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64–941 PDF 2011

THE PRESSURES OF RISING COSTS ON 

EMPLOYER PROVIDED HEALTH CARE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH, 

EMPLOYMENT, LABOR AND PENSIONS 

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

HEARING HELD IN WASHINGTON, DC, MARCH 10, 2011 

Serial No. 112–10 

Printed for the use of the Committee on Education and the Workforce 

( 

Available via the World Wide Web: 

http://www.gpoaccess.gov/congress/house/education/index.html 

or 

Committee address: http://edworkforce.house.gov 
(II) 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN KLINE, Minnesota, Chairman 

Thomas E. Petri, Wisconsin 

Howard P. ‘‘Buck’’ McKeon, California 

Judy Biggert, Illinois 

Todd Russell Platts, Pennsylvania 

Joe Wilson, South Carolina 

Virginia Foxx, North Carolina 

Duncan Hunter, California 

David P. Roe, Tennessee 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Scott DesJarlais, Tennessee 

Richard L. Hanna, New York 

Todd Rokita, Indiana 

Larry Bucshon, Indiana 

Trey Gowdy, South Carolina 

Lou Barletta, Pennsylvania 

Kristi L. Noem, South Dakota 

Martha Roby, Alabama 

Joseph J. Heck, Nevada 

Dennis A. Ross, Florida 

Mike Kelly, Pennsylvania 

[Vacant] 

George Miller, California, 

Senior Democratic Member 

Dale E. Kildee, Michigan 

Donald M. Payne, New Jersey 

Robert E. Andrews, New Jersey 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Lynn C. Woolsey, California 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

Dennis J. Kucinich, Ohio 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Susan A. Davis, California 

Rau ́l M. Grijalva, Arizona 

Timothy H. Bishop, New York 

David Loebsack, Iowa 

Mazie K. Hirono, Hawaii 

Barrett Karr, Staff Director 

Jody Calemine, Minority Staff Director 

SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS 

DAVID P. ROE, Tennessee, Chairman 

Joe Wilson, South Carolina 

Glenn Thompson, Pennsylvania 

Tim Walberg, Michigan 

Scott DesJarlais, Tennessee 

Richard L. Hanna, New York 

Todd Rokita, Indiana 

Larry Bucshon, Indiana 

Lou Barletta, Pennsylvania 

Kristi L. Noem, South Dakota 

Martha Roby, Alabama 

Joseph J. Heck, Nevada 

Dennis A. Ross, Florida 

Robert E. Andrews, New Jersey 

Ranking Minority Member 

Dennis J. Kucinich, Ohio 

David Loebsack, Iowa 

Dale E. Kildee, Michigan 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Robert C. ‘‘Bobby’’ Scott, Virginia 
(III) 

C O N T E N T S 

Page 

Hearing held on March 10, 2011 ............................................................................ 1 

Statement of Members: 

Kildee, Hon. Dale E., a Representative in Congress from the State of 

Michigan, question for the record ................................................................ 36 

Kucinich, Hon. Dennis J., a Representative in Congress from the State 

of Ohio ............................................................................................................ 4 

Prepared statement of ............................................................................... 0 

Submissions for the record: 

‘‘Medical Bankruptcy in the United States, 2007: Results of a 

National Study,’’ American Journal of Medicine, 2009 ............... 42 

‘‘Seeing Red: The Growing Burden of Medical Bills and Debt 

Faced by U.S. Families,’’ the Commonwealth Fund, August 

2008 ................................................................................................. 48 

Arensmeyer, John, founder & CEO, Small Business Majority, 

prepared statement of .................................................................... 68 

Roe, Hon. David P., Chairman, Subcommittee on Health, Employment, 

Labor and Pensions ...................................................................................... 1 

Prepared statement of ............................................................................... 3 

Additional submission: Letter, dated Mar. 10, 2011, from Associated 

Builders and Contractors ...................................................................... 67 

Statement of Witnesses: 

Brewer, J. Michael, president, Lockton benefit group, Lockton Companies, 

LLC ................................................................................................................ 25 

Prepared statement of ............................................................................... 27 

Houser, Jim, Hawthorne Auto Clinic and Main Street Alliance of Oregon . 21 

Prepared statement of ............................................................................... 23 

Miller, Thomas P., J.D., resident fellow, American Enterprise Institute ....

Prepared statement of ............................................................................... 6 

Response to Mr. Kildee’s question ........................................................... 36 

Parker, Brett, vice chairman and chief financial officer, Bowlmor Lanes, 

on behalf of the U.S. Chamber of Commerce .............................................. 15 

Prepared statement of ............................................................................... 17 

(1) 

THE PRESSURES OF RISING COSTS ON 

EMPLOYER PROVIDED HEALTH CARE 

Thursday, March 10, 2011 

U.S. House of Representatives 

Subcommittee on Health, Employment, Labor and Pensions 

Committee on Education and the Workforce 

Washington, DC 

The committee met, pursuant to call, at 10:05 a.m., in room 

2175, Rayburn House Office Building, Hon. Phil Roe [chairman of 

the subcommittee] presiding. 

Present: Representatives Roe, Kline, DesJarlais, Hanna, 

Bucshon, Barletta, Roby, Heck, Kucinich, Kildee, Hinojosa, Tierney, and Wu. 

Staff present: Katherine Bathgate, Press Assistant; Kirk Boyle, 

General Counsel; Casey Buboltz, Coalitions and Member Services 

Coordinator; Ed Gilroy, Director of Workforce Policy; Barrett Karr, 

Staff Director; Ryan Kearney, Legislative Assistant; Brian Newell, 

Press Secretary; Molly McLaughlin Salmi, Deputy Director of 

Workforce Policy; Ken Serafin, Workforce Policy Counsel; Linda 

Stevens, Chief Clerk/Assistant to the General Counsel; Alissa 

Strawcutter, Deputy Clerk; Aaron Albright, Minority Deputy Communications Director; Daniel Brown, Minority Staff Assistant; 

Jerrica Mathis, Minority Legislative Fellow; Megan O’Reilly, Minority General Counsel; Meredith Regine, Minority Labor Policy 

Associate; and Michele Varnhagen, Minority Chief Policy Advisor 

and Labor Policy Director. 

Chairman ROE [presiding]. Good morning, everyone. I want to 

thank our witnesses for being with us today, and for sharing their 

thoughts and experience on this very important subject. 

The steady rise in cost is a critical challenge facing our nation’s 

health care system. For many patients, the price of health care is 

the determining factor when deciding whether to receive the care 

he or she needs. It also imposes a tremendous burden on taxpayers, 

as government health services become more and more expensive. 

As a parent, a physician and elected official, hardly a day goes 

by when I am not reminded of this difficult reality. Yesterday was 

no exception. Employers, however, understand better than most the 

tough choices workers and their families face as health care costs 

go up year after year. 

In 1974, the Employee Retirement and Income Security Act, commonly known as ERISA, became law. It provides the rules of the 

road for benefit plans offered by employers, including employer-pro-
2 

vided health care. Employer-provided health care is now as common to employee compensation as wages, paid vacation and sick 

leave. 

Roughly 170 million individuals receive health insurance through 

an employer-provided health care plan. It has become central to 

our nation’s health care system. While not perfect, it has served 

employers and employees well for nearly 40 years. Any changes to 

the nation’s health care system will affect the lives of millions of 

employers, workers and their families. 

That is why the challenge of rising costs is a pressing national 

concern. An aging workforce, more advanced therapies, higher utilization, liability and fewer providers are just some of the factors 

contributing to the increases. 

As policymakers, we have a responsibility to understand the underlying causes of these factors and to consider common-sense solutions that ultimately reduce expenses for workers and their families. 

President Obama understood this responsibility when, as a candidate for the presidency, he outlined a plan he promised would reduce costs or the families and businesses. Without providing specific details for businesses, then-Senator Obama promised his 

health care plan would lower premiums by as much as $2,500 per 

family. As president, Mr. Obama claimed that under his plan, ‘‘if 

you like your current health care, you can keep it.’’ 

Unfortunately, now, we know these assertions to be untrue. 

Along the path to health care reform, the president and his Democratic allies are banning any effort to reduce costs, and instead focused on expanding access through the creation of a new government entitlement program; a program that will surely change how 

workers receive their health care, regardless of whether they like 

it or not. 

This has left this issue of rising costs unresolved as the need for 

meaningful reform grows more urgent. 

There are a number of provisions in the recent health care law 

that not only fail to address rising costs, but actually exacerbate 

the problems facing employers and their workers. For the first time 

in our nation’s history, we have a mandate requiring certain employers provide government-approved insurance, or pay a fine. 

However, providing government-approved health care will grow 

more and more expensive, as benefit plans begin to comply with a 

number of additional mandates and requirements controlled by 

Washington bureaucrats. Existing employer plans were supposed to 

be grandfathered from the new law’s requirements. But we have 

since learned this will not be the case for up to 69 percent of the 

plans, including up to 80 percent of smaller plans. 

We all want to see individuals with pre-existing conditions get 

the care they need and young adults receive extended help from 

their parents, if they so desire. 

But a sea of government mandates will not lead to lower costs 

and better health care. A number of independent health care researchers have examined the issue and determined costs will continue to increase at a rapid pace, due in part to Obamacare. 

That is why we are here today. We must examine these and 

other driving forces behind rising health care costs, their effects on 
3 

employers and workers, and begin to consider responsible solutions 

that address the needs of the nation. 

I would now recognize my colleague and friend from Ohio, Mr. 

Kucinich, the senior Democratic member of the subcommittee here 

today, for his opening remarks. 

[The statement of Dr. Roe follows:] 

Prepared Statement of Hon. David P. Roe, Chairman, 

Subcommittee on Health, Employment, Labor and Pensions 

Good morning everyone. I want to thank our witnesses for being with us today 

and for sharing their thoughts and experience on this important subject. 

The steady rise in cost is a critical challenge facing our nation’s health care system. For many patients, the price of health care is the determining factor when deciding whether to receive the care he or she needs. It also imposes a tremendous 

burden on taxpayers, as government health services become more and more expensive. As a parent, physician, and elected official, hardly a day goes by when I am 

not reminded of this difficult reality. 

Employers, however, understand better than most the tough choices workers and 

their families face as health care costs go up year after year. In 1974, the Employee 

Retirement and Income Security Act, commonly referred to as ERISA, became law. 

It provides the rules of the road for benefit plans offered by employers, including 

employer-provided health care. Employer-provided health care is now as common to 

employee compensation as wages, paid vacation, and sick leave. 

Roughly 170 million individuals receive health insurance through an employerprovided health care plan. It has become central to our nation’s health care system. 

While not perfect, it has served employers and employees well for nearly forty years. 

Any changes to the nation’s health care system will affect the lives of millions of 

employers, workers, and families. 

That is why the challenge of rising costs is a pressing national concern. An aging 

workforce, more advanced therapies, higher utilization of services, and fewer providers are just some of the factors contributing to the increases. As policy makers, 

we have a responsibility to understand the underlying causes of these factors and 

to consider commonsense solutions that ultimately reduce expenses for workers and 

their families. 

President Obama understood this responsibility when, as a candidate for the presidency, he outlined a plan he promised would ‘‘reduce costs for families and businesses.’’ Without providing specific details for businesses, then-Senator Obama 

promised his health care plan would ‘‘lower premiums by as much as $2,500 per 

family.’’ As President, Mr. Obama claimed that, under his plan, ‘‘if you like your 

current health care, you can keep it.’’ 

Unfortunately, we now know these assertions to be untrue. Along the path to 

health care reform, the president and his Democrat allies abandoned any effort to 

reduce costs and instead focused on expanding access through the creation of a new 

government entitlement program; a program that will surely change how workers 

receive their health care, regardless of whether they like it or not. This has left this 

issue of rising costs unresolved as the need for meaningful reform grows more urgent. 

There are a number of provisions in the recent health care law that not only fail 

to address rising costs, but actually exacerbate the problems facing employers and 

their workers. For the first time in our nation’s history, we have a mandate requiring certain employers provide government-approved insurance or pay a fine. 

However, providing government-approved health care will grow more and more 

expensive as benefit plans begin to comply with a number of additional mandates 

and requirements controlled by Washington bureaucrats. Existing employer plans 

were supposed to be ‘‘grandfathered’’ from the new law’s requirements, but we’ve 

since learned this will not be the case for up to 69 percent of plans, including up 

to 80 percent of smaller plans. 

We all want to see individuals with pre-existing conditions get the care they need 

and young adults receive extended help from their parents if they so desire. But a 

sea of government mandates will not lead to lower costs and better health care. A 

number of independent health care researchers have examined the issue and determined costs will continue to increase at a rapid pace due in part to ObamaCare. 

That is why we are here today. We must examine these and other driving forces 

behind rising health care costs, their affects on employers and workers, and begin 

to consider responsible solutions that address the needs of the nation. 
4 

I would like to now yield to Mr. Andrews, the ranking member, for his opening 

remarks. 

Mr. KUCINICH. I want to thank my friend, Chairman Roe, for 

calling this hearing. I would also like to thank our distinguished 

panel of witnesses for appearing. 

It has been nearly 1 year since the Affordable Care Act became 

law, and already, millions of Americans are realizing its benefits. 

The new health care law comes at a time when both employers and 

families are struggling to keep up with skyrocketing increases in 

their health care costs. 

Over the last decade, family premiums more than doubled in the 

employer-based health insurance market. We know that without 

reform, the problem of rising health care costs will just get worse. 

The Commonwealth Fund estimates that, absent health reform, 

the average family premium will nearly double again by 2020, to 

almost $24,000. These increases are unsustainable, and this country could not afford the status quo any longer. Higher health care 

costs means employers have less to reinvest in their business, and 

families have a harder time making ends meet. 

While the Affordable Care Act is not a perfect law—and I know 

that, because I was involved principally in challenging it—it dramatically expands access to affordable, quality health care. It takes 

critical first steps in reining in the abuses of an insurance industry 

that so far has gone unchecked. 

It will provide small employers with the same purchasing power 

as large employers and will give them tax credits to help them 

cover their workers. 

It also extends flexibility to the states, should they want to pursue an alternative to the federal health law, as long as it provides 

at least the same protections and access to health care as is afforded under the ACA. 

It is unconscionable that we have allowed the insurance industry 

in this country to pad its pockets at the expense of hard-working 

Americans by charging more but spending less on benefits. In 2010, 

the top five insurance companies—UnitedHealth, WellPoint, Aetna, 

Humana and Cigna—saw record profits, $11.7 billion. 

While 43 states already had some kind of premium rate review 

process before the ACA, the law gives states the ability to enhance 

or create a rate review process to go after unjustified rate increases. It also ensures that these rate increases and the justification for them are publicly available. 

The Affordable Care Act further protects against insurance company abuses by requiring them to spend more on benefits and less 

on profits and CEO pay. The law’s medical loss ratio requirements 

require insurance companies spend 80 to 85 percent of premium 

dollars on medical care and health quality. This provision alone 

will provide up to $1.2 billion in rebates starting in 2012. 

The law’s benefits for employers are already being realized, even 

before the law is fully implemented. More than 5,000 employers are 

taking part in the law’s retiree reinsurance program, which has reimbursed more than $535 million in health care benefits, benefiting 

more than 4.5 million Americans. 
5 

Four million small businesses are eligible for the small business 

tax credit, and many are seeing real savings this year. As a result, 

more are offering health care. The number of small employers with 

three to nine workers offering health insurance has risen from 46 

to 59 percent. 

After starting in 2014, small employers will be able to pull together to provide more health care choices to employees at lower 

cost. 

Employers will also benefit from the law’s Patient’s Bill of 

Rights. A healthier workplace is a more profitable and more productive one. 

If these new protections were taken away, it is clear that employers, especially small employers, will be worse off. Helen Darling, 

president of the National Business Group on Health, which includes almost 300 large employers, has said, ‘‘If the law gets repealed or gutted, we will have to start over, and we will be worse 

off.’’ 

The Congressional Budget Office states that repealing the law 

will slightly increase employer-sponsored premiums. 

Ultimately, we need to remove the source of our health care 

problems: the health insurance companies. They are the reason 

that one out of every $3 spent on health care goes to something 

other than providing care. 

I believe the demise of the for-profit health insurance industry is 

inevitable. Until then, Mr. Chairman, the American people who are 

trying to survive this recession need our help. And the Affordable 

Care Act provides Americans relief from the burden of health insurance companies. 

I look forward to today’s hearing. I yield back the balance of my 

time. 

I just want to say, Mr. Chairman, we have votes going on in Government Oversight right around the corner. I may have to duck out 

for a moment here and there. But otherwise, I will be here with 

you. 

Chairman ROE. I thank the gentleman for yielding. 

Pursuant to committee rule 7c, all members will be permitted to 

submit written statements to be included in the permanent hearing 

record. 

And without objection, the hearing record will remain open for 

14 days to allow questions for the record. Statements and extraneous material referenced during the hearing will be submitted for 

the official hearing record. 

It is my pleasure to introduce our panel. 

I know, Mr. Miller, you are probably a wreck in the Washington 

traffic, but thank you for being here. 

Mr. Thomas Miller is a resident fellow for the American Enterprise Institute, where he focuses on health care policy, with a particular emphasis on such issues as information, transparency, 

health insurance regulation and consumer-driven health care. 

He was a member of the National Advisory Council for the Agency of Health Care Research and Quality from 2007 to 2009. Prior 

to his work at AEI, Mr. Miller was a senior health economist for 

the Joint Economic Committee, where he organized a series of 

hearings on promising reforms in private health markets. Mr. Mil-
6 

ler holds a bachelor’s degree in political science from New York 

University and a law degree from Duke University. 

Mr. Brett Parker is vice chairman and chief financial officer for 

Bowlmor Lanes. Bowlmor Lanes, as it is known today, was started 

in 1997, and operates bowling alleys in six locations in four states 

including New York, Maryland and Florida, and California. 

Bowlmor Lanes has grown from 50 to more than 500 employees— 

and congratulations for that—in the last 10 years, with more than 

100 hired within the last year alone. 

Mr. Parker is testifying today on behalf of the U.S. Chamber of 

Commerce. 

I will now yield to the gentleman from Oregon, Mr. Wu, to introduce Mr. Jim Houser. 

Mr. WU. Thank you, Mr. Chairman. 

Mr. Jim Houser is co-owner of Hawthorne Auto Clinic, a AAAapproved auto repair facility located in Portland, Oregon. Hawthorne Auto Clinic has been the recipient of a number of awards, 

including the Blue Seal of Excellence Award from the National Institute for Automotive Service Excellence; the Best Practices for 

Sustainability Award from the City of Portland; and the Small 

Business of the Year Award in both 1996 and 2007, from the Better 

Business Bureau. 

Mr. Houser is testifying on behalf of the Main Street Alliance, a 

national network of state-based small business coalitions. I have 

had the pleasure of meeting with Main Street Alliance members at 

home and welcome Mr. Houser to Washington and this committee. 

Thank you, Mr. Chairman. 

Chairman ROE. Thank you, Mr. Wu. 

And also, thank you, Mr. Houser, for being here. 

Our final witness is Mr. Michael Brewer, the president of 

Lockton Benefit Group located in Kansas City, Missouri. Lockton 

Benefit Group provides national employee benefits consulting services to about 2,500 companies nationwide in a broad range of industries. 

Lockton Benefit Group is part of Lockton Companies, LLC, which 

provides global risk management, insurance and employee benefit 

services. Lockton is the world’s largest privately owned, independent insurance brokerage firm, and it has more than 3,800 associates worldwide. 

Before we start the testimony, let me explain the light system. 

Basically, you have 5 minutes, the yellow light with the green 

light. The yellow light means you have a minute, and the red light 

means that probably I will start tapping to end your testimony. 

So with that, Mr. Miller, would you begin? 

STATEMENT OF TOM MILLER, RESIDENT FELLOW, 

AMERICAN ENTERPRISE INSTITUTE 

Mr. MILLER. Thank you very much, Chairman Roe, Representative Kucinich, members of the subcommittee, for this opportunity 

to speak on the pressures of rising costs on employer-provided 

health care. 

We should be more concerned about what is likely to unfold as 

we approach 2014 and the immediate years afterward than the 
7 

most recent ups and downs of the limited dosage effects of the Affordable Care Act’s initial year of implementation. 

It has not provided much short-term help, but it still threatens 

to do more harm later. Partly because the ACA actually has provided very little in tangible first-year benefits, it also has imposed 

only modest immediate costs and complications on most employers. 

Although the health sector appears to exhibit a longstanding 

ability to grow faster than the rest of the economy, the substantial 

effects of a deep recession within the last 3 years certainly slowed 

the absolute dollar growth of health spending and some health care 

utilization, if not its relative share of a troubled economy. 

We often forget that national health spending has grown at a 

slower rate in every year from 2000 to 2009. However, we can neither afford, nor should we expect, to rely on a prolonged recession 

or sluggish economy to keep slowing down that rate. 

There remains a substantial list of theories and explanations for 

this persistent excess growth of health spending and health insurance costs, but the most predictable common element behind many 

of the more politically effective ones is that it is always someone 

else’s fault. 

The unpredictability of what will be enforced under the regulatory domain authorized under the ACA, and how its complex and 

often inconsistent provisions will be interpreted, leaves many employers frozen in uncertainty in their health benefits planning. 

Leading examples include the narrowed range of grandfathering 

protection for previous employer health plans and future definitions of details to be unveiled later for central benefits and state 

health benefits exchanges. 

In isolation, a few of the initial burdens for employers are likely 

to determine decisively whether most of them continue to offer 

health insurance. But over time, they amount to a steady drip-bydrip, political form of water torture that can eventually reach critical mass and push a much larger share of employers to reconsider 

their continued involvement in offering health coverage. 

The structure of future penalties for noncompliance with employer coverage mandates will send out additional economic disincentive signals that tell different categories of business owners to 

grow slower, hire fewer, pay less and restructure their firms. 

More ominously, the tilted playing field beginning in 2014 for future tax subsidies for workers at the same income level, depending 

on whether they are inside employer health plans or purchasing 

outside coverage in any benefits exchanges that actually come into 

existence by then, appears far from politically sustainable. 

If and when the highly flammable legislative firewalls constructed to separate these two health insurance domains begin to 

break down, the federal budgetary implications of an employer coverage meltdown alone would be explosively unaffordable. And the 

future of market-based forms of private insurance would be in even 

greater jeopardy. 

We still have time to pull back before testing the temperature of 

the water for the lead group of health policy lemmings nearing the 

edge of this cliff. 

A short list of changes in direction would include a much stronger focus on responsible choice in competition in health care mar-
8 

1 As calculated under Current Population Survey methods by the Census Bureau last year. 

Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica C. Smith, U.S. Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 3009, Current Population 

Reports, P60-238 (Washington, D.C.: U.S. Government Printing Office, 2010), table C-1. 

kets; more neutral, limited and transparent taxpayer subsidies for 

health spending by most Americans, but more targeted special protection for the most vulnerable and highest-risk portions of the 

populations; real steps toward meaningful information transparency; and realignment of incentives to reward better health care 

choices and higher-value health care delivery. 

The last round of purported health care reform overloaded the 

operational circuits of our political system, overfed its appetite for 

more private resources and offended longstanding cultural norms. 

Rebalancing the mix necessarily must begin with repeal of many 

core components of the ACA, but it cannot end short of equally difficult but necessary and more sustainable reforms enacted to replace them. 

Thank you. 

[The statement of Mr. Miller follows:] 

Prepared Statement of Thomas P. Miller, J.D., Resident Fellow, 

American Enterprise Institute 

Thank you Chairman Roe, Ranking member Andrews, and members of the Subcommittee for the opportunity to speak this morning on the pressures of rising costs 

on employer-provided health care. 

I am speaking today as a health policy researcher, a resident fellow at the American Enterprise Institute and co-author of the forthcoming book, ‘‘Why ObamaCare 

Is Wrong for America (to be published later this month). I also will draw upon previous experience as a senior health economist at the Joint Economic Committee, 

member of the National Advisory Council for the Agency for Healthcare Research 

and Quality, and health policy researcher at several other Washington-based think 

tanks. 

The subject of this hearing is not a new one, although the economic and policy 

context in which we examine it has changed and will continue to do so in the years 

and decades ahead. The two most significant factors are the recent deep recession— 

from which both the overall economy and its health sector are slowly recovering— 

and the passage and early implementation of the Patient Protection and Affordable 

Care Act (referred to hereafter as ‘‘ACA’’)—from which they may not, without a substantial change in direction. 

Roughly 170 million Americans received private health insurance through the 

workplace in 2009,1 and the vast majority of those workers and their families, despite periodic complaints, value it very much. However, our largely employer-based 

system of private health coverage does not work well for everyone—most notably 

those workers who lose their jobs. Or who cannot find either new or initial work. 

Or who cannot afford their share of expensive and rising premiums. Or who need 

a better balance between lagging wages and rising health benefits costs. Or whose 

employer simply cannot afford to offer insurance. Millions of people need better options to get more stable and affordable health insurance. 

As director of AEI’s ‘‘Beyond ‘Repeal and Replace:’ Ideas for Real Health Reform’’ 

project, I would be happy to discuss in greater depth a number of better solutions 

to the continuing chronic conditions of high costs, inconsistent quality, gaps in access, and misaligned incentives throughout our health care economy. However, the 

primary focus of my testimony today is, first, to place employer health care cost 

challenges and assertions about them in perspective. I then will examine the likely 

effects of the ACA on the future ‘‘health’’ of employer-sponsored health insurance, 

and very briefly conclude with some suggested policy alternatives. 

In brief, we should be more concerned about what is likely to unfold as we approach 2014 and the immediate years afterward than the most recent headlines of 

the limited-dosage effects of the ACA’s initial year of implementation. It has not 

provided much short-term help, but still threatens to do more harm later. A number 

of blame-shifting assertions, statistical mirages, overstatements, and simplistic pet 

theories should not distract us from the more complex and daunting task of both 
9 

rethinking the path that the previous Congress took in the ACA and pursuing more 

robust and realistic routes to sustainable, higher-value health care. 

Putting Health Spending Trends in Perspective 

Let’s start with a reminder of the health spending context when the ACA was 

first proposed, debated, and enacted. From calendar year 2007 to 2008, overall national health spending (as measured by the ‘‘National Health Expenditure’’ accounts 

compiled annually by the Centers for Medicare and Medicaid Services) increased 

only 4.7 percent. That was the smallest percentage annual increase in the nearly 

50 year history of that measure. And then national health spending rose only 4 percent more, in 2009. 

As for the more narrow measure of the employer cost per employee of employersponsored health benefits, the most consistently accurate one over time—Mercer’s 

National Survey of Employer-Sponsored Plans—indicates that those costs remained 

in a steady pattern of roughly 6 percent annual increases in the five years from 

2005 through 2009, even though the underlying health care cost trend was running 

about 9 percent a year. However, those employer health benefits costs increased 6.9 

percent in 2010. Even though the employers surveyed last year expected the health 

care costs they would face in 2011 to rise another 10 percent, they also planned to 

make changes in their health plan benefit designs and vendors in order to bring 

their actual employer benefits cost increases down to 6.4 percent (see Figure 1). 

The Mercer survey includes public and private employers with 10 or more employees. Another longstanding national employer health benefits survey by the Kaiser 

Family Foundation and the Health Research & Educational Trust (KFF/HRET) examines trends among nonfederal private and public employers with three or more 

employees. Its most recent annual survey found that average total premiums (both 

the employer and employee shares) for employer-sponsored coverage increased only 

3 percent for single coverage and 5 percent for family coverage in 2010. This reflected a continuation of relatively modest premium growth in recent years. 

For 2011, several other national employer health costs surveys have forecasted 

somewhat higher rates of increase. Last fall, Hewitt Associates predicted that large 

employers could expect 2011 health care cost increases of 8.8 percent, compared to 

annual growth rates of 6.9 percent in 2010 and 6.0 percent in 2009 and 2008. Also 

generally consistent with other forecasts of underlying health cost growth (as opposed to actual health premium cost increases), PricewaterhouseCoopers estimated 

last June that employers could expect medical costs to increase by 9 percent in 

2011. 
10 

2 Anne Martin, David Lassman, Lekha Whittle, Aaron Catlin and the National Health Expenditure Accounts Team, ‘‘Recession Contributes to Slowest Annual Rate of Increase in Health 

Spending in Five Decades,’’ Health Affairs 30:1 (2011):14. 

The above numbers and estimates tell several overlapping stories, with more than 

a few cautions and limitations. First, employers generally end up paying somewhat 

less for their health plan premiums than initial health care cost projections would 

suggest. Particularly in the case of larger employers, they do not accept passively 

the first set of premium prices quoted to them. They adjust their plan designs (e.g., 

greater cost sharing), insurance partners, and incentives to employees so that they 

can afford better the health benefits they ultimately finance either directly (in selfinsured plans) or through purchases of fully insured coverage. 

Second, it’s more informative to focus on percentage increases and relative shares 

of both the employee compensation dollar and overall economic resources, rather 

than on nominal dollar amounts, in order to spot any changes in past trends. The 

persistence of real rates of increase in health spending relative to spending on other 

goods and services can be less obvious during periods of varying inflation rates. 

Third, different employer benefits surveys often reflect somewhat different types 

of respondents (e.g., large versus small employers), time periods, and methodologies. 

No single survey tells the complete story, but the better ones all tell us important 

parts of it despite lesser inconsistencies. Aggregate national average numbers also 

can obscure substantial variation among different regions, types of purchasers, and 

insurance product markets. For example, large employers (500 or more employees) 

experienced a sharper cost increase in 2010 than smaller employers in the Mercer 

survey, even though they generally have greater advantages in bargaining leverage, 

risk pooling, benefits administration capacity, and regulatory flexibility. Much 

smaller employers—particularly in the below-50-employee ‘‘small group’’ market— 

consistently face higher insurance premium costs for any given level of benefits, but 

they purchase ‘‘less’’ and thereby bring down their actual premium expenses. Consumer-driven health plans with greater cost sharing continued to provide health 

benefits at lower costs, and increased their overall market share (but most notably 

among the largest employers). 

Fourth, although the health sector of the economy appears to exhibit a longstanding ability to grow faster than annual GDP, wages, and non-health areas of 

government spending, the experience of recent years reveals the substantial effects 

of a deep recession in slowing the absolute dollar growth of health spending (and 

health care utilization), if not its relative share of a troubled economy. As a CMS 

team of health spending actuaries explained in a Health Affairs article, ‘‘Although 

health care spending has grown at a slower rate every year since 2002, the deceleration, or slowdown in the rate of growth, was more pronounced in 2008 and 2009 

because of the severe economic recession. In contrast to prior recessions, when there 

was usually a lag before health care spending growth slowed, the recession that 

lasted from December 2007 to June 2009 had a more immediate impact on the 

health care sector.’’ 2

So the illusory ‘‘good news’’ of the last few years might be that the Obama administration can claim at least superficially that it already helped slow down somewhat 

the growth rate for health care spending, and related health insurance premiums. 

The ‘‘bad news’’ is we neither can afford, nor should we expect, to rely on a prolonged recession or sluggish economy to keep doing so. 

Other Statistical Mirages, Mis-Steps, and Pet Theories versus Longer-Term Trends 

There remains a substantial over-supply of theories and explanations for the persistent ‘‘excess’’ growth of health spending and health insurance costs above the rate 

of annual growth in the rest of the U.S. economy. A number have some limited degree of plausibility, but either their overall impact, duration, or independent effects 

(or all of the above) tend to be over-stated at best. Recently on the hit list have been 

such explanations as: 

• Excessive profits by * * * (chose a sector of the health economy you do not represent) 

• Failure to receive more and better-reimbursed health services from * * * 

(choose a sector of the health economy you do represent) 

• Cost shifting (by everyone else) 

• Changes in the insured risk pool (too many healthy people either losing coverage or dropping out of the insurance market, too many sick people staying on employer coverage with enhanced COBRA tax subsidies) 

• Insufficient health coverage and excessive out-of-pocket costs 

• Almost everyone seemingly either has, or is about to suffer from, a chronic and 

costly health condition 
11 

3For an earlier examination of this issue, see Thomas Miller and Rohit Parulkar, ‘‘Out of 

Pocket Theory for Health Spending Cutbacks Is ‘Clueless,’ ’’ Health Affairs Blog, September 24, 

2010, available at http://healthaffairs.org/blog/2010/09/24/out-of-pocket-theory-for-healthspending-cutbacks-is-clueless 4See, for example, Martin Feldstein, ‘‘ How Big Should Government Be?’’ National Tax Journal 50:2 (1997): 197-213; and Christopher J. Conover, ‘‘Congress Should Account for the Excess 

Burden of Taxation,’’ Cato Policy Analysis no. 669, October 13, 2010. 

The full list, on both sides of the ideological as well as interest group divides, is 

of course much longer. It includes a wide assortment of ‘‘silver bullets’’ of health policy reform advocacy that never quite hit their elusive target. But the most predictable common element behind many of the more politically effective ones is that it’s 

always ‘‘someone else’s’’ fault! A broad consensus has existed for many decades that 

the small share of health care costs that we individually have to pay most directly 

are too high. But we appear to be nearing a newer frontier where the limits of what 

all those ‘‘someone else’s’’ (particularly employers and taxpayers, and even U.S. 

Treasury creditors) are willing and able to pay are getting much closer in sight, as 

well. 

One of the more pernicious misstatements of health care financing reality is the 

assertion that our mixed public/private system fails to pay enough of everyone else’s 

health care bills; hence the need both for more insurance coverage and more comprehensive benefits. However, when one compares out-of-pocket (OOP) health spending to total national health expenditures, one finds that the OOP share in the U.S. 

continues to decline as part of a long-term trend—12.0 percent actual in 2009, 9.7 

percent project for 2014, the first fully-installed year of the ACA’s coverage mandates and enhanced taxpayer subsidies. Moreover, the U.S. OOP share of health 

spending, as of the last comparative figures available from the OECD in 2008 (12.1 

percent) was below that of Germany, Canada, and the weighted average of all reporting members, respectively. Despite some apparent growth in the nominal dollar 

amount of potential cost sharing in certain segments of the private health insurance 

market, this first-party exposure to some of the costs of care has not yet translated 

into increases in the share of U.S. health spending that is paid out of pocket.3

Aside from occasional throwaway comments that aggregate health spending is too 

high and/or unaffordable, the default presumption in many elite health policy circles 

remains that the actual consumption of care should remain unburdened by the economics of paying more of its full price out of pocket—even at the margin. Early dollar deductibles are resisted as discouraging essential preventive care (as in * * * 

dropping by the doctor’s office whenever the first unclear symptom appears, to see 

if one might be discovered, along with a billing code for it * * *). Partial cost sharing for larger medical expenses is seen as too punitive and overtaxing the limited 

abilities of patients to assess more complex tradeoffs. And leaving all the other midrange types of health care cost decisions subject to cost sharing apparently either 

would single out the chronically ill too harshly and leave them prone to even greater 

health problems in the future, or it would jeopardize the underlying financial health 

of a health delivery system based on opaque cross-subsidies that detach prices from 

values. Before you know it, not a single dollar of health spending can be left at risk 

to the dangers of cost sharing. 

The above represents only a slight exaggeration of the ambitions and presumptions of the ACA’s coverage mandates, cost sharing limits, and expanded health 

spending subsidies through future health benefits exchanges, which are either imposed on employer-sponsored coverage or will directly affect its future. If left unchanged and fully implemented, they would push most Americans to believe they 

can and should spend even higher relative shares of other people’s money. This in 

turn will aggravate the longstanding economic effects of distorted spending incentives and substantial dead-weight losses when re-routing greater shares of the economy through public financing mechanisms.4

Before examining both the likely short-term and long-term effects of the ACA on 

employer health care costs, overall health spending trends, and the larger economy, 

let’s first remember some broader points about what really matters in improving the 

value of the health care we receive (i.e., delivering better health outcomes at lower 

costs). 

• Although the ACA emphasizes expanded insurance coverage, redistribution and 

expansion of public subsidy payment streams, and scapegoating private insurers for 

a host of partly real but broadly exaggerated misdeeds, the overwhelming component of current health premium costs and their future rates of growth is comprised 

of * * * the underlying cost of health care as currently delivered in far from optimally effective or efficient ways. And it has failed to provide a clear, consistent, feasible, and sustainable route to address that problem. 
12 

• Producing better health outcomes and improved population health is driven 

much more by factors well beyond the supply and cost of medical care. Our longstanding political biases in health policy continue to neglect this crucial point. Despite a handful of fledging initiatives in less-noticed sections of the overall legislation, the ACA’s overwhelming focus remained on politically controlling private 

health insurance more tightly, rearranging public subsidies for health care financing 

predominantly for political and re-distributional reasons, and then jerry-rigging the 

complex contraption to meet daunting political and budgetary scoring needs by 

whatever means necessary to ensure narrow passage last March. • Although our health care system still manages to perform admirably in many 

respects despite the many public policy handicaps under which it continues to operate, its costs continue to exceed its value and this increasingly crowds other important private and public needs. We cannot afford to continue to neglect necessary 

spending and investment in a number of NON-healthcare sectors of our society. • The employer-sponsored portion of private insurance will continue to provide a 

vital role in our health care arrangements. It remains much more creative, accountable, sensitive to workers’ preferences, and value-conscious than the growing share 

of the health care marketplace dominated by politically-administered care and coverage. But the small employer portion of the health coverage market needs better 

tools and options. In an increasing number of cases, traditional small-group coverage is less and less financially viable. Nor is it a consistently satisfactory option 

for small business employees and their employers. The ACA failed to solve those 

problems, largely because it was pursuing a broader political agenda. Rethinking 

and restructuring a much different version of health benefits ‘‘exchange’’ options for 

some, but not all, of those people currently in the small employer, as well as individual, portion of the health insurance market, remains essential. 

• Improved choice, competition, and value in health care arrangements still will 

have to be driven by more transparent, accountable, and decentralized private markets, rather than top-down political edicts. Real health care reform is not a public 

versus private either-or proposition, but we have overloaded the operational circuits 

of our political system and overfed its appetite for private resources. Rebalancing 

the mix necessarily must begin with repeal of many core components of the ACA, 

but it cannot end short of equally difficult but necessary reforms to replace them. 

Assessing the ACA’s Effects on Employers and Employees 

In the very near term, the ACA has only done modest damage to employer-sponsored health coverage. Its main provisions were delayed for a number of years in 

a staggered ‘‘time-release’’ schedule of implementation due to political, economic, 

and administrative considerations. Employer coverage mandate penalties, crowd-out 

competition from highly-subsidized state health benefits exchanges and expanded 

Medicaid coverage, and more binding requirements for (plus actual definition of) essential health benefits, remain a number of years away (‘‘apres 2013, le deluge’’). 

So, because the ACA actually has provided very little in tangible first-year ‘‘benefits,’’ it also has imposed only modest immediate costs and complications on most 

employers. Early projected estimates of the increased employer premium costs of 

initial mandates for offering group health insurance coverage to dependent ‘‘children’’ (up to age 26) of covered adults range in the one- to two-percent range. Premium cost increase estimates for the early prohibition on lifetime coverage limits, 

as well as the gradual phasing out of annual coverage limits, were equally modest. 

The less-noticed fact was that most employer group policies already had rather generous coverage limits, and hence they were largely unaffected by this ‘‘mandate.’’ Of 

course, every two- to three-percent ‘‘average’’ increase in premium costs can be more 

problematic for profit-squeezed small employers already operating on the margin, let 

alone those who are at the high-cost end of those broad cost-estimate averages. 

Several other claims of early deliverable benefits from the ACA remain overstated, if not even more questionable. The initial implementation of minimum medical loss ratio (MLR) mandates for fully-insured coverage that began this year will 

have a more disruptive coverage impact in the individual than in the small group 

market (80 percent of premiums must be paid out in medical benefits by insurers 

in both markets, under rather complex rules for calculating compliance with that 

threshold). However, the initial enforcement of the MLR rules threatens to squeeze 

out or reduce the valuable services of many insurance agents and brokers, and discourage private insurers’ investments in useful ancillary services that do not meet 

more narrow ACA-enabled regulatory definitions of payments for ‘‘medical benefits’’—rather than leave it up to small employers and their covered employees to determine whether they are worthwhile as part of an overall package of insurance 

benefits. Moreover, the exaggerated effort to paint insurers’ ‘‘excessive’’ administrative costs as a key component of high and rising insurance premiums flies in the 
13 

5See Scott E. Harrington, ‘‘Regime Change for Health Insurance Regulation: Rethinking Rate 

Review, Medical Loss Ratios, and Informed Competition,’’ American Enterprise Institute, December 2010, available at http://www.aei.org/paper/100163. 

face of the formers’ relative share of those premium dollars as well as recent trends 

in their rate of growth. In general, administrative costs (including profits) for private insurers have been growing less rapidly than overall private premiums since 

2003, as calculated by CMS in its annual National Health Expenditure account estimates (decreasing from 13.67 percent in 2003 to 11.15 percent in 2009). 

Another ‘‘feel good’’ exercise of short-term political posturing under the ACA involves initial provisions for enhanced federal and state review of private insurers’ 

premium rate filings. Although HHS does not have full power to deny proposed rate 

hikes, it has issued regulations enabling it to ask for more information to ‘‘justify’’ 

them, slow down requests for their approval by state regulators, and enhance the 

ability of the latter to block, reduce, or delay them further under state law. However, the long history of prior approval mechanisms for proposed insurance rate filings at the state level indicates that regulators may temporarily suppress rates but 

cannot keep them below the levels needed for insurers to pay claims and earn a reasonable economic rate of return on their capital.5

In a similar vein, the ACA claims to ensure that insurers in the employer group 

market eventually will be prohibited from denying coverage for employees with 

more costly pre-existing conditions (but not before 2014). Actually, earlier provisions 

of federal law under HIPAA (enacted in 1996) already provided similar protection 

in the group market for current and new employees with evidence of qualified continuous insurance coverage, apart from longstanding guaranteed renewability practices in most of the private insurance market in any event. 

Early interpretation and enforcement of ACA’s prohibition on lifetime insurance 

coverage limits for so-called ‘‘mini-med’’ health benefits plans reveals a different 

short-term ‘‘duck and cover’’ strategy by the current administration, when faced 

with bad publicity and substantial political pressure to reverse course in regulatory 

policy. Initially, a handful of high-profile or politically savvy companies offering such 

lower-cost, limited-benefits health plans to their lower-wage and/or shorter-tenured 

workers were granted short-term ‘‘waivers’’ from the new rules implementing the 

ACA’s ban on lifetime benefits caps. But as public criticism of both the selective 

waivers and the jeopardy remaining for other providers of mini-med coverage increased, the trickle of waivers turned into a gusher of subsequent exemptions until 

almost all of that sub-market had received short-term relief by the end of last 

month (HHS recently reached the magic ‘‘1040’’ mark in the number of waivers 

granted). 

The above rounds of early ACA implementation reveal the overly broad regulatory 

discretion granted to the HHS secretary in many hastily- and poorly-drafted sections of the law, as well as a short-term political strategy to push for tighter regulation unless and until it meets substantial resistance, at which point the administration’s regulators may pull back temporarily. (One-year waivers and creative re-interpretations of ambiguous legislative language provide little assurance regarding later 

years). The more important objective is to avoid substantial political controversies 

on less essential ACA provisions that might threaten to undermine the implementation of much more important and far-reaching ones after the 2012 election cycle 

completes its course. 

However, the unpredictability of what will be enforced and how it will be interpreted leaves many employers frozen in uncertainty in their health benefits planning, when not fearing the worst and finding their expectations met. The best illustration of the latter involves last year’s expansive interpretation of the ACA’s seemingly straightforward rules for grandfather protection from several of its new rules 

for employer health plans that were already in existence on the date of the law’s 

enactment. By the time HHS had re-interpreted the conditions for such 

grandfathering far more narrowly, most employer plans concluded they were likely 

to lose it once they made even modest adjustments in their ‘‘grandfathered’’ plans. 

Even federal regulators acknowledged that by 2013, only about one in five small employers and one-third of large employers will remain grandfathered. The impact of 

the new grandfathering rules was less in terms of the additional obligations and 

costs to which employer plans would become subject (most of them have decided to 

live with those burdens as the price for making other necessary cost-reducing 

changes in the health plans). Rather it was the latest unforeseen construction of a 

new set of hoops (mostly restrictions on any significant changes in cost sharing and 

benefits structure) through which they would have to jump if they still wanted to 

‘‘retain’’ the protection from a lesser set of regulatory hassles and burdens (primarily involving no cost sharing for coverage of ‘‘preventive’’ health benefits) that 
14 

the law had previously promised them on its face. Large employers generally shrug 

and make the economic and political tradeoffs as the price of doing business in a 

highly political and sometimes arbitrary regulatory environment. Smaller employers 

are more likely to be on the receiving end of new regulatory costs that they are proportionately less able to foresee, finesse, and finance. 

Still ahead for the employer community are uncertainties in how the ACA’s rules 

for such largely-uncharted definitions and details of ‘‘essential benefits’’ and ‘‘state 

benefits exchanges’’ will be written and then interpreted in practice. The reasonable 

fears in the employer community are that those benefits will be biased toward more 

generous and less affordable levels, and that the exchanges ultimately will be designed to capture a much greater share of current employer coverage, penalize them 

for it, and then trap those new ‘‘beneficiaries’’ in much more highly regulated and 

restrictive insurance plans that only look ‘‘private’’ initially but eventually gravitate 

toward more of an expansion of Medicaid-like public coverage over time. 

Added on to this menu of bitter-tasting items are various new taxes that nibble 

away further at the affordability of employer coverage and the profitability of the 

enterprises that must finance it. Higher Medicare payroll taxes, including those imposed on a new category of ‘‘unearned’’ income, will hit not just the ‘‘rich’’ but a significant number of successful small business owners operating either as sole proprietors or in subchapter S corporate structures. New taxes on insurance premiums, 

medical devices, and on prescription drugs will add up as they are passed through 

to the end -ser consumers of health care in the form of higher insurance premiums 

and out-of-pocket care costs. A particularly obnoxious Form 1099 tax reporting requirement that would devastate many small businesses with new paperwork burdens remains widely unpopular but not yet fully repealed by the current Congress. 

In isolation, few of the initial burdens under the ACA for employers are likely to 

determine decisively whether most employers continue to offer health insurance. 

But over time they amount to a steady drip-by-drip political form of water torture 

that can eventually reach critical mass and push a much larger share of employers 

to reconsider their involvement in offering health insurance coverage. 

Former football coach Bill Parcells once said, ‘‘They want you to cook the dinner, 

at least they should let you shop for the groceries.’’ The ACA sets in motion the 

temptations to impose stronger doses of a highly politicized and tightly regulated 

regime of health insurance in which employers are increasingly going to be asked 

first to pay for health insurance groceries selected by Washington regulators and 

then to cook and serve them according to recipes concocted by the previous Congress 

and at HHS. 

The potential economic damage ahead posed by the ACA to employers is not limited just to the future cost of health benefits they will face or their decisions whether to offer or drop coverage. The structure of future penalties for failure to comply 

with the employer mandate to provide coverage, which begins in 2014, will send out 

additional economic disincentive signals that tell different categories of business 

owners that they may need in some cases either to grow slower, hire fewer workers 

(particularly lower-wage earners), pay them less, pay them more, restructure firms 

to be smaller or have a different payroll structure, outsource more operations, rely 

on more capital and less labor, or mix and match all of the above as the latest rules, 

ambiguous enforcement guidance, and the surrounding health policy terrain requires them to pay more attention to volatile health care politics and less to business operations. Some of the key economic disincentives include the need to stay 

below the 50-employee threshold for the upcoming employer coverage mandate penalties, to juggle the tradeoffs between higher average wages versus lower cost health 

benefits versus a larger employer share of health benefits premium payments—to 

limit penalties for employees declining ‘‘unaffordable’’ coverage, or to keep payrolls 

lower and smaller in pursuit of temporary and narrowly- defined small business tax 

credits for health coverage costs, Far too many employers will feel like they have 

left the difficult challenges of recent private health insurance markets, only to be 

trapped in a more complex maze where almost all the choices could go wrong but 

must be weighed again and again to determine which is the ‘‘least bad’’ one at the 

moment. 

It is in this larger context that the ‘‘lure to leave’’ the many political and regulatory landmines of ACA-style employer coverage could reach a tipping point if and 

when we reach the years shortly after new subsidized health benefits exchanges 

have become established without crashing (no small feat!). Despite a host of uncertainties ahead, such exchange-based insurance coverage (as envisioned quite optimistically in the ACA) might seem like a great deal to many workers, particularly 

lower-wage employees whose premiums would be more heavily subsidized by taxpayers than under the current tax exclusion for employer-sponsored insurance. 
15 

6See, for example, James C. Capretta and Thomas P. Miller, ‘‘The Defined Contribution Route 

to Health Care Choice and Competition,’’ American Enterprise Institute, December 2010, available at http://www.aei.org/paper/100164. 

As written in the law, however, these generous subsidies are officially limited to 

families earning between 100 percent and 400 percent of the federal poverty level, 

who do not receive qualified health insurance from their employers or from public 

programs such as Medicaid and Medicare. But many employers will face substantial 

economic incentives to reconsider continued offers of health coverage to their workers. A complex set of employer mandate penalties would loom large, with their 

amounts varying depending on the size of a firm and traded off against the net 

gains from eliminating direct health benefits costs, paying higher wages, and competing differently in labor markets. 

The tilted playing field for tax subsidies for workers at the same income level inside employer health plans versus purchasing coverage in the exchanges appears far 

from politically sustainable, despite the temporary legislative ‘‘firewalls’’ constructed 

in the ACA to minimize such crossovers. If and when they begin to break down, two 

related effects would topple the superstructure of ACA’s tenuous combination of 

more, but not unlimited, taxpayer financing of health care financing and reasonably 

predictable access to various types of (largely mandatory) ‘‘private’’ insurance coverage. As sketched out most notably by former CBO director Douglas Holtz-Eakin, 

the federal budgetary implications of this employer coverage meltdown alone would 

be explosively unaffordable. Whether market-based forms of private insurance 

would be sustainable under this vastly rearranged landscape also seems questionable, at best. 

The massive uncertainties and confusion ahead under the ACA for employers and 

their workers are already mounting, after less than one year. Much grimmer reality 

could bite even before its full mandatory coverage and expanded subsidies roll out 

in full force in 2014. The sheer difficulty of understanding, anticipating, and maneuvering through the complex and shifting regulatory terrain of the ACA and 

ObamaCare will be difficult for any business firm. It will be particularly challenging 

for smaller firms still struggling to survive during challenging economic conditions. 

Many of the misguided economic signals sent by the ACA to the business community encourage slower, rather than faster, economic growth; economic paralysis 

amidst the search for clear and consistent regulatory analysis; and fewer opportunities for better-paying jobs. 

We still have time to pull back before testing the temperature of the water for 

the lead group of health policy lemmings nearing the edge of the cliff. A short list 

of changes in direction would include a stronger focus on responsible choice and 

competition in health care markets; more neutral, limited, and transparent taxpayer 

subsidies for health care spending by most Americans (augmented to provide special 

enhanced protection for the most vulnerable low-income and high-risk portions of 

the population); real steps toward meaningful information transparency; and realignment of incentives to reward better health care choices and higher-value health 

care delivery.6

Thank you again for the opportunity to present this testimony. I look forward to 

your questions. 

Chairman ROE. Thank you. 

Mr. Parker? 

STATEMENT OF BRETT PARKER, VICE CHAIRMAN AND CHIEF 

FINANACIAL OFFICER, BOWLMOR LANES, SPEAKING ON BEHALF OF THE U.S. CHAMBER OF COMMERCE 

Mr. PARKER. Chairman Roe, Congressman Kucinich and distinguished members of the subcommittee, thank you for the opportunity to testify before you today, on the pressures businesses face 

from the rising costs of providing employees with health care benefits. 

I am Brett Parker, vice chairman and chief financial officer of 

Bowlmor Lanes, which is headquartered in New York City. I am 

here to speak with you today on behalf of the U.S. Chamber of 

Commerce. 
16 

Bowlmor Lanes as we know it today was formed in 1997, in 

Greenwich Village. We purchased the original Bowlmor location 

and completely remodeled the internal operations by infusing a vision of upscale design elements and dramatic architecture into 

what had become a tired and dilapidated space. 

The overhaul of Bowlmor Lanes saw the installation of video 

screens and lane-side food and drink service. We strove to make 

bowling a relevant activity to the city’s residents and businesses 

again. 

By 1999, Bowlmor Lanes became the highest grossing bowling 

alley in the United States. Today, it stands as one of the longest 

continuously running bowling alleys in the country. 

Following the phenomenal success of Bowlmor in New York City, 

we knew that the Bowlmor concept could be introduced in other locations across the country. Today, we have a total of six locations 

in four states. And last year, we opened our new flagship location 

in Times Square that we are quite excited about. 

Bowlmor has grown from 50 to over 500 employees in the last 

10 years. We are creating jobs. 

With the economic downturn, Bowlmor took a hit like most businesses in the United States. We did not cower from this challenge 

or simply hope that things would somehow play out favorably. We 

tightened our belts and continued to work hard and smart. 

We are entrepreneurs. We believe in ourselves and our business, 

and we are willing to take risks and put our reputation and our 

money on the line. 

I have found that many of the roadblocks that we face to doing 

those very things, expanding our business and generating new jobs, 

are erected by the government. Whether it is a threat posed by 

card check, the absurdity of the new 1099 reporting mandate, or 

the anxiety and complexity of the new health care law and its 

array of mandates, we feel like the federal government, time and 

time again, creates obstacles to success, and by doing so increases 

the likelihood of failure. 

These forces combine to make future investments in growing our 

business less and less attractive. 

Bowlmor Lanes currently employs 532 members of our team, 

with a workforce comprised of 258 full-time employees and 274 

part-time employees. Under the new health care law, it seems 

probable that we will sustain a per capita cost increase on existing 

full-time employees of at least $2,000 per person. This poses a significant cash drain on the business. 

For Bowlmor to develop a new location, we need to have $2 million in cash equity on hand. By depriving us of the cash we need 

to grow, through dollars paid to penalties and lost profits from facilities not developed, over the first 5 years the health care law will 

preclude us from opening five locations, creating over 500 jobs or 

investing $26 million in new infrastructure. The damage gets worse 

every year the employer mandate and the health care law are in 

effect. 

When it comes to health insurance, we have been continually 

forced to weigh the difficult choice between increasing cost to the 

company and our employees with reducing coverage. Every year we 

pay more and get less. 
17 

To minimize the losses sustained due to this mandate, we will 

have to keep employees part-time and not allow them to work 30 

hours a week. We are very unhappy about the effects this will have 

on our employees. 

Unfortunately, even if Bowlmor found a way to offer coverage 

that meets the new law’s standards, we would still be subject to 

$3,000 fines whenever a low-income employee gets a subsidy. This 

is a big incentive for us to stop offering any coverage at all. 

If Bowlmor attempts to continue offering benefits, we can look 

forward to more expensive insurance thanks to the health care law. 

Next, we have a host of new taxes to look forward to. Taxes that 

would make Bowlmor’s health insurance more expensive, taxes on 

prescriptions, medical devices and insurance plans will be passed 

on to consumers, meaning Bowlmor and its employees. 

First and foremost, Congress should repeal the job-destroying 

employer mandate. Senator Hatch introduced a bill to do that in 

the Senate that has 26 co-sponsors. But nobody in the House has 

introduced the companion legislation. 

In conclusion, from the perspective of Bowlmor Lanes, the costs 

incurred with the new health care law will greatly hinder our ability to expand and develop new venues and create new jobs. I am 

hopeful that this body will make it a priority to repeal the most 

objectionable provisions, like the employer mandate. 

Also, I hope you will look to real reforms that lower costs, such 

as tort reform. And throughout this process, I would ask that you 

continually be mindful of how your decisions directly, and oftentimes inadvertently, impact businesses in this nation. 

We are the job creators. Please rebuild an environment that encourages, not suppresses, business growth, entrepreneurism, investment and job creation. 

Thank you for this opportunity to testify, and I look forward to 

your questions. 

[The statement of Mr. Parker follows:] 

Prepared Statement of Brett Parker, Vice Chairman and Chief Financial 

Officer, Bowlmor Lanes, on Behalf of the U.S. Chamber of Commerce 

Chairman Roe, Ranking Member Andrews and distinguished members of the Subcommittee, thank you for the opportunity to testify before you today on the pressures businesses face from the rising costs of providing employees with health care 

benefits. I commend your efforts to further understand the impact the new health 

care law will have on the ability of businesses, including small ones like mine, to 

compete, grow and create jobs as well as our capacity to offer our employees health 

care benefits. 

I am Brett Parker, Vice Chairman and Chief Financial Officer of Bowlmor Lanes, 

which is headquartered in New York City. I am here to speak with you today on 

behalf of the U.S. Chamber of Commerce. The U.S. Chamber of Commerce is the 

world’s largest business federation, representing the interests of more than three 

million businesses and organizations of every size, sector, and region. More than 96 

percent of the Chamber’s members are small businesses with 100 or fewer employees, 70 percent of which have 10 or fewer employees. Yet, virtually all of the nation’s largest companies are also active members. We are particularly cognizant of 

the problems of smaller businesses, as well as issues facing the business community 

at large. 

The Chamber did not support the status quo before passage of the health care 

law—in fact, we were parties to a number of collaborations aimed at building bipartisan reforms that would lower health care costs. We opposed the misnamed Patient 

Protection and Affordable Care Act (PPACA) because it failed to rein in costs, and 

instead increased them, while loading job creators with mandates, regulations, new 

taxes and burdens. Rather than solve the problems in the health care system, 
18 

PPACA ignores costs and instead redistributes money from producers in order to 

fund vast new entitlements and expand old ones—this was not an improvement over 

the status quo, it was a step backwards. Instead, the Chamber believes that we 

should replace PPACA, advance market-based reforms, and focus on lowering costs, 

increasing competition, and improving the health care delivery system. 

Company Background 

In 1938, the original Bowlmor Lanes opened its doors in the heart of Greenwich 

Village. During the golden age of bowling from the 1940s to 1960s, Bowlmor Lanes 

was at the forefront of the bowling revolution, hosting the prestigious Landgraf 

Tournament in 1942 and one of the first televised bowling tournaments in 1955. 

Through the 1970’s and 1980’s, Bowlmor Lanes was home to the top bowlers in the 

sport and became a regular hangout for village hipsters. But in the 1990’s, as the 

popularity of bowling as a sport declined, so did the condition of the bowling alley. 

Bowlmor Lanes, as we know it today, was formed in 1997 under the leadership 

of our CEO, Tom Shannon, who secured financing, purchased the original Bowlmor 

location and completely remodeled the internal operations by infusing his vision of 

upscale design elements and dramatic architecture into what had become a tired 

and depilated space. The overhaul of Bowlmor Lanes saw the installation of video 

screens, glow in the dark lanes and lane side food and drink service. Simply put, 

we strove to make bowling a relevant activity to the city’s residents and businesses 

again. And Bowlmor has achieved this goal and continues to grow and prosper. By 

1999, Bowlmor Lanes became the highest-grossing bowling alley in the United 

States. Today, it stands as one of the longest contiguously running bowling alleys 

in the country. 

Following the phenomenal success of Bowlmor Lanes in New York City, we knew 

that the Bowlmor concept could be introduced in other locations across the country. 

Today, we have a total of six locations in four states: two in New York, two in California, one in Florida and one in suburban Washington, DC, specifically Bethesda, 

Maryland. At each location, our objective is to blend a great American pastime with 

an upscale entertainment experience. And nowhere is this more exemplified than 

our newest venture—Bowlmor Lanes Times Square—where we invested $25 million, 

creating construction jobs in New York City and positions for the 179 individuals 

we directly employ there. With the doors to our new flagship location opened on November 23, 2010, Bowlmor Lanes has taken bowling to new heights—dividing 45 

lanes of luxury bowling into 6 intimate themed lounges. Each lounge is themed to 

represent iconic places and time periods in New York City—Times Square, Chinatown, Central Park, Art Deco, Prohibition and Pop. Bowlmor Lanes Times Square 

also features The Stadium Grill, an upscale sports bar and restaurant that fuses 

innovative American cuisine with premier sports and entertainment viewing. We 

are proud of our new flagship, as well as our growing business—Bowlmor has grown 

from 50 to over 500 employees in the last ten years; we are creating jobs. 

We are quite excited about our new venue in Times Square and proud of what 

it says not just about our company but the entrepreneurial resilience of visionary, 

hard-working, risk-taking men and women throughout our great nation. With the 

economic downturn, Bowlmor Lanes took a hit like most businesses in the United 

States. While I am guardedly optimistic that the worst is behind us, I will point 

out that we did not cower from this challenge or simply hope things would somehow 

play out favorably. We tightened our belts and continued to work hard and smart. 

We took concrete action, and perhaps most importantly, we moved proactively to 

fight our way out of this economic mess without looking for the government to guide 

the way. We are entrepreneurs—we believe in ourselves and our business and we 

are willing to take risks and put our reputation on the line. And we are confident 

that we can succeed, as we have in the past, in growing our business and creating 

jobs. I have unfortunately found that many of the roadblocks we face to doing those 

very things—expanding our business and generating new jobs—are erected by the 

government. Whether it is the threat posed by card check, the absurdity of the new 

1099 reporting mandate or the anxiety, complexity, disorder, uncertainty and overall peril the new health care law and its array of mandates imposes, we feel like 

the Federal government time and again creates obstacles to success and, by doing 

so, increasing the likelihood of failure. These forces combine to make future investments in growing our business less and less attractive. 

Health Care 

Bowlmor Lanes currently employs 532 members on our team, with our workforce 

comprised of 258 full-time employees and 274 part-time employees. We have a 

healthy, profitable, viable business that grows by developing and opening new units 

which, of course, means more jobs. In considering whether to expand and open a 
19 

new Bowlmor Lanes operation, we have to very critically evaluate the costs of doing 

so, with particular scrutiny given to factors that increase our cost of doing business. 

For Bowlmor Lanes to develop a new location, we need to have $2-3 million in equity. Therefore, when the costs of implementing a new law or regulation threaten 

to reduce the cash flow from our existing locations, it stunts our growth. Having 

reviewed the new health care law, it seems probable that we will sustain a per capita cost increase on existing full time employees of at least $2,000 per employee. 

These fines quickly increase over time and confound Bowlmor’s ability to invest, develop more locations, and create more jobs. As demonstrated by the chart below, the 

health care law may well incinerate more than $26 million that Bowlmor would 

have invested, as well as more than 500 jobs we could have created. The damage 

gets worse every year the employer mandate, and the health care law, are in effect. 

The bottom line is that our ability to expand, to open a new operation and create 

new jobs is very sensitive to costs increases that will make existing venues less profitable and future increases that will make all venues more expensive to operate. 

BOWLMOR JOB LOSS RATE EXPECTED FROM PPACA 

Year Aggregate 

impact 1 2 3 4 5 

Lost Cash From Operations of New Units ...... .................. $348,000 $991,800 $2,156,730 $4,237,466 $7,733,996 

Lost Cash From Healthcare Penalties ............ $464,000 $510,400 $561,440 $617,584 $679,342 $2,832,766 

Lost Units ........................................................ 0.2 0.4 0.8 1.4 2.5 5.3 

Lost Jobs ......................................................... 23 43 78 139 246 528 

Lost Investment .............................................. $1,160,000 $2,146,000 $3,883,100 $6,935,785 $12,292,020 $26,416,905 

Currently, Bowlmor offers health insurance to exempt employees; Bowlmor pays 

one third of the premium and employees pay the remainder, with an option for an 

employee to buy more comprehensive coverage if he/she so chooses. When it comes 

to health insurance, we have been continually forced to weigh the difficult choice 

between increasing costs to the company and our employees, with reducing coverage. We have been forced to continually reduce coverage over time to ensure that 

our employees can afford the costs of insurance. Unfortunately, this was the only 

way that we could continue to offer coverage without running ourselves out of business or inducing our staff to opt out of coverage. Every year we pay more and get 

less, and under the new law it appears that this process could get even worse. And 

there has been so much market consolidation already, we have very few insurance 

companies to choose from. 

Under the new health care law, the coverage Bowlmor offers will likely not be 

considered sufficient to avoid the employer mandate, which will penalize us to the 

tune of about $2,000 per full time employee. To minimize losses sustained due to 

this mandate, we will have to do whatever it takes to keep employees part-time, not 

allowing them to work 30 hours a week. We are very unhappy about the effects this 

will have on our employees—for example, an employee who currently works fulltime in our kitchen will be shifted to part-time status with Bowlmor and he/she will 

likely have to find another part-time position at another restaurant or similar business. While Bowlmor would definitely rather not disrupt our full-time employees 

like this, we must do so to protect existing jobs. Unfortunately, even if Bowlmor 

found a way to offer coverage that meets the new law’s standards, we would still 

be subject to fines—whenever our coverage fails to meet the affordability threshold 

for a low income employee and that employee gets a subsidy to purchase coverage 

in the new exchanges, Bowlmor would be fined $3,000 per head. This is a big incentive for us to stop offering any coverage at all. The structure of the penalties and 

mandates in the health care law seems to suggest that proponents want businesses 

to drop coverage and pay a fine, perhaps to funnel all Americans into governmentrun structures and eventually toward a nationalized health care system. 

As the costs of the health care law and other burdensome mandates continue to 

pile up, Bowlmor will be forced to look for other ways to control costs and this may 

mean reducing our workforce. For example, Bowlmor Lanes currently provides inperson service at the lanes, but we are exploring the possibility of deploying touch 

screen kiosks that customers could use instead. We prefer to not have to go this 

route because the in-person service provides our clients with a personal experience 

and we would prefer to keep our staff employed; however, our hand is being forced 

by costly mandates and regulations. We must take action to protect the greatest 

number of existing jobs possible. 
20 

Another provision in the new law requires that companies with 200 full time employees automatically enroll workers in their health insurance plan. This would be 

a disaster for a company like Bowlmor, with a somewhat transient workforce, high 

turnover, and a large number of low wage employees. These employees do not want 

to purchase benefits, and automatically enrolling them would be contrary to both 

their financial interests and their wishes—not to mention an administrative nightmare. Even worse would be a requirement that employers automatically enroll employees in a plan with no value to them: if Bowlmor is pressured into participating 

in the CLASS Act Ponzi scheme, workers will be automatically enrolled in a program they not only have no interest in, but one that they will likely never realize 

any benefit from. Provisions like this make it blindingly obvious that people with 

any real-world business experience had very little input into the health care law. 

If Bowlmor attempts to continue offering benefits, we can look forward to more 

expensive insurance thanks to the health care law. First the law will require a host 

of new benefits that we will have to pay for, including adding ‘‘adult children’’ up 

to age 26 as dependents, no cost-sharing allowed for some services, no annual or 

lifetime limits, etc. These might be nice to have, but when businesses are struggling 

to afford health insurance, these changes make insurance more expensive. 

The law also makes affordable, high-deductible plans worse—a new cap on Flexible Spending Arrangements will reduce employee flexibility, and a new requirement 

prohibits employees from spending their own money in health accounts unless they 

have a prescription for things like aspirin, Allegra, and other over-the-counter 

drugs. 

Next we have a host of new taxes to look forward to, taxes that would make 

Bowlmor’s health insurance more expensive. Taxes on prescription drugs and medical devices will be passed on to consumers—meaning Bowlmor and our employees. 

Even more egregious, a new small business health insurance tax will hit companies 

like Bowlmor who purchase fully-insured health plans, while big businesses that 

self-insure will not pay the tax. I will not even discuss the looming so called ‘‘Cadillac’’ tax, which will be imposed in 2018. And let us not forget that the 1099 paperwork mandate is still out there, and unless the House and Senate can come to an 

agreement on how to offset the costs of repealing it, businesses like Bowlmor will 

be buried in useless tax filings. 

While repealing the 1099 provision would be a good start, Bowlmor and businesses like ours will suffer if all Congress does in the next two years is repeal 1099s 

and talk about repealing the whole health care bill. If Congress really wants to help 

us grow the economy and create jobs, we ask that you do two things—take the 

health care bill apart piece-by-piece, and pass real health reforms that will actually 

lower our costs. First and foremost repeal the job-destroying employer mandate; 

Senator Hatch introduced a bill to do that in the Senate that has 26 co-sponsors, 

but nobody in the House has introduced companion legislation. Also, please go after 

the more than $500 billion in new taxes the health care bill created. 

To actually help lower health insurance costs, Congress could consider a broad 

array of reforms, including medical liability reform, opening up health insurance 

markets to more competition, and allowing businesses to create new pooling mechanisms. Bowlmor’s costs are directly increased because of cost-shifting from Medicare 

and Medicaid as well; so business has a big stake in helping you reform those entitlement programs. More transparency in the medical world would help drive greater 

efficiency and quality, so Congress should release the massive CMS claims database 

and allow that information to be used to report on the quality and efficiency of providers. 

Conclusion 

Congress knows that the national debt is now more than $14 trillion. You know 

the annual deficit will be $1.5 trillion if the President’s budget proposal is enacted 

into law. And you know that our unfunded liabilities, promises that we have made 

under current law, for Medicare, Medicaid, and Social Security are more than $100 

trillion. Congress knows that somehow our children and grandchildren are going to 

be forced to pay those costs, and still they created an entirely new health care entitlement that will add untold amounts to our promises going forward. Worse, it 

seems that small businesses are being forced to pay for this new spending through 

higher taxes, benefit mandates, and increased regulation. This is bound to reduce 

our value to society as investors and job creators, to shackle innovation, stifle economic growth, and create more fear and uncertainty about the future. If we did 

business the way the Congress that passed the health care bill did, we would already be out of business. 

This hearing is aptly entitled ‘‘The Pressures of Rising Costs on Employer Provided Health Care.’’ From the perspective of Bowlmor Lanes, the costs incurred with 
21 

the new health care law will greatly hinder our ability to expand and develop new 

venues and create new jobs. While the existing political reality makes a total repeal 

of the law impossible during this Congress, I am hopeful that this body will make 

it a priority to repeal the most objectionable provisions like the employer mandate, 

which impose burdens on businesses and hinder job creation and growth. Also, I 

hope you will look to real reforms to lower cost, like tort reform. And throughout 

this process I would ask that you be continually mindful of how your decisions directly and oftentimes inadvertently impact businesses in this nation. It is companies 

like Bowlmor Lanes and millions of others like us that serve as the engines of economic growth in the United States. We are the job creators; please, rebuild an environment that encourages, not suppresses, business growth, entrepreneurism, investment, and job creation. 

Thank you for this opportunity to testify, and I look forward to your questions. 

Chairman ROE. Thank you, Mr. Parker. 

Mr. Houser? 

STATEMENT OF JIM HOUSER, OWNER, HAWTHORNE AUTO, 

TESTIFYING ON BEHALF OF THE MAIN STREET ALLIANCE 

Mr. HOUSER. Chairman Roe, Congressman Kucinich and members of the committee, thank you for the invitation to testify regarding trends in health insurance costs and their impact on small 

businesses. 

My name is Jim Houser. I am an ASE certified master automotive technician and co-owner of Hawthorne Auto Clinic in Portland, Oregon. 

I am also co-chair of the Main Street Alliance of Oregon, a small 

business group in my state. And I serve on the national steering 

committee of the Main Street Alliance, a network that creates opportunities for business owners to speak for ourselves on issues 

that impact our businesses. 

When my wife, Liz Dally, and I opened Hawthorne Auto Clinic 

28 years ago, we made the commitment to offer health insurance. 

It seemed like the right thing to do, and it made good business 

sense in a high-skill field where offering benefits to keep experienced technicians is important. But it has not been easy. 

Small businesses are recognized as the engines of job growth. 

But a health care marketplace that stacks the deck against small 

businesses has put us at a consistent disadvantage. 

Small business health care costs have grown a whopping 129 

percent since 2000. We pay an average 18 percent more than large 

firms for the same coverage. 

At my business, we pay 100 percent of the insurance costs for 

our nine full-time employees and their dependents. Our premiums 

have doubled over the last 8 years, reaching $100,000 last year, 

more than 20 percent of payroll. 

This year, we witnessed a minor miracle. Our premiums went 

down 3 percent. It is the first time in my memory they have declined. 

A provision of the Affordable Care Act has allowed my 22-yearold daughter, a recent college graduate, to return to our insurance 

plan. I am glad our family business can actually cover our family 

again. 

We are also eligible for the new tax credits in the health law. My 

accountant says we should get back between $5,000 and $10,000 on 

our 2010 taxes. Combine that with the decrease in our premiums, 
22 

and we will save 8 to 10 percent of our insurance this year, due 

to the Affordable Care Act. 

Now, I am well aware that health insurers are pursuing steep 

rate increases. I am also aware that insurance lobbyists are trying 

to pin these increases on the new law. 

This claim just does not pass inspection. If insurers are jacking 

up their rates, again, it is in spite of the new health law, not because of it. If anything, insurers are seizing the moment to hit customers with one more off-the-charts increase while they still can 

get away with it before measures to rein in those increases take 

effect. 

Even insurance executives admit the rate increases are not because of the new law. A senior vice president at Harvard Pilgrim 

in Massachusetts said, only one percentage point of this year’s increases was attributable to the federal law. And that was mainly 

due to the requirement for free preventative services. 

As my mechanics will tell you, customers who have us perform 

regular preventative maintenance rarely get towed in for unanticipated, expensive repairs. Similarly, it is much more cost-effective 

to spend $200 to get a patient’s blood pressure under control than 

to spend $50,000 for the E.R. response to a stroke. 

Preventative measures are an investment that pays off big in the 

long run. 

Whatever the lobbyists say, the fact is the health law is giving 

small businesses tools to put the brakes on rising insurance rates; 

for example, the new premium tax credits. Four million small businesses like ours can qualify for a credit of up to 35 percent. 

New customer protections allow young adults up to 26 to enroll 

on their parents’ plan. Rate review resources give states new tools 

to protect small businesses from unreasonable rate increases. New 

medical loss ratio standards ensure small businesses get value for 

their premiums. 

And the state insurance exchanges being designed offer greater 

transparency, more choices and, with as many as 970,000 people 

predicted to enroll in the exchange in Oregon, much more bargaining power. 

Small businesses are moving forward on health care. Kaiser 

Family Foundation reports the percentage of employers with three 

to nine employees offering health coverage rose from 46 percent in 

2009, to 59 percent in 2010. 

Efforts to repeal or defund the health law will only hurt us. Even 

the possibility of repeal creates paralyzing uncertainties. 

If the law is repealed, will I have to return my tax credit? What 

about next year? Will I be able to bank on the credit and use that 

money to invest in my business or not? 

We cannot afford to go back to a system that stacks the deck 

against small business. We have got to move forward. 

With proper implementation we can level the playing field, get 

control of insurance costs and allow small businesses to focus on 

what we do best—things like fixing cars, creating jobs and building 

local economies across America. 

Thank you very much. 

[The statement of Mr. Houser follows:] 
23 

Prepared Statement of Jim Houser, Hawthorne Auto Clinic and 

Main Street Alliance of Oregon 

Chairman Roe, Ranking Member Andrews, and members of the committee, thank 

you for the invitation to testify regarding trends in health insurance costs and their 

impact on small businesses. 

My name is Jim Houser. I am an ASE Certified Master Automotive Technician 

and co-owner of Hawthorne Auto Clinic in Portland, Oregon, a family business I 

founded with my wife, Liz Dally, 28 years ago. I am also co-chair of the Main Street 

Alliance of Oregon, a small business group in my state, and serve on the national 

steering committee of the Main Street Alliance, a national network that creates opportunities for business owners to speak for ourselves on issues that impact our 

businesses and our local economies. 

When Liz and I opened Hawthorne Auto Clinic in 1983, we made the commitment 

to offer health insurance to our workers. It seemed like the right thing to do, and 

it made good business sense. Auto repair is a high-skill field where offering good 

benefits to keep experienced technicians is very important. We’re also an aging profession. The makeup of our small group shows it, and with the current system of 

age rating where you’re penalized for having older workers in your group, we have 

suffered relentless increases in our insurance costs year after year. 

A Stacked Deck: Small Businesses at a Disadvantage in the Insurance Marketplace 

Small businesses are recognized as the engines of the American economy. The 

country looks to the innovation and entrepreneurship of small businesses to create 

jobs and drive the economic recovery. But for decades, a health care marketplace 

that stacks the deck against small businesses has put us at a disadvantage. 

The conditions small businesses have faced in the insurance marketplace of the 

last decade include: • Small businesses’ health care costs have grown 129 percent since 2000. • We pay on average 18 percent more than large firms for the same level of coverage. • Administrative costs can be two and a half times higher (sometimes even more) 

for small businesses compared to larger firms. 

• High levels of market concentration, combined with a version of ‘‘competition’’ 

between insurers that is based on cherry-picking healthy enrollees rather than competing to offer the best services at the best rates, leave small businesses with few 

real options and nowhere to turn when double digit rate hikes strike again. 

• Tens of millions of small business owners, our employees, and dependents forego health coverage altogether because the costs have been out of reach: of the 49 

million Americans living without health care (up from 40 million in 2000), an outsized majority—about 60 percent—work for small businesses, according to the Employee Benefit Research Institute. 

Cost Trends at Hawthorne Auto and Impact of the New Health Law 

I know from my own experience that the pressure of rising insurance rates over 

the last decade, without health reform, has been severe and unrelenting. At my 

business, insurance costs for our nine full-time employees and covered dependents 

doubled from 2002 to 2010, reaching over $100,000 last year. That figure represented more than 20 percent of our payroll, adding greatly to our cost of doing 

business. 

This year, we witnessed a minor miracle: our premiums went down 3 percent. It’s 

the first time in my memory they’ve declined. 

A provision of the Affordable Care Act has allowed my 22-year-old daughter, a recent college graduate, to rejoin our insurance plan. I’m not sure if that’s why our 

premiums went down (because we’re now sharing our health care risk over a larger, 

younger, and healthier pool of enrollees), but either way I’m glad our family business can actually cover our family again. 

We’re also eligible for the new small employer premium tax credits in the law, 

and my accountant says we should get back between $5,000 and $10,000 this year. 

Combine that with the premium decrease and we’re going to save 8 to 10 percent 

on our health insurance this year due to the Affordable Care Act. 

Broader Trends in Insurance Rates and Claims of Connection to the ACA 

I’m aware that many health insurers are continuing to pursue steep rate increases—from Blue Shield of California’s push for increases of up to 59 percent to 

Anthem in Maine’s legal battle with the state. I’m also aware that some insurance 

lobbyists are trying to pin these increases on the new law. 

This claim just doesn’t pass inspection. If insurers are jacking up their rates— 

yet again—it’s in spite of the new health law, not because of it. If anything, insurers 
24 

are seizing the moment to hit customers with one more off-the-charts increase while 

they can still get away with it, before measures to rein in those increases take effect. 

Even insurance executives admit the rate increases aren’t because of the new law. 

New York Times correspondent Robert Pear reported in an article on rising insurance rates that a senior vice president at Harvard Pilgrim in Massachusetts said 

only one percentage point of this year’s increases was attributable to the federal 

law. And, according to this insurance company executive, that was mainly due to 

the requirement for free preventive services—a requirement that makes a lot of 

sense to me in the auto repair business. 

As my mechanics will tell you, customers who have us perform regular preventive 

maintenance rarely get towed in for unanticipated, expensive repairs. Similarly, it’s 

much more cost effective to spend $200 to get a patient’s blood pressure under control than to spend $50,000 for the ER response to a stroke. Preventive measures— 

whether in auto repair or health care—are an investment that pays off big in the 

long run. 

Health Law Gives Small Businesses New Tools to Put Brakes on Rising Insurance 

Costs 

Whatever the lobbyists say, the fact is the health law is giving small businesses 

tools to put the brakes on rising insurance rates in a number of ways. The following 

are some examples: 

Small Employer Health Premium Tax Credits 

Business owners across our network from my Portland, Oregon to Portland, Maine 

are already benefiting from the new tax credits effective for tax year 2010. My accountant tells us we should expect to receive a credit of between $5,000 and $10,000 

on our 2010 taxes. Other businesses that offer health coverage and pay half the cost 

can qualify for a credit of up to 35 percent now through 2013 and 50 percent in 

2014. That’s serious savings for a small business. It’s like a time machine, turning 

the clock back on insurance rates. It’s hard to think of a single other step that could 

cut a small business’s insurance bill by 35 percent in one go. 

Consumer Protections that Benefit Small Businesses 

The Affordable Care Act puts in place important consumer protections in the 

small group and individual insurance markets where small business owners, our 

families, and our employees get health coverage. These protections include a ban on 

pre-existing condition exclusions, new limits on insurance caps, and the ability to 

keep adult children covered up to age 26 (this is the provision that has allowed us 

to re-enroll my daughter in our business’s plan). These provisions will increase the 

quality of the coverage for small businesses and our employees. The under-26 provision will also help us spread risk across a broader age range to reduce our rates, 

as illustrated by the story of my business and my daughter. 

Strengthening Premium Rate Review 

After years of enduring double-digit rate increases with no recourse, I’m encouraged that Oregon and other states have new tools and new resources to review insurance rates and require insurers to provide justification for unreasonable rate increases. This is one of the most direct ways to protect small businesses and help 

us do our part to create jobs and grow the economy. Given the high level of market 

concentration in the health insurance industry and the absence of true competition 

(competition based on consumer value rather than competition based on cherry-picking risk pools), we need stronger rate review to protect small businesses from unreasonable rate increases. 

Medical Loss Ratio Requirements and Value for Premiums 

Running a small business, remembering the importance of providing real value 

to our customers becomes second nature. Somehow, it seems health insurance companies have lost sight of that basic tenet of good business. Minimum medical loss 

ratio requirements will restore a focus on ensuring value for our premium dollars. 

If insurers fail to meet this standard, insurance customers like us will receive cash 

rebates to make up the difference. It’s high time we had a value guarantee like this 

in health insurance. 

State Insurance Exchanges: Transparency, Choice, and Bargaining Power 

The state insurance exchanges currently being designed will level the playing 

field for small businesses. By creating a mechanism whereby we can band together 

and shop for coverage in one large pool, the exchanges will give us greater transparency, more choices, expanded risk pooling, and more bargaining power. In Or-
25 

egon, as many as 970,000 people are predicted to enroll in the exchange. I can’t wait 

to join a group of almost a million people. For small businesses that currently have 

groups of 20 people, 10 people, or less, banding together in the exchange will represent an exponential leap in our bargaining power. 

Cutting the ‘‘Hidden Tax’’ 

Small businesses that have insurance now currently pay a ‘‘hidden tax’’ (estimated at over $1,000 per insured family and over $350 per insured individual in 

2008) resulting from the cost-shifting of uncompensated care costs. By getting tens 

of millions more people insured and paying into the system up front, the new law 

should significantly reduce this cost-shifting and cut this hidden tax. 

Conclusion: Small Businesses Moving Forward on Health Care 

Small businesses are moving forward on health care: 

• Nationally, the Kaiser Family Foundation reports the percentage of employers 

with 3 to 9 employees offering health coverage rose from 46 percent in 2009 to 59 

percent in 2010—in part due to the ACA’s tax credits. 

• Information from states also indicates that small businesses are taking advantage of the opportunity to start (and continue) offering health coverage. For example: 

• Blue Cross Blue Shield of Kansas City recently reported that after letting local 

businesses know about the new tax credit, they enrolled more than 9,000 new members covered by 400 new employers. The company reported a 58 percent increase 

in small businesses purchasing insurance since April 2010, the first month after the 

passage of the ACA. 

• Blue Cross and Blue Shield of Nebraska reported a 34 percent increase in 

health insurance sales to small businesses for the new year. 

• A spokeswoman for Blue Cross of Idaho reported a ‘‘huge increase’’ in the number of small employers requesting quotes, and a shift in employers keeping coverage 

for their workers. 

Efforts to repeal or defund the health law will only hurt small businesses that 

are already benefiting or looking forward to the benefits of the new law. Even the 

possibility of repeal creates uncertainties that are harmful to business planning and 

job growth. For example, if the law is repealed, will I have to return my tax credit? 

What about next year—will I be able to bank on the credit and use that money to 

invest in my business, or not? And, will my family business be able to continue providing coverage to our family, including my 22-year-old college graduate daughter— 

or will she be bounced off our plan and left vulnerable to medical debt just as she’s 

working to get on her feet and launch a career? 

We can’t afford to go back to a system that stacks the deck against small businesses. We’ve got to keep moving forward. With proper implementation of the health 

care law, we can level the playing field for small businesses, get meaningful control 

of insurance costs, and allow small businesses to focus on what we do best: things 

like fixing cars, creating jobs, and building local economies, in Oregon and across 

America. 

Thank you. 

Chairman ROE. Thank you, Mr. Houser. 

Mr. Brewer? 

STATEMENT OF J. MICHAEL BREWER, PRESIDENT, 

LOCKTON BENEFIT GROUP, LOCKTON COMPANIES, LLC 

Mr. BREWER. Mr. Chairman, Ranking Member Kucinich and honored members of the committee, my name is Mike Brewer. I am the 

president of Lockton Benefit Group, the employee benefits consulting arm of Lockton Companies, LLC. 

Lockton Benefit Group provides employee benefits consulting 

services to 2,500 middle market clients nationwide. The vast majority of our clients employ between 500 and 2,000 employees. Our clients include private and governmental employers, and employers 

in a wide variety of trades and industries. 

Our clients agree that improvements in the health insurance system are necessary and important. However, they are frustrated 
26 

that the health reform law imposes additional cost and other burdens upon them. 

Our clients wish that Congress would work to make an employer’s provision of health insurance easier and less costly, rather 

than more expensive and more burdensome. 

Our actuaries have modeled for several hundred clients the impact of the health reform law on their group health insurance programs. To-date, we have aggregated the results from 136 of these 

modeling reports and broken out the results by industry segment. 

I would like to share some of those results with you today. 

On average, the reform law’s immediate benefit mandates add 

2.5 percent to our clients’ health insurance cost. The automatic enrollment requirement in 2014 adds 3.8 percent to our clients’ 

health insurance spend, on average, even assuming that 75 percent 

of the automatically enrolled employees, who would not have otherwise enrolled in coverage, would opt back out of the coverage with 

the opportunity. 

These increases may appear modest, but they are not. Many clients have health insurance expense trends of 10 percent or more 

annually. A 10 percent trend line becomes 12.5 percent in 2011, 

and 16.3 percent in 2014, just on account of the mandates that I 

have mentioned. 

I would like to speak for a moment to the impact of employers’ 

‘‘play or pay’’ mandate, which also takes effect in 2014. 

Across most industry segments, our clients will have significant 

financial incentive to terminate the group coverage once the insurance exchanges present employers with another subsidized health 

insurance option. That is because the vast majority of our clients 

currently spend far more on health insurance per employee than 

the penalty under the ‘‘play or pay’’ mandate. By 2014, this gap 

will become even wider. 

On average, our analysis shows that by terminating group coverage our clients would save an amount equal to 44 percent of the 

projected health insurance cost in 2014. 

In fairness, few clients have told us today, here in 2011, that 

they definitely intend to terminate group coverage in 2014. Similarly, few have said they intend to maintain their health insurance 

coverage. The vast majority tell us they are going to wait and see. 

They tell us that what they do in 2014 depends upon their health 

insurance costs then and their perceived need to use the health 

plan to gain a competitive advantage for labor. 

With regard to this latter point, many employers have told us, 

‘‘We won’t be the first to drop coverage, but we also won’t be third.’’ 

The modeling results for our clients in the restaurant, retail and 

hospitality industry is a ‘‘damned if we do, and damned if we don’t’’ 

scenario. 

On average, to comply with the ‘‘play or pay’’ mandate and offer 

qualifying and affordable coverage to all full-time employees, the 

employer’s health insurance costs increase 150 percent. Ironically, 

if the employer simply terminates its group plan, it still pays 56.6 

percent more than it would to maintain the current plan offered 

today, because it then has to pay the $2,000 per year, non-deductible penalty for each of its full-time employees, even those employees to whom the employer has never offered coverage. 
27 

These clients and clients like them tell us they have but one option: to eliminate large numbers of full-time positions. By making 

full-time employees part-time, the employees are removed from the 

penalty equation. 

Let me also note that health reform adds up to 19 additional disclosures and reports to the already daunting 27 disclosures and reports a mere health plan may already be required by federal law 

to make to its enrollees or to the federal government. 

Our employer clients are not the bad guys. Our clients simply do 

not understand why, for making the effort to supply a valuable employee benefit to their employees, the federal government imposes 

so extensive an administrative and regulatory burden. 

These obligations, because of their complexity and steep penalties for violation, give employers yet one more reason to simply 

surrender and exit the group insurance marketplace. This is, of 

course, a huge concern to us. 

Again, Lockton greatly appreciates the opportunity before you 

today. We simply urge Congress that, in assessing the impact of 

this health reform legislation, you place yourselves not only in the 

shoes of those Americans who deserve and need access to affordable insurance, but also into the shoes of the American employers 

who supply valued health insurance coverage to 160 million of us. 

[The statement of Mr. Brewer follows:] 

Prepared Statement of J. Michael Brewer, President, 

Lockton Benefit Group, Lockton Companies, LLC 

Mr. Chairman, Ranking Member Miller and honored members of the Committee, 

my name is Michael Brewer and I am the president of Lockton Benefit Group, the 

employee benefits consulting division of Lockton Companies, LLC. On behalf of 

Lockton I thank you for the opportunity to appear here today to share our views 

regarding the impact of the new health reform law on the group health plans sponsored by our clients. 

Lockton is the largest privately held insurance brokerage and consulting firm in 

the world. Domestically, Lockton employs 2,300 employees in 24 offices nationwide 

who serve the insurance risk needs of approximately 9,000 employer clients from 

coast to coast. Lockton Benefit Group (‘‘LBG ’’) provides employee benefits brokerage 

and consulting services to approximately 2,500 of those clients. Nearly all of those 

clients employ us to assist in the design and administration of their group health 

insurance programs. 

The vast majority of LBG clients are ‘‘middle market’’ employers, employing between 500 and 2,000 employees, although we also have some small-group and 

‘‘jumbo’’ clients. Our clients include private and governmental employers, and employers across many industry segments, including construction, health care, manufacturing, transportation, retail, professional services firms, and the hospitality/entertainment industry. 

More than half of LBG’s clients maintain self-insured group health plans. The 

others purchase group health insurance from licensed insurance companies. 

Make Employer Based Coverage Less Expensive and Burdensome 

Approximately 160 million Americans receive health insurance today through an 

employersponsored group health plan. Employees of our clients enjoy and appreciate 

this coverage. 

Our clients tell us they have no quarrel with the notion that improvements in the 

health insurance system are necessary, to improve access to insurance and reduce 

the cost of health care and, concomitantly, the cost of health insurance. However, 

they are frustrated that in the effort to achieve these aims the health reform law 

adds additional expense to their health insurance costs and imposes additional administrative burdens upon them. 

In short, our clients find that the health reform law makes what is already a costly and administratively burdensome endeavor—the sponsorship of a simple group 

health insurance plan—even more expensive and more hassle-prone. Our clients 
28 

1 In modeling the effect of the automatic enrollment provision, we assumed that 75% of employees who are eligible for coverage but have not affirmatively enrolled, and who are automatically enrolled by the employer, will opt out of coverage. These modeling results do not reflect 

the impact of the automatic enrollment feature on our retail, restaurant, hotel and entertainment industry clients. The modeling results for these clients are described separately, later in 

this document. 

wish that Congress would work to make an employer’s provision of health insurance 

easier and less costly, rather than more expensive and more burdensome. 

Modeling Results 

We have modeled for several hundred clients the impact of the health reform law 

on their group health insurance programs, now and in 2014. As of the date we prepared these comments, our actuaries had aggregated the results from 136 of these 

modeling reports, and broke out the aggregated results by industry segment. I 

would like to share some of those results with you today. We will be pleased to supplement these remarks in the coming weeks and months as we continue to add additional modeling results to this aggregated analysis. 

Effect of Immediate Benefit Mandates 

On average, the health reform law’s immediate benefit mandates (for example, 

the obligation to cover adult children to age 26, the elimination of lifetime dollar 

maximums, restrictions and ultimate elimination of annual dollar limits, etcetera) 

add 2.5% to our clients’ health insurance costs. 

Industries that currently supply more generous health insurance packages—that 

is, they already cover adult children to age 25, for example, and/or already apply 

high lifetime maximums, such as $5 million per lifetime—see the smallest increase 

(.5%). 

Firms that supply more modest packages—such as coverage of children to age 22 

and/or $1 million lifetime maximums—see the largest percentage increases (3.7%). 

Standing alone, expressed as a percentage of total plan costs, these increases may 

not appear compelling. But the increases—particularly the larger increases—concern our clients, many of whom are already struggling with health insurance inflation well in excess of the rate of inflation generally. For example, an employer 

whose health insurance costs are trending at 10% without regard to the reform law 

finds its trend increased to 12.5% (an additional 2.5% increase, on average) on account of the reform law’s mandates. If the employer has 2,000 employees and spends 

$16 million per year on health insurance, the additional cost of the mandates alone 

is $400,000. 

Effect of Limited Waiting Periods (2014) 

The health reform law prohibits waiting periods of more than 90 days, beginning 

in 2014. This mandate has little cost implication for most of our clients, because 

most do not currently maintain waiting periods in excess of 90 days. 

For our clients that have waiting periods in excess of 90 days, the consequences 

can be more dramatic. For example, a construction firm client with a 6month waiting period for health coverage experiences a 3.9% cost increase, while another construction firm with a 12month waiting period experiences a 39.3% cost increase. Our 

transportation firm clients with 4month waiting periods experience a 6.4% increase. 

Effect of Automatic Enrollment Requirement (2014) 

The reform law also requires employers with more than 200 fulltime employees 

to automatically enroll in a health plan those employees who become eligible for coverage but who do not affirmatively enroll. These employees may, however, choose 

to affirmatively disenroll. The automatic enrollment feature adds 3.8% to our clients’ 

health insurance costs on average, with our governmental clients seeing the smallest increase (1.4%) and our transportation industry clients seeing the largest increase (10%). For one client, a large hospital, our actuaries expect the automatic enrollment feature to add more than $1 million annually to the client’s health insurance cost.1

Employer ‘‘Play or Pay’’ Mandate (2014)—Impact on Employers 

Beginning in 2014, employers with at least 50 fulltime equivalent employees must 

offer their fulltime (30+ hours per week) employees ‘‘minimum essential coverage.’’ 

That coverage must be ‘‘affordable’’ to the employee, that is, not cost him or her 

more than 9.5% of household income. 

Where an employer fails to offer this coverage at an affordable cost and the employee instead obtains subsidized coverage in an Insurance Exchange, the employer 

is subject to a penalty. If the employer continues to offer coverage to some employ-
29 

2The first 30 such employees are not taken into account in an employer’s penalty calculation. 

3 Except retail, hospitality and entertainment employers, whose modeling results are addressed separately. 

ees, the penalty is a nondeductible assessment of $3,000 per year ($250 per month) 

for every fulltime employee who does not receive an offer of qualifying and affordable coverage, and who instead obtains subsidized coverage in an Insurance Exchange. 

However, if the employer terminates its group plan and offers coverage to no employees, and at least one fulltime employee obtains subsidized coverage in an Insurance Exchange, the penalty is $2,000 per year times all the employer’s fulltime employees.2

Across all industry segments in our book of business,3 clients will have a significant financial incentive to terminate their group coverage once the Insurance Exchanges present employees with another subsidized health insurance option. The 

vast majority of our clients currently spend far more on health insurance, per employee, than the nondeductible penalty under the ‘‘play or pay’’ mandate. By 2014 

this gap will be much larger still. 

As a result, were they to terminate their group coverage they would, on average, 

save an amount equal to 44% of their projected 2014 health insurance costs. For 

clients whose health plans tend to be more expensive, savings are larger (84% for 

our governmental clients, 60% for our hospital clients). 

Employer ‘‘Play or Pay’’ Mandate (2014)—Impact on Employees 

We also modeled the impact of plan termination on clients’ employees, were they 

forced to seek coverage in an Insurance Exchange. On average, to purchase Exchange-based coverage equivalent to the employer’s health reform-qualifying coverage, our clients’ employees would pay significantly more than they pay for the employer’s coverage. This is because our clients typically subsidize a larger portion of 

employees’ health insurance costs than the Exchanges will subsidize, and employees 

pay their portion of employer-based coverage with pretax dollars. Their portion of 

the cost of Exchange-based coverage will be paid with after-tax dollars. 

On average, our clients’ employees would pay between 101% and 155% more for 

Exchangebased coverage (101% assuming the employee is the sole wage earner in 

the household, 155% assuming there is household income in addition to the employee’s salary, thus reducing the size of the subsidy the employee receives in the Exchange). 

The more highly paid the employer’s workforce, the more significant the expense 

borne by the employee in the Insurance Exchange (again, because higher household 

income means smaller subsidies, if any, in the Exchange). For example, employees 

of our professional service firm clients can expect to pay, for equivalent coverage in 

an Exchange, 113–148% more than they would pay for employer-based coverage. 

This dichotomy has triggered within some employers a conflict between the financial officers, working to hold the line on expenses and increase profitability, and the 

human resource officers who, as necessary, work to fashion appropriate compensation and benefit structures for employees. Next to wages, health insurance costs are 

the most onerous component of labor expenses for the vast majority of our clients. 

By 2014, when the Insurance Exchanges open and present employees with another, 

largely subsidized option for health insurance coverage, the burden of group health 

insurance costs on an employer’s balance sheet will create tremendous tension within many clients. What clients do then depends on several factors. 

Thus far, few clients have told us they definitely intend to terminate group coverage in 2014, when Exchange-based coverage becomes available. Similarly, few clients have told us they definitely intend to maintain their group coverage. The majority of our clients tell us they will wait and see. What they will do in 2014 depends 

on their health insurance costs and budget in 2014, and their perceived need to use 

a health plan to gain a competitive advantage for labor. 

With regard to this latter point, many clients have told us, ‘‘We won’t be the first 

to drop coverage, but we won’t wait to be third, either.’’ 

Our smaller clients will be the first to abandon group coverage. At a recent seminar presentation we made to approximately 200 employers ranging in size from 50 

to 150 employees, half told us they intend to exit the group insurance marketplace 

in 2014. 

To the extent the labor market continues to favor the employer in 2014, we expect 

some of our larger clients—particularly those employing relatively low paid, modestly-skilled hourly workers—to terminate their group health plans. 
30 

4Lockton employees have attended thousands of employee enrollment meetings, and it is not 

uncommon to find many of these disclosures simply littering the floor afterwards. Most employees are simply not interested. The burden on the employer, in terms of cost and effort, thus 

outstrips the value most employees place on many of these myriad disclosures. 

Retail, Hospitality and Similar Clients Will Eliminate Full-Time Jobs 

The modeling results for our clients in the restaurant, retail, hotel and entertainment (e.g., amusement park) industries are more sobering. Most of these clients do 

not offer group health coverage to all their fulltime employees because they cannot 

afford to do so. A restaurant chain, for example, will typically offer coverage to its 

corporate staff and restaurant managers. An amusement park will typically offer 

coverage to its year-round staff, but not to its extended seasonal workforce. 

These employers are caught in a ‘‘damned if we do, damned if we don’t’’ bind. On 

average, to comply with the ‘‘play or pay’’ mandate and offer qualifying and affordable coverage to all fulltime employees, the employer’s health insurance costs increase 150%. 

Maintaining the status quo—offering coverage to some employees, such as corporate staff, but not rank-and-file employees—can trigger excise tax penalties under 

the health reform law’s nondiscrimination rule, and in any event would trigger $250 

per month penalties for every fulltime employee not offered coverage and who instead obtains subsidies in an Exchange. 

Ironically, if the employer simply terminates its group plan it still pays 56.6% 

more than it would pay to continue its plan. Although the employer saves a portion 

of its health insurance spend (it loses the tax deduction on those dollars, and the 

FICA/FUTA savings on employee pretax contributions), it pays a $2,000 per year, 

nondeductible penalty on each of its fulltime employees, even those employees on 

whose behalf the employer is not otherwise incurring a health plan expense. 

These clients, and clients like them who employ a large number of fulltime, relatively low paid hourly workers who are not receiving an offer of robust health coverage today, tell us they have but one option: eliminate large numbers of fulltime 

positions. By making fulltime employees part-time, the employees are removed from 

the penalty equation. 

Other Burdens 

Federal law imposes other burdens and counterproductive barriers on group 

health plan sponsors, burdens that ratchet up the angst, anxiety and frustration of 

our clients, increase costs to their health plans, and give additional reasons for employers to escape the challenges of group health plan sponsorship the moment they 

think they can. 

For example, under federal law alone, a simple group health plan must make up 

to 46 separate disclosures (to enrollees) and reports (to federal agencies). Nineteen 

of these disclosures and reports are required under the health reform law. 

The disclosures often go to different individuals, at different times, via different 

means. Some are required annually. Some might be required even more frequently. 

There are requirements that some be provided in separate documents, or in specific 

fonts, or be ‘‘prominent,’’ or provided in a ‘‘culturally and linguistically appropriate 

manner.’’ 

The myriad disclosure and reporting obligations add angst, cost and anxiety to the 

lives of our clients well in excess of the value that the vast majority of employees 

place in the bulk of the disclosures.4

We supply our clients with detailed ‘‘notice calendars,’’ but employers are often 

compelled to pay third-party vendors to satisfy at least some of the obligations. 

As they propose additional disclosure and reporting requirements, federal agencies estimate the relatively modest burden any single disclosure or report imposes 

on the employer. But there appears to be no effort to consider the cumulative burden—in time, money and effort—on the employer for supplying the currently required disclosures and reports. 

Congress should endeavor to minimize the administrative burdens employers bear 

in order to supply group health coverage. Congress should: (1) legislatively streamline the disclosure and reporting obligations on employers, allowing them greater 

leeway to consolidate disclosures in single documents without existing special rules 

that require some notices to be more ‘‘prominent’’ than others; (2) synchronize due 

dates for various disclosures and reports, unless impracticable; (3) allow employers 

to consolidate multiple government reports in single filings to the extent practicable; 

and 

(4) permit employers to post many of the required disclosures in the workplace 

or on their intranet pages rather than deliver by hand or by mail to employees, most 

of whom have demonstrated little or no interest in many of the disclosures. 
31 

Conclusion 

Lockton greatly appreciates the opportunity to appear before you today. In assessing the impact of the health reform legislation, we urge you to place yourselves not 

only in the shoes of those Americans who need access to affordable insurance, but 

in the shoes of the employers who supply valued coverage to 160 million of us. 

Employers are burdened and frustrated by aspects of the health reform law that 

add costs to their health plans, and will cause some of them to eliminate group coverage and fulltime jobs. They are perplexed by a federally-imposed reporting and 

disclosure scheme that has increased substantially under health reform and become 

far too cumbersome. 

We welcome the opportunity to work with you to mitigate these burdens on the 

employer community. 

Chairman ROE. Thank you, Mr. Brewer. 

Since Mr. Kucinich may have to leave, I am going to allow—go 

ahead and start with your questioning, if you would. 

Mr. KUCINICH. That is very generous of you, Mr. Chairman. I 

really appreciate it. 

I would like to start with Mr. Houser. And I appreciate Mr. 

Brewer’s remarks that we need to be sensitive to all of those businesses that are providing health insurance. 

Now, Mr. Houser is here. And can you tell us how many employees you have? 

Mr. HOUSER. We have nine full-time employees. We have two 

student interns, who work half-time and go to school half-time. 

And we have two part-time employees: a shop maintenance helper 

and a part-time office assistant. 

Mr. KUCINICH. Do you offer family and individual coverage? 

Mr. HOUSER. We provide complete, 100 percent coverage for fulltime employees and their families. For the part-timers we offer proportional, and no one has taken us up on it. 

Mr. KUCINICH. How much of the premium do you pay for your 

employees? 

Mr. HOUSER. It was $100,000 last year, for the total. 

Mr. KUCINICH. Now, so you are paying basically 100 percent. 

Mr. HOUSER. Yes. 

Mr. KUCINICH. Mr. Parker, in terms of your employees at your 

bowling company, do you pay 100 percent? 

Mr. PARKER. No. We pay one-third. 

Mr. KUCINICH. Okay. 

Can you, Mr. Houser, respond to the statement that Mr. Miller 

makes in his testimony where he states that the Affordable Care 

Act provides very little in tangible first-year benefits and imposes 

modest immediate costs and complications on most employers? 

Could you tell us about your experience with that? 

Mr. HOUSER. Congressman, our experience has been several. One 

is, of course, the tax credit that we will be getting. But more than 

that, the new health insurance exchange is what appears to be 

going to provide the greatest benefit to our business. 

The State of Oregon is currently very actively moving forward to 

not only cover about 970,000 more Oregonians, but also to change 

the—with that level of buying power—to change how health care 

is paid for to actually lower the cost of health care by changing 

from a fee-for-service, fee-for-procedure to a fee-for-outcome mode 

of how to pay for—to actually also bring down the cost of health 

care. 
32 

Mr. KUCINICH. Well, could you tell us any benefits that you have 

already realized from the—have there been any benefits that you 

realized—— 

Mr. HOUSER. The largest benefit is that our daughter, who is 22 

years old and unemployed and out of college, is now back on our 

health care plan. And so, that is the biggest advantage that we 

have experienced so far. 

I cannot say whether our decrease in premiums was a result of 

the Affordable Care Act or not. I do not know that. 

Mr. KUCINICH. And do you think this law will raise your costs 

and complicate your ability to offer health care? 

Mr. HOUSER. If the costs were to keep going up like they were 

before the Affordable Care Act was passed, then we would definitely have to re-evaluate our health care costs. I would have 

to—— 

Mr. KUCINICH. What about the role of the tax credits? 

Mr. HOUSER. Well, the tax credits are going to have a huge advantage. Although our employees are toward the higher end; 

$50,000 is the limit. And so, we are not quite there on average, but 

we are pushing that. 

But the tax credit does go up in, I believe it is 2014. So, that will 

certainly carry us quite a ways, and especially if we can get control 

of the health insurance rate increases. 

Mr. KUCINICH. I have heard witnesses, the other witnesses say 

that they think that employers will increasingly stop offering 

health care to employees as a result of this law. 

Do you think that is true? Do you think that more small employers are offering health insurance now? Do you have any experience 

in that outside your own? Have you talked to anybody? Can 

you—— 

Mr. HOUSER. I know that from reading the Kaiser Family Foundation report that actually, the number of small employers who are 

covering have increased from 2009, from 46 percent to 59 percent. 

So, actually, more small businesses are actually increasing their 

coverage. 

Mr. KUCINICH. One final question. What power did you have to 

negotiate with your insurance company when you increasingly saw 

your health care costs increase during the last years? 

Mr. HOUSER. I am sorry. I did not hear. 

Mr. KUCINICH. What kind of negotiating power did you have with 

your insurance company prior to this? 

Mr. HOUSER. None. All we can do is wait for our broker to bring 

us various—you know, what we are going to be paying. 

Mr. KUCINICH. I thank you, thank the gentleman. 

Thank you, Mr. Chairman. 

Chairman ROE. I thank the gentleman for yielding. 

Next is Dr. DesJarlais. 

Mr. DESJARLAIS. Thank you all for being here. And I am also 

going to have to slip away. 

So, Mr. Houser, you mentioned that your business will receive a credit of between $5,000 and $10,000 on your 2010 taxes, because 

of the small employer health premium tax credit. 

Do you know who is paying for that credit? 

Mr. HOUSER. My taxes, I assume. 
33 

Mr. DESJARLAIS. Any idea? Do you think your taxes are paying 

for that, for your employees? 

Mr. HOUSER. If my taxes—I am sorry. 

Mr. DESJARLAIS. Do you feel that your taxes are paying for that 

$5,000 to $10,000 tax credit? Yours personally? 

Mr. HOUSER. My taxes and your taxes. And my health care premiums are also paying for people who work for companies who do 

not cover their employees. 

Mr. DESJARLAIS. Okay. Do you have a plan in 2016 when that 

credit is no longer available? 

Mr. HOUSER. I do not envision us ever dropping health care coverage for our employees. 

Mr. DESJARLAIS. Okay. Thank you. 

One thing, if I could yield just a few seconds to our chairman to 

explain the impact of Medicare’s expense estimates and what they 

actually turned out to be over time? 

Chairman ROE. What Dr. DesJarlais, I think, is talking about, 

when you look at the government estimates of how much a health 

care plan—the CBO estimated this would be budget-neutral. 

Medicare was a plan they started in 1965 to cover our seniors. 

There was no CBO then, but the estimate in 25 years was this 

would be a $15 billion plan. In 1990, it was over $100 billion. So, 

they missed it seven times. 

In Tennessee we saw where our Medicaid—we went through a 

managed care plan very similar to this in Tennessee in 1993, to try 

to control health care costs, because we had the things that you 

mentioned, rising costs, access and liability. And what happened 

was, in 10 years, in 10 budget years, our costs tripled in the state 

of Tennessee. 

So, it is about, how do you hold the costs down? 

I have sympathy. I have been a provider for all these years of 

health insurance. That is the major problem in America is the cost 

of the care. If it was all affordable, we could all have it. 

I yield back. 

Mr. DESJARLAIS. Okay, thank you for the history lesson. I know 

that you have those numbers well in mind. 

Mr. Miller, we have heard supporters of the new law claim that 

Republicans have not provided concrete ideas or suggestions to 

change financial incentives in health care and expand access to affordable, quality coverage. However, your testimony suggests there 

are alternatives to Obamacare. 

Can you elaborate on some of the alternative proposals to reform 

the health care system and design the lower costs of coverage and 

increase access? 

Mr. MILLER. Let me put that in two tiers. I mean, I think that 

the actual, official congressional responses are still evolving. We 

have an earlier history of proposals in the House, and individual 

members in the Senate. 

If you are asking for what I would advise the people I have spoken to along those lines, we need to do several things. We need to 

first, unfortunately, undo the damage. We lost 2 years on the clock, 

and we have gone in the wrong direction. So, we cannot over-extend our resources and, basically, overload the entire system with 

what has happened. 
34 

Some positive proposals, though. They have all limited effects in 

isolation. You have to combine them. The old toolkit includes ways 

to reduce regulatory costs. 

Cross-state purchasing is one proposal in that regard. We certainly hear a lot about medical malpractice reform. It will make 

some contribution in that regard. 

We ultimately need to step up to the plate in terms of rearranging the overall subsidy structure in health care financing. 

While putting more money into a different, more extensive version 

of high-risk pools, what is in the current law has failed in that regard. That would deal with what are the serious problems of people 

who have substantial spikes and continued problems in health care 

costs. 

We then need to think about how we are going to rearrange our 

tax subsidies, not only for our private health insurance, but climb 

up to the plate on Medicare. We do need to make some cost 

changes in Medicare. 

Unfortunately, most of the low-hanging fruit that was raided for 

Medicare spending reduction was then plowed right back into the 

system for the other type of entitlement in the private side. 

Medicaid has been overloaded. We need to restructure that. 

So, essentially, to be simple, we need more transparent measures 

of the value of health care being provided. 

We talk a lot about insurance and financing. But until we change 

the cost of care, we have not changed that basic problem. 

There are a lot of hypotheticals in the law, which someday, somehow might eventually happen. We need to get the private sector involved in actually making them come about. 

You can change, realign the incentives, but we are going to have 

to solve this problem by having care delivered at a lower cost with 

better outcomes. We need to measure it, make that more transparent to consumers, and then empower everybody else in the marketplace as opposed to Washington to make those decisions. 

Mr. DESJARLAIS. Thank you, Mr. Miller. 

Mr. Chairman, I yield back. 

Chairman ROE. I would thank the gentleman for yielding. 

Mr. Kildee? 

Mr. KILDEE. Thank you, Mr. Chairman. 

Mr. Miller, a witness before the Senate Budget Committee stated 

that employees who have employer-sponsored health care do not 

have, as he put it, enough skin in the game—a round-about way 

of saying that workers need to pay more for health care, so they 

do not use it as much. 

In 2009, though, 60 percent of bankruptcies were caused by medical bills. Seventy-five percent of these bankruptcies were filed by 

workers who actually had health insurance. 

Mr. Miller, you are on record supporting a road map offered by 

Congressman Paul Ryan. In that road map, Congressman Ryan 

proposes raising taxes on working families by eliminating the individual income tax exclusion for employer-sponsored health care. 

Can you say that workers do not pay enough for health care 

when the bankruptcy figures indicate that even those who have assistance file for bankruptcy more than any other reason? 
35 

Mr. MILLER. What I can say is that 60 percent figure, and the 

conclusions that run from it, are erroneous. We have done work on 

that, primarily my colleague, Aparna Mathur, which, if you examine what that is based upon, there are a lot of reasons for bankruptcies. 

They are not due to people paying too much for health care. 

Often these are done in a way that it says, as long as you had a 

medical bill along the way, it is then imputed that that somehow 

was what caused the bankruptcy. 

We have serious economic problems in the country. I just think 

that is a miscalculation as to what is the cause and the effect in 

that regard. 

On the larger issue as to whether workers are paying too much 

or too little, that is not the issue. The issue is whether or not they 

can see a way to find a better combination of health care that delivers improved health outcomes for them at a lower cost. 

We have a structure which hides those price tags, hides the results, does not give the information that they need in that regard. 

If you look at the measures as to how much workers are actually 

paying out-of-pocket for their health care, as opposed to what is rerouted through a very expensive, costly and inefficient insurance 

system, the vast proportion of that still flows through third party 

insurance. 

There has been an increase in the amount of cost-sharing in 

some sectors of the marketplace through what are called consumerdriven health plans. They are probably about 20 percent of the 

market without necessarily having accounts. That has tended to 

slow down the overall increase in health care spending and in 

health insurance costs, and has been a positive. 

The law is fundamentally aimed against it. It will not succeed in 

stopping that, because when we are about 5 years from now, we 

are not going to be able to pay for all this stuff we say is going 

to be covered by insurance, and we will end up resorting to that 

type of cost-sharing implicitly anyway. 

Mr. KILDEE. Do you think we should repeal the exemption for the 

worker who gets part of his—— 

Mr. MILLER. We need to change it. It is somewhat of a distraction. We need to think about what assistance you provide to people 

through the tax system to help them buy health insurance. 

But when we actually add it up, everyone is going to have to pay 

some money themselves. We cannot subsidize everyone’s bill and 

think they all come out ahead. 

It has tended to drive up the cost of care, the cost of insurance. 

And we pretend that it actually brings us ahead, and it sets us further back. 

If you are not going to eliminate public assistance through the 

tax code, you are going to move it in a different direction. 

The Ryan proposal that you partly described does not eliminate 

tax relief. It puts it in a different form in more of a defined contribution approach, which flows directly to individuals to decide 

how they are going to spend it on their health care and their 

health insurance, as opposed to routing it through third parties. If 

they want to stay in an employer plan, they will do that. 
36 

Mr. KILDEE. I thank you. And if you can get some of the figures 

that you said differ from these to us, I would appreciate that. 

Mr. MILLER. Yes. We will be happy to provide you with a different analysis of—there are bankruptcy problems and economic 

problems. 

But I know the studies. They have been around for a while. They 

get recycled. They take the wrong database. They do it in a different way. 

But I would be happy to provide you with some information on 

that. 

Mr. KILDEE. Thank you very much, Mr. Miller. 

[The information follows:] 

Question for the Record Submitted by Mr. Kildee 

Mr. Miller, at the hearing I cited a figure that stated 60 percent of bankruptcies 

were caused by medical bills. You responded that the 60 percent figure is erroneous 

and that you have a different analysis to prove your claim. Can you provide this 

analysis to the Committee? 

Response From Mr. Miller to Mr. Kildee’s Question for the Record 

At the March 10 hearing of the House Education and the Workforce subcommittee 

on Health, Employment, Labor, and Pensions regarding the overall topic of ‘‘Employer Health Costs,’’ Rep. Kildee asked me a question following my oral testimony. 

It related partly to cost sharing by employees in employer-sponsored health insurance plans and also to a recent study claiming that 60 percent of bankruptcies were 

caused by medical bills, and that seventy-five percent of these bankruptcies were 

filed by workers who actually had health insurance. As I recall, I referenced some 

of the related research on that topic by my AEI colleague, Resident Scholar Aparna 

Mathur, which challenges the methodologies and findings in that study and other 

related ones. Essentially, she concludes that there are a number of significant 

causes of bankruptcies besides medical bills, and the ‘‘Himmelstein et al.’’ line of 

studies fails to connect causes with effects. . 

Now the Rep. Kildee has submitted a shorter, subsequent version of this question 

to Chairman Roe as a formal part of the hearing record and requested a written 

analysis of the 60-percent bankruptcy claim, I have attached one immediately below 

by Ms. Mathur, along with links to some of our other work in this field. 

Problems with the Himmelstein et al. (2005 and 2009) Studies, and the Massachusetts Study 

(1) Sample Selection Issues 

A major shortcoming with both the Himmelstein et al. (2005 and 2009) studies 

is what economists dub the ‘‘sample selection issue’’. Himmelstein et al. (2005, 2009) 

conducted a survey of bankruptcy filers from public court records for the year 2001 

and 2007. Based on a sample of 1000 debtors, they concluded that more than 50 

percent of these had filed for bankruptcy due to a medical reason. By limiting the 

sample to those who had already filed for bankruptcy, the study overstated the incidence of medical debt. To account for causation, the study sample should have, at 

the very least, included a ‘‘control’’ group of medical debtors who did not file for 

bankruptcy. In other words, if the authors were trying to establish whether medical 

debts cause bankruptcy filings, the appropriate sample should have included households with and without medical debt, and households who filed or did not file for 

bankruptcy. In short, what the authors have established is some correlation, but not 

causation. 

The sample also seems skewed towards debtors with high medical debt. The 

USTP report of bankruptcy filers, which included a much larger sample of 5203 filers, found that 90 percent of filers had medical debts less than $5000. The 

Himmelstein et al.(2009) study reports nearly 35 percent of filers with more than 

$5000 in medical debt. The authors make no attempt to reconcile or explain their 

findings or reveal the distribution of medical debts across filers in their sample. 

(2) Regression Analysis 

The study also should have allowed for the possibility that other household characteristics, such as the filer’s work status, marital status, income, and other kinds 
37 

of debts could have influenced the filing. As explained earlier, this could be done 

through the use of appropriate regression techniques applied on a suitably large, 

random sample of filers and non-filers. Mainstream economics literature discussing 

the relationship between debts and bankruptcy amply outlines these standard considerations. The study does claim to have done multivariate analysis, but the analysis is done on an even more restricted sample than the original 1032 in 2007. The 

sample only includes people who reported having any medical bills. Therefore, it 

simply assumes that medical debts are important for bankruptcy filing, rather than 

testing for that hypothesis in the entire sample of bankruptcy filers. 

(3) Definition of Medical Bankruptcy 

The 2005 study used an overly broad definition of ‘‘medical filers,’’ which included 

people with any sort of addiction or uncontrolled gambling problems. 

The 2009 study removed these clauses but still came up with a 62 percent number; i.e., nearly 62 percent of bankruptcy filings are due to medical reasons. The reason for the high number is puzzling, though as mentioned earlier, it is partly driven 

by the fact that the authors ascribe any remotely medical factor as causing the 

bankruptcy filing, not just medical debts. The survey results shown in Table 2 (Page 

3) of the study clearly state that only 29 percent of the respondents believed that 

their bankruptcy was actually caused by medical bills. However, the authors chose 

to add to this number the percent of people who lost weeks of work due to illness, 

the percent of people with more than $5000 in medical bills, and the percent of people reporting any medical problems. This is clearly an overstatement of the problem. 

Since the respondents themselves do not believe that these other factors caused the 

bankruptcy filing, it is wrong to ascribe the additional bankruptcy filings to their 

medical costs. A related point is that the survey fails to provide information on 

other causes of the bankruptcy filing or how the respondents would rank different 

factors, as in the PSID. Therefore, it is unclear whether medical bills were the most 

important cause or just another cause. 

This criticism was also raised by Dranove and Millenson in reference to the 2005 

paper. Exhibit 2 of that paper identified people who stated that illness or injury was 

a cause of bankruptcy (although not necessarily the most important cause). According to Himmelstein and colleagues, 28.3 percent of respondents stated that illness 

or injury was a cause of bankruptcy. They also reported that medical bills contributed to the bankruptcy of 60 percent of this group. Multiplying the two figures together, Dranove and Millenson conclude that 17 percent of their sample had medical 

expenditure bankruptcies. Even for that 17 percent, it cannot be stated with any 

degree of certainty whether medical spending was the most important cause of 

bankruptcy. 

The latest study by Himmelstein et al. suffers from the same kinds of issues as 

the earlier studies. The new study focuses on the impact of the Massachusetts 

Health Reform on medical bankruptcies. The study relies on the change in the percentage of people reporting medical bankruptcies between 2007 and 2009. Unfortunately, the 2007 survey did not especially focus on Massachusetts, so the authors 

are forced to rely on simply the 44 respondents who were from that state in the 

earlier survey. It compares that to the new 2009 survey relying on 199 people. The 

paper finds that the percentage of medical bankruptcies actually declined by a significant 6.4 percentage points. However, in absolute terms, the number of medical 

bankruptcies increased from 7,504 to 10,093. The fact that the percentage of medical 

bankruptcies in the population declined suggests that the growth rate of medical 

bankruptcies was lower than the growth rate of bankruptcies in the total population. Therefore, it is not clear from this statistic alone, whether the health reform 

had a positive, negative or any impact on medical bankruptcies. A proper analysis 

would include a sufficiently large-scale survey both before and after the Reform, 

which would also account for other contemporaneous changes in economic conditions 

in Massachusetts. Moreover, as mentioned earlier, more rigorous regression techniques would be required to establish causality. Factors that may be important at 

the household level as well as at the state level need to be controlled for. Further, 

the definition of a medical bankruptcy used in the 2009 study is subject to the same 

criticism as in the earlier study. To summarize, the new study provides no conclusive proof one way or the other of the effect of the Massachusetts reform on medical 

bankruptcies. 

In addition, please see the following related testimony and research: 

‘‘The Medical Bankruptcy Fairness Act’’ Aparna Mathur, Testimony before House 

Committee on the Judiciary, July 15, 2010. 
38 

http://www.aei.org/speech/100157 

‘‘Can Bankruptcy Reform Facilitate a Fresh Start?’’ Aparna Mathur, Testimony 

before Senate Subcommittee on Administrative Oversight and the Courts, October 

20, 2009 

http://www.aei.org/speech/100089 

‘‘Medical Debt: Is Our Healthcare System Bankrupting Americans?’’ Aparna 

Mathur. Testimony before House Committee on the Judiciary, July 28, 2009. 

http://www.aei.org/speech/100071 

‘‘Maxing out on Debt Hysteria,’’ Aparna Mathur and Tom Miller, The American, 

June 20, 2007 

http://www.american.com/archive/2007/june-0607/maxing-out-on-debt-hysteria 

‘‘Medical Bills and Bankruptcy Filings,’’ Aparna Mathur, AEI Working Paper 

24680, July 19, 2006 

http://www.aei.org/docLib/20060719—MedicalBillsAndBankruptcy.pdf 

‘‘The Healthcare Bankruptcy Myth,’’ Diana Furchtgott-Roth, 

RealClearMarkets.com, July 30. 2009 

http://www.realclearmarkets.com/articles/2009/07/30/the—medical—bankruptcy—myth—97335.html 

‘‘Medical Bankruptcy: Myth vs. Fact,’’ David Dranove and Michael Millenson, 

Health Affairs 74 (2006). 

Chairman ROE. Mrs. Roby? 

Mrs. ROBY. Thank you, Mr. Chairman. 

Thank you so much to the witnesses for taking the time to be 

here this morning. 

So, in a very timely fashion, just yesterday, the Montgomery 

Chamber of Commerce from Montgomery, Alabama, was here in 

Washington, and I met with them. And the mayor of Montgomery 

was present. 

And during this meeting I learned that the City of Montgomery—and I served on the city council there from 2003 until just 

recently—they are going to see an increase in their health care premiums by $4.6 million this year, due to Obamacare. 

And I guess I can direct this to Mr. Brewer, because I saw in 

your testimony where you also work with governmental employers. 

And then, Mr. Miller, if you will address it, as well. 

But the president promised in 2008 that his health care reform 

efforts would lower health insurance premiums for families by as 

much as $2,500. 

So, I am having a hard time understanding why, then, the City 

of Montgomery is not seeing a decrease in their premiums for the 

cost of their employees. 

Mr. BREWER. I cannot speak to where that came from. 

What I can speak to is the reality of what has happened with the 

benefit mandates that have been imposed upon employers like the 

City of Montgomery, Alabama, larger, self-funded groups. I am presuming they are self-funded, would be my guess. 

But the immediate benefit mandates, as I indicated in my testimony, increase cost to employers like the City of Montgomery by 

about 2.5 percent this year. The auto-enrollment feature down the 

road will add incrementally more cost to it. 

It certainly would have been great, had the Congress been able 

to deliver a bill that actually reduced the cost of health insurance 

coverage for the vast majority of employers in the United States. 
39 

It would have been a message that probably would have resonated 

better and been better received. 

Regrettably, I think the bill falls short in a number of areas of 

addressing the actual root causes of the cost, increasing cost of 

health care. With all due respect to Mr. Kucinich, I do not believe 

that the insurance companies, in and of themselves, are the problem. I think there are plenty of other areas where there are opportunities for savings. 

So, Mr. Miller? 

Mr. MILLER. Yes, I would agree with that last comment by Mr. 

Brewer. Certainly, we all can do better, and it is also distributed 

in that regard. 

The $2,500, let us be straightforward about it, was a campaign 

document. I know the scholars who put it together, and you put 

this on the back of the envelope, and you make pretend it will happen. 

They have been backpedaling from that and rearranging what it 

is supposed to eventually do. A lot of it now is basically, well, you 

are going to get all this tax money from other people. And that is 

how you are saving your $2,500. 

It has not brought down the essential cost of care. There are important things that need to be done in restructuring our health 

care delivery system, making everybody participating in it more accountable. 

Hypothetically, there are a lot of grand plans, you know, national 

strategies, but we do not have anything deliverable in the first couple of years. 

What this legislation essentially was about was about redistribution of money without fixing the problem, so the costs just move 

one place to another. Some people win, some people lose. If you 

happen to be one of the tiny handful of people who might qualify 

for a small business tax break, you are a winner. 

It does not deal with the larger organic system, which is that all 

of the care costs too much compared to what is given. We have got 

to make some decisions in that regard and get that more transparent. 

So, when you move past the politics of getting a law passed by 

any means, the question is: How do we drive forward and think 

about what is actually going to get to the causes of these costs? 

Until care is delivered earlier, cheaper and better, and people are 

healthier and do other things outside of the health care system, 

which means they are presenting fewer things to the table, no matter how much we do to tweak the tiny amount of insurance that 

is administrative costs, which have been going down for the last 5 

years as a percentage of the premium; until we actually change 

that underlying cost growth, which is what gets reflected in the 

premium—we can fight about whether insurers are evil or slightly 

bad—it does not make a difference. 

And if we think we can route all this money through our tax system, there is no money left. We can just borrow some more and 

have it go back and forth. 

We cannot continue subsidizing. We actually have to confront the 

fact that we have got to get better care at a lower price. When we 
40 

get to that stage, then we will have real reform. That is not what 

this bill was about. 

Mrs. ROBY. And I appreciate your comments, both of you, on this 

issue. 

But to go to the point that you just made, municipalities and 

local governments all over this country are required by law to balance their budgets. 

Mr. MILLER. That is correct. 

Mrs. ROBY. And so, when you see this kind of impact in a local 

municipality on their smaller budget, it can be quite devastating. 

They do not print money. 

Mr. MILLER. And they have other problems with their employee 

health care—— 

Mrs. ROBY. That is right. 

Mr. MILLER [continuing]. Their retirees, their pensions. We are 

seeing all this kind of collapse on it, because we could afford our 

way around all these mistakes for a long period of time. 

And now, we have hit the margins where suddenly there is not 

someone else to pick up the tab. We are going to have to rework 

it. 

Mrs. ROBY. Thank you. My time is up. 

Thank you, Mr. Chairman. 

Chairman ROE. Thank you for yielding. 

Mr. Hinojosa? 

Mr. HINOJOSA. Thank you, Mr. Chairman. 

My question is directed to Mr. Houser. 

Mr. Houser, I want to thank you for your participation. You say 

in your written testimony that your insurance costs for your nine 

full-time employees and covered dependents doubled from 2002 

through 2010, eating into more than 20 percent of your payroll. 

That is long before we started this health reform. 

As a small business owner, I know the difficulty of providing 

quality and affordable coverage to employees, because I was president of a family business for 20 years and understand the choices 

you have to make. I experienced first-hand how, year after year, 

every dollar I spent on health insurance for my employees bought 

less and less. 

Given that, number one, the Affordable Care Act places no requirement on small businesses with fewer than 50 full-time employees, and being that the Affordable Care Act provides incentives 

and tax breaks, as you pointed out in your remarks, for those small 

businesses that do offer coverage, it is important that the record 

show that President Obama did not promise that the premiums 

were going to drop $2,500 in 2011, when it starts and begins to 

ramp up. 

He did say that the real bulk of the law will be implemented by 

2014, and that at that time, we will have insured an additional 30 

million people, thus being able to reduce the cost. And some of our 

other witnesses are trying to make this appear as though the president did not keep his word, or that he misled people. 

But there is no question that, as people in my district find out 

the benefits of this health reform, that they are very happy. And 

they are hoping that we will tweak it, but certainly not repeal it. 
41 

I would like to ask you this question. Do you expect that tough 

choice I mentioned earlier to get tougher, or easier, going forward 

for your business and small businesses like yours that you talk to? 

Mr. HOUSER. I am sorry. I did not understand. 

Mr. HINOJOSA. Do you expect that, between now and 2014, that 

things are just going to be so tough that you would not be able to 

offer health insurance to your employees? 

Mr. HOUSER. No, Congressman, not at all. I believe, especially 

based on the most recent trend with our premiums actually going 

down, and with the State of Oregon being very actively pursuing 

the exchange, which will, if the legislation goes through at the 

state level that is currently being proposed, will change the formula for how health care is paid for from the fee-for-procedure, feefor-service to fee-for-outcomes. 

Mr. HINOJOSA. So, you are optimistic that this is going to be—— 

Mr. HOUSER. It will go down. 

Mr. HINOJOSA [continuing]. For small businesses. 

Mr. HOUSER. And we will continue to have health care. 

Mr. HINOJOSA. I would like to yield time to Congressman Dennis 

Kucinich. 

Mr. KUCINICH. I want to thank my friend, Mr. Chairman. 

I ask unanimous consent to enter into the record the American 

Journal of Medicine report on medical bankruptcies in the United 

States, 2007. It is a result of a national study. 

[The information follows:] 
42 
43 
44 
45 
46 
47 

Chairman ROE. So ordered. Without objection. 

Mr. KUCINICH. Thank you, Mr. Chairman. 

This study, by the way, is done by a group of physicians from 

Harvard, and Ph.D.s from Harvard and Ohio University, who found 

that using a conservative definition, 62.1 percent of all bankruptcies in 2007 were medical. 

Now, they have updated this report. I am also going to be submitting for the hearing record the 2010 copy of this report. 

And also, I ask unanimous consent to submit for the record a report from the Commonwealth Fund entitled, ‘‘Seeing Red: The 

Growing Burden of Medical Bills and Debt Faced by U.S. Families,’’ where it points out that an estimated 72 million American 
48 

families have bill problems or medical debts relating to medical bill 

problems or medical debt. And 49.5 are uninsured. 

So, there is a problem with, if you have insurance, you are still 

stuck. So, I would like to submit this for the record. 

[The information follows:] 
49 
50 
51 
52 
53 
54 
55 
56 
57 
58 
59 

Chairman ROE. Without objection, so ordered. 

Mr. Barletta? 

Mr. BARLETTA. Thank you, Mr. Chairman. 

Mr. Parker, I am proud to say, Pennsylvania’s 11th Congressional District is home to a number of initiatives designed to help 

spur small business growth and development; specifically, Wilkes 

University’s Small Business Development Center. 

As a former small business owner, I am well aware of the hurdles and challenges of both the start-up—which I did, I started a 

new business from scratch—and the growth challenges of small 

businesses. 
60 

I want to talk particularly about the employer mandate provision. 

Would you say there is less of an incentive now? If you were a 

business that might have 47, 48 employees, would you believe that 

that is less of an incentive to expand and grow your business to 

over 50 employees? 

Mr. PARKER. Absolutely. And more than that, even if you are already well above that number, the incentive now is to sort of batten down the hatches versus growing. 

And I think, you know, people have been talking throughout this 

hearing about how, well, when we get to 2014, the impacts will be 

this, that or the other. I can tell you, it is not hypothetical. This 

is impacting our business right now. 

You know, I run development for our business. Our growth is 

very much in fits and starts. 

We have to develop a new location, so we have to make a big bet. 

We have to pick an area that we think can support it. We have to 

go in, invest several million dollars. And then, we create a big 

chunk of jobs, and we have a new business. 

And each one of those is a big decision, and we have a lot of skin 

in the game, personally. And we are putting the well-being of everyone in the company on the line every time we do it. 

And more deals that I have looked at over the last, you know, 

6 months, I tend to say, it is marginal. We are going to pass. Just 

because, not only this bill and the impacts it has today, and knowing that it is only going to get worse, but, you know, what is next? 

And it is a huge disincentive to growth overall. 

Mr. BARLETTA. And would you say that a business that might 

have 52 employees may actually—a business that might be struggling to stay in business and pay its bills—would you believe that 

they may lay a few employees off to get under the 50 employee 

mandate? 

Mr. PARKER. Absolutely. 

Mr. BARLETTA. Do you have any idea where they picked the number 50 from, and how we established 50 as a magic number? 

Mr. PARKER. I have no idea. 

Mr. BARLETTA. Mr. Brewer, same question. Would you believe 

that a business that might have 48 employees would be reluctant 

to hire a few more? 

Mr. BREWER. Sure. We do not do business in that space. Our 

cases are typically significantly larger. But I cannot imagine the 

same logic would not apply. 

We have got employers that we serve every day who are reluctant to add employees, because of the additional burden of sort of 

unforeseen health care mandates. 

So, yes, I think it would be perfectly logical that somebody would 

be willing to do that. 

Mr. BARLETTA. And would you believe, because of the Affordable 

Care Act, that in America there will be businesses who will lay off 

a few employees, if they are around 51, 52, 53 employees? 

Mr. BREWER. I cannot tell you that I professionally believe that. 

On a personal level, that certainly makes sense. 

Mr. BARLETTA. Especially if it is a business that is struggling? 

Mr. BREWER. Yes. 
61 

Mr. BARLETTA. Mr. Houser, if your business had 48 employees, 

would you be reluctant to hire a few more, if it was going to put 

you over the 50 employee mandate, especially if you were a business that might be struggling today? 

Mr. HOUSER. Congressman, I make decisions like that based on 

my workload. I would not turn down work because I did not have 

sufficient employees. I would make a decision about hiring more 

employees based on how much work I had to perform. 

So, if I had 49 employees, and I had enough work for 52 employees, and that was going to make me more profitable, I would hire 

52 employees. That would not make—— 

Mr. BARLETTA. But would you also maybe think about making 

the 49 work longer, so that you did not have to go over the 50 employee mandate? 

Mr. HOUSER. I am talking about having enough work for 52 employees. That would be the driving factor in my decision, not 

whether or not I have to provide some—because I am already providing the health care. That is factored in. 

Mr. BARLETTA. If you were a business—— 

Mr. HOUSER. So, I do not see it—— 

Mr. BARLETTA. I am talking about a business that might have 

48, 49 employees that was not. And hiring one or two more employees would now throw you into a mandate, where you would be 

fined $2,000 per employee. 

Mr. HOUSER. I do not—— 

Mr. BARLETTA. Why wouldn’t you think of just making those employees work a little longer, rather than hiring another few more 

employees? 

Mr. HOUSER. People make those kinds of decisions all the time, 

and I am not familiar with them. 

Mr. BARLETTA. Mr. Miller, many small businesses have employees who work full-time hours. My business that I had was a line 

painting business. We painted lines on highways. In Pennsylvania, 

obviously, you cannot paint lines in January. It does not work that 

well. 

Now, so, we would be considered seasonal. They might start 

working in April, and get laid off in October or November. 

Now, would they be considered, under this act, would they be 

considered full-time employees, or part-time employees? 

Mr. MILLER. Well, there is a calculation—and again, these, you 

know, the angels dancing on the head of a pin—where they can get, 

in effect, calculations of full-time equivalents by aggregating parttime, workers, so they can add up to full-time employees and get 

you above or below that 50 threshold. 

And your description of this is exactly right. There is no one single factor that says we are going to shut down the business, or we 

are—— 

Chairman ROE. Mr. Miller? 

Mr. MILLER. But these are all calculations. If you try to trap employers in a maze, and it looks like all the other doors are closed, 

they are going to find one to go through. 

Chairman ROE. Mr. Miller? 

Mr. MILLER. You will do calculations and say, does it pay for me 

to do something different? Do I restructure my firm? Do I suddenly 
62 

have two businesses, and you ship people out somewhere else? Do 

I pay you differently, because it turns out, when I pay you more, 

I lose money under other calculations? 

Is it going to hit me when I grow too much? Can I do it in a different manner? 

All these are not what businessmen should be doing, but they 

have to take into account the entire structure of costs imposed on 

them, and they will act the best they can. We are, though, overloading them, so that they are trying to do so many things that 

have nothing to do with running their own businesses, that it gets 

very complicated, just to run an effective business. 

Chairman ROE. Mr. Miller, the time has expired. 

Dr. Bucshon? 

Mr. BUCSHON. Thank you, Mr. Chairman. 

Just some background, I am a cardiovascular surgeon, so I have 

been in the health care industry for quite a long time. 

Mr. Houser, a couple of questions for you. Have you testified before Congress before, or is the first time? 

Mr. HOUSER. This is my first time, Congressman. 

Mr. BUCSHON. Great. 

Mr. HOUSER. Thank you very much for inviting me. 

Mr. BUCSHON. Welcome. 

Is it—under what you talked about—is it true or not true that 

your, the company that you run is currently exempt from the employer mandates in the new health care law? 

Mr. HOUSER. That is correct. Under my understanding, that is 

correct. 

Mr. BUCSHON. So do you know if your current health care plans 

that you are offering to your employees comply with the requirements of the Affordable Care Act? Do you have any idea whether 

they comply or not? 

Mr. HOUSER. I have no idea. I could find out, but I do not know. 

Mr. BUCSHON. Because under the Affordable Care Act, you really 

do not have to have your health plans comply at all, right, because 

your company is exempt. 

Mr. HOUSER. As far as I know, that is correct. 

Mr. BUCSHON. Okay. I mean, the basic premise of the discussion 

has been the cost of health care. And as you are probably aware, 

under congressional testimony January 26, chief actuary, Mr. Foster, from the Medicare services, stated that, promises the new 

health law would hold down costs were ‘‘false more than true.’’ 

And I applaud you for being a small business owner. It is tough. 

But in fairness, from your testimony, you are really exempt from 

the law and really do not have any risk under the law, other than 

the fact that you are hopeful the law will hold down health care 

cost. But we know the data shows that that is not true. 

So, I just wanted to get your view on that, that—and again, with 

what Mr. Barletta said—if you were an employer that had 60 employees, 70 employees, and you were not exempt from the health 

care law, do you feel that you would try to put yourself in a position that you would not have to comply with not only providing 

health insurance, but the specific type that is required under the 

law, or else suffer penalties? 
63 

Mr. HOUSER. Congressman, there are over 4 million small businesses that fall in the category I am in, that will be able to, for 

example, get the tax credits for providing health care coverage for 

their employees. 

Mr. BUCSHON. Excuse me. I do not want to interrupt, but those 

are going away in fairly short order. Those will be a temporary 

thing. 

And then, again, I think you were asked the question earlier. Do 

you have a plan for your business, when the tax credits, not only 

do they go away, but who is paying for the tax credits? I mean, 

where does the money come from? It comes from the American taxpayer. 

And as we know, with the testimony of Mr. Foster, as health care 

costs continue to rise under this health care bill, everyone is going 

to continue to struggle. Your premiums are going to continue to go 

up. 

And if you do not have a plan for when you lose your short-term, 

small business credits, what are the other 4,000 businesses like 

yourself around the United States going to do when those go away? 

Mr. HOUSER. Congressman, in part, my premium has gone down. 

And I do not see any reason why that might not continue, especially as more people join and are paying premiums, especially 

younger, healthier. 

I have every reason to believe that health care premiums can go 

down, or stabilize. And especially as the State of Oregon makes improvements in health care delivery, I also believe premiums can go 

down. 

So, I plan for the worst, I plan for the best. And you just sort 

of proceed on that basis. 

Mr. BUCSHON. That opinion is in contrast to, again, the chief actuary, Mr. Foster, and most economists around the country that 

have looked at this health care bill, that your premiums will go 

down and the health care costs will go down. 

Because, being in medicine, I think that it is very clear that the 

number one problem we have in America is the skyrocketing cost 

of health care. And I am concerned for businesses like yours, that 

when these tax credits go away, you are going to have trouble. 

And also, you know, I do think, when you are discussing something which you are completely exempt from, that gives you a little 

bit different perspective on your testimony. 

So, I am hopeful that we can get some real cost containment in 

place for businesses like yours going forward, because I am fearful 

that when these very small credits go away, you are going to be 

struggling. 

And my time is up. Thank you. 

Chairman ROE. I thank the gentleman for yielding. 

I will finish the questioning by saying that not anybody on either 

side of the aisle did not think we needed to have a meaningful 

health care reform. This doctor sitting right here knew it better 

than anybody. And that is one of the reasons I ran and came to 

Congress. 

So, the number one issue in America was: How do we control the 

cost of care? Because once we get the costs under control and it is 

more affordable, more people can buy it. 
64 

Number two, and the second problem we had in the American 

health care delivery system was, we had a group of people who did 

not have access to affordable insurance coverage in this country. 

We had the working poor that did not apply for, did not qualify 

for Medicaid, that did not have a job that provided the insurance. 

That is the group we are talking about. 

And thirdly, which did not even come up in this bill, which is a 

huge problem for Dr. Bucshon and myself, was liability reform. 

There is a huge cost for defensive medicine in this nation. 

So, those were the three problems. 

This bill did increase access to a program that has already failed, 

which is the Medicaid system, and it needs to be revamped. It did 

nothing to hold the costs down and did nothing for liability reform. 

The other equation—I see some young, probably physicians, in 

the crowd out here, I am glad they came—is we have forgotten 

about that part of the program. 

Let me explain to you what happens in these government programs. In TennCare, it paid the providers less than 60 cents on the 

dollar for providing the care. Medicare in our state pays about 90 

percent of the cost of the care, leaving that cost shifted to the private sector. 

That is one of the reasons that the cost of private health insurance has gone up so rapidly in this country, is the cost shifting. 

Let me give you an example. When the implantable defibrillators 

first came out, a patient on TennCare—that is our Medicaid program in the state—had to have one. So, it was provided for him. 

The hospital got paid $800 for the defibrillator. And at that time, 

the defibrillator cost $40,000. So, the hospital ate $39,200 of that. 

And you, Mr. Houser, and Mr. Miller and myself, that provided 

health insurance coverage, that cost got shifted to you. 

Let me just say a very simple thing. A 2,500-page bill got written. And you could do two-thirds of it with two paragraphs. One 

is simply, sign up the people who are currently eligible for Medicaid and SCHIP. 

And number two, which I like, is leave your 26-year-old—you 

only had one child, I had three that did that—allow them to stay 

on. That covers over 20 million people. 

And, then, lastly what you do, let people shop across state lines. 

It is the only insurance you cannot do that. Let them form association health plans and get bigger, like you are talking about. And 

have liability reform. 

You do those simple things—not complicated—you can help force 

the costs down. 

Here is a card. That is a health savings account card I have right 

here. I had to have some biopsies done. I had to have some anesthesia for it. I would recommend you get anesthesia, if you have 

the biopsies I had, too. 

[Laughter.] 

Anyway, I walk into the hospital and I have this card. It is called 

a health savings account. I do not ask the insurance company; I do 

not bother with them. I make a deal with the hospital. I said, how 

much will you give me this, if I pay you in a millisecond? 

And guess what. I saved 35 percent. I was happy. The hospital 

was happy. 
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And that is what Mr. Miller was talking about, I think, is changing the way we pay for health insurance in this country. 

So, Mr. Brewer, I have dealt with this issue as a former mayor 

and these costs that are being passed along. Let me ask you why 

I would not do this. 

I had 350 employees in my practice. Right now, we put about 

$5,000 per person away. If I pay the fine and the penalty—we have 

300 people who get health insurance through our practice—if I pay 

the $2,000, that is $600,000 I pay. If I pay the $5,000, that is $1.5 

million. 

If I dump my employees in the exchange, which I certainly do 

not want to do—we provided health insurance in our practice for 

over 42 years. And I won’t be the first, but I won’t be the third, 

either. 

Why wouldn’t I do that, to put that to my bottom line, and put 

that cost onto the government? Why wouldn’t I do that? 

Mr. BREWER. Do you want the CBO logic? 

Chairman ROE. Yes. 

Mr. BREWER. Because it is illogical. I do not see any reason why 

you would not do that. 

You know, I think the way we have characterized this, there is 

going to be a conundrum as we present to our employer clients, the 

clients that we serve, there is going to be a dynamic tension between the CFO and H.R. 

The CFO is going to look at that potential savings, and his eyes 

are going to get real wide. And he is going to say, why in the world 

wouldn’t I do that? 

H.R. is going to be fighting about, well, we need it for a competitive advantage. You know, the CBO refers to a tight labor market 

that does not exist, so I am not sure that one holds any water. 

But over some period of time, if you have been in business—and 

you have—you know how this works. Over a period of time, the 

CFO is going to win that argument. The logic of survival will 

trump the logic of warm and cuddly H.R. 

So, the answer to your question is, there isn’t any reason why 

you would not do that, if you had any reasonable assurance that 

your employees were going to be adequately covered, or adequately 

managed, within the framework of the exchange. 

Chairman ROE. And my time has expired. 

Mr. Kucinich, any closing comments? 

Mr. KUCINICH. Yes. You know, in listening to the testimony, it 

is very interesting. And in hearing your questions from my colleagues, I came up with this conundrum, and you have—and the 

challenges that small businesses face here. 

You have Mr. Houser, who has being asked who pays for the 

small business tax cut he is receiving. But we know that he is paying 100 percent of his employees’ health care, and he has been for 

28 years. 

And you have Mr. Parker’s company. According to staff and documents that they are covering less than 100 of their 530 employees, 

and the rest will have little health care. 

And who is paying for those other 400? Well, it is going to be the 

taxpayers, because what is happening is, you know, people go— 

they will get medical care somehow. 
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They will go to hospitals, they will go on Medicaid. As people 

who do not have any insurance, the hospitals end up being their 

emergency rooms. Taxpayers end up footing that bill in some way, 

shape or form. 

After the exchanges are set up, Mr. Parker’s employees will go 

to the exchanges, and which are government subsidized. 

So, you know, we have to be sensitive to the sometimes conflicting and contradictory situations which businesses find themselves in, notwithstanding their position on the bill. 

Thank you. 

Chairman ROE. I thank the gentleman. 

I thank all of the panelists for being here. It was an excellent 

discussion. 

I will finish by this, by saying that I believe that businesses— 

and all of you all have been involved in business—are much better 

suited to decide what health insurance that they need to purchase 

for their business than the federal government. 

What has happened is that the federal government will now decide which is adequate health insurance coverage. And let me give 

you just an example. They have a minimum benefit package that 

is going to be—and everyone will have to do it. 

And Mr. Houser, what you may have purchased may not be the 

minimum. Your cost may go up, because you may not meet the 

standard that the government says you have to make. I think you 

should be able to make that decision. 

There is a company in Tennessee—and I won’t mention the name 

of it—that right now has a plan that they can afford—it is a large 

company—that they can afford and that they are happy with, their 

employees are happy with. But it will not meet this minimum 

standard that the government has laid out in this affordable health 

care plan. 

It will cost them $40 million to comply with this. If they drop 

their employees into the exchange, it will save them $40 million. 

And Mr. Brewer clearly pointed out, that argument will go on, but 

eventually, the CFO will win out. 

I believe that individuals should make those decisions, and businesses should make those decisions, not the government. 

The other thing that I have a little problem with—matter of fact, 

a major problem—is with the cost estimates. It was a year ago the 

CBO—these are good people, they are honest, they plug in numbers 

that they get—told us that the budget deficit was going to be $1.2 

trillion. It turns out it is going to be $1.65 trillion. So, in 1 year, 

they missed it by $400 billion. 

And I am supposed to believe, looking at all the past history that 

I have with Medicare and with TennCare, and with Massachusetts, 

quite frankly, what their—the Massachusetts plan, which has the 

mandate, have the highest insurance premiums, rising faster than 

anybody else in the country. 

So, when the government makes those decisions, and you do not 

make them as an individual or your family—and I have said this 

from day one. Health care decisions should be made by patients, 

their families and doctors. And it should not be decided by the federal government. 
67 

I have enjoyed this discussion immensely today. I thank each one 

of you for preparing. You did a great job. 

And with this, without any further discussion, this meeting is adjourned. 

[An additional submission of Dr. Roe follows:] 

ASSOCIATED BUILDERS AND CONTRACTORS, 

Arlington, VA, March 10, 2011. 

Hon. PHIL ROE, Chairman; Hon. ROBERT ANDREWS, Ranking Member, 

Subcommittee on Health, Employment, Labor Pensions, House Committee on Education and the Workforce, 2181 Rayburn House Office Building, Washington, 

DC. 

DEAR CHAIRMAN ROE AND RANKING MEMBER ANDREWS: On behalf of Associated 

Builders and Contractors (ABC), a national association with 75 chapters representing more than 23,000 merit shop construction and construction-related firms 

with nearly two million employees, I am writing in regard to the subcommittee 

hearing on, ‘‘The Pressures of Rising Costs on Employer Provided Health Care.’’ 

Throughout the health care reform debate, ABC advocated for policies that would 

reduce the cost of health care for employers and their employees. ABC called on 

Congress to advance common-sense proposals that would address the skyrocketing 

costs of health insurance, especially for employer-sponsored plans, and the rapidly 

rising number of uninsured Americans. 

Unfortunately, the massive and complex health care law, known as the ‘‘Patient 

Protection and Affordable Care Act’’ or PPACA, fails to address the core problem 

facing small businesses: the rising costs of health care. It is unfathomable that our 

elected leaders imposed new costly mandates and taxes on employers at a time of 

record high unemployment. Such actions demonstrate a fundamental failure of the 

federal government to understand the needs of small businesses. As a result, numerous provisions in the health care law will have a direct negative impact on ABC 

members, including: 

• Higher insurance costs due to new mandated benefits 

• New taxes on small business health insurance policies 

• Prohibitions on HSAs, FSAs and HRAs that limit employer and employee flexibility 

• An employer mandate that encourages job cuts 

• New taxes, fees and mandates specifically targeted at the small business community 

Additionally, ABC has expressed concerns about the regulatory burdens imposed 

by the massive health care law. The outcomes of many of the health care related 

federal rulemakings are currently unclear. This has created an environment of uncertainty in our industry that makes it difficult for firms to adequately plan for the 

future. 

Providing quality health care benefits is a top priority for ABC and its member 

companies. ABC urges Congress to move forward with legislative proposals that will 

provide employers and their employees with health care solutions that are both 

practical and affordable. 

ABC believes medical malpractice reform should be included in any true health 

care reform package. By enacting medical malpractice reform we will see a dramatic 

decrease in the cost of health insurance for the American public. ABC also strongly 

supports the inclusion of Small Business Health Plans (SBHPs) and expanding access to Health Savings Accounts (HSAs). Further, the unique nature of construction 

work demands that benefits be portable in order to reflect the reality of the industry 

workforce. 

We appreciate your attention to this important matter and look forward to working with you on commonsense health care initiatives. 

Sincerely, 

CORINNE M. STEVENS, Senior Director, 

Legislative Affairs. 

[An additional submission of Mr. Kucinich follows:] 
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[Whereupon, at 11:25 a.m., the subcommittee was adjourned.] 

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