    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

     REIMAGINING THE HEALTH CARE MARKETPLACE FOR AMERICA'S SMALL BUSINESSES

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON SMALL BUSINESS
                                 UNITED STATES
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  HEARING HELD
                                FEBRUARY 7, 2017

                                   __________

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                Small Business Committee Document Number 115-002
                  Available via the GPO Website: www.fdsys.gov

                                   ____________

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                       HOUSE COMMITTEE ON SMALL BUSINESS

                          STEVE CHABOT, Ohio, Chairman
                                STEVE KING, Iowa
                          BLAINE LUETKEMEYER, Missouri
                              DAVE BRAT, Virginia
                 AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                            STEVE KNIGHT, California
                            TRENT KELLY, Mississippi
                                 ROD BLUM, Iowa
                             JAMES COMER, Kentucky
                     JENNIFFER GONZALEZ-COLON, Puerto Rico
                              DON BACON, Nebraska
                        BRIAN FITZPATRICK, Pennsylvania
                             ROGER MARSHALL, Kansas
                                     VACANT
                   NYDIA VELAZQUEZ, New York, Ranking Member
                           DWIGHT EVANS, Pennsylvania
                           STEPHANIE MURPHY, Florida
                            AL LAWSON, JR., Florida
                             YVETTE CLARK, New York
                              JUDY CHU, California
                           ALMA ADAMS, North Carolina
                          ADRIANO ESPAILLAT, New York
                            BRAD SCHNEIDER, Illinois
                                     VACANT

                       Kevin Fitzpatrick, Staff Director
                           Jan Oliver, Chief Counsel
                    Adam Minehardt, Minority Staff Director

                               C O N T E N T S

                               OPENING STATEMENTS

                                                                       Page
    Hon. Steve Chabot................................................     1
    Hon. Nydia Velazquez.............................................     2

                                   WITNESSES

    Mr. Tom Secor, President, Durable Corporation, Norwalk, OH,
      testifying on behalf of the National Small Business Association     5
    Mr. Keith Hall, President and Chief Executive Officer, The
      National Association for the Self-Employed, Annapolis Junction,
      MD.............................................................     6
    Mr. Kevin Kuhlman, Director of Government Relations, National
      Federation of Independent Business, Washington, DC.............     8
    Ms. Dania Palanker, Assistant Research Professor, Center on
      Health Insurance Reforms, Georgetown University, Washington, DC    10

                                    APPENDIX

    Prepared Statements:
        Mr. Tom Secor, President, Durable Corporation, Norwalk, OH,
          testifying on behalf of the National Small Business
          Association................................................    32
        Mr. Keith Hall, President and Chief Executive Officer, The
          National Association for the Self-Employed, Annapolis
          Junction, MD...............................................    45
        Mr. Kevin Kuhlman, Director of Government Relations, National
          Federation of Independent Business, Washington, DC.........    51
        Ms. Dania Palanker, Assistant Research Professor, Center on
          Health Insurance Reforms, Georgetown University,
          Washington, DC.............................................    58
    Questions for the Record:
        None.
    Answers for the Record:
        None.
    Additional Material for the Record:
        Women Impacting Public Policy (WIPP).........................    67

     REIMAGINING THE HEALTH CARE MARKETPLACE FOR AMERICA'S SMALL BUSINESSES

                                  ----------

                           TUESDAY, FEBRUARY 7, 2017

                      House of Representatives,
                   Committee on Small Business,
                                                        Washington, DC.
        The Committee met, pursuant to call, at 11:00 a.m., in Room
    2360, Rayburn House Office Building. Hon. Steve Chabot
    [chairman of the Committee] presiding.
        Present: Representatives Chabot, King, Luetkemeyer, Brat,
    Radewagen, Kelly, Blum, Comer, Bacon, Fitzpatrick, Marshall,
    Velazquez, Evans, and Lawson.
        Chairman CHABOT. The Committee will come to order. Good
    morning. We want to thank everyone for being here with us today
    so that we can discuss a critical issue facing America's small
    businesses, what I could consider to be a catastrophe our
    health insurance marketplace.
        In my opinion, and in the opinion of many, President
    Obama's signature legislation has proven to be a disaster,
    especially for America's small businesses. From the very
    beginning, promises were made which turned out to be untrue.
    The American people were told that premiums would decrease by
    $2,500. Instead, average premiums and job-based coverage have
    increased by $3,775. President Obama famously promised, and I
    quote, ``If you like your doctor, you can keep your doctor. If
    you like your healthcare plan, you can keep your healthcare
    plan.'' Nothing, as it turned out, could have been further from
    the truth.
        As a result of losses in the market, major insurers have
    bolted for the exits. Their withdrawal from Obamacare-
    established marketplaces left little to no competition within
    the exchanges, leaving consumers fewer choices in health
    insurance options. Doing nothing is not an option because the
    current system is in, quite frankly and literally, a death
    spiral. We need to enact real patient-centered reforms that
    lower costs, improve portability, and ensure coverage for the
    millions of Americans who are struggling to find affordable and
    reliable health insurance.
        In 2016, the National Federation of Independent Businesses,
    NFIB, published a survey which found that the cost of health
    insurance continues as the number one problem small businesses
    face. NFIB members are not the only ones concerned. In late
    2015, the National Small Business Association, NSBA, released a
    survey that found that while the majority of employers think
    offering health insurance is very important to recruiting and
    retaining good employees, just 41 percent of firms with up to 5
    employees offered health benefits, and that is down from 46
    percent in 2014. Overall, the NSBA survey found that 65 percent
    of small firms reported offering health insurance in 2015, down
    from 70 percent in 2014.
        Survey results like these track with what we have been
    hearing from our constituents for the past 8 years. We all hear
    from small business owners in our districts who want to provide
    health insurance for their employees, not just as a recruitment
    and retention tool, but also out of a sense of duty to do the
    right thing for their workers and their families. It is
    important to remember that the damage done by Obamacare was not
    limited to the new problems it created for the healthcare
    marketplace. It also exacerbated and made worse longstanding
    problems in that marketplace.
        While we have a badly damaged system right now, I believe
    there is light at the end of the tunnel. We have a real
    opportunity to enact positive change, and we are going to do it
    the right way, and I believe a better way. America's small
    businesses will not be an afterthought or a bill payer this
    time around. We are going to listen to what they are telling us
    because they are on the frontlines and can help us create the
    step-by-step solutions that will improve access, lower costs,
    and fix a broken system.
        We have an excellent panel of witnesses today, and I want
    to thank each and every one of them for coming here, and very
    shortly here, testifying before us. We thank you for your time,
    and I would now like to yield to the ranking member for her
    opening remarks.
        Ms. VELAZQUEZ. Thank you, Mr. Chairman. I am going to try.
    If not, I will ask Mr. Evans to read my statement. Can you
    understand me? Yes? Okay, good.
        Seven years ago, the president signed into law the
    Affordable Care Act. For the over 20 million people that have
    secured coverage, it has not been a disaster. This gain has
    been significant for small business employees. Between 2013 and
    2015, the number of uninsured small business employees dropped
    by 4.1 percent million, and their uninsured rate fell from 27
    percent to less than 20 percent. These individuals not only
    gained insurance coverage, they gained high-quality insurance
    coverage. The ACA instituted reforms to--can you read this?
        Mr. EVANS. Many of these reforms were particularly
    important for small businesses. Before the ACA, one employee's
    rare illness could cause insurers to drastically raise rates
    for the entire firm. Now the insurance companies are not
    allowed to charge higher premiums based on health status,
    insurance claims, or gender. The insurance market is fair and
    more consumer-friendly than it was seven years ago. The ACA has
    ushered in a period of freedom for entrepreneurs who no longer
    will have to choose between starting their own business and
    retaining their health benefits.
        I recently held a healthcare event in my district. One New
    York entrepreneur said, and I quote, ``I would not be able to
    own my business without the Affordable Care Act.'' The act has
    also contributed to reducing healthcare cost growth. In recent
    years, premium rates increases in the employer market has been
    modest. Between 2010 and 2015, premiums raised 27 percent,
    significantly lower than the 69 percent increase from 2000 to
    2005.
        As with any major law of this complexity, there have been
    challenges in implementation for many eligible firms have not
    taken advantage of the small business tax credit. Similarly,
    markets have had mixed success in the Small Business Health
    Option Program. I look forward to hearing testimony today on
    these programs that could be improved.
        However, rather than working together to develop targeted
    reforms, Republicans want to throw out the baby with the bath
    water. For years, they proposed little more than repeal with
    vague, at best, planned replacement. Even today, there is no
    agreement upon a concrete plan or legislative path to
    replacement. Experts agree that even with a partial repeal
    without a concurrent replacement will destabilize the market.
        The Congressional Budget Office estimated that repealing
    the Affordable Care Act, the reconciliation would cause 30
    million people to lose coverage over the next decade. This
    coverage drop would cause nearly $1.7 trillion in lost revenue
    to hospitals, doctors, and other providers between 2019 and
    2028. At the same time, demand for uncompensated care would
    skyrocket.
        CBO also predicts that premiums in the non-group market
    would increase by 20 percent to 25 percent. This increase would
    reach about 50 percent in the years following the elimination
    of the Medicare expansion and the marketplace subsidies. Even
    if the Affordable Care Act is repealed with a delay,
    uncertainty in the marketplace would likely cause a significant
    premium increase in insurance market exists. These sweeping
    proposals are careless and will cause a great deal of damage to
    our healthcare system and every American who relies on it.
        Small firms are not being served by our healthcare system
    and face many challenges before the Affordable Care Act. The
    Affordable Care Act sought to provide small firms with greater
    stability, flexibility, and cost controls. Though we have seen
    considerable gains, more work remains through a thoughtful and
    bipartisan examination of the policies, we can make targeted
    improvements that better serve small firms. I hope my
    Republican colleagues will join me in this examination and
    abandon their dangerous and disruptive plan for repeal.
        Thank you, Mr. Chairman. I yield back.
        Chairman CHABOT. Thank you very much. The gentleman and
    gentlelady yield back.
        If Committee members have an opening statement prepared, I
    would ask that they be submitted for the record.
        And I will take just a moment to explain our timing and
    lighting system here. We operate by the 5-minute rule, both the
    witnesses and the folks up here, so we ask that you stay within
    that. There will be a green light that is on there for 4
    minutes. Then the yellow light will come on to let you know
    that you have got a minute to wrap up. And when the red light
    comes on, we would ask you to stay within that. We will give
    you a little leeway, but not a whole lot, so we would ask you
    to follow that, if you would.
        And I would now like to introduce our very distinguished
    panel here today.
        Our first witness is Tom Secor, president of Durable
    Corporation, a small manufacturing and master distributor of
    loading dock bumpers and floor matting, primarily serving the
    material handling and janitorial supply industries, located in
    Norwalk, Ohio since 1941. He has been with Durable since 1993,
    which currently employs 37 people. Mr. Secor is an active small
    business advocate, serving on the Board of Directors for the
    National Small Business Association, who he is testifying on
    behalf of today, and the Ohio Chamber of Commerce. We welcome
    you to the Small Business Committee.
        Our second witness is Keith Hall, President and Chief
    Executive Officer of the National Association for Self-
    Employed, NASE. As a 23-year member of the organization, Keith
    has served as Chief Operating Officer, Chief Financial Officer,
    and National Tax Advisor. He has also spent time on the board
    of directors. He began his career with the international
    accounting firm of KPMG, and later served as the chief
    financial officer for a medium-sized bank and a long-term care
    provider. Mr. Hall is a certified public accountant and has
    provided consulting and tax services to small businesses for
    over 20 years, and we welcome you here as well this morning.
        And up next is Kevin Kuhlman, the director of Government
    Relations at the National Federation of Independent Business,
    NFIB. He manages NFIB's House of Representatives lobbying team
    in advocacy strategy, specializing in healthcare and health
    insurance issues. He also closely follows the regulatory
    process and comments on regulations that impact the NFIB's
    membership. Before joining NFIB in 2011, he handled healthcare,
    labor, education, and small business issues for Congressman
    Peter Roskam from Illinois. He started his career in Capitol
    Hill in 2006 as a support research staff member for the
    Committee on Ways and Means. We thank you for being here as
    well.
        And I will now yield to the ranking member for the
    introduction of our fourth witness.
        Ms. VELAZQUEZ. Thank you, Mr. Chairman.
        It is my pleasure to introduce Dania Palanker. She is an
    assistant research professor at the Center on Health Insurance
    Reforms at Georgetown Health Policy Institute. She analyzes
    state and federal insurance market reforms and is an expert on
    health benefits provision of the ACA and ERISA. She is also
    chair of the Plan Management Advisory Committee of the District
    of Columbia Health Benefits Exchange. Ms. Palanker holds a J.D.
    from Georgetown University and an MPP from the Harvard Kennedy
    School. She received her B.A. from Middlebury College. Welcome,
    and thank you for being here.
        Chairman CHABOT. Thank you. And Nydia, I think you will
    acknowledge, I did not do it, did I? I had nothing to do with
    this?
        Ms. VELAZQUEZ. I guess that--well, I do not know.
        Chairman CHABOT. All right. We will begin with Mr. Secor.
    Mr. Secor, you are recognized for 5 minutes.

     STATEMENTS OF TOM SECOR, PRESIDENT DURABLE CORPORATION; KEITH
       HALL, PRESIDENT AND CHIEF EXECUTIVE OFFICER THE NATIONAL
     ASSOCIATION FOR THE SELF-EMPLOYED; KEVIN KUHLMAN, DIRECTOR OF
        GOVERNMENT RELATIONS NATIONAL FEDERATION OF INDEPENDENT
     BUSINESS; DANIA PALANKER, ASSISTANT RESEARCH PROFESSOR CENTER
           ON HEALTH INSURANCE REFORMS GEORGETOWN UNIVERSITY

                         STATEMENT OF TOM SECOR

        Mr. SECOR. Good morning, Chairman Chabot, Ranking Member
    Velazquez, and members of the House Small Business Committee. I
    want to thank you for the opportunity to address this body in
    reference to the current conditions that small businesses are
    facing since the passage of the Patient Protection and
    Affordable Care Act, ACA, and offer some solutions as Congress
    works to improve the law.
        My name is Thomas E. Secor, and I am the president of
    Durable Corporation and a board member of the National Small
    Business Association, NSBA.
        Fewer and fewer small businesses, especially those with
    less than 50 employees, offer health insurance as an employee
    benefit. This is not because they do not want to; it is because
    they simply cannot afford to offer a plan. At Durable, I had to
    make the difficult decision, in 2014, to no longer offer health
    insurance due to the increased cost and complexity of having to
    move to an ACA-approved plan. Then the Obama administration
    ruled we can continue our non-ACA approved plan due to the
    failure of a small business market developing. And each year
    since, we wait to hear if we can continue. To date, we still
    offer health insurance. Even with a non-ACA approved plan, our
    average total cost per employee has risen 51.7 percent between
    2013 and 2017.
        According to NSBA's Health Care Survey, offering health
    insurance as an employee benefit is something the majority of
    small businesses think is very important in terms of recruiting
    and retaining good employees. Yet, with the huge healthcare
    cost increases and the continual struggle to navigate
    significant confusion and complexity within ACA, fewer firms
    report that they offer some kind of health-related benefit.
    NSBA's survey found that when it comes to ACA, the average time
    it takes for small businesses to stay abreast of all the
    changes to health care is 13 hours per month. That is nearly 4
    workweeks every year, and 90 percent reported premium increases
    at their most recent renewal, with 1 in 5 firms reporting
    increases exceeding 20 percent, while 69 percent reported an
    annual increase exceeding 20 percent over the last 5 years.
        It is no wonder one in four small firms are purposely not
    growing as a result of the ACA. Complexity and uncertainty give
    rise to a system that inappropriately overshadows and often
    stifles the ability of business owners and individuals to
    succeed, innovate, and pursue entrepreneurship. The NSBA survey
    shows that one-third of small businesses held off on hiring a
    new employee, and more than half say they held off on salary
    increases for employees as a direct result of high insurance
    costs. This continuous uncertainty and never-ending cost
    increases are not sustainable. Our employees who get up and go
    to work every day deserve better, deserve more certainty,
    deserve more consideration, deserve to have access to
    affordable health insurance and high-quality healthcare
    services.
        NSBA is focused on reform efforts to fix some of the issues
    most burdensome to small businesses, understanding that the ACA
    as passed was primarily about expanding access, not reducing
    cost. Efforts should be made to prioritize healthcare cost
    containment and reduce the rate of medical utilization while
    improving healthcare quality and empowering consumers.
    Incumbent on any requirement to purchase health insurance is a
    need to ensure that appropriate and affordable coverage is
    available for all. With a goal of universal participation,
    there is a need to strike a balance between the population
    served, the premiums charged, and the underwriting risk.
    Wasteful, inefficient, and improper health care is contributing
    astronomical sums to the overall cost of U.S. health care and
    will likely continue absent engaging consumers in their own
    health care.
        The Institute of Medicine estimates that $105 billion of
    annual waste in healthcare spending can be attributed to the
    lack of competition and excessive price variation. A lack of
    public information on the price of healthcare services
    contributes to this waste by denying employers, purchasers, and
    consumers the information they need to make smart choices.
        The small business community needs substantial relief from
    the ACA. This level of relief can only be achieved through a
    broad reform of the current healthcare system with a goal of
    reducing cost and added expenses, focusing on individual
    responsibility and empowerment, creating the right market-based
    incentives and persistent emphasis on improving quality while
    driving out unnecessary, wasteful, and harmful care.
        Again, thank you for what I consider a true honor to be
    able to address this Committee of elected officials in our
    Nation's capital, and I look forward to answering any of your
    questions.
        Chairman CHABOT. Thank you very much.
        Mr. Hall, you are recognized for 5 minutes.

                        STATEMENT OF KEITH HALL

        Mr. HALL. Thank you, Mr. Chairman, Ranking Member
    Velazquez, members of the Committee. Thanks so much for having
    this hearing on this obviously very important topic.
        My name is Keith Hall. I work with the National Association
    for the Self-Employed. We have about 150,000 members in all 50
    States. We represent over 27 million self-employed business
    owners. Virtually all of those businesses have very few
    employees. About half of them work out of their home, and their
    average gross family income is about $90,000. It is estimated
    by the year 2020, that number is going to be 50 million self-
    employed. Now, to put that in perspective, the IRS processes
    about 150 million tax returns a year. So by 2020, one out of
    three tax returns will have a self-employed business attached
    to that tax return. My point, of course, is this is a very
    important part of our economy, of our culture, and of our
    healthcare decisions. So thanks again for holding this hearing.
    I think this is very, very important.
        The ACA concentrated on three areas: quality, access, and
    affordability. In a lot of ways, the ACA got some stuff right,
    especially as it relates to quality and access. There are over
    11 million Americans who are covered today that would not be
    covered without the ACA. Those with preexisting conditions and
    those with incomes below the thresholds now have coverage that
    they would not have had before. Those people can now go to the
    doctor with pride and with dignity. I like that. I think we
    made a difference.
        I think we, as citizens, as Americans, are called to help
    people that need help. And I like that. I do believe whatever
    solution we find needs to include some level of subsidies for
    those that need help, and an exclusion from screening against
    preexisting conditions. I think that is very important.
        I think quality and access have been helped, but I think it
    has been a struggle. The number of actual health plans has
    dramatically decreased, and the number of insurance companies,
    as the chairman mentioned, has dramatically decreased. Some
    have given up. Many places only have one ACA option. I think
    considering opening up interstate ability to expand some plans
    may give more options, and I think we should certainly look at
    that. I think the discussion should also include access to
    healthcare, not just access to health insurance.
        Now, I would like to spend most of my time talking about
    affordability. I think that is where we really struggled. I
    think it is important to note that the self-employed business
    owner considers this a business expense. The self-employed is
    unique in that we really have to pay twice. We have to pay the
    cost, but then, also, if we are sick or out of work, our
    business suffers, also.
        Now, as I mentioned before, the average family income is
    about $90,000 for this group. Now, that is right at the
    threshold where they do not get subsidies, and so that makes it
    extra difficult. As an example, a family in Cheyenne, Wyoming,
    will pay about $14,000 a year for a Silver Plan. That is about
    16 percent of their income. We have got to concentrate on
    lowering that cost. Some options could be incentives for
    younger and healthier people, give them incentives. Maybe
    reducing some of the mandated benefits that exist now, and then
    maybe some of the expansion of ability to go interstate could
    help as well. This is the toughest part of the discussion
    because how do we pay for all that we want?
        And I know at some point the cost is going to be the cost.
    But this is the most important thing I want to say today. Even
    after we do all that we can do to reduce cost, the self-
    employed business owner will still pay 15.3 percent more for
    their health insurance just because of the tax code. That same
    family in Cheyenne, Wyoming, is going to pay $2,100 more for
    their health coverage just because they are a self-employed
    business owner. That just does not make sense to me. The reason
    is their health insurance is not deductible as a business
    expense. And this is easy to fix. Congress can just move the
    deduction off of page 1 of their tax return over to the
    Schedule C. That saves 15 percent right here, right now. Easy
    to do.
        Now, I wish I had a great solution. I wish I could stand in
    front of this Committee, lay out a specific plan that covers
    everybody, everywhere, for everything, and then show you an
    easy way that we can pay for it. But, I am not that smart. I
    do, however, believe strongly in the American small business.
    My only formal request is that those self-employed business
    owners have exactly the same rules as big businesses do. If big
    businesses get a deduction for their health insurance cost,
    small businesses should as well. If big businesses can use
    flexible spending accounts, health reimbursement arrangements,
    then small businesses should as well. If big businesses get a
    lower net tax on their net income, small business owners should
    have that lower tax rate benefit as well.
        I know this is really sappy, but I believe in small
    business. I believe in what the American spirit can do. Small
    business owners are creative, intuitive problem solvers. They
    will figure this out. Tell us the rules, but then let the rules
    be the same for everyone.
        And thank you so much for the opportunity to be here. I
    really appreciate what you guys do for us every day. So thank
    you.
        Chairman CHABOT. Thank you very much.
        Mr. Kuhlman, you are recognized for 5 minutes.

                       STATEMENT OF KEVIN KUHLMAN

        Mr. KUHLMAN. Thank you, Chairman Chabot, Ranking Member
    Velazquez, thank you, and members of the Committee. Thank you
    for the opportunity to testify at this important and timely
    hearing. My name is Kevin Kuhlman. I am the director of
    Government Relations at the National Federation of Independent
    Business.
        The Affordable Care Act has led to higher healthcare costs,
    increased compliance burdens, and decreased flexibility for
    small businesses. These consequences resulted in a significant
    25 percent reduction in the offer rate for small businesses
    between 2010 and 2015. For the first time, fewer than 30
    percent of small businesses offered health insurance to their
    employees in 2015. As Congress considers a partial repeal of
    the ACA through reconciliation and a repair of the health
    insurance markets, please prioritize affordability,
    flexibility, and predictability for small businesses. Health
    reform that works for small business will work for the rest of
    the country.
        The cost problem predates the ACA, but the law exacerbated
    this problem. The ACA was the most significant Federal overhaul
    of the individual and small business health insurance markets
    ever. Forty-one percent of small business owners purchase
    health insurance in the individual markets and 33 percent
    purchase insurance through their business. The ACA added new
    insurance requirements and taxes to these markets that drove up
    plan costs. These costs are passed along to small business
    owners and employees in the form of higher health insurance
    premiums and out-of-pocket costs.
        For small business owners, increased costs are unlikely to
    be offset by tax credits. Only 6 percent of small employers
    received an advanced premium tax credit in the individual
    exchange marketplace. Many of the 9 million unsubsidized
    individuals in the broader individual market are small business
    owners. Few small businesses qualified for the Small Business
    Health Insurance Tax Credit, and the credit expired last year
    for the few businesses that did initially qualify. This
    population needs the most cost relief.
        The ACA implementation by the Departments of Health and
    Human Services, Labor, and Treasury increased compliance and
    paperwork burdens for small businesses. The biggest current
    compliance headache is the employer mandate. Businesses must
    track the cost of coverage for each employee monthly, provide
    current and former employees with a Form 1095, and provide the
    IRS with a Form 1094. Whether outsourced to a payroll company
    or handled within the business, these increased compliance
    requirements again result in higher costs for small businesses.
        IRS regulations limited flexible arrangements that were a
    common market practice for small businesses. Fewer and fewer
    small businesses can afford the high cost of group health
    insurance. Instead, to assist employees with healthcare costs,
    many small businesses directly paid for or reimbursed
    employees' individual market health plans and qualified medical
    expenses. NFIB estimated 16 percent of businesses reimbursed
    employees for insurance they purchased on their own in the year
    2015. The IRS prohibited these arrangements and threatened $100
    per employee per day penalties. Penalties of this magnitude
    would be catastrophic for small businesses, forcing many to
    close their doors.
        Repeal will eliminate taxes and mandate penalties, but more
    action must be taken to lower costs and increase coverage
    options for small business. Congress cannot only pass repeal
    legislation without considering replacement legislation that
    focuses on affordability, flexibility, and predictability for
    small businesses.
        On affordability, reconciliation rules prevent
    reconsidering the increased health insurance requirements in
    repeal legislation. Adjusting tax and insurance rules with a
    laser-like focus on affordability will organically increase
    coverage for the small business population.
        On flexibility, NFIB continues to advocate for innovative
    offering arrangements. NFIB supported the Small Business
    Healthcare Relief Act that allowed businesses to contribute to
    their employees' individual market plans with tax preferred
    dollars. The ACA eliminated these innovated offering
    arrangements, as I mentioned earlier, but NFIB, with some other
    small business organizations, helped lead the effort to restore
    them on a limited basis in the 21st Century Cures Act, and we
    appreciate Congress for doing so. Expanding these arrangements
    will allow small businesses to tailor benefits that fit their
    employees' needs and could help stabilize the individual
    insurance market.
        On predictability, during the repeal-and-repair process,
    Congress and the administration must avoid disrupting the
    fragile individual and small business health insurance markets.
    Congress or the administration should allow individuals and
    businesses to keep their transitional plans by relaxing
    grandfather plan regulations and extending the Obama
    administration's grandmother plan extension policy. These
    policies could also enroll new individuals and business
    customers to ensure true choice.
        Small business was an afterthought during ACA consideration
    and implementation. NFIB remains committed to advocating for
    solutions that promote affordability, increased flexibility,
    and ensure predictability for small businesses.
        Thank you for allowing me to testify today. I look forward
    to any questions.
        Chairman CHABOT. Thank you very much.
        Ms. Palanker, you are recognized for 5 minutes.

                      STATEMENT OF DANIA PALANKER

        Ms. PALANKER. Chairman Chabot, Ranking Member Velazquez,
    and members of this Committee, thank you for the opportunity to
    participate in today's hearing about the healthcare marketplace
    for small businesses.
        My name is Dania Palanker. I am an assistant research
    professor at Georgetown University Center on Health Insurance
    Reforms. However, the views I share today are my own and do not
    represent those of the university, its faculty, or staff.
        Small businesses have long struggled to provide health
    insurance to their workers facing high and often volatile
    premiums. These struggles have existed for decades. One of the
    goals of the Patient Protection and Affordable Care Act was to
    lessen these burdens.
        In 2012, before the ACA was fully implemented, only half of
    businesses with 3 to 9 workers, and less than three-quarters of
    businesses with 10 to 24 workers offered health insurance. The
    small group market provided coverage to only one in five small
    business owners with less than 25 workers. And workers of small
    businesses who received insurance historically had less
    generous coverage than those working for large employers, with
    higher deductibles and lower contributions for their
    dependents.
        Health plans for businesses with less than 15 employees
    were not required to cover maternity services in 35 States and
    the District of Columbia, leaving some workers and their family
    members or their spouses without coverage for tens of thousands
    of dollars for the costs of childbirth and prenatal care. A
    Cesarean delivery was actually about--the average cost was
    about the same cost of median income.
        Health insurers in 23 States were not required to include
    mental health coverage in small group plans, and there was no
    Federal requirement to cover substance use disorder treatments,
    such as opioid addiction, and small businesses could purchase a
    plan without prescription drug coverage.
        Today's small businesses have more choices. They can offer
    their workers the same plan if the issuer made the decision not
    to terminate the plan. Small businesses can choose to purchase
    in the traditional small business market or through the shop
    marketplace. And they can help workers purchase coverage
    through the individual market, including providing premium
    support as we have heard because of the recent passage of the
    21st Century Cures Act. There is no penalty for employers with
    fewer than 50 employees that do not provide health insurance.
    And finally, small business owners and individuals who are
    self-employed can enroll themselves and their families through
    the individual market.
        Prior to the ACA, the individual market was not an option
    for many small business owners, the self-employed, and their
    workers. Applicants were denied coverage because of preexisting
    conditions, including a history of a Cesarean section, a cancer
    diagnosis, even acne. And those who did receive coverage often
    would have the coverage for preexisting conditions excluded.
    People experienced job lock where they would feel locked into
    their job because that was the only way they could access
    health care. And that also prevented people from starting their
    new business, preventing entrepreneurship.
        And small business owners and entrepreneurs are getting
    coverage through the ACA. Almost 10 percent of small business
    owners purchased coverage through the individual health
    insurance marketplaces in 2014, and as marketplace enrollment
    has grown since then, we expect that more have been covered
    since then. In States that expanded Medicaid, there is a
    healthcare safety net for entrepreneurs if they start a
    business that is not profitable in the first few years.
        The uninsured rate for small business workers has fallen by
    10.8 percentage points in just the first year of the
    marketplaces in 2014. And this was due to people enrolling in
    individual insurance and Medicaid. And small businesses are
    also benefitting from an unprecedented slowdown in healthcare
    cost growth. So while premiums are growing, they're growing
    significantly slower than they were prior to the Affordable
    Care Act. For small employers with less than 50 employees, a
    national survey found that there was only an average 4 percent
    rate increase for single coverage and 4.2 percent for family
    coverage between 2010 and 2015, and the rate increase was
    actually only 1 percent between 2014 and 2015.
        Before the Affordable Care Act, a small business could see
    a large double-digit rate increase because only one or two
    workers had high medical costs, such as one employee having an
    HIV diagnosis or a premature baby being born that had to spend
    many days in the NICU. Small businesses with female workforces
    paid higher premiums. Some employers were charged more because
    of the industry and the occupation of their employees. For
    decades the small group market has actually failed small
    businesses and their workers, and the result was that many went
    without insurance. And the ACA has improved and is continuing
    to improve access to coverage. Thank you.
        Chairman CHABOT. Thank you very much.
        We will now ask questions, and I will yield myself 5
    minutes to begin. And I will begin with you, Mr. Kuhlman, if I
    can.
        Towards the end of your statement you made, I thought, a
    very strong comment. I will repeat it. You said that small
    business was an afterthought in consideration and
    implementation of Obamacare. Could you expand upon that? You
    know, why do you think that is the case and what is a better
    alternative, especially since you are here before the Small
    Business Committee?
        Mr. KUHLMAN. Thank you for the question. During
    consideration, NFIB was active throughout the consideration and
    trying to be productive and helpful through the discussions
    with Chairman Baucus to House discussions, designing a health
    insurance tax credit. We provided a suggestion and we were
    told, no, we are going to do this one instead. And the one that
    ended up being created was just too limited on many factors,
    and that was clear from, I think, the results. Four million
    postcards were sent out advertising the credit, and I think we
    are under fewer than 200,000 business have been able to take
    advantage of it. Just too many limitations.
        The second portion is the Small Business Exchange. Again,
    we tried to be productive during consideration, and even
    formulation through the regulations, and it just did not really
    offer anything different than what already existed. The
    exchange was eventually where you could claim the tax credit,
    but again, I do not think it was anything innovative or
    different enough to incentivize businesses to begin offering or
    to move toward that and shift from what they already do offer
    if they were on the outside market.
        Chairman CHABOT. Thank you very much. Thank you.
        Mr. Secor, I will move to you at this point. As a small
    business owner who has continued to try to offer the best
    insurance options possible to your employees, has Obamacare
    made it easier or harder to continue to offer insurance to your
    employees? What changes would you specifically like us to make
    that would make it easier for you as a person in small business
    trying really to do the best for your employees as far as their
    health care goes?
        Mr. SECOR. The ACA, if it would have been fully
    implemented, would have put us out of the insurance market. It
    was just totally unaffordable. The rates we got we could not
    pay. And the complexity, I believe it was over 10,000 pages
    added to the Federal Register. The amount of time it takes us
    to--you know, when you look at 4 weeks a year, workweeks that
    you are spending trying to figure out things, we do not have,
    you know, corporate attorneys and staffs of people to sort
    through this stuff. We tend to find out about stuff like that
    when a regulator is knocking on the door and it is not a
    pleasant situation. So, you know, the complexity is huge in
    this.
        I think the intent, you know, it is fine, but the intent
    was too focused on expanding coverage. You have to address
    cost. And you can talk about any additional coverage you want,
    and there is a lot of good quality reasons to add this coverage
    or that or whatever, but if you add a coverage and now it is
    not affordable and a company has to drop their insurance, well,
    this person got coverage and these 10 people lost everything
    they had. And that is where we need some--we sort of think the
    idea of a bare-bones medical plan, if you will, or medical
    insurance like we used to have years ago, coupled with an HAS,
    maybe would allow the individual to sort of spend their money
    where they need to spend it on a personal basis and yet still
    have that umbrella coverage that if they or their children
    break an arm or were in a car accident or did get some disease,
    they would have a coverage. But that basic level of coverage,
    the cost has to be affordable.
        Chairman CHABOT. Thank you.
        I have only got about a minute left. Mr. Hall, I am going
    to ask you to work miracles here and see if you cannot answer
    two questions for me. One is, you voiced your support for
    allowing insurance companies to sell their insurance across
    state lines, I assume to increase the competition to bring
    costs down. So if you could talk about that and why you think
    that is a good thing.
        Secondly, under the 21st Century Cures Act that we passed
    last year, it lifted some of the restrictions on the use of
    health reimbursement accounts, but there are still some
    restrictions that remain, how would you like to see those
    changed?
        Mr. HALL. Okay. As far as opening competition, I do think
    that is a good thing. I am certainly not an economist. I am not
    smart enough to understand all the implications of that, but I
    do recognize that when you are in Lincoln, Nebraska, and you
    only have one option, it is difficult for them to choose what
    is best for you and your family.
        Back to the overall cost. If increasing competition by
    allowing carriers to go into other States would provide us an
    opportunity to increase choice and reduce cost, then that has
    got to be a good thing. If that does not work, then it seems to
    be pointless, but it still goes back, as you probably heard
    through a bunch of different people, it still comes down to the
    cost.
        The HRA is one of my personal pet peeves. The smallest
    businesses struggle with the cost of a group plan. It is very
    difficult for a business who has three employees to get a Blue
    Cross Blue Shield, ACA-compliant, major medical plan and stay
    in business. But if they can provide $1,000, $2,000, $3,000,
    whatever their budget will allow to help their employees with
    the cost, then we should promote them being able to do that.
    And an HRA, a health reimbursement arrangement, is exactly how
    they do that.
        So I would prefer removing all restrictions, and if there
    is a qualified medical expense, as defined in the Internal
    Revenue Code, that an employee incurs, the business ought to be
    able to reimburse that with a tax benefitted status. It just
    seems like an easy decision to me.
        Chairman CHABOT. Okay. My time is expired.
        The gentlelady is recognized for 5 minutes. The ranking
    member.
        Ms. VELAZQUEZ. Thank you, Mr. Chairman.
        Ms. Palanker, is it not true that before the ACA premiums
    in the small business market were skyrocketing and employers
    were dropping their coverage?
        Ms. PALANKER. Yes, that is true. The increase in employer
    premiums, including for small businesses, did not start with
    the passage of the Affordable Care Act. It had been happening
    for many, many years, which was one of the reasons that the
    Affordable Care Act was needed. And there actually was a
    dramatic cut in small employers offering health insurance
    before the Affordable Care Act passed. And I will also add that
    some of the employees who used to get coverage through a small
    business that are not anymore are now able to get coverage
    through the individual market.
        Ms. VELAZQUEZ. Thank you.
        Mr. Secor, like nearly 96 percent of all American firms,
    you have fewer than 50 employees, correct?
        Mr. SECOR. Yes.
        Ms. VELAZQUEZ. So automatically, you are exempted from the
    employer mandate?
        Mr. SECOR. That is correct.
        Ms. VELAZQUEZ. Correct. So given that you are not subject
    to the mandate, what aspects of the Affordable Care Act
    specifically have been a regulatory burden to you?
        Mr. SECOR. Well, if we are going to offer insurance, then
    you end up offering through the ACA. And once you get in, you
    have all the rules and regulations still apply. The fact that
    we have fewer than 50 employers, you are correct, we do not
    have to offer insurance.
        Ms. VELAZQUEZ. Correct.
        Mr. SECOR. But morally, those employees----
        Ms. VELAZQUEZ. No, if you offer it through the ACA, you are
    going to get more options than you got before.
        Mr. SECOR. Actually, we got less. We had one carrier that
    was willing to offer insurance is what our insurance agent told
    us, that there was one. Now, here again, I am in a rural
    section in Ohio, and I think that is part of the difficulties,
    and that is where you see some of the things have occurred is
    that, you know, in the State of Ohio, we have 88 counties and
    we have 3 what I will call major cities for us: Cleveland,
    Columbus, Cincinnati. And we have a handful of other ones, but
    most of Ohio is rural and so we do not get the kind of
    coverage. If you are in Cleveland, Columbus, Cincinnati, you
    had options. We did not. And it was explained to me that is why
    they allowed us to continue to offer that insurance is because
    we did not get the option.
        Ms. VELAZQUEZ. So, Ms. Palanker, based on your research and
    data, does it reflect that in rural America you get less
    coverage than prior to the enactment of the ACA?
        Ms. PALANKER. Health insurance varies and the issuers vary
    tremendously across the country, and it has always been true
    that in small rural areas there have been less options for
    health coverage than large areas, and there have been certain
    States that have more competition than others. But I would add
    that we do have now the added--I think the individual market
    option for small businesses is very important because for those
    that cannot afford the coverage or do not have those options it
    is something there now for their workers.
        Ms. VELAZQUEZ. Thank you.
        Mr. Kuhlman, the ACA instituted a number of reforms that
    serve to create a more predictable small business market. One
    such reform was prohibiting different prices for coverage based
    on health status or gender of employees. Do you think we should
    go back to a scenario where some small businesses, such as
    those who hire predominantly women, are charged higher
    premiums?
        Mr. KUHLMAN. I do not believe that. I think you are
    referring to underwriting. And there were winners and losers in
    that older system and there are likely winners and losers in
    this new system. But I do not think we need to go back to a
    heavily underwritten thing. But I would encourage more
    flexibility.
        Ms. VELAZQUEZ. Okay. Ms. Palanker, Republicans have not
    agreed upon a concrete proposal to replace the ACA. However,
    most offered plans have a few common elements, including
    expanding health savings accounts, establishing new tax credits
    for health coverage, and restructuring Medicaid through the use
    of block grants. Could you please discuss the merits of these
    proposals and likely impact on consumers, particularly those
    from low- and middle-income families?
        Ms. PALANKER. These proposals are good if you are wealthy
    and healthy, and if you have health problems, if you are
    moderate or low income, they really provide a lot of struggles.
    The health savings accounts work for people who have the
    disposable income to put into the health savings account and
    for the people who do not end up using that entire account for
    their health care. If not, it is really just shifting from the
    insurance paying for the cost to people paying out of pocket.
        For Medicaid, we have a longstanding process of Medicaid
    being a State and Federal partnership, and if it is
    significantly restructured into a block grant, you are actually
    taking a situation where when we have economic downturn, the
    risk of that downturn is now put on the States who are forced
    to, unfortunately, cut benefits or cut employees, people off of
    Medicaid at a time when it is most important to have.
        Ms. VELAZQUEZ. Thank you, Mr. Chairman. Thank you for your
    indulgence.
        Chairman CHABOT. Okay. The gentlelady's time has expired.
        The gentleman from Iowa, Mr. King, is recognized for 5
    minutes.
        Mr. KING. Thank you, Mr. Chairman. I want to thank the
    witnesses for your testimony today.
        And I direct my first question to Mr. Hall. I am using a
    little bit of thinking about how businesses start and grow into
    Fortune 500 companies and how often it is an entrepreneurial
    individual in a garage or a shop somewhere that has an idea. Or
    I am thinking about the local carpenter who went to work for
    the construction company and decided to go out on his own, take
    his tools. Now, the day that he goes out there and starts to
    pound his own nails in his own little self-employed little
    company with no employees, is his health insurance deductible
    on that day?
        Mr. HALL. Well, interesting question. And thanks for the
    question. But on that day when he becomes self-employed, if he
    has exactly the same cost, exactly the same policy, nothing
    changes other than who cuts a check to him for his services, he
    pays 15.3 percent more for his health insurance beginning that
    day simply because the insurance is not deductible.
        Mr. KING. It is whether or not he has employees?
        Mr. HALL. It is whether or not he, himself, is an employee.
    Now, interesting, because as a small business owner, if he
    hires employees, he has got three people and he has the ability
    to pay for their insurance, he does get a full deduction for
    his employees' insurance. But his insurance, for him and his
    family, 15.3 percent more just because he is self-employed.
        Mr. KING. But if he is running a sole proprietorship and he
    is not drawing his salary out of that and not paying himself,
    but he is paying the expenses out of the business itself
    without any corporation, just a sole proprietorship, then can
    he then deduct his health insurance premiums?
        Mr. HALL. His premiums are deductible, but only on the face
    of his 1040, on page 1, not as a business expense.
        Mr. KING. Standard deduction?
        Mr. HALL. Not standard. It is on page 1, self-employed,
    line 29, instead of being a business expense. So he pays taxes
    for FICA, Medicare, self-employment tax, basically 15.3
    percent. If he worked for the old carpentry company as an
    employee, even if he paid his own health premiums, most likely
    the company had a cafeteria plan, a 125 plan that he paid for
    all of those expenses pretax. So bottom line, at the end of the
    day, my example, the family in, Wyoming, at the end of the day,
    that family has $2,100 less in cash. No other differences.
        Mr. KING. That is what you describe in your testimony, the
    $2,100 difference. And so here is some of the narratives that
    come to me. We have a lot of farming families that surround me,
    thankfully, and if they do not have an employee, they tell me
    they are allowed to deduct the health insurance premiums as an
    expense if they are a partnership or a husband-and-wife team.
    Would you concur with that?
        Mr. HALL. Well, again, and this is a critical point, I
    appreciate you bringing this up. I will pay you later for
    planting this question. But the important point is most people
    do not understand the difference in how the premiums are,
    indeed, deductible. So point blank answer to your question,
    yes, those premiums are deductible. But not in the same way as
    big businesses. So, yes, they are deductible, but not in the
    right place on the return.
        Mr. KING. Okay.
        Mr. HALL. So that farmer still is paying 15.3 percent more
    for their health insurance.
        Mr. KING. And then if he hires a part-time employee and
    pays for the health insurance for that part-time employee, does
    that change the deductibility of the farmer and his wife?
        Mr. HALL. Negative. Still the same.
        Mr. KING. Okay.
        Mr. HALL. And if you do not mind, if I could expand, the
    thing that really hurts my heart is that carpenter or that
    individual that did not take that plunge into their American
    dream for being self-employed, but they became self-employed
    kind of by accident: the company laid them off, the company
    decided for whatever reason we no longer have employees, we are
    only going to deal with independent contractors, you are going
    to do the same thing for us you did before, yet you do not have
    vacation, you do not have paid time off, and you do not have
    health insurance. That person now still pays 15.3 percent and
    they did not even make the choice. They are like a necessity
    entrepreneur. Those are the ones that really reach out and
    touch me.
        Mr. KING. Let me pose another thing that I heard here, and
    that is all very interesting and I am awfully glad you are here
    as a witness to clarify these delicate points that they are.
    When I am listening to the discussion about selling insurance
    across State lines and the discussion about what should be
    mandated in health insurance premiums, does anyone on the panel
    have the ability to describe how we can have a successful
    competition established between the 50 States if we repeal the
    components of McCarran-Ferguson that allow for States to write
    monopolistic legislation? Can we maintain Federal mandates and
    still allow for competition between State lines or does that
    nullify? And I would ask Mr. Hall while I have got you here.
        Mr. HALL. My first thought is that probably that would take
    an act of Congress, so that is up to you guys. I do believe
    that is a possibility. I think as we go through the concept of
    mandates, of shared responsibility penalties, people who chose
    not to have an ACA-compliant plan, we encourage them to get an
    ACA plan with a negative encouragement. We said if you do not
    do it, we are going to penalize you. I like both. I like the
    negative penalty, but I also like encouraging people. So if
    part of this nationwide group could include incentives for
    younger people, healthier people to get into the pool, I am not
    an actuary, but that helps the math----
        Mr. KING. Thank you.
        Mr. HALL. --if more healthy----
        Mr. KING. I would ask unanimous consent for an additional
    minute.
        Chairman CHABOT. Seeing no objection, the gentleman is
    recognized for an additional minute.
        Mr. KING. Thank you, Mr. Chairman. I will try to go fast.
        I would like to turn to Mr. Secor and ask you, as I see
    this, if we have mandates that are put on at a Federal level
    and we are trying to establish competition between the States.
    And if it is for the opioid addiction, as the gentlelady
    mentioned, or OB care or preexisting conditions even or
    whatever it might be, can you see how we would end up with
    competition between the States if we loaded them up with
    mandates that all States had to comply with?
        Mr. SECOR. I guess our focus from the NSBA side is still on
    cost. And the more mandates you put on, the higher the cost of
    the product is going to be. So whether there is competition or
    not, you are still going to be driving the cost of that basic
    coverage up and then it does not become affordable. How that
    works in that market, to be quite honest, I really do not know.
        Mr. KING. That is still a clear answer, and so I appreciate
    it. And I thank you, Mr. Chairman. I yield back. Thanks.
        Chairman CHABOT. The gentleman yields back.
        The gentleman from Pennsylvania, Mr. Evans, is recognized
    for 5 minutes.
        Mr. EVANS. Thank you, Mr. Chairman.
        Ms. Palanker, the question I would like to ask you is what
    can you share your thoughts on the small business tax credit?
    And what are your thoughts on how to make the incentives more
    appealing to small employers?
        Ms. PALANKER. For the small business tax credits that were
    eligible and used the tax credit, it was very helpful to make
    coverage more affordable. I believe the tax credit could be
    expanded for higher--you know, for employers with higher wages.
    It did sort of go out very quickly once an employer started
    having more employees. So it could be really a more robust
    credit that could also go longer and is an option to look at to
    help make coverage more affordable for small businesses.
        Mr. EVANS. Do you have any thoughts or suggestions in terms
    of people taking advantage of it, sort of incentives?
        Ms. PALANKER. Well, I think for the small business tax
    credit, although there were postcards sent, there still was
    research shown that people did not know it was available. One
    piece is people do need to know that the credit is available.
    In addition, when it rolled out, it rolled out at the time that
    SHOP was very new. You had to buy the coverage through SHOP. So
    I would say to sort of continue the credit and get more people
    to enroll, it is really trying to both make sure that the
    employers know it is there and that it is designed to both work
    with the employers and work with the insurance options
    available.
        Mr. EVANS. Thank you.
        Mr. Kuhlman, you stated that during the repeal-and-repair
    process, Congress and the administration must avoid disrupting
    the individual and small business health insurance market. In
    your view, what is the leading components that must be
    implemented by a replacement proposal?
        Mr. KUHLMAN. I am a broken record, so I just say focus on
    affordability, flexibility, and predictability. You know, I do
    not have a plan to present to you today, but we remain very
    interested in working together as that plan proceeds.
        Ms. VELAZQUEZ. Will the gentleman yield?
        Mr. EVANS. Yes.
        Ms. VELAZQUEZ. And do you think the Republicans have a
    plan?
        Mr. KUHLMAN. I think there are many plans out there. I have
    read the A Better Way plan. A lot of things that we agree with
    in that plan.
        Ms. VELAZQUEZ. What are those things that you agreed on
    with those plans?
        Mr. KUHLMAN. Well, in that there is a little bit more
    affordability, flexibility, and predictability. There is an
    expansion of the Small Business Health Care Relief Act.
        Ms. VELAZQUEZ. Well, can you help me identify what piece of
    legislation contains those elements?
        Mr. KUHLMAN. Well, I mentioned the Small Business Health
    Care Relief Act that we supported last Congress that was
    partially put in the 21st Century Cures Act.
        Ms. VELAZQUEZ. Okay. That was last Congress. But I am
    talking about today. People are talking about repeal, though I
    hear now they might just--thank you.
        Mr. KUHLMAN. I would love to be helpful.
        Ms. VELAZQUEZ. Yeah. Well----
        Mr. EVANS. Let me follow up. Your view is that Congress
    should equalize the tax treatment between the group market and
    the individual market. Can you share your thoughts on the small
    business tax credit?
        Mr. KUHLMAN. Again, I just think it was too limited. When
    it was designed, I feel like it said, here, we have a box. Now,
    let's fit this into the box. And it was driven by a cost
    target. So it was estimated $40 billion worth of tax relief,
    and that sounds pretty good. I think more recently that
    estimate has been revised downward three or four times to less
    than $10 billion now. And for folks who did take advantage of
    it, it is over. I had one business from Pennsylvania who said,
    you know, as the ACA started, I moved to the SHOP, small
    business, because I was able to take the tax credit. Now it is
    over. Comparing plans inside SHOP to outside SHOP, the outside
    SHOP ones were better. So I was in the SHOP with the tax credit
    and then that credit disappeared, so now I am out. So I would
    be happy to work with you on that or to simplify or broaden any
    tax credit.
        Mr. EVANS. Thank you, Mr. Chairman.
        Chairman CHABOT. The gentleman yields back. The gentleman's
    time is expired.
        The gentleman from Mississippi, Mr. Kelly, who is the
    Chairman of the Subcommittee on Investigations, Oversight, and
    Regulations, is recognized for 5 minutes.
        Mr. KELLY. Thank you, Mr. Chairman. And thank all you
    witnesses for being here.
        Mr. Secor, you know, us southerners do not do
    pronunciations very well, but in your written testimony you
    talk a little bit about how your workforce has gotten younger
    in recent years and how that is affecting your health insurance
    rates. In your experience, what are the reasons that young
    people are declining coverage? And then as an ancillary to
    that, it appears to me if younger people are entering the
    workforce, that insurance rates should go down because they
    have less health costs, but, in fact, what is happening is that
    it is less because they are declining. So if you could comment
    on that, Mr. Secor.
        Mr. SECOR. Well, I think one of the things that happened in
    ACA is they narrowed the bands. There was five bands of
    coverage and they went down to three. And I think possibly one
    of the thoughts was, okay, we are going to start, you know,
    here and work down and at the bottom, work up, so to speak.
    Well, they really did not do that. They started at the top and
    worked down. So the health--because from the insurance
    perspective, okay, here is our major risk. We are going to try
    to price this accordingly. And what it did is it made it just
    extremely unaffordable for those younger employees. I mean, and
    that is what--as we have seen retirees and these young
    employees come in, I mean, I talk to them and they just say,
    you know, we really cannot--it is not worth the money. And they
    look at themselves sometimes as indestructible being young
    people. And I guess I was probably that way a long time ago,
    too. But nonetheless, you know, we have to broaden that market.
    And increasing the bands would be, I think, a possibility to at
    least provide different rates.
        Mr. KELLY. And also for you, you and I are both from rural
    areas. And can you talk about the importance of access to
    telemedicine and urgent care clinics? And do you think your
    employees consider these alternatives when deciding on which
    health insurance plans to use?
        Mr. SECOR. You know, I am amazed at how smart our employees
    are. I mean, I get to go to work every day with 36 fantastic
    individuals. But when it comes to health care, what is
    interesting is buying health insurance, they are not prepared
    for. In their lives, they have never purchased this product.
    And the idea that they can just go out and buy this product, I
    selected annually with a health insurance specialist. You know,
    without that person at my side, I have the same problem. But if
    you have things in the plan that give them incentives, such as
    things like you mentioned where you have a health unit or
    whatever, I know specifically as our deductibles went up,
    MRIs--I had to have an MRI years ago and I was talking to some
    people on the shop floor. They said, no, no, no, do not go to
    this hospital. Go over here to this clinic. The hospital was
    $3,000. The clinic was $1,500. They knew this. They actually
    knew which store to go to get which kind of prescription drug
    because certain stores had a lower price than others. So there
    are parts of this they are very able and willing to embrace.
        Once again, the complexity of the overall insurance packet
    is extremely difficult, and especially, you know, when I look
    at employees that have been with us for 30 years and they have
    never bought this product in their lives, ever, and now all of
    a sudden it is like, okay, go buy health insurance, that is a
    tough one.
        Mr. KELLY. It is.
        And Mr. Hall, I am going to try to do this one real
    quickly. I think a lot of times we talk about the cost of
    insurance plans. However, I am from a poor State, so we do not
    have--if you make $90,000 in Mississippi, you are a rich
    person. And I mean that. You are in the upper echelon. So we
    talk about health care and the cost of the premiums, but we
    rarely talk about the cost of the deductibles. And even I, as a
    private employer, my deductibles went from being $500 a year to
    now it is not uncommon to have $5,000 or $10,000 deductibles.
    Well, if you add that to your premiums, the net effect is you
    are paying a tax and you are getting zero coverage until you
    expend like $15,000 or $20,000 a year. Do you think we are
    taking into account the high deductible as well as the cost of
    the plan?
        Mr. HALL. Well, I think we are. I think we are probably not
    taking it into account enough because it is a factor. I was
    actually doing a seminar in Eugene, Oregon, and was talking to
    a lady who is a hairdresser. She makes $40,000. Her husband is
    disabled, works part-time, makes some money, but they make
    $70,000 combined. They do not get any subsidies, but they pay
    $12,000 a year for an ACA plan and their deductible is $6,000.
    So the math does not work that they have to pay $20,000 or
    $18,000 before it kicks in because there is an out-of-pocket
    maximum, also, but the overall cost, that out-of-pocket is
    material. It is a material factor.
        And if I can go back to the previous question, you know,
    those kids that are over 26--and I am an authority on this
    because I have three kids that are in this age range--but they
    are at this point where there is like an age line and you can
    decide which side of the age line you are on. But if you get an
    illness, if one of my daughters, they feel like something is
    wrong, the very first thing they do is they go to Google and
    they research it and they find out. They are knowledgeable.
    They know what is going on. The telemedicine idea, expanding
    options, that is what they do. My mom, same situation. She felt
    something was bad. She made an appointment with her doctor. And
    I think that is a material difference with the young people and
    incenting them to be part of this pool is giving them different
    options, maximizing use of technology. All of those things can
    be very creative solutions to help get the young people into
    the pool.
        Mr. KELLY. Thank you, Mr. Chairman. My time is expired.
        Chairman CHABOT. The gentleman's time is expired.
        The gentleman from Florida, Mr. Lawson, is recognized for 5
    minutes.
        Mr. LAWSON. Thank you very much, Mr. Chairman. And anyone
    can respond to this.
        I have been in the insurance business for over 36 years and
    have done quite a bit of health insurance group coverage for
    employees and so forth. The problem that I see here is one that
    we are having to deal with, there are fixes for the Affordable
    Care Act, but it does not seem to be that anyone really wants
    to work and take care of the fixes it is so politicized, until
    one group says we just have to do the repeal and we are going
    to come up with something. And then you have the people on my
    side who are pretty much saying that no one has asked to get us
    involved and to make these fixes. And when during the course of
    the campaign, when I was campaigning, every rural community and
    every place I went they say take this message up to Congress.
    We want them to fix it, you know. And so, but how do you get
    there?
        You all have recommendations. We have an educator here, Ms.
    Palanker, and we are looking to get some recommendations, you
    know, so people can sit down and say the most important thing
    is health care regardless of who takes the credit. We are not
    worrying so much about who is going to have all the credit, but
    for people to have a pathway to get health care. And that is
    the thing that is kind of frustrating to be here for 30 days
    and to hear all the rhetoric coming from it.
        Mr. HALL. Well, I appreciate those comments, and I guess I
    do not want to say anything that will get me uninvited from any
    other opportunity to visit for this group. But one of the
    things I do hear that seems to be uncomfortable is I hear, you
    know, one group of people say if we do this, costs are going to
    go up. Then I hear another group of people say if we do this--
    if we do not do this, costs are going to go up. And it seems
    like the one consensus is that costs are going to go up.
        And back to what we have heard so much today is the
    affordability of the solution we choose is paramount. We have
    got to find a way, in my opinion, to expand the pool of covered
    individuals. Everyone having access to coverage. Everyone
    having access to health care I think is what you just said. It
    is difficult for me to see anyone who would stand up and say I
    disagree with that, everyone having the opportunity to get the
    medical care they need. Still, how do we pay for that?
        And my little platform, you know, my issue is, my number
    one goal is I would like for everyone to be on the same playing
    field. Now, I do not mean that every single person regardless
    of your income pays the same thing because obviously there
    should be different tiers, different subsidies, but the tax
    code should be treated the same for all businesses. Individuals
    should be able to have choice. And I think expanding those type
    of things is what we all should be talking about together. At
    least that would be my opinion.
        Ms. PALANKER. And I would say I think the starting point
    should be on the improved health insurance market. We have
    corrected some of the problems that small businesses faced
    prior to 2010 and prior to 2014, because we do have a system
    now where more people are covered and it is a system that is
    more fair and that has ended some discrimination. And that is
    very important.
        The other piece is when you consider cost, there are two
    sides of cost. There is cost of premiums and there is cost of
    health care. And if the way that you are bringing down cost of
    premiums is by limiting what the benefits are that are offered,
    somebody is still paying for that. It is just instead of the
    employer and the employee paying that through premiums, the
    employee that happens to need that health service that is no
    longer covered is facing paying that entire cost of that health
    care. Or if they are not paying for it, they are going without
    needed health care, which can be extremely detrimental to their
    health.
        Mr. SECOR. I would like to thank you for representing the
    people that sent you here, and I guess from the rural part of
    the country, the most important word in USA is the first one.
        Chairman CHABOT. Is the gentleman finished? The gentleman
    yields back. Thank you very much.
        The gentleman from Missouri, who is the Vice Chairman of
    this Committee, Blaine Luetkemeyer is recognized for 5 minutes.
        Mr. LUETKEMEYER. Thank you, Mr. Chairman. And thank the
    panelists this morning. I appreciate always having some small
    business folks who sit in that chair where they have to make
    lots of tough decisions, and sometimes that means going without
    a paycheck yourself in order to make sure that your employees
    get paid and make sure at the end of the day the rest of your
    bills get paid. So I understand what you go through and I
    appreciate you being here today and telling some of your
    stories.
        You know, it is interesting. I saw statistically 74 percent
    of the uninsured--or, excuse me, 74 percent of the people who
    are uninsured are employed, which tells me that it is a great
    way to deliver health insurance if we can find a way to allow
    the employers to be able to afford it. So it is not doable in
    every situation from the standpoint that businesses have to
    make enough money to be able to afford that. By the same token,
    if we can find a way to enable the employers to be able to
    afford it, it is a great way to deliver health care to the
    employees should they desire to take that.
        So I want to talk to Mr. Kuhlman for a minute here. What
    would your suggestions be, sir, if in order to be able to
    enable the small business folks to be able to find a way to
    deliver health care?
        Mr. KUHLMAN. I think a theme throughout everyone's
    testimony is just to help lower the barrier of entry. If the
    product is too expensive for new businesses or small
    businesses, to start offering--you get into the situation you
    are describing, or if it gets to those who are offering too
    expensive to continue to offer, again, you just add to that 74
    percent.
        So one of the specific ideas that a couple of us have
    mentioned is instead of having to--that group coverage be an
    option, but instead of being the only option, allow businesses
    to help their employees with their individual market plans. I
    thought the SHOP's opportunity would be to do something like
    that, be like the private exchanges that allow you to give a
    contribution. Your employees go, they have a menu of options,
    they pick whatever best fits their employees' needs. It did not
    go that direction, but I still think there is opportunity
    either through private exchanges or just in the existing
    individual market.
        Mr. LUETKEMEYER. You know, there was an editorial in one of
    the local newspapers recently, individuals talking about small
    businesses, the entrepreneurs, and how difficult it was to
    manage the business. And they were talking about the new SBA
    director nominee and advising that individual on about five or
    six different things that they needed to be able to overcome to
    be able to help the small businesses, the entrepreneurs, and
    one of them was Obamacare. One of them was the regulation that
    is so difficult to comply with, so costly to comply with.
        And I can tell you when I go home and I talk to my small
    business people, regulation is always at the top of mine, and
    the number one regulation they talk about is health care
    because they want to provide it. It is an important thing they
    want to provide to their employees, yet it is a very costly
    benefit. And some of them will swear they are going to keep it
    in place so they can make sure that they keep good employees,
    but at the end of the day it is still about cost, whether you
    can actually afford something like this.
        You know, as we go through all this, you know, the mountain
    of paperwork and mandates that have been caused by the
    healthcare law, would you guys, Mr. Secor and Mr. Hall, would
    you like to talk just a little bit about some of the mandates
    and some of the costs that you incur to be able to comply?
        Mr. SECOR. I agree wholeheartedly with what your
    constituents are telling you in terms of the small business
    side in terms of regulatory compliance. And the big issue is
    the unknown. It would be simple if it came out and said, okay,
    here are the rules. Boom. Here is a sheet of paper. Follow
    these rules. You know, when it is 10,000 pages, it is tough.
    And it is tough trying, you know, trying to afford to get the
    expertise to tell you how it affects your specific business,
    because so much of that in there, most of it does not even
    apply to you, but you do not know which does and does not, and
    you need somebody to sort that out. And it is expensive.
        Mr. LUETKEMEYER. So do you hire somebody to do this for you
    or do you have a person on staff that takes care of all this
    for you?
        Mr. SECOR. Well, we are not in the ACA.
        Mr. LUETKEMEYER. Okay.
        Mr. SECOR. And so, you know, when we made the decision that
    because of cost and complexity, I sat down and looked at it
    with our healthcare professional and I actually--and it was not
    a fun decision--I met with all of our employees. We actually
    had a discussion about this. And we decided we just cannot do
    this and try to run a business. There are just too many moving
    parts.
        Mr. LUETKEMEYER. Actually, my time is expired. I apologize
    to Mr. Hall, unless the chairman wants to allow him to just say
    a few words. Thank you.
        Chairman CHABOT. Thank you. I missed what you said there at
    the end.
        Mr. LUETKEMEYER. My time is expired. If Mr. Hall would like
    to just----
        Chairman CHABOT. Mr. Hall, go ahead.
        Mr. LUETKEMEYER. --like 10 or 15 seconds----
        Mr. HALL. Thank you. I would love that.
        I think the normal smallest business is not a member of--
    does not go through the ACA, are not required to, but the
    compliance then relates to a tax issue because now the small
    business owner, for themselves and their family, they are
    making this decision of do I pay the penalty? Do I get an ACA
    plan? What is it going to cost me? What is it going to cover?
    And one unique thing we talked about for years is in order to
    determine whether you are eligible for a subsidy, you have got
    to guess what your income is for the next year.
        Mr. LUETKEMEYER. Right.
        Mr. HALL. Because it is based on current year, not last
    year. And this is a unique market. The self-employed person
    does not really know how much they are going to make. So they
    have this fear of estimating their income, they get a subsidy,
    they get to the end of the year, they had a great year, which
    is awesome for small business. Right? No, it is not awesome
    because now they have got to pay back their subsidy. And that
    just adds angst to them, maybe more than paperwork. But having
    to figure out the penalty, do I do it, what is my subsidy, what
    is my income in advance, crystal ball, just provides this
    uncertainty that is very uncomfortable to deal with.
        Mr. LUETKEMEYER. Thank you.
        Chairman CHABOT. The gentleman's time is expired.
        Mr. LUETKEMEYER. Thank you, Mr. Chairman.
        Chairman CHABOT. The gentleman from Pennsylvania, Mr.
    Fitzpatrick, is recognized for 5 minutes.
        Mr. FITZPATRICK. Thank you, Mr. Chairman.
        Mr. Hall, just taking an objective, right-down-the-middle
    view of the ACA, you had mentioned that there are some good
    things about it. Obviously, like many statutes, there are
    winners and there are losers, there are roughly, approximately
    12 million people that are on the ACA exchange, about 85
    percent, approximately, get subsidies; roughly another 12
    million on the Medicaid expansion program. Pennsylvania, my
    home State, is one of those participating States. So clearly,
    they are the beneficiaries. People who kept their current
    health plan and saw premiums skyrocket or deductibles raise
    significantly or people that lost their health plan altogether
    would say that they are not fans of that statute. That is from
    the patient side. From the business side, are there any
    benefits that you have seen on the small business side that did
    not previously exist before the ACA?
        Mr. HALL. I think whether it is individual side or small
    business side, my answer would be the same. You mentioned right
    down the middle. In the middle of myself, I have my head and I
    have my heart. And for the heart side of me, the fact that
    there are people who could not get health insurance before
    because they had a preexisting condition, whether that is my
    wife or whether that is one of my employees, I think the ACA
    did well in that area. I think it fixed a problem that perhaps
    was a very difficult problem. That is my heart.
        With my head, I still get stuck on I love doing that, that
    makes me feel right. I believe we, as Americans, are called to
    do that and I think that is very important. But at the same
    time, we still have to pay for it. And how does that work?
        And the thing that worries me most is not the 85 percent of
    the people that you mentioned that have a subsidy, that someone
    is helping them. My heart goes out to that $90,000 average
    American that is just outside the range of a subsidy that is
    paying 16 percent of their gross family income for an ACA-
    compliant plan. And to me, that hurts both sides of my right
    down the middle. That hurts my head from a cost standpoint, and
    it hurts my heart for that family. Those are the ones I am most
    worried about.
        Mr. FITZPATRICK. Thank you.
        Ms. Palanker, you had mentioned that some of the provisions
    of the Better Way plan were for the healthy and the wealthy.
    Does that only pertain to health savings accounts? Are there
    any proposals, any ideas that have been put forward on the
    Republican side that you think would benefit average Americans?
        Ms. PALANKER. It would depend on how they become
    implemented. You know, high-risk pools are put out there and
    they can work, but they can only work if they are adequately
    funded. And the Tax Policy Center has estimated to adequately
    fund high-risk pools would be a trillion dollars over 10 years
    nationally, so that they sort of have that piece.
        There have been some proposals around providing different
    forms of premium assistance, but I would say they are
    significantly lower than what is in the Affordable Care Act,
    which would make it more difficult for people to afford
    coverage unless the premiums are lower because fewer benefits
    are covered, in which we go back to what I had said earlier
    where the problem is people still need the health care, just
    instead of it being covered through insurance, they are paying
    for it themselves.
        Mr. FITZPATRICK. But what is the way to drive cost down?
    Because as many have acknowledged, having an insurance care in
    your pocket is not the same as having health insurance. And do
    you agree with out-of-state competition? Do you agree with
    antitrust exclusions? Do you agree with medical liability
    reform? Some of the proposals that were put forth are designed
    to reduce cost and expand access.
        Ms. PALANKER. I do not see those proposals as actually
    succeeding in reducing overall healthcare costs. I think, first
    of all, getting healthy people in will reduce health premiums,
    not necessarily--and that is an important piece of it. But to
    really reduce healthcare costs, it is really about changing how
    we deliver health care in the country which, you know, which
    includes trying to find ways to get people the right care in
    the best setting in the least costly manner. And it is really
    actually not as much about I would say the pieces that we have
    seen in some of the current proposals, but really gets back to
    how we deliver health care.
        Mr. FITZPATRICK. Thank you. I yield back, Mr. Chairman.
        Chairman CHABOT. The gentleman's time is expired. The
    gentleman yields back.
        The gentleman from Kansas, Dr. Marshall, is recognized for
    5 minutes.
        Mr. MARSHALL. Thank you. Thank you, Mr. Chairman.
        Mr. Hall, what from the ACA has been successful? What would
    you like to keep from it?
        Mr. HALL. I would like to keep the no prescreening for
    preexisting conditions. I think whatever solution we have ought
    to be able to cover everyone, whether that includes a different
    rate band or whatever. I am not sure how that would work, but I
    think that part needs to be there. I think the subsidies for
    those people at certain income levels that have no other
    option. And my personal opinion is that we, as the taxpayers,
    are paying for the medical care for those people anyway, so
    they should be part of the insurance pool. Those are the two
    things that immediately come to mind for me that I think we
    should make part of any solution we come up with.
        Mr. MARSHALL. Okay. Mr. Kuhlman, kind of the same question.
    Would you add anything to what you would like to keep in the
    ACA?
        Mr. KUHLMAN. He did hit on some good ones that I think that
    NFIB members would support. I cannot think of anything
    specifically more to add.
        Mr. MARSHALL. Ms. Palanker, what is the holy grail of the
    ACA? What is most important to you? If you were in charge, what
    do you think is the most important thing we keep?
        Ms. PALANKER. It is a very hard question to answer because
    people have talked about the ACA as a three-legged stool and I
    have started talking about it as a three-legged stool made out
    of Jenga blocks because so many pieces are interrelated that to
    try to have one thing stay, you know, you really need the other
    pieces. And I also think it is really more the goal. There are
    these goals of improving access, reducing costs, getting people
    covered altogether, and it is hard for me to pick one thing
    because, yes, 27 percent of the population is impacted by
    preexisting conditions, which is huge. Fewer people hit their
    annual limits or their lifetime limits, but I actually have a
    friend who is 5 years old, who was born----
        Mr. MARSHALL. Sure.
        Ms. PALANKER. --who was born with a congenital defect, who
    would have hit his limit in his first year of life. And, you
    know, so to me those are equally as important even though fewer
    people are impacted by one of them.
        Mr. MARSHALL. Okay. Ms. Palanker, I will follow up with
    you. What do you think of transparency? What would that do to
    costs of health care?
        Ms. PALANKER. Cost transparency?
        Mr. MARSHALL. Yes. And quality. Cost and outcomes, quality.
        Ms. PALANKER. I think cost transparency, quality
    transparency is very, very important. And I think it can in the
    long run reduce cost of health care and improve quality as well
    if it is done in a way that consumers of health care can access
    the information and can understand the information, which is
    sometimes very difficult. Quite honestly, some of those people
    who are experts in health care even have difficulty
    understanding and comparing costs right now.
        Mr. MARSHALL. Okay. Are any of the panelists aware of what
    the average deductible for a Bronze Family Plan is in ACA right
    now? It is $12,000. Is that truly health insurance at all? Just
    because you have health insurance and you have a $12,000
    deductible, to most people that is like not having health
    insurance at all. And I just wanted to make sure we point that
    out for a second.
        Anybody on the panel have experience with high-risk pools?
    Go ahead.
        Ms. PALANKER. Not direct experience, but having looked at
    the high-risk pools that existed before we had the Affordable
    Care Act, as I said, where they were successful was where there
    was significant public funding and enough to provide adequate
    benefits. And there were three big problems in a number of
    States that had high-risk pools. One was that the annual limit
    was capped significantly. So people who had cancer, who had
    significant health costs, which was why they were there,
    actually could not get their health services covered. The other
    was extraordinarily high premiums that were unaffordable so
    people did not enroll. And the final piece was some States
    ended up with waiting periods. And if you have a high-risk pool
    with a waiting period, you have people uninsured while they are
    waiting to get in.
        I will add that if you also have a continuous coverage
    requirement, that could create a problem because someone could
    then get caught waiting to get in to get coverage and also hurt
    because they cannot have continuous coverage because there is a
    waiting period.
        Mr. MARSHALL. Thank you, Mr. Chairman. I will yield back my
    remaining time.
        Chairman CHABOT. Thank you very much. The gentleman yields
    back.
        The gentleman from Iowa, Mr. Blum, who is the Chairman of
    the Subcommittee on Agriculture, Energy, and Trade, is
    recognized for 5 minutes.
        Mr. BLUM. Thank you, Mr. Chairman. Thank you to our
    panelists for being here today. I am a career small business
    person, so these issues are near and dear to me.
        As I think about this issue, I think back to 2008-2009 and
    HHS Secretary then, Kathleen Sebelius, famously said, we are
    going to bend the cost curve down with the ACA. Former
    President Obama followed that up and he said, ``Every single
    good idea to bend the cost curve down is in this bill.'' Over
    the last 4 years in Iowa, I have asked my constituents in
    almost every talk I have given about health care, give me an
    example where the Federal Government, 535 suits in Washington,
    D.C., have bent the cost curve down on anything. Life today, 4
    years straight, zero hands have gone up.
        I think we should just keep this simple. The ACA has not
    decreased healthcare costs. The ACA has shifted healthcare
    costs. The only proven way that I know to decrease the cost of
    any product, and I am sure Mr. Secor would agree with this, and
    increase the quality, is the miracle of the free market system.
    We need to unleash consumers in this marketplace. We need to
    make patients consumers.
        Often, the patient today is described in this following
    analogy: You take your dog to the veterinarian and the
    veterinarian looks at the dog and he talks to the dog's owner
    about the prescribed course of action. Everybody has an input
    into the decision on what we are going to do other than the
    dog, other than the patient.
        You know, as a business owner myself over the last 20
    years, and some of my companies had over 300 employees, I have
    asked myself and my executive team, why are we making
    healthcare decisions? Why are we making health insurance
    decisions for 300 employees? That is over 1,000 people when you
    include their families.
        I would like to have your thoughts on this. I think we need
    to unleash the consumers. I think we need to let the miracle of
    the free market work. I think we need to make patients
    consumers.
        HSAs. I, as an employer, would rather deposit money into
    HSAs of every one of my employees and let them decide what is
    in their best interest and their family's best interest. This
    will all work if we have competition. Competition is very
    important. But HSAs, the government can deposit in them.
    Employers can deposit into them. The employee can pretax
    deposit into them. They can go out and decide if they even want
    insurance and what is the best for them. I would like the
    panel's thoughts on HSAs and unleashing the miracle of the free
    market called consumers. And Mr. Secor, if you would start.
        Mr. SECOR. I think it is an excellent idea. I think the one
    key component that has to happen is we have to have
    transparency in the cost and quality, and you have to come up--
    and I do not have the answer of how to create that, but we have
    to be able to get that out there.
        The other thing that has complicated this in recent years
    is we have seen hospitals buying doctors' practices. For
    instance, well, now you go to the hospital to get the same care
    you used to go to the doctor's office to get, and the care in a
    hospital is more expensive, even if you are going into an
    office. And so a lot of that has occurred.
        So I do not know how you sort of go back, if you can, or
    whatever, but whether it is the urgent care centers or
    whatever, but I think the transparency of getting that out so
    that they have something solid to work with, our people have
    done it.
        Mr. BLUM. That is a great point. I agree with you.
        Mr. HALL. I obviously agree as well. I think tax incentives
    are positive incentives. We talked about the penalty for not
    having an ACA, so we are trying to encourage people with
    negative stimuli. I think having positive stimuli is awesome. I
    would add the health reimbursement arrangements to the
    conversation so that you can have a whole range of individuals,
    of governments, the State, the Federal, lots of different
    people can share in the cost. I think the ACA was based on
    cost-sharing, but maybe the cost-sharing did not land the way
    we thought it was going to land. But HSAs, HRAs, expanding
    those, making everything on a level playing field makes a lot
    of sense.
        Mr. BLUM. Because 99 percent of the conversation in this
    town is about who is going to pay. I think 99 percent of the
    conversation should be how can we drive the cost down so
    everybody can afford it.
        Kevin?
        Mr. KUHLMAN. Yeah, you could sign us up. I think the
    business owners and employees would be the most responsible
    stewards of the money if they were controlling it themselves.
    And I think there are some restrictions on many of those
    accounts that need to be modified or lifted or raised in order
    to make them truly viable for everybody.
        Chairman CHABOT. The gentleman's time is expired. But go
    ahead, you can answer the question.
        Mr. BLUM. Thank you, Mr. Chairman.
        Ms. PALANKER. I would start by saying that the employer
    insurance market, particularly the large group market, was
    created by the free market. Employers really created that on
    their own in the United States and that sort of led to a large
    part of our system. As far as providing HSAs with the idea of
    an HSA or an HRA for the individual employees to go and buy
    their own insurance, it needs to be recognized that, as we
    said, buying insurance is complicated and it is very, very hard
    for individuals to understand what they are purchasing. And one
    of the benefits of employers is having someone who really
    understands the business and the industry and how insurance
    works helping to find and purchase that insurance.
        Also, if HSAs are connected to increasing deductibles, then
    you do end up shifting the cost onto the employee or the
    individual enrolling in coverage, especially if the money going
    into the HSA by the employer does not cover the cost of premium
    and deductible.
        Mr. BLUM. I yield back, Mr. Chairman, the time I do not
    have.
        Chairman CHABOT. The gentleman's time is expired.
        The gentleman from Nebraska, Mr. Bacon, is recognized for 5
    minutes.
        Mr. BACON. Thank you, Mr. Chairman. I want to thank the
    panel for being here.
        Thank you. The top complaint being either the cost of red
    tape, regulations, or the health care and ACA. Using just two
    examples, I had one small business share with me that they
    would hire nobody over 29 hours because it puts them over
    certain trip wires, and another small business said they would
    not hire anybody else because it would cost them $180,000 to
    provide more health care for the entire team. Is this a regular
    problem? I ask this to Mr. Secor and to Mr. Kuhlman. Do you see
    this a lot, that folk are making hiring decisions, not hiring
    more or not hiring people full time because of ACA?
        Mr. SECOR. In our survey with small businesses people, it
    is changing the attitude and direction of companies in terms of
    the 30 hours, specifically, as well as in terms of, you know,
    looking at the limits in terms of 50 employees. And even when
    you are a small business, if you go look to pick up additional
    work, sometimes that additional work does not come in one
    employee; it comes in a new line. Well, that new line is 10
    employees. So if I am at 42, I cannot put the new line in. And
    those types of decisions are in our survey that we are getting
    that feedback.
        Mr. KUHLMAN. Yeah, I do not know if it figures out to the,
    like, national Census figures, but to those businesses, say,
    between and 60 employees, they are hypersensitive about both of
    those thresholds, the 50 full-time equivalent employee
    threshold and the 30-hour full-time employee definition. So
    that is most significantly the population that I hear from,
    those that are underneath, what does it mean crossing it, and
    those who are above it saying, you know, I do not want to, but
    if I have to do what can be done to get underneath it.
        Mr. BACON. One more question for Mr. Hall. When I talk to
    the self-employed folks in our district, it seems clear to me
    that ACA is the number one issue. Many are paying $2,000 a
    month, $12,000 deductibles, or a combination thereof. Is there
    any issue that is more pressing to the self-employed right now
    other than fixing ACA?
        Mr. HALL. For 20 years we have done surveys of our members,
    all self-employed. Very few of them have over five employees,
    so this is the marketplace that you are talking about. We
    always ask, what are your big issues? And for 20 years it has
    always been three things. It has been access to capital; I need
    funding. It has been the tax code is too cumbersome for me; I
    do not understand it. And it has been access to quality health
    insurance. Those kind of bounce back and forth, which one is
    the top depending on where we are. There is no question today
    that that third one, access to quality health insurance and,
    different thing, and access to quality health care is the
    number one issue.
        Mr. BACON. Thank you very much, and I yield back, sir.
        Chairman CHABOT. Thank you. The gentleman yields back. And
    unless somebody else shows up, the last questioner today will
    be the gentlelady from American Samoa, Amata Radewagen, who is
    the Chairman of the Subcommittee on Health and Technology. You
    are recognized for 5 minutes.
        Mrs. RADEWAGEN. Thank you, Mr. Chairman. And I want to
    thank the panel for appearing today.
        In my home district of American Samoa, almost 100 percent
    of our businesses are small businesses. Here is my question for
    each of you. Considering that the United States territories
    were left out of the Affordable Care Act altogether, what sort
    of challenges do you see for these small businesses in the
    territories when Congress addresses reform of the small
    business healthcare marketplace? Mr. Secor?
        Mr. SECOR. I am not sure what you have in terms of the
    system there now, so I guess it would depend on what you have
    today versus what you are going to get, so to speak. But my
    guess is if they include you in this, you will be in the same
    boat all the rest of us are and some may think that is good,
    some may think that is bad. But I think no matter where you
    are, if you are a small business, our people are telling us it
    is cost and availability, affordable product and care. And, but
    like I said, I really do not understand what your system is
    today.
        Mr. HALL. I think pre-ACA, during the debate for ACA and
    after it has always been about quality, access, and
    affordability. So I think if this discussion were expanded to
    include the territories, which I think could expand the pools,
    which I think overall actuarially is a positive thing, but my
    best guess is, same thing, at the end of the day, there would
    be an improvement in access for sure. I think particularly
    those with preexisting conditions and those with particularly
    low income would have access that perhaps they would not
    otherwise have, but then the issue would continue to remain
    cost.
        Mr. KUHLMAN. Agree. Cost and flexibility. And it is not for
    a lack of desire by the business owner. Just allow the business
    owner to help their employees because that is what they want to
    do. When you pile mandates or new requirements on top of them,
    that interferes with that relationship. So I think just
    sometimes the tendency to throw a heavy hand on top of it
    interferes with that relationship.
        Mrs. RADEWAGEN. Thank you.
        Ms. PALANKER. If we can expand the pieces that aim to make
    coverage for people more affordable to the territories, which
    does not exist right now, then coverage would be more
    affordable for individuals in the territories so that if things
    were not improved for small businesses, but individuals could
    get premium tax credits, cost-sharing reductions, and also if
    there were consumer protections on the insurance benefits
    themselves. And the other piece is investing in the healthcare
    system is something that is very important, I know, for a
    number of the U.S. territories and making sure that we are
    making sure that our citizens have access to healthcare
    services. Good healthcare services.
        Mrs. RADEWAGEN. Thank you, Mr. Chairman. I yield back.
        Chairman CHABOT. Thank you. The gentlelady yields back.
        And in closing, I would just note that in my opinion there
    is probably no issue that this Congress, the 115th, will deal
    with in the next 2 years than dealing with the Affordable Care
    Act or Obamacare, or some people refer to it as the
    Unaffordable Care Act, whichever term you prefer. It affects so
    many Americans in so many ways and it is critical that the
    small businesses all across this Nation have a seat at the
    table. And this hearing was a part of that and you obviously
    saw that both sides had an opportunity to ask questions, and I
    think we had a very, very good panel here. All four of the
    witnesses I think did a great job, so we want to thank you for
    your participation as this debate continues over the upcoming
    weeks, months, and perhaps years.
        That being said, I would ask unanimous consent that members
    have 5 legislative days to submit statements and supporting
    materials for the record. Without objection, so ordered. And if
    there is no further business to come before the Committee, we
    are adjourned. Thank you very much.
        [Whereupon, at 12:41 p.m., the Committee was adjourned.]
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