[Congressional Record Volume 140, Number 116 (Wednesday, August 17, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 17, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
          UNDERSTANDING THE REALITY OF HEALTH CARE LEGISLATION

  The SPEAKER pro tempore (Mr. Farr of California). Under the Speaker's 
policy of February 11, 1994, and June 10, 1994, the gentlewoman from 
Connecticut [Mrs. Johnson] is recognized for 60 minutes as the designee 
of the minority leader.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, it is a pleasure to be here 
this evening a little late, but it is important to talk about aspects 
of the health care bills that are before the Congress because people 
need to know.
  I am endlessly fascinated that, as I work in my district, people will 
say to me, ``You know, I don't like what I hear,'' and, as they talk 
about it, you can see that they are, A, afraid; B, concerned, and that 
their fear and concern are for the quality of their health care first 
and their jobs second.
  So, their concerns are real. They are not light. They are not little. 
They are very deep. And they are very significant, and what interests 
me is that through what they say to me it is clear they get it, they 
really understand, that there is something about the macro bills, the 
big Clinton look-alikes, that does endanger their health care and their 
jobs. They do not understand quite why, and that is why I am here. I 
want people to understand the reality of these bills, the impact they 
will have on our lives to the extent that we currently understand it, 
and through that I want them to have the confidence that not just they 
have the intuition of fear but that their concerns are legitimate in 
this area or perhaps not legitimate in that area.
  So, we are here tonight to kind of lay out some of the problems with 
the Gephardt health care bill. These were problems with the Clinton 
proposal. They are for the most part problems in the Mitchell proposal. 
But they are problems that follow from Government mandating health care 
on employers of all sizes and all levels of profitability.
  Now, before we get into the issue of employer mandates, what is being 
mandated on whom, and what will be the consequences, I want to indicate 
the level of my concern by illustrating the fact that some of the 
consequences of the bills before us are going to create profound 
unfairness, and in 5 years, and 8 years, and 10 years our constituents 
are going to look at us and say, ``You did this? On purpose?'' Let me 
give you one example:
  In the Gephardt bill companies under 100 cannot self-insure. 
Companies over 100 can self-insure. That sounds innocent enough. What 
it means to you and me and the guy working next to you is this:
  If you work for a company under 100, and I work for a company over 
100, and we get paid exactly the same wage, and we get exactly the same 
benefit package, after health care reform I will get paid less because 
I work for a company who has fewer than 100 employees and, therefore, 
pays a community-rated premium for its health care package which is 
high. My friend who works for an employer who has over 100 employees, 
earning the same wage, getting the same benefit package, still will get 
higher wages because his premium will be experience rated and, 
therefore, lower.

                              {time}  2110

  So reform will mean to those two people different wages and an unfair 
impact, an unfair premium cost, just because we did it from Washington.
  I think we have to be real careful that what we do from Washington 
does not make it worse for people in America, does not give you less 
health care, does not make you pay more for it, does not erode your 
wage base. It is those unintended consequences, or those consequences 
that are less easy to see, that are part of what we want to talk about 
here tonight.
  But in order to understand why bills clearly introduced by well-
intended people, clearly introduced by people who do care about 
individual working Americans, could have these effects, we really want 
to start from the beginning.
  I and my colleagues are going to start out by talking a little bit 
about what is being mandated in these bills, and who they are being 
mandated on, and what are going to be the consequences.
  First of all, what is being mandated. It is not simple.
  First, it is a national benefit package. With every committee that 
the national benefit package goes through, it grows. We are now up to a 
national benefit package in most of the Clinton-type bills that is more 
generous than all but 100 companies in America.
  Now, that is nice, but there ain't no free lunch. And if you are 
being mandated to provide that level of benefit package, it is going to 
have consequences.
  The premium of that kind of benefit package is high. Remember, every 
year Congress is going to enlarge it. But that national benefit package 
is not the only thing that we are mandating. There are other aspects to 
this benefit package that are part of the sneak attack that I was 
talking about.
  My colleague from Louisiana was talking earlier about some of the 
provisions of the Gephardt bill that have the effect of expanding this 
national benefit package, not for everyone. Not necessarily for your 
competitor, but possible for you.
  Jim, if you would talk a little bit about the maintenance of efforts 
provision in the bill.
  Mr. McCRERY. I thank the gentlewoman for yielding. In fact, what is 
not generally known is that there is really a double mandate in the 
Gephardt-Clinton bill, and that is an employer currently provides 
insurance for his employees, under the Gephardt-Clinton bill that 
employer must, for a period of several years, maintain the level of 
benefits for his employees. Even if that level of benefits is greater 
than the standard level of benefits set in the bill, which is fairly 
generous, as you pointed out, that employer, nevertheless, cannot get a 
policy of insurance for his employees at that level of the standard 
benefit package. He must continue to provide a more generous package to 
his employees.
  That is regardless of his profitability, regardless of his cash flow, 
regardless of his income as an employer. That is just not the real 
world.
  As you know, particularly with small businesses, they live on a year-
to-year basis, if not a month-to-month basis. And a package of benefits 
that they purchase for their employees this year may cost too much the 
next year. And in order to stay in business, because their profit 
margin is very, very slim, they must cut back on some of the benefits. 
That may be in paid vacation time, it may be in health care benefits. 
They may have to reduce the level of benefits in order to stay in 
business, in order to continue to employ as many people as they now 
employ.

  That is the real world, and those are the types of decisions that 
employers, particularly small business employers, have to make every 
year.
  So for the Federal Government to tell a small business person, who is 
really trying to do his best for his employees, who is really trying to 
attract and keep quality employees, for the Federal Government to tell 
that employer, I do not care what you have done in the past, how good a 
citizen you have been, how good an employer you have been, we are going 
to make you, regardless of your profitability, regardless of how your 
business fares in the next 5 years, we are going to make you continue 
to spend exactly what you have been spending on that fringe benefit.
  That makes no sense in this society, no sense in a free society, no 
sense in a free-market economy, and I just think it is important for 
people to know that not only is there a mandate in this bill for a 
standard set of benefits, there is a double mandate. And that is, Mr. 
Employer, if you now provide a more generous package of benefits to 
your employees, you are doing to have to keep providing that more 
generous package of benefits.
  Mrs. JOHNSON of Connecticut. To give an example of that, because it 
really hit home with me in talking with a small employer in my district 
who provides some dental and some vision. Now, he does not provide any 
substance abuse or any mental health, but he does provide some dental 
and some vision.
  Under reform, he will have to continue the dental and vision, but add 
also in the substance abuse and mental health and all the other things 
in the national benefit package. And there is one more thing he will 
have to add.
  Now, to show you how difficult this is, as a member of the Committee 
on Ways and Means, I sat through two series of markups, I read all the 
material. We were all there, and it was not until the end of the second 
markup that we happened to ask the right question to find out that in 
addition to the national benefit plan and any maintenance of effort 
benefits you are providing, you will also be obliged to provide all 
State-mandated benefits.
  So the cost of this is going to be extraordinary for our businesses. 
Most businesses now self-insure in order to go around and get out from 
under the State mandates. In Connecticut we have an organization that 
is providing packages to small businesses, which has just come out with 
some new and exciting and lower cost packages. And I said to them, how 
much could you cut your premiums if you did not have to comply with 
State mandates? The answer was 25 percent.
  So we are going to now mandate a national benefit package. Then we 
are going to mandate maintenance of effort. In addition we are going to 
require all State mandates now to be met. So the total cost of this 
benefit package is going to be larger than most employers understand, 
and almost all employers will have to pay more for health care, and 
most will pay a lot more.
  We have also been joined tonight by my colleague from Florida [Mr. 
Stearns] and my colleague from Michigan [Mr. Knollenberg]. Cliff, I 
would like to yield to you.
  Mr. STEARNS. Mr. Speaker, I thank the gentlewoman for yielding, and I 
commend the gentlewoman from Connecticut for what she is doing tonight. 
We did this some time ago when we talked about the Clinton plan. This 
might be like Yogi Berra said, deja vu all over again, because the 
Clinton-Gephardt plan certainly resembles the original Clinton plan.
  As you will remember, when I talked about the mandates last time, I 
talked about some of the outside accounting firms, the outside 
different interest groups that scored this, not just CBO or OMB. And I 
asked them, what impact would the Gephardt-Clinton bill have on the 
amount of people that would be employed? And they looked at it, and I 
would like to share with you some of the statistics from that.
  Consad, a research organization that is reputable, estimates that 
between 850,000 and 1.3 million jobs will be lost with the Clinton-
Gephardt bill. Laura Tyson, the chairman of the President's Council of 
Economic Advisors, estimates that 600,000 will be lost.
  Citizens for a Sound Economy tells us according to a McGraw-Hill 
study commissioned by the CSE Foundation, such mandates could increase 
unemployment by as much as 900,000 when fully implemented.
  The NIFB, which we all respect, looked at this and projected the 
State of Florida, my State, would lose almost 67,000 jobs due to the 
employer mandate. I have state-by-state how many jobs will be lost.
  So we hear a lot of talk about the importance of health care and how 
it could affect our families, but we must realize that if this mandate 
as projected by the Gephardt-Clinton plan is instituted, we are going 
to have a huge amount of job loss across this country, and we should 
take that into consideration.
  In fact, I think most of us agree that the Clinton-Gephardt plan is 
even more draconian for small businesses than the original Clinton 
plan. So that is hard for many of us up here to understand, how we 
could have a bill that is more draconian than the Clinton plan, when 
the majority of people out in the United States say they are against 
what they perceive as the Clinton plan.
  Mrs. JOHNSON of Connecticut. I think that is a very important point. 
The burden in the Gephardt-Clinton bill is heavier than the Clinton 
bill on small business. One reason it is heavier is because in the 
Gephardt bill, they create what is called Medicare Part C.

                              {time}  2120

  They are going to put 55 percent of Americans into a government-run 
health care program. We all know that those government-run programs, 
Medicare and Medicaid, under-reimburse. They pay less than the cost of 
care and right now they are the biggest source of cost shifting, that 
is of putting costs on the private sector from the public sector.
  When they put 55 percent of all Americans into government-run 
programs, they are going to increase that cost shift $16 billion. Which 
means that all of these businesses we are talking about, they are going 
to have this very large mandate put in their shoulders, are going to 
have also the cost of the under-reimbursement for Medicare Part C 
shifted onto them, that $16 billion. They are going to have the new 
costs of the stealth repeal of State malpractice reform laws shifted 
onto them.
  In other words, in this bill, surprisingly enough, they actually 
repeal State malpractice reforms. And when those get repealed, costs 
will go up, both of defense of medicine and of malpractice premiums. 
And so that cost is going to be shifted into the premium base.
  And lastly, there is a 2-percent tax on all premiums that will again 
raise the cost of the very employers. That is why the jobs will 
hemorrhage out of the system.
  I yield to the gentleman from Michigan [Mr. Knollenberg].
  Mr. KNOLLENBERG. I thank the gentlewoman for conducting this special 
order, with her background and expertise in that subject area. It has 
been invaluable to a whole lot of us in the conference.
  I just want to relate to what you just said. My State of Michigan 
just passed a malpractice reform bill, and you are saying to me that 
even though that did lower to the satisfaction of most people, of 
course, obviously certainly the physicians and the medical community, 
as well as doing, I think, justice for the entire State, what you are 
saying to me, by virtue of the Gephardt-Clinton bill, there is a repeal 
mechanism that is calculated or incorporated into this process so that 
even though they do have a program in effect that that will be repealed 
or downsized or removed?
  Mrs. JOHNSON of Connecticut. Absolutely. In all the years, and people 
do not realize that actually Congress has been studying this subject 
for years, not all of Congress, but some significant groups in the 
Congress and outside groups, there has not been a single health reform 
proposal from any credible group of Members or outside experts that has 
not recommended good, solid, extensive, comprehensive malpractice 
reform at the national level. The President's proposal was very weak in 
that area. The Republican proposal, to its credit, was very strong. The 
bipartisan bill is very strong in that area.
  But to everyone's sort of shock and amazement, not only is the 
Gephardt bill not strong, but it actually repeals progressive 
malpractice reform proposals that have been adopted at the state level. 
And yes, Michigan would have to abide.
  Mr. KNOLLENBERG. I thank the gentlewoman for making that 
clarification. I know the gentleman from Louisiana had another point.
  Mr. McCRERY. I just wanted to follow up on the gentlewoman's point of 
creating a system in which maybe half the population would be in a 
Government, direct government-controlled system like Medicare. You and 
I are not the only ones who fear that.
  I want to quote to the gentlewoman from a letter written by two 
democratic Governors, two Governors who are Democrats, and two 
Governors who are Republicans. Governor Howard Dean and Governor Romer, 
Democrats, and Tommy Thompson and Carroll Campbell, Republicans, wrote 
Congressman Gephardt on August 1 expressing concern about the Medicare 
Part C program which would put all these additional millions of 
Americans into a government program.
  They said,

       We believe that America's health care system must remain 
     responsive to market conditions and should operate only with 
     selective regulation by both the Federal and state 
     governments. Medicare, a government run, price-controlled 
     system, does not meet that goal. Moreover, expanding the use 
     of Medicare reimbursement rates to major additional portions 
     of the health care system would have disruptive, if not 
     disastrous, effects on the health care delivery system. The 
     Medicare program is also highly bureaucratic and unresponsive 
     to local needs and has been ineffective at controlling 
     overall costs.

  That is a quote from two Democratic Governors and two Republican 
Governors who clearly agree with you that to force maybe half the 
population of the United States into a Medicare-like program is not the 
answer to solve our problems in health care.

  Mrs. JOHNSON of Connecticut. I hope that one of these evenings we 
will take a special order and just talk about the implications of 
Medicare Part C. But for this special order on the impact of mandates, 
an employer mandate on both the job-creating capability of our economy 
and the quality of health care for our citizens, as well as the cost, 
it is important to recognize that just that portion of the Gephardt 
bill will have the effect of shifting billions of dollars of additional 
costs onto small businesses. That is why the job impact is going to be 
so steep.
  It is the combination of the mandate, of the maintenance of effort 
that it puts even more benefits in there, of the State mandates that 
now come into play, of the cost shifting, which is billions, of the 2-
percent extra in premium, 2-percent extra in all premiums, and the 
malpractice reform implications. What you end up mandating is, indeed, 
a very big package of costs.
  Mr. KNOLLENBERG. I just wanted to, in terms of letting to the States, 
and Michigan is just one of the 50, but in my first town hall hearing 
on health care, and I have had 9, I had some 450 business people. It 
was billed as a business owners, small business-type forum. Over 450 
people showed up. That was some months ago. At that time they told me 
the very same thing that you have been repeating and the gentlemen from 
Louisiana and Florida, that mandates are really a tax. It is going to 
do one of several things.
  Any employer, small business employer facing a mandate in effect is 
facing a tax. That works, as I think you pointed out, several ways. It 
works as, for example, it either means that they have to increase 
prices to their customers. They have to cut profits. They have to 
reduce wages or benefits or reduce employees. And then, finally, if all 
that does not work, they have one option: get out of the business.
  Mrs. JOHNSON of Connecticut. That is right.
  Mr. KNOLLENBERG. Those folks made it very clear to me that those were 
the options. And the last one might be one that they would have to 
consider. Small businesses that are threatened with those kinds of 
concerns do have to look at their bottom line. Many of the retail 
operations work on a very slim margin, and that favorite shop or store 
or restaurant might just go out of business because of mandates of this 
type that does not help any of us. It does not help any of our people 
on our States. And it certainly does not help the economy.
  We seem to have a little bit of a building economy in Michigan these 
days, despite whatever might be taking place countrywide. What we 
should not want to do there, and I know across the country, is 
establish a mandate that is a tax that will do or create those kinds of 
problems for the small business people.
  I just wanted to cite a couple of things. There was a survey done by 
Governor Engler in Michigan, who has done, I think, a number of 
remarkable things. But the survey that they conducted was with a number 
of businesses, small businesses around the State.
  I just wanted to indicate some quotes that came out of the surveys 
that came back. Incidentally, it was heavily responded to, much more so 
than average. And these were mailed out to some 1,800 businesses.
  Here is one quote from the Michigan Grocers Association:

       The net effect would be fewer employees, both part and full 
     time. Overtime would end up being cost effective or more cost 
     effective than having people work 40 hours only and end up, 
     therefore, with more employees. There will be less jobs, both 
     part time and full time, in our company with these mandates 
     in effect.

  And then they also say in another case:

       If all the government red tape restrictions and controls 
     continue to be put on small business, which employ most of 
     the people in Michigan, we cannot pay for it due to the 
     competitiveness of our business.

  Pricing, you can just raise the price a little bit, that may distort 
your sales. It may create some other problems. So it is not as easy as 
they say.

                              {time}  2130

  They are going on to say that ``We cannot run our business like 
government runs theirs because we cannot run a deficit,'' so you look 
for those areas that you have to cut, one of which would be wages, or 
employees.
  Mr. Speaker, this is something that came out of a survey, and I think 
it serves to point out exactly what the gentlewoman has been pointing 
out.
  Mrs. JOHNSON of Connecticut. I want to stay with this issue, so I'm 
not cutting you off, but I want to stay with this issue of the impact 
for a few minutes. It is complicated. People know it is a problem. They 
do not understand why, really, they are so afraid of it, but they know 
they are afraid of it.
  As you go around your district, now Connecticut has been through 
probably as tough a recession as any State in the post-World War II era 
in the last 5 years. We have had a truly hard time, because we not only 
had the recession that the Nation went through, we had the banking 
crisis, we had defense downsizing, all at the same time.
  We have been through very hard times. There are a lot of employers 
who have said to me ``I would not have made it, but I went from a 
first-dollar-coverage plan to a catastrophic plan.'' They said ``It was 
really hard to do that, but I saved those jobs, and in 2 years, I'm 
going to go back up, I'm going to have that full complement of people, 
and I'm going to be back up to a good, solid health plan for my 
folks.''
  One of the things people are not realizing is that if we mandate a 
rigid plan and an 80-percent employer cost, a recession comes, your 
orders drop off, and then you cannot reduce your costs by going to a 
lower cost plan. You can only reduce your costs by laying people off. 
Finally, you can only reduce your costs by going out of business.
  Making a mistake by mandating too big a plan on businesses that 
cannot bear it will not only cost jobs, which, of course, is true, but 
more importantly, it will stop the development of the very kinds of 
small businesses that make that next generation of employers. 
Connecticut is an excellent example.
  Defense is going down. Our big manufacturers are going to be smaller 
and smaller because they are primarily defense-related. Our big 
insurers are never going to be as big in numbers of employees in the 
years ahead as they are today, and they are not as big now as they were 
last year. Banks are not going to be as big employers in the future as 
they have been in the past.

  If we are going to build the companies of the future, you have to let 
the little guy with 5 employees become some guy of 10 employees, become 
some guy of 25 employees, and you make it harder and harder and harder 
when you put a heavy burden on them, and then they cannot make it when 
orders get down.
  Mr. STEARNS. Just to follow along on that point, when you talk about 
mandating to employers that ``You have to pay for it,'' you touched on 
the mandate that the employer has to pay for a mandated plan.
  This particular plan, as you point out, is rigid and is expensive to 
the employer. They cannot have the flexibility that they need, 
particularly depending upon the kind of health service they want to 
provide across the gamut, so they are forced to pay for this plan, 
which is really not tailored, maybe, for their small business or for 
their large business.
  When we talk about mandates, we are not just talking about the 
employer mandate to pay it, but we are talking about the mandate of 
this rigid package. I think we should touch a little bit on this plan, 
because this is sort of the main part of it which causes this increased 
cost.
  Mr. Speaker, the NFIB, the National Federation of Independent 
Businesses, says that ``The mandated benefits package is estimated to 
increase dramatically under the Gephardt-Clinton plan'' than it did 
under the Clinton plan, and it is going to work out to the detriment of 
businesses. They have put together a comparison sheet. It says ``The 
annual cost is going to go from $2,000 to $4,000 average for a 
person,'' for a firm. This is not for the employee, but for a firm.
  So when we are talking about Connecticut having a hard time because 
of the cutback in defense and the other things up there, what is going 
to happen when you say to the employer, ``Regardless, you are going to 
have to take this rigid plan, you are going to have to pay for it, and 
the employee is going to pay 20 percent and you are going to pay 80 
percent,'' and they are going to look at this plan. You and I both know 
that Congress might again come back and mandate a bigger type of plan, 
a more rigid plan. We have seen Congress do that again and again.
  What happens to this employer who has a sound business and he has a 
good bottom line? That is just going to deteriorate, and what is going 
to happen is going to be high unemployment, which is going back to the 
original statistics that I quoted.
  Mr. McCRERY. Will the gentlewoman yield?
  Mrs. JOHNSON of Connecticut. I yield to the gentleman from Louisiana.
  Mr. McCRERY. I thank the gentlewoman for yielding.
  NFIB did a survey of their membership back in 1990 and found out that 
of their members whose owners took more than $70,000 out of their 
business, so in other words, if the owner made $70,000 on his business, 
90 percent of those provided health insurance to their employees. The 
ones who did not provide insurance to their employees were business 
owners who took out less than $10,000 a year for their own income.
  So that means that an employer mandate is not going to hurt the small 
businesses who are successful, because they, most of them already 
provide health insurance, so they are already providing that cost, 
meeting it. But it is the small--it is particularly the new small 
businesses, the ones that are just getting started.
  You have a man and his wife who put their life savings into a 
business and they are struggling to make it work in that first year, 
the first 2 years. They are not taking much out of it for income, 
because they cannot. Now here we come and we are going to say ``It does 
not matter that you don't make any money off of your business, we are 
going to impose another cost of doing business on you.'' And as you 
pointed out, it could be as much as $2,000 per employee, or if that 
employee has a spouse, it could be $4,000, or if that employee has a 
spouse and a child, it could be $5,700, according to the estimates of 
the Clinton-Gephardt plan.
  Mr. Speaker, it is important to know what kind of businesses are 
going to be most hurt by this mandate. When you look at it closely, you 
will find that it is the smallest businesses, the businesses that are 
struggling, the businesses whose owners do not take very much money out 
of the business. They are not making very much money, but they are 
struggling to keep afloat, they are struggling to keep those 2, 3, 4, 
5, 10 jobs in their community.
  What we are about to do if we pass the Clinton-Gephardt bill is to 
tell those people ``Keep struggling. In fact, we are going to make your 
struggle even harder, because we are going to impose a cost of doing 
business on you that you cannot get around. You must pay, regardless of 
if you make a profit, regardless of what your income is, regardless of 
your cash flow. You have got to pay this.''
  What that is going to do is exactly what the gentlewoman from 
Connecticut suggested. It is going to drive out of business a lot of 
those small employers, or it is going to cause them to lay off one 
employee to be able to absorb those additional costs of doing business, 
or maybe two employees. So then what happens to those folks? They do 
not have--not only do they not have insurance, they do not have a job. 
That is no answer. So I appreciate the gentlewoman bringing that up and 
encourage her to continue.
  Mrs. JOHNSON of Connecticut. That certainly is no answer, and it is 
certainly no answer to controlling costs. Remember, what really is 
creating our problems is rising costs. When you mandate a plan on the 
employer and you mandate the employer to pay 80 percent and the 
employee to pay 20 percent, you create a rigid system that denies us as 
innovative Americans the opportunity to do, for instance, what Knox 
Semiconductor did.
  Knox Semiconductor of Rockport, ME, has an insurance plan called 
Health Wealth, which is marketed by Progress Sharing Co., an insurance 
broker in Saco, ME. Under the plan Knox raised employees' deductibility 
and copayments, lowering their premium costs. Then it put the money 
saved into a mutual fund account for each employee. Employees who make 
matching contributions can use the money in their accounts to pay for 
their deductibles and copayments. If they don't, they pay taxes on the 
money and keep it. Knox has had just one rate increase in the past 4 
years.
  Remember, at the beginning of this I talked about the 100 mark and 
how in the Gephardt bill, after a lot of fighting in the committee, we 
at least got the right to self-insure down to 100. This is a 32-
employee company, and they are self-insuring through their own pool 
like this. It is saving them money, benefiting their employees.
  I have to give just one more example, because all of these creative, 
inventive solutions to health care that employees cover costs, but help 
them do it in a way that reduces the overall costs in the society and 
rewards people for thinking health, for thinking wellness, will be 
literally wiped out by Washington, and sometimes our arrogance is 
simply astounding.

                              {time}  2140

  Forbes offered its employees in 1991 a great deal: If during the year 
an employee filed major medical and dental claims totaling less than 
$500, Forbes would pay that person double the difference between the 
$500 and the claims that they filed.
  Suppose an employee and his family had $900 in medical expenses. If 
the employee filed them, the most the insurer would reimburse him would 
be $900 minus his deductible and copayments, the portion of the bill 
the employee is responsible for beyond the deductible. He would be out 
a few hundred dollars and since his claims were over $500, Forbes would 
pay him nothing.
  However, if he filed no claims for those expenses, $500 minus zero 
for no claims comes to $500 double, that is $1,000. This would put the 
employee $100 ahead. So he would be ahead if he filed no claims, which 
means no administrative costs for the company, he pays the whole $900, 
he gets a bonus of $1,000 and he is up $100, and the whole system has 
not had to pay the costs of all of the reimbursements that go with 
insuring, and he has meanwhile shopped around looking to see who will 
charge me what for what health care service which now the people are 
beginning to do. They are finding that charges vary in health care just 
like they vary for sofas and couches and automobiles and everything 
else.
  One of the aspects of the employer mandate and one of its impacts is 
that it will destroy any plan that is not the national health benefit 
package plus the maintenance of effort on the State mandates, that is, 
the wisdom of Government, and is not set up with an 80/20 split 
dictated by Government. And really when you think how innovation, how 
being people-centered, how important one's own personal responsibility 
is to real health and wellness, we are actually about to adopt, if we 
adopt a solution like the Gephardt bill or the Clinton bill or the 
majority leader's bill in the Senate, if we adopt those kinds of plans, 
we will wipe out the very innovative, creative responses that are 
controlling costs, reducing the burden on society but providing quality 
health care. I just wanted to get those two examples on the record 
because if there is one thing that makes America unique and different, 
it is her remarkably resilient and creative people.
  Mr. ABERCROMBIE. Will the gentlewoman kindly yield for a moment or 
two?
  Mrs. JOHNSON of Connecticut. I would be happy to yield.
  Mr. ABERCROMBIE. I thank the gentlewoman very much.
  I have listened with some degree of interest to your concerns about 
particularly where small business is concerned and in employer 
mandates, and I recognize not only the sincerity of the presentation 
but the real and vital concern that I think is felt across the Nation. 
I just simply wanted to share with you just for a moment or two that 
the employer mandate which we put in really quite frankly at the heart 
of the bill we passed in Hawaii 20 years ago has not had that effect. 
In fact, we have increased the number of our small businesses, and the 
principal concern for staying in business today in Hawaii has less to 
do with health care than with other circumstances like workers' 
compensation, et cetera, that might be the basis of a discussion at 
some other time, some other piece of legislation or even special order.
  But I just wanted to indicate that while your concerns, in fact I 
would say anxieties I think is a fair word, about launching a national 
program in this respect is, of course, quite pertinent, I can assure 
you that the health care mandate for employers in small business is not 
cited by small business people who have dealt with them for a number of 
years as the principal threat, if you will, to their financial bottom 
line.
  Mrs. JOHNSON of Connecticut. I was very interested in the gentleman's 
special order before ours and was on the floor and did listen.
  Mr. ABERCROMBIE. Yes, I saw you.
  Mrs. JOHNSON of Connecticut. I have studied the situation in Hawaii, 
because Connecticut is a State with 91 percent coverage. According to 
the Employee Benefit Research Institute, which is I think the most 
unbiased source of these figures, they put Connecticut at 91 percent 
coverage. They put Hawaii at 93 percent coverage. Indeed most of the 
figures showed that Hawaii is not at 100 percent coverage. They are 
somewhere between 93 percent and 95 percent coverage. Furthermore, 
Hawaiians have the choice, primarily 80 percent of them have the choice 
of only two insurers, Kaiser Permanente, an HMO, or Blue Cross-Blue 
Shield. Most of us who have dealt with Blue Cross-Blue Shield and some 
of the other big plans find that they are often inadequate. One of the 
things that keeps them honest on the mainland is that there is a lot of 
smaller companies and there are a lot of creative employers like I just 
quoted who frankly provide far better plans.
  Then the other thing that is real interesting about Hawaii, two other 
things I should just mention about Hawaii, is that between 1980 and 
1990, total health care costs in Hawaii rose 191 percent. The national 
average in the mainland was 163 percent. So the Hawaii system has not 
succeeded in controlling costs.
  Lastly, I would comment that 4 in 10 employers had to reduce the 
number of employees when the mandate first went into effect; 1 in 10 
employers hired part-time workers instead of full-time workers because 
part-time workers were not covered; 55 percent restricted their wage 
increases; 33 percent reduced other benefits; and 6 in 10 raised 
prices. But 1 in 5 of the firms knew other firms that had gone out of 
business because of the mandates. That is the unseen consequence.
  So while I respect Hawaii's decision in this regard, I would also 
point out that Hawaii has a rather different population than the rest 
of the Nation. I do not think that you can say because Hawaii has an 
employer mandate that that makes an employer mandate good. It has not 
provided much more coverage for Hawaii than Connecticut has. It has not 
provided the diversity of insurers that the mainland has. It certainly 
does not allow the diversity that the system over here allows in self-
insured and, therefore, it has not been the State in which things like 
medical savings accounts and other approaches have developed.

  Mr. ABERCROMBIE. Will the gentlewoman yield?
  Mrs. JOHNSON of Connecticut. I will be happy to yield since I threw 
all those things at you that are rather negative to your State.
  Mr. ABERCROMBIE. If you would allow me just a moment or two to 
respond.
  One of the reasons I came down, I have heard this, and I must say, 
you are the mistress of the information that has been given to you and 
present it very effectively.
  One of the reasons I did want to come down because of the small 
business discussion is that virtually nothing of what you have been 
told is accurate as far as Hawaii is concerned, and it is important to 
us for those of us who do live there to at least get the information on 
the record.
  Mrs. JOHNSON of Connecticut. I think it is accurate that you have 
primarily Kaiser Permanente and Blue Cross-Blue Shield. Is that not 
accurate?
  Mr. ABERCROMBIE. No. If you would just give me a moment or two. By 
the way, I am very familiar with the Small Business Hawaii executive 
director because we went to school together and we have been having a 
discussion about business and business regulation for the better part 
of three decades. So I know fully what the approach is.
  Just very quickly, the original law was never intended to provide 
full coverage. It was based on employees who worked full time by 
definition of the law, which was 20 plus or more hours per week. That 
was to start it. We never did amend the bill for all intents and 
purposes except for a couple of benefits because virtually right away, 
with the mandate in operation even when there was a period of time when 
there was a dispute over whether we were going to have a waiver, the 
ERISA waiver, coverage was virtually universal. There are several plans 
that are put forward and choices to be made in addition to Kaiser and 
HMSA.
  What happened almost immediately was many of the other businesses 
left because they were taking premiums out, and I think you are 
familiar with the phrase ``cherry-picking.'' They would go in in those 
areas where they could maximize their profit and minimize their payout, 
and they left. Kaiser and Hawaii Medical Services Association, which is 
in fact the Blue Cross and Blue Shield, do in fact have the major part 
of the business because of the choice of the people. I think if you 
surveyed the people in the State, they are very well satisfied with it, 
although other competition has come up. For example, to try and achieve 
100 percent coverage in our Health Quest program, there are five 
different plans including Kaiser and the Hawaii Medical Services 
Association, and three others that have come into the competition and 
succeeded and they are part of our plan toward achieving it.
  I just want to conclude by citing to you the latest opportunity for 
small businesspeople to express themselves, and this was August 1 of 
this year, 1994, in the Honolulu Star Bulletin. The focus is on 
imperiled entrepreneurs, ``Risky Small Business,'' is the title.
  In the entire article, which focuses on three small businesses, as 
well as an overall portrait of the 29,000 businesses we have in Hawaii, 
98 percent of them with less than 100 employees, and the overwhelming 
majority, less than 50 employees, only once does the question of health 
care costs come up. And the citation there is that over the past 12 
years, the coverage went up approximately $5 a year.

                              {time}  2150

  So there are genuine concerns. Let me rephrase that and I will 
conclude. The gentlewoman has been very generous to give me the time 
she has. I did not mean to imply at all that your concern was not 
genuine on the question of employer mandates. Obviously that has to be 
not only discussed but a conclusion has to be reached.
  What I meant to say was that I believe that with respect to the 
dangers for small business and the difficulties for small business in 
Hawaii, there is much more of a problem with respect to Workers' 
Compensation, with respect to location and costs of actually being able 
to have a lease, et cetera, in Hawaii, factors which do in fact make it 
different and unique from some other areas, although I think Workers' 
Compensation is a difficulty shared by virtually all small businesses 
today. But you will find that being cited virtually 100 percent of the 
time with respect to the difficulties and health care coverage being 
cited occasionally or only when people are reminded of it.
  So what I would ask is as we continue the conversation I hope over 
the next few days and weeks that we give some consideration to what the 
positive effects of health care and employer mandates might be in the 
sense of achieving cooperation in a national health care bill that we 
can all if not be happy with, feel that it is at least minimally fair 
one to another.
  Mrs. JOHNSON of Connecticut. I would certainly say that I think there 
is a good, solid bipartisan health care reform bill that we ought to 
have on the President's desk this year that would do a lot of things 
that would be very important to all Americans that would eliminate the 
discrimination that currently exists against people with preexisting 
conditions, that would prevent companies from cherry-picking, as the 
gentleman alluded to that they used to do in Hawaii, and would prevent 
them from doing that nationwide. So there are lots of good things that 
we can do.
  I also respect and am interested in Hawaii's decision to adopt an 
employer mandate, and I am glad it is working for them. I do not want 
Washington to force Connecticut to adopt an employer mandate when we 
are within two percentage points of Hawaii without one, and when we 
need small businesses to grow and take advantage of our manufacturing 
work force and of our plant capacity to produce new products, and when 
I know perfectly well that the majority of the uninsured in my State 
are in the big cities where there not only are lots of people without 
health insurance, but there is not a good health insurance 
infrastructure. And I know if we create an expanded community health 
center network so those people can get to providers, and we turn 
Medicaid from a fee-for-service compensation program into an insuring 
program so people can have the doctor of their choice and establish 
relationships that they have chosen, I believe that Connecticut can get 
to 95 percent every bit as fast as every other State, including Hawaii. 
So I just do not want Washington to mandate on my State Hawaii's 
solution, which seems to be working nicely for them in many ways.

  Mr. ABERCROMBIE. I appreciate the gentlewoman giving me the time.
  Mrs. JOHNSON of Connecticut. It is nice to have you with us, and I 
thank you.
  I would say you ought to go through and compare what the benefits 
plan is in Gephardt plus the maintenance of effort, plus the State 
mandates and see how that works out, how many of your employers would 
actually experience an increase in costs, because I believe it is 
correct to say that the national benefit plan is considerable richer 
than Hawaii's plan. We have to check that out.
  Mr. ABERCROMBIE. We can discuss that at another time, and I thank the 
gentlewoman again for the opportunity.
  Mrs. JOHNSON of Connecticut. I thank the gentleman from Hawaii.
  Mr. McCRERY. Mr. Speaker, will the gentlewoman yield?
  Mrs. JOHNSON of Connecticut. I yield to the gentleman from Louisiana.
  Mr. McCRERY. Mr. Speaker, I appreciate the gentleman coming to the 
floor and sharing with us his experience in Hawaii. I too had the 
opportunity to hear his remarks on the floor in the previous special 
order, and I know that he is sincere in seeking answers to some of the 
problems that plague our health care system.
  With respect though to the data that the gentlewoman from Connecticut 
cited, with respect to Hawaii the gentleman should know that the figure 
of 93 percent coverage comes from the GAO, which is a fairly well-
respected government watchdog, and the data that she cited with respect 
to the impact of the Hawaii plan on businesses, 4 in 10 employers had 
to reduce the number of employees and so on, that data came from a 1993 
Kaiser family foundation study. So these are not things she just pulled 
out of the air.
  Mr. ABERCROMBIE. May I just respond very briefly. You are right about 
that.
  Unfortunately, as with everything else, it requires perspective and 
context. After Hurricane Aniki came through you will find that both the 
failure of businesses and people being laid off, which was cited there, 
had virtually everything to do with the hurricane. I will not take your 
time tonight, but I can assure you that the latest statistics show that 
our health care costs are going down and our hiring is going back up as 
our economy recovers.
  Mr. McCRERY. I do not mean to criticize Hawaii. I think if Hawaii 
wants to do that, that is fine, and it has achieved 93 percent 
coverage. But there is another element to this that we have not talked 
about tonight, and I think we need to hit it because it is not just job 
loss that is the result of employer mandate. It is not just an increase 
to the cost of doing business. It is not just laying off employees or 
converting from full-time employees to part-time employees to try to 
avoid the full cost of the mandate. I think more important than all of 
that is the fact that when the government, the central government, the 
Federal Government chooses to impose a mandate on all employers in this 
country to provide health insurance, they are taking the first, the 
most important, the biggest step toward government control of our 
health care system. That should not be overlooked in this debate on 
employer mandates, because only through a mandate, short of a single-
payer system where the government controls everything and pays all of 
the bills, short of that, an employer mandate is necessary for the 
government to control our health care system.

  Think about it. Once the government says, ``Mr. Employer, you must 
give your employees health insurance,'' then the government says, ``Mr. 
Employer, you must give your employees this health insurance, these 
benefits,'' that the government prescribes, and then the government 
says, ``We are also going to impose global budgets on health care 
spending on a State by State basis.'' If your State exceeds that global 
budget, guess what? ``We are going to impose price controls and tell 
you what you must pay for that set of benefits.'' Then you have 
government control of health care.
  I do not think anybody, well, there are a few in this country who 
want the government to control health care, but I would submit that the 
vast majority of Americans, the vast majority of the people in my 
district for sure do want the government to control their health care 
system.
  So be careful, those of you who promote employer mandates, be careful 
because that is the first step to government control of our health care 
system.
  Mrs. JOHNSON of Connecticut. I do think that it is absolutely true, 
and those of us who have been on the committee that have marked up this 
bill two times now, both the Subcommittee of Ways and Means and in the 
full committee, we saw how deeply interlocked mandates and price 
controls are. And once government adopts a price control policy, with 
it they do things like this: In the Gephardt bill there is a provision 
in law that says the Secretary of Health and Human Services shall have 
the power to decide whether a drug is being used appropriately, and if 
she does not think that drug is being used appropriately she can deny 
reimbursement for that drug.
  When you look at the future where drugs are going to be more 
expensive, and there are going to be fewer operations and more use of 
pharmaceuticals, you can see why the government in this bill is taking 
control over what drugs you will be able to have reimbursed under your 
health care plan.
  It is the details that reveal the depth of the power shift from 
people to government that lies behind a bill whose fundamental 
structure is employer mandates and price controls.
  Mr. STEARNS. Mr. Speaker, will the gentlewoman yield?
  Mrs. JOHNSON of Connecticut. I yield to my colleague, the gentleman 
from Florida.
  Mr. STEARNS. Mr. Speaker, I just wanted to add a few comments to the 
debate from the gentleman from Hawaii. I think perhaps we should take a 
special order and point out the fallacies in the health care program 
that exists in Hawaii, because there have been many articles written 
upon it talking about how it has increased the tax base and how a lot 
of the research for health care comes from the mainland and the type of 
economy over there versus the economy that might be in Connecticut.

                              {time}  2200

  There are so many comparisons we could do to show that what the 
gentleman was talking about does not apply here and, in fact, that the 
Clinton-Gephardt bill is vastly different than that, and so I think at 
another time we might want to explore that.
  But I wanted to make one final argument concerning this employer 
mandate. And I have heard this by the administration saying, ``What is 
the big deal? You have minimum wage. We have increased the minimum 
wage, and it did not amount to a flick on the economy.'' It does.
  This is a little different. If I am an employer or employee, the 
minimum wage applies to a very small segment within that corporation.
  Mrs. JOHNSON of Connecticut. Just a few employees.
  Mr. STEARNS. Just a few people. Now you are not mandating just that 
small group of employees. You are mandating all employees, all 
employers, all across the United States, and the impact is dramatic in 
comparing it to just raising the minimum wage and making the same 
comparison is the fallacy, and in the end the employer lots of times 
cannot control his health care if Government is going to mandate 
increased standard benefit packages. With all the bureaucracy that 
comes in with this bill, it is going to affect the employer. He will 
not be able to control the costs like he could with a small, narrowly 
segmented group of individuals who are on minimum wage.
  I just wanted to bring up the fallacy about comparing this to minimum 
wage.
  Mrs. JOHNSON of Connecticut. Not only are you imposing a cost for 
each employee, but each employee's spouse and each employee's children. 
At least, in the Clinton plan, President Clinton was going to have the 
employer have the spouse pay something and send it back to the employer 
who paid the family coverage, but this is so typical of Washington. 
Honestly, you have to have a sense of humor. It is not very funny if 
you have to pay the bill.
  In the Gephardt plan the employer of the spouse is going to pay a 
premium, but it is not going to go back to the employer who provides 
the family coverage. It is going to go to the Government to pay the 
subsidies for small business and low-income workers. So remember, we 
talked about how small business is going to have to carry the cost of 
this big benefit plan and of the maintenance of effort benefits and of 
the State mandated benefits. They are also going to have to carry the 
costs of the subsidies necessary to subsidize the premiums of low-
income workers and small businesses. So you are not going to be paying 
just for your employees' mandated benefits; you are also going to be 
paying for other employees' mandated benefits, and that is why the 
costs are going to go up far higher than they are now.
  And then you get into what Europe has gotten into where they said in 
1993, when President Clinton got them all together to look how we can 
make the economies grow, the European Community leaders said, ``We must 
lower taxes on labor to enhance Europe's industrial competitiveness.'' 
By that, they meant lower the fringe-benefit costs on labor, not the 
wages, and in truth, since in the last decade, Europe has created, the 
last 20 years, Europe has created no new net jobs, no new net jobs. We 
have created lots of new jobs, because we create them in the small 
business sector.
  Mr. STEARNS. I wanted to interject one thing. Is it not true in some 
of the European countries the employer health benefits are half of what 
the labor wage is? In other words, they are increasing so dramatically 
the labor wage itself is just about twice, but the whole health care is 
just increasing so dramatically in these countries that it is taking a 
bigger and bigger share of the employer benefits to the employee.
  Mrs. JOHNSON of Connecticut. I thought we had 10 minutes left, but I 
am told we only have 2 minutes left.
  So I yield to the gentleman from Michigan [Mr. Knollenberg].
  Mr. KNOLLENBERG. I will take one quick minute, then you can close. I 
just wanted to say that one of the things I do not think we had talked 
about this evening is the fact these mandates do something else beside 
affecting existing businesses.
  Think of the businesses, and I ran a business for years before I came 
to Congress. I had a small business. I had to borrow money to meet 
payroll sometimes. That is how it goes. That is how you do it. How 
about all the businesses that have not started because they cannot or 
will not be able to fund the requirement of the mandate to buy health 
coverage for those people in their employment? I would suggest to you 
that people are not blocks of wood. They behave normally. They 
understand what the liabilities are of going into business. Believe me, 
it is tough. I have seen people sweat and strain.
  I think the gentleman from Louisiana pointed out that some have less 
than $10,000 to show for it. That is not a livelihood, I can assure 
you.
  These mandates, this is the hidden factor. I think it does impact 
greatly the startup of new businesses where all the net new jobs have 
come from.
  I thank the gentlewoman from Connecticut.
  Mr. STEARNS. I commend the gentlewoman again for the special order.
  Mr. McCRERY. I appreciate the gentlewoman inviting me to join her 
this evening, and I think we have done a good job in exposing the 
employer mandate as nothing but a new payroll tax.
  Mrs. JOHNSON of Connecticut. That is important. I do want to just 
close with this comment that 90 percent of people who take home $70,000 
out of their business do provide health insurance for their employees. 
One-third of those who take home only $10,000 provide health insurance. 
They want to do it. Those who do not, for the most part, cannot afford 
to do it, and mandating it on them will not make them able to afford to 
do it. But it will force them to reduce the number of jobs or go out of 
business.
  So this has big implications both for people's jobs, the strength and 
vitality of our economy, as well as the quality of health care in 
America.
  I thank the Members for joining me tonight.

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