[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

                               __________

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            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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