[Senate Hearing 114-660]
[From the U.S. Government Publishing Office]








                                                        S. Hrg. 114-660

                 SMALL BUSINESS HEALTH CARE CHALLENGES 
                           AND OPPORTUNITIES

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

                                HEARING

                               BEFORE THE

         SUBCOMMITTEE ON PRIMARY HEALTH AND RETIREMENT SECURITY

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                                   ON

            EXAMINING SMALL BUSINESS HEALTH CARE CHALLENGES 
                           AND OPPORTUNITIES

                               __________

                              JULY 7, 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 M. 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
              Lindsey Ward Seidman, Deputy Staff Director
                  Evan Schatz, Minority Staff Director
              John Righter, Minority Deputy Staff Director

                                 ______

         Subcommittee on Primary Health and Retirement Security

                        MICHAEL B. ENZI, Wyoming

RICHARD BURR, North Carolina         PATTY MURRAY, Washington, Ranking 
JOHNNY ISAKSON, Georgia              Member
RAND PAUL, Kentucky                  BARBARA A. MIKULSKI, Maryland
SUSAN M. COLLINS, Maine              BERNARD SANDERS, Vermont
LISA MURKOWSKI. Alaska               ROBERT P. CASEY, JR., Pennsylvania
MARK KIRK, Illinois                  AL FRANKEN, Minnesota
TIM SCOTT, South Carolina            MICHAEL F. BENNET, Colorado
ORRIN G. HATCH, Utah                 SHELDON WHITEHOUSE, Rhode Island
PAT ROBERTS, Kansas                  TAMMY BALDWIN, Wisconsin
BILL CASSIDY, Louisiana              CHRISTOPHER S. MURPHY, Connecticut
                                     ELIZABETH WARREN, Massachusetts
                                       

                Sophie Kasimow, Minority Staff Director

                                  (ii)

  


















                            C O N T E N T S

                               __________

                               STATEMENTS

                         TUESDAY, JULY 7, 2015

                                                                   Page

                           Committee Members

Enzi, Hon. Michael B., Chairman, Subcommittee on Primary Health 
  and Retirement Security, opening statement.....................     1
Sanders, Hon. Bernard, a U.S. Senator from the State of Vermont..     4
Murphy, Hon. Christopher, a U.S. Senator from the State of 
  Connecticut....................................................    28

                               Witnesses

Harte, Thomas M., Owner, Landmark Benefits, Hampstead, NH........     6
    Prepared statement...........................................     7
Scott, James G., Owner, Applied Policy, Alexandria, VA...........    11
    Prepared statement...........................................    12
Conklin, J. Kelly, Owner, Foley Waite LLC, Kenilworth, NJ........    14
    Prepared statement...........................................    15
Corlette, Sabrina, J.D., Senior Research Fellow and Project 
  Director, Georgetown University, Washington, DC................    18
    Prepared statement...........................................    18

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Response by J. Kelly Conklin to questions of the HELP 
      Committee..................................................    42
    Response by Sabrina Corlette, J.D. to questions of Senaor 
      Warren.....................................................    43

                                 (iii)

  

 
        SMALL BUSINESS HEALTH CARE CHALLENGES AND OPPORTUNITIES

                              ----------                              


                         TUESDAY, JULY 7, 2015

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:01 p.m., in 
room SD-430, Dirksen Senate Office Building, Hon. Michael Enzi, 
chairman of the subcommittee, presiding.
    Present: Senators Enzi, Sanders and Murphy.

                   Opening Statement of Senator Enzi

    Senator Enzi. I'll call to order this Subcommittee on 
Primary Health and Retirement Security Roundtable. I want to 
thank the witnesses for coming today, and I want to thank 
Senator Sanders and his staff for working to put together a 
bipartisan conversation about this important issue of small 
business healthcare.
    I'd also like to thank the colleagues who have helped work 
on this, who will be interested in and appreciative of the 
testimony that all of you provided. That's been shared, and I 
appreciate the format that you used. You all answered the same 
questions. That's what we do at a roundtable.
    Senator Kennedy and I used to do a lot of roundtables. One 
of the purposes of a roundtable is not so that the two sides 
can beat up on witnesses. It's so that we can actually get 
information from the witnesses that will help in making future 
decisions. It's OK for there to be a discourse between the 
people that are on the panel as well as with any questions from 
Senators.
    Of course, what we're hoping--I've always had this 80 
percent rule. I've found that we can talk civilly about 80 
percent of the issues, and out of those issues, we can often 
pick an issue that we can agree on 80 percent. It always seems 
like there's 10 percent that each side has that they've been 
butting heads on sometimes for years.
    Some of the legislation I've worked on--sometimes there's 
been 10 or 12 years of fighting through the same arguments. One 
of the problems is that the staff are so used to the arguments 
that when they hear a word, they can respond to that word 
without ever listening to the rest of the sentence. It's a 
challenge to get beyond that and actually get to the meat of 
the subject.
    Sometimes we were even able to do 100 percent. That means 
that on that 20 percent that we'd been fighting over for years, 
we were able to find a third way that both sides could take 
credit for.
    The purpose of a roundtable, of course, is just to have a 
discussion on the problem and the solutions for it. One of the 
first ones that I held with Senator Kennedy, when it was over, 
he said,

          ``You know, it's kind of interesting to learn 
        something about a subject before we do a bill on it.'' 
        That's what we're hoping for today.

    I appreciate the participants taking the time to put 
together the papers that you did. Those are very succinct and 
helpful. I think that we have a representation here at the 
table of a lot of different sectors, so there's a unique on-
the-ground perspective of what is reality for small business. I 
will ask each of you to say a few words shortly after Senator 
Sanders finishes.
    I'd like to welcome Tom Harte, who is the President of 
Landmark Benefits in New Hampshire. Mr. Harte's company, 
Landmark Benefits, provides employee benefit services to over 
300 corporations and thousands of employees. He comes to the 
table with over 25 years of experience in designing, 
implementing, and managing the employee benefits.
    Mr. Harte has built one of the most successful employee 
benefit companies in New Hampshire with a focus on 
contributions to the industry, charity, and community. In 
addition to his role at Landmark Benefits, Mr. Harte was the 
national president of the National Association of Health 
Underwriters from 2013 to 2014. He has consistently promoted 
the importance of reducing the cost of health insurance with a 
deliberate focus on improving the health of employees and 
increasing the transparency of the cost of healthcare services.
    Sabrina Corlette is a Senior Research Fellow and Project 
Director at the Center on Health Insurance Reforms, CHIR, at 
the Georgetown University's Health Policy Institute. She 
directs research on health insurance reform issues as they 
affect consumers and patients. Her areas of focus include State 
and Federal regulation of private health insurance plans and 
markets and implementation of new insurance market rules under 
the Affordable Care Act.
    Prior to joining the Georgetown faculty, Ms. Corlette 
worked at the National Partnership for Women and Families, and 
from 1997 to 2001 for the Senate Health, Education, Labor, and 
Pensions Committee--this committee.
    Jim Scott is a local area small business owner. He is the 
president and CEO of Applied Policy, a company in Alexandria, 
Virginia, that he founded in 2009. It's a seven-person company, 
and you offer your employees a variety of fully insured 
products and a generous employer contribution.
    Before founding Applied Policy, Mr. Scott worked for 
Hoffmann-La Roche, focusing on Medicare coding, coverage, and 
payment, and he served as the company's principal point of 
contact with the Centers for Medicare and Medicaid Services, 
CMS. Before joining Roche, Mr. Scott served as the senior 
legislative advisor at CMS.
    Prior to his service with CMS, Mr. Scott was an assistant 
counsel with the Office of Legislative Counsel of the U.S. 
Senate. Mr. Scott serves on the Board of Directors of the 
Alliance of Aging Research, founded the Northern Virginia 
Health Policy Forum, and is a member of the steering committee 
of the Partnership for a Healthier Alexandria.
    Kelly Conklin is the owner of Foley Waite, an architectural 
woodworking company based in Bloomfield, New Jersey, and is 
here today to discuss his company's experience purchasing 
health insurance for his employees over the last few decades. 
Mr. Conklin lives in Glen Ridge, New Jersey, with his wife and 
business co-owner, Kathryn W. Schackner. In 1978, he and Ms. 
Schackner founded Foley Waite LLC.
    The firm currently has 11 full time employees. Foley Waite 
fabricates cabinets, furniture, doors, paneling, and moldings 
in a 13,600 square foot facility in Kenilworth, New Jersey. 
Conklin attended Rochester Institute of Technology, the School 
for American Craftsman, and Schackner is a graduate of the 
Philadelphia College of Art.
    Mr. Conklin is a member of the Executive Committee of the 
Main Street Alliance and is the Alliance for a Just Society 
board representative of MSA, a steering committee member of the 
New Jersey Main Street Alliance, and he served 14 years on the 
Glen Ridge Planning Board, leaving in 2014 as the chairman. 
From 1998 to 2010, he served on the board of the New Jersey 
Policy Perspective, a nonpartisan New Jersey based think tank.
    I'll keep my remarks brief so we can get to the real 
discussion. I'd like to touch on the heart of what we hope we 
can get to today.
    Small businesses have traditionally had some of the least 
competitive, most expensive health insurance options out there. 
I was in the shoe business. I know about that. Yet so many 
business owners still view it as a priority to assist their 
employees in purchasing health insurance. I know that when I 
was running my small business, I found out that any business 
looks easy to operate as long as you don't have to make the 
decisions for it.
    A lot of people don't realize that in a small business, the 
owner might well have to wash the windows, sweep the sidewalks, 
clean the toilets, do the bookkeeping, and wait on customers, 
preferably not in that order. I also know there's no better 
feeling than seeing your dreams become reality with the success 
of your own business.
    A big part of making all that happen is your employees. As 
the owner, you are linked to these people, and there are 
certainly market competitiveness reasons to provide health 
insurance, but also a sense of responsibility, knowing their 
family as being part of your enterprise together.
    I'd like to touch on the issues that small businesses face. 
Government has tried many things to try to fix the market. I 
think there is a consensus that those efforts haven't gotten us 
over the finish line.
    Today, I'd just encourage the group to think a little 
differently. There are a lot of changes that would improve 
things and meet a short-term need. We also need to think past 
the next plan year. We should try to ask the question of what 
this market should look like in the future and what do we need 
to do to get there. I think all of you have addressed that in 
your papers.
    Just to clarify the process, once we finish our statements 
here, I'll ask each of you to give a brief introduction of 
yourself and any statement that you want to make on what you 
think should be done to help small business, and then we'll 
begin the questions. When it is time for that, if you want to 
speak, just stand your card up, and that will help me to 
recognize you, although today it may be easy to do. We don't 
have 10 or 15 people on the panel.
    With that, I'll turn it over to Senator Sanders for any 
comments he may have, and then we can get into a discussion.

                      Statement of Senator Sanders

    Senator Sanders. Mr. Chairman, thank you very much for 
holding this hearing. Let me apologize to you and to our 
witnesses that I'm not going to be able to stay for very long, 
although this is a subject which interests me and the people of 
Vermont very, very much.
    I think the point that I would like to throw out--I'm not 
going to be here for it, but maybe some of the panelists could 
get into it--is to maybe address the issue of how it happens 
that the United States of America, our great country, the 
wealthiest country in the history of the world, is, in fact, 
the only major country on Earth that doesn't guarantee 
healthcare to all people as a right. That's point No. 1. If we 
did that, a lot of aspects of this discussion might not be 
taking place.
    What we all know is God didn't create a situation where 
businesses were obliged to provide health insurance to their 
workers. That's a public policy issue. I think it began in 
World War II for various reasons, dealing with the State of the 
economy in World War II.
    What concerns me, Mr. Chairman, very much is that, No. 1, 
you have some employers, small and medium-sized employers, who 
feel a moral obligation to make sure that their employees have 
high-quality health insurance. Across the street, there may be 
another employer engaged in the exact same business who has a 
different point of view.
    For no particularly rational reason, you have one guy who's 
trying to do the right thing and spending a lot of money on it. 
Another person is doing something different for his or her own 
reasons, spending a lot less money on it. That's issue No. 1. 
What rational sense is that?
    No. 2, where I think we are at an international competitive 
disadvantage is that our small, medium-sized and large 
businesses spend an enormous amount of time--and it sounds like 
folks like Mr. Harte help them in this area. All right. I have 
20 employees. What is my best deal? How do I provide health 
insurance to my employees in the most cost effective way?
    That's kind of what you do, Mr. Harte. Right?
    All right. Yet in other countries, small and medium-sized 
businesses don't particularly worry about that issue, because 
everybody in those countries has healthcare as a right. I live 
100 miles away from Canada, and that's pretty much the story.
    If you own a shoe store, Mr. Chairman, in one of those 
countries, what those businesses focus on is how you sell as 
many shoes as possible and not spend an enormous amount of time 
on a very, very complicated issue. I'm sure the panelists will 
agree with me that with the market changing every day, if one 
person in your 10-person company comes down with cancer, that 
changes the entire dynamics of what kind of premiums, what kind 
of costs you're going to have for your insurance policies.
    Mr. Chairman, I think it is important for us to understand 
what the problems facing small and medium-sized businesses are 
today. I think what is even more important is that you and I 
who are on the committee, this committee that wrote the 
Affordable Care Act--God knows how many hearings we had on 
that, right, and how many meetings we had on that. The one 
simple question we forgot to ask for a reason is: Why are we 
the only country, major country on Earth, that doesn't 
guarantee healthcare for all people, and what can we learn from 
those other countries?
    In the United States today, as all of us know--the chairman 
and I will disagree, I'm sure--the Affordable Care Act has had 
some modest gains in providing insurance for millions more 
people; doing away with the obscenity of pre-existing 
conditions; making healthcare available to younger people on 
their parents' policies, et cetera.
    But despite the gains of the Affordable Care Act, we still 
have 35 million Americans who have no health insurance. Even 
more significant, I think, is that we have millions more people 
who are underinsured with high deductibles and high copayments. 
How does that impact the health of people?
    If I have a $5,000 deductible, as is not uncommon, and I 
get sick, but I don't have the money, I'm not going to go to 
the doctor. Four months later, when I'm really sick, and I go 
crawling into the doctor's office, what will the doctor say? 
``Why weren't you here when you were sick?'' And I say, ``Well, 
I couldn't afford the deductible,'' and he says, ``I'm sending 
you to the hospital.'' If maybe I had come in 4 months earlier, 
I would not have to go to the hospital.
    I think you have a system which has 35 million uninsured, 
more than that underinsured, and here's the kick. For all of 
that, we end up spending far, far more per capita on healthcare 
as do the people of any other country--close to double, not 
quite double, but far, far more.
    You're a businessman, Mr. Chairman. Do we get good value 
for what we're spending? We're spending a fortune. Do we get 
good value? Are you going to sit here and tell me--which you're 
not--that all of our people have health insurance? No, they 
don't.
    Is our life expectancy as high as many other countries? 
Well, it's not. Is our infant mortality rate higher? Yes, it 
is. We do well in some diseases. We treat some diseases very 
well. Some diseases we don't treat particularly well.
    If we are spending all of this huge amount of money, I 
think the end result is that we're not getting good value for 
what we are spending. What good value means is that everybody 
in America has quality healthcare as a right, and we do it in a 
cost effective way.
    What is really significant is that we take that burden off 
of the backs of small business people and, by the way, millions 
of employees, Mr. Chairman, who stay at their jobs, not because 
they really enjoy their jobs, but who stay at their jobs 
because that job may provide good health insurance for them and 
their kids. That is not a good way to grow an economy. You want 
people to gravitate to the kind of work which they enjoy, where 
they feel passionate about it, and not stay on a job simply 
because they get good healthcare.
    I'm reminded that some years ago--you may have read the 
article--some fellow, I think, in his 50s, who rejoined the 
military--had been in the military and was out--rejoined. 
Somebody said, ``Well, why are you going back to the military 
at the age of 50 or something?'' He said, ``Well, my wife has 
breast cancer. That's the only way that I can get treatment for 
her.''
    That really should not be the kind of healthcare system 
that we have. I think the best thing that we can do for small 
and medium-sized businesses is take the burden of an enormously 
expensive and complicated system off of their backs, allow them 
to go out and do their businesses, whether it's selling shoes 
or whatever it is, and focus on that business rather than 
getting mired down in the complexities and the cost of health 
insurance.
    That is why I very strongly believe that the United States 
should join every other major industrialized country with a 
national healthcare program. In my view, it should be a 
Medicare for all, a single payer system.
    With that, Mr. Chairman, I thank you very much for holding 
this hearing.
    Senator Enzi. Thank you.
    As I promised, now we'll go to our guests at this 
roundtable, and we'll just go from left to right. You may make 
a few comments, and if somebody wants to comment on the 
comments, stand your card up, and we can do that. Hopefully, 
we'll have about 3 to 5 minutes from each of you first, and 
then get into a discussion.
    Another thing that happens with a roundtable, and 
particularly ones we hold on a Monday, is that a lot of the 
people will have additional questions based on the testimony 
that you provided and also things that their staff people will 
report to them based on what happens here today. I'm hoping 
that you'll be willing to answer those questions, too, to 
provide us with additional information, which then will be 
circulated to all the members of the committee. Again, thank 
you for being here.
    Mr. Harte.

    STATEMENT OF THOMAS M. HARTE, OWNER, LANDMARK BENEFITS, 
                         HAMPSTEAD, NH

    Mr. Harte. Senator Enzi, Senator Sanders, members of the 
committee, thank you so much for the opportunity to be here 
today. I look at this as a unique privilege for myself, my 
company, the professionals all over the country, in having an 
opportunity to talk about the challenges that we have in health 
insurance across the country.
    What's interesting with Senator Sanders' comments is I 
share his frustration. I share your frustration, Senator Enzi. 
We've met before. We've talked about these challenges. The fact 
is that small employers across the country are paying premiums 
that are way too high. It's a reflection on the cost of 
healthcare.
    People always are going after--and, quite frankly, 
healthcare reform went after health insurance as the issue. 
When you really think about it, if you think about medical loss 
ratio as one easy example, if 80 percent to 85 percent of our 
premium dollars are going to the cost of healthcare, shouldn't 
our conversations be really more about healthcare, so we treat 
the cause, not the symptom?
    Senator Enzi, I represent about 100,000 agents and brokers 
across the country. I also represent 25 individuals who I 
insure back home in small businesses, like mom and pop stores, 
colleges, healthcare, local stores. We do it every single day.
    I've been in this business for 25 years. I've heard all the 
stories. I've seen people canceled for health insurance. I've 
seen people subject to preexisting conditions. The market is 
not perfect.
    What I hope I can share with you today and members of the 
committee and my colleagues with the opportunity here today is 
what are the real challenges that Americans are facing with 
regard to their health insurance? Why are their premiums 
increasing so significantly? Why is the shop exchange not 
working? It's a great idea, but it's just not working.
    What is the issue with migrating groups of 51 to 100 over 
into the small group marketplace, and what kind of profound 
effects will that have on those businesses and their economic 
viability? Senator Sanders is right that we are at an 
international disadvantage when it comes to the cost of our 
healthcare.
    That's really what I want the conversation to start going 
toward, so that when you look at competition in the United 
States of America, there's competition with health insurance 
companies, but there's very little competition among 
healthcare.
    What I want to do and, hopefully, convey to you today is to 
think about--well, look at the State of New Hampshire. In the 
State of New Hampshire, a CT scan of your head from the least 
expensive facility to the most expensive facility is 446 
percent different. The consumer doesn't know that. We need to 
fix that problem so that we can reduce the long-term cost of 
healthcare.
    Again, I sincerely appreciate the opportunity to be here 
today, and I look forward to your questions, Senator Enzi.
    [The prepared statement of Mr. Harte follows:]
                 Prepared Statement of Thomas M. Harte
    Good afternoon. My name is Tom Harte and I am the president of 
Landmark Benefits Inc.; located in Hampstead, NH. I started my small 
business in 1997 and it has become one of the largest independent 
employee benefit companies in New Hampshire. Today, my company provides 
services to over 300 corporate clients and the majority of them are 
small to mid-sized business owners. My primary goal for my clients is 
to provide innovative solutions that emphasize both quality and 
healthcare cost containment.
    I am proud to be here today on behalf of my professional 
association, the National Association of Health Underwriters (NAHU), 
which represents approximately 100,000 health insurance agents, 
brokers, general agents, consultants and other employee benefit 
specialists nationally. Just last week, I completed 6 years of service 
as a member of our national Board of Trustees, including serving as the 
NAHU's national president for 2013-14. As an association member engaged 
on the national level since 1996, I know thousands of brokers from all 
over the United States who serve small businesses with the health 
insurance challenges. Not only did I consult with my own clients about 
their most critical challenges and opportunities with small group 
coverage that they have asked me to communicate at today's Roundtable, 
but I also reached out to my colleagues nationwide so that I could 
share their message today.
    As requested, I have focused my remarks on three topics of greatest 
interest to the subcommittee:

    (1) Status of the small group health insurance market today,
    (2) Tools, resources, and options available to small employers, and
    (3) What is working and not working for small employers, and the 
policy ideas my NAHU colleagues and I have that could improve the small 
group health insurance market for consumers.

    It is my and NAHU's hope that now, 5 years into the implementation 
of the Patient Protection and Affordable Care Act (PPACA), that 
Congress and President Obama will come together with bipartisan 
solutions to improve the outcomes of ACA and resolve many of the 
unintended consequences that are making coverage more expensive and 
creating burdens for health insurance consumers.
    The Status of Today's Health Insurance Marketplace for Small 
Business Owners and Their Employees. As a benefit broker from southern 
New Hampshire, virtually all of my clients and my professional 
experience are within New England. However, thanks to my resources from 
NAHU and my colleagues from across the country, I hope I can 
effectively communicate the options small business owners in other 
States now have available.
    Currently the small employer marketplace is defined as employers 
with between 1 to 50 ``eligible'' employees for coverage. Every 
employer is different and, of course, many of my clients offer very 
different benefit options. However, my clients in the small employer 
market always purchase fully insured coverage and, in New Hampshire, we 
are able to provide four carrier options, of which two of these plans 
comprise over 95 percent of the small business market.
    One option for small employers is the SHOP exchange and has four 
provider options with a total of 18 plan choices (5 Bronze, 7 Silver, 5 
Gold, and 1 Platinum) and many of these plans have limited networks--as 
a result, many that enroll on the SHOP will be forced to lose their 
doctor. Most of the small employers I represent purchase ``silver level 
plans'' for their employees and have an employer contribution of 
between 50 percent and 80 percent of the employee and dependent 
premium. In New Hampshire, our typical health plan design provides a 
$3,000 deductible with office co-pays of $25 for primary care and $50 
for specialist and a prescription benefit of varying out-of-pocket 
expense depending on the tier (generic, preferred brand, and brand 
name).
    For the types of plans that I described, the total monthly premium 
for our clients will vary considerably. In recent health plan renewals, 
our small employer clients have been faced with renewals of as high as 
46.60 percent with monthly premiums for a single employee as high as 
$726 and $2,168 for a family.

 
----------------------------------------------------------------------------------------------------------------
                                                                                                      Rate Adj.
        Client Location          Enrolled      Deductible       Renewal Single     Renewal Family   [In percent]
----------------------------------------------------------------------------------------------------------------
Merrimack, NH (9.1)............       51   $3,000 to $4,000.  $601 to $688       $1,835 to $2,099.        23.32
                                                               (tiered).
Wrentham, MA (7.1).............        8   $500.............  $760.............  $2,168...........         7.95
Salem, NH (7.1)................        5   $2,000...........  $297 to $573       none.............         3.46
                                                               (list bill).
Lawrence, MA (7.1).............       36   $1,500...........  $550.............  $1,569...........        12.45
Berwick, ME (8.1)..............        3   $2,500...........  $931.............  $2,795...........        21.66
Bedford, NH (6.1)..............       29   $4,000...........  $778.............  $2,296...........        46.60
Derry, NH (6.1)................       38   $3,000...........  $585.............  $1,781...........        10.84
Chelsea, MA (5.1)..............        2   $2,000...........  $639 to $726.....  $1,823 to $2,070.        11.92
Derry, NH (6.1)................       81   $4,000...........  $540.............  $1,756...........        19.50
----------------------------------------------------------------------------------------------------------------

    An unintended consequence of the ACA, with exception of certain 
State statutes (e.g., Massachusetts) or the allowed ``Grandmother'' 
transaction, which varies by State, is that carriers are often not able 
to present small employers with a ``composite rate'' for health plan 
premiums. As a result, the small employer now has to adjust for the 
fact that every single employee and dependent has a separate and 
varying monthly health insurance coverage premium based on their age.
    Additionally, small employers are now challenged with economic 
impact with the hiring of new employees and the significant variance of 
health insurance premiums of one employee versus another. By example, 
if my company elected to have a ``NON-Grandmothered'' plan for our 
health plan, the rate differential for one employee to another would be 
as high as a 300 percent and thousands of dollars in additional 
expense.

 
------------------------------------------------------------------------
                                                               Increase
          Single, Age 25            Single, Age     Annual        (In
                                         60       Difference   percent)
------------------------------------------------------------------------
$385.57...........................    $1,046.44    $7,930.44        273
------------------------------------------------------------------------


 
------------------------------------------------------------------------
                                    Family, Age                Increase
   Family, Age 30, 30, 6, and 4     55, 24, and     Annual        (In
                                         23       Difference   percent)
------------------------------------------------------------------------
$1,364.92.........................    $2,490.75   $24,768.26        183
------------------------------------------------------------------------


    While the pricing of coverage varies significantly by State, or 
even within geographic areas of particular States, my NAHU colleagues 
indicate that the plan design options and available carrier choices are 
becoming more and more limited. State-by-State pricing varies not only 
due to medical care cost variations by State and region but also 
because health reform implementation has varied by State. Some States 
still allow small groups to maintain plans that do not include all of 
the ACA reforms and related costs via ``grandmothered'' plans. Other 
States have essentially required small employers to drop the coverage 
they had before and purchase plans that include all of the ACA-related 
changes and their associated costs by phasing out or never allowing 
``grandmothering.'' When employers in the States with widespread 
``grandmothering'' are eventually forced to shift to post-ACA plan 
designs, then their rate increases will be significant.
    The marketplace I just described is the small group market as it 
exists right now. Today, employers with more than 51 employees have 
significantly different coverage options available to them as they are 
considered ``large groups'' for health coverage purposes. These 
employers are not bound by the age rating or composite rating 
restrictions we see in today's small group market and their benefit 
design options and associated price points are much more flexible than 
in the small group market. Some will elect to self-fund, that is to pay 
their own claims, but most prefer the security of a fully insured 
health plan. These employers also have more benefit from the 
implementation of meaningful wellness programs and the incorporation of 
innovative and cost-saving benefit designs. Although the rates vary 
widely for employers in this market, those employers that have a 
deliberate focus on having an impact on the health plan utilization 
will generally have lower premiums compared to employers that do not. 
As the employee benefit broker for these companies; we have deployed 
nutrition, exercise, and health challenge programs that have allowed 
for the sustainability of premiums for many corporations. With a 
migration to the small group market, the benefit these employers 
receive today with reduced premiums will be lost.
    My colleagues and I are very concerned about the planned expansion 
of the small group market in 2016 to employers with 100 employees or 
less. We anticipate this expansion will result in clients of 51 to 100 
employees receiving significant premium increases in 2016. Furthermore, 
these clients will not be able to keep the plan OR the plan options 
they have today and, in some cases, their current health plan may not 
serve the small group market. They will also have to adapt their plans 
to the ``metal plan'' design options, which means that their covered 
services may change and be forced to either reduce benefit offerings or 
increase them to meet the actuarial values tied to the metal plans.
    For example, an employer with a plan actuarial value today of 76 
percent would have to either reduce coverage to a 70 percent silver 
plan or raise it to an 80 percent gold in 2016. As you would expect, 
there are coverage and cost consequences to either option. These 
employers will have to follow the age rating requirements and will lose 
the ability to receive a true composite rate in most circumstances, so 
their pricing for employee premium cost-sharing will need to change 
dramatically. Furthermore, by forcing these employers into the small 
group market they will lose some of their flexibility to create 
meaningful wellness, cost-containment, and quality components within 
their plan offerings. Finally, this employer segment will have to 
follow the employer mandate in 2016, meaning that these smaller but 
vibrant companies that drive local economies will be the only group of 
employers subject to both the employer responsibility and reporting 
requirements and all of the small group reform requirements and 
associated costs. These are significant changes in a market that is 
exceptionally price sensitive and least able to effectively manage the 
new compliance requirements.
                 tools and options for small employers
    The most important tool any employer has in the management of their 
health plan is a health insurance agent or broker. That's why, 
nationwide, more than 90 percent of small businesses rely on brokers 
and, according to a Society for Human Resources Management (SHRM), 78 
percent look to their broker as their No. 1 source of health reform 
information. Agents and brokers support their small business clients in 
choosing and making the most of coverage options by providing 
assistance, trusted advice and service. Some of the services that I and 
my colleagues provide for our small employer clients include:

     Comprehensive wellness programming to improve the health 
and wellness of the employees and their dependents.
     Deploy health care cost transparency tools to educate the 
employees of the wide variance of cost between health care providers.
     Assist employers with the management to the increased 
complexity of compliance.
     Manage enrollments, terminations, and COBRA process.
     Negotiate renewal rates and identify items that should be 
considered by carriers when determining renewal premiums (i.e., 
turnover of personnel, addition of new hires, etc.).
     Recommend healthcare financing options best suited for the 
client (i.e., fully insured, self-funded, health reimbursement 
arrangements, flexible spending accounts, health savings accounts).
     Provide online and written communication for plan 
administration.
     Advise about new and pending legislation, new plan 
designs, and premium changes.
     Assist clients with claim issues and advocate on their 
behalf.
     Analyze the performance of the medical plan and identify 
key areas of utilization.
     Assist clients with requests to doctors and hospitals to 
improve health care outcomes.
     Assist employee family members with the selection of 
coverage.
     Meet with employers/employees to explain benefits, plan 
designs, and optional coverage.
     Assist the employer in selecting the appropriate plan(s) 
that best meets the employer and employee objectives and goals.
     Assist employers with billing issues.
     Provide or assist with employee Web sites to facilitate 
access to plan information.
     Research and advise on financial viability, credibility, 
and value of various insurance companies and plan offerings.

    Employers of every size rely heavily on agents and brokers for 
advice and assistance. The health insurance marketplace has become so 
complicated with changes in legislation, plan design and benefit 
offerings that my colleagues have become an invaluable resource. 
Whether the large pizza chain in Boston, the colleges we represent in 
New Hampshire, the manufacturing facility in Nashua, or the 
construction company in Maine--employers don't have the resources or 
expertise to take this task on by themselves.
               small group market policy recommendations
    We all have a stake in a having a functioning, viable health 
insurance marketplace for small employers. While the ACA has brought 
many changes and market resources to consumers and employers, I am 
concerned about policies threatening the small group's viability that 
could lead to its erosion. The membership of the National Association 
of Health Underwriters feel that the following policy changes would 
have a significant impact on improving the cost and coverage options 
available today for our Nation's small employers and their employees:

     Passage of the bipartisan S. 1661 to remove agent and 
broker commissions from the medical loss ratio calculation in the small 
and individual health insurance markets, to ensure small business 
access to agent and broker services and to economically help the 
hundreds of thousands of agent small business owners nationwide.
     Restoration of a state's ability to set its small group 
market size at 1-50 employees.
     Efforts to reduce the new tax burdens on small employers 
and their employees, including the new national health insurance 
premium tax that adds more $500 a year to the average premium for a 
small group employee and only affects the fully insured marketplace and 
the coming excise tax.
     A repeal of the employer mandate, or failing that, 
establishing the eligibility threshold at 101 or more employees and a 
simplification of the eligibility criteria so that employers cannot be 
subject to both the small group market reforms and costs and the 
mandate requirement at the same time.
     Allowing employers to set the definition of a full-time 
employee as one that works 40 or more hours a week for health coverage 
purposes.
     Legislation which allows States to increase the law's age 
rating bands from the current 3 to 1 spread to bands that more closely 
resembles the natural breakdown of age and meet the needs of a 
particular state. If a state does not set its own bands, the default 
should be 5 to 1.
     Restoration of the ability of health insurance carriers to 
issue employers a composite rate for employee coverage, just as they 
did prior to the ACA
     Preservation of the law's risk-adjustment mechanisms 
(often referred to as ``The Three Rs'') since they are crucial to 
preserving long-term private insurance market stability.
     Reviewing the essential benefit and other coverage 
requirements to ensure that they allow individuals and employers the 
opportunity to buy affordable coverage.
     Improvements to the SHOP exchange and the small business 
tax credit to make SHOP a more viable coverage option for small 
employers and to provide more small businesses with free-market 
purchasing assistance.

    In closing, I would like to thank Chairman Enzi, Ranking Member 
Sanders and all of the members of the subcommittee for the amazing 
opportunity to share information about the opportunities and challenges 
small business owners like me and my clients are having in today's 
health insurance marketplace. If you have any questions or need more 
information, please do not hesitate to contact me at either (603) 329-
4535 or [email protected].

    Senator Enzi. Thank you.
    Mr. Scott.

STATEMENT OF JAMES G. SCOTT, OWNER, APPLIED POLICY, ALEXANDRIA, 
                               VA

    Mr. Scott. Senator Enzi, Ranking Member Sanders, and 
members of the committee, thanks for the opportunity to 
participate in today's roundtable discussion. Today, I'm here 
in my capacity as a small business owner, but I also work on 
health policy.
    As you mentioned, Senator, in 2009, I founded Applied 
Policy to help healthcare organizations navigate the Centers 
for Medicare and Medicaid Services. When I started Applied 
Policy, my biggest worry was whether I would generate enough 
income to feed my family. My second biggest worry was how I 
would find health insurance for myself and my family, because I 
had always relied on my employer to provide that coverage.
    As a health policy consulting firm, I believe we need to 
walk the walk. We work to encourage healthy lifestyles among 
our employees, and we also want to provide good health 
insurance. As Applied Policy, we have to make sure that all our 
employees have access to high-quality health insurance, and 
that was the first benefit we added.
    To do this as a small business, like you mentioned, you 
have to wash the windows and update your website and all that 
kind of thing nowadays. I needed outside help, so I relied on 
our insurance broker to help us compare a number of options and 
select a range of options for our employees.
    We decided that, as a health policy consulting firm, I 
should ensure that everybody that worked at Applied Policy had 
health insurance. We paid the full cost of the HMO option so 
everybody had access to a zero premium plan, and we allowed 
them to provide that premium subsidy toward other options that 
we provided.
    By 2014, there were seven of us, and six of us have chosen 
health insurance options offered by Applied Policy, and one 
retains their spouse's coverage. That year, we received two 
checks from our carrier because of the medical loss ratio. One 
was for 36 cents, and the other was for 12 cents. Those refund 
checks were accompanied by a stern letter directing us to 
distribute these funds equitably among our employees. I gave 
them each a dime.
    In 2014, when it came time for us to renew our plans for 
2015, I told our broker that we were happy with what we had. We 
just wanted to renew. They said that now our plans were 
designated as platinum plans, and the premium had increased by 
40 percent. The HMO option that we had based our subsidy 
calculation on increased by 48 percent. The year before that, 
we had also seen double digit increases.
    Our desire to give a premium subsidy to each plan enrollee 
has been affected by the new member-level billing-premium 
calculation requirements. Instead of being able to have an 
office-wide meeting and say,

          ``Look, these are our health insurance policy 
        options. Here's our contribution, and here's the 
        options you have to choose from,''

our broker has to have seven individual conversations because 
of the age rating, and the cost of plans varies widely between 
the younger and older employees.
    Generally, we don't discuss the ages of staff at work, and 
I believe compensation should be tied to the work the employee 
does and not how old they are. However, this new system 
requires us to tie compensation to age, at least as far as our 
health insurance benefits go.
    We realigned our plan options, and we took advantage of 
some of the new wellness options, and we continue to provide 
employees with a zero dollar plan. I've changed my family 
dental and vision coverage to coverage for my wife and I, 
because now, pediatric vision and dental is embedded in our 
medical plan. We continue to be concerned about what levels of 
increase we are going to see next year and how we can manage 
the unpredictable changes in benefits and rates from year to 
year.
    With those comments, I'd be happy to answer any questions 
you have.
    [The prepared statement of Mr. Scott follows:]
                  Prepared Statement of James G. Scott
    Chairman Enzi, Ranking Member Sanders and members of the committee: 
Thank you for the opportunity to participate in this roundtable 
discussion regarding small business health care challenges and 
opportunities.
    I am here today in my capacity as a small business owner, but I 
also work on health policy. In 2009, I founded Applied Policy to help 
health care companies, including providers, manufacturers, suppliers, 
insurers, trade associations and specialty societies navigate the 
Centers for Medicare & Medicaid Services. We are not lobbyists, rather, 
we take our clients concerns into account, explain the opportunities 
and threats posed by new legislation and current and proposed changes 
to regulations that apply to those concerns. We then work with them to 
find solutions that not only benefit the client, but also foster a 
government that serves the people as intended.
    When I started Applied Policy, my biggest worry was whether it 
would generate enough income to feed my family. My second biggest worry 
was how I would find health insurance for my family because I had 
always relied on my employer to provide that coverage.
    When I first hung out my shingle, I had to buy health insurance for 
myself and family and go through the underwriting process. Fortunately, 
I worked with an insurance broker who helped us navigate the process 
and we were able to secure good coverage. After completing that 
process, I realized why that process caused so much angst among others 
and how we were fortunate to get a good result.
    As I began to hire staff, I had to consider not only what salaries 
I would offer, but also what benefits highly qualified staff would 
expect. Moreover, working as a health policy consulting firm, I felt 
that Applied Policy should make sure all its employees had access to 
good health insurance. The first benefit I tried to add was health 
insurance.
    The first person I hired was in 2010 and the Affordable Care Act 
had just passed and allowed all individuals under age 26 to remain on 
their parents' health insurance plan. The first person I hired was 
under age 26 and chose to stay on her parents' insurance. The 
implications of this were that I did not yet meet the ``group'' 
criteria and had to maintain my individual insurance at underwritten 
rates until I hired an employee willing to sign up for a group health 
insurance policy.
    Then, I hired my second employee. Our insurance broker helped me 
compare a number of options and select three plan options: an HMO; a 
point-of-service (POS) plan; and a PPO. Applied Policy decided to pay a 
larger subsidy than the law required so its employees could have access 
to a $0 premium plan. Therefore, I paid the full cost of individual 
coverage for the HMO and allowed the employee to elect to have 
additional funds withheld from their paycheck to upgrade to the POS or 
PPO options. We also provided optional vision and dental insurance.
    As we added more staff, Applied Policy continued its policy to 
provide its employees with access to a $0 plan. By 2014, there were 
seven of us, with five electing one of our plans and the other two 
choosing to remain on other health care insurance through their spouse 
or parents.
    That year, Applied Policy received two checks from our carrier 
because of the Medical Loss Ratio calculation. One was for 36 cents and 
the other was for 12 cents. Stern instructions accompanied the checks 
stating the law required Applied Policy to share the funds with our 
employees. Therefore, I gave each of the plan enrollees a dime.
    In July 2014, when it came time for us to renew our plans for 2015, 
I told our broker that we would like to keep the same plans as we 
currently had. She informed us that the plans had been recently 
designated as ``Platinum Plans'' and the insurance premiums increased 
by 40 percent. The HMO option that we had based our subsidy calculation 
on increased by 48 percent. The year before, we had also seen double-
digit increases in our rates.
    Our desire to give a premium subsidy to each plan enrollee 
sufficient to enroll in a $0 premium plan was affected by the new age-
rating requirements. Instead of being able to have an office-wide 
meeting, explain the health insurance options, show the 2015 rates and 
Applied Policy's contribution toward them, our broker had to have seven 
individual conversations. This is because the cost of the plans varies 
widely between young and older subscribers, and results in a greater 
premium subsidy the older the employee is. We do not discuss the ages 
of our staff at work and I believe compensation should be tied to the 
work the employee does, not how old they are. However, the age-rating 
system forced us to tie compensation to age, at least for our health 
insurance benefits.
    We realigned our plan options, taking advantage of some of the new 
wellness options, and continue to provide employees with access to a $0 
premium plan, but I have changed my family vision and dental coverage 
to coverage just for my wife and I, since pediatric vision and dental 
coverage is now included in our health insurance plan. I have not been 
able to determine whether the 40 percent increase was the result of 
additional benefits being required by law, the new rating rules, an 
opportunistic rate hike by the insurer, or a combination of all three.
    With that as background, I would like to answer the questions you 
provided to me before this roundtable:

    What is the current status of the health insurance market for small 
businesses, specifically plan options and costs in the small group 
market?

    The current status is uncertain. Small employers are receiving 
mixed messages regarding what a ``good'' employer should do. Am I 
expected to continue to make employer-sponsored coverage available to 
its employees, should I use the SHOP exchange to make coverage 
available to their employees, individuals should obtain their own 
coverage through the individual Exchanges, or should I be able to do 
whatever I feel is best for my business?
    In addition, the changes in rates are unpredictable from year-to-
year, and one major aspect of running a business is to have recurring 
expenses like health insurance premiums be predictable.
    I get the feeling that the rules are being developed with the 
assumption that small businesses do not want to provide health 
insurance benefits to their employees or are aiming toward the minimum 
requirements.

    What tools and options are available and useful for small employers 
to offer some assistance to their employees?

    Our insurance broker has been an invaluable resource. In addition 
to helping us renew our plans and analyze options that offer us a 
robust provider network, a good benefit package and the best value in 
terms of premiums and cost-sharing, she helps us identify and comply 
with legal requirements like the section 125 plan, helps us welcome on-
board new employees, and answers questions about providers, benefits 
and cost-sharing for my employees.

    What has worked, what hasn't worked and what policy recommendations 
do you have for the committee?

    I encourage the committee to recognize in its policymaking that 
small businesses are all different. Some want to provide health 
insurance to their employees that exceeds Federal standards and others 
will take a different approach.
    My employees want access to providers, a good benefit package and 
fair premiums and cost-sharing. As an employer, I want to provide that 
to them. More could be done to help employers and employees compare the 
total costs of coverage rather than choose the lowest premium plan and 
be surprised by the high out-of-pocket expenses when they visit the 
doctor.
    Please keep in mind that our employees want stable and predictable 
coverage so they can keep their doctor from year-to-year, become 
comfortable with benefits and the cost-sharing obligations, and have 
confidence that if they have to go to the hospital, their insurance 
coverage will help pay the costs. I want my employees to have that kind 
of coverage so that they can focus on work, get healthcare services 
when they need to, and not worry about their health insurance coverage.
    Thank you again for the opportunity to participate in this 
roundtable. I would be happy to answer your questions.

    Senator Enzi. Thank you.
    Mr. Conklin.

    STATEMENT OF J. KELLY CONKLIN, OWNER, FOLEY WAITE LLC, 
                         KENILWORTH, NJ

    Mr. Conklin. Thank you, Senator Enzi, and I too appreciate 
the opportunity to be heard here today. I'm here representing 
not only my small business but my colleagues in the Main Street 
Alliance, both the national organization and the New Jersey 
organization.
    Let me start by saying that I, with the utmost affirmation, 
support the Affordable Care Act. I do that because I think it 
provides fundamental cornerstones for establishing a fair and 
reasonable standard for healthcare insurance, and through that 
establishes the doorway for access to health insurance. Without 
those standards--and I'll probably reiterate this several times 
today--it's impossible to know, from the perspective of a small 
business owner, what you're buying.
    I've said before that in order to make an informed choice 
in purchasing health insurance, you need to be an actuarial to 
understand what the real risks are. You need to be a doctor to 
understand what the formularies provide. It wouldn't be bad to 
be an attorney with a background in business contract law and, 
specifically, health. To top it off, it might not be a bad idea 
to be Nostradamus so you could predict the future and actually 
know what you needed to buy.
    To imply that I, as a cabinet maker from New Jersey, can 
make an informed decision for myself and my employees about 
what health insurance is best for them is a stretch. 
Consequently, what it means to me is that--I'm lucky because I 
live in New Jersey and work in New Jersey, and we had 
protections built into New Jersey insurance law. Things like 
essential health benefits were established before the 
Affordable Care Act.
    Our experience has been as the Affordable Care Act came 
into place, aside from the significant adjustment that occurred 
with age banding--and I have several older employees, and that 
was kind of a shock--we've experienced between 10 percent and 
15 percent increases in our premiums. A reasonable person and I 
think a sound businessman would say, ``Wow, that's 
significant,'' and I wouldn't argue with them. We've absorbed 
increases in the past of 38 percent and 40 percent.
    One year when we tried to maintain our plan, we got a 138 
percent increase from Aetna insurance. By the way, we're back 
on Aetna, and Aetna, this year, provided a plan--again, I can't 
speak specifically to the quality per se of the plan, but we 
were able to, with our insurance agent, buy a plan that was 2 
percent less in premium costs and actually reduced deductibles 
by $500.
    It came at a cost--$6,000 a year total exposure because of 
coinsurance for an individual and $12,000 a year as a potential 
exposure for families. That doesn't sound like a great plan to 
me if you're unlucky. It's the plan that we can afford, and 
it's the plan that provides a window or a doorway into care 
that might, as Senator Sanders enumerated earlier, avoid a 
catastrophic event for a family.
    Having said that, I'm going to skip right to the bottom 
line and say that access to care, in my view and over my years 
of experience in purchasing healthcare and paying attention to 
this issue, is the key. We have to ask ourselves today and 
every day going forward what it is we're trying to accomplish. 
Are we actually trying to accomplish affordable, reliable, 
accessible healthcare for the American people? Or is there an 
alternative at work here, an alternative motivation that we 
don't understand?
    Personally, I think at some point about 30 years ago, we 
made a decision to monetize healthcare. When we did that, we 
changed the entire relationship between doctors and patients, 
insurance companies, premium buyers, the whole deal, and we did 
it without really understanding long-term what the consequences 
are.
    Now we know what the consequences are. The consequences are 
a very high cost for what is an inefficient--I won't even use 
the word, system--approach to delivering healthcare to the 
American people that results in poor quality outcomes and 
higher costs. Until we come up with a way--I don't know whether 
I agree with Senator Sanders entirely that it's a single payer 
system.
    Until we all agree that every American should have a card 
in their pocketbook or wallet that gives them access to a 
physician when they need a physician wherever they need a 
physician, my employees and I are going to spend too much for 
healthcare.
    [The prepared statement of Mr. Conklin follows:]
                 Prepared Statement of J. Kelly Conklin
    Chairman Enzi and Senator Sanders, thank you for the opportunity to 
participate in today's roundtable to discuss the experience of small 
business owners purchasing coverage in the small business health 
insurance market. My colleagues and I at the Main Street Alliance, a 
national network of small business owners, proudly supported the 
passage of the Affordable Care Act. Today, I am eager not only to 
discuss how the law currently works for small business owners, but also 
to discuss how the law should be developed to ensure that it works for 
all small business owners.

    What is the current status of the health insurance market for small 
businesses; specifically plan options and costs in the small group 
market?

    Let me start by reiterating that I am a strong supporter of the 
Affordable Care Act and believe that the ACA is an important and 
crucial step forward for millions of Americans in gaining access to 
affordable healthcare coverage. Today, I'm here to discuss the ways in 
which I believe that the ACA should be improved to strengthen the 
program for small business owners.
    Small business owners' experience in the small business market 
varies from State to State. From our perspective as a New Jersey 
company, we purchase health insurance in the small group market as we 
always have, through an agent. There is little appreciable difference 
between now and before the ACA in terms of options. There are many 
plans available to choose from and there is the same confusing, arcane 
language in the policy documents and in how the various plans are 
presented. That makes meaningful comparison among the plans almost 
impossible beyond the most basic considerations: premium cost, co-pays, 
deductibles and maximum annual out-of-pocket costs. As a small company 
with tight margins the first consideration is always premium cost.
    Premium Increases. Premium increases over the previous 2 renewals, 
2013/2014 have been in the neighborhood of 10 to 15 percent. That said 
this year's is down about 2 percent and we reduced deductibles for the 
individual to 2,000 from 2,500. That did come with an annual increase 
in total maximum out-of-pocket from 5,000 to 6,000 per individual and 
12,000 per family.
    Age Banding. There was an initial ``shock'' when the new price 
schedules were implemented using age as the determinant factor of 
premium rates. In that initial adjustment we had the biggest rate 
increase in some time as a result of our older population of employees 
participating in our plan. As I recollect that was around 18 percent.
    Weak Rate Review. New Jersey does not have a strong rate review 
process nor does the Federal exchange that serves New Jersey. It would 
help consumers like me if a strong rate review policy were set in 
place. Strong rate review has helped dampen down premium increases 
elsewhere. The ACA review process is weak. It only requires insurers to 
file rates if they exceed 10 percent and then it has no enforcement. A 
rate review where the exchange could deny rates before they are used 
would be much more useful.
    Active Purchasing. Furthermore, the exchanges are not what we call 
``active purchasers.'' They do not negotiate price and quality on 
behalf of the consumers. All exchanges should be required to do this.
    Premium Aggregation. Some exchanges around the country are 
abandoning premium aggregation. This is an important tool for small 
businesses because it permits us to send premium dollars to the 
exchange and they pay the insurers. This eases the administrative 
burden. It appears to be a technology problem in some exchanges and it 
needs resources to fix it.
    Increase Competition. One other thing would help with cost--very 
robust competition. I talk to my fellow small business owners around 
the country and discover that many of the SHOP exchanges have very 
little competition. Insurance companies that offer in the individual 
market should be required to offer in the SHOP exchanges also.

    What tools and options are available and useful for small employers 
to offer some assistance to their employees?

    This is a difficult question to address. There is more information 
than ever available to anybody with enough time to investigate the 
available plans in their respective areas. In New Jersey with its high 
density, well-off population, the market is relatively rich affording 
options on the individual market that did not exist prior to the ACA 
through the exchange. Choosing a plan can be a daunting experience, 
filled with uncertainty and anxiety. Thankfully the comprehensive 
consumer protections I mentioned previously are in place to reduce the 
actual risk to individual consumers.
    Tax Credits. It would help enormously if the small business tax 
credits were available to more small businesses. Currently only those 
with under 25 employees qualify. This should be expanded to at least 
50. The salary limitations also should be increased. Small businesses 
want their employees insured and better credits would be a great help.
    Cost of Older Dependents. We recently had our oldest employee move 
to Medicare. His younger wife could no longer be covered under our 
plan. In the exchange they were able to purchase a slightly higher 
quality plan, lower deductible, lower co-pays, for about $50 more per 
month than the coverage she had under our plan. Medicare with part D 
and the additional supplements making his coverage complete, saved us 
enough in premium cost to raise his compensation to cover his 
additional out-of-pocket expenses and his wife's coverage, while saving 
us about $200 per month.

    What has worked, what hasn't worked, and what policy 
recommendations do you have for the committee?

    From my perspective, the ACA has been an incredibly important 
program for individual consumers. It's time to take the next step and 
ensure that the ACA also works for small business owners and their 
employees.
    In terms of next steps for improving the ACA, there are a number of 
things that might be done. Repeal is not one of them. Nor is a piece-
by-piece alteration of the law that will have the same effect as 
repeal. Congress must act to restore faith that changes to the ACA come 
by way of improving access to care and by means resulting in affordable 
quality health care, not political victory laps.
    Let's start with what is working. The consumer protection and 
community rating provisions of the ACA have been a success and must be 
preserved.
    Consumer Protections. New Jersey's robust consumer protections 
prior to ACA, including EHB's and no exclusion for pre-existing 
conditions, made cost increases in our market tolerable. The uniform 
consumer protection standards contained in the ACA for health insurers, 
along the lines of New Jersey's, is a critical piece of the ACA that 
cannot be tampered with. No lifetime limits and no exclusions for pre-
existing conditions are cornerstones of increased access and financial 
security and should not be altered as well. These features along with 
the MLR have had the expected effect of containing both premium 
increases and cost shifting by providers. This along with other 
features of the ACA is working to decelerate the rate of health care 
cost increases.
    Community Rating. Another critically important piece of the ACA 
that must be preserved is Community Rating. Community rating is 
enormously important to small businesses. If a little business has a 
plan and an employee gets cancer or renal disease, we need to be 
protected from disaster. We also need to be protected from the simple 
process of aging. The community rating system should be improved by 
placing stricter limits on age banding.
    Improvements to ACA. I also believe that there are some basic 
policy measures that would dramatically improve the ACA for small 
business owners.
    Tax Credits. As mentioned previously, Congress should expand the 
tax credits available to small business owners so that businesses with 
larger workforces or higher paid workers have access to those 
incentives. Currently these incentives are only available to business 
owners who employ 25 or fewer employees. This should be expanded to at 
least 50 employees. The salary limitations should be increased. Small 
business owners want their employees covered and better tax credits 
would help.
    Require SHOP Participation. Insurers who participate in the 
individual market in a given State should also be required to 
participate in the SHOP exchange in that State. This would ensure much 
needed competition in the exchanges.
    Rate Review. Congress and the States should implement stronger rate 
review, including ``prior approval'' policies.
    Technology. More investment should be directed toward technological 
improvement in the SHOP exchange market places. This should be done in 
a way that eases the administrative burden for participating small 
businesses.
    Active Purchasing. Congress should require that the exchanges 
become active purchasers who negotiate rates and quality for their 
customers. This is an important bargaining measure that ensures better 
consumer costs.
    Medicaid Expansion. I urge you to do everything in your power to 
foster the expansion of Medicaid. This program undergirds the market by 
assuring that cost shifting is reduced and many at-risk populations are 
covered. Our businesses draw their customers from the neighborhoods 
that surround them. If there are huge coverage gaps in those 
neighborhoods, we lose business. Not having Medicaid expanded is 
costing us all.
    The ACA is the first major step toward providing universal access 
to health care, an as yet unmet goal of the reform effort. As long as 
access is determined by one's ability to pay, whether at the point of 
service or in the purchase of insurance, our health care costs will 
continue to climb while quality and availability of care continues to 
decline. Voluntary charity care remains an inadequate alternative to 
mainstream access and that shortfall continues to contribute 
substantially to cost shifting and deferred care, leading to expensive 
and poor outcomes. We can do better.
    I don't live in a Magical Market Place where innovation and quality 
are always rewarded and fraud, abuse, incompetence and inefficiency are 
always weeded out. In the long run, the best way to ensure that the 
American healthcare system works for small businesses is to take the 
employer out of the health insurance provision business all together. 
Not by cutting people off, but by ensuring that everyone in America has 
access to quality care. Until every American has a card in their purse 
or wallet that guarantees access to a doctor--any doctor, anywhere, 
until emergency rooms only serve emergency patients and not emergency 
patients and the uninsured, I and my employees will pay too much for 
too little.
    Our goal must be a comprehensive, all-inclusive health care 
delivery system in the United States. We should get on with it.
    Thank you, Chairman Enzi and Senator Sanders. It has been a 
pleasure speaking with you today.

    Senator Enzi. Thank you.
    Ms. Corlette.

STATEMENT OF SABRINA CORLETTE, J.D., SENIOR RESEARCH FELLOW AND 
    PROJECT DIRECTOR, GEORGETOWN UNIVERSITY, WASHINGTON, DC

    Ms. Corlette. Thank you, Chairman Enzi. It's a real honor 
to be here today. I'm going to be very, very brief, because I 
think the questions that you provided us in advance are really 
just right to allow us to really dive into the details of this 
issue. I'll save the substance of my comments for those.
    I would just like to say, I want to thank you for having 
this roundtable. I think the moment is a timely one. It may be 
hard for some of us to believe, but we're a little bit more 
than 5 years after enactment of the Affordable Care Act. It's a 
great moment to sort of pause and sort of do a temperature 
check to see where is the small group market.
    We at the Center on Health Insurance Reforms have been 
doing some research looking at changes in the small group 
market in the wake of the Affordable Care Act, and the 
incentives for many small businesses have changed. I think 
policymakers and those that are concerned about employees and 
employers' ability to recruit and retain a healthy and 
productive workforce need to assess where we are and where 
we're going. I look forward to the discussion.
    Thank you.
    [The prepared statement of Ms. Corlette follows:]
              Prepared Statement of Sabrina Corlette, J.D.
    Chairman Enzi, Ranking Member Sanders, thank you for the 
opportunity to participate in today's roundtable discussion of issues 
confronting the small business health insurance market. The three 
questions you've asked us to discuss today can help you and your 
colleagues hone in on policies to help support small businesses' 
efforts to recruit and retain healthy and productive workers at an 
affordable cost.

    What is the current status of the health insurance market for small 
businesses, specifically plan options and costs in the small group 
market?

    For a number of years now, employer-sponsored insurance has been 
eroding, and the decline has been more pronounced among small 
businesses. Small business owners have long struggled with high and 
often volatile premium costs relative to large businesses, a lack of 
market power when negotiating premiums, and high administrative costs 
associated with covering a small number of workers. In addition, 
minimum participation requirements used by insurers to safeguard 
against adverse selection used to mean that small employers often could 
offer only one plan and had to contribute a hefty portion of employees' 
premiums in order to encourage enough employees to enroll in the plan. 
These pressures have contributed to the steady decline in the number of 
small businesses offering coverage, from 44.5 percent in 2002 to 35.2 
percent in 2012, leaving their employees disproportionately more likely 
to be uninsured compared to larger firms. Furthermore, even small 
business workers who were fortunate enough to receive insurance have 
historically had less generous coverage than their large business peers 
and have faced significantly higher deductibles and lower employer 
contributions for dependent coverage. Small employers have also been 
less likely to offer their employees a choice of insurers or plans.\1\
---------------------------------------------------------------------------
    \1\ Blavin F, Garret B, Blumberg L, Buettgens M. Monitoring the 
Impact of the Affordable Care Act on Small Employers: Literature 
Review, October 2014 (Washington, DC). Available at http://
www.urban.org/UploadedPDF/413273-Monitoring-the-Impact-of-the-
Affordable-Care-Act-on-Employers.pdf. (Derived from Medical Expenditure 
Panel Survey--Insurance Component (MEPS-IC) summary tables, AHRQ 2002-
12).
---------------------------------------------------------------------------
    The small group market provisions of the Patient Protection and 
Affordable Care Act (ACA) were designed with the goal of making it 
easier for small businesses to offer adequate and affordable coverage 
to their employees. Key pillars of the strategy included changes to 
insurance rules, which for example broadened risk pooling for small 
businesses and ensured that minimum participation requirements do not 
have to be a barrier to small firms offering coverage to their workers. 
In addition, the new ``SHOP'' marketplaces offer small businesses a 
range of group health plans, including the ability for employees to 
choose their own plan.

    What tools and options are available and useful for small employers 
to offer some assistance to their employees?

    In many ways, small employers have some of the most coverage 
options of any other group, and their options have expanded under the 
ACA. They can choose to offer coverage or not, without facing a 
penalty. They can choose whether or not to enroll in the SHOP, in a 
private exchange, or directly with an insurer. They can also decide 
whether to offer their employees a choice of plans, and, through the 
SHOP or a private exchange, set a defined contribution level.
    The ACA created new options and insurance standards in order to 
address some of the most glaring problems with small business coverage, 
including unpredictable premium increases because of changes in an 
employer group's health status, limited benefits, pre-existing 
condition benefit exclusions, and high out-of-pocket costs. Consistent 
with the changes effected for the individual market, the small group 
insurance reforms thus included new rating rules prohibiting variation 
in premiums based on health status, required minimum essential health 
benefits and first-dollar coverage of approved preventive services, 
ended limits or exclusions from plan benefits based on pre-existing 
conditions, and capped enrollees' annual out-of-pocket liability.
    In addition, insurers offering products in the small group market 
are now required to set rates using a single statewide risk pool that 
includes both healthy and sick enrollees across all of their small 
group plans in the State. Small employers can also avoid having to meet 
minimum participation and contribution thresholds if they obtain 
coverage during an open enrollment period running from November to 
December each year.
                    new options for small employers
SHOP marketplaces and tax credits
    The ACA created the Small Business Health Options Program (SHOP) to 
provide new, State-based exchanges, or marketplaces, where small 
businesses can more easily shop for health insurance.\2\ Responding to 
small business owners' concerns about their inability to give employees 
a choice of health plans,\3\ SHOPs are designed to provide an 
``employee choice'' option. As envisioned, instead of having to make a 
``one-size-fits-all'' plan decision for their employees, the employer 
sets its contribution level and lets each employee choose the plan that 
best suits his or her needs.
---------------------------------------------------------------------------
    \2\ 42 U.S.C. Sec. 18031(b)(1)(B) (2010).
    \3\ Kingsdale J, How Small-Business Health Exchanges Can Offer 
Value to Their Future Customers--And Why They Must. Health Aff 
(Millwood). 2012;31(2):275-83.
---------------------------------------------------------------------------
    With few exceptions, the SHOPs have been slow to get off the ground 
and enrollment has been low.\4\ During the first year of operation, 
only a minority of States had the technical capability to offer on-line 
enrollment, and fewer still prioritized the SHOP in their marketing and 
outreach campaigns.\5\ In addition, mandatory implementation of 
employee choice was delayed in both 2014 and 2015, resulting in uneven 
rollout of this option across States. This year, 32 States are 
providing some form of employee choice; the feature is expected to be 
available nationwide in 2016.\6\
---------------------------------------------------------------------------
    \4\ U.S. Government Accountability Office, Small Business Health 
Insurance Exchanges: Low Initial Enrollment Likely due to Multiple, 
Evolving Factors, Nov. 2014 (Washington, DC). Available at http://
www.gao.gov/assets/670/666873.pdf.
    \5\ Blumberg LJ, Rifkin S, Early 2014 Stakeholder Experiences with 
Small-Business Marketplaces in Eight States, August 2014 (Washington, 
DC). Available at http://www.urban.org/UploadedPDF/413204-Early-2014-
Stakeholder-Experiences-with-Small-Business-Marketplaces-in-Eight-
States.pdf.
    \6\ U.S. Department of Health and Human Services, Center for 
Consumer Information and Insurance Oversight, Small Business Health 
Options Program (SHOP) (Washington, DC). Available at http://
www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-
Marketplaces/2015-Transition-to-Employee-Choice-.html (accessed 
February 12, 2015); see also Dash SJ, Lucia KW, and Thomas A, 
Implementing the Affordable Care Act: State Action to Establish SHOP 
Marketplaces, March 2014 (Washington, DC). Available at http://
www.commonwealthfund.org//media/files/publications/issue-brief/2014/
mar/1735_dash_implementing_aca_state_
action_shop_marketplaces_rb.pdf.
---------------------------------------------------------------------------
    A growing number of private exchanges offer another entree into the 
market, generally allowing one-stop shopping, defined contributions and 
employee choice, much like the SHOPs.\7\ These exchanges may be run by 
insurance carriers, insurance brokers, or in some cases by employee 
benefit firms.
---------------------------------------------------------------------------
    \7\ Alvarado A, Rae M, Claxton C, Levitt L, Examining Private 
Exchange in the Employer-Sponsored Insurance Market, Sept. 2013, Kaiser 
Family Foundation (Menlo Park, CA). Available at http://kff.org/
private-insurance/report/examining-private-exchanges-in-the-employer-
sponsored-insurance-market/.
---------------------------------------------------------------------------
    The ACA also included small business premium tax credits to help 
make insurance more affordable for some very small employers with 
moderate-income workers. These tax credits are available only to 
businesses that enroll through the SHOP, and only through 2016. To 
date, few small businesses have made use of these credits, likely due 
to the narrow and complex eligibility requirements and relatively low 
credit amounts.
Non-compliant plans
    Under the ACA reforms, many small employers--and their employees--
will benefit from the new rating and benefit standards and cost-sharing 
protections. Others, particularly those with younger and healthier 
workers, may face premium increases as they are brought into a single 
risk pool that includes older and sicker workers. Several alternative 
coverage options currently enable such employers to circumvent the 
single risk pool, leaving the higher risk people who remain in the pool 
to face higher premiums than would otherwise have been the case and 
threatening the long-term viability of the small group market.
    Many small group plans are exempt from the ACA market reforms. Some 
are considered ``grandfathered'' because they were in existence before 
the law was passed in 2010 and have not made significant changes to 
benefits.\8\ Over time, the importance of grandfathered plans is 
expected to diminish as benefits and cost-sharing are inevitably 
updated. Other small group plans were granted a reprieve under a 
transitional rule that allows small employers and individuals to remain 
on the health plans in which they were enrolled before the ACA reforms 
went into effect in 2014\9\--the so-called ``grandmothered'' or 
transitional plans. Not all States implemented these transitional 
rules, and some required small employers to transition to ACA-compliant 
plans in 2014.\10\ While comprehensive data on how many small employers 
have remained on their pre-ACA plans are lacking, anecdotal evidence 
suggests a good many did.\11\ In most States, these employers will be 
permitted to hang onto their old plans until October 1, 2016 (for 
coverage extending into 2017).\12\ If, as expected, it is mainly 
employers with younger, healthier workers that are remaining in 
transitional plans, the risk pool for ACA-compliant small group plans 
and the SHOP exchanges is likely less healthy than it otherwise would 
have been, putting upward pressure on premiums for employers on these 
plans in the short term. However, as healthy groups transition off 
their pre-ACA plans, the overall risk profile of the small group market 
should stabilize.
---------------------------------------------------------------------------
    \8\ 5 C.F.R. Sec. 147.140 (2015).
    \9\ U.S. Department of Health & Human Services, Insurance Standards 
Bulletin Series--Extension of Transitional Policy through October 1, 
2016. Center for Consumer Information & Insurance Oversight, Mar. 5, 
2014. (Washington DC). Available at http://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/transition-to-compliant-policies-03-
06-2015.pdf.
    \10\ Lucia KW, Corlette S. Update: State Decisions on the Health 
Insurance Policy Cancellations Fix, Jan. 8, 2015, The Commonwealth Fund 
Blog (New York, NY). Available at http://www.commonwealthfund.org/
publications/blog/2013/nov/state-decisions-on-policy-cancellations
-fix.
    \11\ U.S. Government Accountability Office, Small Business Health 
Insurance Exchanges: Low Initial Enrollment Likely due to Multiple, 
Evolving Factors, Nov. 2014 (Washington, DC). Available at http://
www.gao.gov/assets/670/666873.pdf.
    \12\ U.S. Department of Health and Human Services, Center for 
Consumer Information and Insurance Oversight, Insurance Standards 
Bulletin Series--Extension of Transitional Policy through October 1, 
2016 (Washington, DC). Available at http://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/transition-to-compliant-policies-03-
06-2015.pdf.
---------------------------------------------------------------------------
Self-funding
    Small employers with healthy groups may also find it tempting to 
self-fund coverage, meaning that they bear the risk of employees' 
medical claims. As with the non-compliant plans, such a move exempts 
them from many of the ACA's rating and benefit reforms and could help 
lower their costs, at least initially. However, self-funding can also 
pose significant financial risks for employers and is usually 
accompanied by a reinsurance or stop-loss policy to cover unexpectedly 
large claims. Increasingly, these stop-loss policies are incorporating 
very low thresholds (or attachment points) above which claims are 
covered; self-funding employers purchasing these policies can mimic 
traditional health insurance while avoiding health insurance 
regulations. Researchers have projected that use of such low-risk stop-
loss policies can lead to large premium increases for employers 
remaining in the regulated small group market,\13\ undermining 
stability. A few States have moved forward to protect their small group 
market from the risks of self-funding, primarily through the regulation 
of very low-attachment point stop-loss coverage.
---------------------------------------------------------------------------
    \13\ Buettgens M and Blumberg LJ, Small Firm Self-Insurance Under 
the Affordable Care Act, November 2012 (Washington, DC). Available at 
http://www.commonwealthfund.org//media/files/publications/issue-brief/
2012/nov/1647_buettgens_small_firm_self_insurance_under
_aca_ib.pdf.
---------------------------------------------------------------------------
    At this time, there is limited evidence that small employers are 
transitioning to self-funding in significant numbers.\14\ However, 
employers moving off of transitional plans over the next couple of 
years may have greater incentives to self-fund. In addition, when the 
ACA's small group market reforms are extended to employer groups with 
51-100 employees, more mid-sized employers may look to self-funding as 
an option.
---------------------------------------------------------------------------
    \14\ Kaiser Family Foundation and Health Research & Educational 
Trust, 2014 Employer Health Benefits Annual Survey, September 2014. 
(Menlo Park, CA). http://files.kff.org/attachment/2014-employer-health-
benefits-survey-full-report.
---------------------------------------------------------------------------
Discontinue offering coverage
    Small employers are not subject to the ACA's employer mandate and 
some, particularly those of very small size (less than 10) or with low-
income employees, might find it advantageous to drop coverage (perhaps 
raising wages to compensate) and encourage workers to seek premium 
subsidies and enroll in a plan through the individual health insurance 
marketplaces. Evidence of this is anecdotal at this point, and 
reductions in offer rates appear to be modest so far.\15\ While a shift 
out of employer-sponsored coverage reduces employers' health-related 
costs, workers lose the benefit of pre-tax contributions to their 
premiums and would have to pay taxes on any higher wages. For lower 
income workers however, many may benefit from Federal premium and cost-
sharing subsidies.
---------------------------------------------------------------------------
    \15\ Blavin F, Shartzer A, Long SK, Holahan J, Employer-sponsored 
Insurance Continues to Remain Stable under the ACA: Findings from June 
2013 through March 2015, June 2015 (Washington, DC). Available at 
http://hrms.urban.org/briefs/Employer-Sponsored-Insurance-Continues-to-
Remain-Stable-under-the-ACA.html.

    What has worked, what hasn't worked, and what policy 
recommendations do you have for the committee?
                             what's working
    All employers, including small employers, are benefiting from the 
unprecedented slowdown in health care cost growth. Since the ACA was 
passed, we have seen the slowest growth in health care prices in 50 
years. And the three slowest years of growth in real per capita 
national health expenditures on record were 2011, 2012, and 2013. In 
employer-based coverage, the average annual family premium was 
approximately $1,800 lower in 2014 than it would have been if premium 
growth since 2010 had matched the 2000-10 average rate of growth.\16\
---------------------------------------------------------------------------
    \16\ Furman J, The Economic Benefits of the Affordable Care Act, 
White House Council of Economic Advisors Blog, April 2, 2015 
(Washington, DC). Available from: https://www.white
house.gov/blog/2015/04/02/economic-benefits-affordable-care-act.
---------------------------------------------------------------------------
    Employers--and their employees--are also benefiting from the ACA's 
prohibition on discrimination due to pre-existing conditions. No longer 
can an insurer refuse to cover the care for a new employee because he 
or she had a medical condition before being hired. Nor can those small 
employers with a higher proportion of older workers or women be charged 
a higher premium than competitors with a younger or predominantly male 
workforce. And small employers no longer have to worry that an employee 
with cancer, or a difficult pregnancy, will cause their premiums to 
spike.
    For those many small employers who have not been able to offer 
their workers coverage, they now know there is a viable, high quality 
alternative coverage option for their employees. Whether through the 
ACA's health insurance marketplaces or in States adopting the Medicaid 
expansion, many lower-wage employees may be able to find affordable 
coverage for themselves and their dependents for the first time. Even 
when they cannot afford to offer coverage to their workers, small 
business employers know that health coverage is critical to maintaining 
a healthy and productive workforce.
What is not working
    Without question, the SHOP exchanges have been slow to get off the 
ground. At this time, they are not able to provide a sufficient ``value 
add'' to convince small employers--and (more importantly) their 
brokers--that a move to a SHOP exchange is worthwhile. Premiums for the 
same plans inside and outside the SHOP are required under the ACA to be 
the same, and as noted previously, the small business tax credits are 
narrowly drawn and difficult to apply for. As a result, the SHOP has 
not been able to offer small businesses a price advantage. Perhaps even 
more challenging, the commissions for brokers inside and outside the 
SHOP are the same, yet enrolling a business in the SHOP currently takes 
more time than direct enrolling them with an insurer. As a result, 
brokers have no financial incentive to propose SHOP as an option to 
their clients.
Policy recommendations
    1. Discourage self-funding among employers with fewer than 50 
employees. Allowing healthy and younger small groups to self-fund will 
cause adverse selection and premium increases for those employers in 
the regulated small group market. Yet insurers are increasingly using 
low-attachment point stop-loss packages to entice smaller and smaller 
groups to self-fund (knowing they can dump them back into the small 
group market if their risk deteriorates). Such products make a farce 
out of the term ``self-funded.'' When a product looks, acts and 
breathes like health insurance, it should be regulated as such. 
Congress should define ``self-funding'' to exclude these low-attachment 
point products.
    2. Encourage the administration to delay implementation of the 
ACA's requirement that employer groups of 51-100 become part of the 
small group market, and commission a study of the potential benefits 
and risks of such a change. While some employer groups will undoubtedly 
benefit from the small group market insurance reforms, the most 
immediate concern is that premiums for younger, healthier groups of 
this size could face a significant premium increase. Over the longer 
term, some of these mid-sized groups could face a greater incentive to 
self-fund, leaving sicker, older groups in the traditionally regulated 
small group market. At a minimum, policymakers need better data about 
the impact of this policy change.

    Thank you Mr. Chairman, Senator Sanders and members of the 
subcommittee for the opportunity to join this discussion today.

    Senator Enzi. You were really brief.
    Ms. Corlette. I told you I'd be brief.
    Senator Enzi. Did you want to make any comments at this 
point?
    Senator Murphy. No, I don't. I'm good.
    Senator Enzi. OK. I appreciate all those comments. You've 
given me a lot to think about already. I would mention that 
Senator Sanders was referring to the World War II effort that 
changed healthcare. All salaries were set during World War II. 
Nobody could increase salaries.
    There was a little area there where they could provide a 
little different benefit for their employees, and that was in 
healthcare. There were no limits on that. At that point, the 
companies could provide healthcare and give credit for that and 
attract the employees that they wanted to attract.
    Later, we decided that was such a good idea that we'd make 
it tax deductible for the companies. That changed the face of 
healthcare at that point. For small businesses, I wish that 
healthcare were the only regulation that they had to handle. 
Several of you have mentioned the different talents that a 
person has to have as a small businessman, and there are 
continually more things that they have to worry about.
    On the issue of having single-pay, government-run 
healthcare, that had a lot more favorability before we ran into 
the little Veterans Administration problem that we had a little 
over a year ago, and we still haven't worked through that one.
    Of course, our goal would be to have portability that 
Senator Sanders mentioned so that nobody is locked into a 
business. I think if they're working for a major corporation 
that pays for their insurance, they're still kind of locked 
into that because there isn't probably a better offer out there 
anywhere. The benefits are still eliminating some of the 
flexibility that an employee might be able to have.
    As a few things of clarification that I'd like to do here 
to start with, Mr. Harte, you mentioned the 46 percent 
difference in costs. Are you referring to a need maybe to have 
costs at different medical facilities posted so that we could 
see if they change it? Could you expand on that?
    Mr. Harte. Yes. The reference I gave to you earlier--you 
can refer to the website of nhhealthcost.org, and on that 
website in the State of New Hampshire, it will publish the 
different reimbursements to each provider based upon certain 
categories of service. In my testimony, I shared with you that 
from the least expensive facility to the most expensive 
facility, for a CT scan of your head, the cost differential is 
446 percent.
    Senator Sanders' comments earlier were he was referencing a 
high deductible plan. Those people who are on a high deductible 
plan--it does them so much justice to make sure they have 
access to that information. The fact is that information has 
very little access today.
    The health insurance companies have that information. They 
know how much their providers are charging. We need to, as an 
industry, make sure that that information becomes available to 
individuals.
    In New Hampshire, we have access to that information on all 
forms of diagnostic imaging, MRIs, CT scans, PET scans, normal 
childbirth, cesarean childbirth, x-rays, labs--the list goes 
on. However, my colleagues all across the country are envious 
of New Hampshire, that we have access to some information. The 
fact is we can make a huge difference in the cost of healthcare 
if we simply made healthcare costs more transparent.
    Senator Enzi. Thank you. That's been a suggestion that 
we've had from different places, and some companies have done 
that, where they provide the amount of deductible based on 
whether people pick the average or above or below average.
    Mr. Harte. Exactly.
    Senator Enzi. If they go below average, I guess they get 
the extra money. That is one of the suggestions, to have more 
prices posted.
    Mr. Scott, you mentioned the separate meetings because of 
age. Could you expand on that a little bit more?
    Mr. Scott. Yes, Mr. Chairman. The employees in our office 
range from in their 20s to in their 50s. That the premiums are 
age rated, we had to make a decision, because when we were 
group rated, it was basically $300 a person, and the health 
insurance options cost the same if they picked the low, medium, 
or high option.
    I could tell everybody,

          ``You have $300. Shop for a plan, and that amount 
        pays the full cost of the HMO option. If you want more 
        than that, we'll withhold the additional from your 
        check and you can get a more expensive plan option.''

    The plans are a different price for every individual. On 
the low end, the premiums are still about $300. On the upper 
end, they're closer to $500, and I think maybe even a little 
bit more for the subsidy amount.
    In order to keep my promise to the employees that they'll 
have access to a zero premium plan, now I need to give them all 
a different subsidy to start with so they can actually have 
access to a zero premium plan. That's what we did.
    Senator Enzi. Thank you.
    Mr. Conklin, you mentioned monetized insurance. Could you 
give a little broader explanation of that?
    Mr. Conklin. Well, actually, Mr. Chairman, I think I said 
monetized healthcare.
    Senator Enzi. Oh, OK.
    Mr. Conklin. What I mean by that is we turned the 
relationship, the basic relationship between a physician and 
their patient, into a transaction. We all know the stories--or 
perhaps some of us are too young to know the stories--about the 
Depression, when people would walk in with a chicken or perhaps 
in my case a small cabinet or a chair, and the doctor would 
take care of us because we didn't have money.
    That idea, that concept of ``first do no harm'' has been, 
in my opinion, badly dented by the relationship that has to do 
with who gets paid and how they get paid and all the middle men 
in between.
    I'd like to just speak briefly for a moment to your earlier 
question about costs and posting costs. Two brief anecdotes: 
This winter, I was walking my dog and slipped and fell, hit my 
head pretty hard on the sidewalk, went home, reported to my 
wife that I was feeling a little dizzy and I had tingling in my 
hands but I was going to go to work, and she said, ``No, you're 
going to go to the hospital.''
    I went to the nearest hospital. The likelihood that I was 
actually going to check the price posting on my way in the door 
to see a physician is pretty low. About 2 weeks ago, my 
daughter called me at 1 o'clock in the morning to report that 
she was on her way to the hospital--she had been hit by a car 
in Boston--and did she have insurance, which is how I knew she 
was concussed. Again, she was in no condition to make a 
shopping expedition at the emergency room.
    Those are, I admit, fairly extreme examples. They go to an 
underlying reality of the whole approach we have to providing 
care, that it's based on one's ability to pay, and one has the 
capacity in any given situation to make a decision based on 
what makes the most economic sense.
    What we really should be doing, in my opinion, is we should 
be focusing on what makes the most medical sense. If we did 
that, if we did a better job of that, I think we would have 
lower costs of delivery of service at the point of service.
    Senator Enzi. I appreciate that, and I think Mr. Harte was 
talking about the things that you have a little bit more pre-
planning on than your concussion or her car wreck. One of the 
things that we're finding right now is that some people go in 
for the prevention, which is supposed to be free, and if they 
find anything at all, then it's not free. That's a little bit 
of a surprise to them, and that ought to be posted a little bit 
better, I think, for all concerned.
    Ms. Corlette, in your testimony, you talked a lot about the 
shop exchanges and had some suggestions about what could be 
done. Could you expand on that a little bit more?
    Ms. Corlette. Sure, Chairman. We are, I guess, about 18 
months into the launch of the shop exchanges. In concept, the 
shop could be a terrific option for small employers. It tries 
to address a couple of the primary concerns and frustrations 
that small employers have had in the past.
    For example, many small employers are not able to offer 
their employees a choice of insurers or a choice of plans. The 
shop was designed to provide a marketplace for small employers 
to go to say to their employees, ``This is my contribution. You 
can take this contribution and shop among different plan 
choices.'' It's a very appealing idea.
    The other issue that I think the shop was designed to 
address is employers' desire for some predictability around the 
premium contribution. It allows employers to make what's called 
a defined contribution to their employees' premiums, which, 
hopefully, will give them some predictability in what they can 
contribute.
    I think there's a couple of reasons why the shops have been 
slow to get off the ground. No. 1, the IT systems. Just as with 
the launch of the individual marketplace last year, the IT 
systems for the shops have been--it might be kind to say 
nonfunctional in many States. That's a barrier.
    The other issue--and I'll be interested in Mr. Harte's 
perspective on this as well. Most small employers purchase 
their health coverage through a broker. What we have heard from 
most brokers is that the time and effort it takes to enroll 
somebody through a shop--it's just not worth it to them, 
because the commission that they get is the same whether they 
buy direct from a carrier or through the shop, and because the 
shop is taking a considerable amount of time and effort on the 
part of the broker, it's just not profitable for them.
    Then last, but not least, the tax credits. The Affordable 
Care Act created a small business tax credit for employers with 
fewer than 25 employees with average salaries of under $50,000. 
From what we are hearing in talking to both brokers and small 
employers is that the tax credit that they get is just not 
worth the time and effort it takes to apply for it, and it's 
just not a sufficient incentive for employers to try to enroll 
through the shop.
    I think the jury is still out. I think we want to see if 
they can get their IT systems smoothed out and make it a much 
quicker and smoother process and get employee choice rolled out 
in every State. It's not rolled out in every State yet. I think 
maybe if we could make the tax credit easier to apply for and 
get, that might make it a more appealing option for employers.
    The other thing is, frankly, there are a lot of private 
exchanges that are now being established to directly compete 
with the shop in offering many of the same benefits. If we're 
going to fix the shops, we have to do it quickly, because the 
private market is also recognizing that there's a need that 
needs to be filled.
    Senator Enzi. Thank you.
    Mr. Harte, did you want to comment on that?
    Mr. Harte. Oh, I'd love to. Thank you. Her comments are 
spot on. The shop, by intent, is an incredible opportunity for 
small business, an incredible opportunity. It is a dismal 
failure, and I'm going to explain to you why.
    We do try to enroll small groups onto the shop. Here's what 
happens. No. 1, the maximum waiting period on there is 60 days, 
which completely contradicts the Affordable Care Act, whereas 
the Affordable Care Act says it's 90 days.
    The reason why that is is because it's a backstop, because 
if an individual is hired on a given date in the month, they 
don't receive their correspondence from the shop until their 
last day of eligibility. Based upon that last day of 
eligibility, that person only has 2 days to enroll, because 
they only enroll on the 1st or the 15th. They must process 
before the 1st or the 15th. They have to wait an entire other 
month to get their health insurance.
    Myself and my own small business--if I am on the shop, and 
I tell my employee, ``You're going to be on the health 
insurance plan on August 1st,'' and if they don't respond 
within the 2-day period to enroll in the plan and select their 
plan, they're going to get on the plan September 1, and that 
becomes my burden. That's No. 1.
    No. 2, lockouts. If in the event that your employer submits 
your information for your census and says, ``My date of birth 
is 12-5-66,'' and if in the event that my employer put in 12-5-
65, if I go in to change my date of birth, the system locks you 
out, and you cannot proceed any further. You cannot enroll for 
health insurance.
    The testimony you've heard today talks about the brokers. 
We try to call the shop. My staff members call the shop, and 
they'll be on the phone for an hour to 2 hours waiting for 
someone to pick up the phone to unlock it. There's no mechanism 
in place to unlock their enrollment.
    By the way, thanks for backing me up about the emergency 
and urgent care, because I have three kids myself, and I'd 
never pick up an app to shop for my emergency care.
    The fact is our access to healthcare is my priority to my 
clients. The shops, their networks, are bifurcated. In my 
State, we have five different plans. We have 26 hospitals. Some 
of the plans have only half the hospitals in the network. When 
you enroll in the shop, there's a good chance you might 
actually lose your physician.
    One other comment I wanted to make for you is about the tax 
credits--100 percent. We run the analytics. We try to see if 
someone qualifies for the tax credits. I don't have any clients 
who have been approved for the tax credits.
    If you would indulge me for just one moment--because Mr. 
Scott referred to this list billing issue that we have out 
there--I really want to give you some real numbers so you can 
take these back to the other members of the committee.
    I brought one example with me, a client called River Valley 
Development. It's a small business with less than 10 employees. 
Their single rate for a 21-year-old annually is $4,500. For the 
64-year-old, it's $13,000.
    Senator Enzi. Say both of those again, would you?
    Mr. Harte. The single rate for a 21-year-old is $4,579. The 
same plan for a 64-year-old is $13,725. That total difference 
on an annualized basis is $9,146. To Mr. Scott's point--and 
although he didn't say this--this is the struggle with 
employers all over the country. They're saying,

          ``I want to hire an experienced employee who 
        understands my business, who understands healthcare 
        policy, who wants to make a difference in their 
        client's lives.''

    The economic decision, as Mr. Scott said, is ``Do I really 
want to pay them an extra $9,000 off of my books?''
    In essence, the way we look at this in a grid format, every 
single employee, regardless of age, all the way from 21 to age 
64, has their own rate. Each of their dependents, their spouse, 
has another rate. Each of their children has another rate. You 
can have some families who are in your employ who pay $20,000 a 
year, and you can have other families who pay $30,000 a year 
because they have an older spouse or more kids.
    This all comes down to--and I know you have this question 
coming up, Mr. Chairman. When it gets to the 51 to 100, imagine 
the nightmare when we roll out 51 to 100, putting them into the 
small group marketplace, and, using an employer with 75 
employees, having 75 different rates, and an individual rate 
for every single one of your dependents. It's a nightmare to 
manage for small business. It'll be more of a nightmare for 
businesses with 50 to 100.
    Ms. Corlette. I do, though, want to clarify that age rating 
is nothing new in the small group market. The Affordable Care 
Act simply compressed the age rating band to three to one. What 
is new is that the differences from employee to employee are 
now transparent to the employer where, before, they were 
aggregated. Is that correct?
    Mr. Harte. Yes, correct. However, the big difference is--
and, Mr. Scott, you may have had this in your own business, and 
you can share this if this is the case. We always had what we 
call composite rates. If we had a group that had 10 employees, 
even my own company--I have 17 employees--even though I was 
individually--my rates were individually created by an 
underwriter, I would still have a single, a two-person 
employee-child, and a family rate. If you move 51 to 100 over 
to a list bill system, it'll be an administrative nightmare.
    Mr. Scott. Right. That's why I referred to the change as 
sort of the member level billing, because these rates were 
always going on in the background, but I didn't have to divide 
it up for each employee to tell them, ``OK, well, you're older 
so you cost more so I'm giving you more money so that you can 
have access to a zero premium plan.'' It was a big change, and 
it was disruptive and not helpful.
    Senator Enzi. Mr. Conklin, I think you wanted to comment?
    Mr. Conklin. I do. I concur that the--like I said, the age 
band rating was a shock, but only because it exposed how our 
rates were structured previously and more opaquely. The bottom 
line is my premium did not increase significantly as a result. 
Our cohort remained fairly constant. We did hire a younger guy. 
His premiums were around $300 a month, and my oldest employee's 
premium is about $725 a month for a single person.
    Yes, I can imagine with little difficulty how ridiculous it 
would be to expand to the 50 to 100 or even from the 25 to 50 
and keep that format in place. It seems to me--and I'm a 
cabinet maker from New Jersey. I work from plans. When we get a 
plan that doesn't work, we change it, we alter it, we redraw it 
so that it does work. Believe me, we've had plenty of drawings 
from architects and designers that don't work, and that's part 
of our job.
    These guys' hands are tied. My hands are tied. You folks 
can help untie them. I want to reiterate that that can't come 
at the cost of the fundamental building blocks of the 
Affordable Care Act that are in place that do work.
    I think there are pieces here that would allow us, over 
time and with careful adjustment, to do all kinds of 
imaginative things to broaden the small group market, to 
increase access, to allow us to aggregate, to do all kinds of 
interesting things. Those fundamental underpinning consumer 
protections that are built into the act must remain in place. 
They can't be compromised.
    I'm sitting here deathly afraid, frankly, Senator, that 
Congress will get their hands on this and just rip it to 
pieces. That's not something that I could tolerate. I can 
tolerate a 10 percent increase in our premiums, but going all 
the way back to square one and starting over again is just 
unimaginable to me at this point.
    Senator Enzi. Of course, I remember Senator Sanders' 
comment that there are 35 million people who are still 
uninsured. When we were doing the discussion on the Affordable 
Care Act, there were 49 million uninsured. What we've done is 
shifted who is uninsured. We haven't gotten the job done, and 
we're actually kind of having our hands tied on being able to 
make any changes.
    There's been a number of changes that have been suggested, 
and, hopefully, out of this exercise that we're having this 
morning, we'll be able to come up with some ways that small 
business can be helped through the process, because I think the 
reason we're holding this hearing is I think they're the main 
ones that are having difficulties with it. Part of it is 
because they're small and they don't have all the expertise 
that the big companies have. How do we fix it so that their 
expertise can lend itself to getting the insurance for their 
employees?
    Almost all of them that I know are interested in having 
healthcare for their employees and themselves. They kind of 
have to include all of them in the family that way.
    Were you going to make a comment, Senator Murphy?

                      Statement of Senator Murphy

    Senator Murphy. Yes, if I could just jump on board here.
    Senator Enzi. Sure. Go ahead.
    Senator Murphy. Let me very briefly just insert a couple of 
thoughts on this running dialog about how much we can 
ultimately rely on consumers to reset these marketplaces. I 
agree with the comments about the moments of interaction with 
the healthcare system that are most appropriate to make 
informed decisions. That's an important caveat.
    There's also all of this literature around the inequity of 
knowledge that exists in the healthcare system that makes 
consumer-oriented marketplace decisions difficult when you've 
got such a different amount of knowledge in the hands of the 
person who is providing the service versus the person who is 
buying the service. It makes market-based decisionmaking 
difficult when there's that much of a gap. Count me as amongst 
the skeptics that that ultimately is how you continue to bend 
the cost curve.
    I wanted to stay on this topic of the change going from 1 
to 50 to 100, because there seems to be unanimity of opinion 
that there's danger lurking here and that we should be 
counseling for at least a postponement of that decision.
    I maybe wanted to see if, Ms. Corlette, you would help us 
understand the pitfalls of not moving forward. You say that we 
should take the time to weigh the costs and the benefits, and 
I've heard pretty clearly what the costs potentially are. Why 
should we be careful about just walking away completely from 
stretching all the way out to 100 in terms of what we consider 
for a small group rating?
    Ms. Corlette. Sure. Thank you, Senator, for the question. I 
should say just for the record--and it's in my statement--I'm 
an advocate for delaying the change in definition from 51 to 
100 in terms of defining a small group market, largely because 
I just don't think we really know what the consequences of that 
change will be, and it could cause some market disruption.
    The benefits, I think, are fairly straightforward. 
Essentially, what it does is extend the small group market 
protections that are included in the Affordable Care Act to 
these mid-sized groups, so 51 to 100. For example, the 
requirement to offer an essential health benefits package of 
the 10 prescribed categories in the statute--that will be 
required of groups 51 to 100.
    Another example is health status. Gender rating will be 
prohibited as well as the age bands will be tightened down to 3 
to 1. 0n the plus side, for employers that have older workers 
or sicker workers or a predominately female workforce, they 
could see some improvement in their rates, and some employees 
who may not have had the full breadth of benefits that are 
currently required in the small group market could benefit from 
that as well.
    The bottom line for me, however, is I don't think we 
understand this market well enough to really know who's going 
to benefit, but also on the flip side, who's going to suffer. 
There will be some groups that will see some premium increases 
that they may not face if we kept the markets the same. Some of 
those groups could be faced with incentives to self-fund their 
coverage, which will take them out of the regulated market 
entirely, and that poses a whole new set of risks.
    For those reasons, I would say if this provision is 
implemented, proceed with caution.
    Senator Murphy. I'll ask this of Mr. Harte. I would 
appreciate your comment on this risk toward more people self 
funding. I'm sorry that I missed some of the testimony. You may 
have already covered this. Are you seeing clients showing an 
interest already in moving toward self funding? I assume that 
if we do make this change come January 1st, you'll have more 
and more companies interested in taking the risk upon 
themselves.
    Mr. Harte. Yes, 100 percent, and it will be disastrous, and 
I'll explain to you why. First of all, I support my own 
Senator, Senator Shaheen's bill, Senate bill 1099--she has 
bipartisan support with Senator Scott--which will allow 
individual States to define where those 51 to 100 eligible 
employees will fall. I fully support that. As well, the NAIC, 
the National Association of Insurance Commissioners, has issued 
their support for that.
    That being said, this is what the real world will look 
like. If I have an employer today that is a 51 to 100 life 
group, and they have favorable claims experience, favorable 
meaning there's less than 70 percent--some of those employers 
might be 30 percent or 40 percent. Well, if in the event they 
are in a fully insured market today, they're receiving a 
benefit for having lower claims utilization, but also protected 
on the back end should they have a shock loss.
    I can guarantee you that that healthy group will leave the 
small group marketplace at this transition. Why is that so 
important? Well, that's just one group. If you take all of the 
healthy groups that have favorable risks that are losing the 
ability to be rated based upon their claims experience, they're 
going after, as Mr. Scott said, the economic viability of their 
own company.
    They're going to say,

          ``I can save money by avoiding the essential health 
        benefits, by avoiding the nightmares of the 3 to 1 
        ratio, which will lead to list billing. I will lose my 
        discounts. I will lose my plan,''

because if you move over to small group, you're not going to 
have the same plan that you had as a large group. The 
consequences for those businesses, 51 to 100, will simply be 
disastrous. I wish there was a better way to put it.
    Senator Murphy. There's still significant risk. Any time 
you're choosing to self insure----
    Mr. Harte. Absolutely.
    Senator Murphy. That will mitigate those decisions to an 
extent. It will depend on how risk averse you are.
    Mr. Harte. You're absolutely correct. You're talking my 
language. I've been doing this for 25 years, and that's what 
insurance is all about. It's the risk against the peril. Oliver 
Wyman came out with a report, and they said 64 percent of the 
groups that are in that marketplace of 51 to 100 will be faced 
with rate increases, on average, of 18 percent simply for the 
migration over to small group.
    Those companies that already have favorable risk and want 
to keep their plan, they are more than willing, as they have 
told me--my clients have told me--we insure some 300 
corporations that are small businesses. They've told me that 
they will be migrating to the self-funded marketplace.
    Senator Murphy. Thank you. I have to run to another 
committee meeting, but thank you for holding this. This has 
been really fascinating.
    Senator Enzi. Thank you for your questions, and, of course, 
if you or your staff have more, we can get some written 
responses, too.
    Many of the people on the committee are involved in the 
education debate that started this afternoon, about 30 minutes 
after we started. No Child Left Behind has been out of 
authorization now for about 8 years, and it came out of 
committee unanimously to make some changes, and those are the 
changes that are being debated on the floor right now. There'll 
be some additional amendments.
    There were a lot of amendments in committee. There'll be 
more on the floor, I'm sure. There's intense interest from this 
committee, which is in charge of that, for doing that.
    We haven't lost sight of the need to make sure that 
insurance works, and times change, and some of the new 
regulations come into play, and we want to make sure that we're 
adjusting to those.
    I want to ask, particularly, Mr. Scott and Mr. Conklin, 
what kind of flexibility you'd like to see for yourself in the 
way of possible changes, things that would be beneficial to 
you. I know in your testimony you mentioned some things that 
ought to be changed.
    Mr. Scott. Thank you, Mr. Chairman. First of all, I think 
one of the recognitions in making broad national policy is to 
recognize the diversity of U.S. business, and that when you 
open a small business, it's very personal, and after you go 
from being a solo practitioner to going to, say, ``Well, I'm 
going to start to hire additional employees,'' you realize that 
they're not only depending on you, but their families are 
depending on you as well. It's very personal in the way that 
you run that business.
    There are a lot of small businesses that value providing 
high-quality health insurance to their employees. If a business 
across the street were to open up and do the same kind of 
business as ours and not offer health insurance, we'd want to 
be able to leverage that as a competitive advantage of why work 
for us.
    We want a range of options. We also want access to good 
networks of physicians. We want access to care when we need it. 
I don't want my employees afraid to go to the doctor because 
they don't know how they're going to pay for it. I want them to 
go to the doctor when they should and need to. I want to 
provide that environment so our employees can focus on work and 
that Applied Policy is a good place for them to come work.
    Senator Enzi. Mr. Conklin, do you suggest any changes for 
kinds of flexibility or changes at all?
    Mr. Conklin. Yes. Well, for us, personally, again, because 
of our location in New Jersey and the availability in a dense 
market with relatively high income availability, insurance 
companies are working pretty hard to get everyone's business. 
There are innumerable options. My broker comes in with a stack 
of spreadsheets about that thick to run through with me.
    Unfortunately, when I get the policy and start looking 
through it, that's where the arcane and confusing language 
comes in. Very often, I don't fully appreciate--that hit on the 
head, for example. That was billed out by the hospital at 
$12,000. The insurance company paid $4,800, and I was on the 
hook for somewhere between $700 or $800.
    I called my broker and I said, ``Is this legit?'' He called 
me back and he said,

          ``Yes, this is completely above board. These costs 
        that you're paying here are part of your co-insurance, 
        and there's a formula to determine what your share of 
        the final bill is.''

    We start out with $12,000, get $4,800, we're up to $5,200. 
It's a complete mystery as to how anybody arrives at any of 
this, and when I spoke to my broker, he said, ``Oh, yes, it's a 
complete mystery to me. I can't explain it to you.'' If we want 
to have a real conversation about what would be helpful, real 
transparency would be helpful, for me to be able to understand 
in plain language, really, what's going on.
    At the bottom of all of this, I think we need to maintain--
I keep saying this, but I absolutely believe it. We need to 
maintain robust consumer protections. We need to have real 
oversight of the insurance industry, and I have absolute 
respect for both of my colleagues on the panel today, and I 
know from my own insurance agent--he's a small businessman, 
too, and I'm not looking to kill the for-profit insurance 
industry or harm their businesses.
    We do need that oversight, and we also need to put some 
time and money into figuring out how it is this actually works, 
because nobody really seems to know. Until we have a better 
understanding of that--and, honestly, Senator, I went into the 
effort to reform healthcare in 2009 with rose-colored glasses 
on, and they quickly dimmed to fogged over.
    I concluded at the end that what I really hoped for from 
the Affordable Care Act is some window into what it really 
costs, because from the perspective of the small business 
owner, I need to know what my costs are. When I know what my 
costs are, if there's something that's a little out of line, 
well, I can focus on that and fix it. If I have no idea what my 
costs are, then I really don't know whether I'm running a 
profitable business or not.
    The bottom line is what are we trying to achieve? Are we 
trying to achieve affordable access to healthcare for all 
Americans, or are we trying to preserve a system--and I use 
that term loosely--that doesn't work, that just is not really 
going to work based on people's ability to pay? Because at the 
end of the day, they will make bad healthcare decisions that 
feel like good economic decisions when they make them, and I'll 
do it, too. No one is immune from that tendency.
    Senator Enzi. Well, one of the things that we have changed 
is health savings accounts. I know that I had quite a few 
people on my staff that were young and healthy, and they looked 
at the Federal plans, and they looked at the health savings 
accounts, and they said,

          ``You know, if I go with the health savings account 
        and put the difference in cost into a savings account 
        so that I have this stop loss from the health savings 
        account so that there's a maximum that I have to pay in 
        deductibility, in a maximum of 3 years, I can have that 
        minimum--that stop loss already covered, and I'm going 
        to be healthy probably for 3 years.''

    That's not necessarily going to happen, but I think in a 
lot of the cases--I had a lot of people that were young and 
went into the health savings accounts, and that's one of the 
things that we've decreased now. People are finding out that 
their deductibles are considerably greater than they were 
before.
    We just made some changes in the flex accounts for people 
who want to put some money aside for health insurance, things 
that come up during the year. We made a change in that, that 
some of that can actually roll over. I'm sure that hurt the 
eyeglass industry. A lot of people bought glasses at the end of 
the year because they still had some money left in their 
account. Now they'll be able to roll some of that over.
    Do any of you have a feeling for what we ought to do more 
to encourage health savings accounts and the flex plans?
    Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman. What we have found is 
that allowing young people, at least who are working for us, to 
stay on their parents' plans until they're 26 delays their need 
to acquire sort of basic health insurance literacy. One of the 
great things our broker has really helped us with is educating 
the new people that we hire that are younger and that are 
picking their health insurance for the first time, just 
teaching them about health insurance and how it works and what 
a deductible is and the difference between co-pay and co-
insurance so that they're capable of having a basic 
understanding.
    You can't be an expert in everything, and I can't be an 
expert in everything it takes to run a small business. We have 
to rely on outside help like from our broker, who has been 
spectacular.
    For the health savings account, I think that besides more 
being done to encourage health insurance literacy broadly, 
people have to understand that they're comparing not the cost 
of what the premium for their health insurance policy is, but 
they need to look at the value of the overall policy. What's 
the premium plus what's the co-insurance and co-pays plus the 
deductible and what do I expect to use during a year, so they 
can make the best decision they can. When you look at that, 
then you can actually see the value of an HAS coupled with a 
high deductible health plan.
    Right now, we're still at the place where we're trying to 
show the young people that this is health insurance, and here's 
a deductible and a co-pay, and here's what--yes, the premium is 
cheap, but that means that if you go to the hospital, you're 
going to have to pay the $1,500 deductible. There's a lot of 
work, I think, that can be done there. I think that would 
increase the appeal of HSAs together with high deductible 
health plans.
    Senator Enzi. Mr. Harte.
    Mr. Harte. The expectation, of course, is that when you 
have the health savings account, it's your money, and if it's 
your money, you want to spend your money wisely. I'm actually 
coming full circle back here because when you have the health 
savings account, and you know that you have to spend that money 
on a particular product or service, that being healthcare, you 
want to choose wisely.
    When you don't have access to the transparency tools to 
know that--I need to go in for lab work. I'm not sure how much 
it's going to cost here. Maybe I should be going to a 
freestanding lab. Does it really make a difference if I go to a 
hospital? I really don't know. For those on your staff that may 
have migrated to a high deductible health plan, they will find 
out quickly that that money can be burned up very quickly 
without having access to that information.
    That being said, I also want to share with you that my 
professional trade association, the National Association of 
Health Underwriters, has been talking about health savings 
accounts since before they were popular. We recognize that it's 
one of the most powerful consumer-driven tools to effect 
behavior. In order for it to work, you have to have a system 
that supports the purchase of those products.
    We can look at the data as it relates to healthcare 
services that are not covered by insurance, so you can talk 
about services such as Lasik eye surgery. Over the past 10 
years, Lasik eye surgery has come down dramatically because 
it's been a part of competition, because people are looking at 
that price. The same could also be true for other services as 
we come to a more transparent world.
    That also being said, my trade association supports the 
Affordable Care Act. We're here today and recognize that it's 
here to stay. The Supreme Court has made its decision. We're 
beyond the debate. We're here to make sure that we can 
collectively work together for the accessibility and 
affordability of health insurance for all Americans and fix the 
problems for those 35 million that Senator Sanders talked about 
that he says are uninsured.
    The only other comment I'll say about health savings 
accounts which no one is talking about, but it's a significant 
concern for myself and my trade association as well as 
employers who recognize this issue, is when we start talking 
about the excise tax in 2018, employer-sponsored health savings 
accounts and employer-sponsored health reimbursement accounts 
and wellness programs, as well as the premiums that they pay 
for the health insurance, are all included in that calculation.
    What might surprise you is that employers or their 
employees will be paying substantial tax on their health 
savings account because it's over a threshold.
    Ms. Corlette. If I may, on health savings accounts--a 
couple of concerns. As you probably know, Senator Enzi, the 
health savings accounts involve several tax advantages that 
accrue, particularly to people who are healthy and who are 
wealthy. Contributions are obviously tax deductible. The money 
as it accrues in investment accounts accrues tax free or grows 
tax free, and then withdrawals are tax free if they're used for 
medical purposes. They are great tax sheltering devices for 
people with a lot of disposable income or for people who are 
healthy.
    Frankly, that comes at a cost to the Federal Government. If 
you are expanding eligibility for HSAs, and they become more 
widely used, that costs money, Federal taxpayer dollars, to 
support that. Quite frankly, when I look at the finite Federal 
resources that we have, I would far rather see scarce Federal 
dollars go to support people at the lower end of the income 
scale to help make coverage more affordable for them both in 
terms of the premiums that they pay as well as the cost 
sharing.
    If we're looking at--you know, it's a finite pie, our 
Federal tax dollars. I would far rather see those go to people 
of lower incomes who are, frankly, more vulnerable. If we're 
going to do something with Federal tax dollars, let's not give 
a government handout to the people who need it the least.
    Mr. Conklin. If I may, I'd like to tag on to what Ms. 
Corlette said and give you a practical example. I can tell you 
right now that if I went out to my employees--and our average 
income at Foley Waite LLC is $45,000 a year. In the New York 
metropolitan area, there was a time when that was actually a 
pretty solid middle class income. No one could support a family 
on $45,000 a year and have savings for college, have savings 
for the down payment on a new car, having savings for a house--
that's just completely out of the question--have a little money 
set aside for a family emergency. It's just not possible.
    You can make the very compelling argument that my 
colleagues made for health savings accounts, but it's going to 
be a no-sale for my employees. I think that to hang a 
significant alteration of the Affordable Care Act on that is 
going to lead to some disappointment. Clearly, it's going to 
help some people, but there's going to be a significant portion 
of the workforce that just is not going to be able to access it 
or take advantage of it. That's where the real rubber hits the 
road.
    In New Jersey, the small businesses that are getting 
absolutely hammered are the 25 to 50s. We need to expand both 
that income threshold to allow small businesses to take 
advantage of the tax break, and we also need to expand the--in 
doing that, increase or reformulate the calculation for those 
businesses that would qualify. Once you go over 10 you've got 
to be paying people $3 an hour to have any sort of significant 
tax refund from your insurance--subsidy is the word I'm 
struggling for here--for the subsidy to represent any 
significant advantage.
    We need to increase the subsidies for businesses between 10 
and 25. I think we should do that immediately. I also think we 
need to raise the threshold. When the Affordable Care Act was 
first being formulated, one of the things that we advocated for 
at Main Street Alliance was figuring out a way to calculate 
into the subsidies the cost of living, because an across the 
board national threshold didn't make sense to us.
    Senator Enzi. The cost of living then would vary by State?
    Mr. Conklin. Region is probably more accurate. You could 
have, for example, Washington and Boston. You might have one 
standard for that entire area, and for the fly over country, 
incomes might be somewhat lower, and therefore you might have a 
different threshold in that part of the country.
    Mr. Harte. Senator Enzi, could I make one quick comment?
    Senator Enzi. Yes, sure.
    Mr. Harte. Mr. Conklin is just like many of my other 
clients back home, where he clearly appreciates his employees 
and wants to do what he feels is best for them. We deal with 
those struggles every single day. I appreciate his comments 
about how savings accounts are not the solution for my 
employees. When I walk into a client, I don't assume that a 
health savings account or a high deductible plan or an HMO plan 
or a PPO or a POS or all the other acronyms that we have is a 
one-size-fits-all for all of our clients.
    We believe in choice, and that goes back to Senator 
Sanders' comments earlier, when we talk about a public option 
or national healthcare. The employers that I talk to every 
single day, the 300 that we represent and the 25,000 
employees--they don't want to not have choice. I know Mr. 
Conklin and I agree, but we disagree in certain matters.
    I believe that what's most important for small employers 
out there, myself included, is we want to do what we feel is 
best for our employees. Although our system is broken and it 
needs repair, we shouldn't replace that with a system that will 
take that choice away from business owners and their employees.
    Senator Enzi. Anybody else want to comment on that?
    Mr. Conklin. I'll go, because I think it's important that 
we do have an understanding, and I'm not sure we do yet. I said 
earlier that I'm not sure I agree with Senator Sanders, as much 
as I admire him, about a single payer system. He did mention 
that there are multiple models.
    My concern is the 35 million people that are uninsured, and 
I look at it, really, from a standpoint of a business owner. I 
know that's probably not the best way to look at it, but I 
don't have much of a choice. As long as those folks are out 
there, and they're accessing healthcare, my employees and I are 
picking up the tab if they can't pay the bill.
    That has a lot to do--and I'm sure these folks to my right 
know this--with that crazy pay--that crazy cost differential in 
delivery, at the point of delivery, because there's all this 
cost shifting going on. There's all this--how does the hospital 
or this medical group cover the cost of folks who showed up 
that we didn't leave on the sidewalk?
    I don't think we live in a country where we're prepared--I 
have employees from Central America. Very quickly, years ago, 
if you went to the hospital in El Salvador--I had an El 
Salvador employee--and you were injured, the doctor would come 
in or a nurse, and they would give you a list of all the things 
they needed to treat you, and then a family member would go 
down to the Pharmacia and get them.
    If you could afford it, you got care. If you couldn't, they 
patted you on the back and said, ``I hope you survive.'' And I 
said, ``I can't believe that.'' They said, ``No, no, no. That's 
the way it works. That's the way it works.''
    I don't think that's where we want to go as a country, and 
we're not going to. I'm not suggesting that we would. In a 
sense, it is where we are. If you don't have the money to pay, 
somebody's going to pay, and it's going to come through this 
convoluted, incredibly complicated system that we have that 
increases cost and reduces outcomes.
    Ms. Corlette. One comment--oh, I'm sorry.
    Senator Enzi. Go ahead.
    Ms. Corlette. Mr. Chairman, I don't disagree that small 
employers want choice and to be able to give their employees 
choice. However, that choices come with consequences, and one 
of the things that policymakers, particularly national level 
policymakers, need to think about is what might be the right 
choice for an individual or small employer if it's done at a 
critical mass could be the wrong choice for the market as a 
whole.
    As policymakers, I think it's incumbent on you all and 
those of us who try to support you to think about not just 
let's have unfettered choice for everybody, but also what are 
the consequences of those choices for those who may not be able 
to take advantage of them. For employers who have sicker, older 
workers for whom, for example, self funding is not an option, 
what are the consequences if a critical mass of small employers 
self-fund. These are really critical things that policymakers 
need to think about before just opening the door to unfettered 
choice.
    Senator Enzi. Thank you.
    Mr. Conklin. One more anecdote. About a year ago in New 
Jersey, some legislation came up to open MEWAs up. I had never 
heard of a MEWA. I didn't have any idea what that was. One of 
the things that was included in the MEWA was a modified 
essential benefits model. You could sort of cull out some of 
the more expensive essential benefits and offer this as a plan 
for what I would describe as medium-sized small businesses.
    The consequences of this, had that legislation passed, 
would have been the collapse of the small market in New Jersey. 
It would have just destroyed it. We do need to tread carefully, 
and one guy's solution is another guy's disaster.
    Senator Enzi. Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman. I think it's important 
for me to answer Senator Sanders' opening question about access 
to healthcare in the United States and why it might not be 
viewed as good as other countries in the world. I think that 
everyone in the United States should have access to high 
quality healthcare.
    I also think an American solution to the problem should 
recognize that Americans, or at least myself, value freedom, 
opportunity, and self determination, and part of the American 
dream is being able to open a small business and take that risk 
and have that opportunity. With that opportunity, there's no 
guarantee that it's going to work out. If you can't fail, it's 
not really a challenge.
    I think Americans also value access to the latest and best 
care, and I'm not sure if that's what they value in the rest of 
the world. You should look at the other countries and see what 
their models do, but I don't think you should wholesale adopt 
any other country's particular model and say that that's good 
for America. I think that America has some important 
differences and that the American solution should ensure that 
everyone has access to high quality healthcare.
    While there are 35 million uninsured, I think it's 
important to acknowledge that there's more than 300 million 
Americans. While you're fixing the 35 million uninsured 
problem, don't mess up the 200 million part of people who do 
have access to health insurance.
    Senator Enzi. Thank you. Again, I'll mention that the 35 
million are a different 35 million, but still 35 million that 
were uninsured when we started the whole discussion several 
years ago. What we've done is shift who's insured. What I'm 
trying to do with this panel and with this effort is to figure 
out how to insure the other 35 million people.
    In Wyoming, we have limited insurance company options. We 
don't have the raft of them that could provide you with all of 
those documents and spreadsheets. Last week, one of them said 
they're going out of business. We're only looking at even more 
limited choices. That's not choice. That's really a monopoly. 
We could have some problems based on that.
    Another experience that I've had--I was in India. I was 
primarily looking at education. They promise that every kid 
gets an education through sixth grade. We found out that they 
kick out most of them in fourth grade. They're the ones that 
get a dollar a day the rest of their life sweeping the streets, 
and then they kick out more in sixth grade, and they get $2 a 
day the rest of their life--no opportunity to change.
    They have healthcare for everybody, the one that makes $1, 
the one that makes $2, and the one that makes--well, $25,000 is 
considered a real high wage there. We went by a hospital, and 
there was this line that went way around the block, and I said, 
``What's that? '' They said, ``Well, that's the people waiting 
to see a doctor.'' And I said, ``Will the doctors get to all of 
those people today? '' ``No.''
    They're all guaranteed healthcare, but they can't get to 
see a doctor. In my opinion, they don't have healthcare, and we 
certainly want to avoid that in this country.
    At this point, I've run out of questions. I'll let each of 
you do a concluding statement, if you have some more 
suggestions for us. There may be some legislation that comes 
out of this. Again, I'm concentrating on that--because of the 
statements that you provided beforehand, instead of looking at 
1 to 25 or 1 to 50, I'm looking at 1 to 100 where we can make 
changes, and I think that's probably the real small business 
market, even though the Small Business Administration says it's 
500 employees.
    We're just picking random numbers anyway. Since most of you 
mentioned 1 to 100, I would be interested in any concluding 
remarks you might have for improving the coverage in that area. 
You don't even have to give them all right now. You can include 
that in anything additional, written, based on what we've done 
here today. That might be helpful to us.
    We'll go in reverse order this time. I'll start with Ms. 
Corlette.
    Ms. Corlette. Sure. Thank you. I'll just close with my two 
main policy recommendations. The first is--and we've already 
alluded to this a little bit. I would encourage the committee 
and the Congress to discourage self funding among small 
employers. When the risk of self funding is really borne by an 
insurance company and not the employer, that's not true self 
funding.
    When you have a functionally equivalent product that's 
allowed to compete on a different set of rules, that sets up an 
unleveled playing field and creates risk of adverse selection. 
This is something that, actually, the administration could do 
independent of Congress by simply defining what self funding 
means and to say that if it walks, talks, and breathes like 
traditional insurance, it should be treated as such.
    Then the second policy recommendation is--again, I think 
we've touched on this. I would suggest that there be a delay in 
the definition of small group market extending not to 100. I 
think we need to understand the consequences of that and really 
understand who's in this market, what do the groups look like, 
what do their rating structures look like, what would the 
premium impact be before that definition change goes into 
effect.
    Senator Enzi. Thank you.
    Mr. Conklin.
    Mr. Conklin. Yes, Senator Enzi. I really sincerely want to 
thank you for this opportunity and for the way you've conducted 
this meeting. I appreciate very much your interest, which I 
believe is genuine and heartfelt, and I think we both share 
some very significant and important goals, not the least of 
which is trying to figure out how we get everybody access to 
real healthcare.
    Your example of India is certainly frightening. My 
daughter's best friend just graduated for the last time, and 
now she is a full-fledged OBGYN working in Boston. She is, 
without question, the smartest person I know and perhaps the 
hardest working person I know.
    That combination of brilliance and drive is rare. Among the 
many things we're going to have to figure out is how we provide 
a broad-based healthcare system that provides adequate access 
and allows doctors like my daughter's best friend to do her job 
as well as she possibly can. No one pretends--I certainly 
don't--that this is not a daunting undertaking.
    When the Affordable Care Act was being initiated, I had, I 
think, very reasonable expectations that it would be a first 
step and that there are many steps to go. I don't think there 
is another model that we can duplicate in the United States.
    I believed then and I believe today that whatever we come 
up with, it will be uniquely American, and that it will 
probably involve for-profit insurance, and it may involve some 
nonprofit insurance components. It will certainly involve a 
great deal of support at the bottom of the pyramid for people 
to be able to access healthcare.
    I would beg you, Mr. Chairman, to focus on the goal. What 
is it that we are trying to accomplish? I think you and I share 
that goal, that is, to make sure that every American has access 
to healthcare.
    Senator Enzi. Thank you.
    Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman, for the opportunity to 
participate in the roundtable today. As a small business owner, 
the current status is uncertain for us of access to health 
insurance because we don't know what the premium rates increase 
will bring.
    At the same time, we have a desire to keep consistency in 
the health insurance plans we offer from year to year, so 
employees who get comfortable with the coverage and co-pays are 
able to keep the physician that they're used to, they learn how 
the plan works, and then they cannot worry so much about 
healthcare and health insurance and focus more on their work 
and have that comfort that insurance should provide.
    In considering reforms, we would like less help from the 
government. When the government enacts new programs and 
innovative changes for us, it usually means a lot of new 
bureaucratic requirements and risks and stern letters, like we 
got with the MLR. Also, government-run programs seem slow to 
change and adapt to changing circumstances, and, frankly, we 
think we do better on our own, being able to shop for health 
insurance coverage under the current system. We'd just like 
more predictability in what we're getting and not see double 
digit premium increases every year.
    That's all I have. I'm happy to respond to questions after 
the hearing in writing or in any way we can. Thanks again for 
the opportunity to participate.
    Senator Enzi. Thank you.
    Mr. Harte.
    Mr. Harte. Mr. Chairman, as I said earlier, I truly 
consider this an honor and a privilege to be here today to 
represent my clients, to represent the members of NAHU. With 
all heartfelt thanks and gratitude, thank you for the 
invitation. Also thank you to your staff for all they did to 
assemble an amazing panel of individuals who are exemplar in 
their own rights and passions, which I sincerely appreciate 
having the opportunity to share this opportunity with them. 
They did a great job.
    I will share with you four final policy recommendations 
from me. The first, as the testimony from the other panelists 
discussed, the role of the employee benefits broker has 
transformed itself during my career of 25 years. Today, I spend 
more of my time dealing with compliance and underwriting and 
evaluation and taxes and fees and regulations and legislation 
more than I ever would have imagined.
    Certainly, I didn't wake up in college one day and say, 
``I'm going to be an insurance broker.'' I know that my 
clients, much like their own personal experience, sincerely 
appreciate the hundreds of thousands of agents and brokers out 
there who are working tirelessly as the first line of defense 
in the understanding of the complexities of healthcare reform.
    With that, we've been talking about MLR for a very long 
time, and agents and brokers are going away in some States 
because their compensation is included within the MLR. Senate 
bill 1661 addresses that issue and, hopefully, will provide a 
strong foundation for those who are considering to leave the 
business in hopes of other opportunities. They want to be able 
to help their clients. That's No. 1.
    No. 2, we've talked about the 51 to 100, but the one part 
that we haven't talked about is the employer reporting. All I 
will say to you today is this, that large businesses, over 100 
employees, are having a very challenging time embracing the 
employer reporting on the 6056 and the 6055. We really have to 
delay the reporting for those medium-sized groups of 51 to 100.
    There's another Senate bill out there, Senate bill 1415 
from Senator Heitkamp, and that's a repeal of the employer 
mandate for group sizes 51 to 100. That will remove the 
penalties or remove the mandate entirely. We fully support 
that. We're putting a lot of pressure on those groups, and 
whatever we can do to mitigate the potential damage with the 
continued rollout of 51 to 100 will be welcomed by them.
    The last thing I'll say to you--and I know some have 
commented on the 3 to 1 age bands. If we can somehow reduce 
those restrictions so that maybe we can go to 4 to 1 or leave 
it to the individual States to make the decisions of what's 
best for their communities. Leave it to the insurance 
commissioners and let them make the decision, because every 
State is unique in how they should be developing their rates.
    In my closing comments, I'll say to you, as in my first 
speech in front of NAHU back in 2001 and close with the same 
remark. I say this, that health insurance is expensive because 
healthcare is expensive, and that has to be part of the 
solution.
    Again, Mr. Chairman, thank you for the opportunity.
    Senator Enzi. Thank you. I'm glad you mentioned the 
healthcare being more expensive. We're the inventors for all of 
the things for the rest of the world, and I know of a lot of 
things that are coming through the pipeline now that will make 
a difference to people. I've noticed that the cost goes up, and 
we don't want those things denied to people, either.
    I appreciate all the suggestions that you've given today. 
I've been working on healthcare for a long time. I got to work 
with Senator Kennedy for years, and we did a lot in other 
bills. The Needlestick bill was the first one that I got to 
work on so that there is protection for the nurses and the 
janitors and stuff that they wouldn't accidentally get stuck by 
a needle that had been used on somebody and then maybe have to 
wait a year or two to find out if there was going to be a 
complication from it.
    Consequently, he and I worked on a lot of things. One of 
the things we were working out was a 10-step plan for providing 
healthcare for everyone. That is on my website, and I've been 
talking about it for a long time, and some of those would be 
changes that might help, particularly, the small businessman, 
because I always look at it from that position because that's 
all I understand. I was a small businessman. We had three shoe 
stores, and I know that that's most of America.
    I appreciate it. Your comments have been very helpful 
today. Like I said, people will be allowed to submit questions. 
I think they'll have to have those in by tomorrow night. If 
you'd answer those, we'd appreciate it. Any other suggestions 
that you have for things that might improve the healthcare 
system, for small business, we'd be appreciative of. If you'd 
limit it to that, we'd also appreciate it.
    Thank you for being here today, and I thank the people who 
came to listen as well, and all the staff members who, of 
course, will get back to their Senator to get additional 
questions and to share this information.
    Thank you.
    [Additional Material follows.]

                          ADDITIONAL MATERIAL

    Response by J. Kelly Conklin to Questions of the HELP Committee
    Question 1. What is the status of the health insurance market for 
small businesses, specifically plan options and costs in the small 
group market?
    Answer 1. From our perspective as a New Jersey company purchasing 
health insurance in the small group market as we always have, through 
an agent, there is little appreciable difference between now and before 
the ACA in terms of options. There are many. There is the same 
confusing, arcane language in the policy documents and in how the 
various plans are presented. That makes meaningful comparison almost 
impossible beyond the most basic considerations: premium cost, co-pays, 
deductibles and maximum annual out-of-pocket costs. As a small company 
with tight margins the first consideration is always premium cost.
    Premium increases over the previous two renewals, 2013-14 have been 
in the neighborhood of 10 to 15 percent. That said this year's is down 
about 2 percent and we reduced deductibles for the individual to 2,000 
from 2,500. That did come with an annual increase in total maximum out-
of-pocket from 5,000 to 6,000 per individual and 12,000 per family.
    There was an initial ``shock'' when the new price schedules were 
implemented using age as the determinant factor of premium rates. In 
that initial adjustment we had the biggest rate increase in some time 
as a result of our older population of employees participating in our 
plan. As I recollect that was around 18 percent.

    Question 2. What tools and options are available and useful for 
small employers to offer some assistance to their employees?
    Answer 2. This is a difficult question to address. There is of 
course more information than ever available to anybody interested 
enough to investigate the available plans in their respective areas. In 
New Jersey with its high density, well off population, the market is 
relatively rich affording options on the individual market that did not 
exist prior to the ACA through the exchange. Choosing a plan can be a 
daunting experience, filled with uncertainty and anxiety. Thankfully 
the comprehensive consumer protections, essential health benefits, no 
exclusion for pre-existing conditions and medical loss ratio oversight 
are in place to reduce the actual risk to individual consumers.
    We recently had our oldest employee move to Medicare. His younger 
wife could no longer be covered under our plan. In the exchange they 
were able to purchase a slightly higher quality plan, lower deductible, 
lower co-pays, for about fifty dollars more per month than the coverage 
she had under our plan. Medicare with part D and the additional 
supplements making his coverage complete, saved us enough in premium 
cost to raise his compensation to cover his additional out-of-pocket 
expenses and his wife's coverage, while saving us about $200 per month.

    Question 3. What has worked and what hasn't worked and what policy 
recommendations do you have for the committee?
    Answer 3. New Jersey's robust consumer protections prior to ACA, 
mentioned above, made cost increases in our market tolerable. The 
uniform consumer protection standards contained in the ACA for health 
insurers, along the lines of New Jersey's, is a critical piece of the 
ACA that cannot be tampered with. No lifetime limits and no exclusions 
for pre-existing conditions are cornerstones of increased access and 
financial security and should not be altered as well. These features 
along with the MLR have had the expected effect of containing both 
premium increases and cost shifting by providers. This along with other 
features of the ACA is working to decelerate the rate of health care 
cost increases.
    There are any number of things that might be done to improve the 
ACA. Repeal is not one of them. Nor is a piece by piece alteration of 
the law that will have the same effect as repeal. Congress must act to 
restore faith that changes to the ACA come by way of improving access 
to care and by means resulting in affordable quality health care, not 
political victory laps. I suggest correcting the sentence in the ACA 
recently adjudicated by the Supreme Court would be a good first step. 
Done without filibusters and amendments, this symbolic gesture would 
send a powerful signal to the people that Congress is at long last 
ready to attend to the people's work.
    The ACA is the first major step toward providing universal access 
to health care, an as yet unmet goal of the reform effort. As long as 
access is determined by one's ability to pay, whether at the point of 
service or in the purchase of insurance, our health care costs will 
continue to climb while quality and availability of care continues to 
decline. Voluntary charity care remains an inadequate alternative to 
mainstream access and that shortfall continues to contribute 
substantially to cost shifting and deferred care, leading to expensive 
and poor outcomes. We can do better.
    Basic access as established by essential health benefits under the 
ACA should be available to every American. If that requires a universal 
expansion of Medicare to make that access available to the unemployed 
and working poor, then we should do that. If it requires excluding for-
profit insurers from those income earners at 400 percent of the poverty 
line to an established income level that makes for profit coverage 
affordable, we should do that. We should at minimum increase both the 
number of employees that establishes a business as small and the 
average income per employee that qualifies an employer for subsidies. 
We should do that now, without delay or fan fair.
    I abhor the word fair, my heart is not bleeding and I don't care 
about level playing fields. I don't live in The Magical Market Place 
where innovation and quality are always rewarded and fraud, abuse, 
incompetence and inefficiency, broadly shared characteristics of all 
human enterprise, is always weeded out. That is why I know that until 
every American has a card in their purse or wallet that guarantees 
access to a doctor--any doctor, anywhere--until emergency rooms only 
serve emergency patients and not emergency patients and the uninsured, 
I and my employees will pay too much for too little. This is a 
practical problem requiring the completion of the critical step forward 
that is the ACA. Our goal must be a comprehensive, all inclusive health 
care delivery system in the United States. We should get on with it.
   Response by Sabrina Corlette, J.D. to Questions of Senator Warren
    Question. Under current law, the 40 percent excise tax on high cost 
health plans, known as the Cadillac Tax, will go into effect in 2018. 
In determining the cost of repealing the Cadillac Tax, the 
Congressional Budget Office assumes individuals that have their health 
benefits reduced due to the tax will experience an increase in taxable 
wages. Some groups have expressed skepticism that reduced benefits will 
lead to increased wages. A 2014 study by Harvard researchers published 
in the Journal of Health Economics and a 2013 study from the National 
Bureau of Economic Research, which both focused on public sector 
employees, found that when employer health care costs increased, 
employees paid for some of that increase through reductions in wages.
    If employers decrease the amount they spend on employee health 
plans in order to avoid the Cadillac tax, would you expect an increase 
in employees? wages? If so, would the increase in wages be expected to 
fully offset the reduction in benefits?
    Would a requirement that employers must offset any reduction in 
benefits with wage increases change the responses of employers to the 
Cadillac Tax?
    Answer. Many economists believe that on average and in the long 
run, employees bear the full cost of coverage. In other words, economic 
theory suggests that workers pay for higher health care costs via lower 
wages. However, that theory is dependent on the notion that employers 
get no independent benefit from offering coverage. Some economists have 
posited that providing health insurance coverage has benefits that 
accrue to employers, such as improvements to worker productivity or 
reductions in job terminations.\1\ A 2005 study found that firms 
offering benefits (including health and pensions) have higher 
productivity and higher survival rates.\2\ If these analyses are 
correct, it suggests that a reduction in benefits would not necessarily 
be fully offset by an increase in wages, at least in the short term. It 
is not clear how employers would respond to a requirement to offset a 
reduction in benefits with wage increases. More research on this 
question is needed.
---------------------------------------------------------------------------
    \1\ Garret B, Chernew M. Health Insurance and Labor Markets: 
Concepts, Open Questions, and Data Needs. Inquiry 45: 30-57 (Spring 
2008). Available at http://inq.sagepub.com/content/45/1/
30.full.pdf+html.
    \2\ Decressin A, Lane J, McCue K and Stinson M. Employer-Provided 
Benefit Plans, Workforce Composition and Firm Outcomes. Technical Paper 
No. TP-2005-01 (2005). Suitland, MD.: U.S. Census Bureau, LEHD Program.

    [Whereupon, at 3:41 p.m., the hearing was adjourned.]

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