good morning this is a hearing on obamacares employer penalty and its impact on temporary workers the committee will come to order i will recognize myself for an opening statement and the distinguished gentleman from illinois mister davis two months ago this committee heard from five business owners that the new health care law will cause them to reinvest less in their companies reduce the number of workers on their payrolls automate more services and move workers into part time status to minimize compliance costs the testimony revealed that job loss from the law might be considerably worse than the cbo predicted which was eight hundred thousand jobs lost by the end of the decade today we will hear from professionals in the staffing and temporary worker industry that will highlight the negative impact of obamacare on their industry and the economy as a whole this hearing will provide a better understanding of the vital role that staffing firms and temporary workers play in our economy and will also reveal the negative effects of burdensome statutes in president obamas healthcare law american staffing companies are an extremely important component of our economy as a sector they employ nearly three million workers per day and over ten million workers annually for many workers and businesses staffing firms provide an on the job interview that often leads to permanent employment even workers who do not gain permanent employment from their position earn a paycheck and improve upon a skill set perhaps most importantly staffing firms promote flexibility in the labor market which is an essential feature of job creation in fact between june two thousand and nine and june two thousand and eleven the staffing industry added nearly half a million jobs accounting for over ninety percent of all total non farm job growth unfortunately this industry is threatened the new healthcare law was bad for temporary workers and it will harm americas ability to have a more flexible labor force to better compete in the global economy the presidents healthcare law obamacare contains many reasons for this pessimism the employer mandate provision places a tax penalty on businesses that fail to offer their full time workers a health insurance package with terms dictated by the department of health and human services this employer mandate places the burden of carrying out the presidents vision of healthcare reform on the backs of businesses the law defines a full time worker as an employee who works at least thirty hours per week with respect to any month because of the high administrative costs of doing calculations for each worker each month the department treasury does not think this provision is workable and is proposing a holdback period of three to twelve months for the purpose of calculating the employer mandate tax penalty the laws non discrimination rules prohibit an employer from providing different health insurance to different classes of workers the penalty for violating this non discrimination rule is one hundred dollars per day per affected employee the administration is currently writing this regulation and is seemingly oblivious that it is commonsense to compensate different classes of workers differently however there is a common sense economic principle that everyone can understand as something gets more expensive people tend to buy less of it with the employer mandate tax penalty the minimum essential benefit package and the non discrimination rules this healthcare law has made the cost of labor more expensive these provisions will result in fewer jobs and lower wages for many americans and unfortunately those most affected will be younger workers and those with fewer skills many of these workers are just now starting their career paths and because of this irrational law they will have more difficulty getting their feet in the door which will delay or prevent them from learning the skills necessary to move up the economic ladder in reality for many americans the american dream will be replaced by government dependency the witnesses before us today may testify about the urgent need to exempt temporary workers from the employer mandate and non discrimination rules may also call for a longer look back period in essence there will be more calls for obamacare waivers a government by waiver environment as richard epstein calls it creates uncertainty and breeds favoritism uncertainty translates into economic stagnation and only promulgates the distrust in our federal government rather than issuing waivers to particular industries the healthcare law should be repealed and commonsense reforms at lower healthcare costs should be pursued this is the chairman i want to begin by thanking the witnesses for their appearance today i appreciate the fact that you traveled quite a distance to share your concerns about the affordable care act and for that we are the masses in an effort to balance the needs of businesses and workers we understand that the administration is listening too and it has opened the process for crafting the implementation innumerable hours have been spent communicating with stakeholders employers and employees several government agencies including the internal revenue service have solicited public comment on a range of employment issues this has been and continues to be a fair transparent and flexible process the aca was clearly designed with  temporary workers in mind because in america most people have obtained health insurance through their employer temporary workers have been at a disadvantage for many temporary work has meant working for minimum wage or slightly higher by the hour with generally no access to health care these are among the workers receiving primary care in the emergency room these are among the workers that are forced into bankruptcy due to a tragic accident the aca has provided a solution to that problem for temporary workers the aca is immeasurable progress but no one here believes that it is perfection that is why the public input is crucial in this process of developing and implementing regulations behalf of all of us we are delighted to have you we appreciate your willingness to lend us your expertise i will introduce you from my left to right your right to left and after the introductions are complete you will be recognized for your five minute opening statement there may be a series or panel of lights in front of you those lights mean what they traditionally mean in society a green is go yellow is speed up and see if you can get through the stop light quickly and red see if you can wind up your thought by way of reminder make sure you turn on your microphone so we can hear you loud and clear thank you mister chairman we greatly appreciate the opportunity to testify this morning i appreciate your excellent overview of the issues that confronts the staffing industry and i do appreciate mister davis comments as well  repeat all of the points the chairman made but i will try to touch the highlights staffing firms play a vital role in the economy as you mentioned mister chairman we provide critical employment flexibility for employees and businesses  we provide services in every sector of the economy in a wide range of jobs mister davis noted the low income workers but i think it is also important to point out that staffing firms today provide services in health care information technology engineering and scientific sectors including professional and managerial services the low income worker is certainly a part of our work force but by no means is necessarily representative of it we are also playing a vital role in the current economy by keeping people working without the temporary work option u s unemployment rates would be much higher primarily is that most people use temporary work as a short term stop gap on their way to permanent employment we facilitate that one of the things we are most concerned about with the impact of this law is it would have a dampening effect on  ability to bridge people into permanent work of course we are concerned about the impact of the employer tax penalties as you mentioned they are assessed in one of two ways if you do offer coverage to your workers  only pay a tax on those people getting subsidies if you dont offer coverage you pay the tax on all of your full time employees staffing firms are uniquely exposed to the penalties for two reasons one is the unpredictable nature of temporary work which means that staffing firms have no way of knowing who will be a full time employee and therefore wont have any way of knowing what their penalties will be or who to enroll in coverage the second is that they have limited health insurance options for covering their temporary workers which means they might not have a practical way to offer coverage to everybody which means they would pay penalties on all their full time employees not just those getting subsidies so it is a conundrum the historical reason for why there is limited overage for temporary employees is simple it stems from the fact that they are short term high turnover workers and when given the option of health coverage they generally refuse it only a tiny fraction of temporary employees accept coverage abolished staffing firms may not have an economical way to offer coverage especially if the new non discrimination rules limit their ability to provide flexible coverage for workers as they need it and to the extent they need insurance for people and for reform in general i think many of the aspects of this bill are sound and to be applauded but as structured it creates enormous problems for employers that need to be addressed and we are hoping that they can be first we need a sensible definition of a who is a full time employee you mentioned the look back rule treasury is currently considering we strongly support that  drafted so as to permit that we are working with the administration as i mentioned to do that but our concern is that the statute may not afford enough leeway for them to do what they need to do to fix the problem  preference would be for the employer penalties to be repealed entirely or substantially reduced or modified staffing firms operate on razor thin margins and they cannot afford to put those costs through to employers if they do as you pointed out  result will be fewer temporary jobs the elimination of the penalties would resolve that problem and we hope that congress would consider doing that we appreciate the opportunity to testify we look forward to working with you in the future thank you m mister chairman and members of the committee thank you for the opportunity to be here today to discuss the impact of health care reform on the staffing industry and my company specifically my name is john uprichard and i am the president and ceo of find great people a temporary staffing and executive search firm headquartered in greenville south carolina with offices throughout the carolinas we have actually been in business or thirty years and have provided job opportunities and stability to thousands of people throughout the carolinas as well as nationwide we work very hard to take good care of our employees and as a result we have been recognized as best place to work in south carolina for three years in a row in order to help clarify the ramifications of health care reform on my organization i would like to give you some background on my company we currently have fifty internal employees with an average salary of sixty four thousand dollars a year and an average tenure of five years our internal payroll for two thousand and ten was two k retirement savings plan and in addition they have generous time off as well we believe our internal employees are vital to the success of our organization and we are very committed to their individual financial success and stability moving to the folks who work with us on a temporary basis we also recognize the need to provide fair competitive wages and benefits to them we currently have four hundred people working for us on a temporary basis at one time the average wage is fourteen dollars twenty eight cents well above the national minimum wage we provide these temporary employees with access to mini med coverage that is not dependent on their temporary work schedule because we know their hours will fluctuate and we want them to have consistent access to medical care in addition they have access to our k program the average assignment length for one of our temporary employees is five months in most cases the temporary assignments serve as a bridge to a full time job opportunity either with one of our clients or a different employer of their choice those full time job opportunities are usually dependent upon their performance with the opportunity given by one of our customers as we began to study the impact of health care reform on our business we quickly recognized there were some very significant and unintended consequences first is cost based upon historical volumes our monthly health care costs would increase by sixty two thousand dollars to seventy six thousand dollars per month that is a mathematical problem for us in addition the administrative cost to comply with the regulatory and compliance aspects would be over forty thousand dollars annually offering coverage to temporary employees will be difficult because their hours fluctuate and they are moving in and out of coverage constantly also it is essential to note that we do not control the hours those are controlled by the clients to whom we provide the service ultimately health care reform legislation imposes large employer c infrastructure on staffing firms like fgp because we cannot qualify as a small business we technically have four hundred employees but only fifty are regular full time staff you might ask why cant we pass on th customers this is a question we have studied the feasibility of we do not believe it is a viable solution based upon our recent experience with increased cost from our state unemployment taxes in two thousand and eleven in the state of south carolina we had a three hundred percent increase in our state unemployment taxes we had to have this conversation with our customers and we received significant pushback our volume started to drop as a result of these conversations once we take into account the increase cost from health care reform and unemployment taxes we really hit a ceiling on price where the client actually looks at the cost benefit analysis and says it doesnt make sense and it is an affordability issue as a result jobs are going to be impacted unfortunately those jobs will be impacted within our own organization for the full time and temporary folks that work with us this could result in hundreds of jobs per year that is what keeps me up at night that is difficult the people who have helped us build this company especially the fifty employees with us internally who have been with us several years if we are unable to move forward we have to make a business decision we will not close as a company but we will more than likely get out of the temporary staffing business which means we will have to down size those employees who have worked with us for many years i appreciate the opportunity to come before the committee today i would ask that the committee strongly support the look back ago after going to the university of north carolina the real carolina and then wake forest university and then being a commercial banker so as not to repeat what you have already heard it is in my testimony but let me get down to some brass tacks i have sixteen permanent people in my company whose payroll is over one dollar million a year we are in eastern north carolina i think two of my folks have a college degree the rest are high school degreed or associate degreed the average tenure with the company during the thirty years is eighteen years these people are benefited with health insurance for which they pay a premium a significantly large premium we have a huge deductible we have a k plan that is open to our permanent staff as well as our field staff the field staff to my knowledge there have been fewer than fifty people who have wanted to contribute to that in the thirty years we have been in business we match the five percent  two i cannot tell you the numbers that have come across our desk and the ones that would work and wouldnt work and so forth to my knowledge we have never had a temporary staffer take their portion of the mini hour which is significantly above the prevailing minimum wage in north carolina and the federal government we live in i wouldnt say a rural part of the state but we are not in the metropolitan part of the state  if you take nine dollars twenty five cents a hour that annualizes at a little less than twenty thousand dollars a year they would much rather have that extra thirty dollars or forty dollars a week or whatever than to pay for medical care are young and think they are bullet proof and think they dont need it and some would rather have the money if the health care plan goes in as it is written now my premiums for health insurance will go from eighty thousand dollars a year to seven hundred and eleven thousand dollars a year i would close my doors all of my people would be out of work temporary and permanent staff if i was able to pass some of that cost onto my temporary staff say twenty percent i am still out of business because it goes from eighty thousand dollars to five hundred thousand dollars in an effort to skip ahead if i may say this  i know this bill was passed with good intentions by everyone who signed off on it there is no doubt in my mind we need reform in health care when i look at my personal situation with the five thousand dollars and ten thousand dollars deductible rules and laws and fees being charged and fines being raised and charged this is a piling on i ask that you please put it off for a while until we get the loose ends tied up we cannot figure out how to stay in business the way this plan is written now by the way the treasurys idea on look back is not a bad idea but it needs to be twelve months three months is way too short a period of time for a lot of obvious reasons that i wont go into here thank you for your time and thank you for listening i appreciate it  member davis thank you for the opportunity to testify today starting in two thousand and fourteen all americans will have access to affordable health insurance carl camden president and ceo of kelly services one of the largest employers of temporary workers explains why this is so important the united states remains the only advanced nation in which individuals lack access to affordable group health coverage outside the employment setting as a result health insurance related job lock  afflicts millions which is bad for entrepreneurship worse for economic dynamism and frustrating for an industry that relies on a free agent work force simply put non traditional workers are treated badly by the current model any policy choice that enhances the availability and mobility of talent is a good thing for the staffing industry and the economy as a whole as mister camden observes access to affordable health insurance will benefit not only workers but also their employers preventive care will reduce absenteeism and increase the productivity of workers health care costs for the uninsured will no longer be shifted onto employers through higher premiums and for staffing firms millions americans will create demand for health care workers of all types in addition to these economic benefits many temporary workers who work long hard hours but may be struggling to pay the bills and cannot afford health insurance through no fault of their own will not lay awake at night out of fear that a family member will become sick sending the family over the edge into bankruptcy if you agree with mister camden that access to affordable health insurance is a good thing as i do then employer responsibility is an essential piece of the puzzle it provides an incentive for employers that currently offer coverage to maintain that coverage otherwise many employers might drop coverage and allow taxpayers to pick up the tab which would increase the federal deficit by billions of dollars in fact the non partisan congressional budget office concluded that the absence of employer responsibility would significantly erode employer based coverage simple financial comparisons of potential penalty liabilities to the cost of coverage may not drive employer decisions many employers offer coverage because employees expect them to do so and they want to remain competitive in the labor market since individuals will have a responsibility to maintain coverage there will be much more demand for their employers to offer it finally the cost of coverage will still be excluded from income  payroll taxes in fact in massachusetts enrollment in employer based coverage actually increased even during the recession therefore it is not surprising cbo concluded that the affordable care act would have very little effect on employer based coverage congress carefully targeted employer responsibility under the affordable care act and the treasury department is carefully examining how to implement the law so that it is practical and flexible for employers i want to highlight several aspects of the statute and its implementation that demonstrate this careful approach first and most important employer responsibility only applies to large employers with at least fifty full time employees as a result the vast majority of employers will be exempt from employer responsibility altogether second small employers do not become large employers just because they hire seasonal workers third since penalties apply with respect to full time employees the definition of full time employee is important treasury has proposed a safe harbor in which an employer can generally look back up to twelve months to determine whether employees averaged at least thirty hours per week employers for flexibility in health care a coalition of employers that rely on large numbers of temporary workers strongly supports treasurys proposal commenting that it has the potential to provide flexibility employers need to preserve flexible work arrangements provide a stable source of coverage and allow for the practical administration of benefits in addition to proposing the safe harbor treasury has requested comments on alternative methods of course any method must not undermine the purpose of employer responsibility that i discussed earlier to prevent erosion of employer based coverage which would be disruptive and increase cost to taxpayers in closing employers of temporary workers need not fear employer responsibility it is an essential part of health reform which will expand access to affordable health insurance to millions of americans mister camden of kelly services wri significant opportunity that the affordable care act will accelerate the growth of non traditional workers and remove longstanding barriers to employment options mister chairman this concludes my testimony and i all of us are subject to being called for votes at any minute so in that case we will go as quickly as we can to vote and then come back as quickly as we can so that we can all be good stewards of your time we do not workers if this is not changed and yet you and i would assume you would agree with me they have better access to information with respect to their businesses than you do do you agree with that mister spiro i agree he probably has more access to information about his workers than i do mister gowdy that is not a trick question they have better access to the numbers within their own business than you would have and they both testified that they are going to lay off workers if this isnt changed i think she meant perhaps that the benefits of the affordable care act only will be realized in two thousand and fourteen it will take some time for the general public to become comfortable with this law but i think i agree with the speaker that once people have experience under the law as they have had in massachusetts the public overwhelmingly supports that law mister gowdy mister uprichard you  wasnt an ideological comment that came out of your mouth there wasnt a political comment that came out of your mouth to this day i do not know your politics frankly it is none of my business the entire extent of our conversation w politics from your perspective this is all about saving your business and allowing you to provide jobs to people that you care deeply about and you are genuinely fearful that if this is not changed you are not going to be able to keep them mister uprichard you are correct that is really what keeps me up at night when we look at our staffing business the margins are not significant they are thin  we have significant increased costs we cannot pass on to our customers it becomes a mathematical problem we also take on significant risk with our staffing business personal guarantees that personally guarantee millions of dollars in working capital for this staffing business to run as a business owner one of the things i have to do is a cost benefit and risk analysis as the margins erode the ri too great and it doesnt make sense to move forward the challenge with that is we built a great company and i have fifty employees who have been with us for several years people that i am friends with i coach their kids in soccer i see them all the time out in the community and they earn high wages the challenge will be that we will no longer be able to move forward with temporary staffing as part of the services that we offer which means i will reduce my infrastructure resulting in probably at least half our employees losing their jobs with the impact on our industry they really arent able to go get jobs with other staffing companies because they will also be impacted as well that is what keeps me up at night and that is what is important because that is what i am responsible for making sure we provide a paycheck to those fifty employees as well as the temporary lenz that is a broad question and there are many answers some of them are from the worker standpoint and others from the business standpoint employees use temporary help most often as a stop gap when they are out of working looking for new work or simply looking for a different kind of opportunity students retired people make up a huge portion of the work force in the current environment lots of people are unemployed and the only work they can find is temporary work the reason why temporary jobs constitute such a huge portion of the new jobs that have been created since the recession technically ended in june two thousand and nine is precisely because of business uncertainty or concern about making a commitment to permanent hire but they still need to get the job done so the temporary employees are a way for them to get the job done and a way to keep a substantial portion of the population employed that is a unique situation in the current environment from the business standpoint more generally i think the key word is flexibility most labor economists recognize that flexible labor markets is one reason why we have had in the past and hopefully will again soon in the future such a dynamic economy because employers can make employment decisions based on the needs of their businesses and the conditions in the economy and use labor as needed i think it is also important to point out that temporary jobs represent a relatively small percentage of non farm jobs on a daily basis really less than two percent but we play a disproportionate role in the economy because we provide that flexibility to both employees and to  perhaps at the margin some but there is such reluctance on the part of businesses to over hire and to burden themselves with workers they cannot sustain and cannot support because the business is not there that i do not think that shortfall would be made up in permanent jobs by any means mister davis mister gauss do you think seasonal work becomes a big factor in  with the global economy have to be more flexible to answer your question if our industries were only doing business in the united states of america there may be more permanent hiring they are scared to death but it is not and we are competing against a lot of low wage countries for our manufacturers to stay flexible it protects the jobs of their permanent employees if they have too many permanent  a staffing firm much good and the reason for that is most staffing firms have very small permanent staffs and large numbers of temporary employees that come and  go if you were to measure the size of the company by revenue they might be small under small business administration standards but by head count standards they almost always exceed twenty five and even fifty and with respect to the state health insurance gosar this letter basically highlights what we do in the west when we have temporary solutions as far as utilizing a ski area that may operate as little as six weeks out of a year and as many as four months out of a year that gives us a great idea  business for about twenty seven years in health care by the way how much has your overhead gone up in the administrative aspect in regard to rules and regulations mister gauss i would say a good seventy five percent over the last eight or nine years gentlemen if these rules go into effect and they are fairly nebulous rules how would they stay in business mister spiro congressman i have not seen all the numbers and assumptions they have used all i can tell you is that the score massachusetts has been found to be wildly successful and popular reducing the uninsured rate to a couple of percent doctor gosar let me ask you the question where was that money dumped was it on the backs of the businesses or on the taxpayer  let me answer it for you on the taxpayer mister spiro it was from taking the cost of uncompensated care and redistributing it so that it was not being shifted onto higher premiums for employers doctor gosar premiums went up then or are trying to make a difference in peoples lives as we have seen over the last few years even with our current economy it is not easy more regulations more increased costs that we cannot pass on to our only way you can open your doors keep your doors open to do that do you see the environment that was created by this law making it more certain or less certain mister uprichard i see it becoming less certain because the forecasting will be much more difficult we look at hours right now but we will have to look at hours in a different way because of the fluctuation in hours of the temporary workers it will be incredibly difficult to forecast and people moving in and out of coverage will also be very a small law firm for years and we had to do some sacrificing to provide our people with insurance but we also wanted healthy people i know you are a responsible business person and i respect what you are doing i know business is hard we do not let them die but we create a model that is practical and provides flexibility and has for example a twelve month look back rule mister cummings mister spiro they asked you about the massachusetts model i find it the reality that the health reform law could have positive impacts on the economy in addition to reducing the deficit over the next two decades the aca could result in significantly improving health outcomes in this country the number of people without health insurance rose in two thousand and ten and is estimated to be forty nine nine million americans an increase of nine hundred thousand from two thousand and nine expanding health coverage definitely improves health outcomes by helping people obtain preventive care a large part of the affordable care act is trying to help people stay well so they can have employees am i right because if you are sick you cannot work absenteeism and increases productivity that will ripple through the economy it also deals with the problem of job block where people feel they cannot move to another job where they might be more productive all those benefits are for workers but also their employers mister cummings the aca also includes a provision in which certain employers those with at least fifty full time employees would pay a penalty for not offering ten or more full time employees has massachusetts seen a decline or increase in enrollment in employer based coverage mister spiro you are right to point out that the massachusetts employer penalty is much broader  scope even so the vast majority of employers are exempt that is the key to remember that the employer responsibility under the affordable care act will exempt the vast majority of insurance they still get to go to the emergency room and they do get coverage i think it is probably that way in every part of the country there is no question about it mister spiro we need to make some changes in health care you are absolutely right we have come up with a bill that we think solves that problem in a little more effective way than the affordable care we like to call it the obamacare act we believe that small businesses ought to be able to band together to buy insurance like major corporations do so they can get the better rate we believe you ought to be able to buy insurance across state lines so that companies out west or in the midwest can compete with companies in the east we believe there ought to be medical savings accounts with tax deductible options in there so that people and the employers put money into an account if the people dont use that money say three thousand dollars a year it is carried over to the next year and the next year then there is a major medical policy above that which takes it  hundred thousand dollars or more there are whole host of things in our bill that does not cause the federal government to start sticking its nose into the private sector but you are absolutely right we do need to make changes i am now the chairman of europe and  asia on the foreign affairs committee i just got back from greece greece has had a government that has from cradle to grave taken care of people they stuck their nose into everything do you know what they doing to salaries today they are cutting them by forty percent do you know what they are doing to retirement benefits they are cutting them by forty percent they are raising taxes on property and doing it through the utilities over  and in portugal in ireland they had a little different situation but they are in bad trouble as well all those things do have an impact on the united states of america i guess the thing i would like to get across is the private is the engine that drives this country that makes this country great not government not government regulation or the government sticking its nose into the private sector we need to get government out of the way so the private sector can flourish and create jobs the only way our government can create jobs is to take taxpayers money you mentioned the term redistribution of wealth the only way the government can do that is to take money away from the guy that is an entrepreneur and creating jobs and give it to somebody else from the government it just creates a big mess right now i do not know how many regulations we have added to the mix in the last couple of years but i think it and i know what it means to have government sticking their nose into your business you are absolutely right we need to do everything we can to make it more affordable for people the way to do that is as i said to get government out of the countries around the world where the government has been very intrusive because it does not work it didnt work in russia it does not work in greece it will not work in spain it has not worked in italy and it is not going to work here what will happen is government will cause  the future difficult however the federal government website www healthcare gov was launched after the aca was enacted managed by the department of health and human services this website provides comprehensive information about the provisions of the aca including a small business site with up to date guidance on small business tax credits coverage options and reinsurance for retirees among other things mister spiro do you believe there is a lack of information available for small businesses explaining congressman there is a wealth of resources as you mentioned www healthcare gov there are calculators so that small businesses can figure out if they are eligible for a tax credit in addition on this very issue with respect to temporary workers you can see the treasury department is being very responsive and sent out a notice for request for comment before even issuing a proposed rule they are gathering those comments and are going to then issue a proposed rule then get more comments before issuing a final rule it has been a very transparent process and they have gone out of their way to solicit feedback from stakeholders such as the other witnesses at the table lots of information out there and i think hearings like this are an important piece of that to make the public aware of issues surrounding implementation obviously always more can be fact i have been working closely with the deputy of health and human services for the southeast anton gunn he is actually coming to greenville to speak to some of our customer base on november fifteen when i was coming  because i have been fighting on the state level because of unemployment taxes going through the ceiling if i could answer about the website information it is thorough enough for me that is where i got the seven hundred and eleven thousand dollars that is going to put me out of business cbo found that it reduced the deficit one hundred and forty three dollars billion over the first ten years and continues to reduce the deficit in subsequent decades i think repealing the affordable care act would have the opposite effect and would worsen our