[Senate Hearing 114-513]
[From the U.S. Government Publishing Office]
S. Hrg. 114-513
EXAMINING JOB-BASED HEALTH INSURANCE AND DEFINING FULL-TIME WORK
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING JOB-BASED HEALTH INSURANCE AND DEFINING
FULL-TIME WORK
__________
JANUARY 22, 2015
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
LAMAR ALEXANDER, Tennessee, Chairman
MICHAEL B. ENZI, Wyoming PATTY MURRAY, Washington
RICHARD BURR, North Carolina BARBARA A. MIKULSKI, Maryland
JOHNNY ISAKSON, Georgia BERNARD SANDERS (I), Vermont
RAND PAUL, Kentucky ROBERT P. CASEY, JR., Pennsylvania
SUSAN COLLINS, Maine AL FRANKEN, Minnesota
LISA MURKOWSKI, Alaska MICHAEL F. BENNET, Colorado
MARK KIRK, Illinois SHELDON WHITEHOUSE, Rhode Island
TIM SCOTT, South Carolina TAMMY BALDWIN, Wisconsin
ORRIN G. HATCH, Utah CHRISTOPHER S. MURPHY, Connecticut
PAT ROBERTS, Kansas ELIZABETH WARREN, Massachusetts
BILL CASSIDY, M.D., Louisiana
David P. Cleary, Republican Staff Director
Evan Schatz, Minority Staff Director
John Righter, Minority Deputy Staff Director
(ii)
C O N T E N T S
__________
STATEMENTS
THURSDAY, JANUARY 22, 2015
Page
Committee Members
Alexander, Hon. Lamar, Chairman, Committee on Health, Education,
Labor, and Pensions, opening statement......................... 1
Murray, Hon. Patty, a U.S. Senator from the State of Washington,
opening statement.............................................. 3
Collins, Hon. Susan M., a U.S. Senator from the State of Maine... 5
Enzi, Hon. Michael B,, a U.S. Senator from the State of Wyoming.. 29
Warren, Hon. Elizabeth, a U.S. Senator from the State of
Massachusetts.................................................. 31
Roberts, Hon. Pat, a U.S. Senator from the State of Kansas....... 33
Baldwin, Hon. Tammy, a U.S. Senator from the State of Wisconsin.. 34
Sanders, Hon. Bernard, a U.S. Senator from the State of Vermont.. 37
Franken, Hon. Al, a U.S. Senator from the State of Minnesota..... 39
Murphy, Hon. Christopher, a U.S. Senator from the State of
Connecticut.................................................... 41
Cassidy, Hon. Bill, a U.S. Senator from the State of Louisiana... 43
Mikulski, Hon. Barbara A., a U.S. Senator from the State of
Maryland, prepared statement................................... 44
Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode
Island......................................................... 47
Scott, Hon. Tim, a U.S. Senator from the State of South Carolina. 48
Casey, Hon. Robert P., Jr., a U.S. Senator from the State of
Pennsylvania................................................... 50
Witnesses--Panel I
Webb, Betsy M., Superintendent, Bangor School Department, Bangor,
ME............................................................. 6
Prepared statement........................................... 7
Puzder, Andrew F., Chief Executive Officer, CKE Restaurants,
Carpinteria, CA................................................ 9
Prepared statement........................................... 11
Holtz-Eakin, Douglas, President, American Action Forum,
Washington, DC................................................. 17
Prepared statement........................................... 18
Fugere, Joe, Founder, Tutta Bella Pizzeria, Seattle, WA.......... 22
Prepared statement........................................... 24
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
More Time for Full Time Executive Committee.................. 53
Letters:
More Time For Full Time Executive Committee and Employer-
Based Organizations.................................... 54
American Federation of Labor and Congress of Industrial
Organizations (AFL-CIO)................................ 61
2015CKE HealthConnections Benefit Program Attachments.... 63
(iii)
EXAMINING JOB-BASED HEALTH INSURANCE AND DEFINING FULL-TIME WORK
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THURSDAY, JANUARY 22, 2015
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 9:35 a.m., in
room 430, Dirksen Senate Office Building, Hon. Lamar Alexander,
chairman of the committee, presiding.
Present: Senators Alexander, Enzi, Burr, Collins,
Murkowski, Scott, Roberts, Cassidy, Murray, Mikulski, Sanders,
Casey, Franken, Whitehouse, Baldwin, Murphy, and Warren.
Opening Statement of Senator Alexander
The Chairman. The Senate Committee on Health, Education,
Labor, and Pensions will come to order.
Yesterday we had one of our two new members here, Senator
Collins. Today we have the other one in his Mardi Gras tie,
Senator Cassidy. So we welcome both of them to the committee.
This morning we're holding a hearing examining job-based
health insurance and defining full-time work. Senator Murray
and I will each have our opening statement, and then we'll
introduce our panel of witnesses. After our witness testimony,
Senators will have 5 minutes of questions. Today I'm going to
defer my questions and call first on Senator Collins who, along
with Senator Donnelly, Senators Manchin and Murkowski, have
introduced the bipartisan bill to solve the problem that we're
here to discuss today.
Let me begin by mentioning some things that are happening
in Tennessee. In Murfreesboro, Middle Tennessee State
University has started limiting hours for part-time workers.
This means students can no longer accept multiple on-campus
work assignments, and graduate assistants might have to wait
tables instead of picking up extra on-campus, grant-funded
research projects that would better further their careers.
In Knoxville, Regal Entertainment Group, which is
headquart-
ered there, the Nation's largest movie theater chain, announced
last year it was cutting employee hours from 40 to below 30 in
order to comply with Obamacare. According to a news report,
``One Regal Theater manager said the move has sparked
a wave of resignations from full-time managers who have
seen their hours cut by 25 percent or more.''
In Johnson City, TN, Pam Cox, the director of Finance for
Johnson City Public Schools, told a local news outlet about a
year ago that her district will have to hire more people to
work fewer hours. She said,
``It will be challenging to find people. It will also
hurt the employees because where they have been able to
work as much as they wanted in these types of positions
with no benefits attached to it, now you're going to be
saying we can't let you work even though you want to
and you're good at your job. We can't give you the
hours or give you the pay, because we can't afford to
give you the insurance.''
That's the Johnson City Public Schools.
So why are these things happening in Tennessee and across
the Nation? Well, the answer is that Obamacare requires
businesses with 50 or more full-time employees to provide
health insurance to those employees or pay a penalty at tax
time. That penalty is $2,000 for each employee whom the
government says should have been covered by an employer plan,
or $3,000 for every employee who receives a subsidy in the
exchange. The law, passed without any Republican support,
defined ``full-time'' as an employee who works more than 30
hours a week, a strange definition, one that sounds more like
France than the United States.
The average American between the ages of 25 to 49 works 8.8
hours per day, or 44 hours a week, according to the American
Time Use Survey, published by the Bureau of Labor Statistics.
The Obamacare definition of ``full-time'' is nearly one-third
lower.
Many businesses can't afford Obamacare's mandate and must
reduce their number of full-time employees. The result of all
this is that thousands of workers are getting a pay cut. Their
work schedules are being reduced to 29 hours a week and below.
This isn't enough money for these workers to earn a living.
Many must take second jobs. A Hoover Institution study found
that the 30-hour definition puts 2.6 million working-age
Americans with a median income under $14,333 for individuals
and $30,000 for families at risk of losing jobs and hours. The
study found that 89 percent of those affected don't have a
college degree. Sixty percent are between 19 and 34.
Most at risk of lost hours are women, of which half have a
high school diploma or less. These are Americans who are often
working one of their first jobs, trying to work their way up
the ladder. You have to start with a lower paying job, a job
that doesn't require as many skills, and hope that someday your
hard work will lead to a higher paying one. Many of these
Americans are working in a service industry such as
hospitality, retail and restaurants. We're going to hear from
their employers today. But the Obamacare provision is affecting
all kinds of employers.
In September of last year, Investor's Business Daily
reported that at least 451 employers, county governments,
public schools, community colleges and universities have laid
off staff or reduced employee work hours. Our public schools
can't charge higher prices to cover these mandates. They have
to cut special education teachers, coaches, and bus drivers.
Three surveys published by the Federal Reserve Bank in August
found that employers are increasing their proportion of part-
time workers.
There is bipartisan support for repealing this provision.
As I mentioned earlier, this legislation is introduced by four
Senators, two Democrats, two Republicans, one of them Senator
Collins, whom we'll hear from in just a minute. Republicans
have talked a lot about wanting to move as responsibly and
rapidly as we can to repair the damage caused by Obamacare. We
have also talked about wanting to get results. This bill should
be an important step in doing both.
In fact, this bill reminds me of why many of us like being
on this committee, because the issues we work on affect so many
Americans. When we talk about fixing No Child Left Behind,
we're talking about 50 million children and 100,000 public
schools. When we're talking about making it simpler to apply
for a Pell Grant to go to college, we're talking about
simplifying a form that 20 million families fill out each year.
When we talk about modernizing the Food and Drug
Administration, making it easier for Americans to access life-
saving drugs, we're talking about something that affects nearly
every American. And today, we're focused on 2.6 million
Americans who are mostly low-income, disproportionately women,
and at risk of losing jobs and hours.
I look forward to what our witnesses have to say.
Senator Murray.
Opening Statement of Senator Murray
Senator Murray. Thank you very much, Chairman Alexander.
Thank you to everyone joining us here today, especially our
witnesses. And in particular, I am very proud to have a
Washington State business owner here today, Joe Fugere, of
Seattle's Tutta Bella Pizza.
Joe, thanks so much for coming all the way across the
country to be here today.
I'm looking forward to the opportunity to hear from all of
you about how we can do more to strengthen our health care
system for our workers and our families. I believe strongly
that the work did not end when we passed the Affordable Care
Act. Far from it. There is more we need to do to build on the
law and make our health care system work better, and I'm ready
to work with anyone on either side of the aisle who has good
ideas about how to make health care coverage more accessible
and more affordable.
Unfortunately, just weeks into the new Congress, we have
already seen bill after bill introduced that would roll back
the progress we have made when it comes to providing millions
of Americans with affordable, quality health care and improving
coverage for those who already had it, and fighting back
against the worst insurance company abuses.
The legislation the Chairman is focusing on today is no
different. By allowing businesses to get out of offering health
insurance to any employee working less than 40 hours, this bill
will actually create the problems it claims to solve. As
conservative experts have noted, because of how it changes
work-week requirements, this bill would actually give companies
incentive to cut workers' hours and deny them health care.
As a result, the Congressional Budget Office projects this
bill could eliminate job-based health insurance for up to a
million Americans, 500,000 of them who could lose their
insurance altogether. Think about how that would impact
workers. What about a nurse who works three 12-hour shifts, or
the extra hours that teachers put in after class? They
shouldn't have to worry about their health care coverage being
threatened.
And this bill isn't only bad for workers. It also would
shift the cost of providing coverage from business to
taxpayers, driving up the deficit by $53.2 billion over the
next decade. In other words, this legislation puts big
corporations and their profits ahead of working families and
their health care. If it ever became law, workers across the
country will have to worry about their health care being
cutoff, their hours being rolled back, and their jobs being
eliminated for part-timers. We should be rewarding hard work,
not punishing it.
It's also important to note that in addition to denying
workers health care coverage and driving up the deficit, the
legislation my Republican colleagues are proposing would put
businesses like Joe's, businesses that want to help their
workers stay healthy and economically secure, at a serious
disadvantage. As he will talk about, Joe has offered health
care coverage to his hourly employees, including many working
below the current 30-hour threshold, since 2008. And as Tutta
Bella has gone from one location to five in and around Seattle,
Joe has seen firsthand that businesses succeed when their
workers succeed. The Affordable Care Act offered businesses
like Joe's a more level playing field.
But by letting businesses game the system and dump the cost
of their workers' health care onto the taxpayer, my Republican
colleagues' proposal would undo a lot of that progress. Their
proposal would represent a very clear step in the wrong
direction for workers who don't want to see their hours or
benefits cut, and for the many businesses around the country
who want to do the right thing and help their employees stay
healthy.
So I hope that during today's discussion my Republican
colleagues will seriously consider the harm the 40-hour
proposal could actually do, because the bottom line is the last
thing any worker wants is fewer hours and higher health care
costs. In fact, 66 percent of respondents to last week's Fox
News poll said they thought people who worked 30 hours a week
should receive guaranteed health insurance from their employer,
and Americans have been very clear they aren't interested in
partisan political fights about dismantling this law. They want
to see Congress working together to build on the Affordable
Care Act to make our health care system work better. They want
patients and working families to be put first, not insurance
companies, not big corporations trying to cut their costs at
workers' expense, but patients and working families, and that's
what I and many of my colleagues will be focused on.
I hope our Republican colleagues will reconsider the
approach we've seen so far and work with us to move our health
care system forward, not backward, because I'm confident that
if they do, there is a lot we could get done together.
Thank you, Mr. Chairman.
The Chairman. Thanks, Senator Murray.
As I indicated earlier, I'm going to give Senator Collins
my place in the order for questions. We'll have a round of 5-
minute questions. The procedure we're following is those who
were here at the gavel will go in the order of seniority, and
after that it's first to arrive. So after Senator Collins will
be Senator Warren, then Senator Enzi, then Senator Baldwin,
then Senator Scott, and then Senator Sanders. Those are the
first six.
We'll ask the witnesses to summarize their statements in 5
minutes because we have lots of Senators here who will want to
ask you questions and we'd like to take full advantage of that.
So the first thing we want to do is to hear from the
witnesses. And I believe, Senator Murray, you have a witness to
introduce.
Senator Murray. Well, again, thank you very much, Mr.
Chairman.
I want to welcome a witness from my home State of
Washington, as I mentioned, Joe Fugere. He is the founder of
Seattle's Tutta Bella Neapolitan Pizza that is the Pacific
Northwest's first certified authentic Neapolitan pizzeria,
which he first opened back in 2004, and he now has, as I said,
five neighborhood locations in the greater Seattle area, my
favorite pizza place in Seattle, just so you know.
He has modeled Tutta Bella to not only be a respected
pizzeria but also a meaningful business that sets the standard
for taking care of workers and social stewardship. Under his
direction, Tutta Bella regularly leads socially responsible
small business initiatives, and he's been honored by a number
of our local councils, organizations, and the White House.
Joe, thanks so much again for coming all the way across the
country today. It's great to see you.
The Chairman. And, Senator Warren, I believe you have a
witness to introduce.
Senator Warren. I don't think so, Mr. Chairman.
The Chairman. You don't? I'm sorry.
Senator Warren. But I'd be glad to introduce anyone.
[Laughter.]
The Chairman. That was yesterday.
Senator Warren. That was yesterday. That's right.
The Chairman. All right. I'm a day behind.
Senator Collins has a witness to introduce.
Senator Collins. Thank you, Mr. Chairman.
The Chairman. Excuse me.
Statement of Senator Collins
Senator Collins. I'm very pleased to introduce Dr. Betsy
Webb to this committee. Dr. Webb is the superintendent of
schools in Bangor, ME, a position that she has held since 2008.
Under her guidance, the Bangor School Department has earned a
national reputation for academic excellence. In 2013, Dr. Webb
was named Maine's Superintendent of the Year, a fitting tribute
to her total dedication to her students, community involvement,
professionalism, and fiscal management.
In addition to being a well-respected authority on
education policy, Dr. Webb also was the leader who brought to
my attention the real-life problems that the 30-hour definition
would cause in school systems. There's been a lot of focus on
the for-profit world. She opened my eyes to what the impact
would be on school systems across the United States.
First-class education is a team effort, and Betsy is a top-
notch team leader. As a citizen of Bangor, I'm very grateful
for Betsy's contributions to our community and delighted that
she's testifying before us today. I would also note, Mr.
Chairman, that she got up at 3 a.m. in order to catch the 5:30
plane to be here today.
The Chairman. Thank you very much.
I'll introduce two other witnesses.
Mr. Andy Puzder is chief executive of CKE Restaurants,
which is the parent company of Hardy's and Carl Jr. fast food
restaurants. He's been CEO of CKE Restaurants for 15 years. His
company currently owns or franchises about 3,375 restaurants in
the United States and 28 foreign countries, and, with its
franchisees employs over 70,000 people in the United States.
Third to testify will be Dr. Douglas Holtz-Eakin. Dr.
Holtz-Eakin is President of the American Action Forum, a
domestic policy think tank here. Dr. Holtz-Eakin is the former
director of the Congressional Budget Office, also served as
chief economist on President George W. Bush's Council of
Economic Advisors.
Welcome to all four of you.
The order in which we'd like to go, please, is Dr. Webb,
Mr. Puzder, Dr. Holtz-Eakin, and Mr. Fugere. So, let's go in
that order.
Dr. Webb.
STATEMENT OF BETSY M. WEBB, SUPERINTENDENT, BANGOR SCHOOL
DEPARTMENT, BANGOR, ME
Ms. Webb. Chairman Alexander, Ranking Member Senator
Murray, Senator Collins, and distinguished members of the
committee, my name is Betsy Webb and I am the superintendent of
schools in Bangor, ME. Thank you for asking me to testify today
on the impact of the Affordable Care Act's definition of full-
time work on public schools.
The Bangor School Department educates 3,800 students in
seven elementary schools, two middle schools, and a high
school. Our system employs 644 individuals, including 337
teachers, 110 educational technicians, and nearly 300
additional workers in various capacities who are critical to
our mission of academic excellence. We also have approximately
30 tutors and 70 substitute teachers who are not included in
the numbers I provided.
We are fortunate to come from a community that places a
high value on quality education for every child. The people of
Bangor provide schools with extraordinary support, both
financially and through the countless volunteer hours of
hundreds of parents and community members. I am extremely proud
of the faculty and staff commitment and the results our
students achieve.
Our students consistently score above average on
standardized tests and are considered out-performers,
especially when looking at our demographics. Our cost per pupil
is $1,000 lower than the State average.
Two of our schools have been recognized as National Blue
Ribbon Schools of Excellence. Bangor High School has graduated
more National Merit and Semi-Finalists than any other high
school in Maine, public or private, and hundreds of teens from
Bangor High have won State and national championships in a wide
range of academic and athletic competitions.
We do all of this on a budget of about $43 million a year,
an amount that has grown by just 3 percent during my tenure
over 7 years. We are recognized for making ends meet by being
highly efficient, staying flexible, and pursuing what we call
Bangor solutions in the best interests of students. We
obviously watch our pennies very closely.
The Affordable Care Act's definition of full-time deprives
us the flexibility critical to our success. For example, we
have a core group of substitute teachers who often work more
than 30 hours a week, filling in for teachers, some of whom are
out for extended periods, such as for maternity leave. They
help us maintain continuity in the classroom, which is so
important to our students' learning.
Given our limited resources, we cannot afford to offer
health benefits to these substitutes that would cost nearly
$6,000 each, nor can we afford the $2,000 penalty for failing
to do so. Unfortunately, unless something is done to adjust the
30-hour rule, we will be forced to limit their hours.
The 30-hour rule will also affect our 110 educational
technicians who work more than 30 hours a week, and we have no
intention of reducing their hours. The pay ranges from $14 to
$18 an hour, and even though the district pays 77 percent of
their health coverage or the majority of the cost, for many ed
techs the employee share exceeds the affordability limits in
the Affordable Care Act, triggering a $3,000 penalty on the
district for each ed tech who rejects our plan and gets
subsidized coverage in the exchange.
We can't afford this $3,000 penalty, nor can we afford to
pay a larger share of their health care benefits to avoid the
penalty since doing so would potentially cost an additional
$110,000 a year.
Further, we are concerned about the combinations of
positions and are worried that we will have to limit people to
only work one position.
I am hopeful my testimony helps explain why it is so
important to adjust the 30-hour rule and to restore 40 hours as
the threshold for full-time.
Senator Collins and Senator Donnelly have proposed the 40
Hours is Full Time Act, and myself and my colleagues are
hopeful that members of the committee will support this
bipartisan legislation. Thank you.
[The prepared statement of Ms. Webb follows:]
Prepared Statement of Betsy M. Webb
summary
Dr. Betsy Webb is the Superintendent of Schools in Bangor, ME. The
Bangor school system educates 3,800 students in seven elementary
schools, two middle schools, and one high school. The system employs
644 individuals--including 337 teachers, 110 ed techs, and nearly 300
additional workers in various capacities. The district also employs
about 30 tutors and 70 substitute teachers.
Bangor's students consistently score above average on standardized
tests, while the district's cost per-pupil is $1,000 lower than the
State average. Two of Bangor's 10 schools have been named National Blue
Ribbon Schools of Excellence. Bangor High School has graduated more
National Merit and Semifinalists than any other high school in Maine,
public or private. Teams from Bangor High have won State and national
championships in a wide range of academic and athletic competitions.
The district's budget is about $43 million a year, an amount that
has grown by just over 3 percent since Dr. Webb became superintendent
in 2008. Bangor achieves its results by being as efficient as possible,
staying flexible, and by watching its pennies very carefully.
The ACA's definition of ``full-time'' work will deprive the
district of flexibility critical to its success. For example, the
district has a core group of substitute teachers who work more than 30-
hours a week filling in for teachers who are out for extended periods,
such as maternity leave. These substitute teachers help maintain
continuity in the classroom, which is so important to students. Bangor
can't afford to offer health benefits to these substitutes--that would
cost $6,000 each--nor can Bangor afford the $2,000 penalty for failing
to do so. Unless something is done to fix the 30-hour rule, the
district will be forced to reduce the hours of these substitute
teachers.
The 30-hour rule will also affect Bangor's 110 ed techs, who work
more than 30 hours a week at rates of pay ranging from $14 per hour to
$18 per hour. Even though the district pays most of the cost of their
health coverage, for many ed techs the employee-share exceeds the
``affordability'' limits in the ACA, triggering a $3,000 penalty on the
district for each ed tech who rejects the district's plan and gets
subsidized coverage in the exchange instead. Bangor can't afford this
$3,000 penalty, nor can it afford to pay a larger share of the ed
tech's health benefits to avoid the penalty, since doing so could cost
$110,000 a year.
Dr. Webb is also concerned about Bangor's hall monitors, who
sometimes serve as assistant coaches or have other part-time school
jobs. The 30-hour rule will force them to drop one job entirely, just
to stay under an arbitrary limit that no one truly believes is ``full-
time.''
Dr. Webb hopes members will support bipartisan legislation
introduced by Senator Collins and Senator Donnelly, the ``Forty Hours
is Full-Time Act,'' to fix the 30-hour rule and restore 40-hours as the
threshold for ``full-time'' work under the ACA.
______
Chairman Alexander, Ranking Member Murray, Senator Collins,
distinguished members of the committee, my name is Betsy Webb, and I am
the Superintendent of Schools in Bangor, ME, our State's third largest
city. I have had the privilege of serving in this position since 2008.
Thank you for providing me the opportunity to testify today on the
impact on our public school system of the Affordable Care Act's
definition of ``full-time'' work. Before I describe that impact, allow
me to set the stage with some background information: the Bangor school
system educates 3,800 students in seven elementary schools, two middle
schools, and one high school. Our system employs 644 individuals--
including 337 teachers, 28 administrators, 110 ed techs, and nearly 300
additional workers in various capacities who are critical to our
educational mission, such as food service workers and lunch aides,
secretaries, IT workers, custodians, and coaches. In addition, we have
about 30 tutors and 70 substitute teachers who are not included in the
numbers I just listed.
All of our employees work together to provide an outstanding
education to the students in our system. We are fortunate to come from
a community that places a high value on quality education for every
child, and contributes to our efforts both financially and through the
countless volunteer hours of hundreds of parents and dedicated school
supporters. We have an incredible Parent-Teacher Organization and
Parent Boosters network.
I am proud of the work we do together, and the results we have
achieved. Our students consistently score above average on standardized
tests, while our cost per-pupil is $1,000 lower than the State average.
Two of our ten schools have been named National Blue Ribbon Schools of
Excellence. One of these, the James F. Doughty Middle School--earned
this distinction despite the fact that roughly 60 percent of its
students are eligible for free or reduced lunch. The other--Bangor High
School--has graduated more National Merit and Semifinalists than any
other high school in Maine, public or private, and has been recognized
by Newsweek with a top 5 percent high school rating. The academic
excellence for which Bangor High is noted has carried over to State and
national championships in Speech & Debate, JETS, JROTC and Poetry Out
Loud competitions, while teams from the school have also won State
championships in Basketball, Baseball, Football, Soccer, Swimming, and
Track.
We do all of this on a budget of about $43.3 million a year, an
amount that has grown by just over 3 percent during my tenure--less
than one-third the rate of inflation. This is truly a bare-bones-
budget. In fact, in 2011 and 2012, funding for the school system was
cut, in absolute terms, and this past August I was forced to freeze all
non-essential spending due to an unanticipated spike in the price of
natural gas. We manage to make ends meet by being as efficient as
possible, staying flexible, and by pursuing what I like to call
``Bangor solutions.'' Suffice it to say we watch our pennies very
carefully.
Which brings me to the topic of today's hearing. The fact is, by
setting the definition of ``full-time'' work at just 30 hours a week,
the Affordable Care Act deprives us of the flexibility we need to stay
within our budget while continuing to achieve excellence in education.
For example, we have about 70 people on our substitute teacher list who
can be called-in on an as-needed basis. We value each and every one of
these teachers, but we especially rely on a core group who teach more
than 30 hours a week and will be considered ``full-time'' under the
Affordable Care Act. This core-group of substitutes allows us to
maintain continuity and excellence in the classroom by taking the place
of full-time teachers who are out for extended periods, often on
maternity leave. The district cannot afford to offer health coverage to
these substitutes--which would cost us $6000 each--nor can we afford
the $2,000 employer mandate penalty for failing to do so.
Unfortunately, unless something is done to fix the 30-hour rule, we
will have little choice but to reduce the hours of these substitute
teachers.
We should not be forced into this no-win situation by the 30-hour
rule. The district doesn't win--we want these substitute teachers in
the classroom. The substitutes don't win--they want to work more than
30-hours. And our students don't win--they deserve to learn in
classrooms that aren't disrupted by the comings and goings of different
substitutes every few days.
Another example of how the 30-hour rule forces us into no-win
choices is how it affects the 110 ed techs who work in our schools.
These ed techs work more than 30 hours a week, at rates of pay ranging
from $14 per hour to $18 per hour. The school district pays 77 percent
of the cost of coverage for these ed techs, leaving them with 23
percent as their employee share. Yet even this amount exceeds the
``affordability'' limits in the Affordable Care Act, triggering a
$3,000 penalty on the district for each ed tech who rejects our plan
and gets subsidized coverage in the exchange instead. The district
cannot afford this $3,000 penalty, nor can we afford to pay the
additional $700 to $1000 per employee that we would need to pay to make
our plan ``affordable'' to these employees, since doing so could cost
us $110,000 annually. Once again, as a consequence of the ACA's 30-hour
rule, we will be forced to cut back the hours of employees who want and
deserve to work more.
Another group of employees that I am worried about aren't provided
benefits under our plan today, but could be affected by the 30-hour
rule. For example, ``hall monitors'' often work another part-time job
for the district, such as serving as the assistant coach for one of our
athletic teams. Taken together, these two part-time jobs will put some
of these individuals over the 30-hour a week threshold. Since we won't
be able to afford to extend health coverage to these part-time workers,
the 30-hour rule will force them to choose to drop one job entirely,
just to stay under an arbitrary limit that no one truly believes is
``full-time.''
I am hopeful that my testimony will help highlight why it is so
important to fix the 30-hour rule and restore 40-hours as the threshold
for ``full-time'' work under the ACA. I know that Senator Collins and
Senator Donnelly have proposed doing exactly that with the ``Forty
Hours is Full-Time Act,'' and I am hopeful the members of the committee
will support that bipartisan legislation.
Again, I thank you for the opportunity to testify on this important
issue, and I look forward to answering your questions.
The Chairman. Thank you, Dr. Webb, and thank you for
sticking so closely to the 5 minutes.
Mr. Puzder.
STATEMENT OF ANDREW F. PUZDER, CHIEF EXECUTIVE OFFICER, CKE
RESTAURANTS, CARPINTERIA, CA
Mr. Puzder. Chairman Alexander, Ranking Member Murray, and
members of the committee, thank you for inviting me to testify
on an issue of importance to all American workers, the 40 Hours
is Full Time Act.
CKE Restaurants has 2,920 domestic restaurants in which we
employ about 20,000 people. Our franchisees employ roughly
another 55,000. As CEO, our restaurant managers often tell me
how difficult the Affordable Care Act's 30-hour threshold makes
it for them to give crew members the hours they need just to
get by.
In an effort to keep consumer prices down, remain
competitive and earn their bonuses, our general managers, who
are 62 percent minorities and 66 percent women, are always
doing what they can to keep costs down. That's the way American
business men and women succeed.
The ACA's math is simple: three employees working 40 hours
a week will produce 120 hours. Five employees working 24 hours
a week also produce 120 hours. Under the ACA, employers must
offer the three full-time employees health insurance or pay a
penalty. They have no such obligation to the five part-time
employees, making part-time employment less costly. In this
way, the ACA unintentionally encourages our general managers to
reduce employees' hours to under 30 a week. This result
shouldn't come as a surprise to anyone. If you make something
more expensive, people will use less of it. If you make
something less expensive, people will use more of it. This is
the rationale behind sin taxes, and it applies to other costs,
including labor.
For example, when passing the Fair Labor Standards Act in
1938 and establishing the modern 40-hour work week, Congress
and President Roosevelt didn't make working over 40 hours a
week illegal. They simply required that employers pay overtime
to employees who worked over 40 hours, making employees who
work over 40 hours less economical than employees who worked 40
or fewer hours. The result was the commonly accepted 40-hour
work week.
By making employees who work 30 or more hours a week less
economical than employees who work under 30 hours a week, the
ACA has the same economic impact, encouraging businesses to
reduce employees' hours to less than 30.
We like to see our employees insured. For many years, and
as long as I've been CEO, we've offered our general managers
and above ACA-compliant insurance. We felt that employees at
this level were likely to be the prime support for their
families and, as a group, far more desirous of receiving their
compensation partly in the form of health insurance than the
employees they supervised. We have 1,447 who have enrolled for
coverage.
We also elected to offer coverage to over 5,000 additional
employees who work 30 hours or more a week rather than paying
the employer penalty and sending them to the exchanges. Only
420 enrolled.
Since I've been CEO, we've also offered employees who are
ineligible for our company-sponsored insurance access to
inexpensive group coverage. Currently we offer our part-time
employees access to group coverage through what is called
indemnity medical insurance. About 200 of our 13,100 part-time
employees have enrolled.
As these numbers indicate, it's difficult to get our
employees to sign up for insurance. First, they're young. They
don't believe they need insurance. And if the penalty is
cheaper, they'll just pay it, assuming the IRS can collect it.
Second, they believe they can get medical care for free at
the emergency room.
And finally, they believe that if they become seriously
ill, they can simply wait for the next open enrollment date and
get insurance on one of the exchanges because insurers can no
longer turn them down or charge them more if they're sick.
The tradeoff for this low enrollment rate has been a
reduction in the hours of thousands of our employees, and I
believe hundreds of thousands, if not millions, of American
workers. I respectfully submit that the tradeoff isn't worth
it. I'm strongly in favor of making more insurance options
available to more employees, particularly if this can be done
in a way that offers coverage to those who want it without
hurting employment opportunities for those who don't.
Should we return to a 40-hour work week, the White House is
concerned, and Senator Murray, that businesses would reduce the
hours of 40-hour-a-week employees. I'd submit this is a minimal
risk. First, we offered general managers and above ACA-
compliant coverage before the ACA without an hourly threshold.
For us, that's 1,447 employees, or 78 percent of those who
enrolled. We would continue to do so even if the threshold
increased to 40 hours a week.
Of the 420 additional employees who enrolled, only 197, or
about 1 percent, work 40 hours a week. Reducing their hours
would be problematic as we need their expertise in the
restaurants and we could lose them to competitors. However,
even if we marginally reduced the hours of all 197 employees,
the benefits of potentially increasing the hours and incomes of
thousands of our other lower wage employees would, I believe,
again more than offset this cost.
In closing, I respectfully urge you to consider the
negative impact of the ACA's 30-hour-a-week coverage threshold
and the benefit to American workers of a fix, returning that
threshold to 40 hours.
Thank you, and now I can take a breath.
[Laughter.]
[The prepared statement of Mr. Puzder follows:]
Prepared Statement of Andrew F. Puzder
summary
CKE owns the Carl's Jr. and Hardee's restaurant brands. In
our 800 domestic company-owned restaurants we employ about 20,000
people. Our franchisees employ roughly 55,000 additional people in
their 2,120 domestic restaurants.
The Affordable Care Act (``ACA'') encourages employers to
reduce workers' hours to less than 30 a week, reducing the incomes of
low-wage workers who can least afford it. Three employees working 40
hours per week will produce 120 labor hours. Five employees working 24
hours per week also produce 120 labor hours. Under the ACA, employers
must offer the three full-time employees health insurance or pay a
penalty. They have no such obligation to the five part-time employees,
making part-time employment less costly.
I believe this has resulted in employers reducing hundreds
of thousands (if not millions) of jobs to under 30 hours a week. By
raising the ACA's coverage threshold to 40 hours a week, the Forty
Hours is Full Time Act would remove this incentive and encourage
employers to increase low wage workers' hours and incomes.
The White House is concerned that increasing the threshold
for coverage to 40 hours would (i) cause a substantial number of people
to lose their coverage and (ii) encourage employers to reduce
employees' hours to under 40 hours a week to avoid offering them
coverage. Based on our experience, these concerns are unfounded.
Of our 20,000 employees, 6,900 were eligible for coverage,
1,447 already had ACA compliant coverage leaving 5,453 eligible
employees of whom only 420 chose to enroll. That's 2 percent of our
total employees or 6 percent of eligible employees.
While these 420 employees potentially could lose their
coverage if the standard were 40 hours, this change would have the
benefit of encouraging our managers to increase working hours and
incomes for thousands of our other employees.
With respect to reducing the hours of employees who
currently work 40 hours a week, we offered 1,447 of such employees (78
percent of those insured) ACA compliant coverage without an hourly
requirement or any other government compulsion and would continue to do
so should the standard change to 40 hours a week.
Of the 420 additional employees, only 197 (less than 1
percent of our employees) work 40 hours a week. Reducing their hours
would be problematic as we need their expertise in the restaurants and
could lose them to competitors.
However, even if we marginally reduced the hours of all
197 employees (which we would not), the benefit of potentially
increasing the hours and incomes of the thousands of our other
employees would again more than offset this cost.
Accordingly, I respectfully urge you to consider the
negative impacts of the ACA's 30 hours a week coverage threshold on
working Americans and the benefits to such workers of a fix that would
return the threshold to 40 hours.
______
introduction
I want to thank Chairman Alexander, Ranking Member Senator Murray
and the members of the Health, Education, Labor, and Pensions Committee
for giving me the opportunity to discuss the Forty Hours is Full Time
Act, legislation that is of importance to American workers and
businesses alike. My name is Andrew F. Puzder and I have been the CEO
of CKE Restaurants Holdings, Inc. (``CKE'') for over 14 years.
I'm hopeful that this hearing will help open a dialog between
legislators, workers and the business community on the unintended
adverse impact on the American workforce of the Affordable Care Act's
(``ACA'') definition of full-time employment as 30 hours a week. It has
encouraged employers to reduce workers hours, particularly in the
retail segment, lowing wages and reducing consumer spending.
The Forty Hours is Full Time Act represents a bipartisan solution
to this problem. By protecting the best interests of the people the ACA
was intended to benefit, Congress can provide immediate relief to
employees who need more hours to meet their economic needs.
company description and job creation impact
CKE is a quick service restaurant company headquartered in
Carpinteria, CA with regional headquarters in Anaheim, CA, and St.
Louis, MO. Carl N. Karcher, an Ohio native with an 8th grade education,
and his wife Margaret, a California native, started our Company in 1941
with a hot dog cart in South Central Los Angeles.
There are 3,560 Carl's Jr. and Hardee's restaurants in 42 States
and 33 foreign countries. Our franchisees are planning on opening
restaurants in two additional States (New York and New Jersey) during
the first quarter of this fiscal year. Of our 3,560 restaurants, 2,920
(82 percent) are in the United States. All of our international
restaurants are franchised. Our company currently owns and operates
approximately 800 of our domestic restaurants and our franchisees own
and operate the remaining 2,120 (73 percent of our domestic
restaurants). Our domestic restaurants (company and franchised, Carl's
Jr. and Hardee's) average over $1.2 million in sales per year. Each
restaurant employs about 25 people and has one general manager.
We employ approximately 20,000 people in the United States. Our
domestic franchisees employ roughly an additional 55,000 people. As
such, along with our franchisees, we account for about 75,000 jobs in
the United States.
We provide significant employment opportunities for minorities.
About 62 percent of our company employees are minorities. We also
provide significant employment opportunities for women. About, 62
percent of our employees are women. We're proud of the company's
diversity.
The average hourly rate for restaurant level employees is $9.28.
Last year, CKE spent $329 million on restaurant level labor or about 28
percent of total company-owned restaurant sales.
As CEO, I've watched young men and women enter the labor force in
our restaurants for over 14 years. I've seen the pride and
determination that leads to success in their careers and lives. Some
move on to other jobs and challenges equipped with the experience you
can only get from a paying job. Others stay, aspiring to move up to
managerial positions. There's nothing more fulfilling than seeing new
and unskilled employees work their way up to managing a restaurant.
On average, our general managers each run a $1.3 million business
with 25 employees and significant contact with the public. They're in
charge of a million-dollar facility, a profit-and-loss statement and
the success or failure of a business. If that business succeeds, they
benefit just as the owner of a small business would.
Our company-owned restaurant general managers are 62 percent
minorities and 66 percent women. They are 41 years old on average.
However, their ages range from 21 to 65. They earn a management-level
salary starting around $36,000 and going as high as $65,000--the
average is around $45,000--plus benefits. They additionally have the
potential to earn a substantial performance-based bonus.
They can progress through our management ranks as high as their
ambition may take them. Our executive vice presidents responsible for
Carl's Jr. and Hardee's both started as crew employees who worked their
way up to general managers. Several of our senior vice presidents
started as restaurant employees and learned the business as restaurant
general managers.
Our franchisees, who are generally small business owners and
entrepreneurs themselves, also often started out as general managers in
our restaurants or our competitors' restaurants. Many run family
businesses that have passed from one generation to the next. We have
230 franchisees nationwide. A few of our franchisees own a hundred or
more restaurants, but most own 20 or less. Of our 230 franchisees, 44
own one restaurant and 20 own two restaurants (generally putting them
at or near the ACA's 50 employee applicability threshold). All of these
franchisees exemplify the American entrepreneurial spirit on which we
built our Company and they instill that spirit in their 55,000
employees and managers.
While we and our franchisees directly account for about 75,000 jobs
in the United States, our company's impact on the Nation's employment
rate goes well beyond the number of people we directly employ. The
hundreds of millions of dollars we and our franchisees spend on capital
projects, services and supplies throughout the United States create
thousands of additional jobs and generate broader economic growth.
the aca--how many employees enrolled?
The ACA's employer mandate took effect January 1st for employers
with 100 or more full-time employees. The last open enrollment date for
our company was December 4, 2014. As of the enrollment date, our
company had approximately 20,000 employees, 6,900 (34.5 percent) of
whom were managers or worked 30 or more hours per week and were
eligible for our employer-sponsored ACA compliant health insurance. We
elected to offer them coverage rather than paying the employer penalty
and sending them to the ACA's health-insurance exchanges where, if the
workers qualified, they could obtain Federal subsidies to help pay for
insurance.
The remaining 13,100 (65.5 percent) of our employees do not qualify
for ACA compliant coverage as they work under 30 hours a week.
Of the 6,900 eligible employees, 1,447 already had ACA compliant
insurance through our pre-existing company plans. That left 5,453
employees eligible to enroll for our employer-sponsored ACA compliant
insurance.
Out of these 5,453 eligible employees, only 420 actually chose to
enroll. That's 2 percent of our total employees or 6 percent of
eligible employees.
The ACA will impose a penalty on the 5,033 eligible employees who
elected not to enroll, unless they have compliant health insurance from
another source. Of these 5,033 employees, 2,640 (53 percent) were
single and over 26 years of age. So, assuming that the remaining 2,393
all had insurance coverage through a spouse or a parent (which is
clearly not the case as not every parent or every spouse would have
insurance), at a bare minimum, 2,640 will pay the penalty. That's over
6 times as many people as enrolled.
For 2015, the penalty will be equal to the higher of $325 or 2
percent of their yearly household income above about $10,000. The 5,033
employees who declined insurance make, on average, $24,663 a year
($13.55 an hour assuming a 35 hour work week). As such, the employees
without insurance generally will pay the $325 penalty as you have to
make about $26,250 before the 2 percent penalty is higher.
The employee portion of the annual premium available to our full-
time employees for our least expensive ``bronze plan'' is $1,104. As
our very low enrollment rate indicates, if you don't believe you need
health insurance, $325 is better than $1,104. Unfortunately, the
employees the ACA compels to pay this penalty can ill afford it and
still won't have compliant insurance.
Although the ACA does not require us to do so, we also offer our
13,100 part-time employees access to inexpensive group health care
coverage that, while not compliant under the ACA's strict guidelines,
may adequately meet their particular needs. The policies are called
Indemnity Medical Insurance. Insurers are able to offer these policies
because they are excepted benefits as defined by IRS, Labor Department
and Public Health Service Act regulations and, as such, are not
governed by the ACA. The insurer pays a set amount each time the
insured receives a covered service. The insurer pays the same amount
regardless of the fees charged by the provider. (I've provided the
committee a copy of the benefits description pamphlet which also
includes access to dental, life, disability, accident and vision
insurance). About 200 part-time employees are enrolled.
In addition, when we hire new shift leaders or crew people, we
provide them with a letter entitled ``2015 GET INSURED'' (I've provided
the committee with a copy). When these newly hired variable-hour or
part-time employees call our Call Center to enroll or find out about
coverage, our Benefit Specialists walk them through the ACA's
requirements and the individual mandate. The Benefit Specialists
explain that the Medical Indemnity Plan does not help them to meet the
individual mandate. They also offer these employees the option to get a
quote through the Insurance Exchange. It is our intent to give all our
employees easy and informed access to explore their options.
the employer mandate
Because the ACA requires that employers either offer health
insurance to their employees who work 30 or more hours per week or pay
up to a $3,000 per employee penalty, it has had the unintended
consequence of encouraging employers to convert full-time jobs to part-
time jobs (more particularly, jobs where employees work less than 30
hours a week).
The logic for businesses is simple. If you have three employees
working 40 hours per week they will produce 120 labor hours. Five
employees working 24 hours per week also produce 120 labor hours.
Employers must offer the three full-time employees health insurance or
pay a penalty. They have no such obligation to the five part-time
employees, making part-time employment less costly.
I believe this has resulted in employers reducing hundreds of
thousands (if not millions) of jobs to under 30 hours a week. Make
something more expensive and employers will use less of it; make
something less expensive and they will use more of it. While this is
common sense and consistent with comments from the business community,
there is some disagreement about the impact of the ACA's 30-hour
threshold.
Part of the problem lies in interpreting the Bureau of Labor
Statistics (``BLS'') employment data. The BLS and the ACA define part-
time employment differently. The BLS defines ``full-time workers'' as
``[p]ersons who work 35 hours or more per week.'' (BLS Glossary of
Terms). So, the BLS considers individuals working under 35 but above 30
hours per week part-time while the ACA considers them full-time. There
are a significant number of such individuals. In fact, according to
BLS, in December 2014, American workers averaged 34.6 hours a week.
(BLS Economic News Release (``ENR'') Table B-2).
If employers reduce the hours of employees who work less than 35
hours a week to under 30 a week (say from 34 hours to 24), there is no
change in the BLS data on full- or part-time employment but, under the
ACA, such workers transition from full- to part-time employment. The
impact on the workers' earnings is obviously significant. As such, the
BLS data on part-time and full-time jobs understates the ACA's impact.
Another problem with the data is that the BLS ``counts persons, not
jobs.'' (BLS, Industry Hours and Employment, 5/1/14). For example, the
BLS would count someone who works two 20-hour-a-week part-time jobs as
one full-time worker. We have many employees who now work part-time in
our restaurants and also part-time in competitors' restaurants as a
means to increase their hours.
According to the BLS, in 2014 (on average per month) there were
nearly 2 million (1.955 million) multiple job holders working two part-
time jobs. This is higher than in any year since 1994 when the BLS
began tracking the data. This number has steadily increased over the
past 5 years and is 150,000 people higher than it was in 2010 despite
the fact that the number of people the BLS counts as part-time has
declined. The highest month on record was October 2014 (2.172 million
people), the second highest was November 2014 (2.127 million people).
Over twice as many women work two part-time jobs. By definition, each
of these 2 workers actually works two part-time jobs (accounting for 4
million part-time jobs). But, BLS counts the ones working a combined 35
hours or more as one full-time worker. As such, there are more part-
time jobs than show up in the BLS part-time workers data. (ENR Table A-
16, historical data).
There have been a number of articles discussing the ACA's impact on
businesses reducing workers hours below 30 a week. I've written two
articles on this issue. ObamaCare and the Part-Time Economy, WSJ, 10/
10/13; Take It From a Restaurant Executive, ObamaCare is Shifting
Workers into Part-Time Jobs, Forbes, 9-17-14.
Investors Business Daily (``IBD'') compiled a list of job actions
showing ``strong proof '' that the ACA's ``employer mandate is behind
cuts to work hours or staffing levels.'' As of September 5th, IBD's
``ObamaCare scorecard included 450 employers that have reduced
employees' hours with more than 100 school districts among them.''
ObamaCare Employer Mandate: A List Of Cuts To Work Hours, Jobs, IBD 9-
5-14.
Even the Urban Institute has acknowledged that completely
eliminating the employer mandate,
``would not reduce insurance coverage significantly, but it
would eliminate the labor market distortions that have troubled
employer groups and that could have negative effects on some
workers.''
Why Not Just Eliminate the Employer Mandate? The Urban Institute, 5-9-
14.
Notably, the BLS also reported that in December 2014, 6.8 million
Americans were working part-time for economic reasons (i.e., their
hours were cut back or they were unable to find full-time jobs) and not
by choice. (ENR Table A-8); (BLS Labor Force Characteristics).
To address this issue, on January 7, 2015 the House passed the
``Save American Workers Act by a bipartisan vote of 252 to 172. This
bill would change the definition of ``full-time employee'' back to the
traditional 40 hours a week threshold from the ACA's full-time
definition of 30 hours a week. The bill would redefine a full-time
employee as one who works 40 hours a week or 174 hours a month based on
a 52-week year.
Here on the Senate side, co-sponsors Senators Collins (R-ME),
Donnelly (D-IN), Murkowski (R-Alaska) and Manchin (D-WV) have
introduced the bipartisan Forty Hours is Full Time Act which would
accomplish the same goal.
This bill is not intended to repeal or replace the ACA nor would it
eliminate the employer mandate (as the Urban Institute advocates). It
is simply intended as a fix for an unintended consequence that is
negatively impacting American workers.
Nonetheless, the White House has expressed concern that this
legislation would (i) meaningfully reduce the number of Americans with
employer-based health insurance coverage and (ii) encourage employers
to reduce the hours of employees currently working 40 hours a week to
avoid providing coverage. (White House Statement 1/7/15). I
respectfully submit that, based upon the experience at our company,
such concerns are unfounded.
how many employees would lose their employer-sponsored health insurance
coverage?
As noted above, a very small percentage of our Company's eligible
employees would lose coverage if the standard where changed to 40 hours
a week. Of our 20,000 employees, 6,900 were eligible for our ACA
compliant health insurance coverage, 1,447 already had ACA compliant
insurance through our pre-existing company plans leaving 5,453
employees eligible to enroll.
Only 420 enrolled.
That's 2 percent of our labor force and 6 percent of eligible
employees. The other 94 percent of eligible employees declined the
opportunity.
Of the 5,033 who failed to enroll, at a bare minimum 2,640 (53
percent) elected to pay the penalty for not having insurance. As noted
above, the actual number of individuals paying the penalty is certainly
much higher. Again, at a bare minimum, that's six times as many people
of the ACA's 30-hours threshold.
Consistent with the Urban Institute's findings, our experience
indicates that a relatively limited percentage of employees would lose
their employer-sponsored health insurance should Congress move the
ACA's definition of full-time from 30 hours a week back to the
traditional 40 hours. At our company, 420 employees could lose their
employer-sponsored insurance if the ACA's coverage threshold were 40
hours a week (although, as noted below, not all would lose their
coverage). I respectfully submit that the benefit of potentially
increasing the hours and incomes of the thousands of our other
employees would more than offset this cost.
how many 40 hour a week employees are impacted?
With respect to reducing the hours of employees who currently work
40 hours a week, the White House is concerned that moving to a 40 hour
standard would ``create incentives for employers to shift their
employees to part-time work'' by reducing 40 hour a week employees to
39 or fewer hours. (White House Statement 1/7/15). This concern is also
unfounded.
Part of the problem again appears to be a misunderstanding with
respect to the BLS reporting on full-time employment. As stated by the
White House, ``[a]ccording to data from the Bureau of Labor Statistics,
since the Affordable Care Act became law, more than 90 percent of the
increase in employment has been in full-time jobs.'' (White House
Statement 1/7/15). However, as noted above, the BLS defines ``full-time
workers'' as ``[p]ersons who work 35 hours or more per week'' and in
December 2014, Americans workers averaged 34.6 hours a week.
As such, there are a large number of workers that BLS defines as
full-time that work 35 to 39 hours a week rather than 40 and would not
have their hours reduced should the standard change.
In addition, because the BLS counts persons not jobs, it would
count an individual working two part-time jobs totaling 35 hours a week
as a full-time worker even though neither job is full-time. According
to the BLS, there were nearly 2 million multiple job holders working
two part-time jobs. (ENR Table A-16, historical data).
Simply stated, because of how the BLS defines full-time workers and
the fact that it counts workers not jobs, the BLS data is an unreliable
indicator of either the percentage of ``full-time'' jobs where people
are working 40 hour a week or the impact of the ACA's 30-hour threshold
on full-time employment.
With respect to our employees who actually work 40 hours a week, of
our 1,867 employees who have enrolled for ACA compliant coverage, 1,447
(78 percent) already had such coverage through our pre-existing company
plans. We offered these employees such insurance pre-ACA without an
hourly requirement or any other government compulsion. If the hourly
requirement went to 40 hours, we would continue offering these
employees employer-sponsored group coverage regardless.
Of the 420 additional employees who enrolled for ACA compliant
coverage, 197 (less than 1 percent of our workforce) work 40 hours or
more. Reducing these employees' hours would create problems. We would
lose some of them to competitors. For others, we need their expertise
in the restaurants (such as experienced cooks or shift leaders) so
reducing their hours would make no sense.
However, even if we wanted to marginally reduce the hours of all
197 employees to under 40 hours a week (which we would not), certainly
the benefit of potentially increasing the hours and incomes of the
thousands of our other employees who work under 30 hours a week would
more than offset this cost.
conclusion
In conclusion, I want to thank you for the opportunity you've given
me to speak about the Forty Hours is Full Time Act. The bottom line
question is whether the ACA's 30-hour per week eligibility threshold is
worth it. Some would argue sincerely that it is, pointing to the
previously uninsured who now have employer-sponsored health insurance.
As I shared with you, in our company, that would be just 2 percent of
total employees and 6 percent of eligible employees. To achieve those
results, I believe the ACA has caused hundreds of thousands (if not
millions) of full-time jobs to become part-time (under 30 hours a
week), and has imposed a penalty/tax on lower income workers who can
ill afford it.
This is an issue that concerns me not only as the CEO of a company
but as an American who began his career in the same kind of jobs that
the ACA has put at risk. My first job was scooping ice cream at Baskin
and Robbins for minimum wage (I think it was $1 or $1.25). To get
through college and law school while supporting my family, I painted
other people's houses, cut other peoples' lawns, played in bands,
worked in a music store and busted up concrete with a jack hammer,
among other things. I appreciated the opportunities each of these jobs
gave me to earn a living while I pursued an education. I want to
provide those same opportunities to our employees and other like them.
As our company's low enrollment rate and public opinion polls
indicate, the ACA remains extremely unpopular. But, this doesn't mean
Americans want to return to the pre-ACA status quo. The ultimate
solution may well be bipartisan market-based health care legislation
that is comprehensible, workable and, most importantly, provides access
to affordable coverage for those who want it.
In the meantime, the Forty Hours is Full Time or Save American
Workers Act would be a positive and bipartisan step in the right
direction, addressing a serious problem for American workers and
businesses. It is not an attempt to repeal or replace the ACA nor is it
an attempt to eliminate the employer mandate. As stated by Senator
Donnelley, who voted for the ACA in the House and continues to support
it, the Forty Hours is Full Time Act is an attempt to, ``make this bill
stronger. . . . [C]ommon wisdom is that full-time is a 40-hour work
week, and the health care law should reflect that.''
Accordingly, I respectfully urge you to consider the negative
impacts of the ACA's redefining full-time employment as 30 or more
hours a week and the benefits of a fix that would return American
workers to the traditional 40-hour week.
Thank you.
The Chairman. Thank you, Mr. Puzder.
Dr. Holtz-Eakin.
STATEMENT OF DOUG HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION
FORUM, WASHINGTON, DC
Mr. Holtz-Eakin. Thank you, Mr. Chairman, Ranking Member
Murray, and members of the committee. It's a privilege to be
here today to talk about this issue of 30 versus 40 hours as
the norm for full-time employment under the ACA. I'll just make
a couple of points and look forward to your questions.
Point No. 1 is that 30 hours is just simply at odds with
the data on the labor market in the United States. Seventy-two
percent of workers work over 40 hours, and 50.2 percent work
exactly 40 hours. So defining it at 30 is at odds with what we
see in the data out there in the United States every day.
The second point, as you've heard, is that this provides an
incentive to reduce hours to those in order to avoid providing
insurance. So there is going to be a group of workers who don't
have insurance now who would have to be provided insurance, and
you can avoid doing that by reducing hours, and the stakes are
quite high in this case. If you move someone from 40 to 29
hours a week at the average hourly earnings in the United
States, we're talking about $14,000 a year for those workers.
So it's a big impact on their livelihood.
The people most at risk of having their hours shortened are
those who are close to 30 under current law, so maybe 30 to 35
hours a week--you can get them down by dropping an hour a day--
and 40 to 45 hours a week under the proposal. Well, if you look
at those working 30 to 35 hours, only 27 percent have
insurance, so there's a large number of them who don't have
insurance right now, the 73 percent. That's 9.8 million people
who are at risk of having their hours reduced to avoid giving
them the insurance.
If you look at people working 40 to 45 hours a week, the
vast majority have insurance. Eighty-eight percent have
insurance. There's only 12 percent who are at risk of having
their hours reduced to avoid being given insurance. That's 9.3
million workers, roughly.
So by moving from 30 to 40, you do two things. No. 1, you
reduce by a substantial amount the number of people at risk of
having their hours reduced. And No. 2, the 11 million workers
who are working between 30 and 40 are completely freed of any
risk of having their hours reduced. So you're taking enormous
income and hours lost off the table by making this change.
The last point is that there has also been a second
incentive that people talked about, the notion that you'll make
workers who currently have insurance drop it and put them in
the exchanges. I think that's a secondary consideration in
thinking about 30 versus 40 hours. The reality is that
regardless of the hours, for any worker making up to about 250
percent of the Federal poverty line, it's possible for the
worker to stop getting insurance from his employer. The
employer would then pay the penalty. He could also pay the
worker additional cash benefits. Those cash benefits could be
taxed. The worker could take the after-tax raise plus the
subsidies, go to the exchanges and get insurance that is just
as good as what the employer was offering. The employer
meanwhile can pay more penalties, pay more wages, and still
come out ahead by dropping the insurance.
There is an enormous incentive to drop coverage under the
ACA regardless of the definition of full-time employment. So I
don't think we'll see a big change in that. That's baked into
the cake. The real issue is people having their hours reduced
to avoid providing new insurance, and I think that's the
central issue the committee should focus on.
So I thank you for the opportunity to be here and I look
forward to answering your questions.
[The prepared statement of Mr. Holtz-Eakin follows:]
Prepared Statement of Douglas Holtz-Eakin*
summary
I would like to make two main points today regarding the ACA's
employer mandate and the definition of full-time work as 30 hours per
week:
---------------------------------------------------------------------------
* The views expressed here are my own and not those of tha American
Action Forum, the Partnership for the Future of Medicare or the Center
for Health & Economy. I thank Ben Gitis and Christopher Holt for their
assistance.
The definition of full-time employment as a 30-hour
workweek has unintended consequences in the labor market, is at odds
with labor market norms, and creates incentive to reduce hours and pay;
and
The ACA will cause many who would otherwise have employer-
sponsored health insurance to lose it, no matter how ``full-time'' work
is defined.
consequences of the employer mandate and distorting full-time work
Changing the ACA's definition of full-time employment to 40 hours
per week would significantly mitigate the negative consequences of the
employer mandate. First, anyone working between 30 and 40 hours per
week who does not receive health insurance from their employer would no
longer be vulnerable to losing hours, pay, or their jobs. In 2013, this
population represented 8.3 percent of the workforce, which today are
about 11.6 million workers who would immediately be protected. With
this change, instead of those working 30 to 35 hours per week being the
most likely to lose hours, those working 40 to 45 hours would be the
most likely to lose. Some are concerned that since far more people work
between 40 and 45 hours each week (55.6 percent of workers or 77.9
million people) than 30 to 35 hours per week, a much larger number
could see a reduction in hours. According to the payroll processing
firm ADP, however, 88 percent of full-time workers are already offered
health insurance. So the population of workers who could potentially
see this reduction would fall to 9.3 million. That's 500,000 less than
the 9.8 million directly impacted if full-time were defined as 30 hours
per week.
workers will lose insurance regardless of the workweek definition
Concerns that changing the definition of full-time work to 40 hours
would lead to dropped coverage are superfluous. Roughly one-half of the
$900 billion of spending in the ACA is devoted to subsidies for
individuals who do not receive health insurance from their employers.
So the obvious question is how employers will react to the presence of
an alternative, subsidized source of insurance for their workers. AAF
concluded that the incentives for dropping insurance are quite powerful
for workers with incomes up to 250 percent of the Federal poverty
level. Due to the ACA, employers will have motives to drop coverage for
workers who already have health insurance, whether full-time work is
defined as 30 hours per week or 40 hours per week.
conclusion
The ACA's 30-hour workweek risks imposing substantial costs on the
workers it aims to help. So, it is necessary that Congress revise this
inappropriate definition which is clearly out-of-touch with the norms
of the labor market. Moreover, the benefits of conforming to that
reality are quite clear. Changing the ACA's definition of full-time
employment from 30 to 40 hours per week to mirror the actual labor
market would dramatically reduce the harm caused by the employer
mandate.
______
Chairman Alexander, Ranking Member Murray, and members of the
committee, thank you for the opportunity to speak with you today
regarding the Affordable Care Act's (ACA) definition of full-time work
and its impact on the labor market. I would like to make two main
points today regarding the ACA's employer mandate and the definition of
full-time work as 30 hours per week:
The definition of full-time employment as a 30-hour
workweek has unintended consequences in the labor market, is at odds
with labor market norms, and creates incentive to reduce hours and pay;
and
The ACA will cause many who would otherwise have employer-
sponsored health insurance to lose it, no matter how ``full-time'' work
is defined.
consequences of the employer mandate and distorting full-time work
When evaluating the ACA, the employer mandate, and the 30-hour
workweek, there are two central concerns. The primary concern is the
unintended labor market consequences it creates for those who do not
already have health insurance. The second concern is the potential for
employees who already have employer-sponsored insurance (ESI) to be
dropped from their plans, which some believe could be exacerbated by
increasing the ACA's definition of full-time work to 40 hours per week.
Let's first examine the primary concern. When employers are
required to provide health insurance for workers who do not already
receive it, their business costs will naturally rise and companies are
more likely to offset those costs by cutting jobs or compensation.
Employers may also opt to avoid the mandate by reducing hours and
substituting part-time for full-time work. However, since the ACA
defines full-time as 30 hours per week, it gives employers an incentive
to potentially dramatically cut hours to avoid the mandate.
In 2014, American Action Forum (AAF) research revealed significant
evidence that the employer mandate and other ACA regulations have been
negatively impacting employment and pay. The employer mandate and other
ACA regulations have made employers more sensitive to health care
costs, which they offset by reducing pay and employment. As a result,
since ACA's passage, the rise in premiums has cost employees an average
$935 per year and has reduced employment by 350,544 jobs nationwide.\1\
---------------------------------------------------------------------------
\1\ Ben Gitis, Conor Ryan, & Sam Batkins, ``Obamacare's Impact on
Small Business Wages and Employment,'' American Action Forum, September
2014, http://americanactionforum.org/research/obamacares-impact-on-
small-business-wages-and-employment.
---------------------------------------------------------------------------
AAF also found evidence that the labor force was absorbing these
detrimental costs before the government began enforcing the most
stringent ACA regulations. These costs likely understate the
consequences of these regulations and are a result of businesses
preparing for the employer mandate, providing health insurance to
workers, and losing access to low-cost coverage.
Instead of paying for the mandate by cutting worker pay or reducing
hiring, other employers may decide to avoid the mandate altogether by
reducing their employees' hours and reclassifying them as part-time.
The chart below (using 2013 data) reveals that the ACA's definition of
``full-time'' work as 30 hours per week is at odds with the empirical
realities. AAF found that 72 percent of employees in 2013 worked at
least 40 hours per week. Further, 50.2 percent worked exactly 40 hours
per week. As a result, with the full-time threshold at 30 hours per
week, the employer mandate could subject millions of workers to a
dramatic reduction in hours.\2\
---------------------------------------------------------------------------
\2\ Ben Gitis, ``Changing the ACA's Definition of Full-Time Work,''
American Action Forum, January 2015, http://americanactionforum.org/
research/changing-the-acas-definition-of-full-time-work.
The employer mandate could be particularly costly for a full-time
employee who works 40 hours per week and does not receive health
insurance through the employer. If the employer wants to avoid the cost
of the mandate and decides to reduce the worker's hours to reclassify
him or her as part-time under the ACA, it would cost the employee 11
hours to go from 40 hours to 29 hours per week. If the worker's hourly
earnings rate is $24.57 (the December 2014 national average), this
means the employee would lose $270.27 per week or $14,054.04 per
year.\3\
---------------------------------------------------------------------------
\3\ Bureau of Labor Statistics, Department of Labor, http://
www.bls.gov/data/.
---------------------------------------------------------------------------
While it is possible that some workers would see such a large
decline in their weekly hours, those most likely to lose hours are
those who are just above the ACA's ``full-time'' threshold and work 30
to 35 hours per week. AAF found that only 27 percent of that population
already receives health insurance from their employer. Therefore, the
vast majority or 73 percent are very likely to lose hours. This group
is composed of 9.8 million workers and represents 7 percent of the
workforce. For someone working 35 hours per week, going to 29 hours
would on average cost $147.42 per week or $7,665.84 per year.
Changing the ACA's definition of full-time employment to 40 hours
per week to more accurately reflect the labor market would
significantly mitigate the negative consequences of the employer
mandate. First, anyone working between 30 and 40 hours per week who
does not receive health insurance from their employer would no longer
be vulnerable to losing hours, pay, or their jobs. In 2013, this
population represented 8.3 percent of the workforce, which today are
about 11.6 million workers who would immediately be protected.
Second, it would shield most full-time workers without health
insurance from being subjected to the possibility of losing 11 or more
hours per week. Instead of having to dramatically cut back hours,
employers could avoid the mandate simply by reducing the workers hours
from 40 to 39 per week. The average worker discussed above would only
lose $24.57 per week or $1,277.64 per year.
With this change, instead of those working 30 to 35 hours per week
being the most likely to lose hours, those working 40 to 45 hours would
be the most likely to lose. Some are concerned that since far more
people work between 40 and 45 hours each week (55.6 percent of workers
or 77.9 million people) than 30 to 35 hours per week, a much larger
number could see a reduction in hours. According to the payroll
processing firm ADP, however, 88 percent of full-time workers are
already offered health insurance.\4\ So the population of workers who
could potentially see this reduction would fall to 9.3 million. That's
500,000 less than the 9.8 million directly impacted if full-time were
defined as 30 hours per week. As a result, changing the definition of
full-time to 40 hours per week would save most workers from a
potentially massive loss in hours, while the number of workers who are
still directly impacted by the mandate is less. The employer mandate
would still hurt worker pay and hours, but it would be a vast
improvement from current law.
---------------------------------------------------------------------------
\4\ ``ADP Annual Health Benefits Report, 2013 Benchmarks and Trends
for Large Organizations,'' ADP, http://www.adp.com/tools-and-resources/
adp-research-institute/research-and-trends/ /media/RI/whitepapers/
2013_ADPAnnualHealthBenefitsReport_FINAL.ashx.
---------------------------------------------------------------------------
workers will lose insurance regardless of the workweek definition
No matter how ``full-time'' work is defined under the ACA, the law
gives employers strong incentive to drop already covered workers from
their health plans or, more likely, never begin to offer health
insurance. The second concern that changing the ACA's definition of
full-time work to 40 hours per week would make it easier for employers
to drop existing coverage is a secondary consideration because it
overlooks evidence that the ACA's large health exchange subsidies
already provide employers with the incentive to drop insurance.
Roughly one-half of the $900 billion of spending in the ACA is
devoted to subsidies for individuals who do not receive health
insurance from their employers. These subsidies are remarkably
generous, even for those with relatively high incomes. For example, a
family earning about $59,000 a year in 2014 could receive a premium
subsidy of about $7,200. A family making $71,000 could receive about
$5,200; and even a family earning about $95,000 could receive a subsidy
of almost $3,000.
By 2018, subsidy amounts and the income levels to qualify for those
subsidies would grow substantially: a family earning about $64,000
would receive a subsidy of over $10,000, a family earning $77,000 would
receive a subsidy of $7,800, and a family earning $102,000 would
receive a subsidy of almost $5,000.
So the obvious question is how employers will react to the presence
of an alternative, subsidized source of insurance for their workers,
which can be accessed if they drop coverage for their employees. The
simplest calculation focuses on the tradeoff between employer savings
and the $2,000 penalty (per employee) imposed by the ACA on employers
whose employees move to subsidized exchange coverage. Consider a
$12,000 policy in 2014, of which the employer would bear roughly three
quarters or $9,000. A simple comparison of $9,000 in savings versus a
$2,000 penalty would seemingly suggest large-scale incentives to drop
insurance.
Unfortunately, the economics of the compensation decision are a bit
more subtle than this simple calculation. Health insurance is only one
portion of the overall compensation package that employees receive as a
result of competitive pressures. Evidence suggests that if one portion
of the package is reduced or eliminated--health insurance--then another
aspect--wages--will ultimately be increased as a competitive necessity
to retain and attract valuable labor. Thus, the key question is whether
the employer can keep the employee ``happy''--appropriately compensated
and insured--and save money.
AAF has found that the answer is frequently ``yes''--thanks to the
generosity of Federal subsidies. Specifically, if employers were to
drop workers from their health plans, the exchange subsidies limit the
pay hike employees require to remain as well off as they were with ESI.
In many cases, the money employers save from dropping insurance
(employer contribution to health plan less the $2,000 penalty), far
outweighs the wage hike workers require to stay ``happy.'' As a result,
many employers on net would save money by dropping workers from their
health plans.
AAF concluded that the incentives for dropping insurance are quite
powerful for workers with incomes up to 250 percent of the Federal
poverty level. Only for higher income workers do the advantages of
untaxed health insurance make it infeasible to drop insurance and re-
work the compensation package.
So how many workers could be dropped due to the subsidies? AAF
found that there are about 43 million workers for whom it makes sense
to drop insurance.\5\ While CBO estimated that only 19 million people
would receive subsidies, AAF's research suggests that number could
easily triple. As a result, the CBO's cost estimate could grow from
$450 billion over the first 10 years to $1.4 trillion.\6\
---------------------------------------------------------------------------
\5\ This is likely an upper bound estimate as there is a positive
correlation between wage levels and the probability of having
insurance.
\6\ Douglas Holtz-Eakin & Cameron McCosh, ``Labor Markets and
Health Care Reform: New Results,'' American Action Forum, May 2010,
http://americanactionforum.org/sites/default/files/OHC_LabMktsHCR.pdf.
---------------------------------------------------------------------------
Clearly, concerns that changing the definition of full-time work to
40 hours would lead to dropped coverage are superfluous. Due to the
ACA, employers will have motives to drop coverage for workers who
already have health insurance, whether full-time work is defined as 30
hours per week or 40 hours per week.
conclusion
The ACA's 30-hour workweek risks imposing substantial costs on the
workers it aims to help. So, it is necessary that Congress revise this
inappropriate definition which is clearly out-of-touch with the norms
of the labor market. Moreover, the benefits of conforming to that
reality are quite clear. Changing the ACA's definition of full-time
employment from 30 to 40 hours per week to mirror the actual labor
market would dramatically reduce the harm caused by the employer
mandate.
The Chairman. Thank you, Dr. Holtz-Eakin.
Mr. Fugere.
STATEMENT OF JOE FUGERE, FOUNDER, TUTTA BELLA PIZZERIA,
SEATTLE, WA
Mr. Fugere. Good morning, Chairman Alexander, Ranking
Member Murray, and fellow Senate committee members. Thank you
for inviting me to share my company's story and my testimony
about why I think it is important not to modify the definition
of full-service employee as outlined in the Employer Shared
Responsibility Requirements of the Patient Protection and
Affordable Care Act.
My name is Joe Fugere and I'm the founder and owner of a
business in the other Washington, Washington State, just
celebrating 11 years in business. Neapolitan Pizzeria is a
neighborhood restaurant group made up of five locations in the
greater Seattle area, with just over 200 employees.
Let's start with the fact that when it comes to the
American people and small businesses in particular, that I'm an
optimist. In my employer peer group in Seattle, I know business
leaders who are driven to do the right thing, not always
because they reap short-term rewards but because they know that
their employees are the foundation of helping them achieve
their true purpose and values and making all of their
stakeholders successful over time.
I believe that the Affordable Care Act was a step toward
giving some support to the uninsured in our country, but it
also encouraged business owners to do the right thing.
At Tutta Bella, our stated purpose is to nourish lives by
sharing traditions, authentic food, and love. We aspire to
enrich and invigorate the communities by providing memorable
experiences. We hope to inspire others by setting a standard
for social stewardship and fiscal responsibility.
Part of the reason that I'm here today to testify and I
agreed to testify is because I think it's important to share
our story and share some real-world examples of this vision in
action.
We've been offering health care, medical, dental, and
vision benefits to our salaried managers since 2005, and to all
of our hourly managers since 2008, well before the passage of
the Affordable Care Act. We set the minimum hours threshold for
health care qualification at 24 hours per week to maximize the
number of enrollees. As a company, if we raised it to 40 hours,
almost every one of our current hourly employees would not
qualify for enrollment.
I think it needs to be stated explicitly that this industry
has and always will be comprised of part-time workers. It is
inherent in the fabric of restaurants to accommodate the
workforce that often craves a more flexible schedule--students,
caregivers, aspiring artists, for example. I understand that
the backers of this legislation believe that it would give 2.5
million low-income wage earners a raise. The reality is that
very few employees in our industry would be scheduling more
than 30 hours a week regardless of the threshold.
Our industry is teeming with employees from the Millennial
Generation. In a recent article on BusinessInsider.com, the
U.S. Bureau of Labor Statistics predicts that Millennials will
make up approximately 75 percent of the workforce by 2030. The
article also mentions that this generation is struggling for
financial independence compared to previous generations, with
24 percent who participated in a survey reporting the need to
move back home at some point after entering the workforce,
versus 10 percent of GenXers and 5 percent of Baby Boomers.
At the other end of the age spectrum, some employees in the
restaurant business need to continue to bring in income even
after they start to reach a more standard retirement age. I can
think of one of our longest and most loyal employees, Renee.
When I was opening our first location in the Columbia City
neighborhood in Seattle, Renee was so excited about Tutta Bella
opening in our neighborhood that she offered to work for free.
I didn't take her up on the offer of free labor, but she did
become our first server.
Eleven years later, Renee is now 60 years old and has
become a cornerstone of our culture and beloved by our staff
and guests alike. She has been fully enrolled in our benefits
package for years, and it is a huge relief to her as a single
person. Even if it was possible to schedule an employee like
Renee at 40 hours, recommended in this amendment, it would be a
challenge for her physically to manage working that many hours.
With the U.S. restaurant industry projected to have employed
over 13 million people in 2014--that's about 1 in 10 working
Americans--it pains me to think of the potential hundreds of
thousands of people like Renee who would be impacted by this
change in definition.
There's limited evidence that the current health care
reform has caused any significant shift toward part-time work
in any industry. Rather than focusing on the few employers who
will be led solely by profits and cost savings, let's focus
instead on those employers who I believe make up the majority
of business owners in this country, the ones trying to do the
right thing by investing in their employees while at the same
time reaching their financial goals. It's a balancing act, for
sure. I work hard to achieve this with my team every day. But
I've seen the direct results of offering a robust health care
package--higher morale, lower turnover, increased productivity.
You can really take that to the bottom line. Not to mention the
big, bright smiles of happy, healthy, and productive employees.
In closing, I want to be a business leader in a country
that is progressing as a society, not taking steps backward. As
we continue to shift more toward a service-based economy, we
need to provide people in this workforce more opportunities to
be successful and healthy in the years and decades ahead. One
out of 33 people in the State of Washington are food service
employees. As one of those, it would be my dream if we all did
the right thing. Thank you.
[The prepared statement of Mr. Fugere follows:]
Prepared Statement of Joe Fugere
summary
I am the founder and owner of a business in Washington State. Tutta
Bella Neapolitan Pizzeria is a neighborhood restaurant group comprised
of five locations in the greater Seattle area with just over 200
employees.
In my employer peer group in Seattle, I know business leaders who
are driven to do the right thing. Not always because they will reap
short-term rewards, but because they know that their employees are the
foundation of helping them live true to their purpose and values, as
well as to make all of their stakeholders successful over time. I
believe that the Affordable Care Act was a step toward giving some
support to the uninsured in our country, but also to encourage business
owners to do the right thing.
At Tutta Bella our stated purpose is ``To nourish lives by sharing
traditions, authentic food, and love.'' We aspire to enrich and
invigorate communities by providing memorable experiences. We have been
offering healthcare (medical, dental, and vision) benefits to salaried
managers since 2005, and all hourly employees since 2008, well before
the Affordable Care Act's employer-shared responsibility requirements.
We set the minimum hours threshold for health care qualification at 24
hours per week to maximize our number of enrollees. As a company, if we
raised it to 40 hours, almost every current hourly employee would not
qualify for enrollment.
I think that it needs to be explicitly stated that this industry
has and always will be comprised of part-time workers. It is inherent
in the fabric of restaurants to accommodate a workforce that often
craves a more flexible schedule. I understand that the backers of this
legislation believe that it would give 2.5 million low-income wage
arners a raise. The reality is that few employees in our industry would
be scheduled more than 30 hours a week, regardless of the threshold.
Our industry is greatly comprised of employees from the millennial
generation, the aging workforce who are getting close to retirement and
minority workers--I will share ways that this change in legislation
would adversely impact them.
There is limited evidence that the current health reform has caused
any significant shift toward part-time work in any industry.* Rather
than focusing on the few employers who will be led solely by profits
and cost savings, let's focus instead on those employers who I believe
comprise the majority of business owners in our country . . . the ones
trying to do right by investing in their employees while at the same
time reaching their financial goals. I've seen the results of offering
a robust healthcare package in higher morale, lower turnover and
increased productivity.
---------------------------------------------------------------------------
* Bowen Garrett and Robert Kaestner, Little Evidence of the ACA
Increasing Part-Time Work So Far, Urban Institute, September 2014,
http://www.urban.org/UploadedPDF/413217-Little-Evidence-of-the-ACA-
Increasing-Part-Time-Work-So-Far.pdf.
---------------------------------------------------------------------------
In close, I want to be a business leader in a country that is
progressing as a society, not taking steps backward. As we continue to
shift toward a more service-based economy, we need to give large
numbers of people in this workforce more opportunities to be successful
and healthy in the years and decades ahead.
______
Good morning, Chairman Alexander, Ranking Member Murray and fellow
Senate committee members. Thank you for inviting me to share my
company's story and my testimony about why I think that it is important
not to modify the definition of full-time employee as outlined in the
employer-shared responsibility requirements in the Patient Protection
and Affordable Care Act.
I am the founder and owner of a business in the other Washington .
. . Washington State. Just celebrating 11 years, Tutta Bella Neapolitan
Pizzeria is a neighborhood restaurant group comprised of five locations
in the greater Seattle area with just over 200 employees.
Let's start with the fact that when it comes to the American people
and small business owners in particular, I am an optimist. In my
employer peer group in Seattle, I know business leaders who are driven
to do the right thing. Not always because they will reap short-term
rewards, but because they know that their employees are the foundation
of helping them live true to their purpose and values, as well as to
make all of their stakeholders successful over time.
I believe that the Affordable Care Act was a step toward giving
some support to the uninsured in our country, but also to encourage
business owners to do the right thing.
At Tutta Bella our stated purpose is ``To nourish lives by sharing
traditions, authentic food, and love.'' We aspire to enrich and
invigorate communities by providing memorable experiences. We hope to
inspire others by setting the standard for social stewardship and
fiscal responsibility. Part of the reason that I agreed to give this
testimony is because I think it's important to share our story and some
real-world examples of this vision.
We have been offering healthcare (medical, dental, and vision)
benefits to salaried managers since 2005, and all hourly employees
since 2008, well before the Affordable Care Act's employer shared
responsibility requirements. We set the minimum hours threshold for
health care qualification at 24 hours per week to maximize our number
of enrollees. As a company, if we raised it to 40 hours, almost every
current hourly employee would not qualify for enrollment.
I think that it needs to be explicitly stated that this industry
has and always will be comprised of part-time workers. It is inherent
in the fabric of restaurants to accommodate a workforce that often
craves a more flexible schedule . . . students, caregivers, aspiring
visual and performing artists, for example. I understand that the
backers of this legislation believe that it would give 2.5 million low-
income wage earners a raise. The reality is that few employees in our
industry would be scheduled more than 30 hours a week, regardless of
the threshold.
Our industry is teaming with employees from the millennial
generation. In a recent article on Business Insider,\1\ the US Bureau
of Labor Statistics predicts that millennials will make up
approximately 75 percent of the workforce by 2030. The article also
mentions that this generation is struggling for financial independence
compared to previous generations, with 24 percent who participated in a
survey reporting the need to move back home at some point after
entering the workforce vs. 10 percent of Gen Xers and 5 percent of Baby
Boomers. With the Affordable Care Act allowing young adults to stay on
their parents' health care until age 26, this generation is offered
some much-needed support in trying times. As an employer, we are proud
to help our millennial staff during this time of transition to
independence by offering more of them health insurance when they need
it, whether it's before or after the age of 26.
---------------------------------------------------------------------------
\1\ Jacquelyn Smith, 8 Things You Need To Know About Millennials At
Work, November 18, 2014; http://www.businessinsider.com/what-you-
should-know-about-millennials-at-work-2014-11.
---------------------------------------------------------------------------
On the other end of the age spectrum, some employees in the
restaurant business need to continue to bring in income even as they
start to reach more standard retirement age. I think of one of our
longest and most loyal employees, Renee. When I was just opening our
first location in the Columbia City neighborhood in Seattle, Renee was
so excited about the potential of Tutta Bella invigorating the ``main
street'' of our neighborhood that she even offered to work as a server
for ``free.'' I didn't take her up on the offer of free labor, but she
did become our first server. Eleven years later, Renee is 60 years old
and has become a cornerstone of our culture and beloved by staff and
guests alike. She has been fully enrolled in our benefit package for
years and it is a huge relief to her as a single person. Even if it was
possible to schedule an employee like her with the 40 hours recommended
in this amendment, it would be challenging for her to physically manage
working that many hours. With the U.S. restaurant industry projected to
have employed 13.5 million people in 2014 (about 1 out of 10 working
Americans),\2\ it pains me to think of the potential hundreds of
thousands of people like Renee who could be impacted by this change in
definition of full-time employee.
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\2\ National Restaurant Association, http://www.restaurant.org.
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Our industry also shows incredible growth in minority ownership and
employment. In 2012, 59 percent of first-line supervisors/managers of
food preparation and service workers were women, 14 percent were
African-American and 17 percent were of Hispanic origin.\3\ Part-time
shifts are the foundation of the restaurant industry. Increasing the
full-time hours to 40 hours per week is a regressive measure that will
negatively impact minority Americans . . . many of whom may be
receiving health benefits from an employer for the first time.
---------------------------------------------------------------------------
\3\ Bowen Garrett and Robert Kaestner, Little Evidence of the ACA
Increasing Part-Time Work So Far, Urban Institute, September 2014,
http://www.urban.org/UploadedPDF/413217-Little-Evidence-of-the-ACA-
Increasing-Part-Time-Work-So-Far.pdf.
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There is limited evidence that the current health reform has caused
any significant shift toward part-time work in any industry. Rather
than focusing on the few employers who will be led solely by profits
and cost savings, let's focus instead on those employers who I believe
comprise the majority of business owners in our country . . . the ones
trying to do right by investing in their employees while at the same
time reaching their financial goals. It is a balancing act for sure . .
. one I work hard to achieve with my team every day. I've seen the
results of offering a robust healthcare package in higher morale, lower
turnover and increased productivity . . . not to mention the big,
bright smiles of healthy, happy, productive employees!
In close, I want to be a business leader in a country that is
progressing as a society, not taking steps backward. As we continue to
shift toward a more service-based economy, we need to give large
numbers of people in this workforce more opportunities to be successful
and healthy in the years and decades ahead.
One out of 33 people are foodservice employees in Washington
State.\4\ As one of them . . . it would be my dream if we ALL did the
right thing!
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\4\ Washington Restaurant Association, http://warestaurant.org.
The Chairman. Thank you, Mr. Fugere.
Now we will begin a 5-minute round of questions. We will
endeavor to end the hearing by noon or before, and we'll begin
with Senator Collins.
Senator Collins. Thank you very much, Mr. Chairman.
Dr. Webb, you did a terrific job of outlining what the
impact would be on substitute teachers, on the ed techs, on
people who are working two different jobs within the system.
Could you talk to us about what the impact of the law's
definition of full-time work would be on the students?
Ms. Webb. Absolutely. I first became aware of this when I
was researching purchasing a software package to manage
substitute teachers, and the sales person talked to me about
how the software would limit substitute teachers below the 30
hours in order to avoid having to provide health coverage, and
I started thinking about the impact on learning.
When you consider--I think every one of us can remember
having a substitute teacher in our classroom. The environment
was different. The pace of learning was not the same, and there
was a real give and take of getting to know that new person
that was going to guide our learning.
So if you could picture, I would have maybe a teacher on
maternity leave and have one substitute teacher from Monday
through Thursday, but to avoid having that person go over the
30 hours a different substitute teacher on Friday, what a huge
concern that is. I believe it's the full range of learners,
whether it's the advanced placement class where students are
following a rigorous curriculum with a high-stakes test in May
that determines whether they are going to obtain college
credit. Bangor High School had 544 AP tests last year, 80
percent of them earning college credit.
I worry about changing substitutes in that room, but I also
worry about the 54 percent of our students that are on free and
reduced lunch status, and we know they have at-risk factors,
and we know from research that the consistency of the person in
the room and the relationship they have with that person has a
great impact on learning.
So to me, when I heard about this software tracking to
avoid incurring additional expenditures, it didn't make common
sense when considering the impact on learning.
Senator Collins. Thank you.
Dr. Webb, I was particularly struck when you described the
110 ed techs in your system who worked between 30 and 34 hours
a week and do, in fact, receive health insurance now, and the
district pays 77 percent of the cost of the premium. And yet,
because of the way the Affordable Care Act works and the
definition of full-time work, you will have to pay a third of
up to $3,000--no, it would be a $3,000 penalty for each of
those employees--that's your outside risk--because the
insurance that you're providing would not be considered
affordable. Well, if my quick math is correct, that is $330,000
in new costs to the system.
Just yesterday the National Education Association sent me a
letter in which it said that many school districts mistakenly
believe that the only way to avoid the penalties is to cut
employees' hours. I would note the irony, because the NEA a
year ago sent me a letter, sent all Senators a letter urging a
yes vote on a proposal that I made to the budget calling for a
more reasonable definition of full-time work, and in this
letter just a year ago said that it was a critical issue to
their members, that educators face great uncertainty about
their eligibility for coverage, et cetera. So there seems to
have been a flip.
But I guess I would ask you to respond to the NEA saying
that you mistakenly--not you personally but superintendents
mistakenly think that cutting hours is the only option. Is
asking for a huge budget increase a viable option for you and
most superintendents?
Ms. Webb. No, that is not an option. I mean, 95 percent of
our employees are offered insurance, and the school department
pays a large portion of that, anywhere from 77 to 80 percent of
the cost, and there is no intention to cut hours of the people
that are consistently employed, whether teachers or ed techs,
custodians, secretaries, administrators.
But where it becomes problematic is the affordability piece
for the ed techs, and then those substitutes where we'd rather
hire the core substitutes that really know the Bangor way.
We have looked. We've researched the look-back method and
predicting the stability, a 90-day period ahead. My concern is
the resources that would be required to administer that kind of
a program. We hire substitutes weekly. I would say it's almost
every single day someone is coming to our office with an
application, and although we have a core group of substitutes,
this past month we've been hit very hard with the flu, and so
we've gone well beyond. So you can imagine the administration
kind of operation you would need to continually do a 6-month
look-back to determine the 90 days ahead.
When we look at this calendar year for the school, which
would begin July 1 to June 30th, we have 5 months that someone
could hit that threshold as a substitute of the 130 hours. So
if we had someone on maternity leave at the beginning of the
school year and the substitute that we hired worked during
September and October, we would hit the 130-day threshold in
both of those months.
So when I think of our system administration being only 2.4
percent of our budget, my fear is that resources have to be
utilized one place or the other. And when you consider that 80
percent of our budget is personnel, we only have 7 percent of
our budget that's truly discretionary. So there lies my
concern; where do those resources come from?
Senator Collins. Thank you.
The Chairman. Thank you, Senator Collins.
We want to do our best to keep each Senator's time close to
5 minutes, although we want to hear a full answer from our
witnesses.
Senator Warren.
Senator Warren. Thank you, Mr. Chairman and Ranking Member
Murray.
The Chairman. Excuse me. Senator Murray.
Senator Murray. We have to train him how to be a chair.
[Laughter.]
The Chairman. That's twice in 1 day.
Senator Murray. Well, thank you, Mr. Chairman.
You know, for a long time, Democrats and Republicans agreed
that job-based insurance was an important workplace benefit,
and Mr. Fugere has been putting this value into practice, as he
said, long before the Affordable Care Act. But the
Congressional Budget Office has estimated that almost a million
workers would lose job-based coverage if businesses are allowed
to get out of offering health care coverage to those working 40
hours or less.
Mr. Fugere, in your statement you said that increasing the
threshold would be a step backward for working Americans. Can
you just tell us why you think employers offering health
benefits is good for business?
Mr. Fugere. Of course. Listening to the testimony this
morning, it is a bit challenging to hear employees referred to
in statistics and numbers, almost like a commodity. I look at
running a business, a fiscally responsible business, and there
are certain things that are line item expenses. For example, 3
percent of our budget goes to napkins and straws. Less than 1
percent of our budget is in health care, and I feel like rather
than looking at it as an expense, it's an investment, an
investment that pays off. Lower turnover, higher morale, more
productivity, these are not just altruistic and philanthropic
aspirations. They make really good business sense as well, and
can be directly attributed to the bottom line.
Senator Murray. If this were to become law, do you expect
some other Seattle area restaurants to cut benefits for their
employees?
Mr. Fugere. I think it's inevitable that not every business
owner thinks the way I do. So in order to do something that
would level the playing field, if you will, I believe that,
yes, there would be people that would drop benefits,
unquestionably.
Senator Murray. Would you?
Mr. Fugere. No, we wouldn't.
Senator Murray. And that's one of my concerns, because if
this bill passes, it would allow Mr. Fugere's competitors to
cut benefits, and actually what would happen is Tutta Bella
would be subsidizing irresponsible behavior of those employers
who don't cover their employees and push them actually onto
public programs, and I don't think that's fair, and I hope that
we can really consider that as we move forward.
Dr. Webb, I wanted to turn to you. I really appreciate your
thoughtful testimony. I am focused on doing everything we can
to put our students first, and I'm very concerned that the 40-
hour bill will actually do more harm than good. We all know our
teachers work extremely hard. They plan lessons, they do extra-
curricular activities, they grade papers, and those are often
outside those regular hours.
I wanted to ask you how important is the time that teachers
do put in after class to achieving the best results for their
students?
Ms. Webb. Extremely important.
Senator Murray. And everyone knows that when you include
time spent out of the classroom, teachers actually put in a lot
more than 40 hours a week and actually don't log those hours in
the classroom, correct?
Ms. Webb. Correct.
Senator Murray. Well, one of my concerns is that if we
raise the eligibility threshold to 40 hours a week, it will
mean that when teachers do sit down to negotiate their next
contract, we're going to find some schools that are trying to
cut back on the time they spend preparing lessons or grading
papers or providing this really important one-on-one help to
students outside the classroom, and I'm worried that qualified
people are going to walk away from the profession. So I think
we have to think about those unintended consequences.
I just have a minute left, Mr. Puzder, but you currently do
offer insurance to workers whose hours exceed 30 hours a week,
right?
Mr. Puzder. Absolutely, and under.
Senator Murray. And CKE Restaurants employs about 20,000
workers in the United States, including in the States of Texas,
Oklahoma, Louisiana, Missouri, and Alabama, correct?
Mr. Puzder. Yes.
Senator Murray. Well, unlike my home State of Washington,
Mr. Chairman, those are all States that have not expanded their
Medicaid programs, and workers in those States earning the
average hourly rate for restaurants that Mr. Puzder references
in his testimony could be at risk of losing their insurance.
For example, a single mom earning the average restaurant
wage of $9.28 an hour would be at serious risk. I think that a
lot of us can't support a bill that jeopardizes employer-
sponsored health coverage for a lot of our American workers. We
can't take away this benefit for them, and it is actually
surprising as we look at this because the CBO has said that
this will raise the deficit by over $50 billion for a very
clear reason, and that's because these people will go on
government-sponsored programs.
So I think it's really important that we think about that
as we move on this legislation.
The Chairman. Thank you, Senator Murray.
Senator Enzi.
Statement of Senator Enzi
Senator Enzi. Thank you, Mr. Chairman. Thank you for
holding this hearing.
I did a tele-town hall meeting last night, and the very
first call was from Rock Springs, WY, which we would consider
to be one of our bigger towns, but out here it would be
considered a pretty small town. And it was from a person
working for the school district, and they wanted me to know the
difficulties they're having right now, particularly with bus
drivers and coaches who are kind of volunteer contract workers,
not really part of the school district, never expected to get
any health insurance out of it but are now placing the district
in a situation where they are going to have to expend that or
eliminate the service. Of course, a lot of the bus drivers like
going on some of the extended trips to see some of the games,
sometimes even in other States, and they're seeing that they're
not going to get to do that now because of a health care law
that they're not all that interested in.
Would that be a similar situation to what you were
describing earlier?
Ms. Webb. Yes, it would. It's those combination positions
that really can put us at a disadvantage, and I can think of
one particular person, a substitute that also is an assistant
coach in soccer season and in the winter season for hockey. It
would have to be one choice or the other, or a penalty, or
offer insurance.
Senator Enzi. And there are some pretty serious constraints
sometimes on the budget, as you already pointed out. I
appreciate that.
For Dr. Holtz-Eakin, one of the problems that I'm seeing in
Wyoming with the health insurance requirements is that when
they have 50 employees that are working over 40 hours or more,
then they come under this law. For a startup business, it's a
particularly big problem. I've run into a number of people who
have said, man, I've got this great location in the next town
over, got a good price on the building. What do you think about
me moving over there and starting? And my first question is,
how many employees do you have, and how many is it going to
take? And their answer is usually about 45 at the current
place, and they'll need 45 at the new place. They so far have
all decided against expanding their business.
So there are a bunch of jobs going lacking out there. I
would be interested in your reflection on whether that's
actually stopping businesses. And also the little bit of a
problem of if they get cut back to 29 hours, they probably have
to have another job. In Wyoming we consistently have one of the
lowest unemployment rates in the Nation, so we need more people
for the jobs that are available. But some of them, when they
get cut back to 29 hours, they have to take another job, and
that employer is going to want them to work 29 hours as well so
they can get as much benefit as they possibly can. Now we've
got a person working 58 hours with no overtime. Is there any
law that covers that?
Mr. Holtz-Eakin. Let me talk about the first question about
the incentives for expansion. I think this is an important
unintended consequence of the Affordable Care Act. I mean, this
is essentially a tax on the growth of small businesses. When
they cross the 50-person threshold, every employee becomes more
expensive, and they have to deal with that. Many people have an
incentive to avoid crossing that threshold. You might think
this is just abstract, but we actually did some work at the
American Action Forum where we looked at those firms that are
under 50, so they're not going to be subject to any of this,
those firms that are between 50 and 100 and going to be subject
to it, and we compared their sensitivity to health insurance
premiums before and after the passage of the ACA.
What you see clearly is that for those who are going to be
subject to this, you get a negative impact of these premiums,
essentially higher health care costs, and it shows up in lower
employment and lower wages, and that's the real-world
manifestation of the kinds of incentives that are built into
the ACA. It's a deep concern at this point in time.
On the latter, I think the short version is if you're out
of step with labor market norms, as the 30-hour rule is, you
distort all sorts of labor market behaviors. Two part-time jobs
instead of one full-time job is just one example of that.
Senator Enzi. Thank you, and I'll have questions for the
other panelists, as well as some more questions for you, if
you'll take those in writing so I don't use up other people's
time.
But, Mr. Fugere, I want to congratulate you on your
successful business. I used to be in the shoe business, and I
used to provide those benefits to my people. Of course, it
wasn't forced on me by the Federal Government either. I really
appreciate those that build those in as a basic part of their
business but recognize that some of those startup businesses
don't have that same advantage as they startup, and we hope
that there will be a lot more startups for jobs.
I want to thank all the panelists.
The Chairman. Senator Warren.
Statement of Senator Warren
Senator Warren. Thank you, Mr. Chairman, and thank you,
Ranking Member Murray.
So for the past few years, Republicans have been very clear
that they want to limit families' access to health care by
slashing Medicaid and by cutting tax credits that families use
to buy health insurance. I don't support either move, but if I
did, I'd have real problems with the Republicans' first
proposal on health care, which would let corporations drop
health care coverage for anyone working under 40 hours a week.
According to the Congressional Budget Office, the
Republican proposal would increase the number of people on
government health programs, including Medicaid and the
subsidized exchange plans, by at least half-a-million people.
In other words, the Republican proposal would expand the reach
of Obamacare.
Republicans also say they want to reduce the deficit, but
again, according to the Congressional Budget Office, the bill
for pushing people out of these employer-sponsored plans would
increase the deficit by $53.2 billion.
So if this bill pushes more people onto government health
programs and increases the debt, two things Republicans say
they are against, why are they supporting it, Dr. Holtz-Eakin?
Mr. Holtz-Eakin. I can't speak for why they're supporting
it. You'd have to ask them.
Senator Warren. Fair enough. Do you have any dispute with
the numbers from the Congressional Budget Office?
Mr. Holtz-Eakin. I think if you look at the score, the
notion of employer drops is a sideshow. In the CBO score, there
is the presumption of an expansion in Medicaid and insurance
subsidies, but that's offset by the increased tax revenue that
comes from the employees getting cash instead of health
insurance, and that's basically a wash. It's about $24 billion
each.
Senator Warren. Let me just stop you there.
Mr. Holtz-Eakin. Let me finish. The $50 billion increase in
the deficit comes from the assumption that there will be $50
billion, roughly, less in employer penalties paid when you move
the threshold from 30 to 40. If you look in the data, there are
about 11 million people there, and if every one of them has a
$2,000 penalty, that's $23 billion. I don't know where the rest
of that is coming from. So, yes, I'm a little uncertain about
that.
Senator Warren. Do you think the Congressional Budget
Office just made up these numbers? They say it will increase
the deficit by $53 billion, and let's be clear. Conservatives,
like Yuval Levin at the Ethics and Public Policy Center, have
said,
Putting the cutoff for the employer mandate at 40
hours would likely put far, far more people at risk of
having their hours cut than leaving it at 30 hours''.
So we've got both problems. We're pushing people out
between 30 and 40 and, at least according to a conservative
economist here at the Ethics and Public Policy Center, he says
he believes that what happens if we switch from 30 to 40, we
will have more employers cut hours, and that means we'll have
fewer people working, which is what we're worried about here.
As I think you stated your testimony, there are more people
working at 40 hours a week than there are people working at 30
hours a week. So, far more employers could reduce their
obligations by simply slicing 1 hour off people's time that
they work.
Mr. Holtz-Eakin. So let me say two things. First, let me
just stipulate at the outset that as a former director, I have
nothing but the highest regard for the CBO.
Senator Warren. Good.
Mr. Holtz-Eakin. And they don't simply make up numbers.
Senator Warren. Good.
Mr. Holtz-Eakin. That's a good-faith estimate. I've made
the same good-faith estimate, and we've come down in different
places. I think it's open to question.
Second is, as I said in my testimony, I think moving 30 to
40 doesn't change the calculus for dropping insurance very much
at all. The reality is that the subsidies are so rich in the
exchanges that it is a profit-making opportunity to stop
offering your employee insurance, pay the penalties, pay them
raises, and make more money. And for the employee, they are
just as well off or better because they're getting insurance of
the same quality out in the exchanges.
So that's the math. And the open question, the one no one
knows the answer to yet is just how many businesses will
probably not drop but never get in the business of offering
health insurance and simply get in the business of sending
people to the exchanges. That's an important consideration as
well. Yuval Levin has his opinion, I have mine, and we
disagree.
Senator Warren. Well, all right. I can only go with the
numbers that have been given to us by the Congressional Budget
Office, but I think I would analyze this to add one more part
to it, and that is that this bill is corporate welfare. Big
corporations would get to cut health benefits for millions of
workers, push people out of their employer insurance plans.
Some of those people will lose their health insurance
altogether. Others would be pushed onto Federal programs,
expanding the reach of Obamacare, and taxpayers would get stuck
with the tab. According to the Congressional Budget Office,
that would be $53 billion.
I'm against adding $53 billion to the deficit so that
corporations can push their costs and responsibilities onto the
government. I don't think that's how we build a better future
for our families.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Warren.
Senator Roberts.
Senator Roberts. Amazing.
Senator Baldwin, I said good morning. That was it. I was
making signs and people thought I was probably a little bit--
whatever.
[Laughter.]
Statement of Senator Roberts
Senator Roberts. Mr. Chairman, thank you for this, and a
special thanks to Senator Collins, who has led this effort.
Today, President Obama is speaking at the University of
Kansas. He will be likely expanding upon many of his proposals
that he outlined earlier this week in his State of the Union
address. I am a very strong supporter of free speech, and it's
certainly an honor for the University of Kansas to host the
President of the United States. The University of Kansas is a
great Kansas institution, known for our academics and for
basketball. Maybe the President will get a full court press;
who knows. And I know he will get a very warm Jayhawk
reception.
I'm glad the President has chosen to visit my State because
I believe we offer a good dose of Kansas common sense. That
said, in the case of Obamacare's 30-hour work week, we might
also offer a cautionary tale. The University announced last
summer they have reduced undergraduate student employment hours
from 30 hours a week to 20 hours a week, and capped the
graduate student hours at no more than 28 hours a week as a
result of the new 30-hour rule. That's 5,000 students.
Elizabeth Melton, a senior out there, works at the library
25 hours a week. With the cutback, she's going to have to take
out more student loans. I will leave her quote for the record.
And then we have Rachel Prather who said, ``I can't really
imagine how I'm going to buy groceries on 20 hours less a
week,'' and was working for the University. These are not
statistics, these are people. And basically it goes on, and I
won't go into the rest of the students, but I will submit that
for the record.
[The information referred to was not available at time of
press.]
Senator Roberts. Regardless of this fact, the President has
already announced he would veto legislation, along with six
others, six other vetoes, to help restore hours and therefore
wages for these hard-working students.
Kansans want solutions, and everybody in the country wants
solutions. The 30-hour rule is clearly one of the more harmful
provisions of Obamacare for many of our workers, and I hope the
President will revisit his refusal to at least address it and
work with us.
President Doug Holtz-Eakin--a president I can work with.
Mr. Eakin, can you share some thoughts on how this reduction in
hours will hurt the student worker? Could we see more loans
taken out, higher debt for students upon graduation?
Mr. Holtz-Eakin. Absolutely. As I noted in my testimony,
there's an enormous amount of income at stake here. Moving from
40 to 29 hours is a big reduction, moving down to 20 even more.
So you'll have to fill that resource hole one way or another,
and for students the most likely outcome is they'll borrow
more.
Senator Roberts. I know research from the Hoover Institute
has shown that women, younger workers, and workers without a
college degree would be disproportionately affected by this 30-
hour rule. Do you agree with that, and can you explain why that
is?
Mr. Holtz-Eakin. I do agree with that, and that is simply a
reflection of the composition of part-time work in America.
Those are the groups that are most likely to be working part-
time and the incomes that they make.
Senator Roberts. Well, we talked a lot about the problem
with the 30-hour full-time definition with Obamacare. I think
another major problem for the job-based insurance is the health
insurance tax. Is this tax, which is being passed through to
small businesses in the form of higher premiums, also a factor
in hiring full-time employees?
Mr. Holtz-Eakin. Absolutely. We've done a fair amount of
work on the health insurance tax, and it has big impacts on
premiums. Those premiums translate directly into costs for
firms, and they cut back either their pay increases for the
workers they have or they don't hire as much, and we're seeing
those impacts right now.
Senator Roberts. I appreciate your response.
I yield back my time, Mr. Chairman.
The Chairman. Senator Baldwin.
Statement of Senator Baldwin
Senator Baldwin. Thank you. I share my colleagues' concern
that this proposal that we're discussing would increase the
deficit by $53.8 billion, put health benefits for 1 million
hard-working individuals in jeopardy, and make many more
workers vulnerable to having their hours cut than currently
face that risk or threat.
That said, I recognize that the Affordable Care Act is not
perfect, and I'm ready to work across the aisle on commonsense
fixes that strengthen and protect working families and their
access to quality, affordable coverage. But I don't believe
that this proposal is the way to get us there.
I think we could be having, and I hope we are going to
shortly be having a real discussion of possible improvements
that could help businesses and safeguard access to strong job-
based coverage.
I was serving in the House of Representatives during the
initial debate on health care reform, and as we were having
that debate we were looking at this issue of employer
responsibility and sort of took a different look at it in terms
of if this sort of debate on 30 or 40 hours is a proxy for the
size of the employer who should be included in the provision or
not, there are other ways to make that cut, and the House had a
robust debate and a different version of this employer
responsibility provision.
Also, in Massachusetts, prior to the passage of the
Affordable Care Act, they had a different way of getting at
this particular issue. If we want to work on this, let's put a
workable proposal on the table. But I really feel like this is
another politically driven attack on the health care law that
is going to undermine economic security for our families.
Mr. Fugere, thank you for being here. I am very encouraged
that you offer comprehensive health coverage to your employees
who work at least 24 hours a week, and it's worth restating
that this is even more generous than the Affordable Care Act
requires and that you did it before the Affordable Care Act was
even passed.
The Affordable Care Act guarantees families not just access
to coverage but access to high-quality and comprehensive health
care coverage--there are standards in there--through their
employers. So I want to ask you what some of the differences
are between the robust health care plans that you have long
offered and other minimal coverage policies like fixed
indemnity plans. Why did you choose to offer the more
comprehensive coverage before the Affordable Care Act was even
law if there are other less expensive options that could have
maybe been easier for you--that path might have been easier for
you to take as a small business owner?
Mr. Fugere. Well, we looked at a lot of the options that
were available to us, and we really wanted to do something that
would send a message to our employees that we cared about their
service, and we wanted to I guess make a statement that we
wanted to invest in them. In fact, our program not only meets
the bronze level of the ACA plan but it exceeds the platinum
level in just about every respect.
Senator Baldwin. Ranking Member Murray made a reference to
an issue that I'd like to explore a little more with you. I'm
concerned that by raising the definition to 40 hours a week, it
would unfairly reward employers seeking to circumvent the law
and cut benefits while disadvantaging other business owners
like yourself who want to strengthen your workforce by offering
this robust coverage.
Under this proposal, what would be some of the impacts on
your business and your employees should other, arguably,
competitors drop coverage for workers who are under 40 hours a
week?
Mr. Fugere. Well, just like other industries, the
restaurant industry is highly competitive. We run on very thin
margins and we have to be very careful about where we allocate
our resources. So this is just one of many things--menus,
different competition coming into our marketplace--that we
would contend with, and it would just be one more burden for
those businesses that are trying to do the right thing, in my
opinion.
Senator Baldwin. Thank you.
The Chairman. Thank you, Senator Baldwin.
Mr. Puzder, you pointed out that the Congress has
deliberately placed into law an economic incentive to
discourage employers from paying overtime, correct?
Mr. Puzder. Correct.
The Chairman. And do you see much difference between that
and Congress putting into the law an economic incentive to
discourage employers from increasing their health care costs
for employees who work part-time?
Mr. Puzder. It has the same impact on our business. I'm
really sorry that the Senator left because I really would like
to respond to the corporate welfare point, which is, I'm not
here saying that we can't pay this. I'm not here asking you to
give us any welfare. Four hundred and twenty people signed up.
It's going to cost us $2 million. Last year it was almost $200
million. It's not a big deal to us. Nobody--I wouldn't say
nobody signed up. A very small percentage of the people--the
over 5,000 people that we offered Obamacare coverage to, or ACA
coverage, didn't--they don't want it. We had 420 people that
signed up.
I'm not here asking you to give us corporate welfare. What
I'm asking you to let us do is take the thousands of people
that have had to take part-time jobs and let us move them back
over to 30 hours a week. They need the work. They need the
hours. They would prefer to have the hours to the coverage
because they didn't take the coverage. We offered it to them.
In fact, we offered 13,100 employees lesser coverage. I mean,
it doesn't cover 22-year-old boys for pregnancy, but it does
give coverage if you break your ankle or you need to go to the
doctor. And we had 200 people take it.
The problem here isn't corporate welfare. The problem here
is with the thousands and thousands, if not millions of
American workers who have had their hours reduced to below what
they need to get by, and that's what this is about. It's not
about corporate welfare.
You know, companies like ours, we figured this out. I mean,
it's a very little expense. The penalties that you're talking
about losing, they're from small employers for whom it's better
to pay the penalty than it is to give the insurance. Of the
5,000 people who didn't take insurance, 2,640 of them were over
the age of 26 and unmarried. So at a minimum, those 2,640
people have chosen to pay the penalty. These are people who
can't afford that penalty. Those are the penalties you're
losing. They're small businesses and they're the people that
can't pay.
Our business, it's a hit to us. You know, you don't like to
take $2 million and pay it out, but I'm happy to pay that
amount for these people for insurance. And even if you change
it to 40 hours, about half of them would still be over 40
hours.
So the corporate welfare argument is interesting to hear,
and I love the Congressional Budget Office, I refer to them all
the time. I think Doug is a great guy. But have they ever
estimated anything that was accurate? I mean, really, has there
been one estimate that was correct? I'm telling you what's
happening in the world, in the business world. People aren't
signing up, at least at our company.
The Chairman. Thank you. As a matter of fact, in defense of
the Congressional Budget Office, they did do a pretty good job
of estimating the number of jobs that would be lost by
increasing the President's minimum wage proposals. So they are
often correct.
And following up on that point, Mr. Holtz-Eakin, the
Congressional Budget Office for the House-passed bill, which
would restore the definition of full-time to 40 hours a week, I
think we ought to think about this. I asked at a hearing one
time, where did this 30 hours ever come from? It does sound
like it's made in France. They do apparently have in France
inspectors who go around in parking lots to make sure you're
not working more than 30 hours.
I think maybe it was just a mistake. I mean, 30 hours
doesn't reflect any reality in the American workplace. It
doesn't reflect the standards and the customs that have been
recognized by the Fair Labor Standards Act for many years. And
the obvious effect of putting a major economic disincentive to
adding a cost to hiring somebody who works a certain number of
hours, the obvious effect is going to be that employees would
respond to that.
Mr. Holtz-Eakin, the Congressional Budget Office scored the
House-passed bill and it says employers whose current workforce
is comprised mostly of 40-hour workers have tended to offer
health coverage at a greater rate than employers whose
employees typically work between 30 and 35 hours per week.
Is it fair to say that the 30-hour definition of full-time
is doing more to reduce wages than it is to increase the number
of employees with insurance?
Mr. Holtz-Eakin. I think that's fair. I mean, we know that
those working 40 hours or more, 88 percent have insurance.
Those working in the range of 30 to 35 hours, 27 percent have
insurance. So it's not insuring people. It's a big incentive to
cut their hours, and that's going to be the major impact of
changing from 30 to 40, that you'll get rid of that
disincentive for cutting hours.
The Chairman. Thank you.
Senator Sanders
Statement of Senator Sanders
Senator Sanders. Thank you, Mr. Chairman. I promise you
that in the coming weeks I will be highly engaged in this
debate, but I want to make an observation about this
discussion.
I think if this hearing were televised internationally,
people all over the world would not know what the hell anybody
here was talking about, because in every major country in this
world, whether it's 100 miles away from where I live in
Burlington, VT, or throughout Europe, or throughout
Scandinavia, people would literally not understand one word of
this discussion. The argument of whether you provide health
insurance to people who work 30 hours a week or whether they
work 40 hours a week--whoa. In every major country on earth,
health care is a right of all people. It is a right of all
people 100 miles away from where I live under a conservative
Prime Minister in Canada.
No. 2, we have business people on this panel who know
something about economics. You are aware that in the United
States, after the modest gains of the Affordable Care Act, and
I voted for it, 10 million more people have insurance. We still
have 40 million Americans without any health insurance. And
then, despite all of that, we end up paying, per capita, almost
twice as much as any country on earth for health insurance.
So, Mr. Chairman, this is a very interesting discussion,
but we're not discussing what's relevant. And what's relevant
is should health care be a right of all people, or should
businesses, Mr. Fugere's and the others, have to spend a great
deal of time and energy figuring out how they provide health
care to their people or how they do not?
So let me ask a question, and I'm not sure I know what the
answer would be. I can tell you in Vermont, and I suspect
there's no reason to think it's different in Maine or other
States, every year the budget comes around, communities don't
have a whole lot of money, are arguing whether or not we raise
the budget, right? A very serious issue. And a lot of times
health care becomes a key component.
Is that right, Dr. Webb?
Ms. Webb. Yes, that is correct.
Senator Sanders. Let me ask you, and I don't mean to put
you on the spot here, or I don't want to go through the whole
panel, but if we did what virtually every major country on
earth did, say that health care is a right of all people, not a
right for a business--we have the absurd situation where Mr.
Fugere feels that it's his moral responsibility to provide good
health care for his workers, and thank you very much for that.
But the guy who owns the pizzeria across the street may not
feel the same way, and you are at a competitive disadvantage
because you're doing the right thing.
What would it mean for our country and for small businesses
if you could go about your business of producing the best pizza
possible at the lowest possible price rather than worrying
about health care, if we took that burden off of your
shoulders? Mr. Fugere, would that be a good thing for you?
Mr. Fugere. I would absolutely support that.
Senator Sanders. Dr. Webb, you're trying to have the very
difficult job--and I appreciate all the hard work you and other
educators do--of educating kids. I don't know that you took
your job--you worry about how kids achieve in this world,
right? Did you really want to get into the health care business
when you took that job? I mean, if we lifted that burden off of
you--we have town meetings every year arguing about the budget.
I guess it's similar in Maine.
Ms. Webb. It is very similar, and we are being asked to do
more with less and less. I mean, it's interesting to me that I
became superintendent in 2008, and for the last figures
presented in 2013 by the Maine Department of Education, my per-
pupil costs are the same. They are virtually the same. And so
trying to do more with less.
For me, it's really about the resources, and my fear is
that, whether it's on the administrative side or it's on the
penalty side, or it's on offering insurance to what I would
call very temporary employees, it's resources, and we have had
to cut programs and options, and that has an impact on the
students.
Senator Sanders. I know it does, and it's very similar in
Vermont. Would your life be easier if maybe all you had to do
was worry about providing education to the kids and not worry
about health care for your employees?
Ms. Webb. I mean, a question like that, sure. But what is
the reality?
Senator Sanders. Well, the reality is that maybe it should
not have to be the responsibility of the Bangor School District
to provide health care, that maybe it should be a right of all
of our people--whether they work in McDonald's in Bangor,
whether they work for the school district--to have health care.
Mr. Puzder, what do you think?
Mr. Puzder. If what you're saying, Senator, is that if we
had a bill that was debated, that was vetted through
congressional committees, and we looked at the health care
system and really tried to come up with a more rational
solution, I would say you're absolutely right. You would
disengage business from providing health care.
You and I might not agree on the ultimate solution to this,
but----
Senator Sanders. I assume you would rather focus on
producing your products rather than worrying about health care,
right?
Mr. Puzder. From your lips to God's ear. This has been
such--it's not only been such an incredible pain in the butt
for business people, but it's hurting American workers. We need
to change this. It needs to be addressed. You're not helping. I
know you think you are. I know you want to. I know the intent
was there. This isn't helping, and it's not that expensive for
us. I'm not here saying, you know----
Senator Sanders. OK. Let me ask--I am sorry, Mr. Chairman.
I yield.
The Chairman. It was good, though.
Senator Sanders is always good, so we always look forward
to his comments.
Senator Franken.
Statement of Senator Franken
Senator Franken. Thank you, Mr. Chairman, for holding this
hearing on job-based health insurance under the Affordable Care
Act.
You know, my focus on the ACA--I'd like to identify my
remarks with Senator Baldwin's--it's about making sure that the
ACA works as well as possible for people in my State and our
Nation, and it really has helped a lot of people.
In my State of Minnesota, for instance, because of the
health reform law, we've cut the uninsured rate by more than 40
percent. We now have 95 percent of Minnesotans insured. We're
second only to Massachusetts, which had a form of this before.
But I've heard concerns from people who are understandably
anxious and frustrated by the complexity of the Affordable Care
Act and the process of implementing it, so we absolutely need
to fix what's not working about the law. What we shouldn't try
to do is get rid of it. We can't go back to the days when
insurers could deny coverage to people with pre-existing
conditions or drop people who became sick because they'd hit
their lifetime cap. That's incredibly reassuring to every
American, I think.
We shouldn't charge women more simply because they are
women. And we've seen some tremendous benefits. We've had the
lowest inflation growth in health care costs in 50 years. This
is working.
So what I think we need to do is fix what's working, and
one of the things--I've offered some legislation. One is on the
family glitch. This is complicated to explain, so maybe I just
won't take the time to explain it here. But the crux of this
hearing is this: you've got to draw a line somewhere, right?
Forty hours, 30 hours--this is about where to draw the line.
And there are going to be tradeoffs everywhere, right? This is
what this is about.
So today we're talking about the tradeoffs, the negative
aspects of 30. We're hearing that testimony.
The negative aspects of doing it at 40, Dr. Holtz-Eakin,
you started off your testimony by saying this is going to be
much better to do it at 30 because most people, more than 50
percent of people work 40 hours, exactly 40 hours. Most people
work more than 40 hours. So you would lose a lot more if you
were cut from 40 hours to 29, right? Didn't you start your
testimony that way?
How likely is that? Mr. Fugere, how likely is it that
people are going to be cut from 40 to 29, versus being cut from
40 to 39?
Mr. Fugere. Well, for one, not a single one of our servers
works that many hours. And second, I think that in my industry,
our managers schedule for the business' needs and for what the
customers' needs are, regardless of a threshold. It's more
about what the business needs and what the customer needs are.
I think that trying to get them under a certain amount of hours
to meet some type of savings comes secondarily.
Senator Franken. What I'm saying is that the reason we put
it at 30 and the reason that the tradeoffs are such that 40
makes so much less sense is because, as the CBO scored it and
looked at it, this would take insurance away from 500,000, and
up to a million. That's the point.
So, yes, we can go through instances where anywhere you set
this line, anywhere you draw the line, but I want to fix this
thing.
Dr. Holtz-Eakin works for the American Action Forum. That's
aligned with the American Action Network. You go to the
homepage of the American Action Network and what they say in a
banner across the line is, ``Help Us Stop Obamacare.'' So I do
trust the CBO and their good-faith look at this. I'm not sure
that when you're aligned with a group that has a banner across
the line that says, ``Help Us Stop Obamacare,'' that your
estimates are necessarily in good faith.
Thank you.
Mr. Holtz-Eakin. I'd be happy to sit with the Senator and
walk him through our estimates so you can see exactly how
they're done.
Senator Franken. Well, can I respond to that? Because in
your testimony, you have a figure that says that--excuse me,
the study. You say,
``Since the ACA's passage, the rise in premiums has
cost employees an average of $935 per year and has
reduced employment by 350,544 jobs nationwide.''
I'm sorry, but that seems an absurd statement to me,
350,544--not 543, not 545. I don't know how you can make some
kind of statistically sound finding that gets it to the job,
and I looked at the study and I was looking at what years this
data was based on, and it was based on data from years 2003 to
2012.
So how can you say that as a result, not looking at data
from 2013, not looking at data from 2014, that you come up with
the exact number of jobs supposedly lost by the Affordable Care
Act?
The Chairman. Dr. Holtz-Eakin, you can answer the question,
and then we'll go on to Senator Murphy.
Mr. Holtz-Eakin. I'll be brief. It's a regression analysis
that delivers a point estimate of jobs lost. That's the point
estimate. Every point estimate comes with some uncertainty, and
there's a standard error around that. There's no question about
it, and I don't think there's any reason to apologize for that.
It's the best method available for doing this kind of an
analysis.
The Chairman. Senator Murphy
Statement of Senator Murphy
Senator Murphy. Thank you very much, Mr. Chairman.
Thank you to the panel for taking the time to be here with
us today.
I just wanted to briefly comment on Mr. Puzder's
suggestions about the fallibility of CBO. I think they
generally do a pretty fair job, but it is true that they were
pretty wrong in estimating the health care expenditures of the
United States in the wake of the passage of the Affordable Care
Act. They got it so wrong that we have spent about $2 trillion
less on health care since the passage of the Affordable Care
Act than the CBO had initially estimated. We're spending, on
average, about $1,000 less per Medicare beneficiary than we had
initially thought. Dr. Holtz-Eakin and I and others have had
discussions about how much of this is attributable to the
Affordable Care Act and how much is attributable to other
economic factors, but there's pretty good evidence that the ACA
is a big part of that story.
This is a panel full of employers and economists. We don't
have any employees on this panel, and I think we'd be helped by
hearing the stories as part of this debate from the employees
who are going to have their lives changed by this piece of
legislation we're debating here today.
In the audience here today are two of my constituents.
Janice Stauffer and Irene Jadge are ICU nurses at a hospital in
Connecticut. They work three 12-hour shifts in the ICU, maybe
some of the most important work that gets done in our health
care system today, and they total 36 hours a week. It's their
health care benefits that provide health care to their
families, and if we move from 30 to 40 hours, their health care
would be in jeopardy, not just for them but for their families.
So I want to maybe use their story as a way to ask you, Dr.
Holtz-Eakin, because I really respect your thinking a lot on
this, a few questions.
First, you initially sort of framed the risk to the 12
percent of those working 40 hours a week who don't have
insurance, but you also say that you believe that the health
care law is set up in a way that provides an incentive for
employers to move employees off of their coverage onto the
exchanges, right? So that means--and I think Senator Franken
was getting at this--that when you go from a standard that only
affects about 6 or 7 percent of workers to a standard that
affects 50 percent of workers, you're going to have a lot more
people that are at risk of moving from the ranks of employer-
sponsored insurance to being subject to either the exchanges or
Medicaid or some other way of getting insurance. Is that how
you read this?
Mr. Holtz-Eakin. So, I believe they're at risk at 30, 31,
32, 33, 35, 40. So the issue of the incentive for employers to
get out of the business of providing health insurance and
putting people on the exchanges is not materially affected by
this particular piece of legislation.
Senator Murphy. Except that the standard that we have today
is operative on a much smaller number of employees, right? So
if the standard stays at 30 or 35, you're talking about a much
smaller number of employees because the majority of employees
are at 40 or 41 hours, unless you assume that employers look
similarly at the risks to their business of moving from 40 to
29 as they do moving from 40 to 39.
Mr. Holtz-Eakin. If the risk is reducing hours, there are
two risks. One is to reduce hours, and the other is reduced
coverage. Those are the two incentives that are at play. I
believe the latter, the reducing coverage, is not materially
affected by this. It's there. It's a real concern to me, quite
frankly, but it's not about 30 versus 40.
For hours, it's not the case that you expect employers to
move from 40 to 29. The question is who is in the couple of
hours around 40 and who is in the couple of hours around 30 who
are at risk, and my answer would be there are fewer at risk
around 40 than around 30. So we're going to have less
disruption in people's working hours, their incomes, if we have
a 40-hour standard. That's the argument.
Senator Murphy. I guess we're just looking at different
numbers here because you have 50 percent of employees who are
at 40, you have 7 percent who----
Mr. Holtz-Eakin. But they've all got insurance. There's no
reason to--80 percent have insurance, so why reduce their
hours?
Senator Murphy. Right. But you said that the Affordable
Care Act, according to you, is, in and of itself, an incentive
to move from employer-sponsored care to other forms of health
care.
Mr. Holtz-Eakin. And that's true at 30 or 40. So the
question is----
Senator Murphy. And there are more employees at 40.
Mr. Holtz-Eakin. So what changes with this law? And the
answer is----
Senator Murphy. That more employees are at risk of being
subject to that incentive.
Dr. Holtz-Eakin [continuing]. Of losing hours, because
there's no reason to dodge the hours in order to have to
provide the insurance. They've already got the insurance, so
it's done. At 30, that's not true. You've got 27 percent who
have insurance, so this is a big consideration. How many more
people am I going to have to supply insurance to? How costly is
it going to be for my business? That's a big incentive to move
them. That's it.
Senator Murphy. We're reading this very differently. I
would just make this one----
Mr. Holtz-Eakin. I agree, we're reading it differently.
Senator Murphy [continuing]. Quick last comment. The two
nurses that I'm talking about likely aren't going to receive
subsidies, and if they do, they will be relatively small
subsidies. So even if they were to get a boost in income, it is
not going to make up for the entirety of the money that their
employer paid toward their health care. And if they're not
going to receive subsidies in the exchange, they come out net
losers. If you get a subsidy, it may be that you end up being
whole in the end.
But we have to admit that there are going to be a lot of
people who--even if they do get an increase in income because
the employer is no longer paying insurance--are going to be at
risk for a whole lot more money out-of-pocket.
But I'm over my time, so I'd be pleased to continue this
conversation with you. Thank you.
The Chairman. Senator Cassidy
Statement of Senator Cassidy
Senator Cassidy. Yes, thank you.
I think I can answer that a little bit. Nurses will
probably not be affected if we go to 40 because there's so much
competition for nurses. I'll go into that later and discuss
what we found after researching the topic.
Mr. Fugere, when you quote the Urban Institute study--we
pulled that--it takes all workers, the CEO down to the person
pushing the broom, even highly trained ICU nurses who can go
anyplace and get a lot of overtime. Really, the group that is
most impacted is the lowest quintile. This is small so
hopefully you can see it, but that red line is the lowest
quintile, and that is the percent of those workers who are
working full-time.
As you can see, post-recovery, every other quintile is
moving up. Our most vulnerable workers are the ones being
hammered. ICU nurses do not qualify for that--I say that as a
doc--because, my gosh, what those two women know, right now, if
one of you goes down with a heart attack, you want them taking
care of you, not me, the gastroenterologist. I would put the
paddles in the wrong place.
[Laughter.]
Mr. Fugere, I have a couple of questions, please. What is
your cost share for your employees insurance?
I apologize. You said only 1 percent of your company's
expense is for health care?
Mr. Fugere. That's correct, less than 1 percent.
Senator Cassidy. Whoa.
Senator Mikulski. Mr. Chairman, excuse me. Not to interrupt
the dialog, but I need to excuse myself to go to a meeting with
Senator Cochran. I'd like the record to show that I was here
and ask that my statement be in the record. Not to interrupt
their debate, but I'm trying to move the Homeland Security
bill.
The Chairman. Thank you, Senator Mikulski. We appreciate
you coming for the time that you could.
[The prepared statement of Senator Mikulski follows:]
Prepared Statement of Senator Mikulski
Thank you Chairman Alexander and Ranking Member Murray for
convening this Health, Education, Labor, and Pensions Committee
hearing to examine how the Affordable Care Act is working.
There has been a lot of talk, debate, and misinformation
about the Affordable Care Act. But let's talk for a moment
about the facts. Because of the Affordable Care Act,
approximately 10 million people who were previously uninsured
now have health insurance. About 4 million young people are now
on their parents' health insurance plans. Over 8 million
seniors pay less for prescription drugs. These seniors have
saved approximately $1,400 each. Because of the Affordable Care
Act, there is no more gender discrimination, pre-existing
condition exclusions, and annual or lifetime caps on benefits.
I'd like to share how the Affordable Care Act is working in
Maryland and I am going to let my constituents tell the story.
The following are four stories I received from Marylanders.
The first is from Barry from Gwynn Oak, MD. Barry's wife
lost her job at the end of 2011 and decided to return to
school. Barry is self-employed and did not have access to
employer-provided coverage. He and his wife had been on his
wife's health insurance and COBRA, but decided to see how they
would fare in the Maryland marketplace. They successfully
signed up in 2013 and their new coverage went into effect
January 1st. They signed up for a Platinum Plan and their
premiums were MUCH lower than what they were paying through
COBRA. They saved approximately $400 per month and just over
$5,000 a year. Barry also expressed his concerns about what
would have happened to them if they had to look for insurance
in the old ``individual market.'' His wife had a pre-existing
condition, so insurance would have been very expensive for
them.
The second story is from Marilyn from Oxford, MD. Marilyn
got the information she needed from the new Maryland health
insurance exchange. She got a new insurance plan from the same
company and with nearly all the same conditions for $6,000 less
a year! The new law saved her $6,000 a year. She had been
overcharged for years due to a minor pre-existing condition but
now she can get a fair price for her insurance. She wrote,
``Members of Congress who oppose this law have no
idea what it is like to have to buy their own insurance
on the open market. This law is a Godsend for those of
us who do.''
The third story is from Robert from Frederick, MD. Robert's
household is especially grateful for the ACA on two fronts. For
one, Robert has a daughter with a pre-existing condition that
would interfere with her being able to get her own health
insurance had we not eliminated pre-existing condition denials.
And second, Robert and his family are thankful that they can
continue to carry their daughter on their health insurance plan
up to the age of 26. His daughter will graduate from Emory
University in May 2014. He and his wife are greatly relieved
and grateful that their daughter did not have to worry about
obtaining health insurance thanks to the provisions of the ACA.
The final story is from Robyn from Silver Spring, MD. Here
I quote from the letter she sent me.
``This is my story. I am a single mother of the most
absolutely adorable son. Every day I watch him seizure.
He has done so since he was 2 months old. I went to
school and had a job that I loved. I lost that job when
my son was about 3 years old. We lived for almost 3
years without health care. Before the passage of the
Affordable Care Act, my son was denied health care. My
son's medications were about $500 a month. I worked 3
to 4 relief jobs to keep a roof over our head and
afford the medication that saves his life. But now, the
ACA means that no insurance company can say that
Joshua's illness costs them too much. It means that
when he gets older, he won't get denied health care
because he has reached his cap. I would like to thank
you for your efforts to keep the Affordable Care Act.''
I want everyone here to know that I am open to ANY
constructive ideas, Republican or Democrat, about how to
improve the Affordable Care Act. But I am NOT open to proposals
that seek only to harm, undermine, or destroy a law that so
many Marylanders depend on. Marylanders like Barry, Robyn,
Marilyn, and Robert. Thank you.
Senator Cassidy. I'm struck, only 1 percent. That is so
much less than another company that tells me their top item now
is health care expenses. What percent of your employees
participate in your health insurance plan?
Mr. Fugere. Seventy-seven percent of our eligible employees
are enrolled in some insurance plan, meaning either the one we
offer or one that their spouses or somebody else might offer,
and of that, 75 percent are enrolled of that 77 percent.
Senator Cassidy. So 75 percent of the 77 percent is
enrolled in your plan?
Mr. Fugere. Correct.
Senator Cassidy. What is the cost share on that plan? For
example, the deductible. What is their out-of-pocket exposure?
Mr. Fugere. For employees, it's $188 per month.
Senator Cassidy. So that's on average.
Mr. Fugere. On average.
Over time it goes down because we pay a higher percentage.
For those people that stay with us longer, it's closer to $120.
That's pre-tax, by the way.
Senator Cassidy. You have management and you have wait
staff. You have highly paid and you have lowest quintile, if
you will. Do you have it broken down as to what percent of
those lowest quintile are participating in your health care
plan?
Mr. Fugere. Yes. Let's see. We have a total of 55, and of
those, there are 20 of those who are higher paid.
Senator Cassidy. So the 35 remaining, how many of those
participate in the plan? I'm assuming that the 20 total do.
Mr. Fugere. Right.
Senator Cassidy. So how many of the lower paid employees?
Mr. Fugere. Participate in the plan?
Senator Cassidy. Yes.
Mr. Fugere. All of them. Are you asking which ones that are
qualified----
Senator Cassidy. Of your lowest quintile workers, of your
lowest paid workers, how many participate in your plan that
they have to put up $180 a month?
Mr. Fugere. Twenty-three.
Senator Cassidy. Twenty-three out of what number? Fifty-
five?
Mr. Fugere. I'm sorry. I've got a lot of numbers in front
of me.
Senator Cassidy. I understand.
Mr. Fugere. So we have a total enrolled in our plan of 55
people. Of those, 20 are managers.
Senator Cassidy. Twenty are managers.
Mr. Fugere. Yes.
Senator Cassidy. OK. Obviously, the numbers are a little
confusing here.
So you mentioned the employer should do the right thing. We
have school boards that are unable, because of their tax base,
to pay people for more than 30 hours per work week. In Lincoln
Parish in Louisiana, 400 custodial and food service workers
were converted from full-time to part-time. The school board
was very explicit: we don't have the tax base to pay for the
penalties and cost of compliance with Obamacare.
What would be the right thing for that employer to do,
seeing how they don't have the tax base but they have to
provide educational activity? Do you see what I'm saying?
Mr. Fugere. I do.
Senator Cassidy. There's a tradeoff here, and there's a
moral judgment when you say. ``should do the right thing.''
Mr. Fugere. Right.
Senator Cassidy. I would say the school boards are doing
the right thing by concentrating dollars in the classroom.
Would you agree with that''
Mr. Fugere. I would agree with that, and I think the bigger
challenge here is that we should be looking at reducing cost,
not so much reducing hours.
Senator Cassidy. I need to make one more point. Senator
Murphy is absolutely right, the cost of health care has been
mitigated since before Obamacare, but it's continued under
Obamacare. The cost of health insurance has gone out the wazoo.
Mr. Fugere. Right.
Senator Cassidy. Again, as a gastroenterologist, I'll say
that. And the profits for insurance companies are up like 200
percent. I'm struck that premiums are up 250 percent for some
people, and yet the cost of health care itself has mitigated.
So the President speaks of the cost of health care being
mitigated, but if you look at what people are paying out-of-
pocket, they are bearing an incredible burden.
I will say, for your low-wage workers, if that's an
individual policy, not a family policy, they are paying roughly
$1,400 a year, and not knowing what you pay them, that's going
to be a sizable percentage of their income. I'm surprised you
have such a high uptake in people----
Mr. Fugere. We do in the State of Washington have the
highest minimum wage in the country. We don't have a tax
credit. Many of our servers are making $25 an hour.
Senator Cassidy. OK.
I yield back. Thank you.
The Chairman. Thank you, Senator Cassidy.
Senator Whitehouse.
Statement of Senator Whitehouse
Senator Whitehouse. Well, Mr. Chairman, I appreciate you
having this hearing, but I have to say I've got the exact same
concerns that Senator Franken and Senator Murphy have, and to
me, it makes no sense. If there is an economic incentive to
dump employees off of health insurance, it happens at a margin.
Right now, that margin is 30 hours.
Dr. Holtz-Eakin has said that the risk zone of that
incentive hovers around the margin point. So if it's 30, you're
at worst risk if you're at 31 hours, or perhaps 32 hours, less
risk if you're at 50 or 60 hours of being dropped to 30, and
that's the problem we're trying to deal with.
You can move the 30-hour margin point, and the incentive
doesn't go away. That's also been Dr. Holtz-Eakin's testimony.
You can move it to 25, you can move it to 35, you can move it
to 30, you can move it to 40. At wherever you go, the
incentive, if you want to dump your employees off of health
care, remains.
The problem is, as I see it, that the population that is in
Dr. Holtz-Eakin's risk envelope at a 30-hour margin is actually
pretty small. They may or may not have health care now, but if
you move it to 40 hours, you pick up the majority of the entire
American workforce, and you put them into that risk margin
where they weren't before, right?
And the theory that because they already have health care
the incentive goes away, no. You save just as much money by
dumping somebody off health care as you would lose by adding
them on health care. It's the same dollar amount either way.
The incentive is identical.
It seems to me that we're engaged in a discussion that is
fundamentally meaningless because all we're doing is moving a
significant margin point and its incentives up and down. But to
the extent that the decision is made to go from 30 to 40, it's
actually making it worse for Americans and putting ordinary 40-
hour working Americans at risk in the same way that now there's
this risk for 30-hour Americans.
I'll echo what Senator Sanders said. The thing that our
Republican colleagues have fought so hard and determinedly
against for a generation is a universal health care system that
gets rid of all these artificial problems. I'm all for getting
rid of this artificial problem by going to a universal health
care system. Or if you don't want a universal health care
system, at least a public option. So if a particular company
wants to have a special kind of health care or gold-plate its
health care option for very high-end income or extremely
valuable workers, fine, you can do that. But it is the
insistence of the Republican Party that we not have universal
health care that puts us into the position where we have to
make these divisions in the first place.
Now, to move it from the little population around the 30-
hour margin to the very large population around the 40-hour
margin puts more people at risk. This is going backward, not
forwards, even by the terms of the conversation we're having
here.
And just to echo what Senator Murphy said, an oncology
nurse from Warwick, RI wrote to me in the exact same
circumstance as the two Connecticut nurses who are here. She
does three 12-hour shifts. She's at 36 hours. You move it from
30 to 40, she is suddenly at risk. She's not only working the
36 hours, she's also the mom to four kids. So to say, well,
that's too bad, just take on a fourth 12-hour shift a week and
you'll be fine, that doesn't work in her life.
I'd be interested to know what the number is of the people
who this move would knock off their health insurance who are
like my oncology nurse from Warwick, because she is very much
at risk at that point. Why we're moving this around to hurt
these nurses and to expand the population that is at risk of
being put at this employer incentive for those employers who
want to dump their employees off of health insurance, this
makes no sense to me, Mr. Chairman. And I hope perhaps as we
debate this further it will come to make some sense, but I
believe that everything I've said so far has been supported by
even the testimony of the witnesses on your side.
So, go ahead, we can have this discussion, but we're in a
very strange place from the point of view of logic when we
think we're helping Americans by putting--what's the percentage
of Americans you would say who are within 2 hours of a 30-hour
work week, Dr. Holtz-Eakin?
Mr. Holtz-Eakin. I don't have that number. I can get it for
you.
Senator Whitehouse. It's about an 8 percent, 8 or 10
percent order of magnitude? And the percentage of Americans
that are within 2 hours of a 40-hour work week is 60 percent?
So we've just multiplied by six the population that's at risk
of getting their insurance thrown off.
I mean, go for it, but my time has expired.
The Chairman. Thank you, Senator Whitehouse.
Senator Scott.
Statement of Senator Scott
Senator Scott. Thank you very much.
Dr. Webb, thank you for your marvelous work, your amazing
work at Bangor School District. Certainly, we all should
celebrate your success and the success of the students at your
school.
The employer mandate and the 30-hour work week is having a
major impact on schools throughout the country, specifically
two schools that I'm aware of in South Carolina. Spartanburg
Community College and Quincy University both say because of the
part-time labor force the impact on those schools could be a
million dollars of additional cost for health care.
The question for you is how do you think this law is going
to affect the ability of our Nation's kids to receive a high-
quality and affordable education? It seems like we'd be moving
further away from that, not closer to it, because of the impact
of the law, No. 1.
The second question is, in particular, in less affluent
areas that have zero flexibility when it comes to budgets, how
will that impact those kids? And most of those kids are
typically on some type of a work-study program looking for the
opportunity to get as many hours as possible.
Ms. Webb. I believe it will have a great impact. When I
talk to my colleagues across the Nation, I happen to be on the
American Association of School Administrators Governing
Committee, and I checked in with some of them across the
Nation, as well as my colleagues right in the State of Maine,
and we're all concerned.
I think the impact on the quality of the education, if we
all think back to our own education, it took a whole team of
employees to provide that core experience. And I liked the
example of the bus drivers. We often talk with students about
why are they successful, tell us the triggers, the moments in
time that they really feel that they saw that they could be a
high performer, and I'll never forget one girl saying to me
that the bus driver every day told her how smart she was and
that she was going to find a way out of this neighborhood that
happened to be a subsidized neighborhood.
So to think that even the bus driver, who maybe spent an
hour with her each day, half-an-hour to school and half-an-hour
home, played an impact. But it also was when that bus driver
was with her on the trip to the debate in the southern part of
the State, and she really saw him as someone that was pivotal
in her success, and she has done incredibly well in her post-
secondary learning.
I do think that schools across the Nation are facing
limited resources. I can understand the less affluent
communities, but I think even in the communities that have been
more affluent, that we are being forced to do more with less.
So I look at this and I hear the different conversations. We
have collective bargaining agreements for all units of
employees. We are going to offer insurance. We pay a large
portion, 77 to 80 percent. The last 2 years our insurance
increases have been 9 percent, 13 percent, 12 percent. So
obviously, both the employer and the employee are picking up
larger costs.
But it's when we then have to say those combination
positions or those substitutes that we now have to struggle
with, where do those resources come from? For us in Bangor,
which I think is similar to many communities across the Nation,
it is now down to the point of programs and course offerings.
Senator Scott. Thank you, ma'am.
A quick question for you, Dr. Holtz-Eakin. While on the
topic of this hearing, I think it is also worth noting that, I
think it was January 2016, the small exchange market goes from
50 employees to 100 employees. I am hopeful that the
administration will allow States to keep their small group
market at 50 beyond 2016. Congress I think should take a look
into whether expanding the small group market makes sense or
not.
My question for you, sir, is have you given any thought to
how this will impact small businesses and the small group
market, or whether expanding the small group market makes sense
at all?
Mr. Holtz-Eakin. I'm not an expert on every State, but by
and large those in the 51 to 100 range are not subject to the
same kind of rating bans and other regulations that the small
group markets are, 0 to 50.
Senator Scott. Yes.
Mr. Holtz-Eakin. So if you put them into that regime, we'll
have roughly the same experience we had in the individual
market, which is the regulatory regime will increase premiums,
so that's going to be a cost to small businesses. The small
business will have a variety of incentives. If you're 51 to
100, a pretty big size, you might try to self-insure and thus
get out of this. If that happens, the people who self-insure
are going to be the good risks, not the bad risks, and we'll
end up segmenting the market into self-insured with good risks
and the bad risks in the now merged small group market, and
we'll see premiums rise further. That stylized pattern has
worked out in the individual market, and I expect that's what
will happen in the small group market.
Senator Scott. Thank you, sir.
The Chairman. Thank you, Senator Scott.
Senator Casey, you'll have the final 5 minutes.
Senator Casey. Mr. Chairman, thank you very much. I know
that doesn't mean I get extra time.
The Chairman. Oh, no.
Statement of Senator Casey
Senator Casey. But we're grateful for the hearing.
I wanted to make one point--two points, really. One was
that--and we're grateful for the testimony of the witnesses. I
know you have to prepare testimony, you have to get here, and
we're grateful for that.
No. 1 is I've tried to be, as a strong supporter of the
ACA, I've tried to examine and to support reasonable changes to
the law, and I've done that. I've got a good record on that.
But I don't put this in that category. I won't support it, and
I wanted to explore some of it with you in the time we have.
But I also would say, by way of bragging, to the two
restaurant business leaders here, that one issue that I know
your industry has come to us on over a number of years, Senator
Cornyn and I have a bill that deals with the depreciation when
you add, whether it's a restaurant or retail establishment, by
keeping that depreciation schedule to 15 years as opposed to
the old 39 years. In other words, giving you a bigger slice
over a shorter timeframe makes sense by way of deprecation. A
lot of advocates on behalf of the Restaurant Association and
others have put that as their No. 1 priority. I know it's not
today's topic, but I wanted to put in that commercial there.
Mr. Fugere. Well, thank you for your work on that, Senator
Casey.
Senator Casey. Thanks very much. I didn't do it to elicit
that, but I'm grateful you did that.
But, Mr. Fugere, I wanted to ask you about your business
and some of the broader points that you made. No. 1 is, you
have--am I right--200 employees?
Mr. Fugere. Yes.
Senator Casey. And when you focus not only on that number
but also when you focus on the one individual you focused on,
Renee, tell me why you think this doesn't make sense for her,
if you could walk through that again.
Mr. Fugere. Well, for one thing, working 40 hours a week is
a challenge. And for many of our employees in the restaurant
business, it's made up of 4-hour shifts. If you think about
dinner and lunch, dinner is typically the 11 to 2 shift, and
dinner may be 5 to 9. So the reason that we set our threshold
at 24 hours is because we're looking at ways to try to get
people onto the plan, so we lowered the threshold so we could
schedule people as much as possible.
For Renee, she's on the other end of the spectrum where
she's getting more hours because she's been with us for a long
time. It gets to a point where working in the restaurant
business and being on your feet all day long creates some
stress and difficulty. So for her to work 40 hours would be
nearly impossible.
Senator Casey. And you made a point in your testimony--and
I was here for the summary. I'm not sure if this is in the
written testimony, and you may have already made this point.
But you said at the bottom of page 2, and I'm quoting, ``In
2012, 59 percent of the first-line supervisors or managers of
food preparation and service workers were women.'' A big
number. ``Fourteen percent were African-American. Seven percent
were Hispanic.'' And then you go on to say, ``Part-time shifts
are the foundation of the restaurant industry.'' And then
finally, ``Increasing the full-time hours to 40 hours a week is
a regressive measure that would negatively impact minority
Americans.''
Is there anything you wanted to add to that?
Mr. Fugere. One thing, Senator. I'd like to thank you for
reading that because that's included in my submitted testimony,
but unfortunately, because I didn't have enough time, I wasn't
able to say it. So thank you for bringing attention to that.
Senator Casey. Oh, good.
And finally I guess I'd say, in light of the discussion we
had, this is a good discussion to have, and we're grateful that
you helped us shed some light on it. What Senator Whitehouse
said, I take to heart. We don't want to, by making a change,
adversely impact or put at risk more folks than have some kind
of stress right now. I know that's a point of contention, but
I'm grateful for the hearing.
Thank you very much.
The Chairman. Thank you, Senator Casey.
Senator Collins, did you have a letter that you wanted to
introduce to the record?
Senator Collins. I do, Mr. Chairman. I have letters from
the National Association of Home Care and Hospice, which
strongly supports this bill, as well as from the National
Restaurant Association, that I would ask permission be included
in the record.
The Chairman. It will be.
[The information referred to was not available at time of
press.]
Senator Collins. I would also ask permission that a written
question to Dr. Holtz-Eakin be submitted that gets into an
issue of the impact of the ACA on income inequality, and it
picks up on a statement I didn't get to in my questions, and I
would love to have a written answer to that as well, with your
permission.
The Chairman. Thank you.
[The information referred to was not available at time of
press.]
The Chairman. Senator Murray, do you have any other
comments?
Senator Murray. No. I just think this was really a good
hearing, and I think many of the members on our side expressed
our real concern about reducing benefits for employees and the
cost on the Federal Government as these people are put onto the
Medicaid program.
We all look forward to working with you to find ways to
improve this bill, but not at the expense of workers.
The Chairman. Thank you, Senator Murray.
I want to thank the witnesses for coming today. It's been
very helpful. I know you made an effort to come here. Some come
from very long distances, got up early in the morning. We're
grateful for that.
What we'll be doing is sending our opinions to the Finance
Committee, which has jurisdiction on whether or not to report a
bill to the Senate floor. The House has already passed the
bill.
I have a letter from the More Time for Full Time Coalition
I'd like to submit for the record. It's signed by more than 400
business groups in support of the Collins-Donnelly Manchin-
Murkowski 40 Hours is Full Time Act.
[The information referred to may be found in Additional
Material.]
The Chairman. The hearing record will remain open for 10
days. Members may submit additional information and questions
for the record within that time, if they would like.
If the witnesses have other comments that they would like
to make that they didn't have a chance to offer, we'd like to
have those.
Our next hearings will be next Thursday on employer
wellness plans.
Thank you for being here.
The committee will stand adjourned.
[Additional Material follows.]
Prepared Statement of the More Time For Full Time Executive Committee
Chairman Alexander, Ranking Member Murray, and members of the U.S.
Senate Committee on Health, Education, Labor, and Pensions (HELP),
thank you for this opportunity to present testimony today on behalf of
the More Time for Full Time Executive Committee. Specifically, we would
like to highlight the significant harm that the new definition of
``full-time'' in the Affordable Care Act (ACA) is inflicting on both
workers and businesses alike.
The More Time for Full Time initiative
(www.moretimeforfullltime.org) was launched last fall by employer
groups from across the country wishing to harmonize the ACA's new
``full-time'' employment definition of 30 hours per week with the
traditional full-time employment standard of 40 hours per week. In just
a few months, the initiative has grown to include over 400 State,
local, and national organizations--from the Maine, Indiana, Alaska and
West Virginia State Chambers of Commerce to the Tennessee Hospitality
Association and the Washington Restaurant Association. On behalf of the
companies and employees that they serve, these hundreds of employer-
based organizations are all urging their U.S. Senators to co-sponsor S.
30, the Forty Hours is Full Time Act of 2015. (See attached letter.)
Therefore, we greatly appreciate the bipartisan response and
attention being given to the ACA's problematic new definition of
``full-time.'' On January 6, 2015, Senators Susan Collins (R-ME) and
Joe Donnelly (D-IN), along with Senators Lisa Murkowski (R-AK) and Joe
Manchin (D-WV), introduced legislation, S. 30, the Forty Hours is Full
Time Act of 2015, to restore the 40-hour definition standard. As you
know, on January 8, 2015, the House passed similar bipartisan
legislation to address this critical issue: H.R. 30, the Save American
Workers Act of 2015.
Given the broad bipartisan, bicameral interest in ameliorating this
problem and the strong national consensus outside of Washington, DC as
well, we urge the Senate to bring a vote on this matter to the floor.
When asked, close to 80 percent of Americans identify full-time work as
being 40 hours or more per week. However, in our visits around the
Senate, we have been told that supporters of keeping the current
arbitrary definition of full-time in the ACA at 30 hours per week are
also proposing lowering it even further to 20 hours per week. Only
about 1 percent of Americans believe that 20 hours per week should be
the definition of full-time work.
We urge the Senate to move quickly because many employees are
already losing wages and hours, due to the law's perverse incentives.
This is particularly true for part-time workers, who until now, were
working below the traditional 40 hours per week standard.
To be sure, data is available to demonstrate that the ACA is
incentivizing some employers to limit the hours part-time employees can
work. Beyond private sector employers, even some States, cities,
counties, public schools and community colleges around the country are
limiting or reducing the hours part-time employees can work. These
decisions are necessitated by the economic reality that for many
employers it is not feasible to bear either the cost of health care
coverage or the penalties for failing to do so.
This workforce restructuring is significant. In the past 2 years,
the proportion of part-time employees working just below 30 hours a
week has been rising. At the same time, the proportion of those working
just over 30 hours a week has been declining. The reason is simple:
until the ACA, most employers have used the traditional full-time
definition of those working 40 hours per week, in accordance with the
Federal overtime rules found in the Fair Labor Standards Act. Now, the
ACA's 30-hour, full-time definition is forcing employers, private and
public, to start making significant workforce changes to comply with
this new standard.
As a result, employers with variable-hour workforces and flexible
scheduling must also be deliberate about specific workforce hours
because of the greater financial impact and potential liability
associated with employer penalties.
One of the attractive benefits for workers in industries with
flexible scheduling is the ability to change their hours to suit their
own personal needs and even pick up additional hours to earn additional
income when needed. In particular, part-time jobs with flexible
scheduling are not only appealing but are critical for students, single
parents, and other individuals struggling to balance various
obligations and commitments.
We appreciate the hearing's effort to draw greater attention to
this issue. We urge the HELP Committee to send a strong message that
harmonizing the definition of full-time employment in the ACA with the
traditional 40 hours per week definition would benefit both employees,
through more hours and income, and employers, now able to focus on
growing their business and creating jobs, rather than administrative
burdens and restructuring their workforce.
Aligning the ACA's definition of full-time employment with the
traditional 40 hours standard would help avoid any further disruptions
to employees' wages and hours, and would provide financial stability
and significant relief.
The More Time for Full Time members look forward to working with
this committee and the entire Senate to improve the well-being of our
employees without sacrificing their jobs in the process.
Members of the More Time for Full Time Executive Committee:
Angelo Amador, National Restaurant Association,
aamador@restaurant.org, 202-331-5913
Brian Crawford, American Hotel & Lodging Association, bcrawford@
ahla.com, 202-289-3147
Chatrane Birbal, Society for Human Resources Management,
Chatrane.Birbal@shrm.org, 703-535-6476
Chirag Shah, Asian American Hotel Owners Association,
chirag@aahoa.com, 202-507-6157
John McClelland, American Rental Association,
john.mcclellandl@ararental.org, 202-289-4460
Jon Taets, National Association of Convenience Stores,
jtaets@nacsonline.com, 703-684-3600
Katie Mahoney, U.S. Chamber of Commerce, kmahoney@uschamber.com,
202-659-6000
Matt Haller, International Franchise Association,
mhaller@franchise.org, 202-662-0770
Neil Trautwein, National Retail Federation, trautweinn@nrf.com,
202-626-8170
______
More Time For Full Time,
January 22, 2015.
Dear Senator, The More Time for Full-Time initiative (www.moretime
forfulltime.org) was launched by employers from across the country to
restore the traditional definition of full-time employment to 40 hours
per week. Today, we are writing to urge you to co-sponsor S. 30, the
Forty Hours is Full Time Act of 2015.
Many employees are being hurt by lost wages and hours because the
30 hours per week definition in the Affordable Care Act (ACA) is
forcing employers to restructure their workforce by reducing their
employees' hours to alleviate the burden of compliance. Harmonizing the
definition of full-time employment in the ACA with the traditional 40
hours per week definition would benefit both employees, through more
hours and income, and employers, now able to focus on growing their
business and creating jobs, rather than restructuring their workforce.
If this is not addressed soon, our country will experience
significant workforce disruptions and individuals as well as companies
will lose valued workforce flexibility. We urge you to work in a
bipartisan way to restore the traditional 40 hours per week definition
of full-time employment, as called for in the Forty Hours is Full Time
Act of 2015, by harmonizing the Affordable Care Act's full-time
definition with the traditional standard.
Many Americans are drawn to part-time jobs with flexible hours to
suit their personal needs. Further, employers with variable-hour
workforces and flexible scheduling have been appealing and critical for
students, single parents, and other individuals struggling to balance
various obligations and commitments. This critical flexibility will be
lost if employers are forced to abandon current practices in order to
avoid significant financial penalties.
Aligning the law's definition of full-time employee status with
current levels would help avoid any unnecessary disruptions to
employees' wages and hours, and would provide significant relief.
Please consider our concerns and co-sponsor S. 30, the Forty Hours
is Full Time Act of 2015, to address a fundamental challenge employees
and businesses face in implementing this law.
Sincerely,
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
American Federation of Labor and Congress of
Industrial Organizations (AFL-CIO),
Washington, DC 20006,
January 23, 2015.
Dear Senator: On behalf of the AFL-CIO, I urge you to oppose the
Forty Hours is Full Time Act (S. 30). This bill will result in lost
work hours for 6.5 million workers, and it will cause one million
employees to lose employment-based insurance coverage, resulting in
higher costs for government-subsidized health coverage.
The Congressional Budget Office (CBO) and the Joint Committee on
Taxation (JCT) found that the House companion of this bill would cause
a million workers to lose their employer-based health coverage and that
the ranks of the uninsured would increase by up to half a million.
Further, losses in employer-provided coverage would result in higher
government costs, including increased spending for marketplace premium
subsidies of $14.2 billion over 11 years and for Medicaid and
Children's Health Insurance Program coverage of $7.8 billion.
Altogether, the CBO/JCT analysis finds that it will increase the
Federal deficit by $53 billion.
However, our primary concern is preserving workers' hours and
access to health care coverage. The Affordable Care Act (ACA) extends
coverage to the uninsured by allocating responsibility for the costs
among individuals, employers, and government. Under this shared
responsibility framework, employers with 50 or more full-time
equivalent employees must pay their fair share by offering health care
coverage to employees who work 30 or more hours a week or by paying a
penalty if these workers access exchange subsidies instead. To ensure
the success of the ACA, an employer responsibility requirement is
needed to preserve current levels of employer-based coverage.
Unfortunately, the 30-hour ``cliff'' created by the law has motivated
some employers to reduce workers' hours to avoid providing coverage.
This has been a particular problem for workers employed at retailers,
restaurants, public schools, and institutions of higher learning.
Proponents of the Forty Hours is Full Time Act claim they want to
help part-time workers by moving the threshold for employer penalties
from 30 to 40 hours. But raising the threshold will only move the cliff
and actually increase employers' incentive to reduce workers' hours.
According to experts at the UC Berkeley Center for Labor Research and
Education, moving the threshold to 40 hours will result in lost work
hours for 6.5 million workers. That is nearly three times the number
that are vulnerable to employers cutting their hours under the current
threshold (2.3 million). The researchers also found that the policy
would essentially eliminate the employer responsibility requirement,
since employers' costs in moving workers from 40 to 39 hours per week
are negligible compared to the costs of offering coverage or paying the
employer responsibility penalty.
Congress should strengthen the employer-shared responsibility
requirement and eliminate the hours cliff, not simply move it. The
employer responsibility requirement should be strengthened by lowering
the threshold, requiring employers to provide coverage for workers who
work 20 hours a week or more or risk a penalty, and by applying a pro
rata penalty if workers with fewer than 20 hours are not offered
coverage. This is the only way to protect groups of workers that will
lose wages under the existing incentive to reduce hours.
We look forward to working with you to strengthen the employer
responsibility rules of the ACA, by extending coverage requirements to
all workers and improving requirements related to the affordability and
comprehensiveness of coverage. Achieving the coverage goals of the
Affordable Care Act will depend upon enhanced employer responsibility
for providing coverage to working families.
Sincerely,
William Samuel,
Director, Government Affairs Department.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[Whereupon, at 11:31 a.m., the hearing was adjourned.]
[all]