[Congressional Record Volume 155, Number 156 (Monday, October 26, 2009)]
[Senate]
[Pages S10727-S10729]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               SMALL BUSINESS INSURANCE PREMIUM INCREASES

  Mr. HARKIN. Madam President, yesterday I got a call from my friend 
and my colleague from Pennsylvania, Senator Specter. He said: Have you 
read the New York Times yet?
  I said: Well, no, as a matter of fact I have not.
  He said: Well, there was a front page story in the New York Times on 
Sunday about what was happening with small businesses, in terms of 
their insurance rates going up unduly, huge increases.
  I said: Well, no, I have not read about it. I will get the paper and 
read it.
  It struck a chord with me because somehow, over the last several 
weeks, I have gotten an influx of inquiries to me personally and also 
into my office from small businesses in Iowa, some elsewhere but mostly 
from my State, wondering what was happening to the huge increases in 
their premiums this year.
  They have always been used to increases in premiums, but these seemed 
unduly large. Plus, a lot of copays and deductibles were going up. So I 
went out and got the newspaper and read the story in the New York Times 
that Senator Specter pointed out to me. It was alarming.
  As I said, I thought about all the inquires that had come into any 
office. I said: Something is going on out there. Something is going on 
out there. So we have this health care bill now, reform, that will be 
going down to CBO, I guess today, for scoring.
  I wish to commend Senator Reid for his leadership. I was actually in 
Pittsburgh today giving a lecture on disability policy at the 
University of Pittsburgh law school, with former Attorney General Dick 
Thornburgh, who had endowed the law school with an endowment. They have 
a very strong legal scholarship program dealing with disability law at 
the University of Pittsburgh law school.
  So I rushed back from there so I could be on the floor with Senator 
Specter to talk about this a little bit because there is something very 
funny going on.
  When I was in the airport, I saw Senator Reid had said he was sending 
the bill down to CBO for scoring. I commend Senator Reid for his 
leadership and for putting in a strong public option. I am told it is 
basically the public option the Senator from North Carolina worked so 
hard on in the committee to develop. I guess he married that up with 
the provisions from the Finance Committee bill that would allow States 
to opt out by 2014. I commend Senator Reid for putting that strong 
public option in the bill. The vast majority of the American people 
want that. They see it as necessary for trying to keep some control on 
cost and leaving more choice and more competition for policyholders.
  As a matter of fact, this would be a great help to small businesses, 
because small businesses could go on the exchange, and they would have 
that public option also available to them. I have said many times: The 
two biggest winners I can see in the health reform bill are small 
businesses and the self-employed. Small businesses are at the end of 
the line. They have been whipsawed all over the place. They have no 
bargaining power. The same with the self-employed. This bill will turn 
the tables by providing the exchanges and providing more help for small 
businesses. They will be much better able to negotiate and to pick and 
choose among different policies rather than what they have now.
  Now in many cases they get one or two, and that is about it in a lot 
of States, one or two different insurance companies. In the New York 
Times article, some suggest the insurance companies are raising their 
rates to generate as much revenue as possible before health reform 
obliges them to change the way they do business.
  Isn't that interesting. They are anticipating health reform passing 
so they want to jack up their premiums as much as possible before that 
happens. Others assert the industry is responding to Wall Street's 
demands for ever higher profits in the health insurance industry, that 
Wall Street is putting pressure on them to increase profit margins.
  Again, I always have to ask: Why are we doing health reform? Are we 
doing health reform to help the health insurance industry or are we 
doing health reform to help the American people? That had to be our 
first response, that we are here to help the American people, not to 
help the health insurance industry.
  I have had many small businesses tell me how tough it has been. I 
have a small newspaper in Iowa with 12 employees. The owner Art Cullen 
recently turned 50. Their insurance premiums for his small business 
jumped by 58 percent in 1 year and more than 100 percent in 2 years. 
They have a $5,000 deductible.
  I asked Art: Why don't you get another company? He said: I can't. I 
only have one in this area that will offer insurance. So that is why we 
need the exchanges, why we need health reform, so that Art Cullen and 
his small business can join with other small businesses on these 
exchanges to get a better deal.
  Mike Landeaur owns a muffler shop. He has 10 employees. He offers 
insurance to them, but his premiums have jumped 66 percent in the last 
3 years. His deductibles have gone from $4,000 to $16,000. Mike is 
expensive. He was born with a congenital heart disease, so he dropped 
himself from his company's policy. He is the owner, taking himself out 
of the pool. But he can't get any kind of individual insurance because 
of his preexisting condition. Now he is worried he will have to sell 
the small business, all because of excessive health insurance costs.
  This is unconscionable. As we speak, the majority leader is sending 
his bill down to CBO. And make no mistake, the bill we are bringing to 
the floor will offer real solutions for small businesses. It will 
enable them to purchase insurance through an exchange so they can 
choose among multiple plans at lower costs than are now available in 
the small group market. Small businesses and the self-employed can go 
on the exchanges and, if they want, they also are eligible for the 
public option.
  It will sharply reduce administrative overhead that drives up the 
cost of insurance through such practices and medical underwriting and 
preexisting condition exclusion clauses. We provide a new small 
business tax credit to make insurance more affordable for the most 
vulnerable small businesses. We make new investments in wellness and 
disease prevention for all businesses, including small businesses.
  In addition, we will put a stop to the outrageous and unacceptable 
insurance industry practices that harm the ability of small employers 
to cover their workers. We will require that insurance companies 
document how much of each premium dollar is going for medical expenses. 
We will require that insurance companies document how much of each 
premium dollar goes for medical expenses, and we are going to require 
rebates for excessive overhead charges. We will end the broken status 
quo where insurance executives make tens of millions of dollars in 
salaries and bonuses while their small business customers go out of 
business because they can't afford health insurance. We will end the 
exceptional and unwarranted antitrust exemptions the industry has 
enjoyed without public benefit for far too long. We will end the 
ability of insurers to jack up premiums by as much as 160 percent, 
which is what they did for one small business, because they thought the 
group was ``getting too old.'' Therefore, they jacked up their premiums 
by 160 percent.
  I thank Senator Specter for having a keen eye and for giving me a 
heads up on this yesterday. There is something happening out there 
right now all over this country. Small businesses are being inundated 
with higher costs and huge increases in their insurance premiums. To 
America's small business community, we have a simple message: Help is 
on the way. We will get this health reform bill done, and we are going 
to help small businesses and the self-employed.
  I hope they can hang on long enough so we can get this bill through, 
hopefully before the end of the year, so that

[[Page S10728]]

next year when their policies are up for renewal, we won't see these 
kinds of huge increases and gouging of small businesses.
  We need reform. We always think about it in terms of individuals and 
how this affects individuals. But we also think about how it affects 
the majority of workers who work for small businesses who don't have 
the kind of large group power that maybe big businesses and bigger 
industries have. That is why this health reform bill is so important 
for everyone, but none more so than the small businesses and the self-
employed.
  I am hopeful, along with Senator Specter, that we can bring some more 
of this to light. I encourage anyone who has any evidence, stories, 
anything we can document of what the increases are to small businesses, 
please get them in to us. I have heard about enough of these to know it 
is not just a few here and there. It must be more widespread. We need 
those. Hopefully, we can shed more light on this as we move forward to 
bring the bill to the floor.
  I thank my colleague for his leadership and for bringing this out. I 
look forward to working with him to try to help small businesses in 
Pennsylvania, Iowa, and everywhere else.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Pennsylvania.
  Mr. SPECTER. Before commenting further on the article in the New York 
Times, some of the things the distinguished chairman of the HELP 
Committee has said, it would be my hope that we would proceed, as 
Senator Harkin related. I got hold of him yesterday morning after 
noting the Sunday Times, and then we proceeded to talk about a hearing 
which I hope we can do promptly. One of the witnesses whom I would like 
to see called, subject to the approval of the chairman, is Walter Rowen 
of the Susquehanna Glass Company in Columbia, PA who sought to renew 
his company's coverage for 2,000 employees and found out that the 
premiums had gone up by 160 percent. I talked to Mr. Rowen this 
afternoon and got more of the details of his situation.
  As Senator Harkin has commented, this is typical of a great many. 
Right in the middle of where we are now on this debate on the public 
option, I believe the case for the public option, a robust public 
option, would be strengthened materially to document what the New York 
Times has said. Right now it is a newspaper article. It is a little 
different when there is a Senate hearing on the subject and you bring 
in people such as Walter Rowen who have demand for a 160-percent 
increase, and you question the insurance companies on what they are 
doing. If the New York Times is accurate, that small businesses will be 
asked to pay about a 15-percent increase for the next year--and this is 
substantially higher, and in a moment or two I will go through some of 
the specific quotations--and that they are responding to Wall Street 
because Wall Street is demanding more profits from their investors--
that is specified in the article, and I will take it up in detail--and 
the comment is that the insurance companies are more frightened about 
Wall Street than they are about Congress. I suppose that was surprising 
to me that in the context of the times, the way Congress is moving 
ahead on comprehensive health care reform, insurance reform, that they 
at this point should be more concerned about Wall Street than Congress. 
I think Wall Street ought to be more concerned about Congress than 
insurance companies. I think Congress is finally going to act on quite 
a number of the abuses in so many lives. But if we are seeing here 
action by Wall Street pressuring the insurance companies to raise their 
profits before Congress acts, then we ought to find out. If there is 
any justification for insurance companies to raise their premiums, 
let's have them tell us. Let's bring in the insurance companies.
  There are a lot of these famous pictures of a half a dozen corporate 
executives standing in front of a congressional hearing room, raising 
their right hands and swearing to tell the truth. And then we have some 
questions for them. I have questions for them. Why the increase? Is 
there an increase because health care costs have gone up?
  One of the experts quoted in the New York Times article says 23 
percent. Mr. Rowen faces 160 percent. Is there any justification except 
profiteering and acting ahead of congressional action?
  I hope Senator Harkin will have the hearing promptly. It will bolster 
the case for the public option. It will bolster the case to have 
alternatives to the private sector. What is often misunderstood is that 
the public option does not eliminate the private sector. The public 
option is what it says. It is an option, another course, another thing 
one can choose. It is precisely this kind of response to Wall Street--
and I will not prejudge it until we hear the witnesses and have them 
sworn in and take their testimony--if it is true, that reemphasizes the 
need to have some competition, to have competition which will not 
knuckle to Wall Street. A public option will not knuckle to Wall 
Street. We have talked informally. It is not easy to get a hearing 
organized fast, but Senator Harkin and I, as is well known, passed the 
gavel on the chairmanship of the Subcommittee on Labor, Health and 
Human Services, and Education. We can proceed. I submit that now is the 
time to do so.
  Mr. HARKIN. Madam President, I thank the Senator again for bringing 
this to light and urging us. I think we do need information. We do need 
to bring them in and check on what is happening with small business. We 
need to bring in some small businesses, some representatives of small 
businesses. I think we need to bring in some of those insurance people, 
find out what is going on here. How come premiums are going up so much 
this year? I think we were in a recession, were we not?

  Mr. SPECTER. Madam President, I have seen Senator Harkin cross-
examine, and it is a sight to see.
  Mr. HARKIN. Madam President, I am not in the former prosecutor's 
league in that regard, I can say that. But we are working on that. As 
the Senator knows, sometimes it is tough to get these hearings put 
together. But hopefully we will have something we can pull together by 
next week.
  Mr. SPECTER. Madam President, I thank the chairman for that 
statement. Next week would be about right because it would come right 
as we are considering this legislation. I think it would shed a lot of 
light on the legislation and be a big boost for the public option.
  I thank my colleague.
  Mr. HARKIN. I thank my friend from Pennsylvania.
  Mr. SPECTER. Madam President, I refer to some of the specifics in the 
New York Times article. Again, I cite this as a newspaper article. It 
is hearsay in an article, but we will have the hearings to find out the 
facts. But this is what some of the details in the article say: that 
small businesses ``are seeing premiums go up an average of about 15 
percent for the coming year--double the rate of last year's increase''; 
big employers ``have more negotiating clout.'' ``[S]ome experts say 
they think the insurance industry'' is ``under pressure from Wall 
Street'' to raise its ``premiums to get ahead of any legislative 
changes that might reduce their profits.''
  Well, if that is so, we ought to find out about it. And if they have 
a justification for the price increases, let them tell us what it is. 
Let them produce their books and records if they have a justifiable 
basis for their increase.
  The New York Times article goes on to point out that ``Edward Kaplan, 
a consultant with the Segal Company, said his clients were seeing 
renewals for coverage at prices 15 to 23 percent higher this year,'' 
where ``they typically faced increases'' in the past ``of 7 to 12 
percent.''

       Joshua Miley, a consultant with HighRoads, which analyzes 
     benefit information for employers, said the ``undercurrent of 
     health reform is driving part of the renewal increases.''

  The article goes on to point out:

       There is no question that insurers are under pressure from 
     Wall Street . . . they have heard from angry investors 
     disappointed by the companies' earnings.

  The article further states:

       While the industry is particularly vulnerable now in 
     Washington, she said--

  ``She,'' meaning Sheryl Skolnick, an analyst for Pali Capital, 
referring to the insurance companies--

     ``it seems like they're more afraid of Wall Street.''


[[Page S10729]]


  The article goes on to point out that:

       In August, when Walter Rowen, who owns Susquehanna Glass 
     [Company] in Columbia, Pa., sought to renew his company's 
     coverage for two dozen employees, he said his insurer 
     demanded a 160 percent rate increase.

  I called Mr. Rowen today and found out that he has had a family 
business since 1910, and they have had health insurance for about 20 
years, and they cover 50 percent of the premiums for their employees. 
As prices have risen, they have sought deductibles to lower the rate, 
and then they paid the deductibles for their employees. It is cheaper 
to have deductibles, have the company pay them, than to pay the 
increase in costs. That is another factor which we ought to analyze. 
That ought not to be so.
  His policy expired in October--this month--and he corroborated the 
New York Times story that he was told there would be 160 percent more. 
He has found other insurance, but he is paying $22,000 annually. He 
hires invariably in the 28 to 32 category for small business, and 
between 20 and 24 of them are covered. Now he has been forced to go to 
the point where the employees are going to have to pay the deductible. 
If they do not have an illness, then there is no problem. If they do, 
then the deductible is obviously very, very expensive.
  I join my colleague, the senior Senator from Iowa, in congratulating 
the--now he is the junior Senator from Iowa, pardon me, but close--he 
has been here since the election of 1984, a long time. I join Senator 
Harkin in congratulating the majority leader for moving ahead with a 
public option in the legislation which he has melded together. I again 
thank Senator Harkin for his initiative and willingness to move ahead 
and have a hearing.
  Madam President, I have an excellent floor statement which I will not 
take the time to read, prepared by my expert in the field, John Myers, 
which I ask unanimous consent that the full text of the statement be 
printed in the Congressional Record, and I ask that the full 
explanation which I am giving now be included. Sometimes the written 
statement just follows the oral extemporaneous statement and people 
reading the Congressional Record wonder why the Senator has repeated 
himself. Well, let it be understood what I have said is an 
extemporaneous statement, and this is the text prepared by my able 
staff assistant, and would ask that these comments be the preface to be 
included in the Record in full.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
  Mr. SPECTER. Mr. President, yesterday the New York Times ran a front 
page article describing the difficulties faced by small businesses in 
the face of rising health costs [Small Business Faces Sharp Rise in 
Costs of Health Care; October 25, 2009]. Small business is the backbone 
of our economy and in today's economy we must ensure that small 
business has every opportunity to succeed.
  The article highlights the plight of Walter Rowen, a constituent of 
mine. Mr. Rowen is the owner of Susquehanna Glass in Columbia, 
Pennsylvania. In August, when he sought to renew his company's coverage 
for his two dozen employees, his insurer demanded a 160 percent rate 
increase. He was told his work force was ``getting too old and very 
expensive''. He also found that any other health plan was likely to 
charge 30 to 50 percent more than he paid last year. Left with few 
options, Walter chose a less generous plan from a different carrier for 
44 percent more.
  Unfortunately, Mr. Rowen's story is not unique. Steep rises in 
insurance premiums are affecting small businesses across the nation. 
Small businesses are seeing renewal prices 15-23 percent higher 
compared to last year, according to Edward Kaplan, a benefits 
consultant with the Segal Company. As increases from 2008 to 2009 were 
considerably lower at 7-12 percent, it is hard to believe that a 
doubling of the rate of renewal costs in 1 year could be linked to 
medical costs alone. In the article Joshua Miley, a consultant who 
analyzes benefit information for employers, states that the 
undercurrent of health reform is driving part of the renewal increases. 
The idea that health insurance companies would increase rates to 
beneficiaries based on pending health care reform is disturbing. 
Michael A. Turpin, a former senior executive for United Health, and now 
a top official at USI holdings, an insurance brokerage firm, echoes Mr. 
Wiley's hypothesis: insurance companies are ``under so much pressure to 
post earnings, they're going to make hay while the sun is shining.''
  Clearly the primary concern of health insurers is not whether their 
customers receive the best possible health care for their money; it is 
how much money can be generated for the insurers' investors. This 
objectionable action illustrates why there is a need for a public 
option as part of health care reform. Currently, there is a lack of 
competition in the health insurance market. Instead of individuals or 
businesses having the freedom to shop for coverage that works for them, 
they have to take what insurance companies offer. This translates to 
higher prices, preexisting condition exclusions and denials when 
insurance is most needed. A public option can help by introducing 
competition across the country. This plan could constrain costs and 
make the insurers think twice about passing down double-digit rate 
increases to customers.
  The American people deserve a choice in health insurance to keep the 
private insurers honest. Without competition from a public plan, health 
insurance costs have skyrocketed. As health reform moves forward, I 
encourage Majority Leader Reid to include a public option to bring 
affordability and competition back to the market.
  A recent survey conducted by Intuit Inc. revealed that 44 percent of 
small business owners intended to hire new employees in the next year, 
an encouraging indicator in our economic recovery. This survey also 
noted that nearly 90 percent of those small business owners surveyed 
said that health insurance benefits are integral to attracting good 
workers. However, 58 percent of those small employers do not offer 
health insurance, with nearly 50 percent stating that they can't afford 
it. This is a sobering statistic and one we should do everything in our 
power to address.
  I commend the efforts of Chairmen Harkin and Baucus to combat this 
issue. Proposed health reform legislation will include a tax credit for 
small businesses that provide health insurance to their employees. The 
HELP Committee bill provides a tax credit for small businesses of up to 
$2,000 for a family or $1,000 for an individual. The legislation will 
allow small businesses to join health insurance exchanges so that they 
can group together and gain the same market power as larger companies 
currently enjoy. Currently, perhaps most importantly, small businesses 
pay up to 18 percent more than large employers. These exchanges will 
help relieve the problem of small risk pools, which due to their size 
can see their costs grow significantly if one employee suffers an 
illness such as cancer. By increasing the size of these risk pools, 
costs will become more predictable and more affordable for small 
businesses. Proposed legislation will also tighten insurance ratings to 
prevent costs from being disproportionately placed on older workers. 
This is of particular importance for small businesses that might employ 
older individuals, an important part of our Nation's workforce.
  There is an undeniable need to address the health care problems we 
suffer from today. The inequities of the current system must be fixed, 
especially for the 70 million people that are employed by or operate a 
small business. The decisions of health insurers to drastically 
increase health insurance prices before health reform is enacted 
demonstrates the need to promptly move forward with legislation that 
includes a public option.
  Mr. SPECTER. Madam President, I thank the Chair.

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