will come to order today we have a hearing titled the high cost of small business health insurance limited options limited coverage before we begin i have unanimous consent request committee staff have prepared a memorandum that summarizes information gathered in our investigation into the small business health insurance market i ask unanimous consent that the memorandum be entered into the record mr chairman reserving the right to object mr chairman dan majority staff has been working with the insurers to protect confidential medical and business information and of course this information was given to the committee in good faith with the understanding that it would not be made public before consulting with the companies that provide it my question mr chairman is a majority sure and there is no confidential or sensitive medical or business information in this staff memo which we of that there is no confidential medical or business information in the staff memo that will be revealed if we agree to this unanimous consent request and if the majority cannot guarantee together and figure out exactly you're referring to again we reviewed it we see nothing proprietary we brought in by everyone need to be i don't think there's any reason to have any concerns by the end the close of this hearing if there's an objection on a line or two we'll have a chance to discuss it and remove that our purpose here is not to divulge or harmony company's business practice we may question your business practice but we're not here to do recognized for a three minute opening statement i will begin today's hearing is the fourth of a series of subcommittee hearings on business practice in the private insurance market earlier earlier this year we held hearings on the insurance industry practice  of coverage after a policy holder becomes acclaimed our investigation we learned that in our investigation we learned that if your insurance company believes your illness may be costly they will go back and reexamine your initial application to find any excuse to cancel your coverage as health insurance industry executives brazenly told us this practice known as recession will continue until there is a national health care reform to express it to expressly prohibit it last week we held a hearing on the problem of under insured which occurs when someone has health insurance coverage is an adequate leaving them with a limited coverage when they need it the most compelling stories from americans who purchase insurance paid their premiums and expected to be protected in the event of a health crisis when that crisis struck they realize that their insurance was woefully inadequate to cover the high costs incurred to treat themselves or their family members today we continue our investigation of the private health insurance market affordable small businesses these increases are based on factors that are beyond the control of small businesses such as employee health the size of the small business and the age and gender of the employees as a result of these the more shocking cases that committee uncovered include in january two thousand and eight insurance company offered a two hundred thirty two premium rate increase to an engineering services company in kentucky the number of employees on the plan had costs consume an even greater portion of company profits and make it even harder for these companies to cover all persons even before this most recent economic turndown the cost of employers sponsored health insurance was the primary concern  worker contributions for health insurance premiums have more than doubled while their deductibles have greatly increased have even had to take the drastic step of the limiting employer sponsored coverage altogether less than fifty percent of the smallest those with  ten employees offer coverage as a result of reductions and small group coverage more than half of all small business employees in two thousand and seven were either uninsured or under insured during the year it is clear that the high cost of health insurance is crippling small businesses in our country and we need our nation's small businesses to contribute to job growth and economic recovery we must reform our health care system so it does not punish those small business owners who choose to do the right thing and provide coverage for their  in illinois employing levon workers this year he was quoted a premium increase of forty two percent from his current ensure mr landauer believes that this increase is due to his own congenital heart condition which has required three heart surgeries in the past and probably more in the future this year instead of accepting this already he opted to increase his employees he ducked two thousand per individual and sixteen thousand per family next year he plans to take himself off the company's plan in order to reduce the insurance rates for his business more importantly he believes that the right thing to do for his employees mr bruce trick communications in indianapolis indiana with fifteen employees his company received double digit rate increases from his carrier for this year his insurance plan also covered his late wife who developed cancer incurred over three hundred thousand in treatment costs in her last year of life in that year mr had tricked health twenty eight percent after his wife passed away his insurance company to requote the policy the premium increase was rolled back to ten percent mr fred walker owns petersburg glass and beer in st petersburg florida  he has offered health insurance since he started his company fifteen years ago his carrier has increased his premium rates every year including fourteen point six percent increase this year to keep his business afloat during this downturn he was considering dropping health coverage deductible because the group coverage was renewed his secretary has been able to obtain the treatment she needs for her cancer we'll also hear from dr linda bloomberg an expert on health insurance in the small group market can effect of health insurance costs  small businesses the u s house of representatives will soon vote on h r thirty two hundred america's affordable health care choice act of two thousand and thirty two hundred contains critical insurance reforms that will end up the insurance company practices under to bill insurance companies can no longer rescind policies after people get sick based on minor mistakes or technicality the bill prohibits the type of annual and lifetime caps on coverage that lead many individuals to be uninsured or underinsured and insurers will no longer be able to discriminate against small businesses based on how small they are or the health status of their workers we must reform health insurance so that small businesses can compete on a level playing field with large employers and lead the wait for a nation who will testify before the committee today americans who work in a small business their prominent place in the american economy makes this hearing today and even more important small businesses create jobs and we surveys have shown that companies with as few as twenty employees are often responsible for a quarter of the country's job growth and in recent years a vast majority of united states firms had fewer than fifty employees first and foremost congress must enact policies that help these businesses grow and promote job creation as we can to review potential reforms of the health care system we must also find a way to enact new policies and regulations that will help our small business owners provide their employees with quality affordable health care since nine hundred ninety nine the average annual cost of a family premium for employer sponsored health coverage has increased over one hundred twenty percent that's about twelve percent a year over the ten year period three small business owners today will can make health care on a vote on affordable for the entire employee group head for it will testify that his wife's cancer resulted in three hundred thousand dollars in health care c when it came time to renew his policy the premium was scheduled to increase nearly thirty percent his wife passed away a month before the new premium took effect when the insurance company learned of this  hit hard by the economic turmoil of the past two years so much so that in february of this year he had decided to discontinue the company's health care plan and only then he learned that an employee had been diagnosed with breast  walker the choice was easy he decided to continue the employee health care plan but he was facing a fourteen percent increase in the premiums last year today he worries that the next premium increase will be much more substantial and employees health care but today those costs are spiraling out of control over the last two years alone is to die quadruple mr landau plan to remove himself from his own plan next year because own health care costs o d what really is driving up the premiums for the rest of his employees landau thank you again for being here and to testify i note the title this hearing is the high cost of small business health insurance limited options limited government it's a sad truth small business owners have few options when it comes to health insurance congress has an opportunity to enact reforms that address the skyrocketing call however i recognize that their ideological differences among this body regarding how we provide small business owners with more affordable health care options to be frank we do them and millions just like a disservice by insisting that the path to reform is singular one size fits all this congress should consider high risk pools that can be designed to offer those with chronic illnesses affordable coverage without requiring their coworkers or employees to pay more for their own coverage we should also give small business owners the of the full committee opening statement please or thank you very much mr chairman today we're going to hear about the difficulties small businesses face in finding and keeping affordable health coverage for their employees last chairman and i did an investigation into insurance company practices in the group market committee obtained thousands of pages of insurance documents interviewed company executives and heard stories from numerous small business owners what did we learn simply put the health care market for small business health insurance is fundamentally flawed rising health insurance costs  wrecking havoc on small businesses and their employees as one of today's hearing witnesses put it health care and health coverage is small business and to me number one many small business owners like the ones we'll hear from today want to provide health coverage for their employees only the right thing to do but it also makes good business sense because it helps them recruit and retain better employees but the current  system against small businesses small firms pay premiums that are eighteen percent higher than what large companies pay for the same level of coverage and insurance companies can legally discriminate against small firms when setting premium rates if a small firm employee gets sick the insurance company can hike up the premium rate in order to recover it's because insurers can also charge discriminatory rates based on the age and gender of the small firms employees they can charge higher premiums employ older people or young women who might get pregnant and these rates practices are perfectly legal under our current health insurance system moreover the insurance companies punish small businesses for being small insurers charge the highest premium to the smaller firms the one like large businesses cannot spread risk among many employees our investigation revealed that annual premium increases insurers take advantage of weak state regulation of premium rates in order to purge from their roles the less profitable small group policies and they do this by making their insurance plans too expensive for all small business to afford small businesses commonly faced double digit increases in their health insurance premiums and insurers impose even steeper rate hikes on the small businesses that happen to have a sick employ employer more women than men have an older than average workforce the committee's investigation reveals that several insurers have imposed premium increases of greater than one hundred percent of small business customers to insurers have imposed rate hikes of greater than two hundred percent in a single year given the high cost of small group coverage it's not surprising that businesses are less likely than large to offer coverage and as premium premiums skyrocket in this market share small businesses that offer group plans continues to decline the committee has investigated a variety of private insurance practices and one common theme has emerged insurance companies compete not on the basis of who has the best record of keeping their customers healthy but based on who is best at avoiding covering people who need  lifesaving and expensive health care when we examine the individual health insurance market we learn that companies will cancel policies after a policy holder gets sick and file claims in the small group market insurers don't seventy two percent of the new jobs created across this country in recent years and because of that we have a true prescience and for what you do i do have concerns with the plans that the democrats have brought forward on health care reform i was looking at some research today basically their reform plan includes a five hundred forty four billion dollars tax on what is termed the rich but we all know that i primarily those of you who are small business owners and are going to bear the brunt of some of the reform efforts that have been mentioned and brought forward according to data from the s more than half of those targeted under the democrats health care surtax are the small business owners now this is of concern to me because i come from tennessee where we have had the test case for public option health care was put in place in late ninety four it's a program called tenn care our small business owners while i was in the state senate there worked with us repeatedly because of their concern for the way that program was structured and what we saw happen with the advent of public option health care in our state was that the cost of insurance when through the roof for our employer it escalated more than the national average heard my colleagues talk about the rate of increase in some of their states we're also concerned as we look at increased taxes and the mandates and bureaucracy and we've read some of the estimates said that health reform policies that have been proposed from this body would cost as many as five and a half million american jobs we don't want to see health care become such an expense that you can't afford to keep your doors one percent of income between those who make three hundred fifty to five hundred thousand and one point five percent between those who make five hundred two million the issue is the issue is there is no extra tax on small businesses that's your statements that five hundred  n just is not true it's only one point two percent of all taxpayers individual taxpayers not businesses that would have to pay the surtax mr chairman most small businesses file as a sub s or file on a regular ten forty and i think twenty two members of your caucus also have written the speaker with concerned about this very issue for those small businesses joining many of our small business owners are not claiming party affiliation but you're claiming concern many in our state have seen it because of the impact of not is an item of controversy but is an item of concern that i have for our nation small businesses and i think that as we move forward you've always been good to work with us on issues and i would look forward to working with you to make certain that we address this so that it does not affect our nation's small business owners and i appreciate the hearing today well  i want to make that clear in the vigils and that's from the joint tax committee the surcharge would have no thank you i'm not arguing where you're getting your income from what i'm saying is individual income not on businesses burley for an opening statement three minutes thank you mr chairman and thanks to all of our witnesses for joining us today the problems that we're here to talk about are all too familiar to me as a small business owner for twenty years before i came to congress for the last decade that i can recall the place where i worked where i was a small business owner faced a minimum of fifteen percent premium increase notices every year and a maximum of forty seven percent when you're a small business faced with that challenge you have limited options and one of the options that we pursued almost every year was filling out multiple insurance applications at four five six seven different companies in and search of a better option for the employees that we cared about and yet almost every year we were faced with the harsh reality that in my state of iowa eighty percent of the health insurance market is dominated by two companies and so there were very very few cost effective options available to small business owners and i'm also very familiar with the impact that one severe illness among your employees or a covered member of their family can have on dramatically increasing the cost of a small business is insurance because we had employees who were diagnosed with multiple sclerosis and we saw our premiums skyrocket because of the enormous cost of caring for that lifelong disease we had employees diagnosed with cancer who suffered substantial health care  also impacted our next year's premium because these are not things that are abstract to small business owners these are the challenges they face every day and they want to try to provide the best possible coverage for their employees but when we see what's happening right now with health care costs projected to go up ten point five percent again next year according to the health insurance industry itself we know that that's not just going to be a dollar for dollar passthrough to small businesses because if you look at the trends it's usually about a two fold or three fold increase in premium cost and that's why to quote our friends on the other side free market oriented health care solutions aren't working for small businesses we've had high risk pools that have been available in many states it has not solved the problem that small business owners face and that is why it's time to look at new creative solutions like a public health insurance option to inject more competition into a free market system that does not have competition in many states and to give small business owners true choices in the type of coverage they're looking at to provide to their bit their employees and there was a reference to this surcharge well the i r s has done an analysis of every congressional district in the country in terms of who would be impacted by the surcharge that's in the house health care bill and in the first district of iowa ninety nine point three three percent of my constituents would not be impacted at all by that three out of four new jobs premium rates and they're already very high insurance costs more and more of these business difficult if not impossible to offer their employees health insurance and this is even more acute given the current economic crisis looking to the future the council of economic advisors predicts that if nothing is done to address insurance plan practices or to slow the rise in the employer health premium rate fewer than twenty percent of small employers will offer coverage and their employees virtually every this and every household in our country is struggling to cope with rising healthcare costs it's really code red for small businesses the main street alliance describes it this way quote every day small businesses are being forced to drop health coverage lay off employees or shut their doors shut their doors for good because of the rising costs of health care small businesses can't afford the cost of doing nothing on health care we can't afford to see insurance costs continue to skyrocket with no bargaining power to keep the insurance companies in check we can't afford to pay more for less coverage including twice as much an administrative cost as larger groups with no real alternatives we can afford to keep observing her rate hikes in the system that gives insurers free rein to discriminate based on our employers using based on our employees health status and gender you heard about health status i hope to ask some questions about about gender this is a critical condition fronting many of my constituents people like marie who owns a candy store and will m after she and her husband were denied coverage they were finally able to find a policy but one that requires them to pay seven hundred dollars each month in premium and i have pocket costs and how many small business entrepreneurs can afford that particularly today's economy jim cali of view on oil who works for a small business that can afford to provide coverage to its workers jim and his wife are forced to take in to take in his words or risk we're paying cash a medication and hoping that nothing major happens until were eligible for medicare americans should be asked to gamble with their lives it's time for solutions and i hope that we'll hear today the changes health care in july and the quad cities and has been working with my office all year on important health care issues particularly the challenges of providing affordable health care coverage for his employees and i want to thank you for helping me on this critical issue and for being here to share his story with the subcommittee thank you and mr bruce hedrick is with us who owns a small business owner from indianapolis indiana and thanks for being here and the loss of your wife but it's a story i think we all need to know because i think small businesses every day thank you for being on this fred walker a small business owner from st petersburg florida i know economy is not the best on there are some sure you can give us some insight not just on health care but also on economic and what it's doing to your business line on health insurance and dr linda bloomberg who's a senior fellow at the urban institute expert on small business and sure and so we look forward to your testimony it's a policy of the subcommittee to take all testimony under oath and please be advised that you have the right under the rules of the house to be advised by counsel during your testimony you wish to be represented by counsel and shaking your head no so i'll take that as a no answer there from ask you please rise raise your right hand take  will not be able to get health insurance individual are there wise as i turn down our company's group plan that is available to me so i ask you what i pay for my own medical costs once again thank you for letting me testify before you today it has been my utmost honor to have the privilege of speaking before you and trying to give a voice for many other people besides myself thank you headrick your opening statement please mr chairman and members of the committee thank you for the opportunity to talk with you about the impact of health insurance on small business my take on our health system comes from three perspectives first you need to know that i am a hearing impaired migraine suffering diabetic cancer survivor who is also the father of a cancer survivor and the widower of a cancer victim experienced more than my fair share of the american healthcare system second as a professional communicator with a passion for human services i have spent decades working for health educators nurses doctors hospitals health advocates and the people who pay for all of the above third i have been a small business owner for sixteen years in that role my colleagues and i evaluated purchased and paid for health insurance for our employees and our families despite my and my family's health problems i consider myself lucky i've had health coverage for myself my spouse and my twin sons throughout my thirty year career for the most part the policies have covered what they promised to cover a little haggling required when the need was greatest during my late wife's cancer battle our insurance company blue cross blue shield sped approvals and denied not a single claim i'm very grateful for that but on the other hand i have some frustrations first health care and health coverage inflation small business and i'm a number one my company pays eighty percent of employee premiums and fifty percent of dependent premiums that's higher than typical for firms like ours but it helps us to attract and retain good people it also leaves us with a painful choice either the cost of health coverage cuts and to our profits or if we pass it on to our customers it renders us less competitive another concern is health insurance rates inequity if you're a big business you get pricing based on giant risk  covered by our company's health plan in the last year of her life to build charges for pam's cancer care totaled three hundred thousand dollars a few months before her health insurance renewal came up lo and behold the quoted in praise for the health insurance portion of our benefits plan was a whopping twenty eight percent that would have been devastating to our company and our employees twenty eight percent increase reduced to ten percent because of one person who needed the care that we had paid for one additional concern i'll share with the committee involves taxes and economic development because i own more than two percent of a nest corporation my benefits are fully taxed income my employees health insurance is a pretax company expense mine is only taxed as personal income in addition my employees enjoy pretax spending accounts for their out of pocket medical expenses i'm the only person in the company who cannot participate in this country where most jobs are created by small business that's a very powerful incentive to do just the opposite because we are so overly dependent on employment based health insurance in this country and because we've allowed the denial of coverage to those with major maladies and preexisting conditions we have created in the normal chasm between the haves and the have nots one last job paired with one serious or chronic ailments and you are a fiscal earth as pam and i sat in renowned cancer in indianapolis and houston getting pricey chemotherapy and sophisticated scans we were grateful for the caregivers coverage the clinical trials and the chance of survival but we also felt guilty that we were getting those because we had money connections and jobs all the while here in the greatest nation on earth others facing the same predicament citizens with the same right to life and health were growing sick and dying with no chance whatsoever sadly five years after pam's death more uninsured americans than ever still policies that make the provision of health insurance competitive and affordable we need to create and sustain jobs not inside of laid people off close up shop and go to work for large organizations with benefits that we can thank you very much thank you mr walker your statement please good afternoon mr chairman members thank you for having me my name is fred walker on the owner and operator of st petersburg lassen mirror in st petersburg florida we fabricate install flat glass and aluminum products for the construction remodeling and emergency recovery industries founded the company hundred three with two credit cards and some financial support from my family a whole lot of help from my wife sixteen years later i feel lucky to be a survivor of the current economic disaster in our community from day one i felt that each employee should have an option to be included in a health insurance plan over the years we learned plans are many have to shop for a new one every year and help to in order to help and voiding escalating costs preexisting conditions are never covered and each employee is unique as the cost of risen the financial burden that our company could bear has reduced we currently pay fifty percent of our policy for each employee and percentage thousand jack says we have to help those who can't afford proper care john wollaston general contractor is my best customer says the bill passed in the senate last week requiring business health insurance will  small business plan lance is moving in company a customer walked in off the street last week we were talking about it last related story that his wife had kissed her grandson on the when he was a baby she liability was two hundred fifty thousand dollars per year building insurance and where is our money going finally my wife jane walker director of daystar life center in st petersburg takes care of the least fortunate of us every day there are many people who choose between medication and health care for their loved ones every day something has to be done we live in the greatest nation in the world the resources this is an issue about people not politics not money but people finally did find somebody who was happy with their health care plan family friends and they're both over seventy years old their combination of medicare committee thank you for inviting me here today to share my views on the health insurance challenges facing small businesses and their workers while i am an employee of the urban institute this testimony reflects my views alone and should not be attributed to the urban institute its trustees or its funders small employers or artists significant disadvantage purchasers of health insurance relative to large employers the consequences are clear and consistent over time small employers are much less likely to offer health insurance coverage their workers and workers in small firms are much more likely to be uninsured the barriers of small employers insurance purchasing multiple fronts and as premiums continue to grow faster than wages the declines in small employer based coverage outpaced the declines among large employers without significant reforms to how small group health insurance markets function and to the insurance options that are available to those without employer offers of insurance coverage there should be no expectation that these negative trends will be in two thousand and eight only thirty six percent of employers with fewer than ten workers offered insurance to their workers compared with ninety nine percent of employers with a thousand or more workers plus declines in employer offers overtime have been greatest among small employers the employer size differences are most dramatic when looking at employers with a low wage workforce among employers for which at least half of their workers were low wage only eighteen percent of the smallest employers offer health insurance coverage in two thousand and eight compared with ninety eight percent of the largest employers between two thousand and two thousand the share of low wage employers offering coverage to their workers fell almost twenty eight percent for employers with fewer than ten workers but held steady for the largest low wage employers so the differential in operate between small and large employers is large and growing even larger and the situation for low wage firms and their workers is particularly severe differences in employer offer rates and take up translate directly into differences in insurance coverage for workers fully one third of workers employed in firms of fewer than twenty five were uninsured in two thousand and eight compared with thirteen percent of those employed by firms of a thousand or more smaller firms face much larger administrative costs per unit of health benefits purchased administrative a condom use of scale  occur because the cost of enroll in other activities by plans are largely fixed and insurers have fewer workers over which to spread these costs in small firms in addition small employers experience greater year to year variability in medical expenses  do large firms because there are fewer workers over which to spread the rest insurers charge small employers higher premiums as a result many states allow commercial insurers to adjust small employer premiums based on the health status and claims experience of their workers almost all states allow significant variations in premium rates as a function of the age of the workers and many also allow just based on the industry of the employer these rating practices create additional difficulties for many small employers to obtain affordable coverage for their workers another barrier to small employers providing health insurance is that the typical worker in a small firm is paid significantly less than workers in large firms the lower wages of small farm workers imply that they are less able to pay for health insurance through wage for adoption consequently their employers are less likely to offer such benefit workers and small firms that do not offer health insurance are often left with few options for insurance coverage in the vast majority of states there no guarantee that an individual can purchase health insurance in the individual market and even if non group coverage is available coverage is frequently limited such that it may not be adequate to provide these workers with affordable access to necessary medical care a number r thirty two hundred would provide significant assistance for small employers and their workers the most important of these in my opinion are the establishment of a national health insurance exchange along with significant reforms to insurance market rules and the provision of subsidies to assist the low income population purchase health insurance coverage through the exchange not only would workers and small farms have a choice of insurance plan within the exchange a situation extremely unusual today but those that have been priced out of the market due to health issues or an older workforce may have affordable access to coverage for the first time in addition all small groups would see a significant decrease in the year to year variability of premiums due to greater sharing of health risk in addition small employers can expect administrative savings from purchasing coverage through the exchange churning across policies and insurance related jobs should be reduced considerably finally with the insurance reforms in the exchange alone small farm workers would still be more likely to be uninsured than large from workers because they tend to be lower income as a consequence the financial assistance and purchasing exchange based coverage and the expansion of eligibility for the medicaid program that r thirty two hundred would provide are critical elements to expanding coverage for low wage workers and their families in these ways the proposed legislation would make adequate and affordable coverage available to many more workers of small employers than is the case today thank you very much thank you and thank you all for you for your testimony and for being here today we'll start with questions this land or let me ask this you could you had a congenital heart condition and then you said after unfortunate if your wife died yes i'm a rican and they said all it should have been maybe a ten percent increase i guess i'm just thinking aloud i would think that all those years i paid for insurance that when i did get sick i would see a dramatic increase because i've been paying for all those years that's why i have insurance your costs and your risk but that does not seem to be the case it seems like your case your big increase was because unfortunately your wife got walker and you said your secretary there is a compliment you for keeping the insurance so she can at least get some coverage here you should refuse the quote was that your secretary trying to buy an individual policy or was your company quote your company because she was on your profits due to health insurance costs or to next ten years this chart shows that lost profits will skyrocket seventeen times that of the two thousand and nine levels if we do not enact health reform i'd like to ask you about the impact of the current health care system on small business competitiveness if we do not enact comprehensive reform for small group market small group insurance market what will the impact of health cos would benefit both those employees with chronic illnesses as well as their healthy colleagues how risk pools would talk about this a little earlier about how we're created to offer those with chronic illnesses a place to purchase health insurance at affordable right regardless of their chronic conditions by embracing harriss pools in the states and i think twenty eight states actually have embraced them we have a chance to create a unique solution to unique problem namely how a tragic illness can disproportionately hit the health care costs of small business owners and their employees mr chairman i raise a concern because i truly believe that h r thirty two hundred does little to address either of these concerns everyone in this body wants to reform what ails that let me just take a look at i certainly will have chairman i appreciate you looking at that and while you're here glanced at the letter let me ask a question of bloomberg bloomberg as you know h r thirty two hundred contains a surtax which would apply to any adjusted gross income exceeding twenty two hundred eighty thousand dollars a year for an individual and three hundred fifty thousand for couple filing joint return the tax rates would range anywhere from one percent to five point four percent of those are in more than a million according to twenty two house democrats that's a letter that i submitted to the chairman for inclusion on the record would fall largely on small businesses and manufacturers democrats regarding this issue this concern of the surtax and what adverse effect it would have on small businesses and job creation in  this i have no objection but but again there is no as ms blackburn had point out before the original surtax on small businesses taxes on one point two percent in fact i think mr brayley's district ninety nine point three percent people would not see any increase so there is a search tax and it will accept the letter and that you'd like in their unanimous consent to accept it and it goes on to say these twenty one members that health care reform should be good for small businesses and as long as small business rying to understand your point on an individual income tax i am also on ask corporation but that is completely different from my individual income tax and i don't the way your health insurance premium you have to pay you don't get a tax break at all so i'm also an out owner and so i have to channel all the businesses income through my personal return part of that income is the health insurance premium because it is taxable income to anyone who owns more than two percent of an ounce corporation mr walker i am going to chairman been awfully generous with his time bill is a tax on high income individuals and there's a joint tax committee that's charge would have no impact on ninety six percent of small business owners it would affect only the highest income one point two percent of taxpayers getting a mis interpretation of what the bill provides but let's look at the reality health care costs are going up we had a hearing last week and there was a man by the name of wilkes nathan will work for a small company he loved that company and he had a son with hemophilia which is an expensive lifelong blood clotting disorder so the insurance company responded by raising the cost of insurance for everyone and mr wilks company story we're hearing from the three of you and mr brooks described medical condition as a bomb that went off but everybody else was collateral damage because they couldn't have insurance anymore when it became an situation is perfectly legal as far as they're concerned the smart way to do business but it is not acceptable in order to get people covered  in saying to those of us small businesses but somebody's going to pay a tax going to high income people but somebody will have to pay more money if they pay more money which means we can then bring more described your own experience with an insurance company opposing premium increases due to your wife's health i assume you think this is the wrong thing to allowed to be happen even though it's legal  the son of a life insurance executive and so i understand underwriting if we are going to allow the underwriting based on groups of fifteen people or thirteen people were three people or whatever mr landauer had done the policy that way you folks in congress haven't quite got to the three hundred million people answer yet which would be universal coverage and single payer if we go to a public option i guess what i'm asking you is could we come up with a way that small businesses could group together into large risk pools well that does it i'm not dependent on my thirteen people and he's not dependent on for absolutely the only way to end it wouldn't be a public option it would be pulling people together who can't get insurance because they can't afford it can't get insurance because their employer can't afford it can't get insurance because they have preexisting medical conditions all of these people would be pulled together and they would go to an exchange and they would be able to choose a private insurance policy maybe another private insurance maybe a third private and perhaps a public insurance policy it would be their choice but by pulling people together in this exchange we are in effect pulling the risk and not putting it on a small group and that way we make the system makes sense allowing insurance companies to punish businesses because someone got especially a referring to a report recently called high risk insurance pools a flawed model for reform dated september twenty ninth of two thousand and eight and here's the history of high risk pools the report notes high risk pools have been around for over thirty  currently exist in thirty five states but they only cover two hundred seven thousand americans the biggest berry to enrollment is cost high risk pools are inevitably expensive because all of the enrollees have medical conditions and could potentially result in costly medical bills which means the pools cannot spread the risk among low risk and high risk individuals and the report notes specifically the state of florida has a high risk pools which cost seventeen thousand five hundred seventeen dollars per enrollee which is nearly fifty percent of the income of those enrollees and the problem is that most of these high risk pools are already ready heavily subsidized because if you take out of your group of insureds those people who add the most cost to the pool you're insuring and put them with other people who cost a lot of money it's going to take an extraordinary amount of money to cover their health care costs and that's why these high risk pools are already heavily subsidized so you can't come in and heavily subsidize a heavily subsidized high risk pool that makes any sense and that's why many of these subsidies  already cover about fifty percent of the pool and an expansion of those programs could cost as much as one hundred billion dollars i think the last word in this report says in every state that covers the uninsurable with high risk pool or offers coverage to the uninsured the very condition that made you uninsurable will be included as a preexisting condition in the high risk pool usually for six to twelve months that is a conversation stopper for most people and if you have been diagnosed with cancer you cannot wait six months to start your treatment that's what's wrong with expansion of high risk pools as an alternative to doing what we're trying to do which is create reasonable competition in the marketplace more options for skin swimmers and small business owners mr landor i want to make sure people understand the reality of what you just described because insurance terminology can be very confusing but as i understood your testimony your firm has had to double its deductible for individual and family coverage and each of the last two years is that correct yes and there currently paying eight thousand dollars for the individual policy and sixteen thousand dollars for the family plan yes so that means that before any insurance coverage kicks in for your employees if they're under the individual policy they have to pay eight thousand dollars out of their pocket as a shop on our i pay half of that right now absolutely and thank god for that and your generosity my point being that until you and your employees match that deductible of eight thousand dollars for individuals or sixteen thousand for family members that company has been collecting premiums of between four hundred and eight hundred dollars a month and hasn't paid a dime correct well mr chairman i think that is what's wrong with our health care delivery system and the way we pay for it in that we expect so much out of hardworking americans like mr landauer mr had tricked mr walker and millions of other small business owners who simply want to have an opportunity to provide their employees with the best coverage possible at an affordable price and that's why the obligation on us is to find a way to give them the options they need to do that and i think if we have the slide that's part of can we put that up real quickly this map shows what's wrong with the lack of competition in america right now because it shows among the darkest blue states where eighty to one hundred percent of the market is dominated by two carriers the light medium blue is seventy to seventy nine percent of the market dominated by two carriers and the light blue sixty to sixty nine percent when you don't have competition in the marketplace it goes completely contrary to the principles  small groups and obviously individuals would be willing to pay something in order to spread the cost over a period of time in order to smooth out those  just mention is that with these big swings of premiums we see a lot of churning every year in insurance plans by small employers so that they're constantly trying when they are faced with a big increase trying to find a better price and as a consequence of that moving around to different plans they're also creating higher administrative costs which is a dead weight loss  what we're hoping with health care reform is to address the needs both of those fronts to first lower administrative costs by allowing small group purchasers to purchase purchase coverage in the context of a national health insurance exchange that should both lower administrative cost because some of the marketing costs the enrollment costs associated with insurance could be done centrally reducing those costs overall and marketing costs in particular could be lowered that way through the exchange in addition by purchasing through a health insurance exchange we would have a situation where the costs associated with each small employer could be shared in terms of risk pooling so that the risk would be would not be felt when there is a big change in a particular year with a small number of of enrollees in addition if you're allowed to stay within the health insurance exchange over time even if you change jobs and because there would be last year to year variability in the premiums we would see a reduction in the churning that we see now for small businesses going from plan to plan in addition there are some potential inefficiencies associated with individuals picking jobs as a consequence of the health insurance choices and if we eliminate you mr chairman and thank you so much to our witnesses it's almost a rule in politics that you sing the praises of small business in our in our country as an engine for our economy is the biggest creator of jobs but i think it is high time now that we make it possible for you to continue to be those those things and the testimony that you've given is been very very dramatic i wanted to ask you mr landau you said that  you know what are my options you said pay for my own medical costs i'm assuming that's what you're saying in which case i would be forced to sell the business is that what you're talking about correct you're going to sell the business if i have any major problems that require or expense my only option is to sell the business because the doctors are going to require money  and you know you said or maybe move to canada we had a panel of witnesses last week that were advised to get a divorce so that the wife could go on medicaid and be able to pay the family expenses i mean this is the united states of america and to suggest things or leave options like moving to another country or getting a divorce seem totally unreasonable i wanted to mention want to think we had research from the national ms law center that said that insurers who practice gender rating charged forty year old women from four to forty eight percent more than forty year old men and the investigation of this committee suggested that gender discrimination was even worse  and our have you ever encountered that knew that about gender discrimination did not know about gender discrimination we have had women who have been part of the company  doctor another shocking example of insurance company discrimination comes from the individual insurance market in the individual market some insurance companies consider it a preexisting condition when a woman has had  section or been a victim of domestic violence which can justify denying coverage altogether from a policy standpoint is there any good public policy reason why a victim health care spending and where individuals can make decisions about going in or out of the health insurance system where you don't have everyone in all of the time people will have a tendency to purchase coverage selection and that is one of the main reasons why it's important to reform to have an individual requirement of health insurance coverage because once you have that in place once you have everyone or almost everyone in the system you can prohibit those kinds of practices and stop people from being raided as a consequence of your expectations thank you and i just want to thank the business owners for doing really personally suffered from the rules of the game right now actually all of you have so we will do our best to address that thank you i think i think we've completed one round  health insurance to your employees in these small companies and you know where we're talking about in h r thirty two hundred and then the two bills over on the senate side some pretty massive changes in health care system and health insurance delivery system something that's going to call it least i think conservatively a trillion dollars over ten years and the point i wanted to make and the questions i wanted to ask how you feel about this certainly there are those of us on the republican side that feel that we have some good ideas  we would like to share that we would like the majority and the president to to listen to some of these suggestions and let me ask in regard to your small businesses and i want to ask all three of you mr walk i'll start with you because i small companies where a pool of a thousand or more created and that you can actually purchase for affordable health care for your employees with this larger pool less lower florida that was i think something like two hundred seventy five thousand dollars a year for medical malpractise insurance was estimated with malpractise insurance reform tort reform product liability schools let me let me say that obviously i'm not in the insurance business but if you spread the risk going to lower the cost to the employee as for risk pool i wouldn't say a high risk about to deploy in florida and about the other states i have to insure my employees with worker's comp insurance while they're at work so they're of health insurance now a few years back  had a couple accidents on the job i have my guys on a construction site unless we have my answer to fixing that problem was go to an employee leasing program employee leasing do need some sort of reform with the insurance whether it be nationwide whether the single payer plan or whether it groups  and am i allowed to ask a question sure go ahead i don't know if you have a good answer those of you who are against government run ne bit to medicare and many of us sitting on this panel are now eligible for medicare and we want it not to be we can to pay for something else we want to be strengthened we're concerned very much about the babil of medicare which within seventy years will will be almost insolvent and we have thirty five trillion dollars worth of underfunded lab ilithyia over the next fifty years in the medicare program so when we see five hundred billion dollars taken out of current medicare system particulate matter to try to insure fifteen million people many of whom are young and healthy and don't want coverage it just doesn't make a whole lot of but thank you for your question let me give the real answer now on that  do we roll that back but do we move more of that dollar into the realm of the federal government there are several of us who are concerned about that i'm a physician by trade ran a small business for almost twenty five years in my community so i hundred eighty one and there is something that happens in a medical practice where you've got to pay attention to what's called the payer that is if you have patients who are covered by medicaid and medicare those federal programs as good as they are and many people depend on them but as good as they are they don't cover the cost of delivering the care in the physician's office so the doctor is going to have to make up that cost somewhere else and typically with as bad as the health care profit but they still go broke medicaid doesn't have that same safety mechanism so you go broke much more quickly and this individual had seventy percent of her practice medicaid in a rural alabama pediatric practice and she said she was borrowing from a retirement fund to keep her doors open i'll tell you having had some experience with that you may have been counted this yourself if you lose money on every transaction very difficult to make it up in volume and that's what she found herself doing i felt like coming across th the ability to be able to continue for doctors around the country to keep their practices open if we go to a larger government chair there are obviously other things that are involved in that you've heard many of them today but that that in brief would be my answer to your question nobody's talking about rolling back the part of the public option if you will the part of the public insurance that already exists it is what it is right now and no one thinks that that is going to be that's going to be  small business owners it seems like there is a recurrent theme is that if pooling came up as an issue and the ability to pool your employees or your people that you're looking to ensure  concept of association health plans where you can pool not just from within your own neighborhood but if it's a group of florist or realtors even doctors offices or dentists offices you can pull with like business models even around the country to get a much much larger patient very difficult to get the hundred folks behind us to sign up because we're talking about an insurance payment that essentially equals a bass  for but do any of you have are you familiar with the concept of association health plans if something's been talked about up here predating my arrival in congress but have any of you explored that as a possibility or an option if they can do that countenance in iowa they should be able to do it for the muffler shop owners not only in iowa but nationwide so yes that is a very good option  while and the cobra is incredibly expensive and i feel incredibly guilty laying people off but i had to lay some people off in order to keep the other people's health benefits coming i'm going to get i'm going to cut cut off by the chairman you're correct about your observations on cobra my opinion is there are things that are within our purview an ability to modify that system and improve that system so it is not so it is not so injurious but what about the effect of having an eight percent payroll tax on you health care is paid for by tax dollars because we still leave something million people uninsured under thirty two hundred i think you're now done but the fundamental question of health insurance a responsibility of society to the people who are members of it do we all have the shared obligation if you want to talk about all the solutions that we are looking at are trying to find out of society to pay for another subset of society we are asking now for businesses to have noticed that today just want to spread the risk is to put everybody in the risk for everybody to share in the cost equally and that is a bit away from doesn't matter countries as a practical matter to me for interrupting but as a practical matter and eight percent payroll tax what does that do to taxes i'm sorry i have trouble here it wasn't the payroll tax will be the the employer mandate that everyone of course will contribute is this eight percent i mean this is one of the largest taxes never been levied upon one of the largest taxes it's ever been employment based basing your system on people who work but that is the language and thirty two hundred that we have in front of us is that it will be paid for with a with a with an employer mandate so people who work here correct will be paying the bills that the employers and those two went into competition with each other and it helped drive the rates down on both sides of the of the deal i'd love same thing on the health care the payment mechanism of whether i'm paying for a government funded program or paying the insurance company as i am now i want the best deal so you would if the best deal were to pay the eight percent payroll tax people would you would you would move away from it's private insurance it to the government insurance that would be a business decision that you would you would make would be to leave the private system and go to the government i want to look and that's been one of our concerns as well that we will drive out the private sector and again as a response plan or even if you erode the private sector remember the private sector is paying part of the freight carrying part of the load for the public sector i'm not here to apologize for insurance companies they've brought a lot of the problems on the fund the government run question that while we do not object to the inclusion of this staff memo we again caution the majority clear you know specifically examples in states with only a few insurance companies could make it apparent which insurance companies being discussed in route of talking about this onerous tax per employee on small businesses because i was attacked at one of my town hall meetings on health care reform by a small business owner who accused me of giving incentives for businesses to dump existing health care coverage they have that's more costly than that requirement in order to save costs and improve their bottom line so let's talk a little bit about those numbers and i'd be interested in all of your feedback on this there are many small businesses in iowa that employ people who make twenty thousand dollars a year or less and when you're looking at the average annual premium for a family of four for small businesses at thirteen thousand dollars owner six hundred dollars that sounds considerably less than thirteen thousand dollars a year forty thousand dollars a year employee what's that going to cost you if you decide that option thirty two hundred dollars somebody make and sixty thousand dollars a year working for a small business in iowa is doing pretty well aren't they mr land forty eight hundred dollars a year that's about a third of what it's costing right now to insure a family of four you can make one hundred twenty thousand confidence in the free market oriented health care solutions to address these problems count me as skeptical all there has been no institutional impediment to associated health care plans addressing the needs of small business owners in all fifty states have they done it no that's the problem that we're facing with health care and i'd add i just invite each of you to respond to the problems that i've just identified would you repeat the question and i won't go through the whole thing i'll just i mean isn't it true that as a small business owner you are struggling to get by and these rising health care costs are tapping every dollar you have available to return a profit that if you have an opportunity to to pay substantially less by paying eight percent of your employee's income into a pool and letting them choose their own health care and if they're if they're eligible they qualify for affordability credits to get a health care product that may be better than what you're offering them now how is that not a positive outcome correct that is a perfect way of doing business mr headrick have any comments about that given the choice i would have to look at the which was the better deal if the coverage that we have always on the side of providing quality coverage for people and you made a very good point because you're in a market where you're competing for good employees and one of the things we know is that in a free market system that's always going to provide incentives for employers who want to attract the best caliber of employees to offer a better benefits package to their employees and that's why in the exchange that we've constructed there's a base a premium within five years let's drop one hundred million of their employees who are currently covered back corporate america and they'll let them go right into that exchange and if the final bill has a public option the government trust from the government i'm here to help you mr walker said the three business men at the table probably agree that they don't trust the insurance industry trust the government  they'll absolutely crowd out the marketplace for the private insurers and you'll simply have missed a land that definitely then will have medicare for all and you'll have a lack of providers and you'll have  the student loan program and you said how you look at this competition between f i f a and the direct program this is great let's let them compete in let's see who has a better right for your child so they can go to college and get a college education well the government wanted to compete but now they have crowded out the f f a e l p and it's all direct loan program as a bill that we just passed without my vote of course in the house of representatives and there will be no bloomberg the public plan option and not believe that it is going to eradicate private health insurance coverage even if implemented and in the way laid out in the current proposal and in fact well over ninety percent of the number of americans currently covered by private insurers we believe would continue to be would be covered by private insurers under the reform we're talking about bringing in a lot more people into the system than are insured today many of them would be covered through private plans and so because you're increasing the total number of coverage we think roughly ninety two percent of many people would be covered by private insurance even in the presence of a public plan perhaps higher than that depending upon the rules of getting into the exchange in addition when you think about situations where there's been a public plan competing with private plans i think one important example to remember is just how badly private insurers did want to compete with the medicare program and hence we developed the medicare advantage program now those private insurers have actually been quite advantaged by rules under the federal government and in fact have been doing quite well to the point where they've been providing extra well over extra benefits than what the medicare beneficiaries are entitled to an increasing cost as a consequence so we do have examples where we have allowed this kind of competition between private plans in a public health plan and like just to get that part the committee rules as you know provide that members have ten days to submit additional questions for the record and they'll be part of this tradition will be kept ten days to do so if you like submitted additional questions for the record therefore i ask unanimous consent of contents or document mind or binder be entered into the record provided that the committee staff may read any information that is business proprietary relates to privacy concerns or law enforcement