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

                  LEGISLATIVE PROPOSALS TO IMPROVE HEALTH CARE
                 COVERAGE AND PROVIDE LOWER COSTS FOR FAMILIES

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

                                    HEARING

                                   before the

                             COMMITTEE ON EDUCATION
                               AND THE WORKFORCE
                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                 HEARING HELD IN WASHINGTON, DC, MARCH 1, 2017

                                   __________

                                Serial No. 115-8

                                   __________

      Printed for the use of the Committee on Education and the Workforce

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                    COMMITTEE ON EDUCATION AND THE WORKFORCE

                   VIRGINIA FOXX, North Carolina, Chairwoman

    Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott,
    Duncan Hunter, California                Virginia
    David P. Roe, Tennessee              Ranking Member
    Glenn ``GT'' Thompson, Pennsylvania  Susan A. Davis, California
    Tim Walberg, Michigan                Raul M. Grijalva, Arizona
    Brett Guthrie, Kentucky              Joe Courtney, Connecticut
    Todd Rokita, Indiana                 Marcia L. Fudge, Ohio
    Lou Barletta, Pennsylvania           Jared Polis, Colorado
    Luke Messer, Indiana                 Gregorio Kilili Camacho Sablan,
    Bradley Byrne, Alabama                 Northern Mariana Islands
    David Brat, Virginia                 Frederica S. Wilson, Florida
    Glenn Grothman, Wisconsin            Suzanne Bonamici, Oregon
    Steve Russell, Oklahoma              Mark Takano, California
    Elise Stefanik, New York             Alma S. Adams, North Carolina
    Rick W. Allen, Georgia               Mark DeSaulnier, California
    Jason Lewis, Minnesota               Donald Norcross, New Jersey
    Francis Rooney, Florida              Lisa Blunt Rochester, Delaware
    Paul Mitchell, Michigan              Raja Krishnamoorthi, Illinois
    Tom Garrett, Jr., Virginia           Carol Shea-Porter, New Hampshire
    Lloyd K. Smucker, Pennsylvania       Adriano Espaillat, New York
    A. Drew Ferguson, IV, Georgia

                          Brandon Renz, Staff Director
                     Denise Forte, Minority Staff Director
                                     ------

                                C O N T E N T S

                                  ----------
                                                                       Page

    Hearing held on March 1, 2017....................................     1

    Statement of Members:
        Foxx, Hon. Virginia, Chairwoman, Committee on Education and
          the Workforce..............................................     1
            Prepared statement of....................................     3
        Scott, Hon. Robert C. ``Bobby'', Ranking Member, Committee on
          Education and the Workforce................................     5
            Prepared statement of....................................     8

    Statement of Witnesses:
        Klausner, Ms. Allison, Principal and Government Relations
          Leader, Knowledge Resource Center, Conduent Human Resources
          Services...................................................    10
            Prepared statement of....................................    13
        Mitts, Ms. Lydia, Associate Director of Affordability
          Initiatives, Families USA..................................    31
            Prepared statement of....................................    33
        Ritchie, Mr. Jay, Executive Vice President, Tokio Marine HHC.    38
            Prepared statement of....................................    40
        Hurst, Mr. Jon B., President, Retailers Association of
          Massachusetts..............................................    45
            Prepared statement of....................................    47

    Additional Submissions:
        Blunt Rochester, Hon. Lisa, a Representative in Congress from
          the State of Delaware:
            Letter dated February 22, 2017, from the State of
              Delaware Office of the Governor........................    84
            Letter dated February 28, 2017, from National Association
              of Insurance Commissioners (NAIC) and The Center for
              Insurance Policy and Research..........................    91
        Courtney, Hon. Joe, a Representative in Congress from the
          State of Connecticut:
            Business Insider: AP Fact Check: Obamacare is not in a
              `death spiral'.........................................    59
        Chairwoman Foxx:
            Letter dated February 17, 2017, from Gronewoller, Mr.
              Davis E., President and CEO, GC Partners, Inc..........   117
            Letter dated February 13, 2017, from Monson, Ms.
              Catherine, Chief Executive Officer, FASTSIGNS..........   118
            Letter dated February 16, 2017, from Toy, Mr. Jon, Owner,
              FASTSIGN of York.......................................   119
            Letter dated February 16, 2017, from the International
              Franchise Association (IFA)............................   120
            Letter dated February 16, 2017, from the National
              Association of Wholesaler-Distributors (NAW)...........   121
            Letter dated February 16, 2017, from the National
              Restaurant Association.................................   122
            Letter dated February 16, 2017, from the National Retail
              Federation (NRF).......................................   123
            Letter dated February 28, 2017, from the Heating, Air-
              conditioning and Refrigeration Distributors
              International (HARDI)..................................   124
            Letter dated February 28, 2017, from the National
              Restaurant Association.................................   125
            Letter dated March 1, 2017, from the Healthcare
              Leadership Council.....................................   126
            Letter dated March 1, 2017, from the National Association
              of Chemical Distributors (NACD)........................   128
            Letter dated March 2, 2017, from National Federation of
              Independent Business (NFIB)............................   129
            NFIB: Small Business Health Reform Principles............   131
            Slide: Fast Facts: Obamacare Reality.....................     4
        Johnson, Hon. Sam, a Representative in Congress from the
          State of Texas:
            Letter dated March 15, 2017..............................   133
        Polis, Hon. Jared, a Representative in Congress from the
          State of Colorado:
            Letter dated March 1, 2017, from the UMWA Health and
              Retirement Funds.......................................    72
        Walberg, Hon. Tim, a Representative in Congress from the
          State of Michigan:
            Letter dated February 28, 2017, from the Coalition in
              Support of H.R. 1101...................................    65

                        LEGISLATIVE PROPOSALS TO IMPROVE

                        HEALTH CARE COVERAGE AND PROVIDE

                            LOWER COSTS FOR FAMILIES

                                  ----------

                            Wednesday, March 1, 2017

                            House of Representatives

                   Committee on Education and the Workforce,

                                Washington, D.C.

                                  ----------

        The Committee met, pursuant to call, at 10:07 a.m., in Room
    2175, Rayburn House Office Building, Hon. Virginia Foxx
    [chairwoman of the Committee] presiding.
        Present: Representatives Foxx, Wilson of South Carolina,
    Roe, Thompson, Walberg, Guthrie, Barletta, Messer, Byrne, Brat,
    Grothman, Stefanik, Allen, Lewis, Rooney, Mitchell, Smucker,
    Scott, Davis, Courtney, Fudge, Polis, Bonamici, Adams,
    DeSaulnier, Norcross, Blunt Rochester, Krishnamoorthi, Shea-
    Porter, and Espaillat.
        Staff Present: Bethany Aronhalt, Press Secretary; Andrew
    Banducci, Workforce Policy Counsel; Courtney Butcher, Director
    of Member Services and Coalitions; Ed Gilroy, Director of
    Workforce Policy; Jessica Goodman, Legislative Assistant;
    Callie Harman, Legislative Assistant; Nancy Locke, Chief Clerk;
    John Martin, Professional Staff Member; Dominique McKay, Deputy
    Press Secretary; James Mullen, Director of Information
    Technology; Michelle Neblett, Professional Staff Member;
    Krisann Pearce, General Counsel; Whitney Riggs, Professional
    Staff Member; Molly McLaughlin Salmi, Deputy Director of
    Workforce Policy; Alissa Strawcutter, Deputy Clerk; Tylease
    Alli, Minority Clerk/Intern and Fellow Coordinator; Austin
    Barbera, Minority Press Assistant; Michael DeMale, Minority
    Labor Detailee; Denise Forte, Minority Staff Director; Nicole
    Fries, Minority Labor Policy Associate; Christine Godinez,
    Minority Staff Assistant; Carolyn Hughes, Minority Senior Labor
    Policy Advisor; Udochi Onwubiko, Minority Labor Policy Counsel;
    Kiara Pesante, Minority Communications Director; Veronique
    Pluviose, Minority Civil Rights Counsel; and Elizabeth Watson,
    Minority Director of Labor Policy.
        Chairwoman Foxx. The Committee on Education and the
    Workforce will come to order. Good morning. I apologize that we
    are a little bit late this morning. I like to honor people's
    time, and I am always mortified when we run a little late, but
    thank you for your patience.
        We have a very distinguished panel of witnesses for today's
    hearing. Thank you for taking the time to be with us and
    sharing your personal expertise on a very important issue
    affecting the lives of millions of Americans across the
    country.
        ``It's in a death spiral.'' That is how Aetna's chief
    executive, Mark Bertolini, recently described the Democrats'
    failed healthcare law. Citing higher premiums and insufficient
    enrollment among young, healthy individuals, Mr. Bertolini
    predicted that more insurers will quit ObamaCare next year.
    When they do, as they have done year after year, families will
    find it even harder to access the doctors they want and the
    affordable coverage they need.
        A death spiral. That is the honest assessment of someone
    who has looked closely at the facts and who cannot ignore
    reality. Of course, there are those who are still living in an
    alternate reality, and they are trying desperately to protect a
    law that is wreaking havoc on families and small businesses
    across the country.
        Powerful special interest groups are peddling scare tactics
    and doing all they can to defend the status quo. One prominent
    organization in particular is promoting a manual that includes
    tips on how to disrupt town halls. The manual recommends to
    ``grab seats at the front half of the room, but do not all sit
    together'' in order to ``reinforce the impression of broad
    consensus.'' It even asks the activists to boo Republican
    members of Congress.
        All these desperate tactics are aimed at protecting a
    failed law that has resulted in nearly 5 million Americans
    losing the health care they like and were promised they could
    keep.
        A failed law that has left millions of Americans with
    access to just one insurance provider. A failed law that has
    caused countless families to lose access to the doctors they
    trusted.
        A failed law that has forced healthcare costs to skyrocket
    and destroyed hundreds of thousands of small business jobs.
        Ultimately, they are fighting to maintain government
    control, government control over the kind of health insurance
    you can buy. Government control over the kind of health
    insurance employers can and cannot offer workers. Government
    control over the doctors you can see and the doctors you cannot
    see, and government control over certain healthcare benefits
    that many individuals may not need.
        Yet, despite the costs and pain inflicted on so many
    Americans by ObamaCare, the answer for some is still more
    government control. We believe there is a better way, and that
    is what the legislative proposals we will discuss today are all
    about.
        We believe patients, not Washington bureaucrats, should be
    in charge of their healthcare decisions. We believe employers
    should have more choices, not fewer, to provide their workers
    with access to affordable coverage. We believe small businesses
    should be empowered to negotiate for the best coverage at the
    best possible price for their employees.
        I expect the sponsors and our witnesses will discuss in
    greater detail the specifics of each legislative proposal, but
    all three are designed to promote more choices, more
    flexibility, greater access, and lower costs. That is exactly
    what the American people want and need.
        We are at a crossroads right now when it comes to our
    Nation's health care. When people, through no fault of their
    own, are experiencing pain and havoc created by the ObamaCare
    death spiral, the only responsible thing to do is provide
    relief. We simply cannot continue down the unsustainable path
    we are on and sit back and watch as this fundamentally flawed
    law collapses under its own weight.
        We must change course. That is why House Republicans are on
    a rescue mission not only to save families struggling under
    ObamaCare, but also to deliver the meaningful healthcare
    reforms the American people have demanded for years.
        Today, we are taking an important step in this process by
    examining a number of commonsense solutions that will help more
    Americans access high-quality, affordable health care.
        I want to thank my colleagues, HELP Subcommittee Chairman
    Tim Walberg and Representative Phil Roe, as well as a former
    member of this committee, Representative Sam Johnson, for their
    leadership on several of the reforms we will discuss today.
        We have a lot of ground to cover. So, I now yield to
    Ranking Member Scott for his opening remarks.

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        [The statement of Chairwomen Foxx follows:]

      Prepared Statement of Hon. Virginia Foxx, Chairwoman, Committee on
                          Education and the Workforce

        ``It's in a death spiral.'' That's how Aetna's chief executive Mark
    Bertolini recently described the Democrats' failed health care law.
    Citing higher premiums and insufficient enrollment among young, healthy
    individuals, Mr. Bertolini predicted that more insurers will quit
    Obamacare next year. When they do--as they've done year after year--
    families will find it even harder to access the doctors they want and
    the affordable coverage they need.
        A death spiral. That's the honest assessment of someone who has
    looked closely at the facts and who can't ignore reality. Of course,
    there are those who are still living in an alternate reality, and they
    are trying desperately to protect a law that is wreaking havoc on
    families and small businesses across the country.
        Powerful special interest groups are peddling scare tactics and
    doing all they can to defend the status quo. One prominent organization
    in particular is promoting a manual that includes tips on how to
    disrupt town halls. The manual recommends to ``grab seats at the front
    half of the room, but do not all sit together'' in order to ``reinforce
    the impression of broad consensus.'' It even asks activists to boo
    Republican members of Congress.
        All of these desperate tactics are aimed at protecting a failed law
    that has resulted in nearly 5 million Americans losing the health care
    they liked and were promised they could keep. A failed law that has
    left millions of Americans with access to just one insurance provider.
    A failed law that has caused countless families to lose access to the
    doctors they trusted. A failed law that has forced health care costs to
    skyrocket and destroyed hundreds of thousands of small business jobs.
        Ultimately, they are fighting to maintain government control;
    government control over the kind of health insurance you can buy;
    government control over the kind of health insurance employers can and
    cannot offer workers; government control over the doctors you can see
    and the doctors you can't see; and government control over certain
    health care benefits that many individuals may not need.
        Yet, despite the costs and pain inflicted on so many Americans by
    Obamacare, the answer for some is still more government control. We
    believe there is a better way, and that is what the legislative
    proposals we will discuss today are all about.
        We believe patients--not Washington bureaucrats--should be in
    charge of their health care decisions. We believe employers should have
    more choices--not fewer--to provide their workers with access to
    affordable coverage. We believe small businesses should be empowered to
    negotiate for the best coverage at the best possible price for their
    employees.
        I expect the sponsors and our witnesses will discuss in greater
    detail the specifics of each legislative proposal, but all three are
    designed to promote more choices, more flexibility, greater access, and
    lower costs. That's exactly what the American people need.
        We are at a crossroads right now when it comes to our nation's
    health care. When people--through no fault of their own--are
    experiencing pain and havoc created by the Obamacare death spiral, the
    only responsible thing to do is provide relief. We simply cannot
    continue down the unsustainable path we are on and sit back and watch
    as this fundamentally flawed law collapses under its own weight.
        We must change course. That's why House Republicans are on a rescue
    mission not only to save families struggling under Obamacare, but also
    to deliver the meaningful health care reforms the American people have
    demanded for years. Today, we are taking an important step in this
    process by examining a number of commonsense solutions that will help
    more Americans access high quality, affordable health care.
        I want to thank my colleagues--HELP Subcommittee Chairman Tim
    Walberg and Representative Phil Roe--as well as a former member of this
    committee, Representative Sam Johnson--for their leadership on several
    of the reforms we will discuss today.
                                     ______

        Mr. Scott. Thank you, Madam Chair, and I would like to
    welcome our witnesses and thank them for their testimony. In
    this hearing, we will discuss three legislative proposals that
    will weaken insurance protections for consumers and shift costs
    on to workers.
        The title, ``Legislative Proposals to Improve Health Care
    Coverage and Provide Lower Costs for Families,'' insinuates the
    goal of these proposals is to reduce costs for families. In
    fact, these bills will lower costs for only a lucky few while
    others will pay more.
        Let us be clear. This hearing is a distraction from the
    larger debate about the future of America's health care. Across
    the country millions of people are lining up in town halls and
    expressing their deep concern over the Republicans' reckless
    attempts to repeal the Affordable Care Act.
        I think it is important to remind people what the situation
    was before the Affordable Care Act passed. Costs were going
    through the roof. Those with preexisting conditions could not
    get insurance or, if they did, it was unaffordable. Women were
    paying more than men, and every year, millions of people were
    losing their insurance.
        Since the passage of the Affordable Care Act, the costs
    have continued to go up, but at the lowest rate in about 50
    years. Those with preexisting conditions can get insurance at
    the standard rate. Women are not paying more than men. Instead
    of millions of people losing their insurance every year, 20
    million more people have insurance.
        The full name of the Affordable Care Act is ``Patient
    Protection and Affordable Care Act.'' There are patient
    protections, like insurance companies cannot cut you off after
    they have paid a certain amount over your lifetime. We are
    closing the doughnut hole. Those young people up to 26 can stay
    on their parents' policies; prevention and cancer screening;
    annual checkups; no co-pays and deductibles.
        We have heard a lot of complaints about the so-called
    ``failed law,'' but one thing that is conspicuously absent is
    any proposal that will make things any better.
        The Republican draft proposal leaked just last week shows
    the concerns about whether or not there is a replacement plan
    are well founded. To whatever extent the plan has any direction
    in replacement efforts, it is in the wrong direction.
        It is not clear whether or not the leaked draft is the
    proposal that the majority intends to move forward, but
    Republicans have yet to communicate any concrete timetable for
    action and, in fact, have already missed their own legislative
    deadline directed by the recent budget. Their plans were
    supposed to have been available over a month ago.
        For seven years, we have heard calls for repeal, but no
    concrete proposal to replace. We have heard a lot of complaints
    about the Affordable Care Act, but no concrete proposal or idea
    to make things better.
        If this leaked draft is any indication of priorities, one
    thing is clear, and that is the proposals will push more costs
    on to working families, seniors, and average Americans, and, at
    the same time, we are considering tax breaks for corporations
    and the wealthy.
        There is one proposal to dismantle Medicaid. Most of the
    funding under Medicaid goes to the elderly and those with
    disabilities, the rest to low-income families.
        Another idea includes taxing workers' health insurance
    policies, which has the effect of funding tax breaks for
    corporations and the wealthy. That is right. One proposal to
    tax workers' health care while, at the same time, we are
    considering tax breaks for those making more than $200,000 a
    year.
        One of the proposals we will be discussing today expands
    Association Health Plans, a recycled idea from about 20 years
    ago that has been widely discredited as possibly doing nothing
    for most Americans. While a few might pay less, a lot will pay
    more.
        In 2000, the Congressional Budget Office found the proposal
    would have little effect on increasing health coverage.
    Researchers, including the American Academy of Actuaries, have
    expressed concern that Association Health Plans lead to market
    segmentation, where a few healthy people may be better off as
    long as they stay healthy, while older and less healthy workers
    will be left out in the cold.
        In a press release back in 2003, the academy categorized
    the legislation as flawed because it was neither actuarially
    sound nor did it protect consumers. These flaws are still
    present in the idea today.
        For example, a small business owner who is older and
    perhaps has struggled with mental or physical illness in the
    past with a so-called ``preexisting condition,'' may not be an
    attractive partner for the association, so they will not get
    in. Proposals like this allow for cherry-picking to serve only
    the healthy at lower cost and accessible only to those that
    need it while everybody else will pay more.
        The problem is simple arithmetic. Under the Affordable Care
    Act, essentially everybody pays the average. If you have a
    scheme where some people can pay less, then other people
    necessarily will have to pay more. That is just simple
    arithmetic.
        The second proposal insulates stop-loss insurance from
    certain Federal oversight. It is unclear how this does anything
    to help workers get quality health insurance. It might help the
    employers mitigate risk with their questionable implications
    for both employers and workers, particularly when smaller
    businesses decide to self-insure.
        If anything, the committee should look into making sure
    businesses and workers are being protected in the variety of
    new health insurance arrangements that have arisen over the
    past few decades.
        The third proposal allows workplace wellness programs to
    circumvent protections under the Americans With Disabilities
    Act and the Genetic Information Nondiscrimination Act. Because
    wellness programs can carry large financial penalties, this
    legislation makes it easier for workplace wellness programs to
    penalize people who do not want to divulge information that may
    be medically sensitive or genetic information, and, therefore,
    if they do not give it up, they may be penalized, and that
    would undermine key workplace civil rights.
        This is just another policy that will harm sicker and older
    people, including those who have disabilities that may not be
    readily noticeable, and they may not want to divulge.
        A range of consumer and disability groups, including AARP,
    have been vocal supporters of ensuring that important civil
    rights protections remain in place in workplace wellness
    programs. Wellness programs if done correctly have the
    potential to benefit both workers and employers. There is no
    compelling reason to subvert civil rights laws and protections
    to administer them.
        So we will hear about some of these ideas that we know do
    not work, will not do anything to protect millions of Americans
    who now benefit from the ACA. As we discuss these legislative
    proposals, let us not lose sight of the larger debate that
    continues to play out in town halls and the need for
    constituents who are so vocal in expressing their fears.
        We hope we can refocus our efforts on the financial
    security of American families by making sure we improve health
    care instead of revisiting policies that do little more than
    shift costs on to the American worker and families, and make
    sure that before we repeal anything, that a replacement is
    ready to go. And if you can come up with a replacement that is
    better than the Affordable Care Act, I commit today to support
    it. I do not think such a plan exists because if it did exist,
    we would have seen it by now.
        In any case, Madam Chair, I thank you for having the
    hearing, and look forward to the testimony of the witnesses.
        [The statement of Mr. Scott follows:]

     Prepared Statement of Hon. Robert C. ``Bobby'' Scott, Ranking Member,
                    Committee on Education and the Workforce

        I would like to welcome our witnesses and thank them for their
    testimony. This hearing will discuss three legislative proposals that
    will weaken insurance protections for consumers and shift costs onto
    workers. While the title insinuates that the goal of these proposals is
    to reduce costs for families, in truth, these bills will lower costs
    for only a lucky few, at the expense of others.
        But let's be clear. This hearing is a distraction from a larger
    debate about the future of America's health care. All across the
    country, millions of people are lining up in town halls and expressing
    their deep concern over Republicans' reckless attempts to repeal the
    Affordable Care Act.
        A Republican draft health care proposal leaked just last week shows
    these concerns are well founded. Insofar as the Republicans have any
    direction on their replacement efforts, it is the wrong direction. Now,
    it is not clear whether or not this leaked draft is the proposal the
    Majority intends to move forward. Republicans have yet to communicate
    any concrete timetables for action and have missed their own
    legislative deadlines by more than a month.
        But, for seven years we have heard calls for repeal. We've heard a
    lot of complaints about the Affordable Care Act, but every proposal or
    idea we have heard from the Majority fails to make things better. But,
    if this leaked draft is any indication of their priorities, one thing
    is becoming increasingly clear. The Majority's vision for health care
    in America is to push more costs onto working families, seniors, and
    average Americans, while giving bigger breaks to corporations and the
    wealthy.
        This means dismantling Medicaid, which primarily provides funding
    for the elderly and those with disabilities. And their ideas include
    taxing workers' health insurance to foot the bill for big tax breaks
    for the wealthy. That's right - the leaked proposal includes a
    provision allowing workers' health insurance to be taxed so that a
    current tax on high-income earners, those making over $200,000, can be
    repealed.
        The Majority believes that affordable, quality health care is a
    privilege reserved for the young, healthy, and wealthy - not a right
    for all Americans.
        The three legislative proposals being discussed today reflect this
    belief. One of these proposals expands association health plans, a
    recycled idea from nearly 20 years ago that has been widely discredited
    as doing nothing but accelerating a race to bottom for health coverage
    at the expense of both workers and employers. In 2000, the
    Congressional Budget Office found that the proposal would have little
    effect on increasing health coverage. Researchers, including the
    American Academy of Actuaries, have expressed concern that association
    health plans lead to market segmentation, where a few healthy people
    may be better off - so long as they stay healthy - while older and less
    healthy workers and employers are left out in the cold. In a press
    release back in 2003, the Academy characterized the legislation as
    ``flawed'' because it is neither actuarially sound nor does it protect
    consumers. These flaws are still present in the idea today. For
    example, a small business owner who is older or who perhaps has
    struggled with a mental or physical illness in the past will not be a
    very attractive partner for an association. Proposals like these that
    allow for cherry picking only serve to make health coverage less
    affordable and accessible for those who need it the most.
        The second proposal insulates stop-loss insurance from certain
    federal oversight. It is unclear to me how this does anything to help
    workers get quality health insurance. While stop-loss can help self-
    insured employers mitigate risk, there are questionable implications
    for both employers and workers, particularly when smaller businesses
    decide to self-insure. If anything, perhaps the Committee can look into
    making sure businesses and workers are being protected in the variety
    of new health insurance arrangements that have arisen over the past few
    decades.
        The third proposal allows workplace wellness programs to circumvent
    the protections in the Americans With Disabilities Act and the Genetic
    Information Nondiscrimination Act. Because wellness programs can carry
    large financial penalties, this legislation makes it easier for
    workplace wellness programs to penalize people who are not comfortable
    divulging sensitive medical or genetic information, undermining key
    workplace civil rights. This is yet another policy that will harm
    sicker and older people, including those who have disabilities that may
    not be readily noticeable. A range of consumer and disability groups,
    including AARP, have been vocal supporters of ensuring that important
    civil rights protections remain in place in workplace wellness. While
    wellness programs - if done correctly - have the potential to benefit
    both workers and employers, there is no compelling reason to subvert
    civil rights laws and protections to administer them.
        So today we will hear about some ideas that frankly just won't work
    or won't do anything to protect the millions of Americans who now
    benefit from the ACA.
        As we discuss these legislative proposals, let's not lose sight of
    the larger debate that we will continue to play out in town halls and
    the needs of our constituents who are so vocally expressing their
    fears. I hope that we can refocus our efforts on the financial security
    of American families by working to improve health care, instead of
    revisiting policies that do little more than shift costs onto American
    working families. Thank you.
                                     ______

        Chairwoman Foxx. Thank you very much, Mr. Scott.
        Pursuant to Committee Rule 7(c), all members will be
    permitted to submit written statements to be included in the
    permanent hearing record. And without objection, the hearing
    record will remain open for 14 days to allow such statements
    and other extraneous material referenced during the hearing to
    be submitted for the official hearing record.
        We now turn to introductions of our distinguished
    witnesses. Ms. Allison Klausner is a principal at Conduent
    Human Resources Service, and serves as the government relations
    leader for the Knowledge Resource Center, where she focuses on
    human resources and employee benefits. She will testify on
    behalf of the American Benefits Council.
        Ms. Lydia Mitts is associate director of Affordability
    Initiatives at Families USA, specializing in health system
    improvement issues.
        Mr. Jay Ritchie is executive vice president of Tokio Marine
    HHC, and has 20 years of experience in insurance underwriting
    and management. He will testify on behalf of the Self-Insurance
    Institute of America.
        Mr. Jon Hurst is the president of Retailers Association of
    Massachusetts. He will testify on behalf of the National Retail
    Federation.
        I now ask our witnesses to raise your right hand.
        [Witnesses sworn.]
        Chairwoman Foxx. Let the record reflect the witnesses
    answered in the affirmative.
        Before I recognize each of you to provide your testimony,
    let me briefly explain our lighting system. We allow five
    minutes for each witness to provide testimony. When you begin,
    the light in front of you will turn green. With one minute
    left, the light will turn yellow. At the five-minute mark, the
    light will turn red, and you should wrap up your testimony.
    Members will each have five minutes to ask questions.
        I now will recognize Ms. Allison Klausner for five minutes.

        TESTIMONY OF ALLISON KLAUSNER, PRINCIPAL AND GOVERNMENT
      RELATIONS LEADER, KNOWLEDGE RESOURCE CENTER, CONDUENT HUMAN
       RESOURCES SERVICES, TESTIFYING ON BEHALF OF THE AMERICAN
                            BENEFITS COUNCIL

        Ms. Klausner. Hello. My name is Allison Klausner, and I am
    a principal and government relations leader of the Knowledge
    Resource Center at Conduent Human Resources Service.
        It is my honor to testify today on behalf of the American
    Benefits Council, of which Conduent is a member, and I am the
    chair of the Policy Board of Directors.
        Collectively, the council's members either sponsor directly
    or provide services to health and retirement plans that cover
    more than 100 million Americans. Many of the council's members
    are at the forefront of the workplace wellness revolution,
    developing programs to help employees and their families enjoy
    healthier and more productive lives.
        Employer-sponsored benefit plans are designed with the
    express purpose of giving each employee the opportunity to
    achieve personal health and financial well-being. This well-
    being serves as the foundation for employees to receive optimal
    performance and productivity, and, in turn, drives successful
    organizations.
        For these reasons, in recent years, employers of all sizes
    have increasingly been designing and implementing wellness
    programs. This has helped to make wellness an area of
    tremendous promise for the future of health care and employer-
    sponsored benefits.
        Despite the growing popularity of employer-sponsored plans,
    I believe the future of these valuable programs are at risk due
    to the inconsistent regulatory framework that applies to them.
        My testimony today will address this problem, and will
    provide recommendations for creating a consistent regulatory
    framework.
        In my role at Conduent, I have significant exposure to
    innovative wellness programs that employers are developing. I
    also have great insight into the chilling effects that recent
    regulations issued by the EEOC and the lack of consistent
    Federal policy have on employer sponsorship of these programs.
        In 2010, Congress effectively codified as part of the
    Affordable Care Act the longstanding wellness program
    regulatory framework under HIPAA. Despite this explicit
    congressional support of the HIPAA wellness program rules,
    employers are nevertheless subject to inconsistent Federal regs
    when it comes to wellness program design and operation. The
    inconsistency is most recently the result of the regulations
    relating to wellness finalized by the EEOC.
        These recently finalized rules under Title II of GINA and
    the Americans With Disabilities Act are not consistent with the
    well-established employee protective wellness program
    regulatory framework under HIPAA.
        As a result, many wellness programs already subject to
    HIPAA may now also be subject to incongruent and competing
    regulations under GINA and the ADA.
        In addition, many wellness programs that are not subject to
    HIPAA, which are highly beneficial, such as diabetes management
    programs, may now be subject to these EEOC requirements. These
    requirements are so burdensome that employees may lose access
    to them if employers conclude they are no longer able to offer
    them.
        The development and implementation of these programs
    requires a substantial investment of financial, intellectual,
    and human capital on the part of employers. Unfortunately, the
    need to comply with the inconsistent regulatory framework under
    HIPAA, GINA, and the ADA has caused many employers to take a
    step back or to pause in their implementation of innovative
    wellness programs. This, in turn, will weaken the positive
    steps and impact that wellness programs can have on employees,
    employers, and long-term health costs.
        I believe the committee can take steps to develop a
    consistent regulatory policy for wellness programs. In this
    regard, I do appreciate the prior work of this committee in
    introducing H.R. 1189, the Preserving Employee Wellness
    Programs Act.
        This act clarifies that wellness programs that do comply
    with HIPAA and the Affordable Care Act would not violate the
    ADA or GINA merely by offering an award, an important move
    towards consistent Federal policy.
        Since the introduction of the act, the EEOC issued its
    wellness regulations under the ADA and GINA. We encourage the
    committee to reintroduce the act with certain modifications to
    address the inconsistencies introduced by the EEOC rules.
        First, we suggest modifying the act to provide that
    wellness programs that are subject to and comply with the HIPAA
    wellness rules are deemed to comply with the ADA and GINA if
    they offer awards that comply with the limits imposed on health
    contingent programs under HIPAA.
        Second, we recommend modifying the act to provide that
    wellness programs that are not subject to HIPAA wellness regs
    are deemed to comply with the ADA and GINA if they offer awards
    that comply with the limits imposed on health contingent
    programs under HIPAA.
        Third, we believe the act should state that wellness
    programs that provide for more favorable treatment of
    individuals with adverse health factors, such as diabetes
    management programs, are deemed to comply with the ADA and
    GINA.
        Fourth, we suggest modifying the act to provide that the
    collection by a wellness program of information about the
    manifested disease or disorder of a family member should not be
    considered an unlawful acquisition of genetic information with
    respect to another family member, and should not violate GINA.
    This would enable employers to provide spouses and children
    with the same important wellness programs they offer employees.
        I want to thank you for your interest in employer-sponsored
    wellness programs. I appreciate the opportunity to testify, and
    the council and I look forward to working with you to enact
    commonsense reforms and restore certainty to employers who are
    focusing on improving the health of their workforces by
    creating a consistent Federal policy for employer-sponsored
    wellness programs.
        [The statement of Ms. Klausner follows:]

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        Chairwoman Foxx. Thank you very much. The staff gave me
    phonetically how to pronounce your name, and I read it wrong.
    Ms. Klausner, thank you. I apologize.
        Ms. Mitts, I recognize you for five minutes.

     TESTIMONY OF LYDIA MITTS, ASSOCIATE DIRECTOR OF AFFORDABILITY
                       INITIATIVES, FAMILIES USA

        Ms. Mitts. Good morning, Chairwoman Foxx, Ranking Member
    Scott, and distinguished members of the committee. Thank you
    for the opportunity to testify today.
        I am Lydia Mitts, associate director of affordability
    initiatives at Families USA, a nonprofit, nonpartisan consumer
    advocacy organization that has worked since 1982 to promote
    high-quality, affordable health care for all in this country.
        The three bills before you today would make various changes
    to employer-based coverage that would promote the scaling back
    of plan benefits and shift a greater share of cost to workers,
    particularly older and sicker workers.
        I would like to specifically address two of the bills
    before you today, starting with the Preserving Employee
    Wellness Programs Act. We believe that preserving and
    strengthening access to care should be a pillar of workplace
    wellness efforts.
        We have long had concerns with wellness program incentives
    that vary workers' healthcare premiums or other healthcare
    costs based on their completing health screenings or meeting
    certain health goals. Such programs can simply be a backdoor
    way to medically underwrite.
        In addition, national research from RAND has found that
    simply offering a comprehensive wellness program that includes
    extensive lifestyle management and disease management services
    is almost equally as effective as incentives at generating high
    participation.
        Premium surcharges tied to completing invasive health
    screenings also undercut key protections of the Americans With
    Disabilities Act and the Genetic Information Nondiscrimination
    Act that protect the privacy of workers' sensitive medical and
    genetic information.
        Our concerns with these collection practices are elevated
    given research showing that over half of workplace wellness
    programs provide limited services or focus only on providing
    health screenings. These raise significant concerns that many
    programs are focused on collecting sensitive information, not
    making investments in services to help workers address health
    problems.
        The Preserving Employee Wellness Programs Act would open
    the door for employers to charge workers and their families
    even higher healthcare costs if they refuse to complete
    invasive health screenings.
        Under current regulations, employers can already charge
    premium surcharges as high as 30 percent of the premium for
    employee only coverage, which is around $2,000 on average. This
    bill drastically increases maximum surcharges to 30 percent of
    the cost of family coverage, which translates to close to
    $5,500 on average. This change will just make coverage less
    affordable for many families, and further undercut important
    worker protections against discrimination.
        The bottom line is that efforts to support employee health
    need to focus on providing evidence-based services, not
    shifting healthcare costs to workers.
        The second bill I would like to speak to is the Small
    Business Health Fairness Act. This bill would exempt
    Association Health Plans from adhering to critical State and
    Federal requirements for small group coverage. These
    requirements have benefited small employers and their workers
    alike.
        They include protections that prevent plans from charging
    small employers exorbitantly higher premiums because their
    employees have poorer health, are older, or are
    disproportionately women. They also include requirements that
    plans cover comprehensive benefits that meet the needs of a
    diverse workforce.
        By allowing Association Health Plans to ignore these key
    protections, this bill would increase premiums and threaten
    stable access to comprehensive coverage for many small
    employers and their workers.
        Employers with a young workforce that is in pristine health
    may be able to get lower premiums. However, the rest of small
    businesses would see coverage become less affordable, although
    they sought it through an association or the existing small
    group market.
        On top of this, employees that move to association plans
    would be at risk of facing skimpier coverage that doesn't cover
    the care they need. This bill would just move us backward to a
    two-tier system that makes it harder to purchase comprehensive,
    affordable coverage for all but a minority of small businesses.
        In closing, I want to note the real threat that other
    proposals to repeal the Affordable Care Act also pose to the
    health coverage of workers and their families. While not before
    the committee today, these proposals would have grave impacts
    on access to affordable coverage for working people in this
    country.
        As we discuss solutions to improve affordability of
    coverage and care for businesses and their workers, we need to
    focus on solutions that do not simply shift healthcare costs to
    working families or undermine their access to coverage that
    fully meets their needs.
        I hope this testimony has provided you with a valuable
    overview to help inform your deliberations on the legislation
    before this committee. Again, thank you for the opportunity to
    testify before you today.
        [The statement of Ms. Mitts follows:]

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        Chairwoman Foxx. Thank you, Ms. Mitts. Mr. Ritchie, you are
    recognized for five minutes.

       TESTIMONY OF JAY RITCHIE, EXECUTIVE VICE PRESIDENT, TOKIO
        MARINE HHC, TESTIFYING ON BEHALF OF THE SELF-INSURANCE
                          INSTITUTE OF AMERICA

        Mr. Ritchie. Thank you. Chairwoman Foxx, Ranking Member
    Scott, and distinguished members of the committee, my name is
    Jay Ritchie and I'm an executive vice president with Tokio
    Marine HHC Stop-Loss Group.
        Tokio Marine HHC Stop-Loss Group provides coverage for over
    3,000 self-insurance employers and Taft-Hartley plans. We are
    one of the largest providers of medical stop-loss in the U.S.,
    covering 3.4 million employees and their dependents.
        Today, I'm testifying on behalf of the Self-Insurance
    Institute of America, a national nonprofit trade association
    representing the business interests of companies involved in
    the self-insurance marketplace, of which I am the current
    chairman.
        SIIA and its members strongly support the Self-Insurance
    Protection Act, and we thank Dr. Roe for his sponsorship of the
    legislation, as well as the support of many of you on this
    committee.
        Self-insurance offers employers across the country a
    platform to effectively and efficiently manage their healthcare
    expenditures. The self-insurance market is focused on creating
    cost-effective and beneficial outcomes for employee
    populations. Self-insurance is not limited to just private
    sector employers. Local cities, counties, and school districts
    make up 9 percent of my own block of business. Another 5
    percent is made up by Taft-Hartley plans.
        I will also balance my remarks today by saying that self-
    insurance is not the right option for everyone. Self-insurance
    does carry additional responsibilities for the plan sponsor,
    but I feel strongly that every employer should have the right
    to examine their options on how to best finance their employee
    health benefit costs.
        We have submitted to this committee a more detailed written
    testimony, so I will not re-read it in its entirety in respect
    to our allotted time.
        I would like to highlight some of the important reasons why
    the Self-Insurance Protection Act is so important to encourage
    competition and maintain current market forces. The largest
    differentiator between health insurance and self-insurance is
    ownership, who controls the plan.
        Self-funded employers made the choice to take ownership of
    their plan in a fiduciary capacity. While this gives the plan
    control of the benefit design and claim data, it also makes the
    employer financially responsible for all administrative
    expenses and healthcare claims of the enrolled members. This
    financial responsibility can be assumed by the largest
    employers or Taft-Hartley plans.
        However, for those who want to have the benefits of self-
    insurance but need to manage the fiscal risk of large
    catastrophic claims, they purchase an insurance product called
    ``medical stop-loss insurance.''
        Medical stop-loss insurance, also known as simply ``stop-
    loss,'' is not health insurance. Stop-loss does not insure
    employees, nor do we reimburse medical providers for care.
    Rather, we reimburse a self-funded entity for healthcare
    payments incurred by the plan to the extent they exceed a
    certain predetermined threshold or deductible, similar to a
    liability product.
        To further tell the differences between stop-loss and
    health insurance, I would offer you the fact that of the 3,000
    stop-loss policies my company sells, our average deductible is
    $140,000. Smaller policyholders will buy a deductible lower
    than the average while larger plans will buy much higher, but
    the reality is that stop-loss does not cover the same risks as
    health insurance, and that is by design.
        Stop-loss is what makes self-insurance work for employers
    that are not large enough to self-fund the largest claims.
    Without medical stop-loss insurance, these plans cannot afford
    to be self-funded as a single catastrophic claim could create
    financial hardship for the plan, so they purchase stop-loss
    coverage to transfer the risk of large dollar claims.
        We're advocating for the passage of the Self-Insurance
    Protection Act to preclude regulatory action that would limit
    access to stop-loss coverage. If regulators are permitted to
    redefine stop-loss coverage as health insurance, the
    availability and access to stop-loss will be significantly
    reduced.
        It would mean that stop-loss is only available for health
    insurers when they control the plan. This would eliminate the
    most valuable aspects of self-insurance and restrict plans to a
    limited amount of health insurers. This would also lead to
    self-insurance only being available for the largest
    corporations, and we would see its benefits and advantages
    eliminated for small- and medium-sized organizations that need
    it the most.
        Stop-loss insurance, while clearly not health insurance, is
    still an insurance product, meaning states still regulate how
    insurance operates. Certain states have taken action to
    restrict availability of stop-loss based on a specific
    deductible for certain group sizes.
        While we acknowledge the responsibility of a state to
    regulate change for insurance products under their
    jurisdiction, a Federal regulation that would alter the
    definition of ``stop-loss coverage'' into a product it is
    clearly not intended to be is very concerning.
        To prevent this, the Self-Insurance Protection Act simply
    seeks to amend the definition of ``health insurance coverage''
    under the Public Health Services Act and parallel sections of
    ERISA and the Tax Code to clarify that stop-loss insurance is
    not health insurance. This legislation does not amend the ACA.
        In conclusion, self-insured employers, benefit brokers,
    consultants, and third party administrators, who are all
    members of SIIA, strongly support the passage of the Self-
    Insurance Protection Act, to promote and protect the ability of
    organizations to self-insure with access to stop-loss insurance
    based on their specific needs.
        Self-insurance provides affordable health coverage to
    businesses of all sizes, helping many employers access coverage
    they may not otherwise have. While self-insurance is not the
    only solution to accessible and affordable employer health
    care, it is an essential part of the solution and should remain
    available.
        Thank you for the opportunity, and I look forward to
    speaking with the committee.
        [The statement of Mr. Ritchie follows:]

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        Chairwoman Foxx. Thank you, Mr. Ritchie. Mr. Hurst, you are
    recognized for five minutes.

    TESTIMONY OF JON B. HURST, PRESIDENT, RETAILERS ASSOCIATION OF
      MASSACHUSETTS, TESTIFYING ON BEHALF OF THE NATIONAL RETAIL
                               FEDERATION

        Mr. Hurst. Thank you, Chairwoman Foxx, Ranking Member
    Scott, and honorable members of the committee. My name is Jon
    Hurst. I'm president of Retailers Association of Massachusetts.
    We're a state trade association of 4,000 mom-and-pop businesses
    across the Commonwealth. You will find organizations like ours
    in every state capital across the country.
        We are all members of the National Retail Federation. We
    collectively represent what is the most competitive industry on
    the face of the planet, the retail sector. It is most
    competitive because our industry empowers consumers. When you
    think about the consumer, the consumer has all the power to
    make the decisions of what they buy, where they buy it, for how
    much, and when they buy it.
        If we could only translate some of that same power into the
    healthcare industry, and that is what we're trying to get done
    with some of this legislation and some of these reforms for
    small businesses.
        I'll take you back 11 years ago in Massachusetts. Our
    legislature and former governor, Mitt Romney, passed what was
    called ``Chapter 58,'' better known as ``RomneyCare.''
    RomneyCare had a lot of important objectives and a lot of
    important wins, one of which was greatly lowering the level of
    uninsured. We went down below 3 percent.
        The other objective was to make sure that we didn't hurt
    employment of large employers that were at the table and
    effectively involved in the lobbying of that legislation.
        What was overlooked though, Madam Chairwoman, were the
    small businesses. The small businesses were not at the table,
    and those developing that legislation thought that really all
    small businesses needed was an exchange, a marketplace to go to
    and buy health insurance.
        If you fast forward for a few years, we kept on measuring
    what was happening with the health insurance rates for our
    4,000 members. Each and every year between 2006 right on up
    through now, our average increases for these small businesses
    have been 12 percent.
        We always benchmark ourselves against a self-insurance
    group, which is the state, our Group Insurance Commission,
    which is a self-insured group of state employees. Our small
    members, which is a cross section of society, have been
    annually seeing increases three times the rate of the self-
    insured group of the state.
        We find it very hard to believe that employees of Main
    Street businesses were three times less healthy than employees
    of State government.
        So, it didn't take very long for us to decide we needed to
    do something different. We went back to the legislature in 2010
    and got passed unanimously an update of the old Association
    Health Plan law, which had been repealed in Massachusetts about
    15 years earlier.
        We called it ``The Small Business Cooperative Law.'' It
    allowed for small businesses to band together with their trade
    associations, their chambers of commerce, and see real savings
    and real tools that large competition, the competition across
    the street, and from big business and from big government have
    every day, from savings on wellness programs, to savings on
    using transparency on costs and quality, to make sure that your
    employees are well educated about the right place, the right
    service, with the right provider for whatever form of health
    care they need.
        We acted as their H.R. departments. Between our
    association, 100 local chambers of commerce across the
    Commonwealth, this passed unanimously. The legislation was
    signed into law by former Governor Deval Patrick. It was
    extremely supported, and even to this day, we have more small
    businesses and their employees buying through these
    cooperatives and buying through our State exchange, our
    connector. We don't cost the taxpayer one dime.
        You know, it's time that we look at ways to level the
    playing field for small businesses and their employees. They
    compete, Madam Chairwoman, every day with large businesses, not
    only for customers, but also for employees. Whether we have a
    law or not that says you must buy health insurance, or if the
    employees of the small businesses themselves feel like they
    need to have health insurance for themselves and their
    families, it is incumbent upon us and government to make sure
    that we do not throw up roadblocks and cause discrimination
    based upon where you work.
        If employees of large employers have the ability to self-
    insure and to group buy and get discounts on wellness and
    transparency uses, so should the small businesses. They should
    not be held back. They should not see increases that are far
    higher than their competition across the street. That is
    incumbent upon government. It's incumbent upon our markets to
    make sure that we have equality in the marketplace.
        We look forward, Madam Chairwoman and members of the
    committee, of working with you on this very important
    legislation, H.R. 1101, because we think this is an important
    step to reforming our healthcare policies across the country
    for our small businesses and their employees.
        Thank you very much.
        [The statement of Mr. Hurst follows:]

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        Chairwoman Foxx. Thank you very much, Mr. Hurst, and all of
    our witnesses for your excellent testimony today. I now will
    recognize members for five minutes of questioning and answers.
    Mr. Wilson, you are recognized for five minutes.
        Mr. Wilson of South Carolina. Thank you, Madam Chair, and
    thank you, Madam Chair, for your leadership in providing such
    extraordinary witnesses today. We appreciate very much your
    input.
        Ms. Klausner, I am grateful that the South Carolina
    Hospital Association under the leadership of President Allan
    Stalvey has been leading the efforts to establish wellness
    programs in businesses, hospitals, and government offices. To
    date, their Working Well Program has established wellness
    programs in 110 multisector worksites.
        Under the hospital association's leadership, wellness
    programs have increased in our State. What are some of the
    benefits that employers achieve because of wellness programs,
    and what are some of the results that employees have seen?
        Ms. Klausner. Thank you very much for your question.
    Wellness programs have been enormously successful, and for
    different employers and different employee populations, they
    see different successes, but all success, nevertheless.
        Some see benefits directly for employees in terms of
    reducing their healthcare costs. They learn about it through
    their health risk assessments or their biometrics screenings,
    or other opportunities, what may be their weaknesses that they
    can address with their own physicians, with their own health
    care. Ultimately, they have an opportunity to reduce those
    costs.
        They also see as absenteeism goes down, individuals that
    are at work are more productive, and, as a result, the
    employees see a greater value in terms of their contribution to
    the employers. We also see that morale increases as everybody
    becomes healthier.
        So, ultimately, we see across the board many things.
    Healthier individuals create a more productive work environment
    and a reduction of healthcare costs.
        Mr. Wilson of South Carolina. I appreciate your pointing
    out wellness screening preventive care, how helpful that is.
        Mr. Ritchie, Hubner Manufacturing of Mount Pleasant, South
    Carolina, supplies products for buses, trains, and the air
    transportation industry. They discovered they were going to
    have a spike in healthcare insurance premiums. To help control
    the insurance costs, the company began making a change towards
    a healthier working environment.
        I am grateful for the leadership of Hubner Manufacturing's
    chief executive officer, Ron Paquette. He has made a real
    difference.
        As Congress looks at various ways to control affordability
    in health care, wellness programs and initiatives should be
    part of the discussion. What are some of the roadblocks that
    employers face when implementing their first wellness programs?
    Can Congress assist employers in working past these roadblocks?
        Mr. Ritchie. I would say for wellness programs, one thing
    that is important, and I would stress this is where the self-
    insurance aspect comes from, one thing we always talk about on
    self-insurance is that the employer controls the claim data. In
    other words, they get the claim data and they can react to that
    data.
        So, if you see something, you know, an example of we know
    we have a higher incidence of pre-diabetic care, we can create
    a wellness program custom made just for that employer, that
    helps people with pre-diabetic care or helps them in
    controlling their diet, or other types of programs that can
    incentivize people to take a little bit better care of
    themselves, or to early identify an issue, to react to it.
        This is something you won't see in a normal health
    insurance market. Why? Because the health insurance market
    isn't going to be customized to the employer. When the employer
    is self-funding, they become their own self-funded plan, they
    become a 100 percent nonprofit plan, because, again, the
    employer is not taking a profit off the employee benefits.
        They have an incentive to create healthy employees and
    productive employees. That's why we see the benefit of self-
    insurance and the ability to access wellness benefits as
    critical to that component.
        Mr. Wilson of South Carolina. Thank you very much. Mr.
    Hurst, you provided a unique perspective with the different
    healthcare mandates that have been suggested, imposed, or
    mandated in Massachusetts.
        Can you provide insight into the impact ObamaCare has had
    on small businesses that face the increasing cost, and what
    would the Small Business Health Fairness Act do to improve the
    situation?
        Mr. Hurst. Thank you, Mr. Wilson. I believe that this
    legislation is critical because you have to look at what's
    happening in the marketplace. In Massachusetts, 60 percent of
    the commercial marketplace is already self-insured, and
    growing.
        What happens when you go self-insured, you have
    opportunities, particularly if you're a small business buying
    in a merger, small group marketplace, you have the ability, for
    instance, to certainly do the wellness programs and to educate
    your employees on the proper location for various services, but
    you also have to deal with what you're talking about, the
    mandates.
        You have the opportunity of avoiding State mandates. I can
    give Massachusetts as an example. Since RomneyCare passed 11
    years ago, we passed 19 State mandates, nearly two per year,
    through our legislature.
        You know, it's no secret that the healthcare industry is
    very, very powerful. You know, to pass more mandates, what it
    does, it puts more money in their pocket, it raises their
    utilization. If you're a retailer it's called ``raising
    traffic,'' right; for healthcare providers it's raising
    utilization. It also affords them the ability to raise their
    prices. You know, if there's no choices, if there is not the
    ability for consumers to say no, the provider, whether it be a
    Big Pharma company or a hospital, are going to raise their
    prices.
        Under ERISA, these big self-insurance companies can, in
    fact, avoid the State mandates. In Massachusetts, we survey
    every year, at least 12 on any given year are not covered by
    over 90 percent of the ERISA-exempt self-insureds, and that is
    government discrimination, okay.
        So, if you're a large company and you're self-insured,
    you're avoiding State mandates. If you're a small business,
    there's another reason why your premiums are much higher.
        Mr. Wilson of South Carolina. Thank you. Thank you for your
    insight.
        Chairwoman Foxx. Thank you, Mr. Hurst. Thank you, Mr.
    Wilson. Mr. Courtney, you are recognized for five minutes.
        Mr. Courtney. Thank you, Madam Chairwoman, and to the
    witnesses for being here today.
        Again, I would just like to sort of follow up on a couple
    of the opening comments that the Chairwoman quoted, actually
    someone from Connecticut, Mark Bertolini from Aetna, regarding
    the question of death spiral.
        He raises a very significant issue right now in terms of
    the stability of the exchanges, but I think if you read a
    little bit deeper into his comments, the question of stability
    is really about the future of subsidies for next year in terms
    of whether or not carriers are going to have any confidence
    that people have benefited from enrolling in the individual
    market and the small market. And I can tell you some stories
    about some small businesses that have actually done quite well
    with the exchanges and the tax credit, which your remarks did
    not mention, Mr. Hurst, through the ACA.
        Again, Mr. Bertolini went on to say, you know, there is a
    solution here, which is basically to set up a reinsurance
    mechanism, kind of like a stop-loss, for high-cost claims that
    again flow through these markets.
        Again, we did have reinsurance in the first three years of
    the ACA. That expired. You know, a clear fix to try to
    stabilize those markets is to extend that reinsurance mechanism
    that was in the law originally.
        Again, reinsurance is a tried and true mechanism in Federal
    programs, whether it is flood insurance, terrorism insurance,
    nuclear power plant insurance, and it actually was in the
    Republican prescription drug plan, the part D program, which
    has a reinsurance mechanism that has actually kept premiums in
    the Medicare part D program quite stable.
        Kudos to the Republican leadership who incorporated that
    into the prescription drug plan that was enacted back around
    2002 or 2003.
        So, again, there are solutions here to deal with some of
    the instability that exists in the market, but, frankly, that
    is not what we are hearing from the Republican majority. It is
    too bad.
        Again, I think there are a lot of people who are serious,
    people who actually do know the complexity of the health
    insurance market, that could address these problems.
        Even with that, in Connecticut, we just closed the books on
    an enrollment period for 2017. We again had a very strong
    enrollment. The average age of new enrollees in the Connecticut
    individual market exchange actually went down last year from 39
    to 35. I want to repeat that. The average age went down from 39
    to 35.
        That is not an indicator of a death spiral. I mean, again,
    we had younger, healthier lives enrolling in the exchange, even
    with the spike in premiums, because, again, the subsidies
    shielded 75 percent of the people who were enrolling in that
    marketplace.
        To the extent, again, looking forward, there is uncertainty
    regarding the future of the subsidies, that is what is making
    insurers skittish about actually participating in the 2018
    enrollment period.
        Madam Chairwoman, I actually have an AP story which quotes
    the American Academy of Actuaries about whether or not, in
    fact, we are seeing a death spiral in terms of the enrollment.
    Again, this is not a partisan organization. If they debate
    something, it is usually about numbers. That is what actuaries
    do. We have a lot of them who live in Connecticut.
        Again, I ask that the ``AP Fact Check, ObamaCare is not in
    a Death Spiral'' be entered into the record.
        Chairwoman Foxx. Without objection.
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        Mr. Courtney. So, again, real quick, Ms. Mitts, in terms of
    the Association Health Plan that is before us right now, again,
    as a former small employer, you know, I understand the fact
    that because of the smallness of the groups, you know, it is
    harder to spread risk, but I guess the real question is what we
    are really looking at is relaxing some of the patient
    protections that were built into the ACA that this legislation
    seeks to do, for example, lifetime limits. Maybe just sort of
    talk about that in terms of what we are sacrificing with that
    kind of legislation.
        Ms. Mitts. So, if we moved backwards to a situation where
    small group coverage wasn't protected under rating requirements
    that they now are, so now all small groups need to be community
    rated, and it's been a huge benefit for many small employers
    who have workforces that did have healthcare needs, who prior
    to the Affordable Care Act had trouble getting competitive
    rates in the marketplace because they could be charged higher
    premiums, we would move back to a situation where we have some
    small employers who are able to get competitive rates through
    an Association Health Plan, who have risk segmentation, so the
    people who really can't benefit from an Association Health Plan
    because they're not offered competitive rates because they do
    have workers who have healthcare needs.
        That's not a viable option for them, and now we've left
    this small group market with a less robust risk pool, and
    premiums will go up for everyone. So, there definitely is an
    impact on premiums.
        Beyond that, workers could lose coverage of really
    important benefits, including maternity coverage. Previously,
    it was less likely for Association Health Plans to sometimes
    cover autism benefits that are a lifeline for many working
    families.
        So, there is a lot on the line if we move backwards to a
    deregulated market for some small businesses.
        Mr. Courtney. Thank you.
        Chairwoman Foxx. Thank you. Mr. Walberg, you are recognized
    for five minutes.
        Mr. Walberg. Thank you, Madam Chairwoman. Thank you to the
    panel for being here. Representative Sam Johnson and I recently
    introduced H.R. 1101, as you know, the Small Business Health
    Fairness Act. It was introduced to allow small businesses the
    option to pool together to offer health benefits.
        I want to make it very clear, the option. Hearing some of
    the dire suggestions is just concerning. We can make up all of
    the opportunities that would go in the wrong direction, in
    fact, and forget about the fact that did happen with the
    Affordable Care Act. Neither is it affordable anymore. The
    outcome, you may have a piece of paper, but you do not have
    coverage. You do not have options.
        We have heard many stories of how small businesses find it
    difficult to find affordable coverage. According to a 2015
    study by the National Federation of Independent Businesses, the
    cost of health insurance is the principal reason that small
    businesses do not offer coverage. Of the 60 percent of small
    employers that do not offer coverage, 52 percent cited cost as
    the reason.
        Small businesses continue to drop coverage. According to
    the Employee Benefits Research Institute, since 2008,
    approximately 36 percent of small businesses with fewer than 10
    employees have stopped offering coverage.
        So, I would like to submit for the record a letter coming
    from over 35 business associations, small business
    associations, that stand in favor of the opportunity that is
    afforded by H.R. 1101. I would like to submit that for the
    record.
        Chairwoman Foxx. Without objection.
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        Mr. Walberg. Thank you. Mr. Hurst, you testified that
    ObamaCare relegated small businesses and their employees to a
    second-class consumer status versus their larger self-insured
    competitors. You also stated that ObamaCare prohibits you from
    taking full advantage of steps your State took to offer small
    businesses more options for coverage.
        Based on your experience, let me ask, how will the Small
    Business Health Fairness Act help small businesses like those
    that belong to the Retailers Association of Massachusetts?
        Mr. Hurst. Thank you, Congressman. What ObamaCare, what the
    ACA did, it preempted a whole lot of innovation in States, one
    of which was a very socialized effort in the small group market
    as far as rating factors. Rating factors are what State
    regulators use to set premiums for small businesses. The more
    rating factors you have, the fairer the rates that you have for
    the small businesses.
        What the ACA did, it rolled back rating factors to only
    four. In Massachusetts, we used to have 11. You know, what you
    want to try to do is to have fair rates, to make sure people
    are not unfairly cross-subsidizing others.
        If this legislation passes, I believe you're going to see a
    lot of associations, a lot of the chambers of commerce, looking
    at an option, whether it be they self-insure or fully insure,
    to get out there and be proactive in lowering costs for their
    employees. Not only for them, but also we have a big growing
    pot of health care, and there's an issue of how we divide that
    up. Right now, it's not being divided up fairly. It's being
    divided up unfairly.
        We need to stop the growth, but we also need to divide it
    more fairly, and this will help do that, but it also will
    engage those business associations, the professional societies,
    and chambers of commerce to better educate their employees and
    members about the importance of wellness programs, the
    importance of going to the community hospital instead of the
    big teaching hospital where the costs are three times higher.
        We need more education of our consumers out there and our
    associations are the right vehicle to do that.
        Mr. Walberg. Thank you. Mr. Ritchie, can you explain the
    benefits of a self-funded Association Health Plan for an
    employer offering benefits to employees under this bill?
        Mr. Ritchie. Yes. One thing I'd like to talk about, we just
    had the analysis of these are small employers and they're
    trying to compete. Well, when you talk about putting them in an
    Association Health Plan, you're pulling them out. They're not
    small employers anymore from a risk basis. They have bound
    together in a bona fide association, so it's not been a newly
    created association, it's a bona fide association, and now
    they're able to purchase coverage as a larger employer.
        One thing we talked about was Mr. Bertolini and his
    comments about whether the individual market is in a death
    spiral or not. What we know as a fact is the employer market is
    not in a death spiral. It's a very healthy market. It's a very
    competitive market, and it's mainly what is controlling costs
    in the USA right now. Sixty-one percent of all employees who
    get coverage through their employer get it under a self-funded
    plan.
        That's a material thing. That shows you that self-insurance
    is working. It is not broken. So, when we talk about an
    association, we're allowing small employers in another format,
    if they can't do it on their own and standalone basis, to come
    forward and say, yes, I want to be part of a larger group. I
    want to look at maybe having a health insurance product, maybe
    I want to be self-funded. I want to have the choices, but I
    want to be together with a bona fide association to provide
    coverage for my members or my employees.
        Mr. Walberg. Thank you. I yield back.
        Chairwoman Foxx. Thank you very much. Ms. Fudge, you are
    recognized for five minutes.
        Ms. Fudge. Thank you very much, Madam Chair, and thank you
    all for being here today. You know, it is interesting to me
    that any time the majority does not like something, they just
    deal with it ad nauseam, over and over and over again.
        We have voted more than 60 times to repeal the Affordable
    Care Act, and they did not even pretend to have a replacement.
    Just repeal it. What would make you think they have a
    replacement now? This is nothing more than just stalling until
    they can come up with a plan. They have no clue what to do to
    replace it.
        As a matter of fact, the President said it is just
    complicated. It is complicated. I know it is hard. Sixty-five
    times with no replacement plan.
        You know, I listened to the Chairwoman talking about people
    coming to town halls. I had a town hall on Saturday, because I
    know that when I was elected, I was elected to represent every
    single person in the district I represented, even those who
    disagree with me. That is my job.
        So, I listened to what the people said. There was not one
    who believed that we should repeal the Affordable Care Act. Can
    we make it better? Absolutely. They want it fixed. They do not
    want it destroyed. What we want to do here is to destroy it
    because we have no earthly idea how to fix it.
        I wonder how many hearings we are going to have on this.
    They did not like NLRB. We had 26 hearings. I wonder how many
    we will have on this before they come up with a plan.
        Ms. Mitts, even though we have not talked about this today,
    they have this great idea that health savings plans are the
    answer to all of our problems. Could you please talk a bit
    about how someone maybe with cancer or someone who has some
    long-term illness would go into absolute bankruptcy with a
    health savings plan?
        Ms. Mitts. Thank you for your question. Health savings
    accounts do not work for the vast majority of working people in
    this country, middle-income families who are living paycheck to
    paycheck. Basically, it asks people to pay full freight for
    their health care, they're tied to plans with high deductibles.
        Data has shown and research has shown that most families do
    not have that type of money in liquid assets, in any financial
    assets, to pay $2,000, $3,000 in medical bills.
        So, health savings accounts are not the solution for
    working families. They just cannot afford to put that money
    aside in an account where literally they cannot use it for
    anything other than health care. They have an emergency fund
    for health care, for their house, for their children, so it's
    really not a solution, and it's a cost shift to families, and
    would leave them exposed to bankruptcy and medical debt.
        Ms. Fudge. Even though some people think we live in an
    alternative universe, I do not deal in alternative facts. It is
    a fact that 20 million more people have health care because of
    the Affordable Care Act. It is a fact that people are no longer
    going into bankruptcy because they are sick. It is a fact that
    young people can stay on their parents' insurance until they
    are 26. It is a fact that right now, a person who is sick can
    get help and not have to worry about paying their bills.
        So, let us just deal with some facts. What happens if we
    restrict or reduce the amount of Medicaid expansion in our
    States? What happens to these people who now have insurance,
    who after we change whatever it is they are going to change,
    because I still do not know what that is, what happens if we
    roll back Medicaid expansion?
        Ms. Mitts. Medicaid expansion has expanded coverage to
    millions of working people in this country. The majority of
    people who have benefited from Medicaid expansion are working
    adults. They would be left without any affordable coverage
    option and likely go uninsured.
        We've seen people's access to preventive care and primary
    care improve thanks to the Medicaid expansion, and that's
    benefited enrollees of the expansion, as well as their workers,
    who now have a healthier workforce coming into work every
    single day.
        Rolling back the Medicaid expansion would have dire
    consequences for States who have seen an economic boost from
    the Federal funds coming in. It's created jobs and lifted up
    their economies. So, the cuts have dire consequences for the
    low-income people who have relied on Medicaid for affordable
    coverage as well as their States.
        Ms. Fudge. Thank you for just the facts, just the facts.
    Thank you. I yield back.
        Chairwoman Foxx. Thank you, Ms. Fudge. Mr. Barletta, you
    are recognized for five minutes.
        Mr. Barletta. Thank you. Mr. Hurst, thank you for being
    here today. As you well know, many individuals do not have the
    luxury of employer-sponsored health coverage on the sole basis
    that they are, in fact, their own boss. I have heard from many
    of my constituents who are faced with this problem, especially
    farmers.
        Luckily, they were afforded the opportunity to receive
    coverage through the Pennsylvania Farm Bureau. At one point in
    time, the Pennsylvania Farm Bureau provided coverage to almost
    half of the farmers that belong to the organization through an
    Association Health Plan. This arrangement worked very well for
    the Farm Bureau's hardworking members. When they had a question
    concerning their coverage, they were able to simply call the
    Pennsylvania Farm Bureau, a welcomed alternative to calling a
    1-800 number that likely would have immediately put them on
    hold.
        However, perhaps the best part of this arrangement was the
    cost for both the Farm Bureau and its membership. Since the
    rates were set by experience, the prices were affordable.
        The farmers in my district will tell you they do not go to
    the doctor for every cut or every scrape they may have, and
    this characteristic resulted in relatively low coverage costs.
    Of course, when they needed care, it was available to them, and
    the Farm Bureau prides itself on the benefits they were able to
    administer.
        However, all of this changed thanks to ObamaCare. Under
    ObamaCare, arrangements like the one used by the Pennsylvania
    Farm Bureau were no longer viable. Costs for these farmers went
    up because the rates were no longer based on the Farm Bureau's
    coverage pool alone, but rather on a larger community rating
    based on individuals outside of the organization. This is
    because the Pennsylvania Farm Bureau could no longer offer
    their Association Health Plans to their members.
        In short, President Obama's failed healthcare law decreased
    flexibility for groups like the Pennsylvania Farm Bureau and,
    in turn, hardworking farmers and their families.
        I am a strong believer and supporter of Association Health
    Plans and the idea that small businesses should be able to pull
    together to offer their employees affordable health coverage. I
    agree with you that we must give organizations and small
    businesses this option.
        However, I think that we must continue to explore
    innovative options that lower the cost of health care even
    further. Based on your experience in Massachusetts, what type
    of benefits and cost savings do you think groups like the
    Pennsylvania Farm Bureau and their members would experience if
    they were allowed to pool with groups across State lines to
    deliver health coverage?
        Mr. Hurst. Thank you, Congressman. I will say farm bureaus
    across the country had very viable programs, including in
    Massachusetts, and serving a very important part of the
    economy. What we've done is we've essentially asked them to
    unfairly cross-subsidize others, where we don't do the same
    thing for big business or big government who are ERISA-exempt.
        So, that's unfair. It's discriminatory under the law and
    under the marketplace.
        What the Pennsylvania Farm Bureau and other small business
    associations can do is they can get proactive with their
    employees, their families, and make sure they understand the
    importance of wellness, for instance.
        If you get well and prevent certain accidents and certain
    diseases, you know, you're going to avoid claims. If you avoid
    claims, your premiums should come down. There's a reason why
    large employers self-insure, right? There's a reason why they
    do wellness programs, because if people get healthier, your
    premiums are going to drop.
        It's the same thing if you educate your employee base that
    you need to go to XYZ provider rather than ABC who is a higher
    cost and no better in the area of quality. We need more
    education of the small business employees as well about the
    right setting for the right care, and that's what these plans
    can do.
        Mr. Barletta. Thank you. Thank you, Madam Chair.
        Chairwoman Foxx. Thank you very much. Mr. Polis, you are
    next for five minutes.
        Mr. Polis. Thank you, Madam Chair. Today, 20,000 coal
    miners received notice that their retiree healthcare benefits
    will be cut off for 60 days when the Continuing Resolution
    expires.
        They received the notice because last December Congress
    passed a four month patch for coal workers' healthcare benefits
    instead of the permanent fix that many of us in a bipartisan
    way proposed to cover miners' health care.
        A copy of that 60-day notice is on the easel in front of
    us. I would like to ask unanimous consent to enter this notice
    to miners into the record.
        Chairwoman Foxx. Without objection.
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        Mr. Polis. I am entering this nice small one into the
    record, Madam Chair.
        Chairwoman Foxx. I was going to allude to that. I figured
    you would do that.
        Mr. Polis. I recognize that the record is better reflected
    for paper-sized pieces.
        I joined on a bipartisan basis with Representative David
    McKinley and Representative Frederica Wilson in cosponsoring
    the Miners Protection Act, H.R. 179. It would transfer balances
    from the Abandoned Mines Land Fund to a healthcare plan to
    cover coal miners whose employers filed for bankruptcy in the
    last several years.
        Frankly, if we fail to act on the Miners Protection Act by
    the end of April, miners who are not Medicare eligible, which
    is the vast majority, have been advised that they have the
    option of securing health insurance on the Affordable Care
    Exchange, but, as we know, the President and House leadership
    have vowed to repeal the Affordable Care Exchange, leaving the
    miners with no recourse.
        Miners have held up their end of the bargain, giving up
    higher pay for retiree health care down the road, and I would
    hope that we could find bipartisan support to honor that
    agreement and ensure that these coal miners do not lose retiree
    healthcare benefits that they earned.
        Moving on to the hearing before us, I want to thank the
    Chairwoman for yielding. We find ourselves again considering
    proposals that threaten to weaken the healthcare system that
    has insured over 20 million more Americans over the last 6
    years.
        In my own State of Colorado alone, the number of people
    without insurance dropped in half, to 6.7 percent. For Colorado
    children, the uninsured rate is even lower, 2.5 percent.
        Well of course, the Affordable Care Act can be improved.
    Many of the proposals that I worry might come before us would
    weaken rather than strengthen health care in our country.
        There is a lot of progress, and I hope that my colleagues
    on both sides of the aisle agree we need to keep--I hope we can
    keep the fact insurers can have some lifetime coverage, and it
    is a good way of preventing medical bankruptcies and
    devastating families.
        I do not think we should charge women more just because of
    their gender. I do not think we should deny child coverage due
    to illness contracted at infancy. It is also important to keep
    mental health parity. That is an essential health benefit which
    has proven to lower costs in the long run.
        We need to move forward from that baseline rather than
    return to a time when basic healthcare services were not
    guaranteed. Frankly, my constituents are deeply worried about
    what the absence of a plan means for them. I have heard from
    people who use mental health services as well as mental health
    professionals. I have heard from LGBT advocates. I have heard
    from parents of children with terminal illnesses. I have heard
    from self-employed entrepreneurs with preexisting conditions. I
    have heard from young adults. Each story is unique, but the
    common thread is that without the ACA, they worry a lot about
    where we are going to be.
        Rolling back protections and coverage implemented in the
    ACA threatens the health and welfare of hundreds of thousands
    of Coloradoans and their families, millions of people across
    the country.
        Ms. Mitts, my home State of Colorado was one of the 31
    States that expanded Medicaid as part of the Affordable Care
    Act. That law allowed about 350,000 Coloradoans to receive
    health care.
        If Congress were to eliminate the Medicaid expansion, our
    State is at risk of losing close to $2 billion in Federal
    Medicaid dollars that are absolutely essential to care for low-
    income residents in my State, and I do not know what the plan
    would be without that.
        I spoke to a community health center in a mountain
    community that stressed the importance of the program, and do
    not know how they can reach their patient population without
    it.
        Ms. Mitts, what do you foresee is the damage that weakening
    Medicaid would do to health insurance coverage for American
    families, and can you address proposals to block grant the
    program or institute per capita caps?
        Ms. Mitts. Thank you for your question. Repealing the
    Medicaid expansion, which basically was a lifeline for millions
    of lower income people who up until that point did not have any
    access to affordable coverage, would basically scale back
    immense progress and leave those people uninsured.
        In terms of proposals to block grant or per capita cap the
    Medicaid program, that translates to immense cuts to the
    program. They will leave states making hard decisions about
    rolling back the number of people enrolled in the program,
    cutting benefits, cutting provider rates.
        The bottom line is that in all of those scenarios,
    enrollees lose out, and their access to care is harmed.
        Mr. Polis. Thank you, Madam Chair. I yield back.
        Chairwoman Foxx. Thank you. Mr. Byrne, you are recognized
    for five minutes.
        Mr. Byrne. Thank you, Madam Chairman. Ms. Klausner, I
    really appreciate your testimony, but I have to admit, I am
    having a little deja vu listening to you.
        Back in the 1990s, I was a labor employment attorney
    representing small- and medium-sized businesses when Congress
    passed the Americans With Disabilities Act, a bipartisan bill.
        Everybody in America wants to see disabled people be
    successful in the workplace. Except when the law was passed, no
    one thought how that law was going to work with State and
    Workers' Comp laws, because some people become disabled because
    of a workplace injury.
        A few years later, Congress passed the Family Medical Leave
    Act, and no one thought how the Family Medical Leave Act would
    work with the Americans With Disabilities Act, would work with
    State and Workers' Comp laws. So instead of accomplishing our
    objective, we simply made things a lot more complicated and
    difficult for the goal that everybody wanted to get to, to
    actually be achieved.
        Now, here we are in the 2010s, and everyone wants wellness
    programs, except we get these regulations in 2013 that take us
    in one direction from the Secretary of Labor, HHS, Treasury,
    and in 2015, we get a conflicting regulation from the EEOC
    under ADA and GINA. I think you have alluded to that in your
    testimony.
        So, the goal we are trying to get to, which is to get
    wellness programs out in the workplace that are good for our
    American citizens and our workers, is impeded by the fact that
    we now have two competing regulations.
        So, I am sorry, I am having deja vu all over again, to
    quote Yogi Berra. Maybe we have the best of intentions, but by
    having these conflicts, we are making it more difficult to
    achieve the goal we are trying to achieve.
        We have a proposed law in front of us, the Preserving
    Employee Wellness Program Act. Tell me how in your judgment
    that would improve things. Tell me how that would improve
    things so we get to that goal.
        Ms. Klausner. Thank you for your question, Mr. Byrne.
    You're absolutely right, that the layering of the different
    laws and regulations has caused complexity and conflict, and
    ultimately a chilling effect on employers who are trying very
    hard to successfully design and implement wellness programs for
    their employees, as well as their families.
        What employers are finding is that the Affordable Care Act,
    which codified the HIPAA rules, allowed employers to have a
    great amount of flexibility while providing tremendous
    protection to the consumer, the employee, and his or her
    family.
        For example, it allowed the 30 percent rule to be one where
    the premiums or the incentives or the surcharges were done with
    respect to not only the self-only employee coverage, if that
    was the tier they were in, but also relative to family
    coverage. It also allowed there to be an increase for tobacco-
    related cessation programs, an additional 20 percent to bump up
    to 50 percent.
        When the Affordable Care Act rules were there, it was very
    exciting. However, when the Americans With Disabilities rules
    came in recently, it did not align with those ACA rules, those
    HIPAA rules. Suddenly, employers were stuck with a position of
    saying, well, how do I access/leverage that terrific 20 percent
    bump to encourage my employees and perhaps their families to
    stop smoking or to otherwise use tobacco products, which
    ultimately lead to claims?
        We're not suggesting that every tobacco user can stop, but
    to the extent that we can design programs that maximum the
    opportunities for people to take the initiative, take
    behavioral changes, to lower the risk that comes from tobacco
    use, we can no longer do that up to the 50 percent limit
    because of the Americans With Disabilities Act.
        GINA is another example. Employers would like to be able to
    have wellness programs in their workplace that are not only for
    employees and not only for their spouses, but also for their
    adult dependent children. The Affordable Care Act has been a
    very strong reason why employers now allow the children of
    their employees to stay on their plans up to age 26. Perhaps
    some employer plans had that before the Affordable Care Act,
    but not necessarily that many.
        The adult children who are up to age 26 may have valuable
    opportunities to learn from wellness programs. They may have an
    opportunity to understand their own biometrics, their own
    health risks, that they can then go to their doctors under
    their own plans and learn how to make choices to lower their
    own health risks that are preventable. However--
        Mr. Byrne. My time is up, if you could make it real quick.
        Ms. Klausner. Absolutely. GINA does not really allow the
    wellness programs to be for dependent children, whereas they
    can be under the Affordable Care Act rules and the HIPAA rules.
        So, if we were to have complexity simplified, if we could
    make the rules better aligned, employers will have better
    opportunities to customize and create flexible programs so
    their employees and their families can have their most optimal
    performance, both in terms of their health and at the
    workplace.
        Mr. Byrne. Thank you for your testimony. Thank you, Madam
    Chairman.
        Chairwoman Foxx. You are quite welcome. Ms. Bonamici, you
    are recognized for five minutes.
        Ms. Bonamici. Thank you, Madam Chairwoman, and thank you to
    our witnesses for testifying today.
        I appreciate the objectives that are named in the title of
    this hearing, ``Improve healthcare coverage and provide lower
    costs for families.'' That sounds like the Affordable Care Act
    to me, and certainly the more than 2,600 people who showed up
    at a health care town hall meeting I had with our Senators
    recently share that sentiment.
        We have talked a lot about small businesses here today.
    Mike Roach is the owner of Paloma Clothing in Portland, Oregon.
    He said, ``I greatly benefited from the ACA during the years it
    has been in place, and I wish more of us had spoken up loudly
    so that the public, Congress, and the President had a better
    understanding of that.'' He said the ACA helped to slow the
    rising of insurance premiums for his small group of covered
    employees.
        In my home State of Oregon, nearly one in five individuals
    had no health insurance coverage before the ACA. I used to,
    years ago, do financial counseling at Legal Aid, and many of
    the people who came in thinking that they really needed to file
    bankruptcy were there because they had medical bills. They
    either had no insurance or inadequate insurance.
        Today, more than 95 percent of Oregonians are covered,
    including about 56,000 children, and low-income working adults
    in my district who benefit from the expansion of Medicaid.
        Ms. Mitts, Oregon has done a lot of innovative work to
    provide coordinated care while reducing costs. This is true not
    just in urban and suburban areas, but in rural areas as well.
    Our coordinated care organizations are doing amazing work with
    coordinating health care, mental health care, vision care,
    dental care, working with early childhood, and really seeing
    great results.
        So, I know you in response to Mr. Polis talked about the
    proposals such as block grants or per capita allotment and how
    that might affect those efforts. I wonder if you could talk a
    little bit about, geographically, how would this affect rural
    areas in terms of if there were block granting or per capita,
    how would it affect the rural communities where there are jobs
    there and increased access because of the Affordable Care Act?
        Ms. Mitts. Thank you for your question. In the world of per
    capita caps, there would likely be huge enrollment cuts or
    benefit cuts that would have a detrimental impact on rural
    communities' access.
        Rural communities have benefited immensely from the
    expansion of the Medicaid program, and you would see fewer
    people enrolled. You could see them losing benefits. You could
    see them having a harder time finding a provider because they
    have provider rates that they have to cut.
        The real challenge of it is that it really leaves states
    holding the bag, like Oregon, who want to do innovative things
    and who have had the resources to do those innovative things
    and make immense progress in improving care coordination and
    quality of life for people. They won't have the resources to
    pursue those types of innovative strategies to connect medical
    care to community-based services any more.
        Ms. Bonamici. Thank you. I know my constituents are
    extremely concerned about it. And Ms. Mitts, the ACA included,
    as we know, unprecedented new consumer protections for
    patients, such as eliminating annual and lifetime limits,
    preventing insurers from dropping people when they get sick,
    and charging women higher premiums.
        What will happen to these protections in Association Health
    Plans?
        Ms. Mitts. Under the bill put forth to you today, those
    Association Health Plans would no longer have to comply with so
    many of those rating protections that have been a huge benefit
    to many small businesses that before the Affordable Care Act
    actually had a really hard time finding affordable coverage for
    their employees because they employed employees who actually
    had healthcare needs, who were maybe older, and the market
    didn't work for them before.
        So, we would move back to a situation where we would have a
    segmented market, and people who are healthy and in pristine
    health could move into an Association Health Plan.
        I think the thing that is important to keep in mind is that
    doesn't mean that an Association Health Plan would always be
    there and work for that small employer. If their workforce got
    older, claims went up, they might find that an Association
    Health Plan charges them more, and it's not a viable option for
    them anymore.
        Ms. Bonamici. I know there have been some solvency concerns
    about some of the Association Health Plans. Can you address
    that?
        Ms. Mitts. Historically, there have been concerns about
    Association Health Plans not having adequate solvency funds.
    They have leaner, less rigid requirements than typical health
    insurance coverage. Partially, State oversight was added to
    that to help address some of these problems, the bigger
    problems for when they were just under ERISA.
        When a plan goes insolvent, an Association Health Plan goes
    insolvent, their employers and their workers are still left
    with all of those unpaid medical claims, and are on the hook
    for them. If the plans are not under State jurisdiction, they
    won't be able to benefit from State guaranty funds that help
    pay those claims, so they'll be left on the hook for them.
        Ms. Bonamici. Thank you. I see my time has expired. I yield
    back. Thank you, Madam Chair.
        Chairwoman Foxx. Thank you very much, Ms. Bonamici. Mr.
    Allen, you are recognized for five minutes.
        Mr. Allen. Thank you, Chairwoman. Thank you for being with
    us today. I think these hearings are good. I keep waiting for
    the magic formula that is going to fix this problem.
        We know health care is basically a disaster for most
    Americans. I get story after story of people who actually are
    not getting preventive health care, Ms. Klausner, because their
    deductibles are too high, so they cannot get medical attention.
    Now, the costs are going to go up because the next thing that
    is going to happen is they are going to be forced to have
    critical care.
        I agree with you that we spend about 25 percent, at least
    from what I researched, of every dollar on preventive care
    versus about 75 percent of every dollar on critical care. If we
    could just get that evened up, we would save huge sums of
    money.
        Now, I am going to ask this question on behalf of my wife.
    She is big in nutrition, and I have to confess, she stays on me
    all the time about some things I eat. I am also on the
    Committee of Agriculture. We have had hearings on nutrition.
        I just did some research, and I saw that the cost curve on
    nutrition and number of participants and the cost curve on
    Medicaid and the number of participants is on the same upward
    trend.
        In your studies, have you looked at the nutrition side and
    any types of savings we could generate, particularly in dealing
    with the rising healthcare costs?
        Ms. Klausner. Thank you very much for your question. I am
    glad to see that families are together involved in trying to
    create wellness among each member of the family.
        In terms of your absolute specific question, I would like
    to go back and look at our study and see whether or not we did,
    in fact, specifically look at the value of nutrition.
        What I can say is that the wellness programs are ones that
    really are sought to help individuals identify for themselves
    where they have issues that ultimately they can work on, as I
    said before, with their doctors individually, but the aggregate
    information gets collected in a way that can then help
    employers to make changes, not only with their employer-
    sponsored plans, but also with the whole culture of the
    workplace.
        So, if I were to look at your issue, not specifically
    yours, but the issue you raised in terms of nutrition, through
    health risk assessments we have learned that individuals might
    not actually know what food is causing their high blood
    pressure or what foods could lower their cholesterol, or how
    those different issues work together, or if they do have an
    illness, they have irritable bowel syndrome or Crohn's, how
    they can deal with it.
        Ultimately, that information will help them personally with
    their doctors to getting preventive care and maintenance care
    or to deal with the actual illness, but it also allows the
    employer at the aggregate level to recognize that perhaps they
    would change something in their workplace. Their cafeteria
    might have more fresh food. Their cafeteria might end up being
    set down the hall so it takes more steps to walk there.
        It all works together. So what I think is very important is
    that employers are looking to create an environment by
    utilizing these workplace wellness programs to improve the
    health of the employee and their family, as well as to create a
    productive workforce.
        Mr. Allen. Nutrition is a part of that program?
        Ms. Klausner. Absolutely, nutrition is a part of it.
        Mr. Allen. Mr. Ritchie, on self-insured programs, obviously
    the business community--I am involved in small business--
    obviously, we are going to self-insurance because we are trying
    to stabilize costs, the cost increase.
        I believe you said that program is working fairly well, but
    if we could basically release it and make it more available, it
    might be an answer to the rising cost of health insurance.
        Mr. Ritchie. I would say self-insurance is not going to
    answer the rising cost of health insurance. You still have the
    underlying medical costs which were increasing at a phenomenal
    rate that the market is really struggling to keep up with.
        What self-insurance does is it doesn't allow them to double
    down. If you're a health insurer, you're going to take the
    increasing cost of medical insurance and, due to our new
    medical loss ratio law, get a profit percentage on the rising
    increase of that cost. So, you take it into a self-insured
    model and you're not paying the health insurer's profits on top
    of your rising costs. That's the value of self-insurance.
    You're taking it and you're controlling your own destination,
    and keeping it at a true cost basis.
        Mr. Allen. I yield back.
        Chairwoman Foxx. Thank you very much. Ms. Blunt Rochester,
    you are recognized for five minutes.
        Ms. Blunt Rochester. Thank you, Madam Chair and Ranking
    Member Scott. I would also like to thank the panel.
        First, I would like to ask unanimous consent to enter into
    the committee record a letter from Governor John Carney to
    Senator Ron Wyden dated February 22, 2017, to discuss the
    potential impact of the proposed Medicaid changes in the
    Affordable Care Act for my State of Delaware, as well as a
    letter from the National Association of Insurance
    Commissioners.
        Chairwoman Foxx. Without objection.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Blunt Rochester I would like to use my time to highlight a
    few concerns that I have about the House proposals to repeal
    the Affordable Care Act. First, I want to highlight for my
    colleagues two startling numbers.
        One is the fact that repealing the Medicaid expansion part
    of the ACA would eliminate 60,000 adult Delawareans from our
    health care rolls, and open us up to a $170 million hole in my
    State's budget. For some, that might not seem big, but Delaware
    is very small, so it could have a catastrophic impact.
        So, my first question is for Ms. Mitts. I really wanted to
    talk about the impact of Medicaid and whether or not a block
    grant versus a per capita cap is a viable option or a good
    solution, but you have already talked a lot about that. So one
    of the questions I did not hear answered was the fact that I
    think a lot of people have an impression of folks on Medicaid
    as single adults and families, but, Ms. Mitts, can you discuss
    the importance of Medicaid funding for long-term care for
    seniors and individuals with disabilities?
        Ms. Mitts. Thank you for your question. So, Medicaid has
    long been a lifeline for individuals who are elderly, who are
    dual eligible, who get Medicaid benefits, are low income, and
    Medicaid helps them afford the care they need. They also
    provide critical long-term supports and services, nursing home
    care for many older adults.
        Under a block grant or per capita cap situation, we're
    talking about in most proposals we have seen a 30 percent cut
    in the Medicaid budget. That's going to hit those highest cost
    patients in the Medicaid program. If a state is going to have
    to make cuts to their Medicaid program, they're going to have
    to make cuts there and really roll back coverage and care for
    some of the most vulnerable.
        Blunt Rochester Thank you. My second question is actually
    for Ms. Klausner. You mentioned that consistent policy is key
    for businesses. Can you tell us how you and other members are
    reacting to the inconsistent policy proposals, messages,
    timelines? There are just so many different competing things
    out there.
        I am just curious if you could talk about --and it is
    coming from the administration, it is coming from Republicans
    in the House and in the Senate, and also from governors. Can
    you talk a little bit about the impact of all this
    inconsistency?
        Ms. Klausner. Thank you for your question. Specifically,
    with regard to wellness programs, we are getting a lot of
    inconsistent information coming out of the different
    regulations. The impact of it is truly a chilling effect on
    employers being able to maximize reducing costs for employees
    and their families.
        We have employees that desperately need the information,
    and employers that need the information, so they can create
    things like disease management programs, ones where the health
    risk assessment identifies for an individual that they have
    either diabetes or are pre-diabetic, some who may not have
    already known it through either a glucose test or a biometric
    screening.
        Ultimately, we are able to then design plans on behalf of
    the employers so they could perhaps waive a co-pay for someone
    who has been identified as diabetic for maybe getting an eye
    exam or to get their insulin products.
        However, it is unclear as to whether or not these
    management programs that are there to benefit employees who are
    either at risk for health conditions or, in fact, have adverse
    health conditions--we are challenged to create those programs
    because there is uncertainty or lack of clarity as to where
    they stand under the Americans With Disabilities Act as opposed
    to under the Affordable Care Act.
        We would look to have more streamlined rules so we could
    maximize opportunities.
        Blunt Rochester Thank you. I do not have a lot of time
    left, and I would have loved to ask everybody this question
    because one of my big concerns is the fact that because of this
    inconsistency of messaging, even the markets, whether it is
    insurers, others, are really skittish, as we have said.
        So, I yield back the balance of my time. Thank you.
        Chairwoman Foxx. Thank you. Ms. Blunt Rochester, you can
    submit questions to the witnesses and then ask for them to be
    answered. Thank you.
        Mr. Rooney, you are recognized for five minutes.
        Mr. Rooney. Thank you, Chairman Foxx, Ranking Member Scott,
    and thank you to the panel. It has been very informative to me.
        I would like to ask Mr. Ritchie right quick, as an employer
    like you, I think we would agree--I agree with your comments
    about how successful self-insurance plans have been. We know
    very well self-insurance aligns human motivation with their
    money, something which some people do not seem to understand,
    and stop-loss is critical to allowing smaller companies to
    offer them.
        Would you just reiterate, just give us a little bit of your
    opinion about whether self-insurance might present an equally
    attractive option for public sector and multiemployer plans? I
    apologize if you already did this while I was out.
        Mr. Ritchie. Well, I would say, this is something I alluded
    to at the beginning of our testimony, for cities, local
    governments, and school districts, they represent 10 percent of
    my purchasers of stop-loss insurance. Taft-Hartley
    multiemployer plans represent 5 percent of it. So, they are a
    material utilizer of self-insurance and, therefore, stop-loss
    insurance when it makes sense for them. So, we've seen it as a
    huge opportunity and savings for those multiemployer plans.
        One thing we talked about earlier was the miners'
    associations, and if there is a fund established for them. What
    I think is critical and what self-insurance does is it would
    say that all those funds go to pay benefits, and it allows it
    to do that, where it is not going into the health insurance
    mechanism where there is a profit percentage on it.
        That's one thing that I think has been a little bit missed
    in this hearing so far. When we're talking about the Self-
    Insurance Protection Act, we are not talking about amending the
    Affordable Care Act. We are also just talking about protecting
    options for employers so they can finance the risk in an
    appropriate manner. That's all we are simply putting forth with
    this bill.
        Mr. Rooney. I would think with those low percentage market
    shares, there would be a lot of room to go up if the local
    government architecture supported it.
        Mr. Ritchie. I actually think the local districts are very
    much consumers. School districts are huge consumers of it.
    California School Districts have a large self-insurance program
    that they run through a broker in California. They have been
    utilizers of it. School districts usually tend to be around
    that 1,000 to 3,000 life market. That is in the absolute sweet
    spot for self-insurance with stop-loss coverage.
        I think that market is robust, it's vibrant, and as I
    alluded to also earlier, the employer market is not the market
    that's broke. It's working. Employers have an incentive to take
    care of their employees. Small employers are competing with
    large employers. Large employers are also competing with small
    employers to attract and retain talent. They want to offer a
    benefit that makes sense.
        If you're going to finance it, and you're going to ask me
    as an employer, I'm going to offer to pay for your coverage, I
    should have the right to know where the claims are going, to
    know what's happening with the spend, and then to customize my
    program to maximize that spend for the benefit of my employees.
        Mr. Rooney. Thank you very much. I have a little bit of
    time left. This is probably totally off message, but I am not a
    professional at this. This GINA law just takes the cake. I have
    to ask Ms. Klausner just a little bit about this GINA law. Just
    when you think you have seen it all with this Federal
    Government, you read about this thing.
        I kind of feel like it's turning the back on allowing
    someone to know medical history and turning the back on the
    science of gene knowledge. It is kind of like when the medieval
    people would sail out to Gibraltar, the Pillars of Hercules,
    and turn around because they were scared the Earth was flat.
        So, I would like to get your thoughts one more time about
    how we can make sure this law, which is concerning to me that
    it is on the books, can be stopped from preventing rewards and
    normal human incentives to make a wellness plan go well.
        Ms. Klausner. Thank you again for your questions. GINA is
    about genetic information, and genetic information is clearly
    something that is being utilized to improve the health of
    individuals. The science is developing. As the science
    develops, we want to make sure individuals have an opportunity
    to really understand it and use it for their own benefit.
        What we are finding is that the inconsistencies in these
    rules are putting a real pause on the ability to design these
    programs. So, just by way of example, if we want to design a
    program that complies with the ACA rules, that allows there to
    be an incentive for a spouse to ultimately understand his or
    her own genetic makeup, that incentive is counted under one set
    of calculations under HIPAA, a different set of calculations or
    not counted perhaps at all under the Americans With
    Disabilities Act, and counted again differently under GINA in
    terms of the 30 percent rule, the 50 percent rule, et cetera.
        So, we would like to see it to be streamlined so that we
    don't have to not do things that would acquire genetic
    information. When I say ``acquire,'' they acquire on behalf of
    themselves and utilize at the risk of then saying, well, we
    wouldn't do another program, perhaps tobacco cessation or
    disease management program.
        Mr. Rooney. Thank you very much. Thank you, Ms. Foxx.
        Chairwoman Foxx. Thank you, Mr. Rooney. Ms. Davis, you are
    recognized for five minutes.
        Mrs. Davis. Thank you. Thank you, Madam Chair, and thank
    you all for being with us today.
        I wanted to just go back to where we had been in terms of
    the discussions about flexibility and choice, because I think
    that is something we all feel is important, and yet we also
    know how that is developed has something to do with cost, and
    whether or not small businesses feel they can save money or any
    businesses, really, or any State for that matter. We want to be
    sure that if you lower the cost, you do not lower the quality
    of the care that is given.
        So, could you share with me, do you support legislation
    that allows insurers to roll back consumer protections and
    benefits from the ACA? Are you in favor of legislation that
    would do that? To roll back that legislation? A simple yes or
    no is fine.
        Ms. Klausner. I think the answer to the question is that
    all of us in America would like to make sure that there are
    appropriate consumer protections in place.
        Ms. Mitts. Our answer is simply no, we don't want to see
    the consumer protections that are in place right now rolled
    back in the health insurance industry.
        Mr. Ritchie. I think what we're talking about with the
    self-insurance is simply keeping choices alive, keeping choices
    to finance that risk however you wish to do it. You're correct,
    how you build this will be very critical.
        One thing that has happened with the Affordable Care Act is
    we haven't seen costs controlled. You've seen expenses. Just
    like you talked about, just because you pay $100 for a doctor
    visit and someone pays $200 for a doctor visit, it doesn't mean
    there's a difference in the quality of that doctor visit.
        We should incentivize and give employers the ability to say
    I want to build an incentive around getting the right providers
    with the right quality of choice.
        Mr. Hurst. Congresswoman, I believe what we're talking
    about, what I'm talking about, is empowering consumers to make
    some of these decisions on their own and, frankly, allowing
    insurers to make some of these decisions and work on behalf of
    the consumer rather than working on behalf of the provider.
        If we dictate too much, ``we'' being government, dictate
    exactly what those plans have to look like, we're empowering
    the provider. We're not empowering the consumer. So, if we can
    let consumers decide really what type of plan they want, what
    they need, and what they can afford, that is better for
    everybody.
        Mrs. Davis. Thank you. That sort of goes to one of the
    issues that has certainly been before a lot of us, and just
    talking about the protections in terms of what is available to
    people.
        Do you support maintaining direct access to OB/GYN care,
    and continuing the ban on gender rating? Would you support
    maintaining direct access to OB/GYN?
        Ms. Klausner. I am here today testifying on behalf of the
    American Benefits Council and all its members. I have not
    surveyed them for the answer to that question, but I would
    imagine most would support that kind of access.
        Mrs. Davis. And the ban on gender rating?
        Ms. Klausner. It is not something that I've had a
    conversation with our members on.
        Ms. Mitts. Yes, we strongly support maintaining those
    protections. They've been essential for making sure that
    coverage is affordable for women and they actually can access
    the care they need.
        Mr. Ritchie. I'd like to go directly to the gender rating
    question. One thing I want to point out is under the Health
    Insurance Affordability Act, employers are not allowed to
    differentiate between a male employee or a female employee, or
    on age. A 21-year-old male pays the same thing as a 59-year-old
    female under the employer plan. They have to be treated the
    exact same. So, we've been under this rule for years.
        What you guys do in the individual market is what you guys
    choose to do, but the employer market has been doing it, and we
    have been doing it well.
        Mrs. Davis. It sounds like the employer market is basically
    alive and well, with some modifications. Mr. Hurst?
        Mr. Hurst. Congresswoman, you know what, I think reasonable
    people can sit down and talk about what coverages we need to
    maintain and what ones we need to give to the consumer, but
    some of them go overboard, particularly some of the State
    mandates.
        In Massachusetts, we have a requirement for in vitro
    fertilization. I'm a 57-year-old male and my wife is the same
    age. Frankly, we don't need that coverage. We don't want that
    coverage. Many people in Massachusetts can't afford that
    coverage, yet we have to provide it because we're fully
    insured, yet if we were self-insured, we wouldn't have to cover
    it. And, frankly, most self-insureds do not, in fact, cover
    that mandate.
        Mrs. Davis. Mr. Hurst, just in terms of maternity coverage
    and access to women's preventative services, is that something
    that should be part of all plans?
        Mr. Hurst. I believe so, yes.
        Mrs. Davis. Anybody disagree with that, maternity coverage?
        Mr. Ritchie. I won't disagree with maternity coverage, but
    I will disagree with the fact that plans don't cover in vitro
    and don't cover those additional services. They absolutely do.
    It's the employer's choice if they want to cover it or not, and
    they'll do it over the population and the cost will be spread
    over the population.
        Yes, I have quite a few plans--
        Mrs. Davis. I am going to run out of time. I am sorry, sir.
    Preventative health services, is that something that should be
    part of the plans, generally? Does anybody disagree with
    preventative health services?
        Ms. Mitts. I'll speak to it. Thank you for the question. I
    mean, preventive services with no cost-sharing has expanded
    access to timely care for millions of people and help them do
    early identification, so we strongly support it being
    maintained.
        Chairwoman Foxx. The gentlewoman's time has expired.
        Mrs. Davis. Thank you.
        Chairwoman Foxx. Ms. Stefanik, you are recognized for five
    minutes.
        Ms. Stefanik. Thank you, Madam Chair. When I travel across
    my district speaking with families and businesses, one of the
    most frequent concerns I hear about are related to their
    struggles with health care.
        The Affordable Care Act has not been affordable. Premiums
    for families have skyrocketed and continue to climb. Average
    ACA premiums in New York alone rose by 16 percent last year,
    and deductibles have risen for many to a point where it does
    not even feel like they have insurance.
        These concerns mirror my own personal experience with the
    ACA.
        Coming from a small business family, I watched in 2013 as
    our employer insurance plan was canceled due to this law. This
    was in spite of the often-repeated falsehood that if you like
    your plan, you can keep it. What we got was a higher cost plan
    with lesser coverage.
        ObamaCare is not working, and we must find a way for better
    options, more affordable options for health care. It would be
    irresponsible if lawmakers did nothing, while taxes and onerous
    mandates crush small businesses and families across this
    country and across my district.
        Businesses such as Old Forge Hardware, which has been in
    existence since 1900 in the Adirondacks, will now be forced to
    stop offering their employees health coverage due to rate
    increases. As the owner of Old Forge Hardware stated herself,
    ``If you want to see small towns in the Adirondacks disappear,
    then keep raising health insurance rates. There will be no
    small businesses left.'' This is not the future I want to see
    in my district.
        This company employs 15 people year-round, and they treat
    their employees like family. Having to stop offering health
    insurance is a painful decision that is made out of necessity
    and not out of choices.
        Fortunately, I am excited about solutions that we proposed
    to these problems. One of those is H.R. 1101, the Small
    Business Health Fairness Act, which would allow small
    businesses, like Old Forge Hardware, to join together through
    Association Health Plans.
        My question is for Mr. Hurst. In your experience and in
    your opinion, can you discuss how Association Health Plans
    protect access to care for those employees who may suffer from
    rare or expensive diseases or medical conditions?
        Mr. Hurst. Absolutely, Congresswoman. In Massachusetts, I
    should recognize that we are a fully insured Association Health
    Plan. We are not self-insured. What this legislation could do
    is give us more flexibility to be self-insured. We follow all
    the State mandates. We do not discriminate amongst our members.
        What we look to do is to make sure the margins are not
    taken off the backs of our small businesses. We look at
    following the law. We do follow the law. We do not discriminate
    against our members that are really just for equality and
    nondiscrimination under the law.
        Look, as long as the essential benefits package is there,
    no one is going to be ignoring the law, no one is going to be
    walking away from important mandates that everybody should and
    can have.
        Ms. Stefanik. My second question is also for you, Mr.
    Hurst. In your testimony, you state that small businesses
    should have the same marketplace rights to obtain comparable
    coverage at comparable rates as those that work for big
    businesses and the government. I think all here today would
    agree with that statement, and some would also argue that all
    businesses, both large and small, should face the same consumer
    protection requirements.
        How would self-funded Association Health Plans be any
    different than their large business competitors in terms of
    consumer protection?
        Mr. Hurst. Absolutely the same. You know, 60 percent of the
    marketplace in Massachusetts is self-funded and growing. You
    know, to a large extent, the train is already leaving the
    station on this. Smaller and smaller businesses are self-
    funding on their own, or they're doing it through third
    parties. They are even looking at other options, such as
    professional employment organizations.
        Not all these options are the great option for these small
    businesses. It works for some, not for others. This legislation
    is overdue by years. We need this because this is how small
    businesses and their employees want to buy health insurance,
    and it is how they can collectively make decisions and better
    their own employment base.
        Ms. Stefanik. Thank you. My time is about to expire. I
    yield back.
        Chairwoman Foxx. Thank you very much. Ms. Adams, you are
    recognized for five minutes.
        Ms. Adams. Thank you, Madam Chair, and Ranking Member
    Scott, thank all of you for your testimony today.
        The Association of University Centers on Disabilities, the
    National Disabilities Rights Network, and the National
    Association of Councils on Developmental Disabilities all
    advocate for and provide hundreds of thousands of clinical
    services and home and community-based supports to people with
    disabilities and their families.
        These organizations are concerned with the Preserving
    Employee Wellness Program Act as it would bypass certain
    protections within the ADA, which could result in workplace
    discrimination based on health status. The legislation would
    allow employers to penalize workers for not providing medical
    and genetic information, which could also leave them vulnerable
    to discrimination. So, without oversight by EEOC, it sets a
    dangerous precedent, that health plans can be exempted from
    civil rights status.
        Ms. Mitts, are you concerned about how this legislation
    could impact people with disabilities?
        Ms. Mitts. Thank you for your question. Yes. I think one of
    our primary concerns is that wellness program incentives are
    being potentially used in ways to shift costs to workers with
    disabilities who have higher needs, increasing their premiums,
    increasing their deductibles.
        I think something that's been lost in this discussion so
    far is that right now employers can design consumer-friendly
    wellness programs that offer services, offer disease management
    programs, even offer health screenings to their employees,
    without putting their premiums and their access to coverage on
    the line. They do not need to use these types of discriminatory
    incentives that are problematic and undercut the ADA.
        In fact, what research shows is that programs that offer
    disease management, lifestyle management services, and health
    screening services that are really comprehensive, they get a
    high participation rate without any incentives at all.
        The research actually done by RAND questioned whether
    employer enthusiasm for incentives was warranted or whether
    building just a robust program that actually offered services
    to their employees was the better route.
        Ms. Adams. Yes, ma'am. Thank you. The Republicans' leaked
    legislative draft includes placing those with health issues
    into high-risk pools. So, can you explain what this will do to
    individuals' insurance premiums, and how it is different from
    our current structure in ACA?
        Ms. Mitts. Well, high-risk pools are an old idea, and they
    did not work for States before the Affordable Care Act. They
    covered a fraction of the people with preexisting conditions
    who are covered now under the ACA. There's about 52 million
    people in our country who without the ACA could be denied
    coverage because they have a preexisting condition.
        Prior to the ACA, high-risk pools covered less than 500,000
    people in total. On top of that, they had premiums 1.5 to 2
    times the rate of healthy people. The premiums were
    unaffordable for many people, and oftentimes this coverage had
    waiting periods. They had to wait before their coverage kicked
    in.
        There were lifetime caps, so if someone was really sick,
    they literally could be left with no coverage after they hit
    that lifetime cap, and sometimes the high-risk pool would
    literally exclude coverage for certain preexisting conditions
    for a certain number of months, leaving coverage useless at
    that point.
        It was also expensive for States to operate. At the end of
    the day, it just is no replacement for the lifetime guarantee
    that people have right now, that they are guaranteed affordable
    coverage regardless of their preexisting condition.
        Ms. Adams. Thank you. Finally, I want to hit on the overall
    impact that the Republicans' plan will have on patients versus
    what is offered in ACA. Of course, in my district my
    constituents are asking that we preserve and strengthen the
    ACA. You spoke about this as well.
        Can you just give a brief overview of what this Republican
    plan would mean for patients and workers, particularly with
    regard to cost?
        Ms. Mitts. You know, we have looked at a number of
    replacement plans and proposals, and really they would increase
    costs for millions of Americans. Many people would just simply
    go uninsured because coverage would be unaffordable. It would
    scale back incredibly important financial assistance for
    private coverage for lower- and middle-income people, and it
    would often leave people in bare bone coverage with even higher
    deductibles, leaving them unable to afford care.
        Ms. Adams. Thank you very much. I am out of time. Madam
    Chair, thank you. I yield back.
        Chairwoman Foxx. Thank you very much, Ms. Adams. Mr.
    Guthrie, you are recognized for five minutes.
        Mr. Guthrie. Thank you very much. This hearing is not on
    Medicaid, but I want to take a few seconds because we talked
    about Medicaid earlier. Medicaid expansion, if you let it go as
    it is, it doubles over the next 10 years. It is just
    unsustainable.
        So, just to say we cannot do anything to Medicaid is just
    not addressing reality, unless you are here to offer or
    somebody is here to offer a broad-based taxing everybody in
    massive numbers to meet the growing costs. I do not think
    anybody is offering that. I guess they are just not wanting to
    address it.
        Per capita caps. Every U.S. Senator that is in the Senate
    today, Patty Murray, a lot of them, Dick Durbin, who were in
    the U.S. Senate in the Clinton years, signed a letter to
    President Clinton to say they supported a per capita cap.
        It is not a radical issue. It could be bipartisan if people
    chose to work together. Governors want flexibility. We had a
    previous governor of Kentucky last night talk about how great
    the expansion was, 100 percent Federal money. Our current
    governor is trying to come up with $100- to $200 million to
    make it work now. So, it is not just easy to deal with, and it
    is something we have to deal with and move forward.
        I want to get to the bills before us today. Mr. Ritchie,
    how big or small is the self-funded health benefit market and
    how many employers are enrolled in plans that are self-insured
    and how many of those plans also carry stop-loss coverage?
        Mr. Ritchie. If you look at the self-funded market in terms
    of stop-loss coverage, we estimate that market to be somewhere
    between $12- to $14 billion. We consider ourselves one of the
    largest providers, and we are roughly at $1 billion, so it is
    about a 7 percent market share, which shows that it's a pretty
    competitive market. There is no one dominant carrier in the
    market, and there is no one person that holds all the market
    share.
        When we look at the total population that is self-funded, I
    would refer back to the Kaiser Family Foundation study. They do
    an annual study every year. It's a fantastic study. What it
    says is that 61 percent of all people who get their coverage
    through their employer get it through a self-funded plan.
        We could further break that down and say if those employers
    are over 200 lives, that number jumps to 82 percent. If it is
    below 200 lives, that number drops to about 13 percent.
        So, obviously in the smallest markets, self-insurance is
    not that great of an option, not as popular as it is in the
    large employer market, but in the large employer market, it is
    very popular, self-insurance.
        Mr. Guthrie. Stop-loss?
        Mr. Ritchie. Yes, it's stop-loss. Let's go to who buys
    stop-loss. That is generally going to be an employer somewhere
    between the 50 to about 5,000 life range. I don't have the
    stats for you on how many employers are in that number. I
    personally insure 3,000 of them.
        What we see is once you get about 5,000 lives, claims
    become pretty predictable and, therefore, there is no reason to
    even purchase stop-loss insurance anymore. You don't need that
    risk transfer mechanism. Who does need that risk transfer
    mechanism are those as you get smaller, so the smaller an
    employer gets, the more risk transfer they need to support
    their self-funded plan.
        Now, that deductible is going to range over size and what
    kind of risk they have. I will sell a spec down to $20,000, but
    my average spec is $140,000. We generally try to price the
    coverage to where we only have somewhere between one to three
    claims in a year.
        So, what we're trying to do with the Self-Insurance
    Protection Act, obviously, health insurance pays every claim.
    You're using it to finance your medical costs. With stop-loss
    coverage, it's obviously not health insurance coverage, because
    if I'm only expecting even over 1,000 lives, I have three
    claims a year that hit me, that's obviously not health
    insurance.
        Mr. Guthrie. Is self-insurance coverage skimpier, skimpier
    than fully insured coverage?
        Mr. Ritchie. Only if you believe the largest employers in
    America are not offering competitive benefits. It is not
    skimpier. It is still subject to all the employer requirements
    of the Affordable Care Act. It doesn't get you out of those
    benefits or out of those responsibilities. It simply is a
    financing mechanism.
        Mr. Guthrie. In my last minute, I want to go to Mr. Hurst.
    Mr. Hurst, critics of Association Health Plans often say that
    the creation of national Association Health Plans result in
    cherry-picking. They mean the insurance market will segregate
    into two groups: one that is younger and healthier, and one
    that is older and sicker.
        Based on your experience in Massachusetts with your own
    versions of AHPs, under state law, do you believe this will be
    the result, and how does the Small Business Fairness Act react
    to this?
        Mr. Hurst. Well, number one, Congressman, it's illegal
    under our law. It would be illegal under this bill.
        Number two, associations, chambers of commerce,
    professional societies, they aren't in the business of
    discriminating against their members. Their members run the
    association. They join for the benefits.
        Number three and most importantly, these employees of small
    businesses, they are a slice of society. They're no more sick,
    no more healthy, no more older or younger than the rest of
    society out there. They're a cross section of society, yet they
    are being charged too much for the health insurance because
    they're discriminated against.
        Mr. Guthrie. Thank you. Perfect timing. I yield back my
    zero time.
        Chairwoman Foxx. Very good, Mr. Guthrie. Mr. Espaillat, you
    are recognized for five minutes.
        Mr. Espaillat. Thank you, Madam Chair, Ranking Member
    Scott. Just for the record, Madam Chair, I would like to state
    that if the Affordable Care Act is repealed, a hole of $3
    billion will be in New York State's budget, 2.7 million New
    Yorkers will lose their coverage, including 218,000 New Yorkers
    in New York County, Manhattan, and 300,000 New Yorkers in Bronx
    County, where my district is.
        Within the 15th Congressional District, a total of 120,000
    people would lose some level of Medicaid or Medicaid coverage,
    and 34,000 people will lose their basic healthcare plan. It
    will impact dramatically hospitals like New York-Presbyterian
    Hospital, Mount Sinai Hospital, Harlem Hospital, North General,
    and Montefiore in the Bronx.
        My question is for Mr. Hurst. I think you can agree that
    there are strong consumer protections under the Affordable Care
    Act, like no annual or lifetime caps on health care, and
    guaranteed access to those with preexisting conditions, that
    have benefited millions.
        You mentioned this proposal gives small businesses
    flexibility, but it seems like this flexibility could avoid
    conforming to strong consumer protections. It is not clear
    which ACA consumer protections the majority seeks to repeal.
    Coupled with this proposal, is this not inviting a race to the
    bottom for quality of coverage?
        Mr. Hurst. Thank you, Congressman. I don't believe so at
    all. Look, small businesses reflect society. Small businesses
    compete every day for employees. You're talking about the
    coverage for themselves and their families. They want good
    coverage. They want affordable coverage.
        You know, I'm one that believes that personal
    responsibility is important, and I'm not particularly opposed
    to a mandate requiring people to buy health insurance, but the
    question is what is in that insurance? Can we empower the
    consumer to make some of the decisions on their own or is
    government--
        Mr. Espaillat. Your plan promotes a somewhat reduction in
    coverage, does it not? You mentioned there are certain
    benefits, certain parts of the plan that are not really
    necessary. Does not your proposal promote a reduction in the
    level of coverage?
        Mr. Hurst. Congressman, the only thing that would
    potentially be reduced, and it would be up to the collaboration
    of small businesses, is whether or not you follow a lot of
    these State mandates.
        I mentioned earlier Massachusetts has passed an incredible
    whopping 19 state mandates over the last 10 years, since
    RomneyCare was passed. That's two per year. These are lobbied
    by big health care providers, people that are looking for
    higher utilization, and, most importantly, to raise their
    prices. What we need to look at is empowering the consumer, not
    the provider.
        Mr. Espaillat. You mentioned a particular service that as a
    57-year-old, you and your wife were not interested in. Are
    there other healthcare services/benefits that you can see
    prudent to be reduced or eliminated?
        Mr. Hurst. Well, you know, the State of Maine has what they
    call ``mandates to offer.'' What they do is almost like your
    auto insurance and your homeowner insurance, there are certain
    mandates that they leave it up to the consumer to decide, yes,
    this is a coverage that I want, my family wants, at a certain
    price, and here are others I don't want. You're empowering the
    consumer instead of government telling them or the insurer
    telling them--
        Mr. Espaillat. Is that not the essence of health care, that
    although I am not a diabetic, maybe there is no diabetes
    history in my family, I could very well at some point in my
    life become a diabetic. If I do not have that coverage in my
    health insurance, is that not the problem if I run into a
    catastrophic disease that will take up a lot of money and just
    wipe me out, take my home, my car, my savings? Is that not
    really the problem, that we have to be prepared for those types
    of illnesses?
        Mr. Hurst. Well, I think with the essential benefit package
    under the ACA, everyone will continue to follow that, however
    this turns out. What we are primarily talking about are a lot
    of other State-mandated benefits that are designed to benefit
    the provider and, frankly, cause unfair cost subsidies from one
    consumer's pocket to somebody else's, and that's not
    particularly fair.
        There comes a level you have to ask yourself, is this
    really insurance or is this almost a tax, a borderline tax,
    when you're asking people to buy insurance that they don't
    want, they will never use, and they can't afford.
        Mr. Espaillat. Thank you, Madam Chair. I think I have run
    out of time.
        Chairwoman Foxx. Thank you very much. Dr. Roe, you are
    recognized for five minutes.
        Mr. Roe. Thank you, Madam Chairman, I appreciate that.
    First of all, I want to get to a bill I had last year, the
    Self-Insurance Protection Act. Basically what it said was the
    Federal regulators cannot redefine ``stop-loss insurance'' as
    traditional health insurance, preserving the option for self-
    funding.
        The reason I am familiar with it, before I came here, I was
    a city commissioner and mayor of my local community, Johnson
    City, Tennessee. We had about 2,000 employees in our self-
    insurance plan. It worked wonderful. We designed wellness
    programs to help lower costs, and we did that. We kept the
    premiums flat. We put in various things to help control our
    costs. It is a great way to do it.
        Mr. Hurst, I could not agree more with you. If you allowed
    an Association Health Plan and a self-insurance program, where
    you could combine these even across State lines, I think you
    could really lower costs. People are very innovative when they
    are spending their own money.
        You are correct, Mr. Ritchie, you do take out that chunk
    that the insurance company keeps as profit, and you manage that
    and keep it in your benefit package, or you can provide it as
    salaries.
        Let me just say quickly that the Affordable Care Act said
    it wanted to lower costs and increase access. Who could
    disagree with that? What happened is exactly what happened in
    our State of Tennessee 20 years ago when we expanded Medicaid
    called ``TennCare.''
        What happened was I could have done two-thirds to three-
    fourths of what the Affordable Care Act did in two paragraphs.
    One, allow 26-year-olds to stay on their parents' plan; and,
    two, expand Medicaid, which is a plan that not a lot of
    providers, especially providers where I practiced medicine--we
    cannot get somebody to see somebody for the reimbursement they
    get. We added 10 or 11 million people.
        What has happened on the ACA side in my state is there was
    a 62 percent increase in premiums this year. In a third of the
    counties in my district, there are no providers. Knoxville,
    which is the third largest city in my state, has no provider on
    the ACA Exchange.
        Let me just point out a couple of things. When government
    dictates, as Mr. Hurst said, what you buy, what happens? The
    State of Oregon, which was mentioned a moment ago, their
    exchange went belly up and they spent tens of millions of
    dollars that could have gone to health care.
        Right here in the District of Columbia where we are, $134
    million in grants to sign up 10,630 people, it cost $12,600 per
    person to sign somebody up for insurance. How ridiculous is
    that?
        In Hawaii, it gets even better. Their exchange went belly
    up and it cost $25,000. They got $205 million in grants that I
    could have used to take care of pregnant women, provide women's
    health care, to sign up 8,100 people. That is how this was when
    the government got involved.
        Let me just go over this very quickly, Madam Chairman. This
    is not what is in the Republican plan. I want to make this very
    clear. The insurance regulations and mandates, coverage for
    preexisting conditions, under reconciliation that we passed in
    2015, stays. They are guaranteed issue, no preexisting
    condition exclusions; no health status underwriting, in other
    words, charging sick people more; allowing kids to stay on
    until age 26; ban on lifetime or annual limits; preventive care
    coverage; and gender rating. That all stays. Closing the
    Medicare doughnut hole, that stays under reconciliation.
        Unfortunately, the IPAB also stays. That should go. I would
    encourage my colleagues on the other side of the aisle to help
    us get rid of that.
        It is not a matter, as Mr. Guthrie was saying, of us not
    doing something. We have to do something to repair this. It
    cannot continue the way it is.
        You have small business people where I have seen their
    premiums triple, individuals in small business, in the last 2
    years. Certainly, if you are getting a subsidy in my state,
    which 200,000 people do, 160,000 people in my state of
    Tennessee decided to pay the tax, the penalty, or fee, or
    whatever Judge Roberts wanted to call it, because they could
    not afford the coverage.
        In the hospital where I practiced, 60 to 70 percent of the
    uncollectible debt in that hospital were people with insurance,
    and to keep quotes affordable, they raise the out-of-pockets
    and co-pays so high that folks where I live in rural Appalachia
    cannot pay it. It is not fair to them. We have to change it.
        Mr. Ritchie, I want your comment on my bill before I run
    out of time.
        Mr. Ritchie. First of all, I want to personally thank you
    for supporting this bill for as long as you have. Your
    experience with Johnson City is the experience that we see from
    most of our policyholders.
        Once somebody is under a plan, they don't want to go back
    to health insurance. They don't want to relinquish control.
    They don't want to pay more just so they have the right to
    offset some of the risk transfer. They can do that through
    other mechanisms, i.e., a company like mine, purchasing stop-
    loss coverage.
        From the Self-Insurance Institute of America, we proudly
    support the Self-Insurance Protection Act. We think it's vital.
    We think it's critical to maintaining choice and options for
    employers on how they finance their risk.
        Mr. Roe. Madam Chairman, just indulge me for 10 seconds. We
    bought when I was on the commission five policies at quarter of
    a million. We could fund that. That is what people used that
    for, and I think more companies are going to go to that. I
    think it is a wonderful model. Two-thirds almost of all people
    get their self-insurance now.
        Thanks for indulging me. I yield back.
        Chairwoman Foxx. Mr. Scott, you are recognized for five
    minutes.
        Mr. Scott. Thank you, Madam Chair. Mr. Ritchie, you
    mentioned that some doctors charge $100, some $200 for
    essentially the same quality service. Is there any reason the
    self-insured cannot restrict the doctor panel just like
    insurance companies have preferred providers?
        Mr. Ritchie. Actually, no, the self-insurance plan can't
    restrict that.
        Mr. Scott. It cannot?
        Mr. Ritchie. It cannot, because how do you know what the
    doctor is going to cost before you go? In the environment we
    work in, you don't know what the cost is until you go have the
    service, get it repriced through the network, then you get to
    find out what your cost is. If you ask for what the cash price
    is, you're going to get one number. If you ask for what your
    insurance price is, you're going to get a different number. The
    ability to restrict it, the data's not there to do that.
        Mr. Scott. Is there any reason that you could not limit the
    doctor access, like an insurance company has a preferred
    provider network?
        Mr. Ritchie. An employer could design a program that was
    in-network only, no out-of-network benefits, but there's not an
    employer out there who's offering that today because it simply
    is not effective to retain employees. If you're an employee,
    you're going to go that's not good coverage and I'll go down
    the street and work somewhere else.
        Mr. Scott. Mr. Hurst, on the maternity care, I was a little
    confused as to whether you supported maternity care being an
    essential benefit covered at the standard rate for everybody.
        Mr. Hurst. Personally, I believe there are certain things
    that should be in everybody's health insurance policy,
    preventative care, hospitalization, maternity care for women,
    young women particularly. Absolutely.
        Mr. Scott. Everybody pays the standard rate, including
    women at the same rate, and they get maternity care, men would
    be paying the same rate whether they need that service or not?
    The alternative is if it is an optional care, then essentially
    the only people who would buy it are those who need it, and you
    are essentially paying it out of your pocket.
        Mr. Hurst. I believe that reasonable people can sit down
    and decide what is it that your average family is going to need
    over a period of time. There are certain coverages, yes, all of
    us want, at a certain stage in our life, all of us need.
        To make them pay and buy services that they'll never use
    and don't want and can't afford, that's what I'm talking about.
    That's where we need to empower the consumer to make the
    decision, not government and not the provider.
        Mr. Scott. You would count maternity care as an essential
    benefit that everybody ought to have to pay for, whether they
    intend to use it or not?
        Mr. Hurst. I believe that should be part of a package.
        Mr. Scott. Now, it is easy to see how Association Health
    Plans would be beneficial for those that can get into an
    association plan. Is it possible to underwrite and carve out a
    healthier group than average?
        Mr. Hurst. Number one, it would be illegal, and, number
    two--
        Mr. Scott. If you had a group of, say, gym trainers, you
    know they are all healthy, and that is your group, is that
    illegal?
        Mr. Hurst. I'm sorry, Congressman. What group again?
        Mr. Scott. Gym trainers.
        Mr. Hurst. Well, you know, I think if there is an
    association out there representing them and they want to get
    together, you know, I've seen gym trainers that are 60 years
    old and I've seen them that are 20 years old.
        Mr. Scott. The reason Association Health Plans always work
    is if you have a group, whatever the group is, if they do not
    cost less than average, if the bids come in above the average
    cost, the association will not form, because nobody wants to
    join the group where the costs are going to be above average.
    They can go in the normal route and get insurance.
        They will always work because you pull out a group of
    healthy people, which necessarily means that everybody else has
    to pay more because the insurance pool just got a little more
    expensive. Is that not right?
        Mr. Hurst. Well, I think you're assuming that small
    businesses actually have higher based on age or health status,
    which they do not. My members, my 4,000 members, they look just
    like employees of big government and big businesses, yet they
    are discriminated against under the law.
        Mr. Scott. What happens when somebody gets sick and it goes
    above average? Are all the association members required to
    renew at an above average price when they can get insurance
    cheaper in the marketplace?
        Mr. Hurst. You know, in our association plan, we have rules
    that you cannot leave and then come back. If you leave, you
    cannot come back for three years. There are certain rules that
    you have to establish to make sure that this plan is going to
    be sustainable.
        Mr. Scott. But if it gets above average and everybody
    bails, what happens?
        Mr. Hurst. Well, I don't know that's going to happen in
    very many instances because what we're talking about here is
    taking the margins out. We're talking about groups of small
    businesses and their employees that, frankly, are unfairly
    cross-subsidizing other people, that they have become the
    margins from the insurers and on behalf of the providers
    unfairly so.
        Mr. Scott. Madam Chair, that is exactly the point, they
    cross-subsidize everybody. You have a group out that is cheaper
    to insure than everybody else by whatever mechanism you have
    formed the group, and it is cheaper, until they get sick, then
    everybody bails and they got back into the normal plan.
        So, it will always work for those that can get into that
    group, but if you cannot get into the group, everybody else
    will pay exactly more. It is a zero-sum game.
        Chairwoman Foxx. Yes, Mr. Hurst?
        Mr. Hurst. I guess my only response to that is why then do
    we allow Big Government to do this, and allow Big Business to
    do this, because they could do the very same thing. We're just
    discriminating against Main Street businesses.
        Chairwoman Foxx. Thank you, Mr. Hurst. Mr. Grothman, you
    are recognized for five minutes.
        Mr. Grothman. Thank you. Mr. Ritchie, but maybe Ms.
    Klausner wants to weigh in as well, at what point do you think
    it is appropriate for a business to self-insure? How many
    employees?
        Mr. Ritchie. We generally like to see them around 50
    employees, but that doesn't mean it doesn't work to go even
    lower than that.
        Mr. Grothman. You said 50?
        Mr. Ritchie. Fifty employee lives. That's obviously with
    dependents and it's going to be a larger group. That's what we
    generally like to see, but that doesn't mean there's not a
    unique group that could be lower than that. I would say, you
    know, a 50-life law firm is very different than a 50-life
    retail operation in terms of the amount of cash, how they
    understand risk, and how they process that. So, it does vary
    over time, but that's what we're talking about, giving them the
    option to do it.
        There's also large employers who don't self-fund, so they
    have chosen they don't want to manage the plan. They want to
    hand it off to a health insurer and just be done with it.
    That's fine. It's a matter of choice. It's not a matter of
    what's right for everybody. It's a matter of what's right for
    this one individual situation.
        Mr. Grothman. Ms. Klausner, do you agree with that 50
    number?
        Ms. Klausner. I don't have a number that I have in my mind.
    What I know is that employers of all sizes will evaluate
    whether or not self-insurance or fully insured is appropriate.
    The numbers are looked at with the totality of their
    compensation, their awards, how they want to allocate their
    resources, and allocate the dollars.
        Whether or not they can connect them back to wellness
    programs, some employers find that wellness programs are better
    aligned if ultimately they are in a self-insurance environment.
    Others can find services and products where the fully insured
    environment connects them to wellness programs, again,
    primarily designed to lower the costs.
        Mr. Grothman. Just a comment on Congressman Scott's gym
    instructor thing. It just seems to me subjectively that when I
    see people walking around with a cast or whatever, a lot of
    times they hurt themselves in the gym. I am not sure that
    necessarily means you are spending less.
        The next question I have, it kind of surprises me in the
    market that more providers or kinds of groups of providers do
    not get together and offer their own insurance. If you give
    them a capitated rate, the incentive they have to do less
    rather than right now on a fee-for-service thing do more, would
    cause health insurance costs to drop precipitously. Why does
    this not happen more?
        I guess I will start with Ms. Klausner. Do you see what I
    am saying? I cannot think of what we have here--well, you are
    from New Jersey. I am sure in New Jersey, there are, just like
    in Wisconsin, groups of hospitals and clinics, and right now,
    the financial incentive is always more tests, sometimes even
    surgery. But if you said I have a life here, you know, I am
    going to go to whatever, Liberty Health Care, whatever, why
    does that type of arrangement not spring up more?
        Ms. Klausner. I'm not confident I can answer the exact
    question as to why that arrangement doesn't spring up. I think
    what employers are trying to do right now, working with their
    service providers, is specifically to find ways so that
    employees make those right choices, so there are other avenues
    of innovation.
        Mr. Grothman. You see what I am saying? Why cannot you as a
    business go--maybe there are legal restrictions. I do not know
    why you cannot go to say Liberty Health, and I do not know if
    there is such a thing called Liberty Health, and your hospitals
    and your clinics, and say here, I have 60 lives in my store, I
    realize they are going to have some separate coverage, people
    on vacation or something, but I have 60 lives in my company,
    how much will it cost for you to take those 60 lives, and then
    you take the risk.
        Why does that not spring up more? It seems to me if that
    sprung up, you would have massive savings.
        Ms. Klausner. I'm sure there are a host of reasons as to
    why it hasn't sprung up. However, I think what we can do, on
    behalf of the American Benefits Council, is to--
        Mr. Grothman. Does anybody have any comments on this? Is
    there any doubt that one of the reasons healthcare costs are
    spiraling is right now the medical community had financial
    incentives to do more, right? More surgeries, more tests. You
    would have to be blind not to see it.
        If you went to a medical provider and said I will give you
    $8,000 or $10,000 per life, incentives would go the other way.
    Why does this not happen?
        Mr. Ritchie. Actually, I would say in the employer market
    what we are seeing today, and it's one of the new innovations
    that happens through self-insurance, is we are seeing
    employers--let's say I'm a South Georgia employer. I have one
    hospital system and all my employees are within a 20-mile
    radius of that hospital system.
        Well, they're not going to the hospital system and saying
    you provide all my services. They are direct contracting with
    them and saying instead of me going through a PPO network or
    through a health insurer, all my people are here, you're going
    to provide 80 percent of the care that we're going to get, I'm
    just going to get a contract directly with you.
        It's happening. It's going on today. But now, like I said,
    it's only 80 percent. There are services that won't be
    services. If you've got a specialty transplant network, South
    Georgia may not have the facilities to offer the transplant.
    You may have to go to a Mayo Clinic, you may have to go
    somewhere else for that service.
        Mr. Grothman. One more question.
        Chairwoman Foxx. Your time has expired, Mr. Grothman. Thank
    you. Mr. Smucker?
        Mr. Smucker. Thank you, Madam Chair. Talking about self-
    insurance, I would just like to follow up on some of the
    questions. I was a small business owner. We employed about 150.
    We had fully funded. Then we had self-insured with the stop
    gap.
        Our experience with self-insured was that over time,
    obviously, you can have bad years where it would cost more than
    a fully funded, but over time, we saw dramatically decreased
    costs while we thought it was providing even better care for
    the employees because of the attention everyone in our group
    paid to not only receiving quality care, but also to
    controlling those costs.
        My question is--one other point before I get to the
    question. I have had a lot of discussions with businesses in
    regards to the impact of the ACA, in regards to the impact of
    increased health insurance costs. One of the things I have
    noted is that businesses over the past few years who were self-
    insured did not see some of the dramatic increases. Again, as I
    said earlier, it may vary year to year.
        I guess my question is do we have any data to that point?
    In general, overall, do we see cost savings just by the fact
    that businesses are self-insured? If we do, I think it is
    because we are doing the wellness programs, we are doing the
    education with employees, everyone is working to reduce costs.
        What data is out there in that regard? Mr. Ritchie?
        Mr. Ritchie. There is no mass aggregator of data between
    health insurance and self-funded and cost analysis. We are
    truly--I would argue that the self-funded employer is
    experiencing the same cost increases, but they are financing
    it.
        Your analysis was that over time it was cheaper, and I
    agree with that, because over a three- to five-year period, we
    see that self-insurance is generally cheaper than health
    insurance. Now, on a year-to-year basis, that may be very
    different because the health insurance is prospectively priced
    where the self-insurance is actually priced. Whatever you
    actually spend that year is your cost, where for health
    insurance, they're predicting that.
        They're doing the underwriting. They're doing the actuarial
    services to project your ultimate costs. If they go above, that
    will be profit to the health insurer. If the price is below
    actual cost, that will be a loss to the health insurer. That's
    the risk transfer mechanism.
        To your question, there is no grand aggregator, but costs
    are going up for all employers. The self-funded employer over
    time does manage the costs. They're more proactive. They are
    more engaged. A lot of employers will actually tell their
    employees we are a self-funded plan, just so you know what that
    means.
        I do think people understand medical costs and try to save
    medical costs when they can.
        Mr. Smucker. That is what we saw. The other arrangement we
    were part of at some point was we banded together with other
    businesses in sort of what was called a ``rent-a-captive
    program.'' These were like businesses that felt they had
    similar risks, and they worked together to control those risks.
    We also included in that program Workers' Comp insurance and,
    in some cases, other insurance products, like general liability
    and so on.
        Is that still being done today? Did ACA change any of that,
    and can you just talk a little bit about that?
        Mr. Ritchie. The ACA did not impact any of that. What
    you're talking about is the utilization of a group captive for
    the Workers' Comp and CGL product lines, and then of another
    segregated portion of that captive to cover the benefits.
        I don't want to give the illusion that health benefits and
    comp benefits were intermingled somehow, but what you did is
    you had a facility that segmented them in proportionate captive
    cells for each product line, and then you shared that risk
    among the other employers.
        Mr. Smucker. Today, can businesses still band together in
    that way without an association, for instance?
        Mr. Ritchie. Yes.
        Mr. Smucker. How is that different than what we are talking
    about with associations?
        Mr. Ritchie. The association--one thing that has not been
    mentioned on the Association Health Plan is there are rules
    within that law that says it must be a bona fide association,
    so I can't go create an association tomorrow and say I'm going
    to be the guys wearing a blue tie today association, and have
    everybody come into that. It has to be an association that
    already existed for the benefit of the members.
        You can't just create an association that everybody comes
    into. You have to have a legitimate, bona fide association that
    already exists, and then provide health care through that. Does
    that clarify your question?
        Mr. Smucker. Yes. I am out of time, but I would like to
    maybe discuss with you later a little more about the captive
    program.
        Mr. Ritchie. Yes, sir.
        Mr. Smucker. Thank you.
        Chairwoman Foxx. Thank you, Mr. Smucker. As we pointed out
    earlier, any member can submit a question to the witnesses and
    get, I believe, a timely response. Thank you very much.
        Now, it is my turn. I do not think there is any question
    that ObamaCare has been an unmitigated disaster. We were
    promised repeatedly that if you like your plan, you can keep
    it. That simply was not the case for at least 4.7 million
    Americans who were kicked off their health care plans under
    ObamaCare. We were promised that if you liked your doctor, you
    can keep your doctor, but that also has not been kept.
        Meanwhile, small businesses have found it harder to provide
    their employees affordable coverage while facing mandates,
    reams of regulations, and insurance coverage premiums that just
    kept increasing year after year.
        I want to thank our witnesses for their great comments
    today and providing so much information.
        Mr. Hurst, would you agree that ObamaCare has been harmful
    for small businesses and their employees, and how has it made
    it harder for your small business association to offer more
    affordable coverage through your cooperative? And what can
    Congress do as we move forward with step-by-step regulations or
    laws, policy solutions, to lower costs and empower small
    businesses to offer affordable healthcare benefits?
        Mr. Hurst. Thank you, Madam Chairwoman. Yes, to answer your
    question, it has been very damaging and it has been damaging,
    again, because we don't have a level playing field. We have
    discrimination, depending upon where you work.
        One of the biggest problems that came in the ACA was the
    preemption of state innovation and state rating factors. Again,
    we had 11 rating factors in Massachusetts, one of which was
    this cooperative adjustment factor, which was the basis of our
    savings for our members.
        Another was a size rating factor. Ironically, in
    Massachusetts these are things we learned the hard way under
    RomneyCare. We had a size rating factor because we felt like
    government, good healthcare policy, should incent small
    businesses to grow jobs, not to shed jobs. It's a fact that an
    employer with five employees versus one with 50 actuarially and
    administratively, it cost less per life to employ them.
        This is one of the reasons why more people are going self-
    insured, because we're discriminating against employers of 50
    and under or 100 and under and making it harder for them to
    compete with the people just above that regulatory scheme.
        We are, unfortunately, forcing them and them alone to
    unfairly cross-subsidize individuals, and that's where the
    rubber hits the road. We need to reform those rating factors.
    We need to have Association Health Plan legislation. We may
    want to revisit essential benefits and lower them a bit.
        I would also argue that the 30-hour definition of ``full-
    time'' was also wrong, and under RomneyCare we had a 35-hour
    requirement, and that didn't cause any real disruption. Most
    employers consider 35 hours full-time. Virtually none consider
    30 hours full-time. That's not even four days full-time. That
    created disincentives both on the employer side and also the
    employee side to keep hours below a certain level, and that's
    wrong. It really hurt employer coverage for small businesses.
        Chairwoman Foxx. Thank you very much. Ms. Klausner, you
    have given great comments about wellness plans, and I
    appreciate that. I think your comments particularly about the
    conflicting rules and regulations have been very valuable.
        Can you describe how the EEOC rules have had a chilling
    effect on employers setting up these programs?
        Ms. Klausner. Absolutely. Thank you, Madam Chairwoman. It
    has absolutely had a chilling effect because employers are
    stuck evaluating too many things in order to ultimately design
    their programs and ultimately determining where the costs are.
        For example, the first thing they need to determine is
    whether or not if they want to give a $100 incentive, for
    example, whether it's in cash, connected with a group health
    plan, how it complies or doesn't comply under each of the three
    rules, does it go into the 30 percent bucket or not. If instead
    that $100 is provided as seed money to a health savings
    account, it may have a different set of rules. If it's for a
    spouse giving a health risk assessment that includes a genetic
    information question, it has another set of rules.
        So, ultimately it has created a serious chilling effect.
    And what this is converted to is then when they do, in fact,
    roll out these programs, which, of course, they are doing,
    they're trying to maximize them, they end up creating confusion
    even for employees.
        There are many notices, different authorizations, different
    descriptions, and ultimately, the employer wants to provide
    these programs not only in a simplified way for themselves,
    they also want to do it in a simplified way for employees to
    benefit under them. And as a result of the complexity, they
    take a step back and they start shedding or shelving certain
    ideas because it's too complicated to either roll out or
    administer or explain to the employees.
        Chairwoman Foxx. Thank you very much. Mr. Lewis, you are
    recognized for five minutes.
        Mr. Lewis. Thank you, Madam Chair, and thank you to all the
    witnesses. Mr. Ritchie, I have sort of a general question here,
    and I just want to get it for my own benefit, I guess. How has
    the ACA affected the self-insurers, the ERISA folks, with
    regard to mandates?
        Before the ACA, States had different mandates. Minnesota,
    the state where I am from, led the Nation a couple of years in
    the number of state mandates, which I happen to think drives up
    insurance costs.
        To some degree, but not completely, as I understand it, the
    Affordable Care Act did for some self-insurers what those
    states were doing to other plans before it. Is that accurate or
    am I misreading something?
        Mr. Ritchie. Well, with the passage of the Affordable Care
    Act, when the employer responsibilities or shared
    responsibilities section came out, yes, that did have an impact
    on self-funded employers.
        Now, one thing I would state is remember, those self-funded
    employers before, they weren't subject to the state
    requirements because of ERISA.
        Mr. Lewis. Right.
        Mr. Ritchie. Today, they could design their plan design and
    have a uniform plan design across state lines, so a company
    like Coca-Cola, who has employees in every state in the Union,
    could have the same benefit plan for everybody.
        Mr. Lewis. And out from under some of the more costly state
    mandates. That is ostensibly why some folks did it, correct?
        Mr. Ritchie. They could be out of those or they could offer
    them if they choose. Many times we see the self-insured
    employer offer above what it is. Again, it's part of
    customizing it towards your plan. What do you want to pay for,
    what do you want to incentivize, and how do you want to create
    productivity and wellness within your own organization? It
    truly is the self-funded, not-for-profit health care plan for
    that single employer.
        Yes, with the Affordable Care Act, we did see the employer
    responsibility sections impacting employers by them having to
    offer the benefits and asking them to comply with those on a
    uniform basis across the country.
        Mr. Lewis. Central wellness benefits and certain things
    like that, did it raise premiums in your opinion?
        Mr. Ritchie. The biggest increase to us was the unlimited
    nature of the coverage now. So I'm not saying that is right or
    wrong. I'm just saying from a risk and actuarial perspective, I
    did have a limit at one time, now I have no limit. Therefore,
    costs go up. We did see the frequency of $1 million claims
    almost double in 2014, the first year of truly unlimited health
    care.
        Good or ill, right or wrong, I'm making a comment on risk
    perspective.
        Mr. Lewis. Good or ill, that is a mandated benefit. It is
    what it is. Ms. Klausner, we are talking a lot about pooling
    risk, and the idea of small businesses pooling for a larger
    network, I think, is pretty sound economics and a good idea.
        One of the other aspects of the insurance markets is not
    only to pool risk, but to price risk. Have we seen limitations
    on that, in the name of fairness or whatever you want to say,
    that you have these bands where pricing has to be tight even in
    some group markets, would it be beneficial to let prices float
    more freely?
        Ms. Klausner. I'm not sure that I'm able to answer that
    question for you today, but would be happy to get back to you.
        Mr. Lewis. Yes, would you, please? I would be interested.
    Anybody else have a comment on that? Not everybody at once.
        Okay. Thank you very much, Madam Chair. I yield back my
    time.
        Chairwoman Foxx. Thank you very much. Mr. Scott, I
    recognize you for closing comments.
        Mr. Scott. Thank you, Madam Chair. Madam Chair, the
    Affordable Care Act has been described as a disaster, but I
    think we need to recognize that a lot of problems were
    occurring in health care before the Affordable Care Act.
        Certainly if they are going to have complaints, there ought
    to be a plan to do better, and it is hard to hold a
    constructive debate over an invisible plan, so we are waiting
    for the alternative.
        I just want to make a point. On the Self-Insurance
    Institute of America website there is a provision that says an
    employer is free to contract with the providers or provider
    network best suited to meet the healthcare needs of its
    employees. That is on the website.
        We have heard a lot about the Association Health Plans. It
    is easy to see how they work. You get a group together, however
    it is formed. If you figure out that the healthcare costs of
    the group are lower than average, you can insure that group at
    a lower than average cost, which works well while everybody in
    the association stays healthy.
        As soon as a bunch of people get sick and the costs go
    above average and everybody bails, they can join the regular
    insurance pool. While they enjoy lower costs, everybody else in
    the pool they left will be paying higher prices.
        The wellness plans, we know they can reduce long-term
    health costs and they ought to be encouraged, but you ought to
    be able to run one without requiring people to disclose
    sensitive healthcare information that they do not want to
    disclose. We have to figure out how that can take place without
    people having to disclose information that they believe is
    sensitive.
        Stop-loss does economic security for the employer. It is
    unclear what it does for the employee, getting coverage they
    could not ordinarily get.
        Madam Chair, again, if we are going to have a debate on
    health care, it would be helpful if the Republicans would
    conform with the directions of the reconciliation instructions
    and come up with a plan that we can actually debate.
        With that, Madam Chair, thank you for the hearing, and I
    yield back.
        Chairwoman Foxx. Thank you, Mr. Scott. Well, today, we are
    not talking about repealing and replacing ObamaCare. We are
    talking about issues outside that. Our colleagues have spent a
    lot of time talking about a speculative bill, and I am
    conscious of that. We had other issues here to talk about,
    talking about what would happen with Medicaid really was a
    waste of time, in my opinion, because that is not what we are
    talking about here today.
        We are talking about three proposals that would not come
    under repeal and replace of ObamaCare, and I am very grateful,
    again, to our witnesses for having done that.
        Everything the Republicans predicted about ObamaCare has
    come true because we were actually reading a bill that was
    written in the back rooms of the people in charge of the
    Democrat Party at the time, no Republicans voted for it. We
    predicted from an actual bill exactly what would happen, and it
    has happened. Every dire prediction has come true,
    unfortunately.
        I do not know anybody that does not want every American to
    have affordable health care. We all want that. We all do. I
    think as I have sat here and listened to this debate today and
    listened to my colleagues on both sides of the aisle, it really
    comes down to a matter of freedom and coercion.
        What the ObamaCare bill did was coerce people into buying
    insurance they did not need. People who did not need fertility
    insurance, people who do not need maternity insurance, they do
    not need that, but they are forced to buy that coverage in
    order to have--I forget exactly what the President calls it,
    ``wealth distribution,'' I think. That is not the way we
    operate in this country.
        Somebody else brought up the issue of car insurance. Many
    of us when we buy new cars buy collision or comprehensive
    insurance because we have a fairly expensive car and we want
    something more than liability insurance. We buy liability and
    then we buy others.
        As the car gets older and we have maybe a $1,000 deductible
    on our comprehensive, we say, wow, maybe it is not worth paying
    that insurance anymore because my car is not worth a whole lot,
    and we decide to change that.
        Many of us as we get older might want to change our health
    insurance policies. Under the coerciveness of the Federal
    Government, we are not allowed to do that with health care.
    That is wrong in the United States of America. We are based on
    freedom.
        Ms. Mitts, you mentioned how horrible it would be if people
    had HSAs and low-income working families might have to pay up
    to $3,000, which they would not have under an HSA on their
    deductible.
        Well, guess what? The Silver Plan in ObamaCare, the
    deductible is $3,572 for individuals; for families, it is
    $7,474. So, would people be worse off under HSAs? Perhaps not.
    Again, it is speculation. All speculation about what would
    happen if we had changes in Medicaid, all speculation about
    what a bill might look like.
        I so appreciate Mr. Hurst, Mr. Ritchie, Ms. Klausner
    talking about how employers care about their employees. To hear
    our colleagues speak, you would think that we have Simon Legree
    running every company in this country. Now, most of you people
    are too young to know who Simon Legree is, so I will let you
    look it up.
        We do not. My husband and I were small business owners. We
    cared about our employees. Every small business, even large
    businesses, I believe care about their employees.
        Mr. Ritchie pointed out over and over again the labor
    market is extremely competitive these days. It is in the best
    interest of every employer to do everything he or she can to
    keep those employees, the good employees that they have, and
    give them every benefit they can possibly afford.
        I want to thank you all very much for presenting that, and
    pointing out that is the case in the country.
        I want to thank you all. I do want to thank our colleagues
    for being here today and answering questions, and illuminating,
    I think, these issues a great deal.
        With that being said, the hearing is adjourned.
        [Additional submissions by Chairwoman Foxx follow:]

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    [Additional submissions by Mr. Johnson follow:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    [Whereupon, at 12:51 p.m., the Committee was adjourned.]