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







        THE HEALTH CARE LAW: IMPLEMENTATION AND SMALL BUSINESSES

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             APRIL 17, 2013

                               __________



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


            Small Business Committee Document Number 113-011
              Available via the GPO Website: www.fdsys.gov

                                _____

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                       BLAINE LUETKEMER, Missour
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                   JAIME HERRERA BEUTLER, Washington
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                       DAVID SCHWEIKERT, Arizona
                       KERRY BENTIVOLIO, Michigan
                        CHRIS COLLINS, New York
                        TOM RICE, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                        BRAD SCHNEIDER, Illinois
                          RON BARBER, Arizona
                    ANN McLANE KUSTER, New Hampshire
                        PATRICK MURPHY, Florida

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director
















                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Sam Graves..................................................     1
Hon. Nydia Velazquez.............................................     2

                               WITNESSES

Douglas Holtz-Eakin, Ph.D., President, American Action Forum, 
  Washington, DC.................................................     4
William J. Gouldin, Jr., President, Strange's Florists, 
  Greenhouses and Garden Centers, Richmond, VA, testifying on 
  behalf of the National Federation of Independent Business......     5
Louisa McQueeney, General Manager, CFO, Palm Beach Groves, 
  Lantana, FL, testifying on behalf of Main Street Alliance......     7
Kevin Tindall, Owner, Tindall & Ranson Plumbing & Heating, 
  Princeton, NJ, testifying on behalf of the Plumbing-Heating-
  Cooling Contractors--National Association......................     9

                                APPENDIX

Prepared Statements:
    Douglas Holtz-Eakin, Ph.D., President, American Action Forum, 
      Washington, DC.............................................    36
    William J. Gouldin, Jr., President, Strange's Florists, 
      Greenhouses and Garden Centers, Richmond, VA, testifying on 
      behalf of the National Federation of Independent Business..    44
    Louisa McQueeney, General Manager, CFO, Palm Beach Groves, 
      Lantana, FL, testifying on behalf of Main Street Alliance..    53
    Kevin Tindall, Owner, Tindall & Ranson Plumbing & Heating, 
      Princeton, NJ, testifying on behalf of the Plumbing-
      Heating-Cooling Contractors--National Association..........    59
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    ABC - Associated Builders and Contractors, Inc...............    63
    GAO - U.S. Government Accountability Office Draft Report - 
      Small Employer Health Tax Credit Factors Contributing to 
      Low Use and Complexity.....................................    65
    Harris Interactive, Inc. Report..............................   107
    New York Daily News - Small business owners have no strategy 
      for coping with rising healthcare costs: report............   111

 
        THE HEALTH CARE LAW: IMPLEMENTATION AND SMALL BUSINESSES

                              ----------                              


                       WEDNESDAY, APRIL 17, 2013

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in Room 
2360, Rayburn House Office Building. Hon. Sam Graves [chairman 
of the Committee] presiding.
    Present: Representatives Graves, Chabot, King, Luetkemeyer, 
Mulvaney, Tipton, Herrera Beutler, Huelskamp, Schweikert, 
Collins, Rice, Velazquez, Schrader, Clarke, Hahn, Payne, 
Barber, McLane Kuster, and Murphy.
    Chairman GRAVES. I would like to call the hearing to order. 
And I want to thank all of our witnesses for being here today. 
I look forward to your testimony.
    Today we are going to examine the implementation of one of 
the most far-reaching laws in our nation's history--the Health 
Care Reform Law--and its consequences for small businesses. It 
was signed into law on March 23, 2010, just over three years 
ago, so this is a good time to assess how small businesses are 
faring and how the law is being implemented.
    According to a February 2013 Newtek Business Services poll, 
65 percent of small business owners do not have a strategy to 
manage their health care costs over the next 12 months. Most 
small businesses are not even aware of the yet of the thousands 
of pages of mandates, requirements, and taxes in the new health 
care law or they are uncertain just how to comply. Some 
provisions are already in effect, including a new tax on the 
sale of medical devices, a new Medicare payroll tax for higher 
earners, and new net investment income tax for higher earners, 
new limits on tax-favored health spending accounts, and medical 
loss ratio provisions. Next year, the employer mandate, the 
individual mandate, the requirement that employers' plans cover 
a wide range of essential health benefits and the tax on health 
insurance, all become effective.
    In a recent U.S. Chamber of Commerce survey, 86 percent of 
small businesses said regulations and taxes negatively affect 
their ability to operate. Seventy-five percent expect the 
health care law will increase their costs, and 71 percent 
believe the law will make it harder to hire employees. Just 5 
percent expect that their health care coverage will become more 
affordable. Small companies, already hurting, are struggling to 
find ways to absorb additional costs. Beginning in 2014, the 
employer mandate will require employers with the equivalent of 
50 full-time workers to offer affordable health insurance to 
employees who work more than 30 hours per week, or pay a 
penalty. This one change is already causing small business 
owners to consider shifting workers to part-time status, 
reducing the workforce to just simply not hiring.
    In a comment letter I sent to the Treasury Department on 
its employer mandate proposed rule, I suggested minimizing the 
law's impact on small employers--for example, not deeming just 
30 hours per week a full-time work week. Small businesses are 
concerned, and for very good reason. All employers, even small 
businesses with fewer than 50 workers not subject to the 
employer mandate will be affected by various reporting, 
notification and record-keeping requirements.
    In a January 2013 analysis by Dr. Douglas Holtz-Eakin, who 
is one of our witnesses today, found that the law will 
dramatically increase the cost premiums for small employers, 
and the temporary small business health care tax credits help 
very few. A Government Accountability Office report that I 
requested found that despite estimates that 1.4 to 4 million 
small firms will be eligible in 2010, only 170,000 have claimed 
even a partial credit. These are the same small businesses that 
we are counting on to grow, invest, and create new jobs. And 
the laws, provisions, and regulations are still coming.
    Today we will hear from small business owners and others 
about the effects of the health care law's implementation. I 
look forward to your testimony. And I yield to Ranking Member 
Velazquez for her opening remarks.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman. And thank you for 
calling this hearing. I want to take this opportunity to thank 
all the witnesses for being here with us today.
    Three years ago the president signed into law the 
Affordable Care Act. Landmark legislation aimed at improving 
the system that has been broken for too long. For consumers, 
low income workers, and families with children suffering from a 
preexisting condition, the health insurance system offered a 
raw deal for many decades now. Small businesses and 
entrepreneurs were among those left out in the cold by a 
structure that put insurance company profits ahead of health 
care consumers' needs. In that, small firms have seen their 
premiums escalate by 113 percent over the course of the last 
decade. For many of the smallest enterprises, those with 50 
employees or less, providing quality health care to their staff 
was simply not an affordable option.
    Last year, the Supreme Court upheld the Affordable Care 
Act, finding its provisions constitutional. Regardless of where 
each of us stood when Congress considered and passed the bill, 
that debate is now over. Indeed, rolling back or defunding the 
measure would be of enormous harm to our nation's 
entrepreneurs. The challenge before this Committee is ensuring 
reform is implemented in a way that allows small businesses to 
benefit while minimizing disruption for smaller companies.
    Make no mistake, there are significant benefits for 
entrepreneurs in the ACA. Forty billion dollars in tax credits 
are being made available for small businesses that supply 
insurance coverage to their employees. The smallest companies, 
those with fewer than 10 employees, gained the most from these 
credits. As rates have risen, the small employers have 
encountered the most difficulty offering coverage.
    Over just a nine year period, their coverage levels 
declined by more than 10 percent, providing the need for a 
targeted credit. While these tax credits offer great promise, 
challenges remain in ensuring eligible businesses take full 
advantage of the program. With only 335,000 small firms 
applying for this assistance, it is clear that more must be 
done to make small companies aware of how to apply and take 
advantage of this provision.
    I look forward to hearing from our witnesses today what can 
be done at the IRS and throughout the government to maximize 
small firms' use of the tax credit. Small businesses are also 
beginning to reap the benefits from the law's more general 
provisions that protect consumers from unfair insurance 
industry practices. As purchasers of coverage, small companies 
are negatively impacted when one of their employees encounters 
a rare or debilitating illness. For these firms, the caps on 
lifetime limits and elimination of preexisting conditions are 
helping to create a fairer health insurance marketplace. They 
prevent insurance companies from drastically raising rates when 
one of the small firms' employees grows gravely ill.
    In addition to preventing insurance companies from abusing 
their small business customers, the law offers a more consumer 
friendly marketplace for small companies wishing to offer 
coverage. By January of next year, there will be health 
insurance exchanges within every state providing a competitive 
marketplace for small firms to shop for affordable coverage 
that meets their needs. For too long, affordable quality 
insurance was only available to those who worked for large 
employers, such as major corporations or the state and federal 
governments. With full implementation of the Affordable Care 
Act, we can enable small firms to offer compatible coverage, 
making them more competitive and allowing them to attract 
employees who might otherwise flock only to major companies.
    When any major law of this complexity is implemented, there 
will be an adjustment period. It is my hope we can ensure 
implementation goes as smoothly as possible for small firms, 
both by shaping how regulations are crafted and where necessary 
making minor statutory changes.
    With that, Mr. Chairman, I thank you and I yield back.
    Chairman GRAVES. Thank you very much.
    Now we will go to our witnesses. We have got votes that 
will probably happen sometime between 1:25 and 1:40, in there, 
so we will probably get through all of your statements. And 
then we will probably get started on questions and then come 
back to finish questions. Unfortunately, they scheduled votes 
right in the middle of the hearing. But with that, each of you 
have five minutes.
    Our first witness is going to be Douglas Holtz-Eakin, Ph.D. 
Dr. Holtz-Eakin is president of the American Action Forum. He 
served as commissioner of the congressionally chartered 
Financial Crisis Inquiry Commission from 2009 to 2011 and 
director of the Congressional Budget Office from 2003 to 2005. 
Welcome, and we appreciate you coming in today.

 STATEMENTS OF DOUGLAS HOLTZ-EAKIN, PH.D, PRESIDENT, AMERICAN 
  ACTION FORUM; WILLIAM J. GOULDIN, JR., PRESIDENT, STRANGE'S 
  FLORISTS, GREENHOUSES AND GARDEN CENTERS; LOUISA MCQUEENEY, 
GENERAL MANAGER, CFO, PALM BEACH GROVES; KEVIN TINDALL, OWNER, 
             TINDALL & RANSON PLUMBING AND HEATING

                STATEMENT OF DOUGLAS HOLTZ-EAKIN

    Mr. HOLTZ-EAKIN. Chairman Graves, Ranking Member Velazquez, 
and members of the Committee, thank you for the privilege of 
being here today. I have submitted a written statement for the 
record. Let me just talk about a couple of things in the 
opening remarks.
    The Affordable Care Act is many things. It is health 
policy. It is budget policy. But it is certainly also dramatic 
economic policy, and from that perspective I think it has 
significant flaws. It is a very costly regulatory initiative 
whose uncertainty has not yet fully been resolved. It contains 
numerous taxes and fees of a magnitude of nearly a trillion 
dollars over the next 10 years that are hard to describe as 
pro-growth. And it imposes burdens on employers, raising 
insurance costs at the very time when they have a mandate to 
provide insurance to employees. These are significant economic 
policy headwinds and they have a particular implication for 
small businesses. And I want to talk a little bit about each of 
those.
    At the American Action Forum, we spend a lot of time trying 
to track the costs of regulatory initiatives in this area and 
elsewhere, and the ACA is very costly. It has about $24 billion 
in reported regulatory compliance costs. These are estimates 
that come from the administration itself. Eighty million hours 
of paperwork time spent complying with those regulations. To 
give you some perspective, that is 40,000 full-time employees 
filling out paperwork for a year nonstop. And there are also in 
a table in the written testimony, 11 regulations that have 
significant economic impact on a substantial number of small 
entities which is simply a term of art for noticeable and 
significant burdens on small business. And so this is, in fact, 
an initiative that has $2 billion in costs on small businesses, 
has another 11 million hours that are particularly focused on 
paperwork for small businesses, and we are not yet done. I 
think as everyone on the Committee knows, the exchanges are not 
yet fully implemented and there are open questions about 
whether we will meet the October 1st deadline and other aspects 
of the bill remain far from finished, and the ultimate 
regulatory burden will not be seen. But we are already seeing 
some of the impacts on the small business community, and I 
remain concerned about whether overall this does pass the 
typical benefit-cost test.
    If you look at the taxes and the fees in the growth, as I 
said, there are a trillion dollars in new taxes here, including 
the mandate on those employers or the tax on those employers 
who do not provide insurance, the so-called mandate. Two 
thousand dollars is a significant impact. The provision of that 
insurance itself is an impediment to small business hiring. We 
are going to see business after business shift as the chair 
mentioned to part-time as opposed to full-time employment. They 
are going to have to devote resources to insurance costs 
instead of hiring new people, and it is a particular burden on 
minimum wage workers, where there is very little flexibility in 
terms of the pay package so that you could provide less in cash 
wages and more in terms of health insurance. And so I am 
particularly worried about the impact at the bottom of the 
economic ladder, the first step in upward mobility, and the 
small business role in that.
    We have seen other taxes that got mentioned that are 
particularly onerous on small business. The medical device tax 
is a 2.3 percent tax on sales that is utterly divorced from the 
economic health of any entity, and the research shows will have 
a disproportionate impact on small businesses. It is not 
surprising in a country that leads the world in medical science 
that many of those devices are, in fact, the creations of small 
businesses and startups. And even prior to making a single dime 
they are going to have a tax burden as they try to develop 
their products. And finally, the new net investment income tax, 
which is going to show up on many small businesses' individual 
income tax returns, is simply a third tax system above and 
beyond the income tax and the alternative minimum tax. It is 
incredibly complex, and it is going to be quite onerous for our 
entrepreneurs and small businesses to comply with.
    The last thing I will mention is the cost of insurance 
itself. There are lots of reasons to believe the essential 
benefits package, the requirement to cover people with pre-
existing conditions, the limited age-rating bands that are in 
the law, that one would expect the insurance premiums of 
younger and healthier workers to go up, particularly in small 
businesses. The survey work that the chairman mentioned that we 
did was to simply ask how big could that be? And for small 
businesses with healthy workforces, these are double digit, 
sometimes triple digit increases. We saw increases over 150 
percent as a result of the impacts of the law itself. These are 
a substantial burden, an implicit tax on growth, at a time when 
we need businesses, small businesses especially, to restore 
their traditional role of creating jobs and speeding the pace 
of economic recovery.
    So I thank you for the chance to be here today, and I look 
forward to the chance to answer your questions.
    Chairman GRAVES. Thank you very much.
    Our next witness is William J. Gouldin, Jr., who is 
president of Strange's Florists, Greenhouses and Garden Centers 
in Richmond, Virginia. Strange's is a family-run business that 
began in 1935 and has four generations of experience. Mr. 
Gouldin has been president since 1971. He is testifying on 
behalf of the National Federation of Independent Business. 
Welcome to the Committee.

                STATEMENT OF WILLIAM J. GOULDIN

    Mr. GOULDIN. Thank you, sir. Chairman Graves, Ranking 
Member Velazquez, members of the Small Business Committee, 
thank you for inviting me today.
    I am Bill Gouldin, president of Strange's Florists, 
Greenhouses and Garden Centers in Richmond, Virginia. I work 
with my two brothers, my wife, my son, and my daughter, along 
with 120 to 150 employees. We have a blend of full-time, part-
time, and seasonal employees, along with contractor hours at 
the major holidays. We have four retail flower shops, a 
wholesale greenhouse range, and two retail garden centers.
    Due to the holiday season and the nature of our business, 
virtually all of our employees are hourly employees. We have 
been paying 100 percent of the health care premium for all of 
our full-time employees all of my career, and we also provide a 
401(k) plan for our employees. I thought providing health care 
benefits was important because I felt our employees needed it 
and we could provide it for less than it cost them, but in 
recent years I have come to realize that all third-party pay 
systems are having difficulties and that usually the 
beneficiaries have little knowledge of the costs and some just 
do not care; and then I have very little control over those 
costs.
    When the health care debate was raging, I realized there 
was plenty of rhetoric, both pro and con, but there was very 
limited detail. So when people ask me about what happened in 
the financial crisis, my comment has always been it was lack of 
due diligence and integrity on all of our parts that the 
financial system got in such trouble. And I think the same is 
true of the health care industry and the Patient Protection and 
Affordable Care Act.
    That caused me to take the time to begin scanning the House 
and Senate bills as they were progressing, and I printed every 
page that I could find that referenced the employer and the 
employee and quickly realized that there were parts that were 
very vague and confusing, many parts that were not workable, 
and some that were very dangerous to employees and their 
employers. I realized that this law would be the most 
disruptive instrument to the American workplace in my lifetime, 
and no one seemed to know or care right in the middle of the 
worst recession/depression since the Great Depression.
    The IRS has the undesirable task of weeding through the 
details of implementation and is making some progress but has a 
long way to go. Their most complete list just came out December 
of 2012. It was late in the game but it was a big help for some 
of the questions I had. One of the most dangerous parts of the 
law is the statutory definition of full-time employment at 30 
hours per week, or as interpreted at 130 hours per month. The 
IRS cannot correct that definition. Congress will have to amend 
the law. The use of 30 hours to define full-time employment is 
the lowest in the world, far below the common practice of 37.5 
to 40 hours per week that is common practice for both public 
and private employers in this country. This is already causing 
rescheduling of employees where employers have read the law.
    Every employer will be forced to define part-time 
employment as something below 30 hours a week. Most will use 
between 20 and 27.5 hours per week. There millions of people 
who currently work between 30 and 36 hours per week because 
that suits their lifestyle and their income needs. These people 
will be required to lose hours of work and income. Some 
employers are paying ``time and a half'' to avoid hiring 
additional employees. The new full-time employee definition 
will cause a hole in employment between 27.5 and 37.5 hours per 
week and possibly wider.
    In 2009, I began developing the table that I gave you all a 
copy of, and I have been tracking the Kaiser Family Foundation 
average national premiums. And I made modest adjustments of 5 
percent inflation for 2013 and 2014. The tables show the 
marginal cost of offering health insurance at $119.05 an hour 
for an employee allowed to work 30 hours per week where the 
employer pays 100 percent of the premium, which is in their 
case, or a premium of $95 an hour if the employer pays 80 
percent of the premium. These staggering marginal costs are 
evidence of the problematic employment wedge that has been 
created. The 9.5 percent affordability test will only aggravate 
the problem and drive wage rates at the rate of health care 
inflation.
    My concern is that no one seems to care about the millions 
of employees that will lose their job in whole or in part 
because of this 30-hour rule. Most employers have no pricing 
power to pass these increased costs on to their consumers so 
they have no options but to reduce hours or personnel. If a 
business tries to absorb these costs and goes out of business, 
everybody loses their jobs.
    The employer confusion caused by this law is already 
causing higher unemployment and I believe that real 
unemployment, which is the U-6 table, will rise as employers 
try to adapt to this law.
    Amend the definition of full-time employee to read 37.5 
hours per week and begin to improve the U-6 unemployment today 
instead of watching it rise above 14.5 percent. This will 
increase employment better than any scheme that I have heard 
and not cost the government a dime. Our every effort should be 
to move people from unemployment to working taxpayers.
    We need a paradigm change to genuine respect for those 
private businesses that create jobs in this country and for 
those who go to work every day. The most patriotic thing any of 
us can do is to create a job or go get a job.
    Thank you very much. I look forward to your questions.
    Ms. VELAZQUEZ. Mr. Chairman, it is my pleasure to introduce 
to the Committee Ms. Louisa McQueeney. Ms. McQueeney is the 
chief financial officer of Palm Beach Groves, an orange 
shipping business located in Lantana, Florida. The company has 
been family owned since 1946 and has a handful of employees. 
Ms. McQueeney has been with the business for over a decade. She 
is testifying today on behalf of the Main Street Alliance, a 
national network of state-based small business coalitions. 
Welcome.

                 STATEMENT OF LOUISA MCQUEENEY

    Ms. MCQUEENEY. Chairman Graves, Ranking Member Velazquez, 
and members of the Committee, thank you for the invitation to 
testify on how the Affordable Care Act is impacting small 
businesses.
    My name is Louisa McQueeney, and I am the general manager 
and CFO of Palm Beach Groves, a small business in Lantana, 
Florida. We ship gift citrus across the United States and 
Canada. Last year we employed six year-round employees and 
three seasonal workers.
    Part of my job as CFO is managing health care benefits. I 
have grown quite accustomed to yearly double-digit rate 
increases from 12 percent to as high as 32 percent.
    For almost a decade, our staff has not seen any raises, 
because the raise would go to yet another increase in health 
insurance premiums.
    Then, the first components of the Affordable Care Act, or 
``Obamacare'' were implemented.
    In November of 2011, our insurance agent called with our 
renewal. Instead of the nightmare news I have come to expect, I 
found out that our premiums would increase by a grand total of 
0.2 percent. Zero point two. Flat.
    I was floored. This flat renewal came with exactly the same 
plan--no dumbing down the coverage, no increase in our 
deductibles, everything remained the same.
    Then, at tax time, we applied for the small business health 
care tax credit, which cut our total health care costs by about 
10 percent--$7,400--for 2011.
    Last summer, we also received a $1,582 rebate check in the 
mail from our insurance company. Our health insurer had not met 
the ``80/20'' rule which requires them to spend at least 80 
percent of premiums on medical care. So, they were forced to 
pay us back the difference. I was so excited I really thought 
about framing the check.
    My family was also personally benefitting with a free 
annual well-visit, and we were also able to keep our daughter 
on our health insurance until age 26. Between the stable rate, 
the tax credit, and the rebate check, last year our health care 
costs went down 12 percent, the first time ever, thanks to the 
Affordable Care Act.
    Since the law will not be fully implemented until 2014, we 
still face challenges. All of our employees are in their 50s 
and 60s. Last year we had four major health care events in our 
very small group. One of our long-time employees died after 
battling lung cancer. The spouse of another was diagnosed with 
a serious heart condition. Thank God he was covered under our 
insurance, because it literally did save his life.
    Under Florida law, health insurers are allowed to impose 
additional rate hikes to small businesses based on the health 
status and claims experience of the group. When you only have a 
few employees to begin with, just one battle with cancer can 
dramatically affect your rates. Add a heart condition diagnosis 
and a generally aging workforce, and we found ourselves facing 
another double-digit rate hike at our latest renewal.
    Starting next year, the Affordable Care Act prohibits 
insurers from hitting small businesses with these rate hikes 
based on health status or claims experience. Gone will be the 
days when, if one of your employees gets cancer, your rates 
will skyrocket. Frankly, it cannot come soon enough.
    I am pleased that Governor Scott has joined with other 
republican governors in dropping the opposition to the law and 
wants to accept the Medicaid expansion, which will help many 
Floridians. However, this issue is still being hotly debated in 
our state legislature. I hope they do the right thing.
    We need to move forward with health insurance exchanges 
where small businesses can compare costs and coverage. Too many 
small business owners still do not know that they could benefit 
from the health care tax credit, a dollar-for-dollar reduction 
in your tax bill. I found out about the credit through a small 
business IRS mailing, but many business organizations, like the 
U.S. Chamber of Commerce, opposed the law for ideological 
reasons. I feel they have been remiss in educating their 
members about how they might benefit and lower their health 
care costs.
    Before I finish, I want to say something briefly about 
employer responsibility. In our system, health care insurance 
is generally provided by the employer. We feel it our duty to 
provide health coverage to our employees who are like family to 
us. How can you look an employee in the eye while they battle 
cancer and say ``We are going to drop your coverage'' when you 
know it will financially devastate their family?
    As a business doing the right thing in offering health 
coverage, it is a problem for us when businesses much larger 
than ours do not offer health insurance and force us to 
subsidize their costs. The shifting of uncompensated health 
care costs represent a hidden tax in our premiums that cost our 
business hundreds of dollars per employee per year How is that 
fair?
    In conclusion, the Affordable Care Act is bringing 
affordable good quality health coverage within reach for many 
small businesses. We are already seeing the benefits and have 
even more to look forward to with the establishment of the 
state health insurance exchanges, the prohibition on rating due 
to health status, and other provisions that are still on their 
way. We need to keep building on the foundation of the 
Affordable Care Act, not tear it down. Small businesses across 
the country cannot afford to go back to the broken, free market 
health care system we faced before reform.
    I thank you very much.
    Chairman GRAVES. Thank you, Ms. McQueeney.
    Our final witness is Kevin Tindall, who is the owner of 
Tindall and Ranson Plumbing and Heating in Princeton, New 
Jersey. Mr. Tindall received the International Association of 
Plumbing and Mechanical Officials Green Contractor of the Year 
Award. He is testifying on behalf of the Plumbing-Heating-
Cooling Contractors--National Association. Welcome to the 
Committee.

                   STATEMENT OF KEVIN TINDALL

    Mr. TINDALL. Thank you, Chairman Graves, and members of the 
Committee.
    As the owner of a small business and on behalf of the 
Plumbing-Heating-Cooling Contractors National Association, I 
would like to thank you for the opportunity to appear before 
the Committee to discuss health care reform. I applaud the 
efforts to hold this hearing on one of the most important 
issues facing the citizens of our nation.
    Tindall and Ranson provides plumbing, heating, and cooling 
services. My wife, Kathy, and I established the company 20 
years ago. We now have 20 full-time employees. I am proud to 
say that we provide quality health care insurance to all those 
working at Tindall and Ranson.
    For the purposes of my appearance, I would like to ask that 
you look at me as a small business job creator. I further ask 
that you receive my testimony as someone who has worked to help 
create, build, and improve the quality of life for those living 
in my community, as well as providing quality careers for those 
who work for my company, my partners.
    I am not an expert in health care reform. I am, however, a 
person who must live with business decisions and policies that 
Congress establishes which either increases or inhibits my 
ability to create jobs. For that I am an expert. I have yet to 
understand how as a nation we continue to state that we need to 
create more jobs, yet challenge, threaten, or even ignore the 
very mechanisms for job creation.
    I would like to touch on a very few small business dynamics 
that relate to health care reform.
    Small business health care credits. When Congress passed 
the health care reform package, I heard and read much about tax 
incentives for small business. I received material with the 
intent of calculating any benefits of the reform in terms of 
tax credits. I am proud to say that I do not qualify. The 
average salary for those who work for my company exceeds the 
$50,000 threshold, thereby disqualifying me. Tax credits as an 
incentive are meaningless unless you happen to fall within a 
very limited universe as defined by the reform.
    Rising insurance premiums. One of the issues during the 
health care reform debate was rising insurance premiums and the 
need to be brought under control. I could not agree more. But 
that is the difference between policy and the real world. For 
my company, insurance renewal costs for 2011 experienced an 
increase of 9.7 percent, followed by an increase of 9.3 percent 
in 2012. Because I always view those who work for my company as 
partners and because I will always provide my partners and 
their families with quality health care insurance, this 
increase simply means the cost of doing business has increased. 
Eliminating health care insurance or perhaps turning to a lower 
quality health care insurance to save money is not an option. 
The continued rise in cost of providing health care insurance 
absolutely stifles my ability to create, provide, and sustain 
jobs.
    Educational materials. As an officer of the Plumbing-
Heating-Cooling Contractors National Association, I have access 
to health care reform information webinars, materials, and 
analysis, and I take advantage of all those tools. I raise this 
point for two reasons.
    1. With my years as a member of the association and my 
position as an officer with the association, combined with the 
efforts and time to understand the complexities of the reform, 
I still have questions and concerns.
    2. I raise the question--what about other small businesses 
across the country who do not belong to an association--state 
or national? We assume these small businesses know about reform 
and understand its timetables, but I would submit they may not 
have the resources, time, ability, or know-how to reach out and 
find out more.
    I very much agree that one of the nation's top priorities 
should be job creation, but job creation is not a concept. It 
begins in communities like mine and with people like me.
    In closing, Mr. Chairman, I would like to thank you and the 
members of the Committee again for this opportunity. I would be 
happy to answer any questions that you may have either now or 
in the future. Thank you.
    Chairman GRAVES. Thank you, Mr. Tindall. I appreciate it.
    And we are going to turn to Mr. Collins.
    Mr. COLLINS. I would like to thank the panel very much. I 
have a question really for you, Mr. Tindall. But first of all, 
Dr. Holtz-Eakin, you have confirmed a lot of the things I have 
heard as well.
    Last week I was the breakfast speaker at the Job Creators 
Alliance Leadership Summit down in Florida, and I heard time 
and again the very issues that you were raising. So thank you 
for your comments.
    And Mr. Gouldin, I am a fellow member of the NFIB, a great 
organization.
    And I would like to also congratulate Ms. McQueeney and Mr. 
Tindall on being job creators, entrepreneurs in what we know is 
a tough economic climate. And more so even in understanding the 
fact that you provide your employees health care because that 
is not true of all small businesses.
    So Mr. Tindall, my concern is jobs. And there is a saying 
that I have in the business world, ``You grow or you die as a 
small businessman.'' You have to focus on growth. But then 
again, you have got expenses. So I guess my question to you, 
and also if you could relate what you are hearing from other 
folks in the plumbing, heating, and air conditioning business, 
as your expenses are going up and you are faced with this 
mandate, my view is you either have to raise prices, but that 
could cost your company market share because others may not be 
doing it, or you are going to have to cut expenses. I do not 
see an alternative. And if that is advertising or other things 
to get more business, all I am seeing is a wet blanket on job 
creation. And I would like to ask you to speak to your company, 
but also what you are hearing from other fellow members of your 
association.
    Mr. TINDALL. Absolutely. Their primary concern is obviously 
there are--some of my competition does not provide health care 
to their employees, and this law did not really do anything to 
help that. The other thing is we are not being able to predict 
the cost going forward. You know, the implementation of the law 
was supposed to create a cost controlling mechanism and as a 
company I have not seen that yet. Quite the contrary. I mean, 
the renewals are talking about up to a 50 percent increase on 
renewals, which is going to create very much the issues that 
you are talking about. It is unaffordable. We will have to look 
at other options but, you know, we still do not consider 
elimination of health care an option. So it is of great 
concern. And I guess the biggest problem I have is that it is 
unpredictable.
    Mr. COLLINS. Quickly, Dr. Holtz-Eakin, you mentioned the 
medical device tax. I would like to point out, and you 
certainly know this, but it is 2.3 percent of revenue. Not 2.3 
percent of profit. So if you are a small business and it is 2.3 
percent of revenue and you are just barely breaking even, I can 
do the math but I would like you to share what you think might 
be happening in those companies subject to that if, in fact, 
they do not make 2.3 percent of revenue even to their bottom-
line.
    Mr. HOLTZ-EAKIN. We actually have a research paper on this 
which I would be happy to provide to you but the situation is 
exactly as you characterize it. You have a lot of these 
companies who have very small profit margins, under 2.3 
percent. The 2.3 percent chews up all the profit margin. They 
are typically start-up innovator device companies who need to 
plow that money back into the firm in order to get scales 
sufficient to market more effectively. They do not have the 
opportunity to do that. Often, they cannot hire in times they 
need to. And the anecdotal evidence that I have heard already 
is about several of these firms simply giving up and leaving 
the industry.
    Mr. COLLINS. To follow up on that, I assume you could 
support easily a cap to say if the medical device tax at 2.3 
percent of revenue but cannot exceed something like 10 percent 
of profits, which would answer the question of some company 
where they do not even make 2.3 percent, certainly 
modifications like that which bring the tax burden into 
alignment with the underlying economics of these enterprises is 
the right thing to do. If you put aside the large debate over 
the designability of the law, there is a lot of bad tax policy 
in the Affordable Care Act. If you just look at it as tax 
policy--the device tax, the investment tax, the health 
insurance fee premium tax--are all designed in ways that have 
very perverse economic incentives and need to be fixed.
    Mr. COLLINS. Thank you very much, Mr. Chairman. I yield 
back.
    Ms. VELAZQUEZ. Mr. Chairman, in light of the fact that 
there is going to be a vote, I will defer to my colleagues on 
the democratic side.
    Chairman GRAVES. Thank you.
    Ms. VELAZQUEZ. I will be coming back. I will ask my 
questions later.
    Chairman GRAVES. Mr. Schrader.
    Mr. SCHRADER. Thank you, Mr. Chair.
    Mr. Eakin, a lot of work--excuse me--on this issue. Did you 
take into account the number of small business jobs that will 
be created as a result of the consulting industries that are 
developing, doctors' offices, nurse practitioners being hired 
to fulfill the need of implementing the health care bill?
    Mr. HOLTZ-EAKIN. We have not done a precise employment 
estimate.
    Mr. SCHRADER. Okay. So that has not been done. Did you take 
into account the benefits that will occur in lowering costs 
based on the event of health that was testified by Ms. 
McQueeney, the fact that we have lifestyle adjusted premiums 
that will obviously drive down costs? Was that part of your 
analysis?
    Mr. HOLTZ-EAKIN. There is no evidence that----
    Mr. SCHRADER. But you cited anecdotal evidence just a 
moment ago that the premiums are going to be going up maybe 50 
percent and stuff.
    Mr. HOLTZ-EAKIN. That is actually a survey.
    Mr. SCHRADER. If I may reclaim my time.
    My point is that while your study is prophesying doom and 
gloom, the premiums on my small business, my little vendor 
world, were going up double digits prior to any discussion 
about health care reform. Every single business man/woman I 
knew in my great state of Oregon was clamoring for health care 
reform. The real world is the health care bill has not even 
taken effect yet. And that is what the 9 percents that Mr. 
Tindall has talked about that are 9 to 10 percents that are 
gouging him. The higher double-digit increases we have seen.
    Now, the one point I think the panel has made very well, 
and I truly appreciate it, is the uncertainty. You do not know 
what is going to happen next. Is it going to get worse? Is it 
going to get better? Did I buy a pig in a poke with this whole 
ACA thing? That is legitimate, and unfortunately, it is going 
to be uncertain for a little while. Panels like this can help 
inform us. I do agree with frankly the discussion on the 
temporary workers. Our definition there probably needs some 
tweaking. I think that is a really good, solid point and 
hopefully we will bring that back.
    The medical device issue though, I mean, I disagree again 
respectfully, Mr. Holtz-Eakin, that all these new taxes are 
horrific and going to stifle jobs in the industry. What was 
taken into account during the ACA discussion by the insurance 
companies, the medical device manufacturers and everyone else 
that was going to see a score of new lives, have access to 
their products, have access to insurance that do not have 
access now, they are actually going to drive the cost down over 
the long term. They are actually going to be able to sell their 
devices where they could not sell very many of them before.
    So I think it is very important that we understand that 
during the ACA, I did not hear a whole lot of discussion about 
this. After the ACA, sure. No one wants to pay any more taxes 
than they have to. I get that. But the real world is I think 
there is a tendency to overstate things.
    And the last comment I guess I would make that I think is 
extremely important is that we have already seen economists 
around the world, maybe you are one of the few that does not 
agree, but I just came from a presentation by Doug Elmendorf a 
few moments ago. There seems to be a growing consensus among 
economists that the moderation in health care costs--not just 
Medicare, not just Medicare--but in private health care costs, 
it is not just because the recession is preventing people from 
getting health care. That is part of it. I get that. But it is 
because of the rethinking that the medical community is 
thinking about how they deliver health care. Bundled health 
care payments, more coordinated care. I mean, over the long 
haul I think we will have huge benefits in driving costs down.
    And I am old enough to remember back when we looked at 
different types of health care premiums 15, 20 years ago, and 
my state, we were trying to do this managed care thing and 
jeez, what is that going to do? It drove costs down 
dramatically, despite the initial fears that it was going to be 
the worst thing since, you know, the invasion of France by the 
Germans for goodness sake. So there has been some tremendous 
changes that I think we want to figure out what the real score 
is going to be before we all say it is horrible. Productively 
from the panel is there some key tweaks we have to do? Get rid 
of the uncertainty as soon as possible.
    Last, last comment is, you know, a question, I guess. How 
many businesses, small businesses have less than 50 employees? 
Doctor, do you know the answer to that one? I do but I am just 
asking.
    Mr. HOLTZ-EAKIN. The number of small businesses?
    Mr. SCHRADER. Less than 50 employees.
    Mr. HOLTZ-EAKIN. I do not know the precise number.
    Mr. SCHRADER. Yeah, it is 97 percent.
    So the bottom-line is most businesses, most real small 
businesses, are not going to be affected by this. They are 
totally unaffected. They do not have to pay health insurance. 
Do not pay a bloody penalty. Do not have to do anything except 
go to work every bloody day. And their employees go to work.
    So let us put this in perspective. I do agree--I am trying 
to be collegial here--that those businesses between 50 and 200 
employees--this is a tough deal. We have got to figure out how 
to make this work for you all. Business as usual will not do 
it. And it is a sad comment I think that health insurance 
premiums--I provide health care to my employees. My maximum 
deductible says health care costs went up. Got up to 200 to 
500. Now 2,000 is not uncommon. That is just a comment on the 
current system; let us make it better.
    And I yield back. Thank you.
    Chairman GRAVES. Mr. Mulvaney.
    Mr. MULVANEY. Thank you, Mr. Chairman.
    Ms. McQueeney, I am a little confused because what I am 
hearing is that your costs went up only very slightly because 
of the Affordable Care Act, and Mr. Tindall's went up a lot 
because the Affordable Care Act has not yet been implemented. 
So I am a little confused on that. But I want to talk more 
about your business.
    I was listening to your story about your business and was 
wondering, your health insurance premiums should have gone up 
considerably; right? I mean, you have had people with 
substantial claims. You have had some people with some health 
issues. Your health insurance premium should have gone up; 
right?
    Ms. MCQUEENEY. I have been at Palm Beach Grove since 2000, 
since the year 2000. And the premiums of health care have gone 
up every single year, arbitrarily, whether we had a health 
experience or not.
    Mr. MULVANEY. But last year----
    Ms. MCQUEENEY. Last year it went up, and I understood that 
one because we had four horrendous cases. That I can 
understand. But the previous 11 years I really could not 
understand.
    Mr. MULVANEY. You had four horrendous cases and your 
premium only went up 0.2 percent?
    Ms. MCQUEENEY. No, no, no. That was the year 2010-2011. 
Last year, 2012. So the premiums for 2013 went up again.
    Mr. MULVANEY. And I guess there is my point. You are 
employing--you said all your employees were in their 50s and 
their 60s.
    Ms. MCQUEENEY. Yes. The ones that are on the plan; correct.
    Mr. MULVANEY. Health care costs are not going down. Health 
care costs continue to go up. They go up faster than the rate 
of inflation.
    I would suggest to you, Ma'am, that the reason that you 
experienced this particular benefit is because you were hiring 
people or you have people who are 50 and 60 years old. And it 
is folks like my business where we hire young people, folk 18, 
20, 22--I ran a restaurant--who are paying for your low rates.
    Ms. MCQUEENEY. Would you like me to lay them off?
    Mr. MULVANEY. Ma'am, I will tell you that someone has to 
pay for it. Someone has to pay for it. It is not free.
    Ms. MCQUEENEY. I understand.
    Mr. MULVANEY. You are getting it for free, and you are 
getting it on the backs of people who are 18, 20, and 24 years 
old. If you are a young person in this country, it used to be 
that the insurance companies could charge you a much lower rate 
than they could to older people. It was, I think, age banding 
or something like that.
    Ms. MCQUEENEY. Would you prefer----
    Mr. MULVANEY. The Affordable Care Act, Ma'am, I would be 
happy to ask you a question in a few minutes. The Affordable 
Care Act prevents us from doing that. The Affordable Care Act 
is now forcing insurance companies to raise premiums on young, 
healthy people because they are no longer able to offer them 
lower rates.
    So I suggest to you that while it is great for your 
company, it has worked out wonderfully for you, someone is 
paying for that. And that someone happens to be folks who are 
probably under the age of 30 and who are healthy.
    Mr. Holtz-Eakin, you mentioned before about the medical 
device tax. If my margin in my business is 2.3 percent or I am 
paying a 2.3 percent sales tax on my revenues, what percentage 
income tax is that?
    Mr. HOLTZ-EAKIN. It is nearly an infinite income tax. It is 
a zero base.
    Mr. MULVANEY. Exactly. If you are not making more than 2.3 
percent gross margins, this is at least 100 percent income tax 
on your business. That is what this act stands for. If you 
voted for this act, you voted for a 100 percent increase on 
some businesses. One hundred percent tax income or income tax 
on some businesses. That is what I cannot get through a lot of 
my small businesses' heads when they come in and say, ``Oh, 
this has worked out for me.'' There are other folks for whom it 
did not work out for. There is nothing free in this business. 
Someone is paying for your low premiums, Ms. McQueeney, and my 
guess is it is several of the other people here at this podium.
    Ms. MCQUEENEY. Can I answer you, please?
    Mr. MULVANEY. I did not ask you a question.
    Ms. MCQUEENEY. Oh, I am so sorry. But I would just, 
respectfully, I would like to say to you I pay $1,200 a month 
with a $5,000 deductible. I am not taking anything for free 
from anyone. We have people that pay $1,800 a month.
    Mr. MULVANEY. Do you know how much the coverage costs? How 
much the actual health care that your employees receive cost? 
Do you know what you got in exchange for that premium?
    Ms. MCQUEENEY. Can I ask you another question?
    Mr. MULVANEY. I am asking you a question. Do you know----
    Ms. MCQUEENEY. Last year we got an enormous amount of money 
in health care for that. Absolutely.
    Mr. MULVANEY. How much?
    Ms. MCQUEENEY. How much they actually were billed for or 
how much the insurance company actually paid?
    Mr. MULVANEY. How much did it actually cost?
    Ms. MCQUEENEY. Which number would you like?
    Mr. MULVANEY. Tell me how much it actually cost.
    Ms. MCQUEENEY. No, which number would you like? I can give 
you two numbers.
    Mr. MULVANEY. If I ask you the question how much did it 
cost----
    Ms. MCQUEENEY. First of all, I do not have the records to 
my employees. That is private information.
    Mr. MULVANEY. You do not know the answer, do you?
    Ms. MCQUEENEY. I do know the answer.
    Mr. MULVANEY. None of us know the answer. None of us know 
what health care costs in this country. You can go to the 
doctor today and ask them--I do because I have a high 
deductible program. What does it cost? Ma'am, please.
    Ms. MCQUEENEY. What would you like me to do? Lay people 
off?
    Mr. MULVANEY. Please. I do not want you to lay any people 
off. I want you to understand----
    Ms. MCQUEENEY. What would you like me to do then?
    Mr. MULVANEY.--the fact that someone is paying for that and 
it is young people in this country.
    Ms. MCQUEENEY. I cannot access your health care. I have no 
choice.
    Mr. MULVANEY. I have the same--I have the same health care 
as every other federal worker.
    Ms. MCQUEENEY. But I do not have that choice.
    Mr. MULVANEY. I have a high deductible program. I go to my 
doctor's office with a sick child and I say, ``How much does 
this visit cost?'' Do you know what they tell me? They do not 
know. We do not know what health care costs. You are 
complaining about a premium that you say costs $1,200 a month. 
That is only an unreasonable number depending on what you are 
getting in exchange for that $1,200 worth of premium. If you 
are getting a million dollars worth of actual benefit for 
$1,200, that is not a bad deal. And I would suggest to you that 
we have broken down into a discussion about health insurance, 
not the cost of health care. We are sitting here discussing 
today what our premiums are, what happened to our premiums, 
what we have to pay to our employees, and the difficulty is 
that we are not talking about the cost of health care; we are 
talking about the cost of health insurance. And unless you know 
what health care costs, you have no basis for saying that your 
health insurance is expensive, cheap, a great deal, or a lousy 
deal.
    I ask you one last question, Ms. McQueeney, which is you 
mentioned your daughter--oh, I am sorry. The clock was not 
turned on so I lost track. I am sorry. I apologize. I yield 
back the balance of my time.
    Chairman GRAVES. Ms. Hahn.
    Ms. HAHN. Thank you.
    I am one of those that obviously does believe that the 
Affordable Care Act is going to make for a healthier nation, a 
healthier business climate. And I do know that there is a lot 
of misfortune of misinformation out there, a lot of outright 
lies and deception that are being propagated in terms of the 
Affordable Care Act.
    I actually just held a workshop in my district with Natalie 
Orta of the Small Business Administration and David Chase of 
the Small Business Majority. And I had about 25-30 small 
businesses that actually for the first time heard the actual 
facts about what the Affordable Care Act would mean to those 
small businesses. And the first fact that bowled everybody over 
is what Dr. Schrader talked about, which is 97 percent of the 
businesses will be exempt from this because they have less than 
50 employees.
    But one of the things--by the end of the workshop everyone 
was feeling a lot better about the benefits of the Affordable 
Care Act. Many of them had also received the rebates from the 
insurance company because they were not spending 80 percent of 
the premiums on health care and only 20 percent on 
administration. So that is already a huge benefit to people who 
are paying into the system.
    You know, I was going to ask Ms. McQueeney, you know, 
clearly you felt it was important to offer your employees 
health insurance even before the implementation of the 
Affordable Care Act. Could you expand on that a little bit, 
particularly because some of your competitors were not 
providing health insurance. You were spending a little bit more 
money on that. Could you share with us why you felt that was an 
important thing to do and how did that ultimately benefit your 
business?
    Ms. MCQUEENEY. Well, the family that owns Palm Beach 
Groves, they have always provided health care. And again, I 
have to stress that this is how you get health care in this 
country is through employment overall. And it used to be not a 
problem as big as it is now. It is a huge problem, and every 
year you have to make the choice can we continue on with this? 
Like Mr. Tindall says, or do we need to cut the health care--do 
we need to cut their insurance? It is not an easy decision to 
make but we do not have any control over--I agree with him, we 
have no control over any of the costs. I have no leverage with 
the insurance company. I cannot go there and say, no, I want a 
better plan. There is just nothing out there for us. So what am 
I supposed to do? That is my question. I would like to have 
people answer me. What would you like me to do? Not insure? Get 
on the rolls of the uninsured? I do not want to do that.
    Ms. HAHN. Well, that is what I was hoping you would 
elaborate on a little bit. What are the benefits for you?
    Ms. MCQUEENEY. The benefits are people are secure in their 
jobs, they are great staffed, they know the company. I do not 
want to lose them over this. They are like family to us. Am I 
going to devastate people financially because they get sick to 
no fault of their own? It is just the system is broken and we 
are trying to find help here.
    Ms. HAHN. Well, the system was broken and I think that is 
why this Congress passed the Affordable Care Act to fix what 
was a very broken system.
    Ms. MCQUEENEY. But I do agree it is not addressing the 
cost. It is not addressing the cost enough. And we have no 
control over the cost whatsoever. I can go to a doctor's 
office, and I have asked how much is a particular procedure. 
And you get no answer. None.
    Ms. HAHN. Right. And that is the real problem, is the real 
true cost of health care.
    Ms. MCQUEENEY. If I have a heart attack I cannot say how 
much will this cost to fix my heart because at that moment I 
might not be capable to make that decision.
    Ms. HAHN. Right. Well, again, I would urge my colleagues to 
hold similar workshops with the Small Business Administration, 
with those who are actually very knowledgeable in what the 
Affordable Care Act does and walk people through--small 
businesses out there are fearful. They are uncertain. And 
again, there are a lot of lies out there that just are not 
telling the truth about what this law will actually--how it 
will actually benefit people in this country.
    Thank you.
    Chairman GRAVES. Mr. Schweikert.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman.
    Just so conceptually there is an understanding, my friend, 
Mr. Mulvaney, was basically just trying to describe transfer 
costs. Basically, we have decided to transfer costs to young 
taxpayers or just young people in their health care costs to 
subsidize folks on the other end of the age curve. So it is 
very simple. Once again, I think the technical health care term 
is young people get screwed once again.
    Doctor, can you actually--a couple mechanical questions. I 
repeatedly hear stories of businesses that are basically now 
trying to manage their employee counts to stay under 50, to 
stay under their number of hours. What do you see happening out 
there? And some of the blogosphere discussions on small 
business sites now talking about how they are even trading 
employees, even though they are separate organizations to keep 
them all under there, are we about to see a transition in the 
small business economy to gain the new health care law?
    Mr. HOLTZ-EAKIN. Well, certainly, the incentives in the law 
are what they are and they have been a concern. Exempting 
everyone under 50 employees means that you penalize people for 
taking on the 50th employee. And the incentive effects of that 
are one of the things we are going to try to see how they play 
out, especially in the part-time fund that we discussed before. 
It was a concern with the small business tax credit which 
penalized paying people more, taking on workers, how it was 
anti-growth and which the administration in its budget actually 
proposed trying to reform for a year, try to take some of those 
features out. But that cost $10 billion every 10 years and 
shows you the problem, the tension in the law on that front.
    So what will ultimately happen? We do not know. It is 
something I have been concerned about and we are watching 
carefully. I do know that with subsidies as generous as the 
ones that we see in the exchanges and the negative incentives 
to take people on as employees and offer them insurance, there 
is the real potential for clever gaming of the system to leave 
people in the exchanges. And that has been a concern from day 
one.
    Mr. SCHWEIKERT. Mr. Gouldin.
    Mr. SCHRADER. A point of order, Mr. Chair.
    Chairman GRAVES. Yes.
    Mr. SCHRADER. Just real quick. People cannot drop their 
business coverage and move to the exchanges. They do not get 
any subsidies. If your employer offers you a legitimate health 
care plan that meets the test, you cannot drop and go into the 
exchanges.
    Mr. HOLTZ-EAKIN. That is true.
    Mr. SCHWEIKERT. Hold on. My time.
    Mr. Chairman, I was happy to yield but I do hope the left 
side will also extend the same courtesies when we have a point 
of order. All right?
    Ms. VELAZQUEZ. Excuse me, but the previous member----
    Mr. SCHWEIKERT. Madam Ranking Member, I did not yield. 
Okay? I was just making a simple, simple point so we can have 
the dialogue.
    Mr. Gouldin, back to my point and my time, if we are--
basically now have designed our economy through this health 
care law saying you do not want to go over 50 employees----
    Mr. GOULDIN. Exactly.
    Mr. SCHWEIKERT. You do not--we have just created a whole 
series of incentives to not grow. What have you done to--
mechanically, your business, you are up against 50 employees. 
What would you do? What do you do now?
    Mr. GOULDIN. Well, in our case, we are above that line so I 
do not have to think about that anymore. We are going to have 
to pay the premiums, but you know, I think most of the analysis 
that I have seen thus far has been talking about the escape 
penalty. And I watched the escape penalty as it was being 
written. It started at $400 and I tried to tell everybody that 
was just a sucker's pitch. And it went to 750. Then it went to 
1,000, and it went to 2,000. And anyone in this room or anybody 
in this country that thinks it is going to stay at 2,000 is 
insane. It is going to go through the roof--2,500, 3,000, 
4,000, 5,000. It was designed to be the least expensive thing 
for an employer to do. And lay loose.
    Mr. SCHWEIKERT. Is it Mr. Tindall?
    Mr. TINDALL. Yes.
    Mr. SCHWEIKERT. Okay. You were sharing with the Committee 
that you have a small problem in the fact that you pay your 
employees on average over 50,000 a year; correct?
    Mr. TINDALL. Yes.
    Mr. SCHWEIKERT. I will ask you to turn on your mic.
    Mr. TINDALL. I did. I am sorry.
    Mr. SCHWEIKERT. I am sorry. Sometimes these things you have 
to lean into.
    So now we have created an environment where if you were 
actually rebuilding your compensation packages from a business 
modeling standpoint you would do everything you could not to 
break that 50,000, whether you had to find some way to gain it 
in other mechanics, you need to stay under that $50,000 average 
to get some of the benefits that are built into this law. Am I 
understanding your position?
    Mr. TINDALL. I would have created it with a philosophy that 
there were a number of employees that would do that just 
because of the cost savings.
    Mr. SCHWEIKERT. So once again we look at this new health 
care law and we are doing everything in our power to transfer 
costs to young people, to keep businesses from growing, and to 
suppress salaries.
    Mr. Chairman, with that I yield back.
    Chairman GRAVES. With that we have got one vote, so we will 
adjourn and come back. Mr. Murphy will be up or whoever next. 
Whoever is next in line.
    It should not take us very long. Long enough for us to walk 
over and walk back. I apologize for the inconvenience to all of 
you. Nydia and I do not get to set the schedule, unfortunately.
    [Recess.]
    Mr. HANNA. Thank you, Mr. Chairman.
    Ms. VELAZQUEZ. Go ahead. I am not ready.
    Chairman GRAVES. Okay. We will go with Mr. Hanna.
    Mr. HANNA. Thank you.
    It is pretty clear to everybody there is a lot of hyperbole 
and myths and disinformation associated with that and I would 
hope that we do not need a health care provider in this room 
today the way things go sometimes. This is one subject that 
gets very heated.
    The Federal Reserve though recently, Mr. Holtz-Eakin, in 
their own Beige book, our Federal Reserve, which examines 
economic conditions across the country called and cited the 
health care bill as a reason for employers having layoffs and 
holding back hiring. Your January 13th analysis of major 
insurers, particularly that across all markets the law will 
dramatically increase the cost of insurance for small 
employers, precisely that group most likely and to be affected 
by this mandate, I would like you to speak to that if you 
could, sir.
    Mr. HOLTZ-EAKIN. Well, thank you. There are lots of reasons 
to suspect that the provisions in the law would raise insurance 
premiums, and whether it is the underlying benefit package or 
the inability to charge young relatively less compared to older 
individuals, the coverage of preexisting conditions, all of 
that has been debated for a long time. So I thought what we 
ought to do is simply take very specific insurance policies in 
very specific places, whether they were Albany, New York or any 
other particular city that we might want to look at, and then 
ask insurers what would the different provisions in the law do 
to the cost of a premium for this particular policy? And we 
sent that to the insurers. They sent back their answers to my 
lawyer.
    Mr. HANNA. So this is as empirical as you could get it?
    Mr. HOLTZ-EAKIN. We should go to the people who do this and 
find out what the numbers are. And they are as I reported in my 
written testimony, and we have a larger paper on it, quite 
striking in many cases. Triple digits.
    Mr. HANNA. Could you elaborate on that? I mean, I happy to 
give you the balance of my time to talk about all of that.
    Mr. HOLTZ-EAKIN. We tried to do this as impartially as we 
could by picking very specific policies. We were not going to 
let insurers pick the policy that went up the most or anything 
like that. We asked a very particular question. I do not know 
which insurers answered. I do not know what individual insurer 
responses were. They sent their survey responses to my lawyer, 
who signed a confidentiality agreement. He added up the 
averages and brought them to me.
    Mr. HANNA. The broad conclusion was?
    Mr. HOLTZ-EAKIN. And the broad conclusion is for small 
employers, especially those with younger, healthier workforces, 
you are going to see what I think of as sticker shock in health 
insurance premiums come 2014.
    Mr. HANNA. Generally, what would you say about the 
incentive structures that are built within the employer mandate 
and the employee mandate, if you will?
    Mr. HOLTZ-EAKIN. This raises the cost of employment. I 
mean, there is no question about that. For those who are 
already offering insurance, we made the benefits more rich and 
we see the premium shock for those who are not. It is a more 
costly thing to get into. For minimum wage workers, you cannot 
lower their wages to cover the additional insurance cost. So 
this is a negative impact for employment. It is not offset in 
any serious way by other provisions of the law. And the one 
thing we do know is that there is a very rich set of benefits 
sitting out in the subsidized exchanges, and the concern for a 
long time has been employers would get out of the business of 
offering employer-sponsored insurance and they would end up on 
the government and the taxpayers' fist.
    So those are the incentives. If you do not hire----
    Mr. HANNA. So extrapolate from that. If I were to say to 
you then this system is either implicitly or explicitly 
designed to move towards a single-payer option, what would you 
say to that?
    Mr. HOLTZ-EAKIN. I would say you cannot rule that out. 
Given the structure of what is going on, employers are not 
going to hire.
    Mr. HANNA. Without underlying cost savings----
    Mr. HOLTZ-EAKIN. If we are going to recognize they will not 
cover whole families in many cases. They will offer affordable 
insurance to employee but not family coverage. We are going to 
have other issues.
    Mr. HANNA. So if we do not change the fundamental delivery 
system of health care, whatever that means, ultimately this is 
only going to cost more.
    Mr. HOLTZ-EAKIN. Yes. The things I just covered were all 
insurance rate effects. Remember, insurance just covers the 
nation's health care bill. It shifts it around from one person 
to another. Our problem is the bill is too big for the quality 
of care we get. That is the core issue that remains to be 
solved.
    Mr. HANNA. Do you have a few ideas on that? I have a minute 
and a half here.
    Mr. HOLTZ-EAKIN. I have a day and a half's worth of ideas 
on that but, I mean, I think the number one thing that a 
Congress could be would be to do Medicare reform. Medicare pays 
a lot of America's bills. It drives practice patterns. And at 
the moment it is dominated by care that is uncoordinated, fee 
for service, and in many ways drives bad practice patterns in 
the United States.
    Mr. HANNA. How big a factor in all of that would you say--I 
mean, we have talked about the fact that nobody in this room, 
certainly I do not, know what my health care costs. That is a 
big deal.
    Mr. HOLTZ-EAKIN. Big problem.
    Mr. HANNA. We are not informed purchasers of health care, 
which is 18 percent of our economy. For many of us it is the 
biggest thing we purchase on a regular basis. How big a problem 
is that?
    Mr. HOLTZ-EAKIN. That is a very big problem, both in the 
lack of transparency in some cases, which should be fixed, and 
also the lack of incentive to care what it costs. Third-party 
payer does that.
    Mr. HANNA. Sure. So the people can basically get sick and 
hope that the government can handle it, take care of it?
    Mr. HOLTZ-EAKIN. The trouble is----
    Mr. HANNA. Not that anything wants to get fixed.
    Mr. HOLTZ-EAKIN.--balance sheet recently, that guaranty is 
far from perfect.
    Mr. HANNA. Thank you. I yield back the balance of my time.
    Chairman GRAVES. Ranking Member Velazquez.
    Ms. VELAZQUEZ. Yes, thank you, Mr. Chairman.
    I would just like to hear your comments. ACA, Affordable 
Care Act, is the law of the land. It is happening. It will 
happen. It will be fully implemented. We understand from 
anecdotal experience shared with us that some businesses are 
facing premiums going up. It looks like some insurance 
companies some might say are rushing to increase the cost of 
premiums in light of the fact that there is going to be full 
implementation of the Affordable Care Act. Is it not true that 
once most of the important provisions of the Affordable Care 
Act are implemented, one event that will bring transparency, 
increasing the pool of people that will be insured, that that 
by itself provides for more competition and will draw costs 
down?
    Mr. HOLTZ-EAKIN. I do not think so. I think if you put 
aside the health insurance aspects, which are a big part of the 
bill, as I said before, the core issue is how much the United 
States spends on health care and the purpose of insurance is to 
simply shift that cost from one person to another so they stay 
within their financial means. I do not think there was anyone 
who in the aftermath of the signing of the Affordable Care Act 
felt it bent the cost curve. The Congressional Budget Office 
did not say that.
    Ms. VELAZQUEZ. Okay, if I ask you what is the one area you 
recommend changes be made in order to make it better? It is 
going to happen. You can come here and talk about your studies 
and reports and everything, but it is going to happen. So we 
need to move forward.
    I would like to ask Ms. McQueeney, in your dealing with, 
you know, the IRS, you learn from the IRS about the tax 
credits. You took advantage of it. You got rebates back. What 
are you doing with that money? Are you reinvesting that in your 
business?
    Ms. MCQUEENEY. Absolutely.
    Ms. VELAZQUEZ. What has been your experience with the IRS 
in helping you navigate the system?
    Ms. MCQUEENEY. Well, I am on a small business IRS e-mail 
list, so if there is anything that affects our business then I 
get informed that way. I downloaded the form. It takes about an 
hour to do. And submitted it to the accountant and he submitted 
it and we got the tax credit.
    Ms. VELAZQUEZ. For the small businesses that are here, the 
IRS released the proposed regulation just a few months ago. A 
hearing will be held next week regarding feedback they receive. 
So I would like to know if any of you or your respective trade 
associations provided any comments to express your concerns 
about these guidelines. Have you done that?
    Mr. TINDALL. I was not aware of the Committee hearing going 
on, and as far as I am aware of, our association has not 
provided any testimony or any comment.
    Ms. VELAZQUEZ. They have or have not?
    Mr. TINDALL. Have not. Have not.
    Ms. VELAZQUEZ. Okay. So then if you have not done that or 
your association, and this is the process where public comment 
is allowed, how do you think that the concerns that you have 
could in any way be raised so that they consider those and come 
out with a final rule?
    Mr. TINDALL. I agree with you that we should be involved in 
it but the problem is, again our primary responsibility is to 
run our businesses and create jobs. And we, unfortunately, do 
not have the time to focus on everything that is going on down 
here.
    Ms. VELAZQUEZ. But the associations, your members, they are 
supposed to do that.
    Mr. TINDALL. Absolutely. Absolutely. But not every plumbing 
and heating contractor across the country belongs to an 
association. So, and I believe a large number of them do not by 
a lot. And so for those people to be involved in the process, 
they do not even know the process exists.
    Ms. VELAZQUEZ. If it is a trade association, believe me, 
they do. They do.
    Yes, Mr. Gouldin.
    Mr. GOULDIN. I personally have written to the IRS with my 
comments throughout the entire process, plus this is what the 
American Florists and the National Federal of Independent 
Business have also.
    Ms. VELAZQUEZ. Okay.
    Mr. GOULDIN. Right now the biggest concern to my business 
is that we are waiting for the IRS to rule on what is going to 
be the definition of seasonal worker. Right now nobody seems to 
know what that is going to be. That is a big issue.
    Ms. VELAZQUEZ. Okay.
    Ms. McQueeney, 90 percent of small businesses have 20 
employees or less, which means that they are now subject to the 
insurance mandate in the Affordable Care Act. However, these 
businesses are eligible to receive tax credits, which you 
benefitted from. And so given this reality, do you believe that 
the concerns regarding the impact on small businesses are a 
little bit overblown?
    Ms. MCQUEENEY. I can only speak for our business.
    Ms. VELAZQUEZ. Sure.
    Ms. MCQUEENEY. In our case it helped us with our 2011 year. 
You know rates went up in 2013 or just last time period because 
of what we experienced last year. But definitely, that was the 
first time ever in all my years of Palm Beach Groves that the 
cost ever went down.
    Ms. VELAZQUEZ. Okay.
    Ms. MCQUEENEY. It has been consistently going up.
    Ms. VELAZQUEZ. Yes, Mr. Gouldin. I know that you have, 
what, over 150?
    Mr. GOULDIN. We range between 120 and 150. And your 
question was whether or not we have seen health----
    Ms. VELAZQUEZ. Well, when people are making statements 
about the mandate, it just--it makes it sound like it is going 
to impact most small businesses when, in fact, 90 percent of 
all small businesses have 20 employees or less.
    Mr. GOULDIN. Well, it has direct and indirect impact. But 
you are right in that the law requires participation once you 
hit 50 employees. But I think that all businesses, regardless 
of size, see the paperwork and requirements of reporting as a 
major expense. In our case, in our small company of 150 people, 
we will probably have to hire an additional person full-time 
just to track our compliance of our staff to their scheduling. 
It is a very complicated law.
    And so its biggest expense to small businesses, even the 
ones below 50, is the state of confusion that it has caused, 
and that is the state of confusion caused by the complexity of 
the law.
    Ms. VELAZQUEZ. Complexity and maybe misinformation. So we 
have to do a better job as government and elected officials to 
provide the information and do workshops and bring government 
officials from HHS, IRS. I have done that in my district and 
believe me, those who were confused are not that confused 
anymore and are taking advantage of the tax credits provided by 
the law for those type of businesses.
    Many uninsured, Mr. Gouldin, many uninsured consumers are 
forced to set-aside money in low interest accounts to make sure 
that they have enough to cover unexpected medical costs. You 
mentioned how important it is to maximize employment and 
economic growth. Would you agree that the security provided by 
health insurance can free up that savings for more purchases of 
consumer goods? In fact, when we hear about surveys among small 
businesses, the number one issue that comes up is the lack of 
consumer spending.
    Mr. GOULDIN. I think that the number one problem we have 
right now as a result of the financial collapse and the 
restructuring is the lack of employment. And I am amazed by all 
the things that I read all over the place about the stock 
market's return and everything else's return, but employment is 
still terrible. And everybody, all the greatest economists seem 
to be so befuddled. Why is no one hiring? So my question is, 
well, I do not know. What has changed during the process? And 
my answer to that is that, one, the Affordable Care Act got 
passed and a lot of businesses are confused and frustrated and 
see additional costs coming their way that they are trying to 
figure out what are they going to be. And we did raise minimum 
wage 41 percent, the last year being 2009, right in the middle 
of the recession. There is talk about raising it again.
    Ms. VELAZQUEZ. Okay.
    Mr. GOULDIN. So that would slow employment. And without an 
increase in employment, you cannot get the economy back on its 
feet.
    Ms. VELAZQUEZ. It is just that we love to comment on 
surveys conducted about small businesses and what they feel are 
the most important obstacles hindering economic growth or 
expansion in their businesses, and they mention the lack of 
consumers coming through their doors, regulation, and health 
care number three, four. So that is why I was making reference 
to it.
    Ms. McQueeney, more young adults are moving back home after 
college, exactly for some of the reasons that Mr. Gouldin made 
reference to. It is very difficult to find employment. And now 
we know that under the ACA, children can stay on their parents' 
health insurance until they turn 26, ensuring that they have 
health coverage. Are your employees finding this new benefit to 
be helpful for their families?
    Ms. MCQUEENEY. Yes. All of us, again, are in our 50s and 
60s, and all of us have children that age. They are all on our 
health plan.
    Ms. VELAZQUEZ. Thank you.
    Chairman GRAVES. Mr. Tipton.
    Mr. TIPTON. Thank you, Mr. Chairman. Thank you, panel, for 
being here.
    You know, last month I spoke to a Pizza Hut franchise owner 
in my district. Nancy stated that the federal health care law 
has caused a variety of issues for restaurants and employees, 
and one of the biggest hindrances is a change that now 
classifies full-time work as averaging only 30 hours per week. 
And she stated that because of this change alone she will not 
be hiring any more full-time employees and eventually will have 
to be able to reduce some of their formerly part-time employees 
to those hours. She described in detail a conversation she had 
with one of her employees who was literally in tears about the 
prospect of having those hours cut.
    Some of you may well remember with me a time in this 
country when we fought to have a 40-hour work week. Now we have 
got people that are trying to fight to get a 40-hour work week. 
And because of the Affordable Care Act we are continuing to see 
I think something that was well noted. Businesses that are 
afraid to hire. We do not know what the costs are going to be 
and the impacts economically across the board, I believe we 
truly have yet to fully measure.
    You know, Mr. Gouldin and Mr. Holtz-Eakin, maybe you would 
answer for me the question when we are talking about regulatory 
compliance. We have had numerous amounts of testimony in this 
committee. Right now we are spending $1,750,000,000 in 
regulatory compliance. Small businesses are paying better than 
$10,000 per year per employee just to be able to comply with 
the federal government. And you note now an additional $30 
billion burden is being put on the back of small businesses in 
this country. Is this going to discourage hiring?
    Mr. GOULDIN. I think without a doubt. As I said before, we 
need a paradigm change in this country. Most of us have lived 
in the belief of America the way it was post-World War II up 
until 1970, which was there would be plenty of employers to 
hire plenty of employees. Those days are gone. We are in a 
competitive world and we have to meet with competition. So 
whenever you increase the cost of anything beyond what the 
market will bear, you create problems. I think that from my 
experience of being in business 40 years, and I look at all the 
great successful businesses. The big publicly ones, they are 
all in the business of labor elimination. I am in the labor 
business. Our business hires people. We are a labor-intensive 
craft industry, but all the efforts that most big businesses 
that make a lot of money make it on is--think of Amazon. It is 
all labor elimination. So I think we just keep leering on costs 
of employment and thinking there will not be any impact. I am 
telling you the impact is massive unemployment.
    Mr. TIPTON. You know, I would like you both to maybe just 
give a quick comment, if you would. This just came out on the 
Hill this afternoon. Senator Max Bacchus, a democrat out of 
Montana, Senate Finance Chairman commenting to Secretary 
Sebelius. He said Wednesday he fears a train wreck as the Obama 
administration implements its signature health care law. ``I 
see a huge train wreck coming down,'' Bacchus told Health and 
Human Services Secretary Sebelius at a Wednesday hearing. ``You 
and I have discussed many times and I do not see any results 
yet.''
    Is the confusion--is the cost one of the biggest obstacles 
where government is not becoming a stepping stone to be able to 
create success in this country but a stumbling block for 
American prosperity and job creation?
    Mr. HOLTZ-EAKIN. Congressman, as I said in my opening 
remarks and my statement, the cost is real. I mean, these are 
self-reported costs from the agencies, HHS in particular 
reported to the administration. This law has 11--it is in my 
written testimony--11 particular regulations which HHS has 
identified as having a significant economic impact on small 
entities. That is a very unusual number. This just does not 
happen very often. So I think the scale of the costs are real. 
You cannot ignore that.
    The second thing is the uncertainty is enormous about what 
will and will not get done. I think Senator Bacchus's comments 
reflect the uncertainty about whether the exchanges will be up 
and running on time. We have already seen the administration 
put off the so-called shop provisions which were supposed to 
provide options for small businesses. Just what will be there 
of the law is an open question.
    Mr. TIPTON. It truly is. And one thing I thought we ought 
to be very clear on. You know, we talk about tax credits. It is 
something that the president is now calling loopholes. He is 
trying to be able to create more of them. Someone will pay for 
those loopholes that the president is now creating. And my 
biggest concern as a small businessman is there is a 
quantitative difference between everybody in the country having 
health insurance versus quality health care. I can tell you 
this as a matter of fact. We are on the cusp of a rising health 
care crisis in rural America simply because of the Affordable 
Care Act. We are seeing doctors drop out of the system. We are 
not going to be able to see that delivery. We can have all of 
the insurance in the world, but if there are not doctors there 
to be able to accept it we are going to be hurting health care 
in America.
    Mr. Chairman, I yield back. Thank you.
    Chairman GRAVES. Ms. Clarke.
    Ms. CLARKE. Thank you very much, Mr. Chairman. And I thank 
the ranking member, Ms. Velazquez. I thank our panelists this 
afternoon for your testimony here today.
    As a member of one of the committees of jurisdiction in the 
111th Congress, the former Education and Labor Committee, I am 
proud of the work that Congress was able to do in providing the 
American people with quality health care regardless of 
preexisting conditions. As with any new law, there is bound to 
be confusion, as well as apprehension as it is implemented, and 
I look forward to working with my colleagues and the small 
business community at large in ensuring that our small 
businesses and entrepreneurs are educated on all of the 
provisions and ensuring that it causes as little disruption as 
possible.
    Having said that, my first question is to you, Mr. Gouldin. 
Unlike larger businesses, most small firms do not have a legal 
department to assist with tax compliance. How much time and 
money have you dedicated to navigating the tax credit and 
employer payment regulations?
    Mr. GOULDIN. Navigating the tax credit?
    Ms. CLARKE. Mm-hmm. And employer payment regulations.
    Mr. GOULDIN. We do not have any idea how many hours we have 
spent. We have a HR department which consists of my wife and my 
daughter and I am the president. The three of us have spent I 
do not know how many man-hours trying to understand this law. 
My wife is at a seminar today trying to figure out what in the 
world the law means.
    Ms. CLARKE. So as you get more familiar with the new tax 
rules, do you expect the calculations and decisions will get 
easier with time? And if so, why? And if not, why not?
    Mr. GOULDIN. Do I think the decisions will get easier with 
time? I have no way of knowing. Right now there are still too 
many issues.
    Ms. CLARKE. Well, I mean, you have had an opportunity along 
with your family to begin this process, so you have somewhat of 
a sense of what it takes. And I am wondering whether you think 
you will be more familiar and whether that as you become more 
familiar it becomes easier for you to be able to navigate.
    Mr. GOULDIN. It will get easier if it gets clarified. That 
is the biggest issue is there have been so many questions. 
There are many departments in the government today that have 
differing opinions on the law from one branch to the other. So 
what would be very helpful----
    Ms. CLARKE. You are thinking clarification----
    Mr. GOULDIN. I think that if there was----
    Ms. CLARKE.--would be one of the major pieces to assist?
    Mr. GOULDIN. It would be very helpful if there was a 
definitive organization in the federal government that spoke 
for the entire federal government instead of having five or six 
different interpretations by the SBA versus another department. 
There is no place to go to for the employer to get detailed 
information about interpretation of the law. They have to go to 
associations to get that. If you want to go to the federal 
government and get a marketing position on it, that is fine. 
But we need detailed employment information. Hopefully, it will 
get easier.
    Ms. CLARKE. Very well, Mr. Gouldin. I appreciate that.
    Ms. McQueeney, the state exchanges have the potential to 
bring small employers together to offer coverage while also 
keeping prices affordable. Do you think this will allow small 
firms to compete on a level playing field with their larger 
counterparts when attracting the most talented workers?
    Ms. MCQUEENEY. I do not know yet. The state of Florida is 
probably not going to implement a state exchange and we still 
do not know what is going on there. So I really cannot give you 
a clear answer on that.
    Ms. CLARKE. And have you seen any benefit to the law?
    Ms. MCQUEENEY. Well, the benefits to our small company have 
been there. Yeah. We got the tax credit and we got the refund 
check from the insurance company. I think one of the more 
important parts of the law is the medical loss ratio and I 
think that is the one part that actually keeps costs under 
control because they have to spend that much money on medical 
care, and if they do not they have to rebate it. So to me that 
is probably the most important part of the law.
    Ms. CLARKE. Very well.
    Mr. Chairman, I yield back the balance of my time.
    Chairman GRAVES. Mr. Huelskamp. Do you want to go?
    Mr. Rice.
    Mr. RICE. Thank you, Mr. Chairman.
    Small business people here, thank you very much for being 
here, and you, too, Mr. Holtz-Eakin. You know, I do not think 
we have ever formally met but I have heard you a couple of 
times and I have quoted you dozens of times, and I appreciate 
very much you being here as well. Thank you to you small 
business people for taking time to come and educate us about 
the particular problems and circumstances you face.
    I have been a tax lawyer and CPA for 25 years. I have 
carried health insurance for all of my employees. When you have 
got to buy health insurance you choose the kinds of coverage 
you want.
    I am curious, do you all carry maternity coverage for your 
employees? All of you?
    Mr. GOULDIN. Yes.
    Ms. MCQUEENEY. Yes.
    Mr. TINDALL. Yes.
    Mr. RICE. Do you all carry mental health coverage?
    Mr. GOULDIN. Yes.
    Ms. MCQUEENEY. Yes.
    Mr. TINDALL. Yes.
    Mr. RICE. And substance abuse?
    [No audible response.]
    Mr. RICE. And oral care? And dental care?
    Mr. GOULDIN. No.
    Ms. MCQUEENEY. No.
    Mr. TINDALL. Yes.
    Mr. RICE. Under this law there are things that they define 
as essential health benefits, and by law, if you--you know, you 
do not have to provide insurance if you are under 50 employees, 
but if you do, they have to meet these criteria, these 
essential health benefits criteria. So where I chose as an 
employer and with my employees what kind of coverages we were 
going to buy, guess what? You do not have those choices 
anymore. The federal government is now going to choose that for 
you. They are going to dictate the kind of coverages that you 
have to buy. And those coverages, do you think they are free? 
They cost money. And you are going to pay for them. And not 
only are you going to pay for yours, but those other people 
that need to be subsidized, you are going to pay for theirs, 
too. Thus, all these taxes and such.
    Mr. Holtz-Eakin, the effect of these taxes, the effect of 
this massive regulation, the effect of all this uncertainty, it 
is obvious but what is the effect on the employment status in 
the United States?
    Mr. HOLTZ-EAKIN. This is a negative. I do not think there 
is any way around that. Whatever your other objectives might 
be, if you set out to enhance job creation and growth in the 
United States you would not pass a bill with a trillion dollars 
of taxes, a large entitlement program, and this amount of 
regulation. That is not a good strategy.
    Mr. RICE. My opinion is we are the greatest nation on earth 
and we have been in a long dip, but if we could ever get our 
tax policy, if we could get past this health care debate, if we 
could take the blinders off, get rid of the uncertainty, and 
put into effect a competitive tax rate, get these regulations 
off our business, I think we are ready to gallop. But this is 
just one more example of government inserting itself into 
business, trying to make decisions for business ``one size fits 
all,'' and hamstringing our businesses and making us less 
competitive. It is one more reasons why we see millions of 
American jobs hemorrhage overseas very year. And until we stop 
this it will continue.
    Thank you very much.
    Chairman GRAVES. Mr. Payne.
    Mr. PAYNE. Thank you, Mr. Chairman, to the Ranking Member, 
the Committee. Thank you for all your testimony. I apologize 
for my tardiness in getting here today. It has been one of 
those days where I just had a bad start and have not been able 
to catch up.
    Most of your testimonies mentioned a need for the increased 
educational materials and outreach regarding health care laws, 
the law. And you know, thank you for mentioning that, in 
addition to encouraging HHS to provide increased awareness 
about the changes due to the Affordable Care Act. I will be 
hosting meetings in my district for constituents and will be 
sure to include small businesses in those discussions.
    And I have a question for the panelists. You know, due to 
the nature of the costs associated with small health plans, 
small businesses have long been vulnerable to steep premium 
hikes. In fact, health care premiums increased roughly 129 
percent since 2000, forcing many small businesses to drop 
health coverage prior to the enactment of the Affordable Care 
Act. And in her testimony, Ms. McQueeney mentioned annual 
double-digit rate increases for her company's plan prior to the 
enactment of the Affordable Care Act. Can the rest of you 
discuss the rate increases you have experienced prior to this 
law as well?
    Mr. GOULDIN. I looked it up before coming here and I think 
I put it in my testimony that I looked back to income 
statements back to 1968. We were providing health care back 
then to all of our staff and we only had three or four 
employees. And it was 0.44 of sales, and last year it was 
almost 2 percent of sales. So that is quite a bit higher. Five 
times higher as a percentage of sales. And of course, sales 
have been rising over the years.
    Mr. TINDALL. We have experienced the same thing. I mean, 
the health care costs have gone up in the 20 years I have been 
in business. Almost every year, I cannot remember a year that 
it did not go up, most years by double-digits. So it has been 
on the increase. But we still have not seen any benefit yet 
from the health care reform. Our premiums have not been 
noticeably different on the increase and the projected increase 
for next year, you know, could be significantly greater than 
what the past increases have been. So I do not know whether 
that is an evolution of the insurance companies trying to get 
ahead of the curve or what, but again, as the testimony was 
that small businesses do not have much leverage with insurance 
companies. They give you a premium and you pay it or you move 
on. And there is no leverage. So it has been a problem.
    Mr. PAYNE. You know, and I think that that is one of the 
major issues that will be faced as what insurance companies are 
doing now to bump their rates up in preparing for in the 
Affordable Care Act how they will be controlled. So it is a 
false increase in premiums to get it, as you said, get ahead of 
the curve because they know at some point with the Affordable 
Care Act that they will not have the opportunity to do so in 
the future.
    And you know, last year the leadership blocked the funding 
for implementation of the Affordable Care Act which obviously 
impacts the success of the law and influenced the concerns that 
individuals such as Mr. Bacchus might have had. So I just 
wanted to put that on the record. And I yield back.
    Chairman GRAVES. Mr. Huelskamp.
    Mr. HUELSKAMP. . Thank you, Mr. Chairman. I appreciate the 
testimony from the three small business owners. I had a number 
of questions. Just trying to follow up and take in a few of the 
comments which I will say are in many cases quite different 
from what I hear from my constituents in terms of it is very 
hard to find any support in the small business community or 
even in the medical field, providers. I come from a rural area, 
just like my colleague, Mr. Tipton from Colorado, and I have 
some real concerns about what occurs there.
    I want to follow up first with Ms. McQueeney about--I did 
not understand--I was not clear what your annual premiums were. 
Was that your total for businesses? Can you restate again what 
those were for your business?
    Ms. MCQUEENEY. Our premiums are tiered, so we are--I pay 
different for young men, say from 20 to 25, versus a young 
woman from 20 to 25. We are tiered by gender. We are tiered by 
age. So every premium is different.
    Currently, I can give you an example of a 55-year-old who 
has her family on there. It is $1,868 a month with a $5,000 
deductible. In my case, my daughter found health care on her 
own. For me and my husband it is $1,242, plus a $5,000 
deductible. So it is different for each and every employee, 
depending on what their circumstances, their age, and their sex 
is.
    Mr. HUELSKAMP. I appreciate the clarification. I heard the 
$1,200 a month earlier and did not know who that applied to.
    Ms. MCQUEENEY. That applied to myself, yeah.
    Mr. HUELSKAMP. And how many employees are covered under 
your plan?
    Ms. MCQUEENEY. Currently, there are three employees 
covered. The fourth one passed away last year.
    Mr. HUELSKAMP. Three employees including yourself?
    Ms. MCQUEENEY. Including myself.
    Mr. HUELSKAMP. So there are just two employees that we are 
talking about here?
    Ms. MCQUEENEY. Well, I am an employee of the company.
    Mr. HUELSKAMP. Okay.
    Ms. MCQUEENEY. Right. So there are three of us and then we 
cover our families.
    Mr. HUELSKAMP. And the part-time workers that you employ, 
do you provide coverage.
    Ms. MCQUEENEY. The seasonal, no.
    Mr. HUELSKAMP. Where do they get their health care or 
health insurance coverage, do you know?
    Ms. MCQUEENEY. I have one who is Medicare age, so she is on 
Medicare. And the other ones we do not provide health care for.
    Mr. HUELSKAMP. Do you know if they have----
    Ms. MCQUEENEY. And they have no health care.
    Mr. HUELSKAMP. They have none and you do not provide that 
for them. Okay. Well, I appreciate the clarification.
    Comment and perhaps question for the doctor here. But if 
you look at the actual cost and the actual impact from the 
Congressional Budget Office, they are expecting it is going to 
cost $1.88 trillion, double what was guestimated just a couple 
years ago. They also guestimate that 7 million employees will 
lose employer-sponsored health care. And in so doing that it 
also robs $700 billion out of Medicare to pay for this. And at 
the end of the day, Doctor, how much does this add to the 
deficit under the CBO score, do you know, Doctor?
    Mr. HOLTZ-EAKIN. If you take the CBO score at face value, 
this is about $100 billion addition to the deficit over 10 
years. And there have been--I will just say there has been a 
lot of question about whether that is a sensible projection 
from the beginning but that is their current estimates.
    Mr. HUELSKAMP. So how can folks claim this is going to 
reduce health care costs if it is increasing spending, 
increasing taxes, and increasing the deficit?
    Mr. HOLTZ-EAKIN. CBO, when it put out in particular its 
long-term budget which reflects the cost of these big health 
programs in the federal budget, they made it very clear that 
they did not change their long-term projections or the rise in 
health care costs after the law was passed. And so they saw no 
real change in that part of the equation.
    Mr. HUELSKAMP. I appreciate it.
    One last thing, and if there are some comments from the 
business owners I would appreciate that. I was just at a 
business by the name of Hercules, they decided that there are 
certain mandates from Kathleen Sebelius and this administration 
that morally they refuse to cover. But according to the law 
they are mandated to cover that. They won their lawsuit. I 
wonder if there is any response from the three business owners 
or there are things morally you might be opposed to that folks 
covering their health care plans or are you comfortable with 
any mandate that comes out of Kathleen Sebelius's office?
    Mr. GOULDIN. Sir, I do not have any complaints thus far but 
to give a blanket comfortableness, I do not think that is 
possible.
    Mr. HUELSKAMP. Do you cover every option that your 
insurance company says they will cover?
    Mr. GOULDIN. We have pretty broad coverage. The only thing 
we do not cover--we provide dental but we have the employees do 
that through payroll deduction. I do not pay for that because 
when I investigated most dental coverage, the premiums per 
annum were greater than the care given so I felt that was a 
pretty bad bargain.
    Mr. HUELSKAMP. Ms. McQueeney.
    Ms. MCQUEENEY. The same here. Yes. With pretty broad 
coverage and we do not supply dental or vision.
    Mr. HUELSKAMP. Do you pay for abortion and contraceptions 
or contraceptives as mandated?
    Ms. MCQUEENEY. Contraceptives are part of our----
    Mr. HUELSKAMP. Abortions, do you pay for those under your 
company's plan?
    Ms. MCQUEENEY. We are in our 50s and 60s.
    Mr. HUELSKAMP. Not all your employees.
    Ms. MCQUEENEY. There are not a lot of abortions I think 
going on at the moment.
    Mr. HUELSKAMP. That was not the question, ma'am. The 
question is does your coverage supply that. I thought you had 
some younger folks.
    Ms. VELAZQUEZ. Will the gentleman yield?
    Mr. HUELSKAMP. Absolutely. I am out of time. If the ma'am 
would answer the question, I would appreciate that.
    Ms. VELAZQUEZ. I just wanted to know if----
    Mr. HUELSKAMP. I have not yielded, ma'am.
    Does your coverage provide for abortion coverage?
    Ms. MCQUEENEY. I would think so.
    Mr. HUELSKAMP. And the gentleman on the end?
    Mr. TINDALL. I am sure it does but, again, we as small 
business people do not have control over what the packages are. 
We are very limited to what we can buy on the open market, and 
especially in my state of New Jersey, I am very sure that it is 
included.
    Mr. HUELSKAMP. I would welcome you to come to Kansas. We 
have had a lady for eight years as insurance commissioner that 
ultimately destroyed our insurance market and we lost a lot of 
coverage.
    I yield
    Mr. COLLINS. The gentleman's time has expired.
    Mr. Luetkemeyer.
    Mr. LUETKEMEYER. Thank you, Mr. Chairman.
    I know one of the comments that was made here a couple 
times has been uncertainty. In the small business world it is 
hard to plan if you have no idea what the future holds to be 
able to make the kind of investments and sort of proper plans 
for your business to grow and be successful.
    My understanding is that there is probably about 700 rules 
to be yet promulgated, Mr. Holtz-Eakin. Is that pretty close? I 
mean, I am sure you probably know more than--that is about half 
of them, a ballpark figure; okay? So that would be certainly 
another reason for the uncertainty among a lot of folks.
    Also, a while ago I know there was a comment made with 
regards to 97 percent of the small businesses being under 50. 
Let us take that number and break that down. Let us say for 
instance that the average small business is 10 employees and 
you have 1,000--I mean, 970 employees that would be covered. 
Yeah, 97 businesses times 10 is 970 people you are talking 
about. If the other 3 percent, which is 50 to 500 would be an 
average of 300, you are looking at 900 people being covered. So 
you are in the ballpark of 50 percent but let us just say if we 
are talking and being conservative, let us say only 40 percent 
of the employees are impacted. We are talking about people now. 
We are not talking about companies or insurance. We are talking 
about real people whose lives are being affected by what is 
going on with this health care bill.
    I had a gentleman in my office yesterday who has a Taco 
Bell franchise. He is not going to allow people to have 
overtime. He is going to put them underneath the 30-some hours 
that it takes. And they are either going to have to do one of 
two things. Either learn to live on less or get a second job. 
This bill will have a tremendous impact on people's lives. Not 
just their health care but on their lives as well and that is 
the point I want to make.
    I know that in your testimony, Mr. Holtz-Eakin, you talked 
about young people getting out of the market and having an 
impact on the health insurance as well. I know that we have in 
our package here, a February 17th article of the New York Times 
with regards to a lot of small businesses going to be self-
insuring. That would certainly impact, I think, the pool of how 
this all works. Have you, Mr. Gouldin, Ms. McQueeney, and Mr. 
Tindall, have you thought about self-insuring at all, looked 
into it at all? Is this something that you may have to consider 
down the road as an option?
    Mr. GOULDIN. I have not looked at self-insurance. I cannot 
imagine a small business even conceiving of really having self-
insurance of health care because of the cost of health care. 
One employee's major incident would wipe you out. So what we 
have looked at and I have always thought might be more 
efficient than what we have been doing, I have been paying 100 
percent of the premium for our employees. I now realize that is 
probably not very smart. I have been part of the problem. But 
what we would like to learn more about is health savings 
accounts and how deductible insurance, I do think it is very 
important that as many humans in this country get involved in 
the decision-making on health care is the only way you are 
going to get the cost down.
    Mr. LUETKEMEYER. If I am not mistaken, I think health 
savings accounts went by the wayside with this bill.
    Ms. McQueeney.
    Ms. MCQUEENEY. Actually, we do have a health savings 
account. I have a $5,000 deductible before health insurance 
pays anything.
    Mr. LUETKEMEYER. My question though is have you considered 
self-insurance?
    Ms. MCQUEENEY. I would definitely not consider that.
    Mr. LUETKEMEYER. Okay. Mr. Tindall.
    Mr. TINDALL. No. The liability that you would incur or the 
potential liability would put you out of business.
    Mr. LUETKEMEYER. Okay. Mr. Holtz-Eakin, can you kind of put 
a face on this and whether this is a good deal, bad deal? What 
size business you thought it would be something that would be 
impactful on or where everybody else should go with this? I am 
sure you have probably got some ideas.
    Mr. HOLTZ-EAKIN. One of the concerns I had when the bill 
first passed--I will have to go back and review and see if the 
rule-making changed--you could actually opt to self-insure when 
things are going well and then giving guaranteed issue, a firm 
could then jump into another product if they got someone in 
their firm who got sick. So what you would end up with is self-
insured low cost people with very high cost small firms in the 
exchanges. Those dynamics remain to be played out.
    Mr. LUETKEMEYER. My time is about up and I just want to 
make one more point here.
    You know, I saw in some of the testimony here that--I think 
it was Mr. Holtz-Eakin--the cost benefit analysis of the 
paperwork here is a 3 to 1 negative, which is kind of not 
surprising I guess because it is a government program. But it 
was interesting. I had a gentleman in my office yesterday, as I 
was saying, and with all the paperwork, the fire marshal came 
in and cited him for all the paper in his office. So just 
another problem to deal with.
    Thank you, Mr. Chairman. I yield back.
    Mr. COLLINS. Ranking Member Velazquez, do you have any 
questions?
    Ms. VELAZQUEZ. No, I do not.
    Mr. COLLINS. Okay. Thank you.
    I do have one for Dr. Holtz-Eakin. The $100 billion health 
insurance tax, which is going to be imposed on all health 
insurance companies, I know my own concern is there may be 
companies with less than 50 employees that do provide health 
insurance. Common sense would say those costs are going to be 
passed on. Do you have a comment on how the health insurance 
tax, that $100 billion, might impact any and all health 
insurance policies?
    Mr. HOLTZ-EAKIN. I expected that tax to be fully passed 
forward into the premiums that people pay for their health 
insurance. No question about it.
    Mr. COLLINS. That would be mine as well.
    I want to thank Mr. Tindall, Ms. McQueeney, Mr. Gouldin, 
and Dr. Holtz-Eakin for your time today. Your testimony was 
very valuable. We will continue to monitor the implementation 
of the health care law and its impact on small business. We 
will be sending a letter to the Ways and Means Committee, 
Chairman Camp, and Ranking Member Levin to share the testimony 
today that we received, and I do ask unanimous consent that 
members have five legislative days to submit statements and 
supporting materials for the record.
    Without objection, so ordered.
    I ask unanimous consent that the following material be 
inserted into the record. A May 2012 Government Accountability 
Office Report titled ``Small Employer Health Care Tax Credit 
Factors Contributing to Low Use and Complexity,'' the U.S. 
Chamber of Commerce Fourth Quarter 2012 Small Business Outlook 
Survey showing 86 percent of small businesses believe that 
regulations and taxes will impact their ability to operate with 
healthcare regulations causing the most concern, and a February 
7, 2013 New York Daily News article titled ``Small business 
owners have no strategy for coping with rising health care 
costs.''
    Without objection, so ordered.
    The hearing is now adjourned.
    [Whereupon, at 3:09 p.m., the Committee was adjourned.]
                                APPENDIX


            ACA, Regulation, and America's Small Businesses


                     U.S. House of Representatives


                      Committee on Small Business


                    Douglas Holtz-Eakin, President*


                         American Action Forum


                             April 17, 2013


    *The views expressed here are my own and not those of the 
American Action Forum. I thank, without implication, Sam 
Batkins, Sarah Hale, and Cameron Smith for their assistance.
    Chairman Graves, Ranking Member Velazquez, members of the 
Committee, thank you for the opportunity to testify today 
regarding the Patient Protection and Affordable Care Act 
(ACA)'s impact on small businesses. The American Action Forum 
keeps a close eye on the impacts of the law's implementation, 
and carefully tracks the regulatory burden of federal rules and 
administrative actions. I'm pleased to share some of those 
details with the Committee.

    The review provides four main lessons regarding the 
Affordable Care Act and the growth of small businesses:

           It imposes numerous costly regulatory 
        burdens,

           It creates further regulatory uncertainty at 
        a time when we need small business entrepreneurs to 
        hire,

           The law's taxes and fees create 
        disincentives for small businesses to expand, and

           It raises the cost of providing insurance 
        for employees while concurrently penalizing firms that 
        fail to do so.

    Let me discuss each in turn.

    The Regulatory Burden of the ACA

    The ACA's regulatory burden already exceeds $30 billion on 
private, state, and local entities. With more than 80 million 
paperwork burden hours, the law's implementation also imposes 
heavy burdens for small businesses and rural hospitals, two 
aspects that even the Administration's own regulations concede.

    When the Congressional Budget Office (CBO) reviewed ACA 
under the Unfunded Mandates Reform Act (UMRA), it acknowledged 
the law ``would greatly exceed'' statutory cost thresholds ($70 
million for local governments and $141 for the private sector) 
``in each of the first five years that the mandates would be in 
effect.'' After approximately three years of implementation, 
ACA's regulatory burdens have greatly exceeded UMRA's 
thresholds.

    According to AAF's database of all federal regulations, ACA 
has imposed $24 billion in costs on private entities, $9.8 
billion in burdens on state and local governments, and more 
than 80 million paperwork burden hours. These regulatory costs 
will place tremendous pressure on doctors, hospitals, health 
issuers, and small businesses.

    For example, ACA's 80 million hours of paperwork is the 
equivalent of 39,822 employees working an entire year filling 
out the law's new paperwork (assuming a 2,000-hour work year). 
We can conceptualize paperwork burdens by examining gross 
domestic product per hour worked. According to the Bureau of 
Labor Statistics, that figure was $61.59 in 2011. Thus, ACA's 
red tape alone costs the U.S. approximately $4.9 billion 
annually, a figure that will grow as the pace of implementation 
quickens this year.

    White House estimates confirm that HHS's paperwork burden 
has increased. In FY 2008, HHS imposed 412.8 million hours of 
red tape; in FY 2011, that figure stood at 518.8 million, a 
jump of 106 million hours, or 25 percent in just three years. 
ACA is the direct cause of many of these new requirements. The 
figure below details HHS's rising regulatory burden, with the 
pronounced jump in 2010.


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    Finally, AAF did not end its analysis with the law's costs 
alone. We also searched the relevant Regulatory Impact Analyses 
(RIA's) to determine aggregate benefits. Sadly, costs outweigh 
benefits by a factor of at least 3 to one - $33.8 billion in 
costs to $9 billion in quantified benefits. ACA not only fails 
the regulatory cost-benefit test, but the budgetary and policy 
tests as well.

    Regulations with ``a significant economic impact on a 
substantial number of small entities.'' Under the Regulatory 
Flexibility Act (RFA) and its subsequent amendments, all 
federal agencies must consider the impact of their proposal on 
small entities, seek appropriate input, and develop regulatory 
alternatives for small businesses. Agencies have the 
flexibility to ignore the RFA, mostly because the key term is 
undefined, so acknowledging that a regulation imposes a 
``significant economic impact on a substantial number of small 
entities'' is rare.

    Below are the eleven regulations that HHS estimated would 
place significant burdens on small businesses. Combined, rural 
hospitals and doctors would incur more than $1.9 billion in 
burdens and 11.3 million paperwork hours.


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    These regulations are only part of the law's overall 
burden. Several of the administration's regulatory analyses 
admit they will adversely affect small rural hospitals. One 
proposal covering Skilled Nursing Facilities [SNF] stated, ``We 
anticipate that the impact on small rural hospitals would be 
similar to the impact on SNF providers overall. Therefore, the 
Secretary has determined that this final rule may have a 
significant impact on the operations of a substantial number of 
small rural hospitals.''

    Although $1.9 billion in costs, and adverse impacts on 
doctors and rural hospitals might appear significant, the 
actual burden is much higher. Many of the administration's 
formal regulatory publications never capture the macroeconomic 
impact. The impact on small businesses is likely much greater 
than $1.9 billion.

    Increased Regulatory Uncertainty

    Since 1996, after the latest round of amendment to the 
Regulatory Flexibility Act, the White House has published two 
``Unified Agendas'' of federal regulations every year. Last 
year, however, the administration decided simply not to publish 
a spring agenda, leaving industries across the U.S. guessing 
about long-term regulatory actions. The lone agenda was not 
published until shortly before Christmas.

    This policy toward the Unified Agenda was unprecedented, 
and did little to foster transparency in an administration that 
touts its openness. In addition to delays in the Unified 
Agenda, the administration has also imposed several self-
inflicted delays that only add to this uncertainty. In an AAF 
study last year, we found HHS missed nearly half of its self-
imposed deadlines for proposed and final ACA rules.
---------------------------------------------------------------------------
    \1\ According to the rule, ``These requirements are exempt from the 
PRA [Paperwork Reduction Act] in accordance with the provisions of the 
Affordable Care Act.'' 75 Red. Reg. 72238.

    This tardiness has reached into approving state exchanges 
as well, which are supposed to be open for enrollment to 
individuals and small businesses in October 2013. The timeline 
for certifying state exchanges under the law has been modified 
frequently during the past years; few think the administration 
---------------------------------------------------------------------------
will be ready with functioning exchanges by the ACA deadlines.

    Two recent polls do suggest that businesses and consumers 
are concerned about this uncertainty. The latest, from Gallup, 
found that 56 percent of small-business owners worry about 
``new government regulations.'' The survey of 601 participants 
concluded, ``[T]hat so many owners say worries about such 
things as potential healthcare costs and potential new 
government regulations are holding back hiring is troublesome 
for the job market outlook.''

    This evidence echoes an earlier poll from Gallup on 
regulations. In a September 2012 poll of 1,017 adults, 47 
percent said there was ``too much'' regulation, as opposed to 
26 percent who stated there was ``too little'' regulation. 
Gallup notes this data is hardly an aberration. ``In fact, over 
the 15 times since 1993 that Gallup has asked this question, 
never have more than a third of Americans said there is too 
little regulation of business and industry.''

    Regulatory uncertainty does not have to be the norm. It 
gives markets and states the expectation that the law will move 
forward based on partisan motives, as opposed to good public 
policy. The least the administration could do is ensure 
transparency and issue timely regulations with the legally 
prescribed cost-benefit analysis.

    Unfortunately, in a difficult economy, and an otherwise 
uncertain spending and regulatory environment, ACA leaves small 
employers with a large paperwork burden, higher costs, and an 
even greater degree of uncertainty. Those in health-related 
fields are more directly impacted than others, but many firms 
now have at least eleven more regulatory reasons not to expand. 
Although the law may have been well intentioned, its 
implementation negatively affects the small businesses and 
start-ups that might otherwise be hiring new employees and 
creating wealth.

    Taxes and Fees Hamper Small Businesses

    Beyond the regulatory impact, the law contains new fees and 
taxes that negatively affect small businesses and their 
employees.

    Businesses with fifty or more employees are subject to a 
$2,000 per employee (in excess of 30 full-time employees 
(FTEs)) penalty if they do not provide coverage. This penalty 
includes businesses that have less than 50 full-time employees, 
if they have a significant number of part-time employees. For 
example, a company with 33 full-time employees and 30 part-time 
employees is considered an employer of 50 full time employees, 
given that 30 part-time employees amount to the equivalent of 
17 full-time employees. Notably, a business does not avoid the 
penalty if they opt to cover employees with plans deemed 
inferior to those offered in exchanges. Therefore, regulations 
dictate that small employers who offer plans that are 
``unaffordable'' or inadequate are subject to the full penalty.

    In its most recent Budget and Economic Outlook, the 
Congressional Budget Office estimated that the government would 
collect $13 billion more than previously estimated from this 
penalty. This projected increase indicates that a substantial 
number of Americans will lose whatever employer sponsored 
coverage that they have now.

    The 2.3 percent excise tax on medical devices will tilt the 
playing field against smaller companies who are less able than 
larger companies to absorb lost revenue because of higher fixed 
costs and smaller cash reserves. Since about 90 percent of 
medical device companies in the U.S. are small to medium-sized 
firms, the tax will lower employment and raise prices in one of 
the few manufacturing industries where the U.S. remains 
dominant. Beyond concerns about the business impact, it is 
simply an ill-conceived tax policy. Removing $20 billion from 
this industry merely undercuts employment and increases cost 
throughout the healthcare sector.

    New legislative and regulatory requirements may lead to 
further decline in the number of practicing independent 
doctors. Physicians who own their own practices or are members 
of small groups are already feeling pressure to consolidate or 
become employees of larger hospitals and healthcare systems. 
Doctors in private practice have declined from 59 percent of 
all physicians in 2000 to 39 percent in 2012. Legislative and 
regulatory changes, including Medicare payment reductions, 
Accountable Care Organization incentives, and a host of health 
IT, quality, and reporting requirements mean that it is easier 
to be part of a large system than a solo practitioner. Although 
consolidation may have benefits and drawbacks in some areas, it 
has a decidedly negative impact on physicians who run small 
businesses or do not have the opportunity to consolidate 
themselves.

    The administration often points to the way in which ACA 
helps small businesses afford health insurance for their 
employees. To address the existing difficulty, small businesses 
that provide coverage can qualify for a healthcare tax credit. 
Unfortunately, due to its structure, very few companies 
actually qualify for the credit, and the Government 
Accountability Office has stated that the complicated 
application process and numerous exceptions meant that fewer 
have claimed the credit than expected.

    In 2011, 170,300 claimed some amount of the credit, even 
though anywhere from 1.4 to 4 million businesses were eligible. 
Those eligible for the full credit must have fewer than 10 
FTEs, and an average wage of $25,000 or less. The expected cost 
of this credit for 2010 was $2 billion, and it amounted to a 
mere one-quarter of this projection. ACA exceeds expected cost 
projections in terms of expanded bureaucracy and public 
entitlement programs, but comes in dramatically under budget on 
a tax credit that might have assisted small businesses trying 
to provide affordable coverage.

    Given the additional burdens facing small businesses when 
they cross the threshold from 49 to 50 employees, ACA's new 
regulations actually encourage small businesses to pay small. 
Uncertainty about the law's impact on future insurance premium 
costs, payroll, prices, and profit margins can only continue to 
adversely affect the ability of a typical small business to 
grow.

    Health and Insurance Costs Continue to Rise

    There are legitimate policy debates over the implementation 
of ACA and its role in health care costs. However, there is no 
dispute that its regulations will increase premiums. For 
example, the final ACA rule on ``Preexisting Condition 
Exclusions'' noted that if HHS failed to grant a waiver, 
``[T]he restricted annual limit provisions of these interim 
final regulations would result in a significant decrease in 
access to benefits or a significant premium increase.''

    Likewise, the proposed ``Notice of Benefit and Payment 
Parameters for 2014,'' which is currently in final form at the 
White House, acknowledged it too could lead to premium price 
hikes. ``There are administrative costs to States to set up and 
administer these programs. For issuers not receiving payments, 
any contribution is an additional cost, which an issuer could 
pass on to beneficiaries through premium increases.'' Critics 
of the law warned this could happen during passage, it has come 
to pass, and new research is putting a price tag on these 
increases.

    In a paper released last month, I examined possible health 
care premium spikes in 2014. We surveyed large health insurers 
that cover a majority of patients in the U.S. The survey areas 
included Atlanta, GA, Austin, TX, Chicago, IL, Phoenix, AZ, and 
Milwaukee, WI. The results are sobering: young and healthier 
individuals, including small employers, can expect a 169 
percent premium increase, averaged across the five cities. 
Consumers in Milwaukee could experience the greatest sticker 
shock, with a 190 percent increase in 2014.

    These younger, healthier individuals are likely to 
subsidize the cost of insurance for older patients, but not by 
nearly enough to avoid an overall increase. Older and less 
healthy individuals could enjoy a 22 percent premium decrease. 
It is no surprise that ACA will have an enormous impact on the 
structure and pricing of insurance. However, a 169 percent 
premium increase begs the attention of policymakers to address 
the structural flaws in the legislation.

    Thank you for the chance to appear. I look forward to 
answering your questions.


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    Chairman Graves, Ranking Member Velazquez, and members of 
the Small Business Committee, thank you for inviting me to 
testify on how new federal definitions in the healthcare law 
will impact the marginal costs of small businesses and the 
livelihood of their employees.

    I am Bill Gouldin and I have been the President of 
Strange's Florists, Greenhouses, and Garden Centers since 1978. 
I came to the business in 1971 and going to college and serving 
in the U.S. Army. My father owned the business and managed it 
on a part-time basis because he worked as a full-time railroad 
engineer. Two of my brothers joined me in the business after 
graduating from high school and college. My wife works for the 
business as our Human Resources Manager. My son joined the 
business as Treasurer after graduating from college and serving 
in the U.S. Army. My daughter joined the business as Assistant 
Manager of Human Resources after graduating from college.

    We currently have four retail florists, a wholesale 
greenhouse range, and two retail garden centers in the 
Richmond, Virginia metropolitan area. Due to the highly 
seasonal nature of our business, virtually all of our employees 
are paid by the hour. Our staff size ranges from a low of 
approximately 120 employees to a high of over 150 employees 
depending on the season. We have a blend of full-time, part-
time and seasonal personnel that is constantly changing. In 
addition to our employees, we pay a large number of contract 
drivers to assist our delivery staff around the holidays.

    We provide health insurance for our full-time employees who 
work over 37.5 hours per week. We have been paying 100% of the 
health insurance premium of all of our full-time employees that 
desire it my entire career. My father stated the policy of 
paying for health benefits before me. In 1983, we started our 
401(k) plan for all full-time employees as a tool to help our 
employees to save for their retirement and learn about return 
on investments. In the early years, I felt providing health 
insurance was the proper thing to do because our employees 
should have coverage and we could provide it for less than it 
would cost them individually. As I studied the results over the 
years, I realized that all third party payment systems are 
inherently inefficient because the beneficiary has little 
knowledge, or concern in some cases, for the total costs; and 
providers have very few tools to control costs.

    Before Passage - Employer Confusion

    By necessity, not by choice, I have become well-aware with 
our business' rising cost of providing health insurance. Our 
premium costs have risen from .44% of sales in 1968 to nearly 
2% of sales in 2012 and will continue to increase. Of course, 
the constant rise in health insurance costs is regressively 
suppressing wages.

    When the healthcare debate was raging I realized there was 
plenty of rhetoric by proponents selling all of the benefits 
and opponents displaying all of the negatives, but no one 
seemed to have any detailed information. Simple mathematics 
seemed to be lost in the debate. I asked questions of all of 
our professional organizations in which we have memberships, my 
Congressman, and Senator, but could not get all of my questions 
answered. When people ask me what caused the financial crisis, 
my answer is the lack of due diligence and integrity by all of 
us. The same is true of our healthcare system and the Patient 
Protection and Affordable Care Act.

    That caused me to take the time to begin scanning the House 
and Senate bills as they were progressing. I looked for the 
words employee and employer. I printed every page I could find 
that referenced the employer and employee and quickly realized 
there were parts that were very vague and confusing, many parts 
that were not workable, and some that were very dangerous to 
employees and their employers. I realized that this law would 
be the most disruptive instrument to the American workplace in 
my lifetime and no one seemed to know, or care, right in the 
middle of the worst recession/depression since the Great 
Depression.

    After Passage - Disruptive and Problematic Definitions

    The IRS has the undesirable task of weeding through the 
details of implementation and is making some progress but they 
have a long way to go. Their most complete list of 
interpretations and opinions was released on December 28, 2012. 
That was very late in the game but helped answer some of my 
outstanding questions. Unfortunately, some provisions were 
designed in a way that cannot be fixed by regulations. For 
example, a new federal employment definition that must interact 
with an affordability test will harm employees by reducing 
hours and wages. One of the most dangerous parts in the law is 
the statutory definition of full-time employment as 30 hours 
per week, or 130 hours per month. The IRS cannot correct that 
definition. Congress will have to amend the law. The use of 30 
hours to define full-time employment is the lowest in the world 
and far below the common practice of 37.5 to 40 hours used by 
most public and private employers. This is already causing 
rescheduling of employees where public and private employers 
have read the law. The federal government has never attempted 
to define full-time employment until now.

    If the 30 hour definition is not amended several 
consequences will occur. Every employer will be forced to 
define part-time employment as something below 30 hours per 
week and most will use between 20 and 27.5 hours per week. 
There are millions of people who currently work between 30 and 
36 hours per week because that works for their lifestyle and 
income needs. Many are students trying to pay for their 
education or the second wage earner in the household. These 
people will be required to lose needed hours of work and 
income. Millions will be forced to work two part-time jobs. The 
fixed cost of health insurance premiums is already so high that 
many employers will pay the penalty of ``time and a half'' 
because it is less than the marginal cost of health insurance 
per hour for an additional employee. Using the 30 hour 
definition begins to override the ``time and a half'' penalty. 
The new full-time employee definition will cause a hole in 
employment between 27.5 and 37.5 hours per week and very few 
people will be allowed to work between those hours.

    In 2009, I created the attached tables to show the hourly 
costs of health insurance based on the Kaiser Family Foundation 
Survey. I used their average national premiums from 2009 and 
have updated the table annually to 2012. I have projected 
premium modest increases of only 5% per annum for 2013 and 
2014. The tables show the marginal cost of offering health 
insurance at $119.05 per hour for an employee allowed to work 
30 hours per week when the employer pays 100% of the premium or 
$95.24 if the employer pays 80% of the premium. These 
staggering marginal costs are evidence of the problematic 
employment wedge that has been created. This is a very 
regressive law. The cost of health insurance is of less concern 
as you move up the income scale and is why so many highly paid 
people have overlooked this problem. The 9.5% affordability 
test will only aggravate the problem, and drive wage rates at 
healthcare inflation rates (as shown on the right side of the 
tables).

    My concern is that no one seems to care about the millions 
of employees that will lose their job in whole or in part 
because of this provision. Most employers have no pricing power 
to pass these increased costs on to the consumers so they have 
no options but to reduce hours or personnel. If a business 
tries to absorb these costs and goes out of business, everybody 
loses their jobs.

    Now is the Time for a Simple Fix

    The employer confusion caused by this law is already 
causing higher unemployment and I believe that real 
unemployment (U-6 table) will rise if a change is not made. I 
have tried to be aware of the language in the law, but very few 
businesses have any idea of what is in this law. But they are 
beginning to find out.

    Amend the definition of full-time employee to read 37.5 
hours per week and begin to improve the U-6 unemployment table 
today instead of watching it rise above 14.5%. This will 
increase employment better than any scheme that I have heard 
and cost the government a dime. Our every effort should to move 
people from unemployment (expense column) to working taxpayers 
(revenue column).

    We all know that tax rates have been raised and some 
deductions will probably be changed. Many spending programs 
have been overpromised and must be cut or altered. The least 
painful way out of this mess is economic growth and maximum 
employment. We need a paradigm change to genuine respect for 
those private businesses that create jobs in this country and 
for those who go to work every day. It is very important to 
enhance, and not prevent, the opportunity of young people to 
work part-time to gain the experience of working. This basic 
training may lead to a full-time job upon finishing high school 
or college. Most businesses have entry level training in-house 
and some have tuition assistance for full-time employees who 
want more formal training or college. There are many benefits 
to working beyond wages and health insurance. The middle class 
flourished in the period between 1945 and 1970 and has been 
struggling since. The belief that there will always be an 
endless supply of businesses that want to hire Americans should 
have ended then because the rest of the world had recovered 
from WWII and became stronger competitors. Every law, and tax, 
needs to be reviewed to see if it will enhance private sector 
job creation or thwart it. The most patriotic thing any of us 
can do today is create a job or go get a job. Our Generals are 
smart enough to understand that the greatest risk to our 
country's safety is a weakened private sector that cannot keep 
pace with our growing government.

    Thank you for your time. I look forward to answering any 
questions.


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                     U.S. House of Representatives


                      Committee on Small Business


 Hearing: ``The Health Care Law: Implementation and Small Businesses''


                     Testimony of Louisa McQueeney


                 General Manager/CFO, Palm Beach Groves


                              Lantana, FL


                             April 17, 2013

    Chairman Graves, Ranking Member Velazquez, and members of 
the committee,

    Thank you for the invitation to testify before your 
committee on the topic of how the implementation of the 
Affordable Care Act is impacting small businesses. I appreciate 
the opportunity to share my experiences on these issues from 
the perspective of a small business.

    My name is Louisa McQueeney. I am the General Manager and 
CFO of Palm Beach Groves, a small business in Lantana, Florida 
that ships citrus gift baskets across the United States and 
Canada. Last year we employed 6 year round employees and 3 
seasonal workers.

    I've worked at Palm Beach Groves for the last 13 years. 
Part of my job as CFO is managing health care benefits. Over 
the last decade, I have grown quite accustomed to yearly double 
digit rate increases--12 percent, 22 percent, one year even as 
high as 32 percent. Renewal season has always been a nerve-
wracking time, as the decision to continue providing health 
coverage--and how much of the cost to shift onto employees--has 
gotten harder each year.

    Each year, I shop around to different insurance companies, 
but none can quote better rates. In fact, they can actually 
charge an additional 15% if they find one pre-existing 
condition from any person covered on the plan. All of us have 
pre-existing conditions.

    For almost a decade, our staff hasn't seen any raises, 
because the raise would go to yet another increase in health 
insurance premiums.

    How early provisions of the Affordable Care Act are helping 
small businesses

    Then, the first components of the Affordable Care Act, or 
``Obamacare'' were implemented.

    In November of 2011, our insurance agent called with our 
renewal. Instead of the nightmare news I'd come to expect, I 
found out our premiums for the next year would increase by a 
grand total of 0.2 percent. Zero point two. Flat.

    I was floored. This flan renewal came with exactly the same 
plan--no dumbing down the coverage, no increase in our 
deductibles, everything was the same.

    Then, at tax time, we applied for the small business health 
care tax credit. That credit cut our total health care costs by 
about 10 percent--$7,400--for 2011. We will receive this tax 
credit again for 2012.

    Last summer, we also received a $1,582 rebate check in the 
mail from our insurance company. Our health insurer had not met 
the ``80/20'' rule which requires insurers to spend at least 80 
percent of premiums on medical care. So, they were forced to 
pay us back the difference.

    This had never happened before. I was so excited, I thought 
about framing the check.

    During this time, my family was also personally benefiting 
from the ability to keep our adult daughter on our health 
insurance plan until age 26, and I also benefited from free 
preventive care with an annual well-visit.

    Counting it all up--the stable rate, the tax credit, the 
rebate check--last year our business saw our health insurance 
costs cut about 12 percent, with better coverage and greater 
peace of mind, thanks to the Affordable Care Act.

    Continuing challenges for small businesses

    Since the law will not be fully implemented until 2014, we 
still face challenges. All of our employees are in their 50s 
and 60s. We're not spring chickens and we've got more than a 
few pre-existing conditions among us.

    Last year, we had four major health care events in our very 
small group. One of our long time employees died after battling 
lung cancer. The spouse of another was diagnosed with a serious 
heart condition. Thank God he was covered under our insurance, 
because it literally saved his life. He was given a wearable 
defibrillator sudden cardiac arrest protection device, which he 
would not have been able to afford had he not been covered. The 
device actually shocked his heart numerous times keeping him 
alive until the ambulance arrived. He ended up with a 
defibrillator/pacemaker implant at a billed cost of over 
$172,000. Who can afford any of this?

    Under Florida law, health insurers are allowed to impose 
additional rate-hikes to small businesses based on the health 
status and claims experience of the group. When you only have a 
few employees to begin with, just one battle with cancer can 
dramatically affect your rates. Add a heart condition 
diagnosis, a spouse with Alzheimer's, and a generally aging 
workforce, and we found ourselves facing another double-digit 
rate-hike at our latest renewal.

    That's why I'm looking forward to the health care law being 
fully implemented. Starting next year, the Affordable Care act 
prohibits insurers from hitting small businesses with an extra 
rate-hike based on the health status or claims experience of 
their small group. Premiums will be allowed reasonable 
variation for age and smoking status, but gone will be the day 
when, if one of your employees gets cancer, you can count on 
your rates skyrocketing when you need health care the most. 
Gone will be the days when you can be discriminated against 
based on gender. Frankly, it can't come soon enough.

    I am pleased that Governor Rick Scott has joined with other 
Republican Governors in dropping fervent opposition to the law, 
and taking the practical approach of supporting expanding 
Medicaid for more Floridians. Nevertheless, this issue is still 
being hotly debated in our state legislature. I hope they do 
the right thing, because accepting the Medicaid expansion would 
help take some pressure off our hospitals and reduce the cost-
shifting of uncompensated care costs onto private payers, 
including businesses like ours. We also need to move forward 
with implementing health insurance exchanges where small 
businesses can compare coverage options apples-to-apples and 
get the best deal at the best price.

    Too many small business owners still don't know that they 
could benefit from the health care tax credit, a dollar for 
dollar reduction in your tax bill. According to the GAO, 
between 1.4 and 4 million small businesses qualified for the 
tax credit and only about 170,000 took advantage of it. I found 
out about the credit through a small business IRS mailing. But 
many business organizations, like the US Chamber of Commerce, 
opposed the law for ideological reasons. I feel they have been 
remiss in educating their members about how they might benefit 
and lower their health care costs.

    Maybe it's true that too few small businesses qualify for 
the tax credit. So, one opportunity to move forward that I 
would encourage you to support is expanding eligibility for the 
credit. While some elected officials are using the news of 
lower than expected utilization as an excuse to criticize the 
credit and the Affordable Care Act as a whole, that's not 
helpful to small businesses. If you want to help us, it would 
make more sense to ask the question, ``What can we do to make 
this credit work for more of our small businesses?''

    Currently the credit is limited to businesses with fewer 
than 25 FTEs and average wages under $50,000. Why not expand 
the FTE requirement to 50, 75, or even 100 employees, and 
increase the salary cap? You have an opportunity to help so 
many more small businesses throughout the country with the 
small business health care tax credit. I hope you will take it.

    I want to say something briefly about employer 
responsibility. We've always considered it our responsibility 
to provide health coverage to our employees. If we don't 
provide it, where are they supposed to get it... and who will 
pay the bill? At a small business, our employees are like 
family. How could I look one of my employees in the eye while 
they battle cancer and say, ``We're going to drop your 
coverage'' when I know it will financially devastate their 
family?

    In the last year, I've read a lot in the news about some 
companies that are larger than ours taking extraordinary steps 
to avoid their responsibility under the law.

    The employer responsibility provision of the Affordable 
Care Act is often presented as a problem for small businesses. 
I believe the opposite is true. As a business who is doing the 
right thing and offering health coverage to our workers, the 
real problem for us is that when other businesses who are much 
larger than us don't offer health care, we're forced to 
subsidize their health care costs. The shifting of 
uncompensated health care costs to businesses that pay for 
health insurance represents a ``hidden tax'' in our premiums 
that costs our small business hundreds of dollars per employee 
per year. How is that fair?

    Opponents of the health care law argue that the employer 
responsibility requirement will hurt job creation. I disagree. 
More than 9 out of 10 businesses with 50 or more employees 
already offer health coverage.\1\ Think about it this way: for 
every business around the 50 FTE threshold that doesn't already 
offer coverage, there are many more that do. Right now, the 
barrier to job creation for the businesses that do offer health 
care--like mine--is the fact that we're paying more to 
subsidize the ones that don't. The only way to fix this is 
through a system of shared responsibility where all businesses 
above the threshold pitch in and nobody takes a free ride at 
the expense of the rest of us.
---------------------------------------------------------------------------
    \1\ Agency for Healthcare Research and Quality, Center for 
Financing, Access and Cost Trends, 2010 Medical Expenditure Panel 
Survey--Insurance Component; Table I.A.2(2010) Percent of private-
sector establishments that offer health insurance by firm size and 
selected characteristics: United States, 2010, http://meps.ahrq.gov/
mepsweb/data_stats/summ_tables/insr/national/series_1/2010/tia2.htm

---------------------------------------------------------------------------
    Alternatives: Will they work?

    Opponents of the law say they want to replace it with 
something else. But there are no real alternatives being 
offered.

    ``Let health insurance companies sell across state lines.'' 
Sounds nice in theory, but will my cheap South Dakota health 
insurance pay the more expensive care in South Florida? Who 
will regulate that? To date I have heard no real answers to 
these questions. We need the protection of law to ensure that 
insurance is worth more than the paper it's written on. 
Besides, our neighbors in Georgia tried this. Not a single out-
of-state insurance company tried to enter the market there, so 
it does not seem like a feasible alternative.\2\
---------------------------------------------------------------------------
    \2\ No out-of-state insurers offer plans in Georgia,'' Atlanta 
Journal-Constitution, April 30, 2012, http://www.ajc.com/news/no-out-
of-state-1428329.html

    Or ``Health Savings Accounts'' which are supposed to make 
us ``better,'' ``more informed,'' and ``more responsible'' 
consumers of healthcare. Try calling a doctor's office and ask 
for the price of a biopsy, or a fix for a broken leg or by-pass 
surgery. The first answer you get is ``I don't know'' and if 
you persist you get ``depends on your insurance,'' but you will 
---------------------------------------------------------------------------
not get a price. Good luck with that one.

    We have experience with HSAs.

    A few years ago, our company was forced into a high 
deductible HSA plan by our insurer. This meant paying the first 
$5,000 of healthcare costs out-of-pocket and then paying a high 
monthly premium on top of that before the health insurance 
company paid a dime.

    That's not a solution. It feels a lot like paying to be 
uninsured, and it's just more of the same old squeeze.

    Conclusion

    The Affordable Care Act is working for our business and is 
taking important steps forward to address the barriers to lower 
health care costs and bring affordable, good quality health 
coverage within reach for many small businesses. Businesses 
like ours are already seeing the benefits as early provisions 
of the law take effect. We have even more to look forward to 
with the establishment of the state health insurance exchanges, 
the prohibition on rating due to health status, and other 
provisions that are still on their way.

    We need to keep building on the foundation of the 
Affordable Care Act, not tear it down. Small businesses across 
the country can't afford to go back to the broken health care 
marketplace we faced before reform. We need to keep moving 
forward.

    By taking full advantage of the opportunities created by 
the Affordable Care Act, we can break down the barriers to 
lower health care costs and finally level the playing field for 
small businesses. Then small businesses like ours will be able 
to focus our full attention on building our businesses, 
creating jobs, and strengthening our local economies. Thank 
you.


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    Chairman Graves and members of the committee, my name is 
Kevin Tindall. My wife and I own Tindall and Ranson Plumbing 
and Heating located in Princeton, New Jersey. I also serve as 
an officer and member of the Board of Directors of the 
Plumbing-Heating-Cooling Contractors--National Association 
located in Falls Church, Virginia. As the owner of a small 
business and on behalf of the leadership and members of the 
Plumbing-Heating-Cooling Contractors--National Association, 
thank you for the opportunity to appear before the Committee to 
discuss health care reform. I realize the statutory title of 
the act is known as ``The Patient Protection and Affordable 
Care Act'' however, in the small business world, we merely 
refer to it as health care reform. I am also aware of the many 
challenging issues you face as national leaders, and I applaud 
your efforts today to hold this hearing on one of the most 
important issues facing the citizens of our nation.

    Tindall & Ranson provides plumbing, heating, and cooling 
services. We were established 20 years ago with only two 
stockholders and four employees. We now have 20 full-time 
employees ranging from highly qualified technicians to 
administrative and management professionals. I am proud to say 
that we also provide quality health care insurance to all of 
those working at Tindall and Ranson. We measure success by 
providing quality service to our clients and quality careers 
for our employees so that they can provide for their families. 
We don't measure success by evaluating our profit margin.

    For the purposes of my appearance here today, I would like 
to ask that you not look at me as the owner of a plumbing and 
heating company. I would ask that you instead look at me as a 
small business job creator--not unlike millions of other small 
business job creators. As such, I would further ask that you 
receive my testimony as someone who has worked to help create, 
build and improve the quality of life for those living in my 
community as well as providing the foundation of a quality 
career for those who work in my company--my partners.

    I am not an expert in health care or health care reform. I 
am however, the person who must live with the very business 
decisions and policies Congress establishes which in many 
cases, either increases or inhibits my ability to create jobs. 
For that, I am an expert. I have yet to understand how we as a 
nation can continue to state that we need to create more jobs, 
yet challenge, threaten, or even ignore the very mechanisms for 
job creation.

    I would like to touch on a few very important small 
business dynamics that are the result of what we are 
experiencing in the small business world as they relate to 
health care. I would also like to briefly discuss what we see 
as the future. I want to again emphasize that my views are that 
of someone who is responsible for 20 individuals and their 
families.

           Tax Credits for Small Business

          When Congress debated, considered, then passed the 
        health care reform package, I heard and read much about 
        tax credit incentives for small business. On the 
        surface, this was a positive. Something that the 
        business community viewed as a way to partner with the 
        reform. I have spent countless hours viewing health 
        care reform webinars, reviewing materials and speaking 
        with other small business owners with the intent of 
        calculating any benefits of the reform in terms of tax 
        credits. I am often asked why I don't take advantage of 
        the small business tax credit incentives. I am proud to 
        say that I don't qualify--the average salary for those 
        who work at my company exceeds the $50,000 threshold, 
        thereby disqualifying me. Tax credits as an incentive 
        are meaningless unless you happen to fall within a very 
        limited universe as defined by the reform. This is also 
        the reason why many small businesses have not taken 
        advantage of the credits--they can't.

           Rising Insurance Premium Costs

          One of the most talked about issues I heard during 
        the health care reform debate was that rising insurance 
        premiums need to be brought under control. I couldn't 
        agree more. But in my experience, that's the difference 
        between policy and the real world. For my company, the 
        insurance renewal cost for 2011 experienced an increase 
        of 9.7%, followed by an increase of 9.3% for 2012. Let 
        me repeat, an increase of 9.7% in 2011 and an increase 
        of 9.3% in 2012! I would challenge anyone who has 
        experienced a 9.3% to 9.7% increase in anything in 
        their professional or personal life who can simply 
        absorb the excess cost and not have to take action. 
        Because I will always view those who work at my company 
        as partners, and because I will always provide my 
        partners and their families with quality health care 
        insurance, this increase simply means that the cost of 
        doing business has increased. Eliminating health care 
        insurance or perhaps turning to lower quality health 
        care insurance in order to save money, is not an 
        option. The continued rise in the cost of providing 
        health care insurance absolutely stifles my ability to 
        create, provide and sustain jobs. Again Mr. Chairman 
        and members of the Committee, I have yet to understand 
        how we as a nation can continue to state that we need 
        to create more jobs, yet challenge, threaten, or even 
        ignore the very mechanisms for job creation.

           Educational Materials

          As I mentioned, I serve as an officer of the 
        Plumbing-Heating-Cooling Contractors--National 
        Association. I have access to health care reform 
        information webinars, materials, and analysis, and I 
        take advantage of all of these tools. I raise this 
        point for two reasons.
                  1. With my years as a member of the 
                association and in my position as an officer 
                with the association, combined with my efforts 
                and time to understand the complexities of the 
                reform, I still have many questions and 
                concerns.
                  2. I raise the question--what about the other 
                small businesses across the country who don't 
                belong to an association--state or national. We 
                assume these small businesses know about the 
                reform and understand its timetable. But I 
                would submit, they may not have the resources, 
                time, ability, or know-how to reach out to find 
                out more.

    As I watch and listen to the news each evening, I often 
hear the term ``job creation.'' I very much agree that one of 
the nation's top priorities should be creation. But job 
creation is not a concept, it begins in communities like mine 
and with people like me.

    In closing, Mr. Chairman, I want to thank you and the 
members of the Committee for this opportunity. The Plumbing-
Heating-Cooling Contractors--National Association appreciates 
the thoughtful approach of this Committee and looks forward to 
working with you. I am more than happy to answer any questions 
or provide any information today or in the future you or the 
committee may request.


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