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



 
                    THE EFFECTS OF THE HEALTH LAW'S 
         DEFINITIONS OF FULL-TIME EMPLOYEE ON SMALL BUSINESSES 

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON HEALTH AND TECHNOLOGY

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                            OCTOBER 9, 2013

                               __________

                  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Small Business Committee Document Number 113-040
              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, Missouri
                     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. Chris Collins...............................................     1
Hon. Janice Hahn.................................................     2

                               WITNESSES

Raymond J. Keating, Chief Economist, Small Business & 
  Entrepreneurship Council, Vienna, VA...........................     4
Steven Hermann, Vice President, Paul's Supermarket, Inc., Eldon, 
  MO, testifying on behalf of the National Grocers Association...     6
Stephen Bienko, President, Owner, Bienko Enterprises Moving Line, 
  Fairfield, NJ, testifying on behalf of the International 
  Franchise Association..........................................     8
Dean Baker, Co-Director, Center for Economic and Policy Research, 
  Washington, DC.................................................    10

                                APPENDIX

Prepared Statements:
    Raymond J. Keating, Chief Economist, Small Business & 
      Entrepreneurship Council, Vienna, VA.......................    30
    Steven Hermann, Vice President, Paul's Supermarket, Inc., 
      Eldon, MO, testifying on behalf of the National Grocers 
      Association................................................    37
    Stephen Bienko, President, Owner, Bienko Enterprises Moving 
      Line, Fairfield, NJ, testifying on behalf of the 
      International Franchise Association........................    41
    Dean Baker, Co-Director, Center for Economic and Policy 
      Research, Washington, DC...................................    44
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Statement Submitted By The National Association for Home Care 
      & Hospice..................................................    50


                    THE EFFECTS OF THE HEALTH LAW'S 
         DEFINITIONS OF FULL-TIME EMPLOYEE ON SMALL BUSINESSES

                              ----------                              


                       WEDNESDAY, OCTOBER 9, 2013

                  House of Representatives,
               Committee on Small Business,
             Subcommittee on Health and Technology,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 1:00 p.m. in 
Room 2360, Rayburn House Office Building, Hon. Chris Collins 
[chairman of the Subcommittee] presiding.
    Present: Representatives Collins, Coffman, Luetkemeyer, 
Hahn, Schrader, and Schneider.
    Also Present: Representatives Mulvaney, Tipton, Rice, 
Hanna, and Velazquez.
    Chairman Collins. The hearing will come to order. I want to 
thank the witnesses for appearing today for our latest hearing 
on the potential negative consequences of the health care law 
on small business. It has been a little over 1 full week since 
individuals and small business could begin to enroll in the 
public exchanges created by the President's health care law, 
and the outcomes thus far, predictably, have not been 
encouraging. The President promised his health care law would 
reduce health costs and provide affordable coverage to 
individuals and small business.
    Instead, a number of small businesses have told us that 
health care law is increasing the cost of health care 
significantly, in some cases well over 50 percent. However, 
while outcomes such as this were predicted, time and again by 
me and many others, they are not the subject of today's 
hearing.
    What we are here today to discuss are some of the other 
unwanted outcomes of this health care law, namely, what effect 
it has on employment opportunities at small business.
    As the Committee has examined in the past, the health law's 
employer mandate that businesses with 50 or more employees 
offer health insurance to their employees or pay a penalty is a 
disincentive for businesses to grow and add new jobs.
    This outcome is made worse by the health law's seemingly 
arbitrary definition of full-time employee as someone who works 
30 hours or more per week. While most Americans and other 
Federal statutes define a full-time employee as one who works 
an average of 40 hours per week, the health care law creates 
its own definition of 30 hours or more per week. The 
consequences of this 30-hour per week definition are all too 
predictable: fewer hours for employees and administrative 
nightmares for small business.
    According to a recent survey of small business owners and 
executives, nearly 75 percent intend to take some type of 
action to avoid the health law's employer mandate including 
moving more full-time employees to part-time status and 
reducing hours of current part-time employees to less than 30.
    In short, while most of the American public continues to 
place job creation as their number one policy concern, the 
health care law creates the perverse incentive for employers to 
not only refrain from hiring new workers, but also to reduce 
the hours of current employees.
    The witnesses at today's hearing will explain the 
challenges the health law's definition of full-time employee 
creates and how it will affect the way they manage their 
business and provide for their workers.
    I would like to now yield to Ranking Member Hahn for her 
opening statement.
    Ms. Hahn. Thank you, Mr. Chairman.
    Despite over 40 attempts by my Republican colleagues in the 
House to repeal, defund or derail the Affordable Care Act, the 
law is still the law, and it is moving forward to achieve the 
objective of finally giving the almost 50 million uninsured 
men, women and children in this country quality, affordable 
health coverage. Last week, the most long awaited portion of 
this law went into effect as online health insurance exchanges 
opened across the country. These exchanges will mean lower 
costs and expanded coverage for individuals and small firms 
across the country.
    We should all be really pleased that finally the millions 
of Americans who have lived in dread that an illness or an 
accident could plunge them into financial ruin will finally 
have access to good coverage that they can afford.
    But today, we are looking at a provision that could 
potentially impact small businesses and their employees across 
the Nation. The health care law defines a full-time employee at 
30 hours per week. This change was intended to increase the 
number of workers to whom coverage would be offered. This has 
been the debate on both sides of the unintended consequences 
for workers. This Committee has heard claims from employers 
that they are cutting the hours of their workforce to avoid 
offering coverage on those employees. Some labor organizations 
such as Teamsters/Unite Here, UFCW have also expressed 
reservations about the possibility of perverse incentives 
created by this 30-hour threshold.
    Of course, the law isn't perfect. We may need to make some 
changes. Since the exchanges just opened last week, I think we 
might have a clear picture of this impact of this provision if 
we waited until we have a good sense of the proportion of 
people who have bought insurance on the individual exchange and 
when the small business exchanges are a little more 
established.
    I am concerned about how this new definition impacts 
employees and small businesses, but I'm just as concerned about 
the widespread misinformation and blame being put on this law, 
misinformation specifically spread to deter Americans from 
seizing the very real benefits of this Affordable Care Act.
    One of the today's witnesses will discuss whether reduced 
worker hours are due solely because of this section of law or 
the economy. We must determine if these numbers are direct 
impact of the revised definition or some combination of it and 
other factors, like sequestration or a slow economic recovery.
    Accordingly, this hearing will explore the current and 
future impact of this new definition on our labor market.
    As with any other major law, there has been much 
speculation about how the law will affect small firms. For this 
reason, it is important that we consider the legislation 
proposals to address these challenges and work to improve 
rather than repeal.
    This hearing serves as a starting point to examine the 
issue and start a dialogue so we can address it immediately.
    I am open, and the President I believe is open to making 
sensible improvements in the Affordable Care Act. But when the 
opponents of this law are willing to shut the Federal 
Government down and risk the full faith and credit of the 
United States to destroy or at least sabotage this law, it is 
difficult to have a real conversation about what is working and 
what isn't.
    I hope that when the politics die down, we can have that 
conversation. And I think the Small Business Committee has a 
really important role in ensuring that this new law proves that 
it is affordable for employers and employees alike.
    Thanks to the witnesses for appearing before us today, and 
I look forward to this hearing.
    Chairman Collins. Thank you. First of all, if Committee 
members have an opening statement prepared, I would ask that 
they be submitted for the record. I would like to now take a 
moment to explain the timing lights. Each witness will have 5 
minutes to deliver your testimony. The light will start out as 
green. When you have 1 minute remaining, the light will turn 
yellow. Finally, it will turn red at the end of your 5 minutes, 
and I would ask you to try as you can to keep it within that 
time limit, but certainly we will be a little bit lenient if 
you go over.
    Our first witness is Raymond Keating. Mr. Keating serves as 
the chief economist at the Small Business and Entrepreneurship 
Council, a nonpartisan small business advocacy organization 
headquartered in Vienna, Virginia. Among his policy areas of 
expertise are taxation, regulation, the U.S. economy and other 
small business issues.
    In addition to his position as the SBE counsel, Mr. Keating 
also serves as an adjunct professor in the business school at 
Dowling College in Oakdale, New York.
    Mr. Keating, thank you for appearing today. You could now 
deliver your message.

   STATEMENTS OF RAYMOND J. KEATING, CHIEF ECONOMIST, SMALL 
   BUSINESS & ENTREPRENEURSHIP COUNCIL; STEVEN HERMANN, VICE 
 PRESIDENT, PAUL'S SUPERMARKET, INC., TESTIFYING ON BEHALF OF 
 THE NATIONAL GROCERS ASSOCIATION; STEPHEN BIENKO, PRESIDENT, 
OWNER, BIENKO ENTERPRISES MOVING LINE, TESTIFYING ON BEHALF OF 
  THE INTERNATIONAL FRANCHISE ASSOCIATION; AND DEAN BAKER, CO-
DIRECTOR, CENTER FOR ECONOMIC AND POLICY RESEARCH, WASHINGTON, 
                              D.C.

                STATEMENT OF RAYMOND J. KEATING

    Mr. Keating. Thank you very much. Chairman Collins, Ranking 
Member Hahn, members of the Committee, thank you so much for 
having this hearing today on the potential effects of the 
Patient Protection and Affordable Care Act, or ObamaCare, on 
employment and small businesses. My name is Ray Keating, and as 
you said, I am chief economist with Small Business and 
Entrepreneurship Council. I would like to highlight a few 
points from my written testimony and then add some quick points 
from a business owner and SB Council member who I spoke with 
yesterday to get a feel for what he would like to relay to the 
Committee if he were here.
    Number one, obviously it is important to consider the 
impact of ObamaCare within the context of our poor economic 
performance in recent years regarding both economic growth and 
employment growth. Just a quick rundown on a few numbers, 
economic growth during this recovery has been running at about 
half of where we should be during a recovery.
    We are averaging about 2.2 percent real GDP growth, 
historical average going back to 1950 is 3.4 percent, and 
during recovery expansion periods it is actually 4-\1/2\ 
percent so we are badly underperforming. That leads to problems 
on the jobs front. Throughout the recession and subsequent 
recovery, for example, the labor force participation rate which 
has gotten a lot of attention recently has been at a low that 
we haven't seen since August of 1978, 63.2 percent. Now that 
certainly reflects an assortment of things going on in the 
economy, but very much a large number of people simply giving 
up and not bothering to look for work.
    Just to give you a little perspective, if we had a labor 
force participation rate that was a little more within the 
historical norm, the unemployment rate right now would not be 
7--what are we, 3 percent it would be 12 percent roughly.
    Now given the ObamaCare employer mandate and the definition 
of 30 hours a week as full-time, we need to look at full-time 
versus part-time employment. As for people who are working 
part-time but want full-time work, in August this group 
registered 7.9 million. That is, fortunately, down from a peak 
of 9.2 million set in September, 2010, but it is far above the 
pre-recession levels more than double for example the 3.9 level 
that we registered in April, 2006.
    It is also important to recognize a dramatic shift that we 
are seeing in 2013 as to part-time versus full-time job 
creation. During the whole recovery, a bit more than 90 percent 
of jobs created have been full-time. However from January of 
this year to August of this year, two-thirds of employment 
gains have come via part-time jobs. That is a striking number. 
That is a striking break from what normally happens. And I 
think it does speak to the issue of how part-time workers are 
treated under ObamaCare versus full-time.
    If we are going to look at job creation, obviously we have 
to look at small businesses, we are in the Small Business 
Committee and as we well know the bulk of new jobs net new jobs 
are created by small firms, small and mid-sized firms.
    And if you look at the trend there, we have seen a decline 
in entrepreneurship on a whole host of levels, whether you are 
looking at self-employment, business births, the number of 
employer firms, we have seen a dramatic decline. It is not that 
surprising, then, that we see a lag in terms of job creation 
among small businesses in this recovery.
    In the testimony, I highlight several polls of small 
business owners talking about their response to ObamaCare. It 
hasn't been good. For example, 41 percent of owners in one 
Gallup poll said they held off on hiring new employees, 38 
percent have pulled back on plans to grow their business, 1 in 
5 have reduced their number of employees and essentially the 
same number have cut employee hours in response to the health 
care law.
    We have got a new poll coming out at SB Council that shows 
that 76 percent of small businesses are not going to hire, 
unlikely to hire within the next 6 months.
    Finally, just, I wanted to hit on this point I spoke with 
Mike Frederick, who owns a small manufacturing firm in 
Wisconsin, 57 employees and he relayed several frustrations 
with the new law including and he put a big emphasis on dealing 
with the very large administrative costs related to the law. He 
has got one person that works on this. He can't add anybody 
else. He is also looking at probably a 30 percent increase in 
premiums this year, and he faces the very real possibility of 
having to cut staff to less than 50 workers.
    To sum up, in a time of slow economic growth, lackluster 
job creation, troubling trends on the entrepreneurship front, 
we would hope that policy making would be directed towards 
boosting incentives for private sector risk taking, 
entrepreneurship, investment and so on such as broad and deep 
and substantive tax and regulatory relief. But unfortunately, 
when you look at this law and so many other areas, we have been 
pointed in the exact opposite direction.
    Thank you and I look forward to any questions you might 
have.
    Chairman Collins. Thank you, Mr. Keating.
    I would like to now yield to Mr. Luetkemeyer so he may 
introduce our next witness. Mr. Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. It is my honor 
this afternoon to introduce our next witness which is Steve 
Hermann, who is from our district. He is founder of Supermarket 
Solutions and vice president of Paul's Supermarket 
Incorporated. He is one of the only locally family-owned 
supermarkets in the area and he expanded to three different 
locations in central Missouri with 75 full-time employees and 
100 part-time and seasonal employees.
    Like so many other employers in my district, the Affordable 
Care Act and its new definition of full-time employees is 
greatly affecting Mr. Hermann's ability to grow the business 
and employ more workers.
    I am proud to introduce him this afternoon. I look forward 
to his comments with regards to how the ACA is affecting his 
small business. Welcome.

                  STATEMENT OF STEVEN HERMANN

    Mr. Hermann. Good morning, Chairman Collins and members of 
the Subcommittee. Thank you for that kind introduction and for 
the opportunity to testify on behalf of the National Grocers 
Association on an issue that is very important to independent 
grocers and small businesses across the country.
    NGA is a National Trade Association representing the 
retailers and wholesalers that comprise the independent channel 
of the supermarket industry. Independent grocers account for 
approximately one-quarter of the total U.S. supermarket 
industry with nearly $130 billion in sales, and over 944,000 in 
direct jobs that pay over $30 billion in wages.
    My name is Steven Hermann, and I am Vice President of 
Paul's Supermarket. Our family-owned company has been in 
business in Eldon, Missouri, for over 45 years. I started 
working in my family's supermarket when I was 14 years old 
learning the trade of my grandfather and father. Like many 
independent grocers, I fell in love with the business early on, 
and quickly gained an appreciation for hard work and customer 
service.
    Today my family operates three supermarkets in Missouri, 
Lake Ozark, Eldon and Osage Beach. Like many small employers 
across the country, we have weathered many economic storms 
throughout the years and are proud we have never lost sight of 
the two most important things in our business: our customers 
and our employees. However we are facing a challenge in our 
workforce unlike any we have seen before. I am fearful of the 
unintended consequences of the Affordable Care Act will hurt 
our employees and undermine our values as a family owned small 
business.
    Under the ACA, the definition of full-time employees has 
created new barriers for our industry where working an average 
of 30 hours per week is simply not considered full-time. The 
supermarket industry employs a large number of part-time 
workers to help meet the ever-changing needs and demands of our 
customers which can change from day to day. The ACA created new 
hurdles for businesses by greatly expanding the number of 
employees eligible for health plans by defining a full-time 
employee as an employee who has averaged at least 30 hours of 
service per week over the course of a month. This new 
definition of full-time will force small businesses to rethink 
how they hire and schedule part-time employees. Employers are 
likely to hire fewer employees, especially full-time employees 
learning to do more with fewer in order to control costs.
    Not only is the law redefining it what means to be a full-
time worker in this country, but it is permanently changing the 
American workforce by interfering with part-time workers 
ability to earn a living. Part-time employees in need of 
additional money may no longer be able to pick up an additional 
shift to pay for unexpected expenditures or earn extra money 
around the holidays.
    We employ a large number of part-time associates, many 
during our busy summer season, but also others that help staff 
our store throughout the year. These part-time workers include 
kids working while attending college, spouses helping to 
supplement their family's main income, and older associates 
supplementing their retirement. Unfortunately many businesses 
may now be unable to provide part-time associates with the 
hours they need.
    We have long felt that our associate are like family, which 
is why we are proud to offer a wide range of great benefits to 
our full-time associates, including funding 100 percent of the 
health care premium after the deductible is met. Our associates 
have access to a health savings account and the company 
contributes a small monthly stipend toward that account. Today 
we currently employ 75 full-time associates and 100 part-time 
and seasonal workers between our three stores. We are proud of 
the fact that nearly all of our full-time associates 
participate in our health plan, and it is our hope that we can 
continue to provide quality benefits in the future, although it 
gets increasingly difficult each year.
    The commitment to our associates is not without significant 
costs, especially for a small family business such as mine. 
Over the years, as health care costs have increased, we have 
worked hard to maintain the benefits we offer, including 
adapting our health plan to meet the changing times and 
employees' needs. In this year alone, health care costs for my 
company exceeded $300,000, not including any in-house 
administration, and we are on track for a significant increase 
again next year.
    The supermarket industry operates on razor-thin profit 
margins, where net profit before tax among independent grocers 
hovers around a mere 1.65 percent. In this competitive 
industry, pennies really do count. It can make the difference 
between making a profit or not.
    According to the NGA industry survey, 92 percent of 
respondents indicated they currently offer health benefits to 
their full-time employees, which is a testament to the 
commitment that independent grocers have to their associates. 
Employers, such as myself, very much want to continue providing 
quality benefits to our full-time employees recognizing that a 
healthy employee is a productive employee. However, many 
businesses simply cannot afford to provide coverage to workers 
who average 30 hours per week. Thus small business owners will 
have to make tough choices and many part-time employees will 
face reduced hours and smaller paychecks.
    Independent grocers need the flexibility to be able to 
manage their businesses and workers' forces to meet the meets 
and demands of their customers. The burdens placed on our 
business by this law hamper our ability to do just that and 
make it more difficult to succeed in a hyper-competitive 
marketplace. Paul's Supermarket prides itself in supporting 
charitable organizations and community groups. However, 
pressures from the health care law could impact our ability to 
continue that support at the same level.
    My strong recommendation to you today is that Congress 
should do all it can to help businesses by removing any 
barriers or any artificial threshold that will inhibit our 
ability to hire workers and create good jobs. One of the most 
effective ways for Congress to do that is to pass legislation 
that amends the unrealistic definition of a full-time employee 
under the health care law so that businesses can focus on 
continuing to be an employer of choice in the communities we 
serve. Thank you so much for the opportunity to appear before 
the Committee today. I look forward to answering any questions 
that you all may have. Thank you.
    Chairman Collins. Thank you, Mr. Hermann.
    Our next witness is Stephen Bienko. He is the owner and 
President of 42 Holdings LLC, which maintains its headquarters 
Fairfield, New Jersey. Mr. Bienko operates a number of College 
Hunks Moving Junk franchise operations in various States. Very 
catchy name there.
    These business employ a large number of full-time and part-
time college hunks, right?
    Mr. Bienko. Yes, sir.
    Chairman Collins. He is testifying today on behalf of the 
International Franchise Association. Mr. Bienko, thank you and 
we look forward to your testimony.

                  STATEMENT OF STEPHEN BIENKO

    Mr. Bienko. Thank you. And although I may no longer be a 
hunk, my mother does think I am, so that is all that counts.
    Chairman Collins, Ranking Member Hahn, members of the 
Subcommittee, thank you for inviting me here today to testify 
on the affects of the health care law's new definition of full-
time employee. My name is Stephen Bienko. I am the president of 
42 Holdings. I am a member of the International Franchise 
Association, I am a former cadet at the United States Air Force 
Academy and a former trooper with the New Jersey State Police. 
I own and operate an interstate and intrastate moving company, 
and I also own 15 franchises of College Hunks Hauling Junk and 
College Hunks Moving throughout Northern New Jersey, Nashville, 
Tennessee, and Cleveland, Ohio. College Hunks Hauling Junk and 
College Hunks Moving offer residential and household moves, 
office relocations, junk removal, donation pickups and labor 
services.
    I am a proud business owner and offer the service that my 
communities need, flexibility, and secure jobs for dozens of 
motivated team members in multiple States throughout this 
country.
    As a franchise small business owner, my livelihood and my 
ability to provide for my team members depends upon the economy 
and the strength of Federal policies.
    While well intentioned, the Affordable Care Act poses a 
serious threat to my business' ability to continue providing a 
fun, enthusiastic work atmosphere and quality jobs for people 
who want them and deserve them.
    For decades, U.S. employers have used 40-hour workweek as a 
standard for workforce culture. Unfortunately, the Affordable 
Care Act's provision requiring employers to provide coverage to 
full-time employees and defining full-time as 30 hours, will 
cause many employers like me to simply alter the employees' 
hours in order to run a successful small business. This puts 
all of us at a loss. Employers must implement new workforce 
management methods and some team members will receive fewer 
hours and reduced take-home pay, not to mention they will still 
be ineligible for employer sponsored health coverage.
    I currently have 72 employees in three short years. Twenty 
of those are part-time. In 2014, we are planning on hiring an 
additional 34 part-time workers throughout my locations. Many 
of these part-time workers work 3 days a week. It is simple, 
but 3 days a week, 10 to 12-hour shifts daily. These part-time 
workers are attracted to our company culture because the 
positions offered can easily fit with their schedules, whether 
that includes school, child care coverage or something else 
within their family needs.
    During move season, what our industry considers the busy 
time, we typically have a large number of customers who are 
trying to schedule their family's move. I am sure all of you 
have gone through that. Many of my part-time team members will 
try to fit as many as five shifts in during that time to make 
additional income for themselves and their families.
    Currently, it is not uncommon for a part-time team member 
who normally works 25 to 30 hours per week to double their work 
hours during that time period to 50 or 60 to make that extra 
money.
    I currently offer health plan coverage to our full-time 
team members, but in order to manage our health costs, I will 
need to limit the hours worked by our part-time team members. I 
have offered my full-time team members' health coverage even 
without the employer mandate, and I have every intention on 
continuing that coverage.
    However, the increased costs of doing business by providing 
coverage to employees with fluctuating schedules that only 
occasionally put them in full-time status will leave me no 
choice but to scale back my part-time workers' hours. I 
consider myself lucky because I have succeeded with an 
ambitious growth plan over the last 3 years. But many small 
business owners have not. Not only has the employer mandate 
discouraged job creation and business expansion, it also has 
damaged existing jobs by including a misguided statutory 
requirement that discarded more than a half a century of 
established labor policy by now defining full-time as 30 hours. 
Culture is everything in a small business.
    Without a doubt, the 1-year delay of employer mandate is an 
important reprise for franchise small businesses as they 
prepare for ACA implementation. Unfortunately, it is a short-
lived solution. The 30-hour definition is the major change that 
could have far reaching consequences we have not yet begun to 
see. The revision of a new definition of full-time employee for 
the purpose of the Affordable Care Act is a commonsense 
solution that will put the ACA in line with many other Federal 
wage hour regulations.
    Thank you for allowing me to testify today. I will look 
forward to answering any questions, and as a citizen, I am open 
to conversations.
    Chairman Collins. Thank you, Mr. Bienko.
    I would like to now yield to Ranking Member Hahn so she 
could introduce our last witness.
    Ms. Hahn. Thank you, Mr. Chairman. It is my pleasure to 
introduce Mr. Dean Baker, the co director of the Center for 
Economic and Policy Research. Mr. Baker previously worked as a 
senior economist at the Economic Policy Institute and served as 
a consultant for the World Bank and the Joint Economic 
Committee.
    Welcome, Mr. Baker.

                    STATEMENT OF DEAN BAKER

    Mr. Baker. Thank you. Thank you Ranking Member Hahn and 
Chairman Collins. And I appreciate the chance to address the 
Committee. My name is Dean Baker. I am codirector of the Center 
for Economic and Policy Research, and I hear lots of talk about 
our research, research I should say done with my colleague, 
Helene Jorgenson, looking at the impact of the hours of the 
sanctions, employer sanctions on employment practices through 
the first half of 2013, the period prior to when President 
Obama announced that the sanctions would not go into effect for 
2014. So in other words, this is a period when employers had 
reason to believe that they would be subject to the sanctions 
based on their employment for 2013.
    I will make three main points. First off, I want to talk a 
little bit about the plausibility of some of the claims that 
have been made about the ACA and make a point that at least 
some of them clearly are not plausible. Secondly, I will review 
the evidence the analysis that I had done with Dr. Jorgenson, 
and last, I want to say a couple of things what we might say 
about what we might imagine would be the long-term impacts of 
this particular aspect the 30-hour requirement in the ACA.
    On the first point, plausibility of some claims, there have 
been a lot of claims about how the ACA would cause different 
problems, how it is responsible for the downturn and the 
weakness of the recovery, it is important to point out that the 
first time you really have a direct impact of the ACA on 
employment is in 2013. There are many people claiming that 
businesses were deterred from making hires in 2010, 2011, 2012. 
It is very difficult to see that as credible if you look at the 
way the labor force behaves. Specifically, we have an enormous 
amount of churning in our labor force. In the average month, we 
have roughly 4 million people leave their job, a bit less than 
3 percent of the workforce. The idea that an employer would not 
hire someone in 2011, 2012 because they were worried they would 
be, say, over the 50-person limit come 2013, that really isn't 
plausible given the normal churning of the labor market. It is 
extremely unlikely that an employer would even need to lay 
someone off much less simply not replace someone who was hired. 
So that part really just is not very plausible.
    Second, in terms of the impact of this employer sanction, I 
know no employer, I am an employer myself, you don't want to be 
stuck with an additional bill, but just in terms of some 
context, it is a $2,000 sanction, there is a lot of research on 
the impact of minimum wage increases of 15 to 20 percent, the 
vast majority of which funds little or no employment effect. It 
is a little hard to believe that an employer sanction that 
would be less than 10 percent of the pay of a worker who earns 
$10 an hour full-time job would have that large an employment 
effect.
    So I simply don't think some of these claims on the face 
are very plausible.
    Now in terms of the evidence, Dr. Jorgenson and I looked at 
the current population survey which is the most commonly used 
survey for looking at the labor market. This is where we get 
our employment data every month. We didn't get this month 
because of the shutdown. But this is where we get the jobs 
numbers that everyone hears about every month, and we looked at 
the percentage of workers we focused on originally 26 to 29 
hours a week with the idea that you have a lot of employers put 
people just below the cutoff.
    Now it turns out we did find a very small increase in the 
percent who were working in that 26 to 29-hour range in 2013 
compared to 2012. It went from 60/100s of 1 percent of the 
labor force to 64/100s of a percent. Now we might originally 
think that might confirm the story that workers are having 
their hours shortened, but we looked at it more closely, and it 
turns out that actually that increase came at the expense of 
workers working less than 25 hours a week or reporting that 
their hours varied.
    The number of workers who were working 35 hours a week or 
more in 2013 was actually a larger percentage of the workforce 
than it had been in 2012.
    So in other words, our data is showing the complete 
opposite of the story. I won't say there was a big increase in 
full-time employment, but it goes the wrong direction for the 
change that the critics of the ACA have raised.
    Now, the last point I wanted to raise is simply talking a 
little bit about the longer term story. When you put a specific 
cutoff, a 30-hour cutoff whatever it might be, you have to 
imagine over time, employers will respond to that and there 
actually is an interesting example to look at. Hawaii has had 
an employer mandate on health insurance for about 30 years. 
There has been some research on the effect. In that case, the 
cutoff is 20 hours. The research found that it did have, after 
a long period of time, a very modest effect for the bottom 
quintile of the pay scale it reduced full-time employment, or I 
should say employment above this 20-hour cutoff by roughly 3-
\1/2\ percent or for the total workforce roughly seven-tenths 
of 1 percent.
    Now before anyone runs off assuming that that is a very bad 
thing, it is important to keep in mind the vast majority of 
workers who work part-time do so voluntarily that is true even 
today where more than two-thirds are working part-time 
voluntarily.
    Typically it would more than 80 percent. That is not 
necessarily a bad thing that we see a small increase in the 
number of part-time jobs available to people who might be 
raising children, have other reasons to not want full-time 
employment, and important to keep in mind there is nothing 
natural about the length of our workweek, that came about in 
part because we have had a condition of having health care 
insurance as a fixed cost for employers which is likely make 
them prefer a worker overtime even paying them time and a half 
or double-time rather than hiring a second worker. That also is 
not natural. If we change that by making it more easy for 
people to get insurance other than through their employer, to 
my view, that is more consistent with the free market. Thank 
you for listening.
    Chairman Collins. Thank you, Mr. Baker.
    At this point we will start our questions, and I will delay 
mine until the end. I am not sure when votes are coming. They 
may come at 2 o'clock, so we will get this through this as best 
we can but at this point I would like to yield 5 minutes to Mr. 
Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Mr. Hermann, I just want to start with you this afternoon. 
And what are your plans to try and be able to stay competitive 
with the chain grocery stores that are in your area? You are a 
mom-and-pop shop, and we thank you for that because as a mom-
and-pop shop you are a whole lot more engaged and supportive of 
community activities and much more sensitive to the community 
than a lot of the chain folks. What are your plans to try and 
stay competitive with your competition and still be able to 
maintain the quality of service with the number of folks you 
have and trying to deal with the 30-hour situation? I know some 
folks with, you have three separate stores, they go to three 
separate organizations, three separate corporate entities, some 
go with more part-time some temps, some downsize, what are your 
plans to be able to maintain your stores and compete?
    Mr. Hermann. That is a great question. As a successful 
business operates, they have to make plans. And one thing we 
look at, first with our existing employees, is that they are 
our family. We are a small community and we are going to take 
care of them as best we can. Health insurance is a big deal. 
And what we have to look at is at our future hiring practices. 
We may not be able to hire on someone with the potential of 
being a full-time employee. We may not replace somebody, we 
might have to do more with a little less. The other thing, too, 
tough choices is our part-time employees, we offer a 401(k) 
after they have been there for a year. We might have to look at 
getting rid of the 401(k) and we have a great 401(k) program 
that my father put in place back in the 1990s and we match 100 
percent up to 5 percent of gross pay. And you look at areas 
like that and you mention the community.
    As a small businessman, charitable organizations are huge. 
It is the people that work with us. I am fortunate to be on the 
school board and we have a town that is a title 1 district, so 
we are 50 per cent free and reduced lunch. There is a program 
called buddy pack, and buddy pack unfortunately has been 
defunded through ARA which is another thing, but where it has 
been funded from is local businesses and churches in the 
community. Things like that could potentially suffer.
    So I hope that help paints the picture there of what we are 
looking at. But our existing employees, we are going to take 
care of them, they are family. They used to weigh me on the 
scale when I was a baby and they are still there. So, it is 
tough. It is tough. But we are going to do the best for our 
community and that is what we will do our best to be successful 
and stay in business.
    Mr. Luetkemeyer. Mr. Hermann, Mr. Bienko, you guys did 
build it, and we appreciate what you have done.
    Mr. Bienko, would you like to answer the same question 
about how you are going to try and maintain your competitive 
edge with this Affordable Care Act trying to squeeze the hours 
of some of your employees? I know you have kind of a unique 
situation there, a lot of seasonal and part-time employees. Are 
you going to wind up cutting back some of those hours on some 
of those part-time folks so you can put more part-time people 
in there? What are your plans?
    Mr. Bienko. Our competitive advantage is just that, it is 
us trying to actually change an industry in the moving world, 
and that has been our mission from day one is to be a true 
change agent in that industry. What we are trying to do is 
offer opportunities for young individuals to get their career 
start, not just a job start, with our organization and each 
have individual work on the trucks even as young college 
graduates to begin their process in their career on our 
vehicles in the moving world and in the hauling world.
    With that, we do have a lot of them as part-time workers. 
If we have to reduce those types of hours that drastically, 
those quality high end individuals that we are striving to hire 
will not be interested in working with us.
    That prevents us from growing.
    Our expansion growth and expansion opportunities in 2014 
are taking on three other cities to provide our services and 
our job opportunities in three other cities throughout this 
country. It may affect that growth strategy because of the 
amount of part-time workers we hire in the beginning. With 
that, we will have us draw back on those part-time employees.
    Mr. Luetkemeyer. You know, one of the things that Mr. Baker 
said a minute ago that two-thirds of the people who work part-
time want to do that, that means one third of the people that 
are working part-time who don't want to do that, and I think 
that is the tragedy and that is the point that we forget about 
is those folks who are out there who want to work full-time and 
can't do that and this bill is going to force a lot of that to 
happen.
    Mr. Bienko, you had a unique comment a minute ago. You said 
culture is everything in a small business. Would you like to 
elaborate on that just a second?
    Mr. Bienko. Sometimes in a small business when you are 
starting out, you are not in the, you do not have the ability 
to pay the highest wages. And I have always been a believer 
that it is not about the wages you are paying the employees, it 
is about the culture and the opportunity you present for them. 
So our environment is all about culture. It is about providing 
an opportunity for our employees, for our team members to get a 
start, to create a vision for them to give them an opportunity.
    Many of our employees come as college graduates, however 
they have never been given the backing and opportunity for 
someone to say, you know what? You have an opportunity to 
create something out of your life. And we find a lot of them 
even with 4-year college degrees that have absolutely no idea 
where they want to be when they grow up.
    We have created a culture that drives them to success. I 
have always believed in success breeds success. And when you 
have other successful people around you that are striving and 
aiming for that same goal, it attracts more and better people.
    So when I say culture is everything, especially when you 
are 3 years in in a start-up and having a high amount of demand 
on a lot of people and not fully capable of paying the higher 
wages at this point in time, if you don't have culture, you 
die.
    Mr. Luetkemeyer. Unique to a small business. Thank you very 
much for your time this morning, gentlemen, this afternoon, and 
I appreciate your testimony. With that, I yield back, Mr. 
Chairman.
    Chairman Collins. Thank you Mr. Luetkemeyer. At this point 
I would like to yield to Ms. Hahn for her opening questions.
    Ms. Hahn. Thank you very much, Mr. Chairman. I am going to 
do the same thing that you did and I am going to leave my 
questions until the end and turn it over to my members.
    The first one I would like to yield to is the ranking 
member of our Small Business Committee, Ms. Velazquez.
    Ms. Velazquez. Thank you. Thank you, Mr. Chairman, for 
yielding. Mr. Baker, is there any empirical evidence that one-
third of part-time workers are working part-time as a 
consequence of the ACA?
    Mr. Baker. No, absolutely not. The reason there was a big 
increase in involuntary part-time employment was we had the 
downturn, that happens every downturn. This downturn, of 
course, is much more severe, it is a very different sort of 
downturn. We had--the collapse of the housing bubble caused it, 
it was an extraordinary crisis, I am sure I don't have to tell 
people about this. The people here remember this, and that led 
to a large increase in involuntary part-time employment. And 
that has been falling over the last 4 years as this economy has 
slowly recovered. So the rise in part-time employment predated 
even the passage, much less any implementation of the ACA.
    Ms. Velazquez. And basically your numbers concurred with 
the Federal Reserve Bank of San Francisco that found and 
concluded in their research that the share working part-time is 
in line with historical norms, and concluded that part-time 
work is not usually high relative to levels seen after the 
1980s recession.
    Mr. Barker. That is exactly right. So other people have 
looked at it, there is another study which I can't place 
offhand, but I know of no studies that have found and opposite 
conclusion. Basically every study I know that has looked at the 
data has found that involuntary part-time has followed the same 
sort of pattern that you would expect to see given the weakness 
of the economy.
    Ms. Velazquez. Also there have been two recent surveys 
conducted among small businesses, and one of them is from NFIB. 
And they found that the biggest obstacle reported by businesses 
were economic uncertainty and consumer demand.
    Wouldn't these factors play more of a role in an employer's 
hiring decisions rather than implementation of ACA?
    Mr. Baker. Absolutely. In the NFIB survey, in particular, I 
recommend to people because that dates back to the 1980s, so we 
have reliable data going back for close to three decades now, 
and they ask the same question of employers. I don't know if 
they never changed it but basically it is a similar question 
over that period: What are the biggest problems they face? And 
they consistently answered during this downturn, the lack of 
demand, so clearly that is their main obstacle to expanding.
    Ms. Velazquez. So meaning that hiring practices or 
decisions will be driven by economic uncertainty, the impact of 
sequestration, and the lack of consumer demand.
    Mr. Baker. That is right, anything that slows the economy, 
anything that pulls money out of the economy, sequestration 
being one of the things that pulls money out of the economy, we 
had a reference earlier from Mr. Keating to comparing this 
recovery to past recoveries. One important thing to consider 
past recoveries, every prior recovery we have had a significant 
growth in government employment, mostly State and local levels 
throughout the recovery. If we had followed the pattern of 
prior recoveries we would have roughly 7- or 800,000 more 
government employees than we did at the start of the recession. 
Instead we have about 6- or 700,000 less.
    Now government employees spend money like everyone else 
does, so if you get rid of government employees that is less 
demand in the economy. That is clearly one of the factors, I am 
not going to say the major factor, but it is one of the factors 
slowing growth slowing employment.
    Ms. Velazquez. We have held hearings in this Committee, and 
I held a roundtable in my district with the manufacturing 
sector. And what we hear is that they face a shortage of 
workforce, of skilled workers. Don't you think that a way for 
manufacturers and business owners be able to bring in high-
skilled workers is by offering health care benefits?
    Mr. Baker. Absolutely, and I think my colleagues on this 
panel have made that point very well. They know workers value 
health care benefits, and if you can offer a good health care 
benefit, that makes the job more attractive to employees. So 
that is why most employers, most large employers certainly, 
and, in fact, most small employers offer health care benefits 
to their workers.
    Ms. Velazquez. Mr. Keating, in your written testimony, you 
say you blame the Affordable Care Act for reducing job growth 
and employment in 2010 through 2012, yet the sanctions 
impacting employers were not scheduled to be in full effect 
until 2014, and now the employer mandate has been delayed. 
Since 4 million people leave their job every month, is it 
really plausible that a business wouldn't want to hire someone 
in 2011 or 2012 because they were afraid of the penalty in 
2014?
    Mr. Keating. Yes, of course it is plausible, because 
actually businesses and entrepreneurs plan unbeknownst to what 
we heard earlier. When you run a business, you have to figure 
out what your costs are today, and you have to figure out what 
your costs are a year from now, and try to estimate going out. 
So when you have a law that has passed in 2010 that has looming 
mandates and regulations and so on and tax increases, that is 
certainly going to impact the decisions that business owners 
make. That is just the reality of the business world.
    Incentives come into play. I was glad to hear people 
talking about incentives before. As an economist, I try to 
hammer that home with my students. Incentives matter. Economics 
ultimately is about incentives. So, yes, when you put the 
ObamaCare bill in with everything else, I mentioned at the end 
of my testimony, that it is part of an unfortunate policy 
agenda that has been pointed against faster economic growth and 
more job creation. We would want to, as we have seen in past, 
what is the best answer to a poor, to coming out of a recession 
and growing an economy? It is not tax increases and more 
regulations on businesses and entrepreneurs and investors. That 
is exactly what we have done. So I would say that this is very 
much part of the equation, yes.
    Ms. Velazquez. Yeah, it could be, and also the lack of the 
demand.
    Mr. Keating. I am glad you touched on that. Right. The we 
can't take the economy as just being, well, it is bad, so 
therefore, we just have to deal with it. The question is why is 
it bad? Why did we have such a deep recession and why are we 
now over 4 years into a recovery having one of the worst 
recoveries on record?
    Now there is a lot of debate on that I am sure Mr. Baker 
and I would disagree, but I would say a huge part of it, in 
fact, I would argue the biggest part of it today that is 
holding us back is this policy agenda that is pointed in an 
anti-growth direction.
    Ms. Velazquez. Mr. Baker, would you like to comment?
    Mr. Baker. Yeah, well, first off, in terms of businesses 
planning, of course they do, and presumably businesses know 
that their employees turn over. So if they were worried in 2010 
and 2011 that they are making hires that put them over the 
limit for 2013. If they are doing good planning, they know that 
they can count on some of their workers leaving so that really 
wouldn't make a lot of sense.
    In terms again, the downturn, I have written on this at 
length as have others, we had a collapse of the housing bubble 
that was driving the economy and none of us has a magic elixir 
to simply replace that, and this is a qualitatively different 
recession. Some of us said that at the time, we warned that the 
housing bubble was easy to predict, or at least I thought it 
was easy to predict so there are no surprises to me, it has 
really followed pretty much the textbooks. So, and if we look 
at business investment which is if this really is the case that 
is actually pretty much back to the pre-recession levels, so 
unless we know something George W. Bush was doing that was very 
anti business back in 2007, it is hard to see anything Barack 
Obama is doing because it is having no more effect.
    Ms. Velazquez. And on top of that, the housing bubble and 
the impact of sequestration on an economy that still is 
struggling.
    Mr. Baker. Well, again, we need every source of demand we 
can get, and government demand is just like any other source of 
demand. If we cut back government spending, cut back government 
employment, and we are pulling out a source of demand for the 
economy, so that certainty slows growth. And again, in terms of 
the housing bubble we are not going to replace that at least 
not in any easy way that I could see. And frankly, I would not 
want it to be replaced by another housing bubble. That would 
not the way to go but I don't know of any magic elixir that 
just says okay, we will replace that source of demand, which 
again, by my calculation, somewhere around $1 trillion a year 
in lost demand.
    Ms. Hahn. Thank you, Ms. Velazquez. Shall we yield back?
    Chairman Collins. Thank you. At this point I would like to 
yield to Mr. Rice 5 minutes.
    Mr. Rice. Thank you. I am sitting here looking at a Forbes 
poll, when asked will ObamaCare make health insurance more 
affordable, 69 percent said no, online poll 78 percent of small 
business owners think the law should be repealed, 93 percent do 
not want to change from their current plan to plans required 
under ObamaCare. And I want to read to you a little excerpt 
from a constituent I got yesterday, or excuse me, the day 
before. This fellow is in the steel business. I am going to 
redact his name, and obviously, he has to compete 
internationally and I know that when you are talking about 
competition, some of you people some of you guys in the grocery 
store business and the moving business are competing 
domestically but not necessarily with international 
competition.
    And so I was really interested.
    I am very concerned about American competitiveness. And I 
think that a lot of our government policies make--American 
businesses compete with anybody across the world and our 
workers sure can, that our government hamstrings us with 
uncompetitive tax system, uncompetitive regulatory environment. 
And so he is talking about how it affects his business, and he 
says, you know, we are already fighting for our lives against 
the Chinese whose government is helping them to compete with 
various subsidies and tax breaks. At the same time our 
government is adding to our costs, not helping us to reduce 
costs.
    It is obviously what this does for jobs in this country. 
And he goes on to say that the increase, he has got 90 
employees, the increase in the health insurance will be about 
$100,000 for 2014 over 2013, and that he currently buys 
policies from Blue Cross Blue Shield who has decided they are 
no longer going to sell the type of policy he has as anymore, I 
guess, because they can't under the minimum required coverage 
under ObamaCare.
    So, I guess, Mr. Keating, going beyond this part-time 
worker aspect, does this law make our domestic companies more 
or less competitive in the world?
    Mr. Keating. Well, the bottom line, it makes them less 
competitive just due to the costs. Again, you cited polls, and 
poll after poll confirms what kind of economics 101 teaches us 
that if you add government costs, whether through taxes or 
regulations and so on onto businesses, they are going to become 
less competitive obviously, and when you think about what our 
economy is like today in terms of the international 
marketplace, I think it is a really serious impediment.
    The gentleman that I spoke to yesterday who has a small 
manufacturing firm in Wisconsin, he is just not a domestic 
firm, he sells the parts that he makes for all sorts of 
machinery globally. So he is very much involved in that 
international competition.
    And he is, when he looks at the premium increases that he 
is calculating, that puts him at a serious competitive 
disadvantage absolutely.
    Mr. Rice. Mr. Baker, in terms of the plausibility of people 
making hiring decisions today based on a law that the employer 
mandate won't go into effect until next year, I have had people 
in my office, I had a guy in my office 2 weeks ago who has a 
franchise business in two locations and 40 employees, and he 
has declined to open his third because he will go over 50 
employees. So he is making a decision today based on opening a 
business that will affect potential employees. It is absolutely 
plausible people are going to make decisions based on this 
right now.
    I have a friend and a former client that is in the Myrtle 
Beach, South Carolina in the tourism business employing 1,900 
people, and they are absolutely moving people from full-time to 
part-time when this law takes effect. They haven't done it yet, 
because the law hasn't taken effect yet, but it will absolutely 
have an effect on the service economy in my area. Do you want 
to comment on that?
    Mr. Baker. Sure. Thank you for asking. Well, a couple 
points I would make. First off I am sure there are some people 
who are making decisions, you know, based on this and you know 
the gentleman you were talking about, you know, that may well 
be one of them it is clearly not showing up in the data for the 
first 6 months of 2013 when they thought the employer sanctions 
would be in effect. So in aggregate, however many people might 
have been doing that, it was too small to show up in the data.
    Now in terms of moving people from full-time to part-time 
over a longer term, I would be surprised if there is not some 
of that going on. But again, the point I was trying to make and 
perhaps I didn't make it clearly, we have a lot of people in 
this country who choose part-time employment. So the fact that 
you might have some employers that are offering part-time work, 
that would actually be consistent with what many people desire.
    So this isn't something I would expect to see overnight. I 
would expect to see it, in the case of Hawaii, didn't even show 
up after 10 years, it was only after 20 years that it was 
visible in the data.
    Mr. Rice. One more quick thing, in the Budget Committee I 
asked Doug Elmendorf, who is head of CBO, what his estimate of 
job loss from ObamaCare was, and he said CBO's estimates is 
800,000 full-time jobs lost as a result of the implementation 
of this law.
    Mr. Baker. My understanding of Dr. Elmendorf's comment was 
that was mostly people opting not to work because they would 
have the option of getting health care through the exchanges 
rather than through employer provided health insurance.
    Mr. Rice. My time is up, I yield back.
    Chairman Collins. Thank you. Unfortunately, it does look--
not does look, votes have been called, and we have a number of 
members that still have questions to go. So what we are going 
to do is adjourn. It is a quick two series votes so I am 
guessing we will be back in less than 30 minutes.
    Unfortunately, where you see 11 minutes now you can add 
about 10 to that because they always hold over that first vote. 
But we should be back in about a half hour, at which point we 
will adjourn for right now for about 30 minutes and reconvene 
after the votes.
    [Recess.]
    [2:33 p.m.]
    Chairman Collins. The hearing will come back to order. 
Let's see that was a little more than 30 minutes, but at any 
rate we are back, and I appreciate the witnesses all coming 
back. At this point in time, I guess I will yield myself time 
for some questions and then we will go to Ms. Hahn and see if 
any other members come back.
    Ms. Hahn. The important members come back.
    Chairman Collins. Yes, thank you, Mr. Luetkemeyer.
    I am a small business owner, I have been an entrepreneur 
for 40 years, so I know what is going on. But I have also, in 
this role, I can remember asking the Director of the IRS in 
charge of implementing the laws, I asked him a couple of 
questions, so I am just curious if Mr. Bienko or Mr. Hermann 
could even answer these, because as we are preparing for the 
employer mandate, and while the penalty has been delayed, the 
mandate has not been delayed, as has been misspoken time and 
again. I hear people, both sides of the aisle, the 
administration saying the employer mandate has been delayed 1 
year. No, it has not. The penalty associated with it has been 
delayed.
    Ms. Hahn. Right.
    Chairman Collins. The other thing to point out to everyone 
is that when you try to determine who qualifies and whether 
your company qualifies on the 50 employee level, it is the 12 
months that precede the year. So now relative to being charged 
with a penalty, the buckets or the measurement starts January, 
so in less than 3 months. So when people talk about impact, 
starting in January you have to put all your employees into the 
part-time or full-time bucket and calculate the hours and the 
full-time equivalents. You do that each month for 12 months 
during 2014 and then divide by 12 to determine whether or not 
in 2015, you hit the 50-employee threshold.
    So I know I said--I asked the head of the IRS and we 
submitted them questions and I was promised a prompt response, 
and I guess I am still waiting, that was several months ago. 
But I said, Mr. Director--and I am asking--for 5 or 6 days, but 
not 2 months, but so as small business owners, here was the 
question: Full-time employee, who would, say, normally work 40 
hours a week so 160, 170 hours a month, takes 2 weeks vacation, 
so he only works 80 hours in August. Is he full-time or part-
time in the months of August? Would either of you know an 
answer to that?
    Mr. Hermann. I believe that would be under your benefit 
plan. In our business, we have paid vacation up to 4 weeks----
    Chairman Collins. I am saying relative to the IRS 
calculation of which bucket you put him in. He only worked 80 
hours, he was paid for 160, but do you put him that month in 
the part-time bucket because he only worked 80, and you count 
his 80 hours to do your FTE equivalent, or because it was paid, 
does he go in the full-time bucket. The head of the IRS 
couldn't answer that question, but he does expect you to know 
exactly which one to put him in.
    Now the other one I asked him, and again, I know it is 
difficult but this burden is falling on to the small business 
owners in their HR departments. Many workers might, in any 1 
month, work over 130 hours, even if they are part-time based on 
overtime and so forth, but then the next month they don't; so 
they work 135 hours in January, they work 97 in February, they 
work 161 in March, they work 82 in April. Well, you know how 
you put them in the buckets each month, if it is over 130, they 
go in the full-time bucket, if it is less you accumulate their 
hours, divide by 130, get the FTEs. But now you're into 2015. 
They worked 6 months, and they were in the full-time bucket 
that prior year, and for 6 months, they were in the part-time 
bucket. Do you have to give them health insurance or not?
    So this is the tough thing about the law. When the 
regulators set definitions, it is how to you implement it? And 
I'll say, as we are in October, and in the next two--and by the 
way, the mandate has not been delayed, just the enforcement of 
the penalty. The head of the IRS who is in charge of 
implementation can't answer those questions. So again, it tells 
you this isn't ready for prime time. I just bring that up, as I 
am small business owner myself, and we have those very 
situations and we don't know as we are going to be putting them 
into buckets.
    And I guess the other obvious thing is, we will see what 
happens as we move through, but a question maybe for Mr. 
Keating, because I have heard people talk about why 30 hours, 
where'd it come from? It has never been there before. The 
suggestion has been twofold. One was, we'll have small 
businesses just provide health insurance to more people. The 
other more cynical one is, it was a money grab that knowing 
that this would subject them to penalties, it was a way of 
raising money to pay for the expansion of Medicaid, or maybe it 
is a little of both. I am just wondering Mr. Keating, if you 
have a thought on that?
    Mr. Keating. That goes to my public choice economics as to 
what the incentives are in government. And just based on that, 
I would say it is probably a combination of all of the above. 
And to backtrack a little bit, when I get to speak on various 
panels about this law from an economist's perspective, and 
interestingly often, there are representatives from the SBA or 
various government entities, and most of the audience are 
obviously small business owners struggling to figure this out. 
And they have very pointed questions about what this means for 
their business, and I would say at least more than half the 
time the people from the government that are there representing 
it don't have the answers. And that says to the business owners 
what, the folks implementing this don't know, how am I supposed 
to possibly figure this out, and then it goes to the issue of 
how many employees you have to--how much time and energy goes 
into trying to figure this out when I talked about my testimony 
we would hopefully want the time and energy and resources going 
to something productive in terms of expanding the business and 
creating jobs.
    Chairman Collins. I think that goes back to the human 
resource cost. So Mr. Hermann, you are not here only 
representing yourself, but also other franchise owners, or is 
that Mr. Bienko? I know a lot of franchisees have lot of part-
time workers, and by and large, from what I have been told, 
those workers didn't sign up or didn't come in looking for 
health care, they were there to supplement their income, if you 
will. Many of them are working 37-\1/2\ hours and have now, in 
fact, had their hours cut to 28, 27, and I just wonder because 
I know Mr. Baker was saying that the data doesn't show it, but 
then again, the data always lags. Are other franchisees sharing 
with you as I heard from many that they are, in fact, taking 
action to cut the workers under 30 hours?
    Mr. Bienko. Yes. And Mr. Collins, if I can first comment on 
your previous question regarding the new laws and regulations 
and the controversy that it causes for a small business owner, 
the IRS can't figure out what to do or to get back to you on 
it. A small business owner, as you know, your time needs to be 
spent on the growth of your business, not trying to figure out 
laws and regulations. Each and every second that you detract 
from your core business value is a decrease and revenue and 
decrease in growth.
    So I wanted to make a point on that that we don't have the 
time and the opportunity to spend it on trying to figure out 
new regulations that are uncustomary to what we currently have.
    We have seen multiple franchisees, and the ones I have 
spoken to myself that have decreased the hours or are planning 
on decreasing the hours on their part-time employees. One of 
the biggest things about being a small business owner is that 
you have to plan three to five years in advance. If you are not 
doing that planning, no one else is doing that planning for you 
as the business owner. You need to be looking out for where 
your business, where your employees are going to be in 3 years, 
not just 1 or 6 months. So you have to take into account when 
you are doing your budgeting in 2013 as we are going through 
right now, we are not planning for 2013, we are planning for 
2015, 2016 and 2017. And we are taking into account what is 
going come ahead of us.
    So it is not just about hiring new employees, we plan on 
having those employees. Those employees may change, but the 
system and the mandates don't change. So we need to take that 
into account and know that we are going to have X amount of 
additional employees. We need to be able to properly fund those 
employees and plan for them.
    Chairman Collins. Another quick question for Mr. Bienko. I 
know a lot of companies have health insurance plans that they 
and their employees thought were designed very well for their 
business from a cost perspective and so forth. In many, from 
what I am hearing, those plans are no longer available, unlike 
when the President said, if you like your health care plan, you 
can keep it. Well, you can't keep it if it is not offered 
anymore. So I am curious of your college hunks, how many of 
them needed maternity care?
    Mr. Bienko. Zero.
    Chairman Collins. Okay, and I have to assume how many 
really needed prescription drug coverage?
    Mr. Bienko. That varies. And the reason that varies is an 
issue that I talked to them about on a consistent basis, I want 
them to care about themselves and I want them to care about 
their health. I don't want them just to go because they have an 
opportunity to take a plan, and that is an open door for them 
to look for or each and every ailment they might have to go 
search out for a prescription medication. I want them to know 
how to take care of themselves and become healthy individuals 
and not just rely on something.
    So we have actually had that conversation in our, what we 
call our all-staff meetings that we have each month where we 
either bring guest speakers or have internal conversations. And 
the last conversation I had with them was based around taking 
care of themselves is their best opportunity to lower any cost 
that they may have. So it does vary between the individuals, 
but inside our system, we are trying to cut back on that as 
much as possible.
    Chairman Collins. So Mr. Hermann, I am curious from the 
policies that you have had versus now the policies you are 
being offered, which now have to include maternity care, they 
have to include mental health, they have to include 
prescription drug coverage, health club membership. There are 
things now that are mandated and not every workforce is looking 
for those benefits, and now the day of an owner designing a 
health care plan to meet the needs of their employees has now 
been taken out into more of a one size fits all.
    So I am curious, Mr. Hermann, plans that you have offered 
to your employees, are they being offered now or if had you to 
adjust now to the minimum benefit plan that is required by the 
ACA?
    Mr. Hermann. Well, we have been blessed to offer our 
employees a robust plan, and our plan already met the 
requirements of ACA so--what we have done, though, is how are 
we going to control our costs? And we had to get inventive on 
that and look at new ways to handle it, and potentially means 
as a company taking on more of a risk in order to manage those 
costs. What we have done is gone to Captive and, Captive is 
sort of a reinsurance program that allows smaller businesses to 
go out with a group of other businesses, but that is more risk. 
I mean, we are taking a risk as with anything. Health insurance 
is not about when you buy it, you are not supposed to be taking 
a risk. But this forces us to go out there and take these risks 
to hope that we manage it, you know, we are taking our own 
shoulders, meaning more administration costs.
    So put this in--you know, the health insurance is supposed 
to be a benefit, and as a small employer, I am supposed to be 
able to go to somebody and get insurance and not have to worry 
about it, and this has put us in a predicament that we have got 
to also understand the insurance law beyond what we need to.
    Chairman Collins. Thank you. Mr. Keating, one last question 
and then I will turn it over to Ms. Hahn. But one question that 
is been raised, and I wonder if you have heard this before, and 
that is, take the case of a company that has employees working 
37-\1/2\ hours, they did not go to work there for health 
insurance, did not expect health insurance, but now they would 
be--the company would be required because they are full-time to 
offer to pay that $2,000 penalty.
    So the company cuts them very deliberately from 37-\1/2\ 
to, say, 28 for the sole purpose frankly of avoiding having to 
pay--that provide that health plan. The employee wants to work 
37-\1/2\, the company would like them to work 37-\1/2\, they 
can't afford to give them at a donut shop health care, and they 
also can't afford a $2,000 penalty.
    So this is very real life and I am actually using a real-
life example. Now lo and behold there is laws called ERISA. And 
ERISA states very specifically if a company cuts the hours of a 
worker for the sole purpose of denying a benefit then they can 
be fined and brought up on charges, that is what ERISA states.
    So you think about this case, the employee is not getting 
health insurance now, didn't expect it, doesn't want it. It is 
true though, the sole reason that their hours are being cut is 
to avoid giving them a benefit. Now to me, they are violating 
ERISA. In complying with the ACA and to the extent of keeping 
their business open because they can't afford the insurance or 
$2,000, has anyone looked at that--I will call it a conflict, a 
very serious situation of a company actually breaking the law 
in complying with the ACA.
    Mr. Keating. I have not looked at it myself, and I haven't 
heard of that particular example, but it goes along with other 
examples talking again to business owners and listening--they 
are getting--I always tell people listen, what you need to do 
is, unfortunately, get a good accountant and lawyer and figure 
this out, but make sure you are getting the right advice.
    The very disheartening situation, in addition to what you 
just laid out, are other business owners that have made 
decisions--splitting their companies thinking that they could 
do that, and you can't do that under the law. Yet they are 
getting advice from the people--they are doling out money to 
get advice from people, and this is the advice that they are 
getting. So that, unfortunately, is not unique in the sense 
that, again, who really has a handle on all of these issues and 
all of the costs, and this creates obviously all the 
uncertainty that we have been talking about for a very long 
time now.
    Chairman Collins. Yeah, I think a couple of things that are 
misunderstood, you can't split your companies, you also can't 
use temporary workers. A lot of folks have said I will go hire 
temporary workers, they are not on my payroll. In that 
instance, not only do those workers count for the business that 
is using them, but the person running the temporary service 
agency is also hit with the same thing. So that workers 
actually counting in two different companies, as unfair as that 
sounds.
    Mr. Luetkemeyer, do you have any other questions you would 
like to ask?
    Mr. Luetkemeyer. Thank you.
    Chairman Collins. If so, we will yield 5 minutes to you.
    Mr. Luetkemeyer. A couple quick questions with Mr. Keating. 
One of the comments that you made that you are working with the 
entrepreneurship group, how is this ACA affecting start-up 
companies? Most businesses start out as a small business, and 
then grow to whatever size they get to. Is this affecting a lot 
of start-up companies being able to get started? Has your group 
done some research on that?
    Mr. Keating. I think the one people don't think of actually 
that does come into play is the individual mandate, because 
when you talk about somebody starting up their own business, 
that is--now they have to buy their own health insurance or pay 
the tax that could increase up to, I am trying to remember the 
percentage, by 2016. The point is you do have a situation where 
people again are losing resources that could be used to start 
up their business number 1.
    I think beyond that, you have got this air of uncertainty, 
questions, costs. If I get this business up and running, what 
are going to be the costs on the regulatory front in term of 
Obamacare? You have got to plan, as the business owners here 
talk about, and I talk about my MBA courses, you have to have a 
business plan, and you have to be realistic with it, and lay 
out where you want to go and that is from the very startup 
stage, that is an ideal scenario. So how does that all factor 
into the equation in terms of the total benefits package if you 
are looking to hire people and bring them on board, how is that 
going to effect the equation?
    So yes, I have not seen any studies that say, you know, 
this is affecting startups in this way. Again, I don't think we 
have that information yet. But based on, again, good old 
economics 101 incentives, it is clearly a negative in the 
equation. And just a real quick point, all of things that we 
are talking about here, the bottom line is it that it is an 
additional negative. Now you can debate how much of a negative 
it is for various businesses and it will range from business to 
business, but it is a clear negative in the equation in terms 
of cost for businesses, that is the bottom line. In this 
environment, why are we going down this path in the first place 
is the question.
    Mr. Luetkemeyer. One of the figures that just jumped out at 
me was the one in your testimony you mentioned a while ago is 
76 percent of the small businesses are likely not to hire in 
the next 6 months--and with other numbers in here with regards 
to how many are pulling back the number of employees that they 
have as well as cutting your hours.
    Whenever you look at small businesses as being the drivers 
of our economy that just immediately shows there is a blanket 
of over this entire economy with regards to ability to generate 
jobs. And I think you probably could extrapolate from that that 
there is not a whole lot of new job creation going on out there 
as a result, unless there is a particular niche industry of 
some kind.
    Mr. Keating. Right. Well, the energy industry is great, 
right. Yay. When I go out and talk to people, I can talk about 
the energy industry and how well they are doing. But yes, 
across the board, again, the numbers are clear in terms of 
where we should be in term of job creation during this recovery 
and where we actually are. You can pick your survey whether it 
is a household survey or the establishment survey, we are 
nowhere near we are we should be.
    So again, those--I put those surveys in there for a purpose 
because again when you look at the economics we can discuss 
theory an incentives so on. When people are going out there and 
talking to small business owners, this is what they are 
hearing. Surely there will be exceptions along the way that 
think it is great or maybe their business growing so doesn't 
matter to them, that is fantastic.
    I would argue the fact we had 2.2 percent growth with 
everything that has been working against entrepreneurship and 
investment is pretty amazing. And I think that is where the 
tipping hat to the resiliency of the American business owner 
and the workers absolutely.
    Mr. Luetkemeyer. I think your point is about the energy 
industry is probably where the growth has been. If it hadn't 
been for that, I think my numbers that I have seen would be a 
flat GDP. I think the 2.2 is actually as a result of energy 
industry that is going gang busters right now.
    Mr. Keating. A huge contribution without a doubt when you 
look at the GDP numbers and employment numbers without a doubt.
    Mr. Luetkemeyer. Just one point before we close here. Mr. 
Baker made the comment some time ago that the businesses did 
not make any sort of plans and did not make adjustments prior 
to 2000, and beginning of this year in 2013. And I can tell 
from you the businesses I have visited or when I go home on the 
weekends and have district court periods as well as people have 
come to my offices, when you talk to those folks they have been 
looking at this ever since it passed how they are going to 
comply.
    They have talked with their attorneys, they have talked 
with their accountants, and many of them have made business 
decisions on not expanding or not hiring additional folks based 
on this law for a number of years already. And so just because 
the numbers don't reflect it today, they already made those 
decisions in the last year, year before when they decided not 
to expand by new locations or not to expand existing location.
    With that, Mr. Chairman, I thank you for the opportunity to 
be heard here today, and the timeliness of this hearing.
    Chairman Collins. Thank you. At this point I would like to 
yield to Ms. Hahn.
    Ms. Hahn. Thank you, Mr. Chairman. Actually I would like to 
ask Mr. Baker to respond to some of the comments that Mr. 
Keating made. But honestly, I really disagree with the comment 
that being an entrepreneur in this environment with the new 
Affordable Care Act is a negative. I think just the opposite, I 
think it is a positive. I think there are a lot of people that 
get stuck in a job they don't want to be in because of the 
health insurance that is provided them, and they are afraid, 
and their families are afraid for them to step out and be a 
entrepreneur.
    And I think this law allows someone to strike out on their 
own and be able to afford quality health insurance without 
jeopardizing their family or themselves. So I look at it as a 
complete opposite of what you just said. I think it is a 
positive and I think there are resources now that people never 
had before, and there are a lot of people who stay with a job 
just for the health insurance, and really have that 
entrepreneurial spirit inside of them and have been afraid to 
do so specifically because of the inability to get health care 
on their own. I don't know, Mr. Baker, if you wanted to respond 
to some of those comments that Mr. Keating made.
    Mr. Baker. Yeah, well, in particular I would take up on 
that point there what is been a considerable amount of economic 
research showing exactly this idea of job lock that you have 
people that have a job with health insurance, either they or a 
family member has an existing condition, and they know if they 
had to go into the individual market, they would either not be 
able to get insurance at all, or it would be actually 
exorbitant.
    And I actually was curious about this and clicked onto a 
few of the exchanges, the State exchanges, and looked at the 
oldest group 55 to 64 where you pay the highest premiums. And 
you can get the silver plans, middle plans for 600 a month, it 
varied by State and which plan you chose. But in other words, 
insurance that would consider very affordable, not counting any 
subsidy.
    So if you are a more moderate income person, would you get 
a subsidy on top of that. I actually do own my own business, my 
own research center, but, you know, if I were thinking of 
starting that out today, it would make a big difference to me 
knowing that for whatever reason things went badly and I was 
not getting insurance through the center, I had the option of 
getting it through the exchange at an affordable rate. So I 
would be very surprised if you don't see burst of 
entrepreneurship in the next couple years.
    Ms. Hahn. Thank you. That is what I think as well. And just 
to remind everybody the health care in this country was broken, 
and so this is really an attempt to fix what was terribly 
broken. And actually National 2008 study by small business 
majority said that small business health costs would more than 
double by 2018 without any reform. So just to kind of remind 
everybody, health costs were going up, and it was a broken 
system. So this is an attempt to lower health costs and bring 
it down, but there are some issues that we are finding out 
today.
    And just on the small business majority. I don't know if 
you have connected with them, Mr. Bienko and Mr. Hermann, but I 
have held several workshops on the Affordable Care Act with 
small businesses in my district, and the Small Business 
Majority and they have offices throughout the country are 
really a good resource. I felt your pain when you said you 
don't have the kind of resources to figure this law out, and it 
is confusing to some extent, but this is a good resource that--
they are there for small businesses, they are champions of 
small business. And they are very good at helping kind of go 
through the maze of this new health care law, so you guys might 
check into them.
    I guess for both of you sounds like you have different 
issues. Mr. Hermann, you sounded like you were saying you are 
taking care of your employees now. You are going to take care 
of them, they are like family. But it is more about your 
hesitance to hire more in the future.
    Mr. Bienko, it sounded like for you, you are more concerned 
about having to offer health insurance for those who are 
working 30 hours or more. Have you actually calculated those 
costs of, you know, what it would mean to insure your full-time 
employees or those part-time employees that, you know, you 
talked about those that worked 3 days a week, sometimes 10 or 
12 hours that would push them to the 36-hour limit?
    Mr. Bienko. Sure if I can first comment on the previous 
statement referenced the Affordable Care Act as a whole, our 
health care system is broken, there is no doubt about it and we 
need to make a change. But I think what we are addressing here 
today is around the 30-hour workweek, not so much the actual 
plan. And so for an individual like myself, we know, I want 
entrepreneurs to have the ability to be able to step out, it is 
just how it is done and how it is made. I don't think anybody 
is against individuals being able to have health coverage. I 
think as Americans, as people, as human beings, no matter what 
background you come from, you want everybody to be taken care 
of, and I feel the same exact way. However it may not be the 
best system for businesses entrepreneurs. I think today we are 
talking about the 30-hour workweek.
    When it comes to us, we want nothing more than to provide 
the health care coverage, that is why we made the step from day 
one. First day I opened, I provided an opportunity for my very 
first employees from day one and made that investment, and we 
continue to make that investment. You made a comment on the 
cost, it will cost us $2,200 as we have set up per new employee 
on a part-time basis if it is not changed, reverted back to 40 
hours. Now when we look at new locations----
    Ms. Hahn. And how many is that for you? How many of those 
employees fall into that category?
    Mr. Bienko. Sure, when we open a new location, we open a 
new location with 12 to 13 part-time employees and one full-
time employee. Those part-time employees work between 30 and 35 
hours a week when we ramp up a new location and new city. We 
march into a new city right away off the bat, we are providing 
the--30--15 new opportunities right away.
    Ms. Hahn. And they are like 36, 35.
    Mr. Bienko. They are like 36 hours per week.
    Ms. Hahn. Right now you don't consider them full-time.
    Mr. Bienko. No, they are not full-time. And they will grow 
into full-time positions and they will receive that benefit 
from working hard and helping us establish our business, but 
our business cannot be established if we do not profit. We need 
that margin, we need every single margin.
    You talk about 1.6 margins, 5 percent margins, 15 percent 
margin, it doesn't matter what industry you are in and what 
margins you have based upon your industry, when you are a 
startup, you need every single percentage point.
    Ms. Hahn. So if this doesn't get changed back to the 
traditional 40-hour workweek, what will you do?
    Mr. Bienko. We have that additional cost.
    Ms. Hahn. You will have the additional cost, but you 
won't----
    Mr. Bienko. We will grow a lot slower. With our system and 
our model and our scale that we have set up currently that has 
worked tremendously. We went into Nashville, Tennessee, opened 
up a location there as a franchise. I went in there and I 
purchased a failing franchise. We grew by over 600 percent in 
one year with our model and our scale, we know what works. It 
doesn't work with the additional costs. When we moved into 
Dallas, Texas and we opened up in Dallas, Texas on December 
16th, with that in mind. If this was, in fact, currently right 
now, those costs would prohibit us to grow upon the same scale 
that we know we are capable of growing upon. When we went into 
Nashville, we started out with three employees, we now have 
over 30 in 9 short months.
    Ms. Hahn. Is that cost calculated on your current insurance 
provider, they have told you that adding more employees would 
be at that cost?
    Mr. Bienko. That is what I have to go on currently right 
now working with our insurance provider. So if we are offering 
it to the individuals that we are offering it to right now, we 
have to offer it to equally amongst the other employees and 
that is the cost burden that we have to take on a part-time 
basis. It is not an issue of not wanting to do it. It is an 
issue of the business will not grow and scale the same exact 
way without it.
    Ms. Hahn. And Mr. Hermann, what is your biggest concern?
    Mr. Hermann. Biggest concern is go back to, we are taking 
care of our full-time employees right now. We did run the 
numbers and look back on past 4 weeks, and 30 hours could bring 
in about 10 more under the plan. And----
    Ms. Hahn. What would that cost you?
    Mr. Hermann. That would cost me $36,000 a year at least. 
That is not including administration costs, not including----
    Ms. Hahn. For 10 more?
    Mr. Hermann. For 10 more.
    Ms. Hahn. I think he has a better plan.
    Mr. Hermann. And here we go, we talk about these plans, 
they are so diverse. We are talking apples and oranges here. To 
have this conversation, and I am just concerned like I said--
you talk about the budget office. That is still time I have to 
step out of the store, and go down there, when what happened to 
just shaking my uncle's hand who is an insurance agent and 
saying, thanks for getting us good coverage. I actually have to 
leave him now, I am leaving my uncle in the local insurance 
agency because they don't provide the plan that I think is 
going to best keep us in business.
    So a local insurance agent he has his hands in the air, he 
sells this stuff and he says, I don't know what to do we don't 
have a plan for you, I am sorry. So I am concerned about that. 
That is a local guy that shops in my store, he has agents 
there, he has other agents there.
    Ms. Hahn. I thought your current plan provided the benefits 
that the----
    Mr. Hermann. No, to stay competitive for our rates. When I 
look at our rates, his rates are going to go--we are going to 
go up 10 to 20 percent at least. So we had to do something to 
keep our insurance plan, to keep our costs in line. And as a 
small insurance agency, they didn't have the ability to look at 
their underwriters and see what options they have, they had to 
go with someone else who is innovative and do something else. 
It hurts the small business guy and it also drags you out of 
the office more, and spend a lot of time on this. We had health 
insurance and we still provide health insurance to our 
employees, to our families. But I have spent a lot of time on 
this.
    I have taken time out of my schedule because I believe the 
30-hour requirement can cause some issues, that is why I am 
here today to comment on those 30 hours and hopefully represent 
the independent supermarkets across the Nation and independent 
business owners and make a difference.
    Ms. Hahn. Thank you. Well, I appreciate all the witness 
here today. I think we have all learned something.
    Chairman Collins. Myself as well. I think we heard some 
divergent opinions. I think at some point, where do we agree, 
uncertainty is not good, uncertainty in any number of areas 
including surrounding our deficit and debts and where those are 
headed. The more entrepreneurs and small business owners have 
certainty, the more likely they are to invest.
    And it is interesting too, I think we are getting consensus 
agreement in a bipartisan way that whether it is the 30-hour 
workweek, whether it is now the new definition of large 
business at 50 employees, or whether it is the medical device 
tax, or whether it is the health insurance tax, all of these 
revenue drivers that we are going to bring money the taxes into 
the government to pay for this huge expansion Medicaid.
    In each and every case, there is bipartisan agreement, they 
are not good for the economy, whether it is 30 hours, 50 
employees, health insurance tax medical, they are all bad for 
growth, which is why, to some, we would say why don't we delay 
this a year and let's get the economy growing a little bit more 
before we would ever take on things that there is bipartisan 
agreement. In fact, our cost in jobs, we don't have any jobs 
that we can afford to lose.
    So I just would leave that out there, that as we move 
forward in these uncertain times the best thing we can do is 
all get in a room. We can talk about this, we can talk about 
the negative impacts, how could we change something in order to 
deal with the negative impacts and yet understand the cost 
associated with that so that we can all have a little less 
uncertainty and clearly today, the exchanges aren't open, they 
are not working. My own staff can't get on to the exchange here 
in D.C., it is not open. Yet in a very short period of time, 
you have to put your employees in buckets to prepare for a year 
down the road.
    Anyway I think those are all facts that would indicate we 
should delay, but that is just my opinion.
    So again, thank you all for coming, your insight has been 
very valuable. I appreciate you taking time away from your 
business traveling here, and I can assure you that that this 
testimony is valuable to us.
    So with that, I ask unanimous consent that members have 5 
legislative days to submit statements and supporting materials 
for the record. And seeing none, without objection, so ordered. 
The hearing is now adjourned.
    [Whereupon, at 3:08 p.m., the subcommittee was adjourned.]



                            A P P E N D I X

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman Collins, thank you for hosting this important 
hearing today to examine the potential effects of the Patient 
Protection and Affordable Care Act's (ACA or ObamaCare) 
definition of 30 hours a week as full-time employment, and what 
this might mean for employment at small businesses. The Small 
Business & Entrepreneurship Council (SBE Council) is pleased to 
submit this testimony.

    My name is Raymond Keating, and I am the chief economist 
for SBE Council, as well as serving as an adjunct professor in 
the Townsend Business School at Dowling College where I teach a 
variety of courses in the MBA program; a weekly newspaper 
columnist for Long Island Business News; and author of several 
books, with the latest being Unleashing Small Business Through 
IP: Protecting Intellectual Property, Driving Entrepreneurship.

    SBE Council is a nonpartisan, nonprofit advocacy, research 
and training organization dedicated to protecting small 
business and promoting entrepreneurship. With nearly 100,000 
members and 250,000 small business activists nationwide, SBE 
Council is engaged at the local, state, federal and 
international levels where we collaborate with elected 
officials, policy experts and business leaders on initiatives 
and policies that enhance competitiveness and improve the 
environment for business start-up and growth.

    Economic and Employment Growth

    It is important to consider the impact of the ACA--or 
ObamaCare--within the context of our poor performance in recent 
years regarding both economic and employment growth.

    Real GDP growth during this recovery has averaged only 2.2 
percent. That not only comes in far below the 3.4 percent 
average since 1950, but also compares miserably to the 4.5 
percent average during periods of recovery/expansion. So, in 
effect, economic growth during this recovery has been running 
at roughly half of where it should be.

    Why does this matter? Well, keep in mind that if the 
economy grows at an annual average rate of four percent a year, 
our standard of living double every 17.5 years, while if growth 
averages a mere two percent then it takes 35 years to double 
the standard of living. The U.S. should not be content with 
growth of roughly 2 percent a year. It hurts us today, and far 
into the future.

    Meanwhile, on the employment front, the latest data told a 
story of continued under-performance. Consider several key 
points.

    First, in August, the labor force fell by 312,000 compared 
to July. Throughout the recession and subsequent recovery, the 
labor force participation rate has rather steadily declined. 
The August level of 63.2 percent was the lowest since August 
1978. That is, the worst labor force participation rate in 35 
years. That speaks mainly to a large number of people simply 
not even bothering to look for work.

    As for what's going on with actual employment, the federal 
government serves up employment data via two surveys. The 
establishment (or payroll) survey gets widely quoted in the 
media, and in August, nonfarm payrolls rose by 169,000. That's 
far below the 250,000 or so expected during a solid recovery.

    But the other set of data, i.e., the household survey, is 
where we get the unemployment rate, and it also better captures 
start up and small business activity. Unfortunately, the reason 
that the unemployment rate declined in August to 7.3 percent 
from 7.4 percent in July was because a 115,000-drop in 
employment was outdistanced by the larger decline of 312,000 in 
the labor force.

    To put this in perspective, if the U.S. had a labor force 
participation rate more in line with recent historical norms, 
the unemployment rate would be nearly 12 percent.

    And what about the number of long-term unemployed? The 
number of people unemployed for more than 27 weeks came in at 
4.3 million in August. That's down from the high of 6.6 million 
set in may 2010, but is nearly four times the May 2007 level of 
1.1 million.

    In summary, as of August, we were still down by about 2.4 
million in terms of employment compared to the pre-recession 
level (November 2007).

    Compared to the same point in the economic recovery of the 
1980s, after the arguably worse economic period of January 1980 
to November 1982, the U.S. had added 11.84 million jobs versus 
the 4.17 million added so far in the current recovery.

    No matter how you measure it, the U.S. is suffering through 
one of the worse recoveries on record in terms of both economic 
growth and job creation.

    Given the ObamaCare employer mandate and the definition of 
30 hours a week as full-time employment, we also need to look 
at full-time versus part-time employment. It must be noted that 
as for people who are working part time, but want full-time 
work, in August, this group working part time for economic 
reasons registered 7.9 million. That's fortunately down from 
the peak of 9.2 million set in September 2010. However, it's 
far above pre-recession levels. In fact, it's more than double 
the 3.9 million level of April 2006.

    (Keep in mind that the Bureau of Labor Statistics defines 
full-time employment as 35 hours a week, versus the ObamaCare 
de facto definition of full-time employment as being 30 hours 
per week.)

    It is important to recognize that a dramatic shift has been 
going on in 2013 as to part-time versus full-time jobs being 
created. During this recovery, a bit more than 90 percent of 
jobs created have been full time. However, from January 2013 to 
August 2013, two-thirds of employment gains have come via part-
time jobs.

    So, job creation thus far in 2013 has been overwhelmingly 
about part time jobs, which is a striking break from what 
normally happens, and speaks to the issue of how part-time 
workers are treated under ObamaCare versus full-time.

    Small Business Role in Job Creation

    Of course, it needs to be pointed out that small and mid-
sized businesses--that is, those with less than 500 workers--
create the bulk of net new jobs in the economy. As the SBA's 
Office of Advocacy sums up: ``Small firms accounted for 64 
percent of the net new jobs created between 1993 and 2011 (or 
11.8 million of the 18.5 million net new jobs). Since the 
latest recession, from mid-2009 to 2011, small firms, led by 
the larger ones in the category (20-499 employees), accounted 
for 67 percent of the net new jobs.''\1\
---------------------------------------------------------------------------
    \1\ Office of Advocacy, Small Business Administration, ``Frequently 
Asked Questions About Small Business,'' September 2012.

    Given the importance of smaller businesses to job creation, 
we should all be concerned about recent declines in various 
---------------------------------------------------------------------------
measures of entrepreneurship.

    For example, a good take on early stages of 
entrepreneurship is the number of self-employed. Unfortunately, 
the trend after 2006 has been very troubling. In terms of 
unincorporated self-employed, the recent high of 10.68 million 
(seasonally adjusted) was set in December 2006, and the numbers 
have been on a general decline since. In August, the level came 
in at 9.5 million, which showing no growth compared to a year 
earlier. The range over the past couple of years has been 
running at 25-to-27-year lows. Similarly, incorporated self-
employed also has trended down, though more unevenly, since 
2008.

    And not surprisingly then, data on business births revealed 
a big decline from 2006 to 2009, with some growth in 2010 and 
2011, but levels remaining far below just a few years earlier. 
As for the total number of businesses, unfortunately, the data 
from the U.S. Census Bureau has a long lag. According to the 
latest available information, though, the number of firms with 
employees declined for three straight years, dropping by 5.2 
percent from 2007 to 2010.

    The unmistakable and troubling trend in recent years has 
been a decline in the level of entrepreneurship in the U.S. 
That's worrisome for many reasons, including on the employment 
front.

    For example, as reported by the September 5 Wall Street 
Journal, small business job creation activity lags: ``According 
to ADP numbers, payrolls at private firms with less than 50 
employees have increased 4.7% since the end of the recession 
through August, medium-size firms (50-499 employees) are up 
6.1% and large firms (more than 1,000 workers) have increased 
payrolls by 7.4%.''

    A similar finding was offered by Intuit's small business 
employment index, released on September 4. Economist Susan 
Woodward noted that small business job growth has been flat for 
two months now. Over the long run, Woodward observed, ``Small 
business employment continues to lag behind total private 
employment, which has risen 7 percent since the trough in March 
2010, while small business employment has only risen by 2 
percent.''

    Small Business Outlook and Incentives Under ObamaCare

    A new survey of small business owners by TechnoMetrica 
Market Intelligence done for the Small Business & 
Entrepreneurship Council found the following regarding 
ObamaCare and its impact on hiring decisions by small 
businesses:

           ``Over three-quarters of small businesses 
        (76%) said they were not likely to hire over the next 
        six months.''

           Among those likely to hire in the coming six 
        months, 57% said they would likely hire full-time 
        workers (28% very likely, 29% somewhat likely), and 77% 
        said they would likely hire part-time workers (36% very 
        likely, 41% somewhat likely).

           One third of small business owners said that 
        ObamaCare has had an effect on their hiring decisions, 
        including 21 percent saying it has had a ``major'' 
        impact. Those businesses that said ObamaCare has had an 
        impact on hiring decisions are largely firms with 
        actual employees, versus sole-proprietorships.

           ``Most small businesses (63%) do not believe 
        that ObamaCare will help businesses like them to 
        purchase more affordable health insurance for them and 
        their employees. More than half (52%) strongly disagree 
        with the idea that it would help them obtain affordable 
        health insurance.'' 12% of businesses are not yet sure.

    Earlier this year, a Gallup poll put a variety of questions 
to small business owners as to the impact of ObamaCare on their 
enterprises.\2\ Consider the following results:
---------------------------------------------------------------------------
    \2\ Dennis Jacobe, ``Half of U.S. Small Businesses Think Health Law 
Bad for Them,'' Gallup Economy, May 10, 2013, accessed at http://
ww.gallup.com/poll/162386/half-small-businesses-think-health-law-
bad.aspx.

           48% of U.S. small business owners said that 
        the 2010 Affordable Care Act would be bad for their 
        businesses, versus 39% anticipating no impact and only 
---------------------------------------------------------------------------
        9% saying it would be good.

           ``55% of small-business owners expect the 
        money they pay for healthcare to increase. Five percent 
        expect their healthcare costs to decline, while 37% say 
        the health law will have no impact on what they pay for 
        healthcare.''

           ``When asked if they had taken any of five 
        specific actions in response to the ACA, 41% of small-
        business owners say they have held off on hiring new 
        employees and 38% have pulled back on plans to grow 
        their business. One in five (19%) have reduced their 
        number of employees and essentially the same number 
        (18%) have cut employee hours in response to the 
        healthcare law. One in four owners (24%) have thought 
        about eliminating healthcare coverage for their 
        employees.''

    In August, the International Foundation of Employee 
Benefits Plans also released a survey on the impact of the 
ACA.\3\ Among its findings were the following regarding small 
businesses:
---------------------------------------------------------------------------
    \3\ International Foundation of Employee Benefits Plan, ``2013 
Employer-Sponsored Health Care: ACA's Impact,'' accessed at http://
www.ifebp.org/pdf/research/2103ACAImpactSurvey.pdf.

           95.1% of businesses with 50 or fewer 
        employees expected costs to increase due to the ACA, 
        with 51.2% expecting cost increases of more than 10 
---------------------------------------------------------------------------
        percent.

           Among all businesses, the ACA provision 
        cited most often (by 21.2%) as having the most 
        significant impact in boosting costs was ``Offering 
        affordable coverage to all employees working an average 
        of 30 hours or more a week in a month.''

           As for workforce adjustments due to the ACA, 
        among firms with 50 or fewer employees, 19.5% (11.3% 
        already having done so and 8.2% planning to do so in 
        the coming 12 months) said they are reducing ``hiring 
        to get/stay under the 50-employee ACA threshold for 
        small employers.''

           Also in terms of workforce adjustment 
        responses, among firms with 50 or fewer employees, 
        again, 19.5% (11.3% already having done so and 8.2% 
        planning to do so in the coming 12 months) said they 
        are ``adjusting hours so fewer employees qualify for 
        full-time employee medical insurance requirement.''

    Assorted media reports also have highlighted the threat of 
per-full-time-employee (or FTE) fines under ObamaCare leading 
to businesses cutting employee hours. A September 11 Fox 
Business News story noted the following: ``The Obama 
administration announced in July that it would delay the so-
called employer mandate until 2015. ObamaCare requires that 
companies with 50 or more employees provide health insurance 
benefits to very full-time workers, considered to be anyone who 
logs an average of 30 or more hours a week. Employers will be 
hit with a penalty for each full-time employee who isn't 
covered and instead purchases insurance through a federally 
subsidized exchange. Although the administration delayed 
implementing the rule until 2015, the penalties for that year 
will be based on staffing levels recorded in the second half of 
2014 at the latest. As a result, several large companies and a 
long list of smaller businesses have changed their policies to 
cap weekly hours at 29.'' \4\
---------------------------------------------------------------------------
    \4\ Matthew Rocco, ``With Eye on ObamaCare, Companies Move to Cut 
Workers' Hours,'' FoxBusiness.com, September 11, 2013, accessed at 
http://www.foxbusiness.com/industries/2013/09/11/with-eye-on-obamacare-
companies-move-to-cut-workers-hours/.

    And regarding the high level of part-time jobs, a Reuters 
report recently highlighted the ObamaCare role on the part-time 
jobs front: ``Faltering economic growth at home and abroad and 
concern that President Barack Obama's signature health care law 
will drive up business costs are behind the wariness about 
taking on full-time staff, executives at staffing and payroll 
firms say ... Executives at several staffing firms told Reuters 
that the law, which requires employers with 50 or more full-
time workers to provide healthcare coverage or incur penalties, 
was a frequently cited factor in requests for part-time 
workers. A decision to delay the mandate until 2015 has not 
made much of a difference in hiring decisions, they added.'' 
Later, it was noted: ``Obamacare appears to be having the most 
impact on hiring decisions by small- and medium-sized 
businesses. Although small businesses account for a smaller 
share of the jobs in the economy, they are an important source 
of new employment. Some businesses are holding their headcount 
below 50 and others are cutting back the work week to under 30 
hours to avoid providing health insurance for employees, 
according to the staffing and payroll executives.'' \5\
---------------------------------------------------------------------------
    \5\ Lucia Mutikani, ``Analysis: Obamacare, tepid U.S. growth fuel 
part-time hiring,'' Reuters, August 21, 2013, accessed at http://
www.reuters.com/article/2013/08/21/us-usa-economy-jobs-analysis-
idUSBRE97K05K20130821.

    In addition, as health insurance costs continue to rise, 
including with increased regulations and taxes via ObamaCare, 
it must be noted that business owners with more than 50 workers 
have every reason to calculate whether it makes sense to 
---------------------------------------------------------------------------
continue offering coverage, or drop it and pay the panty.

    For good measure, firms with less than 50 workers now have 
an added incentive to drop coverage, perhaps provide a far 
cheaper lump sum payment to workers, and let employees then 
seek government subsidies and coverage via the insurance 
exchanges. All of this means more government subsidies, and an 
ever-growing tab for taxpayers, including, of course, small 
business owners.

    Conclusion

    In a time of slow economic growth, lackluster job creation, 
and troubling trends on entrepreneurship, policymaking should 
be focused on how to incentivize private-sector risk taking, 
that is, starting up, expanding and investing in businesses. 
That would mean, for example, providing broad and substantive 
tax and regulatory relief.

    Unfortunately, policymaking has been pointed in the exact 
opposite direction for a number of years now. In fact, an 
assortment of public policy measures--with ObamaCare's 
mandates, regulations and tax increases being prominent--
explicitly raise costs and create uncertainty for 
entrepreneurs, businesses and investors.

    So, at a time when we desperately need the entrepreneurial 
sector of our economy to be focused on investing and creating 
good-paying jobs, ObamaCare forces businesses to be focused on 
how to deal with a massive government intrusion on the employee 
cost front.

    And when doing so, ObamaCare provides clear incentives to 
hire part-time over full-time workers if possible; reduce 
employee hours (getting them under the 30-hour mark); maintain 
staff levels at less than or cut back to below 50 full-time or 
FTE workers to avoid the employer-mandate; and seriously 
consider dropping coverage altogether given the relative costs 
of providing, or not providing coverage.

    The recent numbers on hiring and in various surveys confirm 
that the costs and incentives under ObamaCare push many small 
and mid-size businesses towards hiring fewer workers, 
especially fewer full-time workers, and reducing employee 
hours. In the end, it's clear that ObamaCare serves as a very 
real drag on economic and employment growth.
``The Effects of the Health Law's Definitions of Full-Time Employee on 
                           Small Businesses''


                              Testimony of


                             Steven Hermann


                             Vice President


                          Paul's Supermarkets


                              On Behalf of


                    The National Grocers Association


                                 Before


                     U.S. House of Representatives


                      Committee on Small Business


                 Subcommittee on Health and Technology


                            Washington, D.C.


                            October 9, 2013

    Good Morning Chairman Collins and members of the 
Subcommittee. Thank you for that kind introduction and for the 
opportunity to testify on behalf of the National Grocers 
Association on an issue that is very important to independent 
grocers and small businesses across the country. NGA is the 
national trade association representing the retailers and 
wholesalers that comprise the independent channel of the 
supermarket industry. Independent grocers account for 
approximately one quarter of the total US supermarket industry 
with nearly $130 billion in total sales, and over 944,000 in 
direct jobs that pay over $30 billion in wages.

    My name is Steven Hermann and I am the Vice President of 
Paul's Supermarkets. Our family-owned company has been in 
business in Eldon, Missouri, for over 45 years. I started 
working in my family's supermarket when I was 14 years old, 
learning the trade from my grandfather and father. Like many 
independent grocers, I fell in love with the business early on 
and quickly gained an appreciation for hard work and customer 
service. Today my family operates three supermarkets with 
locations in Eldon, Osage Beach, and Lake Ozark, Missour,

    Like many small employers across the country, we have 
weathered many economic storms throughout the years and are 
proud that we have never lost sight of the two most important 
things for our business: our employees and our customers. 
However, we are facing a challenge in our workforce unlike any 
we have seen before. I am fearful that the unintended 
consequences of the Affordable Care Act (ACA) will hurt our 
employees and undermine our values as a family owned small 
business. Under the ACA, the definition of full time employee 
has created new barriers for our industry where working an 
average of 30 hours per week is simply not considered full-
time.

    Independent grocers are proud to provide employment to 
hundreds of thousands of individuals, many of whom are working 
a second job or simply looking to help supplement their 
family's income. As such, the supermarket industry employs a 
large number of part-time workers to help meet the ever 
changing needs and demands of our customers, which can change 
from day to day. The ACA created new hurdles for businesses by 
greatly expanding the number of employees eligible for health 
plans by defining a full-time employee as an employee who has 
averaged at least 30 hours of service per week over the course 
of a month.

    This new definition of full-time under the law will force 
small businesses to re-think how they hire and schedule part-
time employees. Where an employer may have previously hired a 
new part-time employee with the exception that they would work 
33-35 hours per week, that employee will now be brought on 
knowing they are a part-time employee and their work week will 
be limited to less than 30 hours per week. Employers are likely 
to hire fewer employees, especially full-time employees, 
learning to do more with fewer workers in order to control 
costs.

    Not only is the law redefining what it means to be a full-
time worker in this country, but it's permanently changing the 
American workforce by interfering with part-time workers' 
ability to earn a living. Part-time employees in need of 
additional money may no longer be able to pick up an additional 
shift to pay for unexpected expenditures or earn extra money 
around the holidays.

    We employ a large number of part-time associates, many 
during our busy summer season, but also others that help staff 
our stores throughout the year. These part-time workers include 
kids working while attending college, spouses helping to 
supplement their family's main income, and older associates 
supplementing their retirement. Unfortunately, due to the law, 
many businesses may now be unable to provide part-time 
associates with the hours they need.

    We have long felt that our associates are like our family, 
which is why we are proud to offer a wide range of great 
benefits to our full-time associates, including funding 100 
percent of the associate's healthcare premium after the 
deductible is met. Our associates have access to a Health 
Savings Account and the company contributes a small monthly 
stipend toward that account. Today, we currently employ 75 
full-time associates and 100 part-time and seasonable workers 
between our three stores. We are proud of the fact that nearly 
all of our full-time associates participate in our health plan 
and it's our hope that we can continue to provide quality 
benefits in the future, although it gets more and more 
difficult to do so with each passing year.

    This commitment to our associates is not without 
significant costs, especially for a small family--owned 
business such as mine. Over the years, as health care costs 
have increased we have worked hard to maintain the benefits we 
offer, including adapting our health plans to meet the changing 
times and employees needs. In this year alone, healthcare costs 
for my company exceeded $300,000, not including any in-house 
administration costs, and we are on track for a significant 
increase again next year. The supermarket industry operates on 
razor thin profit margins, which was confirmed again in the 
2013 NGA Financial Survey, where net profit before taxes among 
independent grocers hovered around 1.65%. In this competitive 
industry pennies really do count and can make the difference 
between making a profit or not.

    According to the same NGA Financial Survey, 92 percent of 
respondents indicated they currently offer health benefits to 
their full-time employees, which is a testament to the 
commitment that independent grocers have to their associates. 
Employers, such as myself, very much want to continue providing 
quality benefits to our full-time employees, recognizing that a 
healthy employee is a productive employee. However, many 
businesses simply cannot afford to provide coverage to workers 
who average 30 hours per week. Thus, small business owners will 
have to make tough choices and many part-time employees will 
face reduced hours and smaller paychecks.

    Independent grocers need the flexibility to be able to 
manage their businesses and workforces to meet the needs and 
demands of their customers. The burdens placed on our 
businesses by this law hamper our ability to do just that and 
make it more difficult to succeed in a hypercompetitive 
marketplace. Paul's Supermarket prides itself on supporting 
charitable organizations and community groups; however 
pressures from the healthcare law could impact our ability to 
continue that support that the same level. My strong 
recommendation to you today is that Congress should do all it 
can to help businesses by removing barriers or any artificial 
thresholds that will inhibit our ability to hire workers and 
create good jobs. One of the most effective ways for Congress 
to do just that is to pass legislation that amends the 
unrealistic definition of a full-time employee under the 
healthcare law so that businesses can focus on continuing to be 
an employer of choice in the communities we serve.

    Thank you for the opportunity to appear before the 
Committee today and I look forward to answering any questions 
you may have.
                      TESTIMONY OF STEPHEN BIENKO


                       PRESIDENT, 42 Holdings LLC


                               Before the


       U.S. HOUSE OF REPRESENTATIVES COMMITTEE ON SMALL BUSINESS


                 SUBCOMMITTEE ON HEALTH AND TECHNOLOGY


``The Effectives of the Health Law's Definitions of Full-Time Employee 
                          on Small Business''


                            OCTOBER 9, 2013


    Introduction

    Chairman Collins, Ranking Member Hahn, and members of the 
Subcommittee, thank you for inviting me to testify today on the 
effects of the health care law's new definition of a full-time 
employee on a small business. My name is Stephen Bienko, and I 
am the President of 42 Holdings, and a member of the 
International Franchise Association. I own and operate an 
interstate and intrastate moving company, and I also own 15 
franchises of College Hunks Hauling Junk and College Hunks 
Moving throughout northern New Jersey, as well as in the 
Nashville, Tennessee and Cleveland, Ohio areas. College Hunks 
Moving and College Hunks Hauling Junk offer residential 
household moves, office relocations, junk removal, donation 
pickups and moving labor services. I bought my first franchise 
three years ago in 2010 after a career as an entrepreneur and a 
previous stint as a New Jersey State Trooper. I'm proud of my 
business; it offers a service that my communities need, and 
flexible, secure jobs for dozens of motivated team members in 
three states.

    As a franchise small business owner, my livelihood and my 
ability to provide for my team members is directly linked to 
the strength of the economy and federal policies enacted by 
Congress. Most recently, I have been studying the ways the 
expansive Affordable Care Act will impact my business, our team 
members and the company culture that supports all of it. While 
the one-year delay of the employer mandate gives us more time 
to properly implement the law, one thing remains clear: while 
well-intentioned, the Affordable Care Act poses a serious 
threat to my business' ability to continue providing a fun, 
enthusiastic work atmosphere and quality jobs for people who 
want and need them.

    The Definition of ``Full-Time Employee''

    For decades, U.S. employers have used a 40-hour workweek as 
a standard for workforce culture. Unfortunately, the Affordable 
Care Act's provision requiring employers to provide coverage to 
full-time employees, and defining full-time as 30 hours, will 
cause many employers--like me--to simply alter their employees' 
hours in order to run a successful small business. This puts 
all of us at a loss; employers must implement new workforce 
management methods, and some team members will receive fewer 
hours and reduced take-home pay, not to mention they will still 
be ineligible for employer-sponsored health coverage.

    I currently have 72 employees, and 20 of those employees 
are part-time workers. In 2014, we are planning on adding an 
additional 34 part-time workers across all of my locations. 
Many of these part-time employees work three days per week, 
with 10-12 hour daily shifts. These part-time workers are 
attracted to our company culture because the positions offered 
can easily fit with their schedules, whether that includes 
school, childcare coverage, or other personal commitments. 
During ``move season,'' what our industry considers the ``busy 
period,'' we typically have a large number of customers who are 
trying to schedule their family's move. Many of my part-time 
team members will try to fit in as many as five of these shifts 
in order to make additional income for themselves, and in many 
cases, their families. Currently, it is not uncommon for a 
part-time team member who normally works 25-30 hours per week 
to double their work hours to 50-60 per week during these 
periods of high demand.

    I currently offer a health plan to our full-time team 
members, but in order to manage my health care costs (which are 
a company benefit and a line item on a Profit & Loss sheet), I 
will need to limit the hours worked by our part-time team 
members. The simplest way to accomplish this is to limit part-
time workers to only two full shifts per week. This will equal 
between 20 and 24 hours per week, instead of the 30-36 hours 
they are working now. These part-time workers will no longer be 
permitted to pick up extra shifts and garner additional income 
during high-volume ``move seasons.''

    Reduced Hiring and Expansion

    I have offered my full-time team members health coverage 
even without the employer mandate, and I have every intention 
of continuing that coverage, even as I continue to expand my 
business. However, the increased cost of doing business by 
providing coverage to employees with fluctuating schedules that 
only occasionally put them into full-time status will leave me 
no choice but to scale back my expansion plans. I consider 
myself lucky, because I have succeeded with an ambitious growth 
plan for my business over the last several years, but many 
small business owners are not so fortunate. Not only has the 
employer mandate discouraged job creation and business 
expansion, it has also damaged existing jobs by including a 
misguided statutory requirement that discarded more than a 
half-century of established labor policy by now defining 
``full-time'' as 30 hours per week.

    The employer mandate will hurt franchise business workers 
in many ways, but one of the most devastating effects of the 
mandate is that fewer workers will be offered health insurance, 
and employees will be less able to afford their own coverage 
when working fewer hours. The true losers under this misguided 
mandate are the employees, who work day-in and day-out to 
provide a better life for themselves and their families.

    Allowing employers to manage their workers to the 
traditional 40-hour work week would give employees more 
flexibility and eliminate the need to revamp longstanding 
employer personnel policies. For my part, I would be able to 
give my part-time employees more hours and pay them more wages, 
without incurring the additional cost of providing health 
coverage that true part-time employees are currently not 
eligible for.

    Conclusion

    Without a doubt, the one-year delay of the employer mandate 
is an important reprieve for franchise small businesses as they 
prepare for ACA implementation; unfortunately, it is a short-
lived solution and is far from workable in the long run. Many 
franchise businesses are being turned upside-down by the new 
costs, complexities and requirements of the law. Allowing 
employers to continue with the current and traditional 
workforce management practices provides more personal stability 
in a period of continued economic uncertainty and recovery. So 
far, Congress has seemingly been willing to listen to testimony 
from small business owners about these serious challenges, but 
fast-approaching deadlines command your swift action to assist 
our nation's franchise small businesses. Business owners are 
already weighed down by complex reporting requirements, small 
business health exchanges that lack competitive options, and 
increased costs brought on by additional taxes and fees. The 
30-hour definition is a major change that could have far 
reaching consequences we have not yet begun to see.

    I urge the Committee to support H.R. 2575, the Save 
American Workers Act, and H.R. 2988, the Forty Hours Is Full 
Time Act to help ease the employer mandate's enormous burden on 
franchise small businesses. The revision of the new definition 
of the full-time employee for the purposes of the Affordable 
Care Act is a common-sense solution that will put the ACA in 
line with many other federal wage and hour regulations, provide 
small business owners such as myself with health benefit 
consistency, and allow for increased hours and more take-home 
pay for my hard-working and deserving team members.

    Thank you for allowing me to testify before you today, and 
I look forward to answering any questions you might have.
                              Testimony of


                        Dean Baker, Co-Director


                Center for Economic and Policy Research


                               Before the


Small Business Subcommittee on Health and Technology of the U.S. House 
                      Committee on Small Business


                               Hearing on


 The Effects of the Health Law's Definitions of Full-Time Employee on 
                            Small Businesses


                            October 9, 2013


    I want to thank Chairman Collins and Ranking Member Hahn 
for giving me the opportunity to address the subcommittee. I 
will use this opportunity to discuss work that I did with my 
colleague at the Center for Economic and Policy Research, 
Helene Jorgenson, examining the extent to which the Affordable 
Care Act (ACA) may have lead to more part-time employment as 
employers cut work hours in order to avoid the employer 
sanctions in the law.\1\
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    \1\ Helene Jorgensen is also my wife.

    The ACA includes a provision that requires employers of 50 
or more full-time workers (those working at least 30 hours per 
week on average) to either provide affordable insurance 
coverage directly to workers, as defined in the law, or to pay 
a penalty for each full-time worker who is not covered and 
subsequently buys subsidized insurance in the health care 
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exchanges. There are two obvious ways to avoid this penalty.

    The first route would be to keep the total number of 
workers under 50, either by not hiring workers for businesses 
near the cutoff or shedding workers for businesses just over 
the cutoff. The second route would be to reduce the number of 
hours that employees work so that they fall under the 30 hour a 
week average that would have them count towards the firm's 
penalty under the ACA.

    There are good reasons for questioning the extent to which 
the employer penalty provisions in the ACA would affect 
employment. Most importantly, the overwhelming majority of 
firms that employ at least 50 already provide health insurance 
coverage to their workers that would meet the standards of the 
ACA. According to a survey by the Kaiser Family Foundation more 
than 94 percent of firms that exceed the ACA's 50 workers 
cutoff already provided coverage to their workers 
voluntarily.\2\ Clearly these firms consider it a good practice 
to offer a valuable benefit to their workers or they would not 
do so. Since most firms in this category already provide 
coverage voluntarily, it is difficult to believe that requiring 
the remaining firms to provide coverage or pay a penalty would 
create such an onerous burden.
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    \2\ The Kaiser Family Foundation and Health Research & Educational 
Trust. 2012. ``Section 2: Health Benefit Offer Rates'' in 2012 Employer 
Health Benefits Survey, 33-46. Menlo Park, CA: The Kaiser Family 
Foundation. http://kff.org/report-section/ehbs-2012-section-2/

    Furthermore, the penalty for not providing insurance of 
$2,000 per worker (excluding the first 30 workers), is 
relatively modest. If the pay of full-time workers averaged 
just $10 an hour, this would be an increase in annual 
compensation of less than 10 percent. A considerable amount of 
research has found no measurable employment impact from 
considerably larger increases in the minimum wage.\3\
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    \3\ Schmitt, John. 2013. ``Why Does the Minimum Wage Have No 
Discernible Effect on Employment?'' Washington, DC: Center for Economic 
and Policy Research. http://www.cepr.net/index.php/publications/
reports/why-does-the-minimum-wage-have-no-discernible-effect-on-
employment

    For these reasons it seems unlikely that the ACA would have 
a large negative impact on employment. However, there have been 
numerous accounts of employers claiming to reduce employment or 
adjust hours in order to avoid the requirements and penalties 
in the ACA. If this is the case, we should have first begun to 
see evidence of the impact of ACA in January of 2013, since 
under the original law employment in 2013 would serve as the 
basis for assessing penalties in 2014. (The Obama 
administration announced on July 2, 2013 that it would not 
enforce sanctions in 2014 based on 2013 employment, but 
employers would not have known that sanctions would not be 
enforced prior to this date. Therefore we can assume that they 
would have behaved as though they expected to be subject to the 
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sanctions.)

    Some employers claim to have reduced employment because of 
the provisions of the ACA as soon as its passage in 2010, and 
many have blamed the ACA for the slow pace of employment growth 
in the years from 2010-2012. This is not plausible. There is 
enormous churning in the labor market, with close to 3 percent 
of employees leaving their job every month (half voluntarily 
and half involuntarily).\4\ If an employer felt the need to 
hire additional employers in 2010-2012 to meet the demand for 
labor they were seeing at the time, they would have no 
difficulty getting their employment. Just the normal churning 
in the labor market would bring a firm with 52 or 53 employees 
below the 50 employee threshold in a few months. Since 
employers generally have the option to dismiss workers at will 
(unless they have a union contract), there is no reason that 
they could not have added employees in the years prior to 2013 
to meet their demand for labor at the time, and then reduce 
employment in 2013 to avoid the ACA penalties.
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    \4\ The Kaiser Family Foundation and Health Research & Educational 
Trust, op. cit.

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    Evidence from 2013

    It is too early to assess the claim that employers are 
staying just below the 50 employee limit since we do not yet 
have data available on employment by firm size in 2013. However 
as a practical matter it is implausible that the behavior of 
these firms could have any noticeable effect on employment 
growth. It is unlikely that more than 1 percent of potential 
employment growth would be in firms that are near this cutoff. 
Furthermore, most of these firms would already be providing 
health care insurance for their employees and therefore need 
not be concerned about the sanctions in the ACA. If some number 
of firms actually are limiting or reducing employment to stay 
below the 50 worker cutoff then the impact would be too small 
to be noticed in the economy as a whole.

    The alternative course of evading ACA penalties, reducing 
average hours of work below 30 per week, could at least 
plausibly have an impact on employment patterns. In fact, 
several large employers have claimed that they would 
deliberately keep workers' hours below 30 hours per week in 
order to avoid having them count toward the number for whom 
they would have a $2,000 penalty.

    It is possible to test whether employers are actually 
reducing hours below the 30-hour threshold. The Current 
Population Survey (CPS) provides monthly data on workers usual 
weekly hours. We used the CPS to compare the first six month of 
2013 with the first six months of 2012. Our original focus has 
been on the group of workers who reported working 26-29 hours a 
week. We considered this range a reasonable cutoff for an ACA 
effect. Presumably if an employer would have a worker put in 
more than 30 hours a week in the absence of ACA penalties, they 
would require a worker to put in close to, but less than, 30 
hours in order to avoid the penalties.

    In an analysis done on the first four months of data from 
2013 we found a modest drop in the percentage of workers who 
worked this number of hours compared with the corresponding 
months of 2012.\5\ This suggested that concern over the 
employer sanctions in the ACA was leading firms to reduce work 
hours below the 30 hour cutoff.
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    \5\ Jorgenson, Helene and Dean Baker, 2013. ``The Affordable Care 
Act: A Hidden Jobs Killer?'' Washington, DC: Center for Economic and 
Policy Research. http://www.cepr.net/index.php/publications/reports/
the-affordable-care-act-a-hidden-jobs-killer.

    We repeated the analysis after the July data became 
available, giving us all six months for which employers might 
have acted on the belief that they would be subject to the 
ACA's sanctions based on 2013 employment levels. With the full 
six months of data we instead found a modest increase in the 
percentage of workers who are putting in 26-29 hours. The share 
went up from 0.61 percent of the workforce in 2012 to 0.64 
percent of the workforce in 2013, an increase that corresponds 
to slightly more than 40,000 workers who have work schedules 
that put them just below the threshold as shown in the table 
below.


------------------------------------------------------------------------
                                       Percent of works in
 Ususal weekly hours in ------------------------------------------------
      primary job                  2012                    2013
------------------------------------------------------------------------
                0                     0.07                     0.07
          1 to 19                     8.97                     8.69
         20 to 24                     1.39                     1.37
               25                     1.78                     1.81
         26 to 29                     0.61                     0.64
               30                     3.03                     3.12
         31 to 34                     1.78                     1.79
       35 or more                    75.37                    75.79
           varied                     7.01                     6.74
------------------------------------------------------------------------
Source: Author's analysis of Current Population Survey.


    This may look like it is confirming exactly what opponents 
of the ACA warned against, that employers are responding to the 
threat of sanctions and cutting back workers' hours, exactly as 
several prominent business owners had promised they would do.

    However a closer examination shows that the data don't 
support this story. The percentage of workers putting in 25-29 
hours is up, but so is the percentage of the workforce that 
puts in 35 hours a week or more. In fact, the share of the 
workforce that reports working just over the limit, either at 
30 hours a week or 31-34 hours a week, is up also.

    It turns out that the big declines are in the percentage of 
workers who put in 1-19 hours a week, 20-24 hours a week, or 
who report that their hours typically vary. The data indicate 
that fewer workers are in these low or ``hours varied'' 
categories and more workers report falling into all the 
categories at 25 hours a week or above.

    These changes are all small and mostly not statistically 
significant. They also reflect the influence of many factors 
other than the ACA. But the data certainly provide no evidence 
supporting the claim that the shortening of workweeks has been 
a widespread phenomenon.

    Just to be clear, it is likely that the 30-hour sanction 
cutoff will have a modest but measurable effect on hours 
through time as employers adjust schedules and new businesses 
open.\6\ And any movement away from employer-based insurance 
will eliminate an important overhead cost that discouraged 
firms from shortening hours and hiring more workers.
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    \6\ An analysis of the impact of Hawaii's employer mandate, which 
first took effect in the early 1980s, found that it led to an increase 
of 3.7 percentage points in the share of workers in the bottom wage 
quintile who worked less than the 20 hour a week threshold specified in 
the state's law (Buchmueller, Thomas C., John DiNardo, and Robert G. 
Valletta. 2009. ``The Effect of an Employer Health Insurance Mandate on 
Health Insurance Coverage and the Demand for Labor: Evidence from 
Hawaii.'' FRBSF Working Paper 2009-08, April). This implies an increase 
in the percentage of the whole work force working less than 20 hours of 
0.74 percentage points.

    There are three points that should be kept in mind about 
any possible movement to shorter hours that may result from the 
ACA. First, the vast majority of people who work part-time do 
so voluntarily. In many cases they have family or other 
obligations that make part-time employment desirable. Even with 
the current weak labor market more than two-thirds of the 
people who work part-time report that they do so voluntarily. 
In more normal times this share would typically be close to 80 
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percent.

    Second, the United States is an outlier in that workers put 
in far more hours each year on average than they do in other 
wealthy countries. One of the factors that has prevented the 
same sort of decline in the length of the average work year 
that we have seen in other countries is that health insurance 
is typically seen as an overhead cost by employers. Typically 
they pay the same amount for workers' health insurance 
regardless of how many hours they work.\7\ This gives employers 
an incentive to get more hours from each worker instead of 
hiring more workers. Insofar as the ACA leads to a movement 
away from employer provided insurance, it will take away one of 
the factors leading to longer work hours. The result is that 
employers may more often decide to hire more workers at fewer 
hours per worker than would have been the case in the absence 
of the ACA.
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    \7\ Some employers do make contributions to health insurance 
policies based on the numbers of hours worked, but this practice is 
still the exception.

    Finally, the impact of the ACA's sanctions is only likely 
to be seen over time. It is very disruptive to a workplace to 
overhaul work schedules, especially if workers see the goal as 
being to deny them a benefit that they would otherwise receive. 
For this reason, it is not likely that many employers would 
restructure work hours immediately after the ACA employer 
sanctions took effect. However over a longer term, new 
businesses are established and employers do periodically redo 
business plans, including restructuring of work hours. It would 
stand to reason that when employers have the option of having a 
worker put in a number of hours that is just over the cutoff 
for sanctions or just under the cutoff, they will opt in many 
cases to give workers a schedule that has them put in just 
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under the cutoff.

    In this respect, it is worth noting that the analysis of 
the impact of Hawaii's employer sanctions for firms not 
providing coverage \8\ found no effect on the percentage of 
workers employed at less than the 20 hours cutoff for the 
period 1992-1993, more than ten years after the law had been in 
effect. The impact only appeared in an analysis of work 
patterns for the years 2002-2005; more than twenty years after 
the law had been in effect. Based on the findings of this 
analysis of Hawaii's law, any possible effect of the ACA's 
employer sanctions will not be large enough to be picked up in 
the data for many years into the future.
---------------------------------------------------------------------------
    \8\ Buchmeulller et al., op. cit.

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    Conclusion

    The employer sanctions in the ACA do provide a modest 
incentive for employers to reduce work hours below the 30 hour 
cutoff in the law. However, research suggests that the size of 
the sanction is relatively modest compared to other 
interventions, like the minimum wage, which have generally been 
found to have little or no effect on employment. Our analysis 
of hours data from the Current Population Survey for the first 
six months of 2013 actually finds a small increase in the 
percentage of workers who usually work more than the 30 hour 
cutoff. This suggests that the number of employers who may have 
actually cut hours to avoid the sanctions is too small to have 
a noticeable impact on the labor market.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The National Association for Home Care & Hospice (NAHC) is 
the leading association representing the interests of the home 
care and hospice community since 1982. Our members are 
providers of all sizes and types from the small, rural home 
health agencies to the large national companies, including 
government-based providers, nonprofit voluntary home health 
agencies and hospices, privately-owned companies, and public 
corporations. NAHC has worked constructively and productively 
with Congress and the regulators for three decades, offering 
useful solutions to strengthen the home health and hospice 
programs.

    As the House Small Business Subcommittee on Health and 
Technology examines the effects of the Affordable Care Act 
(ACA) definition of full time employee on small businesses, 
NAHC appreciates this opportunity to provide our views. The 
great majority of the estimated 25,000 home care agencies are 
small businesses. While many of these agencies employ more than 
50 workers, the vast majority are considered small businesses 
under the SBA threshold. All told, there are over 2 million 
persons employed in home care. These home care agencies are 
innovative job creators that provide much needed compassionate, 
high quality care to elderly and disabled individuals in their 
homes and communities. The Department of Labor forecasts that 
home care workers are among the largest area of growth in 
employment today and in the decade to come. Our economy is 
built on millions of small enterprises like these. We should be 
doing all we can to promote policies to help them survive and 
thrive.

    Currently the provision in the ACA that imposes penalties 
on employers with more than 50 full-time equivalent employees 
for not providing health insurance for their ``full time'' 
workers defines an employee working just 30 hours a week as 
full time. This definition of full time is entirely out-of-
keeping with standard employment practices across the country.

    The majority of personal care home care workers do not 
receive employee health insurance because home care agencies 
have three problems that are fairly unique: reliance on 
government programs such as Medicaid where payment rates as low 
as $11 an hour won't cover the increased costs of providing 
health insurance; consumers of private pay home care that are 
often elderly and disabled with fixed low incomes; and a home 
care workforce with widely varying work hours primarily to 
accommodate the needs of their infirm clientele.

    Home care agencies that are unable to provide health 
insurance or absorb the ACA penalties will have to restrict 
their employees to no more than 29 hours per week to ensure 
their workers are considered part-time under the ACA. A survey 
that NAHC conducted earlier this year showed two-thirds of the 
private pay home care companies and three-quarters of the 
Medicaid home care companies are expecting to reduce working 
hours of staff to avoid the penalties. Millions of home care 
workers could find their hours, and thus their earnings, are 
cut back at a time when many of them are already struggling.

    A good example of what we are talking about is a small home 
care agency, Health Force, located just outside of Buffalo that 
serves Chairman Collins' district. HealthForce employs more 
than 50 workers, but is revenue puts it well below the small 
business threshold. The following is a message we received from 
its CEO.

    ``I am Patricia M. Krall-Dwyer. I am CEO of a small woman-
owned business called Health Force. We opened this family 
owned, licensed home care agency in 1985 to assist and empower 
the elder and disabled communities throughout western New York. 
Many of our clients would be confined to a nursing home without 
our assistance.

    ``Health Force is located in Cheektowaga, NY, a suburb of 
Buffalo. Our services include nursing, physical therapy, home 
health aides, and companion care. A predominant majority of the 
populations that we serve receive their care through government 
funded programs. Thus, our organization is continually required 
to implement and comply with the significant rule and 
regulation changes and additions over the past 36 months while 
balancing complying with these requirements with cuts to our 
firm's reimbursement rates.

    ``Our small family business is built on the mission of 
empowering these communities to age in the residence that they 
choose and matching the best people to care for them. Being a 
smaller provider allows us to provide a personal touch that our 
clients need from such an intimate personal service. Our 
elderly and disabled clients get lost in the maze of many of 
the large institutional care companies. Clients that have no 
advocate for themselves need the small agencies to be there to 
``hold their hand'' through the trials and tribulations of 
living a life with decreased mobility or mental capacity. We 
help them with the everyday tasks you and I take for granted. 
The current pace of additional Federal and State unfunded 
regulatory mandates are placing family run organizations like 
ours at risk of being eliminated while rewarding large 
conglomerate organizations.

    ``With the pending onset of this legislation already 
creating massive expenditures not just in the cost of health 
insurance but also the additional employees needed to comply 
with the numerous mandates contained within the Affordable Care 
Act. In particular, the mandate of 30 hours being defined as 
full time sets the stage for disaster. Health Force doesn't 
sell shoes or serve food, our product is people who take care 
of people. So our small business will meet the 50 (FTE) 
requirements for the provision of affordable health care 
coverage.

    ``Due to the continuing cuts to our reimbursement rates our 
agency has to remain very lean administratively to continue to 
operate in this current environment. Increasing the hourly 
requirement to 40 hours to be considered a full time employee 
will accomplish a number of benefits and allow for the spirit 
of the Affordable Care Act to be implemented. By using a 40 
hour work week to define full time, our organization would be 
able to comply with the mandate without having to add an 
additional FTE to enforce compliance and would incent our team 
members to increase their hours to access affordable coverage 
instead of reducing hours to avoid it. Implementing this change 
could reduce our costs by nearly 40%. We do not have other 
departments to help us absorb the costs of tracking, 
monitoring, yet another individual mandate. We track our 
employees for 40 hours for overtime. We track our employees for 
40 hours of vacation. This mandate of 30 hours will mean a 
massive IT overhaul and redevelopment of compliance processes. 
Most small agencies do not have an IT department; it's us on 
the Internet trying to figure out how to adjust our computers.

    ``It truly is small businesses that run this country. 
During the last economic period, it was small businesses that 
added jobs. It was small business that increased economic 
growth. I ask that Congress please not add us to the endangered 
species list.''

    During consideration of the Senate Budget Resolution, the 
Senate adopted an amendment calling for legislation setting a 
more sensible definition of a ``full time'' employee for 
purposes of the ACA employer obligations and penalties. The 
amendment was endorsed by organizations across the political 
spectrum. As you know, there are two House bills and a Senate 
bill with bipartisan support that would define full time for 
purposes of the ACA as 40 hours a week: the Forty Hours Is Full 
time Act (H.R. 2988 and S. 1188) and the Saving American 
Workers Act (H.R. 2575). We urge the members of this committee 
to support this legislation and help advance it to enactment.

    Small home care agencies are an essential part of the 
network of services that our growing population of elderly and 
disabled individuals rely on. The last thing we need is an 
obstacle to helping them grow and create much needed jobs.

                                 
