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24–359 PDF 2017

LEGISLATIVE PROPOSALS TO 

IMPROVE HEALTH CARE 

COVERAGE AND PROVIDE LOWER 

COSTS FOR FAMILIES 

HEARING 

BEFORE THE

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD IN WASHINGTON, DC, MARCH 1, 2017 

Serial No. 115–8 

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

( 

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

committee.action?chamber=house&committee=education 

or 

Committee address: http://edworkforce.house.gov 

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(II) 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

VIRGINIA FOXX, North Carolina, Chairwoman 

Joe Wilson, South Carolina 

Duncan Hunter, California 

David P. Roe, Tennessee 

Glenn ‘‘GT’’ Thompson, Pennsylvania 

Tim Walberg, Michigan 

Brett Guthrie, Kentucky 

Todd Rokita, Indiana 

Lou Barletta, Pennsylvania 

Luke Messer, Indiana 

Bradley Byrne, Alabama 

David Brat, Virginia 

Glenn Grothman, Wisconsin 

Steve Russell, Oklahoma 

Elise Stefanik, New York 

Rick W. Allen, Georgia 

Jason Lewis, Minnesota 

Francis Rooney, Florida 

Paul Mitchell, Michigan 

Tom Garrett, Jr., Virginia 

Lloyd K. Smucker, Pennsylvania 

A. Drew Ferguson, IV, Georgia 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Ranking Member 

Susan A. Davis, California 

Rau ́l M. Grijalva, Arizona 

Joe Courtney, Connecticut 

Marcia L. Fudge, Ohio 

Jared Polis, Colorado 

Gregorio Kilili Camacho Sablan, 

Northern Mariana Islands 

Frederica S. Wilson, Florida 

Suzanne Bonamici, Oregon 

Mark Takano, California 

Alma S. Adams, North Carolina 

Mark DeSaulnier, California 

Donald Norcross, New Jersey 

Lisa Blunt Rochester, Delaware 

Raja Krishnamoorthi, Illinois 

Carol Shea-Porter, New Hampshire 

Adriano Espaillat, New York 

Brandon Renz, Staff Director 

Denise Forte, Minority Staff Director 

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(III) 

C O N T E N T S 

Page 

Hearing held on March 1, 2017 .............................................................................. 1 

Statement of Members: 

Foxx, Hon. Virginia, Chairwoman, Committee on Education and the 

Workforce ....................................................................................................... 1 

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

Scott, Hon. Robert C. ‘‘Bobby’’, Ranking Member, Committee on Education and the Workforce ............................................................................. 5 

Prepared statement of ............................................................................... 8 

Statement of Witnesses: 

Klausner, Ms. Allison, Principal and Government Relations Leader, 

Knowledge Resource Center, Conduent Human Resources Services ........ 10 

Prepared statement of ............................................................................... 13 

Mitts, Ms. Lydia, Associate Director of Affordability Initiatives, Families 

USA ................................................................................................................ 31 

Prepared statement of ............................................................................... 33 

Ritchie, Mr. Jay, Executive Vice President, Tokio Marine HHC .................. 38 

Prepared statement of ............................................................................... 40 

Hurst, Mr. Jon B., President, Retailers Association of Massachusetts ........ 45 

Prepared statement of ............................................................................... 47 

Additional Submissions: 

Blunt Rochester, Hon. Lisa, a Representative in Congress from the State 

of Delaware: 

Letter dated February 22, 2017, from the State of Delaware Office 

of the Governor ...................................................................................... 84 

Letter dated February 28, 2017, from National Association of Insurance Commissioners (NAIC) and The Center for Insurance Policy 

and Research .......................................................................................... 91 

Courtney, Hon. Joe, a Representative in Congress from the State of 

Connecticut: 

Business Insider: AP Fact Check: Obamacare is not in a ‘death 

spiral’ ...................................................................................................... 59 

Chairwoman Foxx: 

Letter dated February 17, 2017, from Gronewoller, Mr. Davis E., 

President and CEO, GC Partners, Inc. ................................................ 117 

Letter dated February 13, 2017, from Monson, Ms. Catherine, Chief 

Executive Officer, FASTSIGNS ............................................................ 118 

Letter dated February 16, 2017, from Toy, Mr. Jon, Owner, 

FASTSIGN of York ................................................................................ 119 

Letter dated February 16, 2017, from the International Franchise 

Association (IFA) ................................................................................... 120 

Letter dated February 16, 2017, from the National Association of 

Wholesaler-Distributors (NAW) ............................................................ 121 

Letter dated February 16, 2017, from the National Restaurant Association ..................................................................................................... 122 

Letter dated February 16, 2017, from the National Retail Federation 

(NRF) ...................................................................................................... 123 

Letter dated February 28, 2017, from the Heating, Air-conditioning 

and Refrigeration Distributors International (HARDI) ...................... 124 

Letter dated February 28, 2017, from the National Restaurant Association ..................................................................................................... 125 

Letter dated March 1, 2017, from the Healthcare Leadership Council 126 

Letter dated March 1, 2017, from the National Association of Chemical Distributors (NACD) ....................................................................... 128 

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IV 

Additional Submissions—Continued 

Chairwoman Foxx—Continued 

Letter dated March 2, 2017, from National Federation of Independent 

Business (NFIB) ..................................................................................... 129 

NFIB: Small Business Health Reform Principles ................................... 131 

Slide: Fast Facts: Obamacare Reality ..................................................... 4 

Johnson, Hon. Sam, a Representative in Congress from the State of 

Texas: 

Letter dated March 15, 2017 .................................................................... 133 

Polis, Hon. Jared, a Representative in Congress from the State of Colorado: 

Letter dated March 1, 2017, from the UMWA Health and Retirement 

Funds ...................................................................................................... 72 

Walberg, Hon. Tim, a Representative in Congress from the State of 

Michigan: 

Letter dated February 28, 2017, from the Coalition in Support of 

H.R. 1101 ................................................................................................ 65 

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(1) 

LEGISLATIVE PROPOSALS TO IMPROVE 

HEALTH CARE COVERAGE AND PROVIDE 

LOWER COSTS FOR FAMILIES 

Wednesday, March 1, 2017 

House of Representatives 

Committee on Education and the Workforce, 

Washington, D.C. 

The Committee met, pursuant to call, at 10:07 a.m., in Room 

2175, Rayburn House Office Building, Hon. Virginia Foxx [chairwoman of the Committee] presiding. 

Present: Representatives Foxx, Wilson of South Carolina, Roe, 

Thompson, Walberg, Guthrie, Barletta, Messer, Byrne, Brat, 

Grothman, Stefanik, Allen, Lewis, Rooney, Mitchell, Smucker, 

Scott, Davis, Courtney, Fudge, Polis, Bonamici, Adams, 

DeSaulnier, Norcross, Blunt Rochester, Krishnamoorthi, Shea-Porter, and Espaillat. 

Staff Present: Bethany Aronhalt, Press Secretary; Andrew 

Banducci, Workforce Policy Counsel; Courtney Butcher, Director of 

Member Services and Coalitions; Ed Gilroy, Director of Workforce 

Policy; Jessica Goodman, Legislative Assistant; Callie Harman, 

Legislative Assistant; Nancy Locke, Chief Clerk; John Martin, Professional Staff Member; Dominique McKay, Deputy Press Secretary; James Mullen, Director of Information Technology; Michelle 

Neblett, Professional Staff Member; Krisann Pearce, General Counsel; Whitney Riggs, Professional Staff Member; Molly McLaughlin 

Salmi, Deputy Director of Workforce Policy; Alissa Strawcutter, 

Deputy Clerk; Tylease Alli, Minority Clerk/Intern and Fellow Coordinator; Austin Barbera, Minority Press Assistant; Michael 

DeMale, Minority Labor Detailee; Denise Forte, Minority Staff Director; Nicole Fries, Minority Labor Policy Associate; Christine 

Godinez, Minority Staff Assistant; Carolyn Hughes, Minority Senior Labor Policy Advisor; Udochi Onwubiko, Minority Labor Policy 

Counsel; Kiara Pesante, Minority Communications Director; 

Veronique Pluviose, Minority Civil Rights Counsel; and Elizabeth 

Watson, Minority Director of Labor Policy. 

Chairwoman FOXX. The Committee on Education and the Workforce will come to order. Good morning. I apologize that we are a 

little bit late this morning. I like to honor people’s time, and I am 

always mortified when we run a little late, but thank you for your 

patience. 

CEWDOCROOM with DISTILLER

2 

We have a very distinguished panel of witnesses for today’s hearing. Thank you for taking the time to be with us and sharing your 

personal expertise on a very important issue affecting the lives of 

millions of Americans across the country. 

‘‘It’s in a death spiral.’’ That is how Aetna’s chief executive, Mark 

Bertolini, recently described the Democrats’ failed healthcare law. 

Citing higher premiums and insufficient enrollment among young, 

healthy individuals, Mr. Bertolini predicted that more insurers will 

quit ObamaCare next year. When they do, as they have done year 

after year, families will find it even harder to access the doctors 

they want and the affordable coverage they need. 

A death spiral. That is the honest assessment of someone who 

has looked closely at the facts and who cannot ignore reality. Of 

course, there are those who are still living in an alternate reality, 

and they are trying desperately to protect a law that is wreaking 

havoc on families and small businesses across the country. 

Powerful special interest groups are peddling scare tactics and 

doing all they can to defend the status quo. One prominent organization in particular is promoting a manual that includes tips on 

how to disrupt town halls. The manual recommends to ‘‘grab seats 

at the front half of the room, but do not all sit together’’ in order 

to ‘‘reinforce the impression of broad consensus.’’ It even asks the 

activists to boo Republican members of Congress. 

All these desperate tactics are aimed at protecting a failed law 

that has resulted in nearly 5 million Americans losing the health 

care they like and were promised they could keep. 

A failed law that has left millions of Americans with access to 

just one insurance provider. A failed law that has caused countless 

families to lose access to the doctors they trusted. 

A failed law that has forced healthcare costs to skyrocket and destroyed hundreds of thousands of small business jobs. 

Ultimately, they are fighting to maintain government control, 

government control over the kind of health insurance you can buy. 

Government control over the kind of health insurance employers 

can and cannot offer workers. Government control over the doctors 

you can see and the doctors you cannot see, and government control over certain healthcare benefits that many individuals may not 

need. 

Yet, despite the costs and pain inflicted on so many Americans 

by ObamaCare, the answer for some is still more government control. We believe there is a better way, and that is what the legislative proposals we will discuss today are all about. 

We believe patients, not Washington bureaucrats, should be in 

charge of their healthcare decisions. We believe employers should 

have more choices, not fewer, to provide their workers with access 

to affordable coverage. We believe small businesses should be empowered to negotiate for the best coverage at the best possible price 

for their employees. 

I expect the sponsors and our witnesses will discuss in greater 

detail the specifics of each legislative proposal, but all three are designed to promote more choices, more flexibility, greater access, 

and lower costs. That is exactly what the American people want 

and need. 

CEWDOCROOM with DISTILLER

3 

We are at a crossroads right now when it comes to our Nation’s 

health care. When people, through no fault of their own, are experiencing pain and havoc created by the ObamaCare death spiral, the 

only responsible thing to do is provide relief. We simply cannot continue down the unsustainable path we are on and sit back and 

watch as this fundamentally flawed law collapses under its own 

weight. 

We must change course. That is why House Republicans are on 

a rescue mission not only to save families struggling under 

ObamaCare, but also to deliver the meaningful healthcare reforms 

the American people have demanded for years. 

Today, we are taking an important step in this process by examining a number of commonsense solutions that will help more 

Americans access high-quality, affordable health care. 

I want to thank my colleagues, HELP Subcommittee Chairman 

Tim Walberg and Representative Phil Roe, as well as a former 

member of this committee, Representative Sam Johnson, for their 

leadership on several of the reforms we will discuss today. 

We have a lot of ground to cover. So, I now yield to Ranking 

Member Scott for his opening remarks. 

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4 

CEWDOCROOM with DISTILLER


Insert offset folio 72 here 24359.072
5 

[The statement of Chairwomen Foxx follows:] 

Prepared Statement of Hon. Virginia Foxx, Chairwoman, Committee on 

Education and the Workforce 

‘‘It’s in a death spiral.’’ That’s how Aetna’s chief executive Mark Bertolini recently 

described the Democrats’ failed health care law. Citing higher premiums and insufficient enrollment among young, healthy individuals, Mr. Bertolini predicted that 

more insurers will quit Obamacare next year. When they do—as they’ve done year 

after year—families will find it even harder to access the doctors they want and the 

affordable coverage they need. 

A death spiral. That’s the honest assessment of someone who has looked closely 

at the facts and who can’t ignore reality. Of course, there are those who are still 

living in an alternate reality, and they are trying desperately to protect a law that 

is wreaking havoc on families and small businesses across the country. 

Powerful special interest groups are peddling scare tactics and doing all they can 

to defend the status quo. One prominent organization in particular is promoting a 

manual that includes tips on how to disrupt town halls. The manual recommends 

to ‘‘grab seats at the front half of the room, but do not all sit together’’ in order 

to ‘‘reinforce the impression of broad consensus.’’ It even asks activists to boo Republican members of Congress. 

All of these desperate tactics are aimed at protecting a failed law that has resulted in nearly 5 million Americans losing the health care they liked and were 

promised they could keep. A failed law that has left millions of Americans with access to just one insurance provider. A failed law that has caused countless families 

to lose access to the doctors they trusted. A failed law that has forced health care 

costs to skyrocket and destroyed hundreds of thousands of small business jobs. 

Ultimately, they are fighting to maintain government control; government control 

over the kind of health insurance you can buy; government control over the kind 

of health insurance employers can and cannot offer workers; government control 

over the doctors you can see and the doctors you can’t see; and government control 

over certain health care benefits that many individuals may not need. 

Yet, despite the costs and pain inflicted on so many Americans by Obamacare, the 

answer for some is still more government control. We believe there is a better way, 

and that is what the legislative proposals we will discuss today are all about. 

We believe patients—not Washington bureaucrats—should be in charge of their 

health care decisions. We believe employers should have more choices—not fewer— 

to provide their workers with access to affordable coverage. We believe small businesses should be empowered to negotiate for the best coverage at the best possible 

price for their employees. 

I expect the sponsors and our witnesses will discuss in greater detail the specifics 

of each legislative proposal, but all three are designed to promote more choices, 

more flexibility, greater access, and lower costs. That’s exactly what the American 

people need. 

We are at a crossroads right now when it comes to our nation’s health care. When 

people—through no fault of their own—are experiencing pain and havoc created by 

the Obamacare death spiral, the only responsible thing to do is provide relief. We 

simply cannot continue down the unsustainable path we are on and sit back and 

watch as this fundamentally flawed law collapses under its own weight. 

We must change course. That’s why House Republicans are on a rescue mission 

not only to save families struggling under Obamacare, but also to deliver the meaningful health care reforms the American people have demanded for years. Today, we 

are taking an important step in this process by examining a number of commonsense solutions that will help more Americans access high quality, affordable health 

care. 

I want to thank my colleagues—HELP Subcommittee Chairman Tim Walberg and 

Representative Phil Roe—as well as a former member of this committee, Representative Sam Johnson—for their leadership on several of the reforms we will discuss 

today. 

Mr. SCOTT. Thank you, Madam Chair, and I would like to welcome our witnesses and thank them for their testimony. In this 

hearing, we will discuss three legislative proposals that will weaken insurance protections for consumers and shift costs on to workers. 

CEWDOCROOM with DISTILLER

6 

The title, ‘‘Legislative Proposals to Improve Health Care Coverage and Provide Lower Costs for Families,’’ insinuates the goal 

of these proposals is to reduce costs for families. In fact, these bills 

will lower costs for only a lucky few while others will pay more. 

Let us be clear. This hearing is a distraction from the larger debate about the future of America’s health care. Across the country 

millions of people are lining up in town halls and expressing their 

deep concern over the Republicans’ reckless attempts to repeal the 

Affordable Care Act. I think it is important to remind people what the situation was 

before the Affordable Care Act passed. Costs were going through 

the roof. Those with preexisting conditions could not get insurance 

or, if they did, it was unaffordable. Women were paying more than 

men, and every year, millions of people were losing their insurance. 

Since the passage of the Affordable Care Act, the costs have continued to go up, but at the lowest rate in about 50 years. Those 

with preexisting conditions can get insurance at the standard rate. 

Women are not paying more than men. Instead of millions of people losing their insurance every year, 20 million more people have 

insurance. 

The full name of the Affordable Care Act is ‘‘Patient Protection 

and Affordable Care Act.’’ There are patient protections, like insurance companies cannot cut you off after they have paid a certain 

amount over your lifetime. We are closing the doughnut hole. 

Those young people up to 26 can stay on their parents’ policies; 

prevention and cancer screening; annual checkups; no co-pays and 

deductibles. 

We have heard a lot of complaints about the so-called ‘‘failed 

law,’’ but one thing that is conspicuously absent is any proposal 

that will make things any better. 

The Republican draft proposal leaked just last week shows the 

concerns about whether or not there is a replacement plan are well 

founded. To whatever extent the plan has any direction in replacement efforts, it is in the wrong direction. 

It is not clear whether or not the leaked draft is the proposal 

that the majority intends to move forward, but Republicans have 

yet to communicate any concrete timetable for action and, in fact, 

have already missed their own legislative deadline directed by the 

recent budget. Their plans were supposed to have been available 

over a month ago. 

For seven years, we have heard calls for repeal, but no concrete 

proposal to replace. We have heard a lot of complaints about the 

Affordable Care Act, but no concrete proposal or idea to make 

things better. 

If this leaked draft is any indication of priorities, one thing is 

clear, and that is the proposals will push more costs on to working 

families, seniors, and average Americans, and, at the same time, 

we are considering tax breaks for corporations and the wealthy. 

There is one proposal to dismantle Medicaid. Most of the funding 

under Medicaid goes to the elderly and those with disabilities, the 

rest to low-income families. 

Another idea includes taxing workers’ health insurance policies, 

which has the effect of funding tax breaks for corporations and the 

wealthy. That is right. One proposal to tax workers’ health care 

CEWDOCROOM with DISTILLER

7 

while, at the same time, we are considering tax breaks for those 

making more than $200,000 a year. 

One of the proposals we will be discussing today expands Association Health Plans, a recycled idea from about 20 years ago that 

has been widely discredited as possibly doing nothing for most 

Americans. While a few might pay less, a lot will pay more. 

In 2000, the Congressional Budget Office found the proposal 

would have little effect on increasing health coverage. Researchers, 

including the American Academy of Actuaries, have expressed concern that Association Health Plans lead to market segmentation, 

where a few healthy people may be better off as long as they stay 

healthy, while older and less healthy workers will be left out in the 

cold. 

In a press release back in 2003, the academy categorized the legislation as flawed because it was neither actuarially sound nor did 

it protect consumers. These flaws are still present in the idea 

today. 

For example, a small business owner who is older and perhaps 

has struggled with mental or physical illness in the past with a socalled ‘‘preexisting condition,’’ may not be an attractive partner for 

the association, so they will not get in. Proposals like this allow for 

cherry-picking to serve only the healthy at lower cost and accessible only to those that need it while everybody else will pay more. 

The problem is simple arithmetic. Under the Affordable Care Act, 

essentially everybody pays the average. If you have a scheme 

where some people can pay less, then other people necessarily will 

have to pay more. That is just simple arithmetic. 

The second proposal insulates stop-loss insurance from certain 

Federal oversight. It is unclear how this does anything to help 

workers get quality health insurance. It might help the employers 

mitigate risk with their questionable implications for both employers and workers, particularly when smaller businesses decide to 

self-insure. 

If anything, the committee should look into making sure businesses and workers are being protected in the variety of new 

health insurance arrangements that have arisen over the past few 

decades. 

The third proposal allows workplace wellness programs to circumvent protections under the Americans With Disabilities Act and 

the Genetic Information Nondiscrimination Act. Because wellness 

programs can carry large financial penalties, this legislation makes 

it easier for workplace wellness programs to penalize people who 

do not want to divulge information that may be medically sensitive 

or genetic information, and, therefore, if they do not give it up, 

they may be penalized, and that would undermine key workplace 

civil rights. 

This is just another policy that will harm sicker and older people, 

including those who have disabilities that may not be readily noticeable, and they may not want to divulge. 

A range of consumer and disability groups, including AARP, have 

been vocal supporters of ensuring that important civil rights protections remain in place in workplace wellness programs. Wellness 

programs if done correctly have the potential to benefit both workCEWDOCROOM with DISTILLER

8 

ers and employers. There is no compelling reason to subvert civil 

rights laws and protections to administer them. 

So we will hear about some of these ideas that we know do not 

work, will not do anything to protect millions of Americans who 

now benefit from the ACA. As we discuss these legislative proposals, let us not lose sight of the larger debate that continues to 

play out in town halls and the need for constituents who are so 

vocal in expressing their fears. 

We hope we can refocus our efforts on the financial security of 

American families by making sure we improve health care instead 

of revisiting policies that do little more than shift costs on to the 

American worker and families, and make sure that before we repeal anything, that a replacement is ready to go. And if you can 

come up with a replacement that is better than the Affordable Care 

Act, I commit today to support it. I do not think such a plan exists 

because if it did exist, we would have seen it by now. 

In any case, Madam Chair, I thank you for having the hearing, 

and look forward to the testimony of the witnesses. 

[The statement of Mr. Scott follows:] 

Prepared Statement of Hon. Robert C. ‘‘Bobby’’ Scott, Ranking Member, 

Committee on Education and the Workforce 

I would like to welcome our witnesses and thank them for their testimony. This 

hearing will discuss three legislative proposals that will weaken insurance protections for consumers and shift costs onto workers. While the title insinuates that the 

goal of these proposals is to reduce costs for families, in truth, these bills will lower 

costs for only a lucky few, at the expense of others. 

But let’s be clear. This hearing is a distraction from a larger debate about the 

future of America’s health care. All across the country, millions of people are lining 

up in town halls and expressing their deep concern over Republicans’ reckless attempts to repeal the Affordable Care Act. 

A Republican draft health care proposal leaked just last week shows these concerns are well founded. Insofar as the Republicans have any direction on their replacement efforts, it is the wrong direction. Now, it is not clear whether or not this 

leaked draft is the proposal the Majority intends to move forward. Republicans have 

yet to communicate any concrete timetables for action and have missed their own 

legislative deadlines by more than a month. 

But, for seven years we have heard calls for repeal. We’ve heard a lot of complaints about the Affordable Care Act, but every proposal or idea we have heard 

from the Majority fails to make things better. But, if this leaked draft is any indication of their priorities, one thing is becoming increasingly clear. The Majority’s vision for health care in America is to push more costs onto working families, seniors, 

and average Americans, while giving bigger breaks to corporations and the wealthy. 

This means dismantling Medicaid, which primarily provides funding for the elderly and those with disabilities. And their ideas include taxing workers’ health insurance to foot the bill for big tax breaks for the wealthy. That’s right – the leaked 

proposal includes a provision allowing workers’ health insurance to be taxed so that 

a current tax on high-income earners, those making over $200,000, can be repealed. 

The Majority believes that affordable, quality health care is a privilege reserved 

for the young, healthy, and wealthy – not a right for all Americans. 

The three legislative proposals being discussed today reflect this belief. One of 

these proposals expands association health plans, a recycled idea from nearly 20 

years ago that has been widely discredited as doing nothing but accelerating a race 

to bottom for health coverage at the expense of both workers and employers. In 

2000, the Congressional Budget Office found that the proposal would have little effect on increasing health coverage. Researchers, including the American Academy 

of Actuaries, have expressed concern that association health plans lead to market 

segmentation, where a few healthy people may be better off – so long as they stay 

healthy – while older and less healthy workers and employers are left out in the 

cold. In a press release back in 2003, the Academy characterized the legislation as 

‘‘flawed’’ because it is neither actuarially sound nor does it protect consumers. These 

flaws are still present in the idea today. For example, a small business owner who 

CEWDOCROOM with DISTILLER

9 

is older or who perhaps has struggled with a mental or physical illness in the past 

will not be a very attractive partner for an association. Proposals like these that 

allow for cherry picking only serve to make health coverage less affordable and accessible for those who need it the most. 

The second proposal insulates stop-loss insurance from certain federal oversight. 

It is unclear to me how this does anything to help workers get quality health insurance. While stop-loss can help self-insured employers mitigate risk, there are questionable implications for both employers and workers, particularly when smaller 

businesses decide to self-insure. If anything, perhaps the Committee can look into 

making sure businesses and workers are being protected in the variety of new 

health insurance arrangements that have arisen over the past few decades. 

The third proposal allows workplace wellness programs to circumvent the protections in the Americans With Disabilities Act and the Genetic Information Nondiscrimination Act. Because wellness programs can carry large financial penalties, 

this legislation makes it easier for workplace wellness programs to penalize people 

who are not comfortable divulging sensitive medical or genetic information, undermining key workplace civil rights. This is yet another policy that will harm sicker 

and older people, including those who have disabilities that may not be readily noticeable. A range of consumer and disability groups, including AARP, have been 

vocal supporters of ensuring that important civil rights protections remain in place 

in workplace wellness. While wellness programs – if done correctly – have the potential to benefit both workers and employers, there is no compelling reason to subvert civil rights laws and protections to administer them. 

So today we will hear about some ideas that frankly just won’t work or won’t do 

anything to protect the millions of Americans who now benefit from the ACA. 

As we discuss these legislative proposals, let’s not lose sight of the larger debate 

that we will continue to play out in town halls and the needs of our constituents 

who are so vocally expressing their fears. I hope that we can refocus our efforts on 

the financial security of American families by working to improve health care, instead of revisiting policies that do little more than shift costs onto American working families. Thank you. 

Chairwoman FOXX. Thank you very much, Mr. Scott. 

Pursuant to Committee Rule 7(c), all members will be permitted 

to submit written statements to be included in the permanent 

hearing record. And without objection, the hearing record will remain open for 14 days to allow such statements and other extraneous material referenced during the hearing to be submitted for 

the official hearing record. 

We now turn to introductions of our distinguished witnesses. Ms. 

Allison Klausner is a principal at Conduent Human Resources 

Service, and serves as the government relations leader for the 

Knowledge Resource Center, where she focuses on human resources and employee benefits. She will testify on behalf of the 

American Benefits Council. 

Ms. Lydia Mitts is associate director of Affordability Initiatives 

at Families USA, specializing in health system improvement 

issues. 

Mr. Jay Ritchie is executive vice president of Tokio Marine HHC, 

and has 20 years of experience in insurance underwriting and management. He will testify on behalf of the Self-Insurance Institute 

of America. 

Mr. Jon Hurst is the president of Retailers Association of Massachusetts. He will testify on behalf of the National Retail Federation. 

I now ask our witnesses to raise your right hand. 

[Witnesses sworn.] 

Chairwoman FOXX. Let the record reflect the witnesses answered 

in the affirmative. 

CEWDOCROOM with DISTILLER

10 

Before I recognize each of you to provide your testimony, let me 

briefly explain our lighting system. We allow five minutes for each 

witness to provide testimony. When you begin, the light in front of 

you will turn green. With one minute left, the light will turn yellow. At the five-minute mark, the light will turn red, and you 

should wrap up your testimony. Members will each have five minutes to ask questions. 

I now will recognize Ms. Allison Klausner for five minutes. 

TESTIMONY OF ALLISON KLAUSNER, PRINCIPAL AND GOVERNMENT RELATIONS LEADER, KNOWLEDGE RESOURCE 

CENTER, CONDUENT HUMAN RESOURCES SERVICES, TESTIFYING ON BEHALF OF THE AMERICAN BENEFITS COUNCIL 

Ms. KLAUSNER. Hello. My name is Allison Klausner, and I am a 

principal and government relations leader of the Knowledge Resource Center at Conduent Human Resources Service. 

It is my honor to testify today on behalf of the American Benefits 

Council, of which Conduent is a member, and I am the chair of the 

Policy Board of Directors. 

Collectively, the council’s members either sponsor directly or provide services to health and retirement plans that cover more than 

100 million Americans. Many of the council’s members are at the 

forefront of the workplace wellness revolution, developing programs 

to help employees and their families enjoy healthier and more productive lives. 

Employer-sponsored benefit plans are designed with the express 

purpose of giving each employee the opportunity to achieve personal health and financial well-being. This well-being serves as the 

foundation for employees to receive optimal performance and productivity, and, in turn, drives successful organizations. 

For these reasons, in recent years, employers of all sizes have increasingly been designing and implementing wellness programs. 

This has helped to make wellness an area of tremendous promise 

for the future of health care and employer-sponsored benefits. 

Despite the growing popularity of employer-sponsored plans, I 

believe the future of these valuable programs are at risk due to the 

inconsistent regulatory framework that applies to them. 

My testimony today will address this problem, and will provide 

recommendations for creating a consistent regulatory framework. 

In my role at Conduent, I have significant exposure to innovative 

wellness programs that employers are developing. I also have great 

insight into the chilling effects that recent regulations issued by 

the EEOC and the lack of consistent Federal policy have on employer sponsorship of these programs. 

In 2010, Congress effectively codified as part of the Affordable 

Care Act the longstanding wellness program regulatory framework 

under HIPAA. Despite this explicit congressional support of the 

HIPAA wellness program rules, employers are nevertheless subject 

to inconsistent Federal regs when it comes to wellness program design and operation. The inconsistency is most recently the result of 

the regulations relating to wellness finalized by the EEOC. 

These recently finalized rules under Title II of GINA and the 

Americans With Disabilities Act are not consistent with the wellCEWDOCROOM with DISTILLER

11 

established employee protective wellness program regulatory 

framework under HIPAA. 

As a result, many wellness programs already subject to HIPAA 

may now also be subject to incongruent and competing regulations 

under GINA and the ADA. 

In addition, many wellness programs that are not subject to 

HIPAA, which are highly beneficial, such as diabetes management 

programs, may now be subject to these EEOC requirements. These 

requirements are so burdensome that employees may lose access to 

them if employers conclude they are no longer able to offer them. 

The development and implementation of these programs requires 

a substantial investment of financial, intellectual, and human capital on the part of employers. Unfortunately, the need to comply 

with the inconsistent regulatory framework under HIPAA, GINA, 

and the ADA has caused many employers to take a step back or 

to pause in their implementation of innovative wellness programs. 

This, in turn, will weaken the positive steps and impact that 

wellness programs can have on employees, employers, and longterm health costs. 

I believe the committee can take steps to develop a consistent 

regulatory policy for wellness programs. In this regard, I do appreciate the prior work of this committee in introducing H.R. 1189, the 

Preserving Employee Wellness Programs Act. This act clarifies that wellness programs that do comply with 

HIPAA and the Affordable Care Act would not violate the ADA or 

GINA merely by offering an award, an important move towards 

consistent Federal policy. 

Since the introduction of the act, the EEOC issued its wellness 

regulations under the ADA and GINA. We encourage the committee to reintroduce the act with certain modifications to address 

the inconsistencies introduced by the EEOC rules. 

First, we suggest modifying the act to provide that wellness programs that are subject to and comply with the HIPAA wellness 

rules are deemed to comply with the ADA and GINA if they offer 

awards that comply with the limits imposed on health contingent 

programs under HIPAA. 

Second, we recommend modifying the act to provide that 

wellness programs that are not subject to HIPAA wellness regs are 

deemed to comply with the ADA and GINA if they offer awards 

that comply with the limits imposed on health contingent programs 

under HIPAA. 

Third, we believe the act should state that wellness programs 

that provide for more favorable treatment of individuals with adverse health factors, such as diabetes management programs, are 

deemed to comply with the ADA and GINA. 

Fourth, we suggest modifying the act to provide that the collection by a wellness program of information about the manifested 

disease or disorder of a family member should not be considered an 

unlawful acquisition of genetic information with respect to another 

family member, and should not violate GINA. This would enable 

employers to provide spouses and children with the same important wellness programs they offer employees. 

I want to thank you for your interest in employer-sponsored 

wellness programs. I appreciate the opportunity to testify, and the 

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12 

council and I look forward to working with you to enact commonsense reforms and restore certainty to employers who are focusing 

on improving the health of their workforces by creating a consistent Federal policy for employer-sponsored wellness programs. 

[The statement of Ms. Klausner follows:] 

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TESTIMONY OF 

ALLISON R. KLAUSNER, 

PRINCIPAL, GOVERNMENT RELATIONS LEADER 

KNOWLEDGE RESOURCE CENTER 

CONDUENT HUMAN RESOURCE SERVICES 

ON BEHALF OF THE 

AMERICAN BENEFITS COUNCIL 

BEFORE THE 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

HEARING ON 11LEGISLATIVE PROPOSALS TO IMPROVE HEALTH 

CARE COVERAGE AND PROVIDE LOWER COSTS FOR FAMILIES" 

MARCH1,2017 
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My name is Allison Klausner, and I am a Principal and Government Relations 

Leader of the Knowledge Resource Center at Conduent Human Resource Services. I am 

testifying today on behalf of the American Benefits Council (the "Council"), of which 

Conduent is a member. I am also the Chair of the Council's Policy Board of Directors. 

The Council is a public policy organization representing principally Fortune 500 

companies and other organizations that assist employers of all sizes in providing 

benefits to employees. Collectively, the Council's members either sponsor directly or 

provide services to health and retirement plans that cover more than 100 million 

Americans. Many of the Council's members are at the forefront of the workplace 

wellness revolution, developing programs to help employees and their families enjoy 

healthier and more productive lives. 

As stated in the Council's public policy strategic plan, A 2020 Vision: Flexibilitv and 

the Future o(Emplovee Benefits,1 employer-sponsored benefit plans are designed with the 

express purpose of giving each employee the opportunity to achieve personal health 

and financial well-being. This well-being serves as the foundation for employees to 

achieve optimal performance and productivity and, in turn, drives successful 

organizations. 

The Council has asked me to testify on its behalf because, in my role as Principal and 

Government Relations Leader at Conduent' s Knowledge Resource Center, I h!lve 

extensive experience helping my organization and its employer clients understand and 

navigate important legislative and regulatory developments related to employee 

benefits, including wellness programs. In my role at Conduent, I not only have 

significant exposure to the innovative wellness programs that employers are 

developing for their employees, but I also have great insight into the chilling effects that 

recent regulatory developments in the wellness field continue to have on employer 

sponsorship of wellness programs. In addition, in my prior role as Assistant General 

Counsel at Honeywell International Inc., I experienced firsthand the difficulties that can 

arise for employers and their employees when there is a lack of consistent federal policy 

on important issues such as employer-sponsored wellness programs. 

We applaud Congress for having worked on a bipartisan basis to craft the wellness 

provisions in the Patient Protection and Affordable Care Act ("PP ACA") that built on 

the existing framework created in the Health Insurance Portability and Accountability 

Act of 1996 (HIPAA). PPACA's bipartisan wellness provisions increased employer 

flexibility in designing programs to improve the health of employees and their families. 

Additionally, it recognized the important role of wellness programs as a cornerstone of 

health reform. 

1 http: I I www .americanbenefitscouncil. org/ newsroom I 2020vision.cfm. 

1 
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As I will discuss today, the future of workplace wellness programs remains at risk. 

Despite explicit Congressional support of wellness programs in recent years (for 

example, through PPACA's codification of the HIPAA framework), employers continue 

to face complex and inconsistent regulations for the design and administration of these 

programs, most recently as the result of regulations relating to wellness programs 

finalized by the U.S. Equal Employment Opportunity Commission ("EEOC"). 

The Council's public policy strategic plan, A 2020 Vision: Flexibilit11 and the Future of 

Empl011ee Benefits, notes that "[a] critical component of encouraging employers to offer 

meaningful wellness programs is consistent federal policy that promotes the health of 

Americans and is aligned across multiple agencies and Congress." Unfortunately, the 

EEOC's recently finalized rules, which address the application of Title II of the Genetic 

Information Nondiscrimination Act ("GINA") and Title I of the Americans with 

Disabilities Act ("ADA") to wellness programs, are not consistent with the wellestablished and employee-protective wellness program regulatory framework under 

HIPAA. 

The result is that many wellness programs already subject to regulation under 

HIP AA may now also be subject to incongruent and competing regulations under Title 

II of GINA and the ADA. In addition, many wellness programs that are not subject to 

HIPAA, but which are highly beneficial- such as healthy mother/healthy baby and 

diabetes management programs - may now be subject to rules so burdensome that 

employees may lose access to these programs where employers conclude they are no 

longer able to offer such programs. 

My testimony will describe the current state of employer-sponsored wellness 

programs and how they benefit employees. Not only are these programs important for 

achieving better health outcomes for employees and their families, they also have the 

potential to increase employee productivity, improve workforce morale and 

engagement and reduce health care spending. The bulk of my data is drawn from 

Conduent' s 2016 survey report, Working Well: A Global Survey of Workplace 

Wellbeing Strategies,2 which represents the views of 428 employer respondents based in 

33 countries, including 187 respondents in the United States alone. 

I will also explain how the inconsistent and unnecessarily complex federal 

regulatory landscape is adversely affecting employers' wellness initiatives. I will close 

with suggestions for how the Committee may be able to alleviate the problem as it 

considers any future legislation. 

2 Conduent Human Resource Services, Working Well: A Global Survey of Workforce Wellbeing Strategies 

(2016). 

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WHAT Is A WELLNESS PROGRAM? 

HealthCare.gov defines a wellness program3 as "a program intended to improve 

and promote health and fitness that's usually offered through the work place, although 

insurance plans can offer them directly to their enrollees. The program allows your 

employer or plan to offer you premium discounts, cash rewards, gym memberships, 

and other incentives to participate. Some examples of wellness programs include 

programs to help you stop smoking, diabetes management programs, weight loss 

programs, and preventative health screenings." 

As we study wellness at Conduent, with the benefit of a broad range of employer 

experience, we have learned to subdivide wellness strategies into three distinct phases. 

Wellness 1.0 demonstrates a focus on general health promotion and prevention 

activities, such as fun runs, competitions, and health risk appraisals, and some 

programs designed to support behavioral changes, such as tobacco cessation. 

Wellness 2.0 incorporates rapid adoption of health risk appraisals and biometric 

screenings to assess the health of the covered population. These more advanced 

approaches are increasingly integrated with employee assistance programs ("EAPs")4 

and/ or disease management programs, often leveraging portals and tracking of 

incentives with appropriate privacy and security safeguards. External (often financial) 

incentives are more frequently used to motivate participation in various activities, 

sometimes with the goal of meeting defined clinical outcomes. 

Wellness 3.0, the most advanced approach to wellness, encompasses a broader focus 

on overall well-being, including a more holistic view and integrated approach to 

supporting employees in their health, wealth and careers, with employers taking a 

shared responsibility for well-being as part of a compelling value proposition for 

employees. While external incentives are often still used, Wellness 3.0 relies on the 

development of intrinsic incentives/motivators and the value a supportive company 

culture and workplace environment can play in behavior change, leveraging newer 

personal engagement metl1ods such as social media, gamification, mobile technology, 

automated coaching, and personalized challenges. Very often, these programs are 

extended more fully to the family and sometimes to the community at large. 

3 See https: // www .healthcare .gov f glossary/ wellness-programs f. 

• According to the JFEBP, an EAP is an "employment-based program designed to assist in the 

identification and resolution of a broad range of employee personal concerns that may affect job 

performance. These programs deal with situations such as substance abuse, marital problems, stress and 

domestic violence, financial difficulties, health education and disease prevention. The assistance may be 

provided within the organization or by referral to outside resources. Also called an employee assistance 

plan." International Foundation of Employee Benefit Plans, Benefits and Compensation Glossary, 12th 

Edition, 185 (2010). 

3 
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This holistic approach is consistent with the Council's 2020 Vision, in which we posit 

that health and retirement benefits will no longer be considered in separate silos, but 

instead focused on the concept of "personal health and financial well-being," 

encompassing physical and mental health as well as financial security, both when 

actively employed and in retirement. 

To start on this path, employers have developed a variety of wellness program 

designs. The most recent Conduent survey lists the following health 

promotion/wellness components, from most prevalent to least prevalent, in the United 

States: 

1. Employee Assistance Program (EAP) 

2. On-site immunizations/flu shots 

3. HR policies (e.g., flexible work schedules) 

4. Regular communications (e.g., online mailings, posters) 

5. Health risk appraisal (health and lifestyle questionnaire) 

6. Nurse line or other health decision phone support 

7. Biometric health screenings (such as blood pressure, cholesterol, glucose, body 

fat) 

8. Ergonomic adaptations and awareness 

9. Work/life balance support (e.g., legal, financial services, elder or child care 

support) 

10. Telephonic chronic disease management support or coaching 

The fastest-growing wellness programs in the United States include: 

1. Telephonic physician support (telemedicine services) 

2. Cycle-to-work program 

3. On-site healthy lifestyle programs and coaching (e.g., nutrition, weight loss, 

stress reduction, smoking cessation) 

4. Personal health record (electronic summary of personal health information) 

5. On-site medical facility 

Some wellness program designs include a reward or incentive element to encourage 

participation in wellness programs, increase overall participation, and inspire 

employees to strive for healthy results. Ninety percent of U.S. employers with wellness 

programs responding to the Conduent survey currently offer incentives, including 

rewards, penalties, or both, to encourage participation in wellness initiatives. The most 

common activities for which incentives are offered include the completion of a health 

risk appraisal or biometric screening, or participation in tobacco cessation programs or 

workplace health "challenges" (such as walking). 

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Incentives most frequently take the form of gift cards, travel, merchandise or cash 

awards, although some employers offer reduced premium cost-sharing or lower 

deductibles, or provide for additional employer contributions to an account-based 

arrangement (such as employer flex credit contributions to health flexible spending 

arrangements or employer contributions to Health Savings Accounts or health 

reimbursement arrangements.) 

According to The Wall Street Journal, studies have shown that wellness program 

participation rates can be increased from 40 percent without an incentive to more than 

70 percent with a $200 incentive and to 90 percent when incentives are built into healthplan premiums or deductibles.s 

While incentives can be tied to participation, wellness programs may also be 

designed to link receipt of the incentive to the achievement of a specific health outcome. 

For example, a survey by Aon Hewitt found that 58% of responding employers offer 

incentives for completion of a lifestyle modification program (e.g., participating in a 

smoking cessation or weight loss program), and approximately 25% offer incentives for 

progress toward or attainment of a specified health goal (e.g., improved blood pressure, 

BMI, blood sugar or cholesterol).6 

A company's wellness strategy is dictated not only by its choice of programs but also 

by its participant scope. Our survey found that 69 percent of programs include spouses, 

56 percent include domestic partners and 42 percent include children. Our survey also 

found that 23 percent of responding firms offer wellness programs to their retirees. 

Additionally, as suggested in the Council's 2015 testimony? before the Senate 

Health, Education, Labor and Pensions Committee, delivered by Catherine Baase, Chief 

Medical Officer for The Dow Chemical Company, population health is best achieved 

with business strategies that address employees as well as the community. Consistent 

with the Center for Disease Control and Prevention's "Health in All Policies" efforts, 

the worksite is a critical venue to address health needs and health improvement. 

WHY WELLNESS? 

The development and implementation of a wellness strategy requires substantial 

financial, intellectual and human capital on the part of employers. This investment is 

made with the goal to improve employee well-being, increase productivity and lower 

5 Michael P. O'Donnell, Should Employees Get Insurance Discounts for Completing Wellness Programs?, 

Wall Street Journal, Feb. 18, 2013, at R5. 

6 Aon Hewitt, 2012 Health Care Survey (2012). 

7See http://www.help.senate.gov /imo/media/ doc/Baase2.pdf. 

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long-term health costs. 

While "improving performance and productivity" is cited as the most important 

wellness program objective to U.S. employers (with 83 percent of respondents calling it 

"very important" or "extremely important"), these programs hold the promise of more 

direct economic benefits under the principle that successful preventive actions, bettermanaged chronic conditions and fewer episodes of care will result in reduced health 

service utilization and fewer claims. 

The potential for cost savings is particularly appealing to U.S. employers, with 76 

percent of respondents in the United States telling Conduent that "reducing health care 

or insurance costs" is "very important" or "extremely important." While measurement 

is still inconsistent even among program sponsors, 24 percent of employers told us that 

their wellness program had an impact on their population's health care trend rate, and 

67 percent of those respondents reported a trend rate reduction of two percent or more. 

The potential of wellness programs to reduce costs is particularly important for 

employer health plan sponsors as they assess the impact of the PP ACA' s 40 percent 

excise tax on "high-cost" plans on their health benefits coverage.s Although the effective 

date of the tax is delayed until 2020, employers continue to model its impact on their 

plans and consider and implement changes to health benefits coverage to help avoid the 

tax. 

A RAND Employer Survey9 examining wellness program outcomes, sponsored by 

the U.S. Department of Labor, found that while it is not clear at this point whether 

improved health-related behavior will translate into lower health care cost, there is 

reason to be optimistic. Fully 60 percent of respondents indicated that their wellness 

program reduced health care cost, tO with reductions in inpatient costs accounting for 62 

percent of the total cost reduction, compared to outpatient costs (28 percent) and 

prescription drug costs.n 

The available evidence also supports the aspirational goals of wellness programs 

like improving productivity, morale and safety. Data from the RAND survey shows 78 

percent of responding employers stated that their wellness program has decreased 

absenteeism and 80 percent stated that it has increased productivity.12 Likewise, 32 

percent of respondents to a 2014 Mercer Survey said specifically that the health risks of 

s Code section 49801 imposes a 40 percent excise tax on" applicable employer-sponsored coverage" 

offered to an employee that exceeds specified statutory thresholds (For 2018, the thresholds are $10,200 

for self-only coverage, and $27,500 for coverage other than self-only, subject to certain adjustments). 

9 RAND, Workplace Wellness Programs Study: Final Report (2013). 

10 Id at 53. 

n Id at 57. 

12Jd at 53. 

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the population served by their wellness programs were irnproving.13 

These results support published research findings that workplace wellness programs 

can improve health status, as measured with physiological markers (such as body mass 

index, cholesterol levels and blood pressure).14 According to our data, 45 percent of 

responding employers were measuring specific outcomes from health promotion 

programs in 2016. 

The evidence that workplace health promotion is effective continues to evolve, with 

employers and vendors making greater use of population strategies and evidence-based 

approaches. As they do, existing strategies will evolve correspondingly and adoption of 

new programs will grow. 

THE CURRENT STATE OF EMPLOYER SPONSORSHIP OF WELLNESS PROGRAMS 

The prospect of a healthier workforce has compelled a growing number of 

companies to develop and implement wellness strategies. As part of our 2014 study, we 

asked employers whether they had a wellness strategy. A full65 percent of U.S. 

respondents indicated that they do have a wellness strategy. This 65 percent included 

29 percent who said their strategy was fully implemented and another 31 percent who 

said their strategy was partially implemented. These results are consistent with other 

recent broad-based surveys from Willis,15 SHRM16 and The Families and Work 

Institute.17 

The trend is particularly strong among large employers. According to the Kaiser 

Family Foundation's Employer Health Benefits 2016 Annual Survey,18 83 percent of 

large U.S. companies (with 200 or more workers), compared to 46 percent of smaller 

U.S. companies, offered at least one wellness program in 2014. Large firms are also 

more likely to offer financial incentives to employees for participating (42 percent vs. 14 

percent).19 

It is estimated that more than 75 percent of U.S. employees now have access to 

"Mercer, Taking health management to a new level (2014) via Sloan Center, supra note 2, at 3. 

14 RAND, supra note 10 at 61. 

15 Willis, The Willis Health and Productivity Survey Report (2015). 

16 SHRM, State of Employee Benefits in the Workplace- Wellness Initiatives (2013). 

17Matos, K., & Galinsky, E., Families and Work Institute, 2014 National Study of Employers (2014). 

1s Kaiser Family Foundation, Employer Health Benefits 2016 Annual Survey -Health Risk Assessments, 

Biometric Screening and Wellness Programs 224 (2016). 

19Jd at 225. 

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wellness prograrns.2o 

The remarkable take-up of these programs by employers and employees, combined 

with the capacity and incentives for growth, make wellness an area of tremendous 

promise for the future of health care and employer-sponsored benefits. The Council 

believes that public policy should generally support private sector investment in 

wellness by giving all employers the flexibility to design these programs. 

CHALLENGES WITH CURRENT PuBLIC POLICY 

Employers applaud Congress for working on a bipartisan basis to craft the wellness 

provisions in the PPACA that built on the existing framework created in HIP AA. 

PP ACA' s bipartisan provision increased employer flexibility in designing programs to 

improve the health of employees and their families and reinforced wellness programs 

as a cornerstone of health reform. 

A critical component of encouraging employers to offer meaningful wellness 

programs for the benefit of employees and their families is consistent federal policy 

with respect to the regulation of wellness programs. We appreciate the work of this 

Committee in introducing H.R. 1189, Preserving Employee Wellness Programs Act 

("Act"). The Act included important clarification that wellness programs that comply 

with HIPAA and the PPACA would not violate the ADA or GINA merely by offering a 

reward- a step toward consistent federal policy. 

Following the 2015 introduction of the Act, the EEOC issued regulations under Title 

II of GINA and the ADA governing wellness plans, which are inconsistent with HIPAA. 

The unnecessary burdens imposed on employers by multiple incongruent regulatory 

structures stifle adoption and innovation ofwellness programs. We are concerned the 

future of workplace wellness programs is at risk. We encourage the Committee to 

consider approaches for alleviating these unnecessary regulatory burdens in any future 

legislation. We look forward to working with the Committee to achieve a consistent 

federal regulatory scheme for workplace wellness programs. 

Legal Landscape 

W ellness programs are subject to the jurisdiction of the Department of Labor 

("DOL"), the Department of the Treasury ("Treasury"), the Department of Health and 

Human Services ("HHS"), and the EEOC via a range of federal statutes and regulations. 

Many states have laws governing wellness programs, as well. The discussion below sets 

2o Sloan Center on Aging & Work at Boston College, Fact Sheet 38: Health and Wellness Programs in the 

Workplace 1 Guly 2014). 

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forth the basic federal legal framework applicable to the oversight of wellness 

programs. This is not intended to be an exhaustive discussion of all federal legal issues 

related to wellness programs but rather to provide a basis for understanding 

compliance and other issues employers face with regard to wellness programs. 

Health Insurance Portability and Accountability Act of 1996 

For years, wellness programs have been subject to extensive regulation by the DOL, 

HHS, and Treasury through the Health Insurance Portability and Accountability Act of 

1996, Pub. L. No. 104-191 ("HIPAA"). HIPAA provides privacy and nondiscrimination 

protections to consumers in connection with group health plans. 

Specifically, Titles I and IV of HIP AA added provisions to the Internal Revenue 

Code ("Code"), the Employee Retirement Income Security Act ("ERISA"), and the 

Public Health Service Act ("PHSA")21 that generally prohibit group health plans and 

group health insurance issuers from discriminating against individuals in eligibility, 

benefits, or premiums based on a health factor, which includes, among other things, 

disability.22 An exception to the general rule allows plans and issuers to provide 

premium discounts, rebates, and cost-sharing modifications in return for an 

individual's adherence to certain programs of health promotion and disease prevention, 

such as a wellness program.23 

Final regulations issued by the DOL, HHS and Treasury to implement these 

provisions of HIP AA took effect in 2007, and imposed rules that certain wellness 

programs must satisfy in order to allow incentives to be provided to participants.24 

Programs that either do not require an individual to meet a standard related to a health 

factor in order to obtain a reward or that do not offer a reward at all ("participatory 

wellness programs") are not subject to the additional rules if participation in the 

program is made available to all similarly situated individuals. 25 Programs that require 

individuals to satisfy certain health factor standards in order to obtain a reward 

("health-contingent wellness programs") must satisfy a host of requirements in order to 

'' See Code § 9802, ERISA § 702, PHSA § 2705. 

n See Code§ 9802(a)-(b). Code§ 9802(a)(1) identifies the following as health factors: (i) disability, (ii) 

health status, (iii) medical condition (including both physical and mental illnesses), (iv) claims experience, 

(v) receipt of health care, (vi) medical history, (vii) genetic information, and (viii) evidence of insurability 

(including conditions arising out of acts of domestic violence). 

23 Code § 9802(b )(2). 

24 Nondiscrimination and Weliness Programs in Health Coverage in the Group Market, 71 Fed. Reg. 

75,014 (Dec. 13, 2006). 

25 See 26 C.F.R. § 54.9802-1(1)(2). Examples of participatory wellness programs include reimbursement of 

gym memberships, diagnostic testing that does not condition receipt of a reward on attainment of certain 

outcomes, and a program that reimburses employees for the costs of smoking cessation programs 

regardless of whether an employee stops smoking. 

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satisfy the HIPAA nondiscrimination rules.26 

The requirements are intended to prevent discrimination in the use of incentives in 

connection with wellness programs based on a health factor such as disability. In 

particular, the requirements that a wellness program (1) "not be a subterfuge for 

discriminating based on a health factor, and not be highly suspect in method," and (2) 

the requirement that a "reasonable alternative standard (or waiver of the otherwise 

applicable standard)" be provided to individuals for whom it is unreasonably difficult 

due to a medical condition to satisfy the standard or for whom it is medically 

inadvisable to attempt to satisfy the standard each provide stringent protections to 

individuals with disabilities. 

Patient Protection and Mfordable Care Act 

Congress signaled its strong support for wellness program incentives in a bipartisan 

provision of the PPACA. Specifically, PPACA Section 1201 codifies the HIP AA 

regulations and increases the permitted incentive from 20 percent to 30 percent (and 

permits regulators to increase incentives up to 50 percent at their discretion). This is a 

rare bipartisan provision in the otherwise controversial health care reform law and 

reflects Congress's approval of the offering of incentives for health-contingent wellness 

programs. 

On June 3, 2013, the DOL, HHS and Treasury issued final rules on "Incentives for 

Nondiscriminatory Wellness Programs in Group Health Plans."27 These final wellness 

rules are based on the same general framework as the 2007 HIP AA wellness rules. They 

only apply to wellness programs that are offered in connection with, or that are 

themselves, group health plans. 

Under the PPACA- as under the previous HIPAA rules- plans first must 

determine whether their wellness program is participatory or health-contingent. A 

program will be considered participatory if none of the conditions to obtain a reward 

are based on an individual satisfying a health standard, and thus participatory 

programs are not required to meet the HIP AA wellness rule requirements as long as 

any reward is available to all similarly situated individuals. Health-contingent 

programs must meet the additional requirements of the HIP AA wellness rules in order 

to be in compliance with the HIP AA nondiscrimination rules. A wellness program is 

considered to be health-contingent if it requires an individual to satisfy a standard 

related to a health factor in order to obtain a reward. The June 3, 2013, final rules break 

the health-contingent category down further into activity-based and outcome-based, 

26 See 26 C.F.R. § 54.9802-1(£)(3}-(4). Examples include not smoking, attainment of certain biometric 

screening results, and achieving exercise targets. 

21 78 Fed. Reg. 33,158. 

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with different requirements for each depending on the type of program. 

The HIP AA weliness program regulations promulgated pursuant to PPACA require 

that health-contingent programs satisfy a number of new requirements. Healthcontingent programs must limit the maximum incentive to 30% of the total cost of 

coverage (up to 50% for tobacco cessation programs). The limit is based on the total cost 

of employee-only coverage (or enrolled coverage if dependents may participate). The 

regulations also enhanced protections for participants by requiring that healthcontingent programs must make available a reasonable alternative standard in certain 

situations where an individual cannot satisfy the initial standard. In addition, the 

regulations require a notice alerting individuals to the availability of a reasonable 

alternative standard. 

Genetic Information Nondiscrimination Act of 2008 

W eliness program design and implementation is also affected by the Genetic 

Information Nondiscrimination Act of 2008, Pub. L. No. 110-233 ("GINA"). Title I of 

GINA, which is under the jurisdiction of DOL, HHS and Treasury, addresses whether 

and to what extent group health plans may collect or use genetic information, including 

family medical history. Title II of GINA, under the jurisdiction of EEOC, restricts how 

employers and certain other "covered entities" (collectively referenced herein as 

"employers" for purposes of clarity) may collect and disclose genetic information and 

prohibits employers from using genetic information in employment decisions. 

Title I: Title I of GINA, in relevant part, prohibits group health plans and health 

insurance issuers in the group and individual markets from discriminating against 

covered individuals based on genetic information. Interim final rules were published in 

the Federal Register on October 7, 2009.28 Title I applies to a wide variety of group 

health plans, including weliness programs that constitute or are related to group health 

plans. Title I generally prohibits a group health plan and a health insurance issuer in the 

group market from: 

• increasing the group premium or contribution amounts based on genetic 

information; 

• requesting or requiring an individual or family member to undergo a genetic 

test; and 

• requesting, requiring or purchasing genetic information prior to or in connection 

2ll Interim Final Rules Prohibiting Discrimination Based on Genetic Information in Health Insurance 

Coverage and Group Health Plans, 74 Fed. Reg. 51,664 (Oct. 7, 2009). 

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with enrollment, or at any time for underwriting purposes.29 

The prohibition on requesting, requiring or purchasing genetic information at any 

time for underwriting purposes affects wellness programs. The term "underwriting 

purposes" is defined broadly to include rules for eligibility for benefits and the 

computation of premium or contribution amounts, and it does not merely encompass 

activities relating to rating and pricing a group policy.30The regulations clarify that the 

term "underwriting purposes" includes changing deductibles or other cost-sharing 

mechanisms, or providing discounts, rebates, payments in kind, or other premium 

differential mechanisms in return for activities such as completing a health risk 

assessment (HRA) or participating in a wellness program.31 "Genetic information" is 

defined for purposes of GINA Title I to include family medical history.32 

Wellness programs cannot provide rewards for completing HRAs that request 

genetic information (including family medical history), because providing rewards 

would violate the prohibition against requesting, requiring or purchasing genetic 

information prior to or in connection with enrollment, or at any time for underwriting 

purposes. A plan or issuer can collect genetic information through HRAs under Title I 

of GINA as long as no rewards are provided for such genetic information (and if the 

request is not made prior to or in connection with enrollment).33 A plan or issuer can 

provide rewards for completing an HRA as long as the HRA does not collect genetic 

information. 

Title II: Title II of GINA, which is under EEOC's jurisdiction, restricts how 

employers may collect and disclose genetic information and prohibits employers from 

using genetic information in employment decisions. Final regulations under Title II 

were published in the Federal Register on November 9, 2010.34 

Title II generally prohibits employers from requesting, requiring or purchasing 

genetic information of an individual or a family member of the individual. An 

exception is provided where health or genetic services are offered by the employer, 

including where they are offered as part of a wellness program, if the employer meets 

certain requirements: 

29Jd. 

3o Code § 9832(d)(10). 

31 26 C.F.R. § 54.9802-3T(d)(1)(ii); 29 C.F.R. § 2590.702-l(d)(l)(ii}; 45 C.F.R. § 146.122(d)(l)(ii). 

32 26 C.F.R. § 54.9802-3T(a)(3); 29 C.F.R. § 2590.702-1(a)(3); 45 C.F.R. § 146.122(a)(3). 

33 Interim Final Rules Prohibiting Discrimination Based on Genetic Information in Health Insurance 

Coverage and Group Health Plans, 74 Fed. Reg. at 51,669. 

34 Regulations Under the Genetic Information Nondiscrimination Act of 2008,75 Fed. Reg. 68,912 (Nov. 9, 

2010). 

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• The provision of genetic information by the individual is voluntary, meaning 

the covered entity neither requires the individual to provide genetic 

information nor penalizes those who choose not to provide it; 

• The individual provides prior knowing, voluntary, and written authorization, 

meaning that the covered entity uses an authorization form that (1) is written 

in language reasonably likely to be understood by the individual from whom 

the information is sought, (2) describes the information being requested and 

the general purposes for which it will be used, and (3) describes the 

restrictions on disclosure of genetic information; 

• Individually identifiable genetic information is provided only to the 

individual (or family member and the health care professional or genetic 

counselor providing services); and 

• The information cannot be accessed by the employer (except in aggregate 

terms).35 

The 2010 regulations raised questions as to whether incentives could be offered to 

spouses for completing HRAs that request health information. This is because, when an 

employer requests information from an employee's spouse about the spouse's current 

or past health status, this request itself may be considered a request for the employee's 

genetic information (i.e., an inquiry regarding the manifestation of a disease or disorder 

in a family member). This is due to the fact that GINA and the 2010 regulations define 

"genetic information" by reference to a "family member," which is defined to include 

an individual's spouse. 

In May 2016, the EEOC finalized regulations addressing the question of spousal 

HRAs.36 The 2016 GINA regulations provide that an employer may offer an incentive to 

an employee as part of an ADA-compliant employee health program in exchange for an 

employee's spouse providing information about the spouse's manifestation of disease 

or disorder as part of an HRA or biometric screening administered in connection with 

an employer-sponsored wellness program. The maximum total incentive is limited to 

30% of the total cost of employee self-only coverage (as opposed to enrolled coverage, 

as is the case with HIP AA where a dependent participates in a wellness program). 

Notably, incentives may not be offered for a child's provision of this information 

(unlike under HIPAA). The EEOC rules also require that the spouse provide prior 

knowing, voluntary, and written authorization when the spouse is providing 

information regarding his or her own manifestation of disease or disorder. 

"29 C.F.R. §1635.8(b){2}. 

36 Genetic Information Nondiscrimination Act, 81 Fed. Reg. 31,143 (May 17, 2016). 

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The 2016 GINA regulations apply to wellness programs regardless of whether they 

are part of a group health plan (unlike HIP AA, which is limited to wellness programs 

that are part of a group health plan). 

Americans with Disabilities Act 

The EEOC also regulates wellness programs pursuant to Title I of the Americans 

with Disabilities Act(" ADA"). Title I of the ADA prohibits discrimination against 

qualified individuals with disabilities.37 The ADA prohibits employers from conducting 

medical examinations or making inquiries regarding disabilities at any point during the 

hiring process or during employment, with certain limited exceptions.38 

Title I of the ADA allows employers to conduct voluntary medical examinations, 

including voluntary medical histories, which are part of an employee health program 

available to employees at a work site. Any medical information acquired as part of the 

program is kept confidential arid separate from personnel records. Until the issuance of 

proposed and final regulations in 2015 and 2016, respectively, there was little guidance 

regarding what the term "voluntary" means in this context. 

In May 2016, the EEOC also finalized regulations addressing what constitutes a 

"voluntary" wellness program for purposes of the ADA.39 The 2016 ADA regulations 

provide that an employer may offer an incentive to an employee in connection with a 

medical examination or a disability related inquiry where offered as part of an 

employee health program. The maximum total inducement is limited to 30% of the total 

cost of employee self-only coverage (as opposed to enrolled coverage, as is the case with 

HIP AA where a dependent participates in a wellness program). 

In addition to HIPAA' s existing notice requirements, the final EEOC regulations 

require the use of a much more prescriptive and lengthy notice, which must be 

provided to employees in advance of their participation in an ADA-subject wellness 

program. Additionally, the 2016 ADA regulations provide that a "voluntary" wellness 

program cannot- based upon program participation- deny coverage under any group 

health plan or particular benefits package within a group health plan, or otherwise limit 

the extent of medical benefits or services.40 Accordingly, wellness programs subject to 

the ADA cannot encourage wellness program participation by tying access to special or 

additional group health plan coverage or benefits packages to wellness program 

participation. 

37 42 U.S. C.§ 12112(a). 

38 42 u.s. c.§ 12112(d). 

39 Regulations Under the Americans With Disabilities Act, 81 Fed. Reg. 31,126 (May 17, 2016). 

40See 81 Fed. Reg. at 31,139. 

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Another important misalignment in the regulatory schemes is that the 2016 ADA 

regulations apply to wellness programs regardless of whether they are part of a group 

health plan. This is unlike HIPAA, which applies solely to wellness programs that are 

part of a group health plan. 

Additionally, and quite importantly, many employers now sponsor wellness 

programs with a disease management component. Under these programs, individuals 

with a health factor may be provided financial incentives to engage with the wellness 

program- but at all times they must be treated better than similarly situated employees 

who lack the health factor. Many employers sponsor disease management programs 

under this rubric, such as healthy mother/healthy baby programs, or diabetes 

management programs. One example is that a plan may charge a copay for the 

purchase of insulin, but may waive the copay for their enrollees with diabetes given the 

clinical evidence supporting the importance of properly managing blood sugar levels. 

While these programs are excepted from HIP AA' s prescriptive regime - which is 

appropriate given the favorable treatment under these programs of persons with an 

adverse health status- the 2016 ADA regulations could subject these types of disease 

management programs to the regulations' requirements, which, as discussed below, 

would likely cause many employers to reconsider offering these very valuable and 

helpful programs. 

KEY CONCERNS FOR EMPLOYERS 

Notwithstanding the important role of wellness programs in promoting the health 

and productivity of employees and their families, the inconsistent federal regulatory 

framework under HIP AA, GINA, and the ADA has caused many employers to take a 

step back or pause in their implementation of irmovative wellness programs. This is 

because the new rules under GINA and the ADA added complexity and inconsistency 

and have made it significantly more difficult for employers to structure programs that 

comply with all applicable federal regulatory regimes. 

The Council's A 2020 Vision strategic plan, urged that" federal agencies 

promulgating regulations should proceed in a consistent, collaborative manner that 

supports participatory and outcomes-based wellness initiatives." We are concerned that 

the recent final EEOC regulations under GINA and the ADA have resulted in more 

inconsistency, not less. Programs that are subject to comprehensive and robust 

regulation under HIPAA nonetheless are now also subject to a different- and 

sometimes conflicting- framework under GINA and the ADA. Moreover, effective 

programs that previously were subject to minimal regulation - such as healthy 

mother/healthy baby programs and participatory disease management programs- are 

now subject to unnecessarily burdensome rules that will cause some employers to 

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consider whether to continue them. 

Because federal regulations are not aligned in a consistent manner, they have put at 

risk the availability and effectiveness of workplace wellness programs. This would have 

the adverse consequence of depriving employees and their families of the meaningful 

wellness benefits that such programs offer, including improved health and 

productivity. 

POLICY RECOMMENDATIONS 

We urge the Committee to consider the issues discussed above and identify 

solutions aimed at bringing greater consistency to federal regulation of wellness 

programs and reducing unnecessary burden. 

The Council encourages the Committee to consider the following in the 

development of any future legislation: 

• Wellness programs that are subject to, and comply with, the wellness provisions 

of HIPAA (as amended by PPACA) should be deemed to comply with the ADA 

and GINA Titles I and II, respectively, if they offer rewards that comply with the 

limits imposed on health-contingent programs under HIP AA. It would minimize 

unnecessary regulatory burden on wellness programs and ensure that employers 

are able to rely on Congress's prior stated support for HIP AA-compliant 

wellness programming. 

• W ellness programs that are not subject to the wellness provisions of HIP AA (as 

amended by PPACA) should be deemed to comply with the ADA and GINA 

Titles I and II if they offer rewards that comply with the limits imposed on 

health-contingent programs under HIP AA. In general, this would apply to 

wellness programs that are not offered as part of, or in connection with, an 

employer group health plan, but which voluntarily comply with HIP AA' s 

incentive limits for health-contingent programs. 

• Wellness programs that provide for more favorable treatment of individuals with 

adverse health factors (i.e., disease management programs that are excepted 

from HIPAA) should be deemed to comply with the ADA and GINA Titles I and 

II. 

• The collection of information about the "manifested disease or disorder of a 

family member" should not be considered an unlawful acquisition of genetic 

information with respect to another family member as part of workplace 

wellness programs and should not violate GINA. This provision, if enacted, 

16 
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would ensure that employers can offer to an employee's spouse or child the same 

opportunities afforded to the employee to earn incentives in connection with 

undertaking activities to better understand or manage his or her current health 

status and related health risks. 

CONCLUSION 

It is my hope that this testimony has reinforced the imperative to support and 

strengthen the efforts of employers to be effective in their role of advancing the health 

and well-being of their employees and their family members. 

As the Committee considers any future legislation, we urge you to do so with the 

goal of achieving consistent federal policy and a regulatory framework that is 

minimally burdensome while protecting individuals from discrimination. We believe 

that framework exists in the current HIPAA regulations implemented under PP A CA. 

The employer community appreciates this Committee's recognition of the 

importance of wellness programs and the existing regulatory framework that protects 

individuals against unlawful discrimination, and notes PP ACA was amended on a 

bipartisan basis to endorse and expand HIP AA -compliant wellness programs. 

As the Council's A 2020 Vision states, employer-sponsored benefit plans are now 

being designed with the express purpose of giving each employee the opportunity to 

achieve personal health and financial well-being. This well-being serves as the 

foundation for employees to achieve optimal performance and productivity, which, in 

tum, drives successful organizations. 

Thank you for your interest in employer-sponsored wellness programs. I appreciate 

the opportunity to testify, and look forward to working with you to create a consistent 

federal policy for employer-sponsored wellness programs to improve the health and 

productivity of employees and their families. 

17 
31 

Chairwoman FOXX. Thank you very much. The staff gave me 

phonetically how to pronounce your name, and I read it wrong. Ms. 

Klausner, thank you. I apologize. 

Ms. Mitts, I recognize you for five minutes. 

TESTIMONY OF LYDIA MITTS, ASSOCIATE DIRECTOR OF 

AFFORDABILITY INITIATIVES, FAMILIES USA 

Ms. MITTS. Good morning, Chairwoman Foxx, Ranking Member 

Scott, and distinguished members of the committee. Thank you for 

the opportunity to testify today. 

I am Lydia Mitts, associate director of affordability initiatives at 

Families USA, a nonprofit, nonpartisan consumer advocacy organization that has worked since 1982 to promote high-quality, affordable health care for all in this country. 

The three bills before you today would make various changes to 

employer-based coverage that would promote the scaling back of 

plan benefits and shift a greater share of cost to workers, particularly older and sicker workers. 

I would like to specifically address two of the bills before you 

today, starting with the Preserving Employee Wellness Programs 

Act. We believe that preserving and strengthening access to care 

should be a pillar of workplace wellness efforts. 

We have long had concerns with wellness program incentives 

that vary workers’ healthcare premiums or other healthcare costs 

based on their completing health screenings or meeting certain 

health goals. Such programs can simply be a backdoor way to 

medically underwrite. 

In addition, national research from RAND has found that simply 

offering a comprehensive wellness program that includes extensive 

lifestyle management and disease management services is almost 

equally as effective as incentives at generating high participation. 

Premium surcharges tied to completing invasive health 

screenings also undercut key protections of the Americans With 

Disabilities Act and the Genetic Information Nondiscrimination Act 

that protect the privacy of workers’ sensitive medical and genetic 

information. 

Our concerns with these collection practices are elevated given 

research showing that over half of workplace wellness programs 

provide limited services or focus only on providing health 

screenings. These raise significant concerns that many programs 

are focused on collecting sensitive information, not making investments in services to help workers address health problems. 

The Preserving Employee Wellness Programs Act would open the 

door for employers to charge workers and their families even higher healthcare costs if they refuse to complete invasive health 

screenings. 

Under current regulations, employers can already charge premium surcharges as high as 30 percent of the premium for employee only coverage, which is around $2,000 on average. This bill 

drastically increases maximum surcharges to 30 percent of the cost 

of family coverage, which translates to close to $5,500 on average. 

This change will just make coverage less affordable for many families, and further undercut important worker protections against 

discrimination. 

CEWDOCROOM with DISTILLER

32 

The bottom line is that efforts to support employee health need 

to focus on providing evidence-based services, not shifting 

healthcare costs to workers. 

The second bill I would like to speak to is the Small Business 

Health Fairness Act. This bill would exempt Association Health 

Plans from adhering to critical State and Federal requirements for 

small group coverage. These requirements have benefited small 

employers and their workers alike. 

They include protections that prevent plans from charging small 

employers exorbitantly higher premiums because their employees 

have poorer health, are older, or are disproportionately women. 

They also include requirements that plans cover comprehensive 

benefits that meet the needs of a diverse workforce. 

By allowing Association Health Plans to ignore these key protections, this bill would increase premiums and threaten stable access 

to comprehensive coverage for many small employers and their 

workers. 

Employers with a young workforce that is in pristine health may 

be able to get lower premiums. However, the rest of small businesses would see coverage become less affordable, although they 

sought it through an association or the existing small group market. 

On top of this, employees that move to association plans would 

be at risk of facing skimpier coverage that doesn’t cover the care 

they need. This bill would just move us backward to a two-tier system that makes it harder to purchase comprehensive, affordable 

coverage for all but a minority of small businesses. 

In closing, I want to note the real threat that other proposals to 

repeal the Affordable Care Act also pose to the health coverage of 

workers and their families. While not before the committee today, 

these proposals would have grave impacts on access to affordable 

coverage for working people in this country. 

As we discuss solutions to improve affordability of coverage and 

care for businesses and their workers, we need to focus on solutions 

that do not simply shift healthcare costs to working families or undermine their access to coverage that fully meets their needs. 

I hope this testimony has provided you with a valuable overview 

to help inform your deliberations on the legislation before this committee. Again, thank you for the opportunity to testify before you 

today. 

[The statement of Ms. Mitts follows:] 

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March I, 2017 

"Legislative Proposals to Improve Health Care Coverage and Provide Lower 

Costsfor Families" 

Testimony of Lydia Mitts 

Associate Director of Affordability Initiatives, Families USA 

Before the Education and the Workforce Committee 

Good morning, Chairwoman Foxx, Ranking Member Scott, and distinguished members of the 

Committee. Thank you for the opportunity to testify today. I am Lydia Mitts, Associate Director 

of Affordability Initiatives at Families USA, a non-profit, non-partisan, consumer advocacy 

organization that has worked since 1982 to promote high-quality, aftordable health care for all in 

this country. 

The three bills before you today would make various changes to the requirements governing 

coverage available to workers. All of these bills would promote the scaling back of employee 

health plan benefits and shift a greater share of costs to workers. These changes would harm 

access to a!Tordable, comprehensive coverage, particularly for older and sicker workers. 

l would like to specifically address two of the bills before you, starting vvith the ''Preserving 

Employee \Vellness Programs Act." We have strong concerns that this bill will proliferate the 

usc ofwellness programs as a backdoor way to charge sicker workers more tor health coverage 

and will further undercut critical workforce non-discrimination protections. 

First, I want to emphasize that we support efforts to provide employees with resources to 

improve their health and well-being. However, it is critical that these efforts are grounded in 

evidence, do not open the door to workforce discrimination, and do not threaten workers' access 

to affordable health coverage and care. We believe that preserving and strengthening access to 

care should be a pillar of any workplace well ness e!Torts. Workplace well ness programs that 

increase workers' health care premiums or other health care costs if they do not meet certain 
34 

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program requirements do the opposite of support well-being; rather these types of programs 

make it harder t(Jr workers to access the clinical care they need to achieve good health. 

Background: Evidence on Workplace Wellness Programs and Incentives 

Before spt:aking to the bill specifically. I would like to provide some background on workplace 

wcllness programs and the risks they potentially pose to workers. The RAND Corporation 

conducted a review of workplace wellness programs. commissioned by the federal government. 

This RAND review found that many wcllness programs do not provide extensive services 

beyond health screenings. It found that only 13 percent of all employer wellness programs are 

considered comprehensive. This means that in addition to health screenings. these programs have 

comprehensive lifestyle management and disease management services. Perhaps most 

concerning, just over half of all programs (54%) provide only limited services across the board, 

or focus only on providing health screenings.1 These trends raise significant concerns that many 

workplace well ness programs are t~tiling to make significant investments in services that could 

actually help workers improve their overall health and well-being. 

RAND also looked at the efficacy of the use of financial incentives to boost pa1iicipation in 

wellncss programs. It found that incentives can increase participation, particularly in programs 

that offer very limited services. However, more importantly, RAND found that simply offering a 

comprehensive program that includes extensive lifestyle management and disease management 

services is almost equally as effective at generating high participation. Among programs that 

used no incentives at all, comprehensive programs had 52 percent participation, while limited 

programs had only 20 percci]t participation? RAND stated that their findings, "question whether 

employers· enthusiasmfor incentives, 1rhich have the unintended consequence of shifiing cost to 

employees with poor health, is warranted "3 Put simply, employers should not need to use 

1 Soeren Mattke et al., Workplace Wei/ness Programs Study: Final Report, (Santa Monica, CA: RAND Corporation, 

2013), available online at b.llQ~w.rand.org/pubs/research reports/RR254.html. 2 Soeren Mattke et al., Workplace Wei/ness Programs Study: Final Report, (Santa Monica, CA: RAND Corporation, 

2013), available online at http:f!www.rand.org/pubs/research reports/RR254.html. 

3 RAND Corporation, Incentives for Workplace Wei/ness: They Increase Employee Participation But Building a Better 

Program Is Almost os Effective, (Santa Monica, CA: RAND Corporation, 2015), available online at 
35 

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incentives at all if they design a wellness program that actually provides meaningful services to 

their employees. 

Wellness Incentives Shift Health Care Costs to Vulnerable Workers 

We have long had concerns with well ness program incentives that vary workers' health care 

premiums or other health care costs based on their completing health screenings or their meeting 

ccttain health goals. There is no evidence that charging people more f()r coverage or care leads to 

sustained improvements in health outcomes or behaviors- rather it is simply a backdoor way to 

medically underwrite and shift premium costs to workers in poorer health. Furthermore, 

premium surcharges tied to completing invasive health screenings undercut key protections of 

the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act that 

have prohibited employers from compelling their workers to share sensitive medical and genetic 

information. Such programs run an equal risk of shifting costs to workers in poorer health, who 

are more likely to be wary of disclosing sensitive medical information out of fear of 

discrimination or privacy concerns. Our concerns with these practices are elevated given the 

earlier mentioned research showing that: I) more than half of programs do little beyond collect 

employee health data through screenings; and 2) truly comprehensive wellness programs built to 

help employees address health problems do not need discriminatory incentives to encourage 

participation. 

"Preserving Employee Wellness Programs Act" Paves Road for Greater Cost-Shifting to 

Workers 

The "Preserving Employee Wcllness Programs Act" would open the door for employers to 

charge workers and their families even higher health care costs if they refuse to complete 

invasive health screenings. This would further undercut affordability of coverage and weaken 

longstanding worker protections. Under current regulations, employers can already charge 

premium surcharges as high as 30 percent of the premium for employee-only coverage if 

workers refuse to complete health screenings; based on the average cost of employer-based 
36 

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VOICE FOR HEALTH CARE CONSUMERS 

employee-only coverage in 2016 that is close to $2,000 ($1 ,930). 4 This bill would drastically 

increase this maximum surcharge to 30 percent of the cost of family coverage; based on the 

average cost of employer-based family coverage, this translates to a premium surcharge of close 

to $5.500 ($5,442)' This change will do nothing to support the health and well-being of workers. 

Rather, it will just make coverage less affordable for many workers and their families. The 

bottom line is that efforts to support employee health need to focus on providing evidence-based 

services, not shifting health care costs to workers. 

"Small Business Health Fairness Act" Not the Solution to Improve Affordability of 

Coverage for Small Businesses 

The second bill I would like to speak to is the ''Small Business Health Fairness Act." This bill 

would exempt association health plans marketed to small businesses from adhering to critical 

state and federal requirements for small group coverage. These requirements have benefitted 

small employers and their workers alike. They include protections under the Affordable Care Act 

that prevent small group plans from charging employers exorbitantly higher premiums because 

their employees have poorer health, are older, or are disproportionately women. They also 

include state and federal requirements that small group plans cover comprehensive benefits that 

meet the needs of a diverse workforce. 

By allowing association health plans marketed to small businesses to ignore these key 

protections, this bill would increase premiums and threaten stable access to comprehensive 

coverage for many small employers and their workers. Employers with a young workforce that is 

in pristine health may be able to get lower premiums. However, the rest of small businesses 

would sec coverage become less affi.Jrdable, whether they sought it through an association or the 

existing small group market. Small businesses with a workforce that is older, disproportionately 

·'According to Kaiser Family Foundation/Health Research and Education Trust's 2016 Employer Benefits Survey the 

average total premium for employee only coverage in 2016 was $6,435. Kaiser Family Foundation and Health 

Research and Education Trust, 2016 Employer Benefits Survey, (Washington, DC: Kaiser Family Foundation, 

September, 2016), available online at http://kff.org/health-costs/report/2016-employer-health-benefits-survey/ 

5 According to Kaiser Family Foundation/Health Research and Education Trust's 2016 Employer Benefits Survey the 

average total premium for family coverage in 2016 was $18,142. Kaiser Family Foundation and Health Research 

and Education Trust, 2016 Employer Benefits Survey, (Washington, DC: Kaiser Family Foundation, September, 

2016), available online at http://kff.org/health-costs/report/2016-employer-health-benefits-survey/ 
37 

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THE VOICE FOR HEALTH CARE CONSUMERS 

women, or that has more health problems would suffer the most. On top of this, employees 

moved to association plans would be at risk of facing skimpier coverage that comes with 

significantly higher cost-sharing or doesn't cover the care they need. Exempting association 

health plans from important protections is not the solution to make coverage more affordable for 

small businesses and their workers. This bill would just move us backward to a two-tiered 

system that makes it harder to purchase comprehensive, affordable coverage for all but a 

minority of small businesses. 

Threats Posed by Repealing the Affordable Care Act 

In closing, I want to note the real threat that Affordable Care Act repeal proposals pose to the 

health coverage of workers and their families. While they are not before the Committee today, 

policies are being discussed and considered by the House that would repeal the Affordable Care 

Act, give large tax breaks to the wealthy, and significantly cut back on financial assistance with 

coverage for lower- and moderate-income families. These policies would have devastating 

consequences to millions of working individuals who have gained health insurance under the 

Affordable Care Act. It is critical that we find solutions to improve affordability of coverage and 

care for businesses and their workers. However, we need to focus on solutions that do not simply 

shift health care costs to working families or undermine their access to coverage that fully meets 

their needs. 

In closing, I hope this testimony has provided you with a valuable overview to help inform your 

deliberations on the legislation before this Committee. Again, thank you for the opportunity to 

testify before you today. 
38 

Chairwoman FOXX. Thank you, Ms. Mitts. Mr. Ritchie, you are 

recognized for five minutes. 

TESTIMONY OF JAY RITCHIE, EXECUTIVE VICE PRESIDENT, 

TOKIO MARINE HHC, TESTIFYING ON BEHALF OF THE SELFINSURANCE INSTITUTE OF AMERICA 

Mr. RITCHIE. Thank you. Chairwoman Foxx, Ranking Member 

Scott, and distinguished members of the committee, my name is 

Jay Ritchie and I’m an executive vice president with Tokio Marine 

HHC Stop-Loss Group. 

Tokio Marine HHC Stop-Loss Group provides coverage for over 

3,000 self-insurance employers and Taft-Hartley plans. We are one 

of the largest providers of medical stop-loss in the U.S., covering 

3.4 million employees and their dependents. 

Today, I’m testifying on behalf of the Self-Insurance Institute of 

America, a national nonprofit trade association representing the 

business interests of companies involved in the self-insurance marketplace, of which I am the current chairman. 

SIIA and its members strongly support the Self-Insurance Protection Act, and we thank Dr. Roe for his sponsorship of the legislation, as well as the support of many of you on this committee. 

Self-insurance offers employers across the country a platform to 

effectively and efficiently manage their healthcare expenditures. 

The self-insurance market is focused on creating cost-effective and 

beneficial outcomes for employee populations. Self-insurance is not 

limited to just private sector employers. Local cities, counties, and 

school districts make up 9 percent of my own block of business. Another 5 percent is made up by Taft-Hartley plans. 

I will also balance my remarks today by saying that self-insurance is not the right option for everyone. Self-insurance does carry 

additional responsibilities for the plan sponsor, but I feel strongly 

that every employer should have the right to examine their options 

on how to best finance their employee health benefit costs. 

We have submitted to this committee a more detailed written 

testimony, so I will not re-read it in its entirety in respect to our 

allotted time. 

I would like to highlight some of the important reasons why the 

Self-Insurance Protection Act is so important to encourage competition and maintain current market forces. The largest differentiator 

between health insurance and self-insurance is ownership, who 

controls the plan. 

Self-funded employers made the choice to take ownership of their 

plan in a fiduciary capacity. While this gives the plan control of the 

benefit design and claim data, it also makes the employer financially responsible for all administrative expenses and healthcare 

claims of the enrolled members. This financial responsibility can be 

assumed by the largest employers or Taft-Hartley plans. 

However, for those who want to have the benefits of self-insurance but need to manage the fiscal risk of large catastrophic 

claims, they purchase an insurance product called ‘‘medical stoploss insurance.’’ 

Medical stop-loss insurance, also known as simply ‘‘stop-loss,’’ is 

not health insurance. Stop-loss does not insure employees, nor do 

we reimburse medical providers for care. Rather, we reimburse a 

CEWDOCROOM with DISTILLER

39 

self-funded entity for healthcare payments incurred by the plan to 

the extent they exceed a certain predetermined threshold or deductible, similar to a liability product. 

To further tell the differences between stop-loss and health insurance, I would offer you the fact that of the 3,000 stop-loss policies my company sells, our average deductible is $140,000. Smaller 

policyholders will buy a deductible lower than the average while 

larger plans will buy much higher, but the reality is that stop-loss 

does not cover the same risks as health insurance, and that is by 

design. 

Stop-loss is what makes self-insurance work for employers that 

are not large enough to self-fund the largest claims. Without medical stop-loss insurance, these plans cannot afford to be self-funded 

as a single catastrophic claim could create financial hardship for 

the plan, so they purchase stop-loss coverage to transfer the risk 

of large dollar claims. 

We’re advocating for the passage of the Self-Insurance Protection 

Act to preclude regulatory action that would limit access to stoploss coverage. If regulators are permitted to redefine stop-loss coverage as health insurance, the availability and access to stop-loss 

will be significantly reduced. 

It would mean that stop-loss is only available for health insurers 

when they control the plan. This would eliminate the most valuable 

aspects of self-insurance and restrict plans to a limited amount of 

health insurers. This would also lead to self-insurance only being 

available for the largest corporations, and we would see its benefits 

and advantages eliminated for small- and medium-sized organizations that need it the most. 

Stop-loss insurance, while clearly not health insurance, is still an 

insurance product, meaning states still regulate how insurance operates. Certain states have taken action to restrict availability of 

stop-loss based on a specific deductible for certain group sizes. 

While we acknowledge the responsibility of a state to regulate 

change for insurance products under their jurisdiction, a Federal 

regulation that would alter the definition of ‘‘stop-loss coverage’’ 

into a product it is clearly not intended to be is very concerning. 

To prevent this, the Self-Insurance Protection Act simply seeks to 

amend the definition of ‘‘health insurance coverage’’ under the Public Health Services Act and parallel sections of ERISA and the Tax 

Code to clarify that stop-loss insurance is not health insurance. 

This legislation does not amend the ACA. 

In conclusion, self-insured employers, benefit brokers, consultants, and third party administrators, who are all members of SIIA, 

strongly support the passage of the Self-Insurance Protection Act, 

to promote and protect the ability of organizations to self-insure 

with access to stop-loss insurance based on their specific needs. 

Self-insurance provides affordable health coverage to businesses 

of all sizes, helping many employers access coverage they may not 

otherwise have. While self-insurance is not the only solution to accessible and affordable employer health care, it is an essential part 

of the solution and should remain available. 

Thank you for the opportunity, and I look forward to speaking 

with the committee. 

[The statement of Mr. Ritchie follows:] 

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Testimony of Jay Ritchie 

Executive Vice President, Tokio Marine HCC Stop-loss Group 

Chairman, Self-Insurance Institute of America, Inc. (SUA) 

Before the House Education & Workforce Committee 

"legislative Proposals to Improve Health Care Coverage and Provide Lower Costs for Families" 

March 1, 2017 

Chairwoman Foxx, Ranking Member Scott and distinguished members of the Committee, my 

name is Jay Ritchie and I am an Executive Vice President ofTokio Marine HCC-Stop Loss Group. I also 

serve as chairman of the Self-Insurance Institute of America, Inc. 

Tokio Marine HCC- Stop Loss Group provides coverage for over 3,000 self-insurance employers 

and Taft-Hartley plans. We are one of the largest providers of medical stop loss insurance for selfinsurance plans in the U.S., covering 3.4 million employees and their dependents. 

Today, I am testifying on behalf of the Self-Insurance Institute of America (SIIA), a national non· 

profit trade association representing the business interests of companies involved in the self-insurance 

marketplace. SIIA and its members strongly support the Self-Insurance Protection Act (SIP A) and we 

thank Dr. Roe for his sponsorship of the legislation, as well as the support of many of you on this 

committee. 

Self-insurance offers employers across the country a platform to effectively and efficiently 

manage their healthcare expenditures by using both individual employer and benchmarking data 

combined with effective healthcare systems, to improve outcomes and eliminate waste. The self-insured 

market is focused on creating cost-effective and beneficial outcomes for employee populations. Selfinsurance is not limited to just the private sector. Cities, counties and school district's make up 9% of our 

total block of business, with another 5% made up of Taft Hartley and collective bargained labor plans. 

I will also balance my remarks today by saying that self-insurance is not the right option for 

everyone. An organization needs to understand the financial requirements because self-insurance is 

more responsibility than just handing it off to a health insurer. Self-insurance carries additional liabilities 

and time commitments to ensure the plan is successful, but I feel strongly that every employer should 

have the right examine their options on how to best finance their employee health care costs 

Fully Insured vs. Self-Insured Health Plans 

Traditionally, a fully insured arrangement (i.e. health insurance) offers little risk to the plan 

sponsor, who purchases a policy from an insurance company. The plan agrees to pay a set premium per 

employee per month and the insurance company pays all eligible claims incurred during the policy 

period. The benefits of the policy are often predefined based on standardized plan designs and 

systematic processing. The insurer is the covered entity under the law as the risk taker and therefore 

governs the plan. This is certainly a viable option that employers have at their disposal. 

A self-insured arrangement can include the same services and the same benefits, but the 

financing of the plan is different. Instead of paying a monthly premium to an insurance company, they 

fund a claim account that pays for claims incurred under their plan. The employer is now the covered 

entity for the plan and makes the determinations on plan design and benefits payable. Because the plan 
41 

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is now the risk assuming entity, they often elect to purchase stop loss insurance to manage the potential 

of a catastrophic risk and we will discuss that topic in a moment. The biggest difference between health 

insurance and self-insurance is simple- who owns the funds at the end of the year when budgeted costs 

are below expectations. In fully insured arrangements it is the health insurer. In self-insurance, it is the 

plan. Money not spent by the self-insured plan stays with the plan. 

A well-run self-insured plan is normally less expensive over time compared to a fully-insured 

plan. Traditional insurance premiums account for profit and marketing costs that are passed on to the 

plan in every premium dollar. These profit costs are not applicable to a self-insured plan, which are 

essentially not-for-profit health plans. In addition, federal law provides self-insured plans flexibility in 

designing benefit packages that meet the specific needs of plan participants and allows the plan to 

structure more innovative reimbursement arrangements when warranted 

Self-insuring also allows claims to be funded as they are paid, instead of the pre-payment seen 

in the fully-insured market. A self-insured plan pays health plan costs as they are actually paid to the 

medical service providers. 

Another key point is ownership of health claims data, an extremely valuable tool for plan design 

benefits. Self-insured organizations own all claims data and can use it to help deliver benefits efficiently 

while being cost-effective. Self-insured plan sponsors are at the forefront of reducing medical costs by 

emphasizing wellness programs, including preventative care and chronic disease management. 

Employer sponsors of self-insurance plans have both the ability and the incentive to create and integrate 

health risk assessments, prevention and wellness programs tailored to the employer's specific 

demographic and need. For instance, a tech company with a younger employee population may see 

that they are having a large portion of their claims in prenatal care, so they could implement a program 

to ensure proper pre-natal screening and create a new incentive or benefit for mothers to participate in 

post-delivery mental health screening. While a manufacturing company with an older employee 

population may want to increase cardiac well ness visits due to an increased frequency of cardiac claims. 

Stop loss is Critical to Self-Insured Plans 

let me also further explain about stop loss insurance. Stop loss insurance may be purchased by 

self-insured organizations to provide a financial backstop guarding against catastrophic health care 

claims. While the plan is self-insurance, not every plan can or wants to self-finance large catastrophic 

claims that can be unpredictable. It is important to note that stop-loss does not insure employees nor 

do we reimburse medical providers for care, but rather stop loss reimburses a self-insured entity for 

health care payments they have made that exceed a certain, pre-determined level similar to a liability 

product. This pre-determined level is also known as an attachment point. These attachment points can 

either be for a specific plan participant, called specific stop loss coverage, or for total claims paid by the 

plan, called aggregate stop loss. 

Stop loss coverage is not purchased by all self-insurance plans. Very large plans have large 

enough group populations where even the catastrophic claims become fairly predictable. Stop loss is 

also a unique product in that the plan decides where it wants to set its specific coverage thresholds. As 

groups get larger, the specific retention gets larger. For our block of business the average specific 

deductible is over $140,000. As you can surmise, this means the plans retains a large portion of the day 

to day risk of the plan and stop loss covers the catastrophic claims. This results in stop loss premiums 

2 
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being a fraction of the size of health insurance premiums simply because we take a materially different 

risk than health insurance does. 

The requirements of the Affordable Care Act (ACA) have challenged many organizations with 

self-insurance health care plans and stop loss. For many plans, the removal of annual claims limits and 

lifetime coverage maximums have led plans to purchase stop loss coverage to protect their plans from 

large scale claims and ensure financial reserves. If stop loss is defined as health insurance coverage, it 

will dramatically change the nature of stop loss coverage, potentially leading to few or no carriers in the 

market, which will drive up the cost and threaten the existence of self-insured plans. By limiting the 

availability of stop loss, employer sponsors would be forced to move back to a more expensive fullyinsured model, passing those costs on to employees and restricting their ability to offer more 

customized benefits and access to data. 

Wellness Programs Under Self-Insurance 

Given the higher level of engagement when employers choose a self-insurance option, it can 

empower them to focus more on employees' health. Many businesses have turned to wellness 

programs such as smoking cessation, on-site clinics and indoor walking paths to help encourage healthy 

lifestyles. Disease-management programs have been shown to reduce hospital visits and lower health 

costs. This emphasis on health supports the employees and helps businesses lower health care costs. 

Criticism of Self-Insurance 

I would like to address some of the criticisms raised over self-insured health plans, primarily 

those surrounding small business. The main criticism being raised by opponents is that self-insured plans 

are not regulated, and are removing important patient protections. These criticisms are patently false. In 

fact, self-insurance plans are regulated by no less than 10 federal laws, including the Employment 

Retirement Income Security Act (ERISA) and the Health Insurance Portability and Accountability Act 

(HIPAA). 

Critics have also included the idea of adverse selection, based on the mistaken assumption that 

small businesses will offer only "bare bones" benefit packages through self-insured plans. There is broad 

agreement that "bare bones" plans, wherever they have been tried, have failed due to lack of demand. 

This is because small business workers want Fortune-500 style benefits like those enjoyed by workers in 

large companies. Also, small businesses must offer benefit options comparable to those offered by large 

companies if they are going to attract and retain quality employees. 

Self-Insured Health Plans under the ACA 

Non-grandfathered self-insured group health plans are subject to almost all of the ACA market 

reforms, regardless of whether stop-loss insurance is utilized or not. Self-insured plans are also 

regulated under ERISA, HIPAA and the Tax Code, making it important to emphasize that self-insurance 

does not constitute a regulatory loophole. 

Opponents state that self-insurance plans are not subject to all the provisions of the ACA. In 

fact, the employer is still subject to all the employer responsibilities requirements of the ACA. What the 

self-insurance plan is not subject to is the insurance company rules that are no longer applicable due to 

the fact that the insurer is now the plan itself. For example, a self-insurance plan is not subject to the 

3 
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medical loss ratio rule. Why? Because now 100% ofthe claims are paid by the plan for health care claims 

and quality improvements, so a rule that regulates what the insurance company spends on health claims 

and quality improvements is illogical. 

Critics further argue that this trend toward self-insurance, especially in the small and mid-sized 

employer market segments, will compromise the viability of the ACA Exchanges (in particular, the SHOP 

Exchanges) because self-insured plans will cover healthy populations, leaving "bad" health risks for the 

Exchanges. There is no data to substantiate these arguments, and efforts to make it more difficult for 

employers to self-insure by restricting the availability of stop-loss insurance restricts choice and could 

lead to more employers discontinuing coverage. 

Self-Insurance Protection Act: Strengthening Access to Self-Insurance 

The Self-Insurance Protection Act would preclude harmful regulatory action that would limit 

access to stop-loss coverage, ensuring that many groups seeking to self-insure are able to access the 

necessary tools to do so. Already regulated under ERISA, PHSA and the Tax Code, access to self-insured 

plans will become further restricted if regulators are permitted to redefine stop loss coverage as health 

insurance. Doing so would force the market to only purchase stop loss coverage from the ever 

decreasing health insurance market where the insurer would take full and complete control ofthe plan. 

Thus, eliminating the most valuable aspects of self-insurance and restricting plans to a limited amount of 

options offered only by health insurers. Resulting in self-insurance only being available for the largest 

corporations and to see it numerous benefits and advantages eliminated for small and medium sized 

plans. 

Stop loss insurance, while clearly not health insurance, is still an insurance product, meaning 

states still regulate how insurance operates. Certain states have taken action to restrict availability of 

stop loss based on specific deductible for certain group sizes. While we all acknowledge the 

responsibility of the state to legislate change for insurance products under their jurisdiction, a federal 

regulation that would alter the definition of stop loss coverage into a product it is clearly not intended to 

be would be concerning. 

To prevent this, the SIP A simply seeks to amend the definition of "health insurance coverage" 

under the Public Health Services Act (PHSA), and parallel sections of ERISA and the Tax Code, to clarify 

that stop-loss insurance is not health insurance. The legislation does not amend the ACA. 

Since the passage of the Affordable Care Act, the share of small businesses offering coverage 

has plummeted to 29%. Among firms who have ended their health benefits programs, half cite cost as 

the top reason. Throughout this time, self-insurance has been a viable option for some small businesses 

and the passage of SIP A is needed to maintain that ability. 

Conclusion 

In conclusion, self-insured employers, consultants, brokers, plan administrators and SIIA 

members strongly support the passage of the Self-Insurance Protection Act, and the ongoing ability of 

organizations to self-insure with access to stop loss insurance based on their specific needs. Selfinsurance provides affordable health coverage to businesses of all sizes, helping many employers access 

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coverage they may not otherwise have. While self-insurance is not the only solution to accessible and 

affordable employer health care, it is an essential part of the solution and should remain available. Hard 

working employees and their families depend on self-insured plans, along with the high-quality coverage 

they need. Often, that coverage includes access to customized wellness benefits, onsite medical clinics 

and so forth. We look forward to continuing a constructive dialogue on how to increase access to 

affordable and competitive employer sponsored health coverage for all businesses. 

Thank you for the opportunity to submit this testimony. I look forward to answering any 

questions you may have. 

5 
45 

Chairwoman FOXX. Thank you, Mr. Ritchie. Mr. Hurst, you are 

recognized for five minutes. 

TESTIMONY OF JON B. HURST, PRESIDENT, RETAILERS ASSOCIATION OF MASSACHUSETTS, TESTIFYING ON BEHALF OF 

THE NATIONAL RETAIL FEDERATION 

Mr. HURST. Thank you, Chairwoman Foxx, Ranking Member 

Scott, and honorable members of the committee. My name is Jon 

Hurst. I’m president of Retailers Association of Massachusetts. 

We’re a state trade association of 4,000 mom-and-pop businesses 

across the Commonwealth. You will find organizations like ours in 

every state capital across the country. 

We are all members of the National Retail Federation. We collectively represent what is the most competitive industry on the face 

of the planet, the retail sector. It is most competitive because our 

industry empowers consumers. When you think about the consumer, the consumer has all the power to make the decisions of 

what they buy, where they buy it, for how much, and when they 

buy it. 

If we could only translate some of that same power into the 

healthcare industry, and that is what we’re trying to get done with 

some of this legislation and some of these reforms for small businesses. 

I’ll take you back 11 years ago in Massachusetts. Our legislature 

and former governor, Mitt Romney, passed what was called ‘‘Chapter 58,’’ better known as ‘‘RomneyCare.’’ RomneyCare had a lot of 

important objectives and a lot of important wins, one of which was 

greatly lowering the level of uninsured. We went down below 3 percent. 

The other objective was to make sure that we didn’t hurt employment of large employers that were at the table and effectively involved in the lobbying of that legislation. 

What was overlooked though, Madam Chairwoman, were the 

small businesses. The small businesses were not at the table, and 

those developing that legislation thought that really all small businesses needed was an exchange, a marketplace to go to and buy 

health insurance. 

If you fast forward for a few years, we kept on measuring what 

was happening with the health insurance rates for our 4,000 members. Each and every year between 2006 right on up through now, 

our average increases for these small businesses have been 12 percent. 

We always benchmark ourselves against a self-insurance group, 

which is the state, our Group Insurance Commission, which is a 

self-insured group of state employees. Our small members, which 

is a cross section of society, have been annually seeing increases 

three times the rate of the self-insured group of the state. 

We find it very hard to believe that employees of Main Street 

businesses were three times less healthy than employees of State 

government. 

So, it didn’t take very long for us to decide we needed to do something different. We went back to the legislature in 2010 and got 

passed unanimously an update of the old Association Health Plan 

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46 

law, which had been repealed in Massachusetts about 15 years earlier. 

We called it ‘‘The Small Business Cooperative Law.’’ It allowed 

for small businesses to band together with their trade associations, 

their chambers of commerce, and see real savings and real tools 

that large competition, the competition across the street, and from 

big business and from big government have every day, from savings on wellness programs, to savings on using transparency on 

costs and quality, to make sure that your employees are well educated about the right place, the right service, with the right provider for whatever form of health care they need. 

We acted as their H.R. departments. Between our association, 

100 local chambers of commerce across the Commonwealth, this 

passed unanimously. The legislation was signed into law by former 

Governor Deval Patrick. It was extremely supported, and even to 

this day, we have more small businesses and their employees buying through these cooperatives and buying through our State exchange, our connector. We don’t cost the taxpayer one dime. 

You know, it’s time that we look at ways to level the playing field 

for small businesses and their employees. They compete, Madam 

Chairwoman, every day with large businesses, not only for customers, but also for employees. Whether we have a law or not that 

says you must buy health insurance, or if the employees of the 

small businesses themselves feel like they need to have health insurance for themselves and their families, it is incumbent upon us 

and government to make sure that we do not throw up roadblocks 

and cause discrimination based upon where you work. 

If employees of large employers have the ability to self-insure 

and to group buy and get discounts on wellness and transparency 

uses, so should the small businesses. They should not be held back. 

They should not see increases that are far higher than their competition across the street. That is incumbent upon government. It’s 

incumbent upon our markets to make sure that we have equality 

in the marketplace. 

We look forward, Madam Chairwoman and members of the committee, of working with you on this very important legislation, H.R. 

1101, because we think this is an important step to reforming our 

healthcare policies across the country for our small businesses and 

their employees. 

Thank you very much. 

[The statement of Mr. Hurst follows:] 

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Statement of the 

Retailers Association of Massachusetts 

on behalf of 

National Retail Federation 

submitted to the 

U.S. House of Representatives Committee on 

Education and the Workforce 

for its hearing on 

"Legislative Proposals to Improve Health Care Coverage and 

Provide Lower Costs for Families" 

March I, 2017 

Jon Hurst 

President 

Retailers Association of Massachusetts 

18 Tremont St., Suite 810 

Boston, MA 021 08 

(617 523-1900 

www .retai lersma.org 

On behalf of: 

National Retail Federation 

1101 New York Avenue, N.W., Suite 1200 

Washington, D.C. 20005 

(202) 783 -7971 

www.nrf.com 
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Chairwoman Foxx, Ranking Member Scott and honored members of the Committee, I thank you 

for the opportunity to appear before you today to offer comments regarding the various legislative 

proposals currently before the Committee to improve health care coverage for small businesses. 

My name is Jon Hurst and I am the president of the Retailers Association of Massachusetts (RAM) 

and a member of the National Retail Federation (NRF). 

Established in 1918, RAM is a statewide trade association of approximately 4,000 member 

companies. Our membership ranges from independent, "mom and pop" owned stores to larger, 

national chains operating in the general retail, restaurant and service sectors of the retail industry. 

The retail industry in the Commonwealth of Massachusetts is the backbone of our local Main 

Streets, supporting over 928,000 jobs and operating in more than 73,000 brick-and-mortar 

establishments. 

NRF is the world's largest retail trade association, representing discount and department stores, 

home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants 

and Internet retailers from the United States and more than 45 countries. Retail is the nation's 

largest private sector employer, supporting one in four U.S. jobs- 42 million working Americans. 

Contributing $2.6 trillion to annual GOP, retail is a daily barometer for the nation's economy. 

As a leading employer organization advocating for equitable and affordable health insurance 

coverage for small businesses, RAM would like to voice its support for the Small Business Health 

Fairness Act (H.R. 1101) as the legislation would allow small businesses to join together through 

association health plans to provide greater access to affordable health care for their employees. In 

doing so, this legislation would offer small businesses access to the same cost savings available to 

larger employers under the ERISA Act. Trade associations, professional societies, and local 

chambers of commerce and in particular state retail associations can offer a vital bridge to such 

affordable coverage for their small employer members and their employees. 

Group health benefits are the key to coverage for more than 170 million Americans. But, not all groups 

are created equally. NRF has long noted the discrepancy between larger and smaller companies and has 

supported past iterations of the Johnson-Walberg bill H.R 1101 to help provide smaller companies better 

and more affordable access to health benefits. NRF continues that support today and endorses H.R. II 0 I. 

Group health coverage balances the risk of health care utilization between younger and older employees, 

healthy or less so. Employment-based group coverage can be distinguished from public pools because 

employees come to the business to work rather than to seek coverage, as opposed to a public pool where 

the sole objective is to obtain coverage. The difference in presentation of risk. though subtle, is 

important. Private, employment-based group plans work better and provide more affordable coverage. 

Smaller employers have fewer employees to balance their employees' various risk profiles. Strategies 

taken by the Affordable Care Act- the SHOP plans and the rather byzantine small business tax credit 

have not helped smaller employees. Steps must be taken to better support these smaller businesses in 

providing coverage. 

Association Health Plans are an important answer in our view. Not only do they offer the potential to 

band with additional small employers in their local state through bona fide trade or professional 

associations, but it also offers potential to band together with other employer groups in other states 

utilizing the federal ERISA law to maintain common benefits across state lines. 
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Under the Affordable Care Act (ACA) our nation's small businesses and their employees have 

been relegated to a second class consumer status versus their large, self-insured, ERISA exempt 

competitors when it comes to access and affordability of health insurance coverage. Allowed to 

group rate, such large employers avoid the costs associated with unfair levels of cross subsidization 

experienced in the individual and small group markets. They are also able to avoid the costs of 

provider pushed, costly state mandates which most consumers don't want, will never use, and can't 

afford. Avoidance of these costs provides significant savings for these employers and places their 

small competitors at a competitive disadvantage. The ACA, in mandating the purchase of health 

insurance coverage yet failing to provide consumers equitable treatment under the law in terms of 

access and pricing is not only unfair it is discriminatory. 

As called for in the proposal before you today, the solution to this problem is to provide small 

businesses more flexibility under the ACA to look outside the traditional markets available to them 

to secure their coverage. This includes providing small businesses, either through industry or 

professional organizations or on their own, the ability to band together to self-insure and be group 

rated or in the alternative band together and purchase fully insured products outside the community 

rated small group and individual markets. Such changes would not only level the playing field for 

small businesses, but as experienced in Massachusetts under our group purchasing cooperative 

program, leveraging existing relationships with industry organizations provides small businesses 

with additional benefits beyond simply securing health insurance coverage. 

The adoption of the cooperative model in Massachusetts is indicative of our leaders' bi-partisan 

support of the concepts underlying the legislation currently before the Committee. And in a recent 

letter to House Majority Leader Kevin McCarthy, Massachusetts Governor Charles Baker 

reiterated that support when he called on Congress to amend the ACA to "permit insurance 

products offered through group purchasing cooperatives and professional employer 

organizations." 1 Today, I echo this request for flexibility for our nation's small businesses and 

urge your support the Small Business Health Fairness Act. 

Introduction to Universal Healthcare in Massachusetts 

Eleven years ago, the Massachusetts General Court adopted Chapter 58 of the Acts of2006 2

, (often 

referred to as "RomneyCare") mandating universal coverage for Massachusetts residents. While 

successful in moving Massachusetts towards universal coverage, the law failed to rein in the ever 

growing cost of coverage and created a system where a subset of consumers-small businesseswere relegated to second class status under the law. As a result, affordability became a significant 

issue for Massachusetts small businesses, as did their inability to take advantage of essential cost 

saving tools due to the nature of the state's merged individual and small business risk pool. 

Chapter 58 also failed to recognize how small businesses make their employee purchasing 

decisions, and the important relationship industry and professional organizations play in the ability 

1 Governor Charles D. Baker to The Honorable Kevin McCarthy, January II, 20!7, 

http://www .bostonglobe.comlmetro/20 1710 1112/read·letter-governor-baker-sent· 

congress/h9m 7B I HrkeWYRi xNiN gJnK/story .html ?pI= Article_ Related_ Box _Article 2 https:l/malegislature.gov/Laws/SessionLaws/Acts/20061Chapter58 
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of small businesses to adequately assess and access health insurance options. Rather than leverage 

these relationships and allow these trusted advisors to serve as access points to the health insurance 

marketplace, the law relied on government run exchanges to offer small businesses options they 

did not want. 

Recognizing these issues, Massachusetts began work on a second set of health care reforms 

focusing on cost containment, which would eventually pass into law in August of20 I 0 as Chapter 

288 of the Acts of 20 I 03• By that time, the Affordable Care Act (ACA), which borrows heavily 

from the Massachusetts model had already been passed into law at the federal level. In doing so 

the ACA not only replicated the affordability issues experienced in Massachusetts under Chapter 

58, but it also preempted important provisions of Chapter 288 intended to address the problem. 

As a result our small businesses continue to experience year over year premium increases well in 

excess of their large competitors and government insureds. 

Merged Market and State Mandates under Chapter 58 

As part of Chapter 58, Massachusetts merged its non-group (individuals) and small group 

(employers with less than 50 employees) insurance markets into one guaranteed issue "merged" 

market and prohibited insurers from basing merged market rates on any individual's or group's 

past or projected health claim experience. The rates in the merged market are therefore community 

rated based on the claims experience of the entire merged market pool. 

By nature, the community rating structure utilized in the merged market results in significant cross 

subsidization of individuals by small groups within the merged market. Furthermore, by 

prohibiting the use of an individual's or employer's past or projected health claim experience, 

community rating also effectively prevents feasible utilization of cost containment tools typically 

available to larger groups purchasing coverage outside the merged market. In short, an insured's 

effort to reduce one's risk and claims cannot be translated into direct premium savings by merged 

market consumers. 

Merged market consumers also incur the increased costs associated with covering state-adopted 

mandated benefits. However, these costly mandates may be completely avoided by larger selfinsured groups which make up 60% of commercial marketplace in Massachusetts. Since the 

adoption of Chapter 58 in 2006, 19 new mandates and/or assessments have been passed in 

Massachusetts- an average of three per year. A 2013 report by the Massachusetts Division of 

Insurance (DOl)\ required by 211 CMR 149.00, found that 12 state mandated benefits fully 

insured plans are required to cover are NOT covered at all by more than 90% of the self-insured 

plans in the Commonwealth. 

As a result of community rating and unavoidable mandated benefits, from 2006 to 20 I 0, RAM 

small group members experienced a cumulative average premium increase of73%, or about 15% 

per year, with no ability to effect positive change in their premiums. Large employers and even 

the Commonwealth itself saw annual increases of only about a third of that amount each and every 

3 https://malegislature.gov /Laws/SessionLaws/ Acts/20 1 O/Chapter288 4 Massachusetts Division of Insurance, "Annual Report of Self-Insured Accounts as of December 2013- membership 

Data," December 2013, http://www.mass.gov/ocabr/docs/doi/companies/tpa-financial-20 13 .pdf 
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year. Chapter 58 essentially relegated small businesses in Massachusetts and their employees to 

second class consumer status compared to their larger competitors. 

Cost Containment Reform 

In an effort to level the playing field for small employers and provide them more flexibility to 

access coverage through industry organizations, the Massachusetts General Court, in a bi-partisan 

effort, responded with the passage of Chapter 288 of the Acts of201 0. Among other changes, the 

legislation established small business group purchasing cooperatives designed to give merged 

market consumers the ability to negotiate with providers and carriers, create new plan options and 

choices and enable such consumers to realize true financial incentives for implementing wellness 

and consumer educational programs. 

The law authorized the creation of six small business group purchasing cooperatives. Cooperative 

applicants are limited to nonprofit or not-for-profit corporations or associations organized in 

Massachusetts (i.e. industry trade associations, chambers of commerce, professional societies). 

Applicants must have been organized for purposes other than securing health insurance for their 

members. 

Unlike the ACA's Consumer Operated and Oriented Plans (CO-OPs) which were designed to 

compete with the commercial market, the Massachusetts cooperatives are designed to exist as part 

of the commercial insurance market. The law requires all plans offered through the cooperatives 

to be fully-insured and based on products available in the merged market by the issuing carrier. 

Rates offered by the issuing carrier through the cooperatives must be based on the rates available 

in the merged market outside the cooperatives but may differ based on the relative difference in 

the projected experience of the cooperative members versus the projected experience of insureds 

enrolled in merge market products outside the cooperative. This is commonly referred to as the 

cooperative adjustment factor or cooperative rating factor. The amount of the cooperative factor 

is determined through negotiation between the cooperative and the contracting insurance carrier 

within certain limitations and subject to DOl approval. 

In order to ensure positive claims experience within the cooperative population and thus positively 

impact future carrier negotiations, the law also required all cooperatives to provide members 

access to a sponsored wellness program. Each cooperative must maintain a wellness participation 

rate of 33% of covered subscribers. The goal is to reduce claims and ensure proper utilization 

through transparency tools and creation of a healthier, more educated healthcare consumer. The 

resulting reduction in costs to the insurer may then be reflected in premium discounts derived from 

the cooperative rating factor. 

The law designates the DOl as the regulatory agency responsible for the oversight of the 

cooperative program. The regulatory framework promulgated by the DOI (211 CMR 151: 

Certified Group Purchasing Cooperatives5

) includes a comprehensive approval and renewal 

process as well as stringent reporting requirements designed to ensure protection of the consumer 

and compliance with the law. Approved cooperatives are required to file for annual renewal with 

the Division of Insurance. 

5 http://www.mass.gov/courts/docs/lawlib/2! 0-219cmr/2ll cmr l5l.pdf 
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Massachusetts Cooperatives Experience 

To date, five organizations, starting with RAM in January of 2012, have been approved by the 

DOl to operate as certified group purchasing cooperatives. Of the five, RAM, the Massachusetts 

Association of Chamber of Commerce Executives (MACCE) and the Spring Healthcare 

Cooperative, are currently operating in the marketplace. The Associated Subcontractors of 

Massachusetts and the Massachusetts Society of Certified Public Accountants have both been 

certified as group purchasing cooperatives but have ceased operation due to limitations imposed 

by the ACA. Both groups have indicated an interest in continuing operation should changes in the 

ACA make it feasible again. 

Initially, the approved cooperatives had been able to offer members between a 3% and 5% discount 

on their premiums by demonstrating their commitment to creating a healthier, more educated 

population of health care consumers through adoption of wellness participation requirements 

beyond what is required by the law. The model began working as designed until implementation 

of the ACA removed the state's ability to utilize certain rating factors including the cooperative 

factor. 

Impact of the ACA 

The cooperative concept followed six years of experience under a mandated universal health 

insurance law in Massachusetts. An innovative approach, strongly supported by our elected and 

regulatory officials, cooperatives should have served as a model cost containment measure for 

small group markets throughout the rest of the country under the ACA. Instead, rigid market rating 

rules adopted as part of the ACA implementation essentially prohibited the continued operation of 

the Massachusetts cooperative model as it was originally designed. 

In November of2012 the federal Centers for Medicare and Medicaid Services (CMS) published 

regulation CMS-9972-P: Health Insurance Market Rules6 as part of the implementation of the 

ACA. A key provision in the regulation required that state regulators limit rate variation within 

the individual and small group markets to four listed rating factors: (I) whether the plan covered 

an individual or family, (2) the insured's geographical rating area, (3) age, and (4) tobacco use. In 

doing so the regulation prohibited Massachusetts from using the cooperative rating factor to 

provide discounts under Chapter 288. 

These changes to the state's rating factors were originally scheduled to take effect on January I, 

f\014. However, through a series of waivers the Department of Health & Human Services (HHS) 

granted Massachusetts a transition period for the elimination of state rating factors (industry, use 

of intermediary, participation rate, size, and cooperative) which would otherwise be disallowed 

under the ACA. Under the transition period Massachusetts may utilize certain rating factors at a 

diminished value until policy year 2018. 

RAM Cooperative 

6 https://www.gpo.gov/fdsys/pkg/FR-2012-ll-26/pdf/2012-28428.pdf 
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RAM was the leading employer organization advocating for the passage of small business group 

purchasing cooperatives, and was the first certified to operate as a cooperative in January of 2012. 

For the past four years the Retailers Association of Massachusetts Health Insurance Cooperative 

(RAMHIC), has worked to create a market based solution to disproportionate premiums for small 

businesses versus their larger competition. In addition to offering discounted premium rates 

RAMHIC has sought innovative approaches to delivering comparable coverage for comparable 

premiums using tools ranging from low administrative costs, to taking proactive initiatives 

designed to make members healthier and more educated consumers of health care services. 

Through the cooperative model, RAM has not only been able to directly impact the cost of 

coverage through discounts to members but have also provided members additional value to their 

basic health care coverage through the offer of ancillary benefits such as hospital care plans, dental 

plans and negotiating with carriers to secure wellness programs that provide financial incentives 

at the business and employee level. 

As required by law, RAMHIC is a fully insured program offering plans based on small group 

market products from two contracting insurance carriers-Fallon Health (FH) and Blue Cross Blue 

Shield of Massachusetts (BCBSMA). Offerings include limited network, HMO and PPO plan 

options which may be coupled with varying deductibles, flexible spending accounts and health 

reimbursement arrangements to allow the consumer to design and choose a plan that fits the needs 

of their business and those of their employees. Both carriers allow businesses to offer their 

employees choice by selecting multiple plan designs to offer to their employees who then may 

choose their desired plan. 

RAMHIC currently utilizes the wellness programs offered through our carrier partners as part of 

their health plans. Both programs provide financial incentives to subscribers for participating in 

the program. The BCBSMA program also provides small businesses a year end rebate based on 

the percentage of their employees that participate in the program. Through continuous marketing 

and educational efforts, RAMHIC has consistently exceeded the statutorily required 33% wellness 

participation. Despite this success, the resulting positive impact on the population's claims 

experience and utilization may not be translated into additional savings due to the ACA's 

limitation on the cooperative factor. 

Despite limitations caused by the ACA, RAMHIC has experienced consistent overall year to year 

growth. As of December 2016 the cooperative services 287 member businesses for a total of5, 121 

lives. This exceeds the number of small group lives covered by the Massachusetts Health 

Connector and comes at no cost to the tax payer and with no discrimination on coverage. 

Analysis of the cooperative's experience indicates that the group is outperforming similarly sized 

large groups in terms of overall claims experience and is below several small group benchmarks. 

Prior to implementation of the ACA, similar analysis had resulted in both carriers requesting an 

increase in the cooperative rating factor applied to RAMHIC. The terms of the federal waiver 

prevented the Commonwealth from considering such requests. 

In an effort to explore all options for providing members the most affordable coverage available, 

RAM has also considered a number of alternatives to traditional commercial insurance including 
54 

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transitioning the group into a Multiple Employer Welfare Arrangement, creating a stand-alone 

captive, and joining an existing captive. None of these options have been determined feasible at 

this time. 

RAM continues to advocate at the state and federal level for a Massachusetts waiver from some of 

the more onerous and costly provisions of the ACA, including the limitation of state small group 

rating factors designed to seek fair rates and to incent job growth. At the same time RAM 

continues to seek Congressional changes to the ACA which will return small group rate setting 

flexibility to the states, as well as federally authorized solutions such as association health plans 

for small employers across the country. Providing high quality health insurance coverage for small 

employers and their employees at rates comparable to those experienced by large self-insured 

groups should be a primary objective for us all. 

Conclusion 

The parallels between the experience in Massachusetts under Chapter 58, and now across the 

country under the ACA are very clear. Individuals were helped, insurance coverage was 

expanded, and large self-insured employers were not particularly harmed financially. Yet small 

businesses and their employees saw government imposed discrimination in their choices, their 

tools, and their costs. Small businesses compete every day with large employers for both 

customers and employees. And whether required by law to buy health insurance or not, 

employees of small businesses deserve the same marketplace rights to obtain comparable 

coverage at comparable rates as those that work for big business and big government. 

RAM and NRF appreciate the opportunity to appear before you today and for your consideration 

of these comments. We urge this Committee and Congress to support the Small Business Health 

Fairness Act and its underlying intent of eliminating discrimination and seeking equality for 

small businesses and their employees. 

We look forward to working with you on an ongoing basis to identify solutions to the significant 

problems facing small businesses and stand ready to help this Committee and Congress on the 

vital issue of fair and affordable health care and health insurance. 
55 

Chairwoman FOXX. Thank you very much, Mr. Hurst, and all of 

our witnesses for your excellent testimony today. I now will recognize members for five minutes of questioning and answers. Mr. 

Wilson, you are recognized for five minutes. 

Mr. WILSON of South Carolina. Thank you, Madam Chair, and 

thank you, Madam Chair, for your leadership in providing such extraordinary witnesses today. We appreciate very much your input. 

Ms. Klausner, I am grateful that the South Carolina Hospital Association under the leadership of President Allan Stalvey has been 

leading the efforts to establish wellness programs in businesses, 

hospitals, and government offices. To date, their Working Well Program has established wellness programs in 110 multisector worksites. 

Under the hospital association’s leadership, wellness programs 

have increased in our State. What are some of the benefits that 

employers achieve because of wellness programs, and what are 

some of the results that employees have seen? 

Ms. KLAUSNER. Thank you very much for your question. Wellness 

programs have been enormously successful, and for different employers and different employee populations, they see different successes, but all success, nevertheless. 

Some see benefits directly for employees in terms of reducing 

their healthcare costs. They learn about it through their health 

risk assessments or their biometrics screenings, or other opportunities, what may be their weaknesses that they can address with 

their own physicians, with their own health care. Ultimately, they 

have an opportunity to reduce those costs. 

They also see as absenteeism goes down, individuals that are at 

work are more productive, and, as a result, the employees see a 

greater value in terms of their contribution to the employers. We 

also see that morale increases as everybody becomes healthier. 

So, ultimately, we see across the board many things. Healthier 

individuals create a more productive work environment and a reduction of healthcare costs. 

Mr. WILSON of South Carolina. I appreciate your pointing out 

wellness screening preventive care, how helpful that is. 

Mr. Ritchie, Hubner Manufacturing of Mount Pleasant, South 

Carolina, supplies products for buses, trains, and the air transportation industry. They discovered they were going to have a spike 

in healthcare insurance premiums. To help control the insurance 

costs, the company began making a change towards a healthier 

working environment. 

I am grateful for the leadership of Hubner Manufacturing’s chief 

executive officer, Ron Paquette. He has made a real difference. 

As Congress looks at various ways to control affordability in 

health care, wellness programs and initiatives should be part of the 

discussion. What are some of the roadblocks that employers face 

when implementing their first wellness programs? Can Congress 

assist employers in working past these roadblocks? 

Mr. RITCHIE. I would say for wellness programs, one thing that 

is important, and I would stress this is where the self-insurance aspect comes from, one thing we always talk about on self-insurance 

is that the employer controls the claim data. In other words, they 

get the claim data and they can react to that data. 

CEWDOCROOM with DISTILLER

56 

So, if you see something, you know, an example of we know we 

have a higher incidence of pre-diabetic care, we can create a 

wellness program custom made just for that employer, that helps 

people with pre-diabetic care or helps them in controlling their 

diet, or other types of programs that can incentivize people to take 

a little bit better care of themselves, or to early identify an issue, 

to react to it. 

This is something you won’t see in a normal health insurance 

market. Why? Because the health insurance market isn’t going to 

be customized to the employer. When the employer is self-funding, 

they become their own self-funded plan, they become a 100 percent 

nonprofit plan, because, again, the employer is not taking a profit 

off the employee benefits. 

They have an incentive to create healthy employees and productive employees. That’s why we see the benefit of self-insurance and 

the ability to access wellness benefits as critical to that component. 

Mr. WILSON of South Carolina. Thank you very much. Mr. Hurst, 

you provided a unique perspective with the different healthcare 

mandates that have been suggested, imposed, or mandated in Massachusetts. 

Can you provide insight into the impact ObamaCare has had on 

small businesses that face the increasing cost, and what would the 

Small Business Health Fairness Act do to improve the situation? 

Mr. HURST. Thank you, Mr. Wilson. I believe that this legislation 

is critical because you have to look at what’s happening in the marketplace. In Massachusetts, 60 percent of the commercial marketplace is already self-insured, and growing. 

What happens when you go self-insured, you have opportunities, 

particularly if you’re a small business buying in a merger, small 

group marketplace, you have the ability, for instance, to certainly 

do the wellness programs and to educate your employees on the 

proper location for various services, but you also have to deal with 

what you’re talking about, the mandates. 

You have the opportunity of avoiding State mandates. I can give 

Massachusetts as an example. Since RomneyCare passed 11 years 

ago, we passed 19 State mandates, nearly two per year, through 

our legislature. 

You know, it’s no secret that the healthcare industry is very, 

very powerful. You know, to pass more mandates, what it does, it 

puts more money in their pocket, it raises their utilization. If 

you’re a retailer it’s called ‘‘raising traffic,’’ right; for healthcare 

providers it’s raising utilization. It also affords them the ability to 

raise their prices. You know, if there’s no choices, if there is not 

the ability for consumers to say no, the provider, whether it be a 

Big Pharma company or a hospital, are going to raise their prices. 

Under ERISA, these big self-insurance companies can, in fact, 

avoid the State mandates. In Massachusetts, we survey every year, 

at least 12 on any given year are not covered by over 90 percent 

of the ERISA-exempt self-insureds, and that is government discrimination, okay. 

So, if you’re a large company and you’re self-insured, you’re 

avoiding State mandates. If you’re a small business, there’s another reason why your premiums are much higher. 

CEWDOCROOM with DISTILLER

57 

Mr. WILSON of South Carolina. Thank you. Thank you for your 

insight. 

Chairwoman FOXX. Thank you, Mr. Hurst. Thank you, Mr. Wilson. Mr. Courtney, you are recognized for five minutes. 

Mr. COURTNEY. Thank you, Madam Chairwoman, and to the witnesses for being here today. 

Again, I would just like to sort of follow up on a couple of the 

opening comments that the Chairwoman quoted, actually someone 

from Connecticut, Mark Bertolini from Aetna, regarding the question of death spiral. 

He raises a very significant issue right now in terms of the stability of the exchanges, but I think if you read a little bit deeper 

into his comments, the question of stability is really about the future of subsidies for next year in terms of whether or not carriers 

are going to have any confidence that people have benefited from 

enrolling in the individual market and the small market. And I can 

tell you some stories about some small businesses that have actually done quite well with the exchanges and the tax credit, which 

your remarks did not mention, Mr. Hurst, through the ACA. 

Again, Mr. Bertolini went on to say, you know, there is a solution 

here, which is basically to set up a reinsurance mechanism, kind 

of like a stop-loss, for high-cost claims that again flow through 

these markets. 

Again, we did have reinsurance in the first three years of the 

ACA. That expired. You know, a clear fix to try to stabilize those 

markets is to extend that reinsurance mechanism that was in the 

law originally. 

Again, reinsurance is a tried and true mechanism in Federal programs, whether it is flood insurance, terrorism insurance, nuclear 

power plant insurance, and it actually was in the Republican prescription drug plan, the part D program, which has a reinsurance 

mechanism that has actually kept premiums in the Medicare part 

D program quite stable. 

Kudos to the Republican leadership who incorporated that into 

the prescription drug plan that was enacted back around 2002 or 

2003. 

So, again, there are solutions here to deal with some of the instability that exists in the market, but, frankly, that is not what we 

are hearing from the Republican majority. It is too bad. 

Again, I think there are a lot of people who are serious, people 

who actually do know the complexity of the health insurance market, that could address these problems. 

Even with that, in Connecticut, we just closed the books on an 

enrollment period for 2017. We again had a very strong enrollment. 

The average age of new enrollees in the Connecticut individual 

market exchange actually went down last year from 39 to 35. I 

want to repeat that. The average age went down from 39 to 35. 

That is not an indicator of a death spiral. I mean, again, we had 

younger, healthier lives enrolling in the exchange, even with the 

spike in premiums, because, again, the subsidies shielded 75 percent of the people who were enrolling in that marketplace. 

To the extent, again, looking forward, there is uncertainty regarding the future of the subsidies, that is what is making insurers 

skittish about actually participating in the 2018 enrollment period. 

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58 

Madam Chairwoman, I actually have an AP story which quotes 

the American Academy of Actuaries about whether or not, in fact, 

we are seeing a death spiral in terms of the enrollment. Again, this 

is not a partisan organization. If they debate something, it is usually about numbers. That is what actuaries do. We have a lot of 

them who live in Connecticut. 

Again, I ask that the ‘‘AP Fact Check, ObamaCare is not in a 

Death Spiral’’ be entered into the record. 

Chairwoman FOXX. Without objection. 

[The information follows:] 

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4/7/2017 AP FACT CHECK Obamacareis notm a 'de.alll spiral'- Busmess lns1der 

CHECK: Obamacare is not in a 

'death spiral' 

Ef,ICA WERNER. ASSOCIATED PRESS 

JAN. 10, 2017, 5:24AM 

President Barack 

care la-w '\vill fall of its m\·n 

\reight." 

Hous(' SpeGkcr Paul Ryan says the 

hw is "in ·vv'hat the actuaries call a 

death spiral." 

And Senate Majority Leader Mitch 

McConnell says that "by 

tneasurc, Ohamacarc has 

The problem v>'ith all these claims: 

They are if not 

dm..;nrighl 

congressional Republicans 

to lhe health law, they are working to portray it as a mess of Democrats' making, and themselYes 

as ones \Vill clean up that mess. 

In the process 

helicvc that 

bipartisan solutions. 

Republicans, ·who\·c 

aren't interested in 

there arc signs some arc getting cold feet now thai the reality is upon them. 

excesses around the health care law, often claiming that it's 1-vorking as 

But with Rcpuhlicans in the 

lmv, and hmx they compare 

and clriYing the agenda, here's a look at some of the GOP claims about the 

the 

TRl:MP. RYACJ ACiD MCCONNELL: The law will "t;rl! of its 0\\11 weight," is in a "death spiral" and "has failed." 

THE FACTS: Experts agree that the law is not current!)· in a "death 

vicious cycle when risinp; insurance costs force healthy customers out 

http 1/www busmes.s:•lSider.comrap-ap-fact-c!leck-despile-woes-obamacare--not-in-death-spira!-201 "1·1·2 

"an actuarial term that refers to a 

marketplace, resulting in still higher 

115 
60 

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4!7/2017 AP FACT CHECK: Obamacare is not in a 'death spiral'- Busmess Insider 

prices, which cause even more customers to bail, etc., until the system collapses. 

But some say that if the current situation continues, that is a likely or possible scenario. Health care premiums 

are jumping by double digits this year, and the health care marketplaces created by the law are short on the 

healthy consumers who make insurance companies profitable. 

"It's not a failure in that 20 million people or more have insurance that didn't used to have insurance. Everything 

else, it's too early to judge," said economist Gail Wilensky, who ran Medicare under former President George 

H.W. Bush. 

"To say that the exchange markets remain unstable and in turmoil is an appropriate statement," she said. 'To say 

that they're in a death spiral really depends on what happens." 

The American Academy of Actuaries itself disputed the "death spiral" claim Monday. The group pro\~ded a 

statement from its senior health fellow asserting that high premium increases in many states this year "do not 

necessarily indicate that a premium spiral is occurring" and could be a one-time adjustment. 

House Speaker Paul Ryan (R-WI) speaks to the media on repealing the Affordable Care Act, during his 

weekly news conference on Capitol Hill January 5, 2017 in Washington, DC. 

http-!/www.businesslnsider.com/ap-ap--fact-check-desplte-woes-obamacare-not·ln-death-spiral-2017·1-2 215 
61 

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4!712017 AP FACT CHECK Obamacare is not in a 'death spiral'~ Busmess Insider 

RYAN: "You cannot fix a fundamentally broken law; you've got to replace it." 

THE FACI'S: Experts agree that Congress could fix the law's problems, should it choose. Indeed many argue 

that some of the law's problems can be traced to the decision by Obama and Democrats to push it through on a 

partisan basis alienating Republicans who have refused ever since to participate in any attempt to tweak the 

law to improve it, as would be necessmy with any program of such sir.e and complexity. 

Some predict that when Republicans get through with their repeal-and-replace effort, what it will really amount 

to will be an improved Obamacare - even if they don't admit it. 

The health care exchanges, for example, could be improved with changes aimed at getting more young and 

healthy people to sign up, such as gi,ing insurers more flexibility to charge older people higher prices. 

"You could, I think, relatively simply address the issues that the exchanges have," said Dan Mendelson, president 

of Avalere Health, a health consulting firm, noting that other major programs including Medicare have been 

tweaked repeatedly since their creation. "If you freeze a program in a point of time, it is likely to have problems, 

and that's exactly what's happening." 

Bob Laszewski, a health care consultant, predicted: "Before this all ends they're going to fix it ... The Republicans 

are going to say they repealed and replaced, and the Democrats arc going to say they fixed it." 

http:llwww.businessinsider.com/ap-ap-fact-check·despite-woes-obamacare--not-in-death-spiral-2017-1-2 315 
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4{7/2017 AP FACT CHECK: Obamacare is not fn a 'death spiral'~ Business lnstder 

Arminda Murillo, 54, reads a leaflet on Obamacare at a health insurance enrollment event in Cudahy, 

California, U.S. March 27,2014. 

Luty NichobonjReuters 

MCCONNELL: Obamacare "didn't lower costs, it didn't increase choice." 

THE FACTS: McConnell's comments are true in part. 

The first five years of Obama's presidency saw historically slow growth in U.S. health care spending, though 

experts differ on whether the law had anything to do with that. Some credit the global recession. Individual 

consumers in the law's marketplaces, meanwhile, face higher premiums this year, though subsidies protected 

most customers from the increases. 

And while the Affordable Care Act did increase choice initially in the individual market, that is not the case now 

with brand-name insurers bailing out of the online state markets, although the many Americans with employerbased health coverage have been insulated from such changes. 

In about one-third of U.S. counties, consumers in the individual markets don't have a choice of plans. 

"It depends for whom you're talking about," said Larry Levitt, senior vice president at the Kaiser Family 

Foundation. "For people with pre-existing conditions, choices are infinitely more abundant because they couldn't 

get coverage at all. For someone who's young and healthy there are likely fewer choices available now than 

before." 

Associated Press writer Ricardo Alonso-Zaldivar c~ntributed to this report. 

EDITOR'S NOTE_ A look at the veracity of claims by political figures 

http:I!Www.buslnessinslder.com/ap-ap-fact-check-despite-.woes~obamacare-not~in-death-spiral-2017-1·2 4/5 
63 

Mr. COURTNEY. So, again, real quick, Ms. Mitts, in terms of the 

Association Health Plan that is before us right now, again, as a 

former small employer, you know, I understand the fact that because of the smallness of the groups, you know, it is harder to 

spread risk, but I guess the real question is what we are really 

looking at is relaxing some of the patient protections that were 

built into the ACA that this legislation seeks to do, for example, 

lifetime limits. Maybe just sort of talk about that in terms of what 

we are sacrificing with that kind of legislation. 

Ms. MITTS. So, if we moved backwards to a situation where small 

group coverage wasn’t protected under rating requirements that 

they now are, so now all small groups need to be community rated, 

and it’s been a huge benefit for many small employers who have 

workforces that did have healthcare needs, who prior to the Affordable Care Act had trouble getting competitive rates in the marketplace because they could be charged higher premiums, we would 

move back to a situation where we have some small employers who 

are able to get competitive rates through an Association Health 

Plan, who have risk segmentation, so the people who really can’t 

benefit from an Association Health Plan because they’re not offered 

competitive rates because they do have workers who have 

healthcare needs. 

That’s not a viable option for them, and now we’ve left this small 

group market with a less robust risk pool, and premiums will go 

up for everyone. So, there definitely is an impact on premiums. 

Beyond that, workers could lose coverage of really important benefits, including maternity coverage. Previously, it was less likely for 

Association Health Plans to sometimes cover autism benefits that 

are a lifeline for many working families. 

So, there is a lot on the line if we move backwards to a deregulated market for some small businesses. 

Mr. COURTNEY. Thank you. 

Chairwoman FOXX. Thank you. Mr. Walberg, you are recognized 

for five minutes. 

Mr. WALBERG. Thank you, Madam Chairwoman. Thank you to 

the panel for being here. Representative Sam Johnson and I recently introduced H.R. 1101, as you know, the Small Business 

Health Fairness Act. It was introduced to allow small businesses 

the option to pool together to offer health benefits. 

I want to make it very clear, the option. Hearing some of the dire 

suggestions is just concerning. We can make up all of the opportunities that would go in the wrong direction, in fact, and forget 

about the fact that did happen with the Affordable Care Act. Neither is it affordable anymore. The outcome, you may have a piece 

of paper, but you do not have coverage. You do not have options. 

We have heard many stories of how small businesses find it difficult to find affordable coverage. According to a 2015 study by the 

National Federation of Independent Businesses, the cost of health 

insurance is the principal reason that small businesses do not offer 

coverage. Of the 60 percent of small employers that do not offer 

coverage, 52 percent cited cost as the reason. 

Small businesses continue to drop coverage. According to the Employee Benefits Research Institute, since 2008, approximately 36 

CEWDOCROOM with DISTILLER

64 

percent of small businesses with fewer than 10 employees have 

stopped offering coverage. 

So, I would like to submit for the record a letter coming from 

over 35 business associations, small business associations, that 

stand in favor of the opportunity that is afforded by H.R. 1101. I 

would like to submit that for the record. 

Chairwoman FOXX. Without objection. 

[The information follows:] 

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65 

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The Honorable Sam Johnson 

U.S. House of Representatives 

2304 Rayburn House Office Building 

Washington, DC 20515 

February 28, 2017 

The Honorable Tim Walberg 

U.S. House of Representatives 

2436 Rayburn House Office Building 

Washington, DC 20515 

Dear Representatives Johnson and Walberg: 

The undersigned groups thank you for your leadership in introducing H.R. 1101, the Small 

Business Health Fairness Act. This legislation allows small businesses an option to access 

affordable health insurance coverage through Association Health Plans (AHPs) and is a step 

towards building a more competitive market. 

The rising cost of health insurance remains a major problem for small business owners. In 2015, 

25 percent fewer small businesses offered health insurance than when the Affordable Care Act 

(ACA) passed in 2010, a significant drop in small business coverage. As health insurance costs 

continue to increase, fewer employers and working families can afford coverage. 

We believe AHPs will help lower the cost of health insurance by allowing small business owners 

the same opportunities that larger businesses now experience. AHPs will allow small business 

owners to band together across state lines through their membership in a bona fide trade or 

professional association to purchase health coverage. Establishing health insurance benefits 

through associations will make coverage more affordable by spreading risk among a much larger 

group, strengthening negotiating power with plans and providers, and reducing administrative 

costs. 

Thank you again for your leadership on this issue. As congressional action takes place to replace 

the ACA with market-based solutions, we look forward to working with you to improve the health 

insurance markets where small businesses and employees purchase coverage. Small business 

needs legislative solutions that lower health insurance costs and increase flexibility to maintain a 

competitive workforce. 

Sincerely, 

4A's -American Association of Advertising Agencies 

Air Conditioning Contractors of America 

American Council of Engineering Companies 

American Farm Bureau Federation 

American Foundry Society 

American Hotel & Lodging Association 

American Rental Association 

American Society of Association Executives 

American Veterinary Medical Association 

Associated Builders and Contractors 

Associated General Contractors 

Auto Care Association 

Electronic Security Association 
66 

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Far West Equipment Dealers Association 

Farm Equipment Manufacturers Association 

Independent Electrical Contractors 

International Franchise Association 

Manufacturers Education and Training Alliance of CT 

National Association of Chemical Distributors 

National Association of Home Builders 

National Association of Manufacturers 

National Association of REAL TORS® 

National Association of Wholesaler-Distributors 

National Federation of Independent Business 

National Restaurant Association 

National Retail Federation 

National Roofing Contractors Association 

National Tooling and Machining Association 

National Utility Contractors Association 

North American Die Casting Association 

Precision Machined Products Association 

Precision Metalforming Association 

Self-Insurance Institute of America, Inc. 

Small Business & Entrepreneurship Council 

U.S. Chamber of Commerce 

Western Equipment Dealers Association 
67 

Mr. WALBERG. Thank you. Mr. Hurst, you testified that 

ObamaCare relegated small businesses and their employees to a 

second-class consumer status versus their larger self-insured competitors. You also stated that ObamaCare prohibits you from taking full advantage of steps your State took to offer small businesses 

more options for coverage. 

Based on your experience, let me ask, how will the Small Business Health Fairness Act help small businesses like those that belong to the Retailers Association of Massachusetts? 

Mr. HURST. Thank you, Congressman. What ObamaCare, what 

the ACA did, it preempted a whole lot of innovation in States, one 

of which was a very socialized effort in the small group market as 

far as rating factors. Rating factors are what State regulators use 

to set premiums for small businesses. The more rating factors you 

have, the fairer the rates that you have for the small businesses. 

What the ACA did, it rolled back rating factors to only four. In 

Massachusetts, we used to have 11. You know, what you want to 

try to do is to have fair rates, to make sure people are not unfairly 

cross-subsidizing others. 

If this legislation passes, I believe you’re going to see a lot of associations, a lot of the chambers of commerce, looking at an option, 

whether it be they self-insure or fully insure, to get out there and 

be proactive in lowering costs for their employees. Not only for 

them, but also we have a big growing pot of health care, and 

there’s an issue of how we divide that up. Right now, it’s not being 

divided up fairly. It’s being divided up unfairly. 

We need to stop the growth, but we also need to divide it more 

fairly, and this will help do that, but it also will engage those business associations, the professional societies, and chambers of commerce to better educate their employees and members about the 

importance of wellness programs, the importance of going to the 

community hospital instead of the big teaching hospital where the 

costs are three times higher. 

We need more education of our consumers out there and our associations are the right vehicle to do that. 

Mr. WALBERG. Thank you. Mr. Ritchie, can you explain the benefits of a self-funded Association Health Plan for an employer offering benefits to employees under this bill? 

Mr. RITCHIE. Yes. One thing I’d like to talk about, we just had 

the analysis of these are small employers and they’re trying to 

compete. Well, when you talk about putting them in an Association 

Health Plan, you’re pulling them out. They’re not small employers 

anymore from a risk basis. They have bound together in a bona 

fide association, so it’s not been a newly created association, it’s a 

bona fide association, and now they’re able to purchase coverage as 

a larger employer. 

One thing we talked about was Mr. Bertolini and his comments 

about whether the individual market is in a death spiral or not. 

What we know as a fact is the employer market is not in a death 

spiral. It’s a very healthy market. It’s a very competitive market, 

and it’s mainly what is controlling costs in the USA right now. 

Sixty-one percent of all employees who get coverage through their 

employer get it under a self-funded plan. 

CEWDOCROOM with DISTILLER

68 

That’s a material thing. That shows you that self-insurance is 

working. It is not broken. So, when we talk about an association, 

we’re allowing small employers in another format, if they can’t do 

it on their own and standalone basis, to come forward and say, yes, 

I want to be part of a larger group. I want to look at maybe having 

a health insurance product, maybe I want to be self-funded. I want 

to have the choices, but I want to be together with a bona fide association to provide coverage for my members or my employees. 

Mr. WALBERG. Thank you. I yield back. 

Chairwoman FOXX. Thank you very much. Ms. Fudge, you are 

recognized for five minutes. 

Ms. FUDGE. Thank you very much, Madam Chair, and thank you 

all for being here today. You know, it is interesting to me that any 

time the majority does not like something, they just deal with it 

ad nauseam, over and over and over again. 

We have voted more than 60 times to repeal the Affordable Care 

Act, and they did not even pretend to have a replacement. Just repeal it. What would make you think they have a replacement now? 

This is nothing more than just stalling until they can come up with 

a plan. They have no clue what to do to replace it. 

As a matter of fact, the President said it is just complicated. It 

is complicated. I know it is hard. Sixty-five times with no replacement plan. 

You know, I listened to the Chairwoman talking about people 

coming to town halls. I had a town hall on Saturday, because I 

know that when I was elected, I was elected to represent every single person in the district I represented, even those who disagree 

with me. That is my job. 

So, I listened to what the people said. There was not one who believed that we should repeal the Affordable Care Act. Can we make 

it better? Absolutely. They want it fixed. They do not want it destroyed. What we want to do here is to destroy it because we have 

no earthly idea how to fix it. 

I wonder how many hearings we are going to have on this. They 

did not like NLRB. We had 26 hearings. I wonder how many we 

will have on this before they come up with a plan. 

Ms. Mitts, even though we have not talked about this today, they 

have this great idea that health savings plans are the answer to 

all of our problems. Could you please talk a bit about how someone 

maybe with cancer or someone who has some long-term illness 

would go into absolute bankruptcy with a health savings plan? 

Ms. MITTS. Thank you for your question. Health savings accounts 

do not work for the vast majority of working people in this country, 

middle-income families who are living paycheck to paycheck. Basically, it asks people to pay full freight for their health care, they’re 

tied to plans with high deductibles. 

Data has shown and research has shown that most families do 

not have that type of money in liquid assets, in any financial assets, to pay $2,000, $3,000 in medical bills. 

So, health savings accounts are not the solution for working families. They just cannot afford to put that money aside in an account 

where literally they cannot use it for anything other than health 

care. They have an emergency fund for health care, for their house, 

for their children, so it’s really not a solution, and it’s a cost shift 

CEWDOCROOM with DISTILLER

69 

to families, and would leave them exposed to bankruptcy and medical debt. 

Ms. FUDGE. Even though some people think we live in an alternative universe, I do not deal in alternative facts. It is a fact that 

20 million more people have health care because of the Affordable 

Care Act. It is a fact that people are no longer going into bankruptcy because they are sick. It is a fact that young people can stay 

on their parents’ insurance until they are 26. It is a fact that right 

now, a person who is sick can get help and not have to worry about 

paying their bills. 

So, let us just deal with some facts. What happens if we restrict 

or reduce the amount of Medicaid expansion in our States? What 

happens to these people who now have insurance, who after we 

change whatever it is they are going to change, because I still do 

not know what that is, what happens if we roll back Medicaid expansion? 

Ms. MITTS. Medicaid expansion has expanded coverage to millions of working people in this country. The majority of people who 

have benefited from Medicaid expansion are working adults. They 

would be left without any affordable coverage option and likely go 

uninsured. 

We’ve seen people’s access to preventive care and primary care 

improve thanks to the Medicaid expansion, and that’s benefited enrollees of the expansion, as well as their workers, who now have 

a healthier workforce coming into work every single day. 

Rolling back the Medicaid expansion would have dire consequences for States who have seen an economic boost from the 

Federal funds coming in. It’s created jobs and lifted up their economies. So, the cuts have dire consequences for the low-income people 

who have relied on Medicaid for affordable coverage as well as 

their States. 

Ms. FUDGE. Thank you for just the facts, just the facts. Thank 

you. I yield back. 

Chairwoman FOXX. Thank you, Ms. Fudge. Mr. Barletta, you are 

recognized for five minutes. 

Mr. BARLETTA. Thank you. Mr. Hurst, thank you for being here 

today. As you well know, many individuals do not have the luxury 

of employer-sponsored health coverage on the sole basis that they 

are, in fact, their own boss. I have heard from many of my constituents who are faced with this problem, especially farmers. 

Luckily, they were afforded the opportunity to receive coverage 

through the Pennsylvania Farm Bureau. At one point in time, the 

Pennsylvania Farm Bureau provided coverage to almost half of the 

farmers that belong to the organization through an Association 

Health Plan. This arrangement worked very well for the Farm Bureau’s hardworking members. When they had a question concerning their coverage, they were able to simply call the Pennsylvania Farm Bureau, a welcomed alternative to calling a 1–800 

number that likely would have immediately put them on hold. 

However, perhaps the best part of this arrangement was the cost 

for both the Farm Bureau and its membership. Since the rates 

were set by experience, the prices were affordable. 

The farmers in my district will tell you they do not go to the doctor for every cut or every scrape they may have, and this charCEWDOCROOM with DISTILLER

70 

acteristic resulted in relatively low coverage costs. Of course, when 

they needed care, it was available to them, and the Farm Bureau 

prides itself on the benefits they were able to administer. 

However, all of this changed thanks to ObamaCare. Under 

ObamaCare, arrangements like the one used by the Pennsylvania 

Farm Bureau were no longer viable. Costs for these farmers went 

up because the rates were no longer based on the Farm Bureau’s 

coverage pool alone, but rather on a larger community rating based 

on individuals outside of the organization. This is because the 

Pennsylvania Farm Bureau could no longer offer their Association 

Health Plans to their members. 

In short, President Obama’s failed healthcare law decreased 

flexibility for groups like the Pennsylvania Farm Bureau and, in 

turn, hardworking farmers and their families. 

I am a strong believer and supporter of Association Health Plans 

and the idea that small businesses should be able to pull together 

to offer their employees affordable health coverage. I agree with 

you that we must give organizations and small businesses this option. 

However, I think that we must continue to explore innovative options that lower the cost of health care even further. Based on your 

experience in Massachusetts, what type of benefits and cost savings 

do you think groups like the Pennsylvania Farm Bureau and their 

members would experience if they were allowed to pool with groups 

across State lines to deliver health coverage? 

Mr. HURST. Thank you, Congressman. I will say farm bureaus 

across the country had very viable programs, including in Massachusetts, and serving a very important part of the economy. What 

we’ve done is we’ve essentially asked them to unfairly cross-subsidize others, where we don’t do the same thing for big business or 

big government who are ERISA-exempt. 

So, that’s unfair. It’s discriminatory under the law and under the 

marketplace. 

What the Pennsylvania Farm Bureau and other small business 

associations can do is they can get proactive with their employees, 

their families, and make sure they understand the importance of 

wellness, for instance. 

If you get well and prevent certain accidents and certain diseases, you know, you’re going to avoid claims. If you avoid claims, 

your premiums should come down. There’s a reason why large employers self-insure, right? There’s a reason why they do wellness 

programs, because if people get healthier, your premiums are going 

to drop. 

It’s the same thing if you educate your employee base that you 

need to go to XYZ provider rather than ABC who is a higher cost 

and no better in the area of quality. We need more education of the 

small business employees as well about the right setting for the 

right care, and that’s what these plans can do. 

Mr. BARLETTA. Thank you. Thank you, Madam Chair. 

Chairwoman FOXX. Thank you very much. Mr. Polis, you are 

next for five minutes. 

Mr. POLIS. Thank you, Madam Chair. Today, 20,000 coal miners 

received notice that their retiree healthcare benefits will be cut off 

for 60 days when the Continuing Resolution expires. 

CEWDOCROOM with DISTILLER

71 

They received the notice because last December Congress passed 

a four month patch for coal workers’ healthcare benefits instead of 

the permanent fix that many of us in a bipartisan way proposed 

to cover miners’ health care. 

A copy of that 60-day notice is on the easel in front of us. I would 

like to ask unanimous consent to enter this notice to miners into 

the record. 

Chairwoman FOXX. Without objection. 

[The information follows:] 

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72 

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Insert offset folio 43 here 24359.043

UMWA HEALTH AND RETIREMENT FUNDS 

2121 K Street, NW • Suite 350 • Washington, DC 20037 • Telephone: 202.521.2200 

March I, 2017 

Name 

Address 

City State Zip 

(Non-Medicare) 

The UMWA 1993 Benefit Plan notified you in December 2016.that the U.S. Congress had 

passed the Continuing Health Benefits for Miners Act, which provided for the transfer of federal 

funds to the Plan to cover the health care benefits you receive through April30, 2017. The Plan 

cautioned that further Congressional action would be necessary in order for the Plan to provide 

health care coverage to you after April 30. At this time, Congress has not taken the action 

needed to continue your benefits. Unless Congress acts before the end of April, the 1993 

Benefit Plan will not be able to provide you with the health benefits that you have been 

receiving from the 1993 Plan, and those benefits will terminate effective May 1, 2017. In 

addition, your .Funds health service card will no longer be valid. 

Please see the attached information sheet for other coverage options that may be available to you 

if your 1993 Plan benefits terminate on May I, 2017. Please feel free to call our call center at 

1-800-291-1425 if you have questions or need assistance. 

Sincerely, 

Lorraine Lewis, Executive Director 

On behalf of the Trustees of the UMWA 1993 Benefit Plan 
73 

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Insert offset folio 44 here 24359.044

Non-Medicare Coverage Options 

Health Insurance Marketplace (Affordable Care Act) Coverage 

If your 1993 Plan benefits terminate on May l, 2017, you will have a 60-day special enrollment 

period to sign up for health coverage through the Health Insurance Marketplace. However, 

depending on the date that you enroll, your coverage may not become effective until June or July 

2017. Depending on your circumstances, you may qualify for a premium tax credit or costsharing subsidies to help you pay for coverage. Please note that if your 1993 Plan benefits 

terminate and you do not enroll in other health coverage, you may have to pay a penalty when 

you file your federal income tax return. 

There are four ways to apply for coverage through the Health Insurance Marketplace. You can: 

Apply online at www.healthcare.gov and select your state to get started. 

Apply by phone: Call 1-800-318-2596 (TTY: 1-855-889-4325). The Marketplace Call 

Center is open 24 hours a day, 7 days a week. 

Apply in person: Speak to trained people in your community like Navigators, assisters, 

agents, and brokers. Go to https://localhelp.healthcare.gov and enter your zip code to see 

a list of groups and people near you. 

Apply by mail: Complete a paper application and mail it in. To get an application, call 

the Marketplace Call Center number above. 

Medicaid Coverage and Veterans Benefits 

You may also be eligible for Medicaid or Veterans' medical benefits. You may apply for 

Medicaid at any time by filling out an application online at www.healthcare.gov or by contacting 

your state's Medicaid office directly. The VA encourages all Veterans to apply for VA health 

care benefits. To get more information about applying calll-877-222-8387 or you may apply 

online at www.vets.gov/healthcare/apply/. 
74 

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Insert offset folio 45 here 24359.045

UMWA HEALTH AND RETIREMENT FUNDS 

2121 K Street, NW • Suite 350 • Washington, DC 20037 • Telephone: 202.521.2200 

March I, 2017 

Name 

Address 

City State Zip 

(Medicare) 

The UMWA 1993 Benefit Plan notified you in December 2016 that the U.S. Congress had 

passed the Continuing Health Benefits for Miners Act, which provided for the transfer of federal 

funds to the Plan to cover the health care benefits you receive through April30, 2017. The Plan 

cautioned that further Congressional action would be necessary in order for the Plan to provide 

health care coverage to you after April 30. At this time, Congress has not taken the action 

needed to continue your benefits. Unless Congress takes action before the end of April, the 

1993 Benefit Plan will not be able to provide you with the health benefits that you have 

been receiving from the 1993 Plan, including prescription drug coverage, and will no 

longer pay your Medicare coinsurance and deductibles. Those benefits will be terminated 

effective May 1, 2017, and your Funds health service card will no longer be valid. 

As a Medicare beneficiary, your Medicare benefits will continue, including Medicare Part A 

coverage (for hospital benefits), and Medicare Part B coverage (for physician services and other 

services such as durable medical equipment). These benefits will be administered by the 

Medicare program and not by the UMW A Health & Retirement Funds, however, and you will 

need to show your Medicare cards to your health care providers. Although there is no charge 

for Medicare Part A, you must continue to pay your monthly premium to continue to 

receive Medicare Part B. 

Please see the attached information sheet for other coverage options that may be available to you 

if your 1993 Plan benefits terminate on May 1, 2017. Please feel free to call our call center at 1-

800-291-1425 if you have questions or need assistance. 

Sincerely, 

Lorraine Lewis, Executive Director 

On behalf of the Tmstees of the UMWA 1993 Benefit Plan 
75 

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Insert offset folio 46 here 24359.046

Medicare Coverage Options 

Medicare Part D Prescription Drug Coverage 

If you want to receive coverage for prescription drugs, you will need to select and enroll in a 

Medicare Part D prescription drug plan for an additional monthly premium. You will have an 

opportunity to do so during a special enrollment period that is in effect now and ends on 

June 30,2017. The effective date is generally the first day of the month after the application is 

submitted. (NOTE: if you go 63 continuous days or longer without prescription drug coverage 

that's creditable, your monthly premium may go up by at least 1% of the Medicare base 

beneficiary premium per month for every month that you did not have that coverage). To join a 

Medicare Prescription Drug Plan: Enroll on the Medicare Plan Finder found on 

www.Medicare.gov or on the website of the Medicare Prescription Drug Plan that you want to 

join; Complete a paper enrollment form; Call the Medicare Prescription Drug Plan; or Calll800-MEDICARE. 

Medicare Supplement Insurance (Medigap) 

If you want to obtain Medicare Supplement Insurance (Medigap) to cover Medicare deductibles 

and coinsurance, you must obtain Medigap coverage, which will also require an additional 

premium. You will have the right to do so during a special enrollment period that is in 

effect now and will end on July 2, 2017. During the special enrollment period the Medigap 

issuer you select must sell you a policy, must cover any preexisting conditions you have, and 

carmot charge you more for the policy because of any past or present health problems. You can 

get more information about Medigap plans at www.medicare.gov/find-aplanlquestions/medigap-home.aspx or by calling 1-800-MEDICARE. You can also call your 

State Health Insurance Assistance Program (SHIP), and they can give you free help in choosing a 

policy. SHIP contact information can be found at www.shiptacenter.org/about-us/about-ships/. 

Medicare Advantage Plans 

You may also have the option of enrolling in a Medicare Advantage plan, if this type of 

Medicare plan is available in your area, during a special enrollment period that is in effect 

now and ends on June 30,2017. The effective date is generally the first day of the month after 

the application is submitted. Most Medicare Advantage plans include Part D prescription drug 

coverage. You can get more information about Medicare Advantage plans sold in your at 

www.medicare.gov/find-a-plan/questionslhome.aspx or by calling 1-800-MEDICARE. 

Medicaid Coverage and Veterans Benefits 

You may also be eligible for Medicaid or Veterans' medical benefits. You may apply for 

Medicaid at any time by filling out an application online at www.healthcare.gov or by contacting 

your state's Medicaid office directly. The VA encourages all Veterans to apply for VA health 
76 

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Insert offset folio 47 here 24359.047

care benefits. To get more information about applying call 1-877-222-8387 or you may apply 

online at www.vets.gov/healtbcare/apply/. 
77 

Mr. POLIS. I am entering this nice small one into the record, 

Madam Chair. 

Chairwoman FOXX. I was going to allude to that. I figured you 

would do that. 

Mr. POLIS. I recognize that the record is better reflected for 

paper-sized pieces. 

I joined on a bipartisan basis with Representative David McKinley and Representative Frederica Wilson in cosponsoring the Miners Protection Act, H.R. 179. It would transfer balances from the 

Abandoned Mines Land Fund to a healthcare plan to cover coal 

miners whose employers filed for bankruptcy in the last several 

years. 

Frankly, if we fail to act on the Miners Protection Act by the end 

of April, miners who are not Medicare eligible, which is the vast 

majority, have been advised that they have the option of securing 

health insurance on the Affordable Care Exchange, but, as we 

know, the President and House leadership have vowed to repeal 

the Affordable Care Exchange, leaving the miners with no recourse. 

Miners have held up their end of the bargain, giving up higher 

pay for retiree health care down the road, and I would hope that 

we could find bipartisan support to honor that agreement and ensure that these coal miners do not lose retiree healthcare benefits 

that they earned. 

Moving on to the hearing before us, I want to thank the Chairwoman for yielding. We find ourselves again considering proposals 

that threaten to weaken the healthcare system that has insured 

over 20 million more Americans over the last 6 years. 

In my own State of Colorado alone, the number of people without 

insurance dropped in half, to 6.7 percent. For Colorado children, 

the uninsured rate is even lower, 2.5 percent. 

Well of course, the Affordable Care Act can be improved. Many 

of the proposals that I worry might come before us would weaken 

rather than strengthen health care in our country. 

There is a lot of progress, and I hope that my colleagues on both 

sides of the aisle agree we need to keep—I hope we can keep the 

fact insurers can have some lifetime coverage, and it is a good way 

of preventing medical bankruptcies and devastating families. 

I do not think we should charge women more just because of 

their gender. I do not think we should deny child coverage due to 

illness contracted at infancy. It is also important to keep mental 

health parity. That is an essential health benefit which has proven 

to lower costs in the long run. 

We need to move forward from that baseline rather than return 

to a time when basic healthcare services were not guaranteed. 

Frankly, my constituents are deeply worried about what the absence of a plan means for them. I have heard from people who use 

mental health services as well as mental health professionals. I 

have heard from LGBT advocates. I have heard from parents of 

children with terminal illnesses. I have heard from self-employed 

entrepreneurs with preexisting conditions. I have heard from young 

adults. Each story is unique, but the common thread is that without the ACA, they worry a lot about where we are going to be. 

CEWDOCROOM with DISTILLER

78 

Rolling back protections and coverage implemented in the ACA 

threatens the health and welfare of hundreds of thousands of Coloradoans and their families, millions of people across the country. 

Ms. Mitts, my home State of Colorado was one of the 31 States 

that expanded Medicaid as part of the Affordable Care Act. That 

law allowed about 350,000 Coloradoans to receive health care. 

If Congress were to eliminate the Medicaid expansion, our State 

is at risk of losing close to $2 billion in Federal Medicaid dollars 

that are absolutely essential to care for low-income residents in my 

State, and I do not know what the plan would be without that. 

I spoke to a community health center in a mountain community 

that stressed the importance of the program, and do not know how 

they can reach their patient population without it. 

Ms. Mitts, what do you foresee is the damage that weakening 

Medicaid would do to health insurance coverage for American families, and can you address proposals to block grant the program or 

institute per capita caps? 

Ms. MITTS. Thank you for your question. Repealing the Medicaid 

expansion, which basically was a lifeline for millions of lower income people who up until that point did not have any access to affordable coverage, would basically scale back immense progress 

and leave those people uninsured. 

In terms of proposals to block grant or per capita cap the Medicaid program, that translates to immense cuts to the program. 

They will leave states making hard decisions about rolling back the 

number of people enrolled in the program, cutting benefits, cutting 

provider rates. 

The bottom line is that in all of those scenarios, enrollees lose 

out, and their access to care is harmed. 

Mr. POLIS. Thank you, Madam Chair. I yield back. 

Chairwoman FOXX. Thank you. Mr. Byrne, you are recognized for 

five minutes. 

Mr. BYRNE. Thank you, Madam Chairman. Ms. Klausner, I really 

appreciate your testimony, but I have to admit, I am having a little 

deja vu listening to you. 

Back in the 1990s, I was a labor employment attorney representing small- and medium-sized businesses when Congress 

passed the Americans With Disabilities Act, a bipartisan bill. 

Everybody in America wants to see disabled people be successful 

in the workplace. Except when the law was passed, no one thought 

how that law was going to work with State and Workers’ Comp 

laws, because some people become disabled because of a workplace 

injury. 

A few years later, Congress passed the Family Medical Leave 

Act, and no one thought how the Family Medical Leave Act would 

work with the Americans With Disabilities Act, would work with 

State and Workers’ Comp laws. So instead of accomplishing our objective, we simply made things a lot more complicated and difficult 

for the goal that everybody wanted to get to, to actually be 

achieved. 

Now, here we are in the 2010s, and everyone wants wellness programs, except we get these regulations in 2013 that take us in one 

direction from the Secretary of Labor, HHS, Treasury, and in 2015, 

CEWDOCROOM with DISTILLER

79 

we get a conflicting regulation from the EEOC under ADA and 

GINA. I think you have alluded to that in your testimony. 

So, the goal we are trying to get to, which is to get wellness programs out in the workplace that are good for our American citizens 

and our workers, is impeded by the fact that we now have two competing regulations. 

So, I am sorry, I am having deja vu all over again, to quote Yogi 

Berra. Maybe we have the best of intentions, but by having these 

conflicts, we are making it more difficult to achieve the goal we are 

trying to achieve. 

We have a proposed law in front of us, the Preserving Employee 

Wellness Program Act. Tell me how in your judgment that would 

improve things. Tell me how that would improve things so we get 

to that goal. 

Ms. KLAUSNER. Thank you for your question, Mr. Byrne. You’re 

absolutely right, that the layering of the different laws and regulations has caused complexity and conflict, and ultimately a chilling 

effect on employers who are trying very hard to successfully design 

and implement wellness programs for their employees, as well as 

their families. 

What employers are finding is that the Affordable Care Act, 

which codified the HIPAA rules, allowed employers to have a great 

amount of flexibility while providing tremendous protection to the 

consumer, the employee, and his or her family. 

For example, it allowed the 30 percent rule to be one where the 

premiums or the incentives or the surcharges were done with respect to not only the self-only employee coverage, if that was the 

tier they were in, but also relative to family coverage. It also allowed there to be an increase for tobacco-related cessation programs, an additional 20 percent to bump up to 50 percent. 

When the Affordable Care Act rules were there, it was very exciting. However, when the Americans With Disabilities rules came in 

recently, it did not align with those ACA rules, those HIPAA rules. 

Suddenly, employers were stuck with a position of saying, well, 

how do I access/leverage that terrific 20 percent bump to encourage 

my employees and perhaps their families to stop smoking or to otherwise use tobacco products, which ultimately lead to claims? 

We’re not suggesting that every tobacco user can stop, but to the 

extent that we can design programs that maximum the opportunities for people to take the initiative, take behavioral changes, to 

lower the risk that comes from tobacco use, we can no longer do 

that up to the 50 percent limit because of the Americans With Disabilities Act. GINA is another example. Employers would like to be able to 

have wellness programs in their workplace that are not only for 

employees and not only for their spouses, but also for their adult 

dependent children. The Affordable Care Act has been a very 

strong reason why employers now allow the children of their employees to stay on their plans up to age 26. Perhaps some employer 

plans had that before the Affordable Care Act, but not necessarily 

that many. 

The adult children who are up to age 26 may have valuable opportunities to learn from wellness programs. They may have an opportunity to understand their own biometrics, their own health 

CEWDOCROOM with DISTILLER

80 

risks, that they can then go to their doctors under their own plans 

and learn how to make choices to lower their own health risks that 

are preventable. However— 

Mr. BYRNE. My time is up, if you could make it real quick. 

Ms. KLAUSNER. Absolutely. GINA does not really allow the 

wellness programs to be for dependent children, whereas they can 

be under the Affordable Care Act rules and the HIPAA rules. 

So, if we were to have complexity simplified, if we could make 

the rules better aligned, employers will have better opportunities 

to customize and create flexible programs so their employees and 

their families can have their most optimal performance, both in 

terms of their health and at the workplace. 

Mr. BYRNE. Thank you for your testimony. Thank you, Madam 

Chairman. 

Chairwoman FOXX. You are quite welcome. Ms. Bonamici, you 

are recognized for five minutes. 

Ms. BONAMICI. Thank you, Madam Chairwoman, and thank you 

to our witnesses for testifying today. 

I appreciate the objectives that are named in the title of this 

hearing, ‘‘Improve healthcare coverage and provide lower costs for 

families.’’ That sounds like the Affordable Care Act to me, and certainly the more than 2,600 people who showed up at a health care 

town hall meeting I had with our Senators recently share that sentiment. 

We have talked a lot about small businesses here today. Mike 

Roach is the owner of Paloma Clothing in Portland, Oregon. He 

said, ‘‘I greatly benefited from the ACA during the years it has 

been in place, and I wish more of us had spoken up loudly so that 

the public, Congress, and the President had a better understanding 

of that.’’ He said the ACA helped to slow the rising of insurance 

premiums for his small group of covered employees. 

In my home State of Oregon, nearly one in five individuals had 

no health insurance coverage before the ACA. I used to, years ago, 

do financial counseling at Legal Aid, and many of the people who 

came in thinking that they really needed to file bankruptcy were 

there because they had medical bills. They either had no insurance 

or inadequate insurance. 

Today, more than 95 percent of Oregonians are covered, including about 56,000 children, and low-income working adults in my 

district who benefit from the expansion of Medicaid. 

Ms. Mitts, Oregon has done a lot of innovative work to provide 

coordinated care while reducing costs. This is true not just in 

urban and suburban areas, but in rural areas as well. Our coordinated care organizations are doing amazing work with coordinating 

health care, mental health care, vision care, dental care, working 

with early childhood, and really seeing great results. 

So, I know you in response to Mr. Polis talked about the proposals such as block grants or per capita allotment and how that 

might affect those efforts. I wonder if you could talk a little bit 

about, geographically, how would this affect rural areas in terms 

of if there were block granting or per capita, how would it affect 

the rural communities where there are jobs there and increased access because of the Affordable Care Act? 

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81 

Ms. MITTS. Thank you for your question. In the world of per capita caps, there would likely be huge enrollment cuts or benefit cuts 

that would have a detrimental impact on rural communities’ access. 

Rural communities have benefited immensely from the expansion 

of the Medicaid program, and you would see fewer people enrolled. 

You could see them losing benefits. You could see them having a 

harder time finding a provider because they have provider rates 

that they have to cut. 

The real challenge of it is that it really leaves states holding the 

bag, like Oregon, who want to do innovative things and who have 

had the resources to do those innovative things and make immense 

progress in improving care coordination and quality of life for people. They won’t have the resources to pursue those types of innovative strategies to connect medical care to community-based services 

any more. 

Ms. BONAMICI. Thank you. I know my constituents are extremely 

concerned about it. And Ms. Mitts, the ACA included, as we know, 

unprecedented new consumer protections for patients, such as 

eliminating annual and lifetime limits, preventing insurers from 

dropping people when they get sick, and charging women higher 

premiums. 

What will happen to these protections in Association Health 

Plans? 

Ms. MITTS. Under the bill put forth to you today, those Association Health Plans would no longer have to comply with so many 

of those rating protections that have been a huge benefit to many 

small businesses that before the Affordable Care Act actually had 

a really hard time finding affordable coverage for their employees 

because they employed employees who actually had healthcare 

needs, who were maybe older, and the market didn’t work for them 

before. 

So, we would move back to a situation where we would have a 

segmented market, and people who are healthy and in pristine 

health could move into an Association Health Plan. 

I think the thing that is important to keep in mind is that 

doesn’t mean that an Association Health Plan would always be 

there and work for that small employer. If their workforce got 

older, claims went up, they might find that an Association Health 

Plan charges them more, and it’s not a viable option for them anymore. 

Ms. BONAMICI. I know there have been some solvency concerns 

about some of the Association Health Plans. Can you address that? 

Ms. MITTS. Historically, there have been concerns about Association Health Plans not having adequate solvency funds. They have 

leaner, less rigid requirements than typical health insurance coverage. Partially, State oversight was added to that to help address 

some of these problems, the bigger problems for when they were 

just under ERISA. 

When a plan goes insolvent, an Association Health Plan goes insolvent, their employers and their workers are still left with all of 

those unpaid medical claims, and are on the hook for them. If the 

plans are not under State jurisdiction, they won’t be able to benefit 

CEWDOCROOM with DISTILLER

82 

from State guaranty funds that help pay those claims, so they’ll be 

left on the hook for them. 

Ms. BONAMICI. Thank you. I see my time has expired. I yield 

back. Thank you, Madam Chair. 

Chairwoman FOXX. Thank you very much, Ms. Bonamici. Mr. 

Allen, you are recognized for five minutes. 

Mr. ALLEN. Thank you, Chairwoman. Thank you for being with 

us today. I think these hearings are good. I keep waiting for the 

magic formula that is going to fix this problem. 

We know health care is basically a disaster for most Americans. 

I get story after story of people who actually are not getting preventive health care, Ms. Klausner, because their deductibles are 

too high, so they cannot get medical attention. Now, the costs are 

going to go up because the next thing that is going to happen is 

they are going to be forced to have critical care. 

I agree with you that we spend about 25 percent, at least from 

what I researched, of every dollar on preventive care versus about 

75 percent of every dollar on critical care. If we could just get that 

evened up, we would save huge sums of money. 

Now, I am going to ask this question on behalf of my wife. She 

is big in nutrition, and I have to confess, she stays on me all the 

time about some things I eat. I am also on the Committee of Agriculture. We have had hearings on nutrition. 

I just did some research, and I saw that the cost curve on nutrition and number of participants and the cost curve on Medicaid 

and the number of participants is on the same upward trend. 

In your studies, have you looked at the nutrition side and any 

types of savings we could generate, particularly in dealing with the 

rising healthcare costs? 

Ms. KLAUSNER. Thank you very much for your question. I am 

glad to see that families are together involved in trying to create 

wellness among each member of the family. 

In terms of your absolute specific question, I would like to go 

back and look at our study and see whether or not we did, in fact, 

specifically look at the value of nutrition. 

What I can say is that the wellness programs are ones that really are sought to help individuals identify for themselves where they 

have issues that ultimately they can work on, as I said before, with 

their doctors individually, but the aggregate information gets collected in a way that can then help employers to make changes, not 

only with their employer-sponsored plans, but also with the whole 

culture of the workplace. 

So, if I were to look at your issue, not specifically yours, but the 

issue you raised in terms of nutrition, through health risk assessments we have learned that individuals might not actually know 

what food is causing their high blood pressure or what foods could 

lower their cholesterol, or how those different issues work together, 

or if they do have an illness, they have irritable bowel syndrome 

or Crohn’s, how they can deal with it. 

Ultimately, that information will help them personally with their 

doctors to getting preventive care and maintenance care or to deal 

with the actual illness, but it also allows the employer at the aggregate level to recognize that perhaps they would change something in their workplace. Their cafeteria might have more fresh 

CEWDOCROOM with DISTILLER

83 

food. Their cafeteria might end up being set down the hall so it 

takes more steps to walk there. 

It all works together. So what I think is very important is that 

employers are looking to create an environment by utilizing these 

workplace wellness programs to improve the health of the employee 

and their family, as well as to create a productive workforce. 

Mr. ALLEN. Nutrition is a part of that program? 

Ms. KLAUSNER. Absolutely, nutrition is a part of it. 

Mr. ALLEN. Mr. Ritchie, on self-insured programs, obviously the 

business community—I am involved in small business—obviously, 

we are going to self-insurance because we are trying to stabilize 

costs, the cost increase. 

I believe you said that program is working fairly well, but if we 

could basically release it and make it more available, it might be 

an answer to the rising cost of health insurance. 

Mr. RITCHIE. I would say self-insurance is not going to answer 

the rising cost of health insurance. You still have the underlying 

medical costs which were increasing at a phenomenal rate that the 

market is really struggling to keep up with. 

What self-insurance does is it doesn’t allow them to double down. 

If you’re a health insurer, you’re going to take the increasing cost 

of medical insurance and, due to our new medical loss ratio law, 

get a profit percentage on the rising increase of that cost. So, you 

take it into a self-insured model and you’re not paying the health 

insurer’s profits on top of your rising costs. That’s the value of selfinsurance. You’re taking it and you’re controlling your own destination, and keeping it at a true cost basis. 

Mr. ALLEN. I yield back. 

Chairwoman FOXX. Thank you very much. Ms. Blunt Rochester, 

you are recognized for five minutes. 

Ms. BLUNT ROCHESTER. Thank you, Madam Chair and Ranking 

Member Scott. I would also like to thank the panel. 

First, I would like to ask unanimous consent to enter into the 

committee record a letter from Governor John Carney to Senator 

Ron Wyden dated February 22, 2017, to discuss the potential impact of the proposed Medicaid changes in the Affordable Care Act 

for my State of Delaware, as well as a letter from the National Association of Insurance Commissioners. 

Chairwoman FOXX. Without objection. 

[The information follows:] 

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The Honorable Ron Wyden 

Ranking Member 

S·rArE or D!.i.\\'(.\Rl 

OFFICE OF THE GOVERNOR 

T.H:-.i:\1 L lkrLDl\1(;, Sl::cot"--:n FLOOR 

~\i \RTf!\: !J.. n!E!t f(n,:(;,Jn. Boni'\'.\RD Sot'J! t 

Dnvuz, DHAWM<F.199()1 

February 22, 2017 

U.S. Senate Committee on Finance 

219 Dirksen Senate Office Building 

Washington, DC 20510 

Dear Sen. Wyden, 

Poo"F: 302-744A101 

F.\x: 302-739-2775 

Thank you for your letter dated January 19, 2017 regarding the potential impact to Delaware of 

proposed changes to the Medicaid program. Please see the below responses to your questions. 

Should you have any additional questions or wish to discuss this matter in more detail, please do 

not hesitate to contact me. I can be reached through Emily Kuiken at (202) 624-7724 or 

Emily.Kuiken@state.de.us. 

1. How would a 30 plus percent cut in federal financial participation in Chairman 

Price's fiscal year 2017 budget proposal impact your state Medicaid program? 

A budget cut of this magnitude would be devastating to the Medicaid program in 

Delaware. Absorbing an immediate reduction of this size could only be accomplished by 

eliminating coverage for non-mandatory eligibility groups, most notably non-caregiver 

adults (60,000 individuals out of a total enrollment of230,000). Given that we are nearly 

half-way through the fiscal year, it is unlikely that even this draconian measure could 

achieve the necessary budget reduction. 

2. How would repeal of the Medicaid expansion affect health coverage rates in your 

state? 

Delaware is proud of the gains we have made in improving health coverage rates through 

both the Medicaid Expansion and the Marketplace. It is important to note, however, that 

these efforts began in 1996 with a Medicaid demonstration waiver that expanded 

coverage to all adults below 100% of the federal poverty level. Repeal of the Medicaid 

expansion would eliminate enhanced federal funding that has allowed Delaware to 

maintain the prior expansion as well as implement the ACA expansion to 133% of the 
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Response to U.S. Senate Committee on Finance 

February 22, 2017 

Page 2 of7 

FPL. The result, as noted above, could be the elimination of coverage for 60,000 adults 

reducing health coverage rates to levels not seen since 1996. 

3. How would repeal of the Medicaid expansion impact your state Medicaid budgets? 

What would be the impact on other state budget priorities such as education? 

Would your state be able to raise revenues or otherwise compensate for the loss of 

federal funding? 

Repeal of the Medicaid expansion would result in a reduction in federal funding 

estimated at $170 million. This figure includes both savings from enhanced funding for 

the state's early expansion ($120 million) as well as funding for the ACA expansion ($50 

million). That represents a 13% reduction in federal funding. The state would need to 

increase its current Medicaid appropriation by 21% to offset such a loss. 

The Delaware Department of Education's concerns relative to school-age children and schools, 

are as follows: 

I. Medicaid and CHIP provide necessary medical coverage to children with highest need, in 

terms of severe medical conditions and poverty. If there is a reduction in benefits for 

these children, their health will suffer. That will directly impact their ability to learn. 

2. A number of our students with severe disabilities require the services of a one-on-one 

nurse or health aide to monitor 2417 and provide life-saving interventions. If this service 

were disallowed or reduced, the child's life would, quite literally, be placed at risk. A 

full-time school nurse in a school building cannot assume responsibility for one-on-one 

care while also providing safe care for an entire school's population of students. 

3. In the past, our schools for students with severe health conditions, like Howard T. Ennis 

or Leach, generated the most reimbursement for services and the money they generated 

was required to go directly back to that individual school. These schools have used the 

CSCRP funds to hire additional nurses and support. Reduction in funds to these schools 

could impact services and safety. 

4. School Based Health Centers who may be dependent on or relying on Medicaid billing, a 

reduction in Medicaid dollars would compromise their ability to continue services. 

4. How would these levels of cuts impact your ability to meet the needs of an aging 

baby boomer population expected to require more long-term services and supports, 

including nursing home care and personal care services? 

Delaware Medicaid has made significant progress in reforming the L TSS delivery system 

to better support individuals in community-based settings over the past five years. We 

recognize that demands for service will increase in the future. Significant funding cuts at 
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Response to U.S. Senate Committee on Finance 

February 22,2017 

Page 3 of7 

this point will force difficult choices to be made that will limit our ability to provide a full 

continuum of services and supports for this growing population. 

5. How would these level of cuts impact your ability to combat the opioid epidemic and 

mental health crisis and meet the needs of those with mental health and substance 

use disorder needs? 

Delaware Medicaid has partnered with the Division of Substance Abuse and Mental 

Health in their efforts to enhance mental health and substance use disorder services. This 

includes expansion of Medicaid coverage for SUD treatment services as well as 

development of a new waiver program to offer specialized services for individuals with 

Severe and Persistent Mental Illness (SPMI). Funding cuts would not only eliminate 

access to many of these services if Medicaid eligibility levels are reduced but may require 

a review of these optional services to see if they can be sustained. 

6. How would these levels of cuts impact your ability to invest in innovative changes to 

your health care delivery system? 

Delaware has been actively involved in a SIM health care delivery transformation 

planning and implementation effort for several years. We are at a critical stage now 

where initial efforts to provide practice transformation and care coordination support are 

being put in place to support value based purchasing strategies. Funding cuts now could 

halt these efforts designed to provide long term return on investment through better 

health outcomes and reduced costs. 

7. How would these levels of cuts impact your ability to respond to public health crises 

such as the Zika virus or increases in HIV cases? 

Nearly all ofDPH's funding to respond to HIV and Zika are federal funds. Therefore, a 

cut in federal funds would have critical direct impacts. It would most certainly mean 

laying off personnel who are responsible for tracking the occurrence of these infections, 

and, in the case of Zika, investigation of suspect cases. Testing for Zika virus and other 

mosquito borne viruses will be hampered. This testing is important not only to diagnose 

disease in individual patients but also to conduct surveillance for these diseases so that 

mitigation measures can be applied to protect the health of the public as is done through 

the non-human surveillance program that DPH carries out in collaboration with DNREC 

(looking for west nile virus in sentinel chickens and conducting mosquito surveillance for 

disease vectoring mosquitos). In addition, treatment and access to social supports for HIV 

infected persons- currently going on through the Ryan White program- would be 

hindered. It would likely mean cessation of educational efforts to prevent these 
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Response to U.S. Senate Committee on Finance 

February 22, 2017 

Page 4 of7 

infections, and for HIV the provision of counseling and testing services, case 

management and community outreach. 

Another direct impact of federal funding cuts would be that DPH laboratory will be 

unable to test for Ebola virus disease and other similar high impact emerging pathogens 

as this capacity is completely supported by federal funds (Through the epidemiology and 

laboratory capacity and the Public Health preparedness grants). This is particularly 

significant because for diseases such as Ebola for which there is such significant 

morbidity and mortality, hospital labs and commercial labs often do not have the capacity 

to test. At present, DPH laboratory is the only lab in the state that tests for Ebola. In 

addition, the laboratory preparedness network is a federally funded program that allows 

the Division of Public Health lab (and other state and territorial labs) to rapidly test and 

detect agents ofbioterrorism in human and environmental samples. Cuts to federal funds 

could hinder or eliminate this capability 

With regard specifically to the impact of the repeal of the Affordable Care Act on the 

prevention and control of infectious diseases in DE: 

• 6 of our 9 infectious disease epidemiologists are funded by ACA/PPHF funds. 2 

microbiologists (contractual) are also funded off of these funds. Loss of these 

staff will mean that we are severely hampered in our ability to investigate and 

contain disease outbreaks. Our ability to test for and halt outbreaks of 

gastrointestinal diseases; healthcare associated infections, influenza and emerging 

infectious diseases as well as our ability to test for other respiratory viral 

pathogens and for vaccine preventable diseases such as mumps and measles 

would be greatly impacted. 

• The impact on vaccine preventable diseases would extend beyond inability to 

conduct laboratory testing. Childhood Immunization Section 317 grants help 

ensure that the right vaccines get to the right people at the right time to protect 

their health and the health of their communities and prevent resurgences of life· 

threatening vaccine preventable diseases. Section 317 maintains immunization 

infrastructure including vaccine registries, surveillance, outreach and service 

delivery. Loss of the PPHF funds will greatly impact our (highly successful and 

nationally recognized) immunization program by loss ofstaff(l0.25 FTEs) and 

loss of funding to run the program 

• Medicaid is the largest payer for HIV care. Access to early and effective HIV 

care significantly improves the health of people living with HIV and greatly 

reduces their risk of transmitting the virus to others. A reduction in federal 

Medicaid spending will shift costs to the states and widen state-based health 

disparities. By increasing state financial risk, Delaware's Medicaid program will 
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Response to U.S. Senate Committee on Finance 

February 22, 2017 

Page 5 of7 

be unable to respond to increases in demand, new treatment advances or public 

health emergencies such as Zika. States will be forced to cut eligibility, essential 

services and provider payments. 

8. How would these levels of cuts impact your ability to respond to an economic 

downturn such as a recession? 

Economic downturns are accompanied by increasing demands for health care and social 

services. In the past, the federal government has been very responsive in financially 

assisting states to address these challenges. Reduced federal funding and proposed 

federal Medicaid reforms such as block grants would severely limit states' ability to 

effectively serve impacted residents in such a crisis. 

9. How would these levels of cuts impact your ability to respond to new high-cost 

medical breakthroughs such as Sovaldi and other blockbuster drugs. 

As stated above, reduced federal funding will severely limit our ability to respond to any 

unanticipated cost driver. 

10. How would these levels of cuts impact your ability to respond to natural and other 

disasters such as Hurricane Katrina, Superstorm Sandy, and the Flint water crisis? 

As stated above, reduced federal funding will severely limit our ability to respond to any 

unanticipated cost driver. 

11. How would these levels of cuts impact your ability to provide affordable family 

planning services, including contraceptive coverage to low-income women and 

families? 

Delaware Medicaid has partnered with the Division of Public Health to implement the 

Contraceptive Access Now (CAN) initiative to ensure that all women in Delaware have 

access to appropriate contraceptive strategies. We recognize the importance of avoiding 

unintended pregnancies to improve birth outcomes and promote overall family health. 

Funding cuts could jeopardize the future of this initiative and funding for Long Acting 

Reversible Contraceptives (LARCs). 

12. How would these levels of cuts impact hospital and provider payments? What types 

of increases in uncompensated care would you expect to see in your state given such 

cuts? 

Since funding cuts would likely result in loss of coverage for a large number of adults, 

uncompensated care would increase dramatically. This would, most likely, be 
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Response to U.S. Senate Committee on Finance 

February 22, 2017 

Page 6 of7 

accompanied by reductions in preventive care and care to manage chronic conditions. 

Consequently, health quality would decline and treatment would be concentrated in 

emergency rooms and urgent care centers. The increase in uncompensated care would 

also lead to demands for reimbursement increases from commercial and government 

payers. 

13. How would these levels of cuts impact localities in your state, such as counties and 

local jails? 

While an inmate is incarcerated they do not receive Medicaid. However, if an inmate goes to 

the hospital while in custody and is admitted (post 24 hours), Delaware Department of 

Corrections can apply for Medicaid, and if approved, receive Medicaid hospital 

rates. Unfortunately when the ACA was passed, it affected inmates over 65 as they could no 

longer get Medicaid if hospitalized. This already costs DOC and our medical provider 

millions of dollars. Therefore any further reduction in Medicaid would have a direct impact 

on DOC. Reduced funding would likely impact inmates when they leave DOC and go to the 

community where they will be expected to get their medical care. 

14. What kind of cuts would state have to contemplate under these levels of cuts in 

federal financing for state Medicaid programs? 

At a minimum, the state would very seriously consider rolling back eligibility and 

services to the levels that existed before the initial expansion of eligibility to 100% of the 

federal poverty level that occurred in 1996 under then-Governor Carper. We would also 

have to revisit Medicaid waivers created for long term supports helping those with severe 

and persistent mental illness remain in the community. An estimate of impact for these 

changes are 50,000 people would lose Medicaid coverage, and the remaining 175,000 

enrollees would lose critical benefits that they need to remain healthy in their 

communities. 

15. How else would these levels of cuts impact your state? 

State governments throughout the nation are struggling to provide services to their 

citizens while facing uncertain economic times. According to the National Association 

of State Budget Officers (NASBO) Fall Fiscal Survey, twenty four states reported fiscal 

2017 general fund revenues coming in below projections, the highest number of states 

expecting revenue shortfalls at that time in the fiscal year since 2010. Certainly Delaware 

has not been immune to such issues. Current year revenue projections as estimated by 

the Delaware Economic and Financial Advisory Council (DEF A C) for the State have 

fallen $70 million since the fiscal year 2017 budget was enacted in July, 2016. 
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Response to U.S. Senate Committee on Finance 

February 22, 2017 

Page7of7 

The outlook for fiscal year 2018 remains similarly pessimistic. Delaware's fiscal year 

2018 revenue is projected to be flat, increasing by only 0.4% over fiscal year 2017. In 

combination with mandated cost drivers for items such as projected enrollment increases 

in our schools, and projected growth in Medicaid it leads to an estimated gap for the 

Fiscal Year 2018 budget of approximately $350 million. Delaware policy makers will be 

faced with difficult decisions on funding essential services that Delawareans count on 

such as providing a quality education, protecting those most in need, and ensuring the 

public's safety. It is clear that in this context, the State would be hard pressed to absorb 

an estimated $120 million in additional obligations due to the federal government 

reneging on their share of the costs for the Medicaid expanded population. 

Sincerely, 

~~ Governor 

State of Delaware 
91 

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National Association oi 

Insurance Commissioners 

February 28, 2017 

&77wCENTE~I~ 

f<,; INSURANCE . POLICY 

a"'l RESEARCH 

The Honorable Virginia Foxx, Chair 

Committee on Education and the Workforce 

U.S. House of Representatives 

Washington, D.C. 20515 

The Honorable Robert C. Scott, Ranking Member 

Committee on Education and the Workforce 

U.S. House of Representatives 

Washington, D.C. 20515 

Dear Madame Chairwoman and Mr. Ranking Member: 

The U.S. House Education and the Workforce Committee is once again scheduled to consider legislation 

that would allow a new category of health insurance company, "Association Health Plans {AHPs)," to 

form and operate outside the authority of state regulators and beyond the reach of proven state consumer 

protections and solvency laws. This bill, H.R. 1101, would adversely impact consumers and the National 

Association of Insurance Commissioners (NAIC) urges you to oppose it. 

The NAIC, which represents the nation's insurance regulators, shares the sponsors' concern for the 

growing number of small business owners and employees who cannot afford adequate coverage. 

However, the root cause of this problem is the steadily rising cost of healthcare merely reflected in 

premiums, and this legislation would do nothing to address that reality. In fact, we fear the legislation 

could actually increase the cost of insurance for many small businesses whose employees are not 

members of an AHP. 

Even more troubling than prescribing a treatment that does not address the underlying disease, the 

legislation would actually harm consumers by further segmenting the small group market, eliminating 

critical state consumer protections, and could lead to increased fraud and plan failures. This legislation 

would encourage AHPs to "cherry-pick" healthy groups by desi&>ning benefit packages and setting rates 

so that unhealthy groups are disadvantaged. This, in turn, would make existing state risk pools even 

riskier and more expensive for insurance carriers, thus making it even harder for sick groups to afford 

insurance. In addition, the legislation as written would eliminate all state consumer protections and 

solvency standards that ensure consumers receive the coverage for which they pay their monthly 

premium. These protections arc the very core of a state regulatory system that has protected consumers 

for nearly !50 years. As we have already seen in the past when such plans were allowed under federal 

law, consumers will be left with unpaid claims and nowhere to turn when they are harmed. A prior law 

along the lines of HR. 1101 was repealed because it was found to harm consumers; the same mistake 

should not be made again. 

We recognize that supporters of AHPs are well intentioned, looking for solutions to the same problems 

we are seeking to address, but history has demonstrated that AHP-type entities have done more hann 

than good to small businesses. A far broader approach to the existing problems - one that addresses 

healthcare spending, allows more innovation, and permits more state flexibility- is necessary to bring 

real relief to small businesses. The federal government and the states need to work with healthcare 
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February 28, 2017 

Page Two 

providers, insurers and consumers to implement effective reforms that will curb spending and make 

insurance more affordable to small businesses. Rehashing strategies that have failed would not be a step 

forward. It is time to move on and find more effective solutions. 

Sincerely, 

Ted Nickel 

NAIC President 

Commissioner 

Wisconsin Office of the 

Commissioner of Insurance 

~·t4.f!tt- Eric A. Cioppa 

NAIC Vice President 

Superintendent 

Maine Bureau of Insurance 

~ 1v.; 1\!.lul< 

Julie Mix McPeak 

NAIC President-Elect 

Commissioner 

Tennessee Department of 

Commerce & Insurance 

a~ David C. Mattax 

NAIC Secretary-Treasurer 

Commissioner of Insurance 

Texas Department oflnsurance 
93 

BLUNT ROCHESTER I would like to use my time to highlight a few 

concerns that I have about the House proposals to repeal the Affordable Care Act. First, I want to highlight for my colleagues two 

startling numbers. 

One is the fact that repealing the Medicaid expansion part of the 

ACA would eliminate 60,000 adult Delawareans from our health 

care rolls, and open us up to a $170 million hole in my State’s 

budget. For some, that might not seem big, but Delaware is very 

small, so it could have a catastrophic impact. 

So, my first question is for Ms. Mitts. I really wanted to talk 

about the impact of Medicaid and whether or not a block grant 

versus a per capita cap is a viable option or a good solution, but 

you have already talked a lot about that. So one of the questions 

I did not hear answered was the fact that I think a lot of people 

have an impression of folks on Medicaid as single adults and families, but, Ms. Mitts, can you discuss the importance of Medicaid 

funding for long-term care for seniors and individuals with disabilities? 

Ms. MITTS. Thank you for your question. So, Medicaid has long 

been a lifeline for individuals who are elderly, who are dual eligible, who get Medicaid benefits, are low income, and Medicaid helps 

them afford the care they need. They also provide critical long-term 

supports and services, nursing home care for many older adults. 

Under a block grant or per capita cap situation, we’re talking 

about in most proposals we have seen a 30 percent cut in the Medicaid budget. That’s going to hit those highest cost patients in the 

Medicaid program. If a state is going to have to make cuts to their 

Medicaid program, they’re going to have to make cuts there and 

really roll back coverage and care for some of the most vulnerable. 

BLUNT ROCHESTER Thank you. My second question is actually for 

Ms. Klausner. You mentioned that consistent policy is key for businesses. Can you tell us how you and other members are reacting 

to the inconsistent policy proposals, messages, timelines? There are 

just so many different competing things out there. 

I am just curious if you could talk about —and it is coming from 

the administration, it is coming from Republicans in the House and 

in the Senate, and also from governors. Can you talk a little bit 

about the impact of all this inconsistency? 

Ms. KLAUSNER. Thank you for your question. Specifically, with 

regard to wellness programs, we are getting a lot of inconsistent information coming out of the different regulations. The impact of it 

is truly a chilling effect on employers being able to maximize reducing costs for employees and their families. 

We have employees that desperately need the information, and 

employers that need the information, so they can create things like 

disease management programs, ones where the health risk assessment identifies for an individual that they have either diabetes or 

are pre-diabetic, some who may not have already known it through 

either a glucose test or a biometric screening. 

Ultimately, we are able to then design plans on behalf of the employers so they could perhaps waive a co-pay for someone who has 

been identified as diabetic for maybe getting an eye exam or to get 

their insulin products. 

CEWDOCROOM with DISTILLER

94 

However, it is unclear as to whether or not these management 

programs that are there to benefit employees who are either at risk 

for health conditions or, in fact, have adverse health conditions— 

we are challenged to create those programs because there is uncertainty or lack of clarity as to where they stand under the Americans With Disabilities Act as opposed to under the Affordable Care 

Act. 

We would look to have more streamlined rules so we could maximize opportunities. 

BLUNT ROCHESTER Thank you. I do not have a lot of time left, 

and I would have loved to ask everybody this question because one 

of my big concerns is the fact that because of this inconsistency of 

messaging, even the markets, whether it is insurers, others, are 

really skittish, as we have said. 

So, I yield back the balance of my time. Thank you. 

Chairwoman FOXX. Thank you. Ms. Blunt Rochester, you can 

submit questions to the witnesses and then ask for them to be answered. Thank you. 

Mr. Rooney, you are recognized for five minutes. 

Mr. ROONEY. Thank you, Chairman Foxx, Ranking Member 

Scott, and thank you to the panel. It has been very informative to 

me. 

I would like to ask Mr. Ritchie right quick, as an employer like 

you, I think we would agree—I agree with your comments about 

how successful self-insurance plans have been. We know very well 

self-insurance aligns human motivation with their money, something which some people do not seem to understand, and stop-loss 

is critical to allowing smaller companies to offer them. 

Would you just reiterate, just give us a little bit of your opinion 

about whether self-insurance might present an equally attractive 

option for public sector and multiemployer plans? I apologize if you 

already did this while I was out. 

Mr. RITCHIE. Well, I would say, this is something I alluded to at 

the beginning of our testimony, for cities, local governments, and 

school districts, they represent 10 percent of my purchasers of stoploss insurance. Taft-Hartley multiemployer plans represent 5 percent of it. So, they are a material utilizer of self-insurance and, 

therefore, stop-loss insurance when it makes sense for them. So, 

we’ve seen it as a huge opportunity and savings for those multiemployer plans. 

One thing we talked about earlier was the miners’ associations, 

and if there is a fund established for them. What I think is critical 

and what self-insurance does is it would say that all those funds 

go to pay benefits, and it allows it to do that, where it is not going 

into the health insurance mechanism where there is a profit percentage on it. 

That’s one thing that I think has been a little bit missed in this 

hearing so far. When we’re talking about the Self-Insurance Protection Act, we are not talking about amending the Affordable Care 

Act. We are also just talking about protecting options for employers 

so they can finance the risk in an appropriate manner. That’s all 

we are simply putting forth with this bill. 

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Mr. ROONEY. I would think with those low percentage market 

shares, there would be a lot of room to go up if the local government architecture supported it. 

Mr. RITCHIE. I actually think the local districts are very much 

consumers. School districts are huge consumers of it. California 

School Districts have a large self-insurance program that they run 

through a broker in California. They have been utilizers of it. 

School districts usually tend to be around that 1,000 to 3,000 life 

market. That is in the absolute sweet spot for self-insurance with 

stop-loss coverage. 

I think that market is robust, it’s vibrant, and as I alluded to 

also earlier, the employer market is not the market that’s broke. 

It’s working. Employers have an incentive to take care of their employees. Small employers are competing with large employers. 

Large employers are also competing with small employers to attract and retain talent. They want to offer a benefit that makes 

sense. 

If you’re going to finance it, and you’re going to ask me as an 

employer, I’m going to offer to pay for your coverage, I should have 

the right to know where the claims are going, to know what’s happening with the spend, and then to customize my program to maximize that spend for the benefit of my employees. 

Mr. ROONEY. Thank you very much. I have a little bit of time 

left. This is probably totally off message, but I am not a professional at this. This GINA law just takes the cake. I have to ask 

Ms. Klausner just a little bit about this GINA law. Just when you 

think you have seen it all with this Federal Government, you read 

about this thing. 

I kind of feel like it’s turning the back on allowing someone to 

know medical history and turning the back on the science of gene 

knowledge. It is kind of like when the medieval people would sail 

out to Gibraltar, the Pillars of Hercules, and turn around because 

they were scared the Earth was flat. 

So, I would like to get your thoughts one more time about how 

we can make sure this law, which is concerning to me that it is 

on the books, can be stopped from preventing rewards and normal 

human incentives to make a wellness plan go well. 

Ms. KLAUSNER. Thank you again for your questions. GINA is 

about genetic information, and genetic information is clearly something that is being utilized to improve the health of individuals. 

The science is developing. As the science develops, we want to 

make sure individuals have an opportunity to really understand it 

and use it for their own benefit. 

What we are finding is that the inconsistencies in these rules are 

putting a real pause on the ability to design these programs. So, 

just by way of example, if we want to design a program that complies with the ACA rules, that allows there to be an incentive for 

a spouse to ultimately understand his or her own genetic makeup, 

that incentive is counted under one set of calculations under 

HIPAA, a different set of calculations or not counted perhaps at all 

under the Americans With Disabilities Act, and counted again differently under GINA in terms of the 30 percent rule, the 50 percent 

rule, et cetera. 

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So, we would like to see it to be streamlined so that we don’t 

have to not do things that would acquire genetic information. When 

I say ‘‘acquire,’’ they acquire on behalf of themselves and utilize at 

the risk of then saying, well, we wouldn’t do another program, perhaps tobacco cessation or disease management program. 

Mr. ROONEY. Thank you very much. Thank you, Ms. Foxx. 

Chairwoman FOXX. Thank you, Mr. Rooney. Ms. Davis, you are 

recognized for five minutes. 

Mrs. DAVIS. Thank you. Thank you, Madam Chair, and thank 

you all for being with us today. 

I wanted to just go back to where we had been in terms of the 

discussions about flexibility and choice, because I think that is 

something we all feel is important, and yet we also know how that 

is developed has something to do with cost, and whether or not 

small businesses feel they can save money or any businesses, really, or any State for that matter. We want to be sure that if you 

lower the cost, you do not lower the quality of the care that is 

given. 

So, could you share with me, do you support legislation that allows insurers to roll back consumer protections and benefits from 

the ACA? Are you in favor of legislation that would do that? To roll 

back that legislation? A simple yes or no is fine. 

Ms. KLAUSNER. I think the answer to the question is that all of 

us in America would like to make sure that there are appropriate 

consumer protections in place. 

Ms. MITTS. Our answer is simply no, we don’t want to see the 

consumer protections that are in place right now rolled back in the 

health insurance industry. 

Mr. RITCHIE. I think what we’re talking about with the self-insurance is simply keeping choices alive, keeping choices to finance 

that risk however you wish to do it. You’re correct, how you build 

this will be very critical. 

One thing that has happened with the Affordable Care Act is we 

haven’t seen costs controlled. You’ve seen expenses. Just like you 

talked about, just because you pay $100 for a doctor visit and 

someone pays $200 for a doctor visit, it doesn’t mean there’s a difference in the quality of that doctor visit. 

We should incentivize and give employers the ability to say I 

want to build an incentive around getting the right providers with 

the right quality of choice. 

Mr. HURST. Congresswoman, I believe what we’re talking about, 

what I’m talking about, is empowering consumers to make some of 

these decisions on their own and, frankly, allowing insurers to 

make some of these decisions and work on behalf of the consumer 

rather than working on behalf of the provider. 

If we dictate too much, ‘‘we’’ being government, dictate exactly 

what those plans have to look like, we’re empowering the provider. 

We’re not empowering the consumer. So, if we can let consumers 

decide really what type of plan they want, what they need, and 

what they can afford, that is better for everybody. 

Mrs. DAVIS. Thank you. That sort of goes to one of the issues 

that has certainly been before a lot of us, and just talking about 

the protections in terms of what is available to people. 

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Do you support maintaining direct access to OB/GYN care, and 

continuing the ban on gender rating? Would you support maintaining direct access to OB/GYN? 

Ms. KLAUSNER. I am here today testifying on behalf of the American Benefits Council and all its members. I have not surveyed 

them for the answer to that question, but I would imagine most 

would support that kind of access. 

Mrs. DAVIS. And the ban on gender rating? 

Ms. KLAUSNER. It is not something that I’ve had a conversation 

with our members on. 

Ms. MITTS. Yes, we strongly support maintaining those protections. They’ve been essential for making sure that coverage is affordable for women and they actually can access the care they 

need. 

Mr. RITCHIE. I’d like to go directly to the gender rating question. 

One thing I want to point out is under the Health Insurance Affordability Act, employers are not allowed to differentiate between 

a male employee or a female employee, or on age. A 21-year-old 

male pays the same thing as a 59-year-old female under the employer plan. They have to be treated the exact same. So, we’ve been 

under this rule for years. 

What you guys do in the individual market is what you guys 

choose to do, but the employer market has been doing it, and we 

have been doing it well. 

Mrs. DAVIS. It sounds like the employer market is basically alive 

and well, with some modifications. Mr. Hurst? 

Mr. HURST. Congresswoman, you know what, I think reasonable 

people can sit down and talk about what coverages we need to 

maintain and what ones we need to give to the consumer, but some 

of them go overboard, particularly some of the State mandates. 

In Massachusetts, we have a requirement for in vitro fertilization. I’m a 57-year-old male and my wife is the same age. Frankly, 

we don’t need that coverage. We don’t want that coverage. Many 

people in Massachusetts can’t afford that coverage, yet we have to 

provide it because we’re fully insured, yet if we were self-insured, 

we wouldn’t have to cover it. And, frankly, most self-insureds do 

not, in fact, cover that mandate. 

Mrs. DAVIS. Mr. Hurst, just in terms of maternity coverage and 

access to women’s preventative services, is that something that 

should be part of all plans? 

Mr. HURST. I believe so, yes. 

Mrs. DAVIS. Anybody disagree with that, maternity coverage? 

Mr. RITCHIE. I won’t disagree with maternity coverage, but I will 

disagree with the fact that plans don’t cover in vitro and don’t 

cover those additional services. They absolutely do. It’s the employer’s choice if they want to cover it or not, and they’ll do it over the 

population and the cost will be spread over the population. 

Yes, I have quite a few plans— 

Mrs. DAVIS. I am going to run out of time. I am sorry, sir. Preventative health services, is that something that should be part of 

the plans, generally? Does anybody disagree with preventative 

health services? 

Ms. MITTS. I’ll speak to it. Thank you for the question. I mean, 

preventive services with no cost-sharing has expanded access to 

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timely care for millions of people and help them do early identification, so we strongly support it being maintained. 

Chairwoman FOXX. The gentlewoman’s time has expired. 

Mrs. DAVIS. Thank you. 

Chairwoman FOXX. Ms. Stefanik, you are recognized for five minutes. 

Ms. STEFANIK. Thank you, Madam Chair. When I travel across 

my district speaking with families and businesses, one of the most 

frequent concerns I hear about are related to their struggles with 

health care. 

The Affordable Care Act has not been affordable. Premiums for 

families have skyrocketed and continue to climb. Average ACA premiums in New York alone rose by 16 percent last year, and 

deductibles have risen for many to a point where it does not even 

feel like they have insurance. 

These concerns mirror my own personal experience with the 

ACA. 

Coming from a small business family, I watched in 2013 as our 

employer insurance plan was canceled due to this law. This was in 

spite of the often-repeated falsehood that if you like your plan, you 

can keep it. What we got was a higher cost plan with lesser coverage. 

ObamaCare is not working, and we must find a way for better 

options, more affordable options for health care. It would be irresponsible if lawmakers did nothing, while taxes and onerous mandates crush small businesses and families across this country and 

across my district. 

Businesses such as Old Forge Hardware, which has been in existence since 1900 in the Adirondacks, will now be forced to stop 

offering their employees health coverage due to rate increases. As 

the owner of Old Forge Hardware stated herself, ‘‘If you want to 

see small towns in the Adirondacks disappear, then keep raising 

health insurance rates. There will be no small businesses left.’’ 

This is not the future I want to see in my district. 

This company employs 15 people year-round, and they treat their 

employees like family. Having to stop offering health insurance is 

a painful decision that is made out of necessity and not out of 

choices. 

Fortunately, I am excited about solutions that we proposed to 

these problems. One of those is H.R. 1101, the Small Business 

Health Fairness Act, which would allow small businesses, like Old 

Forge Hardware, to join together through Association Health 

Plans. 

My question is for Mr. Hurst. In your experience and in your 

opinion, can you discuss how Association Health Plans protect access to care for those employees who may suffer from rare or expensive diseases or medical conditions? 

Mr. HURST. Absolutely, Congresswoman. In Massachusetts, I 

should recognize that we are a fully insured Association Health 

Plan. We are not self-insured. What this legislation could do is give 

us more flexibility to be self-insured. We follow all the State mandates. We do not discriminate amongst our members. 

What we look to do is to make sure the margins are not taken 

off the backs of our small businesses. We look at following the law. 

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We do follow the law. We do not discriminate against our members 

that are really just for equality and nondiscrimination under the 

law. 

Look, as long as the essential benefits package is there, no one 

is going to be ignoring the law, no one is going to be walking away 

from important mandates that everybody should and can have. 

Ms. STEFANIK. My second question is also for you, Mr. Hurst. In 

your testimony, you state that small businesses should have the 

same marketplace rights to obtain comparable coverage at comparable rates as those that work for big businesses and the government. I think all here today would agree with that statement, and 

some would also argue that all businesses, both large and small, 

should face the same consumer protection requirements. 

How would self-funded Association Health Plans be any different 

than their large business competitors in terms of consumer protection? 

Mr. HURST. Absolutely the same. You know, 60 percent of the 

marketplace in Massachusetts is self-funded and growing. You 

know, to a large extent, the train is already leaving the station on 

this. Smaller and smaller businesses are self-funding on their own, 

or they’re doing it through third parties. They are even looking at 

other options, such as professional employment organizations. 

Not all these options are the great option for these small businesses. It works for some, not for others. This legislation is overdue 

by years. We need this because this is how small businesses and 

their employees want to buy health insurance, and it is how they 

can collectively make decisions and better their own employment 

base. 

Ms. STEFANIK. Thank you. My time is about to expire. I yield 

back. 

Chairwoman FOXX. Thank you very much. Ms. Adams, you are 

recognized for five minutes. 

Ms. ADAMS. Thank you, Madam Chair, and Ranking Member 

Scott, thank all of you for your testimony today. 

The Association of University Centers on Disabilities, the National Disabilities Rights Network, and the National Association of 

Councils on Developmental Disabilities all advocate for and provide 

hundreds of thousands of clinical services and home and community-based supports to people with disabilities and their families. 

These organizations are concerned with the Preserving Employee 

Wellness Program Act as it would bypass certain protections within 

the ADA, which could result in workplace discrimination based on 

health status. The legislation would allow employers to penalize 

workers for not providing medical and genetic information, which 

could also leave them vulnerable to discrimination. So, without 

oversight by EEOC, it sets a dangerous precedent, that health 

plans can be exempted from civil rights status. 

Ms. Mitts, are you concerned about how this legislation could impact people with disabilities? 

Ms. MITTS. Thank you for your question. Yes. I think one of our 

primary concerns is that wellness program incentives are being potentially used in ways to shift costs to workers with disabilities 

who have higher needs, increasing their premiums, increasing their 

deductibles. 

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I think something that’s been lost in this discussion so far is that 

right now employers can design consumer-friendly wellness programs that offer services, offer disease management programs, 

even offer health screenings to their employees, without putting 

their premiums and their access to coverage on the line. They do 

not need to use these types of discriminatory incentives that are 

problematic and undercut the ADA. 

In fact, what research shows is that programs that offer disease 

management, lifestyle management services, and health screening 

services that are really comprehensive, they get a high participation rate without any incentives at all. 

The research actually done by RAND questioned whether employer enthusiasm for incentives was warranted or whether building just a robust program that actually offered services to their employees was the better route. 

Ms. ADAMS. Yes, ma’am. Thank you. The Republicans’ leaked legislative draft includes placing those with health issues into highrisk pools. So, can you explain what this will do to individuals’ insurance premiums, and how it is different from our current structure in ACA? 

Ms. MITTS. Well, high-risk pools are an old idea, and they did not 

work for States before the Affordable Care Act. They covered a fraction of the people with preexisting conditions who are covered now 

under the ACA. There’s about 52 million people in our country who 

without the ACA could be denied coverage because they have a preexisting condition. 

Prior to the ACA, high-risk pools covered less than 500,000 people in total. On top of that, they had premiums 1.5 to 2 times the 

rate of healthy people. The premiums were unaffordable for many 

people, and oftentimes this coverage had waiting periods. They had 

to wait before their coverage kicked in. 

There were lifetime caps, so if someone was really sick, they literally could be left with no coverage after they hit that lifetime 

cap, and sometimes the high-risk pool would literally exclude coverage for certain preexisting conditions for a certain number of 

months, leaving coverage useless at that point. 

It was also expensive for States to operate. At the end of the day, 

it just is no replacement for the lifetime guarantee that people 

have right now, that they are guaranteed affordable coverage regardless of their preexisting condition. 

Ms. ADAMS. Thank you. Finally, I want to hit on the overall impact that the Republicans’ plan will have on patients versus what 

is offered in ACA. Of course, in my district my constituents are 

asking that we preserve and strengthen the ACA. You spoke about 

this as well. 

Can you just give a brief overview of what this Republican plan 

would mean for patients and workers, particularly with regard to 

cost? 

Ms. MITTS. You know, we have looked at a number of replacement plans and proposals, and really they would increase costs for 

millions of Americans. Many people would just simply go uninsured 

because coverage would be unaffordable. It would scale back incredibly important financial assistance for private coverage for 

lower- and middle-income people, and it would often leave people 

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in bare bone coverage with even higher deductibles, leaving them 

unable to afford care. 

Ms. ADAMS. Thank you very much. I am out of time. Madam 

Chair, thank you. I yield back. 

Chairwoman FOXX. Thank you very much, Ms. Adams. Mr. Guthrie, you are recognized for five minutes. 

Mr. GUTHRIE. Thank you very much. This hearing is not on Medicaid, but I want to take a few seconds because we talked about 

Medicaid earlier. Medicaid expansion, if you let it go as it is, it doubles over the next 10 years. It is just unsustainable. 

So, just to say we cannot do anything to Medicaid is just not addressing reality, unless you are here to offer or somebody is here 

to offer a broad-based taxing everybody in massive numbers to 

meet the growing costs. I do not think anybody is offering that. I 

guess they are just not wanting to address it. 

Per capita caps. Every U.S. Senator that is in the Senate today, 

Patty Murray, a lot of them, Dick Durbin, who were in the U.S. 

Senate in the Clinton years, signed a letter to President Clinton to 

say they supported a per capita cap. 

It is not a radical issue. It could be bipartisan if people chose to 

work together. Governors want flexibility. We had a previous governor of Kentucky last night talk about how great the expansion 

was, 100 percent Federal money. Our current governor is trying to 

come up with $100- to $200 million to make it work now. So, it is 

not just easy to deal with, and it is something we have to deal with 

and move forward. 

I want to get to the bills before us today. Mr. Ritchie, how big 

or small is the self-funded health benefit market and how many 

employers are enrolled in plans that are self-insured and how 

many of those plans also carry stop-loss coverage? 

Mr. RITCHIE. If you look at the self-funded market in terms of 

stop-loss coverage, we estimate that market to be somewhere between $12- to $14 billion. We consider ourselves one of the largest 

providers, and we are roughly at $1 billion, so it is about a 7 percent market share, which shows that it’s a pretty competitive market. There is no one dominant carrier in the market, and there is 

no one person that holds all the market share. 

When we look at the total population that is self-funded, I would 

refer back to the Kaiser Family Foundation study. They do an annual study every year. It’s a fantastic study. What it says is that 

61 percent of all people who get their coverage through their employer get it through a self-funded plan. 

We could further break that down and say if those employers are 

over 200 lives, that number jumps to 82 percent. If it is below 200 

lives, that number drops to about 13 percent. 

So, obviously in the smallest markets, self-insurance is not that 

great of an option, not as popular as it is in the large employer 

market, but in the large employer market, it is very popular, selfinsurance. 

Mr. GUTHRIE. Stop-loss? 

Mr. RITCHIE. Yes, it’s stop-loss. Let’s go to who buys stop-loss. 

That is generally going to be an employer somewhere between the 

50 to about 5,000 life range. I don’t have the stats for you on how 

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many employers are in that number. I personally insure 3,000 of 

them. 

What we see is once you get about 5,000 lives, claims become 

pretty predictable and, therefore, there is no reason to even purchase stop-loss insurance anymore. You don’t need that risk transfer mechanism. Who does need that risk transfer mechanism are 

those as you get smaller, so the smaller an employer gets, the more 

risk transfer they need to support their self-funded plan. 

Now, that deductible is going to range over size and what kind of risk they have. I will sell a spec down to $20,000, but my average spec is $140,000. We generally try to price the coverage to 

where we only have somewhere between one to three claims in a 

year. 

So, what we’re trying to do with the Self-Insurance Protection 

Act, obviously, health insurance pays every claim. You’re using it 

to finance your medical costs. With stop-loss coverage, it’s obviously 

not health insurance coverage, because if I’m only expecting even 

over 1,000 lives, I have three claims a year that hit me, that’s obviously not health insurance. 

Mr. GUTHRIE. Is self-insurance coverage skimpier, skimpier than 

fully insured coverage? 

Mr. RITCHIE. Only if you believe the largest employers in America are not offering competitive benefits. It is not skimpier. It is 

still subject to all the employer requirements of the Affordable Care 

Act. It doesn’t get you out of those benefits or out of those responsibilities. It simply is a financing mechanism. 

Mr. GUTHRIE. In my last minute, I want to go to Mr. Hurst. Mr. 

Hurst, critics of Association Health Plans often say that the creation of national Association Health Plans result in cherry-picking. 

They mean the insurance market will segregate into two groups: 

one that is younger and healthier, and one that is older and sicker. 

Based on your experience in Massachusetts with your own 

versions of AHPs, under state law, do you believe this will be the 

result, and how does the Small Business Fairness Act react to this? 

Mr. HURST. Well, number one, Congressman, it’s illegal under 

our law. It would be illegal under this bill. 

Number two, associations, chambers of commerce, professional 

societies, they aren’t in the business of discriminating against their 

members. Their members run the association. They join for the 

benefits. 

Number three and most importantly, these employees of small 

businesses, they are a slice of society. They’re no more sick, no 

more healthy, no more older or younger than the rest of society out 

there. They’re a cross section of society, yet they are being charged 

too much for the health insurance because they’re discriminated 

against. 

Mr. GUTHRIE. Thank you. Perfect timing. I yield back my zero 

time. 

Chairwoman FOXX. Very good, Mr. Guthrie. Mr. Espaillat, you 

are recognized for five minutes. 

Mr. ESPAILLAT. Thank you, Madam Chair, Ranking Member 

Scott. Just for the record, Madam Chair, I would like to state that 

if the Affordable Care Act is repealed, a hole of $3 billion will be 

in New York State’s budget, 2.7 million New Yorkers will lose their 

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coverage, including 218,000 New Yorkers in New York County, 

Manhattan, and 300,000 New Yorkers in Bronx County, where my 

district is. 

Within the 15th Congressional District, a total of 120,000 people 

would lose some level of Medicaid or Medicaid coverage, and 34,000 

people will lose their basic healthcare plan. It will impact dramatically hospitals like New York-Presbyterian Hospital, Mount Sinai 

Hospital, Harlem Hospital, North General, and Montefiore in the 

Bronx. 

My question is for Mr. Hurst. I think you can agree that there 

are strong consumer protections under the Affordable Care Act, like 

no annual or lifetime caps on health care, and guaranteed access 

to those with preexisting conditions, that have benefited millions. 

You mentioned this proposal gives small businesses flexibility, 

but it seems like this flexibility could avoid conforming to strong 

consumer protections. It is not clear which ACA consumer protections the majority seeks to repeal. Coupled with this proposal, is 

this not inviting a race to the bottom for quality of coverage? 

Mr. HURST. Thank you, Congressman. I don’t believe so at all. 

Look, small businesses reflect society. Small businesses compete 

every day for employees. You’re talking about the coverage for 

themselves and their families. They want good coverage. They want 

affordable coverage. 

You know, I’m one that believes that personal responsibility is 

important, and I’m not particularly opposed to a mandate requiring 

people to buy health insurance, but the question is what is in that 

insurance? Can we empower the consumer to make some of the decisions on their own or is government— 

Mr. ESPAILLAT. Your plan promotes a somewhat reduction in coverage, does it not? You mentioned there are certain benefits, certain parts of the plan that are not really necessary. Does not your 

proposal promote a reduction in the level of coverage? 

Mr. HURST. Congressman, the only thing that would potentially 

be reduced, and it would be up to the collaboration of small businesses, is whether or not you follow a lot of these State mandates. 

I mentioned earlier Massachusetts has passed an incredible 

whopping 19 state mandates over the last 10 years, since 

RomneyCare was passed. That’s two per year. These are lobbied by 

big health care providers, people that are looking for higher utilization, and, most importantly, to raise their prices. What we need to 

look at is empowering the consumer, not the provider. 

Mr. ESPAILLAT. You mentioned a particular service that as a 57- 

year-old, you and your wife were not interested in. Are there other 

healthcare services/benefits that you can see prudent to be reduced 

or eliminated? 

Mr. HURST. Well, you know, the State of Maine has what they 

call ‘‘mandates to offer.’’ What they do is almost like your auto insurance and your homeowner insurance, there are certain mandates that they leave it up to the consumer to decide, yes, this is 

a coverage that I want, my family wants, at a certain price, and 

here are others I don’t want. You’re empowering the consumer instead of government telling them or the insurer telling them— 

Mr. ESPAILLAT. Is that not the essence of health care, that although I am not a diabetic, maybe there is no diabetes history in 

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my family, I could very well at some point in my life become a diabetic. If I do not have that coverage in my health insurance, is that 

not the problem if I run into a catastrophic disease that will take 

up a lot of money and just wipe me out, take my home, my car, 

my savings? Is that not really the problem, that we have to be prepared for those types of illnesses? 

Mr. HURST. Well, I think with the essential benefit package 

under the ACA, everyone will continue to follow that, however this 

turns out. What we are primarily talking about are a lot of other 

State-mandated benefits that are designed to benefit the provider 

and, frankly, cause unfair cost subsidies from one consumer’s pocket to somebody else’s, and that’s not particularly fair. 

There comes a level you have to ask yourself, is this really insurance or is this almost a tax, a borderline tax, when you’re asking 

people to buy insurance that they don’t want, they will never use, 

and they can’t afford. 

Mr. ESPAILLAT. Thank you, Madam Chair. I think I have run out 

of time. 

Chairwoman FOXX. Thank you very much. Dr. Roe, you are recognized for five minutes. 

Mr. ROE. Thank you, Madam Chairman, I appreciate that. First 

of all, I want to get to a bill I had last year, the Self-Insurance Protection Act. Basically what it said was the Federal regulators cannot redefine ‘‘stop-loss insurance’’ as traditional health insurance, 

preserving the option for self-funding. 

The reason I am familiar with it, before I came here, I was a city 

commissioner and mayor of my local community, Johnson City, 

Tennessee. We had about 2,000 employees in our self-insurance 

plan. It worked wonderful. We designed wellness programs to help 

lower costs, and we did that. We kept the premiums flat. We put 

in various things to help control our costs. It is a great way to do 

it. 

Mr. Hurst, I could not agree more with you. If you allowed an 

Association Health Plan and a self-insurance program, where you 

could combine these even across State lines, I think you could really lower costs. People are very innovative when they are spending 

their own money. 

You are correct, Mr. Ritchie, you do take out that chunk that the 

insurance company keeps as profit, and you manage that and keep 

it in your benefit package, or you can provide it as salaries. 

Let me just say quickly that the Affordable Care Act said it 

wanted to lower costs and increase access. Who could disagree with 

that? What happened is exactly what happened in our State of 

Tennessee 20 years ago when we expanded Medicaid called 

‘‘TennCare.’’ 

What happened was I could have done two-thirds to threefourths of what the Affordable Care Act did in two paragraphs. 

One, allow 26-year-olds to stay on their parents’ plan; and, two, expand Medicaid, which is a plan that not a lot of providers, especially providers where I practiced medicine—we cannot get somebody to see somebody for the reimbursement they get. We added 

10 or 11 million people. 

What has happened on the ACA side in my state is there was 

a 62 percent increase in premiums this year. In a third of the counCEWDOCROOM with DISTILLER

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ties in my district, there are no providers. Knoxville, which is the 

third largest city in my state, has no provider on the ACA Exchange. 

Let me just point out a couple of things. When government dictates, as Mr. Hurst said, what you buy, what happens? The State 

of Oregon, which was mentioned a moment ago, their exchange 

went belly up and they spent tens of millions of dollars that could 

have gone to health care. Right here in the District of Columbia where we are, $134 mil- lion in grants to sign up 10,630 people, it cost $12,600 per person 

to sign somebody up for insurance. How ridiculous is that? 

In Hawaii, it gets even better. Their exchange went belly up and it cost $25,000. They got $205 million in grants that I could have 

used to take care of pregnant women, provide women’s health care, 

to sign up 8,100 people. That is how this was when the government 

got involved. 

Let me just go over this very quickly, Madam Chairman. This is 

not what is in the Republican plan. I want to make this very clear. 

The insurance regulations and mandates, coverage for preexisting 

conditions, under reconciliation that we passed in 2015, stays. They 

are guaranteed issue, no preexisting condition exclusions; no health 

status underwriting, in other words, charging sick people more; allowing kids to stay on until age 26; ban on lifetime or annual limits; preventive care coverage; and gender rating. That all stays. 

Closing the Medicare doughnut hole, that stays under reconciliation. 

Unfortunately, the IPAB also stays. That should go. I would encourage my colleagues on the other side of the aisle to help us get 

rid of that. 

It is not a matter, as Mr. Guthrie was saying, of us not doing 

something. We have to do something to repair this. It cannot continue the way it is. 

You have small business people where I have seen their premiums triple, individuals in small business, in the last 2 years. 

Certainly, if you are getting a subsidy in my state, which 200,000 

people do, 160,000 people in my state of Tennessee decided to pay 

the tax, the penalty, or fee, or whatever Judge Roberts wanted to 

call it, because they could not afford the coverage. 

In the hospital where I practiced, 60 to 70 percent of the 

uncollectible debt in that hospital were people with insurance, and 

to keep quotes affordable, they raise the out-of-pockets and co-pays 

so high that folks where I live in rural Appalachia cannot pay it. 

It is not fair to them. We have to change it. 

Mr. Ritchie, I want your comment on my bill before I run out of 

time. 

Mr. RITCHIE. First of all, I want to personally thank you for supporting this bill for as long as you have. Your experience with 

Johnson City is the experience that we see from most of our policyholders. 

Once somebody is under a plan, they don’t want to go back to 

health insurance. They don’t want to relinquish control. They don’t 

want to pay more just so they have the right to offset some of the 

risk transfer. They can do that through other mechanisms, i.e., a 

company like mine, purchasing stop-loss coverage. 

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From the Self-Insurance Institute of America, we proudly support the Self-Insurance Protection Act. We think it’s vital. We think 

it’s critical to maintaining choice and options for employers on how 

they finance their risk. 

Mr. ROE. Madam Chairman, just indulge me for 10 seconds. We 

bought when I was on the commission five policies at quarter of a 

million. We could fund that. That is what people used that for, and 

I think more companies are going to go to that. I think it is a wonderful model. Two-thirds almost of all people get their self-insurance now. 

Thanks for indulging me. I yield back. 

Chairwoman FOXX. Mr. Scott, you are recognized for five minutes. 

Mr. SCOTT. Thank you, Madam Chair. Mr. Ritchie, you mentioned that some doctors charge $100, some $200 for essentially the 

same quality service. Is there any reason the self-insured cannot 

restrict the doctor panel just like insurance companies have preferred providers? 

Mr. RITCHIE. Actually, no, the self-insurance plan can’t restrict 

that. 

Mr. SCOTT. It cannot? 

Mr. RITCHIE. It cannot, because how do you know what the doctor is going to cost before you go? In the environment we work in, 

you don’t know what the cost is until you go have the service, get 

it repriced through the network, then you get to find out what your 

cost is. If you ask for what the cash price is, you’re going to get 

one number. If you ask for what your insurance price is, you’re 

going to get a different number. The ability to restrict it, the data’s 

not there to do that. 

Mr. SCOTT. Is there any reason that you could not limit the doctor access, like an insurance company has a preferred provider network? 

Mr. RITCHIE. An employer could design a program that was innetwork only, no out-of-network benefits, but there’s not an employer out there who’s offering that today because it simply is not 

effective to retain employees. If you’re an employee, you’re going to 

go that’s not good coverage and I’ll go down the street and work 

somewhere else. 

Mr. SCOTT. Mr. Hurst, on the maternity care, I was a little confused as to whether you supported maternity care being an essential benefit covered at the standard rate for everybody. 

Mr. HURST. Personally, I believe there are certain things that 

should be in everybody’s health insurance policy, preventative care, 

hospitalization, maternity care for women, young women particularly. Absolutely. 

Mr. SCOTT. Everybody pays the standard rate, including women 

at the same rate, and they get maternity care, men would be paying the same rate whether they need that service or not? The alternative is if it is an optional care, then essentially the only people 

who would buy it are those who need it, and you are essentially 

paying it out of your pocket. 

Mr. HURST. I believe that reasonable people can sit down and decide what is it that your average family is going to need over a peCEWDOCROOM with DISTILLER

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riod of time. There are certain coverages, yes, all of us want, at a 

certain stage in our life, all of us need. 

To make them pay and buy services that they’ll never use and 

don’t want and can’t afford, that’s what I’m talking about. That’s 

where we need to empower the consumer to make the decision, not 

government and not the provider. 

Mr. SCOTT. You would count maternity care as an essential benefit that everybody ought to have to pay for, whether they intend 

to use it or not? 

Mr. HURST. I believe that should be part of a package. 

Mr. SCOTT. Now, it is easy to see how Association Health Plans 

would be beneficial for those that can get into an association plan. 

Is it possible to underwrite and carve out a healthier group than 

average? 

Mr. HURST. Number one, it would be illegal, and, number two— 

Mr. SCOTT. If you had a group of, say, gym trainers, you know 

they are all healthy, and that is your group, is that illegal? 

Mr. HURST. I’m sorry, Congressman. What group again? 

Mr. SCOTT. Gym trainers. 

Mr. HURST. Well, you know, I think if there is an association out 

there representing them and they want to get together, you know, 

I’ve seen gym trainers that are 60 years old and I’ve seen them 

that are 20 years old. 

Mr. SCOTT. The reason Association Health Plans always work is 

if you have a group, whatever the group is, if they do not cost less 

than average, if the bids come in above the average cost, the association will not form, because nobody wants to join the group where 

the costs are going to be above average. They can go in the normal 

route and get insurance. 

They will always work because you pull out a group of healthy 

people, which necessarily means that everybody else has to pay 

more because the insurance pool just got a little more expensive. 

Is that not right? 

Mr. HURST. Well, I think you’re assuming that small businesses 

actually have higher based on age or health status, which they do 

not. My members, my 4,000 members, they look just like employees 

of big government and big businesses, yet they are discriminated 

against under the law. 

Mr. SCOTT. What happens when somebody gets sick and it goes 

above average? Are all the association members required to renew 

at an above average price when they can get insurance cheaper in 

the marketplace? 

Mr. HURST. You know, in our association plan, we have rules 

that you cannot leave and then come back. If you leave, you cannot 

come back for three years. There are certain rules that you have 

to establish to make sure that this plan is going to be sustainable. 

Mr. SCOTT. But if it gets above average and everybody bails, 

what happens? 

Mr. HURST. Well, I don’t know that’s going to happen in very 

many instances because what we’re talking about here is taking 

the margins out. We’re talking about groups of small businesses 

and their employees that, frankly, are unfairly cross-subsidizing 

other people, that they have become the margins from the insurers 

and on behalf of the providers unfairly so. 

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Mr. SCOTT. Madam Chair, that is exactly the point, they crosssubsidize everybody. You have a group out that is cheaper to insure 

than everybody else by whatever mechanism you have formed the 

group, and it is cheaper, until they get sick, then everybody bails 

and they got back into the normal plan. 

So, it will always work for those that can get into that group, but 

if you cannot get into the group, everybody else will pay exactly 

more. It is a zero-sum game. 

Chairwoman FOXX. Yes, Mr. Hurst? 

Mr. HURST. I guess my only response to that is why then do we 

allow Big Government to do this, and allow Big Business to do this, 

because they could do the very same thing. We’re just discriminating against Main Street businesses. 

Chairwoman FOXX. Thank you, Mr. Hurst. Mr. Grothman, you 

are recognized for five minutes. 

Mr. GROTHMAN. Thank you. Mr. Ritchie, but maybe Ms. 

Klausner wants to weigh in as well, at what point do you think it 

is appropriate for a business to self-insure? How many employees? 

Mr. RITCHIE. We generally like to see them around 50 employees, 

but that doesn’t mean it doesn’t work to go even lower than that. 

Mr. GROTHMAN. You said 50? 

Mr. RITCHIE. Fifty employee lives. That’s obviously with dependents and it’s going to be a larger group. That’s what we generally 

like to see, but that doesn’t mean there’s not a unique group that 

could be lower than that. I would say, you know, a 50-life law firm 

is very different than a 50-life retail operation in terms of the 

amount of cash, how they understand risk, and how they process 

that. So, it does vary over time, but that’s what we’re talking 

about, giving them the option to do it. 

There’s also large employers who don’t self-fund, so they have 

chosen they don’t want to manage the plan. They want to hand it 

off to a health insurer and just be done with it. That’s fine. It’s a 

matter of choice. It’s not a matter of what’s right for everybody. It’s 

a matter of what’s right for this one individual situation. 

Mr. GROTHMAN. Ms. Klausner, do you agree with that 50 number? 

Ms. KLAUSNER. I don’t have a number that I have in my mind. 

What I know is that employers of all sizes will evaluate whether 

or not self-insurance or fully insured is appropriate. The numbers 

are looked at with the totality of their compensation, their awards, 

how they want to allocate their resources, and allocate the dollars. 

Whether or not they can connect them back to wellness programs, some employers find that wellness programs are better 

aligned if ultimately they are in a self-insurance environment. Others can find services and products where the fully insured environment connects them to wellness programs, again, primarily designed to lower the costs. 

Mr. GROTHMAN. Just a comment on Congressman Scott’s gym instructor thing. It just seems to me subjectively that when I see people walking around with a cast or whatever, a lot of times they 

hurt themselves in the gym. I am not sure that necessarily means 

you are spending less. 

The next question I have, it kind of surprises me in the market 

that more providers or kinds of groups of providers do not get toCEWDOCROOM with DISTILLER

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gether and offer their own insurance. If you give them a capitated 

rate, the incentive they have to do less rather than right now on 

a fee-for-service thing do more, would cause health insurance costs 

to drop precipitously. Why does this not happen more? 

I guess I will start with Ms. Klausner. Do you see what I am saying? I cannot think of what we have here—well, you are from New 

Jersey. I am sure in New Jersey, there are, just like in Wisconsin, 

groups of hospitals and clinics, and right now, the financial incentive is always more tests, sometimes even surgery. But if you said 

I have a life here, you know, I am going to go to whatever, Liberty 

Health Care, whatever, why does that type of arrangement not 

spring up more? 

Ms. KLAUSNER. I’m not confident I can answer the exact question 

as to why that arrangement doesn’t spring up. I think what employers are trying to do right now, working with their service providers, is specifically to find ways so that employees make those 

right choices, so there are other avenues of innovation. 

Mr. GROTHMAN. You see what I am saying? Why cannot you as 

a business go—maybe there are legal restrictions. I do not know 

why you cannot go to say Liberty Health, and I do not know if 

there is such a thing called Liberty Health, and your hospitals and 

your clinics, and say here, I have 60 lives in my store, I realize 

they are going to have some separate coverage, people on vacation 

or something, but I have 60 lives in my company, how much will 

it cost for you to take those 60 lives, and then you take the risk. 

Why does that not spring up more? It seems to me if that sprung 

up, you would have massive savings. 

Ms. KLAUSNER. I’m sure there are a host of reasons as to why 

it hasn’t sprung up. However, I think what we can do, on behalf 

of the American Benefits Council, is to— 

Mr. GROTHMAN. Does anybody have any comments on this? Is 

there any doubt that one of the reasons healthcare costs are spiraling is right now the medical community had financial incentives 

to do more, right? More surgeries, more tests. You would have to 

be blind not to see it. 

If you went to a medical provider and said I will give you $8,000 

or $10,000 per life, incentives would go the other way. Why does 

this not happen? 

Mr. RITCHIE. Actually, I would say in the employer market what 

we are seeing today, and it’s one of the new innovations that happens through self-insurance, is we are seeing employers—let’s say 

I’m a South Georgia employer. I have one hospital system and all 

my employees are within a 20-mile radius of that hospital system. 

Well, they’re not going to the hospital system and saying you 

provide all my services. They are direct contracting with them and 

saying instead of me going through a PPO network or through a 

health insurer, all my people are here, you’re going to provide 80 

percent of the care that we’re going to get, I’m just going to get a 

contract directly with you. 

It’s happening. It’s going on today. But now, like I said, it’s only 

80 percent. There are services that won’t be services. If you’ve got 

a specialty transplant network, South Georgia may not have the facilities to offer the transplant. You may have to go to a Mayo Clinic, you may have to go somewhere else for that service. 

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Mr. GROTHMAN. One more question. 

Chairwoman FOXX. Your time has expired, Mr. Grothman. Thank 

you. Mr. Smucker? 

Mr. SMUCKER. Thank you, Madam Chair. Talking about self-insurance, I would just like to follow up on some of the questions. I 

was a small business owner. We employed about 150. We had fully 

funded. Then we had self-insured with the stop gap. 

Our experience with self-insured was that over time, obviously, 

you can have bad years where it would cost more than a fully funded, but over time, we saw dramatically decreased costs while we 

thought it was providing even better care for the employees because of the attention everyone in our group paid to not only receiving quality care, but also to controlling those costs. 

My question is—one other point before I get to the question. I 

have had a lot of discussions with businesses in regards to the impact of the ACA, in regards to the impact of increased health insurance costs. One of the things I have noted is that businesses over 

the past few years who were self-insured did not see some of the 

dramatic increases. Again, as I said earlier, it may vary year to 

year. 

I guess my question is do we have any data to that point? In general, overall, do we see cost savings just by the fact that businesses 

are self-insured? If we do, I think it is because we are doing the 

wellness programs, we are doing the education with employees, everyone is working to reduce costs. 

What data is out there in that regard? Mr. Ritchie? 

Mr. RITCHIE. There is no mass aggregator of data between health 

insurance and self-funded and cost analysis. We are truly—I would 

argue that the self-funded employer is experiencing the same cost 

increases, but they are financing it. 

Your analysis was that over time it was cheaper, and I agree 

with that, because over a three- to five-year period, we see that 

self-insurance is generally cheaper than health insurance. Now, on 

a year-to-year basis, that may be very different because the health 

insurance is prospectively priced where the self-insurance is actually priced. Whatever you actually spend that year is your cost, 

where for health insurance, they’re predicting that. 

They’re doing the underwriting. They’re doing the actuarial services to project your ultimate costs. If they go above, that will be 

profit to the health insurer. If the price is below actual cost, that 

will be a loss to the health insurer. That’s the risk transfer mechanism. 

To your question, there is no grand aggregator, but costs are 

going up for all employers. The self-funded employer over time does 

manage the costs. They’re more proactive. They are more engaged. 

A lot of employers will actually tell their employees we are a selffunded plan, just so you know what that means. 

I do think people understand medical costs and try to save medical costs when they can. 

Mr. SMUCKER. That is what we saw. The other arrangement we 

were part of at some point was we banded together with other businesses in sort of what was called a ‘‘rent-a-captive program.’’ These 

were like businesses that felt they had similar risks, and they 

worked together to control those risks. We also included in that 

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program Workers’ Comp insurance and, in some cases, other insurance products, like general liability and so on. 

Is that still being done today? Did ACA change any of that, and 

can you just talk a little bit about that? 

Mr. RITCHIE. The ACA did not impact any of that. What you’re 

talking about is the utilization of a group captive for the Workers’ 

Comp and CGL product lines, and then of another segregated portion of that captive to cover the benefits. 

I don’t want to give the illusion that health benefits and comp 

benefits were intermingled somehow, but what you did is you had 

a facility that segmented them in proportionate captive cells for 

each product line, and then you shared that risk among the other 

employers. 

Mr. SMUCKER. Today, can businesses still band together in that 

way without an association, for instance? 

Mr. RITCHIE. Yes. 

Mr. SMUCKER. How is that different than what we are talking 

about with associations? 

Mr. RITCHIE. The association—one thing that has not been mentioned on the Association Health Plan is there are rules within that 

law that says it must be a bona fide association, so I can’t go create 

an association tomorrow and say I’m going to be the guys wearing 

a blue tie today association, and have everybody come into that. It 

has to be an association that already existed for the benefit of the 

members. 

You can’t just create an association that everybody comes into. 

You have to have a legitimate, bona fide association that already 

exists, and then provide health care through that. Does that clarify 

your question? 

Mr. SMUCKER. Yes. I am out of time, but I would like to maybe 

discuss with you later a little more about the captive program. 

Mr. RITCHIE. Yes, sir. 

Mr. SMUCKER. Thank you. 

Chairwoman FOXX. Thank you, Mr. Smucker. As we pointed out 

earlier, any member can submit a question to the witnesses and 

get, I believe, a timely response. Thank you very much. 

Now, it is my turn. I do not think there is any question that 

ObamaCare has been an unmitigated disaster. We were promised 

repeatedly that if you like your plan, you can keep it. That simply 

was not the case for at least 4.7 million Americans who were 

kicked off their health care plans under ObamaCare. We were 

promised that if you liked your doctor, you can keep your doctor, 

but that also has not been kept. 

Meanwhile, small businesses have found it harder to provide 

their employees affordable coverage while facing mandates, reams 

of regulations, and insurance coverage premiums that just kept increasing year after year. 

I want to thank our witnesses for their great comments today 

and providing so much information. 

Mr. Hurst, would you agree that ObamaCare has been harmful 

for small businesses and their employees, and how has it made it 

harder for your small business association to offer more affordable 

coverage through your cooperative? And what can Congress do as 

we move forward with step-by-step regulations or laws, policy soluCEWDOCROOM with DISTILLER

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tions, to lower costs and empower small businesses to offer affordable healthcare benefits? 

Mr. HURST. Thank you, Madam Chairwoman. Yes, to answer 

your question, it has been very damaging and it has been damaging, again, because we don’t have a level playing field. We have 

discrimination, depending upon where you work. 

One of the biggest problems that came in the ACA was the preemption of state innovation and state rating factors. Again, we had 

11 rating factors in Massachusetts, one of which was this cooperative adjustment factor, which was the basis of our savings for our 

members. 

Another was a size rating factor. Ironically, in Massachusetts 

these are things we learned the hard way under RomneyCare. We 

had a size rating factor because we felt like government, good 

healthcare policy, should incent small businesses to grow jobs, not 

to shed jobs. It’s a fact that an employer with five employees versus 

one with 50 actuarially and administratively, it cost less per life to 

employ them. 

This is one of the reasons why more people are going self-insured, because we’re discriminating against employers of 50 and 

under or 100 and under and making it harder for them to compete 

with the people just above that regulatory scheme. 

We are, unfortunately, forcing them and them alone to unfairly 

cross-subsidize individuals, and that’s where the rubber hits the 

road. We need to reform those rating factors. We need to have Association Health Plan legislation. We may want to revisit essential 

benefits and lower them a bit. 

I would also argue that the 30-hour definition of ‘‘full-time’’ was 

also wrong, and under RomneyCare we had a 35-hour requirement, 

and that didn’t cause any real disruption. Most employers consider 

35 hours full-time. Virtually none consider 30 hours full-time. 

That’s not even four days full-time. That created disincentives both 

on the employer side and also the employee side to keep hours 

below a certain level, and that’s wrong. It really hurt employer coverage for small businesses. 

Chairwoman FOXX. Thank you very much. Ms. Klausner, you 

have given great comments about wellness plans, and I appreciate 

that. I think your comments particularly about the conflicting rules 

and regulations have been very valuable. 

Can you describe how the EEOC rules have had a chilling effect 

on employers setting up these programs? 

Ms. KLAUSNER. Absolutely. Thank you, Madam Chairwoman. It 

has absolutely had a chilling effect because employers are stuck 

evaluating too many things in order to ultimately design their programs and ultimately determining where the costs are. 

For example, the first thing they need to determine is whether 

or not if they want to give a $100 incentive, for example, whether 

it’s in cash, connected with a group health plan, how it complies 

or doesn’t comply under each of the three rules, does it go into the 

30 percent bucket or not. If instead that $100 is provided as seed 

money to a health savings account, it may have a different set of 

rules. If it’s for a spouse giving a health risk assessment that includes a genetic information question, it has another set of rules. 

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So, ultimately it has created a serious chilling effect. And what 

this is converted to is then when they do, in fact, roll out these programs, which, of course, they are doing, they’re trying to maximize 

them, they end up creating confusion even for employees. 

There are many notices, different authorizations, different descriptions, and ultimately, the employer wants to provide these programs not only in a simplified way for themselves, they also want 

to do it in a simplified way for employees to benefit under them. 

And as a result of the complexity, they take a step back and they 

start shedding or shelving certain ideas because it’s too complicated 

to either roll out or administer or explain to the employees. 

Chairwoman FOXX. Thank you very much. Mr. Lewis, you are 

recognized for five minutes. 

Mr. LEWIS. Thank you, Madam Chair, and thank you to all the 

witnesses. Mr. Ritchie, I have sort of a general question here, and 

I just want to get it for my own benefit, I guess. How has the ACA 

affected the self-insurers, the ERISA folks, with regard to mandates? 

Before the ACA, States had different mandates. Minnesota, the 

state where I am from, led the Nation a couple of years in the 

number of state mandates, which I happen to think drives up insurance costs. 

To some degree, but not completely, as I understand it, the Affordable Care Act did for some self-insurers what those states were 

doing to other plans before it. Is that accurate or am I misreading 

something? 

Mr. RITCHIE. Well, with the passage of the Affordable Care Act, 

when the employer responsibilities or shared responsibilities section came out, yes, that did have an impact on self-funded employers. 

Now, one thing I would state is remember, those self-funded employers before, they weren’t subject to the state requirements because of ERISA. 

Mr. LEWIS. Right. 

Mr. RITCHIE. Today, they could design their plan design and 

have a uniform plan design across state lines, so a company like 

Coca-Cola, who has employees in every state in the Union, could 

have the same benefit plan for everybody. 

Mr. LEWIS. And out from under some of the more costly state 

mandates. That is ostensibly why some folks did it, correct? 

Mr. RITCHIE. They could be out of those or they could offer them 

if they choose. Many times we see the self-insured employer offer 

above what it is. Again, it’s part of customizing it towards your 

plan. What do you want to pay for, what do you want to 

incentivize, and how do you want to create productivity and 

wellness within your own organization? It truly is the self-funded, 

not-for-profit health care plan for that single employer. 

Yes, with the Affordable Care Act, we did see the employer responsibility sections impacting employers by them having to offer 

the benefits and asking them to comply with those on a uniform 

basis across the country. 

Mr. LEWIS. Central wellness benefits and certain things like that, 

did it raise premiums in your opinion? 

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Mr. RITCHIE. The biggest increase to us was the unlimited nature 

of the coverage now. So I’m not saying that is right or wrong. I’m 

just saying from a risk and actuarial perspective, I did have a limit 

at one time, now I have no limit. Therefore, costs go up. We did 

see the frequency of $1 million claims almost double in 2014, the 

first year of truly unlimited health care. 

Good or ill, right or wrong, I’m making a comment on risk perspective. 

Mr. LEWIS. Good or ill, that is a mandated benefit. It is what it 

is. Ms. Klausner, we are talking a lot about pooling risk, and the 

idea of small businesses pooling for a larger network, I think, is 

pretty sound economics and a good idea. 

One of the other aspects of the insurance markets is not only to 

pool risk, but to price risk. Have we seen limitations on that, in 

the name of fairness or whatever you want to say, that you have 

these bands where pricing has to be tight even in some group markets, would it be beneficial to let prices float more freely? 

Ms. KLAUSNER. I’m not sure that I’m able to answer that question for you today, but would be happy to get back to you. 

Mr. LEWIS. Yes, would you, please? I would be interested. Anybody else have a comment on that? Not everybody at once. 

Okay. Thank you very much, Madam Chair. I yield back my 

time. 

Chairwoman FOXX. Thank you very much. Mr. Scott, I recognize 

you for closing comments. 

Mr. SCOTT. Thank you, Madam Chair. Madam Chair, the Affordable Care Act has been described as a disaster, but I think we need 

to recognize that a lot of problems were occurring in health care 

before the Affordable Care Act. 

Certainly if they are going to have complaints, there ought to be 

a plan to do better, and it is hard to hold a constructive debate over 

an invisible plan, so we are waiting for the alternative. 

I just want to make a point. On the Self-Insurance Institute of 

America website there is a provision that says an employer is free 

to contract with the providers or provider network best suited to 

meet the healthcare needs of its employees. That is on the website. 

We have heard a lot about the Association Health Plans. It is 

easy to see how they work. You get a group together, however it 

is formed. If you figure out that the healthcare costs of the group 

are lower than average, you can insure that group at a lower than 

average cost, which works well while everybody in the association 

stays healthy. 

As soon as a bunch of people get sick and the costs go above average and everybody bails, they can join the regular insurance pool. 

While they enjoy lower costs, everybody else in the pool they left 

will be paying higher prices. 

The wellness plans, we know they can reduce long-term health 

costs and they ought to be encouraged, but you ought to be able 

to run one without requiring people to disclose sensitive healthcare 

information that they do not want to disclose. We have to figure 

out how that can take place without people having to disclose information that they believe is sensitive. 

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Stop-loss does economic security for the employer. It is unclear 

what it does for the employee, getting coverage they could not ordinarily get. 

Madam Chair, again, if we are going to have a debate on health 

care, it would be helpful if the Republicans would conform with the 

directions of the reconciliation instructions and come up with a 

plan that we can actually debate. 

With that, Madam Chair, thank you for the hearing, and I yield 

back. 

Chairwoman FOXX. Thank you, Mr. Scott. Well, today, we are not 

talking about repealing and replacing ObamaCare. We are talking 

about issues outside that. Our colleagues have spent a lot of time 

talking about a speculative bill, and I am conscious of that. We had 

other issues here to talk about, talking about what would happen 

with Medicaid really was a waste of time, in my opinion, because 

that is not what we are talking about here today. 

We are talking about three proposals that would not come under 

repeal and replace of ObamaCare, and I am very grateful, again, 

to our witnesses for having done that. 

Everything the Republicans predicted about ObamaCare has 

come true because we were actually reading a bill that was written 

in the back rooms of the people in charge of the Democrat Party 

at the time, no Republicans voted for it. We predicted from an actual bill exactly what would happen, and it has happened. Every 

dire prediction has come true, unfortunately. 

I do not know anybody that does not want every American to 

have affordable health care. We all want that. We all do. I think 

as I have sat here and listened to this debate today and listened 

to my colleagues on both sides of the aisle, it really comes down 

to a matter of freedom and coercion. 

What the ObamaCare bill did was coerce people into buying insurance they did not need. People who did not need fertility insurance, people who do not need maternity insurance, they do not 

need that, but they are forced to buy that coverage in order to 

have—I forget exactly what the President calls it, ‘‘wealth distribution,’’ I think. That is not the way we operate in this country. 

Somebody else brought up the issue of car insurance. Many of us 

when we buy new cars buy collision or comprehensive insurance 

because we have a fairly expensive car and we want something 

more than liability insurance. We buy liability and then we buy 

others. 

As the car gets older and we have maybe a $1,000 deductible on 

our comprehensive, we say, wow, maybe it is not worth paying that 

insurance anymore because my car is not worth a whole lot, and 

we decide to change that. 

Many of us as we get older might want to change our health insurance policies. Under the coerciveness of the Federal Government, we are not allowed to do that with health care. That is 

wrong in the United States of America. We are based on freedom. 

Ms. Mitts, you mentioned how horrible it would be if people had 

HSAs and low-income working families might have to pay up to 

$3,000, which they would not have under an HSA on their deductible. 

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116 

Well, guess what? The Silver Plan in ObamaCare, the deductible is $3,572 for individuals; for families, it is $7,474. So, would people 

be worse off under HSAs? Perhaps not. Again, it is speculation. All 

speculation about what would happen if we had changes in Medicaid, all speculation about what a bill might look like. 

I so appreciate Mr. Hurst, Mr. Ritchie, Ms. Klausner talking 

about how employers care about their employees. To hear our colleagues speak, you would think that we have Simon Legree running every company in this country. Now, most of you people are 

too young to know who Simon Legree is, so I will let you look it 

up. 

We do not. My husband and I were small business owners. We 

cared about our employees. Every small business, even large businesses, I believe care about their employees. 

Mr. Ritchie pointed out over and over again the labor market is 

extremely competitive these days. It is in the best interest of every 

employer to do everything he or she can to keep those employees, 

the good employees that they have, and give them every benefit 

they can possibly afford. 

I want to thank you all very much for presenting that, and pointing out that is the case in the country. 

I want to thank you all. I do want to thank our colleagues for 

being here today and answering questions, and illuminating, I 

think, these issues a great deal. 

With that being said, the hearing is adjourned. 

[Additional submissions by Chairwoman Foxx follow:] 

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David E. Gronewoller 

President & CEO 

3816 Drive 

Wi<1St<on-'Sal<em. NC 27103 

Telephone +1.336.767.1600 

May 17, 2012 

To: The Honorable Virginia Foxx 

Chairwoman, House Education and Workforce Committee 

U.S. House of Representatives 

2176 Rayburn House Office Building 

Washington, DC 20515 

Dear Chairwoman Foxx, 

I am writing to express my strong support of Rep. Sam Johnson's Small Business Health Fairness Act, which 

would provide small businesses with an opportunity to pool resources together to provide their employees 

with better, more affordable health insurance coverage. This legislation is a priority for not only my 

business but also the franchising community of 733,000 small business establishments across the country. 

As a member of the International Franchise Association, I have seen first-hand how small businesses and 

franchisees are challenged in offering competitive health benefits. The federal Employee Retirement 

Income Security Act, which currently permits large corporations and labor organizations to "self-insure" 

and offer insurance with certain exemptions from state law, does not provide small business with the same 

advantage. The law must be reformed to empower small employers with the ability to obtain and offer 

competitively priced health insurance, 

The Small Business Health Fairness Act would allow small business employers, including franchise owners, 

the ability to obtain and offer health insurance benefits through membership in a trade association, as well 

as a franchise system. With rising medical costs being a top concern of both individuals and employers, the 

impact of this increased availability of affordable insurance would be significant. 

Please let me know if you have any questions, and thank you for considering my views. I appreciate your 

strong support of the small businesses and the franchise community. 

Respectfully, 

David E. Gronewoller 

A Profession<!! Franchise Owner, M<magcrnent & Development Company 
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February 13, 2017 

The Honorable Sam Johnson 

U.S. House of Representatives 

2304 Rayburn House Office Building 

Washington, DC 20515 

Dear Congressman Johnson: 

1 am writing to express my strong support for the Small Business Health Fairness Act, which would 

provide small businesses with an opportunity to pool resources together to provide their employees 

with better, more affordable health insurance coverage. This· legislation is a priority for the franchising 

community, which is a network of 733,000 small business establishments across the country. I 

commend you for your leadership on this important issue. 

I have been in franchising for over 30 years, working for multiple franchisors, starting with Sir Speedy 

Printing Centers in 1980. I worked for PIP Printing & Marketing Services and then became CEO of 

FASTSIGNS in 2009. FASTSIGNS, the sign industry's leading franchise system, founded in 1985, is a sign 

and visual graphics company that provides comprehensive visual marketing solutions to customers of all 

sizes across all industries to help them meet their business objectives. Our network of sign centers 

includes 572 locations in the United States, 281ocations in Canada, plus locations in the United Kingdom, 

Mexico, Brazil, the Caribbean, Saudi Arabia, UAE and Australia, for a total of 643 locations worldwide. 

As an expert in the franchising system, I have seen first-hand how small businesses and franchisees are 

challenged in offering competitive health benefits. The federal Employee Retirement Income Security 

Act, which currently permits large corporations and labor organizations to "self-insure" and offer 

insurance with certain exemptions from state law, does not provide small business with the same 

advantage. The law must be reformed to empower small employers with the ability to obtain and offer 

competitively priced health insurance. 

Your legislation, the Small Business Health Fairness Act, would allow small business employers, including 

franchise owners, the ability to obtain and offer health insurance benefits through membership in a 

trade association, including a franchise system. With rising medical costs being a top concern of both 

individuals and employers, the impact of this increased availability of affordable insurance would be 

significant. 

Please let me know if you have any questions, and thank you again for your leadership and support of 

the franchising system. 

Sincerely, 

Catherine Monson 

Chief Executive Officer 
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More than fast. More than signs:· 

February 16,2017 

Representative Lloyd Smucker 

516 Cannon House Office Building 

Washington, DC 20515 

Dear Representative Smucker, 

I am writing to express my strong support for Rep. Sam Johnson's Small Business Health Fairness Act, 

which would provide small businesses with an opportunity to pool resources together to provide their 

employees with better, more affordable health insurance coverage. This legislation is a priority for the 

franchising community, which is a network of 733,000 small business establishments across the 

country. 

As a business owner, I have seen first-hand how small businesses and franchisees are challenged in 

offering competitive health benefits. I have 8 employees and struggle to offer group insurance because 

I fail to meet the insurance company's minimum coverage requirements. Not all of my employees 

want insurance through my company. When I looked at cost estimates for individual insurance, the 

prices were astronomical. Instead, I elected to give stipends to my employees' to assist with their 

costs, and three of them have seen over 40% price increases and have had to made additional changes, 

and on unfortunately, dropped coverage all together. 

I know first-hand how difficult it is for micro-businesses to offer employee group health coverage, 

which is why I strongly support national association health plans. The federal Employee Retirement 

Income Security Act, which currently permits large corporations and labor organizations to "self-insure" 

and offer insurance with certain exemptions from state law, does not provide small business with the 

same advantage. The law must be reformed to empower small employers with the ability to obtain 

and offer competitively priced health insurance. 

The Small Business Health Fairness Act would allow small business employers, including franchise 

owners, the ability to obtain and offer health insurance benefits through membership in a trade 

association, including a franchise system. With rising medical costs being a top concern of both 

individuals and employers, the impact of this increased availability of affordable insurance would be 

significant. I respectfully request your co-sponsorship of this very important legislation. 

I appreciate your hard work and appreciate the fact that you purchased a banner from us when you 

represented a portion of York County (my business location) in the state legislature. Keep up the great 

work. 

Please let me know if you have any questions, and thank you for considering my views. 

Sincerely, 

Jon Toy 

Home Address: 125 Pentail Dr 1 Lancaster PA 17601 

FASTSIGNS of York 12801 E Market St • York • PA 17402 

p: 717.840.6400 • f: 717.840.6402 • w: www.fastsigns.com/444 1 444@fastsigns.com 
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February 16,2017 

The Honorable Sam Johnson 

U.S. House of Representatives 

2304 Rayburn House Office Building 

Washington, DC 20515 

Dear Congressman Johnson: 

On behalf of the International Franchise Association (IFA), the world's oldest and largest organization 

representing franchising worldwide, I write in strong support of the Small Business Health Fairness Act. 

This legislation will increase small businesses' bargaining power with health insurance providers and 

ensure a level playing field for smaller entities that want to help their workers and families with health 

care costs. IFA commends you for your longstanding leadership on this important issue to the 

franchising community. 

Locally owned franchises are America's hidden small businesses, with 733,000 establishments across the 

country. The entrepreneurs who make up the franchising system directly contribute $674.3 billion in 

economic output, accounting for roughly 2.5% of the private sector U.S. GDP. 

While the small business community's economic output is great, its negotiating power in the health care 

market is at a competitive disadvantage. The federal Employee Retirement Income Security Act, which 

currently permits large corporations and labor organizations to "self-insure" and offer insurance with 

certain exemptions from state law, does not provide small business with the same advantage. The law 

must be reformed to empower small employers with the ability to obtain and offer competitively priced 

health insurance. 

For these reasons, IFA strongly supports the Small Business Health Fairness Act, which will allow small 

businesses the opportunity to band together to provide their employees with better, more affordable 

health insurance coverage. With rising medical costs being a top concern of both individuals and 

employers, the impact of this increased availability of affordable insurance would be significant. 

IFA commends your efforts to provide small businesses with health care options in a thoughtful and 

constructive manner. We look forward to working with you on this key legislation. 

Sincerely, 

Matt Hailer 

Senior Vice President of Government Relations & Public Affairs 

International Franchise Association 

1900 K Street, N.W., Suite 700 Washington, DC 20006 USA 

Phone: +1 202/628-8000 Fax: +1 202/628-0812 www.franchise.org 
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N·A·W 

James A. Anderson, Jr. 

Vice President-Government Relations 

February 16,2017 

To all Members of the US House of Representatives: 

I write to express the support of the National Association of Wholesaler-Distributors (NA W) for 

H.R. 1101, Small Business Health Fairness Act. 

The National Association of Wholesaler-Distributors (NA W) is the "national voice of wholesale 

distribution," an association comprised of employers of all sizes, and national, regional, state and 

local line-of-trade associations that span the $5.6 trillion wholesale distribution industry that 

employs over 5.9 million workers in the United States. Approximately 40,000 enterprises with 

places of businesses in all 50 states and the District of Columbia are affiliated with NAW. 

HR II 0 I authorizes the formation of multistate operation of association health plans (AHP). 

Enactment will enable smaller employers to realize cost-saving marketplace clout and economies 

of scale similar to that currently enjoyed by large corporations. The cost of providing health 

coverage as an employee benefit will consequently be brought within the reach of many small 

employers, and the ultimate beneficiaries will be small business employees and their dependents. 

The considerable role the Nation's employers play in our health insurance delivery system 

combines with the capacity of trade associations to marshal the resources of the small and 

medium-size employer community, to render AHPs uniquely attractive vehicles for providing 

quality health coverage to more workers and their families. NA W is pleased to support this 

legislation and urges your cosponsorship of it. 

Thank you for your consideration ofNA W's views. 

Sincerely, 

James A. Anderson, Jr. 

Vice President-Government Relations 

NATIONAL ASSOCIATION OF WHOLESALER-DISTRIBUTORS 

1325 G Street N. W., Suite 1000, Washington, DC 20005 • 202-872-0885 • FAX: 202-785-0586 • www.naw.org 
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February 16, 2017 

The Honorable Sam Johnson 

United States House of Representatives 

2304 Rayburn House Office Building 

Washington, D.C. 20515 

Dear Congressman Johnson: 

RESTAURANT NATIONA~ ASSOCIATION , 

On behalf of the members ofthe National Restaurant Association, we write to you in support 

of your recently introduced legislation entitled the Small Business Health Fairness Act. This 

important legislation to amend the Department of Labor (DOL) definition of Association Health 

Plans (AHPs) under ERISA will broaden health care access and lower overall costs of employersponsored health insurance. 

Restaurants employ nearly 10 percent of the nation's workforce, or approximately 14.4 

million Americans. With one million locations across the country, the $783 billion in sales from 

the restaurant industry makes up four percent of the US GDP. Restaurant jobs provide 

opportunities for promotion. Nine of ten salaried restaurant employees started in hourly 

positions. The typical hourly restaurant employee who starts out at an entry-level wage receives 

a pay raise after six months. Restaurants are a training ground for the American workforce. Onein-three Americans got their first job in the restaurant industry, and one-half of all Americans 

have work in the restaurant industry at some point in their lives. 

The National Restaurant Association is the leading voice for American restaurateurs on 

commonsense reforms to the current health care law. By amending the current DOL definition of 

AHPs under ERISA, this would allow small, independent restaurants to pool together across 

state lines through their membership in a trade or professional association like the NRA, to 

purchase health coverage for their employees and their families. Additionally, AHPs increase 

small businesses' bargaining power, to help leverage discounts, and provide administrative 

efficiencies while freeing businesses from costly state benefit mandates. AHPs allow restaurants 

to balance administrative costs with their risk pools and ensure they have access to affordable 

health insurance. AHPs stand as a vehicle to lower cost of employer-sponsored health insurance 

and better health for all employees. 

Thank you for your leadership in introducing the Small Business Health Fairness Act. We 

strongly support passage of this important piece of legislation and look forward to working with 

you to advance this bill through Congress. 

Sincerely, 

Cicely Simpson 

Executive Vice President, Policy and Government Affairs 

National Restaurant Association 
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The Honorable Sam Johnson 

U.S. House of Representatives 

2304 Rayburn House Office Building 

Washington, DC 20515 

Dear Congressman Johnson: 

February 16, 2017 

I write to share the strong support of the National Retail Federation (NRF) for H.R. I 101, the 

Small Business Health Fairness Act. We strongly support your bill and urge that it be promptly 

adopted. 

NRF is the world's largest retail trade association, representing discount and department stores, 

home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and 

Internet retailers from the United States and more than 45 countries. Retail is the nation's largest private 

sector employer, supporting one in four U.S. jobs 42 million working Americans. Contributing $2.6 

trillion to annual GDP, retail is a daily barometer for the nation's economy. 

NRF has long sought to ease access to health coverage for smaller employees and have 

supported previous versions of this legislation. Your bill appropriately would offer small businesses 

access to the same cost savings available to larger employers under the federal ERISA Act. Trade 

associations- particularly state retail associations- can offer a vital bridge of more affordable coverage 

to small employers and their employees. 

NRF commends you for introducing this necessary legislation. Group health purchasing enjoys 

bipartisan support and so should your legislation. We strongly support your efforts. 

cc: The Honorable Virginia Fox 

The Honorable Bobby Scott 

The Honorable Tim Walberg 

The Honorable Gregorio Sablan 

NATIONAL RETAIL FEDERATION 

1101 N{~vv York i\v(~rlue, NW, Su1tc· 1200 

Wa:,nm9ttm. DC 20005 

Sincerely, 

David French 

Senior Vice President 

Government Relations 
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February 28, 2017 

Chairman Sam johnson 

Subcommittee on Social Security 

2304 Rayburn House Office Building 

Washington, D.C. 20515 

Chairman Tim Walberg 

Subcommittee on Health, Employment, Labor, and Pensions 

2436 Rayburn House Office Building 

Washington, D.C. 20515 

Chairman johnson and Chairman Walberg, 

I 

On behalf of Heating, Air-conditioning & Refrigeration Distributors International (HARD!) I write to you today 

to offer HARDI's strong support for the Small Business Health Fairness Act (H.R. 1101). 

By way of background, HARD! is a trade association comprised of nearly 1,000 member companies, over 475 

of which are U.S.-based wholesale distribution companies. More than 80 percent of HARD!'s distributor 

members are classifled as small businesses that collectively employ over 35,000 U.S. workers, representing 

more than $35 billion in annual sales and an estimated SO percent of the U.S. wholesale distribution market of 

HVACR equipment, supplies, and controls. 

A recurring inquiry from our member companies is for a solution to rising health care costs for their small 

business, which your legislation provides. The Small Business Health Fairness Act allows HARD! as a trade 

organization to formulate an Association Health Plan for our members, which would give them the ability to 

purchase quality health care coverage at a lower cost to them and their employees. 

For these reason, HARD I applauds your efforts in offering a solution to a problem affecting many small 

businesses across the country. 

On behalf of HARD I. l want to thank both of you for your leadership on this important issue. Due to your 

legislation, more American small businesses will be able to curb the rising cost of health care coverage for 

their employees, as well as offer quality health care packages to tens of thousands of working~class families. 

HARD! vigorously endorses H.R. 1101 and encourages the passage of this important legislation. Please feel 

fl-ee to contact me if HARD! can be of assistance in providing background or context to this important issue. 

Sincerely, 

(}1}/JLL' 

(on Mel chi 

Vice President of Government & External Affairs 

Heating, Air-conditioning & Refrigeration Distributors International 

445 Hutchinson Ave, Ste. 550, Columbus, OH 43235 

888-253-2128 I www.hardinet.org 
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February 28, 2017 

The Honorable Virginia Foxx 

Chairwoman 

United States House of Representatives 

2176 Rayburn House Office Building 

Washington, D.C. 20515 

RESTAURANT NATIONA~ ASSOCIATION ., 

The Honorable Robert C. "Bobby" Scott 

Ranking Member 

United States House of Representatives 

2101 Rayburn House Office Building 

Washington, D.C. 20515 

Dear Chairwoman Foxx and Ranking Member Scott: 

On behalf of the members of the National Restaurant Association, we write to you in support of the 

recently introduced legislation entitled the Small Business Health Fairness Act (H.R. 11 0 I). This 

important legislation to amend the Department of Labor (DOL) definition of Association Health Plans 

(AHPs) under ERISA will broaden health care access and lower overall costs of employer- sponsored 

health insurance. 

Restaurants employ nearly I 0 percent of the nation's workforce, or approximately 14.4 million 

Americans. With one million locations across the country, the $783 billion in sales from the 

restaurant industry makes up four percent of the US GDP. Restaurant jobs provide opportunities 

for promotion. Nine of ten salaried restaurant employees started in hourly positions. The typical 

hourly restaurant employee who starts out at an entry-level wage receives a pay raise after six 

months. Restaurants are a training ground for the American workforce. One- in-three Americans 

got their first job in the restaurant industry, and one-half of all Americans have work in the 

restaurant industry at some point in their lives. 

The National Restaurant Association is the leading voice for American restaurateurs on 

commonsense reforms to the current health care law. By amending the current DOL definition of 

AHPs under ERISA, this would allow small, independent restaurants to pool together across state 

lines through their membership in a trade or professional association like the NRA, to purchase 

health coverage for their employees and their families. Additionally, AHPs increase small 

businesses' bargaining power, to help leverage discounts, and provide administrative efficiencies 

while freeing businesses from costly state benefit mandates. AHPs allow restaurants to balance 

administrative costs with their risk pools and ensure they have access to affordable health 

insurance. AHPs stand as a vehicle to lower cost of employer-sponsored health insurance and 

better health for all employees. 

We thank you for bringing the Small Business Health Fairness Act to the full committee for 

consideration. We strongly support passage of this important piece of legislation and encourage 

members of the committee to support this bill through Congress. 

Sincerely, 

Cicely Simpson 

Executive Vice President, Policy and Government Affairs 

National Restaurant Association 
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March 1, 2017 

The Honorable Virginia Foxx 

Chairwoman 

Committee on Education and the Workforce 

United States House of Representatives 

Dear Chairwoman Foxx: 

Thank you for your efforts to make healthcare affordable and accessible for all 

Americans. As the Committee on Education and the Workforce prepares to hold a 

briefing on this important topic, the Healthcare Leadership Council (HLC) welcomes the 

opportunity to share our thoughts with you. 

HLC is a coalition of chief executives from all disciplines within American healthcare. It 

is the exclusive forum for the nation's healthcare leaders to jointly develop policies, 

plans, and programs to achieve their vision of a 21st century health system that makes 

affordable, high quality care accessible to all Americans. Members of HLC-hospitals, 

academic health centers, health plans, pharmaceutical companies, medical device 

manufacturers, biotech firms, health product distributors, pharmacies, post-acute care 

providers, and information technology companies-are committed to advancing a 

consumer-centered healthcare system that values innovation, affordability, and 

accessibility. 

HLC conducted research in the early 2000s to identify the barriers small businesses 

face in offering health insurance coverage. Survey after survey found that while cost is 

one barrier, it is not the only one. Another significant barrier is knowledge and 

understanding of how health insurance works. During its research, HLC provided a 

short 15-minute educational session on insurance to small business owners through the 

Small Business Development Centers (SBDCs). These sessions led to an increase in 

knowledge about health insurance as well as an increase in the propensity by the small 

business owner to offer health insurance. These owners do not have large human 

resource departments that can explain all their health plan options to them and their 

employees. These consumers must be provided with decision support tools-including 

out of pocket cost calculators, smart plan-finder tools, searchable online provider 

networks and drug formularies, and clear cost information for common services-that 

will help them to understand their options and choose among plans. H.R. 1101, the 

Small Business Health Fairness Act, would allow small businesses to join together 

through association health plans (AHPs). HLC urges the Committee to ensure that the 

AHPs provide small businesses with the decision support tools necessary to compare 

their healthcare options. 
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HLC also understands the importance of ensuring that self-insured companies are able 

to continue to provide coverage to their employees. The Self-Insurance Protection Act 

would clarify that federal regulators cannot redefine stop loss insurance as health 

insurance. Stop loss insurance provides self-insured plans with a financial backstop to 

reimburse the employer or the plan for catastrophic claims. HLC thanks the Committee 

for its efforts to give self-insured companies this flexibility and protection. 

HLC has long been a supporter of employee well ness programs. Much of the illness 

and early death related to chronic diseases is caused by modifiable health risk 

behaviors such as lack of physical activity, poor nutrition, and tobacco use. By 2020, 

the number of Americans with one or more of these illnesses will reach 157 million. 

HLC's member companies are at the forefront of working to reverse this trend by 

developing and implementing programs that give employees access to the tools, 

resources, and incentives to empower behavior change that will reduce, delay, or 

eliminate the impact of chronic disease. These efforts are described in HLC's 

compendium, The Future is Here, and HLC and its member companies strongly 

supported the bipartisan Affordable Care Act (ACA) provision that increased the ability 

of employers to vary premiums up to 50% based on participation in a wellness program. 

We are pleased that the Preserving Employee Well ness Programs Act clarifies that 

these discounts, rebates, and modifications do not violate the Americans with 

Disabilities Act and the Genetic Information Nondiscrimination Act. 

Thank you again for your work to make healthcare affordable and accessible. HLC 

looks forward.to continuing to work with you. Should you have any questions, please do 

not hesitate to contact Debbie Witchey at (202) 449-3435. 

Sincerely, 

/w~ 

Mary R. Grealy 

President 

2 
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March 2017 

The Honorable Virginia Foxx 

Chairwoman 

Committee on Education and Workforce 

U.S. House of Representatives 

2262 Rayburn House Office Building 

Washington, DC 20515 

The Honorable Sam Johnson 

Committee on Ways and Means 

U.S. House of Representatives 

2304 Rayburn House Office Building 

Washington, DC 20515 

The Honorable Tim Walberg 

Chairman 

Subcommittee on Health, Employment, 

Labor, and Pensions 

U.S. House of Representatives 

2436 Rayburn House Office Building 

Washington, DC 20515 

Dear Chairwoman Foxx, Chairman Walberg, and Representative Johnson: 

On behalf of the National Association of Chemical Distributors (NACD) and our membership, I 

applaud your efforts to improve health care coverage and lower health care costs for families. I 

especially would like to thank Chairman Walberg and Representative Johnson for introducing H.R. 

1101, the Small Business Health Fairness Act. This legislation will provide small businesses and 

their employees access to more affordable health insurance coverage by expanding the use of 

Association Health Plans. 

NACD is a trade association representing over 250 chemical distribution companies throughout 

North America. These companies process, transport, and market chemical products for an 

industrial customer base of about 750,000. Unique to NACD is our condition of membership 

requiring participation in the Responsible Distribution process, a management practice that 

embraces continuous improvement in health, safety, security, and environment protection 

performance, 

The rising cost of health insurance premiums has long been a problem facing NACD members. 

Congress has recognized that action is needed to realize lower costs and provide better plan 

options for individuals and the employer community. Association Health Plans are a way to 

increase market leverage for small employers and give them the opportunity to band together to 

provide their employees with better, more affordable health insurance coverage. The Small 

Business Health Fairness Act will enable small businesses to provide valuable and affordable health 

benefits to their employees. 

Thank you again for your leadership on this issue. As congressional action moves forward to 

replace the ACA with these various proposals, we look forward to working with you. 

Sincerely, 

Eric R. 8yer 

President 
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March 2, 2017 

The Honorable Paul D. Ryan 

Speaker 

NFIB 

The Voice of Small Business~ 

U.S. House of Representatives 

H-232, The Capitol 

Washington, D.C. 20515 

Dear Speaker Ryan: 

As Congress crafts legislation to repeal and replace the Affordable Care Act (ACA), the 

National Federation of Independent Business (NFIB) remains committed to advocating 

for health reform principles that prioritize affordability, increase flexibility, and ensure 

predictability. Small businesses were an afterthought when the ACA was considered 

and implemented, even though the cost of health insurance has been the number one 

problem facing small businesses for the past 30 years. 

Under the ACA, small businesses' health insurance costs increased and benefit 

flexibility decreased, resulting in 25 percent fewer small businesses offering health 

insurance within five years of the law's enactment. Small businesses were so opposed 

to the ACA that NFIB challenged the constitutionality of the law as the lead plaintiff in 

NFIB v. Sebelius. 

Repeal of the ACA will eliminate taxes that drive up the cost of health insurance and 

mandate penalties that inhibit job creation, providing important relief. However, repeal 

of the ACA is not enough; Congress must replace the law with proposals that lower 

health insurance costs and increase coverage options for small businesses. 

To prioritize affordability, Congress must reconsider benefit mandates and health 

insurance requirements; amend tax laws to level the playing field for small businesses; 

and eliminate unnecessary compliance burdens. To increase flexibility, Congress must 

expand health insurance options for small businesses; permit innovative pooling 

arrangements; and improve Americans' ability to save and pay for healthcare with taxfavored health accounts. To ensure predictability, Congress must allow small 

businesses to keep the health insurance they currently enjoy and prevent disruption of 

the markets where small business owners purchase health insurance. 

Multiple proposals contained within the Better Way agenda satisfy these goals. For 

example, H.R. 1101, the Small Business Health Fairness Act, creates an Association 

Health Plan option that allows small businesses to band together across state lines to 

National Federation of Independent Business 

1201 F Street NW • Suite 200 • Washington, DC 20004 • 202-554-9000 • Fax 202-554.0496 
130 

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form larger risk pools with increased negotiating power and decreased administrative 

costs. 

NFIB urges Congress to consider this legislation and other proposals that promote 

affordability, flexibility, and predictability for small businesses. Health reform that 

satisfies these goals will work for small business; health reform that works for small 

business will work for the rest of the country. 

Sincerely, 

cr~o.lh11~-

Juanita D. Duggan 

NFIB President and CEO 

Attachment: 

NFIB Small Business Health Reform Principles 

cc: The Honorable Kevin McCarthy, Majority Leader 

The Honorable Steve Scalise, Majority Whip 

The Honorable Virginia Foxx, Chair, Education and the Workforce Committee 

The Honorable Kevin Brady, Chair, Ways and Means Committee 

The Honorable Greg Walden, Chair, Energy and Commerce Committee 

National Federation of Independent Business 

1201 F Street NW' Suite 200 • Washington, DC 20004 • 202-554-9000 *Fax 202-554-0496 
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SMALL BUSINESS 

Health Reform Principles 

Small businesses deserve health insurance that is affordable, flexible, and predictable. 

Repeal of the ACA is not enough; a replacement that repairs the health insurance 

markets is the only suitable outcome for small businesses. 

The principles here detail the path to affordability, flexibility, and predictability. 

AFFORDABILITY 

Do away with taxes and mandates that drive up the cost of health insurance and inhibit job 

creation 

o Repeal taxes on health insurance products and mandate penalties 

o Reconsider benefit mandates and health insurance requirements with a focus on 

afford ability 

Equalize the tax treatment of health insurance for small business owners and self~employed 

individuals 

o Allow self-employed individuals and business owners the same tax treatment as business 

owners and employees who receive health insurance through their employers 

Lift or remove contribution caps for small businesses that help employees who purchase 

Insurance on their own 

Eliminate unnecessary compliance burdens 

:: Eliminate the employer mandate compliance requirements after penalties are repealed 

,) Eliminate outdated paperwork burdens and prevent new paperwork requirements 

FLEXIBILITY 

Increase health Insurance options for small businesses 

Enhance the ability of small businesses to help employees purchase health insurance on 

their own 

o Allow small businesses the same health insurance opportunities as large businesses 

Permit innovative pooling arrangements 

v Enable groups of individuals and employers to band together to form larger, more stable 

risk pools wlth negotiating power 

Improve Americans' ability to save and pay for healthcare with tax*favored health accounts 

Eliminate Affordable Care Act restrictions on tax-favored health accounts 

0 Enhance tax-favored health accounts to make them more accessible and useful 

PREDICTABILITY 

A!!ow indtviduals and businesses to keep the health insurance they currently enjoy 

Relax grandfathered plan regulations 

o Extend the Obama Administration's transitional plan policy 

Prevent disruption of markets where individuals and small business owners purchase health 

1nsurance 

o Build a stronger market that services business owners and employees who purchase 

health insurance on their own 
132 

[Additional submissions by Mr. Johnson follow:] 

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SAM JOHNSON H-lfRDD!STR!CT TFXAS 

www.SII<nJOhnson.house.gov [ongrcss of the ilnitcd ~tatcs 

!c'lousc of "Rcprcscntatiucs 

i..llJashington, 19tt 20515-4303 

March 15,2017 

COMM!TTHS 

WAYS AND MEANS 

SUBCOMMITTEE ON 

SOCIAL SECURITY 

DEPUTY WHIP 

JOINT COMMITTEE 

ON TAXATION 

COMMlSSlONER: 

U.S.-RUSSIAN JOINT 

COMMISSION ON POW/MIAs 

RCGCNT: 

SMITHSONIAN INSTITUTION 

The Honorable Virginia Foxx 

Chairwoman 

The Honorable Bobby Scott 

Ranking Member 

Committee on Education and the Workforce 

U.S. House of Representatives 

Washington, D.C. 20515 

Committee on Education and the Workforce 

U.S. House of Representatives 

Washington, D.C. 20515 

Chairwoman Foxx, Ranking Member Scott and Members of the Committee, 

Thank you for including the Small Business Health Fairness Act (H.R. 110 I) in the Education and the 

Workforce Committee's recent hearing, "Legislative Proposals to Improve Health Care Coverage and 

Provide Lower Costs to Families." As you know, association health plans (AHPs) have long been an issue 

1 have championed, and I continue to believe AHPs can help small businesses obtain and provide quality 

health insurance to their employees. 

AHPs arc particularly needed now after the failure ofObamacare. Since 2008, there has been a notable 

decline in small businesses offering health insurance to their employees, in large part due to Obamacare. 

The stated purpose of Obamacm·e was to provide health insurm1ce to those without it, including those 

working for small businesses. Yet, as a result of this law's many flaws, we can now clearly see it has been 

a failure. 

For this reason, on February 16, 20 I 7, I introduced H.R. I 10 I along with Congressman Tim Walberg. 

Our bill will allow small businesses to band together through association health plans to provide quality 

health care for workers and their families at a lower cost. 

The basic rule of insurance is easy enough to understand: the bigger the risk pool, the lower the cost to 

those in the pool. As a result of their strength in numbers, larger corporations and unions are better able to 

provide quality, affordable health care to their employees. Similarly, small mom and pop businesses may 

band together through AHPs to provide health insurance to their workers, thus leveling the playing field 

in tenns of cost and options. Further, AHPs would also allow small businesses to be exempt from many 

costly state and federal mandates again, the same as large corporations and labor unions. It's high time 

we stop treating small businesses like second class citizens when it comes to health care. 

This is a proposal that has passed the House of Representatives twice before, and it has also been included 

in numerous repeal and replace measmes including Speaker Ryan's A Beller Way, Rep. Tom Price's 

Empowering Patients First Act (1-l.R. 2300 in the I l41

h Congress), Rep. Phil Roe/RSC bill, American 

Health Care R~j'orm Acl (H.R. 277), and Sen. Rand Paul's Obamacare Replacement Act (S. 222). 

I also wanted to clear the air on a few misconceptions that are out there regarding AHPs. 

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MYTH: H.R. 1101 does not provide sufficient solvency requirements for Al!Ps. 

FACT: That simply isn't accurate. l) AHPs can only be formed through bona fide associations which 

have existed for at least three years before offering an AHP, and which were formed for purposes other 

than providing health insurance. 2) AI IPs would need to have an indemnified back-up plan to be able to 

pay outstanding claims should the plan terminate. 3) AHPs would have to undergo quarterly certification 

for financial soundness. 4) AHPs would further be required to maintain surplus reserves beyond the 

aforementioned requirements. 5) Finally, when it comes to solvency, I would be remiss to not mention the 

failure of 19 of 23 CO-OPs under Obamacare, which were seeded with federal dollars and have lost 

taxpayers $1.9 billion as well as left thousands of beneficiaries without health care. 

MYTH: H.R. 1101 does not subject AHPs to state requirements, which then !nuts consumers due to 

exclusion from state benefit requirements and fraud laws. 

FACT: It is simply false to assert that the AHP ERISA preemption would endanger consumers when 

plans offered by both large corporations and labor unions are already exempt. Not only that, but even 

Obamacare recognized how good large group coverage is and exempted large group plans with respect to 

federal Essential Health Benefits. l f small businesses are able to form a large pool, why should they be 

treated any differently than other large groups? It makes no logical sense. Flllther, it is well known one of 

the challenges small businesses face is recruiting and retaining good, high quality employees. However, 

AHPs put small businesses on a more level playing field with large corporations and unions in terms of 

their ability to offer good, competitive health care to their employees. Employees and small business 

owners would both benefit. 

In terms of fraud, AHPs must already meet a number of fraud protections. Also, there are strict criminal 

penalties in place for fraud. 

MYTH: A l-IPs will increase the cost of insurance for small businesses outside of A l-IPs. 

FACT: According to data compiled by the Employee Benefit Research Institute (EBRI), from 2008-2015 

there has been a marked decline in the number of small businesses offering health coverage. For example, 

the percent of employers with fewer than 10 employees offering health insurance has fallen from 35.6 

percent to 22.7 percent. Meanwhile, among employers with 10 to 24 employees, there has been a decline 

from 66.1 percent to 48.9 percent. Moreover, because ofObamacare, we have seen premiums skyrocket. 

This year, the nationwide average on premium increases on the individual and small group market is 

approximately 25%, with the highest increase in Arizona at 116%. Further, we have seen options in the 

Obamacare exchanges dwindle. Where !live in Collin County, Texas, over the past year we have gone 

from eight insurers on our exchange in 2016 down to three- only two of which are retuming. Given this, 

A HPs offer small businesses a new opportunity to provide health insurance to their employees and their 

families. 

MYTH: AHPs will "cherry pick" who can get coverage and vary rates based on health status and age. 

FACT: Since 1996, HIP AA has prevented adverse selection and "cherry picking" of beneficiaries. Thus, 

no group health plan can deny or condition coverage based on health status to individuals within the 

group. Further, H.R. II 0 I requires that any active marketing must include all member employers, 

regardless of the claims history or health status of employees. AHPs are also restricted from setting 

their premiums in a way that might force higher claims companies to pay higher premiums than 

other similarly situated employers in the plan. Also, AHPs can only vary the rates that they 
135 

[Whereupon, at 12:51 p.m., the Committee was adjourned.] 

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charge individuals based on current laws for large employer health plans- again, the same rules 

that apply to large corporations and labor unions. 

In closing, let me thank you again for holding this important hearing and for including H.R. 1101 

in the discussion. I look forward to working with you to make association health plans a reality. 

Sam Johnson 

Member of Congress