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95–491 PDF 2017

S. HRG. 114–660 

SMALL BUSINESS HEALTH CARE CHALLENGES 

AND OPPORTUNITIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON PRIMARY HEALTH AND 

RETIREMENT SECURITY 

OF THE

COMMITTEE ON HEALTH, EDUCATION, 

LABOR, AND PENSIONS 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

ON

EXAMINING SMALL BUSINESS HEALTH CARE CHALLENGES 

AND OPPORTUNITIES 

JULY 7, 2015 

Printed for the use of the Committee on Health, Education, Labor, and Pensions 

( 

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

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS 

LAMAR ALEXANDER, Tennessee, Chairman 

MICHAEL B. ENZI, Wyoming 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

RAND PAUL, Kentucky 

SUSAN M. COLLINS, Maine 

LISA MURKOWSKI, Alaska 

MARK KIRK, Illinois 

TIM SCOTT, South Carolina 

ORRIN G. HATCH, Utah 

PAT ROBERTS, Kansas 

BILL CASSIDY, M.D., Louisiana 

PATTY MURRAY, Washington 

BARBARA A. MIKULSKI, Maryland 

BERNARD SANDERS (I), Vermont 

ROBERT P. CASEY, JR., Pennsylvania 

AL FRANKEN, Minnesota 

MICHAEL F. BENNET, Colorado 

SHELDON WHITEHOUSE, Rhode Island 

TAMMY BALDWIN, Wisconsin 

CHRISTOPHER S. MURPHY, Connecticut 

ELIZABETH WARREN, Massachusetts 

DAVID P. CLEARY, Republican Staff Director 

LINDSEY WARD SEIDMAN, Deputy Staff Director 

EVAN SCHATZ, Minority Staff Director 

JOHN RIGHTER, Minority Deputy Staff Director 

SUBCOMMITTEE ON PRIMARY HEALTH AND RETIREMENT SECURITY

MICHAEL B. ENZI, Wyoming 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

RAND PAUL, Kentucky 

SUSAN M. COLLINS, Maine 

LISA MURKOWSKI. Alaska 

MARK KIRK, Illinois 

TIM SCOTT, South Carolina 

ORRIN G. HATCH, Utah 

PAT ROBERTS, Kansas 

BILL CASSIDY, Louisiana 

PATTY MURRAY, Washington, Ranking 

Member 

BARBARA A. MIKULSKI, Maryland 

BERNARD SANDERS, Vermont 

ROBERT P. CASEY, JR., Pennsylvania 

AL FRANKEN, Minnesota 

MICHAEL F. BENNET, Colorado 

SHELDON WHITEHOUSE, Rhode Island 

TAMMY BALDWIN, Wisconsin 

CHRISTOPHER S. MURPHY, Connecticut 

ELIZABETH WARREN, Massachusetts 

SOPHIE KASIMOW, Minority Staff Director 

(II) 

C O N T E N T S 

STATEMENTS 

TUESDAY, JULY 7, 2015 

Page 

COMMITTEE MEMBERS

Enzi, Hon. Michael B., Chairman, Subcommittee on Primary Health and 

Retirement Security, opening statement ............................................................ 1 

Sanders, Hon. Bernard, a U.S. Senator from the State of Vermont ................... 4 

Murphy, Hon. Christopher, a U.S. Senator from the State of Connecticut ........ 28 

WITNESSES

Harte, Thomas M., Owner, Landmark Benefits, Hampstead, NH ...................... 6 

Prepared statement .......................................................................................... 7 

Scott, James G., Owner, Applied Policy, Alexandria, VA ..................................... 11 

Prepared statement .......................................................................................... 12 

Conklin, J. Kelly, Owner, Foley Waite LLC, Kenilworth, NJ .............................. 14 

Prepared statement .......................................................................................... 15 

Corlette, Sabrina, J.D., Senior Research Fellow and Project Director, Georgetown University, Washington, DC ...................................................................... 18 

Prepared statement .......................................................................................... 18 

ADDITIONAL MATERIAL 

Statements, articles, publications, letters, etc.: 

Response by J. Kelly Conklin to questions of the HELP Committee ........... 42 

Response by Sabrina Corlette, J.D. to questions of Senaor Warren ............ 43 

(III) 

(1) 

SMALL BUSINESS HEALTH CARE 

CHALLENGES AND OPPORTUNITIES 

TUESDAY, JULY 7, 2015 

U.S. SENATE, 

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:01 p.m., in room 

SD–430, Dirksen Senate Office Building, Hon. Michael Enzi, chairman of the subcommittee, presiding. 

Present: Senators Enzi, Sanders and Murphy. 

OPENING STATEMENT OF SENATOR ENZI

Senator ENZI. I’ll call to order this Subcommittee on Primary 

Health and Retirement Security Roundtable. I want to thank the 

witnesses for coming today, and I want to thank Senator Sanders 

and his staff for working to put together a bipartisan conversation 

about this important issue of small business healthcare. 

I’d also like to thank the colleagues who have helped work on 

this, who will be interested in and appreciative of the testimony 

that all of you provided. That’s been shared, and I appreciate the 

format that you used. You all answered the same questions. That’s 

what we do at a roundtable. 

Senator Kennedy and I used to do a lot of roundtables. One of 

the purposes of a roundtable is not so that the two sides can beat 

up on witnesses. It’s so that we can actually get information from 

the witnesses that will help in making future decisions. It’s OK for 

there to be a discourse between the people that are on the panel 

as well as with any questions from Senators. 

Of course, what we’re hoping—I’ve always had this 80 percent 

rule. I’ve found that we can talk civilly about 80 percent of the 

issues, and out of those issues, we can often pick an issue that we 

can agree on 80 percent. It always seems like there’s 10 percent 

that each side has that they’ve been butting heads on sometimes 

for years. 

Some of the legislation I’ve worked on—sometimes there’s been 

10 or 12 years of fighting through the same arguments. One of the 

problems is that the staff are so used to the arguments that when 

they hear a word, they can respond to that word without ever listening to the rest of the sentence. It’s a challenge to get beyond 

that and actually get to the meat of the subject. 

Sometimes we were even able to do 100 percent. That means 

that on that 20 percent that we’d been fighting over for years, we 

were able to find a third way that both sides could take credit for. 

2 

The purpose of a roundtable, of course, is just to have a discussion on the problem and the solutions for it. One of the first ones 

that I held with Senator Kennedy, when it was over, he said, 

‘‘You know, it’s kind of interesting to learn something about 

a subject before we do a bill on it.’’ That’s what we’re hoping 

for today. 

I appreciate the participants taking the time to put together the 

papers that you did. Those are very succinct and helpful. I think 

that we have a representation here at the table of a lot of different 

sectors, so there’s a unique on-the-ground perspective of what is reality for small business. I will ask each of you to say a few words 

shortly after Senator Sanders finishes. 

I’d like to welcome Tom Harte, who is the President of Landmark 

Benefits in New Hampshire. Mr. Harte’s company, Landmark Benefits, provides employee benefit services to over 300 corporations 

and thousands of employees. He comes to the table with over 25 

years of experience in designing, implementing, and managing the 

employee benefits. 

Mr. Harte has built one of the most successful employee benefit 

companies in New Hampshire with a focus on contributions to the 

industry, charity, and community. In addition to his role at Landmark Benefits, Mr. Harte was the national president of the National Association of Health Underwriters from 2013 to 2014. He 

has consistently promoted the importance of reducing the cost of 

health insurance with a deliberate focus on improving the health 

of employees and increasing the transparency of the cost of 

healthcare services. 

Sabrina Corlette is a Senior Research Fellow and Project Director at the Center on Health Insurance Reforms, CHIR, at the 

Georgetown University’s Health Policy Institute. She directs research on health insurance reform issues as they affect consumers 

and patients. Her areas of focus include State and Federal regulation of private health insurance plans and markets and implementation of new insurance market rules under the Affordable Care 

Act. 

Prior to joining the Georgetown faculty, Ms. Corlette worked at 

the National Partnership for Women and Families, and from 1997 

to 2001 for the Senate Health, Education, Labor, and Pensions 

Committee—this committee. 

Jim Scott is a local area small business owner. He is the president and CEO of Applied Policy, a company in Alexandria, Virginia, that he founded in 2009. It’s a seven-person company, and 

you offer your employees a variety of fully insured products and a 

generous employer contribution. 

Before founding Applied Policy, Mr. Scott worked for HoffmannLa Roche, focusing on Medicare coding, coverage, and payment, 

and he served as the company’s principal point of contact with the 

Centers for Medicare and Medicaid Services, CMS. Before joining 

Roche, Mr. Scott served as the senior legislative advisor at CMS. 

Prior to his service with CMS, Mr. Scott was an assistant counsel 

with the Office of Legislative Counsel of the U.S. Senate. Mr. Scott 

serves on the Board of Directors of the Alliance of Aging Research, 

founded the Northern Virginia Health Policy Forum, and is a memVerDate Nov 24 2008 16:15 Jul 11, 2017 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 S:\DOCS\95491.TXT CAROL
3 

ber of the steering committee of the Partnership for a Healthier Alexandria. 

Kelly Conklin is the owner of Foley Waite, an architectural woodworking company based in Bloomfield, New Jersey, and is here 

today to discuss his company’s experience purchasing health insurance for his employees over the last few decades. Mr. Conklin lives 

in Glen Ridge, New Jersey, with his wife and business co-owner, 

Kathryn W. Schackner. In 1978, he and Ms. Schackner founded 

Foley Waite LLC. 

The firm currently has 11 full time employees. Foley Waite fabricates cabinets, furniture, doors, paneling, and moldings in a 

13,600 square foot facility in Kenilworth, New Jersey. Conklin attended Rochester Institute of Technology, the School for American 

Craftsman, and Schackner is a graduate of the Philadelphia College of Art. 

Mr. Conklin is a member of the Executive Committee of the 

Main Street Alliance and is the Alliance for a Just Society board 

representative of MSA, a steering committee member of the New 

Jersey Main Street Alliance, and he served 14 years on the Glen 

Ridge Planning Board, leaving in 2014 as the chairman. From 1998 

to 2010, he served on the board of the New Jersey Policy Perspective, a nonpartisan New Jersey based think tank. 

I’ll keep my remarks brief so we can get to the real discussion. 

I’d like to touch on the heart of what we hope we can get to today. 

Small businesses have traditionally had some of the least competitive, most expensive health insurance options out there. I was 

in the shoe business. I know about that. Yet so many business owners still view it as a priority to assist their employees in purchasing 

health insurance. I know that when I was running my small business, I found out that any business looks easy to operate as long 

as you don’t have to make the decisions for it. 

A lot of people don’t realize that in a small business, the owner 

might well have to wash the windows, sweep the sidewalks, clean 

the toilets, do the bookkeeping, and wait on customers, preferably 

not in that order. I also know there’s no better feeling than seeing 

your dreams become reality with the success of your own business. 

A big part of making all that happen is your employees. As the 

owner, you are linked to these people, and there are certainly market competitiveness reasons to provide health insurance, but also 

a sense of responsibility, knowing their family as being part of your 

enterprise together. 

I’d like to touch on the issues that small businesses face. Government has tried many things to try to fix the market. I think there 

is a consensus that those efforts haven’t gotten us over the finish 

line. 

Today, I’d just encourage the group to think a little differently. 

There are a lot of changes that would improve things and meet a 

short-term need. We also need to think past the next plan year. We 

should try to ask the question of what this market should look like 

in the future and what do we need to do to get there. I think all 

of you have addressed that in your papers. 

Just to clarify the process, once we finish our statements here, 

I’ll ask each of you to give a brief introduction of yourself and any 

statement that you want to make on what you think should be 

4 

done to help small business, and then we’ll begin the questions. 

When it is time for that, if you want to speak, just stand your card 

up, and that will help me to recognize you, although today it may 

be easy to do. We don’t have 10 or 15 people on the panel. 

With that, I’ll turn it over to Senator Sanders for any comments 

he may have, and then we can get into a discussion. 

STATEMENT OF SENATOR SANDERS

Senator SANDERS. Mr. Chairman, thank you very much for holding this hearing. Let me apologize to you and to our witnesses that 

I’m not going to be able to stay for very long, although this is a 

subject which interests me and the people of Vermont very, very 

much. 

I think the point that I would like to throw out—I’m not going 

to be here for it, but maybe some of the panelists could get into 

it—is to maybe address the issue of how it happens that the United 

States of America, our great country, the wealthiest country in the 

history of the world, is, in fact, the only major country on Earth 

that doesn’t guarantee healthcare to all people as a right. That’s 

point No. 1. If we did that, a lot of aspects of this discussion might 

not be taking place. 

What we all know is God didn’t create a situation where businesses were obliged to provide health insurance to their workers. 

That’s a public policy issue. I think it began in World War II for 

various reasons, dealing with the State of the economy in World 

War II. 

What concerns me, Mr. Chairman, very much is that, No. 1, you 

have some employers, small and medium-sized employers, who feel 

a moral obligation to make sure that their employees have highquality health insurance. Across the street, there may be another 

employer engaged in the exact same business who has a different 

point of view. 

For no particularly rational reason, you have one guy who’s trying to do the right thing and spending a lot of money on it. Another 

person is doing something different for his or her own reasons, 

spending a lot less money on it. That’s issue No. 1. What rational 

sense is that? 

No. 2, where I think we are at an international competitive disadvantage is that our small, medium-sized and large businesses 

spend an enormous amount of time—and it sounds like folks like 

Mr. Harte help them in this area. All right. I have 20 employees. 

What is my best deal? How do I provide health insurance to my 

employees in the most cost effective way? 

That’s kind of what you do, Mr. Harte. Right? 

All right. Yet in other countries, small and medium-sized businesses don’t particularly worry about that issue, because everybody 

in those countries has healthcare as a right. I live 100 miles away 

from Canada, and that’s pretty much the story. 

If you own a shoe store, Mr. Chairman, in one of those countries, 

what those businesses focus on is how you sell as many shoes as 

possible and not spend an enormous amount of time on a very, very 

complicated issue. I’m sure the panelists will agree with me that 

with the market changing every day, if one person in your 10-person company comes down with cancer, that changes the entire dyVerDate Nov 24 2008 16:15 Jul 11, 2017 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 S:\DOCS\95491.TXT CAROL
5 

namics of what kind of premiums, what kind of costs you’re going 

to have for your insurance policies. 

Mr. Chairman, I think it is important for us to understand what 

the problems facing small and medium-sized businesses are today. 

I think what is even more important is that you and I who are on 

the committee, this committee that wrote the Affordable Care 

Act—God knows how many hearings we had on that, right, and 

how many meetings we had on that. The one simple question we 

forgot to ask for a reason is: Why are we the only country, major 

country on Earth, that doesn’t guarantee healthcare for all people, 

and what can we learn from those other countries? 

In the United States today, as all of us know—the chairman and 

I will disagree, I’m sure—the Affordable Care Act has had some 

modest gains in providing insurance for millions more people; doing 

away with the obscenity of pre-existing conditions; making 

healthcare available to younger people on their parents’ policies, et 

cetera. 

But despite the gains of the Affordable Care Act, we still have 

35 million Americans who have no health insurance. Even more 

significant, I think, is that we have millions more people who are 

underinsured with high deductibles and high copayments. How 

does that impact the health of people? 

If I have a $5,000 deductible, as is not uncommon, and I get sick, 

but I don’t have the money, I’m not going to go to the doctor. Four 

months later, when I’m really sick, and I go crawling into the doctor’s office, what will the doctor say? ‘‘Why weren’t you here when 

you were sick?’’ And I say, ‘‘Well, I couldn’t afford the deductible,’’ 

and he says, ‘‘I’m sending you to the hospital.’’ If maybe I had come 

in 4 months earlier, I would not have to go to the hospital. 

I think you have a system which has 35 million uninsured, more 

than that underinsured, and here’s the kick. For all of that, we end 

up spending far, far more per capita on healthcare as do the people 

of any other country—close to double, not quite double, but far, far 

more. 

You’re a businessman, Mr. Chairman. Do we get good value for 

what we’re spending? We’re spending a fortune. Do we get good 

value? Are you going to sit here and tell me—which you’re not— 

that all of our people have health insurance? No, they don’t. 

Is our life expectancy as high as many other countries? Well, it’s 

not. Is our infant mortality rate higher? Yes, it is. We do well in 

some diseases. We treat some diseases very well. Some diseases we 

don’t treat particularly well. 

If we are spending all of this huge amount of money, I think the 

end result is that we’re not getting good value for what we are 

spending. What good value means is that everybody in America has 

quality healthcare as a right, and we do it in a cost effective way. 

What is really significant is that we take that burden off of the 

backs of small business people and, by the way, millions of employees, Mr. Chairman, who stay at their jobs, not because they really 

enjoy their jobs, but who stay at their jobs because that job may 

provide good health insurance for them and their kids. That is not 

a good way to grow an economy. You want people to gravitate to 

the kind of work which they enjoy, where they feel passionate 

6 

about it, and not stay on a job simply because they get good 

healthcare. 

I’m reminded that some years ago—you may have read the article—some fellow, I think, in his 50s, who rejoined the military— 

had been in the military and was out—rejoined. Somebody said, 

‘‘Well, why are you going back to the military at the age of 50 or 

something?’’ He said, ‘‘Well, my wife has breast cancer. That’s the 

only way that I can get treatment for her.’’ 

That really should not be the kind of healthcare system that we 

have. I think the best thing that we can do for small and mediumsized businesses is take the burden of an enormously expensive 

and complicated system off of their backs, allow them to go out and 

do their businesses, whether it’s selling shoes or whatever it is, and 

focus on that business rather than getting mired down in the complexities and the cost of health insurance. 

That is why I very strongly believe that the United States should 

join every other major industrialized country with a national 

healthcare program. In my view, it should be a Medicare for all, 

a single payer system. 

With that, Mr. Chairman, I thank you very much for holding this 

hearing. 

Senator ENZI. Thank you. 

As I promised, now we’ll go to our guests at this roundtable, and 

we’ll just go from left to right. You may make a few comments, and 

if somebody wants to comment on the comments, stand your card 

up, and we can do that. Hopefully, we’ll have about 3 to 5 minutes 

from each of you first, and then get into a discussion. 

Another thing that happens with a roundtable, and particularly 

ones we hold on a Monday, is that a lot of the people will have additional questions based on the testimony that you provided and 

also things that their staff people will report to them based on 

what happens here today. I’m hoping that you’ll be willing to answer those questions, too, to provide us with additional information, which then will be circulated to all the members of the committee. Again, thank you for being here. 

Mr. Harte. 

STATEMENT OF THOMAS M. HARTE, OWNER, LANDMARK 

BENEFITS, HAMPSTEAD, NH 

Mr. HARTE. Senator Enzi, Senator Sanders, members of the committee, thank you so much for the opportunity to be here today. I 

look at this as a unique privilege for myself, my company, the professionals all over the country, in having an opportunity to talk 

about the challenges that we have in health insurance across the 

country. 

What’s interesting with Senator Sanders’ comments is I share his 

frustration. I share your frustration, Senator Enzi. We’ve met before. We’ve talked about these challenges. The fact is that small 

employers across the country are paying premiums that are way 

too high. It’s a reflection on the cost of healthcare. 

People always are going after—and, quite frankly, healthcare reform went after health insurance as the issue. When you really 

think about it, if you think about medical loss ratio as one easy example, if 80 percent to 85 percent of our premium dollars are going 

7 

to the cost of healthcare, shouldn’t our conversations be really more 

about healthcare, so we treat the cause, not the symptom? 

Senator Enzi, I represent about 100,000 agents and brokers 

across the country. I also represent 25 individuals who I insure 

back home in small businesses, like mom and pop stores, colleges, 

healthcare, local stores. We do it every single day. 

I’ve been in this business for 25 years. I’ve heard all the stories. 

I’ve seen people canceled for health insurance. I’ve seen people subject to preexisting conditions. The market is not perfect. 

What I hope I can share with you today and members of the committee and my colleagues with the opportunity here today is what 

are the real challenges that Americans are facing with regard to 

their health insurance? Why are their premiums increasing so significantly? Why is the shop exchange not working? It’s a great idea, 

but it’s just not working. 

What is the issue with migrating groups of 51 to 100 over into 

the small group marketplace, and what kind of profound effects 

will that have on those businesses and their economic viability? 

Senator Sanders is right that we are at an international disadvantage when it comes to the cost of our healthcare. 

That’s really what I want the conversation to start going toward, 

so that when you look at competition in the United States of America, there’s competition with health insurance companies, but 

there’s very little competition among healthcare. 

What I want to do and, hopefully, convey to you today is to think 

about—well, look at the State of New Hampshire. In the State of 

New Hampshire, a CT scan of your head from the least expensive 

facility to the most expensive facility is 446 percent different. The 

consumer doesn’t know that. We need to fix that problem so that 

we can reduce the long-term cost of healthcare. 

Again, I sincerely appreciate the opportunity to be here today, 

and I look forward to your questions, Senator Enzi. 

[The prepared statement of Mr. Harte follows:] 

PREPARED STATEMENT OF THOMAS M. HARTE

Good afternoon. My name is Tom Harte and I am the president of Landmark Benefits Inc.; located in Hampstead, NH. I started my small business in 1997 and it 

has become one of the largest independent employee benefit companies in New 

Hampshire. Today, my company provides services to over 300 corporate clients and 

the majority of them are small to mid-sized business owners. My primary goal for 

my clients is to provide innovative solutions that emphasize both quality and 

healthcare cost containment. 

I am proud to be here today on behalf of my professional association, the National 

Association of Health Underwriters (NAHU), which represents approximately 

100,000 health insurance agents, brokers, general agents, consultants and other employee benefit specialists nationally. Just last week, I completed 6 years of service 

as a member of our national Board of Trustees, including serving as the NAHU’s 

national president for 2013–14. As an association member engaged on the national 

level since 1996, I know thousands of brokers from all over the United States who 

serve small businesses with the health insurance challenges. Not only did I consult 

with my own clients about their most critical challenges and opportunities with 

small group coverage that they have asked me to communicate at today’s Roundtable, but I also reached out to my colleagues nationwide so that I could share their 

message today. 

As requested, I have focused my remarks on three topics of greatest interest to 

the subcommittee: 

(1) Status of the small group health insurance market today, 

(2) Tools, resources, and options available to small employers, and 

8 

(3) What is working and not working for small employers, and the policy ideas 

my NAHU colleagues and I have that could improve the small group health insurance market for consumers. 

It is my and NAHU’s hope that now, 5 years into the implementation of the Patient Protection and Affordable Care Act (PPACA), that Congress and President 

Obama will come together with bipartisan solutions to improve the outcomes of ACA 

and resolve many of the unintended consequences that are making coverage more 

expensive and creating burdens for health insurance consumers. 

The Status of Today’s Health Insurance Marketplace for Small Business 

Owners and Their Employees. As a benefit broker from southern New Hampshire, virtually all of my clients and my professional experience are within New 

England. However, thanks to my resources from NAHU and my colleagues from 

across the country, I hope I can effectively communicate the options small business 

owners in other States now have available. 

Currently the small employer marketplace is defined as employers with between 

1 to 50 ‘‘eligible’’ employees for coverage. Every employer is different and, of course, 

many of my clients offer very different benefit options. However, my clients in the 

small employer market always purchase fully insured coverage and, in New Hampshire, we are able to provide four carrier options, of which two of these plans comprise over 95 percent of the small business market. 

One option for small employers is the SHOP exchange and has four provider options with a total of 18 plan choices (5 Bronze, 7 Silver, 5 Gold, and 1 Platinum) 

and many of these plans have limited networks—as a result, many that enroll on 

the SHOP will be forced to lose their doctor. Most of the small employers I represent 

purchase ‘‘silver level plans’’ for their employees and have an employer contribution 

of between 50 percent and 80 percent of the employee and dependent premium. In 

New Hampshire, our typical health plan design provides a $3,000 deductible with 

office co-pays of $25 for primary care and $50 for specialist and a prescription benefit of varying out-of-pocket expense depending on the tier (generic, preferred brand, 

and brand name). 

For the types of plans that I described, the total monthly premium for our clients 

will vary considerably. In recent health plan renewals, our small employer clients 

have been faced with renewals of as high as 46.60 percent with monthly premiums 

for a single employee as high as $726 and $2,168 for a family. 

Client Location Enrolled Deductible Renewal Single Renewal Family Rate Adj. 

[In percent] 

Merrimack, NH (9.1) ....... 51 $3,000 to $4,000 .. $601 to $688 (tiered) .. $1,835 to $2,099 ..... 23.32 

Wrentham, MA (7.1) ....... 8 $500 ...................... $760 ............................. $2,168 ...................... 7.95 

Salem, NH (7.1) ............. 5 $2,000 ................... $297 to $573 (list bill) none .......................... 3.46 

Lawrence, MA (7.1) ........ 36 $1,500 ................... $550 ............................. $1,569 ...................... 12.45 

Berwick, ME (8.1) ........... 3 $2,500 ................... $931 ............................. $2,795 ...................... 21.66 

Bedford, NH (6.1) ........... 29 $4,000 ................... $778 ............................. $2,296 ...................... 46.60 

Derry, NH (6.1) ............... 38 $3,000 ................... $585 ............................. $1,781 ...................... 10.84 

Chelsea, MA (5.1) .......... 2 $2,000 ................... $639 to $726 ............... $1,823 to $2,070 ..... 11.92 

Derry, NH (6.1) ............... 81 $4,000 ................... $540 ............................. $1,756 ...................... 19.50 

An unintended consequence of the ACA, with exception of certain State statutes 

(e.g., Massachusetts) or the allowed ‘‘Grandmother’’ transaction, which varies by 

State, is that carriers are often not able to present small employers with a ‘‘composite rate’’ for health plan premiums. As a result, the small employer now has to 

adjust for the fact that every single employee and dependent has a separate and 

varying monthly health insurance coverage premium based on their age. 

Additionally, small employers are now challenged with economic impact with the 

hiring of new employees and the significant variance of health insurance premiums 

of one employee versus another. By example, if my company elected to have a 

‘‘NON-Grandmothered’’ plan for our health plan, the rate differential for one employee to another would be as high as a 300 percent and thousands of dollars in 

additional expense. 

Single, Age 25 Single, Age 60 Annual 

Difference 

Increase 

(In percent) 

$385.57 ...................................................................................................................... $1,046.44 $7,930.44 273 

9 

Family, Age 30, 30, 6, and 4 

Family, Age 

55, 24, 

and 23 

Annual 

Difference 

Increase 

(In percent) 

$1,364.92 ................................................................................................................... $2,490.75 $24,768.26 183 

While the pricing of coverage varies significantly by State, or even within geographic areas of particular States, my NAHU colleagues indicate that the plan design options and available carrier choices are becoming more and more limited. 

State-by-State pricing varies not only due to medical care cost variations by State 

and region but also because health reform implementation has varied by State. 

Some States still allow small groups to maintain plans that do not include all of 

the ACA reforms and related costs via ‘‘grandmothered’’ plans. Other States have 

essentially required small employers to drop the coverage they had before and purchase plans that include all of the ACA-related changes and their associated costs 

by phasing out or never allowing ‘‘grandmothering.’’ When employers in the States 

with widespread ‘‘grandmothering’’ are eventually forced to shift to post-ACA plan 

designs, then their rate increases will be significant. 

The marketplace I just described is the small group market as it exists right now. 

Today, employers with more than 51 employees have significantly different coverage 

options available to them as they are considered ‘‘large groups’’ for health coverage 

purposes. These employers are not bound by the age rating or composite rating restrictions we see in today’s small group market and their benefit design options and 

associated price points are much more flexible than in the small group market. 

Some will elect to self-fund, that is to pay their own claims, but most prefer the 

security of a fully insured health plan. These employers also have more benefit from 

the implementation of meaningful wellness programs and the incorporation of innovative and cost-saving benefit designs. Although the rates vary widely for employers 

in this market, those employers that have a deliberate focus on having an impact 

on the health plan utilization will generally have lower premiums compared to employers that do not. As the employee benefit broker for these companies; we have 

deployed nutrition, exercise, and health challenge programs that have allowed for 

the sustainability of premiums for many corporations. With a migration to the small 

group market, the benefit these employers receive today with reduced premiums 

will be lost. 

My colleagues and I are very concerned about the planned expansion of the small 

group market in 2016 to employers with 100 employees or less. We anticipate this 

expansion will result in clients of 51 to 100 employees receiving significant premium 

increases in 2016. Furthermore, these clients will not be able to keep the plan OR 

the plan options they have today and, in some cases, their current health plan may 

not serve the small group market. They will also have to adapt their plans to the 

‘‘metal plan’’ design options, which means that their covered services may change 

and be forced to either reduce benefit offerings or increase them to meet the actuarial values tied to the metal plans. 

For example, an employer with a plan actuarial value today of 76 percent would 

have to either reduce coverage to a 70 percent silver plan or raise it to an 80 percent 

gold in 2016. As you would expect, there are coverage and cost consequences to either option. These employers will have to follow the age rating requirements and 

will lose the ability to receive a true composite rate in most circumstances, so their 

pricing for employee premium cost-sharing will need to change dramatically. Furthermore, by forcing these employers into the small group market they will lose 

some of their flexibility to create meaningful wellness, cost-containment, and quality 

components within their plan offerings. Finally, this employer segment will have to 

follow the employer mandate in 2016, meaning that these smaller but vibrant companies that drive local economies will be the only group of employers subject to both 

the employer responsibility and reporting requirements and all of the small group 

reform requirements and associated costs. These are significant changes in a market 

that is exceptionally price sensitive and least able to effectively manage the new 

compliance requirements. 

TOOLS AND OPTIONS FOR SMALL EMPLOYERS

The most important tool any employer has in the management of their health 

plan is a health insurance agent or broker. That’s why, nationwide, more than 90 

percent of small businesses rely on brokers and, according to a Society for Human 

Resources Management (SHRM), 78 percent look to their broker as their No. 1 

10 

source of health reform information. Agents and brokers support their small business clients in choosing and making the most of coverage options by providing assistance, trusted advice and service. Some of the services that I and my colleagues 

provide for our small employer clients include: 

• Comprehensive wellness programming to improve the health and wellness of 

the employees and their dependents. • Deploy health care cost transparency tools to educate the employees of the wide 

variance of cost between health care providers. • Assist employers with the management to the increased complexity of compli- ance. • Manage enrollments, terminations, and COBRA process. • Negotiate renewal rates and identify items that should be considered by carriers when determining renewal premiums (i.e., turnover of personnel, addition of 

new hires, etc.). • Recommend healthcare financing options best suited for the client (i.e., fully insured, self-funded, health reimbursement arrangements, flexible spending accounts, 

health savings accounts). • Provide online and written communication for plan administration. • Advise about new and pending legislation, new plan designs, and premium 

changes. • Assist clients with claim issues and advocate on their behalf. • Analyze the performance of the medical plan and identify key areas of utilization. • Assist clients with requests to doctors and hospitals to improve health care out- comes. • Assist employee family members with the selection of coverage. • Meet with employers/employees to explain benefits, plan designs, and optional 

coverage. • Assist the employer in selecting the appropriate plan(s) that best meets the employer and employee objectives and goals. • Assist employers with billing issues. • Provide or assist with employee Web sites to facilitate access to plan information. • Research and advise on financial viability, credibility, and value of various insurance companies and plan offerings. 

Employers of every size rely heavily on agents and brokers for advice and assistance. The health insurance marketplace has become so complicated with changes in 

legislation, plan design and benefit offerings that my colleagues have become an invaluable resource. Whether the large pizza chain in Boston, the colleges we represent in New Hampshire, the manufacturing facility in Nashua, or the construction 

company in Maine—employers don’t have the resources or expertise to take this 

task on by themselves. 

SMALL GROUP MARKET POLICY RECOMMENDATIONS

We all have a stake in a having a functioning, viable health insurance marketplace for small employers. While the ACA has brought many changes and market 

resources to consumers and employers, I am concerned about policies threatening 

the small group’s viability that could lead to its erosion. The membership of the National Association of Health Underwriters feel that the following policy changes 

would have a significant impact on improving the cost and coverage options available today for our Nation’s small employers and their employees: 

• Passage of the bipartisan S. 1661 to remove agent and broker commissions from 

the medical loss ratio calculation in the small and individual health insurance markets, to ensure small business access to agent and broker services and to economically help the hundreds of thousands of agent small business owners nationwide. 

• Restoration of a state’s ability to set its small group market size at 1–50 employees. 

• Efforts to reduce the new tax burdens on small employers and their employees, 

including the new national health insurance premium tax that adds more $500 a 

year to the average premium for a small group employee and only affects the fully 

insured marketplace and the coming excise tax. 

• A repeal of the employer mandate, or failing that, establishing the eligibility 

threshold at 101 or more employees and a simplification of the eligibility criteria 

so that employers cannot be subject to both the small group market reforms and 

costs and the mandate requirement at the same time. 

• Allowing employers to set the definition of a full-time employee as one that 

works 40 or more hours a week for health coverage purposes. 

11 

• Legislation which allows States to increase the law’s age rating bands from the 

current 3 to 1 spread to bands that more closely resembles the natural breakdown 

of age and meet the needs of a particular state. If a state does not set its own bands, 

the default should be 5 to 1. 

• Restoration of the ability of health insurance carriers to issue employers a composite rate for employee coverage, just as they did prior to the ACA 

• Preservation of the law’s risk-adjustment mechanisms (often referred to as ‘‘The 

Three Rs’’) since they are crucial to preserving long-term private insurance market 

stability. 

• Reviewing the essential benefit and other coverage requirements to ensure that 

they allow individuals and employers the opportunity to buy affordable coverage. 

• Improvements to the SHOP exchange and the small business tax credit to make 

SHOP a more viable coverage option for small employers and to provide more small 

businesses with free-market purchasing assistance. 

In closing, I would like to thank Chairman Enzi, Ranking Member Sanders and 

all of the members of the subcommittee for the amazing opportunity to share information about the opportunities and challenges small business owners like me and 

my clients are having in today’s health insurance marketplace. If you have any 

questions or need more information, please do not hesitate to contact me at either 

(603) 329-4535 or tharte@landmarkbenefits.com. 

Senator ENZI. Thank you. 

Mr. Scott. 

STATEMENT OF JAMES G. SCOTT, OWNER, APPLIED POLICY, 

ALEXANDRIA, VA 

Mr. SCOTT. Senator Enzi, Ranking Member Sanders, and members of the committee, thanks for the opportunity to participate in 

today’s roundtable discussion. Today, I’m here in my capacity as a 

small business owner, but I also work on health policy. 

As you mentioned, Senator, in 2009, I founded Applied Policy to 

help healthcare organizations navigate the Centers for Medicare 

and Medicaid Services. When I started Applied Policy, my biggest 

worry was whether I would generate enough income to feed my 

family. My second biggest worry was how I would find health insurance for myself and my family, because I had always relied on 

my employer to provide that coverage. 

As a health policy consulting firm, I believe we need to walk the 

walk. We work to encourage healthy lifestyles among our employees, and we also want to provide good health insurance. As Applied 

Policy, we have to make sure that all our employees have access 

to high-quality health insurance, and that was the first benefit we 

added. 

To do this as a small business, like you mentioned, you have to 

wash the windows and update your website and all that kind of 

thing nowadays. I needed outside help, so I relied on our insurance 

broker to help us compare a number of options and select a range 

of options for our employees. 

We decided that, as a health policy consulting firm, I should ensure that everybody that worked at Applied Policy had health insurance. We paid the full cost of the HMO option so everybody had 

access to a zero premium plan, and we allowed them to provide 

that premium subsidy toward other options that we provided. 

By 2014, there were seven of us, and six of us have chosen health 

insurance options offered by Applied Policy, and one retains their 

spouse’s coverage. That year, we received two checks from our carrier because of the medical loss ratio. One was for 36 cents, and 

the other was for 12 cents. Those refund checks were accompanied 

12 

by a stern letter directing us to distribute these funds equitably 

among our employees. I gave them each a dime. 

In 2014, when it came time for us to renew our plans for 2015, 

I told our broker that we were happy with what we had. We just 

wanted to renew. They said that now our plans were designated as 

platinum plans, and the premium had increased by 40 percent. The 

HMO option that we had based our subsidy calculation on increased by 48 percent. The year before that, we had also seen double digit increases. 

Our desire to give a premium subsidy to each plan enrollee has 

been affected by the new member-level billing-premium calculation 

requirements. Instead of being able to have an office-wide meeting 

and say, 

‘‘Look, these are our health insurance policy options. Here’s 

our contribution, and here’s the options you have to choose 

from,’’ 

our broker has to have seven individual conversations because of 

the age rating, and the cost of plans varies widely between the 

younger and older employees. 

Generally, we don’t discuss the ages of staff at work, and I believe compensation should be tied to the work the employee does 

and not how old they are. However, this new system requires us 

to tie compensation to age, at least as far as our health insurance 

benefits go. 

We realigned our plan options, and we took advantage of some 

of the new wellness options, and we continue to provide employees 

with a zero dollar plan. I’ve changed my family dental and vision 

coverage to coverage for my wife and I, because now, pediatric vision and dental is embedded in our medical plan. We continue to 

be concerned about what levels of increase we are going to see next 

year and how we can manage the unpredictable changes in benefits 

and rates from year to year. 

With those comments, I’d be happy to answer any questions you 

have. 

[The prepared statement of Mr. Scott follows:] 

PREPARED STATEMENT OF JAMES G. SCOTT

Chairman Enzi, Ranking Member Sanders and members of the committee: Thank 

you for the opportunity to participate in this roundtable discussion regarding small 

business health care challenges and opportunities. 

I am here today in my capacity as a small business owner, but I also work on 

health policy. In 2009, I founded Applied Policy to help health care companies, including providers, manufacturers, suppliers, insurers, trade associations and specialty societies navigate the Centers for Medicare & Medicaid Services. We are not 

lobbyists, rather, we take our clients concerns into account, explain the opportunities and threats posed by new legislation and current and proposed changes to regulations that apply to those concerns. We then work with them to find solutions that 

not only benefit the client, but also foster a government that serves the people as 

intended. 

When I started Applied Policy, my biggest worry was whether it would generate 

enough income to feed my family. My second biggest worry was how I would find 

health insurance for my family because I had always relied on my employer to provide that coverage. 

When I first hung out my shingle, I had to buy health insurance for myself and 

family and go through the underwriting process. Fortunately, I worked with an insurance broker who helped us navigate the process and we were able to secure good 

coverage. After completing that process, I realized why that process caused so much 

angst among others and how we were fortunate to get a good result. 

13 

As I began to hire staff, I had to consider not only what salaries I would offer, 

but also what benefits highly qualified staff would expect. Moreover, working as a 

health policy consulting firm, I felt that Applied Policy should make sure all its employees had access to good health insurance. The first benefit I tried to add was 

health insurance. 

The first person I hired was in 2010 and the Affordable Care Act had just passed 

and allowed all individuals under age 26 to remain on their parents’ health insurance plan. The first person I hired was under age 26 and chose to stay on her parents’ insurance. The implications of this were that I did not yet meet the ‘‘group’’ 

criteria and had to maintain my individual insurance at underwritten rates until 

I hired an employee willing to sign up for a group health insurance policy. 

Then, I hired my second employee. Our insurance broker helped me compare a 

number of options and select three plan options: an HMO; a point-of-service (POS) 

plan; and a PPO. Applied Policy decided to pay a larger subsidy than the law required so its employees could have access to a $0 premium plan. Therefore, I paid 

the full cost of individual coverage for the HMO and allowed the employee to elect 

to have additional funds withheld from their paycheck to upgrade to the POS or 

PPO options. We also provided optional vision and dental insurance. 

As we added more staff, Applied Policy continued its policy to provide its employees with access to a $0 plan. By 2014, there were seven of us, with five electing 

one of our plans and the other two choosing to remain on other health care insurance through their spouse or parents. 

That year, Applied Policy received two checks from our carrier because of the 

Medical Loss Ratio calculation. One was for 36 cents and the other was for 12 cents. 

Stern instructions accompanied the checks stating the law required Applied Policy 

to share the funds with our employees. Therefore, I gave each of the plan enrollees 

a dime. 

In July 2014, when it came time for us to renew our plans for 2015, I told our 

broker that we would like to keep the same plans as we currently had. She informed 

us that the plans had been recently designated as ‘‘Platinum Plans’’ and the insurance premiums increased by 40 percent. The HMO option that we had based our 

subsidy calculation on increased by 48 percent. The year before, we had also seen 

double-digit increases in our rates. 

Our desire to give a premium subsidy to each plan enrollee sufficient to enroll 

in a $0 premium plan was affected by the new age-rating requirements. Instead of 

being able to have an office-wide meeting, explain the health insurance options, 

show the 2015 rates and Applied Policy’s contribution toward them, our broker had 

to have seven individual conversations. This is because the cost of the plans varies 

widely between young and older subscribers, and results in a greater premium subsidy the older the employee is. We do not discuss the ages of our staff at work and 

I believe compensation should be tied to the work the employee does, not how old 

they are. However, the age-rating system forced us to tie compensation to age, at 

least for our health insurance benefits. 

We realigned our plan options, taking advantage of some of the new wellness options, and continue to provide employees with access to a $0 premium plan, but I 

have changed my family vision and dental coverage to coverage just for my wife and 

I, since pediatric vision and dental coverage is now included in our health insurance 

plan. I have not been able to determine whether the 40 percent increase was the 

result of additional benefits being required by law, the new rating rules, an opportunistic rate hike by the insurer, or a combination of all three. 

With that as background, I would like to answer the questions you provided to 

me before this roundtable: 

What is the current status of the health insurance market for small businesses, specifically plan options and costs in the small group market? 

The current status is uncertain. Small employers are receiving mixed messages 

regarding what a ‘‘good’’ employer should do. Am I expected to continue to make 

employer-sponsored coverage available to its employees, should I use the SHOP exchange to make coverage available to their employees, individuals should obtain 

their own coverage through the individual Exchanges, or should I be able to do 

whatever I feel is best for my business? 

In addition, the changes in rates are unpredictable from year-to-year, and one 

major aspect of running a business is to have recurring expenses like health insurance premiums be predictable. 

I get the feeling that the rules are being developed with the assumption that 

small businesses do not want to provide health insurance benefits to their employees or are aiming toward the minimum requirements. 

14 

What tools and options are available and useful for small employers to 

offer some assistance to their employees? 

Our insurance broker has been an invaluable resource. In addition to helping us 

renew our plans and analyze options that offer us a robust provider network, a good 

benefit package and the best value in terms of premiums and cost-sharing, she 

helps us identify and comply with legal requirements like the section 125 plan, 

helps us welcome on-board new employees, and answers questions about providers, 

benefits and cost-sharing for my employees. 

What has worked, what hasn’t worked and what policy recommendations 

do you have for the committee? 

I encourage the committee to recognize in its policymaking that small businesses 

are all different. Some want to provide health insurance to their employees that exceeds Federal standards and others will take a different approach. 

My employees want access to providers, a good benefit package and fair premiums 

and cost-sharing. As an employer, I want to provide that to them. More could be 

done to help employers and employees compare the total costs of coverage rather 

than choose the lowest premium plan and be surprised by the high out-of-pocket expenses when they visit the doctor. 

Please keep in mind that our employees want stable and predictable coverage so 

they can keep their doctor from year-to-year, become comfortable with benefits and 

the cost-sharing obligations, and have confidence that if they have to go to the hospital, their insurance coverage will help pay the costs. I want my employees to have 

that kind of coverage so that they can focus on work, get healthcare services when 

they need to, and not worry about their health insurance coverage. 

Thank you again for the opportunity to participate in this roundtable. I would be 

happy to answer your questions. 

Senator ENZI. Thank you. 

Mr. Conklin. 

STATEMENT OF J. KELLY CONKLIN, OWNER, FOLEY WAITE 

LLC, KENILWORTH, NJ 

Mr. CONKLIN. Thank you, Senator Enzi, and I too appreciate the 

opportunity to be heard here today. I’m here representing not only 

my small business but my colleagues in the Main Street Alliance, 

both the national organization and the New Jersey organization. 

Let me start by saying that I, with the utmost affirmation, support the Affordable Care Act. I do that because I think it provides 

fundamental cornerstones for establishing a fair and reasonable 

standard for healthcare insurance, and through that establishes 

the doorway for access to health insurance. Without those standards—and I’ll probably reiterate this several times today—it’s impossible to know, from the perspective of a small business owner, 

what you’re buying. 

I’ve said before that in order to make an informed choice in purchasing health insurance, you need to be an actuarial to understand what the real risks are. You need to be a doctor to understand what the formularies provide. It wouldn’t be bad to be an attorney with a background in business contract law and, specifically, 

health. To top it off, it might not be a bad idea to be Nostradamus 

so you could predict the future and actually know what you needed 

to buy. 

To imply that I, as a cabinet maker from New Jersey, can make 

an informed decision for myself and my employees about what 

health insurance is best for them is a stretch. Consequently, what 

it means to me is that—I’m lucky because I live in New Jersey and 

work in New Jersey, and we had protections built into New Jersey 

insurance law. Things like essential health benefits were established before the Affordable Care Act. 

15 

Our experience has been as the Affordable Care Act came into 

place, aside from the significant adjustment that occurred with age 

banding—and I have several older employees, and that was kind 

of a shock—we’ve experienced between 10 percent and 15 percent 

increases in our premiums. A reasonable person and I think a 

sound businessman would say, ‘‘Wow, that’s significant,’’ and I 

wouldn’t argue with them. We’ve absorbed increases in the past of 

38 percent and 40 percent. 

One year when we tried to maintain our plan, we got a 138 percent increase from Aetna insurance. By the way, we’re back on 

Aetna, and Aetna, this year, provided a plan—again, I can’t speak 

specifically to the quality per se of the plan, but we were able to, 

with our insurance agent, buy a plan that was 2 percent less in 

premium costs and actually reduced deductibles by $500. It came at a cost—$6,000 a year total exposure because of coin- surance for an individual and $12,000 a year as a potential exposure for families. That doesn’t sound like a great plan to me if 

you’re unlucky. It’s the plan that we can afford, and it’s the plan 

that provides a window or a doorway into care that might, as Senator Sanders enumerated earlier, avoid a catastrophic event for a 

family. 

Having said that, I’m going to skip right to the bottom line and 

say that access to care, in my view and over my years of experience 

in purchasing healthcare and paying attention to this issue, is the 

key. We have to ask ourselves today and every day going forward 

what it is we’re trying to accomplish. Are we actually trying to accomplish affordable, reliable, accessible healthcare for the American people? Or is there an alternative at work here, an alternative 

motivation that we don’t understand? 

Personally, I think at some point about 30 years ago, we made 

a decision to monetize healthcare. When we did that, we changed 

the entire relationship between doctors and patients, insurance 

companies, premium buyers, the whole deal, and we did it without 

really understanding long-term what the consequences are. 

Now we know what the consequences are. The consequences are 

a very high cost for what is an inefficient—I won’t even use the 

word, system—approach to delivering healthcare to the American 

people that results in poor quality outcomes and higher costs. Until 

we come up with a way—I don’t know whether I agree with Senator Sanders entirely that it’s a single payer system. 

Until we all agree that every American should have a card in 

their pocketbook or wallet that gives them access to a physician 

when they need a physician wherever they need a physician, my 

employees and I are going to spend too much for healthcare. 

[The prepared statement of Mr. Conklin follows:] 

PREPARED STATEMENT OF J. KELLY CONKLIN

Chairman Enzi and Senator Sanders, thank you for the opportunity to participate 

in today’s roundtable to discuss the experience of small business owners purchasing 

coverage in the small business health insurance market. My colleagues and I at the 

Main Street Alliance, a national network of small business owners, proudly supported the passage of the Affordable Care Act. Today, I am eager not only to discuss 

how the law currently works for small business owners, but also to discuss how the 

law should be developed to ensure that it works for all small business owners. 

What is the current status of the health insurance market for small businesses; specifically plan options and costs in the small group market? 

16 

Let me start by reiterating that I am a strong supporter of the Affordable Care 

Act and believe that the ACA is an important and crucial step forward for millions 

of Americans in gaining access to affordable healthcare coverage. Today, I’m here 

to discuss the ways in which I believe that the ACA should be improved to strengthen the program for small business owners. 

Small business owners’ experience in the small business market varies from State 

to State. From our perspective as a New Jersey company, we purchase health insurance in the small group market as we always have, through an agent. There is little 

appreciable difference between now and before the ACA in terms of options. There 

are many plans available to choose from and there is the same confusing, arcane 

language in the policy documents and in how the various plans are presented. That 

makes meaningful comparison among the plans almost impossible beyond the most 

basic considerations: premium cost, co-pays, deductibles and maximum annual outof-pocket costs. As a small company with tight margins the first consideration is always premium cost. 

Premium Increases. Premium increases over the previous 2 renewals, 2013/2014 

have been in the neighborhood of 10 to 15 percent. That said this year’s is down 

about 2 percent and we reduced deductibles for the individual to 2,000 from 2,500. 

That did come with an annual increase in total maximum out-of-pocket from 5,000 

to 6,000 per individual and 12,000 per family. 

Age Banding. There was an initial ‘‘shock’’ when the new price schedules were implemented using age as the determinant factor of premium rates. In that initial adjustment we had the biggest rate increase in some time as a result of our older population of employees participating in our plan. As I recollect that was around 18 

percent. 

Weak Rate Review. New Jersey does not have a strong rate review process nor 

does the Federal exchange that serves New Jersey. It would help consumers like 

me if a strong rate review policy were set in place. Strong rate review has helped 

dampen down premium increases elsewhere. The ACA review process is weak. It 

only requires insurers to file rates if they exceed 10 percent and then it has no enforcement. A rate review where the exchange could deny rates before they are used 

would be much more useful. 

Active Purchasing. Furthermore, the exchanges are not what we call ‘‘active purchasers.’’ They do not negotiate price and quality on behalf of the consumers. All 

exchanges should be required to do this. 

Premium Aggregation. Some exchanges around the country are abandoning premium aggregation. This is an important tool for small businesses because it permits 

us to send premium dollars to the exchange and they pay the insurers. This eases 

the administrative burden. It appears to be a technology problem in some exchanges 

and it needs resources to fix it. 

Increase Competition. One other thing would help with cost—very robust competition. I talk to my fellow small business owners around the country and discover that 

many of the SHOP exchanges have very little competition. Insurance companies 

that offer in the individual market should be required to offer in the SHOP exchanges also. 

What tools and options are available and useful for small employers to 

offer some assistance to their employees? 

This is a difficult question to address. There is more information than ever available to anybody with enough time to investigate the available plans in their respective areas. In New Jersey with its high density, well-off population, the market is 

relatively rich affording options on the individual market that did not exist prior 

to the ACA through the exchange. Choosing a plan can be a daunting experience, 

filled with uncertainty and anxiety. Thankfully the comprehensive consumer protections I mentioned previously are in place to reduce the actual risk to individual consumers. 

Tax Credits. It would help enormously if the small business tax credits were available to more small businesses. Currently only those with under 25 employees qualify. This should be expanded to at least 50. The salary limitations also should be 

increased. Small businesses want their employees insured and better credits would 

be a great help. 

Cost of Older Dependents. We recently had our oldest employee move to Medicare. 

His younger wife could no longer be covered under our plan. In the exchange they 

were able to purchase a slightly higher quality plan, lower deductible, lower co-pays, 

for about $50 more per month than the coverage she had under our plan. Medicare 

with part D and the additional supplements making his coverage complete, saved 

us enough in premium cost to raise his compensation to cover his additional outof-pocket expenses and his wife’s coverage, while saving us about $200 per month. 

17 

What has worked, what hasn’t worked, and what policy recommendations 

do you have for the committee? 

From my perspective, the ACA has been an incredibly important program for individual consumers. It’s time to take the next step and ensure that the ACA also 

works for small business owners and their employees. 

In terms of next steps for improving the ACA, there are a number of things that 

might be done. Repeal is not one of them. Nor is a piece-by-piece alteration of the 

law that will have the same effect as repeal. Congress must act to restore faith that 

changes to the ACA come by way of improving access to care and by means resulting in affordable quality health care, not political victory laps. 

Let’s start with what is working. The consumer protection and community rating 

provisions of the ACA have been a success and must be preserved. 

Consumer Protections. New Jersey’s robust consumer protections prior to ACA, including EHB’s and no exclusion for pre-existing conditions, made cost increases in 

our market tolerable. The uniform consumer protection standards contained in the 

ACA for health insurers, along the lines of New Jersey’s, is a critical piece of the 

ACA that cannot be tampered with. No lifetime limits and no exclusions for preexisting conditions are cornerstones of increased access and financial security and 

should not be altered as well. These features along with the MLR have had the expected effect of containing both premium increases and cost shifting by providers. 

This along with other features of the ACA is working to decelerate the rate of health 

care cost increases. 

Community Rating. Another critically important piece of the ACA that must be 

preserved is Community Rating. Community rating is enormously important to 

small businesses. If a little business has a plan and an employee gets cancer or 

renal disease, we need to be protected from disaster. We also need to be protected 

from the simple process of aging. The community rating system should be improved 

by placing stricter limits on age banding. 

Improvements to ACA. I also believe that there are some basic policy measures 

that would dramatically improve the ACA for small business owners. 

Tax Credits. As mentioned previously, Congress should expand the tax credits 

available to small business owners so that businesses with larger workforces or 

higher paid workers have access to those incentives. Currently these incentives are 

only available to business owners who employ 25 or fewer employees. This should 

be expanded to at least 50 employees. The salary limitations should be increased. 

Small business owners want their employees covered and better tax credits would 

help. 

Require SHOP Participation. Insurers who participate in the individual market in 

a given State should also be required to participate in the SHOP exchange in that 

State. This would ensure much needed competition in the exchanges. 

Rate Review. Congress and the States should implement stronger rate review, including ‘‘prior approval’’ policies. 

Technology. More investment should be directed toward technological improvement in the SHOP exchange market places. This should be done in a way that eases 

the administrative burden for participating small businesses. 

Active Purchasing. Congress should require that the exchanges become active purchasers who negotiate rates and quality for their customers. This is an important 

bargaining measure that ensures better consumer costs. 

Medicaid Expansion. I urge you to do everything in your power to foster the expansion of Medicaid. This program undergirds the market by assuring that cost 

shifting is reduced and many at-risk populations are covered. Our businesses draw 

their customers from the neighborhoods that surround them. If there are huge coverage gaps in those neighborhoods, we lose business. Not having Medicaid expanded 

is costing us all. 

The ACA is the first major step toward providing universal access to health care, 

an as yet unmet goal of the reform effort. As long as access is determined by one’s 

ability to pay, whether at the point of service or in the purchase of insurance, our 

health care costs will continue to climb while quality and availability of care continues to decline. Voluntary charity care remains an inadequate alternative to mainstream access and that shortfall continues to contribute substantially to cost shifting and deferred care, leading to expensive and poor outcomes. We can do better. 

I don’t live in a Magical Market Place where innovation and quality are always 

rewarded and fraud, abuse, incompetence and inefficiency are always weeded out. 

In the long run, the best way to ensure that the American healthcare system works 

for small businesses is to take the employer out of the health insurance provision 

business all together. Not by cutting people off, but by ensuring that everyone in 

America has access to quality care. Until every American has a card in their purse 

or wallet that guarantees access to a doctor—any doctor, anywhere, until emergency 

18 

1 Blavin F, Garret B, Blumberg L, Buettgens M. Monitoring the Impact of the Affordable Care 

Act on Small Employers: Literature Review, October 2014 (Washington, DC). Available at 

rooms only serve emergency patients and not emergency patients and the uninsured, I and my employees will pay too much for too little. 

Our goal must be a comprehensive, all-inclusive health care delivery system in 

the United States. We should get on with it. 

Thank you, Chairman Enzi and Senator Sanders. It has been a pleasure speaking 

with you today. 

Senator ENZI. Thank you. 

Ms. Corlette. 

STATEMENT OF SABRINA CORLETTE, J.D., SENIOR RESEARCH 

FELLOW AND PROJECT DIRECTOR, GEORGETOWN UNIVERSITY, WASHINGTON, DC 

Ms. CORLETTE. Thank you, Chairman Enzi. It’s a real honor to 

be here today. I’m going to be very, very brief, because I think the 

questions that you provided us in advance are really just right to 

allow us to really dive into the details of this issue. I’ll save the 

substance of my comments for those. 

I would just like to say, I want to thank you for having this 

roundtable. I think the moment is a timely one. It may be hard for 

some of us to believe, but we’re a little bit more than 5 years after 

enactment of the Affordable Care Act. It’s a great moment to sort 

of pause and sort of do a temperature check to see where is the 

small group market. 

We at the Center on Health Insurance Reforms have been doing 

some research looking at changes in the small group market in the 

wake of the Affordable Care Act, and the incentives for many small 

businesses have changed. I think policymakers and those that are 

concerned about employees and employers’ ability to recruit and retain a healthy and productive workforce need to assess where we 

are and where we’re going. I look forward to the discussion. 

Thank you. 

[The prepared statement of Ms. Corlette follows:] 

PREPARED STATEMENT OF SABRINA CORLETTE, J.D. 

Chairman Enzi, Ranking Member Sanders, thank you for the opportunity to participate in today’s roundtable discussion of issues confronting the small business 

health insurance market. The three questions you’ve asked us to discuss today can 

help you and your colleagues hone in on policies to help support small businesses’ 

efforts to recruit and retain healthy and productive workers at an affordable cost. 

What is the current status of the health insurance market for small businesses, specifically plan options and costs in the small group market? 

For a number of years now, employer-sponsored insurance has been eroding, and 

the decline has been more pronounced among small businesses. Small business owners have long struggled with high and often volatile premium costs relative to large 

businesses, a lack of market power when negotiating premiums, and high administrative costs associated with covering a small number of workers. In addition, minimum participation requirements used by insurers to safeguard against adverse selection used to mean that small employers often could offer only one plan and had 

to contribute a hefty portion of employees’ premiums in order to encourage enough 

employees to enroll in the plan. These pressures have contributed to the steady decline in the number of small businesses offering coverage, from 44.5 percent in 2002 

to 35.2 percent in 2012, leaving their employees disproportionately more likely to 

be uninsured compared to larger firms. Furthermore, even small business workers 

who were fortunate enough to receive insurance have historically had less generous 

coverage than their large business peers and have faced significantly higher 

deductibles and lower employer contributions for dependent coverage. Small employers have also been less likely to offer their employees a choice of insurers or plans.1

19 

http://www.urban.org/UploadedPDF/413273-Monitoring-the-Impact-of-the-Affordable-Care-Acton-Employers.pdf. (Derived from Medical Expenditure Panel Survey—Insurance Component 

(MEPS–IC) summary tables, AHRQ 2002–12). 2 42 U.S.C. § 18031(b)(1)(B) (2010). 

3Kingsdale J, How Small-Business Health Exchanges Can Offer Value to Their Future Customers—And Why They Must. Health Aff (Millwood). 2012;31(2):275–83. 4 U.S. Government Accountability Office, Small Business Health Insurance Exchanges: Low 

Initial Enrollment Likely due to Multiple, Evolving Factors, Nov. 2014 (Washington, DC). Available at http://www.gao.gov/assets/670/666873.pdf. 5 Blumberg LJ, Rifkin S, Early 2014 Stakeholder Experiences with Small-Business Marketplaces in Eight States, August 2014 (Washington, DC). Available at http://www.urban.org/ 

UploadedPDF/413204-Early–2014-Stakeholder-Experiences-with-Small-Business-Marketplacesin-Eight-States.pdf. 6 U.S. Department of Health and Human Services, Center for Consumer Information and Insurance Oversight, Small Business Health Options Program (SHOP) (Washington, DC). Available at http://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/ 

2015-Transition-to-Employee-Choice-.html (accessed February 12, 2015); see also Dash SJ, Lucia 

Continued 

The small group market provisions of the Patient Protection and Affordable Care 

Act (ACA) were designed with the goal of making it easier for small businesses to 

offer adequate and affordable coverage to their employees. Key pillars of the strategy included changes to insurance rules, which for example broadened risk pooling 

for small businesses and ensured that minimum participation requirements do not 

have to be a barrier to small firms offering coverage to their workers. In addition, 

the new ‘‘SHOP’’ marketplaces offer small businesses a range of group health plans, 

including the ability for employees to choose their own plan. 

What tools and options are available and useful for small employers to 

offer some assistance to their employees? 

In many ways, small employers have some of the most coverage options of any 

other group, and their options have expanded under the ACA. They can choose to 

offer coverage or not, without facing a penalty. They can choose whether or not to 

enroll in the SHOP, in a private exchange, or directly with an insurer. They can 

also decide whether to offer their employees a choice of plans, and, through the 

SHOP or a private exchange, set a defined contribution level. 

The ACA created new options and insurance standards in order to address some 

of the most glaring problems with small business coverage, including unpredictable 

premium increases because of changes in an employer group’s health status, limited 

benefits, pre-existing condition benefit exclusions, and high out-of-pocket costs. Consistent with the changes effected for the individual market, the small group insurance reforms thus included new rating rules prohibiting variation in premiums 

based on health status, required minimum essential health benefits and first-dollar 

coverage of approved preventive services, ended limits or exclusions from plan benefits based on pre-existing conditions, and capped enrollees’ annual out-of-pocket liability. 

In addition, insurers offering products in the small group market are now required to set rates using a single statewide risk pool that includes both healthy and 

sick enrollees across all of their small group plans in the State. Small employers 

can also avoid having to meet minimum participation and contribution thresholds 

if they obtain coverage during an open enrollment period running from November 

to December each year. 

NEW OPTIONS FOR SMALL EMPLOYERS

SHOP marketplaces and tax credits 

The ACA created the Small Business Health Options Program (SHOP) to provide 

new, State-based exchanges, or marketplaces, where small businesses can more easily shop for health insurance.2 Responding to small business owners’ concerns about 

their inability to give employees a choice of health plans,3 SHOPs are designed to 

provide an ‘‘employee choice’’ option. As envisioned, instead of having to make a 

‘‘one-size-fits-all’’ plan decision for their employees, the employer sets its contribution level and lets each employee choose the plan that best suits his or her needs. 

With few exceptions, the SHOPs have been slow to get off the ground and enrollment has been low.4 During the first year of operation, only a minority of States 

had the technical capability to offer on-line enrollment, and fewer still prioritized 

the SHOP in their marketing and outreach campaigns.5 In addition, mandatory implementation of employee choice was delayed in both 2014 and 2015, resulting in 

uneven rollout of this option across States. This year, 32 States are providing some 

form of employee choice; the feature is expected to be available nationwide in 2016.6

20 

KW, and Thomas A, Implementing the Affordable Care Act: State Action to Establish SHOP 

Marketplaces, March 2014 (Washington, DC). Available at http://www.commonwealthfund.org/ 

∼/media/files/publications/issue-brief/2014/mar/1735ldashlimplementinglacalstatel 

actionlshoplmarketplaceslrb.pdf. 7 Alvarado A, Rae M, Claxton C, Levitt L, Examining Private Exchange in the Employer-Sponsored Insurance Market, Sept. 2013, Kaiser Family Foundation (Menlo Park, CA). Available at 

http://kff.org/private-insurance/report/examining-private-exchanges-in-the-employer-sponsoredinsurance-market/. 8 5 C.F.R. § 147.140 (2015). 

9 U.S. Department of Health & Human Services, Insurance Standards Bulletin Series—Extension of Transitional Policy through October 1, 2016. Center for Consumer Information & Insurance Oversight, Mar. 5, 2014. (Washington DC). Available at http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/transition-to-compliant-policies–03–06–2015.pdf. 10Lucia KW, Corlette S. Update: State Decisions on the Health Insurance Policy Cancellations 

Fix, Jan. 8, 2015, The Commonwealth Fund Blog (New York, NY). Available at http:// 

www.commonwealthfund.org/publications/blog/2013/nov/state-decisions-on-policy-cancellations 

-fix. 

11 U.S. Government Accountability Office, Small Business Health Insurance Exchanges: Low 

Initial Enrollment Likely due to Multiple, Evolving Factors, Nov. 2014 (Washington, DC). Available at http://www.gao.gov/assets/670/666873.pdf. 12 U.S. Department of Health and Human Services, Center for Consumer Information and Insurance Oversight, Insurance Standards Bulletin Series—Extension of Transitional Policy 

through October 1, 2016 (Washington, DC). Available at http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/transition-to-compliant-policies–03–06–2015.pdf. 

A growing number of private exchanges offer another entre ́e into the market, generally allowing one-stop shopping, defined contributions and employee choice, much 

like the SHOPs.7 These exchanges may be run by insurance carriers, insurance brokers, or in some cases by employee benefit firms. 

The ACA also included small business premium tax credits to help make insurance more affordable for some very small employers with moderate-income workers. 

These tax credits are available only to businesses that enroll through the SHOP, 

and only through 2016. To date, few small businesses have made use of these credits, likely due to the narrow and complex eligibility requirements and relatively low 

credit amounts. 

Non-compliant plans 

Under the ACA reforms, many small employers—and their employees—will benefit from the new rating and benefit standards and cost-sharing protections. Others, 

particularly those with younger and healthier workers, may face premium increases 

as they are brought into a single risk pool that includes older and sicker workers. 

Several alternative coverage options currently enable such employers to circumvent 

the single risk pool, leaving the higher risk people who remain in the pool to face 

higher premiums than would otherwise have been the case and threatening the 

long-term viability of the small group market. 

Many small group plans are exempt from the ACA market reforms. Some are considered ‘‘grandfathered’’ because they were in existence before the law was passed 

in 2010 and have not made significant changes to benefits.8 Over time, the importance of grandfathered plans is expected to diminish as benefits and cost-sharing 

are inevitably updated. Other small group plans were granted a reprieve under a 

transitional rule that allows small employers and individuals to remain on the 

health plans in which they were enrolled before the ACA reforms went into effect 

in 20149—the so-called ‘‘grandmothered’’ or transitional plans. Not all States implemented these transitional rules, and some required small employers to transition to 

ACA-compliant plans in 2014.10 While comprehensive data on how many small employers have remained on their pre-ACA plans are lacking, anecdotal evidence suggests a good many did.11 In most States, these employers will be permitted to hang 

onto their old plans until October 1, 2016 (for coverage extending into 2017).12 If, 

as expected, it is mainly employers with younger, healthier workers that are remaining in transitional plans, the risk pool for ACA-compliant small group plans 

and the SHOP exchanges is likely less healthy than it otherwise would have been, 

putting upward pressure on premiums for employers on these plans in the short 

term. However, as healthy groups transition off their pre-ACA plans, the overall 

risk profile of the small group market should stabilize. 

Self-funding 

Small employers with healthy groups may also find it tempting to self-fund coverage, meaning that they bear the risk of employees’ medical claims. As with the 

non-compliant plans, such a move exempts them from many of the ACA’s rating and 

benefit reforms and could help lower their costs, at least initially. However, selffunding can also pose significant financial risks for employers and is usually accomVerDate Nov 24 2008 16:15 Jul 11, 2017 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6621 S:\DOCS\95491.TXT CAROL
21 

13 Buettgens M and Blumberg LJ, Small Firm Self-Insurance Under the Affordable Care Act, November 2012 (Washington, DC). Available at http://www.commonwealthfund.org/∼/media/ 

files/publications/issue-brief/2012/nov/1647lbuettgenslsmalllfirmlselflinsurancelunder lacalib.pdf. 14Kaiser Family Foundation and Health Research & Educational Trust, 2014 Employer 

Health Benefits Annual Survey, September 2014. (Menlo Park, CA). http://files.kff.org/attachment/2014-employer-health-benefits-survey-full-report. 15 Blavin F, Shartzer A, Long SK, Holahan J, Employer-sponsored Insurance Continues to Remain Stable under the ACA: Findings from June 2013 through March 2015, June 2015 (Washington, DC). Available at http://hrms.urban.org/briefs/Employer-Sponsored-Insurance-Continues-to-Remain-Stable-under-the-ACA.html. 16Furman J, The Economic Benefits of the Affordable Care Act, White House Council of Economic Advisors Blog, April 2, 2015 (Washington, DC). Available from: https://www.white 

house.gov/blog/2015/04/02/economic-benefits-affordable-care-act. 

panied by a reinsurance or stop-loss policy to cover unexpectedly large claims. Increasingly, these stop-loss policies are incorporating very low thresholds (or attachment points) above which claims are covered; self-funding employers purchasing 

these policies can mimic traditional health insurance while avoiding health insurance regulations. Researchers have projected that use of such low-risk stop-loss policies can lead to large premium increases for employers remaining in the regulated 

small group market,13 undermining stability. A few States have moved forward to 

protect their small group market from the risks of self-funding, primarily through 

the regulation of very low-attachment point stop-loss coverage. 

At this time, there is limited evidence that small employers are transitioning to 

self-funding in significant numbers.14 However, employers moving off of transitional 

plans over the next couple of years may have greater incentives to self-fund. In addition, when the ACA’s small group market reforms are extended to employer 

groups with 51–100 employees, more mid-sized employers may look to self-funding 

as an option. 

Discontinue offering coverage 

Small employers are not subject to the ACA’s employer mandate and some, particularly those of very small size (less than 10) or with low-income employees, might 

find it advantageous to drop coverage (perhaps raising wages to compensate) and 

encourage workers to seek premium subsidies and enroll in a plan through the individual health insurance marketplaces. Evidence of this is anecdotal at this point, 

and reductions in offer rates appear to be modest so far.15 While a shift out of employer-sponsored coverage reduces employers’ health-related costs, workers lose the 

benefit of pre-tax contributions to their premiums and would have to pay taxes on 

any higher wages. For lower income workers however, many may benefit from Federal premium and cost-sharing subsidies. 

What has worked, what hasn’t worked, and what policy recommendations 

do you have for the committee? 

WHAT’S WORKING

All employers, including small employers, are benefiting from the unprecedented 

slowdown in health care cost growth. Since the ACA was passed, we have seen the 

slowest growth in health care prices in 50 years. And the three slowest years of 

growth in real per capita national health expenditures on record were 2011, 2012, 

and 2013. In employer-based coverage, the average annual family premium was approximately $1,800 lower in 2014 than it would have been if premium growth since 

2010 had matched the 2000–10 average rate of growth.16

Employers—and their employees—are also benefiting from the ACA’s prohibition 

on discrimination due to pre-existing conditions. No longer can an insurer refuse to 

cover the care for a new employee because he or she had a medical condition before 

being hired. Nor can those small employers with a higher proportion of older workers or women be charged a higher premium than competitors with a younger or predominantly male workforce. And small employers no longer have to worry that an 

employee with cancer, or a difficult pregnancy, will cause their premiums to spike. 

For those many small employers who have not been able to offer their workers 

coverage, they now know there is a viable, high quality alternative coverage option 

for their employees. Whether through the ACA’s health insurance marketplaces or 

in States adopting the Medicaid expansion, many lower-wage employees may be 

able to find affordable coverage for themselves and their dependents for the first 

time. Even when they cannot afford to offer coverage to their workers, small business employers know that health coverage is critical to maintaining a healthy and 

productive workforce. 

22 

What is not working 

Without question, the SHOP exchanges have been slow to get off the ground. At 

this time, they are not able to provide a sufficient ‘‘value add’’ to convince small employers—and (more importantly) their brokers—that a move to a SHOP exchange 

is worthwhile. Premiums for the same plans inside and outside the SHOP are required under the ACA to be the same, and as noted previously, the small business 

tax credits are narrowly drawn and difficult to apply for. As a result, the SHOP has 

not been able to offer small businesses a price advantage. Perhaps even more challenging, the commissions for brokers inside and outside the SHOP are the same, yet 

enrolling a business in the SHOP currently takes more time than direct enrolling 

them with an insurer. As a result, brokers have no financial incentive to propose 

SHOP as an option to their clients. 

Policy recommendations 

1. Discourage self-funding among employers with fewer than 50 employees. Allowing healthy and younger small groups to self-fund will cause adverse selection and 

premium increases for those employers in the regulated small group market. Yet insurers are increasingly using low-attachment point stop-loss packages to entice 

smaller and smaller groups to self-fund (knowing they can dump them back into the 

small group market if their risk deteriorates). Such products make a farce out of 

the term ‘‘self-funded.’’ When a product looks, acts and breathes like health insurance, it should be regulated as such. Congress should define ‘‘self-funding’’ to exclude these low-attachment point products. 

2. Encourage the administration to delay implementation of the ACA’s requirement that employer groups of 51–100 become part of the small group market, and 

commission a study of the potential benefits and risks of such a change. While some 

employer groups will undoubtedly benefit from the small group market insurance 

reforms, the most immediate concern is that premiums for younger, healthier 

groups of this size could face a significant premium increase. Over the longer term, 

some of these mid-sized groups could face a greater incentive to self-fund, leaving 

sicker, older groups in the traditionally regulated small group market. At a minimum, policymakers need better data about the impact of this policy change. 

Thank you Mr. Chairman, Senator Sanders and members of the subcommittee for 

the opportunity to join this discussion today. 

Senator ENZI. You were really brief. 

Ms. CORLETTE. I told you I’d be brief. 

Senator ENZI. Did you want to make any comments at this point? 

Senator MURPHY. No, I don’t. I’m good. 

Senator ENZI. OK. I appreciate all those comments. You’ve given 

me a lot to think about already. I would mention that Senator 

Sanders was referring to the World War II effort that changed 

healthcare. All salaries were set during World War II. Nobody 

could increase salaries. 

There was a little area there where they could provide a little 

different benefit for their employees, and that was in healthcare. 

There were no limits on that. At that point, the companies could 

provide healthcare and give credit for that and attract the employees that they wanted to attract. 

Later, we decided that was such a good idea that we’d make it 

tax deductible for the companies. That changed the face of 

healthcare at that point. For small businesses, I wish that 

healthcare were the only regulation that they had to handle. Several of you have mentioned the different talents that a person has 

to have as a small businessman, and there are continually more 

things that they have to worry about. 

On the issue of having single-pay, government-run healthcare, 

that had a lot more favorability before we ran into the little Veterans Administration problem that we had a little over a year ago, 

and we still haven’t worked through that one. 

23 

Of course, our goal would be to have portability that Senator 

Sanders mentioned so that nobody is locked into a business. I think 

if they’re working for a major corporation that pays for their insurance, they’re still kind of locked into that because there isn’t probably a better offer out there anywhere. The benefits are still eliminating some of the flexibility that an employee might be able to 

have. 

As a few things of clarification that I’d like to do here to start 

with, Mr. Harte, you mentioned the 46 percent difference in costs. 

Are you referring to a need maybe to have costs at different medical facilities posted so that we could see if they change it? Could 

you expand on that? 

Mr. HARTE. Yes. The reference I gave to you earlier—you can 

refer to the website of nhhealthcost.org, and on that website in the 

State of New Hampshire, it will publish the different reimbursements to each provider based upon certain categories of service. In 

my testimony, I shared with you that from the least expensive facility to the most expensive facility, for a CT scan of your head, the 

cost differential is 446 percent. 

Senator Sanders’ comments earlier were he was referencing a 

high deductible plan. Those people who are on a high deductible 

plan—it does them so much justice to make sure they have access 

to that information. The fact is that information has very little access today. 

The health insurance companies have that information. They 

know how much their providers are charging. We need to, as an 

industry, make sure that that information becomes available to individuals. 

In New Hampshire, we have access to that information on all 

forms of diagnostic imaging, MRIs, CT scans, PET scans, normal 

childbirth, cesarean childbirth, x-rays, labs—the list goes on. However, my colleagues all across the country are envious of New 

Hampshire, that we have access to some information. The fact is 

we can make a huge difference in the cost of healthcare if we simply made healthcare costs more transparent. 

Senator ENZI. Thank you. That’s been a suggestion that we’ve 

had from different places, and some companies have done that, 

where they provide the amount of deductible based on whether people pick the average or above or below average. 

Mr. HARTE. Exactly. 

Senator ENZI. If they go below average, I guess they get the extra 

money. That is one of the suggestions, to have more prices posted. 

Mr. Scott, you mentioned the separate meetings because of age. 

Could you expand on that a little bit more? 

Mr. SCOTT. Yes, Mr. Chairman. The employees in our office 

range from in their 20s to in their 50s. That the premiums are age 

rated, we had to make a decision, because when we were group 

rated, it was basically $300 a person, and the health insurance options cost the same if they picked the low, medium, or high option. 

I could tell everybody, 

‘‘You have $300. Shop for a plan, and that amount pays the 

full cost of the HMO option. If you want more than that, we’ll 

withhold the additional from your check and you can get a 

more expensive plan option.’’ 

24 

The plans are a different price for every individual. On the low end, the premiums are still about $300. On the upper end, they’re 

closer to $500, and I think maybe even a little bit more for the subsidy amount. 

In order to keep my promise to the employees that they’ll have 

access to a zero premium plan, now I need to give them all a different subsidy to start with so they can actually have access to a 

zero premium plan. That’s what we did. 

Senator ENZI. Thank you. 

Mr. Conklin, you mentioned monetized insurance. Could you give 

a little broader explanation of that? 

Mr. CONKLIN. Well, actually, Mr. Chairman, I think I said monetized healthcare. 

Senator ENZI. Oh, OK. 

Mr. CONKLIN. What I mean by that is we turned the relationship, 

the basic relationship between a physician and their patient, into 

a transaction. We all know the stories—or perhaps some of us are 

too young to know the stories—about the Depression, when people 

would walk in with a chicken or perhaps in my case a small cabinet or a chair, and the doctor would take care of us because we 

didn’t have money. 

That idea, that concept of ‘‘first do no harm’’ has been, in my 

opinion, badly dented by the relationship that has to do with who 

gets paid and how they get paid and all the middle men in between. 

I’d like to just speak briefly for a moment to your earlier question about costs and posting costs. Two brief anecdotes: This winter, I was walking my dog and slipped and fell, hit my head pretty 

hard on the sidewalk, went home, reported to my wife that I was 

feeling a little dizzy and I had tingling in my hands but I was 

going to go to work, and she said, ‘‘No, you’re going to go to the 

hospital.’’ 

I went to the nearest hospital. The likelihood that I was actually 

going to check the price posting on my way in the door to see a 

physician is pretty low. About 2 weeks ago, my daughter called me 

at 1 o’clock in the morning to report that she was on her way to 

the hospital—she had been hit by a car in Boston—and did she 

have insurance, which is how I knew she was concussed. Again, 

she was in no condition to make a shopping expedition at the emergency room. 

Those are, I admit, fairly extreme examples. They go to an underlying reality of the whole approach we have to providing care, 

that it’s based on one’s ability to pay, and one has the capacity in 

any given situation to make a decision based on what makes the 

most economic sense. 

What we really should be doing, in my opinion, is we should be 

focusing on what makes the most medical sense. If we did that, if 

we did a better job of that, I think we would have lower costs of 

delivery of service at the point of service. 

Senator ENZI. I appreciate that, and I think Mr. Harte was talking about the things that you have a little bit more pre-planning 

on than your concussion or her car wreck. One of the things that 

we’re finding right now is that some people go in for the prevention, which is supposed to be free, and if they find anything at all, 

25 

then it’s not free. That’s a little bit of a surprise to them, and that 

ought to be posted a little bit better, I think, for all concerned. 

Ms. Corlette, in your testimony, you talked a lot about the shop 

exchanges and had some suggestions about what could be done. 

Could you expand on that a little bit more? 

Ms. CORLETTE. Sure, Chairman. We are, I guess, about 18 

months into the launch of the shop exchanges. In concept, the shop 

could be a terrific option for small employers. It tries to address a 

couple of the primary concerns and frustrations that small employers have had in the past. 

For example, many small employers are not able to offer their 

employees a choice of insurers or a choice of plans. The shop was 

designed to provide a marketplace for small employers to go to say 

to their employees, ‘‘This is my contribution. You can take this contribution and shop among different plan choices.’’ It’s a very appealing idea. 

The other issue that I think the shop was designed to address 

is employers’ desire for some predictability around the premium 

contribution. It allows employers to make what’s called a defined 

contribution to their employees’ premiums, which, hopefully, will 

give them some predictability in what they can contribute. 

I think there’s a couple of reasons why the shops have been slow 

to get off the ground. No. 1, the IT systems. Just as with the 

launch of the individual marketplace last year, the IT systems for 

the shops have been—it might be kind to say nonfunctional in 

many States. That’s a barrier. 

The other issue—and I’ll be interested in Mr. Harte’s perspective 

on this as well. Most small employers purchase their health coverage through a broker. What we have heard from most brokers is 

that the time and effort it takes to enroll somebody through a 

shop—it’s just not worth it to them, because the commission that 

they get is the same whether they buy direct from a carrier or 

through the shop, and because the shop is taking a considerable 

amount of time and effort on the part of the broker, it’s just not 

profitable for them. 

Then last, but not least, the tax credits. The Affordable Care Act 

created a small business tax credit for employers with fewer than 

25 employees with average salaries of under $50,000. From what 

we are hearing in talking to both brokers and small employers is 

that the tax credit that they get is just not worth the time and effort it takes to apply for it, and it’s just not a sufficient incentive 

for employers to try to enroll through the shop. 

I think the jury is still out. I think we want to see if they can 

get their IT systems smoothed out and make it a much quicker and 

smoother process and get employee choice rolled out in every State. 

It’s not rolled out in every State yet. I think maybe if we could 

make the tax credit easier to apply for and get, that might make 

it a more appealing option for employers. 

The other thing is, frankly, there are a lot of private exchanges 

that are now being established to directly compete with the shop 

in offering many of the same benefits. If we’re going to fix the 

shops, we have to do it quickly, because the private market is also 

recognizing that there’s a need that needs to be filled. 

Senator ENZI. Thank you. 

26 

Mr. Harte, did you want to comment on that? 

Mr. HARTE. Oh, I’d love to. Thank you. Her comments are spot 

on. The shop, by intent, is an incredible opportunity for small business, an incredible opportunity. It is a dismal failure, and I’m going 

to explain to you why. 

We do try to enroll small groups onto the shop. Here’s what happens. No. 1, the maximum waiting period on there is 60 days, 

which completely contradicts the Affordable Care Act, whereas the 

Affordable Care Act says it’s 90 days. 

The reason why that is is because it’s a backstop, because if an 

individual is hired on a given date in the month, they don’t receive 

their correspondence from the shop until their last day of eligibility. Based upon that last day of eligibility, that person only has 

2 days to enroll, because they only enroll on the 1st or the 15th. 

They must process before the 1st or the 15th. They have to wait 

an entire other month to get their health insurance. 

Myself and my own small business—if I am on the shop, and I 

tell my employee, ‘‘You’re going to be on the health insurance plan 

on August 1st,’’ and if they don’t respond within the 2-day period 

to enroll in the plan and select their plan, they’re going to get on 

the plan September 1, and that becomes my burden. That’s No. 1. 

No. 2, lockouts. If in the event that your employer submits your 

information for your census and says, ‘‘My date of birth is 12-5-66,’’ 

and if in the event that my employer put in 12-5-65, if I go in to 

change my date of birth, the system locks you out, and you cannot 

proceed any further. You cannot enroll for health insurance. 

The testimony you’ve heard today talks about the brokers. We 

try to call the shop. My staff members call the shop, and they’ll be 

on the phone for an hour to 2 hours waiting for someone to pick 

up the phone to unlock it. There’s no mechanism in place to unlock 

their enrollment. 

By the way, thanks for backing me up about the emergency and 

urgent care, because I have three kids myself, and I’d never pick 

up an app to shop for my emergency care. 

The fact is our access to healthcare is my priority to my clients. 

The shops, their networks, are bifurcated. In my State, we have 

five different plans. We have 26 hospitals. Some of the plans have 

only half the hospitals in the network. When you enroll in the 

shop, there’s a good chance you might actually lose your physician. 

One other comment I wanted to make for you is about the tax 

credits—100 percent. We run the analytics. We try to see if someone qualifies for the tax credits. I don’t have any clients who have 

been approved for the tax credits. 

If you would indulge me for just one moment—because Mr. Scott 

referred to this list billing issue that we have out there—I really 

want to give you some real numbers so you can take these back to 

the other members of the committee. 

I brought one example with me, a client called River Valley Development. It’s a small business with less than 10 employees. Their 

single rate for a 21-year-old annually is $4,500. For the 64-year-old, 

it’s $13,000. 

Senator ENZI. Say both of those again, would you? 

Mr. HARTE. The single rate for a 21-year-old is $4,579. The same 

plan for a 64-year-old is $13,725. That total difference on an 

27 

annualized basis is $9,146. To Mr. Scott’s point—and although he 

didn’t say this—this is the struggle with employers all over the 

country. They’re saying, 

‘‘I want to hire an experienced employee who understands 

my business, who understands healthcare policy, who wants to 

make a difference in their client’s lives.’’ 

The economic decision, as Mr. Scott said, is ‘‘Do I really want to pay them an extra $9,000 off of my books?’’ 

In essence, the way we look at this in a grid format, every single 

employee, regardless of age, all the way from 21 to age 64, has 

their own rate. Each of their dependents, their spouse, has another 

rate. Each of their children has another rate. You can have some 

families who are in your employ who pay $20,000 a year, and you 

can have other families who pay $30,000 a year because they have 

an older spouse or more kids. 

This all comes down to—and I know you have this question coming up, Mr. Chairman. When it gets to the 51 to 100, imagine the 

nightmare when we roll out 51 to 100, putting them into the small 

group marketplace, and, using an employer with 75 employees, 

having 75 different rates, and an individual rate for every single 

one of your dependents. It’s a nightmare to manage for small business. It’ll be more of a nightmare for businesses with 50 to 100. 

Ms. CORLETTE. I do, though, want to clarify that age rating is 

nothing new in the small group market. The Affordable Care Act 

simply compressed the age rating band to three to one. What is 

new is that the differences from employee to employee are now 

transparent to the employer where, before, they were aggregated. 

Is that correct? 

Mr. HARTE. Yes, correct. However, the big difference is—and, Mr. 

Scott, you may have had this in your own business, and you can 

share this if this is the case. We always had what we call composite rates. If we had a group that had 10 employees, even my 

own company—I have 17 employees—even though I was individually—my rates were individually created by an underwriter, I 

would still have a single, a two-person employee-child, and a family 

rate. If you move 51 to 100 over to a list bill system, it’ll be an administrative nightmare. 

Mr. SCOTT. Right. That’s why I referred to the change as sort of 

the member level billing, because these rates were always going on 

in the background, but I didn’t have to divide it up for each employee to tell them, ‘‘OK, well, you’re older so you cost more so I’m 

giving you more money so that you can have access to a zero premium plan.’’ It was a big change, and it was disruptive and not 

helpful. 

Senator ENZI. Mr. Conklin, I think you wanted to comment? 

Mr. CONKLIN. I do. I concur that the—like I said, the age band 

rating was a shock, but only because it exposed how our rates were 

structured previously and more opaquely. The bottom line is my 

premium did not increase significantly as a result. Our cohort remained fairly constant. We did hire a younger guy. His premiums 

were around $300 a month, and my oldest employee’s premium is 

about $725 a month for a single person. 

Yes, I can imagine with little difficulty how ridiculous it would 

be to expand to the 50 to 100 or even from the 25 to 50 and keep 

28 

that format in place. It seems to me—and I’m a cabinet maker 

from New Jersey. I work from plans. When we get a plan that 

doesn’t work, we change it, we alter it, we redraw it so that it does 

work. Believe me, we’ve had plenty of drawings from architects and 

designers that don’t work, and that’s part of our job. 

These guys’ hands are tied. My hands are tied. You folks can 

help untie them. I want to reiterate that that can’t come at the cost 

of the fundamental building blocks of the Affordable Care Act that 

are in place that do work. 

I think there are pieces here that would allow us, over time and 

with careful adjustment, to do all kinds of imaginative things to 

broaden the small group market, to increase access, to allow us to 

aggregate, to do all kinds of interesting things. Those fundamental 

underpinning consumer protections that are built into the act must 

remain in place. They can’t be compromised. 

I’m sitting here deathly afraid, frankly, Senator, that Congress 

will get their hands on this and just rip it to pieces. That’s not 

something that I could tolerate. I can tolerate a 10 percent increase 

in our premiums, but going all the way back to square one and 

starting over again is just unimaginable to me at this point. 

Senator ENZI. Of course, I remember Senator Sanders’ comment 

that there are 35 million people who are still uninsured. When we 

were doing the discussion on the Affordable Care Act, there were 

49 million uninsured. What we’ve done is shifted who is uninsured. 

We haven’t gotten the job done, and we’re actually kind of having 

our hands tied on being able to make any changes. 

There’s been a number of changes that have been suggested, and, 

hopefully, out of this exercise that we’re having this morning, we’ll 

be able to come up with some ways that small business can be 

helped through the process, because I think the reason we’re holding this hearing is I think they’re the main ones that are having 

difficulties with it. Part of it is because they’re small and they don’t 

have all the expertise that the big companies have. How do we fix 

it so that their expertise can lend itself to getting the insurance for 

their employees? 

Almost all of them that I know are interested in having 

healthcare for their employees and themselves. They kind of have 

to include all of them in the family that way. 

Were you going to make a comment, Senator Murphy? 

STATEMENT OF SENATOR MURPHY

Senator MURPHY. Yes, if I could just jump on board here. 

Senator ENZI. Sure. Go ahead. 

Senator MURPHY. Let me very briefly just insert a couple of 

thoughts on this running dialog about how much we can ultimately 

rely on consumers to reset these marketplaces. I agree with the 

comments about the moments of interaction with the healthcare 

system that are most appropriate to make informed decisions. 

That’s an important caveat. 

There’s also all of this literature around the inequity of knowledge that exists in the healthcare system that makes consumer-oriented marketplace decisions difficult when you’ve got such a different amount of knowledge in the hands of the person who is providing the service versus the person who is buying the service. It 

29 

makes market-based decisionmaking difficult when there’s that 

much of a gap. Count me as amongst the skeptics that that ultimately is how you continue to bend the cost curve. 

I wanted to stay on this topic of the change going from 1 to 50 

to 100, because there seems to be unanimity of opinion that there’s 

danger lurking here and that we should be counseling for at least 

a postponement of that decision. 

I maybe wanted to see if, Ms. Corlette, you would help us understand the pitfalls of not moving forward. You say that we should 

take the time to weigh the costs and the benefits, and I’ve heard 

pretty clearly what the costs potentially are. Why should we be 

careful about just walking away completely from stretching all the 

way out to 100 in terms of what we consider for a small group rating? 

Ms. CORLETTE. Sure. Thank you, Senator, for the question. I 

should say just for the record—and it’s in my statement—I’m an 

advocate for delaying the change in definition from 51 to 100 in 

terms of defining a small group market, largely because I just don’t 

think we really know what the consequences of that change will be, 

and it could cause some market disruption. 

The benefits, I think, are fairly straightforward. Essentially, 

what it does is extend the small group market protections that are 

included in the Affordable Care Act to these mid-sized groups, so 

51 to 100. For example, the requirement to offer an essential 

health benefits package of the 10 prescribed categories in the statute—that will be required of groups 51 to 100. 

Another example is health status. Gender rating will be prohibited as well as the age bands will be tightened down to 3 to 1. 0n 

the plus side, for employers that have older workers or sicker workers or a predominately female workforce, they could see some improvement in their rates, and some employees who may not have 

had the full breadth of benefits that are currently required in the 

small group market could benefit from that as well. 

The bottom line for me, however, is I don’t think we understand 

this market well enough to really know who’s going to benefit, but 

also on the flip side, who’s going to suffer. There will be some 

groups that will see some premium increases that they may not 

face if we kept the markets the same. Some of those groups could 

be faced with incentives to self-fund their coverage, which will take 

them out of the regulated market entirely, and that poses a whole 

new set of risks. 

For those reasons, I would say if this provision is implemented, 

proceed with caution. 

Senator MURPHY. I’ll ask this of Mr. Harte. I would appreciate 

your comment on this risk toward more people self funding. I’m 

sorry that I missed some of the testimony. You may have already 

covered this. Are you seeing clients showing an interest already in 

moving toward self funding? I assume that if we do make this 

change come January 1st, you’ll have more and more companies interested in taking the risk upon themselves. 

Mr. HARTE. Yes, 100 percent, and it will be disastrous, and I’ll 

explain to you why. First of all, I support my own Senator, Senator 

Shaheen’s bill, Senate bill 1099—she has bipartisan support with 

Senator Scott—which will allow individual States to define where 

30 

those 51 to 100 eligible employees will fall. I fully support that. As 

well, the NAIC, the National Association of Insurance Commissioners, has issued their support for that. 

That being said, this is what the real world will look like. If I 

have an employer today that is a 51 to 100 life group, and they 

have favorable claims experience, favorable meaning there’s less 

than 70 percent—some of those employers might be 30 percent or 

40 percent. Well, if in the event they are in a fully insured market 

today, they’re receiving a benefit for having lower claims utilization, but also protected on the back end should they have a shock 

loss. 

I can guarantee you that that healthy group will leave the small 

group marketplace at this transition. Why is that so important? 

Well, that’s just one group. If you take all of the healthy groups 

that have favorable risks that are losing the ability to be rated 

based upon their claims experience, they’re going after, as Mr. 

Scott said, the economic viability of their own company. 

They’re going to say, 

‘‘I can save money by avoiding the essential health benefits, 

by avoiding the nightmares of the 3 to 1 ratio, which will lead 

to list billing. I will lose my discounts. I will lose my plan,’’ 

because if you move over to small group, you’re not going to have 

the same plan that you had as a large group. The consequences for 

those businesses, 51 to 100, will simply be disastrous. I wish there 

was a better way to put it. 

Senator MURPHY. There’s still significant risk. Any time you’re 

choosing to self insure—— 

Mr. HARTE. Absolutely. 

Senator MURPHY. That will mitigate those decisions to an extent. 

It will depend on how risk averse you are. 

Mr. HARTE. You’re absolutely correct. You’re talking my language. I’ve been doing this for 25 years, and that’s what insurance 

is all about. It’s the risk against the peril. Oliver Wyman came out 

with a report, and they said 64 percent of the groups that are in 

that marketplace of 51 to 100 will be faced with rate increases, on 

average, of 18 percent simply for the migration over to small group. 

Those companies that already have favorable risk and want to 

keep their plan, they are more than willing, as they have told me— 

my clients have told me—we insure some 300 corporations that are 

small businesses. They’ve told me that they will be migrating to 

the self-funded marketplace. 

Senator MURPHY. Thank you. I have to run to another committee 

meeting, but thank you for holding this. This has been really fascinating. 

Senator ENZI. Thank you for your questions, and, of course, if 

you or your staff have more, we can get some written responses, 

too. 

Many of the people on the committee are involved in the education debate that started this afternoon, about 30 minutes after 

we started. No Child Left Behind has been out of authorization 

now for about 8 years, and it came out of committee unanimously 

to make some changes, and those are the changes that are being 

debated on the floor right now. There’ll be some additional amendments. 

31 

There were a lot of amendments in committee. There’ll be more 

on the floor, I’m sure. There’s intense interest from this committee, 

which is in charge of that, for doing that. 

We haven’t lost sight of the need to make sure that insurance 

works, and times change, and some of the new regulations come 

into play, and we want to make sure that we’re adjusting to those. 

I want to ask, particularly, Mr. Scott and Mr. Conklin, what kind 

of flexibility you’d like to see for yourself in the way of possible 

changes, things that would be beneficial to you. I know in your testimony you mentioned some things that ought to be changed. 

Mr. SCOTT. Thank you, Mr. Chairman. First of all, I think one 

of the recognitions in making broad national policy is to recognize 

the diversity of U.S. business, and that when you open a small 

business, it’s very personal, and after you go from being a solo 

practitioner to going to, say, ‘‘Well, I’m going to start to hire additional employees,’’ you realize that they’re not only depending on 

you, but their families are depending on you as well. It’s very personal in the way that you run that business. 

There are a lot of small businesses that value providing highquality health insurance to their employees. If a business across 

the street were to open up and do the same kind of business as 

ours and not offer health insurance, we’d want to be able to leverage that as a competitive advantage of why work for us. 

We want a range of options. We also want access to good networks of physicians. We want access to care when we need it. I 

don’t want my employees afraid to go to the doctor because they 

don’t know how they’re going to pay for it. I want them to go to 

the doctor when they should and need to. I want to provide that 

environment so our employees can focus on work and that Applied 

Policy is a good place for them to come work. 

Senator ENZI. Mr. Conklin, do you suggest any changes for kinds 

of flexibility or changes at all? 

Mr. CONKLIN. Yes. Well, for us, personally, again, because of our 

location in New Jersey and the availability in a dense market with 

relatively high income availability, insurance companies are working pretty hard to get everyone’s business. There are innumerable 

options. My broker comes in with a stack of spreadsheets about 

that thick to run through with me. 

Unfortunately, when I get the policy and start looking through 

it, that’s where the arcane and confusing language comes in. Very 

often, I don’t fully appreciate—that hit on the head, for example. 

That was billed out by the hospital at $12,000. The insurance company paid $4,800, and I was on the hook for somewhere between 

$700 or $800. 

I called my broker and I said, ‘‘Is this legit?’’ He called me back 

and he said, 

‘‘Yes, this is completely above board. These costs that you’re 

paying here are part of your co-insurance, and there’s a formula to determine what your share of the final bill is.’’ 

We start out with $12,000, get $4,800, we’re up to $5,200. It’s a 

complete mystery as to how anybody arrives at any of this, and 

when I spoke to my broker, he said, ‘‘Oh, yes, it’s a complete mystery to me. I can’t explain it to you.’’ If we want to have a real conversation about what would be helpful, real transparency would be 

32 

helpful, for me to be able to understand in plain language, really, 

what’s going on. 

At the bottom of all of this, I think we need to maintain—I keep 

saying this, but I absolutely believe it. We need to maintain robust 

consumer protections. We need to have real oversight of the insurance industry, and I have absolute respect for both of my colleagues on the panel today, and I know from my own insurance 

agent—he’s a small businessman, too, and I’m not looking to kill 

the for-profit insurance industry or harm their businesses. 

We do need that oversight, and we also need to put some time 

and money into figuring out how it is this actually works, because 

nobody really seems to know. Until we have a better understanding 

of that—and, honestly, Senator, I went into the effort to reform 

healthcare in 2009 with rose-colored glasses on, and they quickly 

dimmed to fogged over. 

I concluded at the end that what I really hoped for from the Affordable Care Act is some window into what it really costs, because 

from the perspective of the small business owner, I need to know 

what my costs are. When I know what my costs are, if there’s 

something that’s a little out of line, well, I can focus on that and 

fix it. If I have no idea what my costs are, then I really don’t know 

whether I’m running a profitable business or not. 

The bottom line is what are we trying to achieve? Are we trying 

to achieve affordable access to healthcare for all Americans, or are 

we trying to preserve a system—and I use that term loosely—that 

doesn’t work, that just is not really going to work based on people’s 

ability to pay? Because at the end of the day, they will make bad 

healthcare decisions that feel like good economic decisions when 

they make them, and I’ll do it, too. No one is immune from that 

tendency. 

Senator ENZI. Well, one of the things that we have changed is 

health savings accounts. I know that I had quite a few people on 

my staff that were young and healthy, and they looked at the Federal plans, and they looked at the health savings accounts, and 

they said, 

‘‘You know, if I go with the health savings account and put 

the difference in cost into a savings account so that I have this 

stop loss from the health savings account so that there’s a 

maximum that I have to pay in deductibility, in a maximum 

of 3 years, I can have that minimum—that stop loss already 

covered, and I’m going to be healthy probably for 3 years.’’ 

That’s not necessarily going to happen, but I think in a lot of the 

cases—I had a lot of people that were young and went into the 

health savings accounts, and that’s one of the things that we’ve decreased now. People are finding out that their deductibles are considerably greater than they were before. 

We just made some changes in the flex accounts for people who 

want to put some money aside for health insurance, things that 

come up during the year. We made a change in that, that some of 

that can actually roll over. I’m sure that hurt the eyeglass industry. A lot of people bought glasses at the end of the year because 

they still had some money left in their account. Now they’ll be able 

to roll some of that over. 

33 

Do any of you have a feeling for what we ought to do more to 

encourage health savings accounts and the flex plans? 

Mr. Scott. 

Mr. SCOTT. Thank you, Mr. Chairman. What we have found is 

that allowing young people, at least who are working for us, to stay 

on their parents’ plans until they’re 26 delays their need to acquire 

sort of basic health insurance literacy. One of the great things our 

broker has really helped us with is educating the new people that 

we hire that are younger and that are picking their health insurance for the first time, just teaching them about health insurance 

and how it works and what a deductible is and the difference between co-pay and co-insurance so that they’re capable of having a 

basic understanding. 

You can’t be an expert in everything, and I can’t be an expert 

in everything it takes to run a small business. We have to rely on 

outside help like from our broker, who has been spectacular. 

For the health savings account, I think that besides more being 

done to encourage health insurance literacy broadly, people have to 

understand that they’re comparing not the cost of what the premium for their health insurance policy is, but they need to look at 

the value of the overall policy. What’s the premium plus what’s the 

co-insurance and co-pays plus the deductible and what do I expect 

to use during a year, so they can make the best decision they can. 

When you look at that, then you can actually see the value of an 

HAS coupled with a high deductible health plan. 

Right now, we’re still at the place where we’re trying to show the 

young people that this is health insurance, and here’s a deductible 

and a co-pay, and here’s what—yes, the premium is cheap, but that 

means that if you go to the hospital, you’re going to have to pay 

the $1,500 deductible. There’s a lot of work, I think, that can be 

done there. I think that would increase the appeal of HSAs together with high deductible health plans. 

Senator ENZI. Mr. Harte. 

Mr. HARTE. The expectation, of course, is that when you have the 

health savings account, it’s your money, and if it’s your money, you 

want to spend your money wisely. I’m actually coming full circle 

back here because when you have the health savings account, and 

you know that you have to spend that money on a particular product or service, that being healthcare, you want to choose wisely. 

When you don’t have access to the transparency tools to know 

that—I need to go in for lab work. I’m not sure how much it’s going 

to cost here. Maybe I should be going to a freestanding lab. Does 

it really make a difference if I go to a hospital? I really don’t know. 

For those on your staff that may have migrated to a high deductible health plan, they will find out quickly that that money can be 

burned up very quickly without having access to that information. 

That being said, I also want to share with you that my professional trade association, the National Association of Health Underwriters, has been talking about health savings accounts since before they were popular. We recognize that it’s one of the most powerful consumer-driven tools to effect behavior. In order for it to 

work, you have to have a system that supports the purchase of 

those products. 

34 

We can look at the data as it relates to healthcare services that 

are not covered by insurance, so you can talk about services such 

as Lasik eye surgery. Over the past 10 years, Lasik eye surgery 

has come down dramatically because it’s been a part of competition, because people are looking at that price. The same could also 

be true for other services as we come to a more transparent world. 

That also being said, my trade association supports the Affordable Care Act. We’re here today and recognize that it’s here to stay. 

The Supreme Court has made its decision. We’re beyond the debate. We’re here to make sure that we can collectively work together for the accessibility and affordability of health insurance for 

all Americans and fix the problems for those 35 million that Senator Sanders talked about that he says are uninsured. 

The only other comment I’ll say about health savings accounts 

which no one is talking about, but it’s a significant concern for myself and my trade association as well as employers who recognize 

this issue, is when we start talking about the excise tax in 2018, 

employer-sponsored health savings accounts and employer-sponsored health reimbursement accounts and wellness programs, as 

well as the premiums that they pay for the health insurance, are 

all included in that calculation. 

What might surprise you is that employers or their employees 

will be paying substantial tax on their health savings account because it’s over a threshold. 

Ms. CORLETTE. If I may, on health savings accounts—a couple of 

concerns. As you probably know, Senator Enzi, the health savings 

accounts involve several tax advantages that accrue, particularly to 

people who are healthy and who are wealthy. Contributions are obviously tax deductible. The money as it accrues in investment accounts accrues tax free or grows tax free, and then withdrawals are 

tax free if they’re used for medical purposes. They are great tax 

sheltering devices for people with a lot of disposable income or for 

people who are healthy. 

Frankly, that comes at a cost to the Federal Government. If you 

are expanding eligibility for HSAs, and they become more widely 

used, that costs money, Federal taxpayer dollars, to support that. 

Quite frankly, when I look at the finite Federal resources that we 

have, I would far rather see scarce Federal dollars go to support 

people at the lower end of the income scale to help make coverage 

more affordable for them both in terms of the premiums that they 

pay as well as the cost sharing. 

If we’re looking at—you know, it’s a finite pie, our Federal tax 

dollars. I would far rather see those go to people of lower incomes 

who are, frankly, more vulnerable. If we’re going to do something 

with Federal tax dollars, let’s not give a government handout to the 

people who need it the least. 

Mr. CONKLIN. If I may, I’d like to tag on to what Ms. Corlette 

said and give you a practical example. I can tell you right now that 

if I went out to my employees—and our average income at Foley 

Waite LLC is $45,000 a year. In the New York metropolitan area, 

there was a time when that was actually a pretty solid middle class 

income. No one could support a family on $45,000 a year and have 

savings for college, have savings for the down payment on a new 

car, having savings for a house—that’s just completely out of the 

35 

question—have a little money set aside for a family emergency. It’s 

just not possible. 

You can make the very compelling argument that my colleagues 

made for health savings accounts, but it’s going to be a no-sale for 

my employees. I think that to hang a significant alteration of the 

Affordable Care Act on that is going to lead to some disappointment. Clearly, it’s going to help some people, but there’s going to 

be a significant portion of the workforce that just is not going to 

be able to access it or take advantage of it. That’s where the real 

rubber hits the road. 

In New Jersey, the small businesses that are getting absolutely 

hammered are the 25 to 50s. We need to expand both that income 

threshold to allow small businesses to take advantage of the tax 

break, and we also need to expand the—in doing that, increase or 

reformulate the calculation for those businesses that would qualify. 

Once you go over 10 you’ve got to be paying people $3 an hour to 

have any sort of significant tax refund from your insurance—subsidy is the word I’m struggling for here—for the subsidy to represent any significant advantage. 

We need to increase the subsidies for businesses between 10 and 

25. I think we should do that immediately. I also think we need 

to raise the threshold. When the Affordable Care Act was first 

being formulated, one of the things that we advocated for at Main 

Street Alliance was figuring out a way to calculate into the subsidies the cost of living, because an across the board national 

threshold didn’t make sense to us. 

Senator ENZI. The cost of living then would vary by State? 

Mr. CONKLIN. Region is probably more accurate. You could have, 

for example, Washington and Boston. You might have one standard 

for that entire area, and for the fly over country, incomes might be 

somewhat lower, and therefore you might have a different threshold in that part of the country. 

Mr. HARTE. Senator Enzi, could I make one quick comment? 

Senator ENZI. Yes, sure. 

Mr. HARTE. Mr. Conklin is just like many of my other clients 

back home, where he clearly appreciates his employees and wants 

to do what he feels is best for them. We deal with those struggles 

every single day. I appreciate his comments about how savings accounts are not the solution for my employees. When I walk into a 

client, I don’t assume that a health savings account or a high deductible plan or an HMO plan or a PPO or a POS or all the other 

acronyms that we have is a one-size-fits-all for all of our clients. 

We believe in choice, and that goes back to Senator Sanders’ 

comments earlier, when we talk about a public option or national 

healthcare. The employers that I talk to every single day, the 300 

that we represent and the 25,000 employees—they don’t want to 

not have choice. I know Mr. Conklin and I agree, but we disagree 

in certain matters. 

I believe that what’s most important for small employers out 

there, myself included, is we want to do what we feel is best for 

our employees. Although our system is broken and it needs repair, 

we shouldn’t replace that with a system that will take that choice 

away from business owners and their employees. 

Senator ENZI. Anybody else want to comment on that? 

36 

Mr. CONKLIN. I’ll go, because I think it’s important that we do 

have an understanding, and I’m not sure we do yet. I said earlier 

that I’m not sure I agree with Senator Sanders, as much as I admire him, about a single payer system. He did mention that there 

are multiple models. 

My concern is the 35 million people that are uninsured, and I 

look at it, really, from a standpoint of a business owner. I know 

that’s probably not the best way to look at it, but I don’t have much 

of a choice. As long as those folks are out there, and they’re accessing healthcare, my employees and I are picking up the tab if they 

can’t pay the bill. 

That has a lot to do—and I’m sure these folks to my right know 

this—with that crazy pay—that crazy cost differential in delivery, 

at the point of delivery, because there’s all this cost shifting going 

on. There’s all this—how does the hospital or this medical group 

cover the cost of folks who showed up that we didn’t leave on the 

sidewalk? 

I don’t think we live in a country where we’re prepared—I have 

employees from Central America. Very quickly, years ago, if you 

went to the hospital in El Salvador—I had an El Salvador employee—and you were injured, the doctor would come in or a nurse, 

and they would give you a list of all the things they needed to treat 

you, and then a family member would go down to the Pharmacia 

and get them. 

If you could afford it, you got care. If you couldn’t, they patted 

you on the back and said, ‘‘I hope you survive.’’ And I said, ‘‘I can’t 

believe that.’’ They said, ‘‘No, no, no. That’s the way it works. 

That’s the way it works.’’ 

I don’t think that’s where we want to go as a country, and we’re 

not going to. I’m not suggesting that we would. In a sense, it is 

where we are. If you don’t have the money to pay, somebody’s going 

to pay, and it’s going to come through this convoluted, incredibly 

complicated system that we have that increases cost and reduces 

outcomes. 

Ms. CORLETTE. One comment—oh, I’m sorry. 

Senator ENZI. Go ahead. 

Ms. CORLETTE. Mr. Chairman, I don’t disagree that small employers want choice and to be able to give their employees choice. 

However, that choices come with consequences, and one of the 

things that policymakers, particularly national level policymakers, 

need to think about is what might be the right choice for an individual or small employer if it’s done at a critical mass could be the 

wrong choice for the market as a whole. 

As policymakers, I think it’s incumbent on you all and those of 

us who try to support you to think about not just let’s have unfettered choice for everybody, but also what are the consequences of 

those choices for those who may not be able to take advantage of 

them. For employers who have sicker, older workers for whom, for 

example, self funding is not an option, what are the consequences 

if a critical mass of small employers self-fund. These are really critical things that policymakers need to think about before just opening the door to unfettered choice. 

Senator ENZI. Thank you. 

37 

Mr. CONKLIN. One more anecdote. About a year ago in New Jersey, some legislation came up to open MEWAs up. I had never 

heard of a MEWA. I didn’t have any idea what that was. One of 

the things that was included in the MEWA was a modified essential benefits model. You could sort of cull out some of the more expensive essential benefits and offer this as a plan for what I would 

describe as medium-sized small businesses. 

The consequences of this, had that legislation passed, would have 

been the collapse of the small market in New Jersey. It would have 

just destroyed it. We do need to tread carefully, and one guy’s solution is another guy’s disaster. 

Senator ENZI. Mr. Scott. 

Mr. SCOTT. Thank you, Mr. Chairman. I think it’s important for 

me to answer Senator Sanders’ opening question about access to 

healthcare in the United States and why it might not be viewed as 

good as other countries in the world. I think that everyone in the 

United States should have access to high quality healthcare. 

I also think an American solution to the problem should recognize that Americans, or at least myself, value freedom, opportunity, 

and self determination, and part of the American dream is being 

able to open a small business and take that risk and have that opportunity. With that opportunity, there’s no guarantee that it’s 

going to work out. If you can’t fail, it’s not really a challenge. 

I think Americans also value access to the latest and best care, 

and I’m not sure if that’s what they value in the rest of the world. 

You should look at the other countries and see what their models 

do, but I don’t think you should wholesale adopt any other country’s particular model and say that that’s good for America. I think 

that America has some important differences and that the American solution should ensure that everyone has access to high quality healthcare. 

While there are 35 million uninsured, I think it’s important to 

acknowledge that there’s more than 300 million Americans. While 

you’re fixing the 35 million uninsured problem, don’t mess up the 

200 million part of people who do have access to health insurance. 

Senator ENZI. Thank you. Again, I’ll mention that the 35 million 

are a different 35 million, but still 35 million that were uninsured 

when we started the whole discussion several years ago. What 

we’ve done is shift who’s insured. What I’m trying to do with this 

panel and with this effort is to figure out how to insure the other 

35 million people. 

In Wyoming, we have limited insurance company options. We 

don’t have the raft of them that could provide you with all of those 

documents and spreadsheets. Last week, one of them said they’re 

going out of business. We’re only looking at even more limited 

choices. That’s not choice. That’s really a monopoly. We could have 

some problems based on that. 

Another experience that I’ve had—I was in India. I was primarily 

looking at education. They promise that every kid gets an education through sixth grade. We found out that they kick out most 

of them in fourth grade. They’re the ones that get a dollar a day 

the rest of their life sweeping the streets, and then they kick out 

more in sixth grade, and they get $2 a day the rest of their life— 

no opportunity to change. 

38 

They have healthcare for everybody, the one that makes $1, the one that makes $2, and the one that makes—well, $25,000 is considered a real high wage there. We went by a hospital, and there 

was this line that went way around the block, and I said, ‘‘What’s 

that? ’’ They said, ‘‘Well, that’s the people waiting to see a doctor.’’ 

And I said, ‘‘Will the doctors get to all of those people today? ’’ ‘‘No.’’ 

They’re all guaranteed healthcare, but they can’t get to see a doctor. In my opinion, they don’t have healthcare, and we certainly 

want to avoid that in this country. 

At this point, I’ve run out of questions. I’ll let each of you do a 

concluding statement, if you have some more suggestions for us. 

There may be some legislation that comes out of this. Again, I’m 

concentrating on that—because of the statements that you provided 

beforehand, instead of looking at 1 to 25 or 1 to 50, I’m looking at 

1 to 100 where we can make changes, and I think that’s probably 

the real small business market, even though the Small Business 

Administration says it’s 500 employees. 

We’re just picking random numbers anyway. Since most of you 

mentioned 1 to 100, I would be interested in any concluding remarks you might have for improving the coverage in that area. You 

don’t even have to give them all right now. You can include that 

in anything additional, written, based on what we’ve done here 

today. That might be helpful to us. 

We’ll go in reverse order this time. I’ll start with Ms. Corlette. 

Ms. CORLETTE. Sure. Thank you. I’ll just close with my two main 

policy recommendations. The first is—and we’ve already alluded to 

this a little bit. I would encourage the committee and the Congress 

to discourage self funding among small employers. When the risk 

of self funding is really borne by an insurance company and not the 

employer, that’s not true self funding. 

When you have a functionally equivalent product that’s allowed 

to compete on a different set of rules, that sets up an unleveled 

playing field and creates risk of adverse selection. This is something that, actually, the administration could do independent of 

Congress by simply defining what self funding means and to say 

that if it walks, talks, and breathes like traditional insurance, it 

should be treated as such. 

Then the second policy recommendation is—again, I think we’ve 

touched on this. I would suggest that there be a delay in the definition of small group market extending not to 100. I think we need 

to understand the consequences of that and really understand 

who’s in this market, what do the groups look like, what do their 

rating structures look like, what would the premium impact be before that definition change goes into effect. 

Senator ENZI. Thank you. 

Mr. Conklin. 

Mr. CONKLIN. Yes, Senator Enzi. I really sincerely want to thank 

you for this opportunity and for the way you’ve conducted this 

meeting. I appreciate very much your interest, which I believe is 

genuine and heartfelt, and I think we both share some very significant and important goals, not the least of which is trying to figure 

out how we get everybody access to real healthcare. 

Your example of India is certainly frightening. My daughter’s 

best friend just graduated for the last time, and now she is a fullVerDate Nov 24 2008 16:15 Jul 11, 2017 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6601 S:\DOCS\95491.TXT CAROL
39 

fledged OBGYN working in Boston. She is, without question, the 

smartest person I know and perhaps the hardest working person 

I know. 

That combination of brilliance and drive is rare. Among the 

many things we’re going to have to figure out is how we provide 

a broad-based healthcare system that provides adequate access and 

allows doctors like my daughter’s best friend to do her job as well 

as she possibly can. No one pretends—I certainly don’t—that this 

is not a daunting undertaking. 

When the Affordable Care Act was being initiated, I had, I think, 

very reasonable expectations that it would be a first step and that 

there are many steps to go. I don’t think there is another model 

that we can duplicate in the United States. 

I believed then and I believe today that whatever we come up 

with, it will be uniquely American, and that it will probably involve 

for-profit insurance, and it may involve some nonprofit insurance 

components. It will certainly involve a great deal of support at the 

bottom of the pyramid for people to be able to access healthcare. 

I would beg you, Mr. Chairman, to focus on the goal. What is it 

that we are trying to accomplish? I think you and I share that goal, 

that is, to make sure that every American has access to healthcare. 

Senator ENZI. Thank you. 

Mr. Scott. 

Mr. SCOTT. Thank you, Mr. Chairman, for the opportunity to participate in the roundtable today. As a small business owner, the 

current status is uncertain for us of access to health insurance because we don’t know what the premium rates increase will bring. 

At the same time, we have a desire to keep consistency in the 

health insurance plans we offer from year to year, so employees 

who get comfortable with the coverage and co-pays are able to keep 

the physician that they’re used to, they learn how the plan works, 

and then they cannot worry so much about healthcare and health 

insurance and focus more on their work and have that comfort that 

insurance should provide. 

In considering reforms, we would like less help from the government. When the government enacts new programs and innovative 

changes for us, it usually means a lot of new bureaucratic requirements and risks and stern letters, like we got with the MLR. Also, 

government-run programs seem slow to change and adapt to 

changing circumstances, and, frankly, we think we do better on our 

own, being able to shop for health insurance coverage under the 

current system. We’d just like more predictability in what we’re 

getting and not see double digit premium increases every year. 

That’s all I have. I’m happy to respond to questions after the 

hearing in writing or in any way we can. Thanks again for the opportunity to participate. 

Senator ENZI. Thank you. 

Mr. Harte. 

Mr. HARTE. Mr. Chairman, as I said earlier, I truly consider this 

an honor and a privilege to be here today to represent my clients, 

to represent the members of NAHU. With all heartfelt thanks and 

gratitude, thank you for the invitation. Also thank you to your staff 

for all they did to assemble an amazing panel of individuals who 

are exemplar in their own rights and passions, which I sincerely 

40 

appreciate having the opportunity to share this opportunity with 

them. They did a great job. 

I will share with you four final policy recommendations from me. 

The first, as the testimony from the other panelists discussed, the 

role of the employee benefits broker has transformed itself during 

my career of 25 years. Today, I spend more of my time dealing with 

compliance and underwriting and evaluation and taxes and fees 

and regulations and legislation more than I ever would have imagined. 

Certainly, I didn’t wake up in college one day and say, ‘‘I’m going 

to be an insurance broker.’’ I know that my clients, much like their 

own personal experience, sincerely appreciate the hundreds of 

thousands of agents and brokers out there who are working tirelessly as the first line of defense in the understanding of the complexities of healthcare reform. 

With that, we’ve been talking about MLR for a very long time, 

and agents and brokers are going away in some States because 

their compensation is included within the MLR. Senate bill 1661 

addresses that issue and, hopefully, will provide a strong foundation for those who are considering to leave the business in hopes 

of other opportunities. They want to be able to help their clients. 

That’s No. 1. 

No. 2, we’ve talked about the 51 to 100, but the one part that 

we haven’t talked about is the employer reporting. All I will say 

to you today is this, that large businesses, over 100 employees, are 

having a very challenging time embracing the employer reporting 

on the 6056 and the 6055. We really have to delay the reporting 

for those medium-sized groups of 51 to 100. 

There’s another Senate bill out there, Senate bill 1415 from Senator Heitkamp, and that’s a repeal of the employer mandate for 

group sizes 51 to 100. That will remove the penalties or remove the 

mandate entirely. We fully support that. We’re putting a lot of 

pressure on those groups, and whatever we can do to mitigate the 

potential damage with the continued rollout of 51 to 100 will be 

welcomed by them. 

The last thing I’ll say to you—and I know some have commented 

on the 3 to 1 age bands. If we can somehow reduce those restrictions so that maybe we can go to 4 to 1 or leave it to the individual 

States to make the decisions of what’s best for their communities. 

Leave it to the insurance commissioners and let them make the decision, because every State is unique in how they should be developing their rates. 

In my closing comments, I’ll say to you, as in my first speech in 

front of NAHU back in 2001 and close with the same remark. I say 

this, that health insurance is expensive because healthcare is expensive, and that has to be part of the solution. 

Again, Mr. Chairman, thank you for the opportunity. 

Senator ENZI. Thank you. I’m glad you mentioned the healthcare 

being more expensive. We’re the inventors for all of the things for 

the rest of the world, and I know of a lot of things that are coming 

through the pipeline now that will make a difference to people. I’ve 

noticed that the cost goes up, and we don’t want those things denied to people, either. 

41 

I appreciate all the suggestions that you’ve given today. I’ve been 

working on healthcare for a long time. I got to work with Senator 

Kennedy for years, and we did a lot in other bills. The Needlestick 

bill was the first one that I got to work on so that there is protection for the nurses and the janitors and stuff that they wouldn’t accidentally get stuck by a needle that had been used on somebody 

and then maybe have to wait a year or two to find out if there was 

going to be a complication from it. 

Consequently, he and I worked on a lot of things. One of the 

things we were working out was a 10-step plan for providing 

healthcare for everyone. That is on my website, and I’ve been talking about it for a long time, and some of those would be changes 

that might help, particularly, the small businessman, because I always look at it from that position because that’s all I understand. 

I was a small businessman. We had three shoe stores, and I know 

that that’s most of America. 

I appreciate it. Your comments have been very helpful today. 

Like I said, people will be allowed to submit questions. I think 

they’ll have to have those in by tomorrow night. If you’d answer 

those, we’d appreciate it. Any other suggestions that you have for 

things that might improve the healthcare system, for small business, we’d be appreciative of. If you’d limit it to that, we’d also appreciate it. 

Thank you for being here today, and I thank the people who 

came to listen as well, and all the staff members who, of course, 

will get back to their Senator to get additional questions and to 

share this information. 

Thank you. 

[Additional Material follows.] 

42 

ADDITIONAL MATERIAL 

RESPONSE BY J. KELLY CONKLIN TO QUESTIONS OF THE HELP COMMITTEE

Question 1. What is the status of the health insurance market for small businesses, specifically plan options and costs in the small group market? 

Answer 1. From our perspective as a New Jersey company purchasing health insurance in the small group market as we always have, through an agent, there is 

little appreciable difference between now and before the ACA in terms of options. 

There are many. There is the same confusing, arcane language in the policy documents and in how the various plans are presented. That makes meaningful comparison almost impossible beyond the most basic considerations: premium cost, co-pays, 

deductibles and maximum annual out-of-pocket costs. As a small company with 

tight margins the first consideration is always premium cost. 

Premium increases over the previous two renewals, 2013–14 have been in the 

neighborhood of 10 to 15 percent. That said this year’s is down about 2 percent and 

we reduced deductibles for the individual to 2,000 from 2,500. That did come with 

an annual increase in total maximum out-of-pocket from 5,000 to 6,000 per individual and 12,000 per family. 

There was an initial ‘‘shock’’ when the new price schedules were implemented 

using age as the determinant factor of premium rates. In that initial adjustment 

we had the biggest rate increase in some time as a result of our older population 

of employees participating in our plan. As I recollect that was around 18 percent. 

Question 2. What tools and options are available and useful for small employers 

to offer some assistance to their employees? 

Answer 2. This is a difficult question to address. There is of course more information than ever available to anybody interested enough to investigate the available 

plans in their respective areas. In New Jersey with its high density, well off population, the market is relatively rich affording options on the individual market that 

did not exist prior to the ACA through the exchange. Choosing a plan can be a 

daunting experience, filled with uncertainty and anxiety. Thankfully the comprehensive consumer protections, essential health benefits, no exclusion for pre-existing 

conditions and medical loss ratio oversight are in place to reduce the actual risk to 

individual consumers. 

We recently had our oldest employee move to Medicare. His younger wife could 

no longer be covered under our plan. In the exchange they were able to purchase 

a slightly higher quality plan, lower deductible, lower co-pays, for about fifty dollars 

more per month than the coverage she had under our plan. Medicare with part D 

and the additional supplements making his coverage complete, saved us enough in 

premium cost to raise his compensation to cover his additional out-of-pocket expenses and his wife’s coverage, while saving us about $200 per month. 

Question 3. What has worked and what hasn’t worked and what policy recommendations do you have for the committee? 

Answer 3. New Jersey’s robust consumer protections prior to ACA, mentioned 

above, made cost increases in our market tolerable. The uniform consumer protection standards contained in the ACA for health insurers, along the lines of New Jersey’s, is a critical piece of the ACA that cannot be tampered with. No lifetime limits 

and no exclusions for pre-existing conditions are cornerstones of increased access 

and financial security and should not be altered as well. These features along with 

the MLR have had the expected effect of containing both premium increases and 

cost shifting by providers. This along with other features of the ACA is working to 

decelerate the rate of health care cost increases. 

There are any number of things that might be done to improve the ACA. Repeal 

is not one of them. Nor is a piece by piece alteration of the law that will have the 

same effect as repeal. Congress must act to restore faith that changes to the ACA 

come by way of improving access to care and by means resulting in affordable quality health care, not political victory laps. I suggest correcting the sentence in the 

ACA recently adjudicated by the Supreme Court would be a good first step. Done 

without filibusters and amendments, this symbolic gesture would send a powerful 

signal to the people that Congress is at long last ready to attend to the people’s 

work. 

The ACA is the first major step toward providing universal access to health care, 

an as yet unmet goal of the reform effort. As long as access is determined by one’s 

ability to pay, whether at the point of service or in the purchase of insurance, our 

health care costs will continue to climb while quality and availability of care continues to decline. Voluntary charity care remains an inadequate alternative to mainVerDate Nov 24 2008 16:15 Jul 11, 2017 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6621 S:\DOCS\95491.TXT CAROL
43 

1Garret B, Chernew M. Health Insurance and Labor Markets: Concepts, Open Questions, and 

Data Needs. Inquiry 45: 30–57 (Spring 2008). Available at http://inq.sagepub.com/content/45/ 

1/30.full.pdf+html. 2Decressin A, Lane J, McCue K and Stinson M. Employer-Provided Benefit Plans, Workforce 

Composition and Firm Outcomes. Technical Paper No. TP–2005–01 (2005). Suitland, MD.: U.S. 

Census Bureau, LEHD Program. 

stream access and that shortfall continues to contribute substantially to cost shifting and deferred care, leading to expensive and poor outcomes. We can do better. 

Basic access as established by essential health benefits under the ACA should be 

available to every American. If that requires a universal expansion of Medicare to 

make that access available to the unemployed and working poor, then we should 

do that. If it requires excluding for-profit insurers from those income earners at 400 

percent of the poverty line to an established income level that makes for profit coverage affordable, we should do that. We should at minimum increase both the number of employees that establishes a business as small and the average income per 

employee that qualifies an employer for subsidies. We should do that now, without 

delay or fan fair. 

I abhor the word fair, my heart is not bleeding and I don’t care about level playing fields. I don’t live in The Magical Market Place where innovation and quality 

are always rewarded and fraud, abuse, incompetence and inefficiency, broadly 

shared characteristics of all human enterprise, is always weeded out. That is why 

I know that until every American has a card in their purse or wallet that guarantees access to a doctor—any doctor, anywhere—until emergency rooms only serve 

emergency patients and not emergency patients and the uninsured, I and my employees will pay too much for too little. This is a practical problem requiring the 

completion of the critical step forward that is the ACA. Our goal must be a comprehensive, all inclusive health care delivery system in the United States. We 

should get on with it. 

RESPONSE BY SABRINA CORLETTE, J.D. TO QUESTIONS OF SENATOR WARREN

Question. Under current law, the 40 percent excise tax on high cost health plans, 

known as the Cadillac Tax, will go into effect in 2018. In determining the cost of 

repealing the Cadillac Tax, the Congressional Budget Office assumes individuals 

that have their health benefits reduced due to the tax will experience an increase 

in taxable wages. Some groups have expressed skepticism that reduced benefits will 

lead to increased wages. A 2014 study by Harvard researchers published in the 

Journal of Health Economics and a 2013 study from the National Bureau of Economic Research, which both focused on public sector employees, found that when 

employer health care costs increased, employees paid for some of that increase 

through reductions in wages. 

If employers decrease the amount they spend on employee health plans in order 

to avoid the Cadillac tax, would you expect an increase in employees? wages? If so, 

would the increase in wages be expected to fully offset the reduction in benefits? 

Would a requirement that employers must offset any reduction in benefits with 

wage increases change the responses of employers to the Cadillac Tax? 

Answer. Many economists believe that on average and in the long run, employees 

bear the full cost of coverage. In other words, economic theory suggests that workers 

pay for higher health care costs via lower wages. However, that theory is dependent 

on the notion that employers get no independent benefit from offering coverage. 

Some economists have posited that providing health insurance coverage has benefits 

that accrue to employers, such as improvements to worker productivity or reductions in job terminations.1 A 2005 study found that firms offering benefits (including 

health and pensions) have higher productivity and higher survival rates.2 If these 

analyses are correct, it suggests that a reduction in benefits would not necessarily 

be fully offset by an increase in wages, at least in the short term. It is not clear 

how employers would respond to a requirement to offset a reduction in benefits with 

wage increases. More research on this question is needed. 

[Whereupon, at 3:41 p.m., the hearing was adjourned.] 

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