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IMPACT OF OBAMACARE ON JOB CREATORS AND

THEIR DECISION TO OFFER HEALTH INSURANCE

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF

COLUMBIA, CENSUS AND THE NATIONAL ARCHIVES

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

JULY 28, 2011

Serial No. 112–89

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform
(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF COLUMBIA, CENSUS AND THE

NATIONAL ARCHIVES

TREY GOWDY, South Carolina, Chairman

PAUL A. GOSAR, Arizona, Vice Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

PATRICK T. MCHENRY, North Carolina

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

DANNY K. DAVIS, Illinois, Ranking Minority

Member

ELEANOR HOLMES NORTON, District of

Columbia

WM. LACY CLAY, Missouri

CHRISTOPHER S. MURPHY, Connecticut
(III)

C O N T E N T S

Page

Hearing held on July 28, 2011 ............................................................................... 1

Statement of:

Puzder, Andrew, CEO, CKE Restaurants; Grady Payne, Connor Industries, Inc.; Will Morey, president and CEO, Morey’s Piers; Victoria

J. Braden, president and CEO, Braden Benefit Strategies, Inc.; Michael

J. Brewer, president, Lockton Benefit Group; and Terry Gardiner, vice

president, Small Business Majority ............................................................ 5

Braden, Victoria J. .................................................................................... 44

Brewer, Michael J. .................................................................................... 50

Gardiner, Terry ......................................................................................... 60

Morey, Will ................................................................................................ 38

Payne, Grady ............................................................................................. 33

Puzder, Andrew ......................................................................................... 5

Letters, statements, etc., submitted for the record by:

Braden, Victoria J., president and CEO, Braden Benefit Strategies, Inc.,

prepared statement of ................................................................................... 46

Brewer, Michael J., president, Lockton Benefit Group, prepared statement of ........................................................................................................... 52

Gardiner, Terry, vice president, Small Business Majority, prepared statement of ........................................................................................................... 62

Morey, Will, president, and CEO, Morey’s Piers, prepared statement of .... 40

Payne, Grady, Connor Industries, Inc., prepared statement of .................... 35

Puzder, Andrew, CEO, CKE Restaurants, prepared statement of ............... 8

(1)

IMPACT OF OBAMACARE ON JOB CREATORS

AND THEIR DECISION TO OFFER HEALTH

INSURANCE

WEDNESDAY, JULY 28, 2011

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF

COLUMBIA, CENSUS AND THE NATIONAL ARCHIVES,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 9:35 a.m., in room

2154, Rayburn House Office Building, Hon. Trey Gowdy (chairman

of the subcommittee) presiding.

Present: Representatives Gowdy, Gosar, DesJarlais, Davis, Norton, Clay, Murphy, and Cummings.

Staff present: Brian Blase, professional staff member; Robert

Borden, general counsel; Drew Colliatie and Mike Whatley, staff

assistants; Adam P. Fromm, director of Member liaison and floor

operations; Christopher Hixon, deputy chief counsel, oversight;

Sery E. Kim, counsel; Justin LoFranco, press assistant; Jeff Solsby,

senior communications advisor; Jaron Bourke, minority director of

administration; Yvette Cravins, minority counsel; Ashley Etienne,

minority director of communications; Carla Hultberg, minority

chief clerk; and Paul Kincaid, minority press secretary.

Mr. GOWDY. Welcome, everyone. I apologize for being late; we

had a conference that ran a little longer than normal, discussing

some things you may have been reading and hearing about lately.

This is a hearing on the Impact of Obamacare on Job Creators

and Their Decision to Offer Insurance.

The committee will come to order. Consistent with the policy of

the Oversight Committee, I will read the mission statement. We

exist to secure two fundamental principles: first, Americans have

a right to know the money Washington takes from them is well

spent and, second, Americans deserve an efficient, effective government that works for them.

Our duty on the Oversight and Government Reform Committee

is to protect these rights. Our solemn responsibility is to hold government accountable to taxpayers because taxpayers have a right

to know what they get from their government. We will work tirelessly in partnership with citizen watchdogs to deliver the facts to

the American people and bring genuine reform to the Federal bureaucracy. This is the mission of the Oversight and Government

Reform Committee.
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I will now recognize myself for an opening statement. I will recognize the gentleman from Illinois for his opening statement while

I am in the process of finding mine.

Mr. DAVIS. Thank you very much, Mr. Chairman.

Before I begin, let me take the opportunity to acknowledge the

presence of a dear friend of mine and certainly a friend to all of

the people who have been in the House and in the Senate, a former

distinguished Member of this body who was also chairman of the

Small Business Committee and a Member of the U.S. Senate. Senator Jim Talent is with us and I am pleased to see you, Jim. I must

confess that I had two bills that Jim and I co-sponsored that were

passed into law, so he represents some of the proudest moments of

my tenure here, so I am delighted to see him.

Thank you, Mr. Chairman. For several years I have been a supporter of a national health plan. Good quality, affordable health

care should not be a privilege afforded to just a few. The Patient

Protection and Affordable Care Act provided a pathway to bring affordable health care for the masses. It balances the needs of businesses and workers with accessibility and affordability. Large and

small businesses consistently express their concerns about rising

health care costs. The Affordable Care Act addresses this concern

with cost containment measures for the employer such as small

business tax credits, insurance market reforms, rate reviews, price

transparency, and the creation of health marketplace exchanges,

just to name a few.

The anticipated reductions on health premiums enabled job creators to hire more workers, increase salaries to maintain their

work forces, and to reinvest in new technologies for their business

growth. The Center for American Progress estimates that health

care reform that reduces premium growth will add 250,000 to

400,000 jobs annually over the next decade.

The Affordable Care Act also addresses the needs of workers.

The act eliminates job lock, which discourages workers from seeking new opportunities for fear of losing health coverage. The ACA

supports the entrepreneurial spirit of the American work force, as

nearly 10 million self-employed Americans have the ability to purchase insurance for their families. Additionally, the act makes

health insurance affordable with premium assistance for eligible

employees.

Last, a recent Harvard study estimated that one American family filed for bankruptcy every 90 seconds in the aftermath of an illness. Three-quarters of them had health insurance at the time of

the precipitating health event. In addition, medical debt burdens

families with the inability to pay for other expenses, contributes to

credit card debt, and causes people to delay necessary medical care.

The Affordable Care Act ensures that these nightmare scenarios

will no longer be common.

In my district there are many Medicare and Medicaid recipients

that have established community health centers as their medical

home. Medicaid beneficiaries that rely on health centers for usual

care were 19 percent less likely to use the emergency room at a

hospital than other providers for non-emergency and usual care

services. Overall, health centers save the health care system between $9.9 billion and $17.6 billion annually. Community health
3

centers provide high quality health care regardless of the ability to

pay, and health centers in Illinois have a tremendous impact on

our economy and employment.

In 2008, 40 health centers operated over 350 sites, contributed almost $1 billion to the Illinois economy, and directly employed almost 6,000 Illinoisans. Indeed, for every 10 people employed by an

Illinois health center, an additional four jobs were created in their

surrounding communities. Illinois health centers served over 1.1

million patients, nearly 80 percent of whom had no health insurance, helping them cope with chronic health conditions and general

health issues to be able to work and care for their families. Repeal

of the health care law would eliminate $11 billion in support for

our community health centers over the next 5 years. Funding that

would nearly double the number of patients served today and

greatly strengthens Illinois’s economy.

I know a little bit about health care, given the fact that my congressional district has more than 20 hospitals, 21 to be exact; four

medical schools; a large number of community health centers and

other outlets. And I can tell you that health care is the lifeblood

of our community.

Simply put, the Affordable Health Care Act is indeed progress.

I thank you for this hearing and yield back the balance of my

time.

Mr. GOWDY. I thank the gentleman from Illinois.

First I want to thank all of our distinguished witnesses for your

patience and for your willingness to lend us your insight and your

perspective on what all of us agree is a very important issue.

As we sit here this morning, Washington is debating the relative

merits and demerits of deals or plans or solutions, whatever euphemism you want to use, averting the short-term debt crisis. However, our country continues to face long-term fiscal crises, some of

which is rooted in the calls that we need substantive reform and

return to our founding principles.

Quite simply, government is too big. Out of control spending and

over-regulation have threatened America’s credit rating and crippled business’s ability to create jobs. When asked what the single

greatest impediment to job growth is in the United States today,

and I hasten to add I come from a State with about 10 percent unemployment and some counties are as much as 20 percent, but

when asked what the greatest impediment to job growth is in the

United States, the founder of Home Depot simply responded, the

U.S. Government. That is a stinging indictment.

Our dire economic situation requires us to take a hard look at

every dollar we spend and fundamentally reform programs headed

down the wrong path to fiscal insolvency. At the same time, we

must be enacting pro-growth policies, paving the way for American

companies to grow and expand, creating the jobs that will spark a

broader economic resurgence, which brings us to why we are here

today.

The current health care law was marketed to the American people as a means to provide high quality, low cost health coverage options to every citizen in the country, while ensuring that those who

like their current coverage can keep it. However, time and time

again we have discovered examples exposing this political myth.
4

The uncertainty surrounding the law’s broader implementation and

the expectation of future taxes have worsened an already dreary

economic picture.

While we often hear about the looming debt crisis, we are also

in the midst of a job crisis, one that Obamacare has done nothing

to ameliorate and, in many instances, has served to exacerbate.

From new taxes to increased government mandates and regulations, to picking winners and losers based on arbitrary criteria, the

new legislation burdens businesses with confusion and uncertainty,

the exact wrong prescription for turning around our floundering

economy.

Further, as the full impact of certain sections become more clear,

we are uncovering myriad disincentives and hidden taxes embedded within the law that served to negatively impact businesses’

bottom line, while CBO estimates the law will reduce the number

of jobs by 80,000 by the end of the decade. Finally, instead of allowing employees to keep the coverage they currently have, tax subsidies in Obamacare will cause many employers to drop workplace

health coverage, forcing workers to purchase their own insurance,

all the while skyrocketing costs and further deepening our Nation’s

budget deficit.

In a recent survey, McKinsey & Co. found that 30 percent of employers will definitely or probably drop health insurance in 2014,

a scenario not contemplated when the initial costs were calculated

in a rushed, predominantly hidden, legislative process. Thus, the

Federal Government will yet again pick up the tab, an outcome

that is simply unacceptable and untenable, given the current fiscal

climate.

So we are here today to examine the true impact of Obamacare

on you, America’s job creators, and whether employees across the

country will be dropped from their current coverage based on

Obamacare’s arcane requirements.

With that, on behalf of all of us, other Members will have 7 days

to submit opening statements and extraneous material for the

record.

We will introduce our distinguished panel. From my left to right,

your right to left, Andrew Puzder is the CEO of CKE Restaurants,

which I have a parenthetical that says Hardee’s and Carl’s Jr. My

history could very well be wrong. I think Hardee’s may have its origin in the upstate of South Carolina and specifically perhaps in

Spartanburg, with Mr. Richardson and Mr. Bradshaw, but if I am

wrong on that, as I frequently am. Sir?

Mr. PUZDER. [Remarks made off mic.]

Mr. GOWDY. Okay, good. Well, as usual, I am close, but wrong.

[Laughter.]

I hope my wife is listening.

Grady Payne is president of Connor Industries. Welcome.

Mr. Will Morey is the president and CEO of Morey’s Piers. Welcome.

Victoria Braden is the president and CEO of Braden Benefit

Strategies, Inc. Welcome.

Mr. Brewer is the president of Lockton Benefit Group. Welcome,

Mr. Brewer.
5

Mr. Terry Gardiner is the vice president of Small Business Majority. Welcome.

Consistent with committee rules, all witnesses must be sworn before they testify, so I would ask you to please rise and raise your

right hands.

[Witnesses sworn.]

Mr. GOWDY. May the record reflect all witnesses answered in the

affirmative.

There should be a series of lights, which mean what they traditionally mean in our culture; green means go, yellow means speed

up and try to get under the light, and red means stop.

We will now recognize you for 5 minutes. The yellow light or

amber light means you have about a minute left and the red light

means stop. So we will begin with Mr. Puzder and go from left to

right.

STATEMENTS OF ANDREW PUZDER, CEO, CKE RESTAURANTS;

GRADY PAYNE, CONNOR INDUSTRIES, INC.; WILL MOREY,

PRESIDENT AND CEO, MOREY’S PIERS; VICTORIA J. BRADEN,

PRESIDENT AND CEO, BRADEN BENEFIT STRATEGIES, INC.;

MICHAEL J. BREWER, PRESIDENT, LOCKTON BENEFIT

GROUP; AND TERRY GARDINER, VICE PRESIDENT, SMALL

BUSINESS MAJORITY

STATEMENT OF ANDREW PUZDER

Mr. PUZDER. Chairman Gowdy, Ranking Member Davis, and

members of the subcommittee, thank you for inviting me to testify

today on the impact of the Patient Protection and Affordable Care

Act on job creation. As the chairman noted, my name is Andrew

F. Puzder. I am CEO of CKE Restaurants. With me today are

Cheryl Soper, our vice president of benefits, in case you have any

really difficult questions for me; Louis Fareous, who is our vice

president of Government relations; and also my sons, Matt and

John.

CKE owns and franchises 3,182 restaurants in 42 States and 23

foreign countries under the Carl’s Jr. and Hardee’s brand names.

With our franchisees in the United States, we employ about 70,000

people. Our company is a job creation machine. We create jobs by

building new restaurants. Each restaurant employs about 25 people and we invest over $1 million in the community where we construct the restaurant.

But our job creation goes way beyond our building of restaurants.

Last year we spent over $1.25 billion for job creating capital

projects, media and advertising, supplier products and services. For

example, we spent $1 billion on food and paper products, which

gives jobs to everybody from the farmer who plants the seeds or

tends the herds to the people that process and manufacture our

products to the guy who drives the truck and delivers it to the back

door. We spent $175 million on media advertising, employing people in television stations, radio stations, and newspapers. We spent

$30 million on repairs and maintenance, employing people that

wash the windows, cut the lawn, fix the air conditioner, and slurry

the blacktop.
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Our franchisees own 70 percent of the restaurant, so they spend, you would assume, about $70 million in addition to that 30. We

spent $60 million on capital expenditures; building restaurants, remodeling restaurants, and investing in our infrastructure. The people we employ in these concentric circles that really grow out from

our restaurants went to grocery stores, went to the movies, spent

their kids to school, bought cars, bought houses; just creating jobs

on a very broad basis, which is the way free enterprise system

works. And you can see other businesses with concentric circles

growing out from them that overlap and really drive the greatest

economy the world has ever known.

I am very concerned that in the coming years we will be unable

to create as many jobs as we could like due to the increased expenses necessitated by laws such as the PPACA. I will start with

the law’s menu labeling provision. That requires disclosure of the

caloric content of our products on our menu boards.

Now, as a company, we support nutritional disclosure, we have

and have for years had comprehensive, effective, and economic nutritional disclosure in our restaurants and broadly available online

at our Web site. We estimate that should we have to replace the

menu boards in all of our restaurants, the cost would be approximately $1.5 million. That is 17 percent of the $8.8 million we invested last year on job-creating new restaurant construction.

Independent research done to date demonstrates that caloric

menu labeling has no impact on consumers’ eating habits. In other

words, this was a politically correct solution that is ineffective and

imposes unnecessary costs on American businesses that could better spend their money and their time creating jobs and economic

prosperity. Nutrition disclosure can be accomplished effectively,

comprehensively, and economically. The current law simply fails in

all three of these respects.

Now on to the ACA’s mandatory medical coverage provisions. I

am not an expert on health care law other than how it impacts our

company. I also know that there are people who believe universal

health care coverage is beneficial, and I am not here to debate that.

However, there is a sacrifice that must be made to gain that benefit. The question is whether the costs are worth the benefits.

The ACA will eliminate job creation and opportunity. Our best

estimate, the ACA will increase our health care costs approximately $18 million per year, should it be implemented, as we currently understand the regulations. That is a 150 percent increase

from the $12 million we spent on health care last year and approximately double the $8.8 million we spent on job-creating new restaurants. At this point, we do not intend to drop coverage for our

employees, but the money to comply with the ACA must come from

somewhere.

We use our revenue to pay our bills and expenses, to pay down

our debt, and we reinvest what is left in our business. That is how

we create jobs. There is no corporate pot of gold we can go to to

cover increased health care costs. New unit construction will cease

if we have to allocate the moneys for that construction to the ACA,

and building new restaurants is how we create jobs.

We would also have to reduce our other capital spending, and

capital spending not only creates jobs, but is important to main-
7

taining and growing our business. We would need to reduce the

number of our full-time employees and increase the number of our

part-time employees. We would need to automate positions where

we could and reduce compensations for the positions that we retain.

As I speak with franchisees and encourage them to build new

restaurants, I am constantly met with concern about their economic futures. They are concerned about poorly conceived government regulations as the ACA’s menu labeling provision. They are

concerned about the ACA’s mandatory health care coverage provisions, stifling growth and possibly requiring that they close restaurants that are marginally profitable now, but which would be

unprofitable once the ACA comes into effect. The result is stagnation.

The simple fact is that regulations such as those growing out of

the ACA do impose costs, and those costs do result in reduced

growth, stifling both job creation and prosperity. Prosperity is neither Republican nor Democrat, it is neither liberal nor conservative; it is a bipartisan issue. People are unsure about their futures. American people are suffering because they don’t have jobs.

American businesses want to create jobs, and we respectfully request that Congress review the ACA to determine which provisions

can be administered in a way that reduces costs for the businesses

they impact.

We would further request that Congress review the ACA’s provisions to determine which provisions, on balance, are detrimental to

our Nation’s economic prosperity and eliminate such provisions. If

done effectively, this review would encourage job creation and prosperity, as well as better government.

Thank you.

[The prepared statement of Mr. Puzder follows:]
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Mr. GOWDY. Thank you, Mr. Puzder.

Mr. Payne.

STATEMENT OF GRADY PAYNE

Mr. PAYNE. Thank you, Chairman Gowdy, Ranking Member

Davis, and members of the committee for this opportunity to testify. I am Grady Payne, CEO of Connor Industries, with our headquarters in Fort Worth, Texas. We have plants in Texas, Oklahoma, Mississippi, Tennessee, Georgia, Florida, South Carolina,

and Virginia. We supply cut lumber and assembled wood products

to manufacturing companies for their shipping and crating needs,

as well as logistics and supply chain management services.

Our company was started in 1981 with five people. Tody we are

celebrating our 30th anniversary with 450 employees and 11

plants. Over 120 of our people today have been with us over 5

years, and 22 of those over 15. Ours is a commodity business which

works off low margins. In each of our markets we compete against

companies that have fewer than 50 employees, as well as importing

crating companies that we compete against. These companies will

not be subject to the penalties imposed under the new law; it will

give them an unfair cost advantage over our locations.

According to the SBA, we are a small business, but not so by the

Affordable Care Act. We are caught in the no-man’s land between

assistance and exemptions for smalls and waivers for large corporations and other powerful entities.

We started our medical plan in the 1990’s and offered coverage

to all employees. Most of our production line employees opted out

due to cost. To meet Federal discrimination laws, we were forced

to create groups of employees and significantly reduce the number

to whom insurance was offered. This remains today. We offer coverage to approximately 140 employees and struggle each year to

get 75 percent participation. The company pays approximately 55

percent of the total premium cost.

Ours is a fully insured plan. The new discrimination rules created by the law have the effect of pushing us immediately into a

self-insured alternative or face a fine of up to $500,000. The IRS

has just delayed enforcement of the new nondiscrimination testing

until regulation can be written; however, our plan can be tested

and penalized as early as next year. Without changes in these

harsh penalties, we may be forced to drop our plan completely,

prior to the State-based exchanges even becoming available.

In 2014, we will be faced with an even more difficult choice: Option one is to expand coverage to all our employees and pay the full

premium cost. To do this, the additional cost would be approximately $1.5 million over the $750,000 we spend today on premiums. Option two is to expand coverage to all our employees and

have employee-contributed cost set at affordable amounts based on

the law’s affordability rates and each employee’s household income.

If all employees stayed in the plan, our additional cost under this

option would be estimated at over $1 million. Option three is to discontinue all policies and pay a non-tax-deductible penalty of $2,000

for each employee for our 450 employees, plus some portion of a

penalty for employee turnover during the year. The cost of this

penalty option is well over $1 million and it is not tax deductible.
34

The impact of this law will cost our company $1 million or more

no matter which option we take and, worse, some of the extra

costs, if not all of it, may be classified as a penalty and not tax deductible. We would owe income tax plus the penalty. Today, these

estimates total more than the company makes.

We have been very blessed to be a profitable company, even in

these hard times. We have had to make many sacrifices and pay

bonus programs and people. We have no tax loopholes; we are a tax

paying company.

We are a company caught in the middle. As the law stands now,

our 30-year business is at risk of being legislated out of business.

How can this be? Our lives are in this company. We have done a

good job for our customers, our employees, and all our families. We

understand the goal of getting everyone medical coverage, and we

agree that it is a worthy goal, but the massive cost hits us right

between the eyes. We are too small to get favorable group rates or

self-insured contracts, and too large by statute to be exempt, even

though our profit centers are less than 50 employees in each location. There has to be a more equitable way to achieve this goal

than to cripple a small business like ours. The ratio of cost to earnings is overwhelming for a company our size.

We have seen bad markets before, though none as bad as this

one. Our current capital expansion and business development plans

are and will be stopped by this law because expansion and hiring

requires cash. The impact of the law robs us of our needed growth

capital. Our goals turn from hire and grow to cut and survive.

I thank all of you for your service to our great Nation and for

allowing me to plead the case of Connor Industries.

[The prepared statement of Mr. Payne follows:]
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Mr. GOWDY. Thank you, Mr. Payne.

Mr. Morey.

STATEMENT OF WILL MOREY

Mr. MOREY. Yes, sir. Good morning, Chairman Gowdy and Ranking Member Davis. Thank you for the opportunity to speak today

on this important matter. My name is Will Morey. I am president

of Morey’s Piers.

Morey’s Piers is a family business that began in 1969. It began

with very humble beginnings, a single giant slide on a postagestamp piece of property along the boardwalk along the sea in Wildwood, New Jersey. It now consists of three piers, two water parks,

and 120 rides or attractions.

Our operating season is primarily from Memorial to Labor Day;

however, we operate shoulder seasons weekends, starting Easter

and concluding on Halloween. We have 110 year-round benefited

staff members and we grow to an additional 1,500 seasonal staff

members during that time.

I am privileged also to be the Vice Chair of our International Association of Amusement Parks and Attractions, which represents

3,000 fixed site supplier and individual members in the United

States, and I will be chairman of that organization in 2013.

By way of perspective on the industry, our total domestic eco- nomic impact is approximately $53 billion. We employee 700,000,

of which 600,000 are seasonal employees, typically young people in

their first jobs, retirees, school teachers, and others supplementing

their incomes during the summer months.

Now, there is a tremendous amount of uncertainty related to this

bill, from my perspective, but there is one thing that I know at

Morey’s Piers we can be certain about, and that is the inclusion of

seasonal workers and the definition of full-time employee, and the

lack of suitable recognition of seasonal employees within our industry will cause severe negative consequences to our business.

Now, I am here to be constructive and I would really like to be

a part of the solution, but the fact is, as it stands, the law will have

a substantial negative impact to our industry, on our seasonal employees, and our permanent employees as well. From our point of

view, the law is a large expense; it is an administrative nightmare.

It is hard to see any appreciable benefit to anyone working at

Morey’s Piers, but it is easy to see the negative impact on our ability to provide jobs and run our business productively.

Now, it is important to note that our industry seasonal workers

are hired for short, temporary periods. They have very different set

of expectations and responsibilities than full-time employees, and

they were clearly an element of the work force that Congress did

not pay close attention to in drafting the bill. The law will force

businesses like Morey’s Piers to provide health insurance to seasonal workers and, as a result, we have the following concerns:

Immediate loss of jobs, including full-time positions due to decreased profitability; negative economic impact on the communities’

surrounding attractions such as ours as operating schedules are adjusted and employment is curtailed; and the promotion of a seasonal labor society that schedules employees under 30 hours per

week or terminates employment before 90 days. This will happen
39

across the entire country, hurting both seasonal businesses and

seasonal employees. And very importantly and close to my heart is

the ability to be able to reinvest. Capital is an incredibly important

part of the attraction industry, and reinvesting in our businesses

is critical to creating growth and future jobs.

Additionally, the administrative and compliance issues are, simply put, extreme. The majority of these workers are employed 5

months or less. By the time the 90-day administrative period

passes, they will have insurance for less than 2 months, at most.

Many of these seasonal workers get their health care from other

sources—parents, university, their primary full-time positions—and

will opt out of our coverage. Yet, we still have to do the following:

ensure compliance, track work days, track average hours per week,

offer the insurance, educate and present the insurance program,

auto enroll into the insurance program, get declinations to the program, and maintain records for all of the above.

Consider a work force that swells from 110 to 1,600 employees,

with individuals starting and ending their employment every day

of the week throughout the season. Just imagine tracking and

managing this information. This is unreasonably burdensome and

will provide little to no benefit to the seasonal employees.

Now, the bottom line is the inclusion of seasonal workers in the

definition of full-time employee will needlessly cause severe negative consequences to businesses like Morey’s Piers, to seasonal and

full-time employees and to their communities. Ultimately, if this

law is to go into effect, it should be amended to properly recognize

the real world of seasonal employees and their tremendous importance to our industry and to our national economy.

I would like to conclude just by mentioning that we really want

to be a great business. We want to grow. We want to support our

community. We want to create as many career opportunities we

can. That is what life in America is about. So please don’t burden

us with a needless compliance and other issues that come along

with this bill.

Thank you for your attention and consideration of this important

matter.

[The prepared statement of Mr. Morey follows:]
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Mr. GOWDY. Thank you, Mr. Morey.

Ms. Braden.

STATEMENT OF VICTORIA J. BRADEN

Ms. BRADEN. Thank you. Chairman Gowdy, Ranking Member

Davis, thank you for inviting me here today and to testify. My

name is Victoria Braden. I am president and CEO of Braden Benefits Strategies. We are truly a small business. My business at this

point has three full-time employees and two interns. And we deal

with small businesses; that is our client base. We deal with companies that have 20 to 300 employees.

In 2002, I started Braden Benefits Strategies with one employee

in the basement of my home. Our business model was to be a resource for small businesses headquartered in Georgia, advising

them on employee benefits, specifically group health insurance. My

business plan was to expand our small group market base and then

to grow a large individual market practice.

In 2008, I moved the company into a building, took the risk,

rented a space based on my long-term plan. At the end of our

move, I was employing three full-time people, one part-time person,

one intern, and myself. In addition, we sold our backroom services

to three other health insurance agents, which kept their business

viable. I had visions and a business plan to grow to 8 to 10 fulltime employees; however, in December 2009, we looked at that and

it was time to add our individual health product, which is what we

had looked at for our expansion, put in a call center, hired a fulltime person, and put an aggressive marketing campaign together.

On March 24th, the day after PPACA passed, I had looked at my

business plan before, knowing that it could be coming, and I made

sweeping changes to my business. I eliminated our expansion to

the individual health market, which I still, to this day, believe was

a good decision since individual market will most likely go to the

exchange; I terminated that full-time person; I lost revenue from

the sales we already had, which accounted for $35,000 annually.

And to these other gentlemen that is just a small amount; to me

it is a person, it is huge. I also terminated a part-time claims administrator and then I terminated my part-time accountant and

outsourced that. The law eliminated my plans to grow and now

have turned me into what could possibly be no business at all in

2014.

On top of that, we advise small businesses on their health insurance options, and that has become very expensive. My company has

had to go out and educate ourselves on the health insurance. When

we get bad information or conflicting information, because the bill

is so intensive, we have to hire a lawyer, have to ask the lawyers

for the differences, and oftentimes we go between three law firms,

again, trying to figure out what it is that the law exactly says and

how to advise our clients.

It has also taken a huge financial toll on my business from the

value of my business. With my business in 2007, I was looking at

a value of $1.2 million, two times my annual revenue, and now I

am looking at a business worth of zero. And the reason it is worth

zero is because our declining business will then be worth nothing

at the end when PPACA goes into effect.
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On January 1, 2014, and I think this is probably the basis of why

I am here, we expect 22 of our 65 clients to immediately drop their

group health insurance. The size of the clients that we service will

have no cost to the employer to not have insurance; there will be

no penalty and no fine. Of those companies, I expect 769 people to

be added to the exchange rules.

Through PPACA, the taxpayer is now subsidizing the cost when

that happens, of small business employees’ health insurance. Our

conservative estimate of 462 will be the first year, and other businesses will leave shortly after that.

We always said the young and the healthy would take this bill

and make it worthwhile. It will not, because the young and the

healthy will find a way around the bill. We have already seen that

through the self-funded small business pieces that are being developed.

I would just ask you to reconsider not only the job loss of the bill,

but the cost of the bill both to employers and to the unexpected

consequences of what it is going to cost the U.S. Government.

Thank you.

[The prepared statement of Ms. Braden follows:]
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Mr. GOWDY. Thank you, Ms. Braden.

Mr. Brewer.

STATEMENT OF MICHAEL J. BREWER

Mr. BREWER. Chairman Gowdy, Ranking Member Davis, my

name is Mike Brewer. I am president of Lockton Benefit Group of

Lockton Companies, LLC in Kansas City. On behalf of Lockton and

our clients, I thank you for the opportunity to appear here today.

Lockton is the largest privately held insurance brokerage and

consulting firm in the world. Most of our 2,500 employee benefits

clients are middle market clients, those with 500 to 2,000 employees. Our professionals are experts on last year’s health reform laws

provisions affecting employer group health plans. They have been

instrumental in educating our clients regarding the law and analyzing its impact on our clients’ employee benefits programs and

their budget.

In May of this year, we also conducted a survey of our clients,

soliciting their views on the costs and other implications of the reform law. We do believe that we are uniquely positioned to articulate the law’s effect on employer-based health insurance plans.

Mr. Chairman, the employer community is the single largest employer of health insurance in America. The majority of our clients

want to continue to supply health insurance, but they struggle with

the cost and the federally imposed complexity of plan administration. Health care reform adds to, rather than mitigates, the cost

and complexity of providing employer-sponsored health insurance.

For example, the Federal Government requires 52 separate notices, disclosures, and reports to enrollees in health insurance programs; 19 of these, and that is just so far, were added by health

reform. This frustrates our clients immensely. They question why,

during a recession, when employers are struggling mightily just to

stay afloat, much less supply this valuable fringe benefit, Congress

would make the process more expensive, more onerous, and more

complicated. They tell us the additional cost, complexity, and uncertainty wrought by the law affects their ability to hire additional

workers or even retain current full-time employees.

Clients find it difficult to plan strategically in light of the uncertainty the law brings to their world. One client in our survey

summed up the view of many regarding this law, calling it a job

killer. Nearly 20 percent of our survey respondents said they will

consider terminating their group insurance plan in 2014, and they

cite cost and complexity as the main reasons that they will consider

doing this.

In our survey, 63 percent of respondents said they were concerned or very concerned about the cost of the law’s immediate benefit mandates. Seventy-one percent said they were concerned or

very concerned about the cost of implication of the pay-or-play

mandate on employers and 60 percent about the cost of automatic

enrollment. Our actuarial modeling of over 250 middle market clients validates our clients’ concerns. Taken together, the law’s immediate benefit mandates, waiting period limits, and auto enrollment requirements, on average, add 6.3 percent to our clients’

health insurance costs, on top of current health insurance inflation,

and it is more in certain industries.
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The employer pay-or-play mandate in 2014 poses additional problems for employers because of the sizable difference between what

most employers pay to supply coverage for an employee and the

penalty they would pay if they terminated coverage, the vast majority of our clients have a significant financial incentive to exit the

group insurance market in 2014. On average, our clients outside

the retail, restaurant, and hospitality industries would save 44 percent off their current health care budget by terminating their group

plans, leading nearly 20 percent to tell us they would consider

doing just that in 2014.

About 80 percent of our clients indicate they don’t expect to consider terminating coverage, but the reason they give is the perceived need to provide health insurance to attract and retain clients. We are concerned that the moment they see they don’t have

to offer competitive health insurance, that 80 percent number could

drop significantly. This would result in huge increases in exchange

participation and subsidy liability for taxpayers.

Seventeen percent of our survey respondents said they would

work to avoid play-or-pay penalties by substituting more part-time

employees for full-time workers. Forty-four percent said they would

reduce the employer subsidy toward employee coverage and 43 percent they said they would reduce the employer’s subsidy toward dependent coverage. That does not bode well for working Americans.

Thank you for the opportunity to appear before you today. In assessing the impact of this legislation, I urge you to place yourselves

not only in the shoes of those Americans who need and deserve access to affordable health care coverage, but also in the shoes of the

employers who supply valued coverage to 160 million of us. As one

of our survey respondents wrote, this plan doesn’t fix the health

care problems, but shifts the burden to employers to take care of

the issue without any type of assistance in covering the increase

in cost.

We look forward to answering your questions and working with

you to address the issues raised by our employer clients. Thank

you.

[The prepared statement of Mr. Brewer follows:]
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Mr. GOWDY. Thank you, Mr. Brewer.

Mr. Gardiner.

STATEMENT OF TERRY GARDINER

Mr. GARDINER. Good morning, Chairman Gowdy, Ranking Member Davis, and members of the subcommittee. Thank you for the

opportunity to testify on the number one problem facing small business, the ever-rising health care cost. I am Terry Gardiner. I am

vice president of policy at Small Business Majority.

Small Business Majority is a national nonprofit small business

advocacy organization founded and run by small business owners.

I myself have spent most of my career, I was kind of shocked to

add it up and to think I started my first business 40 years ago as

a self-employed commercial fisherman in Alaska, where I grew up.

Went on to create a seafood processing company that grew over 22

years, and when I retired, it had 1,000 employees with over $100

million in sales, exporting to 22 countries.

Other members of our senior team at Small Business Majority

are also entrepreneurs. And as business owners we are well aware

that government policies can take either of two courses, they can

help promote job creation and help promote business, and, at the

same time, there can be other laws and regulations, in our experience, that can definitely be a burden on business and discourage

growth. So we are not unaware of those situations from our own

personal experience.

But the problem facing small businesses, those 22 million selfemployed out there, one-third of whom don’t have coverage, and

the nearly 6 million small businesses with under 100 employees,

they keep saying that health care costs, ever-rising, are their number one problem. We have done a lot of polling, scientific polls

across the country, national and in many, many States between

December 2008 and August 2009, 67 percent of respondents said

reform was urgently needed to fix the economy. An average of 86

percent of those companies who do not provide coverage said they

couldn’t afford it. Seventy-two percent of those offering health benefits said they were struggling to do so and cited the cost as the

reason they were struggling. So this simply paints a status quo

that is unacceptable for small business.

We have also done some economic research that was conducted

by MIT economist Jonathan Gruber to look at the scenarios. Our

country then and now does face alternatives, we could do nothing

about our health care system or we could try to change it so it

works better. So we looked at those alternatives.

Doing nothing is a job killer. Gruber’s projection showed that

over the next decade small employers would pay $2.4 trillion in

health care costs, there would be a loss of 178,000 jobs. There

would be negative impacts for employees, too; $834 billion in reduced business wages and a reduction in profits. So doing nothing

is not a great scenario.

So that moves us to where we are at now, where we have the

Affordable Care Act as the law in the country that we are here

today discussing, projected by CBO that it would have the benefit

of reducing the Federal deficit by $200 million over the next 10

years and $1 trillion over the following decade, which is a positive
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for all businesses and all citizens. But the point for small businesses is to reduce their cost so that they can keep more money

in their bank account, which is what they use as fuel to expand

and create jobs.

And there are many provisions in the ACA that are going to help

small businesses, many of which do not offer health coverage now,

and many self-employed simply can’t afford it. So there are new

mechanisms here in the ACA; tax credits for small employers.

There are health insurance exchanges that will be established in

the 50 States. Some States have already moved forward; Massachusetts, Utah. We have exchanges that have been in effect for 15

years in Connecticut and provides a lot of insurance to small

groups.

So we know there are problems. You have heard about some of

them here today with the ACA. We are not here to say they are

perfect, but we think focusing on these and fixing them would be

a better course of action than going backward.

Thank you.

[The prepared statement of Mr. Gardiner follows:]
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Mr. GOWDY. Thank you, Mr. Gardiner.

I will recognize myself for 5 minutes of questions.

I will direct this to the first three witnesses to my left. What

should the Federal Government do or stop doing to enable you to

create more jobs?

Mr. PUZDER. The Government now is doing a lot to create a high

degree of uncertainty in the business community. We are uncertain

about what tax rates are going to be; we are very uncertain about

health care costs, and the only thing we are certain about is that

they are going to go way up. We are uncertain what is going to

happen with energy, with the EPA. We are uncertain about unionization with the NLRB. There is a lot of uncertainty out there.

When businesses are going to invest and create jobs, they generally

want to come up with a 5-year business plan which shows you get

a return on your investment at about 20 percent a year, and at the

end of 5 years you have gotten a return on your initial investment.

If you can’t do a forecast because you don’t know your costs, you

don’t know your expenses, and what you do know you don’t like,

you are not going to invest. And American businesses are stalled.

I think that chart shows it up there. People are not investing because they can’t show a profitable return of their investment. And

if you think your expenses are going to go way up and you have

two choices on what to do with your money, retain it so you can

cover your expenses, or invest it to grow and create jobs, you are

going to hold on to your cash.

So we are not seeing the kind of investment we should be seeing,

and if the Government would just work to create some certainties,

some positive certainty for the business community, I think you

would see an explosion of job creation.

Mr. GOWDY. Some of us like to say that our tax, regulatory, litigation structures create the uncertainty that stifle job creation. Is

that a fair statement; tax, litigation, regulation?

Mr. PUZDER. I think that is a very fair statement.

Mr. GOWDY. Mr. Payne, what employees, what categories of employees are most likely to be adversely impacted by the implementation of Obamacare?

Mr. PAYNE. Well, in our company, it is going to impact all of us;

it spreads completely out through the organization. We can’t necessarily cut sections out; we are kind of a complete pie. So if you

cut part of it down somewhere, you have to equally pull out the

support structure that goes with it across the lines. It is going to

impact every area that we are involved in.

I agree with everything that was just said. In our case, our plants that we put in are about $1 million investments. We add

people less than 50 generally and we pump about $1 million in

payroll into those plants on an annual basis. We cannot add any

more plants not knowing what the cost structures are going to be

going forward. Will we cut people? We are trying to cut people now.

So it has an impact on all of us.

Mr. GOWDY. Mr. Morey, the President famously said that if you

like your health insurance, you will be able to keep it. With respect

to your company, is that statement true?

Mr. MOREY. Back to the comment that was made later about uncertainty, that is one of our great concerns. We would like to offer
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our private plan essentially to out staff members; they are very important to us, we want to see that they have a great plan and they

are well taken care of in that area. But it is unclear to us whether

or not that is going to be the case or not. And when we look at

things like the burden of the seasonal issue that I have been speaking of and what that means to us in terms of cost and compliance,

that endangers our ability to be able to provide the coverage that

we are providing now.

Mr. GOWDY. Mr. Gardiner, I only have a little bit of time left, so

if I could get just a yes or no response from you on whether or not

you support some other initiatives that might—some of our health

care woes. Do you support incentivizing health savings accounts?

Mr. GARDINER. I am not sure what you mean by incentivizing.

Mr. GOWDY. Through our tax structure, flexible spending accounts.

Mr. GARDINER. I think they work too.

Mr. GOWDY. Do you support creating the same tax treatment for

employees who want to purchase health insurance as the employer

has?

Mr. GARDINER. You mean self-employed?

Mr. GOWDY. No, I mean an employee. If they want to purchase

health insurance on their own, should they enjoy the same tax benefits as employers?

Mr. GARDINER. Well, this is a particular problem for self-employed now. We have the 1-year provision that needs to be extended that self-employed don’t have the same tax.

Mr. GOWDY. I am not talking about self-employees, I am talking

about individual employees. Individuals who want to purchase

health insurance, should they have the same favorable tax treatment as employers?

Mr. GARDINER. Yes.

Mr. GOWDY. Medical malpractice reform, does your organization

support that?

Mr. GARDINER. Yes, and we did during the ACA. We are on

record as supporting that.

Mr. GOWDY. Thank you. My time has expired and I will recognize

the gentleman from Maryland, the ranking member of the full committee—do we go to Mr. Davis? I will recognize the gentleman from

Illinois, ranking member of the subcommittee, Mr. Davis.

Mr. DAVIS. Thank you very much, Mr. Chairman.

Let me thank our witnesses. I must say that I was seriously impacted by all of your businesses, your courage, your determination,

the tenacity, the fact that you have been able to make conscious

use of yourselves to build strong businesses and provide opportunities for other people to work.

Mr. Gardiner, can I ask you have you ever had any employees

who didn’t earn enough money to pay for health insurance?

Mr. GARDINER. Yes.

Mr. DAVIS. Mr. Brewer, have you ever had any employees who

didn’t earn enough money to pay for health insurance?

Mr. BREWER. Yes, sir.

Mr. DAVIS. Ms. Braden, have you ever had any who didn’t earn

enough to pay for health insurance?

Ms. BRADEN. No.
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Mr. DAVIS. No?

Ms. BRADEN. No.

Mr. DAVIS. Mr. Morey, have you ever hired anybody that didn’t

make enough money to pay for health insurance? You have?

Mr. Payne, have you ever had any who didn’t earn enough?

Mr. PAYNE. I am not sure that I know the answer to that because

I don’t know what costs would be. But I have people that have

turned down insurance before because of cost.

Mr. DAVIS. Mr. Puzder, have you ever hired anyone who didn’t

have enough money when they got through to pay for health insurance?

Mr. PUZDER. Well, we have a number of part-time employees who

may not have enough, but we do offer them a very low mini-med

affordable plan. I really can’t say that I have ever done any research on that, but we probably have part-time employees who

couldn’t afford the plan.

Mr. DAVIS. Well, let me ask you this question. Can you think of

anything in life more important than being healthy?

Mr. PUZDER. No. Well, your family, belief in God.

Mr. DAVIS. That is a good point, especially belief in God. I happen to be a practicing Christian, and I notice at my church that

everybody wants to go to heaven, but nobody wants to die. That

sort of reminds me of Frederick Douglas sometime when they were

talking about the abolition of slavery, and every time somebody

would come up with a way to do it, there would be a reason why

it couldn’t get done, and he ended up saying that there are those

who reminded him of people who might have wanted the rain, but

without the thunder and the lightning, or they wanted the crops

without plowing up the ground, or they may have even wanted the

ocean without the roar of the mighty waters. So it seems to me

that there are things that we want to happen, but somehow or another we can’t bring ourselves to the point of doing what is necessary.

Do we believe in tax credits? Let me ask. Have any of you ever

used tax credits in any facet of your businesses?

Mr. PUZDER. I am sure that whenever they are available we use

them.

Mr. DAVIS. And so if tax credits are made available for small

businesses to help provide health insurance for employees, that

might be one way of helping some of those individuals who had no

other way of being insured.

Mr. PUZDER. I think it would, Congressman, but I will tell you

that we offer all of our employees health care coverage inexpensively, and I think of our 17,000 part-time employees, about 6 percent choose to take the health care coverage over the cash. So it

is 94 percent would rather have the job and the compensation.

Mr. DAVIS. Oh, I would certainly agree. And I guess when you

say small business, it would be kind of difficult for one to suggest

that your company was a small business, I mean by pretty much

any standard.

Mr. PUZDER. But, Congressman, we deal primarily with larger

employers, but I fundamentally believe that the same advantages

that are available for larger employers ought to be available to

smaller employers as well.
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Mr. DAVIS. Well, let me ask you do you believe that health care

should be a right, and not a privilege?

Mr. PUZDER. That is a difficult question. You know, we have created a system where people don’t have to buy health care to get

health care. I would certainly like to believe that it is a right. I

think that there are fundamentally some better ways that we could

go about some of this. And I will tell you that our firm has been

historically pro on health reform. It is exactly what you said, it is

just the form that that takes.

Mr. DAVIS. Well, see, I think that at the base of the discussion

is what we believe in terms of individuals who live in our society.

Ms. Braden, you were about to say something?

Ms. BRADEN. I was. I am the person that actually deals with the

small, small businesses I think that you were referring to, and on

the tax credit that we have on the floor right now, the $25,000 of

income and you could do that, I don’t have but a handful of employers out of my group that can actually take advantage of that, and

those employers are all nonprofits, so they are taking advantage of

it against their FICA taxes. So that piece of it I don’t see.

As far as health insurance being a fundamental right, so is being

healthy, and people have a responsibility to that, and we are not

seeing that in any of our small groups; we are not seeing folks

going out and actually working to be healthy, which would then

bring down the health insurance costs.

Mr. DAVIS. Well, I think we could debate that a great deal, but

my time is up.

Mr. GOWDY. I thank the gentleman from Illinois.

We now recognize the gentleman from Tennessee, Dr. DesJarlais.

Mr. DESJARLAIS. Thank you, Mr. Chairman.

And thank you, panel, for appearing here today. There are so

many questions in so many directions I would like to go today,

after hearing your testimony, and I don’t think I have ever sat

through a hearing where the testimony was almost so self-explanatory that a lot of the questions I had to ask have already been answered to some extent.

Mr. Payne, you had laid out three options for your company in

terms of health care. When we discuss Obamacare now, sometimes

we get chastised for using that term, Obamacare; it is known as

the Affordable Health Care Act. After laying out your three options, do you agree that it is affordable?

Mr. PAYNE. It is not affordable to us. The way it is structured,

and talking about the credits for small business, we consider ourselves a small business and some of the exemptions for less than

50 employees really hurt us; we don’t get those exemptions, yet we

are competing against the people that do. So it ought to be more

of a level playing field.

But to answer your question, no, it is not affordable. Is the current system good? I won’t say that the current system is good, but

we are surviving and making a profit and growing and hiring people with the current system, dealing with year-to-year increases in

the programs, dealing through the insurance companies. Under the

new program it could be that we may not have a business to grow.

So it has definitely changed.

Mr. DESJARLAIS. Thank you.
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Mr. Gardiner, today the Center for Medicare and Medicaid Services’ actuary stated health care costs will double by 2020. Considering President Obama passed Obamacare to reduce health care

costs now, will your business be able to cope with these increased

health care costs?

Mr. GARDINER. Well, fortunately for me, I have reached that retirement age and don’t own a business today.

Mr. DESJARLAIS. But you represent several.

Mr. GARDINER. Yes. And I think that there is more that needs

to be done about cost containment. I think that was very evident

during the whole debate of the Affordable Care Act. More needs to

be done and we have faced these kind of racing costs. If you look

at a graph, as I did when I retired and got into health care, these

costs have been going up like a rocket for decades.

Mr. DESJARLAIS. Okay, but we as a Congress, I wasn’t here at

the time, but we then passed massive sweeping health care reform

that we didn’t ask for, we don’t want, and apparently we certainly

can’t afford. So here we are moving forward with what did then

Speaker Pelosi say, we need to pass this bill so we can find out

what is in it?

From what I am hearing from this panel up here today, I doubt

that anybody sat down with business folks like this and listened

to what they have to say before this bill was constructed, and I can

tell you as a physician I don’t think they sat down with health care

professionals either to see whether or not this was feasible.

So now we have this problem. You are sitting here wondering

how we are going to continue to employ people in this Nation. The

greatest crisis facing our country right now is unemployment and

spending, and everything about this bill that I can see is nothing

but driving up cost and government spending, and, frankly, government spending is nothing more than taxes. Our government doesn’t

generate any revenue outside of taxes. So, anyway, I wanted to ask

a few more questions.

Mr. Brewer, the CBO has estimated that as many as 12 million

employees could be forced into the exchanges. Do you find this

number accurate?

Mr. BREWER. No. I think the CBO is made up of smart, hardworking, well-intentioned people. I don’t know how much interaction they have with people who have employees and payrolls and

have to make these decisions, but I can tell you we dealt with

about 3,000 of them last year and the year before that and the year

before that. So I think the incentives that we uncovered in our actuarial studies, as well as the information we got as a result of our

survey, would suggest to me, I don’t know how many renewals

CBO did last year, but, as I said, we did about 3,000, and we are

coming to a much different conclusion based upon that information.

Mr. DESJARLAIS. Okay. Thank you.

Mr. Puzder, will the health care law lead you to automate more

services or replace full-time workers with part-time staff?

Mr. PUZDER. Thank you, Congressman. Absolutely. People who

are currently full-time employees we will have to make part-time

employees, which means they will have to have two jobs to get a

full-time salary. We will automate positions such as the cashier.

Right now they have those ordering kiosks like the ATM or what
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you see at the gas station where you pay with your credit card. We

haven’t used those because we like the personal touch and they are

a little expensive, but once you implement this health care bill, I

think those kiosks are going to become much more desirable. So I

will be reducing labor force and also automating positions.

Mr. DESJARLAIS. Well, I am out of time, but just quickly, do you

believe most of your workers prefer a job or government health insurance?

Mr. PUZDER. Absolutely. And I think the fact that only 6 percent

of the 17,000 part-time employees we offer insurance to take it

would be a very strong indication that that is true.

Mr. DESJARLAIS. Thank you.

I yield back.

Mr. GOWDY. I thank the gentleman from Tennessee.

The Chair would now recognize the gentleman from Maryland,

the ranking member of the full committee, Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I want to

thank you for calling this hearing. As I was sitting here listening,

I could not help but think about my days as an employer of a small

law firm. We provided insurance for our employees and it took

away from our profit, but we did it. We did it because we believe

that it was the right thing to do. There were only three lawyers,

but we had about five clericals and we did it.

Let me also say this. I am not here to chastise anybody about

anything, but I take great offense when I hear the word

Obamacare. There is no such thing. Members of this Congress

voted for this legislation and many of us have very strong feelings

about it because we are seeing people in our districts without insurance; we are seeing people literally die, and that is a very serious thing.

So there has to be a balance here, and I appreciate your comments, because I can look at this thing from a small business employer for 20 years, but I can also look at it from the standpoint

of a legislator who has seen the results of people who end up in

emergency rooms and we are paying a lot more through emergency

room care, and we all end up paying for that.

But you said something, Ms. Braden, that I found very intriguing

and very interesting, and correct me if I am wrong. You said something to the effect that you saw people that were not, you said, not

seeing anyone trying to be healthy. What did you mean by that and

how do you know that?

Ms. BRADEN. Because I deal every day with the people inside the

companies that I work with. Thank you for asking. If you look at

people and healthy, we are not talking health insurance. When you

go to the emergency room, you are receiving health care. And we

sort of have taken those two subjects and melded them together,

and really I think what we need to do is separate them apart.

If you take health insurance, what it does is support people in

health care. If people are getting health care, that is one thing; but

if they are not taking care of themselves, then they are driving up

the cost of health care, which does drive up the cost of insurance.

Mr. CUMMINGS. I guess what I am saying to you is that there are

a lot of people who, first of all, part of the Affordable Care Act, one

of the driving forces was to keep people well, and another thing
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that we were trying to do was to try to drive down the cost that

these insurance companies were charging for these policies. It is a

hard thing to control.

Ms. BRADEN. Well, in insurance it is really easy. It is premium

paid in, claims paid out. So if you want to control health care costs,

you have to control claims paid out. I mean, insurance isn’t hard,

it is a pass-through. The reason we have insurance was to make

deals with doctors and hospitals at a reduced cost so that every individual company didn’t have to go do those negotiations.

Mr. CUMMINGS. I understand. But did you realize that when we

were going through this there were insurance companies literally

out in California went up on their rates 30 percent? Thirty percent.

Ms. BRADEN. When I looked at some of those policies, because we

heard about BlueCross BlueShield out there, and I called some of

my folks out there that I work with, there was one policy that they

said 59 percent. Well, that was five people on it and the policy was

very rich and had been constructed over 20 years ago.

Mr. CUMMINGS. Well, that is one, but I am just saying, well, I

don’t want to get caught up in this, but what I am trying to say

to you is there is one thing, when we talk to health care insurance

people, it is not as simple as you are making it sound, in and out.

That sounds nice, and if that were true, that would be nice, but

part of the Affordable Health Care Act was to try to say to these

companies that were spending, say, for example, insurance companies spending 35 percent on overhead, 40 percent on overhead, that

they had to control that and they had to put more into medicine.

Another part of the Health Care Act was to try to address this

thing of preexisting conditions. You know, there are people who,

and God forbid it happen to any of you all, you get a scare with

cancer, and if you have a gap in your insurance right now, you will

never get insurance. I have had people in my family in that situation. If they had $100,000 to pay for insurance they couldn’t get it.

So I think we have to be careful when we are looking at this because there are parts of the bill that you might like and there are

other parts that you might not like, but I think, again, we have to

be careful, well, again, we are trying to bring down the costs so

that people will stay well, because we are going to pay one way or

another.

I realize I have run out of time, but thank you, Mr. Chairman.

Mr. GOWDY. I thank the gentleman from Maryland.

The Chair would now recognize the distinguished gentleman

from Arizona, Dr. Gosar.

Mr. GOSAR. Thank you, Mr. Chairman.

I am a health care provider, I am a dentist, and I am a small

businessman, so there is theory and then there is application. So

a lot of things look great on paper, and I know every single one

of you hear it in your board meetings every day. But then there

comes the reality of how does it actually be implicated.

Mr. Gardiner, I know you cite a model, you show that the small

businesses actually benefit from government takeover health care.

I prefer that term because I can tell you, and back that up, that

that is what it is. However, the model assumes much smaller

growth in health care costs, an assumption both the CBO and CMS

have rejected as being highly implausible. And I think we have
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seen a lot of that discussion and looking back at equations and

numbers making that.

Instead of relying on an academic model, and with faulty assumptions, how many businesses are you aware of that are enthusiastic about this health care plan?

Mr. GARDINER. Many. And we could have some of them call you

or write you, if you would like.

Mr. GOSAR. Oh, I would love to. Can you pull off a couple off the

top of your head?

Mr. GARDINER. Yes. I think some of them are cited in my written

testimony. I am just thinking of one right here in the greater metro

area, Mike Ray, with the Hobby Shop. He has come on his own and

testified.

Mr. GOSAR. How about something in Arizona? I don’t like examples in the Beltway. How about something out in Arizona?

Mr. GARDINER. I don’t have one off the top of my head in Arizona.

Mr. GOSAR. Mr. Brewer, do you think that you are real happy

with the assumptions based off what I just asked Mr. Gardiner?

Mr. BREWER. You mean the CBO assumptions?

Mr. GOSAR. Yes.

Mr. BREWER. No, not at all.

Mr. GOSAR. Is it going to create jobs?

Mr. BREWER. No. Everything that we see indicates the incentive

to a cattle drive to the exchanges.

Mr. GOSAR. Oh, I like that. Now, I am going to skip you for just

a second because I am coming back to you, okay?

Mr. Morey, how about you?

Mr. MOREY. I do not see the opportunity for job creation out of

this bill, no.

Mr. GOSAR. How about you, Mr. Payne?

Mr. PAYNE. None.

Mr. GOSAR. How about you, Mr. Puzder?

Mr. PUZDER. It is a job killer, it is not a job creator.

Mr. GOSAR. So my colleague on the other side talked about the

administrative costs. Mr. Puzder, tell me where the administrative

costs many times are linked, is it in less government regulations

or more?

Mr. PUZDER. Less government regulation will drive down administrative costs.

Mr. GOSAR. Thank you.

Mr. Payne.

Mr. PAYNE. Same thing. Regulation costs a lot of money.

Mr. GOSAR. Mr. Morey.

Mr. MOREY. I would echo those comments.

Mr. GOSAR. How about you, Mr. Brewer?

Mr. BREWER. Certainly.

Mr. GOSAR. I am not being disrespectful, because I have something special for you. [Laughter.]

Mr. Gardiner.

Mr. GARDINER. Less is more.

Mr. GOSAR. Okay. I love that.

So my colleagues on our side have been talking about, or the opposite side, have been telling us that the Republicans have been
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never proposing any jobs, and what we are really trying to do is

get to the core matter of it. We are not trying to put a band aid

on it, we are trying to streamline the red tape.

Mr. Brewer, you made the comment of a cattle call. Okay?

Mr. BREWER. Cattle drive.

Mr. GOSAR. Cattle drive? Cattle call.

Mr. BREWER. They are different things. [Laughter.]

I am a Texas boy.

Mr. GOSAR. I am from Wyoming, so you use one to get to the

other.

Mr. BREWER. Yes.

Mr. GOSAR. So, Ms. Braden, you made some wonderful comments, and that is there is a responsibility. I am a believer we need

reform, but not the reform I saw. Okay? Because you hit it, and

that is there is personal accountability, personal responsibility.

And I do believe there was a little company in Iowa that actually

had a concept like this, if I am not mistaken, and what they basically did is they invested in the employee. And they said, listen, we

are going to make you see your family doctor, and that preventative service, whatever they come up with, we are going to give you

time during that workday to be able to do that, but you have to

stay on that preventative model.

And if I am not mistaken, then they made another caveat. They

said that as long as you stay on that caveat, we will pay 100 percent of your claims. They said if you fall off, you are going to pay

25 percent co; fall off again it is 50 percent co; fall off a third time,

it is 75 percent co; and so forth and so on. And guess what?

Ms. BRADEN. Everybody went to the doctor.

Mr. GOSAR. Everybody went to the doctor. And guess what? You

died with that company. What a job creation that was. Because

what happened is you had investment from the patient and the employer and the health care benefit, all the way across the board,

minimizing the red tape. So thank you very much for making sure

that we understood that we are not here about job stymieing, we

are here about building jobs and reducing red tape.

Thank you.

Mr. GOWDY. I thank the gentleman from Arizona.

The Chair would now recognize the distinguished gentleman

from Missouri, Mr. Clay.

Mr. CLAY. Thank you, Mr. Chairman.

And let me, too, welcome two of my friends, former colleague and

friend, the former Senator Jim Talent from my home State of Missouri. Thank you for being here. As well as my friend, Mr. Puzder,

who runs a significant operation out in Missouri. Thank you for

your testimony today.

Let me start out by saying that the Patient Protection and Affordable Care Act is the law of the land, and it is a good law, and,

like any law, it could be improved. However, my colleagues on the

other side of the aisle are not interested in honestly examining the

positive and negative aspect of the law, and I think they are just

interested in repealing it; it is scoring a political victory over President Obama.

This health care reform law is good for Americans, it is good for

businesses, and especially small businesses. And it is very good for
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young businesses, which are actually the ones that create the most

jobs. And I am so glad to hear the phrase job creation; first time

I have heard it in over 6 months in this committee.

Some have raised concerns that businesses won’t be able to afford compliance with the ACA. Ninety-eight percent of employers

will be exempt from the insurance mandate, and 95 percent of the

businesses that are not exempt already offer health insurance to

their employees. This misleading premise of this particular hearing

is that the ACA hurts so-called job creators.

Let me start with Mr. Gardiner. Thanks to the ACA, starting

this year, consumers will receive more value for their premium dollar because insurance companies will be required to spend 80 to 85

percent of premium dollars on medical care and health care quality

improvement, rather than on administrative costs. If they don’t,

the insurance companies will be required to provide a rebate to

their customers starting in 2012. This provision is known as the

medical loss ratio.

Mr. Gardiner, do you believe that the combination of the medical

loss ratio requirements and the shop exchanges will make it easier

for employers to offer quality affordable health insurance to their

employees?

Mr. GARDINER. In terms of the MLR, we have looked at the data.

There are a lot of States before the ACA passed and currently were

under those rates in those States already, and the world didn’t

come to an end. So we just see it as this means it is feasible for

insurance companies in other States to do it, and the 22 million

self-employed who buy insurance today in the individual market

are certainly going to be protected, the 4.8 million companies that

have under 10 employees, who are paying a lot more for insurance

than other businesses that have more than 10 employees, are going

to benefit from this too because they are in the small group market.

And we think the exchanges are really the critical part for putting small businesses on a level playing field; they don’t have the

option to really be self-insured if you are 10, 20 employees, 50,

where the bulk of small businesses are. And these exchanges can

work and they have been proven to work, and we think that is

going to be the driving force for making it more available and more

affordable for small business.

Mr. CLAY. Thank you so much for that response.

Mr. Puzder, I have heard your concerns about providing the nutritional information for the products that you sell. Other than that

requirement, do you think that this law will help shave cost on

health care for your employees? And when I say shave costs, will

it help reduce the cost of prescription medicine? Will it make the

delivery of health care more efficient for your employees?

Mr. PUZDER. I don’t believe that it will. As I said early on, I am

not a health care expert. I can tell you how it impacts our company

from a financial perspective, but right now, I went into our restaurants when the health care debate was going on and I said to

some of the employees, why do so few of you buy this insurance

that we offer that is so inexpensive, and the response was, Mr.

Puzder, we get it for free at the emergency room. So I don’t know

how much better they are going to do than free.
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Mr. CLAY. Well, that is why we are trying to connect people with

health care providers and to cut down the cost of people showing

up at the emergency room for a cold.

Mr. PUZDER. I agree with that. I think that the employee is not

going to be positively impacted, but there should be something

done to cut those emergency room costs. You have a very good

point there.

Mr. CLAY. Thank you.

I yield back.

Mr. GOWDY. I thank the gentleman from Missouri.

With the indulgence of our panel and my colleagues on both

sides, we would like to have a second round, which we sometimes

refer to as a lightening round. My colleagues do not need to feel

the need to take their full 5 minutes if they don’t want to, but I

will start with the distinguished gentleman from Tennessee, Dr.

DesJarlais.

Mr. DESJARLAIS. Thank you, Mr. Chairman, and thank you, Mr.

Clay, for shortening the term to HCA or Health Care Act, and

dropping the Affordable. That is a little easier for me to pallet. But

you mentioned that this bill was brought about and it is the law

of the land, and you are glad to hear us mention job creation; and

I think we are all here today talking about the detriments to job

creation, and I think that point has been very strongly made.

In terms of the last question on shaving cost, I worry more, as

a physician, about shaving quality because we are trying to increase the number of people into a health care market with really

no means to pay for it. But that is not entirely true because our

friends on the other side of the aisle believe that Obamacare’s

taxes, which includes the employer mandate tax penalty, an increase in the Medicare Part A tax, a new tax on investment income, a new tax on health insurance providers, a new tax on drug

manufacturers, and a new tax on medical device manufacturers are

paid by firms out of their massive profit buckets. Moreover, they

believe taxes only impact the top 2 percent of taxpayers.

Based on your experience, is this a fair portrait of reality? And

I will just open that to whoever would like to grab it.

Mr. BREWER. No, it is not. There is no way you add all those

taxes in and reduce the cost to health care, period.

Mr. PUZDER. Mr. Cummings had mentioned how his firm had

been profitable, Congressman Cummings, how his firm had been

profitable and they gave those profits into paying for insurance. I

think part of what we are all saying here is we can take those profits and put them into insurance, but if we do that we can’t invest

them to grow our businesses and create jobs.

So we are not really in conflict on that, but you can’t—like I said,

there is no corporate pot of gold to go to to pay for this stuff; we

have to take it from someplace, and it is going to come from growth

and job creation.

Mr. DESJARLAIS. So again, as you stated, it is a job killer.

Mr. PUZDER. A job killer.

Mr. DESJARLAIS. Does the rest of the panel, for the most part,

agree with that?

Mr. GARDINER. I think part of the solution of getting more dollars

in the system is that everyone, as has been talked about here,
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every citizen has to be responsible, and I think that is why there

was an individual mandate put in. You can’t have a bunch of people who don’t pay, but yet can show up and get coverage and doing

what people are talking about here. So I don’t think anybody has

ever looked at this and said that you could have a sustainable

health care system and not have everybody in the system and everybody paying their fair share.

Mr. DESJARLAIS. So basically forced health care?

Mr. GARDINER. I don’t think you can have a system with freebies.

It doesn’t work.

Mr. DESJARLAIS. There has always been a big debate about exactly who was uninsured in this country. Now, I heard numbers

early on that there was 30 million uninsured. We have asked people to define who those 30 million were; apparently up to half may

have been here illegally and not eligible for health care, perhaps

half of the remaining 15 million are folks that would qualify for

Medicare but just haven’t signed up, and then the other half are

some of the workers that are young and bulletproof and just opt

not to have health insurance.

So, in essence, this new law of the land that was imposed upon

people against their will, and clearly the majority of people in this

country still do not want this, is what we are stuck with at this

point, and I think that is why we are having hearings to show the

detriment of this health care law and what it is going to do to impact the economy and yet not really resolve the health care problem. It was a poorly conceived, it was passed in the middle of the

night, and people maybe have forgotten about how that occurred,

but let’s get back to some more questions.

Mr. Puzder, did Hardee’s need a government mandate to add salads to its menu?

Mr. PUZDER. No. Actually, at Carl’s Jr. we have had salads since

the 1970’s; used to have salad bars.

Mr. DESJARLAIS. A government mandate to add turkey burgers?

Mr. PUZDER. No, not at all. They tested well and sold well.

Mr. DESJARLAIS. Okay. So you have managed to do things to

help keep people healthy without government mandates.

Mr. PUZDER. We love it if people buy healthy products; we are

happy to sell them.

Mr. DESJARLAIS. Right. So now Federal mandates of sign

changes to help people understand what it is they are buying, do

you think that is going to impact their habits or do people just kind

of do what they want?

Mr. PUZDER. No, I don’t think it is other than—well, there have

been a number of studies on this, and I have included in my written testimony that show that, in fact, that has no impact on people’s eating habits. In fact, anecdotally, we have noticed, in some

of the restaurants where there is already menu labeling required,

people think that fast food has more calories than it does, and they

actually end up ordering higher calorie products once they see what

the caloric content actually is. So it has been a very interesting experiment so far that clearly hasn’t worked.

Mr. DESJARLAIS. My time is up. I yield back.
84

Mr. GOWDY. I thank the gentleman from Tennessee, would now

recognize the gentleman from Illinois, the ranking member of the

subcommittee, Mr. Davis.

Mr. DAVIS. Thank you very much, Mr. Chairman. I was thinking,

when you walk into my home, my wife has a sign that says, welcome to the Davis Household, and then it says, Please know that

the opinion of the husband is not necessarily that of management.

[Laughter.]

And I am so pleased that opinions don’t necessarily manage what

we do all of the time. I am amazed at some of the things that I

hear. Job killer? If you create an opportunity for more than 30 million people in this country to have health insurance and go to the

doctor on a regular basis, and stay out of the emergency rooms of

hospitals, and to live longer, the only business that I could see that

gets hurt by this is the undertaker. And he doesn’t get hurt too

much because eventually he is going to get you anyway; I mean,

it takes a little bit longer.

Could someone please share with me how creating opportunity

for 30 million people, over 30 million to get decent health care that

creates the need over the next 10 or 15 years for 150,000 additional

doctors, more than 250,000 nurses, could someone tell me how that

kills jobs?

Mr. PUZDER. I think I can, Congressman. Let’s just assume that

there is this benefit as you have outlaid it, and I don’t know if it

is a health care benefit or a health insurance benefit, because I

think the law requires health insurance; they already get health

care.

But let’s just talk about the health insurance benefit. Benefits

have costs. The money to pay for those benefits has to come from

somewhere. Our business makes a profit. All of that profit is reinvested in the business. When the profit is reduced, you invest less

in the business. If the profit is eliminated, you have nothing to invest in the business. If you don’t have anything to invest, you can’t

grow and you can’t create jobs.

So there is a benefit, and I am not here to argue about that. I

just want you to know that there is a cost associated with the benefit, and I think the businesses that are at this table here are telling you in some instances it might put them out of business.

Mr. DAVIS. But if I am dead because I couldn’t get health care,

can I come to your business?

Mr. BREWER. No, but there will be somebody to replace him. Congressman, your passion is evident and commendable, and your conviction is commendable, but he is right. Anything you do that

erodes profits in an organization, impedes their ability to create

jobs. And right alongside the cost implications of the Affordable

Care Act are the administrative complexities that makes it easier

for an employer just to throw up their hands and say, heck, I am

out; let’s send these folks to the exchanges and then they can be

subsidized by the taxpayers.

I am all for everybody having health care. I totally agree with

you on that. I think we disagree fundamentally on how you get

there.

Mr. DAVIS. But, see, I think that the realities are if you even just

deal with the question of fairness, if you ask a bird is it fair for
85

birds to eat worms, and you turn around and ask the worm the

same question, chances are you are going to get a different answer.

So if you ask the thousands of employees in my congressional district who provide health care for people all over the world if somehow or another their ability to provide these services will drive

down jobs or take away jobs, they would probably disagree vehemently.

Mr. BREWER. I am sorry, that is not what our survey results tell

us.

Mr. DAVIS. They would disagree. Well, ask the 21 hospital administrators in my congressional district if they would agree.

Mr. GARDINER. Congressman Davis, there is another impact aspect of job creation, and that relates to job lock, and job lock has

two impacts: one, employees at a company who don’t want to leave

because they go somewhere else, maybe they wouldn’t have health

coverage and it is very vital for they and their family members; the

other is who is going to start those new companies.

And those are people in the work force working at a job, and they

go through this same system, and the harder it is for them to see

their way to go out and launch in the first step, to be a self-employed person, to found a company, and they can’t get benefits for

them and their family and they are a responsible person, they are

going to stick with their job.

So it is more complicated than just surveying existing companies.

There is a whole bunch of other factors about who starts businesses

and how they grow at the bottom.

Mr. DAVIS. Thank you very much, Mr. Chairman. I certainly

agree in terms of our health delivery system, we have much more

of a sickness care system than we do a health care system, so I

would certainly agree with you, Ms. Braden, on that point, and I

yield back.

Mr. GOWDY. I thank the gentleman from Illinois.

The Chair would now recognize the gentleman from Arizona, Dr.

Gosar.

Mr. GOSAR. My colleague, Mr. Davis, really brings it forthright.

First of all, life isn’t fair, never has, never will be. If you are a business, you should never complain about a profit. That is what you

should do; that is what has to happen in order to create jobs and

to have the ability to employ more.

The other thing that we have to look at is when government impedes itself or impugns itself into any type of parts of our life, to

the degradation of that industry, we see it flounder. Give you a

good example. You don’t have to look very far with government intrusion in health care to look at the Native Americans. Boy, there

is a great unemployment rate there, 60 percent at the Navajo Nation, 75 percent in the Apache reservation, all because of dictations

by government.

And why do I bring that up? Well, because this program is based

on a flawed system that flawed it from the very get-go, as it demanded that you had to go to the emergency room; you couldn’t

turn anybody away. You couldn’t even ask the questions where are

you from, how do you look. You couldn’t turn them away.

So what we have done is we have restricted care, and medicine

did that. I am happy to say I am from dentistry. We never went
86

down that road. And the reason I say that is that today, for every

dollar spent in dentistry, 50 percent comes out of the patient’s

pocket. So they have risk. They find value. That is why you see lots

of dentists. Of course, we are not doing so good right now because

we don’t have a good economy, but there is something inherently

right about that.

So I kind of want to continue that by saying in 2014 employers

who employ at least 50 person full-time employees will face a penalty for failing to provide minimum essential coverage. How is this

going to affect businesses specifically in respect to hiring? Mr.

Brewer.

Mr. BREWER. Well, people who have 49 employees are going to

keep 49. I think there is a fair number of our survey respondents

that suggested that they would go to more part-time employees so

they wouldn’t have to offer coverage. There is no way that helps

in their hiring practice.

Mr. GOSAR. So what we are doing is we are cost-shifting again;

we are making it go back to the government so that the government is going to have to streamline them, just like they did in the

Medicare roles, where what we did is we look at the equations and

we take away certain benefits so that we set them on Medicaid.

This whole system is based on a flawed system; it doesn’t work

anywhere along the line for job creation.

Ms. Braden.

Ms. BRADEN. If you really look at what the cost of health care

is to an employer, there is not one employer sitting here that can

tell you that it costs less than $3,000, which is the fine, per year.

Every one of us pays, on an individual basis, pays more than

$3,000 for our health care for our employees per year. So now we

have a fine that is less than what we are currently paying. It

doesn’t take a rocket scientist to figure out what we are going to

do.

Mr. GOSAR. And let me ask you the next thing. You talked about

the administrative costs. A lot of that administrative cost, is it not

true, that it has to do with tort?

Ms. BRADEN. Yes.

Mr. GOSAR. And did you see anything in this bill, any one of you,

do you see anything about tort reform in this bill? In fact, it was

refused. I wonder why. I guess I am a dentist, not an attorney.

That is where the American people need to stand up and businesses need to stand up.

Mr. Morey, how do you see this is going to affect those people,

those businesses that are under 50 jobs?

Mr. MOREY. I see it very much the same way. I would like to

mention that the issue of tort reform, to me, is gigantic.

Mr. GOSAR. Paramount, right?

Mr. MOREY. I would like it to go beyond medical, into general

tort reform, if possible, from our business perspective as well. But

ultimately we want to employ people; we want to provide them

great coverage. We just don’t want mandates shoved down our

throat in how to do it. And ultimately I think that the free enterprise system does a pretty good job. The marketplace does a pretty

good job of attracting; the better employers attract better staff

members. The marketplace does work.
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Mr. GOSAR. Mr. Puzder, you really drive my attention because

equations. You know, when you are in business, you are looking at

all the parameters and what possibly could do. Have you run all

the numbers? Are you comfortable with all the numbers based

upon this bill and how it is going to impugn job creation?

Mr. PUZDER. No, Congressman. In fact, we hired an expert in

this area, Mercer. They are one of the national experts on health

care costs, and while their best estimate is that our health care

costs will increase $18 million, which is that 150 percent, the range

runs from $7.3 million to $35.1 million. Now, I have to tell you in

any other aspect of my business, if one of the people who works for

me came to me with an estimate that ran from $7 to $35 million,

I would tell them to go back and sharpen their pencils. But nobody

can figure it out.

Mr. GOSAR. One last question, just a quick indulgence.

If you have a program in your business that is failing, what do

you do?

Mr. PUZDER. Terminate it, replace it, try and figure out what the

next best thing is.

Mr. GOSAR. That is exactly what this law is, and it should be terminated. We should have the guts to say that. Thank you.

Mr. GOWDY. I thank the gentleman from Arizona and would now

recognize the ranking member of the full committee, the gentleman

from Maryland, Mr. Cummings.

Mr. CUMMINGS. Thank you very much.

I want to just reference something that Dr. Gosar said, and I was

meeting with staff and I may have missed it, so correct me if I am

wrong, that he was glad that dentists can turn away people, unlike

emergency rooms; dental care people pay 50 percent, an average of

calls, and they have some skin in the game. Is that accurate? I will

yield to the gentleman.

Mr. GOSAR. Did I say that?

Mr. CUMMINGS. I am just asking you what did you say about it

is okay?

Mr. GOSAR. [Remarks made off mic.]

Mr. CUMMINGS. I just wanted to say that I spend a phenomenal

amount of my time working on my case called the Deamonte Driver

case. This was a 12-year-old boy who had a tooth infection, he was

on Medicaid, and he couldn’t find a dentist because he was being

turned away. Twelve years old. And this was 3 years ago. So because a dentist would not accept him, and this was in Maryland,

my State, the infection from an $80 tooth decay problem, it would

cost $80 to treat it, he died. Twelve years old. Because a dentist

turned him away. And they spent $250,000 trying to save his life

at the end.

So, I guess with regard to dental care and care, period, I just say

that our country is better than that. We are better than that.

And I understand, believe me, to all of you, I understand what

you are saying. I understand it is hard being in business. For you

all who have your own businesses, a lot of people don’t realize what

you go through. They don’t realize all the folks you have to deal

with; the IRS, you have to deal with making sure the lights are on,

you have to make sure, if you have grass, you have to make sure

the grass is cut, everything. You have to pay for every toothpick,
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every pen, every pencil; you have to make sure employees are okay;

you have to deal with absenteeism. You have to deal with all kinds

of stuff.

But at the same time I think that we have to also balance that.

If we are talking about our people, people, of course, are who make

our businesses go, and if they are not healthy, that is a problem.

That is a real big problem. And there are those who may not see

health care as a right, I still happen to think so, but I do believe

that when we get to a point where we feel that it is okay to, if I

am a skilled lawyer and somebody comes in to me and they have

a problem, but that is a little different because I am not talking

about life and death. That is different.

But if I have a skill and like the doctors in my State, not in Arizona, but in my State, who turned this little boy away, and I am

talking about a whole lot of them turned him away, and you die

at 12, I don’t know how many of you have children, but if you have

a child who dies at 12, you don’t forget it. So what we have done

is spent a lot of time, I spend a phenomenal amount of my time

trying to make sure that that never happens to another child in

our State again. As a matter of fact, because of Diamonte Driver,

we have now been able to take Maryland from one of the worst

States with regard to having dentists work with kids on Medicaid

to one of the top, I think it is even number one or number two, in

a matter of 2 or 3 years.

So the reason why I mention that is because my staff had mentioned to me, like I said, I was with a staff member, that that

statement was made, and maybe I misunderstood it or misquoted

it, I am sorry I didn’t hear it, but I just want to make it clear that

there is something that I think should always be above profit, and

that is life, health and safety; and I think that is what the Affordable Care Act was about and is about. And as somebody said a little bit earlier, no, it is not perfect, but a lot of its imperfections

were because of people trying to satisfy both sides of the aisle to

get a decent bill, and it did not come out perfect. It is not a product, it is a project; that means it can ever get better.

So, with that, I yield back.

Mr. GOWDY. I thank the gentleman from Maryland.

My father is a physician. The only two things that kept me from

following in his footsteps were math and science. If it weren’t for

those two, I might have become one as well. And I was sitting here

while Mr. Cummings was talking, who is one of the most eloquent

Members of Congress and somebody that I have a lot of personal

affection for. I remember always being the last ones to leave church

because folks wanted to ask my dad questions. I remember holidays being interrupted.

But the thing I remember the very most are the people who

would call at night and say my kid has been sick all day, can you

come see him tonight? That is frustrating, when somebody has

been sick all day, why you didn’t take advantage of the office

hours? Why you waited until the evening. And my mom would say

why don’t you charge more? And he never would do it.

So my question to you all is what is the role of personal responsibility in our health care system? Do we incentivize the right conduct? And we have all these different models from what we have
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now to what is perceived as radical, which is decoupling health insurance from employment. It is perceived as radical, but that is the

way we existed.

Up until 1944 we didn’t get our health insurance from our employer; we got it ourselves. I am not smart enough to know the difference between a right and a privilege; I just know this: personal

responsibility has to be part of the equation or we are not going

to make it as a Republic.

So I would ask you this, in conclusion, and I will let you go from

left to right, give you all the last word, although we only have

about 3 minutes, so apportion it accordingly. What is the role of

personal responsibility and how can our country better incentivize

the right conduct and penalize the wrong conduct in our health

care system?

Mr. PUZDER. When you said right to left, does that mean you are

starting with me? That was your right or my right?

Mr. GOWDY. Your right to left, my left to right. I always like to

start on the right.

Mr. PUZDER. Okay, I guess it is me. I think private enterprise

and State governments are the best place to make determinations

as to health care. I think there are many things that the Federal

Government could do that would contribute to a better health care

system. I don’t know if health care is a right or not, Congressman,

but I know it is the law. I know an emergency room cannot turn

you away. What we are talking about here is health insurance, not

health care. Health care people get now. This is why they don’t

take up our offer on health insurance when we offer to pay even

60 percent. They are getting health care. This is about health insurance and how you allocate those costs. The way they are allocated now, they will destroy our ability to create jobs and prosper.

That doesn’t mean that profits will go down, but profits are what

we reinvest to grow. And if we can’t reinvest to grow, we can’t create jobs and we can’t create prosperity, which is what American

business has done for over 200 years.

Mr. GOWDY. Mr. Payne.

Mr. PAYNE. I agree with that completely. I think there is some

personal responsibility that has to go into the medical cost. I agree

with the skin in the game program. Years ago, programs that I was

in, you had to pay for the coverage, turn it in and get reimbursed.

Well, I understand people may not have money to pay to start

with. In our districts, every plant that I have I have gone around

and checked, our people get medical coverage, it is there. Our property taxes, everything is paying for it already. I haven’t had a single complaint of a person in our organization that comes back to

us and says, hey, we have an employer or somebody in their family

that has a serious problem; we don’t have that problem at all.

It is not a question of whether people have the right to have the

insurance or the coverage. Everybody wants that for them, there is

no question. It is where does the cost lie. In our company, it is

throwing all the cost to the employer to pay these new expenses,

and where does that cash come from? It is a big burden on companies in the middle, on all companies, I suspect, but certainly on our

company it is a burden that is bigger than we have. That is the

problem.
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Mr. GOWDY. I have 45 seconds left to split between four of you.

Mr. MOREY. Yes. We provide $100 incentive for folks to go get

a physical. That is cover-to-cover in the program. We provide a

smoking cessation program that is for both the staff member and

for their spouse. These are the kind of things we do to try to help

people help themselves. That is where I think much of that responsibility lies and that is on the individual person.

Ms. BRADEN. When I look at it, it can go so much farther, and

we all have a story, and I respect that, because I have them just

in my practice alone, with people that were offered health care and

health insurance, and didn’t take it. That is a private decision.

What exactly is our responsibility and does the government regulate it? I am not sure. I think if these guys really looked at their

businesses, they would say that the reason they offer the wellness

that they do is because they know it improves their work force and

they get more out of it.

If we really wanted to look at health care, we would start with

dentistry and we would say, if you don’t have your teeth cleaned

twice a year, you are not entitled to basic and major dental, because everything starts in the mouth. So we are looking at health

care and we are looking at wellness and we are looking at health

insurance, three different things.

Mr. GOWDY. Mr. Brewer.

Mr. BREWER. One of the things that ACA did get right was increasing the opportunity for employers to incent people to well behavior. We have a pretty sophisticated practice in our firm of helping clients design programs that incent people to live healthier lifestyles and make better lifestyle decisions. So in this morass of

things that we don’t like in ACA, certainly that aspect of it was

welcome.

Mr. GARDINER. I think there are three things I will mention. One

is I think you have to have an individual mandate so everybody

pays their fair share and gets coverage. I think employees need to

know the total cost of insurance, including what the employers are

paying. Most of the time they don’t realize how much it really

costs.

And we have seen in all our surveys and meetings with small

businesses, where 42 percent of Americans work, that small businesses would like wellness and prevention programs that fit small

business, and they don’t have access. We hope that it changes; run

by States can do this. And I agree that dentistry has some good

models. I know I don’t have to pay any copay if I get in there, and

I think that is a good incentive and it has been proven to work.

Mr. GOSAR [presiding]. Well, on behalf of the chairman, I would

like to thank you very much for your indulgence for two rounds,

and thank you so very, very much. Thank you.

Our meeting is adjourned.

[Whereupon, at 12:03 p.m., the subcommittee was adjourned.]

[Additional information submitted for the hearing record follows:]
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