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



CHALLENGES FACING AMERICA'S BUSINESSES UNDER THE PATIENT PROTECTION AND 
                          AFFORDABLE CARE ACT

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 26, 2013

                               __________

                           Serial No. 113-60





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
  Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana                  Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas                  PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
              Subcommittee on Oversight and Investigations

                        TIM MURPHY, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
  Vice Chairman                        Ranking Member
MARSHA BLACKBURN, Tennessee          BRUCE L. BRALEY, Iowa
PHIL GINGREY, Georgia                BEN RAY LUJAN, New Mexico
STEVE SCALISE, Louisiana             EDWARD J. MARKEY, Massachusetts
GREGG HARPER, Mississippi            JANICE D. SCHAKOWSKY, Illinois
PETE OLSON, Texas                    G.K. BUTTERFIELD, North Carolina
CORY GARDNER, Colorado               KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         PETER WELCH, Vermont
BILL JOHNSON, Ohio                   PAUL TONKO, New York
BILLY LONG, Missouri                 GENE GREEN, Texas
RENEE L. ELLMERS, North Carolina     JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        officio)



















                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Diana DeGette, a Representative in Congress from the state 
  of Colorado, opening statement.................................     4
Hon. Fred Upton, a Representative in Congress from the state of 
  Michigan, opening statement....................................     6
    Prepared statement...........................................     7
Hon. Henry A. Waxman, a Representative in Congress from the state 
  of California, opening statement...............................     8

                               Witnesses

Michael Brey, Owner, Hobby Works.................................    10
    Prepared statement...........................................    13
    Answers to submitted questions...............................   118
Jeffrey S. Kelly, CEO, Hamill Manufacturing Company..............    15
    Prepared statement...........................................    17
    Answers to submitted questions...............................   121
Steve Lozinsky, Vice President, Sparkle and Shine Cleaning 
  Services, Inc..................................................    23
    Prepared statement...........................................    24
Hugh Morrow, President, Ruby Falls, LLC..........................    26
    Prepared statement...........................................    28
    Answers to submitted questions...............................   124
William Daley, Legislative and Policy Director, Main Street 
  Alliance.......................................................    57
    Prepared statement...........................................    59
Katie Mahoney, Executive Director, Health Policy, U.S. Chamber of 
  Commerce.......................................................    68
    Prepared statement...........................................    70
    Answers to submitted questions...............................   128
Michelle R. Neblett, Director of Labor and Workforce Policy, 
  National Restaurant Association................................    89
    Prepared statement...........................................    91
    Answers to submitted questions...............................   131
Neil Trautwein, Vice President and Employee Benefits Policy 
  Counsel, National Retail Federation............................   102
    Prepared statement...........................................   104
    Answers to submitted questions...............................   137

 
CHALLENGES FACING AMERICA'S BUSINESSES UNDER THE PATIENT PROTECTION AND 
                          AFFORDABLE CARE ACT

                              ----------                              


                        WEDNESDAY, JUNE 26, 2013

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:15 a.m., in 
room 2123, Rayburn House Office Building, Hon. Tim Murphy 
(chairman of the subcommittee) presiding.
    Present: Representatives Murphy, Burgess, Blackburn, 
Gingrey, Scalise, Harper, Olson, Gardner, Griffith, Johnson, 
Long, Ellmers, Barton, Upton (ex officio), DeGette, Schakowsky, 
Butterfield, Welch, Tonko, Green, and Waxman (ex officio).
    Also Present: Representative Sarbanes.
    Staff Present: Sean Bonyun, Communications Director; Karen 
Christian, Chief Counsel, Oversight; Andy Duberstein, Deputy 
Press Secretary; Julie Goon, Health Policy Advisor; Brad 
Grantz, Policy Coordinator, O&I Sydne Harwick, Legislative 
Clerk; Brittany Havens, Legislative Clerk; Sean Hayes, Counsel, 
O&I Andrew Powaleny, Deputy Press Secretary; Brian Cohen, 
Minority Subcommittee Staff Director, Senior Policy Advisor; 
Hannah Green, Minority Staff Assistant; Stephen Salsbury, 
Minority Special Assistant; and Matthew Siegler, Minority 
Counsel.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Good morning. I convened this hearing of the 
Subcommittee on Oversight and Investigations entitled 
``Challenges Facing America's Businesses Under the Patient 
Protection and Affordable Care Act.''
    Today, we will hear firsthand from business owners about 
the impact the healthcare law and its costs and requirements 
are having on their employees and their families, the people 
they care about deeply.
    First, I'm pleased to introduce a constituent from my 
district, Mr. Jeffrey Kelly. Mr. Kelly is a CEO and owner of 
Hamill Manufacturing Company, a 62-year-old company based in 
Penn Township, Pennsylvania. Like many small businesses across 
the country, Hamill is loyal to its employees, and Mr. Kelly 
recognizes that providing benefits to employees is not only the 
right thing to do, but attracts better employees and helps to 
drive success for all.
    Yet as Mr. Kelly will testify today, since passage of the 
healthcare law, his companies premiums have risen 46 percent--
that's 46 percent. And as Mr. Kelly and other business owners 
look forward to full implementation of the Affordable Care Act 
in a few months, their brokers and insurance agents have warned 
them to brace for the higher fees and taxes associated with the 
healthcare law.
    Questions remain for families, workers and employers 
because there is a huge gap between what they hoped for and 
what they got. Good intentions do not guarantee good results.
    Today, I'm sure the witnesses will continue to hear the 
same promises from supporters of the Affordable Care Act. Mr. 
Kelly, I don't think you'll find much comfort in the fact that 
even though your premiums keep going up, supporters of the law 
today will tell you that if you look at the numbers the right 
way, premiums are going down.
    In addition to the rising costs for businesses, the 
witnesses today will also explain how the law's requirements 
will directly impact workers. Steve Lozinsky operates a 
cleaning service that he has grown from 1 employee to over 200. 
Mr. Lozinsky's business is run on a tight margin. When he bids 
on contracts, the costs of his service is often the determining 
factor. With less than 6 months to go until the Affordable Care 
Act is implemented, Mr. Lozinsky is weighing three options for 
his company. Option one is to reduce every employee's hours to 
less than 30 hours per week. Option 2 is to fire 100 employees. 
And there's a third option: going out of business. Mr. Lozinsky 
is a real-world example of how the employee mandate is causing 
havoc for American families.
    Members on this committee may have their own opinions on 
whether the passage of the Affordable Care Act was the right 
decision, but we cannot disagree on the facts. The costs and 
the requirements of this law are forcing many businesses across 
the country to make difficult decisions, decisions that will 
impact the strength and growth of their companies, the wages of 
the workers, their ability to hire new staff.
    And the witnesses before us today are not outliers. Last 
week a Gallup poll revealed that 41 percent of small businesses 
have frozen hiring because of the Affordable Care Act. 
Meanwhile the same Gallup poll found that 19 percent of small 
businesses have reduced their number of workers because of the 
law. And that is remarkable. Nearly one-fifth of the Nation's 
small businesses have reduced employment because of the 
Affordable Care Act.
    Uncertainty over the impact of this law is building a mere 
months from full implementation. The nonpartisan Government 
Accountability Office told this committee last week that 
implementation of the law is behind schedule. Premiums continue 
to climb, although this hasn't stopped the law's defenders from 
claiming otherwise. Competition has failed to materialize as 
well, and not only are we hearing stories about insurers 
sitting out exchanges in places like New Hampshire, North 
Carolina and California, last week we learned that one of the 
Nation's largest insurers was simply going to exit California 
because of the individual insurance market altogether.
    Meanwhile stories continue to break about cash-strapped 
local governments cutting hours of workers because they simply 
cannot afford the healthcare law.
    Again, I want to thank our witnesses before us today, and 
it takes courage to come here and talk about the nuts and bolts 
of your businesses. And we all greatly appreciate your taking 
the time to do so.
    [The prepared statement of Mr. Murphy follows:]

                 Prepared statement of Hon. Tim Murphy

    Today, we will hear firsthand from business owners about 
the impact the health care law and its costs and requirements 
are having on their employees and their families--the people 
they care about deeply.
    First, I am pleased to introduce a constituent from my 
district, Mr. Jeffrey Kelly. Mr. Kelly is the CEO and Owner of 
Hamill Manufacturing Company, a 62-year-old company based in 
Penn Township, Pennsylvania. Like many small businesses across 
the country, Hamill is loyal to its employees. Mr. Kelly 
recognizes that providing benefits to employees is not only the 
right thing to do, but attracts better employees and helps to 
drive success for all.
    Yet, as Mr. Kelly will testify today, since passage of the 
healthcare law, his company's premiums have risen 46 percent. 
And as Mr. Kelly and other business owners look forward to full 
implementation of the Affordable Care Act in a few months, 
their brokers and insurance agents have warned them to brace 
for the higher fees and taxes associated with the healthcare 
law.
    Questions remain for families, workers, and employers 
because there's a huge gap between what they hoped for and what 
they got.
    Good intentions don't guarantee good results.
    Today, I'm sure the witnesses will continue to hear the 
same promises from supporters of the Affordable Care Act. Mr. 
Kelly, I don't think you'll find much comfort in the fact that 
even though your premiums keep going up, supporters of the law 
today will tell you that if you look at the numbers the right 
way, premiums are going down.
    In addition to the rising costs for businesses, the 
witnesses today will also explain how the law's requirements 
will directly impact workers. Steve Lozinsky operates a 
cleaning service that he's grown from one employee to over 200. 
Mr. Lozinsky's business runs on a tight margin. When he bids on 
contracts, the cost of his services is often the determining 
factor. With less than six months to go until the Affordable 
Care Act is implemented, Mr. Lozinsky is weighing three options 
for his company. Option one is reduce every employees' hours to 
less than 30 hours per week. Option two is fire 100 employees. 
There is a third option--go out of business. Mr. Lozinsky is a 
real-world example of how the employee mandate is causing havoc 
for American families.
    Members on this committee may have their own opinions on 
whether passage of the Affordable Care Act was the right 
decision but we cannot disagree on the facts: the costs and 
requirements of this law are forcing many businesses across the 
country to make difficult decisions, decisions that will impact 
the strength and growth of their companies, the wages of their 
workers, and their ability to hire new staff. The witnesses 
before us today are not outliers. Last week a new Gallup poll 
revealed that 41 percent of small businesses have frozen hiring 
because of Obamacare. Meanwhile, that same Gallup Poll found 
that 19 percent of small businesses have reduced their number 
of workers because of the law. That is remarkable: nearly one 
fifth of the nation's small businesses have reduced employment 
because of the Affordable Care Act.
    Uncertainty over the impact of this law is building mere 
months from full implementation. The nonpartisan Government 
Accountability Office told this committee last week that 
implementation of the law is behind schedule. Premiums continue 
to climb-although this hasn't stopped the law's defenders from 
claiming otherwise. Competition has failed to materialize as 
well; not only are we hearing stories about insurers sitting 
out the Exchanges in places like New Hampshire, North Carolina, 
and California, last week we learned that one of the nation's 
largest insurers was simply going to exit the California 
individual insurance market altogether. Meanwhile, stories 
continue to break about cash-strapped local governments cutting 
hours of workers because they simply cannot afford the 
healthcare law.
    Again, I want to thank our witnesses before us today. It 
takes courage to come here and talk about the nuts and bolts of 
your businesses, and we all greatly appreciate you taking the 
time to do so.

                                #  #  #

    Mr. Murphy. With that, I'm going to turn the remainder of 
my time over to Dr. Burgess.
    Mr. Burgess. I thank the chairman. And I also want to join 
with thanking the witnesses for being here, taking time away 
from your families and out of your productive lives to share 
your stories with us. It is important that you do so.
    So the President promised when he signed the Affordable 
Care Act that it would add hundreds of thousands of new jobs to 
the United States economy. But as we get closer and closer, 6 
months and 5 days, to full implementation, it becomes apparent 
that job loss, not job creation is the actual result.
    Look, business owners, I know, because I was one before 
coming to Congress, you tend to be goal-directed. The natural 
inclination of a business owner is to want to expand and grow. 
But instead of facilitating this growth, the healthcare law 
incentivizes businesses to decrease their workforce, and even 
provides an outlet for employers to drop employees by providing 
Federal subsidies in the exchange.
    The Affordable Care Act not only burdens many workers with 
lower wages, fewer hours, reduced job growth, but it also 
increases the possibility of business failure. At a time when 
the country is finally beginning to find relief from the severe 
recession and high unemployment, it's not the time to 
discourage economic growth. Let's remove the hurdles that the 
President has placed on economic growth and job creation and 
empower our businesses to propel the United States toward full 
economic recovery.
    I thank the chairman for the recognition. I will yield back 
the time.
    Mr. Murphy. The gentleman yields back.
    I now recognizes the ranking member of the committee Ms. 
DeGette for her opening prepared statement, 5 minutes.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you very much, Mr. Chairman. I really 
appreciate your holding this hearing.
    As we have been discussing for a long time, ensuring that 
the Affordable Care Act is properly implemented is a top 
priority for me and should be for all of us.
    I agree with you that there is a great deal of confusion 
and even fear about what the Affordable Care Act will mean for 
businesses and their employees. Just like everybody else on 
this committee, I hear this every week when I go home to Denver 
from all sizes of businesses.
    I hope the hearing can help clear up some of the confusion 
and bring to light some of the very real benefits this law is 
already providing to businesses and their employees. I also 
hope that it can help key in for us some of the areas that we 
need to improve and have further hearings on in this oversight 
subcommittee.
    I do just want to mention several key pieces of the 
Affordable Care Act that are already benefiting small 
businesses. The Affordable Care Act contains tax credits that 
can reduce the cost of small businesses' health insurance by 35 
percent. Four million businesses are eligible for this tax 
credit, and nearly 400,000 have already taken advantage of it. 
Beginning next year, the value of the tax credit will rise to 
50 percent of an eligible small business' health insurance 
costs. I hope we can work together to help educate our small 
businesses about this important benefit of the health reform 
law.
    On Friday of last week, I met with a group of small 
businesses at one of our small business incubators in Denver, 
and I asked these small businesses how many of them really 
wanted to offer insurance to their employees. All of them 
raised their hand. Every single one of them raised their hand. 
And then I said to them, did you know that you will be eligible 
for a tax credit of up to 50 percent of your costs? And most of 
them were unaware of that. So I think there's a big education 
process that we need to undertake to let people know the 
benefits they can get.
    Something else that the Affordable Care Act will help with 
is it contains medical loss ratio provisions to limit overhead 
and administrative waste by insurance companies. Now, I heard 
from the chairman--and I hear from small businesses all the 
time--that premiums increased dramatically the last couple of 
years, and that is correct. That is exactly why we passed this 
bill, and that's why we put the medical loss ratio provisions 
in the bill, because insurance rates have just been going wild 
the last number of years.
    So the provisions that we put into effect in the bill have 
already helped with $1.6 billion in rebates by insurance 
companies to consumers, and they have also contributed to $5 
billion in premium savings over the past 2 years. But in the 
next few months, nearly 6 million business owners and employees 
will get over $310 million in rebate checks from their 
insurance companies. And these medical loss ratio provisions 
are only going to continue to work to bend the curve of the 
increase in premiums that our small businesses have been 
seeing.
    The Affordable Care Act contains a number of long-overdue, 
commonsense reforms that are driving down the costs of health 
care and pushing waste out of the system. And as these reforms 
are have gone into effect, we have seen a persistent slowdown 
in the core cost of health care. Medicare cost growth is at 
historic lows. PricewaterhouseCoopers found that overall 
healthcare cost growth was at its lowest level in 50 years. So 
this slowdown, combined with the other provisions of the ACA, 
will help small businesses begin to afford healthcare coverage.
    But we all know the biggest changes are going to come in 
2014. Small businesses will have the opportunity to purchase 
health insurance on the State or Federal marketplaces. They 
will benefit from increased competition. There will be more of 
a choice in healthcare plans with quality benefits, and 
businesses are going to be able to compare them side by side.
    Businesses will also no longer be in danger of facing 
significant cost increases just because one of their employees 
becomes ill or has an accident.
    Of course, there is also a new responsibility for business 
owners. Many will be required for the first time to provide 
minimal health insurance for their employees. I can understand 
why businesses are nervous about this, but while the benefits 
are great, the burden is not likely to be as high as folks 
fear. If a business has less than 50 employees, there's no 
penalty if they do not over offer coverage. If there are more 
than 50 employees, it's likely that the coverage they already 
have complies with the law. If they don't offer coverage, 
there's going to be new options to give people coverage.
    And so I know there is a lot of healthy skepticism. I hear 
it from my constituents, too. I look forward to working with 
you, Mr. Chairman, and the witnesses here today to help 
implement this bill so that it works for everybody and gives 
high-quality health insurance for all Americans.
    Thank you very much.
    Mr. Murphy. The gentlelady yields back.
    I now turn to the chairman of the full committee Mr. Upton 
for 5 minutes.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Mr. Chairman.
    One of my top priorities as chairman of this committee has 
been rigorous oversight of the Affordable Care Act to learn 
more about how the law is being implemented and how it is 
impacting Americans and the Nation's jobs creators.
    Last month, the committee released a report based on actual 
data provided by the Nation's leading insurers that chronicled 
the looming premium rate shock in store for millions. And just 
last week the nonpartisan GAO released a report requested by 
this committee about implementation, and the findings raised 
additional red flags.
    The GAO found that despite having over 3 years to prepare, 
this administration is woefully unprepared for implementation, 
and the missed deadlines and delays show potential for further 
challenges ahead of the October 1st enrollment date.
    Today we are here to learn more about how the Affordable 
Care Act is affecting business owners and their employees. It's 
our job creators who are on the front lines of implementation. 
They have a very important story to tell, and I would like to 
welcome our witnesses and thank them for taking the time to be 
here for this important discussion.
    Like many small businesses across the country, the choices 
facing the business owners who will testify this morning are 
not easy ones. Because of the cost of the law and its 
requirements, these businesses will have to make gut-wrenching 
decisions whether they can keep the employees that they have, 
whether they will have to lay off employees or reduce their 
hours, and whether or not they can continue offering health 
insurance altogether. These are not hypotheticals issues; these 
are real questions businesses are facing today.
    And we'll hear today for some businesses the costs of the 
law may force them to close their doors, reduce their hours. 
Despite the President's promise that the law would lower costs 
for businesses and families, the testimony of these witnesses 
reveals that the Affordable Care Act is not, in fact, 
affordable to a number of them and for many of the small 
business owners across the country.
    Sadly, job creators large and small across the country are 
facing very difficult, similar decisions. In Michigan, a 
medical device manufacturer announced that it would lay off 
1,000 folks--1,000 employees from across its global workforce 
because of the Affordable Care Act.
    The healthcare law's threat to job creators and job growth 
is real, and I worry about similar announcements that will be 
all too common. Our rigorous oversight will continue as we fast 
approach the law's full implementation.
    And I yield the balance of my time to Mrs. Blackburn from 
Tennessee.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    One of my top priorities as chairman of this committee has 
been rigorous oversight of the Affordable Care Act to learn 
more about how the law is being implemented and how it is 
impacting Americans and the nation's job creators. Last month, 
the committee released a report, based on actual data provided 
by the nation's leading insurers, that chronicled the looming 
premium rate shock in store for millions. And just last week, 
the nonpartisan Government Accountability Office released a 
report requested by this committee about implementation, and 
the findings raised additional red flags. The GAO found that, 
despite having over three years to prepare, the administration 
is still woefully unprepared for implementation and the missed 
deadlines and delays show potential for further challenges 
ahead of the October 1st enrollment.
    Today, we are here to learn more about how the Affordable 
Care Act is affecting business owners and their employees. It 
is our job creators who are on the frontlines of 
implementation--they have a very important story to tell, and I 
would like to welcome our witnesses and thank them for taking 
the time to be here for this important discussion. Like many 
small businesses across the country, the choices facing the 
business owners who will testify this morning are not easy 
ones. Because of the costs of the law and its requirements, 
these businesses will have to make gut wrenching decisions--
whether they can keep the employees they have; whether they 
will have to let employees go or cut their hours; or whether 
they can continue offering health insurance altogether to their 
employees. These are not hypothetical issues. These are real 
questions businesses are facing right now. As we will hear 
today, for some businesses, the costs of this law may force 
them to close their doors. Despite the president's promise that 
this law would ``lower costs for businesses and families,'' the 
testimony of these witnesses reveals that the Affordable Care 
Act is not, in fact, ``affordable'' for many of the nation's 
small business owners.
    Sadly, job creators large and small across the country are 
facing similar difficult decisions. In my home state of 
Michigan, a medical device manufacturer announced it would lay 
off over 1,000 employees from across its global workforce 
because of the Affordable Care Act. The health care law's 
threat to job creators and job growth is real, and I worry 
similar announcements will soon be all too common. Our rigorous 
oversight will continue as we fast approach the law's full 
implementation.

                                #  #  #

    Mrs. Blackburn. I thank the chairman for yielding.
    I welcome all of our witnesses, and I especially want to 
welcome a Tennessean, Mr. Hugh Morrow, who is a constituent of 
Congressman Fleischmann's, and he is out of the Chattanooga 
area and has a wonderful location there. He's president of Ruby 
Falls, and Ruby Falls is this Nation's largest and deepest 
waterfall that is open to the public.
    So welcome, Mr. Morrow. We look forward to your perspective 
on how the Affordable Care Act is going to affect you, your 
business, seasonal, part-time workers, and how that law's 
definition of a full-time employee affects you.
    So welcome to all, and I yield the balance of my time to 
the gentlelady from North Carolina Mrs. Ellmers.
    Mrs. Ellmers. Thank you, Madam Vice Chairman, and at this 
time I am introducing my witness, Mr. Lozinsky from North 
Carolina. It is my honor to do so today.
    Mr. Lozinsky and I became friends while discussing many of 
the issues that he had concerns about--with health care 
lawbeing implemented, or, as we call it, the Affordable Care 
Act, Obamacare, the Unaffordable Care Act. And since that time 
we've had many discussions, and I have actually witnessed the 
changes that have occurred in his business and the concerns 
that he has had.
    His business was started a number of years ago in 1998 with 
1 employee, now having 240 employees. He is a small business 
owner. He loves his employees, they are family, and he has 
expressed this to me many times. He is very concerned. Thank 
you for being here today and the bravery that you're showing 
coming forward to discuss this issue.
    Mr. Murphy. The gentlelady yields back the balance of her 
time.
    I now turn to Mr. Waxman, the ranking member of the full 
committee, for 5 minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman.
    My hope is that this can be a productive hearing. We need 
to educate small businesses about their new benefits and new 
responsibilities under the law and make sure that we're on the 
right track to have the State and the Federal marketplaces for 
small businesses to purchase insurance up and running by 
October 1.
    But I'm concerned that today's hearing will be just another 
exercise in fear mongering and misinformation, a continuation 
of the Republican strategy on healthcare reform for more than 3 
years now. After all, we've faced 37 times efforts to repeal 
the law in part or in its entirety on the House floor. And even 
one of our Republican's witnesses today said, I quote, ``little 
patience,'' unquote, for this fruitless effort.
    Well, Mr. Chairman, I held a series of forums with small 
businesses in my district. These business owners wanted to know 
what the law requires, the benefit it offers, and where they 
can get more information. This is the law after all, and they 
needed the basic facts about the law, not the propaganda.
    It was helpful for them to know that businesses with fewer 
than 50 employees do not face a penalty if they offer no 
coverage to their employees. It was helpful for them to know 
that the Affordable Care Act does not require employers to 
provide coverage to part-time and seasonal workers. They are 
gratified to learn that beginning on January 1, 2014, they'll 
be able to use the marketplaces to choose from a wide variety 
of healthcare plans for their employees, and that they'll 
benefit from new transparency and competition in the 
marketplaces, that they will not have to worry about their 
premiums skyrocketing because one of their employees becomes 
ill or has an accident, and that they may be eligible for tax 
credits to pay for up to 50 percent of the cost of coverage.
    My colleagues who have expressed a great deal of concern 
about this issue, or employers that may have to close their 
doors should be reminded, 95 percent of employers in this 
country with 50 employees or more already have healthcare 
coverage for those employees. So when we hear about people 
closing their door, well, we hear that for anything the 
government hopes to do. Whether it's to protect people in the 
workplace from hazards or exposure to chemicals that may harm 
them, or to regulate the businesses in which they act, we hear 
it all the time, they're going to have to close their doors.
    Mr. Chairman, we should be joining together to make sure 
the Affordable Care Act is implemented effectively, not wasting 
time on dozens of votes to repeal the law. I noticed that one 
of our witnesses that the Democrats suggested, Mike Brey, for 
example, is a business owner who knows that quality health 
coverage is a valuable way to attract quality employees. He has 
seen health insurance premiums rise dramatically in the years 
before reform. He's starting to see new competition amongst 
insurers, and finally he sees an opportunity to get costs under 
control.
    Members of Congress have an important jobs in the months 
ahead. Our constituents are coming to us looking for help in 
understanding their new benefits and new responsibilities. We 
have an obligation to give them the facts about the law and to 
help them understand their options in a fair and 
straightforward way. I hope all members of this committee will 
join with me in that effort. Our goal should be to educate, not 
scare or mislead.
    Mr. Waxman. I want to yield a brief period of time to the 
gentleman from Maryland Mr. Sarbanes to introduce his witness.
    Mr. Sarbanes. I thank the gentleman for yielding. I 
appreciate the committee giving me the opportunity to join the 
hearing today.
    I'm excited to welcome Michael Brey here, who is a 
constituent of mine from Annapolis, Maryland.
    Michael, as you can see, Members of Congress will walk over 
hot coals to welcome their constituents here to these hearings. 
It hasn't been that difficult today because the committee has 
indulged me.
    But we are excited to have Michael here. He is the founder 
and president of Brey Corporation, which he started back in 
1992. He acquired Hobby Works, which is a unique toy store 
offering models, trains, planes, boats, games, in 1993, and 
since that time he has increased Hobby Works to five locations 
in Maryland and Virginia. The sales have grown 600 percent to 
$5 million in 2012.
    Michael may be familiar to some of you because he is 
someone who is a strong advocate for small businesses. He has 
worked with Members on both sides of the aisle over time in 
both the House and Senate on how healthcare issues impact small 
businesses, and we are very excited to have him here and hear 
his discussion of why he thinks the Affordable Care Act offers 
real opportunities for relief to his business.
    Thank you, Michael, for being with us.
    I yield back.
    Mr. Murphy. The gentleman's time has expired.
    So now all of our witnesses have been introduced. I will do 
it one more time here. Our first witness is Michael Brey. He 
owns Hobby Works, a company he started in 1992. It has grown to 
five stores in the Virginia and Maryland area.
    Our second witness is Jeff Kelly, CEO and owner of Hamill 
Manufacturing Company, the family-owned business, precision 
machining and fabricating company serving many defense 
industry-related needs.
    Our third witness, Steve Lozinsky, vice president of 
Sparkle and Shine Cleaning, providing construction and 
entertainment cleaning along with janitorial services.
    And last witness is Hugh Morrow, president of Ruby Falls, 
the Nation's largest and deepest waterfall open to the public. 
Because of the seasonal nature of his business, Mr. Morrow has 
both full-time and part-time employees.
    I'm now going to swear in the witnesses. You are all aware 
that the committee is holding an investigative hearing and when 
doing so has the practice of taking testimony under oath. Do 
any of you have any objections to testifying under oath?
    All the witnesses answered negative.
    Now, the chair then advises you that under the rules of the 
House and the rules of the committee, you are entitled to be 
advised by counsel. Do any of you desire to be advised by 
counsel during your testimony today?
    And all of the witnesses say no.
    So in that case if you would all please rise, raise your 
right hand, and I'll swear you in.
    [Witnesses sworn.]
    Mr. Murphy. You are now under oath and subject to the 
penalties set forth in Title 18, section 1001 of the United 
States Code. You may now each give a 5-minute summary of your 
written statement. We will recognize first Mr. Brey for 5 
minutes.

   TESTIMONY OF MICHAEL BREY, OWNER, HOBBY WORKS; JEFFREY S. 
KELLY, CEO, HAMILL MANUFACTURING COMPANY; STEVE LOZINSKY, VICE 
PRESIDENT, SPARKLE AND SHINE CLEANING SERVICES, INC.; AND HUGH 
               MORROW, PRESIDENT, RUBY FALLS, LLC

                   TESTIMONY OF MICHAEL BREY

    Mr. Brey. Well, thank you, Chairman Murphy, Ranking Member 
DeGette and members of the committee for having me. As you 
heard, my name is Mike Brey, owner of Hobby Works, a hobby and 
toy shop I acquired in 1992, which I've since expanded to five 
locations in Maryland and Virginia. I also volunteer my time 
and entrepreneurial expertise to help other small business 
owners and small business advocacy groups find solutions to 
problems that we, small business owners, face every day.
    One of the fastest-growing problems is the nonstop rising 
cost of health insurance, and that's what I'm here to talk 
about today. From the very beginning, I offered health 
insurance coverage to keep and retain my good employees, and 
one of the first questions people ask me when you're hiring is 
if you provide health coverage. And I have taken some pride in 
being able to say, yes, and the coverage we're offering you is 
the same coverage that the president of the company and his 
family are on.
    My business has been successful, and we've been able to 
grow, but my ability to keep my workers happy and secure by 
providing health insurance coverage has eroded. Our health plan 
once cost 100 bucks a person, all of which was covered by the 
company. Over the years our premium has tripled. My employees 
have seen their costs increase fivefold as they pay more of the 
premium for worse coverage. My workers are burdened by high 
deductibles, and so they put off preventive care for themselves 
and their children by avoiding the doctor.
    Passage of the Affordable Care Act was the first thing in 
years that gave me some hope that this endless spiral of 
escalating costs and declining quality of coverage might 
finally end. I'm looking forward to full implementation of the 
Affordable Care Act next year when our State exchange opens and 
more cost-containment provisions go into effect. Perhaps then I 
will finally start to have the certainty and stability every 
business owner craves.
    There are benefits of the ACA for my small business. Long 
before anybody ever heard of Obamacare, the high cost of health 
insurance was one of my top business concerns. Costs 
skyrocketed for many years while quality of coverage decreased. 
The status quo was utterly unacceptable. Doing nothing would 
have wreaked havoc on mine and other small business owners' 
bottom lines and our ability to create jobs.
    An MIT economist, Jonathan Gruber, did an analysis of the 
consequences of doing nothing. He found that without reform 
employers would pay trillions, $2 trillion, in healthcare costs 
by 2018, costing several hundred thousand jobs, $800 billion in 
small business wages, and $50 billion in profits. Those numbers 
show why passage of the Affordable Care Act was so important.
    There have been objections from small business owners about 
this law, but I believe that that discontent is largely based 
on misinformation and myths. One myth I hear all the time is 
that small businesses will go out of business because they'll 
be required to provide costly health insurance to their 
employees. This is simply not true. Ninety-six percent of 
businesses in this country have fewer than 50 full-time 
employees, which means they're essentially unaffected. Of the 4 
percent who do have more than 50 employees, 96 percent of them 
already offer insurance. So that leaves less than two-tenths of 
1 percent--not 2 percent; two-tenths of 1 percent of small 
businesses that have more than 50 full-time employees that 
don't offer insurance that will be impacted. That's a pretty 
small segment of the community.
    I'm one of those employers with fewer than 50 full-time 
equivalent employees, and starting next year I'll be able to 
use our State SHOP Exchange to purchase coverage. This is huge. 
In Maryland we haven't had a lot of choice. This exchange will 
allow me to pool together my buying power with other small 
business owners when purchasing insurance. Presumably with a 
larger--with more competition and a larger pool, the market 
will become more competitive, and prices will stabilize, maybe, 
maybe even come down as a result. And I crave this kind of 
predictability.
    Another way the law will help me is to rein in the hidden 
costs in the system, like shouldering the burden, the huge 
burden, of uninsured receiving medical care. When everybody is 
required to have insurance, there won't be the need to pass 
those costs on to me.
    The Affordable Care Act isn't perfect and won't solve all 
of our business problem overnight, but it is the first 
meaningful law in decades that meets many small business core 
needs in regards to rising healthcare costs. In this fragile 
economy, policies that allow me to spend less on health 
premiums, and reinvest more of my profits, and create more jobs 
is what I need the most.
    Implementing and strengthening the Affordable Care Act is 
the only logical path forward to lowering the overall cost of 
health care, providing more options for coverage for small 
business owners like myself, and enabling small businesses to 
resume our traditional role as primary job generators.
    I would like to thank the committee for having me and 
giving me the opportunity to address you today.
    Mr. Murphy. Thank you.
    [The prepared statement of Mr. Brey follows:]


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    Mr. Murphy. Mr. Kelly, you're recognized for 5 minutes.

                 TESTIMONY OF JEFFREY S. KELLY

    Mr. Kelly. Good morning. Chairman Murphy, members of the 
committee, thank you for the opportunity to testify today.
    My name is Jeff Kelly, CEO and owner of Hamill 
Manufacturing, a veteran-owned family business based in Penn 
Township, Pennsylvania. The company was started by my father in 
a chicken coop in 1952 in our backyard. Our first contract was 
for parts for the U.S.S. Nautilus, the first nuclear-powered 
Navy ship. Hamill has produced critical components for every 
naval reactor built since, and we plan to continue to do so.
    Our company is made up of machinists, welders, inspectors, 
engineers, administrators, among others. There are about 125 of 
us in the Hamill family, and I cannot stress that point enough 
that Hamill, just like thousands of other small businesses, our 
employees are our family. I plan to retire in 4 years, at which 
point Hamill will be 100 percent ESOP. Currently the employees 
own 49 percent of the company.
    We pay well. Our average salary is about $50,000, which, 
combined with our company size, means we are largely on our own 
and will not benefit from most of the subsidies and tax credits 
from the Affordable Care Act.
    We offer good benefits to help to attract and retain 
talent. In southwest Pennsylvania companies like ours compete 
against much larger employees who can offer higher wages and 
more easily absorb increased healthcare costs. The irony of 
this: The cost of our generous plans are increasing so rapidly 
that we can no longer provide regular wage increases, which we 
need to attract and retain the best talent.
    Our healthcare costs for the fiscal year ending March 10--
March 31, 2010, were 795,000. Today with the same number of 
employees, they are 1.2 million. And we have--would have been 
1.8 million were it not for changes we made to prevent 
catastrophic increases difficult for any small business to 
absorb.
    The future should be bright, but current and future 
healthcare costs cloud it. The Affordable Care Act is proving 
to be unpredictable and unaffordable. Since the passage of the 
law in 2010, our healthcare premiums have increased 46 percent. 
It would have been 20 percent higher if we had not taken some 
extraordinary means to hold the increase to 20 percent. A 
nearly 50 percent increase in healthcare costs is virtually 
impossible for small business to absorb, let alone a two-thirds 
increase.
    To avoid the additional 20 percent, we changed carriers, 
doubled our deductible from 2,500 per individual and 5,000 per 
family to 5,000 and 10,000. We also instituted an aggressive 
wellness program and charged a premium for all employees and 
spouses who are tobacco users. The higher deductible was 
misleading since we, as the employer, cover 95 percent of the 
employees' costs, meaning the company covers 4,500 or 9,000, 
while the employee pays a 500 individual and 1,000 family 
deductible. That means the amount the company will pay each 
year actually depends on how many employees and by how much 
they exceed their nominal deductible. In the past fiscal year, 
those additional costs were $110,000, money we could have used 
to hire two employees or increase wages to retain employees.
    So we track two numbers, the premiums we pay and the 
company portion of the plan deductible. Currently the company 
pays 80 percent of the premium, while the employee pays 20 
percent of the balance. In time we will have to ask employees 
to share more of the expense towards a 60/40 split. The speed 
with which we move to that position will depend on how steep 
the future cost curve is. That may in turn cause us to lose 
valuable employees. Talk about a no-win situation.
    In addition to the actual cost involved with having a 
company-sponsored healthcare plan, one cannot overstate how 
much management time and resources are spent on administering 
the plan. One wonders if running or starting a small business 
is really worth the effort.
    I want to be clear: This is not just about how much our 
company pays for health care. I know many believe the 
Affordable Care Act will lower costs for small businesses, but 
the opposite has occurred for us. As implementation nears, 
insurance companies are pushing down as many increases as they 
think employers can absorb.
    Unlike the Federal Government, we in small business have to 
budget for future costs today. How can I develop a business 
strategy for 2014 when I can't estimate future costs?
    We will manage next year, but I'm most concerned about when 
our company becomes 100 percent employee owned. I doubt they 
will like running a healthcare provider, which is what we're 
becoming, instead of a manufacturing company that they thought 
they were getting.
    Thank you for the opportunity to testify before you today 
and bring attention to this serious problem.
    Mr. Murphy. I thank the gentleman.
    [The prepared statement of Mr. Kelly follows:]


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    Mr. Murphy. Mr. Lozinsky is recognized now for 5 minutes.

                  TESTIMONY OF STEVE LOZINSKY

    Mr. Lozinsky. Good morning. Thank you for the opportunity 
to speak.
    My wife Kathy and I run a cleaning company in Apex, North 
Carolina, with 240 employees. We are very concerned on how this 
law will affect our employees. With a $2,000 fine for every 
employee after 50, we cannot afford the $380,000 a year that 
the law will cost us. It looks like our only option will be to 
cut our employees' hours to less than 30 hours a week, but this 
will have a devastating effect on our employees' paychecks and 
their ability to pay their bills.
    Most of our employees are minorities, and we also have 
programs to hire felons that cannot find work anywhere else. So 
this law that was supposed to help your lower-income workers 
will end up hurting my lower-income workers.
    We try to be fair and follow the law and pay all of our 
employees over minimum wage, but because of some of our 
competition pay their employees off the books or as 1099 
employees, they already start off with a competitive advantage 
against us because they don't pay unemployment insurance, 
compensation, Social Security and Medicaid. So with the 
implementation of this law, they're not going to follow this 
law either, so that just gives them another competitive 
advantage bidding against us.
    Ninety percent of our jobs are bid, so it's a very, very 
small, small margin, and it's a very tight competition. So our 
competition who don't play fair, this will give them an extra 
competitive advantage against us.
    But I'm not here to criticize the law; I'm here to try to 
find a solution to our specific problems for our employees and 
to try to better their--better them. So any suggestions you 
have will be greatly appreciated. Thank you. Sorry, I'm a 
little nervous.
    Mr. Murphy. You are doing a great job. Thank you, Mr. 
Lozinsky.
    [The prepared statement of Mr. Lozinsky follows:]


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    Mr. Murphy. Now, Mr. Morrow, you're recognized for 5 
minutes. Make sure your mic is on, and pull it close to you.

                    TESTIMONY OF HUGH MORROW

    Mr. Morrow. Good morning, and thank you, Mr. Chairman and 
members of this committee. I'm here today representing the Ruby 
Falls and its employees. Ruby Falls is an 84-year-old small 
business that employs over 100 strong in the height of our 
season, and it's supported by approximately 40 full-time 
employees year round.
    Ruby Falls is better known as the tallest underground 
waterfall open to the public. We've been mentioned in such 
lists as the top seven natural wonders in the U.S.A., and 
number two waterfall--underground waterfall by World Reviewer 
travel site on Earth. A simple way to explain what we are, you 
take a 260-foot elevator ride down into the cavern, walk 2,000 
feet into a limestone mountain, and when you arrive at the 
falls, you're 1,100 feet underground and view a 145-foot 
waterfall. People have been doing this for over 80 years. 
During 2013, we will host close to 400,000 people. It truly is 
a unique experience that has spanned generations.
    Since 2008, Ruby Falls has had its challenges, as most 
small businesses have in the travel and leisure area. 
Disposable incomes have been down, the cost of travel and 
energy prices have been up, so, being reliant on the drive-in 
market, we have struggled.
    Fortunately, Ruby Falls has thrived over the 5 years. Our 
workforce is comprised of full-time and part-time workers that 
are second to no organization in this country. I could not be 
prouder to be representing them today.
    This group is a homogeneous mix of Ruby Falls career 
employees, retirees, and those working while transitioning to 
other jobs, and a mix of students both high school and college 
age. Our payroll has increased 27 percent over the past 4 
years, and this does not include the contract labor, such as 
technicians, plumbers and electricians that we retain.
    Many people ask me how do we keep such a great group? The 
main reason is that we fit and conform to where they are in 
their life situation. One of those options is that we offer 
full-time qualifying employees health insurance that is 100 
percent employer paid for the individual coverage. How can an 
employer manage these costs? We have crafted the plan that 
works for both us and our employees that focuses on their 
needs, not the needs of every American.
    Now, because we have to combine the full-time employees 
with part-time employees that choose to work for us part time, 
our full-time equivalents will exceed 50 employees. Why is this 
important? Because we are in this category, we will not be able 
to buy insurance at the benefit levels that work for our 
business, and we'll have to move to higher levels that are 
mandated by the Affordable Care Act.
    And since 2006, we have seen premium increases that have 
not exceeded 5 percent, but this past year we saw 21 percent 
and are projected to see higher than 30 percent increases for 
2014. We are working in a very competitive market, as I 
mentioned earlier. Absorbing these costs and passing them on to 
our customers is not an option.
    We have spent more time analyzing the effects of this law 
than creating memories for our visitors. For the first time in 
my career, business growth and creating jobs has become a 
secondary task.
    You know, why invest capital? Significant cost increases we 
will see because of the increased mandated benefits will reduce 
our ability to grow going forward. As I mentioned, we have 
grown our payroll 27 percent, invested over 2 million in 
capital and expansion, and invested in the Chattanooga and 
surrounding Tennessee community. Ruby Falls is the first U.S. 
attraction to be certified by Green Globe, an international 
achievement, for our environmental stewardship of our business. 
A huge part of that certification was a reduction of power 
usage, and we were the first solar-powered cave in the U.S. 
Yes, solar power is an important part of our ongoing plan.
    Throughout these tough economic times, we have operated on 
less resources, reassigned and eliminated nonproductive 
positions, reduced inventory, but have still managed to 
increase customer satisfaction and revenues. The expenses 
created by the Affordable Care Act are not affordable and will 
force us to reduce payroll, share in the cost, reduce 
investments and growth, or a combination of all three. None of 
these solutions create jobs.
    I represent our team by saying the coverage we have we 
would like to keep, but the coverage we are being mandated to 
have is unaffordable. More people have healthcare coverage 
available today because we grew our business. We hope to 
continue to do that going forward just as we have in the past. 
And thank you for your time and attention. I look forward to 
your questions.
    [The prepared statement of Mr. Morrow follows:]


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    Mr. Murphy. I thank the panel.
    I was looking at pictures before of the falls. We would 
love to have a hearing there sometime. It would be nice.
    I will go on with questions, and I will recognize myself 
first for 5 minutes.
    Mr. Kelly, you testified today that since passage of the 
affordable care law, your premiums have continued to climb. 
Could you elaborate on the amount of your recent premium 
increases, and do you expect more in the future?
    Mr. Kelly. We do. As I said, it was a 46 percent. That's 
since 2010. There was one big year, which was last year, that 
was 23--well, actually was 23 percent. The initial premium 
request that came in from Highmark was 42 percent. We were able 
to--we had to double our deductible, and we had to basically 
tell them we were going to leave them if they don't--we ended 
up with a 23 percent increase. That was last year.
    This year we moved to from Highmark to HealthAmerica, and 
we still had a 15 percent increase, and that was when we 
doubled our deductibles again.
    Mr. Murphy. Can you give me an idea of what the cash amount 
of that percentage is?
    Mr. Kelly. Well, I can actually----
    Mr. Murphy. If you don't have it handy. I was just 
wondering with regard to percentage, but I just wonder how 
much. But that's something that comes out of the employees'----
    Mr. Kelly. A couple hundred thousands dollars.
    Mr. Murphy. I was wondering what that was per employee.
    How has it impacted your ability to plan for the future? 
Are you able to hire or expand?
    Mr. Kelly. We have to figure out what we're going to do to 
keep employees. You know, what we're faced with in southwestern 
Pennsylvania, our competitors are large OEMs; it's not other 
small businesses. And they typically can offer higher wages and 
richer healthcare plans. So when I ask my employees to take--
pay more of the premium plus have a higher deductible, even 
though we cover 95 percent of the deductible, it still means 
less money in their pocket. So I just had a welder walk out the 
door the other day because under our new healthcare plan, there 
was a certain procedure that was covered under Highmark, wasn't 
covered under HealthAmerica. He said his wife needed this 
procedure. He left and went to the L8 company. And that's 
happening, and I expect it to happen more regularly.
    Mr. Murphy. So you're saying--your conclusion is that the 
way health care is going is affecting your ability to recruit 
or train workers?
    Mr. Kelly. Absolutely, Congressman. We're not--we're very, 
very careful about hiring somebody today. Where we would--I 
need welders, and I need machinists, but frankly I've got to be 
very, very careful, because knowing that when you hire 
somebody, you're going to pay at least 50,000 in wages, another 
$20,000 in benefits, you have to be very cognizant of what 
that's going to mean to your bottom line.
    Mr. Murphy. So supporters of this law have claimed that 
directly costs have gone down, or with tax credits it's going 
to lower your costs and allow you to keep the coverage you 
currently enjoy. First of all, are you able to take advantage 
of these tax credits?
    Mr. Kelly. No.
    Mr. Murphy. Why is that?
    Mr. Kelly. Because we're 125 people. We're too big.
    Mr. Murphy. It cuts off at a much lower number.
    Mr. Kelly. This gentleman talked about 96 percent of the 
small businesses, but the 4 percent of the small businesses 
that are well over 50 people--small business think if you have 
less than 750 people, you're a small business. If you're a 
manufacturer, I think in some of our Federal contracts, if we 
have less than 500 people, we're a small business. So what's 
the definition of a small business? Maybe under Affordable Care 
Act it's 50, but there's a lot of people in that sweet spot.
    I was the chairman of the NTMA, the National Tooling and 
Machining Association, in 2007, and I traveled the country. I 
talked to colleagues all over the country, and many of them are 
well over 50 people. And every one of them is going to be 
affected by higher premiums and higher costs. And I can hear 
right now from my colleagues across the country they're very 
careful about hiring people. What we're doing is looking at 
automation and productivity using machine tools. I'd rather 
invest in a machine tool than a person right now because I 
don't have to pay health care for a machine tool.
    Mr. Murphy. So robotic things instead of people.
    Mr. Kelly. Yes.
    Mr. Murphy. Mr. Lozinsky, are you able to take advantage of 
the tax credits that they're being touted here?
    Mr. Lozinsky. No. I mean, even if it pays 50 percent of my 
healthcare costs at $450,000 a year, I still couldn't afford 
half--I still couldn't afford the 50 percent.
    Mr. Murphy. My understanding is the tax credit is only 
available if you fewer than, what, 25 employees? I think you're 
beyond that?
    Mr. Lozinsky. Yes, we're at 240.
    Mr. Murphy. Mr. Morrow, you're beyond that level, too, so 
the tax credits don't apply?
    Mr. Morrow. We'll be right at 51 employees.
    Mr. Murphy. I see.
    Mr. Kelly, again, so if someone operates a business, with 
the full implementation of the law coming out, let me ask this: 
Do you believe it's easy to even understand what the 
expectations are in terms of what this is going to impact in 
the future?
    Mr. Kelly. I don't believe so. I've talked to my broker at 
length, and he's a very close personal friend of mine. In fact, 
he just sent me an email the other day to tell me that there 
are four fees that are going to go into effect next year 
starting January 1: the patient-centered outcome research fee, 
the transitional reinsurance fee, the risk adjustment fee, and 
the insurer's tax.
    Those fees alone next year in the 3 months that are 
involved, from January to March, are going to cost me $11,000. 
In the full year, from April 1, 2014, to 2015, it's going to 
cost Hamill an additional $48,000. That's for no more better 
coverage, no change; those are just additional fees that are 
coming down the road because of the ACA.
    Mr. Murphy. Thank you. I see my time has expired.
    By the way, thank you for your service in the Marine Corps.
    Ms. DeGette is recognized for 5 minutes.
    Ms. DeGette. Thank you very much.
    I just want to ask a quick little series of questions to 
try to kind of clarify where we need to go to help small 
business be able to afford insurance.
    Mr. Morrow, you offer insurance to all of your full-time 
employees right now, correct?
    Mr. Morrow. Correct.
    Ms. DeGette. And, Mr. Kelly, you do also, correct?
    Mr. Kelly. That is correct.
    Ms. DeGette. And Mr.--is it Brey?
    Mr. Brey. Brey.
    Ms. DeGette. Brey. And you offer insurance to all of your 
employees, correct?
    Mr. Brey. Correct.
    Ms. DeGette. And, Mr. Lozinsky, I would assume that you 
would like to offer insurance if you could afford to do it from 
a cost perspective; is that right?
    Mr. Lozinsky. If I could afford to do it, of course.
    Ms. DeGette. And I think, Mr. Morrow, the cost of insurance 
is not cheap, and it's been going up for some number of years; 
is that right?
    Mr. Morrow. We've not seen substantial increases until this 
past year.
    Ms. DeGette. OK. Mr. Kelly, I think you testified that it's 
been going up quite a bit in the last few years.
    Mr. Kelly. Yes, it has.
    Ms. DeGette. And, Mr. Brey, you, too? Have you seen 
insurance increases?
    Mr. Brey. Oh, yes, for nearly a decade.
    Ms. DeGette. I'm wondering if you could, Mr. Brey, talk to 
us about why you think it's important to give health insurance 
to your employees.
    Mr. Brey. Well, when you're one of those guys, young men or 
whatever, working for somebody else in a low-wage job, like I 
did a long time ago, you always say to yourself things like, 
well, you know what? If I ran the company, I would do blank. 
And so, working in a front-line retail job as I did, if you 
were offered insurance, it was crap insurance or----
    Ms. DeGette. And it was unusual that people were offered 
insurance in jobs like that; not just young men, but young 
women, too.
    Mr. Brey. If you were offered it at all, and that's always 
bothered me. So it's something I sought to do differently right 
from the beginning.
    Ms. DeGette. And you have done it from the beginning. And 
has it hurt your ability to grow as a company?
    Mr. Brey. We've grown 5-, 600 percent over a period of 
time. We survived through the recession. We added employees.
    Ms. DeGette. OK. And do you think that the fact that you 
offer health insurance helps you attract good employees?
    Mr. Brey. Yes, absolutely.
    Ms. DeGette. OK. Mr. Kelly, now, you testified that your 
health insurance costs have increased about 50 percent in the 
last 3 years; is that right?
    Mr. Kelly. Yes. Actually the costs--the premiums were 46 
percent; the costs were 42 percent.
    Ms. DeGette. It went from 795,000 to 1.2 million, correct?
    Mr. Kelly. Correct.
    Ms. DeGette. And, Mr. Brey, I think you testified the 
health insurance costs for your company have grown the last 
number of years, too; is that correct?
    Mr. Brey. Yes, that's correct.
    Ms. DeGette. And do you know if your health insurance has 
cost about the same as your larger competitors', or has it cost 
more?
    Mr. Brey. For a small group in Maryland, it costs more, 
because we're not----
    Ms. DeGette. I think that's true in Colorado and probably 
every place else.
    Mr. Brey. We have from one to three providers at any given 
point in time.
    Ms. DeGette. And what about shopping for coverage? Was it 
easy to compare plans side by side, or did you have to hire 
brokers? What did you do?
    Mr. Brey. I guess in the sense that in Maryland there is so 
little competition, they all offer identical plans at roughly 
the same price, it makes it easy to compare pricing, but it 
doesn't make it easy to find affordable coverage or a variety 
of coverage.
    Ms. DeGette. And this has been going on for quite a while; 
is that right?
    Mr. Brey. Yes, that's correct.
    Ms. DeGette. OK. And, Mr. Kelly, your costs have been going 
up for quite a while, too; is that right?
    Mr. Kelly. Yes, that's correct.
    Ms. DeGette. So what we're trying to figure out here with 
the Affordable Care Act, we're trying to figure out how to bend 
that cost curve, and that's part of what we're--that's part of 
what we're trying to figure out, but we're also trying to 
figure out how to make it accessible for folks.
    Mr. Lozinsky, that's one reason why I think about employers 
like you who are employing--you're employing lower-paid 
workers, but you still want to be able to get them insurance. 
Are your people eligible for Medicaid?
    Mr. Lozinsky. I'm assuming, yes, a lot of them are.
    Ms. DeGette. So that would be helpful. You could get those 
folks enrolled, and you wouldn't have to pay a penalty, did you 
know that, under the new bill?
    Mr. Lozinsky. No.
    Ms. DeGette. Part of what I think we need to do is get this 
word out to employers. There's a lot you can do.
    Mr. Morrow, I was thinking about what you said. You said 
you've got 40 full-time employees, right?
    Mr. Morrow. Approximately.
    Ms. DeGette. So technically you would be under the 50-
employee limit under the Affordable Care Act, right?
    Mr. Morrow. No.
    Ms. DeGette. Except for the part-timers that somebody is 
telling you that they're--are these part-timers year round, or 
just seasonal part-timers?
    Mr. Morrow. These part-timers are year round.
    Ms. DeGette. OK. So they're going to be put together in a 
group, and you believe that's going to take you over 50 
employees. So I think that's an area we should look at as well, 
because you want to offer your people insurance if it's 
appropriate for them, right?
    Mr. Morrow. We currently do, yes.
    Ms. DeGette. Yes. And you just don't want to have to go 
broke doing it.
    Mr. Morrow. Correct.
    Ms. DeGette. I think that's everybody's goal here.
    OK. Thank you very much, Mr. Chairman.
    Mr. Murphy. The gentlelady's time has expired.
    Now I turn to the vice chair of the full committee Dr. 
Burgess for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman.
    Mr. Morrow, let me just ask you a question. You do have 
seasonal employees, correct?
    Mr. Morrow. Correct.
    Mr. Burgess. So if I were to go to one of your typical 
seasonal employees on January 1st of 2014, the year this thing 
is implemented, and I were to asking them to estimate their 
earnings for the coming year, would they be able to give me an 
answer?
    Mr. Morrow. Well, most of our seasonal employees are in the 
summer, so January would not be a good time, but in the summer, 
yes, they should be able to.
    Mr. Burgess. But here is the point: On January 1st of 2014, 
they're going to be asked--as they apply for this Affordable 
Care Act insurance, they're going to be asked what their 
earnings are for this year coming up. And many people, myself 
included when I ran a medical practice, would have difficulty 
coming up with that figure.
    So if they're wrong when they estimate that number, and 
they underestimate their earnings, they will receive a subsidy 
to buy health care in the exchange if you don't provide the 
insurance for them. And then they could be required to pay that 
back if their actual earnings, as reported to the IRS--so that 
information will be available to the government, so they could 
be required to pay that money back.
    Is your experience that your typical seasonal employee 
would hold money in an account in case they had to pay it back 
to the government at the end of the year?
    Mr. Morrow. No, sir, they do not do that.
    Mr. Burgess. Yes. I wouldn't think so, because I wouldn't 
do it either. And we've had other people on other panels, and 
you deal with that issue of how are you going to estimate your 
earnings when you're a lawyer in solo practice, when you're a 
doctor in a group practice; how are you going to estimate your 
earnings over the coming year when it's entirely contingent 
upon factors that are completely beyond your control, such as 
the economy and other things that may be affected?
    Now, I think we're all getting a clear understanding as the 
law comes toward completion, or at least the 2014 completion, 
and I have a copy here if anybody wishes to reference it, but 
it's pretty difficult to know what the road ahead is. And it's 
difficult for us to be able to advise you of the road ahead. 
And I daresay, although it's difficult to get answers out of 
the agency, have any of you contacted the Department of Health 
and Human Services or the Office of Personnel Management--if 
your State doesn't do an exchange, the Federal Government is 
going to do it for you--have any of you contacted them for 
information about what the next year looks like?
    And I daresay they wouldn't be able to tell you, so I don't 
blame you for not making that contact, but that has 
historically has been a difficulty.
    Now, Mr. Lozinsky and, I think, Mr. Morrow, you both 
reference the fact that you deal with competitive environments. 
You deal with the fact that there are other people out there 
competing for the same space, and the same entertainment dollar 
in Mr. Morrow's case, and the same cleaning dollar in Mr. 
Lozinsky's case. Tell me--and both of your businesses have over 
50 employees; is that correct? Mr. Lozinsky, are you over 50?
    Mr. Lozinsky. Yes. Oh, yes.
    Mr. Burgess. And, Mr. Morrow, you're over 50?
    Mr. Morrow. Yes.
    Mr. Burgess. So what is the fine that people talk about 
that you might face? Do you have a clear understanding of what 
that fine is? Say you have an employee you're providing 
insurance, but they go and say, I want the subsidy in the 
exchange. I don't want your insurance, Mr. Morrow, I want the 
subsidy. Do either of--and either of you feel free to answer--
do you have an idea of what that fine is and why it's there?
    Mr. Lozinsky. I don't. I just know that if you can't afford 
to pay for insurance for your employees, the government is 
going to fine you I think it's $2,000 the first year and then 
$3,000 the second year.
    Mr. Burgess. And I appreciate you may not know the 
specifics. I daresay people on this panel don't know the 
specifics. But are you aware, as confusing as this law is, 
we're not done with you yet? The Senate is working today, this 
very day, on S. 744, a major immigration overhaul for this 
country. As a consequence of that law, there will be a group of 
individuals who are called registered provisional immigrants 
who will not be--will not have the Affordable Care Act 
available to them. The President told us this 2 or 3 years ago 
when he came to Congress. So they will be outside.
    So, Mr. Lozinsky, can you imagine a competitor who would 
staff their rolls with people who are RPIs and therefore 
outside the requirements of the Affordable Care Act? Can you 
imagine having to compete with that as a business?
    Mr. Lozinsky. No. That's part of the problem, because most 
of our competition, like I said, they're either below 50 
employees, or they pay their employees off the books, or they 
make them 1099 employees.
    Mr. Burgess. And yet you offer employment to a group of 
individuals--we got 22 million unemployed in this country, and 
you offer employment to some of the hardest people to employ; 
is that correct?
    Mr. Lozinsky. That is correct.
    Mr. Burgess. How does it make you feel that your government 
is to going to set up your competition to make your business 
model essentially extinct?
    Mr. Lozinsky. I mean, I'm very concerned about it.
    Mr. Burgess. Of course you are, and I understand it. I 
appreciate you all being here. I share your concern, too, sir. 
Thank you.
    Mr. Murphy. Now I recognize the gentleman from Texas Mr. 
Green for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    And like a lot of us, these hearings--and I know there's 
issues with this law, and there's issues with any law that 
Congress passes. And a lot of us on our side of the aisle have 
tried to sit down and say, OK, what can we do to make it better 
for the witnesses that are here today? And that's our issue.
    Instead of talking about how bad it is, the law is going to 
be the law. The Supreme Court upheld it. We passed 33 times 
last Congress in the House and 1 time this Congress. It's not 
going to change, so maybe we ought to quit saying how bad it is 
and say, OK, let's get a list of things to fix it. And we're 
not seeing that in this House of Representatives. All we're 
seeing is let's paint it bad.
    Well, I have information that says, for example, in 
California they're going to set up their own State exchange. 
The premiums are going down, and also they announced that 
there's going to be at least five different insurance carriers.
    In an earlier life I managed a small business with 13 
employees. Part of our employees were union bargaining unit. We 
had the option to go into the union plan, or have a plan that 
met that for all our employees, including our front office. And 
my job was to negotiate benefits with those carriers, and like 
some of you, I couldn't get anyone to negotiate. We couldn't 
get the top-tier companies particularly. So we would battle 
every year. And we were seeing the same percentage increases as 
you have seen in your time, but we're also seeing that some of 
those percentage increases are going down. And maybe we ought 
to hear from that. I'd like to hear from Secretary Sebelius and 
some of the Members who--the information that we've gotten come 
to that.
    So, I'm glad you all are here, but we really need to find 
out what can we do to fix it, because the law is not going to 
go away, and we have to deal with it. But in this House of 
Representatives, we're not dealing with it. All we're doing is 
saying, the dam is going to break, and we're going to get 
flooded. Well, wouldn't it be nice to say, OK, let's deal with 
it and see how we can come up with some better things?
    But as we know on October 1st, the State exchanges--or the 
national exchange. I'm from Texas, and we're not to going to 
have any State participation in our State exchange, so we will 
have a national exchange. And I'm looking forward to having at 
least five plans, whether they're from the Blue Cross, Aetna, 
you name it, because when I was in business, we couldn't get 
five companies to give us a price. In fact, my experience was 
we signed a 3-year contract, but it was always premium reopened 
the first year, and so ended up having to negotiate premiums 
every year on a 3-year plan. And I know that's the experience 
you all are having, because we didn't go through the--we didn't 
decide to only cover five of our employees under our bargaining 
unit and then try and find for the other seven or eight 
employees we had.
    Small business have the right to be nervous about health 
reform, but a lot of us who voted for that made sure there were 
things in there to help small business. You know, the 50 
employees, that's the same thing for minimum wage. That's not 
new law. If you're over 50 employees, you have to pay minimum 
wage. And so now you're going to have to cover your employees 
with some type of health care. And each of you have particular 
issues, and I wish Congress would take those issues and say, 
let's put together legislation to do it.
    Instead of, as some of my colleagues said, talk about how 
bad it is, let's see how we can fix it. When I managed a 
business, that's what we did. If I lost a customer, I'd say, 
wait a minute, what did we do wrong that that customer left us? 
We're not seeing that in this House of Representatives, and 
that's what's frustrating.
    I have a district, though, in Texas that's 44 percent of my 
constituents who work did not have insurance through their 
employer; only 32 percent did. It's a very urban area. I have 
some of the biggest companies in the country; refineries, big 
chemical plants, service companies for the oil and gas 
industry. But, again, 44 percent of my constituents who worked 
didn't have any insurance through their employer. So that's why 
there was a lot of support for this, because those employers 
were not providing health care, and they were showing up in our 
emergency rooms. And those of us who had insurance were 
continuing to see those premiums increase because somebody was 
paying that bill for those folks showing up in the emergency 
rooms.
    Mr. Brey, is it fair to say that the health insurance 
market for your small business has been problematic for quite a 
while?
    Mr. Brey. Yes. You have anywhere from one provider choice 
to three provider choices.
    Mr. Green. There was a reason why Congress passed the 
Affordable Care Act with the health insurance market for 
individuals in small businesses were dysfunctional.
    I also served in the State legislature. We tried to create 
plans, but the problem is that if you have a high-risk plan, 
and all you have are people with high risk, nobody can afford 
it, including employers.
    And I went through the experience some of you had. Since I 
negotiated it, our insurance carrier came in and said, this 
lady in your plan had a double mastectomy. If you separate her 
and get an individual plan for her, we can save you money. And 
I explained to them, I said, I'll be glad to share that with 
the owners, because that happened to be the owner's wife. And 
so, and I'm glad that company did not do that. And they 
wouldn't do it for the owner's wife, and they didn't do it for 
any of the 12 employees that we had.
    But the Affordable Care Act hopefully will solve some of 
these problems as of January the 1st, and the SHOP marketplaces 
will allow more competition, more transparency. That was the 
other reason. When I would see those premiums increase every 
year----
    Mr. Murphy. Gentleman's time has expired.
    Mr. Green [continuing]. I never understood why, why they 
did.
    But, anyway, I appreciate you all being here and explaining 
your problem. Now, if we would do our jobs and try and fix some 
of these problems----
    Mr. Murphy. Thank you. Gentleman's time has expired. 
Appreciate that. Thank you.
    I now recognize Mr. Olson for 5 minutes.
    Mr. Olson. I thank the chair. And welcome to our witnesses.
    I go home to Texas 22 every weekend, and I get out and go 
to small businesses to hear how they're impacted by Obamacare. 
I've been to property management companies, oil, and gas 
service companies, even block-walked an area of Spanish-
language businesses in historic Rosenberg, Texas. In broken 
English in Rosenberg, these three words which were said over 
and over and over, sum up Obamacare's impact on every family 
business in Texas: Bad. Hurts. Stop.
    There are many job-killing, growth-stunting parts of 
Obamacare. My questions will focus on a small part of the law 
which is hurting the very people the law is supposed help, 
Americans working minimum-wage and low-skilled jobs. They're 
being locked into a future of stagnant wages and few 
opportunities for personal prosperity.
    I'm talking about that small section which defines a full-
time employee as someone who works 30 hours per week. My staff 
has done some research. There are over 100 regulations with 
different definitions of a full-time employee. Obamacare is the 
first to define it so clearly and so broadly, 30 hours per 
week.
    A new name has emerged in American business: 29ers, people 
only being employed for 29 hours because of Obamacare. And I 
will follow up my questions from my colleague from Texas, Mr. 
Burgess. Mr. Lozinsky. Sparkle and Shine, your testimony says, 
has 240 employees, 85 percent of which are minority employees 
or people trying to get a new start from being incarcerated.
    Mr. Lozinsky. Correct.
    Mr. Olson. In light of your testimony, you have three 
options: going forward with Obamacare, reduce everybody's hours 
to something below 30, make them 29ers; can fire 140 employees, 
60 percent of your company, fire them, lose their jobs; or 
close up shop. In ancient Greece those choices are hemlock, 
cyanide, or poison mushrooms.
    Can you describe how you came to realize these were your 
only three options, and have you talked to your employees about 
what their future is going to look like?
    Mr. Lozinsky. No, we have not talked to our employees yet. 
We've been trying to research what our opportunities are. We 
have talked to our management staff already and asked them to 
get--to start getting a list of the 50 people, because the 
first 50 are exempt. So all of our project managers are getting 
their main, key people, a list to us so that we can have our 50 
that can still be full-time, and then we'll have to make tough 
decisions on the other 190, on what kind of hours we can give 
them. But we have not discussed it with our rank-and-file help 
yet.
    Mr. Olson. Do you think anyone will say, great, I want to 
work for 30 hours instead of 40 or more?
    Mr. Lozinsky. No, I don't think so. Like I said in my 
letter, we have husband and wives that work for us. Like I 
said, we have a husband and wife that works for us. They have 
three kids. They work 45 hours a week. So they get paid 40 
regular time and 5 overtime. And it's--and it's tough for them 
to survive on that amount of money. So cutting them back to 29 
hours would be devastating for their family and their kids.
    Mr. Olson. Thank you.
    This next question to you, Mr. Morrow. You have the largest 
and deepest waterfall in America, and you must be careful 
saying that in this committee because we have some Texans here, 
and bigger is better in Texas. That sounds like a challenge to 
me in many ways. But your business is seasonal, as came out 
with your discussion with my colleague Mr. Burgess. And you've 
got 40 full-time employees now, 100 seasonal employees. If you 
cross these guys and the one-season ones, do most of your 
season employees work for at least 40 hours per week, more than 
30?
    Mr. Morrow. Yes, they will work full time during--mainly 
between Memorial Day and Labor Day.
    Mr. Olson. And so they will be full-time employees. You'll 
cross 50. So you have to yield to Obamacare. You have to 
provide healthcare to these employees, all these new ones, or 
somehow modify your business; is that correct?
    Mr. Morrow. Correct.
    Mr. Olson. Can you talk to me about how the employees 
suffer because of these changes?
    Mr. Morrow. The employees are going to suffer through 
increased cost. We have paid their premiums 100 percent since 
I've been with the company 7 years ago, and it's been part of 
our family of support for them. We are going to have to pass on 
part of that expense when we see 30, 40 percent increases in 
our premium. They will have to share in that cost going 
forward, which will reduce their incomes.
    Mr. Murphy. Gentleman's time has expired.
    Mr. Olson. Thank you. Yield back.
    Mr. Murphy. Now turn to the gentleman from New York, Mr. 
Tonko for 5 minutes.
    Mr. Tonko. Thank you, Mr. Chair.
    Our Secretary of HHS Sebelius has been quoted as saying 
many were priced out, locked out, or dropped out of healthcare 
insurance coverage in the years ensuing before--the pre-
Affordable Care Act days. The question is, did U.S. companies 
or did you know counterparts that were unable to get insurance 
written for their companies at all? Any of you, to any of the 
gentlemen of the panel.
    Mr. Kelly. I can say that in southwestern Pennsylvania I've 
had fellow manufacturing companies tell me that it's 
increasingly difficult to find somebody that would insure them 
without some huge premium increase.
    If you wouldn't mind, Mr. Congressman, I'd like to make a 
comment to what Mr. Green said. He said you guys were 
complaining about the fact that--that you're looking for 
solutions, you're tired of the--the hits that Obamacare is 
taking. I'm going to give you a perspective of a businessman, 
if I might. I don't know whether I have that leeway, but I 
would happy to do that.
    You know, in my view, the Affordable Care Act was designed 
to get 30 million Americans that weren't insured insured. The 
one thing it doesn't do and hasn't done at all is to address 
the real problem. That's cost. In southwestern Pennsylvania you 
have basically one juggernaut, UPMC, University of Pittsburgh 
Medical Center. They own 60 percent of the doctors and about 80 
percent of the hospitals. There's no competition.
    You haven't even addressed cost. One of the great drivers 
of cost is malpractice insurance. Not one word was written in 
the Affordable Care Act about tort reform.
    Mr. Brey. This is not true. In Maryland in April they--
Maryland announced--we had six people announced to participate 
on the SHOP exchange. I've never had anywhere close to six 
options.
    Mr. Kelly. I know that people tell me all the time that the 
reason that doctors practice so much defensive medicine is 
because of malpractice insurance. I know, I talk to doctors all 
the time about that fact. My cardiologist tells me that. He 
said that's the real reality.
    Mr. Brey. I serve on the board of directors, the finance 
committee of a $100 million health insurance----
    Mr. Johnson. This is not a debate.
    Mr. Kelly. So I'm just saying from a perspective of a 
business person, I believe that if you want to get past the 
fact that the Affordable Healthcare Act really is about putting 
more people in--insuring those people, fine, you've made that 
step, but you haven't done anything to really address the major 
driver of costs. And if you can get costs under control, then 
things probably would work better. But they're not going to 
happen until costs can be driven down. You have to start 
addressing what are the causes of costs to be so high.
    You know, and Congressman Murphy knows this, in 
southwestern Pennsylvania you basically have an oligopoly of 
providers. You have one big, big provider, and he basically can 
charge whatever he wants. There's no competition really. It's a 
real problem. And it's one problem that, because of so many 
special interests, you people really won't have the courage to 
face that problem.
    So that's what my--as a business person, I'm going to 
challenge you folks to come up with a way to really take on 
some things that are really difficult.
    Mr. Tonko. Right.
    Mr. Kelly, I think my question to you, all of you as a 
panel, was the affordability and accessibility of health care 
pre the Affordable Care Act. I was hoping to glean some 
information on that.
    And in terms of the bending of the cost curve, that is 
indeed part of the effort here with the Affordable Care Act by 
making certain we go forward and rewarding the quality of care 
rather than just the number of tests or procedures performed.
    And, Mr. Brey, I would ask if you had something to offer 
that--to the previous statement made, I would like to hear that 
now, and then we can move forward.
    Mr. Brey. Well, listen, there was--I've seen a lot of cost 
increases long before I ever heard the term ``Affordable Care 
Act'' or ``Obamacare.'' I served on the board of directors of a 
finance committee of a hospital system, and our crushing cost 
was the burden of the uninsured. And I guess it's interesting 
to me that back then everybody--I was the evil conservative 
businessman because I thought everybody should pay their fair 
share. It wasn't fair to me--to me to be paying for those 
people. And now here I am, I'm testifying for the liberal side. 
My views haven't changed.
    So, I have seen--I've gone for 18 years in small group 
never having real choice, and now six insurance--five insurance 
companies have definitely said that they're going to 
participate in Maryland SHOP exchange, and there's one on the 
fence. So that may be six. So I may be doubling my pool of 
choices. We'll see if it actually happens.
    Mr. Murphy. Gentleman's time has expired.
    Mr. Tonko. I'm sorry. I yield back, Mr. Chair.
    Mr. Murphy. Thank you.
    Now turn to Mr. Long for 5 minutes.
    Mr. Long. Thank you, Mr. Chairman.
    Thank you all for being here today.
    Mr. Brey, how are your sales this year, year to date, over 
last year's sales? Do you find your business has improved, 
stayed the same, declined in sales?
    Mr. Brey. Our business has declined for the first half of 
this year.
    Mr. Long. It's declined?
    Mr. Brey. Yes, sir. 2011 and 2012, coming out of the 
recession, were exceptionally strong years for us. And because 
we're in this Maryland-Virginia area, I think that there's been 
a little bit of uncertainty that has made the first half of the 
year less than optimal. But May, May finished very strong, June 
is going great, and so far the summer looks really good.
    Mr. Long. So your thoughts about the Bush tax cuts 
expiring. Whenever you said that by letting the Bush tax cuts 
expire, allowing the tax rates to go back to where they were 
will help bolster the economy and with it your customer base, 
the middle class. So that didn't work out like you thought it 
would.
    Mr. Brey. Say that again.
    Mr. Long. Your comments about letting the Bush tax cuts 
expire, letting the Bush tax cuts expire on people over 
250,000.
    Mr. Brey. Well, we did----
    Mr. Long. The vast majority--let me finish. The vast 
majority of small business owners simply won't be affected. 
Allowing the tax rates to go back to where they were will help 
bolster the economy and with it your customer base, the middle 
class.
    Mr. Brey. But instead what you did is you let payroll taxes 
go up on people making $40,000 a year, and in exchange for 
going from 250,000 to $400,000 on that tax break. I mean, 
that's what happened in January. My guys making 40 grand a year 
managed--you know, 40- to $50,000 a year managing one of my 
stores saw their payroll taxes increase. So what we did is we 
took the money right out of the pockets.
    Mr. Long. We're talking apples and oranges. The Bush tax 
cuts were above 250,000 people is what you were talking about, 
which those did go back up on January 1 or January 2, if I 
remember right. So----
    Mr. Brey. I think it was over 400,000, though.
    Mr. Long. But how does letting taxes go up on people above 
250- bolster the middle class? I mean, that's money that's paid 
to the government, to us, Congressmen and Senators and people 
here in Washington that are----
    Mr. Brey. My objection at the time was it appeared--
Congress appeared to be making a trade-off, the trade-off being 
allowing payroll taxes to go up on middle-class workers in 
exchange for keeping tax rates low on high-income--on high-
income earners.
    Mr. Long. Say that again.
    Mr. Brey. I said, my perception at the time, which was in 
January, I think is when you're talking about--my perception at 
the time was that Congress appeared to be making a trade 
amongst the Members, letting payroll tax--the payroll tax cuts 
expire on middle-class workers, and in exchange Democrats would 
hold down--would--would let tax rates--would--we would make the 
cut from--go from 250---instead of the cutoff being 250-, would 
go to 400-. At the time that was the debate that appeared to be 
taking place, and that's when those comments were made.
    Mr. Long. This was back in October, not January.
    Mr. Brey. I'm sorry. I'm sorry. October.
    Mr. Long. OK. But I'm just trying to get--I mean, you're of 
the opinion that the Affordable Care Act is indeed affordable, 
and we need to work things out here in Washington. We need to 
work for the American people. We need to make health care more 
affordable for everyone, we all agree to that. Health care 
needs to be reformed, granted.
    I sit here representing the Seventh District of Missouri, 
southwest corner of Missouri, Springfield, Joplin, Branson down 
in the southwest corner. And there's a company at home that 
started out with one store back in the '60s, and now they have 
53,000 employees. And when they--when the CEO comes to me and 
says, I'm going to you; I'm going to Roy Blunt, U.S. Senator; 
I'm going to Claire McCaskill, U.S. Senator, one Republican, 
one Democrat, to explain to you all how devastating this 
Obamacare actually is, and I said, OK, I'm here to listen. He 
said, we provided great health care for our employees for 
years. They loved it. It was affordable, it was doable. Their 
estimate--Mr. Kelly, who found his rates going up by 46 
percent, I'm sure they'll want to talk to you because the way 
they calculated it, theirs are going to go up by 120 percent. 
They've already told all their part-time employees--I don't 
know how many are part time out of this 53,000--that they will 
no longer cover their health insurance next year. And they--so 
120--I forget what the dollar figure is here, wasn't actually 
for this panel, but I was just curious when I--trying to hear 
all the good things you say and all the good things that Mr. 
Green--looks like he's gone, but that Mr. Green has to say 
about this----
    Mr. Brey. But that is a tragedy, but that was going on, 
like I said, before I ever heard of the Affordable Care Act.
    Mr. Long. Well, not according to these folks who have 
53,000 employees.
    But anyway, I appreciate it. I don't have any time, but if 
I did, I'd yield it back.
    Mr. Murphy. Gentleman's time expired.
    Now go to Mr. Butterfield for 5 minutes.
    Mr. Butterfield. Thank you very much, Mr. Chairman.
    And thank the four of you for your testimony today.
    I think I'm going to begin my part by asking each of you a 
yes or no question. That seems to work very well with Mr. 
Dingell when he does it. Starting with you, Mr. Brey, do you 
accept the goal of the Affordable Care Act to make affordable 
insurance available to every single American? That's a goal of 
the Affordable Care Act. Do you embrace that goal?
    Mr. Brey. I do.
    Mr. Butterfield. Yes.
    You, Mr. Kelly.
    Mr. Kelly. Yes.
    Mr. Butterfield. Mr. Lozinsky?
    Mr. Lozinsky. Yes.
    Mr. Butterfield. And Mr. Morrow?
    Mr. Morrow. Yes.
    Mr. Butterfield. All right. Do you believe that an employee 
is happier and therefore more productive when they can cover 
their healthcare costs?
    Mr. Brey. Yes, sir.
    Mr. Kelly. Yes.
    Mr. Lozinsky. Yes.
    Mr. Morrow. Ours at Ruby Falls are.
    Mr. Butterfield. All right.
    Finally, do you agree or disagree that a good corporate 
citizen would look for responsible ways to comply with the law?
    Mr. Brey. Yes, sir.
    Mr. Kelly. Yes.
    Mr. Lozinsky. Yes, sir.
    Mr. Morrow. Yes, sir.
    Mr. Butterfield. Thank you. And that's what I anticipated 
your testimony would be.
    Let me go to you, Mr. Lozinsky. You are--you have a 
business that is a skip and a jump from my congressional 
district. I'm over in Durham and surrounding area. And so thank 
you very much for coming today----
    Mr. Lozinsky. We have----
    Mr. Butterfield [continuing]. And thank you for what you 
do.
    And I particularly took interest in the spirit of your 
testimony. You said that you came here today looking for 
solutions, and I like that. And that's the way a good 
businessman or -woman should conduct themselves. And I also 
want to thank you for offering jobs to low-income people in the 
Wake County area. That is commendable.
    Mr. Lozinsky. We have quite a few people that actually live 
in Durham also. Probably about 25 percent of our employees are 
from Durham.
    Mr. Butterfield. And you also said that some of your 
workforce are convicted felons.
    Mr. Lozinsky. Yes.
    Mr. Butterfield. And that's a big deal in my world, because 
we have so many young men who rehabilitated their lives, they 
are looking for an opportunity, and you seem to be giving out a 
better opportunity.
    Mr. Lozinsky. Yes----
    Mr. Butterfield. When this committee wrote the bill some 
years ago, and I've been on this committee now for some years, 
as many of my colleagues, a different group was in the 
leadership of this committee at the time. But when we wrote the 
bill, we anticipated that poor people would need insurance, and 
so we created what we call Medicaid expansion, which would 
cover employees or individuals from zero percent of the Federal 
poverty level to 133 percent. Many of those are working for 
you.
    Mr. Lozinsky. Right.
    Mr. Butterfield. And so it seems--Ms. DeGette mentioned 
this in her question--it seems that some of your employees 
would qualify for the Medicaid expansion if it existed in North 
Carolina. The problem is that your legislature and my 
legislature and your Governor and my Governor have chosen to 
decline to expand the Medicaid program in our State, and so the 
option that would normally be available to your low-income 
workers doesn't exist. And so if you have any influence with 
our State legislature and Governor, if you would join some of 
us in trying to convince them to try to rethink this whole 
thing. We need full participation.
    Let me now ask you, are your employees currently covered 
with insurance?
    Mr. Lozinsky. My employees?
    Mr. Butterfield. Yes. Health insurance.
    Mr. Lozinsky. No, the majority of them are not. Once our 
employees get to be at the supervisor and the project manager 
level, yes, then we offer them health care. So we have--we pay 
insurance on about--I think it's around 22 people right now.
    Mr. Butterfield. But your minimum-wage earners do not have 
insurance----
    Mr. Lozinsky. Correct.
    Mr. Butterfield [continuing]. Because you simply can't 
afford it----
    Mr. Lozinsky. I can't afford----
    Mr. Butterfield [continuing]. At this point. Yes.
    Mr. Lozinsky. My margins are very small, and yes.
    Mr. Butterfield. We anticipated that. And we had hoped 
under this act that those people that you speak of, that you 
care about and I care about, would be able to go across the 
street and qualify for the Medicaid expansion, and it's not 
happening. And that's very disappointing.
    Let me use my final minute with you, Mr. Kelly. And you 
mentioned a minute ago that you clearly understand that this is 
the law of the land. I would hope that you would find some way 
in Pennsylvania to try make this thing work. You haven't gotten 
where you are today in business without being smart, and 
shrewd, and strategic and visionary in your approach. I wish 
that you could find some way to find--to make this thing work.
    Forty-six percent of your premiums have gone up 46 percent 
since 2010. I understand the pain. I understand the problem 
that that poses to your company. And I would certainly hope 
that you would find some way to really make this thing work. 
You say that the average wage--and correct me if I'm wrong--I 
think you said the average wage was somewhere around $50,000 
for your employees?
    Mr. Kelly. Average wages for our employees.
    Mr. Butterfield. Commendable. Wonderful. But that's for a 
single individual. And I would hope that that individual's 
spouse would also be gainfully employed at some other location 
in Pennsylvania, and he or she would be making 40- or 50- or 
$60,000. That's a $100,000 family. And I would hope that that 
family would be able to find some way, some way to afford 
health insurance because they need it, you know they need it, I 
know they need it, and I hope that you could get creative and 
help your employees get insured.
    Thank you for listening. I've run out of time. I yield 
back.
    Mr. Murphy. Thank you. Gentleman's time has expired.
    Now I turn to Ms. Ellmers of North Carolina for 5 minutes.
    Mrs. Ellmers. Thank you, Mr. Chairman.
    Mr. Lozinsky, we've had numerous conversations on this 
issue. And I again commend you for coming forward, especially 
in the spirit that you're doing so, which is looking for 
solutions. But as we all know, many times in order to find the 
solutions, you also have to identify what the problems are, and 
you have to be willing to make changes that are necessary to do 
so.
    With that, I would like to say I know that you have looked 
at this issue. I know this is something that's very important 
to you because you care very much about your employees, again 
pointing out that many of these individuals are low income; 
many of these individuals, 85 percent, are minority; and you 
employ those who have formerly been in prison; and now you're 
giving them--you and Kathy have offered them a second chance.
    Some of the discussion here today has focused around the 
idea that many of your employees, because they are low income, 
would therefore be able to qualify for Medicaid. Are some of 
them already on Medicaid, to the best of your knowledge?
    Mr. Lozinsky. To the best of my knowledge, I think, yes, 
quite a few of them are.
    Mrs. Ellmers. And I guess my question to you is--and 
looking at this, and the testimony that you've submitted, 
you've pointed out that, basically what you'll have to do is 
cut back employees to under 30 hours, or what we're now calling 
the 29ers, because essentially at 29 hours you're not 
obligated.
    Mr. Lozinsky. Correct.
    Mrs. Ellmers. The point being, do your employees want to be 
cut back?
    Mr. Lozinsky. No, definitely not.
    Mrs. Ellmers. Do your employees want to work more than 40 
hours?
    Mr. Lozinsky. Yes. Most of our employees do work--our 
business is not like 9:00 to 5:00.
    Mrs. Ellmers. Right.
    Mr. Lozinsky. They go do certain amount of jobs during the 
day. And, believe me, when we have Saturday work, they line up 
for the overtime. And the majority of our employees, at least 
in our construction division, work more than 40. And they are 
always begging to work Saturday so they can pick up that extra 
time-and-a-half money.
    Mrs. Ellmers. Absolutely. So the point here is that these 
are individuals who want to better their lives. These are 
individuals who want to work, earn an income. You are an 
employer that wants to offer these jobs. You want to grow as a 
business; do you not?
    Mr. Lozinsky. Yes, I do. Yes.
    Mrs. Ellmers. In the present situation, facing the 
implementation of the Affordable Care Act, do you see your 
business growing?
    Mr. Lozinsky. No. Well, this is the first year since we've 
started that we haven't grown, and that was pretty much our 
decision because we don't know what the effects of this law is. 
We don't want to hire more people and have to lay them off, or 
hire more people and have to get them over--over 30. So what 
we've been trying to do is just bid on jobs for our present 
customers who haven't been--we haven't been trying to expand 
our customer base this year because last year we were pretty 
much getting close to 300 employees, and in--because of what 
the effect this law was going to be on that, we haven't--we 
haven't tried to grow this year until we--and hopefully we come 
up with a solution for us, and then we will hopefully continue 
to grow.
    Mrs. Ellmers. Let me ask a question about the employees 
that you have which have former prison records that you and 
Kathy have employed. In the event that you do have to layoff 
employees, and I'm assuming that some of them would--would be 
those individuals who are getting a second chance at bettering 
their lives, how easy is it going to be for them to get a job 
out there? Especially in this economy?
    Mr. Lozinsky. I don't know what the job market is around 
us. I'm sure it's not going to be easy. There's been a lot of 
them that have come to us and said, you know, nobody else would 
give them a chance. And they really appreciated what we did.
    Like I said in my letter, I had one former inmate that's 
just celebrated his 10-year anniversary with us. He actually 
worked for 7 months out of a work release program from Raleigh, 
the central prison. And he works at a work release program. 
Then he came to work for us, and he started as a laborer. And, 
like I said, last week he celebrated his 10-year anniversary. 
He's now moved up to a project manager, and he makes over 
$50,000 a year.
    Mrs. Ellmers. That is wonderful.
    I have about 30 seconds left, so I would like to ask each 
and every panel member here, are you aware that the CBO has 
actually come forward and said that even after implementation 
in 10 years of the Affordable Care Act, there would still be 30 
million people left uninsured? Are you aware of that, yes or 
no?
    Mr. Brey. I'm aware of that.
    Mrs. Ellmers. You are aware.
    Mr. Kelly. Yes.
    Mrs. Ellmers. Mr. Kelly.
    Mr. Kelly. Yes.
    Mr. Morrow. I was not aware of that.
    Mrs. Ellmers. Yes, 30 million will still be left uninsured, 
and that is, again, by the nonpartisan Congressional Budget 
Office.
    So thank you, gentlemen. I yield back the remainder of my 
time.
    Mr. Murphy. Gentlelady yields back.
    Now turn to Ms. Schakowsky for 5 minutes.
    Ms. Schakowsky. Mr. Kelly, I heard you talking about the 
bending the cost curve. We have to do something about the cost 
of health care. The fact of the matter is that the increases 
that have been overall--I realize averages don't apply to 
everyone--but are at about a 50-year low right now in 
healthcare costs over the last year or so. And this has to do 
with--just heard this today from Secretary Sebelius, but it's 
also CMS and Pricewaterhouse that would document that. Because 
you're exactly right, and the Affordable Care Act took steps to 
address the core problem of rapidly increasing healthcare 
costs, requires insurance companies to operate more 
efficiently. It subjects premiums to independent review. Some 
States actually have the right, their insurance commissioner, 
to modify rates and bring them down. And it requires that at 
least 80 percent, every--80 cents on every dollar--go to health 
care now; can't go to CEO salaries or to marketing costs. And 
many enrollees in insurance policies have gotten rebates around 
the country equaling billions of dollars. We're beginning to 
now reward the quality of care rather than just the number of 
tests and the procedures performed. That gets at the issue, 
too, of, we were talking about the doctors that are doing 
defensive medicine.
    So while it's still early to say for certain, there is 
increasing evidence that the reforms in the ACA are on their 
way, overall and over time, to drive down costs while improving 
healthcare quality and health outcomes. And if you've received 
a 46 percent increase over the last little while, this is not 
untypical. This is not about the Affordable Care Act, which 
hasn't gone into effect yet. And this is typical of what has 
been happening over the years.
    You have seen--I mean, sometimes I listen to these 
arguments, and I think, well, gee, it must have been great in 
the insurance market before the Affordable Care Act came along. 
And, of course, we know that that is absolutely not the case.
    I don't know if you wanted to comment at all.
    Mr. Kelly. Well, I don't know--I must be in a different 
universe, Congresswoman, because we have not experienced a 
reduction of any kind. Yes, costs have been going up long 
before the Affordable Care Act. They seem to have accelerated, 
unfortunately. Maybe it's because insurance companies are 
starting to pack--they're taking advantage of the opportunity, 
the window that's available, to just jack the prices up because 
they know, after the so-called reforms that are going to go 
into effect, that maybe the game will be up.
    However, for example, I mentioned to Congressman Murphy 
that there are four fees that go into effect next year because 
of the Affordable Care Act. That's going to add $40,000--
$48,000 to my costs without any change in coverage or anything 
else. That's just $48,000 in additional fees. Now, I don't know 
how that's bending the cost curve down. If the Affordable Care 
Act is going to mandate that fees be levied on insured people, 
insured--in the companies that provide the insurance, I don't 
see that. I'm sorry, I don't see that.
    So you're going to have to show me where in the law that 
there are prescriptions that are going to drive costs down. I 
don't see it. In our market it's just not going to happen. When 
you have two basic providers of healthcare in southwestern 
Pennsylvania, UPMC and Highmark, they own all the doctors and 
the hospitals, there's no incentive for them to cut their 
costs. I don't see it happening. I'm sorry.
    Ms. Schakowsky. Well, we're all going to have to, as 
Members of Congress, work with our constituents and with our 
healthcare providers to make this thing work.
    But getting back to sort of the theme that Mr. Green was 
raising before, what we're finding in this House of 
Representatives is rather than a willingness to sit down and 
talk about what are the snags in this legislation, this 
Affordable Care Act, this Obamacare, and figure out how to do 
it, it's just a continuous drumbeat of repeal, repeal, stop, 
get over it. We--as the United States of America, we are 
capable, as most other industrialized countries are, of 
constructing a system that is going to work for our people and 
for our businesses to provide healthcare. We could do this.
    Mr. Kelly. Haven't you reaped what you've sown? By that I 
mean this----
    Mr. Murphy. Gentlelady's time has expired. I need to move 
on. The gentlelady's time has expired.
    Thank you, Mr. Kelly.
    Mr. Griffith of Virginia is recognized for 5 minutes.
    Mr. Griffith. Thank you very much.
    Mr. Kelly, reap what you sew. Tell me what you were going 
to say.
    Mr. Kelly. What I was going to say was if you look at the 
history of this law----
    Ms. Schakowsky. I really resent that.
    Mr. Kelly. Well, I'm sorry you resent that.
    But the reality is that the law was passed without any 
support on the Republican side. So here you are, you force 
something down the throats of--and it's--I feel this way as a 
business person--you're forcing this down my throat. I've got 
no say in the process. You had no say in the process. And now 
because it's not going very well, because the implementation is 
difficult, all of a sudden it's--you folks are--are the 
problem, and I find that really reprehensible that that is 
said.
    I think if you would have--I think if it had been really a 
spirit of comity and bipartisanship 4 years ago, perhaps what 
we would have would be something that would be implementable 
and affordable, but it hasn't turned out that way. I'm sorry.
    Ms. DeGette. Will the gentleman yield?
    Mr. Griffith. I will not at this time. I only have 4 
minutes left.
    Mr. Kelly, would you agree with me that there's more than 
just snags in this bill? There's more than just a few snags?
    Mr. Kelly. Absolutely. Absolutely.
    Mr. Griffith. And I would have to say that among the things 
that my constituents tell me are snags, and what I've heard 
testimony here today, is we've got the long-term care insurance 
part didn't work out, so they abandoned it; the catastrophic 
coverage that was to be the interim step cost a lot more than 
was originally projected to cost; the insurance rates didn't 
react the way they thought they were going to do, we haven't 
seen any real savings there; the Secretary is--is having to go 
out and look for more money to try to get folks to enroll in 
the programs and to do the things that they want to do; we've 
got the 29ers that we've referred to several times today, which 
both--even if we were to change it tomorrow, the Commonwealth 
of Virginia has a law coming in July 1 that says that they 
can't have part-time workers that work longer than that because 
they don't want to have to pick up that cost; the Medicaid, 
forcing the States to do the Medicaid expansion--forcing the 
States to do the Medicaid expansion was ruled unconstitutional 
by the Supreme Court.
    You know, you've got problem after problem after problem. 
And I kind of think this is--is similar to Blacksburg High 
School in my district. The roof of the gym caved in, and the 
debate began do we just build a new gym, or what about the rest 
of the building? And it caved in because of structural defects. 
And the ultimate decision was they condemned the rest of the 
building, and they are going to build a new Blacksburg High 
School.
    Sometimes when the construction, the initial part of 
putting something together, putting a building together, is so 
poor, you have to just say, OK, let's start over. Let's go back 
and see what we can do to build something that does work for 
the American people, that does lower costs, that does expand 
coverage in the ways that we want to, and doesn't cost people 
the hours at work or jobs. Would you not agree with that, Mr. 
Kelly?
    Mr. Kelly. Absolutely.
    Mr. Griffith. And Mr. Lozinsky?
    Mr. Lozinsky. Sure.
    Mr. Griffith. And, Mr. Morrow, as a businessman, if 
something is structurally flawed, don't you sometimes have to 
just say, OK, we're going to scrap that, bulldoze it, and start 
over?
    Mr. Morrow. In our business, sometimes we do that, yes.
    Mr. Griffith. I mean, I think everybody who's been in 
business very long has run into that position where they have 
to do that, or they have to go back and say, that didn't work. 
And I would submit to you all and to this committee that that's 
where we are on this particular plan. It was built poorly; it's 
not going to work as currently designed. I don't know how many 
patches we could put on it. I don't think we could put enough 
patches on it to fix it; I think we have to tear down the 
building and start rebuilding.
    And so I would ask you all, have any of you all run into 
the 29-hour problem in your particular business where you have 
had to stay to employees, we're only going to give you 29 
hours?
    Mr. Lozinsky. Yes.
    Mr. Griffith. Mr. Lozinsky, I think you mentioned that 
earlier.
    Mr. Lozinsky. Yes, I have.
    Mr. Griffith. And I will tell you, I'm going to ask you 
this. I have a business in my district. See if you all have had 
this problem or if you know folks who do. This business has 
been in existence more than 30 years. It now has 59 employees. 
They have three shifts. One of the shifts they just started a 
few years ago. So the businessman came to me and he said, I 
just left my folks--this was a couple months ago, now, and I 
don't know what decision he ultimately made. He says, here are 
my decisions: I can layoff the third shift, marginally 
profitable. I, you know, worked for years to get it off the 
ground, but I can lay off the third shift and get below the 50 
employees so I'm in the same position that Mr. Brey--he didn't 
use Mr. Brey's name, obviously--but I can be in a position 
where I'm not covered by this bill. I can pay $40,000 in the 
fines, or I can pay 60-some thousand dollars and cover 
everybody. And I've been covering--kind of like you, Mr. 
Lozinsky. He's got a lot of folks that don't last in the 
business. He's in a business where some come in and stay for a 
couple of months, and then they move on, but some stay for a 
while. And when they stay for a while, they get a supervisory 
position.
    Mr. Lozinsky. Correct.
    Mr. Griffith. And he's been covering all those folks for 
years. So he said, my choices are for the first time in over 30 
years don't grow my business anymore, cut back, and lay folks 
off, pay a fine, or pay $40,000 fine or $60,000 increase. And 
he doesn't know what he's going to do, and he's wringing his 
hands over it. Have you all found that to be true as well?
    Mr. Lozinsky. I have, yes.
    Mr. Kelly. Yes.
    Mr. Griffith. I yield back.
    Mr. Murphy. Gentleman yields back.
    Now turn to the gentleman from Louisiana Mr. Scalise for 5 
minutes.
    Mr. Scalise. Thank you, Mr. Chairman. Appreciate you having 
this hearing.
    I appreciate all of our panelists for coming and taking 
time away from your businesses, because I think as you, Mr. 
Kelly, pointed out at the beginning of this, it seems like the 
voice of the small-employing business owner was left out of 
this debate back when this bill came through.
    In fact, this committee, it was here in this committee room 
that we had those hearings for hours and hours and combed 
through--I remember reading through the bill when it was this 
high, and it got higher. And there were so many bad provisions 
that we saw that could devastate small businesses, could 
devastate families who have good health care that they like.
    But there were all those lofty promises, too, you know, the 
President's promise, if you like what you have, you can keep 
it. That promise has been broken to so many Americans already 
when the law hasn't even taken effect yet, just businesses that 
are looking at this saying there's no way that they can comply, 
that provide good health care to their employees today. We 
remember the Speaker at the time, Nancy Pelosi, her famous 
quote: We have to pass the bill so that you can find out what's 
in it. Well, now you know what's in it and, as all of have 
testified, the different impacts it's having.
    But when I go home every weekend and talk to small business 
owners in southeast Louisiana, I'm hearing the same things. You 
know what, Mr. Lozinsky, what you talk about with your small 
business, you know, you're competing against people that are 
also going to be handling this bill differently, and all of a 
sudden it makes changes to the way you're going to have to do 
business.
    You know, my colleague from Texas, Pete Olson, talked about 
the 29ers, and we've heard about them from so many of our 
businesses. There are restaurants in Louisiana that everybody 
in this room has heard of, famous New Orleans restaurants, that 
have the same problem, because the law--there's so many 
perverse incentives in this law that literally force you to 
contemplate reducing the number of your workers. You're 
rewarded in Obamacare if you lower the number of workers you 
have. You're rewarded in Obamacare if you reduce the hours to 
your employees. That's what you all are facing. What kind of 
perverse incentive is that where the Federal Government is 
encouraging you to reduce your workforce? And yet that's what's 
going on in this law, and we're seeing it all around the 
country.
    And so, when those of us who say you need to rip up the 
foundation and actually go and fix the problems-- Mr. Kelly, 
you talked about costs, and we ought to be focused on fixing 
the cost. This bill actually raises the cost of health care. 
We've seen that from so many different reports and, in fact, 
States that are grappling with it. In Louisiana, the estimates 
are over 54 percent increase in healthcare costs due to the 
impacts of the law.
    Since passage of this law in 2010, what have you seen in 
terms of increases in your healthcare costs?
    Mr. Kelly. Well, the cost--premiums are 46 percent. The 
actual costs, because we pay some of the deductible, is 46 
percent.
    Mr. Scalise. Forty-six percent higher?
    Mr. Kelly. Higher.
    Mr. Scalise. But, wait, you were promised that they would 
be lower. How could that be?
    Mr. Kelly. Well, I never thought that that was----
    Mr. Scalise. I think a lot of us didn't either. 
Unfortunately, you're seeing that in the real world. And that 
takes into account the changes you made, right? You doubled 
the--you doubled the deductibles, you even changed carriers, 
and even with those changes you still saw increases; is that 
right?
    Mr. Kelly. Yes. Congressman, the thing that's so 
frustrating as a business owner is that it's the amount of time 
now that we spend looking at not the strategic path of where 
the company is going to go in terms of market share, in terms 
of who your customers are going to be and what opportunities 
you're going to have. We're spending an inordinate amount of 
time on how are we going to manage this leviathan that's out 
there. This healthcare costs that are already greatly increased 
and appear to be on a path--there's a hockey stick. And it's 
not on global warming. The hockey stick in--this is my view, 
it's a personal opinion, it's on the healthcare costs.
    Mr. Scalise. You don't have to take our word for it, but 
one of the lead authors of the bill in the Senate, one of the 
architects of the law in the Senate, Senator Baucus, called it 
a train wreck coming down. That was his words. He called this a 
train wreck. And, of course, you all are the ones sitting at 
the end of the track where it's coming.
    I want to ask you, Mr. Lozinsky, because you're considering 
those kind of options of how many employees do you lay off; is 
that correct?
    Mr. Lozinsky. Well, I don't know. I think best bet would be 
the 29 option.
    Mr. Scalise. So you're going to have to lower the number 
of----
    Mr. Lozinsky. We will lose a lot of employees because they 
won't be able to survive on 29 hours.
    Mr. Scalise. What a shame.
    Mr. Lozinsky. So it will be very hectic. And the sad part 
about it is, our best employees are the ones that are--want to 
work the most and want to work the most hours, and those are 
the ones that we will lose.
    Mr. Scalise. What a shame.
    I'm almost out of time. I want to ask Mr. Morrow one 
question.
    The supporters of the healthcare law promised that the law 
would lower costs for your business. Is that true for your 
company?
    Mr. Morrow. No. We've seen a lot more increases and heavier 
increases this past year.
    Mr. Scalise. Thank all of you for your time and your 
testimony. I yield back the balance of my time.
    Mr. Murphy. Gentleman yields back.
    Now recognize the gentleman from Ohio Mr. Johnson for 5 
minutes.
    Mr. Johnson. Thank you, Mr. Chairman. And I, too, want to 
thank our witnesses for being here today.
    You know, I think oftentimes the complexities of the law 
and the discussions that we get into, we tend to overlook the 
cultural changes that's going to result long term. I came from 
a background as a kid where I looked for an opportunity to get 
a job and to go to work, whether it was on the farm, later in 
restaurants and seasonal-type work. You folks come from 
industries that provide that opportunity.
    Today we have millions of college students that are working 
their way through school, working hard, going to class in an 
effort to keep from becoming indebted to the Federal Government 
with huge student loans.
    So, you know, I just want to comment before I begin asking 
questions that this is going to have far-reaching implications, 
far beyond just the benign discussion of health care. It's 
going to have societal and cultural changes as industries like 
yours have to pare back and pull back, and are unable to grow 
and hire, and laying off workers. It's not going to be good.
    Mr. Morrow, you testified that--that--let me go back. My 
colleague pointed out just a minute ago one of the big promises 
of the healthcare law was to--if you like your current health 
insurance, you can keep it. Do you believe that your employees 
like and enjoy the healthcare coverage that you've provided to 
them up until now?
    Mr. Morrow. Yes, I do. They helped us architect that plan. 
For instance, prescription drug coverage was extremely 
important to them, so we spent more money in that area for 
them, and we also spent a lot of money on well health care for 
preventative healthcare. We have health fairs. In fact, we had 
an employee that we found prostate cancer in its early stages 
through a simple health fair. Saved his life. He's on Medicare; 
he doesn't go to the doctors, he said. And I caught this. So, 
yes, we constructed it with their input for the best coverages 
possible.
    Mr. Johnson. Do you think you're going to be able to 
sustain that? Are you going to be able to provide that same 
level of health care that was promised to all Americans by the 
President? Do you think you're going to be able to do that?
    Mr. Morrow. I don't think we are, because the costs are 
going to become prohibitive for us to do it through our family 
at Ruby Falls as private healthcare coverage.
    Mr. Johnson. Mr. Lozinsky, Mr. Kelly, either of you have a 
comment on that? Are you going to be able to provide the same 
healthcare coverage in the future that you've provided in the 
past?
    Mr. Kelly. Based on where we're headed, I don't know how we 
can. We really value--I mean, we're becoming an ESOP. My 
employees already own 49 percent of my company. They're going 
to own 100 percent. Nobody can value their employees more than 
somebody who says, I'm going to actually give you the company. 
They're not paying for that; under the ESOP rules, they are 
going to have ownership of the company.
    My concern for them is when they have to sit down and 
manage the company and have to decide those really tough 
questions--by the way, we have a health committee that looks at 
these increases that we get every year. They decide what 
they're going to do to keep us competitive. It's not me. And 
so, honestly, I don't know what they're going to be able to 
look at in 4 years and say, what are the choices that we have?
    Mr. Johnson. Sure.
    Mr. Kelly. Do they get rid of their fellow employees?
    Mr. Johnson. Let me move on quickly. We just saw a report a 
couple weeks ago, the State of Ohio, for example, the Ohio 
Department of Insurance says we're going to see an 88 percent 
increase in premiums, a staggering increase for college 
students. And a lot of that is because we've seen a change in 
the risk pool composition. The younger are going to be paying 
higher premiums, who are healthy, to subsidize the more senior 
folks, who may be unhealthy.
    In your situations with your employees, do you think young 
people are going to pay these higher insurance premiums, or are 
most of them going to opt for the penalty? Any of you. Mr. 
Morrow.
    Mr. Morrow. I would going to say they're going to opt for 
the penalty.
    Mr. Johnson. OK. Mr. Kelly?
    Mr. Kelly. I believe that's what they'll do.
    Mr. Johnson. Mr. Lozinsky.
    Mr. Lozinsky. Yes, I would think so.
    Mr. Johnson. Mr. Chairman, I've exceeded my time, and I 
yield back.
    Thank you, gentlemen.
    Mr. Murphy. Thank you.
    Now recognize the gentleman from Georgia Mr. Gingrey for 5 
minutes.
    Mr. Gingrey. Mr. Chairman, thank you.
    I want to first go to Mr. Lozinsky, because, Mr. Lozinsky, 
as I heard your testimony and response to some of the other 
questions, and you mentioned that there are a lot of former 
felons that you've been good enough to hire in your business in 
North Carolina, and you were talking with Mr. Butterfield 
earlier about that, there was a discussion about the Medicaid 
program and Medicaid expansion. But just a few minutes ago, you 
said that if you have to cut to 29 hours a week to avoid the 
expense of health care, that a lot of these people won't be 
able to make it; they'll have to find another job----
    Mr. Lozinsky. Correct.
    Mr. Gingrey [continuing]. Just to make do. I couldn't help 
but think, in your unique situation, some of these people that 
you talked about, you would be forcing them back into the only 
other skill set that they know so as to support themselves and 
their families. And wouldn't that be a tragedy, when you've 
gone to all of the tremendous Good Samaritan work to give them 
the opportunity to set their lives straight.
    Mr. Lozinsky. Well, I sure hope not. The employees are 
really good.
    Mr. Gingrey. Well, I hope not, too.
    But let me go back to that issue of Medicaid, because I 
think this needs to be clarified for everybody, and they need 
to understand.
    Why do you think in drafting this bill that they wanted 
to--the Democratic majority wanted to expand Medicaid coverage 
to 33 percent above the poverty level? We say 133 percent, but 
the poverty level is 100 percent. They expand it to 33 percent, 
because quite simply if you had all of those people in that 
window between 33 percent--between a hundred--zero and 400 
percent of the Federal poverty level, you think about the cost 
of the subsidies that the Federal Government--that this Federal 
Government would be paying, especially those who were at 33 
percent above the Federal poverty level, they would probably be 
paying something like 75, 80 percent of the premiums.
    So to put it on the backs of the States where there's this 
matching program, this FMAP, granted there's a couple of years 
where the Federal Government pays for all of it, then there's 
another year or two where the Federal Government pays for 90 
percent of it, but it's a loss leader, just like a used car lot 
or a grocery store; come on in, get something, and first thing 
you know, it's not there anymore. And I'll guarantee you in 4 
or 5 years--and that's what these Governors are looking at. 
They know that once that expansion occurs in 4 or 5 years, that 
FMAP is going to go back to 50-50, 60-40, 55-45. And they're 
going to have no money for anything but Medicaid; no money for 
public safety, no money for public schools. An absolute train 
wreck, as Chairman Baucus said.
    So that is a scheme to keep those people out of the 
exchange where it would be just Federal dollars supplementing 
their health insurance premium. So just wanted to bring that 
out.
    Real quickly, I'd like to thank all of the witnesses. It's 
sobering to hear the trouble and uncertainty that your 
businesses face. I have, unfortunately, heard much of the same 
from small businesses back in my home State of Georgia, if you 
can't tell by the accent. I have heard from the overbearing 
compliance burden that businesses must endure to ensure they 
are not breaking the law. Instead of investing money in their 
workforce or expansion, they are forced to hire consultants and 
law experts. This is no way to create new jobs and incubate 
small business growth.
    I spoke to another constituent, an owner of a welding 
company, that pays high wages and benefits to its employees, 
who has decided to hire subcontractors or automated equipment 
instead of hiring new workers due to the fact that he is just 
under the 50-employee threshold.
    Based on a U.S. Chamber of Commerce poll, 72 percent, 72 
percent of small business executives would have a harder time 
hiring. Mr. Chairman, it's clear the President's healthcare law 
is placing an undue burden on our small businesses.
    And quickly, in these last few seconds, to all of the 
witnesses, three of you operate businesses where in the future 
you'll be faced with a choice of providing coverage or paying a 
penalty. Have any of you looked at the feasibility of this and 
which is cheaper? Can we start with Mr. Brey and just go right 
down real quickly?
    Mr. Brey. As we expand, I intend to continue attempting to 
provide coverage. I have not looked into which would be 
cheaper.
    Mr. Gingrey. Mr. Kelly.
    Mr. Kelly. Doesn't really apply to me because we're----
    Mr. Gingrey. Mr. Lozinsky?
    Mr. Lozinsky. From what I understand as of now, the fine is 
cheaper. I did read a couple days ago where there might be a--
just a basic preventive plan that kind of skirts the law, but 
will satisfy the law, and that comes in at around $50 a month 
per an employee. So that's something that I just found out 
about a couple days ago that I'll look more into. But I didn't 
look into it before.
    Mr. Gingrey. Mr. Morrow?
    Mr. Morrow. It would be cheaper for us to pay the penalty, 
but it's not part of our culture with our family.
    Mr. Gingrey. Well, I understand that.
    I'm beyond my time. I'm sorry, Mr. Chairman. I yield back.
    Mr. Murphy. Thank you. I thank the gentleman.
    I also thank this panel. It's very helpful to have the 
information from all of you. We deeply appreciate it. We're 
trying to get our hands and minds around this issue, and the 
testimony provided today has been very helpful to us. So thank 
you so much.
    This first panel is dismissed, and while the second panel 
is taking their seats, I will introduce them all so we can be 
moving forward here.
    So let me describe our second panel here. Our first witness 
is going to be Mr. Daley. Bill Daley is the legislative and 
policy director for the Main Street Alliance. The Main Street 
Alliance is a national network of State and locally-based small 
business coalitions.
    Our second witness is Katie Mahoney. She is the executive 
director of health policy at the United States Chamber of 
Commerce. She has more than 13 years of healthcare experience 
in hospital and health plan operations as well as healthcare 
policy.
    She is responsible for the healthcare regulation portion of 
the healthcare policy portfolio.
    And our third witness is Michelle Neblett. She is the 
director of labor and workforce policy for the National 
Restaurant Association. She is responsible for labor and 
workforce issues, including health care.
    Our fourth witness is Neil Trautwein. He is the vice 
president and employee benefits policy counselor for the 
National Retail Federation. In this role he serves as NRF's 
lead advocate and strategist on healthcare policy and 
legislation, and manages NRF's exclusive health and employee 
benefits committee.
    I thank all the members for being here.
    I'm now swearing the witnesses. So, as you're aware, the 
committee is holding an investigative hearing; when doing so 
has a practice of taking testimony under oath. Do you have any 
objection to taking testimony under oath?
    All of the witnesses say they have no objections.
    The chair then advises you that under the rules of the 
House and the rules of the committee, you are entitled to be 
advised by counsel. Do any of you desire to be advised by 
counsel during your testimony today?
    And all of the witnesses decline.
    In that case, if you will all please rise and raise your 
right hand, I'll swear you in.
    [Witnesses sworn.]
    Mr. Murphy. All of the witnesses responded that they do.
    Well, you are now under oath and subject to the penalties 
set forth in Title 18, section 1001 of United States Code.
    You may now each give a 5-minute summary of your written 
statement. We'll start with Mr. Daley. You are recognized for 5 
minutes.

 TESTIMONY OF WILLIAM DALEY, LEGISLATIVE AND POLICY DIRECTOR, 
MAIN STREET ALLIANCE; KATIE MAHONEY, EXECUTIVE DIRECTOR, HEALTH 
POLICY, U.S. CHAMBER OF COMMERCE; MICHELLE R. NEBLETT, DIRECTOR 
OF LABOR AND WORKFORCE POLICY, NATIONAL RESTAURANT ASSOCIATION; 
AND NEIL TRAUTWEIN, VICE PRESIDENT AND EMPLOYEE BENEFITS POLICY 
              COUNSEL, NATIONAL RETAIL FEDERATION

                   TESTIMONY OF WILLIAM DALEY

    Mr. Daley. Mr. Chairman, thank you very much for the 
opportunity, and thank you, Mr. Chairman and Ranking Member 
DeGette.
    I am Bill Daley. I work for the Main Street Alliance. We 
represent about 12,000 small business owners with organizations 
in a dozen States and at-large members throughout the country. 
Our members are very supportive of the passage of the 
Affordable Care Act because of the market that they've 
confronted over the last decade at least for small businesses. 
It's been a disaster. You've already heard testimony about the 
price that they've had to pay. The biggest challenge we face is 
affordability, and I must say that at least in some surveys 
now, we're beginning to see some hope.
    The actual filings that are being made under the Affordable 
Care Act that have been surveyed, there are nine States where 
there are actual filings of rates, are coming in under CBO 
estimates. And as you heard others state earlier today, there 
is evidence that the healthcare cost trend is slowing, so we 
can be hopeful.
    There are reasons for us to be hopeful about the market, 
too, because it simplifies paperwork. It gets rid of a lot of 
the problems we've encountered trying to get quality care and 
benefits. Many of our businesses have not purchased health care 
because they didn't think it was worth it, given the 
exclusions, the rescissions, the pre-exes, and the low benefits 
that were available. So our members are hopeful that they will 
benefit from the Affordable Care Act and look forward to its 
implementation.
    On the matter of the question of employer mandates, again, 
let's make it clear: Under 50 employees, those mandates do not 
apply, and over 50, some 94 percent of the companies are 
already qualified. So you're talking about a very narrow sector 
of the economy when you talk about this issue.
    On the matter of the 30 hours, I must also point out that 
only approximately 1 percent of the entire workforce in the 
United States falls into the category that's being discussed. 
So as you look at these problems, please try to keep them in 
perspective.
    I also want to just mention the question of paperwork and 
simplicity. One of the issues our members raise constantly 
confronting bureaucracies is that they have the daunting task 
filling out the forms. They look forward to the simplicity of 
qualifying for insurance through exchanges and the new 
simplified online processes. They also have found, and our 
members have come here to testify, that qualification for the 
credits under the Affordable Care Act, which many of them are 
getting, took very little time and was greatly beneficial to 
them.
    And you've all heard a lot of these other issues already 
today. I just want to mention one other thing, and it's the 
functionality of the markets at the State level. You heard 
testimony about Medicaid. In those States where Medicaid is not 
being implemented, indirect costs will continue to fall back 
into the market, and risk will continue to fall back into the 
market, creating affordability difficulties.
    In a number of States that are implementing their own 
exchanges, there are still some questions about competition and 
how well it will actually function, and we do hope that you 
will continue to monitor that. But overall we think the act is 
poised to be a success for small businesses, we look forward to 
its implementation, and we appreciate the opportunity to come 
and present our remarks to that effect.
    Mr. Murphy. Thank you, Mr. Daley.
    [The prepared statement of Mr. Daley follows:]


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    Mr. Murphy. Ms. Mahoney, you are recognized for 5 minutes.

                   TESTIMONY OF KATIE MAHONEY

    Ms. Mahoney. Thank you, Mr. Chairman and Ranking Member and 
other members of the subcommittee, for the opportunity to 
participate in today's hearing. We appreciate the focus on the 
challenges facing America's business under the health reform 
law and believe we must all do what we can to help employers 
and their employees deal with the challenges of implementation.
    I'm Katie Mahoney, executive director of health policy at 
the U.S. Chamber of Commerce. With our diverse membership we're 
particularly cognizant of the problems facing small businesses 
as well as large corporations. While the Chamber opposed the 
health reform law during the legislative debate, we are moving 
forward to help our member companies understand and comply with 
the law. To that end, we continue to work with the regulators 
to mitigate the burdens and challenges of implementation and 
with Members of Congress to provide relief to business.
    Our vision of reform continues to be one where Americans 
can access affordable healthcare coverage, receive innovative 
and high-quality care, and realize better health.
    Tomorrow the Chamber will release a report with 
recommendations to improve access to affordable coverage and 
drive greater healthcare value. While the report outlines ways 
to improve the system, today's hearing focuses on the system 
created by the health reform law, and that is where I will 
focus my comments.
    As the first panel outlined, despite the goal of the 
employer mandate, the health reform law is eroding the 
employer-sponsored system and forcing employers to consider 
significantly changing their workforce not because these 
changes make sense for their customers or their employees, but 
because they are necessary to keep their doors open. In many 
cases, employers are not hiring new employees; they're 
canceling expansion plans, reducing employee hours, and 
dropping the affordable healthcare coverage that they had 
previously provided for their employees.
    Beyond the statistics, the real-life conversations we have 
with businesses are perhaps the most remarkable. What is most 
shocking during these opportunities is the complete confusion 
as to what the law will require. While we're eager to explain 
recent regulatory developments, we find ourselves still 
outlining the basics of the law, such as what constitutes an 
applicable large employer and the difference between a full-
time equivalent and a full-time employee.
    So what are we to do? We're working hard to educate our 
members, regulators, Members of Congress and the public. First, 
for our members, we've created a new Web site, Health Reform 
Law 101, which has a variety of interactive resources including 
a coverage or penalty chart, an employer mandate penalty 
calculator, an interactive timeline, and an FAQ page. We are 
getting great feedback on these resources.
    Secondly, we've been working with the regulators, 
submitting comments and meeting with the administration to 
highlight problems with the regulations promulgated to 
implement the law. We filed 62 comments to date to mitigate 
implementation burdens at every opportunity.
    For example, one key point that we're focused on now is 
encouraging the Treasury to use its discretion to not tax the 
tax, but to exclude the portion of the premiums collected to 
pay for the health insurance providers fee from gross income 
for reporting purposes. This important and feasible regulatory 
approach would save small businesses unnecessary premium 
increases of between 45- and $70 billion over 10 years.
    Third, we've been educating Members of the House and Senate 
and pushing for relief with regard to several critical 
provisions. First and foremost, our focus is on the employer 
mandate and how it will hurt employees as well as employers. 
Unfortunately, and perhaps ironically, because of the mandate 
not only are employees not receiving healthcare coverage, 
they're now losing full-time wages. To rectify this we continue 
to push for changes and believe that restoring the definition 
of full-time employment to the traditional 40 hours per week is 
a critical step in the right direction.
    Fourth, our efforts to educate the public will be even more 
important in the coming months as the administration begins its 
PR campaign. We need to have an honest discussion about what 
the law does and does not do. Selling the law to the public 
instead of educating the public about the law is going to lead 
to further confusion and frustration.
    Beyond the employer mandate, the list of problematic 
provisions is long, and several constantly rank as the most 
dire for business. the health insurance tax, the essential 
health benefit package requirements, the limits on out-of-
pocket maximums and deductibles will all increase premiums and 
reduce flexibility, continuing to contribute to the one-size-
fits-all vision of health care under the PPACA. It's like 
forcing all car manufacturers to make only cars with leather 
seats, DVD players, GPS systems, sunroof, and seat warmers, 
where many people could only afford a more modest car at a 
lower price.
    In conclusion, regardless of our opinions of the law, it is 
being implemented. It is critical that everyone, businesses, 
regulators, Members of Congress and the public, do what we can 
to mitigate the harm on Americans, our economy and innovation. 
We must engage in an honest discussion, not a sales pitch, to 
inform individuals about the law and to take every opportunity 
to ease burdens, administrative burdens, preserve flexibility, 
and reduce premium increases.
    Finally, we urge business to continue to innovate and work 
within the confines of the law to develop and offer coverage 
options that employees value. We urge the regulators to adopt a 
compliance assistance approach as opposed to strict 
enforcement. We urge our elected representatives to pass 
legislation that would restore common business standards for 
the definition of ``full-time employee,'' and we urge the 
public to be inquisitive and cautious as they assess the 
information available to understand the law.
    Thank you.
    Mr. Murphy. Thank you, Ms. Mahoney.
    [The prepared statement of Ms. Mahoney follows:]


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    Mr. Murphy. Ms. Neblett, you are recognized for 5 minutes.

                TESTIMONY OF MICHELLE R. NEBLETT

    Ms. Neblett. Chairman Murphy, Ranking Member DeGette, 
members of the Subcommittee on Oversight and Investigations of 
the House Energy and Commerce Committee, thank you for the 
opportunity to testify before you today regarding the 
challenges restaurant and food service operators are facing in 
implementing the 2010 healthcare law.
    My name is Michelle Neblett. I'm the director of labor and 
workforce policy for the National Restaurant Association. We 
are the leading trade association for the restaurant and food 
service industry, which is comprised of 980,000 restaurant and 
food service outlets employing 13.1 million people, who serve 
130 million guests daily. Our industry employs about 10 percent 
of the U.S. workforce, and restaurants are employers of choice 
for many looking for flexible work schedules. As a result, we 
employ a high proportion of part-time and seasonal workers. 
Much of our workforce could also be considered young 
invincibles, as 43 percent of the employees are under age 26.
    The National Restaurant Association is active in helping 
our operators understand the requirements of the healthcare 
law. We have conducted numerous Webinars and countless 
educational sessions in partnership with our State restaurant 
associations and as part of our annual trade shows. We have 
detailed, written materials, and through our Health Care 
Knowledge Center Web site, we are trying to provide a one-stop 
place where an operator can go to understand the law's 
requirements.
    In my role I have traveled around the country conducting 
these educational sessions and answering operators' questions 
as they work through how to comply with the law. What I have 
learned is that this is one of the most challenging 
requirements placed on the restaurant and food service industry 
that any can recall, and it is clear that the law cannot stand 
as it is today.
    While the restaurant association has worked since enactment 
to constructively shape the regulations, legislative action is 
needed as there are limits to what can be done through the 
regulatory process.
    With a little more than 3 months until open enrollment 
begins October 1st in the exchanges, an employee notification 
about those exchanges by employers must go out as well. The 
time for restaurant and food service operators to comply is 
now. The overarching challenge our members face with this law 
is to first understand its complexity and interwoven 
requirements.
    By far the definition of ``full-time employee'' under the 
law possess the greatest challenge for my industry. The statute 
defines ``full time'' as an average of 30 hours a week in any 
given month. This is not based on existing law or traditional 
business practices. Certainly restaurant and food service 
operators, like many businesses, have traditionally used a 40-
hour workweek.
    One of the attractive benefits of working in our industry 
is the flexibility to adjust one's hours to suit their own 
needs. However, for the first time, under the law, the Federal 
Government has drawn a bright line as to who is part-time and 
who is full-time. As a result, employers with variable-hour 
workforces and flexible scheduling must be deliberate about 
scheduling hours, because there is now a greater financial 
impact with potential liability for employer penalties if 
employees who do work full-time hours are not offered coverage. 
If the definition is not changed to align better with workforce 
patterns, there is concern that the flexibility so many 
employees value in our industry will no longer be widely 
available, and structural changes to our labor markets could 
occur.
    The applicable large employer determination is also too 
complex and stifles small employers' ability to manage their 
workforces, plan to expand their businesses, and prepare to 
offer coverage. The automatic enrollment provision is a concern 
that could cause financial hardship for some employees and 
greater confusion as well, without increasing access to 
coverage.
    Finally, these challenges clearly demonstrate a need for 
broader transition relief without threat of penalty or subsidy 
recapture for good-faith compliance by both employers and 
employees. We believe it is appropriate to provide time for 
employers to make plan and system changes and for employees to 
understand their options under the law.
    In conclusion, thank you again for the opportunity to 
testify before you today regarding the challenges restaurant 
and food service operators face as they implement the law. The 
National Restaurant Association is dedicated to providing 
restaurant and food service operators with the information they 
need to face these challenges and to make the best possible 
decisions they can for their employees and their businesses.
    Thank you.
    Mr. Murphy. Thank you.
    [The prepared statement of Ms. Neblett follows:]


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    Mr. Murphy. Mr. Trautwein, you are recognized for 5 
minutes.

                 TESTIMONY OF E. NEIL TRAUTWEIN

    Mr. Trautwein. Thank you, Chairman Murphy, Ranking Member 
DeGette and honored members of the committee. I appreciate the 
opportunity to appear before you today to discuss the 
challenges of ACA implementation and how we in the business 
community, particularly retailers, are reacting to those 
challenges.
    My name is Neil Trautwein, and I'm a vice president with 
the National Retail Federation. NRF is the voice of the retail 
industry worldwide, everybody from the very largest to the very 
smallest, and everybody in between. Our membership also 
includes chain restaurants and online retailers.
    We figure our members support everybody from stores to 
supply chain, one in four jobs in the American economy today. 
So it's particularly important that the transition moves 
smoothly.
    We continue to have concerns about the ACA, but we're also 
working very hard to help educate our members on what's coming, 
when, where and how. We've worked hard and productively with 
the administration to help address and smooth wherever possible 
particular provisions in ACA implementation. Yet we still 
remain worried by fast-approaching deadlines for 
implementation. Our Nation can't afford to have the ACA stumble 
out of the gates as it makes its debut.
    We've been closely engaged in the regulatory process ever 
since the ACA was signed into law, probably after the--before 
the ink dried on it. We've met numerous times with the 
regulators, and we've submitted numerous written comments.
    For retails, our part-time and variable-hour employees are 
a particular challenge for us. Some may become full-time and 
move on to long-term careers in retail. Others value the great 
flexibility that part-time work provides. Many of the most 
useful regulatory approaches that have been developed to deal 
with these problems, such as the look-back/stability period, in 
turn breed additional complexity and are a challenge to 
implement.
    One very significant challenge is the 30-hour rule for 
full-time coverage. As my colleagues have said, most of us have 
long assumed that 40 hours, consistent with Federal overtime 
rules, is a normal full-time workweek. A 30-hour definition 
forces retail employers to manage to a new standard. The 
requirement to provide an equal period of stable coverage to 
the look-back adds to the stakes, complexity and anxiety 
employers have over this provision, who will be forced to fine-
tune our workforce and adjust the balance between full-time and 
part-time in order to meet the new realities.
    This is time, effort and money spent on compliance rather 
than on retail or chain restaurant sales.
    For variable-hour employees who don't reach that standard, 
as my colleagues have said, it means less money in their 
pockets.
    We strongly support the efforts that have been commented on 
to redefine full-time work at 40 hours as is traditional. We 
respectfully ask that this and other steps to address the 
shortcomings of the ACA be addressed before it becomes fully 
effective. Later on may be too late to really make a difference 
in the amount of change coming.
    We respectfully don't agree with those who either argue 
full implementation or full repeal are the only options. We 
think we need to move ahead on specific changes. We have 
responsibilities in the here and now, and our members have 
responsibilities to their employees, their stores, shareholders 
and communities. We'll bend every effort we can to mitigate the 
impact of the ACA on the retail and chain restaurant 
industries.
    We also urge Congress to consider an outright delay in the 
provisions in order to allow businesses to spool up and create 
the systems they will need to manage these requirements. 
Alternatively, Congress could consider a soft rollout and more 
compliance-oriented in order to help them move through this.
    Again, I greatly appreciate the opportunity to appear 
before you today. We urge you to be wary of the pace of ACA 
implementation. This could have the effect of freezing 
employers and forcing them away from providing coverage. At a 
minimum it's going to pressure our ability to continue to 
provide coverage. We hope to work with you to mitigate those 
harmful effects.
    Thank you.
    Mr. Murphy. Thank you.
    [The prepared statement of Mr. Trautwein follows:]


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    Mr. Murphy. I thank all the panelists. I'll start off by 
asking questions for 5 minutes.
    Just for the record, Mr. Daley, I appreciate your 
testimony. You made reference to an article that actually a 
number of Members have been talking about, and that is 
something from Health Affairs, I think May of this year, which 
was doing some analysis of healthcare costs and them declining 
and flattening out. I call attention to a couple of the 
articles.
    Kaiser Family Foundation did a study, and it said that that 
some of the leveling off of health care costs actually began in 
2002. The New England Journal of Medicine article from last 
summer said that the leveling off has been going on since 2005. 
And the Health Affairs article made references to a couple of 
parts. One is the job loss and economy. That's a fraction of 
the leveling off; am I correct? That's a fraction, but not the 
whole explanation for leveling off of healthcare costs and some 
declines?
    Mr. Daley. Actually--I'm uncertain I can be heard, but 
actually the article pointed to the recession as a considerable 
contributor to leveling off. However, not only that article, 
but another, both found that there were structural changes in 
the healthcare system itself long term, and that would, in 
fact, reduce the growth of costs.
    Mr. Murphy. Yes. I just want to go on the record as saying 
those--what they refer to in that--articles in Health Affairs 
was the out-of-pocket costs for employees have gone up, and 
then it says it has shifted from the employers to the 
employees. And that's been a significant part of the impact as 
well, as well as I think the article also referenced a 
reduction of rate of new technology.
    I just wanted to make sure we had that fact on the record 
for Members to note that these articles are not referencing the 
Affordable Care Act as making this more affordable. They're 
saying the structural things you said. No, we don't have big 
technologies introduced, the economy has been down, and 
employers are basically shifting costs to employees. Some 
employees are seeking the health care less.
    But let me go on to a couple other things for Ms. Mahoney, 
Ms. Neblett and Mr. Trautwein. What do you hear from business 
owners about the burden of complying with the healthcare law in 
terms of the time requirements and their costs of just 
compliance?
    Ms. Mahoney, what do you hear there?
    Ms. Mahoney. I think some are savvy, and they say, wow, I'm 
really overwhelmed with what all I'm going to have to do to 
comply. I'm talking to my broker, I'm looking at what the 
reporting limits are going to be, it's a lot. Others are, I 
think, just really shell-shocked.
    I mean, it's really remarkable when we travel the country, 
I know my colleagues do as well, to speak with small businesses 
that really have no understanding of the kind of basic function 
of the law and what all it will require, and sort of their 
brilliant ideas about how to circumvent it, whether it's 
letting their spouse or their child take a bigger portion of 
ownership. And we all appreciate that there are laws of common 
control and aggregation that are going to be very confusing to 
kind of navigate with regard to those possible solutions.
    So I think it depends on what segment of the employer 
community you're talking about, what segment of the country, 
not only just size, but industry.
    Mr. Murphy. Let me move on.
    Ms. Neblett, what are you hearing?
    Ms. Neblett. Yes. I think our operators are small 
businesses, midsized businesses, large businesses, and so we 
have a range of operators that we're talking to. And some have 
H.R. departments, and have the benefit of benefit consultants 
and attorneys and others to help them.
    We're talking to a lot of those smaller operators, those 
right on the bubble of 50 FTEs, when we go out and speak a lot, 
those just over that threshold, and the complexity is, one, to 
get over and then dive into the details, because the details 
really do matter in this.
    Mr. Murphy. Mr. Trautwein, I only have a minute left.
    Mr. Trautwein. I share the same experience. I've been very 
surprised by the--by how much of an all-hands effort it is for 
larger companies, everybody from H.R., who you would expect, 
but also finance, legal, information technology and on down the 
line. But when you go down that chain, it gets to be a lot more 
frustration, and these are the same people we're trying to help 
educate.
    Mr. Murphy. Let me ask this: My assumption is you're going 
around the country trying to explain the healthcare bill, and 
none of you are undermining the healthcare bill and saying, 
here is how you get away from it; am I correct?
    All the panelists say yes.
    So you're out actually teaching the people how to comply 
with the bill; is that correct?
    Ms. Neblett. That's correct.
    Ms. Mahoney. Yes.
    Mr. Murphy. Now, given that, do they have enough 
information on how to comply, and is it working? Quickly.
    Ms. Mahoney. No. And I think my biggest concern is that the 
effort to educate will turn more into a campaign style of 
selling. I know this is a very controversial issue, but--or 
law, but to sell, for example, preventive services as free 
care, I think, is----
    Mr. Murphy. So it's an issue that it just has to do with 
how this is sold or how this is pitched, or fundamental in the 
law itself there are flaws that are difficult for them to 
comply with? Real quick.
    Mr. Trautwein. I think the Achilles heel of the law is its 
complexity, and we heard differences on applicable size and 
number of hours on the first panel. It's a tough law to 
understand.
    Mr. Murphy. Thank you.
    Ms. Neblett. I think it's complex, but there are also some 
very specific challenges, especially from my industry and 
industries like mine, that it makes it particularly difficult.
    Mr. Murphy. We appreciate getting the details from you 
then.
    I yield now to Ms. DeGette for 5 minutes.
    Ms. DeGette. Thank you, Mr. Chairman.
    I want to start out by thanking the three people over here, 
Ms. Mahoney, Ms. Neblett and Mr. Trautwein, because even though 
all three of your organizations oppose this legislation, you 
are all working assiduously to try to implement it in an 
appropriate way for your members, and I really appreciate that.
    The other thing I would wish is that my colleagues on the 
other side of the aisle, I've been saying this for a long time, 
let's put bygones be bygones. This bill is here now. We've had 
37 votes to repeal it, and it's not going away. So what I think 
we should do, and I know the chairman agrees with me on this, I 
think we should be really working on ways to make it work 
better for small businesses and for everybody, because the 
ultimate goal is to give high-quality health insurance to all 
Americans.
    And we heard this last panel of small business people. Some 
of them I know don't agree with me. They all said they want to 
offer insurance to their employees, and I would think that 
would be true of all of your members, that they all want to be 
able to do that.
    Mr. Daley, is that correct? Yes or no.
    Mr. Daley. Ours, absolutely.
    Ms. DeGette. Ms. Mahoney?
    Ms. Mahoney. Yes.
    Ms. DeGette. Ms. Neblett?
    Ms. Neblett. Yes.
    Ms. DeGette. And Mr. Trautwein?
    Mr. Trautwein. Yes.
    Ms. DeGette. And all of you are bringing suggestions to the 
table that I think we need to look at, because I don't--we're 
still trying to revise Medicare, and it was passed in 1964. So 
definitely we should be working on that. And like your 40-hour 
suggestion that you're making and other suggestions, I think we 
should sit down and talk about that instead of sitting here and 
quoting things that were said when the bill was passed on both 
sides of the aisle.
    And, Ms. Mahoney, you're nodding your head, so I assume you 
would agree with that.
    Ms. Mahoney. I would agree. I think one point I would make 
is the need for flexibility.
    Ms. DeGette. Yes. And this kind of goes to the other point 
you made, which I like, which is--and this goes on both sides 
of the coin, too--is we should be educating people, not trying 
to sell this. And that's true. You know, we shouldn't be having 
commercials saying, this is great for everybody, and it's free. 
And we shouldn't be having commercials saying, this is 
terrible, and don't do it. And I agree with that.
    And the other thing I agree with that all four of you said 
is as I go in my district and around Colorado, there is a lot 
of confusion about what the Affordable Care Act is. So I 
welcome your--I got the names of your Web sites, and I welcome 
your participation and your partnership in trying to explain to 
people, small businesses in particular, what this does. And 
there is so much misinformation out there.
    I do want to ask a couple of questions.
    Mr. Daley, I think I already asked this, but your sense 
would be that small businesses really do want to offer their 
employees insurance; is that correct?
    Mr. Daley. I think that's a surveyed and universal almost, 
they want to.
    Ms. DeGette. They want to, but yet over the last number of 
years, small businesses have been really the hardest hit by 
great increases in insurance prices and also less ability to 
get affordable plans for their employees; is that right?
    Mr. Daley. Absolutely. The markets have been adversely 
selected, there is tremendous cost, and it's very difficult----
    Ms. DeGette. And part of what happened for small employers, 
this was in your testimony, they had to pay 18 percent more 
than large insurers for complete coverage; is that right?
    Mr. Daley. That is correct.
    Ms. DeGette. And a lot of those plans, people were thrown 
out if they had preexisting conditions, or if they hit the 
caps, or issues like that; isn't that correct?
    Mr. Daley. That's why many of them don't buy, because the 
quality of the insurance isn't very good.
    Ms. DeGette. You know, I had mentioned before I did this 
this little town hall meeting with some small businesses in 
Denver last Friday, and there was a small company, and the 
woman said, my husband and I own this company, and we have a 
child with severe handicaps. She said, it doesn't pay for my 
employees to go into my insurance plan because it would cost so 
much for them.
    I'm sure that happens a lot with small business; is that 
right?
    Mr. Daley. We just had a personnel person had a stroke, and 
everybody's premium went up $1,000.
    Ms. DeGette. Everybody's premium went up.
    Now, one last thing, and I hope all of you know this, 
several people mentioned we don't want a one-size-fits-all, and 
I agree with that. But under the Affordable Care Act, just 
within the exchanges we have several different levels of plans, 
and we also have catastrophic plans for younger workers that 
would help with Ms. Neblett's employees. So, in fact, we have a 
variety of options, it's not that everybody has to have one 
plan; is that right?
    Mr. Daley. That's correct.
    Ms. DeGette. But what we do is we make it so there's a 
minimum level of coverage so if somebody gets sick, they 
actually have insurance that they can use; is that right?
    Mr. Daley. I think you need to be clear that there are 
standards pegged to employer responsibility, that there are 
certain levels of offering that need to be made. There are 
different offerings in the exchanges that are available.
    Ms. DeGette. Thank you very much. And thanks again to all 
of you for coming. I look forward to working with you as we 
sort this all out.
    Mr. Murphy. I now recognize the gentleman from Texas Mr. 
Olson 5 minutes.
    Mr. Olson. I thank the chair.
    And welcome to the second panel. A special thanks to you, 
Ms. Mahoney, for the help the local Chambers have done back 
home in Texas 22. They've given me access to your member 
organizations, and I go there and listen to them. I appreciate 
that. And I get the challenges they're facing in Texas 22.
    And many of these businesses are restaurants. So I need to 
thank you, Ms. Neblett, for all the hard work you've done at 
the National Restaurant Association.
    As you know, Texans love to eat out. And when I want to get 
a pulse on an issue, I go get some barbecue, some Tex-Mex, go 
to a burger joint, a steakhouse, Chinese food place, Indian 
food place and get a full belly and a full mind. So thank you, 
thank you, thank you.
    My questions will focus on Obamacare's prosperity-
threatening definition of 30 hours of work as a full-time 
workweek.
    Almost a year ago, I toured a steakhouse in Pearland, 
Texas. It was heartbreaking. Owners painfully telling their 
employees in the future they'd be limited to 30 hours--less 
than 30 hours, 29 hours, the 29ers, per week. Many of these 
kids--and they were kids working part time, full time, 40 hours 
a week and going to school. They were single moms raising a son 
or a daughter, who did not have the flexibility to find another 
job. They need to have the job they had for 40 or more hours.
    And my questions are for all four of you; first with you, 
Ms. Neblett. Since this train wreck is coming, it sounds like 
you really have no information to advise your membership. If 
you do have information, please tell me what you're advising. 
If not, what do we need to give you so your members can make 
informed decisions about the future?
    Ms. Neblett. Thank you.
    We help explain and lay out the law's requirements for our 
members, explain the regulations. And, as Neil mentioned, the 
look-back/stability period is very helpful, although still 
complex to implement for those variable-hour and seasonal 
employees when a large employer is offering coverage.
    But I think we need a one-stop place for information about 
the law. I think that would be very helpful from the Federal 
Government's perspective. And I think we really need to take a 
close look at this definition, because it is having potential 
impacts on the employees in terms of hours and wages.
    Mr. Olson. Mr. Trautwein?
    Mr. Trautwein. We're engaging in similar efforts talking 
about different options. If you look at the law, there's a neon 
sign saying that it's cheaper to pay a penalty than to provide 
coverage if you're in that applicable large-employer size. But 
there are other options, and the last panel talked about some 
of the newer things, and strategies of satisfying the A 
penalty, but not the B penalty, and all this is contrary and 
foreign to the process of running a retail or chain restaurant 
store. And that's part of the problem and part of the 
frustration in the employer community.
    Mr. Olson. Mr. Daley.
    Mr. Daley. I need to point out that the Towers Watson, 
which is a huge H.R. firm across the river in Virginia, did a 
survey of employers about the 30 hours and found that almost 
none of them plan to change the way they treat their employees. 
There are reasons for that. It's difficult administratively to 
mess around with more employees in order to bring your 
workforce down under that 30-hour lid. It offends your 
employees if you make them 29 rather than when they were 35. 
And again, keep in mind, as I said in my testimony, the 
category that this affects is around 1 percent of the entire 
U.S. workforce.
    Mr. Olson. Yes, sir. One further comment. I have a little 
bit of time here. Some of my colleagues on the other side of 
the aisle have been saying we're just after this because it's 
politics. It's not politics. This 30-hour provision needs to be 
fixed. It's a big problem in your businesses, and we're trying 
to fix it, and that's why we're having this hearing.
    And one other thing we talked about, Mr. Trautwein. You 
brought up talking about so-called large businesses. Every 
business I've talked to back home has more than 50 employees, 
every single one that provides health care now likes that, they 
get better employees, they keep them longer, and they want to 
give them health care. But they have to compete, and one of the 
competitors drops out and goes in the exchanges, they will do 
it. Everyone has told me that. So they won't be able to keep 
their health care. That was a false promise.
    I yield back. Thank you.
    Mr. Murphy. Thank you.
    Mr. Long is recognized for 5 minutes.
    Mr. Long. Thank you, Mr. Chairman, and thank you to the 
panel taking your time to be here today. I know our first panel 
ran over a little longer than what we all anticipated, but 
thank you all for being patient and being here.
    And as we have heard here today, the impact of this 
legislation known as the Affordable Care Act will have a major 
and often harmful impact on businesses small and large across 
our Nation.
    One particular company based out of my district, which is a 
Fortune 500 company--this is a Fortune 500 company that started 
with one little store, one dream in a guy's mind that he could 
start a business back in the 1960s. So he opened his first 
store. Fortune 500 company. Now they employ 56,000 employees in 
retail stores across the United States.
    And they have a desire to continue offering affordable 
healthcare plans like they've been offering for all these years 
to their employees, to their workforce. Unfortunately, after 
making the calculations, the total impact of the law on its 
benefit package, the company estimates that full implementation 
of the Affordable Care Act will ultimately increase their 
annual net cost 120 percent, or $100 million. And what the CEO 
has told me from his lips to my ears is that it's going to be 
worse coverage, not as good a coverage as what they have now, 
and it's going to cost 120 percent more.
    In order to address these dramatic new costs, the company 
has already announced to its part-time employees they will no 
longer be offered the coverage that they currently receive. 
Additionally, they're exploring ways to reduce their number of 
full-time employees by moving them to part-time work, the 29ers 
as we call them today.
    Mr. Trautwein, I have a question for you that I would like 
to direct you. Are your member businesses similar to this 
company experiencing the same difficult decisions?
    Mr. Trautwein. The short answer is they vary greatly in 
terms of their approach, but it's at least part of the 
decisionmaking process and the balance, and fine tuning that 
balance between full time and part time. And, again, they would 
much rather be making sales or doing other business-related 
activities, and they don't want to be thinking about these 
things.
    Mr. Long. Do you find it pretty widespread across the 
country----
    Mr. Trautwein. I think it is.
    Mr. Long [continuing]. With the companies?
    And I just want to say for the record--is the ranking 
member gone?
    Mr. Murphy. She is here in absentia.
    Mr. Long. OK. I was hoping we had at least one person on 
the other side to hear this, but there's this constant--and my 
friend Jan Schakowsky often says she hears this constant 
drumbeat from our side of the aisle about repeal and replace 
Obamacare.
    There are good things about Obamacare. When I ran the first 
time for Congress, it had just passed. It was all out there in 
the media. Everyone knew health care needed to be tackled, 
needed to be handled, needed to be changed. And there are good 
things about Obamacare. I'm willing to admit that. There's the 
allowing kids to stay on their parents' plan until they're 26, 
preexisting conditions. Insurance providers used to be risk 
takers, and over the years they kind of became risk averters. 
So there are good things, and I'm willing to admit that.
    I would hope that the other side of the aisle, when we're 
trying to work through these things to help companies, help 
individuals to get good, affordable health care and keep the 
insurance that they have, would come across and admit there are 
some bad things about the Affordable Care Act so we can all get 
together, instead of we get in these meeting after meeting, 
hearing after hearing where they sing the praises that 
everything is coming up roses on Obamacare. And it's simply not 
true.
    Now, not everything is disastrous about Obamacare. That's 
not true either. There are some good parts of it. But I would 
wish that we could work together, and I wish I had someone to 
talk to on the other side of the aisle, but apparently they 
have other things to do, bigger fish to fry, I guess I could 
say.
    But anyway that is just kind of my statement going forward 
trying to resolve these problems, because there are good and 
bad things about it, and we need to come to that realization 
instead of just coming in on one side saying everything's 
coming up roses, and the other side saying that everything's 
going to heck in a handbasket.
    So, again, I just want to thank you all for being here 
today, and I yield back.
    Mr. Murphy. The gentleman yields back.
    I now go to Mr. Griffith from Virginia for 5 minutes.
    Mr. Griffith. Thank you all very much for being here today. 
And I saw most of you were here listening to the testimony of 
the previous panel, and I do appreciate that.
    Ms. Neblett, one of the concerns that I have and have had 
with Obamacare is that a number of the restaurants in my area, 
particularly the fast-food restaurants, indicated when I was 
first elected--and I was elected the same time Mr. Long was, 2 
years and a piece ago now--they indicated that if there weren't 
some relief from this act, that their marginal stores would 
have to close down. And I have noticed over the course of the 
last 2-and-a-piece years that some of these restaurants have, 
in fact, closed down in my district.
    Now, the economy not being good, and the fact that 
apparently our position in this country in my district, which 
is a coal district, which is adverse to coal, at least 
according to the President, that has not helped matters any. 
But have you all seen a trend where some of the more marginal 
stores are closing down because they don't want to have to deal 
with Obamacare in the first place?
    Ms. Neblett. I think it's very hard to pinpoint exactly 
why, as you said, the economy has been slow, and businesses 
that are on the margin have--will always tend to go out of 
business. But there's no doubt that this is a complex law. It 
does add a lot of time in terms of trying to figure out what 
you need to do, and costs in terms of either the penalties or 
offering coverage is a big factor, and these are all things 
that operators are trying to figure out and deal with.
    Mr. Griffith. And here is--one of the concerns that I have 
is that I believe this bill is all built with pieces 
interconnecting. And so one of the difficulties I think we have 
in trying to work out some interesting compromises--and we've 
talked about the 29ers, and a lot of folks are saying, well, 
let's just move it back up to where it was at 40 hours a week. 
The problem is I believe that--and I wasn't here when it was 
passed, but I believe that the reason that they lowered it down 
to the 29 was they felt they'd get more people actually buying 
in. They had the Medicaid expansion component. Then they had 
the component of we're going to lower that, you have to cover 
folks down if they're working the 30 hours, because they needed 
to pick up those employees between 30 and 40 hours to make the 
numbers work on how many people were going to be pulled in the 
system, how many people were going to be insured, and, of 
course, the bigger the pool, the less expensive the insurance.
    So my fear is we raised that number up to 40, we solved 
that problem, but then we've made the overall cost of Obamacare 
greater because we have not--we don't have that group invested 
in doing--that 29-to-30 group invested in being a part of the 
program.
    So I have some real concerns there, and I'm wondering if 
any of your members and, Ms. Mahoney and Ms. Neblett 
particularly, if any of your members have expressed those 
concerns as well.
    Ms. Mahoney. Our members haven't expressed that concern. I 
think for them their focus is on how their businesses are run--
--
    Mr. Griffith. They're drowning, and they're looking for 
anything they can grab onto.
    Ms. Mahoney. Well, how their businesses have run 
historically, how they can continue to keep their businesses 
going in a way that's best for their employees, and this is a 
big wrench in that piece. I don't think they're aware of kind 
of the economic matrix that may have gone on to the funding of 
it and who gets in and who gets out. I think they're just 
working----
    Mr. Griffith. And I think that's where it's a problem for 
us to come in and try to tweak it here or tweak it there, and 
everybody keeps saying, well, why don't you all just try to fix 
it? I believe that the way it was constructed is such that if 
you pull out any major piece, the whole house of cards 
collapses. And it may have already happened with the fact that 
there's not the forced Medicaid expansion, which was a part of 
the program to make sure that everybody, you know, was going to 
be brought into the system one way or the other.
    And so I have some real concerns with trying to do 
piecemeal fixes when you pull a piece here, and it unravels 
something else over here. And I think if we try to fix it, 
we're going to spend years trying to repair what I believe is a 
structurally flawed from the very beginning concept that will 
not work. And I do appreciate that you all are just looking for 
solutions because you have lots of businesses that are in 
trouble and that are going to have to lay off people.
    And I would make this one last point. I've got about 30 
seconds left. While the people who were only working 29 hours 
may only be 1 percent of the workforce now, I suspect that it's 
going to be a lot larger come this time next year, because when 
you have the entire Commonwealth of Virginia saying we're not--
the State of Virginia says we're not going to have part-time 
workers at any more than 29 hours, when you look at the 
counties in my district that are looking at the same kind of 
policy, when you look at the grocery stores and the fast-food 
places and the other businesses across the country that are 
looking at sending people down to 29 because of the huge cost 
savings if they only work 29 hours, I think you're going to see 
that that's a lot more than 1 percent, Mr. Daley.
    And I yield back.
    Mr. Long. Will the gentleman yield just a second?
    Mr. Griffith. Well, I'm out of time. I don't have a second 
to yield, but by unanimous consent I'd be happy to----
    Ms. DeGette. No. I object.
    Mr. Murphy. We're out of time at this point.
    Ms. DeGette. Oh, if you want to apologize that's OK. That's 
fine.
    Mr. Murphy. Do you want to say something. Mr. Long?
    Mr. Long. Pardon?
    Mr. Murphy. Did you have a quick comment to make, Mr. Long?
    Mr. Long. Yes, if I could.
    When I prepared my line of questioning, the ranking member 
was in the room, and I'm sure if you watch the video, you will 
see I turned around to speak to her, and she was not there. And 
might I offer her my apology if my comments came off as being 
smart alec or whatever. They did not intend to be. I did not 
intend to turn and see until I turned around, and I was 
surprised you weren't there.
    And I really think that we need to work together as 
Republicans and Democrats. And like I said in my comments, and 
I understand you were with your art student, which I'm going to 
meet mine after a while, which is a great program, and I 
apologize to you. I don't know if you'll accept it or not, but 
it's a harsh call----
    Ms. DeGette. I'm always happy to accept an apology. I 
appreciate it. And what I'm trying to do here is the same thing 
you're trying to do, which is to solve a problem. And we can't 
do it if we're going to, A, demagogue this issue, or, B, 
attacking each other.
    Mr. Long. Right. And that was my whole point not for it to 
end like it did when I was trying to be helpful, and I 
apologize.
    Ms. DeGette. And I'm happy that you recognize that, and I 
accept your apology.
    Mr. Murphy. Thank you. I appreciate you all for tuning into 
Dr. Murphy's group therapy session. Stay tuned tomorrow for 
more good comments on how we can work together.
    Ms. DeGette. Mr. Chairman, I just have one final comment, 
which is very brief and aside from the fact that we do hope we 
can work together on all of these issues.
    Ms. Neblett said that small businesses need one resource to 
go to to figure out answers to the questions and to bust some 
of these myths. I would suggest that you put on your Web site 
healthcare.gov. That is the central Web site that the HHS has 
put up. And then we'll continue to work with you on trying to 
get this message out better all around the country.
    Thank you, Mr. Chairman.
    Mr. Murphy. Thank you.
    I thank all the panelists here today. I thank the Members. 
And I ask unanimous consent that the written opening statements 
of other Members be introduced in the record. So without 
objection, the documents will be entered in the record.
    And, again, I want to thank all of the panelists from both 
panels here and all the Members who participated in today's 
hearing. I remind Members they have 10 business days to submit 
questions for the record, and I ask that all the witnesses also 
agree to respond promptly to any of the questions.
    And with that, I adjourn this hearing. Thank you.
    [Whereupon, at 1:05 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]


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