highest unemployment rate 
in the country--some counties in my district have between 12 percent 
and 16 percent unemployment. I tell folks all the time my top three 
priorities are JOBS, JOBS, and JOBS. Our priority as a state and nation 
should not be implementing more mandates handed down from Washington, 
but doing all we can to roll back the regulations that are crushing 
small business and enable our employers to get back to creating jobs.
    The problems facing America's economy and workforce are immense, 
and the current regulatory environment simply creates confusion, 
anxiety, and a culture of uncertainty among small businesses. The 
extremely detailed and complex regulations that make up the Affordable 
Care Act only add to the hesitation businesses have with hiring people 
in a climate clouded with regulations. The U.S. Chamber of Commerce 
recently conducted a survey of small business owners in which 71 
percent of the participants in the survey said that it will be harder 
to hire new employees under this health care law.
    I was recently talking to a business owner who owns a few oil 
change franchises and he told me that he bought land to build 3 more 
shops, but isn't going to build them now. I asked why and he said 
because it will add about 15 new employees, which will put him over the 
50 employee threshold. While we may not be able to turn the economy 
around with 15 jobs, we can turn it around 15 jobs at a time. Our 
government shouldn't be penalizing businesses who want to expand, they 
should be encouraging it. Unfortunately, this is the reality under the 
President's health care law.
    Some of the original leading proponents of the Affordable Care Act 
are starting to vocalize just how detrimental the effects of the law 
will be. Democratic Senator Jay Rockefeller recently stated, ``I am of 
the belief that the Affordable Care Act is probably the most complex 
piece of legislation ever passed by the United States Congress. * * * 
It's just beyond comprehension.'' Senate Democrat Max Baucus, who 
helped write the legislation, recently addressed the implementation of 
the law saying, ``I just see a huge train wreck coming down.''
    I was not a member of Congress when the Affordable Care Act was 
passed into law. However, from the beginning, I joined the public 
debate in opposition to a government takeover of health care. Since 
being sworn in, I have taken numerous steps to stop or at least fix 
this dangerous health care law that will harm our job creators and 
workers if left untouched. I recently co-sponsored legislation to 
repeal and defund the law entirely and have introduced legislation that 
takes an incremental approach to repealing certain harmful provisions 
in the law.
    I know that good ideas don't originate in Washington, D.C. 
Therefore, it is important that we hear from real people out here in 
the real world. That's why I live here in Concord and commute to 
Washington to vote. That's also why I was grateful to learn the 
subcommittee was going to convene this field hearing here today. 
Today's hearing serves as opportunity to examine the real life effects 
of the Affordable Care Act's implementation and I'm looking forward to 
an open discussion about how we can work toward commonsense solutions 
that help expand access to affordable health care for the American 
people.
                                 ______
                                 
    Chairman Roe. I thank the gentleman for yielding.
    Pursuant to committee Rule 7(c), all members will be 
permitted to submit written statements to be included in the 
permanent hearing record. Without objection, the hearing record 
will remain open for 14 days to allow such statements and other 
extraneous material referenced during the hearing to be 
submitted for the official hearing record.
    We have two distinguished panels of witnesses today, and I 
would like to recognize Mr. Hudson to introduce our first 
panel.
    Mr. Hudson. Thank you, Mr. Chairman. It is my pleasure to 
introduce our first panel.
    First we have Mr. Chuck Horne, who is the President of 
Hornwood, Inc. in Lilesville, North Carolina. Hornwood, Inc. 
manufactures various textiles, including the fabric used in our 
infantry's combat boots. Mr. Horne holds a Bachelor's of 
Science in Textile Technology and has been named a 
distinguished alumnus of NC State University.
    Ms. Tina Haynes is the Chief Human Resource Officer at 
Rowan Cabarrus Community College in Salisbury. Before her 
current position at Rowan Cabarrus, Ms. Haynes was an 
Operations Manager at Humana Health Plans and Senior Vice 
President of Wachovia Financial's Human Resources Division.
    Mr. Adam Searing is the Director of the Health Access 
Coalition in Raleigh. He has been named by President Obama as a 
Champion of Change. He holds a Juris Doctorate from UNC Chapel 
Hill.
    And Mr. Ken Conrad is Chairman of Libby Hill Seafood 
Restaurants in Greensboro. Mr. Conrad began as a cook in his 
parents' restaurant, eventually becoming company president in 
1983. He is Vice Chair of the National Restaurant Association 
in Washington, D.C.
    Thank you all for being here.
    Chairman Roe. Before I recognize your testimony, let me 
briefly explain our lighting system. We talked about this 
before. You have five minutes to present your testimony. When 
you begin, the light in front of you will turn green. When one 
minute is left, the light will turn yellow. When your time has 
expired, the light will turn red, at which point I will ask you 
to wrap up your remarks as best you can. After you have 
testified, members will each have five minutes to ask 
questions, and as I mentioned previously, we probably will have 
two rounds of questioning.
    Mr. Horne, we will begin with you.

              STATEMENT OF CHUCK HORNE, PRESIDENT,
                 HORNWOOD, INC., LILESVILLE, NC

    Mr. Horne. Thank you, and good morning.
    Chairman Roe. Did you push the ``On'' button?
    Mr. Horne. Yes, I did.
    Chairman Roe. Pull the mic a little bit closer.
    Mr. Horne. A little closer?
    My name is Chuck Horne, and I am a resident of Anson 
County, North Carolina. I am President of Hornwood, 
Incorporated, a family-owned textile business that has been in 
operation since 1946. I am second generation in the business 
and proud to say I have a son working with me that will be able 
to carry the business forward for another generation. We are 
the largest private employer in Anson County, with 350 
employees which we call partners. Our business has managed to 
grow and prosper over the last 66 years because of the 
dedication of our partners. We are proud of our 
accomplishments, particularly in view of the devastating impact 
imports have had on the textile industry in the last 12 years.
    Our company is self-insured and provides one of the best 
medical, dental and vision plans in the area. Hornwood pays 80 
percent of the cost, and our partners pay the other 20 percent 
through weekly premiums. In 2012 the company's expense for 
health care, above the premiums collected, was in excess of 
$2.5 million, approximately 5 percent of our revenue. We have a 
company nurse that works with our partners to promote healthy 
lifestyles in terms of diet and exercise, and she also works 
with them to get preventive services such as colonoscopies and 
mammograms which are provided at no cost to the partner. We 
have an on-site exercise facility and provide a free annual 
health screening in partnership with our local hospital.
    We don't do this because we are forced to by any agency, 
but because it is the right thing to do. The health and well-
being of our partners is an important part of controlling our 
costs and remaining competitive. When the Affordable Care Act 
was passed, I did not express much concern because I knew we 
offered a plan that far exceeded the mandates imposed on an 
employer our size. As time went by, we began to learn that we 
were going to have to pay more, but not for the benefit of our 
partners. For example, in 2014, we will have to pay $63 per 
covered individual to help pay for the adverse selection that 
will hit the insurance exchanges. The amount we pay will exceed 
$32,000. This provision continues through 2016.
    Like many private employers, we are a Subchapter S 
corporation, and as such the income of the company flows 
through me, which results in an income in excess of $250,000. 
As a result of the Affordable Care Act, I will have to pay an 
additional nine-tenths of a percent in Medicare taxes and an 
additional 3.8 percent tax on investment income starting this 
year. This will result in more money being taken from the 
company, money that could have been invested in new equipment 
or training for our partners to help keep us competitive.
    One of our frustrations with the Affordable Care Act is the 
lack of knowledge we and our health care advisors have with the 
law. Aside from the additional expense, it places an 
administrative burden on us to try and comply with the 
provisions. It is difficult to get definitive answers to our 
questions. Our human resources department has spent countless 
hours trying to understand the law.
    I thank you for your time and your service and will do my 
best to answer any questions.
    [The statement of Mr. Horne follows:]

      Prepared Statement of Chuck Horne, President, Hornwood, Inc.

    Good morning. My name is Chuck Horne and I am a resident of Anson 
County, NC. I am the president of Hornwood, Inc.,a family owned textile 
business that has been in operation since 1946. I am second generation 
in the business and proud to say I have a son working with me that will 
be able to carry the business forward for another generation. We are 
the largest private employer in Anson County with 350 employees which 
we call partners. Our business has managed to grow and prosper over the 
last 66 years because of the dedication of our partners. We are proud 
of our accomplishments, particularly in view of the devastating impact 
imports have had on the textile industry over the last 12 years.
    Our company is self-insured and provides one of the best medical, 
dental and vision plans in the area. Hornwood pays 80% of the cost and 
our partners pay the other 20% through weekly premiums. In 2012 the 
company's expense for health care, above the premiums collected, was in 
excess of 2.5 million dollars, approximately 5% of our revenue. We have 
a company nurse that works with our partners to promote a healthy 
lifestyle in terms of diet and exercise and she also works with them to 
get preventive services such as colonoscopies and mammograms which are 
provided at no charge to the partner. We have an on- site exercise 
facility and provide a free annual health screening in partnership with 
our local hospital.
    We don't do this because we are forced to by any agency, but 
because it is the right thing to do. The health and well-being of our 
partners is an important part of controlling our cost and remaining 
competitive. When the Affordable Care Act was passed, I did not express 
much concern because I knew we offered a plan that far exceeded the 
mandates imposed on an employer our size. As time went by, we began to 
learn that we were going to have pay more, but not for the benefit of 
our partners. For example, in 2014 we will have to pay $63 per covered 
individual to help pay for the adverse selection that will hit the 
insurance exchanges. The amount we pay will exceed $32,000. This 
provision continues through 2016.
    Like many private employers, we are a subchapter S corporation and 
as such the income of the company flows through me which results in an 
income in excess of $250,000. As a result of the Affordable Care Act, I 
will have to pay an additional .9% in Medicare taxes and an additional 
3.8% tax on investment income starting this year. This will result in 
more money being taken from the company, money that could have been 
invested in new equipment or training for our partners to help keep us 
competitive.
    One of our frustrations with the Affordable Care Act is the lack of 
knowledge we and our health care advisors have with the law. Aside from 
the additional expense, it places an administrative burden on us to try 
and comply with the provisions. It is difficult to get definitive 
answers to our questions. Our human resources department has spent 
countless hours trying to understand the law.
    I thank you for your time and your service and will try my best to 
answer any questions.
                                 ______
                                 
    Chairman Roe. Thank you, Mr. Horne.
    Ms. Haynes?

 STATEMENT OF TINA HAYNES, CHIEF HUMAN RESOURCE OFFICER, ROWAN-
           CABARRUS COMMUNITY COLLEGE, SALISBURY, NC

    Ms. Haynes. Thank you. I would like to thank you for the 
opportunity to testify today about the Affordable Health Care 
Act and its impact on the Rowan Cabarrus Community College. 
Considered a large employer under the definition of the 
Affordable Care Act, Rowan Cabarrus College has focused on 
emerging regulations, and we are alarmed at the extent to which 
regulations will affect our college. As currently published, 
the supporting regulatory framework has far-reaching and 
significant negative consequences. The regulations defining how 
benefits eligibility works will force us to reduce the number 
of courses we currently allow adjunct faculty members to teach, 
produce a costly and significant administrative burden, and 
potentially result in penalties.
    Further, it effectively reduces the income that dedicated 
adjunct faculty will be able to earn at Rowan Cabarrus, and it 
may slow our students' ability to get degrees if we drop 
courses from the schedule.
    As a strategy for responding to the variability in course 
demand and controlling costs while maintaining high-quality 
instruction, Rowan Cabarrus relies on adjunct faculty. Like our 
sister institutions, we operate with a lean budget, remaining 
responsive to unexpected funding cuts and variability in demand 
that is driven by external forces such as high unemployment.
    The use of adjunct faculty is the best approach to augment 
full-time faculty without introducing an unsustainable cost for 
more full-time employees.
    In December of 2012, the IRS stated specifically that it is 
unreasonable to only consider the time spent in instruction 
toward benefits eligibility. Because of this change, our 
institution will have to reduce the hours that adjunct faculty 
can teach. A ratio of 3 hours of service time for every 1 
credit hour of instruction was suggested by the IRS. While the 
Internal Revenue Service is still taking comments, it is 
unclear whether anything less than the 3-to-1 ratio will be 
acceptable.
    Underlying the IRS regulation is an inconsistent approach 
between the Department of Labor and the IRS. According to 
Department of Labor standards, faculty are exempt employees, 
and they are paid on the basis of instructional hours. They may 
work more hours at their discretion, like others who are 
classified professionals. Now the IRS has explicitly stated the 
hours outside of instruction time should be counted toward 
benefits eligibility, which is fundamentally different than the 
Department of Labor's instruction on exempt employees.
    While it is true that the Department of Labor is defining 
compensable hours, and the IRS is defining benefits eligibility 
hours, it seems plausible that the basis for both would be the 
same.
    Further, the regulations that should result in greater 
access to affordable health care ultimately work against 
adjunct faculty. Dedicated adjunct faculty who have had steady, 
multi-course workloads for years will lose income and have less 
money to purchase coverage through those health care exchanges.
    This impact ultimately reaches our students. Rowan Cabarrus 
must consider reducing courses offered, and if students can't 
get the courses they need, they can't complete their degrees 
and can't become employable. It is a financial impact to them, 
and it is a burden on the economic engine of our community 
since these students can't contribute to the tax base, and they 
can't become consumers of goods either.
    To administer the new regulations, our institution will 
incur one-time and recurring costs to determine eligibility, 
notification, enrollment, and there will be new billing, 
remittance and collections processes for health care coverage 
for former employees. When applying all the rules, the 
variation in employee populations and different measurement 
periods are complex, and as a population adjunct faculty may 
work one semester and then may skip the next. Employees who 
don't work for us currently but worked for us during the prior 
measurement period are still qualified to participate in our 
health plan during the next stability period, but we can't 
deduct for insurance premiums because they are no longer on our 
payroll. So that sets us up for collections and expenses if it 
is uncollected.
    In addition to complex rules and measurement, the 
regulations assess penalties for excluding employees from 
eligibility. Even with the 5 percent margin of error that is 
provided by the regulations, a single systematic error could 
inadvertently exclude individuals from coverage and result in 
disastrous and crippling penalties.
    Like our sister institutions, we must reevaluate course 
schedules, and we are acutely aware that our students will be 
affected when courses are eliminated from the schedule. We ask 
for your support for us and for other public institutions that 
can't shut down registration, and we can't limit the number of 
freshmen coming in for the next semester as a means to control 
our benefits costs. We need the flexibility to develop and 
apply rules that, while consistent in approach to providing 
health care eligibility, provide the flexibility that respects 
the unique and varied nature of courses being taught.
    Again, I thank you for the opportunity to present the 
impact of the Affordable Care regulations on our institution. 
We are hopeful that our remarks today highlight the very real 
impact of these regulations on our institution, our employees, 
our community, and our sister institutions across the nation. 
Thank you.
    [The statement of Ms. Haynes follows:]

            Prepared Statement of Tina M. Haynes, MS, SPHR,
    Chief Human Resources Officer, Rowan-Cabarrus Community College

    I would like to thank you for the opportunity to testify about the 
impact of the Affordable Health Care Act on Rowan-Cabarrus Community 
College. Considered a large employer under the definition of the 
Affordable Health Care Act, Rowan-Cabarrus Community College has 
focused on emerging regulations and guidance, and we are alarmed at the 
extent to which this act will affect the college and its workforce. As 
currently published, the supporting regulatory framework has far-
reaching and significant negative consequences for the college and our 
employees, our students, and our community. The regulations defining 
how health care coverage eligibility works will force us to reduce the 
number of courses we currently allow adjunct faculty members to teach, 
produce a significant and costly administrative burden and could 
further harm the institution through egregious penalties if errors are 
made in identification of those who qualify for health care coverage. 
Further, it effectively reduces the income that our long-time, 
dedicated adjunct faculty will be able to earn, and it may slow our 
students' ability to get degrees if we must eliminate courses from the 
academic schedule.
IRS guidelines will force the reduction in courses adjunct faculty can 
        teach
    As a strategy for responding to the variability in course demand 
and controlling costs while maintaining high quality instruction, 
Rowan-Cabarrus has relied on adjunct faculty since its origin in the 
1960's. Employment of adjunct faculty is the best approach for 
providing high quality, experienced instructors with current, real-
world experience to supplement our full-time faculty without 
introducing an unsustainable expense of additional full- time faculty. 
Like our sister institutions, we operate with a lean budget; we must 
remain responsive to unexpected funding cuts and variability in demand 
that is driven from external forces such as high unemployment.
    Rowan-Cabarrus Community College is certain that we will have to 
reduce the total hours that adjunct faculty can teach because of IRS 
regulatory changes related to the Affordable Health Care Act. In 
December of 2012, the IRS published guidance that requires us to 
consider more than instructional time when calculating benefits 
eligibility, stating specifically that it is ``unreasonable to only 
consider the time spent in instruction''. A ratio of 3 hours of service 
time for every one credit hour of instruction was suggested by the IRS 
since faculty are exempt employees by Department of Labor standards and 
don't require tracking for actual hours worked. Effectively, this means 
that an instructor cannot teach more than three, 3-credit hour courses 
without exceeding the 30-hour threshold for health care coverage 
eligibility. While the IRS is taking comments on this point, it is 
unclear whether anything other than the 3:1 ratio will be acceptable.
    The regulations that should result in greater access to affordable 
health care ultimately work against the adjunct faculty. Reducing the 
course load for adjunct faculty is the only way that Rowan-Cabarrus can 
avoid the unfunded liability of additional health care cost. This 
further compounds the problem for adjuncts who still aren't covered by 
health insurance, and now, have a reduction in income because we 
reduced the number of hours they will be working for us.
    The impact ultimately reaches our students. Rowan-Cabarrus must 
consider reducing courses offered if we don't have an adequate number 
of faculty to teach. Students can't get jobs if they can't get the 
courses they need to complete degrees. This is a tremendous economic 
impact for them, but it is also a drag on the economic engine of our 
community since they can't be contributors to the tax base or consumers 
of goods without an income.
The administrative burden of affordable health care
    Not only does the Affordable Health Care Act negatively affect 
adjunct faculty income and slow student progress toward employability, 
it introduces a massive administrative burden that comes with 
unanticipated costs. Rowan- Cabarrus will incur one-time costs to 
establish processes needed and will have recurring costs related to 
managing the workforce, determining eligibility, notification, and 
enrollment. There will be new billing, remittance and collections 
processes for health coverage for former employees who no longer work 
for us.
    As a population, adjunct faculty may work one semester and not the 
next or teach multiple courses one semester and teach only one course 
in the next semester. Measurement periods have to address the 
intermittent and varied nature of their work. When applying safe harbor 
rules, the multiplicity of periods and the variations in employee 
populations are complex. Employees who don't even work for us 
currently, but worked for us during the measurement period, are still 
qualified to participate in our health plan during the next stability 
period but insurance premiums can't be payroll deducted since they 
aren't working for us. Since by state regulations we can't debit a 
checking account, we face collection issues and expense for premiums if 
not reimbursed.
Penalties
    The Affordable Health Care Act brings a set of complex regulations 
and associated penalties, which if unintentionally breached, could have 
catastrophic results. Even with the 5% margin of error provided by 
regulations, a single, systematic error that inadvertently excludes 
individuals from coverage could result disastrous and crippling 
penalties.
Summary
    Like our sister institutions, Rowan-Cabarrus must reduce the number 
of hours that adjunct faculty can teach. As we evaluate course 
schedules for the fall semester, we are acutely aware that our students 
will be affected when courses are eliminated from the schedule. Their 
employability is slowed, which in turns affects our local economic 
engine since they won't be earning and contributing. Dedicated, adjunct 
faculty who have had steady, multi- course workloads for years will 
lose income as their course loads are reduced. Consequently, these 
employees will have less disposable income to put back into our economy 
and less money to buy health care through health care exchanges.
    Thank you again for the opportunity to present the impact of 
Affordable Health Care regulations on our institution. We are hopeful 
that our remarks today highlight the very real impact of the Affordable 
Health Care Act on our institution, our employees and on our community.
                                 ______
                                 
    Chairman Roe. Thank you, Ms. Haynes.
    Mr. Searing?

              STATEMENT OF ADAM SEARING, DIRECTOR,
              HEALTH ACCESS COALITION, RALEIGH, NC

    Mr. Searing. Okay. Thank you very much, Mr. Chairman, 
Representative Hudson. I appreciate the opportunity to come and 
speak today. I run our healthcare work at the Health Access 
Coalition of the North Carolina Justice Center. We are an anti-
poverty organization. We have been working to reduce poverty 
and expand opportunity for all North Carolinians since 1994.
    Ms. Haynes, one thing that was just running through my mind 
when you were talking about the problems you are having with 
having part-time faculty, I was just looking at Governor Pat 
McCrory's budget and saw that he is cutting the amount of money 
that is coming to the community colleges, and I sure wish that 
he would reconsider that and give more money to our community 
colleges so they all can hire full-time faculty, because I 
think that would be better for everybody.
    Anyway, as I said, I have had the privilege to work on this 
issue for a long time, and as sort of the designated hitter 
this morning, saying why the Affordable Care Act isn't the end 
of civilization, let me just go ahead and start by giving a few 
of the benefits that have been coming to North Carolinians 
since the passage of the Act in 2010. I have been hearing so 
much about how the sky is falling this morning that I was 
looking outside to see if it was actually coming down, but it 
is still up there.
    So, for instance, I bet many folks in this room know 
somebody or actually have a child who is under 26 who is able 
to stay on their parents' health care plan now. That is a huge 
benefit. I have met many people in my travels around the state 
who have been able to keep their kids on the plan whether they 
are in college or not, whether they take a job, Chairman Roe, 
like you were talking about when the students are working in 
that theme park in your district and they are able to stay on 
their parents' plan, a great opportunity.
    The other things that are happening, there is no more co-
insurance co-payments for preventive services. This just makes 
sense. I mean, come on. If you are going to get people to come 
in to the doctor to get a checkup and get screened for diseases 
that we can treat early, it just makes sense to make that is 
easy as possible.
    Another change. We're moving towards the situation where 
you can't charge women more for exactly the same health 
coverage that men buy. It doesn't seem right that we charge 
women more money for exactly the same health coverage. I am not 
talking about maternity care. I am talking about exactly the 
same health coverage. That doesn't make any sense. That is 
another thing that is going away with this law.
    There are tax credits for small businesses that are in this 
law, and those are going to be expanded come 2014.
    So, for over 1 million of us, however, really the biggest 
changes are about to come. Now, if you have health insurance 
already through your job, you are going to be doing all right, 
what these gentlemen provide here, Mr. Horne, Mr. Conrad, in 
their large businesses. But if you are working in a small 
business or you are out on your own, you are not getting your 
coverage through your job, you are going to be able to go to 
this health exchange, get a tax credit--that is the key to what 
Chairman Roe was talking about. You can just look on your iPad. 
Well, you are not going to get the tax credit to buy health 
insurance if you are just looking on your iPad. You have to go 
through this health exchange. You go through this health 
exchange, buy coverage if you are a business owner or working 
in a small business.
    The other part of the change is that no longer will health 
insurance companies be able to charge people more because 
someone has a pre-existing health condition. Now, I am sure 
that everybody sitting up at that table up there and back here, 
and myself included, who has talked to anybody in the last 10 
years knows somebody who has not been able to go and buy health 
insurance on their own, has been quoted a price of $1,000, 
$2,000 a month from North Carolina Blue Cross-Blue Shield 
because they had a pre-existing health condition. Well, Blue 
Cross and other insurance companies are no longer going to be 
able to do that.
    Let me tell you a story how the Affordable Care Act could 
make a huge difference for a business owner that I know. In 
Raleigh, there is a fellow who was a restaurant owner and he 
was a chef. His full name was Hamid Mohajer. Everybody called 
him Mo. He came to this country as an immigrant. He went to 
Campbell College when it was a college, before it became 
university. He had to drop out because of financial issues. He 
worked on a tobacco farm, Chairman Roe, and he ended up working 
at Darrell's in Raleigh bussing tables. He was such a good 
chef, though, he eventually got to go and open his own 
restaurant.
    Well, he had a pre-existing condition, like I was talking 
about. He couldn't go buy health insurance. His wife went out 
and took a job in a chain restaurant, got some coverage. 
Unfortunately, he got bone cancer, ended up in the hospital. 
This was just devastating. What was even more devastating was 
that health plan was so weak and had so many limits on it that 
he ended up dying with hundreds and hundreds of thousands of 
dollars in bills. So Mo left his wife not only with a 
restaurant to run but also having to do fundraiser after 
fundraiser to pay off these medical bills that they had 
incurred.
    Under the Affordable Care Act, it came too late for him, 
but he would have been able to buy coverage that took care of 
that. He probably would have gotten sick and, unfortunately, 
would have passed away anyway, but the Affordable Care Act 
would have made sure that he would have been able to buy a 
health plan for him and his business.
    I hope we can go forward and think about the positive 
effects. Thank you very much.
    [The statement of Mr. Searing follows:]

             Prepared Statement of Adam Searing, J.D., MPH,
             Health Director, North Carolina Justice Center

    Mr. Chairman, Representative Hudson, and committee members--thank 
you very much for the opportunity to speak today. The North Carolina 
Justice Center is a statewide organization created in 1994 committed to 
reducing poverty and expanding opportunity for all North Carolinians.
    I have had the privilege to direct our health care work at the 
Center for the past fifteen years, and I am very excited to be a part 
of implementing the Affordable Care Act here in North Carolina.
    Millions of North Carolinians are already seeing some benefits from 
the Act--like kids under 26 able to stay on their parents' health plans 
to freedom from copayments and coinsurance for basic preventive health 
services for people both on Medicare and on private coverage to a 
fairer marketplace where women can no longer be charged more money than 
men for exactly the same health coverage.
    For over one million North Carolinians however--many of us owning 
or working in small businesses--the best is yet to come. Starting later 
this year, employees in businesses that choose not to provide health 
coverage will be able to sign up for new health plans in the health 
exchange. If their family income is under about $88,000 a year, they 
will qualify for tax credits--and the lower your income, the higher the 
tax credit--that will be worth thousands of dollars and will make that 
insurance affordable. And business owners will be able to buy coverage 
in the exchange too.
    In addition, business owners and employees will no longer have to 
worry that a pre-existing health condition will mean insurance 
companies will quote them unattainable monthly premiums. I cannot tell 
you how many people over the years I have met around our state who, 
because of a pre-existing health condition, have been quoted premiums 
of $1,000, even $2,000 a month! In just a few months, that will be a 
thing of the past.
    Yes--employees will now have a place to go for coverage no matter 
what.
    Let me tell you a story about how the Affordable Care Act will 
change lives.
    In Raleigh the restaurant owner and influential chef Hamid Mohajer 
could not get health insurance due to a preexisting condition after he 
started his restaurant. (he attended Campbell College and worked on a 
tobacco farm before his successful restaurant career--Mo's Diner) His 
wife had to take a part-time job at a chain restaurant to get some form 
of coverage. In 2010 Hamid got bone cancer and needed extensive 
treatment. The flimsy policy offered by his wife's employer capped 
benefits and didn't cover everything Hamid needed. After he died his 
wife not only had to worry about sustaining the family's business, she 
had to host regular fundraisers to pay off the medical bills. That's no 
way to run a business or a health care system.
    The changes for our business owners and employees come too late for 
Hamid, but will be most welcome by many of the people I meet every day 
across North Carolina.
    Finally, let's get some things straight about the Affordable Care 
Act and North Carolina:
    1. Any business with less than 50 full time employees--95% of the 
businesses in NC--has no penalties and has no requirements to meet 
under the ACA. None. Owners and employees of this vast majority of 
businesses in our state do get access to the health care exchange 
however along with tax credits to buy affordable coverage for many 
families.
    2. Governor Pat McCrory's decision to follow the General Assembly 
and reject over a billion dollars a year from the federal government 
under the ACA to provide Medicaid health coverage to families earning 
under $29,000 a year was a real mistake. There are many employees who 
would gain coverage under this provision and it is not right that they 
will be left out. Business benefits when workers come to work healthy 
and having health coverage--no matter how low income you are--is a part 
of that. Medicaid coverage also can help some businesses who have more 
than 50 full time low income employees avoid paying penalties since 
their workers can be covered by Medicaid.
    3. Finally--we are doing some really innovative things aimed at 
small businesses in NC with our Medicaid Community Care program and NC 
Blue Cross--we are starting to test letting Blue Cross- insured 
businesses use our excellent health care networks under Community Care. 
This can save money, lower premiums and improve health care at the same 
time by coordinating our health care better, while using evidence to 
drive the kind of health care we deliver. This is the kind of 
innovation we need to see more of.
    Thank you.
                                 ______
                                 
    Chairman Roe. Thank you, Mr. Searing.
    Mr. Conrad?

     STATEMENT OF KEN CONRAD, CHAIRMAN, LIBBY HILL SEAFOOD 
                  RESTAURANTS, GREENSBORO, NC

    Mr. Conrad. Thank you, gentlemen, for the opportunity to 
testify before you today on behalf of the National Restaurant 
Association. My name is Ken Conrad, and I am Chairman of the 
Board of Libby Hill Seafood Restaurants. I currently serve as 
the Vice Chair of the National Restaurant Association. On any 
given day, 13 million Americans go to work in 980,000 
restaurants in the United States. Our industry faces a number 
of challenges in implementing the law due to the unique 
characteristics of our workforce. I wish to highlight three of 
those for you today: one, the definition of a full-time 
employee; the complexity of a large employer determination; and 
potential harm that automatic enrollment provision could cause 
for some employees.
    Libby Hill is a seafood distribution and restaurant company 
begun in 1953 when my father, Luke Conrad, first opened our 
doors. I am proud to say that my son, Justin, is the third 
generation of Conrads in this business. Our first restaurant is 
still located within the city limits of Greensboro, North 
Carolina. We have eight additional units in the state and 
Southern Virginia. We operate our sales for those units, and we 
lease the remaining to the management team on location.
    Libby Hill Restaurants employs 141 team members, of which 
32, by the full-time definition as defined in the healthcare 
law, 32 are considered full-time. We have always used a 40-hour 
work week to determine who is full-time and part-time. So we 
will have to make changes on the new definition.
    Today we offer a full medical plan and pay 80 percent of 
the premium for our corporate employees. That includes office 
staff, warehouse employees, truck drivers, et cetera. We try to 
drill down deeper in this carve-out program, but we could not 
get enough of the restaurant employees to come forward to have 
75 percent covered under the plan. So we continue to pay all 
but one of our corporate employees to take this plan.
    What employees will choose to do in 2014 when they are 
required to obtain coverage or pay a tax penalty remains an 
unanswered question that will impact our cost of offering 
coverage. The statute lays out a very specific and complicated 
calculation that must be used by employers to determine if they 
are applicable to be a large employer. As you might imagine, 
operators on the bubble of 50 full-time equivalent employees, 
which we are, are especially concerned in trying to understand 
what we must do to complete this complicated calculation. It is 
creating a lot of concern as these businesses, who have always 
considered themselves to be small, are now considered to be 
large.
    At first brush, our company, we are on the verge of 
becoming a large employer. We must offer healthcare or face a 
substantial penalty, knowing from past experience that we are 
unlikely to get to the 75 percent participation level. We must 
do this calculation every year, and if we remain on the 
threshold of becoming a large employer, then we will not open 
any additional units because this insurance provision would be 
a game changer for our company.
    The automatic enrollment requirement is a concern to many 
in the industry or that 200 full-time employees are 
automatically enrolled in healthcare. We think it is redundant 
and we think it is already covered. I want to thank Congressman 
Hudson and Congressman Robert Pittinger for proposing H.R. 1254 
to repeal this part of it, and we appreciate your work on that.
    In conclusion, since the enactment of the law, the National 
Restaurant Association has worked to constructively shape 
implementing the regulations of the healthcare law. 
Nevertheless, there are limits to what can be achieved through 
the regulatory process alone. At the end of the day, if this 
law remains in effect as it is currently written, restaurants 
and food service operators will face serious challenges.
    Thank you again for this opportunity.
    [The statement of Mr. Conrad follows:]

   Prepared Statement of Marshall ``Ken'' Conrad, Libby Hill Seafood 
  Restaurants, Inc., on Behalf of the National Restaurant Association

    Chairman Roe, Ranking Member Andrews, and members of the 
Subcommittee on Health, Employment, Labor and Pensions, of the House 
Committee on Education and the Workforce, thank you for this 
opportunity to testify before you today on behalf of the National 
Restaurant Association. It is an honor to be able to share with you the 
impact the 2010 health care law is having on businesses like mine, and 
the restaurant industry as a whole, particularly on our ability to 
create and grow jobs.
    My name is Ken Conrad, and I am Chairman of the Board of Libby Hill 
Seafood Restaurants, Inc., a seafood restaurant first opened by my 
father Luke Conrad back in 1953. I am very involved in the seafood and 
restaurant industry here in the state and am the former Chairman of the 
North Carolina Restaurant Association. I currently serve as Vice 
Chairman of the National Restaurant Association.
    The National Restaurant Association is the leading trade 
association for the restaurant and foodservice industry. Its mission is 
to help its members, such as myself, establish customer loyalty, build 
rewarding careers, and achieve financial success. The industry is 
comprised of 980,000 restaurant and foodservice outlets employing 13.1 
million people who serve 130 million guests daily. Restaurants are job 
creators. Despite being an industry of predominately small businesses, 
the restaurant industry is the nation's second-largest private-sector 
employer, employing about ten percent of the U.S. workforce.\1\
---------------------------------------------------------------------------
    \1\ 2013 Restaurant Industry Forecast.
---------------------------------------------------------------------------
The Libby Hill Seafood Restaurants story
    My family continues to own and operate Libby Hill Restaurants and 
I'm proud to say that my son Justin is the third generation of Conrad's 
in the business. Our first restaurant is still located within the city 
limits of Greensboro, North Carolina with locations scattered across 
North Carolina and Virginia. Four of the restaurants are part of Libby 
Hill Restaurants, Inc., with the remaining 5 separately owned and 
operated by others. My company also includes a seafood distribution 
company. We cook some of the best seafood in the area, and you know 
that every Libby Hill Restaurant is a family-friendly kind of place.
    Libby Hill Restaurants, Inc. employs 32 full time employees and 109 
part-time employees based on the new definition of full-time employment 
within the health care law. We have always used a 40 hour work week to 
define who is full-time and part-time within our company, and so we 
will have to makes changes based on this law's new definition of full-
time at 30 hours a week on average in any given month.
    Today, we offer a full medical benefits plan and pay 80 percent of 
the premium, but only 10 employees take the plan. As a result we have a 
carve-out plan for our corporate office staff, our warehouse employees 
and our truck drivers. We have tried to offer coverage to our 
restaurant employees in the past, but not enough employees opted in for 
the company to even be able to purchase a plan. To offer coverage, we 
needed a minimum participation of 75 percent of the eligible employees 
to take our offer of coverage, but that was not the case when all of 
our staff was included. As a result, we had to limit the eligibility 
pool to a smaller group of employees to be able to offer coverage to 
anyone. Level of participation in restaurateurs' plans has been a long-
standing challenge in our industry. I am concerned that even with the 
new law's requirements for individuals, employees who are eligible for 
our offer of coverage will not accept it and choose to pay individual 
mandate tax penalty instead.
    Business owners crave certainty and one of the most difficult 
things to predict about the impact of this law is the choice employees 
will make. Will they accept our offer of minimum essential coverage? 
Will exchange coverage be less expensive than what we can afford to 
offer under the law? Will our young workforce choose to pay the 
individual mandate tax penalty instead of accepting our offer of 
coverage in 2014, 2015 and beyond? Future take-up rate of coverage is 
very hard to predict given many new factors, but could mean increased 
costs for employers when offering coverage.
Complying with the health care law is challenging for restaurant and 
        foodservice operators given the unique characteristics of the 
        industry
    Since the law was enacted in 2010, me and my staff have educated 
ourselves about the requirements of the law, the details of the Federal 
agencies' guidance and regulations, and to understand how to implement 
the necessary changes within our organization. Understanding our 
compliance requirements has been time consuming and burdensome. 
Currently we do not have human resources personnel on staff responsible 
for administering the health benefits program as part of their duties. 
Instead, we are relying on our lawyers and outside vendors to help us 
determine our options and implement the law within our business. This 
is typical of restaurants of similar size to our operations. Our Chief 
Financial Officer has primary responsibility for developing our 
strategy and plan to comply with the law. Both he and I have spent a 
significant amount of time trying to understand the impact so that 
educated business decisions can be made.
    Until the January 2, 2013 Federal Register publication of the 
Treasury Department's Proposed Rule regarding the Shared Responsibility 
for Employers provision, employers did not have any firm rules on which 
they could plan and make business decisions. Up until this time, 
proposals and guidance had been issued with numerous opportunities for 
public comment, but nothing had the weight of regulation. This proposed 
rule, while not finalized, does provide employers assurances that the 
rules proposed can be relied upon until further rules are issued.
    Our Association has been educating the industry since enactment and 
doing everything we can so that operators know that now is the time to 
take action to comply. While many rules and guidance have been 
proposed, questions still remain regarding exact implementation of many 
of the employer requirements.
    The unique characteristic of our workforce creates compliance 
challenges for restaurant and foodservice operators. As a result, many 
of the determinations employers must make to figure out how the law 
impacts them--for example the applicable large employer calculation--
are much more complicated for restaurants than for other businesses who 
have more stable workforces with less turnover.
    Restaurants are employers of choice for many looking for flexible 
work hours and so we employ a high proportion of part-time and seasonal 
employees. We are also an industry of small businesses with more than 
seven out of ten eating and drinking establishments being single-unit 
operators. Much of our workforce could be considered ``young 
invincibles,'' as 43 percent of employees are under age 26 in the 
industry.\2\ In addition, the business model of the restaurant industry 
produces relatively low profit margins of only four to six percent 
before taxes, with labor costs being one of the most significant line 
items for a restaurant.\3\
---------------------------------------------------------------------------
    \2\ Bureau of Labor Statistics, U.S. Department of Labor.
    \3\ 2013 Restaurant Industry Forecast.
---------------------------------------------------------------------------
    All of these factors combine to complicate what a restaurant and 
foodservice operator must consider when implementing the necessary 
changes in their business to comply with the law. My company is a great 
example as we have spent a large amount of time trying to understand 
the law and what we must do to comply, but still do not know the 
answers to many questions.
Applicable large employer determination
    The statute lays out a very specific calculation that must be used 
by employers to determine if they are an applicable large employer and 
hence subject to the Shared Responsibility for Employers and Employer 
Reporting provisions. Because of the structure of many restaurant 
companies, determining who the employer is may not be as easy as it 
would seem.
    Aggregation rules in the law require employers to apply the long 
standing Common Control Clause\4\ in the Tax Code to determine if they 
are considered one or multiple employers for the purposes of the health 
care law. While these rules have been part of the Code for many years, 
this is the first time many restaurateurs, especially smaller 
operators, have had to understand how these complicated regulations 
apply to their businesses. The Treasury Department has not issued, nor 
to our knowledge, plans to issue, guidance to help smaller operators 
understand how these rules apply to them. Restaurant and food service 
operators must hire a tax advisor to determine how the complicated 
rules and regulations associated with this section of the Code apply to 
their particular situation. It is common that business partners of one 
restaurant company own multiple restaurant companies with other 
partners. These restaurateurs consider themselves to be separate 
businesses, but because there is common ownership, under the rules many 
are discovering that all the businesses can be considered as one 
employer for purposes of the health care law.
---------------------------------------------------------------------------
    \4\ Internal Revenue Code, Sec. 414 (b),(c),(m),(o).
---------------------------------------------------------------------------
    Once a restaurant or foodservice operator determines what entities 
are considered one employer, they must determine their applicable large 
employer status annually. This is not an easy calculation. My business 
is on the bubble of being an applicable large employer defined as 
employing 50 full-time equivalent employees on business days in a 
calendar year. We must consider the number of full-time employees now 
based on 30 hours a week, as well as the hours worked by all our other 
employees. Given we are an industry of small businesses and that 
restaurants are labor intensive and require many employees to operate 
successfully, many small businesses will have to complete this 
calculation annually to determine their responsibilities under the law. 
I may be one of them.
    As you might imagine, operators like myself who are on the bubble 
of 50 full-time equivalent employees are trying to understand what they 
must do to complete this complicated calculation each year. Generally, 
an employer must consider the hours of service of each of their 
employees in all 12 calendar months each year. However, the Treasury 
Department has allowed for transition relief in 2013 for businesses to 
use as short as 6 months to do this calculation. The Treasury 
Department recognized the fact that small businesses, who may not 
currently offer health coverage, will need time to determine their 
status and then negotiate a plan with an insurance carrier. However, 
there remain questions about the process in later years when January 
through December must be considered for status beginning the following 
January 1st. Will small employers just reaching the applicable large 
employer threshold find that they determine they are large on December 
31, 2014, for example, and must offer coverage a day later on January 
1, 2015? Rules are needed to clarify when such employers must offer 
coverage in future years.
    The applicable large employer determination is complicated. For 
compliance beginning in 2014, employers must determine all employees' 
hours of service each calendar month, calculate the number of FTEs per 
month, and finally average each month over a full calendar year to 
determine the employer's status for the following year. The calculation 
is as follows:
    1. An employer must first look at the number of full-time employees 
employed each calendar month, defined as 30 hours a week on average or 
130 hours of service per calendar month.
    2. The employer must then consider the hours of service for all 
other employees, including part-time and seasonal, counting no more 
than 120 hours of service per person. The hours of service for all 
others are aggregated for that calendar month and divided by 120.
    3. This second step is added to the number of full-time employees 
for a total full-time equivalent employee calculation for one calendar 
month.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    4. An employer must complete the same calculation for the remaining 
11 calendar months and average the number over 12 calendar months to 
determine their status for the following calendar year.
    This annual determination is administratively burdensome and 
costly, especially for those just above or below the 50 FTE threshold 
who must most closely monitor their status--most likely small 
businesses. Many restaurant operators rely on third-party vendors to 
develop technology or solutions to help them comply with these types of 
requirements but vendors are backlogged and solutions are not widely 
available today.
Offering coverage to full-time employees
    The 2010 health care law requires employers subject to the Shared 
Responsibility for Employers provision to offer a certain level of 
coverage to their full-time employees and their dependents, or face 
potential penalties. The statute arbitrarily defines full-time as an 
average of 30 hours a week in any given month. This 30-hour threshold 
is not based on existing laws or traditional business practices. In 
fact, the Fair Labor Standards Act does not even define full- time 
employment. It simply requires employers to pay overtime when nonexempt 
employees work more than a 40-hour workweek. As a result, 40 hours a 
week is generally considered full- time in many U.S. industries. 
Certainly in the restaurant and foodservice industry, operators have 
traditionally used a 40-hour definition of full-time. Adopting such a 
definition in this law would also provide employers the flexibility to 
comply with the law in a way that best fits their workforce and 
business models.
    This is complicated by the fact that sometimes it is difficult to 
know who the full-time employees will be in a restaurant. For 
restaurant and foodservice operators who are applicable large 
employers, it is not easy to predict which hourly staff might work 30 
hours a week on average and which will not. Many employees' hours can 
be unpredictable week to week.
    During periods of high customer traffic during the year, employees 
are scheduled to work more hours to maintain the customer's expected 
level of service, but then hours are reduced as business slows. Some 
weeks an employee might pick up extra shifts to earn a little extra in 
their paycheck that month, and others they prefer a few less hours 
because of commitments outside the restaurant. This is one of the 
attractive benefits of our industry--the flexibility to change your 
hours to suit your own personal needs. However, for the first time 
under this law, the federal government has drawn a bright line as to 
who is full-time and who is part-time. As a result, employers with 
variable workforces and flexible scheduling must be deliberate about 
scheduling hours because there is now potential liability for employer 
penalties if employees who work full-time hours are not offered 
coverage.
    The industry appreciates that the Treasury Department has 
recognized that it may be difficult for applicable large employers to 
determine employee's status as full-time or part-time on a monthly 
basis, causing churn between employer coverage and the exchange or 
other programs. Such coverage instability is not in the employee's best 
interest and so the restaurant and foodservice industry is pleased that 
the Lookback Measurement Method is an option that applicable large 
employers may use.
    The Lookback Measurement Method's implementing rules are complex 
but it could be helpful for both employers and employees. Employers 
will be better able to predict costs and offer coverage to employees 
they are required to offer to, and employees whose hours fluctuate have 
the peace of mind of knowing that if their hours do drop, coverage will 
not be cut short before the end of their stability period. The Lookback 
Measurement Method can only be applied to variable hour or seasonal 
employees. Employers cannot consider the length of time of service of 
these employees, only that their hours are unpredictable and that they 
fluctuate.
Automatic enrollment requirement
    Applicable large employers who employ 200 or more full-time 
employees are also subject to the Automatic Enrollment provision of the 
law. This duplicative mandate requires the employer to enroll our new 
and current full-time employees in our lowest cost plan if they have 
not opted-out of the coverage. This provision also interacts with the 
prohibition on waiting periods longer than days and effectively means 
that on 91 day, we must enroll a new full-time hire in our lowest cost 
plan if they do not tell us that they do not want to be enrolled. 
Employee premium contributions will begin to be collected and the 
industry is concerned that it could cause financial hardship and 
greater confusion about the law, especially amongst our young 
employees. Since 43 percent of restaurant employees are under age 26 
and more likely to be moving from job to job or eligible for enrollment 
in parents' plans, many are likely to inadvertently miss opt- out 
deadlines and will be automatically enrolled in their employer's health 
plan causing significant, unexpected financial hardship.
    Automatically enrolling an employee and then shortly thereafter 
removing them from the plan when the employee opts-out only increases 
costs unnecessarily without increasing our employee's access to 
coverage as the law intended. Since the health care law's employer 
mandate already subjects large employers to potential penalties if they 
fail to offer affordable health care coverage to full-time employees 
and their dependents, the auto-enrollment mandate is redundant. It adds 
a layer of bureaucracy and burdens businesses without increasing 
employees' access to coverage.
    Some compare automatically enrolling employees in health benefit 
plans to automatically enrolling them in a 401(k) plan, but this isn't 
a good parallel. The financial contribution associated with health 
benefits can be much larger, for example: 9.5 percent of household 
income toward the cost of the premium for employees of large employers 
versus an average 3 percent automatic 401(k) contribution. The 
financial burden on employees of automatic enrollment in health benefit 
plans would be much greater than that of 401(k) plans. Additionally, 
401(k) rules allow employees to access their contributions when they 
opt-out of automatic enrollment; however health benefit premium 
contributions cannot be retrieved.
    Restaurateurs will educate their employees about how this provision 
impacts them, but if an employee misses the 90-day opt-out deadline, a 
premium contribution is a significant amount of money, which can be a 
financial burden. Since the same full-time employees must be offered 
coverage by the same employers subject to the Automatic Enrollment 
provision and the Shared Responsibility for Employer provisions, we 
believe the automatic provision is unnecessary and should be 
eliminated.
    I want to acknowledge and thank Congressman Richard Hudson for his 
leadership in introducing H.R. 1254, the Auto Enroll Repeal Act 
recently, together with Congressman Robert Pittenger. Enactment of this 
measure would eliminate this requirement that could hurt both employees 
and employers. The National Restaurant Association supports of passage 
of H.R. 1254 and looks forward to working with Congressmen Hudson and 
Pittenger and this Subcommittee to move the bill forward in Congress.
Challenges for applicable large employers offering coverage to their 
        full-time employees and their dependents
    Once an applicable large employer has determined to whom coverage 
must be offered, he must make sure that the coverage is of 60 percent 
minimum value and considered affordable to the employee, or he may face 
potential employer penalties.
    Minimum value is generally understood to be a 60 percent actuarial 
test; a measure of the richness of the plan's offered benefits. This is 
a critical test for employers especially as it relates to what an 
employer's group health plan covers and hence what the premium cost 
will be in 2014. Business owners like certainty and that means the 
ability to plan for their future costs.
    Employers are eager to know what their premium costs will be under 
the new law. Minimum value is key to determining that information.
    On February 25, 2013 the Health and Human Services Department did 
include the Minimum Value Calculator, one of the acceptable methods to 
determine a plan's value, in its Final Rule, Standards Related to 
Essential Health Benefits, Actuarial Value, and Accreditation. Minimum 
value can now be determined using this calculator but still it is 
difficult to know premium costs so far in advance. For our January 1st 
plan year start date, we do not anticipate being able to obtain premium 
pricing for several more months. With a potential increase in cost, 
this gives us a short timeframe within which to make business decisions 
in advance of the new plan year. Any plan design or other changes to 
help control our costs will be part of our budgeting process going 
forward.
    Employers must also ensure at least one of their plans is 
affordable to their full-time employees or face potential penalties. A 
full-time employee's contribution toward the cost of the premium for 
single-only coverage cannot be more than 9.5 percent of their household 
income, or else the coverage is considered unaffordable. Employers do 
not know household income, nor do they want to know this information 
for privacy reasons. However, employers needed a way to be able to 
estimate before a plan is offered if it will be affordable to 
employees. What employers do know are the wages they pay their 
employees. Almost always, employees' wages will be a stricter test than 
household income. Employers are willing to accept a stricter test in 
the form of wages so that they know they are complying with the law and 
are provided protection from penalty under a safe harbor. The Treasury 
Department will allow employers to use one of three Affordability Safe 
Harbors based on Form W-2 wages, Rate of Pay or Federal Poverty Line. 
We believe that the option of utilizing these methods will be helpful 
to employers as they determine at what level to set contribution rates 
and their ability to continue to offer coverage to their employees.
    Our company has looked at this particular issue within the law, but 
we do not believe we will have to worry about the affordability of our 
plan for our employees, at least in the first year. As I previously 
mentioned, our company pays 80 percent of the total premium cost for 
the plan we offer. The remaining 20 percent of the premium, that we 
currently ask our employees to contribute, is less than 9.5 percent of 
our employees' wages. Hence, if premiums do not increase we believe 
that our current practice will satisfy the affordability test and 
changes to employee contributions are not necessary for our next plan 
year.
    The law speaks to affordability for employees but is silent 
regarding whether the coverage required to comply with the Shared 
Responsibility for Employers section of the law is affordable to 
employers. We anticipate added costs as a result of this law, either 
through required changes impacting plan design or additional fees--such 
as the PCORI Funding Fee, the Exchange Reinsurance Program Fee, the 
Health Insurance Provider Fee--that will continue to drive up premiums 
for employers and employees as others pass along these increased costs. 
In addition, new taxes such as the ``Cadillac'' tax on certain 
employer-sponsored coverage, will also squeeze restaurateurs when it 
begins in 2018.
    As restaurant and foodservice operators implement this law, 
considering all of the interlocking provisions that impact employers, 
some will be faced with difficult business decisions between offering 
coverage which they cannot afford and paying a penalty for not offering 
coverage that they equally cannot afford nor want to do. We encourage 
all policymakers to address the cost of coverage so that the employer-
sponsored system of health care coverage will be maintained.
New nondiscrimination rules applied to fully-insured plans
    The health care law applies the nondiscrimination rule, that self-
funded plans cannot offer benefits in favor of their highly-compensated 
individuals, now to fully-insured plans. This rule is not in effect as 
the Treasury Department has put implementation on hold until further 
guidance has been issued in this complex area. Under the new law, these 
rules apply to all insured plans, regardless of where they are offered 
by an applicable large employer or a small business. The restaurant and 
foodservice industry is watching this rule closely as it may impact 
what plans may continue to be offered to employees.
    Current group health plan participation often forces operators to 
carve out the group of employees who will participate in the plan. In 
our members' experience, these are almost always a group that would be 
considered in the top 25 percent based on compensation.
    However, management carve-outs are not just for upper level 
executives who may receive richer benefit plans than the rest of the 
employees. In the restaurant and foodservice industry, management-only 
plans are sometimes the only option that operators have to provide 
health care coverage to those employees who want to buy it and pass 
participation requirements at the same time. As a result, these plans 
are quite common in the industry. This was the situation I encountered 
when we tried to offer coverage to more employees several years ago.
    The rules the Treasury Department writes to apply non-
discrimination testing to fully- insured plans will have an impact on 
our industry. Regardless of how they are written, restaurant and 
foodservice operators will need sufficient transition time to apply 
these rules as it could create upheaval for plans and employers alike.
Applicable large employer reporting requirements
    A key area of implementation that employers have not received 
guidance on are the employer notice and reporting requirements: the 
Fair Labor Standards Act Notice to Employees from the Department of 
Labor, the notices and appeals processes with Exchanges from the 
Department of Health and Human Services, and the required information 
reporting under Tax Code Sec. 6055 and Sec. 6056 from the Treasury 
Department. These employer notice and reporting requirements are a key 
link in the chain of the law's implementation. They represent a 
significant employer administrative burden as well as rules that will 
help employers ensure that their employees are well informed about 
their options under the law. Operators are aware of this requirement 
and ask often when guidance and a template for this notice will be 
available from the Labor Department.
    Of particular concern to the industry, is the flow of information 
and the timing of reporting employers must make to multiple levels and 
layers of government. Streamlining employer reporting will help ease 
employer administrative burden and simplify the process. The 
information provided by employers under Tax Code Sec. 6055 and 
Sec. 6056 is critical in this process and can be used by the Treasury 
Department to verify if an individual had an offer of affordable 
minimum essential coverage of minimum value from an applicable large 
employer. The information provided by employers must be compared by the 
Internal Revenue Service to verify eligibility determinations made by 
the Exchanges for premium tax credits or cost-sharing reductions. The 
information can also be used to determine employer penalty liability. 
The restaurant and foodservice industry, along with other employer 
groups, have advocated for a single, annual reporting process by 
employers to the Treasury Department each January 31st that would 
provide prospective general plan information and wage information for 
the affordability safe harbors, as well as retrospective reporting as 
required by Sec. 6056 on individual full-time employees and their 
dependents.
    We are anxious for guidance to be issued on all of these 
interrelated issues, as employers cannot just flip a switch and produce 
the detailed information reports required by the law. It will take time 
for employers to set up systems, or contract with vendors, to track and 
maintain the date needed to comply with the law. When I think of our 
own company and the detailed information we will have to track and 
report on all full-time employees and dependents, it is a large amount 
of data. The reporting will include not only the employees who remain 
with the restaurant for the entire year, but even our seasonal staff 
and others who may only stay for a couple of months. Health plan 
benefit information as well as individualized payroll-sourced 
information must be merged to produce the report needed under the law.
Transition relief
    Within the Proposed Rule for Shared Responsibility for Employers, 
the Treasury Department provided targeted transition relief. While 
appreciated, we believe that further transition relief is critical. The 
timeframe for compliance is short and getting shorter and safe harbor 
protections for good-faith compliance by employers in the law's early 
phases is necessary. Employers are still missing essential pieces of 
guidance and regulation necessary to construct their systems, make plan 
design changes and communicate with their employees with 8 months until 
the first of the year. Under the threat of heavy penalties for not 
getting this exactly right the first time, some employers may opt-out 
of offering coverage to their employees and choose to pay the penalties 
instead. This is not what the restaurant and foodservice industry 
wants, but it may be a likely result of employers having to make 
difficult decisions under extremely uncertain conditions. The process 
should not discourage employers and employees from participating in the 
new system and the application of a good-faith compliance standard is 
appropriate. As with implementation of any law this size, it will take 
some time for the hiccups in the processes to be worked out and 
employers should be allowed adequate time to come into compliance.
Conclusion
    Since enactment of the law, the National Restaurant Association has 
worked to constructively shape the implementing regulations of the 
health care law. Nevertheless, there are limits to what can be achieved 
through the regulatory process alone. Ultimately, the law cannot stand 
as it is today given the challenges employers such as restaurant and 
foodservice operators face in implementing it.
    Broader transition relief is needed for employers attempting to 
comply with the law in good-faith as time is short to make the 
significant changes required by the law. The duplicative automatic 
enrollment provision should be eliminated as it could unnecessarily 
confuse and financially harm employees. Key definitions in the law must 
be changed: The law should more accurately reflect the general business 
practice of 40 hours a week as full-time employment. The applicable 
large employer determination is too complicated, and over-reaches to 
include more small businesses than it should.
    The National Restaurant Association looks forward to working with 
this Committee and all of Congress on these and other important issues 
to improve health care for our employees without sacrificing their jobs 
in the process. We also continue to actively participate in the 
regulatory process to ensure the implementing rules consider our 
industry's perspective.
    Thank you again for this opportunity to testify today regarding the 
impact of the health care on the restaurant and foodservice industry, 
and the challenging environment it will cause for job creation and 
growth.
                                 ______
                                 
    Chairman Roe. Mr. Conrad, thank you, and thank you to the 
panel for your very, very good testimony. I read every bit of 
it last night.
    I would like to start by just saying a few things about how 
I share the vision and goal of providing health insurance 
coverage for everybody in this country. I live in rural East 
Tennessee, in Appalachia, and I have seen many, many people who 
don't have health insurance, and as an OB/GYN doctor, I have 
delivered almost 5,000 babies, and I did find out that when you 
run for Congress, delivering your own voters worked out pretty 
well for me. [Laughter.]
    So I would recommend, if you are a doctor, deliver a lot of 
babies. They grow up and vote, and I saw some yesterday.
    Obviously, we have made this incredibly complicated. As I 
stated, I am on the Veterans Affairs Committee, and I spent two 
hours and 15 minutes this week just looking at the effect of 
the Affordable Care Act on veterans. After two hours of 
testimony, we couldn't figure it out. Nobody walked out of the 
room--and these were smart people, IRS, Treasury, the chief 
medical officer of the VA.
    Mr. Searing, to your comment, there are many parts or parts 
of this bill that I agree with, the under 26. I had three kids 
of my own. The problem with it is that we took something that 
was very affordable, and what we did for young people was, 
actuarially, someone my age would pay six times--that is the 
risk I have--six times more than a young person. What we did 
was, by this law, you can now only charge at 3-to-1. So a young 
person who had very inexpensive, affordable coverage, we just 
doubled or tripled the cost of their coverage. I have had 
insurance agents already tell me in the small group market, the 
individual market, those rates are up 25 percent, 35 percent. 
Bill Gates is not going to be able to afford healthcare if we 
don't do something.
    The OMB, the Office of Management and Budget, estimated 
that in 2016 the average family of four's health insurance 
coverage will be $20,000 a year. I mean, that is not 
sustainable.
    We took a bill, this bill, which I read every word of it, 
which doesn't say much about my intelligence but I read all 
2,700 pages of it, there are now over 13,000 pages of rules and 
regulations that these business people right here have got to 
go over. Let me give you an example.
    Mr. Horne--and I am going to let him answer this--we had 
the self-insured market. When I was the mayor of Johnson City, 
I practiced full-time and I was mayor of Johnson City. It is 
not a big town, about 60,000 people, so I did both. We were 
self-insured. Well, now we find out that when you are self-
insured--and one company that came to me, I won't mention it 
but it is a national company, is totally insured. They don't 
have any reinsurance or anything. They pay every nickel that 
they pay. They derive no benefit from the Affordable Care Act 
whatsoever. But guess what they get? They get $63, not per 
family, per person covered. It is a $25 million hit for them 
this year.
    And you know what that money does? It indemnifies the 
private health insurance companies so that they won't have a 
risk in the exchange of more than a $60,000 loss. So here is a 
company doing exactly the right thing. I couldn't think of 
anybody, Mr. Horne, doing more right for your employees than 
you are, providing preventive services, totally free for them, 
a nurse on site to take care of problems, and what do you do? 
You get penalized for that.
    So how much--would you go through what the cost is for your 
business again in your small business of 350 employees?
    Mr. Horne. We have 350 employees, and there are 515 covered 
individuals. So that $63 will be times 515 people in our case, 
a little over $32,000.
    One of the issues also is that we keep learning things. 
Just yesterday, I learned that we will now pay $2 per covered 
individual to pay for the Patient Centered Outcome Research 
Institute, whatever that is. We just keep learning these things 
as time goes by.
    Chairman Roe. Well, another point on the thing that we use 
and would recommend is our high-risk pools for people with pre-
existing conditions. We explained to the administration you did 
not put in--we have a high-risk pool in Tennessee. You did not 
put enough money into the high-risk pools. So they didn't. They 
ran out of money, and right now they are not enrolling anybody 
else in high-risk pools. So if I had patients that came to me 
that developed breast cancer, that is the most common cancer 
that I saw, and the cure rates now for early breast cancer is 
95 percent. It is phenomenal. And yet, these patients now have 
a pre-existing condition. So they go back into the workforce 
after their treatment and they couldn't find coverage. So we 
have a high-risk pool to help cover that.
    The Obama Administration is now taking money out of 
preventive services, which we tried to prevent, to pay for 
advertising for the Affordable Care Act. So money is being 
taken out of a service that you, Mr. Searing, mentioned, to 
help people, and we knew that the high-risk pools were 
underfunded, greatly underfunded. They need to be funded where 
someone who has that can go to that pool and buy insurance at 
the same rate that I can or someone else who is healthy can.
    Ms. Haynes, I thought your testimony was really very, very 
good. We have two community colleges in my district, and I say 
this tongue-in-cheek. I sort of overdosed on education. I went 
for 23 years, and my dad kept saying when is that boy ever 
going to get out of school. I was raised on a farm, and my dad 
was a factory worker. So I used education, public education, 
not private. I never went to a private school in my life, all 
to public schools, how important that is to be able to make 
sure that these young people, with the cost of education being 
what it is today--would you elaborate on that a little bit for 
me?
    Ms. Haynes. Certainly. I think the important point here is 
that it costs us about $450 a month per employee to provide 
health care coverage. Any coverage that we provide, obviously, 
at some point in time the student is going to incur the cost 
because we are funded through taxpayer dollars, obviously, and 
anything that costs the college ultimately costs the students. 
So in order to provide that coverage, it is a path through to 
the students.
    The difficulty I think becomes, with this too, is that the 
adjunct faculty have an impact that was unintended. We have no 
way to fund insurance. We believed that the healthcare 
exchanges would be the appropriate way for them to be able to 
purchase that coverage that they need. And yet, now they will 
have less income because we cannot provide them the number of 
courses that they would have had to have taught before in order 
to be able to purchase that as well.
    So it is an impact across the board. You have students now 
who won't get classes that they potentially would have had in 
the sequence that they would have been able to do, so it slows 
their progress. They don't become taxpayers and contributors as 
quickly. So there is a tremendous impact there.
    Chairman Roe. I thank you, and I now yield to Mr. Hudson.
    Mr. Hudson. Thank you, Mr. Chairman.
    I thank the witnesses for your excellent testimony.
    Mr. Conrad, I was listening to your testimony, and you said 
that you do not employ any outside HR folks to help you deal 
with those issues. Now with the new law, are you going to need 
to probably bring in some HR folks? What kind of cost are you 
looking at for trying to comply with this law?
    Mr. Conrad. To begin with, we have been scratching the 
surface. I have gone to accountants, I have gone to lawyers. I 
haven't brought the certified HR people in. But on first brush, 
the low number was $160,000 a year to over $200,000 a year, 
just to expand on what we are presently doing, the 80 percent 
for corporate people. So we know it is going to be quite 
expensive, but we just don't know how expensive.
    I don't think all those numbers, Congressman, are going to 
come out until November. I think we are all, the experts, just 
sort of playing a guessing game until then, because until they 
get into the fourth quarter, they are not going to give us any 
rates for 1 January 2014.
    Mr. Hudson. So what is the impact of this uncertainty on 
you? What are you doing to prepare for whatever the eventuality 
might be?
    Mr. Conrad. Well, let me back up and say that the 
restaurant business in itself is one of the very lowest profit-
per-employee industries in the United States. With 10 percent 
of the workforce employed in a restaurant or a food service 
operation today, and that is directly, not all the indirect 
people that depend on that, we are in dangerous territory. The 
mortality rate for a restaurant today on the average is they 
are not going to last 36 months. So if you stop and look, it is 
a changing industry. It is one, when you look at the profit per 
employee, why did we ever go into the business to begin with? 
But we were just born into it and we love it.
    Mr. Hudson. I appreciate that, and I love eating the fried 
fish that you serve up. [Laughter.]
    So you talk very specifically about a couple of different 
items in the law that are having an impact on you, and we are 
working on one of those together, on the auto enrollment. But 
which of these do you think is the most critical, or could you 
talk a little more about it?
    Mr. Conrad. I think right now the defining deal with 30 
hours a week, a lot of employers right now are trimming their 
workforce back to 29, 29 hours, and people are having to find 
multiple jobs. I think if you were to go to a more realistic 
number of 35 to 40, that may give an umbrella to some of those 
people that are going to be impacted.
    I think the definition of large employer/small employer is 
very critical because the equivalency of--somebody mentioned 
talking about the three people working in--I think it was you, 
Chairman--that were working in the summer to relieve their 
college deals, and then you add their hours up, and that 
equates to one full-time employee. And so I think that could be 
relaxed somewhat, the equivalency part of it.
    Mr. Hudson. Thank you for that.
    I have a little bit of time left. Mr. Horne, I would like 
to go back to you. I introduced you to the Chairman earlier as 
an endangered species because you are a textile person who has 
been very successful, and you have a reputation in your 
community of being an outstanding corporate citizen, and I hope 
folks noted that you didn't call your employees ``employees.'' 
You call them partners, and I was very impressed the more I 
learned about the things you do preventive care-wise and others 
to provide benefits to your employees.
    But with the costs coming down the pike, $63 per individual 
and so forth, what kind of impact is that going to have on your 
ability to continue to provide these benefits to your workers, 
your partners?
    Mr. Horne. Well, I am sure we will continue to provide the 
benefits. There is no question about that. The conversations 
that we are having right now are what are we going to do to 
help control our costs, and oftentimes that comes down to not 
replacing people, using attrition to reduce the numbers. So I 
think that is going to be the likely outcome of all this. 
Certainly, we are going to pay quite a bit more.
    There is another issue, too, and that is that we think 
there is going to be a morale issue here. We have some young 
employees who choose not to take our health insurance. It may 
not be the best decision, but we have that, and, of course, we 
are going to have to automatically enroll them. They have no 
choice in that. And I feel like the response is going to be to 
be angry at us about that as opposed to the law, and it is 
going to be difficult to explain that.
    Of course, our premiums for single individuals is $23 a 
week. So it is going to cost them a little over $1,000 when we 
enroll them. They can easily withdraw and pay the penalty, and 
they would be much better off.
    Mr. Hudson. Thank you.
    My time has expired. Mr. Chairman, I will yield back to 
you.
    Chairman Roe. I thank the gentleman for yielding.
    We will have a second round of questions. Let me start off 
by saying there is a large fast food chain in Tennessee that 
has 70 percent full-time employees and 30 percent part-time. 
Instead of growing their business this year, their model is 
going to be to flip that number to 70 percent part-time and 30 
percent full-time.
    Let me give you an example in my own--I asked Secretary 
Sibelius, and she will be in front of our committee on the 15th 
of May. But I asked Secretary Sibelius last year, I said, look, 
I am in a medical practice, and we pay about $6,000 per 
employee for health insurance coverage. We have covered our 
employees and have been proud to do it since 1967 when we 
opened our practice. So I said we have 400 employees. We are 
paying $6,000 each. If I pay a penalty of $2,000 each, that 
costs me $800,000, and I can save myself $1.6 million. Why 
won't I do that? And she had no answer.
    Mr. Horne had the answer, is because we want to do the 
right thing by our employees. We think we get better employees. 
So, therefore, you want to do that.
    We had testimony from a guy, an HR firm last year, who came 
in and said one of his clients said I am not going to be the 
first one to drop my health insurance coverage, but I am not 
going to be third either. And what he meant was that he will be 
at a competitive disadvantage if some of his competitors drop 
that and they can put that money to their bottom line. I can 
tell you, I know of one large company, a Fortune 500 company 
that is in Tennessee that can put $40 million to their bottom 
line by simply putting their employees into the exchange, and 
let me tell you why that is a bad idea for the employees, 
because the subsidy that they get through the exchange is not 
as much as their employer is currently paying, and the 
difference between those numbers that the employee will have to 
pay is not tax-deductible.
    So once again, I will go back to the first premise I made. 
The biggest problem with healthcare in this country is the cost 
of it, how much it costs people. If it were all cheap, we would 
all have it. I absolutely believe that there is enough money in 
our system to cover all of our citizens.
    Let me just give you a brief example of Tennessee when we 
reformed our Medicaid program. We are going to get to that in 
our second panel. The problem in Tennessee in the early 1990s, 
we had a lot of people--we are not a wealthy state. Our per 
capita income is less than the national average. We wanted to 
provide health insurance coverage for as many people in 
Tennessee as we could. So we reformed in a managed care plan 
called TennCare.
    We found out we were spending $2.5 billion in 1993. In 
2003, we were spending $8.5 billion. Our costs had over tripled 
in 10 years, and half the people who had health insurance 
coverage, half the people who got on TennCare dropped their 
private health insurance and got on the public, and the reason 
they got on that was it was a better plan than I could afford 
in my office.
    So the state, what it did was, our Democratic governor, to 
his credit, in 2005, basically how he rationed care was he just 
cut the rolls. That is what he did.
    So I have seen this health care reform done before. I had 
written an article about it three years ago about how I see it 
going down. Look, healthcare decisions ought to be made between 
a patient and the doctor and that patient's family. It 
shouldn't be made between an insurance company telling you what 
you can have done or the Federal Government telling you what 
you can have done. That is the most personal decision you can 
possibly make, and that is who should be making it.
    I admire all of you. Every bit of testimony here has been 
spot-on correct.
    Mr. Conrad, I want to go back to the auto enrollment. My 
kids are all above 26 now, but when they were less than 26, I 
think they would have made a decision, instead of paying $300 a 
month, to pay $95 a year, opt out, and the whole premise of 
this Affordable Care Act is that you are basically going to 
extract healthy people. Look, the healthiest people in the 
world are people under 26 years of age. The only thing you are 
insuring a less than 26-year-old boy for is just stupidity. 
They are going to do dumb stuff. [Laughter.]
    I have two boys. I understand what they do. You are 
insuring stupid. You are not insuring disease.
    So what you are doing at that point is you are taking 
people who don't have much risk and forcing their costs up. 
When they figure that out, and they will in about 10 minutes, 
they are going to opt out of the auto enroll.
    Mr. Conrad, what you mentioned about how you can dual 
enroll people, I don't think most people understand that a 
husband and wife can be working, both get auto-enrolled at 
different jobs and both be on an insurance plan when only one 
of them needs to be.
    Mr. Conrad. And then the children also are covered under 
mom and dad's plan, and they are not needing to be there. We 
just think the redundancy of the 200 employee limit, it is 
already in the large employer. It is already there. You have to 
offer that health insurance. Just like the gentleman said, he 
is offering it to all of his employees. Not all will take it.
    The auto enrollment is going to create ill will for those 
people who really didn't want health insurance and all of a 
sudden they get that check on the 91st day and it has them 
enrolled in health insurance and they didn't sign up for. All 
of a sudden, you have another problem with the morale of your 
employees. We just feel like H.R. 1250, whatever it is, is the 
right bill to come out of Congress to get rid of this.
    Chairman Roe. Well, I thank you.
    One last comment, and then I will yield to Mr. Hudson.
    The only people I know of who define a 30-hour work week as 
a full work week would be the French. [Laughter.]
    I yield to Mr. Hudson.
    Mr. Conrad. And see where it got them.
    Mr. Hudson. Mr. Chairman, I don't know how to follow that.
    Ms. Haynes, I would like to talk some about the issue you 
raised with adjunct professors. You discussed calculating the 
hours worked both inside and outside the classroom for the 
purpose of the 30-hour part-time calculation and the healthcare 
law. By your math, an adjunct faculty member would not be able 
to teach more than three 3-hour credit courses at one time. How 
much of a departure is this from current practice, and what is 
going to be the real impact? Have you calculated how many 
courses we may lose at the college with this?
    Ms. Haynes. Well, it varies by college, and it varies by 
subject matter. So it would be difficult to say exactly what 
the impact is going to be. But I can tell you that it can be 
substantial. I mean, at a point in time we can use adjunct 
faculty to teach four, five, or even six classes. And it 
depends on the type of class. All classes and all courses are 
not created equal. You have those that are purely lecture. They 
require an intense amount of preparation ahead of time. And 
then there are classes, like welding or some cosmetology, for 
example, where the instruction and the lab take place 
simultaneously. So most of the preparation and the instruction, 
everything, happens within the content and the context of that 
classroom.
    So there is not a lot of preparation that happens outside, 
nor supporting or needful activity outside of the classroom. It 
all happens within. So defining that and giving us a one-size-
fits-all rule really just doesn't work for the type of 
instruction that we deliver.
    Mr. Hudson. Well, I appreciate that. You also mentioned the 
massive administrative burden on the college. Can you elaborate 
on that a little bit?
    Ms. Haynes. Well, let's see. I was thinking just before we 
came, there is the look-back period, the measurement period, 
the stability period, and then there is the initial measurement 
period for new employees, and administrative period, and all of 
that is followed by additional enrollment. So you just keep 
this going on and on and on.
    We also have employees who work for us, and faculty, for 
example, adjunct faculty, they will teach for us for a year and 
then, for whatever reason, they drop out a year, either by our 
demand or because they are going back to school. Whatever the 
reason, they may be with us a year, they leave a year. So 
during that measurement period, they are entitled under the 
eligibility rules to participate in our health plan, but they 
are no longer with us. So you have payroll deduction that would 
have occurred had they still been employed, but they are not 
there.
    So now we have to set up collections. You have to figure 
out how to get that money, and we believe that in most cases 
people are honorable and they follow up on their debts. But 
sometimes, let's face it, it is just difficult to collect, and 
that is part of what we are going to have to look at.
    In addition to that, you have to look at all of these 
different employee populations, and the penalties, I might 
mention, are tremendous. We couldn't afford the penalty if we 
hit that penalty bracket. So we have to be extra careful. It is 
a massive undertaking to set up the administration to do the 
eligibility, to look at eligibility, to make sure that always 
you are defining every population for every measurement period 
and every stability period and every enrollment correctly.
    Mr. Hudson. Wow. I heard you say in your testimony before 
what is going to happen to the added cost. Would you repeat 
that and highlight what you said?
    Ms. Haynes. Well, if you consider that we have $5,400 
roughly in employer costs when we cover someone, that cost has 
to go somewhere. Frankly, you and I both know as taxpayers, 
there is not a whole lot more in the taxpayer base, in our 
taxes, that we can apply towards that. And so ultimately, I 
think it will become a student expense. It has got to trickle 
through. That is really not where we want to put that cost. 
Students need to be able to kind of get that education, and 
frankly, that slows down our entire economy. We are looking to 
help that student along. We don't want to be the impediment. We 
want to help them get their education and get in that 
workforce.
    Mr. Hudson. Absolutely. And this college's ability to 
respond to the needs of employers and the needs of students 
that need certain skills is why this college is so critical, 
and other colleges like South Piedmont that, Mr. Horne, you 
deal with. They supply the type of skilled workers you need in 
your business, and the ability to adapt to that, to get 
students who need those skills matched up with those skills. It 
really concerns me to hear that we may see increased costs to 
try and comply with this law that could then limit the access 
students have to those skills. So I appreciate you raising that 
issue.
    Mr. Chairman, I yield back.
    Chairman Roe. I thank the gentleman for yielding, and I 
want to thank the panel.
    Just to show you, Ms. Haynes, how I share in your 
confusion, I am supposed to be an expert in this healthcare 
law, and I can't even tell you, I can't even tell my employees 
in Washington and in my district office what their health 
insurance is going to be in September or October, when we have 
the opt-in period. I don't know. I don't know what I am going 
to do. So if you are confused, I am confused.
    And one last comment about I think the future of our 
country rests in the education system that we have, and today 
education debt, student debt exceeds credit card debt in this 
country. It is a humongous problem. The affordability of an 
education for kids--when I went to school, it was amazingly 
affordable. Today it is not. You all do a great job here in 
North Carolina. I asked about your fees. It is less than $1,000 
per semester. That is still affordable in today's dollars.
    So, thank you all, all the panel. Great job, and I will now 
excuse you all and we will have our second panel come up.
    I would like to call the committee back to order. I would 
like to again thank the witnesses for taking the time to 
testify before the committee today, and I will now ask that the 
second panel come forward, which they have done.
    It is again my pleasure to yield to Mr. Hudson to introduce 
our second panel of witnesses.
    Mr. Hudson. Thank you, Mr. Chairman.
    First we have Mr. Dave Bass, who is the Vice President of 
Compensation and Associate Wellness at Delhaize America, 
headquartered in Salisbury. They employ many area residents in 
their Food Line grocery stores, which are very popular with me 
and a lot of folks around here.
    Also, Mr. Ed Tubel is the Founder and CEO of Tricor, Inc., 
in Charlotte. Mr. Tubel operates a number of Sonny's Bar-B-Q 
Restaurant franchises--we frequent the one here at Exit 49 in 
this area--and he is a recipient of the North Carolina Small 
Business Administration Entrepreneur of the Year Award.
    Dr. Olson Huff is a retired pediatrician from Asheville. He 
is a veteran of the United States Air Force.
    We thank you for your service, sir.
    He served as a flight surgeon in Vietnam. He received his 
medical degree from the University of Louisville.
    Finally, Mr. Bruce Silver is the President and CEO of 
Racing Electronics in Concord. Racing Electronics is the 
worldwide leader in providing radio communication products to 
the motor sports industry, and you can rent those, I believe, 
at the track. I have done that myself. He was named the 2011 
Small Business of the Year by the Cabarrus Regional Chamber of 
Commerce.
    So, thank you all for being here.
    Mr. Chairman, I yield back.
    Chairman Roe. I thank the gentleman for yielding.
    Before recognizing you, we will go through again the 
lighting system. You will each have five minutes to present 
your testimony. When you begin, the light in front of you will 
turn green. With one minute left, it will turn amber. Then when 
your time has expired, the light will turn red, at which point 
we will ask you to wrap up your remarks as best as you can. 
After everyone has testified, each member will have five 
minutes, and we probably again will have a second round of 
questioning.
    I will now recognize Mr. Bass for your testimony.

   STATEMENT OF DAVE BASS, VICE PRESIDENT, COMPENSATION AND 
       ASSOCIATE WELLNESS, DELHAIZE AMERICA, CONCORD, NC

    Mr. Bass. Thank you. Chairman Roe and Congressman Hudson, 
my name is Dave Bass, and I am the Vice President of 
Compensation and Associate Wellness for Delhaize America Shared 
Services Group, LLC. Perhaps as important, I am also a resident 
of Concord. In my role, I work on behalf of the companies of 
Delhaize America, including Bottom Dollar Food, Food Lion, 
Hannaford, Harvey's, Sweetbay Supermarket and Reid's, to 
understand and apply health and wellness best practices as it 
pertains to our associates and our company. Thank you for the 
opportunity to appear here today to provide feedback on the 
implications of the Patient Protection and Affordable Care Act 
for Delhaize America's business.
    Delhaize America is a leading supermarket operator in the 
United States, with over 105,000 associates working in 18 
states throughout our network of 1,500 store locations, 10 
distribution centers, and four corporate support centers. 
Despite the economic climate during the Great Recession and the 
narrow 1 percent profit margins traditionally associated with 
the grocery industry, in recent years our company has expanded 
into new markets and grown its Bottom Dollar Food banner in New 
Jersey, Ohio and Pennsylvania.
    In North Carolina, Delhaize America employs over 30,000 
associates and operates more than 500 store locations. As you 
may know, Food Lion was founded in Salisbury, North Carolina in 
1957, and we are proud of our long history in this great state. 
In all of our operating states, our company is dedicated to 
supporting programs and organizations that make a difference in 
the lives of our shoppers and neighbors. Last year alone, 
Delhaize America companies donated over 41 million pounds of 
food. Through corporate and foundation giving, local programs 
and individual associate involvement, millions of dollars and 
countless volunteer hours are devoted to helping our 
communities and our associates grow and prosper.
    Delhaize America's vision is to enrich the lives of our 
customers, associates, and communities we serve in a 
sustainable way. Along with a culture of respect, Delhaize 
believes a primary way of supporting our associates in a 
sustainable way is through the provision of benefits to a large 
number of our associates. To meet the needs of our associates 
and support their overall health and wellness, Delhaize America 
provides comprehensive health care coverage, one of the most 
expensive benefit options, for its associates. Delhaize is 
proud to offer all our full-time associates the opportunity to 
enroll in healthcare, and has done so for many, many years.
    The Patient Protection and Affordable Care Act creates 
complex challenges for food retailers seeking to provide health 
care coverage to associates while maintaining a viable business 
in an exceedingly competitive consumer environment. Food 
retailers and their associates operate under fluctuating and 
unpredictable work schedules in order to meet varying consumer 
demand. Health coverage and compliance costs must remain 
affordable to Delhaize America in order for the company to 
maintain employee benefits and provide competitive consumer 
prices.
    Under the Patient Protection and Affordable Care Act, 
beginning in 2014, large employers, those larger than 50 full-
time equivalents, must offer coverage to full-time employees, 
which the law defines as averaging 30 hours or more per week, 
and that employer-offered coverage must be affordable, which is 
defined as not costing the employee more than 9.5 percent of 
his or her household income, and provide a minimum value of at 
least 60 percent of the average benefit costs covered or face a 
tax penalty, a mouthful. While on the surface this may seem 
straightforward, there are many complications that could impact 
the health coverage that Delhaize provides.
    As we look ahead to the implementation of the primary 
provisions of the Patient Protection and Affordable Care Act, 
our company foresees a number of challenges, and I would like 
to draw your attention to a few key issues for our business 
including: the definition of a full-time employee; 
affordability criteria; mandatory auto-enrollment; the 
temporary reinsurance fee; and Flexible Spending Account 
purchases.
    Under the Patient Protection and Affordable Care Act, as a 
large employer, Delhaize America must offer coverage to full-
time associates who average 30 hours per week beginning in 
2014. The companies of Delhaize America employ a significant 
number of both full-time and part-time associates. Currently, 
45 percent of our associates are in full-time hourly and 
salaried roles. Both full-time and part-time associates who 
meet eligibility criteria are able to receive coverage under 
our medical plan. Full-time hourly, salaried, and part-time 
associates working at least an average of 35 hours per week are 
eligible for coverage after two months of continuous 
employment.
    I will skip ahead here a little bit.
    Mandatory auto-enrollment. Delhaize America also is 
concerned about the Affordable Care Act's mandatory auto-
enrollment provision. Open enrollment for Delhaize America's 
medical plan is held annually in October and November to give 
associates an opportunity to select coverage options for the 
next plan year. Associates with existing coverage under the 
company's medical plan that do not actively engage in the 
enrollment process for benefits have their benefits rolled over 
to their existing selections.
    The Affordable Care Act's mandatory associate enrollment 
provision under Section 1511 could inadvertently cost 
associates wages and create duplicative coverage if a parent or 
spouse already covers the insurance.
    To wrap up here today, as an employer and retailer who is 
trying to do the right thing by continuing to offer coverage to 
our full-time employees, I am concerned that even if I were to 
have the perfect playbook to try to make sure I have all of my 
full-time equivalents identified and I have offered the right 
coverage, my company may still get penalized because one of our 
employees is mistakenly awarded an ACA credit. I am either 
going to be in a position of demonstrating that we did offer 
affordable coverage and have that person, that associate, 
penalized, or Delhaize America is going to get penalized.
    Any steps that can be taken by the committee to mitigate 
the burdens employers are facing is greatly appreciated. 
Specifically, we need Congress' help in addressing some of 
these burdens that puts at risk our company's ability to offer 
health coverage that is affordable and of value to as many of 
our employees as possible.
    Representative Roe and Representative Hudson, thank you for 
your time.
    [The statement of Mr. Bass follows:]

   Prepared Statement of Dave Bass, Vice President, Compensation and 
    Associate Wellness, Delhaize America Shared Services Group, LLC

    Chairman Roe and Congressman Hudson, my name is Dave Bass, and I am 
the Vice President of Compensation and Associate Wellness for Delhaize 
America Shared Services Group, LLC. Perhaps as important, I also am a 
resident of Concord, North Carolina. In my role, I work on behalf of 
the companies of Delhaize America, LLC, including Bottom Dollar Food, 
Food Lion, Hannaford, Harveys, Sweetbay Supermarket and Reid's, to 
understand and apply health and wellness best practices as it pertains 
to our associates and our company. Thank you for the opportunity to 
appear here today to provide feedback on the implications of the 
Patient Protection and Affordable Care Act for Delhaize America's 
business.
    Delhaize America is a leading supermarket operator in the United 
States, with over 105,000 associates working in 18 states throughout 
our network of 1,553 store locations, 10 distribution centers and four 
corporate support centers. Despite the economic climate during the 
Great Recession and the narrow one percent profit margins traditionally 
associated with the grocery industry, in recent years our company has 
expanded into new markets and grown its Bottom Dollar Food banner in 
New Jersey, Ohio and Pennsylvania.
    In North Carolina, Delhaize America employs over 30,000 associates 
and operates more than 500 store locations. As you may know, Food Lion 
was founded in Salisbury, NC in 1957, and we are proud of our long 
history in this great State. In all of our operating states, our 
company is dedicated to supporting programs and organizations that make 
a difference in the lives of our shoppers and neighbors. Last year 
alone, Delhaize America companies donated over 41 million pounds of 
food. Through corporate and foundation giving, local programs and 
individual associate involvement, millions of dollars and countless 
volunteer hours are devoted to helping our communities and our 
associates grow and prosper.
    Delhaize America's vision is to, `Enrich the lives of our 
customers, associates, and communities we serve in a sustainable way.' 
Along with a culture of respect, Delhaize believes a primary way of 
supporting our associates in a sustainable way is through the provision 
of benefits to a large number of our associates. To meet the needs of 
our associates and support their overall health and wellness, Delhaize 
America provides comprehensive health care coverage, one of the most 
expensive benefit options, for its associates. Delhaize is proud to 
offer all our full-time associates the opportunity to enroll in 
healthcare--and has done so for many, many years.
    Challenges Facing Delhaize America and its Associates under the 
Affordable Care Act The Patient Protection and Affordable Care Act 
creates complex challenges for food retailers seeking to provide health 
care coverage to associates while maintaining a viable business in an 
exceedingly competitive consumer environment. Food retailers and their 
associates operate under fluctuating and unpredictable work schedules 
in order to meet varying consumer demand. Health coverage and 
compliance costs must remain affordable to Delhaize America in order 
for the company to maintain employee benefits and provide competitive 
consumer prices.
    Under the Patient Protection and Affordable Care Act, beginning in 
2014, `large employers' (which the law defines as companies with 50 or 
more full-time `equivalents') must offer coverage to full-time 
employees (which the law defines as averaging 30 hours/week) and that 
employer-offered coverage must be `affordable' (defined as not costing 
the employee more than 9.5% of his/her household income) and provide a 
`minimum value' of at least 60% of the average benefit costs covered or 
face a tax penalty. While on the surface this may seem straight- 
forward, there are many complications that could impact the health 
coverage that Delhaize provides.
    As we look ahead to the implementation of the primary provisions of 
the Patient Protection and Affordable Care Act, our company foresees a 
number of challenges, and I would like to draw your attention to a few 
key issues for our business including: the definition of a full-time 
employee, affordability criteria, mandatory auto-enrollment, the 
temporary reinsurance fee and Flexible Spending Account purchases.
The definition of a full-time employee
    Under the Patient Protection and Affordable Care Act (ACA; PL 111-
148), as a large employer Delhaize America must offer coverage to full-
time employees who average 30 hours per week beginning in 2014. The 
companies of Delhaize America employ a significant number of both full 
and part-time associates. Currently, 45 percent of our associates are 
in full time hourly and salaried roles. Both full and part-time 
associates who meet eligibility criteria are able to receive coverage 
under our medical plan. Full-time hourly, salaried and part-time 
salaried associates working at least an average of 35 hours per week 
are eligible for coverage after two months of continuous employment.
    The revised definition of a full-time employee under the Affordable 
Care Act could result in the reclassification of many of Delhaize 
America's associates from part-time to full-time. Such a change may 
impact store managers' ability to provide for flexible scheduling, and 
associates' hours could be impacted as a result. The definition of a 
full-time employee under the Act also may cause confusion among 
associates as they seek to understand which benefits they are eligible 
to receive should the individual only be considered full-time for the 
purposes of medical coverage.
Affordability criteria
    Another complicating factor is that when coverage is offered to our 
associates, the premium must not cost the associate more than 9.5% of 
his/her household income and also must cover at least 60% of the 
average benefit costs. Again, while that may sound simple, it is 
challenging to analyze associate wages even under the current safe 
harbor provisions that allow employers to use an employee's W-2 wages 
to verify affordability.
    Complicating matters, as I am seeking to define Delhaize America's 
health plan and determine associate rates for 2014, the uncertainty 
created by the federal government's delay in rule finalization affects 
my ability to understand how best to craft and comply with the 
Affordable Care Act as I look to finalize our company's plan for next 
year.
Mandatory auto-enrollment
    Delhaize America also is concerned about the Affordable Care Act's 
mandatory, auto-enrollment provision. Open enrollment for Delhaize 
America's medical plan is held annually in October and November to give 
associates an opportunity to select coverage options for the next plan 
year.
    Associates with existing coverage under the company's medical plan 
that do not actively engage in the enrollment process for benefits have 
their benefits rolled over to their existing selections. Allowing for 
the automatic enrollment of associates who have previously chosen to 
receive coverage saves associates time and ensures continued coverage.
    Whereas, the Affordable Care Act's mandatory associate enrollment 
provision under Section 1511 could inadvertently cost associates' wages 
and create duplicative coverage if a parent or spouse already covers 
the associate. When associates who do not want employer coverage fail 
to opt-out of the auto-enrollment process, the employer is required to 
deduct a premium from the associates' paycheck. Delhaize America 
supports Congressman Hudson's introduction of the Auto Enroll Repeal 
Act (H.R. 1254) that would repeal the Affordable Care Act's mandatory 
enrollment provision, helping to ensure that associates take an active 
role in coverage determinations.
Temporary reinsurance fee
    On top of all the compliance costs associated with offering health 
coverage under these rules is a `temporary' reinsurance fee for 
employers offering self-insured plans that will charge our company 
$5.25 per month per capita in benefit year 2014 ($63 per capita for all 
of 2014) and onward.
Flexible spending account purchases
    Additionally, under a little known provision of the Affordable Care 
Act, Flexible Spending Account (FSA) and Healthcare Reimbursement 
Account (HRA) funds may no longer be used to buy over-the-counter (OTC) 
medicines unless they are prescribed by a doctor. This prohibition 
restricts individuals' access to OTC medications by requiring an 
unnecessary and more costly visit to the doctor's office for an OTC 
prescription while also putting our store locations without pharmacies 
at risk of losing FSA shoppers. It was just five years ago, in 2008, 
when Food Lion retrofitted its registers to comply with Internal 
Revenue Service regulations to accept customers' FSA/HRA cards for 
approved healthcare and pharmacy items.
    Many of our customers rely on over-the-counter medicines to manage 
existing conditions, and Delhaize America supports legislation that 
would reinstate FSA/HRA purchases of over-the- counter medicines 
without a prescription. In the 112th Congress, the Restoring Access to 
Medication Act (H.R. 2529) was introduced to restore this valuable 
benefit, and we would encourage the committee to evaluate options for 
the introduction of similar legislation in the 113th Congress.
Conclusion
    Since the Affordable Care Act became law, I have been focused on 
trying to understand all of the applicable rules so we can determine 
how our companies' health plans fit into this structure. I understand 
that the Administration has attempted to provide some flexibility to 
employers, but many of these rules were only recently released and many 
rules are still pending. As a human resources professional, I cannot 
afford to build a health plan based on so many uncertainties, 
particularly given the complexities of these rules. Unfortunately, 
there is no one place or handbook that is available for me to figure 
out all of the rules and ensure that our plan is in place and our 
employees understand their options--as the need to finalize my plan 
design quickly bears down on me.
    As an employer and retailer who is trying to do the right thing by 
continuing to offer coverage to our full-time employees, I'm concerned 
that even if I were to have the perfect playbook to try to make sure I 
have all of my FTEs identified and I have offered the `right' coverage, 
my company may still get penalized because one of our employees is 
mistakenly awarded an ACA tax credit. I'm either going to be in a 
position of demonstrating that we did offer affordable coverage and 
have that person--that associate--penalized or Delhaize America is 
going to get penalized.
    Any steps that can be taken by the Committee to mitigate the 
burdens employers are facing is greatly appreciated. Specifically, we 
need Congress's help in addressing some of these burdens that puts at 
risk our company's ability to offer health coverage that is affordable 
and of value to as many of our employees as possible. First, we need 
Congress to amend the ACA's full-time employee definition to be in line 
with current workforce standards. Second, employers need a `transition' 
or `good faith' period through 2014 to figure out all of these rules, 
test how our eligibility measurements and health plans perform without 
fear of being penalized--and our associates to similarly understand 
what is available to them. And as a retailer, we need Congress to 
restore the use of Flexible Spending Account debit card purchases 
without a prescription. By no means are these suggested reforms `cure-
alls,' but the changes would potentially alleviate some of the burdens 
to our business.
    Delhaize America is grateful for the opportunity to appear before 
you today. We welcome the opportunity to work with you in your efforts 
to address and clarify provisions within the Affordable Care Act.
    Representative Roe and Representative Hudson, thank you for your 
time.
                                 ______
                                 
    Chairman Roe. Thank you, Mr. Bass.
    Mr. Tubel?

            STATEMENT OF ED TUBEL, FOUNDER AND CEO,
                   TRICOR INC., CHARLOTTE, NC

    Mr. Tubel. Chairman Roe, Congressman Hudson, thank you for 
this opportunity. My name is Ed Tubel, and I am Founder and CEO 
of Tricor Inc., a licensed franchisee of Sonny's Real Pit Bar-
B-Q. Today I will attempt to provide a realistic overview in 
regards to the impact the Affordable Care Act has on my small 
business.
    I was fortunate to start Sonny's in the Carolinas in 1978 
with an SBA guaranteed loan. Over 34 years, we have built 27 
restaurants in four states. We currently operate five locations 
in North and South Carolina and employ 178 full and part-time 
people. Tricor/Sonny's has a very strong reputation locally as 
a family restaurant that provides for both our customers and 
our people.
    Our current health program is an HRA and a mini medical 
where we contribute to our 75 full-time and 103 part-time 
workers.
    Operating under the Affordable Care Act has negative 
consequences on our company. In essence, it is really not 
affordable.
    Since its passage, we have studied and participated in 
numerous seminars to estimate our most realistic cost in 
implementing this program. Based upon this information, it 
would cost our company from $140,000 to $200,000 to meet this 
mandate. This is disastrous financially since we are only 
projecting 2013 net profit of $240,000.
    Our loan covenants require us to maintain a coverage ratio 
of 1.5 to 1. This burdensome cost would reduce our coverage 
ratio to below 1, thereby placing our loan in default. Our bank 
could either increase our interest rate by adding to our costs, 
call our loan, which is absolutely unaffordable, or allow us to 
remain in default. I believe we all know the current financial 
atmosphere of the banking industry today.
    We have evaluated our choices to abide by the law as 
presently interpreted to include, one, increasing our menu 
prices to cover the additional costs, making us less 
competitive and affecting our sales, which eventually could 
lead to losses. The restaurant industry is very competitive and 
has experienced a very traumatic down slide since 2008. 
Research by the National Restaurant Association shows that 
since the recession, 70 percent have changed their eating-out 
habits by either reducing or even eliminating dining out. 
Increasing menu prices would be my last resort.
    We could reduce scheduled hours of 30 employees to less 
than 29, reducing our people's hours and income and the 
resulting effect on the local economy. This could require 
valuable employees to either obtain a second job or quit and 
seek full-time employment elsewhere.
    Split the company into four or five companies with 
different ownership is another option in order to stay under 
the 50 full-time requirements. This is difficult, and also 
costly.
    Or finally, we could just pay the penalty for not providing 
coverage under the Affordable Care Act.
    Major companies have legal advisors who will successfully 
guide them through this legislation. Small businesses such as 
ours must obtain as much information as possible and do their 
best to live by the letter of the law. Even after attempting in 
good faith to abide by the law, because this act is so 
complicated, we hope and pray we do not get penalized.
    The majority of our employees are below the age of 40. Many 
are students attending local schools, working during breaks and 
holidays part-time to supplement their income. The restaurant 
business has a history of high turnover due to this nature of 
being a second occupation, a supplement for school, or even a 
beginning job. Using W-2s to compute the total number of full-
time equivalents under this mandate would unfairly influence 
these results. In addition, the majority of our full-time 
employees believe this healthcare will be free. Many mistakenly 
believe the 9.5 percent cost is coming from Tricor rather than 
required from them, which many cannot afford, not to mention 
the administrative nightmare of our small company just having 
to enforce.
    Finally, we invest the majority of our cash flow into 
updating and remodeling our facilities to try to stay 
competitive. However, current profit levels are not sufficient 
to allow us to remodel or even consider expanding, which could 
provide an additional 50 jobs per location.
    The information I provided to you today is our best 
indications of observing the Act. We respectfully request that 
Congress reevaluate this mandate in relation to small business 
concerning both the 50 full-time threshold and calculation of 
full-time equivalents. With new interpretations being issued 
regularly, we can only hope and pray that we will be able to 
sustain our 34-year-old business and survive for both our 
employees and our customers. Thank you.
    [The statement of Mr. Tubel follows:]

         Prepared Statement of Edmund Tubel, CEO, Tricor Inc.,
       Licensed Franchisee, Sonny's Real Pit Bar B Q Restaurants

    Ladies and Gentlemen: My name is Edmund Tubel and I am CEO of 
Tricor Inc a licensed franchi see of Sonny's Real Pit Bar B Q 
Restaurants.
    Today I will attempt to provide as objective a position in regards 
to the impact the Affordable Care Act has on a small business such as 
our company.
    I was fortunate to start Sonny's in the Carolina's in 1978 with an 
SBA guaranteed loan. Over 34 years, we have built 27 restaurants in 
four states. We currently operate 5 locations in North and South 
Carolina and employ 178 full and part-time people. Tricor/Sonny's has a 
very strong reputation locally as a family restaurant that provides not 
only for their customers but also their own people.
    Our current health program is an HRA and a mini medical where we 
contribute to both our salary and hourly employees.
    Our census includes 75 Full time and 103 part time workers with 
less than 30 hours per week.
    Our interest today is to illustrate not only the complexity of 
operating under this legislation but also the negative consequences the 
Affordable Care Act will have on our Company. In essence it's really 
not affordable.
    Since its passage, we having observed and studied various outlines 
and participated in numerous seminars, to develop our best estimate in 
implementing this program as currently outlined. Based upon this 
information, it would cost our company anywhere from $150,000-$200,000 
to meet this mandate. This is disastrous financially since we are only 
projecting 2013 net profit of $240,000.
    Our loan covenants require us to maintain a coverage ratio of 1.5 
to 1. This burdensome cost would reduce our coverage ratio to below 1 
thereby placing our loan in default. Being in default would require the 
bank to 1) increase our interest rate, adding to our costs, 2) calling 
our loan, or 3) allowing us to remain in default. I believe we all know 
the current atmosphere of the financial community.
    Therefore we have evaluated our choices to abide by the law as 
presently interpreted. These include:
    1. Increasing our menu prices to cover the additional costs thereby 
making us less-competitive in the marketplace and affecting our sales 
which eventually could lead to losses. The restaurant industry is very 
competitive and has experienced a very traumatic downward slide since 
2008. Research shows that since the recession 70% of people have 
changed their eating out habits by reducing or even eliminating dining 
out according to the National Restaurant Association. Increasing menu 
prices should be a last resort.
    2. Reduce scheduled hours to less than 29 in order to stay below 
the 50 full time employee equivalent, thereby reducing our people's 
hours and income and the resulting effect on the local economy.
    3. Split the company into 4-5 separate companies with different 
ownership in order to stay under the 50 full-time requirements.
    4. 0r just pay the penalty for not providing coverage under the 
Affordable Care Act.
    Major companies I am sure have legal advisors that will 
successfully guide them through this legislation. Small businesses such 
as ours must obtain as much available information as possible and do 
their best to live by the letter of the law. Then because this act is 
so complicating hope and pray we do not get penalized.
    Many of our employees are very young. Many are students attending 
local schools working during breaks and holidays part-time to 
supplement their income. The restaurant business understandably has a 
history of high turnover due to its nature of being a second occupation 
or a supplement for school or even a beginning job position.
    Therefore using W-2's to compute the total number of those full 
time equivalents under the mandate would unfairly influence these 
results. In addition, the majority of our FTE employees will not be 
able to afford this healthcare. Not to mention the administrative 
nightmare of our small company having to enforce.
    The information provided today is our best indications of observing 
the act. We respectfully request that Congress reevaluate this mandate 
in relation to small business concerning both the 50 fulltime threshold 
and calculation of full time equivalents.
    With new interpretations being issued regularly we can only hope 
and pray that we will be able to sustain our 34 year old business and 
survive for our employees and customers.
                                 ______
                                 
    Chairman Roe. Thank you.
    Dr. Huff, thank you for your service to our country.

      STATEMENT OF OLSON HUFF, PEDIATRICIAN, ASHEVILLE, NC

    Dr. Huff. Good morning and thank you very much for allowing 
me to be here today, Chairman Roe and Congressman Hudson. I 
think that we are an example of democracy at its best, and I 
really appreciate the opportunity of sharing in that with you.
    I have to say, however, as a pediatrician, Chairman Roe, I 
may need to talk to you afterwards about some of those 5,000 
children you gave me to help take care of during these years. 
[Laughter.]
    Chairman Roe. Well, Dr. Huff, they are all good 
Republicans. [Laughter.]
    Dr. Huff. I really appreciate the fact that we are in this 
discussion, and in the many years, 50 or more now, that I have 
been in medical practice in North Carolina and in other parts 
of the world, I have dealt with countless families. I have seen 
them at their best, and I have seen them at their worst.
    There are three things that I have noticed about the 
families and the children I have cared for which is certainly 
common to all of us. Number one, when we are sick, we want to 
get well. Number two, when we are injured, we want to be 
mended. And number three, when we have pain, we want relief. 
That basically is the scenario that has been handed to me as a 
medical professional and to all of those who are my colleagues: 
How do we respond to those particular issues of health?
    My perspective from this presentation that I want to make 
to you this morning comes not from a particular business or an 
institution to which I may belong, but from the representation 
that I hope that I have to say about the health of all of our 
people.
    As a practitioner, I have been faced over these 50 years 
with a magnificent amount of change. We have seen changes in 
technology, we have seen changes in the scientific advances, 
and we have seen changes in how we become educated about those. 
As a result, we have increased the cost of medical care 
significantly in order to respond to those changes. That cost 
has been shared by patients, it has been shared by payers, it 
has been shared by private and by public institutions.
    One of the things that I remember specifically as a young 
patient of mine by the name of Alice, she has cerebral palsy. 
She came into my clinic always with a bright smile and a high-
five for everyone. I asked her mother one day, ``What do you 
need to make sure that Alice gets the best care?'' She said, 
``I need to make sure that someone is taking care of her who 
knows their business. I need to get as much of the care for her 
in one place, and I need to make sure that it is covered by 
some way, that it is paid for, so I can get her the care she 
needs.''
    That is the question that is in front of us, and I want to 
give two very specific reasons that I feel it is important to 
answer Alice's mother.
    First of all, North Carolina has missed a major opportunity 
when it failed to expand Medicaid, a portion of the Affordable 
Care Act that would extend care to significant numbers of 
people that would increase their opportunity for preventive 
health care. In North Carolina, we lost 25,000 jobs. We failed 
to add to our gross domestic product over the next 10 years, at 
least $1.2 billion. But more importantly, we failed to ensure 
and guarantee that access to the relief of pain, the relief of 
sickness and the mending of bodies that are broken for 500,000 
people.
    Translate that into another factor. We have about 122,000 
births in North Carolina each year, and almost 10 percent of 
those are born too early. The premature birth rate at our 
hospital costs us a little over $10,000 a year, compared to 
under $2,000 a year for a full-term newborn baby. We can 
prevent prematurity by offering better resources for preventive 
health care, and Medicaid is one of the ways in which women can 
get that preventive health care.
    We have talked a lot about cost today, and we will continue 
to talk about cost as it is related to health care. One of the 
things, however, that I think is tremendously important for us 
to understand is that there is a return on investment here, and 
rather than spending so much time on cost, I would love to see 
us spend more time on the benefits of what it means to insure 
all of our people and guarantee them the relief that is so 
necessary that we practitioners, hospitals, and institutions of 
medicine need to provide.
    Thank you for your service to our country. I continue to 
hope we will dialogue about this together.
    [The statement of Dr. Huff follows:]

              Prepared Statement of Olson Huff, M.D., FAAP

    For more than thirty-five years I have provided health care to 
countless children in North Carolina and have entered the lives of 
their families in substantial and enduring ways. I have seen them at 
their best and their worst. In those years, I have learned many things. 
Three stand out:
    1. When, ill, there is a desire to be well.
    2. When injured, there is a desire to be mended.
    3. When in pain there is a desire for relief.
    My task as a medical practitioner has been to address those issues 
and to bring a resolution to those desires whenever and wherever 
possible. To do so required me, and all my fellow medical colleagues, 
to rely on an extensive network of health care resources. Chief among 
those resources is and has been the economic strength necessary to 
support an ever-expanding medical system engaged in technological, 
scientific and educational advances.
    From my perspective as a medical practitioner, I wish to address 
two specific issues affecting children and their families in North 
Carolina and the economics surrounding them.
    They are:
    1. Medicaid Expansion
    2. Premature births
    Let me first state that these two issues are only a fraction of the 
many faces of health care today and both are centered squarely in the 
center of preventive care, a must if health care costs are to be 
reduced.
    Medicaid expansion in North Carolina. This opportunity of the ACA 
would have produced 25,000 jobs in North Carolina, added between 1.2 
and 1.7 billion dollars to the GDP of the state and provided badly 
needed health care access to 500,000 uninsured citizens. This would 
have been a bold step for prevention as the most reliable index of 
better health and therefore decreased medical costs is reliable access 
to health care.
    Premature births. In North Carolina each year, approximately 
122,000 babies are born. At the last counting, 15,569 of those were 
born too early. Not to even mention the human cost and impact on the 
economic and emotional health of a family with a premature baby, the 
average cost of caring for that baby is about $50,000.00 compared to 
$4550.00 for a full term healthy infant.
    The figures speak for themselves. Improved access to care, and a 
reliable resource to pay for it yields better health, better prenatal 
and infant care, a lowered rate of premature births and a healthier and 
more dependable work force to drive the engines of commerce our state 
so badly needs.
    Expanding Medicaid is one easily achievable way to guarantee that 
access to a population most likely to benefit and thus most likely 
improve the economic bottom line that will add greatly to the future 
needs and development of all of North Carolina's citizens.
                                 ______
                                 
    Chairman Roe. Thank you, Dr. Huff.
    Mr. Silver?

         STATEMENT OF BRUCE SILVER, PRESIDENT AND CEO,
                RACING ELECTRONICS, CONCORD, NC

    Mr. Silver. Thank you. My name is Bruce Silver. I am the 
President and CEO and Founder of Racing Electronics. We are 
based in Concord, North Carolina. I am very proud to be here 
today, and I want to thank the Congressman Hudson and Chairman 
Roe for allowing me to speak today.
    As a small business owner, I am concerned about the effects 
of the Affordable Health Care Act, Obamacare, and how it 
affects me and my small business in the future.
    What was once a choice for Americans will now become 
mandates and requirements, not only for employers but for also 
employees. Our right to choose is going to be lost.
    Insurance companies have already seen new taxes on health 
care. These new taxes are already in place and already have 
increased our premiums. In 2012, our premiums at Racing 
Electronics rose by 28 percent. In this year of renewal, just 
this month, in April of 2013, we have seen a 40 percent 
increase this year to our health care premiums. We cannot 
continue to sustain this and absorb increases and the effects 
to our bottom line.
    In the past, we have increased our employees' share of 
their paying for their health coverage, increased co-pays, and 
increased their deductibles. As a net result, our employees 
enjoy a much less rich plan than they enjoyed just three years 
ago.
    In the past we have competed in the marketplace, and still 
currently to this day we compete in the marketplace for 
employees. We have job applicants who come in wanting to know 
what our salary is, what their vacation time is, and what their 
insurance plan is. We compete by having affordable health care 
for our employees, by having substantial and equitable salaries 
to offer our employees. That choice for health care is being 
taken away. We can't compete with that now. It is going to be 
mandated what we are going to have to give.
    We are looking for automated distribution. We distribute 
radios and scanners at the Nascar and Indy Car and NHRA races, 
mostly all over the USA. This week in Talladega, we will have 
40 staff members. I am sure you have all seen the high-tech 
vending machines that have started to come to airports and 
malls around the country. We are looking at that right now. We 
are looking at what the benefits are if we would go and have 30 
machines instead of 30 staff members at the race, and the 
result--we don't want that result, we don't want that result.
    Since moving our headquarters to Concord in 2005, we have 
started to re-hire North Carolinians and put people back to 
work. While based in New Jersey in the early 1990s, we moved 
some of our production to Asia. I am very proud that we are 
pulling back a lot of that production and putting people back 
to work in this country. Thank you.
    [The statement of Mr. Silver follows:]

 Prepared Statement of Bruce Silver, President, Electronics Industries 
                     Corp.--TIA Racing Electronics

Talking Points
    Taxes Accessed to Healthcare Providers--How this affects premiums
    New Mandates--The effect of mandates related to premium hikes First 
year and future year costs (unknown)
    The disincentives for businesses to hire--
     Avoid penalties, new costs and burdens
     Turning to outsource work and turn to contractors and not 
hire new employees
    The elements regarding hiring/retention of employees (most 
desirable candidates)--Government in independent business
    The effects on companies of 50 or more employees--How part-time/
seasonal employees will be classified and the affects
    Related Penalties/Calculations--
     Tax affects
     How much penalty payments will generate What plans the 
employer may be required to offer
     Calculations of the employee contribution as it relates to 
the household income
     Why the premiums will continue to soar and the effect on 
employee's rising deductibles and out of pocket expenses
                                 ______
                                 
    Chairman Roe. Thank you, Mr. Silver, and thank the panel 
for your testimony, all again very good.
    In the right of full disclosure, the staff and I ate at a 
Sonny's Restaurant last night, and we are still full. It was 
very good. [Laughter.]
    Chairman Roe. We know a little something about Nascar 
racing in East Tennessee at the Thunder Valley and the Bristol 
Motor Speedway, so we use your products there.
    Mr. Silver. Thank you.
    Chairman Roe. We thank you for that, and we would like to 
see, of course, that business get back on its feet a little 
bit, too. They have been struggling a little bit, the racing 
industry has.
    Let me start by saying that I share a vision and a goal, 
and one of the reasons I left my medical practice and I told my 
wife I am either going to quit complaining or I am going to try 
to get elected to Congress and do something about the way I 
think the healthcare system is going in this country. I could 
see in my own patients this cost forcing people to lose their 
insurance, and you have seen this recession do that. We have 
fewer people now that have private health insurance coverage 
than before. So we have lost coverage because of our economy, 
and we are not going to increase coverage by losing jobs. We 
increase it by, as you, Mr. Silver, pointed out, bringing that 
manufacturing back, allowing people to get jobs and fill these 
positions that have health insurance coverage.
    And I went through this health care reform in Tennessee and 
I watched what happened, and I can see the same thing happening 
here on a national level. We have created a massive bureaucracy 
for the simplest transaction in the world, and that is a 
patient coming to see me and me getting paid for that 
transaction. It is unbelievable when you listen to all of the 
work that has to be done for that to happen now, and we have 
only begun to scratch the surface. We haven't even talked about 
Medicare, which is extremely important for me and extremely 
complicated when you look at the Affordable Care Act.
    So let me just talk about Medicaid expansion. Our state in 
Tennessee elected not to do it, to expand, and elected not to 
have the exchange. The Federal Government will set up the 
exchange. Let me just explain to you why we elected not to do 
it.
    Our governor, Governor Haslam, what he wanted to do was to 
have the flexibility to allow patients on Medicaid--by the way, 
if you want to, go pull this up. A large study was just 
published by the University of Virginia, 800,000-something 
patients, not a small study. Medicaid patients' surgical 
outcomes were worse than people that did not have health 
insurance coverage at all. The outcomes were worse. Mortality 
was higher and so forth. Why do we take a flawed, failed system 
that doesn't serve the patients well, why don't we reform that 
system so that it serves them better?
    One of the things I think we can do with that is to allow 
the private market to work. The public it has served, and, Dr. 
Huff, in Tennessee, all women who don't have health insurance 
coverage--because pregnancy is one of the things where you is 
or you ain't. So it is not one of those things where I may be 
pregnant. So in Tennessee, we cover every pregnant woman. So 
they have access to coverage. And with SCHIP plan, all of our 
children have coverage for pediatric coverage. So that is 
happening right now in our state, and I would suspect a lot of 
it is happening here.
    What you are talking about is expanding the program to the 
uninsured in North Carolina, and I think certainly those folks 
need to have adequate coverage, but there is a better way to do 
it other than Medicaid. What we wanted to do is use the same 
good health insurance that I currently have, I would like to 
have lower-income people have access to that, and that is what 
we would like to do in Tennessee.
    Mr. Bass, I am going to ask you a couple of questions. It 
is extremely important what you brought out in your testimony, 
which was excellent. One was defining a 40-hour work week. I 
think that is very important. Two is would you go over, Mr. 
Bass, a good-faith effort you were talking about in 2014? And 
lastly, a lot of people don't pay any attention to it, but it 
would help to fund the Affordable Care Act. To me, it was 
exactly the wrong way to go, to take a flexible spending 
account that I have right now and have me call my doctor to be 
able to get Prilosec over the counter instead of using your 
flexible spending account. You send it to the highest-cost 
provider instead of just letting me go down and get my 
Prilosec.
    And by the way, this is a personal testimonial. Thirty-one 
years I have practiced medicine, took care of some of the 
sickest people in the world. I never took a Tums, and six 
months after getting to Congress, I take a Prilosec every day, 
to let you know how it is. [Laughter.]
    So if you would go over those three points I made?
    Mr. Bass. Sure can. Food Lion invested itself several years 
ago to support the IRS regs around over-the-counter medications 
and accepting FSA accounts, and obviously with the new laws, 
that investment is going to be in jeopardy. We would similarly 
argue that we think it is inefficient to have patients go to 
their doctor for over-the-counter medications that they should 
be able to buy via those accounts without that interruption, I 
would argue.
    As far as a full-time associate, we strongly believe that 
for us, 35 hours and up is an adequate definition, and we 
believe that the expansion of that to 30 hours will create 
confusion, added cost, and in a business, frankly, where 
everyone sells food, we are doing our best to serve our 
customers and our associates in the best way possible. So for 
us, that expansion is really something that is important to us, 
and we believe we should be re-examining that.
    Chairman Roe. One of the things that I wanted to bring up 
that I learned in a hearing in Evansville, Indiana, obviously 
in medicine, we don't do this this way, but it is profit per 
employee. We had an IHOP owner that owned 12 IHOPs, had 800 
employees, and he said he was very efficient. He made $2,800 
per employee, and apparently in that business, that is very 
good. I didn't know that. Other McDonald's franchisee owners 
told me that $1,200 a year was very good per employee.
    He said, Doc, what do I do? He said, if I pay for the 
health insurance that I am required by the government, the 
essential health package, essential health benefits it is 
called--the government decides what you buy, not you, and what 
you can afford. He said, it is going to cost me $8,000. I am 
upside-down $5,000 per employee. If I pay the penalty and the 
taxes on that, I make no money. He said, what do I do? I said, 
well, by Washington speak, you charge me $10 for a pancake and 
you go out of business. I think that is exactly what you just 
described. I think I heard you say the last thing you wanted to 
do was raise the price for your customer.
    Mr. Tubel. Exactly.
    Chairman Roe. Could you comment on that?
    Mr. Tubel. Well, one of the problems we have is that we 
compete in a very competitive marketplace to where we compete 
with a lot of mom and pops. They won't have to operate under 
the same mandate as we do, which would require us, if we raised 
our prices, to go across the street and get something for a lot 
less money than coming to us, notwithstanding the service or 
the quality of what we provide.
    But bottom line is, after all is said and done, we are 
lucky at the end of the day to, after taxes, to make 2 to 3 
percent profit, which is more in line with about $1,200 per 
employee.
    Chairman Roe. I thank you.
    I yield to Mr. Hudson.
    Mr. Hudson. Thank you, Mr. Chairman.
    I thank the witnesses for your testimony.
    Going back, Mr. Bass, talking about I guess these added 
costs, which I think Mr. Tubel is referring to, how is your 
business going to respond? You are operating on a 1 percent 
profit margin on grocery items already. Are you going to raise 
food prices? Do you impact the incomes of employees? Your 
organization does a tremendous amount of charitable work in the 
community. Is that where we will probably see the cuts? How are 
you going to respond to the costs that are coming down the 
pike?
    Mr. Bass. That is a great question and the key one that we 
are wrestling with right now. So for us, we are deep in the 
planning phase. I think, as was mentioned on the earlier panel, 
with many new laws, we spend a fair amount of money, frankly, 
both for legal advice and for consulting advice, which could be 
used to grow our business in different ways, serve our 
customers differently and, frankly, serve our associates.
    We have already spent a substantial amount of money to try 
and determine how to comply with the regulations that are there 
already. So going forward, we continue to do that work. We are 
not quite sure exactly what the full impact will be. But as a 
competitive business who also believes we need to serve our 
employees as much as we serve our customers, we have a real 
strong conviction to continue to maintain health insurance. The 
form that it happens, the full impact of that, we are not quite 
sure, but it is very complex, and that is really why I think we 
need to consider some of the additional changes to those laws 
that have been discussed already.
    Mr. Hudson. I appreciate that.
    Mr. Tubel, you talked about the impact on your profit 
margins. I don't think folks who are not in business and, 
unfortunately, the people who are writing regulations for laws 
like this understand just how tight business people operate on 
margins, and especially in economies like this.
    You mentioned, I believe, how much time you are having to 
spend on legal advice and that sort of thing. What is the 
impact of that, just trying to understand the law, trying to 
figure out how to comply with the law? What kind of impact does 
that have on you?
    Mr. Tubel. Well, what we try to do is participate in 
various seminars that are provided by the industry. The North 
Carolina Restaurant and Lodging Association has also brought us 
a seminar, and then our franchise company has brought in legal 
to try to separate the single operator to the mini operator to 
the big operator. So it takes time away.
    But our biggest concern is if we get to the point where we 
can understand where we are at in the law, that it changes 
again. It is like a moving target for us. So we try to keep 
that moving target within range so we know that we have a 
probability of meeting the demands of the Act.
    Mr. Hudson. I know it is frustrating. I continue to try to 
beat that drum when we go to Washington just about what the 
uncertainty does to business people like yourself. So I will 
continue to be your advocate.
    Mr. Silver, thank you for your testimony. Can you elaborate 
a little bit on what you mentioned just in terms of the health 
care cost as a disincentive for hiring folks like you?
    Mr. Silver. Sure. Right now, we have offered a very 
healthy, rich plan, didn't try to incentivize people coming on 
board and working for our company. We are going to have to 
limit that. We are going to have to back down on some of the 
coverage and, frankly, we feel we're going to lose some 
employees to other employers because we are not going to be 
able to sustain the level of health care that is going to be 
mandated.
    Mr. Hudson. Well, you have certainly been a great citizen 
of this community, as was recognized by the Chamber, recognized 
U.S. Business of the Year, and we appreciate what you do for 
the community and the type of quality jobs you provide.
    Mr. Silver. Thank you. I am honored.
    Mr. Hudson. In my opinion, the Federal Government ought to 
be doing everything we can to get out of the way of people who 
are manufacturing things in this country, and we hope you can 
continue to have real people handing me a scanner at the race 
and not a machine.
    Mr. Silver. That is our goal. It will be a sad day for me 
and my company if we ever have to really go down that route.
    Mr. Hudson. Yes, sir. Well, as we look at just sort of what 
is the impact on your business, what do you think is the 
greatest impact out of this law as we look at ways we might 
improve it and tweak it? What is sort of the biggest thorn, the 
biggest burr in your saddle there?
    Mr. Silver. The lack of choice. We don't have a choice. We 
are told what we need to do. We are told how we need to do it. 
Instead of letting business do what businesses do and compete 
in the marketplace with good products and for good employees, 
we are told that we can't do that anymore. More regulation is 
not healthy for business.
    Mr. Hudson. That is very well said.
    Mr. Chairman, before I yield back, during our break one of 
our citizens in the audience grabbed me and handed me an 
article about--it is titled, ``Republicans and Democrats in 
Washington Conspire to Exempt Themselves from Obamacare,'' and 
I just wanted to state on the record that I have nothing to do 
with those negotiations, and as far as I am concerned we need 
to live under laws that we pass. So I don't support any efforts 
to exempt Congress, although I would love to find a way to 
exempt everyone from this health care law.
    But with that, Mr. Chairman, I will yield back.
    Chairman Roe. I thank the gentleman for yielding.
    I had an email about that yesterday, and my response was I 
would vote against me if I did that. So I would vote against 
myself.
    A couple of things that I want to sort of start by sharing 
with you to show you how complicated and complex this health 
care system this, and Dr. Huff brought it out. He spent his 
life taking care of poor children in western North Carolina, 
and that is a noble goal, something that just--literally across 
Mountain Sam's Gap is where I live. Medicaid is one way to do 
it. It was started in 1965, as Medicare was. Medicare began as 
a plan that cost $3 billion, and the government in 1965, the 
government estimator said that in 1990, 25 years later, it 
would be a $13 billion program, a $12 billion program. It is 
$110 billion. They missed it just a little bit, by a factor of 
nine.
    Medicaid has had the same explosive growth. Over 40, 50 
million people now have Medicaid in this country as their 
primary. And again, if it were a system that were working for 
them, that would be one thing. Because you get a Medicaid card 
doesn't mean you can get access to health insurance coverage. 
Our Medicaid patients tend to use more than the uninsured the 
emergency room, which is the most expensive, the worst thing 
you can do. And then there is the cost shifting that goes on. 
Let me explain what that is.
    When you come in to the hospital or to the doctor's office, 
it pays, Medicaid pays less than 60 percent of the actual cost 
of providing the care. So that cost is shifted onto the private 
sector, forcing all of these gentlemen up here who provide 
health insurance coverage for their employees to go higher. So 
the government program is actually shifting the cost to the 
private sector, and let me give you an example.
    When implantable defibrillators first came out, there was a 
man, a gentleman who needed one, and it was put in. Medicaid 
paid $800 for that device. The only problem with it, it cost 
$40,000. So that $38,000, $39,200--I am a public school guy; 
you see how I did in my math--that $39,200 was shifted to 
private insurers. So we have to stop this cost shifting that is 
going on right now, currently. And remember that hospitals and 
doctors have the responsibility by the EMTALA law that anyone 
who comes up, whether you are legally in this country or 
illegally in this country, have a right to health care. If you 
show up in the emergency room, Dr. Huff will see you if he is 
on call. If you show up in the emergency room, I will see you, 
and we will treat you whether you can pay or not, and no one is 
complaining about that.
    But we have to figure out a way to make this--as you heard 
these gentlemen say, their businesses can't afford it, and they 
can't afford more cost shifting. And it also occurs to a much 
lesser extent in Medicare.
    So I am going to finish up my questions, and I certainly 
appreciate this panel. It has been very, very informative.
    I think, Mr. Bass, you bring a point out that I had not 
thought of, which is the good faith period. I think we have to 
have a time, since I don't believe the Federal Government is 
going to be prepared for this come January 1, 2014, and it is 
the law of the land. I mean, it is the law we have to comply 
with and live with, and the thousands of pages somebody has to 
read. You guys are spending an inordinate amount of money and 
time doing that. Smaller businesses like these, they don't have 
an HR department to do that, so I don't know how they get the 
information. But we do need a grace period. I am taking that 
back. That is something I think we do.
    And the question I have for all of you all, we have 
Secretary Sibelius in front of my committee on the 15th of May. 
If you had a question to ask her, what would you want me to 
ask? And I will take it back from right here and ask it.
    Mr. Bass. I would emphasize a grace period that you just 
outlined. Food Lion and Delhaize America are proud to be strong 
partners in our communities. We will support both the law of 
the land and the desires of the communities we work within. We 
are proud to do that. We will do our best to comply with the 
law, but there are fairly strong penalties involved for lack of 
compliance that--we will not comply because we want to. We 
won't probably comply because we don't have the knowledge and 
skills yet. So if there were a grace period, that would be a 
huge plus from our perspective, and we would ask you to ask her 
that question.
    Chairman Roe. And Secretary Sibelius is, by the way, for 
those of you in the audience who don't know, is the Secretary 
of Health and Human Services, who is responsible for the 
implementation of the Affordable Care Act.
    Mr. Tubel. I think my question would be how do you apply 
one size to fit all? I mean, that is probably one of the 
biggest questions we have in health care, is that you can't put 
the one program in to cover everyone because everyone is 
different, and there should be some basis that you could allow 
some correction within the industry, based upon the industry 
demographics, to allow us to be able to afford the health care.
    Chairman Roe. Dr. Huff?
    Dr. Huff. How do we provide incentives that are already 
part of the Affordable Care Act to increase the ability to make 
sure that primary care physicians are readily available in this 
country to take care of the people we need? Because we have a 
significant lack of primary care physicians, and part of the 
reason that we need health care reform is to make sure we 
incentivize the educational programs to make sure those persons 
are going to those areas of need.
    Chairman Roe. Thank you, Dr. Huff.
    Mr. Silver?
    Mr. Silver. I would challenge the Secretary to make this a 
good program, to implement changes that would not have the 
negative impact that they have now. It is beyond belief how 
complex, needlessly how complex this program has become, and 
that is my question.
    Chairman Roe. We will pose those questions. And before I 
yield to Mr. Hudson for the last questions, Dr. Huff, just to 
let you know, there is a program in Medicare called Graduate 
Medical Education, GME. I am co-chair of the Academic Health 
Caucus in the Congress. What the Affordable Care Act did was in 
graduate--GME is graduate medical education--is how we train 
our young doctors across the country, and you are absolutely 
correct, we do not have enough. We will have, by 2025, 120,000 
primary care doctors short in this nation, and we are going to 
be lined up around Wal-Mart to get in.
    The Affordable Care Act cut the funding for graduate 
medical education so there is less money to train our 
residents. We are graduating more medical students, but they 
can't get into residency slots, and that is an impending 
disaster that we are working on.
    Mr. Hudson, I yield.
    Mr. Hudson. Thank you, Mr. Chairman.
    It was very enlightening to hear each of you say what you 
would ask the Secretary, and I think that is important. And 
again, I think that was part of the goal of this, was to allow 
real people to talk about real challenges out here in the real 
world. And so I appreciate your testimony and I appreciate 
those candid answers.
    I guess I would just try to dig a little bit deeper on what 
are some of the things in each of your businesses that you do 
to control health care costs, and how does this law impact 
that. So what are some of the processes you go through, the 
decision-making you do currently to control costs, and then how 
does this law impact that sort of decision-making process? And 
I will just start with Mr. Bass.
    Mr. Bass. For us, similar to other panelists, we have a 
significant emphasis on wellness. We do cover preventive care 
and the like, and we believe that that sets the stage for 
better long-term care and outcomes for the associate, as well 
as for us as a business, as well, on the cost side. There is a 
lot of uncertainty about exactly how wellness discounts work 
within the rate structure, and that is a significant question 
for us and, frankly, a concern, and that could dramatically 
impact how we offer wellness programs which, in the end, 
benefit the associate as much as it benefits our business.
    Mr. Hudson. Thank you.
    Mr. Tubel?
    Mr. Tubel. Well, because of the nature of our business, we 
encourage our people to join the YMCA and the other fitness 
places around. We have a lot of time to group together and do 
it as teams, but we don't have anything formal within the 
actual restaurant itself.
    Mr. Hudson. Thank you.
    I don't know if this question applies to your practice, 
but----
    Dr. Huff. Well, actually, I have in front of me my notepad 
that says, ``Eat smart, move more, North Carolina.'' I think 
the things that you all are talking about that provide 
healthier ways of living is really a great emphasis.
    I would like to mention one program in Greenville, South 
Carolina, and this is an OB/GYN program. Under the Medicaid 
program in South Carolina, they have actually taken pregnant 
women who are in the highest risk categories and reduced the 
premature birth weight by 47 percent. That is how we save 
money, and that is how we reduce costs, by really attending to 
those areas that are high risk and need attention to prevent 
it.
    Mr. Hudson. Mr. Silver?
    Mr. Silver. I am a small business. I started this out of my 
condominium in 1988 as a part-time job, and we kept adding and 
adding people. Two areas that I am a little sensitive to is 
weight and smoking, so I personally reward people that work 
within the company that quit smoking, financially, out of my 
own pocket, and lose weight for some people that we have had 
who had serious weight problems. We just preach a healthy 
lifestyle.
    Mr. Hudson. That is great. Well, I am impressed with your 
answers. But did any of you want to elaborate, though, on what 
the new health care law, the impact it will have on your 
ability to do some of these incentive programs? Is it going to 
be helpful, or is it going to kind of eliminate some of your 
flexibility to do these things? Anyone want to jump in? Mr. 
Bass?
    Mr. Bass. Yes, I will jump in. I think that the key for us 
is that lack of clarity around the rate structure and discounts 
for wellness programs. At the end, we have so many dollars we 
can really spend on our benefits program. We are proud to do 
that. But to the extent that there is a lack of clarity and 
uncertainty, it puts us at risk of compliance, and the fines 
involved typically are much more expensive than some of the 
benefits involved. So it forces us into potentially making hard 
choices. We don't know where it is going to go quite yet as we 
gather all the information over the course of the summer. But 
there is a significant potential negative impact, I think, for 
myself and other large employers who are considering the pros 
and cons of the rates, the regs, and the impact on wellness.
    Mr. Tubel. We would hope that the Affordable Care Act would 
provide some means for just about everybody to have the 
opportunity to be involved in the YMCA or a fitness center on a 
regular basis.
    Dr. Huff. And in relationship to prevention, again, North 
Carolina has drawn down several million dollars already from 
the Affordable Care Act to put into place prevention programs 
for obesity prevention, smoking prevention, and to increase 
activity. So there has been some effort that has been made 
under the Affordable Care Act for different states, certainly 
North Carolina, to benefit from some of the monies that can 
provide better prevention.
    Mr. Silver. We are going to continue to do what we have 
been doing, and that is to try to make our company as strong as 
it can be and our employees as healthy as they can be.
    Mr. Hudson. Great. Well, I thank the panel and, Mr. 
Chairman, I yield back.
    Chairman Roe. I thank the gentleman for yielding, and I 
certainly want to thank our witnesses for taking your time 
today. It has been fantastic. And I also want to thank all the 
people here in the audience who came in. As you can see, this 
is incredibly complicated, and we have only been two hours. We 
have only begun to scratch the surface of how complex our 
health care system is.
    By the way, I want to mention one thing. I think when the 
Lord walks on this earth again, it will start at St. Jude's 
Children's Hospital. I was a medical student there in 1969. My 
first rotation, pediatric rotation, was St. Jude's Children's 
Hospital. At that point in time, 90 percent of those children 
died, 90 percent. Today, 90 percent of those children live. It 
is absolutely unbelievable. And every child is treated for 
free. Every child's family is flown there for free. I probably 
will get a little bit emotional talking about this.
    My partner's child, my partner in medical practice, his 
wife was in the hospital having a baby when his 3-year-old 
child had a seizure and found out that he had a metastatic 
tumor from the abdomen with a 98 percent mortality. He was 3 
years old. That boy graduates from high school this year. It is 
an amazing story. I hope that this health care plan, or 
whatever you want to call it here, doesn't interrupt the 
incredible medical innovations that we have in this nation.
    Yesterday on the airplane flying over here to Charlotte 
from the Tri-Cities, I ran into a constituent of mine who was 
going to the M.D. Anderson Hospital. He had a familial leukemia 
that had a 4-month survival rate 12 years ago. We don't want to 
stop that in this nation. We want to continue to be the country 
that provides that medical research and doctors that provide 
the kind of care that we are getting that is available nowhere 
else in the world.
    I will now yield to my good friend, Mr. Hudson, for his 
closing remarks.
    Mr. Hudson. Thank you, Mr. Chairman. Again, thank you for 
being here today, bringing this hearing to Concord and Cabarrus 
County. This has been extremely informative to me, and I thank 
our witnesses from both panels for sharing your testimony.
    I think we all share the goal of having the best health 
care in the world here in this country, having it accessible to 
everyone, and having it at a price people can afford. My desire 
is that individuals have more power and more control over the 
decisions when it comes to health care. A lot of you may have 
seen Dr. Ben Carson when he spoke at the Prayer Breakfast 
recently. I thought he put it so well when he said if it was up 
to him, every child who is born in this country, he would hand 
them a birth certificate and a health savings account. And if 
they couldn't afford to put money in their health savings 
account, then the Federal Government would put it in for them 
because it would be cheaper than a lot of the social welfare 
programs we do now.
    And by putting the power in that individual's hands to make 
health care decisions, if you combine that with some 
commonsense things like liability reform, like more 
transparency in costs, allowing insurance companies to compete 
across state lines, tax credits for folks who buy their own 
insurance, if you bring these market-based reforms into health 
care and empower individuals to make decisions, individuals 
will make smarter decisions. They will make smarter decisions 
about what kind of preventive care they seek. They will make 
smarter decisions about what kind of tests that they and their 
doctors decide they might need or that a family member might 
need, and we will continue to have the best quality health care 
in the world.
    There is a reason people come here for health care from 
other parts of the world. It is because we have the best 
quality. So I want to see us move toward more access, more 
affordability, but keep that quality of care. I am just really 
afraid that the program we are moving towards, the Affordable 
Care Act, is going to destroy the quality and the access in an 
attempt to fix the price.
    And then the other side effect that we have talked about a 
lot today here is the impact on our businesses, businesses who 
are trying to do the right thing, to provide health care, to 
even provide preventive care. I have heard some remarkable 
stories here today. But this law is going to become such a 
burden to these businesses. Not only can they not afford to do 
what they are doing to take care of their employees, but I 
question whether they can keep their doors open and keep the 
jobs that we need so desperately in our communities.
    And so I appreciate the testimony, I appreciate the 
opportunity to highlight these issues, and I just pledge to you 
that I will continue to work as hard as I can to make 
improvements to this law as long as this law is the law of the 
land and look for alternatives to this law as we build support 
to do that.
    So, with that, Mr. Chairman, with much gratitude to you for 
being here, I yield back to you, sir.
    Chairman Roe. I thank the gentleman for yielding, and I 
want to thank the panel and the audience. You have been great 
out there.
    And if he is not going to do it, if Mr. Hudson is not going 
to do it, I am going to introduce his mother, who is here in 
the audience today----
    [Laughter.]
    Chairman Roe [continuing]. And thank her for being here, 
because without you, he wouldn't be here. So, thank you for 
that.
    I was out at a VA jogging many years ago when this veteran 
stopped me and he said, Doc, he said, do you know what the 
problem with this place is? And I said no. And he said, 
alcohol, tobacco, and inertia. And I think that is what 
basically, Mr. Bass, you said was the problem we have, is that 
people need to get up and move and not smoke and drink too 
much, and that probably would take care of their own health.
    To give you an example of a wellness program, the 
government had absolutely nothing to do with this. It is called 
BAE. BAE is a large, worldwide corporation, and they make in my 
district C-4. If it blows up in Afghanistan, we made it in 
Kingsport, Tennessee. When the helicopter blew up inside the 
bin Laden compound, I know where the C-4 came from.
    They started a prevention program about six years ago where 
if you were an obese, diabetic, smoking, hypertensive train 
wreck waiting to happen, you could do that, but you were going 
to be an expensive train wreck and it was going to cost you. 
But if you got your hemoglobin A1C down, you quit smoking, you 
got on the wellness program, they would pay you. So they 
reversed the incentives. Doctors have been incentivized to take 
care of sick people instead of incentivized to make people 
well. So what they did was they had put this program in, and 
all of their 700 employees, every single one of them 
participated in this program, and in six years, even with these 
huge rate increases--they are self-insured--they have had one 
minimal rate increase in six years. It is amazing. That should 
be done around the country.
    I personally use a health savings account, as Mr. Hudson 
said. I am a very savvy consumer of health care. I negotiate. I 
went into the outpatient clinic not long ago for a procedure. I 
had to have a minor procedure. So I negotiated the price, 
because they got their money in a millisecond. I didn't ask the 
insurance company. I asked my doctor. I knew I needed it. I 
went in and got it done. I got a 35 percent discount. My son 
worked for the hospital medical system. He said, dad, you could 
have gotten a 50. I wasn't as good a negotiator as I thought. 
[Laughter.]
    But anyway, I think we have learned a lot today, and I want 
to thank the host here at the college for allowing us to be 
here and sharing this facility, and all of you all for coming. 
I have learned a lot. You can see just how we have just 
scratched one part. We haven't even talked about Medicare, 
which I am passionate about. I have a bill out there that I am 
the primary sponsor of, and Mr. Hudson is a co-sponsor of this 
bill, to repeal the IPAB. It is the worst piece of the entire 
health care bill, and it is going to drastically affect our 
senior citizens in a negative way. It will ultimately ration 
their care.
    So I am going to continue to work on this as long as I am 
allowed to serve in the Congress of the United States, and 
certainly his door is open, my door is open. I have learned 
more at these hearings out here in the field than I do back in 
D.C., and I want to thank you all for being here, all eight of 
you.
    And without any further comments, this hearing is 
adjourned.
    [Whereupon, at 11:00 a.m., the subcommittee was adjourned.]

                                 
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