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THE SMALL BUSINESS STRUGGLE 

UNDER OBAMACARE 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

AND ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

MAY 18, 2016 

Printed for the Committee on Small Business and Entrepreneurship 

( 

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

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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED FOURTEENTH CONGRESS 

DAVID VITTER, Louisiana, Chairman 

JEANNE SHAHEEN, New Hampshire, Ranking Member 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

TIM SCOTT, South Carolina 

DEB FISCHER, Nebraska 

CORY GARDNER, Colorado 

JONI ERNST, Iowa 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

MARIA CANTWELL, Washington 

BENJAMIN L. CARDIN, Maryland 

HEIDI HEITKAMP, North Dakota 

EDWARD J. MARKEY, Massachusetts 

CORY A. BOOKER, New Jersey 

CHRISTOPHER A. COONS, Delaware 

MAZIE K. HIRONO, Hawaii 

GARY C. PETERS, Michigan 

MEREDITH WEST, Republican Staff Director 

ROBERT DIZNOFF, Democratic Staff Director 

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C O N T E N T S 

OPENING STATEMENTS

Page 

Vitter, Hon. David, Chairman, and a U.S. Senator from Louisiana ................... 1 

Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire ............................ 3 

WITNESSES

Panel 1 

Frank, Hon. Richard G., Assistant Secretary for Planning and Evaluation, 

U.S. Department of Health and Human Services, Washington, DC ............... 5 

Panel 2 

Kunkel, Tom, President, Full House Marketing, Inc., Edgewood, MD ............... 26 

Brey, Mike, President, Hobby Works, Laurel, MD ............................................... 33 

Kuhlman, Kevin, Director of Legislative Affairs, National Federation of Independent Business, Washington, DC ................................................................... 37 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Brey, Mike 

Testimony .......................................................................................................... 33 

Prepared statement .......................................................................................... 35 

Frank, Hon. Richard G. 

Testimony .......................................................................................................... 5 

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

Kuhlman, Kevin 

Testimony .......................................................................................................... 37 

Prepared statement .......................................................................................... 39 

Responses to Questions Submitted by Senator Enzi ..................................... 67 

Kunkel, Tom 

Testimony .......................................................................................................... 26 

Prepared statement .......................................................................................... 29 

Responses to Questions Submitted by Senator Enzi ..................................... 65 

Shaheen, Hon. Jeanne 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 62 

Vitter, Hon. David 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 54 

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THE SMALL BUSINESS STRUGGLE 

UNDER OBAMACARE 

WEDNESDAY, MAY 18, 2016 

UNITED STATES SENATE, COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, Washington, DC. 

The Committee met, pursuant to notice, at 2:05 p.m., in Room 

SR–428A, Russell Senate Office Building, Hon. David Vitter, Chairman of the Committee, presiding. 

Present: Senators Vitter, Risch, Scott, Fischer, Gardner, Ernst, 

Ayotte, Shaheen, Cantwell and Cardin. 

OPENING STATEMENT OF HON. DAVID VITTER, CHAIRMAN, 

AND A U.S. SENATOR FROM LOUISIANA 

Chairman VITTER. Good afternoon, everybody, and thanks for 

joining us today in the Senate’s Small Business Committee hearing 

to discuss the impact of the Affordable Care Act on America’s small 

businesses and employees. 

I would like to thank the Ranking Member, Senator Shaheen, 

and the other members of the Committee, who should be on their 

way, for participating today. 

Since its enactment in 2010, the Patient Protection and Affordable Care Act has forced so many small businesses to change fundamentally the way they provide employer-sponsored health insurance coverage for their employees. Currently, 60 percent of small 

employers do not offer health insurance to their employees, and 

much of that is due to the high cost of providing health insurance 

that must be purchased on the small group market. 

Clearly, in my opinion, the Affordable Care Act has failed its 

namesake intention. From rising premiums and increased health 

care cost, to reduced access to doctors and hospitals, ObamaCare 

just is not working for so many Americans. 

Now lest you think that is a partisan statement, let me go specifically to demonstrated facts. Fact number one, premiums and 

deductibles have risen every year since the ACA passed in 2010. 

Premiums have gone up 24 percent, deductibles have gone up 67 

percent. Wages, on the other hand, have only increased 10 percent. 

Fact number two, ObamaCare has increased premiums for the 

average American family. Now we all recall when the President 

said he would sign a universal health care bill by the end of his 

first term that would cover every American and cut the costs of a 

typical family’s premium by $2,500 a year. That just has not happened. 

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Between 2009 and 2015, the average family premiums for em- ployer coverage have increased to $4,170. This year is just a continuation of that trend, with average premiums for benchmarked 

Silver plans on the Federal exchange rising by 7.5 percent this 

year, far surpassing inflation. For Bronze plans, premiums have increased an average of 12.7 percent this year and the fear is that 

next year they will go up even more. 

Fact number three, over 4 million people had their plans canceled because those plans did not meet the new ObamaCare requirements. And of course, that is despite the President’s promise 

37 times over that if you like your health care plan, you can keep 

it. 

Fact number four, visits to emergency rooms have increased by 

75 percent, which becomes enormously expensive for hospitals and 

taxpayers. And this utterly contradicts one of ObamaCare’s biggest 

selling points, that once everyone got health insurance coverage, 

emergency room care would go down significantly. 

Fact number five, with all of this, there are still 33 million people who are uninsured. 

When it comes to ObamaCare and small businesses, there were 

a number of provisions meant to encourage employer-sponsored 

health insurance coverage, particularly among small businesses. 

Unfortunately that, too, did not play out as promised by President 

Obama and his administration. 

Today I want to focus on three ObamaCare provisions that most 

directly relate to small businesses. Number one, an employer penalty for not offering health insurance known as the employer mandate. Number two, a tax credit to increase the affordability of 

health care for the smallest firms. And number three, small business health insurance exchanges designed to increase plan options 

and lower plan costs. 

The employer mandate punishes small employers who do not 

offer adequate or affordable coverage if at least one of their employees enters an individual health insurance exchange and receives a 

premium credit. These related penalties were scheduled to take effect in 2014 but, because of the political implications, the administration delayed implementation for businesses with 100 or more 

full-time employees until 2015 and, for businesses with 50 to 100 

until 2016. 

Last year, small employers who offered to pay their employee’s 

medical expenses directly through a health reimbursement arrangement were told by the IRS they could not do that anymore 

and, if they did, they would be penalized $100 per day per employee, up to $36,500 a year. 

It is worth noting that a $36,500 penalty is 18 times greater than 

the $2,000 penalty on a large employer that does not provide insurance at all. 

That logic does not make sense to me. Small businesses account 

for over 99 percent of employer firms in the U.S. and we should 

be focused on helping them grow and create more jobs instead of 

penalizing them. 

Another ObamaCare failure is the Small Business Tax Credit. 

The ACA provides a Small Business Tax Credit to for-profit and 

non-profit organizations with fewer than 25 full-time employees, 

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phasing out as firm size increases. The problem is that most small 

businesses are not signing up. The administration estimated that 

4 million small businesses would be eligible and sign up for the tax 

credit, but only 181,000 claimed the credit in 2014, according to the 

GAO. A big gulf, obviously, between 4 million and 181,000. 

Small businesses are also avoiding the Small Business Health 

Options Program and the SHOP exchanges, which were specifically 

designed to help small business utilize the risk pool mechanism of 

the newly established health insurance exchanges. 

Despite the Small Business Tax Credit and the SHOP exchanges, 

businesses simply cannot afford to provide health insurance for 

their employees in many cases. Not only do small businesses pay 

approximately 18 percent more, on average, for health insurance 

per employee, than large companies, they also receive fewer comprehensive benefits. 

Part of the small business struggle is having limited options in 

health plans. Big insurance companies are bailing out of the health 

insurance exchanges, leaving individuals—especially folks in rural 

areas—with only one or two choices in health plans. So choices are 

shrinking as we speak, not expanding. This consolidation of health 

care providers is forcing out the small independent physicians who 

are essential to a competitive health care market. 

Then there are the taxes that have been imposed, like the health 

insurance tax and the Cadillac tax. 

When you put all of these problem areas together, it is quite 

clear to me that ObamaCare is failing American small businesses. 

I am hopeful that today’s discussion will shed some light on how 

folks are managing their businesses in the real world, despite all 

of these impediments. 

With that, I will turn to our Ranking Member, Senator Shaheen. 

OPENING STATEMENT OF HON. JEANNE SHAHEEN, RANKING 

MEMBER, AND A U.S. SENATOR FROM NEW HAMPSHIRE 

Senator SHAHEEN. Thank you, Mr. Chairman. The purpose of today’s hearing is to examine the impact of the Affordable Care Act 

on small businesses. 

I am sure it will come as no surprise to anyone here in the room 

that I have a very different view of how the Affordable Care Act 

is working than Chairman Vitter. 

I believe that the Affordable Care Act is working. Millions of 

Americans, including tens of thousands of people in New Hampshire, now have access to affordable health care coverage. 

Just yesterday, the National Health Interview Survey released 

estimates that showed that 9.1 percent of Americans are currently 

uninsured, and that is the lowest uninsured level on record. The 

survey also shows consistent declines in uninsured rates since the 

Affordable Care Act took effect. 

Since the law was passed in 2010, the country has had over 74 

straight months of job growth with more than 14.6 million jobs created, and the unemployment rate has been cut in half. In my home 

State of New Hampshire, our unemployment rate is 2.6 percent. 

Now I know that we would all agree that we must continue to 

create and promote policies that incentivize better health care at 

lower costs. The Affordable Care Act has taken some important 

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steps forward to develop, test, and implement innovative health 

care delivery system reforms. And this is essential to controlling 

health care costs, which is important to individuals and small business owners. 

Because of the ACA, Americans now have health insurance options and can no longer be discriminated against because they have 

pre-existing conditions. This gives so many people the opportunity 

to leave a job they may otherwise have stayed in just because of 

the health benefits. So now they can pursue their dreams in other 

areas. 

It also allows some who are self-employed to get insurance for 

the first time. Take, for example, Steve, who is a self-employed real 

estate broker from Londonderry, New Hampshire. Steve is 61 years 

old and he had a bypass 12 years ago. Because of his medical history, prior to the ACA he was unable to purchase health insurance. 

Once the ACA was enacted, he purchased a Silver plan and two 

months later he had another quadruple bypass. This year, Steve 

pays about $80 a month for coverage, after a tax credit is taken 

into account. So the Affordable Care Act saved Steve from financial 

ruin and it has allowed him to continue to work. 

I do appreciate, though, that despite the gains made under the 

Affordable Care Act, there is still more work to be done. I also have 

heard from small businesses who are concerned by provisions in 

the ACA. They tell me about the impact of higher insurance premiums, the reporting requirements that can be a burden to some 

small businesses, and the effect the employer mandate has on hiring practices. 

I believe there are changes that need to be made to the law to 

make it work better, especially for small businesses. For example, 

I am pleased to support Senator Coons’ legislation—a member of 

this Committee—that would expand and simplify the ACA’s Small 

Business Tax Credit, making it available to more employers for a 

longer period of time. 

I am also a cosponsor of Senator Warner’s Commonsense Reporting Act, which makes important changes to streamline the ACA’s 

reporting requirements, making it less burdensome for employers. 

And last fall, Senator Tim Scott, another member of this Committee, and I joined together to pass the first stand-alone bipartisan Affordable Care Act change. The PACE Act will help small 

businesses by protecting them from premium increases in the small 

group market that could have otherwise occurred without that legislation. 

So it is my hope that we can continue to come together to work 

in a bipartisan way to improve the Affordable Care Act, particularly for small businesses in New Hampshire and across the country. 

I look forward to today’s discussion. I look forward to hearing 

from our first witness, Mr. Frank, and from our other witnesses 

who will come later. 

Thank you. 

Chairman VITTER. Thank you. 

Now we will go to our first panel, an Administration witness, Dr. 

Richard Frank. He is the Assistant Secretary for Planning and 

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ices. As such, he advises the Secretary on the development of 

health, disability, human services data and science policy and provides advice and analysis on economic policy. 

From 2009 to 2011, Dr. Frank served as the Deputy Assistant 

Secretary for Planning and Evaluation, directing the Office of Disability, Aging, and Long-Term Care Policy. 

Dr. Frank has a BA in Economics from Bard College and a Ph.D. 

in Economics from Boston University, and is on leave from his position at the Harvard Medical School. 

Welcome, Dr. Frank. You have five minutes and are certainly 

welcome to submit anything additional for the record. 

STATEMENT OF HON. RICHARD G. FRANK, ASSISTANT SECRETARY FOR PLANNING AND EVALUATION, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC 

Mr. FRANK. Thank you, Chairman Vitter, Ranking Member Shaheen, and other members of the Committee. Thank you for the opportunity to discuss the progress that has been made in reforming 

our health care system through implementation of the Affordable 

Care Act and, most significant to today’s discussion, small businesses and their employees. 

In the time I have with you today, I will touch on the accomplishments of the ACA and the specific impacts it has had on small 

firms. I will also touch on some of the economic issues that have 

been raised in connection to the ACA. 

In the past, although many small businesses have wanted to 

offer health benefits to their employees, they have faced many challenges. Historically, small businesses have been charged more for 

the same benefits than large employers. 

The ACA has equipped us with a number of tools for addressing 

health insurance coverage in small businesses. These include coverage expansion, small employer tax credits, the creation of Small 

Business Health Options Program, or SHOP, exemptions from the 

employer mandate. And we judge our success by the impact of this 

whole package of policies. 

In 2013, prior to the implementation of the ACA’s coverage expansion, more than 44 million Americans were uninsured. In 2012, 

it was estimated that 61 percent of uninsured workers were employed by firms with 100 or fewer employees. Since then, we have 

made historic progress in reducing the size of the uninsured population. 

In the years since the ACA passed, we estimate that 20 million 

Americans that were previously uninsured have gained health insurance coverage. These coverage gains are particularly notable for 

employees of small businesses. Data from the Current Population 

Survey highlight the overall gains in coverage among workers employed by firms with under 100 employees. Overall, there have 

been reductions in the number of uninsured employees and owners 

of small businesses across all categories of small businesses. 

For firms with 10 or fewer employees, for example, the percent 

of workers with no health insurance fell by 6.8 percentage points 

between 2013 and 2014, from 32.1 percent to 25.3 percent. 

These gains have been realized while keeping spending growth 

in check. Current enrollee spending growth for the private sector, 

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in private insurance, remains low. A similar pattern is apparent 

when one examines the Bureau of Labor Statistics Employment 

Cost Index. That measure measures changes in the cost of compensating workers. The ECI data through April of 2016 shows 12 

month growth in employee benefit costs are at 3.3 percent, a continuation of historically low rates of cost growth in health benefits. 

When the ACA was enacted, there were predictions made by 

some that the ACA would cause shifts from full-time to part-time 

work and reduce total employment. Several studies have been conducted examining the impacts of the ACA on labor markets. The 

evidence consistently shows that there were no significant negative 

effects on either total employment or the mix of full-time and parttime employment attributable to the ACA. 

Some recent data from the National Federation of Independent 

Businesses, NFIB, shows an increase to 53 percent in the percentage of small businesses that are hiring or trying to hire. 

The Affordable Care Act created the Small Business Health Options Program, or SHOP, to make it easier for small employers to 

obtain health coverage for employees. The SHOP allows eligible 

small employers to easily compare and select plans that meet the 

needs of their employees. In 2015, some 85,000 Americans were 

covered by SHOP and had about 10,700 small employers participating. 

Now we continue to work on improving the consumer experience 

through better technology, expanded choices for employers and 

their employees, and existing research suggests that these improvements can be expected to attract more participants in SHOP in the 

future. 

The ACA also offers a Small Business Health Care Tax Credit 

for eligible employers with fewer than 25 full-time equivalent employees to assist with up to 50 percent of their premium contributions. Data from 2014 shows that $541 million in tax credits due 

to this provision were claimed. 

The ACA has used a range of policy tools to expand health insurance coverage. Connecting workers to coverage regardless of where 

they work helps improve productivity of the American labor force 

and the evidence clearly shows that small businesses are sharing 

in these benefits. 

Thank you for your attention and I am pleased to take questions. 

[The prepared statement of Mr. Frank follows:] 

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Chairman VITTER. Okay. Thank you. 

You heard my critique of the actual experience of so many Americans with ObamaCare since it was passed in 2010. You said these 

provisions, like the tax credit provision for instance, have to be 

judged by the success and impact of these policies. Let us go to that 

because I think that is a good example, certainly not the only one. 

Again, if we can put up the relevant slide, the Small Business 

Tax Credit slide. 

The administration talked about 4 million small businesses being 

eligible to take advantage of that. The actual experience is 181,000, 

a trivial percentage of the 4 million. What happened? And what is 

being done to change that? 

Mr. FRANK. I can tell you that we are doing a number of things 

that we believe, and research supports, will allow this market to 

grow. First of all, it is important to note that this is an entirely 

new market and we are working in uncharted territory. We are 

building a new market from the start. 

In so doing, what we are working on is improving the consumer 

experience by making choice clear and having technology very supportive of consumers making choices and businesses being able to 

negotiate the options out there. 

Second, what we are trying to do is we are working with partners such as brokers and agents. Recently, we have completed 

training about 31,000 of these folks to help consumers and employers find their way through the thicket of options. And then finally, 

we are continuing to conduct webinars and reaching out into the 

community in a variety of ways to increase awareness of this program, which actually at this point in time is still very low. 

Chairman VITTER. So all of those things, I mean, we are at 

181,000. The stated promise was 4 million. All of those things, 

where are they going to get us over the next year, say from 181,000 

toward 4 million? 

Mr. FRANK. I cannot tell you. I can tell you that we have been 

talking to a number of states, and states like California are projecting pretty rapid growth over the next two years in their SHOP 

program by taking—— 

Chairman VITTER. First of all, I am talking about the Small 

Business Tax Credit specifically. So do you have any estimate or 

guesstimate about where we will go in the next year, from 181,000 

toward the promise of 4 million? 

Mr. FRANK. Well, on the Small Business Tax Credit, that is really sort of a Treasury jurisdiction, so I do not really have the data 

that they have to sort of look at where the projections are on that 

one. 

Chairman VITTER. Okay. Can you submit for the record, by talking to your colleagues at Treasury, where they expect to get over 

the next year? 

Mr. FRANK. We can follow up with you on that. 

Chairman VITTER. Probably the most fundamental fact that has 

not played out was a promise that the President made 37 times 

over: If you like your health plan, you can keep it. 

Has that promise been kept? 

Mr. FRANK. The vast majority of people who have liked their 

health plan have been able to keep it. 

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Chairman VITTER. The promise was to everybody—if you like 

your health plan you can keep it—37 times over. Has that promise, 

that commitment, been kept? 

Mr. FRANK. As I said, we have worked very hard to make sure 

that Americans are covered and the vast majority of people have 

been able to keep their health plan and, in fact, many new people— 

in fact, 20 million new people—have health plans that they are 

now keeping. 

Chairman VITTER. Well, the promise was not to the vast majority. The promise was to everybody, right? 

Mr. FRANK. Well, there are 20 million people who now have coverage and have the option of keeping their health plans that did 

not have it before. 

Chairman VITTER. Well, the promise was not about new coverage. The promise was if you like your existing plan, you can keep 

it. Four million folks, at least, have been forced off their health 

plan. That promise has been broken. What is being done to correct 

that? 

Mr. FRANK. We continue to work with all parties to do things 

that will increase access, improve affordability, improve quality of 

our health care system and our health insurance system. 

Chairman VITTER. Is that going to mean that those folks can go 

back to their old plans that they were on and wanted to keep? 

Mr. FRANK. Was that the question? 

Chairman VITTER. The folks that were involuntarily thrown off 

their former plans that they wanted to keep, is the work that you 

are describing going to mean that they will be able to go back? 

Mr. FRANK. We are working to try to get everybody affordable, 

high quality health insurance. That is what I—— 

Chairman VITTER. Okay. That was not my question. So, can you 

answer my question? 

Mr. FRANK. That is my answer. 

Chairman VITTER. Okay, that was not my question. 

Has competition in this important sector of the economy increased since ObamaCare passed? 

Mr. FRANK. Yes. Actually, it has increased dramatically. For the 

first time in years there are new entrants into the small individual 

health insurance market. The provisions, for example, we are putting into SHOP now allow people to choose across issuers, within 

a middle level, which allows people to really comparison shop in a 

way that they have not previously been able to. 

We have dramatically increased the transparency of insurance offerings so that people can look at the cost-sharing and look at the 

premiums and make easy comparisons between them, including 

whether a plan includes their doctor or not. That improves competition. 

Chairman VITTER. So overall, as an economist, you believe that 

overall competition has increased significantly? 

Mr. FRANK. I think competition in the individual health insurance market has improved since the initiation of the Affordable 

Care Act. 

Chairman VITTER. Should that not stabilize and lower prices instead of increase prices? 

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Mr. FRANK. This is a start-up, and you have to remember that 

prior to the creation of the Affordable Care Act, the individual market was seeing double digit price increases continuously, which was 

part of the slide that was not shown, that they were growing very 

rapidly in the period prior to 2010. And what you have seen is, in 

fact, that level of growth has actually stabilized and has come 

down a bit since the initiation of the Affordable Care Act. 

Chairman VITTER. So are you happy with what prices are doing? 

And what do you expect in the near future? 

Mr. FRANK. We have work to do. We are not done, and I think 

that is true on the small business side; it is true in the individual 

market. And we are continuing to work within our authorities to 

improve matters. But we are also anxious to work with members 

of Congress to make changes that would improve affordability, improve quality, and continue to grow access to care. 

Chairman VITTER. Okay. Well, I have a lot more concerns and 

questions, but let me turn to Senator Shaheen. I am already over 

time. 

Senator SHAHEEN. Thank you, Dr. Frank, for your testimony. 

One of the things that you pointed out is that there are some jurisdictional issues around the Affordable Care Act. So maybe it 

would be helpful if you could just clarify for me, and for the Committee, what the role is of Health and Human Services in terms of 

the Affordable Care Act and how you work with some of the other 

agencies. You mentioned Treasury, obviously the Department of 

Labor is also involved. 

And then, if you would, talk about how you are working with 

small businesses to address some of the concerns that you hear 

from small businesses. 

Mr. FRANK. Thank you very much for the question. 

The Department of Health and Human Services has a variety of 

authorities. They relate, in part, to the exchanges. They relate 

partly to insurance coverage. They relate very broadly to what you 

termed delivery system reform. 

Now we work very closely with the Small Business Administration, the Department of Labor. Many of the insurance regulations 

associated with the Affordable Care Act are so-called tri-department regulations which involve Treasury, HHS and Labor. In fact, 

yesterday I was down in Atlanta with my Labor colleagues working 

on some mental health issues and coverage policy there. That is 

just sort of an example of sort of the way we do things regularly. 

In terms of the small business side of things, the Small Business 

Administration has been just fantastic partners to us. They have 

done a tremendous amount of outreach to try to increase awareness in the small business community, to try to bring back ideas 

to us from their contacts. RCMS has worked very closely with them 

to do webinars, to do visits around the country. And we continue 

to work with our partners, including the Small Business Administration, to train and support brokers and agents in helping small 

businesses find their way into things like SHOP. 

Senator SHAHEEN. Thank you. 

Obviously, rising health care costs are a concern that everyone 

has, and I mentioned delivery system reforms in my opening statement, as you pointed out. New Hampshire is proud to have DartLAP51NQ082 with DISTILLER

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mouth-Hitchcock Hospital and they are part of a nationwide collaborative that is looking at delivery system reforms and what that 

can do to lower health care costs. 

Can you talk about how HHS is working on trying to address 

some of those rising costs of health care and what you are seeing 

in terms of the delivery system reform efforts? 

Mr. FRANK. Yes. Well, first of all, I do think it is important to 

reemphasize that we are still in a period of historical low rates of 

growth in spending. And that shows up in savings to individual 

consumers and to employees of small business. And we have seen 

some of the most dramatic effects—— 

[Audio system failure.] 

Mr. FRANK. In terms of delivery system growth reform, some of 

the key elements are the way we pay providers. And we have been 

making a dramatic pivot from the traditional fee-for-service pay for 

volume [inaudible.] 

Is this better? 

Senator SHAHEEN. I think so. Try it again. 

Mr. FRANK. Usually they put a microphone on me to dampen my 

voice. 

[Laughter.] 

What we have done is made this pivot from fee-for-service pay 

for volume system to one where we are really trying to pay for 

value. Our Secretary set a goal of moving the Medicare program to 

a 30 percent pay for volume away from fee-for-service by the end 

of 2016. We have already hit that goal. 

Senator SHAHEEN. I am sorry, can you say that again? 

Mr. FRANK. So our Secretary, Secretary Burwell, when she came 

in set a goal of getting 30 percent of Medicare no longer just paying 

for volume, and moving toward value, including quality through 

risk-based payments and the like. We hit that goal at the beginning of this year, even though the goal was for the end of this year. 

So we are moving very aggressively to really changing the incentives, so that all health care providers really are focused on doing 

what is right and getting patients healthy, as opposed to generating a lot of volume. 

Senator SHAHEEN. Thank you. My time is up. 

Chairman VITTER. Senator Ayotte. 

Senator AYOTTE. Thank you very much. 

I wanted to ask Secretary Frank about, in particular, one of the 

tools. I actually happened to have a meeting on Monday with a 

number of small businesses in New Hampshire about this topic. 

And one of the concerns that was raised in the meeting by the 

small business owners was the restriction on the use of Health 

Care Relief Acts. In other words, the Health Care Relief Fund, I 

should say, reimbursement arrangements where you have small 

businesses that have previously been funding their employees’ 

Health Savings Accounts. In fact, this one business was doing it in 

supplement even to existing health care—they had health care coverage for their employees and they provide 100 percent to their employees. And they had a health savings account to allow their employees to help cover any gaps in their coverage. So this is an employer who has gone—who is doing a lot, really right, by their employees. 

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And yet, they raised the issue with me that they are very concerned that now there is a regulation, currently a Treasury regulation, essentially fining them $100 a day if they do that as an employer. It seems to me, especially for our small businesses, this is 

an important tool. 

And I also think about our sole proprietors, too. I have heard a 

lot from them, you know, that this Health Savings Accounts can be 

a very important tool. And also, if you are an employer who wants 

to help their employees—like this employer—a health reimbursement account. 

I am actually cosponsoring legislation to be able to address that, 

but can you talk about this? Do you agree it is an important tool 

that we should allow small businesses to have access to help their 

employees? 

Mr. FRANK. Well, the HRAs are addressing—first of all, you are 

correct that they are mostly sort of subject to the regulations and 

the purview of the Treasury Department. 

Senator AYOTTE. Right. But we are talking about small businesses, affordable health care. Do you think that that regulation 

makes sense? Do you think that these types of accounts are an important tool that consumers should have access to, including small 

businesses? 

Mr. FRANK. So a couple things to note. First of all, HRAs are not 

insurance. They are sort of these other types of accounts and they 

do not meet the definition of insurance. So one issue is that I think 

people conflate the two. 

Senator AYOTTE. I am not conflating. I am just being clear. I 

have an employer that provides 100 percent coverage. They have 

insured their employees. And they use the HRA as a supplement 

to fill in any gaps in insurance. 

Mr. FRANK. As I said, this is mostly the purview of the Treasury 

Department, but what I do know about is there are provisions that 

if you have insurance and you want to do additional funds through 

an HRA, that is permissible. 

I think that what gets conflated in many quarters is sort of 

where the line between HRAs and insurances are drawn. 

Senator AYOTTE. Okay, but do you think that—right now, you would be fined $100 a day from Treasury. So do you think that is 

a good idea? 

Mr. FRANK. Yes, I do not know the details. I do not understand 

the details of that. 

Senator AYOTTE. Also, do you think that Health Savings Accounts are good tools for people who—like, let us say you are below 

the mandate level and you are an individual, and that is something 

that is an important tool that you want to utilize. What is your 

view on those? 

Mr. FRANK. Health Savings Accounts, for individuals? 

Senator AYOTTE. Yes. 

Mr. FRANK. I do not—— 

Senator AYOTTE. What does Health and Human Service think— 

I mean, the Affordable Care Act reduced the ability of what you 

could use, in terms of over-the-counter medications and some of 

these tools that we have had for Health Savings Accounts. So I just 

wanted to know what is the administration’s view on that? Because 

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I think it is an important tool that many have come to me and say 

we want expanded access to these tools. 

Mr. FRANK. So, as I said, the details to that are really the Treasury thing. I can tell you that HHS is focused on really trying to 

get as many people covered as we possibly can and that is sort of 

our number one priority here. 

And really, the HSAs and the HRAs are really under the purview 

of the Treasury Department. I am not that familiar with the details of those regulations. 

Senator AYOTTE. I just think as we look at the big picture, these 

are tools that we need to look at and we cannot have one side of 

the Federal Government doing this and the other side of the Federal Government interfering with other really important tools that 

people use that, for some individuals, are very helpful in covering 

their health care costs. 

Mr. FRANK. Okay. 

Senator AYOTTE. Thank you. 

Chairman VITTER. Let me follow up with some questions that 

Senator Ayotte brought up. 

I realize you are in HHS, you are not in Treasury. But this penalty is a big deal and it is a big part of the system and it is a big 

impact on health care. And it is there to penalize small business 

who want to do it one way versus the SHOP exchange, which is 

what you are directly involved in. 

So quite frankly, it just does not cut it to say you are not in Treasury. This is a big deal and it is $100 a day penalty per employee, up to $36,500 a year, small businesses who are trying to 

pay their employees’ medical expenses through a Health Reimbursement Arrangement. 

Do you think that draconian penalty is good policy? Because that 

is a key policy that the administration is promoting. 

Mr. FRANK. So Senator Vitter, I appreciate your question and 

really, the issue for me is I am not familiar with all of the details. 

I do know—— 

Chairman VITTER. This is not exactly, you know, a comma on 

page 672. This is a big deal, including for small businesses, which 

was the whole purpose for this discussion. 

Mr. FRANK. I understand. I just am not familiar with all of the 

details of that regulation. But what I think is important is that we 

are interested, if there are problems, if there are things that need 

to be changed, and they meet the test of improving access, affordability and quality, we are happy to work with Congress on that. 

Chairman VITTER. Does that include lifting this penalty? 

Mr. FRANK. Look, we do have a variety of tools that we can work 

on. We are willing to—— 

Chairman VITTER. Does that include lifting this penalty? 

Mr. FRANK. I think that we are willing to talk about moves that 

will improve quality, access and affordability. I just do not know— 

I have not been able to look into the consequences of changing the 

policy you are talking about. It is for that reason that I need to 

refer to the Treasury for the details. 

Chairman VITTER. Thank you. 

Senator Ernst. 

Senator SHAHEEN. You mean Senator Cantwell. 

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Chairman VITTER. Oh, I am sorry. 

Senator Cantwell. 

Senator CANTWELL. Thank you, Mr. Chairman. 

Mr. Frank, good to see you here. 

One of the issues, obviously, for small businesses, among many 

people who are looking for affordable insurance these days, is the 

ability to get leverage in the marketplace. One of the provisions of 

the Affordable Care Act was the Basic Health Plan. I do not know 

if you are familiar with it, but it is my understanding that a couple 

of states have implemented that. 

Do you see that as a way for smaller employers/employees to leverage themselves in the marketplace, bundled up with others to 

get more affordable rates? 

Mr. FRANK. Yes, I think so far we have seen these in New York 

and Minnesota and we have about 400,000 people now signed up 

in those and they seem to be doing well. They are set up in a way 

that is fiscally very solid because they are budget neutral. And 

again, it is a way of addressing some of the problems that have historically plagued small businesses, which is having difficulty to 

spread risk. 

Other tools that we are using, such as the SHOP, are sort of 

aimed at the same kind of fix. 

Senator CANTWELL. Well, you say spreading risk. I look at it and 

say small businesses know that if you are an employee at a small 

company versus a larger employer, you do not have the same leverage in the marketplace. But what we have seen about Basic Health 

Plans, at least when we had them, was that by bundling up a large 

percentage of people together, 30,000 or 40,000 people, that you can 

gain a lot of leverage in the marketplace. 

And I think that is what these individual employees or small entrepreneurs want to see, is their ability to get the same kind of leverage as somebody that works for a larger company. 

Mr. FRANK. Absolutely. In a sense, there are two things that are 

accomplished at once. You grow the risk pool, you spread the risk, 

and you bring a greater ability to move market share and therefore 

bargain better in the marketplace. 

Senator CANTWELL. Well, I hope that—I know that it was a challenge getting these rules out until just 2015, so it is possible that 

other people could take this up and use it as a solution in the coming years. Is that correct? 

Mr. FRANK. I think so, yes. 

Senator CANTWELL. Thank you. 

Chairman VITTER. Okay, Senator Risch is next, and then Senator 

Ernst. 

Senator RISCH. I just have a comment, not a question. 

I have to tell you, Mr. Frank, I am astonished, sitting here and 

listening to you tell us that you do not know the details of these 

Treasury regulations that are so important to what you do, that 

are related to what you do, that dovetail to what you do, and you 

cannot answer simple questions that Senator Ayotte or the Chairman has asked you about this. 

This is an embarrassment. I mean, here you are in the middle 

of this mess and you are supposedly administrating certain parts 

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of it, and you cannot tell us the details—as you call them—of the 

other parts of it that are so important? 

Can you imagine if you are a small businessman somewhere in 

America who does not want to have anything to do with this and 

who has to deal with this? And here you are, a bureaucrat that 

deals with this every day. And you do not get it, you do not understand it, you do not know about it. This is astonishing to me, that 

you would come here before this Committee and give those kinds 

of answers. 

I will tell you, I am taken aback by this and it is impossible for 

me to understand how whoever it is that is running this can allow 

those of you who are further down, trying to administrate it, not 

knowing what this is all about. 

Mr. Chairman, this is—to me, this is just absolutely astonishing. 

Thank you. 

Chairman VITTER. I agree, Senator. This is not a detail of this 

legislation. It is a huge component with huge impact on small business. 

Senator Ernst. 

Senator ERNST. Thank you, Mr. Chairman, and thank you for 

coming today. I hope that we are able to get a number of answers 

today. 

I understand that earlier you were talking about the myth that 

exists with small businesses that maybe are not able to hire additional employees. And I would push back on that, because that is 

not a myth in Iowa, because I hear it from small businesses all the 

time. 

One of those is a small business in Okoboji and the owner had 

told me that they have had to halt plans to expand their business, 

which was a thriving business. And then the ACA came into play 

and because of the rules and the Affordable Care Act’s employer 

mandate, they decided not to expand and they have stopped filling 

open positions. And what they did in that transition period is they 

allowed people to retire and they simply did not backfill jobs. 

So that is not healthy for small businesses. When they have an 

opportunity to expand and fill a gap that exists in our marketplace, 

they should be able to do that without feeling the heavy weight of 

the Federal Government. 

I have heard those stories over and over again. Chuck Grassley 

and I both do a 99 county tour across Iowa. What we hear over and 

over again is about the detriment of the ACA, whether it is the individual mandate or the employer mandate. And so it is not a myth 

and we have got to stop saying it is a myth because I see it and 

it is impacting people’s lives. 

Is your agency doing anything to address these challenges that 

those employers have and the negative impact that the law is having on job creation, specifically on job creation? 

Mr. FRANK. Well, first of all, I do not think I referred to that as 

myth. We are always concerned about doing things that will expand coverage for as many as we can and to promote the interest 

of small business. That is why, in a sense, we have exemptions 

from the employer mandate wherein 96 percent of businesses are 

exempt from it. It is only—there is 2 percent of businesses that are 

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between 50 and 100 that are subject to it that fall under the definition—— 

Senator ERNST. So timeout, just a second, 96 percent of all businesses have exemptions? 

Mr. FRANK. Yes. 

Senator ERNST. Then why did we need the ACA? 

Mr. FRANK. From the business mandate. There are other provisions that are enforced. 

The impact on the small businesses has been actually strikingly 

positive. There have been very large decreases in the uninsured 

rate among small businesses and particularly among sole proprietorships. They have seen some of the largest decreases in the uninsured rate. 

And that, to us, is an incredibly important success here. 

Senator ERNST. Okay. And you will count that as a success, but 

I would like to push back from the other side to say—and yes, I 

would agree that perhaps we do have more people that have insurance, but they have extremely high deductibles. And I spoke to a 

podiatrist yesterday that explained most of the folks, especially 

young people, that are coming in and that maybe have foot or 

ankle problems, they will come in and get their initial evaluation 

to solve whatever issue they are having with their feet. And because they have such a high deductible, they will choose not to get 

a surgery. He said they will limp around the rest of their lives on 

a bad foot, having bad feet problems, because they do not ever meet 

that deductible. They are young and healthy otherwise. Maybe they 

have hurt their foot, but they are never going to meet the point 

where they can actually engage in that surgery. They simply cannot afford to do so. 

So I would say yes, you know, they have got insurance. But what 

good does it do when they have got such high premiums? It is a 

real issue with folks in Iowa. 

And I have got about 30 seconds, so if you could answer that 

charge. 

Mr. FRANK. Sure. I think the important thing to recall is 

deductibles have been increasing economy-wide for some time. In 

the Affordable Care Act, there are a lot of provisions that try to insulate people from that. For example, all the preventive visits are 

now free, and so they do not count toward the deductible. 

People have choices among plans in most places, 90 percent of 

people have choices of multiple plans where some deductibles are 

higher and some are lower. And if they are low-income, they have 

got cost-sharing reductions which insulate them further from the 

deductible. 

So I think that the statistics can be pretty misleading if you do 

not sort of look at all of the nuances. 

But I would like to go back to your point on the employment. We 

have looked very hard because we are concerned about employment. We worked closely with our colleagues at the Department of 

Labor, who are really the main agency focused on this. And we 

have been monitoring very closely changes in employment, changes 

in full-time/part-time work among businesses of different size. And 

overall, the trend is up. 

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I presented quite a bit of data on that in my written testimony 

so I would be happy to share further details with you. 

Senator ERNST. Certainly. And I would like to make a point, too, 

Mr. Chair, about those types of services that are included, the preventive measures. One thing I have also heard from physicians is 

that those that are not paying for those services, they will call the 

doctor’s office, they will make an appointment, but they simply do 

not show up. And so the doctors do block off time and then they 

are not able to recoup anything for blocking off that time when 

they could be using that time for a patient that really does want 

to be seen by a doctor and treated. 

So I know there are many issues out there and we really do need 

to navigate through this and make sure that not only are people 

receiving the health care that they need, but it is done in a responsible manner and I do not think this law was done in a responsible 

manner. 

But I do thank you for your time. 

Thank you, Mr. Chair. 

Chairman VITTER. Thank you, Senator, and thank you, Dr. 

Frank. 

Now we are going to move on to our second panel. I will be introducing them as they come to the witness table. 

Tom Kunkel is President of Full House Marketing, Inc. He started his own marketing company in 2007 and has over 30 years of 

marketing, graphics, and business development experience assembling his company that offers print, promotion, sign and web solutions to local and regional businesses. Mr. Kunkel has a degree 

from Towson University in marketing and mass communications 

and had studied publications design at the University of Baltimore. 

Mike Brey is the owner of Hobby Works. That opened in 1992 

and has expanded to five locations throughout Maryland and Virginia. He had previously been a manager for larger retailers such 

as Sam Goody, Tandy and Macy’s. Hobby Works is a new breed of 

retail store that brings a different shopping experience to the consumer, combining the unique product mix of a specialty shop along 

with the neatness of a chain store. It employees 48 employees in 

five locations. 

Kevin Kuhlman is with the National Federation of Independent 

Business. He is a Director of Legislative Affairs there and he has 

also focused his advocacy efforts on health care issues with members of Congress. Prior to his tenure at NFIB, Kevin handled 

health care, labor, education and small business issues for Congressman Peter Roskam from the western suburbs of Chicago. He 

started his career on Capitol Hill, working in support and research 

staff for the Ways and Means Committee, serving under Chairman 

Bill Thomas, Ranking Member Jim McCrery, and current Chairman Dave Camp. He holds a Bachelor of Arts degree from the University of Illinois at Urbana-Champaign. 

With that, we welcome all of you. You will each have five minutes. You can submit anything else you would like in writing for 

the record. 

We will start with Mr. Kunkel. 

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STATEMENT OF TOM KUNKEL, PRESIDENT, FULL HOUSE 

MARKETING, INC., EDGEWOOD, MD 

Mr. KUNKEL. Thank you, Chairman Vitter, Ranking Member 

Shaheen, and members of the Senate Small Business and Entrepreneurship Committee. 

Thank you for this opportunity for me to testify today before you 

and share my experience on how the Affordable Care Act has impacted my business and my employees. 

As you mentioned, my name is Tom Kunkel. I am President of 

Full House Marketing and Print. We are actually neighbors. I have 

a location based in Edgewood, Maryland, which is up in Harford 

County, Maryland. 

Growing up in a family owned business and then working 

through various corporate positions, I was excited to return to my 

hometown to fulfill my dream of owning my own small business. 

In 2013, I took the plunge and left a full-time job to take a parttime business that I was running to full-time. I formed my company, Full House Marketing and Printing, as mentioned. We are a 

full service marketing company. Over three years, we have acquired and merged seven different companies in all areas of marketing and printing into one company. 

We provide the majority of our services in-house. We do 

outsource some. We are able to provide cost effective marketing 

and print solutions to local small- and medium-sized businesses. 

So I am not here only as a small business owner but also, you 

know, a lot of small businesses are my customers, so I obviously 

want a thriving customer base. 

In 2015, we also opened several other locations. We currently 

have four locations in three counties in Maryland, with 25 full-time 

and six part-time employees. 

I have a variety of employees, from retail positions working at 

minimum wage to employees in the delivery and production at $12 

to $18 an hour, and then sales and technical employees up to the 

$50,000 range, so a pretty diverse set. 

Prior to the Affordable Care Act, as a small business, growing up 

in a small business, it was difficult to compete for employees with 

large companies with large benefit offerings. Things like pre-existing conditions and few insurance options for individuals, many 

qualified workers chose large businesses over working locally because of their benefit programs. 

From a small business perspective, the ACA actually could have 

been a huge relief and benefit for us. We had hoped we would be 

able to offer employees affordable health insurance without pre-existing condition exclusions. They could choose a variety of plans 

they wanted, not what our plan just offered. And I was optimistic 

the ACA would help my 21 employees to obtain health insurance. 

I had several employees, one with diabetes and one with high 

blood pressure, that actually—because they were considered pre-existing conditions—could not get insurance. 

I was reimbursing my employees for their premiums because this 

offered me, as a small business, a way to compete with larger companies who provided employer-sponsored health insurance plans. I 

also had a Health Reimbursement Plan, still do, that we set up. 

And we also offer supplementary insurance programs. 

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I felt that I could better retain or compete to get better employees because I had an affordable option for my employees. And essentially, I offered the ACA as part of my benefits program and my 

reimbursement as part of my benefit package. 

However, in a meeting with my accountant in June of 2015, just 

several weeks prior to the IRS Notice 2013–54, I learned of that 

notice that prohibits employers from assisting with employees’ individual market health insurance. I was just stunned. I could no 

longer help my employees with their health care benefits, and 

there were also very steep penalties. 

So mid-year, essentially July 1st, I had to pull my employees together and tell them I could no longer reimburse them for their 

health care and that they were essentially on their own again. I 

had several employees who could not afford their premiums without my contribution. 

Since we were mid-year in their plans, they were forced to cancel 

insurance, reenroll—some of them reenrolled in lower cost plans 

with higher deductibles. Then they had to start over with those 

deductibles for the year. 

One of my employees, who happens to have cancer, was not able 

to get his prescription refilled for over three weeks because of the 

new plan, having to meet new deductibles. His prescription is 

about $10,000 a month, so it is obviously very, very difficult for 

him. 

I do not believe this is what was intended by the regulation, but 

it is the reality of what happened. 

So now I had three options as a small business. I could simply 

offer nothing at all, just tell them that we offer no plans. My second option was to artificially inflate wages to cover the cost for the 

employees. But to do that I would be required to essentially inflate 

it by 35 percent, so that their net pay would equal my previous 

contribution. In addition, this option would have required me to 

pay additional expenses that are employer-sponsored, including 

Worker’s Comp, matching FICA, Social Security, State and Federal 

unemployment. That equals about $3.50 an hour in our case, or 

about $1,735 per employee per year in additional costs for me, as 

an employer. 

This also meant that any contribution would be subject to individual income taxes and payroll taxes, which is the reason for having to gross it up. And actually, the contribution cannot be designated for health insurance, according to the IRS. 

For most workers, this inflated pay would have also caused them 

to qualify for less of a subsidy through the Health Exchange since 

they would have shown more gross income. I have several examples of specific people and it would have essentially reduced their 

subsidy by about $100 a month, which essentially would have come 

out of their pocket. 

My third option was to offer a group health plan. So, I did go out, 

I researched a number of group options, spoke with a number of 

different brokers, and I settled on a Maryland-based plan that did 

not require a guaranteed participation—which was a challenge 

with a lot of plans—and had very affordable rates. 

I also did look at the SHOP program, but I was actually told by 

two different brokers that it was too cumbersome and that the tax 

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credit would expire soon, so it was not worth actually taking that 

as an option. 

So I did offer the plan and, because of the expense of the rates 

compared to individual plans in the exchange, none of my employees elected to enroll in it. I do have several examples which I can 

show later, but essentially it was several hundred dollars a month 

more for someone to go on our group plan than it was to go through 

exchange programs. 

In a situation where my employees cannot afford insurance and 

I am prohibited from helping, I look like the bad guy. I tried to 

help them out and now I feel—or they feel—like I am taking something away from them. I also expended a lot of time and resources 

in exploring options and I am certainly not a health insurance expert but none of them happened to work out for my business. 

Most recently, I lost a long-time employee who left to go to a 

competitor who was able to offer him full-time benefits and insurance. He cited his loss of that insurance contribution as a major 

reason for his leaving. I also have another employee that most recently left that I believe that was also part of her decision. 

IRS Notice 2013–54 has essentially taken us back to the situation before the ACA, where a small business cannot afford to offer 

health benefits to its employees. It has essentially negated the 

ACA, from my perspective, for any of the benefits. 

In today’s political and economic climate, as a small business it 

is difficult to operate in the global economy. I feel the burden of 

many new initiatives as they affect my company’s ability to operate 

profitably and to hire and retain employees. Many of these initiatives often have unforeseen consequences and cause small businesses expenses and burdens that can lead to actually less hiring, 

more expenses, and sometimes lead to businesses closing their 

doors altogether. 

IRS Notice 2013–54 is one such initiative. But the—— 

Chairman VITTER. Mr. Kunkel, I do not want to cut you off, but 

I want to get everyone in and have time for questions and discussion, so if you want to wrap up and we will go to Mr. Brey. 

Mr. KUNKEL. Essentially, the Senate can help. The Small Business Health Care Relief Act is one way in which it can help in protecting small businesses from catastrophic IRS penalties and restoring a business’ ability to help their employees afford individual 

affordable health care. 

[The prepared statement of Mr. Kunkel follows:] 

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Chairman VITTER. Thank you very much. And now we will hear 

from Mr. Brey. 

STATEMENT OF MIKE BREY, PRESIDENT, HOBBY WORKS, 

LAUREL, MD 

Mr. BREY. Thanks for having me, Chairman Vitter and Ranking 

Member Shaheen. 

My name is Mike Brey. I am President of Hobby Works. We are 

a hobby and toy store with four locations in the D.C. Metro area, 

Maryland and Virginia. We have just under 50 employees, a little 

over 30 full-time equivalents. Thanks for allowing me to share my 

comments with you. 

I started my business in 1992. I have been in retail my entire 

life. So almost from the beginning I offered health coverage, not 

only to help attract and retain good employees but because, as a 

former retail employee myself, I had found it difficult to get good 

affordable insurance. 

My business has been successful, moderately successful, and we 

have been able to expand on multiple occasions. But over the years 

it became more and more difficult to continue offering health insurance to my employees. 

Prior to the passage of the Affordable Care Act, our insurance 

rates were going through the roof. We were seeing annual premium 

increases of 15 to 20 percent, sometimes even higher. As a result, 

we were forced to ask employees to pay more of their premiums 

and face higher deductibles in order to continue offering coverage. 

To put things in a little bit of perspective, from 2009 to 2010 we 

experienced increases of 18 to 21 percent. Prior to 2009, we experienced similarly large increases, usually double digits, beginning in 

the early 2000s. 

Once the Affordable Care Act provisions started going into effect, 

our rates started improving and for a little bit of time even stabilized. During the 2014 to 2015 enrollment period, our rates went 

up 9.7 percent and the most recent enrollment period our rates increased about 5 percent. 

Other small business owners also struggled with rising health 

care costs. Research shows that many small business owners struggled to offer health insurance to their employees due to costs. 

Small Business Majority’s scientific opinion polling found that the 

majority of small business owners provided insurance to at least 

some of their employees. But of those who did not, 70 percent said 

it was because they could not afford it. 

What is more, small businesses paid 18 percent more, on average, for health coverage than large companies and we received 

fewer comprehensive benefits. 

So to me, inaction was inexcusable. The passage of the Affordable 

Care Act was really the first thing that ever gave me hope that the 

spiral of escalating costs and depreciating quality of insurance coverage might finally end. 

Many provisions of the health care law have been key to making 

health insurance more accessible and affordable for small businesses like mine. In addition to the marketplaces, a multitude of 

cost containment provisions have gone in effect that I feel like—at 

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least in the short term here—are helping to lower costs and provide 

more stability throughout the system. 

A survey conducted by Towers Watson and the National Business Group on Health found that in 2013 employers experienced 

the lowest increase in health care costs in 15 years. Some argue 

that the health care law is requiring many small firms to drop 

their coverage. Analysis conducted by the Kaiser Foundation found 

that the percentage of adults under 65 with employer-based insurance has held firm for the last five years after steadily declining 

in the early 2000s. 

Thanks to the health care law’s cost containment provisions, premiums are starting to stabilize and I believe that I am finally 

starting to have some predictability and stability when it comes to 

health insurance premiums and my choice of plans. 

What is more, in Maryland we actually have more options now 

when it comes to insurance carriers and health plans. Where before 

we only had a couple of carriers to choose from, we can now choose 

between a variety of insurers that offer many different health 

plans. The last cycle in Maryland, it was 110 options for my business to choose from. 

Meanwhile, some claim that the health care law is a job killer 

and that small businesses are being forced to make their full-time 

employees to cut their hours. We have not felt that same impact. 

For my part, I do not make expansion decisions based on tax law. 

I do make expansion decisions based on consumer confidence and 

how we expect sales to increase over time. As a retailer, we are 

still recovering from the effects of the recession but I, frankly, have 

never thought of expanding or shrinking based on the health care 

law. 

Some say that the health care laws are forcing small businesses 

to hire more outside help in order to comply with the law’s requirements. As a small business owner, I can tell you that the vast majority of owners, including myself, already rely on the expertise of 

accountants and lawyers and brokers. I had a broker before the 

health care law. I have a broker now. 

I have been concerned about health care coverage costs and how 

they impact my business and my employees since long before anybody heard of the Affordable Care Act. And while the ACA is not 

perfect and it will not solve our health insurance problems overnight, it is the first meaningful law in decades that attempts to 

meet many small businesses’ core needs in regards to rising health 

care costs. In this economy, policies that allow us to spend less on 

health premiums so we can keep more of our profits to reinvest in 

our companies and create jobs is what we need most. 

I will close by saying that strengthening and improving the Affordable Care Act is the only path forward, I think, to lowering the 

overall cost of health care and providing more options for coverage 

for small business owners like myself. 

Thank you for your time. 

[The prepared statement of Mr. Brey follows:] 

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Chairman VITTER. Okay. Thank you, very much, Mr. Brey. 

Now we will welcome Mr. Kuhlman. 

STATEMENT OF KEVIN KUHLMAN, DIRECTOR OF LEGISLATIVE 

AFFAIRS, NATIONAL FEDERATION OF INDEPENDENT BUSINESS, WASHINGTON, DC 

Mr. KUHLMAN. Thank you, Chairman Vitter, Ranking Member 

Shaheen, Senator Ernst and other members of the Senate Small 

Business and Entrepreneurship Committee for hosting this hearing 

today on this important matter. 

My name is Kevin Kuhlman. I am a Director of Legislative Affairs at the National Federation of Independent Business. NFIB is 

the Nation’s leading small business advocacy association. 

The ACA is and was the most significant overhaul of health insurance markets and the tax code in more than 20 years. NFIB’s 

research and story collection demonstrate that the costs to small 

businesses outweigh the benefits. The ACA has led to higher premiums, increased compliance burdens, and decreased benefit flexibility. 

Congress does deserve credit for addressing some of these concerns. Senator Shaheen referenced the PACE Act. But NFIB urges 

further relief for small business owners and employees. 

The Small Business Health Insurance Tax Credit and SHOP Exchange were intended to incentivize small businesses to offer group 

health insurance to employees. But these provisions failed to deliver premium savings to a significant number of small businesses 

due to fundamental limitations and implementation problems. 

The ACA added insurance requirements and taxes to help insurance plans that were passed along in the form of higher premiums. 

Congress thankfully suspended the health insurance tax for the 

year 2017, saving an additional 3 percent in increased premiums, 

but the tax restarts in 2018 and escalates significantly in future 

years. 

ACA implementation requires additional compliance and paperwork burdens for small businesses, even when Federal agencies 

have not fulfilled their responsibilities. 

The biggest current compliance headache is the employer mandate, which was fully phased in this year. Businesses with 50 or 

more employees must offer affordable and adequate health insurance to employees or pay penalties. Business must track the offers 

and cost of coverage for each employee monthly, provide current 

and former employees with transmittal forms, and provide the IRS 

with an additional form. 

The IRS estimation of four hours and 12 minutes to conduct research, complete paperwork, and file forms is grossly understated. 

In reality, compliance requires much more time. 

The SBA Office of Advocacy wrote that the employer mandate 

would have a significant economic impact on a substantial number 

of small businesses, triggering the Regulatory Flexibility analysis. 

Unfortunately, Treasury disagreed and did not conduct a small 

business economic analysis. The lack of recognition from Treasury 

is frustrating for small business owners. 

The individual exchanges were supposed to notify employers 

when they are at risk of a penalty because an employee receives 

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an advance premium tax credit on the exchange. But not a single 

business has received a communication from the IRS yet. 

Small businesses do not commonly employ human resource professionals, so compliance responsibilities fall on the business 

owner, like these gentlemen. Some of these functions can be 

outsourced, yes, but those services are costly. 

Many small businesses are unable to afford the high cost of 

group health insurance. Instead, they directly paid for or reimbursed employees individual market health insurance plans and 

qualified medical expenses. This arrangement worked for both employers and employees. 

Now to be clear, this prohibition actually started with HHS. I 

would be happy to go into further details on that during questions. 

But in 2013, the IRS published sub-regulatory guidance that prohibited employers from assisting employees with individual plans. 

Enforcement began July 1, 2015, after an initial delay, and continuing the practice risked that $100 per employee per day penalty 

that was mentioned earlier. Penalties of this magnitude would be 

disastrous for small businesses, forcing many to close their doors. 

Certainly, lawmakers who drafted the ACA did not intend to punish small businesses in this manner. 

Fortunately, bipartisan, bicameral legislation exists that would 

right this wrong for small businesses. The Small Business 

Healthcare Relief Act, S. 1697, would allow the flexible practice to 

continue. NFIB urges Congress to consider this bill and relieve 

small businesses from the threat of significant harm. 

Thank you again for allowing me to share NFIB concerns before 

the Committee today. I look forward to answering any questions 

and working with you to help provide further relief. 

[The prepared statement of Mr. Kuhlman follows:] 

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Chairman VITTER. Great. Thanks to all of you for your testimony. 

Now we will get into some discussion. 

Mr. Kunkel, obviously your testimony focused on health reimbursement arrangements. If that draconian penalty against what 

you did previously were removed, what would you do in your small 

business? What would be the impact for employees? 

Mr. KUNKEL. Well, it would allow me to offer what I was offering 

for a period of time, before the regulation took effect. It would 

allow me to provide a set amount, a set reimbursement to my employees essentially as a health plan for them. And then it would 

allow them to go into the open market and purchase whatever plan 

best suited them. 

Because when we actually looked at even our own plan, our own 

group plan, I am limited to three different plans that I can choose 

and it is very, very difficult to have three plans meet all of my employee’s needs. So it would allow them to go and get whatever plan 

they needed, whatever best fit them, and then I am contributing 

to them and doing my part in helping them have affordable health 

care. 

Chairman VITTER. So again, if that major penalty were lifted, 

would you, in fact, go back to that sort of arrangement? 

Mr. KUNKEL. Absolutely. 

Chairman VITTER. And in your opinion, how would your employee’s health care situation compare under that arrangement versus 

now? 

Mr. KUNKEL. It would very definitely improve. One is that it 

would allow some that are maybe paying right now out-of-pocket 

because they wanted to keep health care. Now, if I am giving them, 

for example, $300 a month they can use that to pay for their entire 

plan. Or some people will probably get a better plan and use the 

$300 to supplement and pay the rest out of their pocket. But it certainly would give them better opportunity to have health care. And 

again, from a competitive standpoint now, I am able to say I offer 

a health care plan or health care option that helps me retain employees and get additional employees. 

Chairman VITTER. Okay. Mr. Brey, I got the impression from 

your testimony, and maybe I missed something, that you never 

participated in that sort of HRA arrangement. Is that accurate or 

not? 

Mr. BREY. No, we did not. We always tried to offer full health 

insurance plans and, at various times, covered different amounts 

toward people’s premiums. So at one point, when we first start offering, we paid 100 percent of coverage. Now we are down to somewhere in the 40 or 50 percent range. 

Chairman VITTER. And understanding that you never directly 

participated in that HRA, do you have an opinion about the 

$36,500 penalty against it? 

Mr. BREY. You know, I am opposed to anything that prevents 

myself and my employees from having access to health care coverage. 

Chairman VITTER. Okay. Excuse me, one minute. 

[Pause.] 

Mr. Kuhlman, what are your members’ concerns about premiums, what they are doing 2017 and beyond? And what do you 

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think that is going to do in terms of small businesses offering any 

health care? 

Mr. KUHLMAN. The high cost of health insurance has been our 

member’s number one concern every time we have asked them 

since 1986. So it continues to be that problem. 

I think the initial requests for 2017, especially in the individual 

market, where about 41 percent of small business owners themselves purchase their coverage, is very concerning. I think the requests on the small group side, the small business side, traditional 

employer insurance, are a little bit more moderated but they are 

still increasing. 

So it is definitely a concern. The number one reason business 

owners do not offer health insurance is cost. And if you continue 

to offer—if costs continue to increase, you are going to see a decrease in offer rates. What I mean by that is in 2010 there were 

39 percent of businesses with fewer than 50 employees that offered 

health insurance. In 2014, there was a 7 percent drop and only 32 

percent of businesses with fewer than 50 employees offer health insurance. Those are HHS figures. 

Chairman VITTER. Okay. Previously, Senator Ernst brought up 

disincentives to job growth. And the most obvious one is the 50 employee line. Talking to your members, which you do both informally 

and, I assume, you take surveys as well, is there a meaningful disincentive for them to cross that 50 employee line because of the 

employer mandate? 

Mr. KUHLMAN. I probably heard the most concerns with people 

who were near or at that threshold. They breathed a little bit of 

a sigh of relief when there was the upward adjustment for the year 

2015 to businesses with 100 employees and then it was fully 

phased in this year, in 2016. So there was a little bit of relief there, 

but anyone needs to be very concerned about moving below that 

threshold because you can set yourself up for ERISA lawsuits even 

after that. 

So it is certainly a disincentive to grow, and dropping could bring 

you new legal liability. 

Chairman VITTER. Okay. Thank you. 

Senator Shaheen. 

Senator SHAHEEN. Thank you all very much for your testimony 

and for being here today. 

Mr. Brey, one of the challenges, I think, is to—as you pointed out 

and Mr. Kunkel pointed out—is getting small businesses to offer 

insurance and cost is the top concern that they have. What more 

can we do to try and encourage small businesses to help cover their 

employees? 

Mr. BREY. You know, that is a big question. I think a lot of small 

businesses, cost is obviously the number one issue. And sort of the 

struggle to know what is coming the next year. Especially in the 

years before the Affordable Care Act, it was very frustrating for me 

to be providing coverage knowing that I basically had just advanced the cause by one more year and that next summer we 

might be having a similar conversation with our broker, how can 

we lower the average age of our group, what kinds of things—one 

year I think it was a 33 percent increase because not only did costs 

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go up a lot that year, but we also, as a group, crossed an age band, 

which is how it used to work in Maryland before then. 

So that was really the most frustrating thing, the high cost and 

the unpredictability of future costs. 

Senator SHAHEEN. And Mr. Kuhlman, I appreciate the concerns 

that NFIB has that you have heard from small businesses, and 

that there is probably a disagreement among members of this Committee about what we should be doing around health care. I would 

bet that most of the members on this side of the room would say 

we should repeal the law and most of the members on this side of 

the room should say we should not. 

So let us assume that we are not going to repeal the law, because 

I do not think we are. I do think there are changes that we should 

be looking at that we can make that would improve it, make it 

work better, address many of the concerns that small businesses 

have. 

So can you talk about those changes that you would like to see? 

Assuming the law stays in place, what would you like to see done 

to improve it so that it works better for small businesses? 

Mr. KUHLMAN. Thank you, Senator. 

Again, I want to thank you for helping lead the effort on the 

PACE Act. Had that not been passed, we would have seen 

some—— 

Senator SHAHEEN. Right 

Mr. KUHLMAN [continuing]. Tumult in the market this upcoming 

year. 

I think what Tom identified and what I identified in my testimony would be number one on the priority, the Small Business 

Healthcare Relief Act. It has 14 bipartisan cosponsors in the Senate, over 90 bipartisan cosponsors in the House. I think it was just 

one of these unintended consequences, a game of regulation telephone almost, where IRS says HHS says this and HHS says IRS 

says that. 

Senator SHAHEEN. So this is primarily the HRA issue? 

Mr. KUHLMAN. Yes, ma’am. 

Senator SHAHEEN. Are there other things in there that you think 

are important? 

Mr. KUHLMAN. I think Congress did some help with the end-ofthe-year legislation when they provided some relief from some of 

the taxes. I think the Cadillac tax is going to be not only a problem 

as we get closer to that threshold and above it but, just reading 

from the two initial IRS notices, the compliance responsibilities on 

the Cadillac tax for small businesses is going to be far worse than 

the compliance responsibilities for the employer mandate. 

Further relief from the health insurance tax, I think, would be 

another good place to—or a good effort to pass because any of those 

excise taxes are just passed along in the form of higher premiums. 

Senator SHAHEEN. One of the things that we have heard a fair 

amount about as the Affordable Care Act was being worked on 

were efforts by admittedly larger companies like Safeway to try 

and look at their employees and incentivize personal activities that 

made them healthier; to try to encourage exercise and reduce 

smoking and some of the challenges to health care costs. 

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Are there things like that that small businesses have looked at, 

that you are aware of, that have made an impact on the cost of 

health care? 

Mr. KUHLMAN. I think those might come downstream in the future but I just do not think the luxury is there yet. Usually those 

are efforts by the human resources department to say hey, we are 

going to put a big effort into a wellness program. In this case, it 

would probably have to be the bosses here who would have to say 

hey, we are all going to wear Fitbits and walk 20,000 steps today. 

So I would defer to them. 

Mr. BREY. We are in retail, we walk all the time. 

Senator SHAHEEN. We have been trying to get people in Congress 

to do that, as you know. 

Do either of you have—have you all looked at that option and 

have you thought about trying to encourage healthier behavior 

among your employees? 

Mr. KUNKEL. That is—again, that is not a luxury, typically, within a smaller business. I mean, I am the HR department, I am the 

IT department, I am the accounting department. So certainly we 

encourage our employees to be healthy and do certain things, but, 

you know, I am typically worried about getting orders out the door 

and answering the phone. That is the reality of a small business. 

Mr. BREY. I mean, we are in retail, so you know, people are on 

their feet, walking around all day anyway. 

But sort of the bigger answer to the question is that is why I 

have been trying to provide health insurance since a year or two 

after I started the company, especially in retail at the time. It was 

very difficult to get any kind of health insurance, even if you were 

a low level manager. 

Mr. KUNKEL. I think the challenge in that is that the concern I 

saw was a lot of employees that—especially younger, who thought 

they were invincible—that would not get health insurance because 

they could not afford it, because they were not providing it or were 

not providing an option. So they were not getting their regular 

checkups and dental and all of that. 

So I think us being able to afford it, in my case the reimbursement was a way that I could provide that to them. That was certainly preventative care from their standpoint. Otherwise, they 

were waiting until they had to go to the hospital before they sought 

health care. 

Senator SHAHEEN. Well, thank you all very much. 

Chairman VITTER. Senator Cardin is on the way so as we wait 

for him, I think he will be here momentarily, just a comment following up on Senator Shaheen’s really good point. 

I think when you talk to those companies like Safeway who have 

done a lot of that, one big thing they will tell you is the way to 

have an impact is not through feel good encouragement but 

through provisions that have a bottom line impact to the employee’s bottom line, to their wallet, to their take-home pay, to what 

they keep and enjoy. 

Now obviously, we do not want to do anything that penalizes genetics but outside of that, I think the way to have that sort of 

healthy behavior impact is to make it pay for the individual to go 

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to this class, to lose weight, to not smoke or to penalize things in 

the opposite direction. 

Is Senator Cardin still on the way? 

The CLERK. Yes, Senator. 

Chairman VITTER. Well, would anybody like to break into song, 

tell a good joke? 

Mr. KUNKEL. I have been involved—I am also on another advisory board for Maryland Health Benefits Exchange. I know there 

is a lot of talk about the SHOP program. So I certainly see any 

kind of modifications in that—I mean, I was told by—I do not know 

a lot about it, quite honestly, but I was told by two different brokers not to—it was very cumbersome. You had to apply with—essentially if you had three different insurance companies, you had 

to fill out the paperwork for each of those three. 

So I was discouraged going into that. So I certainly see that as 

a viable option moving forward, as long as it was made a little less 

cumbersome for small business owners. 

Mr. KUHLMAN. Regarding the SHOP, I think there was a great 

opportunity, and NFIB was long supporters of the concept of the 

SHOP. I think either through the regulatory process and the implementation process things kind of got lost in translation. I think if 

it would have acted more like a vehicle where you could do these 

HRAs or a defined contribution that allows employees to pick a 

plan that fits theirs and their family’s needs, and the employer 

plays a supporting role, but is not doing everything, that might 

have been—and it is a technology tool that would help do that. I 

think that would be an opportunity there. 

The last thing is I would just discourage participation requirements, minimum contributions requirements, because these things 

serve as barriers of entry. And they can exist, sometimes in just 

the State ones, but the Federal one has a participation requirement 

barrier, as well. 

Mr. BREY. Just as a Maryland small businessman, to add on to 

this a little bit, let us not forget that as a small group in Maryland 

we basically had no choices prior to the Affordable Care Act coming 

along. Maryland already mandated in their small group a lot of— 

like Maryland did not have pre-existings. They already mandated 

small group coverage. So if you wanted to sell small group coverage 

in Maryland, you had to abide by certain rules. 

And so as a result, we basically had two choices, plus Kaiser. 

Kaiser did not work for us because we span three states. So when 

the Affordable Care Act came along, frankly, I understand that it 

is easiest and most fun to beat up on it. But let us be honest, the 

coverage we had to choose from went from almost nothing to dozens and dozens of plans, maybe too many, almost. 

But I would certainly rather have to fight through too many 

plans than be stuck with this is the plan that you can get for small 

groups this year. 

Senator SHAHEEN. Mr. Brey, let me just say that in New Hampshire we had some of those same problems. And in fact, when the 

ACA started in New Hampshire, we only had one insurer in our 

marketplace. We have now grown to five insurers and 11 plan options, I think, have grown. I cannot remember how many now. 

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But it has been—it has had that same impact, and hopefully that 

will continue and we can make the kinds of changes that you all 

are encouraging in a way that makes it even more robust and 

available for people who need it. 

Chairman VITTER. Senator Scott. 

Senator SCOTT. Thank you, Mr. Chairman. I know that you, I believe, have already discussed the PACE Act a little bit earlier and 

the importance for keeping the threshold of small businesses defined at 50. We are very thankful for the passing of our bill. 

Senator SHAHEEN. I gave us credit. 

Senator SCOTT. Oh, did you? Good job. Thank you very much. 

Teamwork works, even in the United States Senate. It is a great 

thing. 

Mr. Kuhlman, ObamaCare imposed a new tax on—we call it the 

HIT tax—which has been delayed for a year. But this is a massive 

tax. Over the next couple of years, by 2018, it should cost about 

$14.3 billion. And while we have that one year moratorium on the 

HIT, the question really is how will that impact small businesses 

in 2018 and beyond? This will be passed on in higher premiums, 

without any question. 

As a small business owner myself for about 14 years, it is hard 

to wrestle with the reality that small businesses can pay higher 

taxes, they can deal with higher amounts of red tape, or they can 

hire more employees. It is almost impossible to do all three. 

Mr. KUHLMAN. Yes, sir. Yes, Senator, it is passed along dollar for 

dollar, so it is—in real numbers, it is $350 to $500 per employee, 

on the individual market per family member. It is problematic. And 

that is just when it does come back in 2018 at about $14.3 billion. 

Ten years down the road it is going to be nearly double that, and 

that is just another added cost there. 

So we recommend—NFIB recommends any further relief that 

can come from that. We are very thankful for the one year moratorium and hope that it can be revisited soon. 

Senator SCOTT. Thank you. 

Chairman VITTER. Senator Cardin. 

Senator CARDIN. Thank you, Mr. Chairman. I appreciate it. 

I want to thank all of our witnesses. I particularly want to acknowledge with pride two Maryland people that are on our panel. 

Mr. Kunkel, welcome. Mr. Brey, welcome. 

I want to—I am a strong supporter of the Affordable Care Act. 

I make no pretense otherwise. However, I think it can be improved. 

I think we can make it better for small businesses. That is why I 

think this hearing is particularly important on how we can improve 

our health care system to help particularly small companies. That 

is why this hearing, to me, is very, very appropriate. 

I have been in Congress long enough to remember the hearings 

in which we had small businesses present on health care before the 

passage of The Affordable Care Act. I served on the Ways and 

Means Committee in the House of Representatives and I recall 

very vividly the hearings that we had. 

The number one issue, by far, that was brought up when we had 

small businesses before us was the availability of affordable quality 

health insurance. 

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And there were several reasons for it. One, there was a huge escalation of costs of health care. And in fact, if we used the pre-2010 

Health Index, if that cost curve had not been reduced, the average 

family health premiums today would be $2,600 higher. So we have 

been able to bend the cost curve. 

Now did the Affordable Care Act do that? I think it contributed 

to that. But clearly, the cost curve is not what it was pre-2010. 

Secondly, there was a huge differential between small companies 

that did not have a risk pool similar to larger companies that 

caused, in my State I think we set up a small market reform in 

my State to try to deal with it. But it was about an 18 percent differential generally, between small companies and large companies, 

for identical policies. That is not totally eliminated but we have 

dealt with that under the Affordable Care Act. 

And then lastly, everyone who had insurance was paying for 

those who did not have insurance because of cost-shifting. We know 

that not just hospitals, which is pretty direct, the cost-shifting to 

those who pay their bills, but all health care providers there is a 

cost shift because of people who do not pay their bills. In Maryland, 

the uninsured rates have dropped from 13 percent down to about 

7.5 percent. 

So we have seen those three trends. 

So Mr. Brey, if I could just start with you. Has there been a noticeable effect on smaller companies as a result of these dynamics 

occurring within the last five years in the health market? 

Mr. BREY. Well, since the full implementation of the Affordable 

Care Act, we have seen premium increases in the single digits compared to mostly double digits before. I think I said in my testimony 

9.7 percent in the 2013–2014 and then 5 percent—I am sorry, 5 

percent in the current year and 9.7 percent before then. 

Rates prior to that were increasing anywhere from 13 percent to 

25 percent. That is each year. Not 24 percent over a period of time 

since the passage of the Affordable Care Act, which people point to 

quite a bit now. I am talking about those were increases each and 

every year. 

Senator CARDIN. And of course, every employer and every plan 

dealt with that differently. Some changed the benefits, reduced the 

benefits. Some added to the costs for the beneficiaries, copayments, 

deductibles, et cetera. And some increased the premium contributions by employees. And of course, employers put more money in, 

in some cases. It was a combination of all of that. 

So it is difficult at times, when you see premium increases, to 

compare apples to apples because the Affordable Care Act, of 

course, requires a certain benefit structure. 

Mr. BREY. Correct. In fact, we did every single one of those 

things, depending on the year. When I first started, we paid 100 

percent of people’s coverage. And as I explained earlier, by the time 

we got to the end, we are about 50 percent covering the cost of 

their premiums. We had also switched to plans that had higher 

deductibles, et cetera. So we had done all of those things, trying to 

keep costs under control for us because the number one thing I 

wanted to do is continue to provide coverage for our employees. 

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miums were unpredictable and they just could not do it. So they 

had to terminate their policies. We also saw that in the marketplace. 

I am not saying it has been solved. I am saying this is where we 

were before the passage of the Affordable Care Act. And sometimes 

we forget where we were before we had a more level playing field 

for small companies. 

And the one practice that I always remember small companies 

telling me, they would hold their breath every year to see whether 

someone had a major illness. Because if they had a major illness, 

one person, one family, it could very well affect the ability to continue a health insurance plan because of the costs going up reflecting that particular individual’s experience. 

Mr. BREY. You also did not want your employees to get old because they worked on the average age of the whole group. 

Senator CARDIN. Yes. I just think that it is useful for Congress 

to reflect on that because if you look at it in absolutes today—and 

obviously, there are dynamics occurring in health coverage that we 

have to deal with. But if we did not have the number of people insured, if we did not have a level playing field, if we did not have 

broader pools available for smaller companies, the circumstances 

would be far more difficult to us to find affordable coverage for employees of small companies. 

Thank you, Mr. Chairman. 

Chairman VITTER. Thank you. 

One last point, there has been some criticism of the Small Business Exchange. I just want to say for the record, I think that is 

a fabulous deal if you are a member of Congress. If you are a small 

business, I am not sure. But that is a different topic and a different 

hearing. 

And so with that, we will thank all of our witnesses. Thank you 

for being here today. Thanks for what you do for the economy. 

We are adjourned. 

[Whereupon, at 3:44 p.m., the Committee was adjourned.] 

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