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