Summary 

Report 

Roundtable on 

Access to Affordable Health Coverage 

by Women-Owned Businesses 

 March 2003 
Table of Contents 

Page 

Foreword...............................................................................................................2 

Introduction ...........................................................................................................3 

Highlights of Presentations by Women Business Owners and Other Panelists ....3 

Highlights of the Open Discussion Period .............................................................5 

Summary of Presentations by Women Business Owners .....................................6 

Summary of Presentations by Other Panelists and Guest Speakers ..................10 

Appendix A: List of Participants.........................................................................A-1 

Appendix B: Biographies of the Panelists and Guest Speakers ........................B-1 

Appendix C: Verbatim Transcript ......................................................................C-1 
FOREWORD 

The inability to secure affordable health care for employees is a critical and 

growing concern of many women business owners. It is estimated that 60% of 

the 41 million uninsured Americans reside in households with one or more 

members employed by small businesses. An estimated 7.3 million of the 

uninsured are employees or families of employees of the 9.1 million womenowned firms in the U.S. 

The National Women's Business Council (NWBC) believes that hearing from 

those who are directly affected provides valuable input that informs public policy 

discussion. NWBC recently convened a Roundtable discussion on affordable 

health care for businesses and their employees. The Roundtable brought 

together women business owners, business association leaders, issue experts, 

and public policy makers from across the U.S. to discuss not only the concerns 

involved in providing affordable health care, but also the most effective solutions 

that can be considered in the 108th Congress. An initial background review on 

the current state of health care served to structure the agenda and dialogue. 

The National Women’s Business Council is a bipartisan Federal government 

council created to serve as an independent source of advice and counsel to the 

President, Congress, and the U.S. Small Business Administration (SBA) on 

economic issues of importance to women business owners. Members of the 

Council are prominent women business owners and leaders of women's 

business organizations. The National Women’s Business Council is committed 

to conducting research on issues of importance to women business owners and 

their organizations; to communicating these findings widely; to connecting the 

women's business community to public policy makers; and to providing programs 

and platforms for change in order to expand and improve opportunities for 

women business owners and their enterprises. For more information about the 

Council, its mission, and activities, contact: National Women's Business Council, 

409 3rd Street, SW, Suite 210, Washington, DC 20024; phone: 202-205-3850; 

fax: 202-205-6825, e-mail: nwbc@sba.gov; web site: www.nwbc.gov. 

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Summary Report 

INTRODUCTION 

The movement to increase access to affordable health care for small business 

owners gained momentum as women business owners gathered in Washington, 

DC, on February 27, 2003, to have a voice and provide their individual 

testimonies. They described how the health care crisis is affecting their 

companies—and the millions of Americans who work for them—and hampering 

their ability to survive, grow, and thrive. On the heels of the first hearing of the 

108th Congress on the small business health care crisis held February 5—and 

just days before the official commencement nationwide of Women’s History 

Month in March—a diversified group of women business owners provided their 

individual views on the critical issues outlined below. This first ever Roundtable 

on Affordable Health Care at the Capitol for female entrepreneurs was hosted by 

the National Women’s Business Council (NWBC). 

This report summarizes the proceedings of the Roundtable, which included 

presentations by a panel of 19 women business owners, business association 

executives, and other stakeholders. A list of Roundtable participants, complete 

with biographical sketches of the speakers, is contained in the appendices, as is 

a verbatim transcript of the event. A companion research report, which reviews 

current data and studies on access to affordable health care and discusses 

alternative solutions for business owners, is also available at www.nwbc.gov. 

HIGHLIGHTS OF PRESENTATIONS BY WOMEN BUSINESS OWNERS AND 

OTHER PANELISTS 

The Roundtable, moderated by Council Chair Marilyn Carlson Nelson, Chairman 

and CEO of Carlson Companies, Inc. of Minneapolis, MN, provided a forum in 

which women entrepreneurs from all over the country presented their individual 

stories and experiences about accessing affordable health insurance. From 

these accounts emerged a number of facts and recurring themes, as described 

below. 

• Key Role of Women-Owned Firms in the Economy. At least onequarter of all businesses in the United States are owned by women. The 

number of women-owned firms is 9.1 million, employing 27.5 million 

workers and generating $3.6 trillion in revenues. By 2005, it is estimated 

that there will be 4.7 million self-employed women. Yet, more than ever, 

women-owned firms are facing a crisis posed by the rising cost of health 

coverage. It is estimated that 60% of the 41 million uninsured Americans 

reside in families employed by small businesses. 

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• Commitment to Provide Coverage. Women business owners 

demonstrate a sincere commitment and willingness to provide health 

insurance coverage to their employees despite the exorbitant cost— 

sometimes even over the objections of workers who would prefer to see 

larger paychecks—because of a moral obligation to protect their workers. 

Some of the businesses represented at the Roundtable pay anywhere 

from 80%-100% of employee coverage—an admirable contribution in 

today’s economy. 

• Coverage Issues for Business Startups. Upon starting a business, 

many women entrepreneurs cannot afford to offer health insurance 

coverage, although they tend to add this benefit later as the business 

grows. Many new business owners are surprised to learn just how 

expensive coverage is, are unfamiliar with insurance products and 

terminology, and are unaware that this is a cost that will dramatically 

impact the bottom line each and every year. 

• Coverage Issues for Growth Firms. Firms who are able to purchase 

insurance are hit routinely with the high cost of coverage. Double-digit 

premium increases are commonplace. Many small businesses, especially 

those with fewer than three employees, have witnessed increases of 25%-

50% in their health premiums, and many even 100%. Also, as more 

seasoned businesses continue to face surging health care costs year after 

year, some are reluctantly considering increasing employee cost-sharing, 

paring down coverage, or dropping health benefits altogether. 

• Unequal Access to Employee Talent. The lack of access to affordable 

health insurance has created an uneven playing field for small business 

owners trying to attract and retain employee talent. This situation directly 

threatens the viability and sustainability of many small businesses that 

may be able to hire only personnel who have other options for health 

coverage. 

• Concern Over Quality of Coverage. Women business owners are just as 

concerned with health care quality as they are about access and 

affordability. Replacing high-cost policies with less expensive ones that 

decrease benefits to their employees would be an unacceptable solution. 

• Potential Solutions to the Health Care Crisis. Many women business 

owners voice strong support for passage of legislation on association 

health plans (AHPs), which in their view would be a major first step toward 

improving access by small business to more affordable health care 

coverage. AHPs would offer small businesses greater bargaining power, 

economies of scale, and administrative efficiencies that would ultimately 

lower their health care premiums. Women entrepreneurs also view the 

expansion, permanence, and improvement of medical savings accounts 

4 
(MSAs) and the passage of legislation for refundable tax credits, which 

individuals could use to purchase health insurance, as important parts of 

the solution. 

HIGHLIGHTS OF THE OPEN DISCUSSION PERIOD 

In addition to the observations of women business owners and other panelists 

during the presentations, several related issues were addressed during the Open 

Discussion period, as summarized below. 

• Transfer Costs of a Lack of Insurance. Some business owners attribute the 

high cost of premiums to the large number of uninsured persons treated in 

hospital emergency rooms—the most expensive source of medical care. 

These costs are ultimately passed on to the insured population in the form of 

higher rates. The escalating costs of medical litigation represent another 

contributing factor, exposing the need for reform of the legal system as it 

pertains to health care. 

• Affordable Versus Accessible Coverage. Caution is warranted in the use 

of the term “affordable” rather than “accessible” in the health coverage 

debate. What is affordable for one business owner may be out of reach for 

another. While passage of AHP legislation would increase consumer choice 

and small-firm access to health insurance, some small business owners may 

have unrealistic expectations about the savings to be gained. For example, it 

is unlikely that a $400 premium would cost $150 after enactment of AHP 

legislation. 

• Support of AHPs by Asian American Business Owners. The U.S. Pan 

Asian American Chamber of Commerce, which represents over a million 

Asian American business owners, has been addressing affordable health 

care issues for some time. Like the women business owners who testified at 

the Roundtable, these minority entrepreneurs have experienced challenges in 

accessing affordable health coverage. 

• Resistance to AHPs in the States. Part of the resistance to AHPs is 

perceived to be at the state level. Many Governors have not thrown their 

support behind AHPs. Support for AHPs by state insurance commissioners 

has been lacking, because many fear that some associations creating AHPs 

would not be bona fide or legitimate—a situation that has already occurred in 

some states. In short, they are reluctant to support a measure that could in 

their view make a bad situation even worse. Also, some insurance 

commissioners may not want to relinquish nonresident license fees or 

premium taxes. Some insurance brokers in the states are likewise resisting 

AHPs because of the potential for system abuse that could result in unpaid 

consumer claims or other negative consequences. 

5 
 

• Immediate Action Needed by Women-Owned and Other Small 

Businesses. In light of resistance to AHPs at the state level, small business 

owners should consider taking action immediately in the debate over 

affordable health coverage by communicating with their Governors, 

congressional representatives, Senators, and state insurance commissioners. 

Although AHP legislation passed the House in the 107th Congress, it died in 

the Senate. More nationwide advocacy by a critical mass of entrepreneurs 

may help stimulate passage of AHP legislation in the 108th Congress. 

• Information on AHPs. A comprehensive source of information on AHPs can 

be found online at www.AHPsNOW.com, a service of The Coalition 

Supporting Access and Choice Through Association Health Plans. This 

informative Web site publicizes extensive research on the background and 

status of AHP legislation, enabling small business owners and others to 

become more knowledgeable about this issue. Other sources of relevant 

information include the Heritage Foundation Web site (www.heritage.org) 

and the NWBC Web site (www.nwbc.gov). 

SUMMARY OF PRESENTATIONS BY WOMEN BUSINESS OWNERS 

A diverse array of America’s women business owners was represented by those 

presenting at the Roundtable. Their experience reflects the challenges of finding 

and maintaining affordable health insurance coverage throughout the business 

life cycle, as detailed below. 

REBECCA BOENIGK, NEUTRAL POSTURE, INC., BRYAN, TX –-MS. Boenigk is chief 

executive officer (CEO) of a manufacturer of ergonomic chairs, with current 

revenues of about $17 million. She is also Chair of the Women’s Enterprise 

Leadership Forum of the Women’s Business Enterprise National Council 

(WBENC), representing certified women’s business enterprises from around the 

country. (WBENC is a leading advocate of women-owned businesses as 

suppliers to America’s corporations and is a third-party certifier of businesses 

owned and operated by women in the United States.) In 1989, Ms. Boenigk 

decided that health insurance was such an important benefit that her company 

would offer it to all employees. Now, the company still maintains its original 

commitment, paying 100% of the health insurance premiums for its 80 

employees at a total cost of $480,000, or 2.8 % of sales. This year, as the policy 

renewal date approaches, insurance rates are expected to increase by 20% to 

$600,000. From an employees’ perspective, the company’s health coverage 

translates to about $3.00-$4.23 per hour in wages—an amount that some 

production workers admit they would rather see in their paychecks. However, 

part of the decision to continue coverage of the entire work force was based on 

an employee survey suggesting that about 35% of workers would drop out of the 

health insurance program if they had to pay $10 a week, or 35 cents per hour, to 

participate. But instead of placing these employees at risk—many of whom would 

likely go without coverage and receive care at an indigent hospital—her company 

6 
has decided to continue paying the full cost of coverage for all its workers, 

despite an additional expense of almost $200,000. Ms. Boenigk attributes much 

of the rise in health care outlays to the high cost of medical litigation. She 

believes that legal reform is needed in this area. 

MARY QUIGG, VANDOVER, ST. LOUIS, MO—Vandover, an outplacement and 

relocation support services firm with 41 employees, maintains a client base of 

Fortune 500 companies, midsized businesses, and government agencies. When 

the company began, it could not afford to offer health care benefits to its work 

force. The firm’s ability to attract and retain high-quality employees during its first 

six years was limited to persons who could obtain coverage through another 

source, such as a spouse or other family member. Since 1991, the firm has 

always paid 85% of worker health insurance premiums, but has had to engineer 

periodic “remodeling” of policies along the way. Plans have shifted from blended 

rate structures to those based on experience and gender/age to those with a flat 

rate. Eligibility waiting periods have grown from 30 to 90 days, and deductibles 

and prescription coverage have also changed to maintain the company 

percentage. Since offering coverage 12 years ago, the firm has experienced 

premium growth in excess of 125%, and it currently grapples with costly 

dependent coverage. Nevertheless, the business continues to provide health 

insurance benefits to its employees so that it can attract the type of employee 

talent it needs to succeed. 

Ms. Quigg also belongs to the Women President’s Organization (WPO)—a nonprofit group whose members have guided their businesses to at least $2 million 

in gross annual sales, or $1 million for a service-based business. They represent 

31,000 employees and $4 billion in annual revenues. According to a recent poll 

of WPO members—with an average business size of 85 employees—their top 

issue of concern, next to the state of the economy, is the skyrocketing cost of 

health insurance. Although most member firms offer health insurance, nearly all 

have remodeled their policies over the years because of high costs, and many 

are considering dropping coverage altogether for the first time. 

LESLIE SAUNDERS, LESLIE SAUNDERS INSURANCE AND MARKETING INTERNATIONAL, 

TAMPA BAY, FL—Representing consumers, business owners, and insurance 

professionals, Ms. Saunders is founder and CEO of a licensed insurance 

brokerage firm that covers women-owned and other small businesses in all 50 

states, as well as Fortune 500 companies. Her testimony reveals the dilemma 

faced by women and other business owners who, in fact, fill several roles—each 

of which may relate to differing circumstances and needs and may require 

different health plan options. As a consumer and covered employee of her own 

firm, for example, she is concerned about access to the types of services she 

needs to maintain her personal health as an aging baby-boomer. She must 

likewise consider the health of her spouse, for whom access to selected medical 

specialists and treatments is more important than cost. 

7 
As a small business owner based in Florida but with employees in other states, 

she is also disturbed about the lack of health plans that could cover all her work 

force. Meanwhile, the average employee rates for health insurance in Florida are 

higher than in most states (i.e., about $400 per month for those 35 years old and 

under, and about $700 per month or more for employees 50 and up) because of 

the legal climate and mandated State benefits. Family coverage is, of course, 

even more expensive, with rates of one group averaging $1,500 per family. 

Overall increases of 20%-35% have been reported. 

As an insurance broker who has designed and implemented employee benefit 

plans of all sizes since 1973, Ms. Saunders is concerned about access by small 

businesses to affordable health care plans. In the past 20 years, she has 

witnessed extraordinary increases in health insurance premiums and has 

struggled to help many small firms keep pace. Her roles as both owner and 

broker have shown her how access across state lines to national networks and 

other group pools—a key feature of AHPs—could result in more affordable health 

care coverage for small firms. 

DEBORAH HARRINGTON, HARRINGTON CAPITAL ADVISORS, INC., NEWPORT BEACH, 

CA—Harrington Capital Advisors, Inc. is a newly formed investment 

management firm that provides services to high net worth individuals, 

corporations, and non-profit organizations through individually managed 

accounts. Despite promising beginnings and a current management portfolio 

exceeding $25 million, CEO Harrington is unable to offer any type of health 

insurance to her employees. When she and her husband founded the company 

in 2002, she had no idea that finding affordable health insurance would present 

such a formidable challenge. Like many new business owners who have left 

companies with good health benefits, the couple was totally unprepared to pay 

over 10% of their overhead costs for health insurance. In her words, “We now 

find ourselves in an unfortunate situation. We have to pay a small fortune in 

insurance premiums for a plan that provides us with less in comprehensive 

benefits than what we would have been accustomed to when we were employed 

with a large, publicly held company.” Although Ms. Harrington brought many 

years of experience and extensive knowledge of financial markets and the 

investment industry to her startup company, she admits that a lack of familiarity 

with the terminology and procedures of the insurance industry placed her at a 

distinct disadvantage in evaluating various insurance products. 

LEEANNA ROMAN FOURNIER, PROVIDENCE PEDIATRIC MEDICAL DAYCARE, INC., 

MARLTON, NJ—Ms. Fournier is CEO of two multimillion-dollar companies, 

including Providence Pediatric Medical Daycare, Inc., which supplies education 

and nursing care to medically fragile young children. She recalls the difficulties 

that she has encountered in remaining a viable and growing business while 

providing affordable, high-quality health insurance to her employees. Although 

she currently pays 80% of her employees’ health insurance premiums, she is 

uncertain whether she can continue to do so without jeopardizing the financial 

8 
well-being of her company. Also, she needs to hire more staff but cannot afford 

to because it would increase her health insurance costs. One solution to the 

health care crisis proposed by Ms. Fournier is GAAP (Government Assisted 

Alternative Program), which she considers to be an improved version of AHPs. 

Fournier maintains that “GAAP perfects the system by leveraging state and 

Federal Government employee health insurance plans to obtain lower, more 

affordable health insurance for association members participating in the 

program.” Her patented program requires no new legislation and is a process 

that businesses can begin using now. Ms. Fournier is also a founding member of 

Women Impacting Public Policy (WIPP), with 430,000 members, and president of 

Hispanics Influencing Public Policy (HIPP). 

SHEILA BROOKS, NATIONAL BOARD MEMBER, NATIONAL ASSOCIATION OF WOMEN 

BUSINESS OWNERS (NAWBO)—NAWBO is a premier women’s business 

membership organization, with over 8,000 members. In a recent NAWBO survey, 

passage of AHP legislation was among the top public policy issues identified by 

its members. The survey also revealed that the majority (58%) of member firms 

with employees offer health insurance coverage to them. Ms. Brooks shared her 

personal experiences as an African American business owner of a 13-year-old 

communications firm in Washington, DC, which paid 100% of employees’ health 

insurance premiums until the tragedy of September 11, 2001. Following that 

event, the business lost about $2.6 million in revenues and was forced to make 

some hard decisions about its operations, including a reduction in employer-paid 

coverage. Even now, with rebounding revenues and a recent doubling of staff 

size, the business cannot afford to restore coverage to its original levels because 

of surging health care costs. It is this type of economic climate that prompts Ms. 

Brooks’ appeal to the small business community to “conjure the passion and zeal 

for which it is known, to fight the good fight and provide affordable health care for 

all small businesses.” 

KAREN KERRIGAN, PRESIDENT AND CEO, WOMEN ENTREPRENEURS, INC. (WE,

INC.)—WE, Inc. is a nonpartisan business association that endeavors to improve 

the economic environment for women business owners. Under Ms. Kerrigan’s 

leadership, the organization has devoted many of its efforts to support the 

expansion, permanence, and improvement of MSAs (medical savings accounts) 

—one of several proposed solutions to the health care crisis. Congress approved 

MSAs as a pilot program in a bill that the President subsequently signed into law 

in 1996. However, the law imposed many restrictions on the implementation of 

MSAs that have made them a less viable health care product for consumers 

seeking affordable health insurance. For example, as a pilot program, MSAs 

have not been widely marketed by insurers. Also, not all persons are eligible to 

purchase an MSA. “If you are an individual who does not have insurance, who 

works part-time for a business, or who works for a business, you cannot buy a 

medical savings account,” states Ms. Kerrigan, who is a frequent witness at 

congressional Small Business Committee hearings. “The other reforms that are 

important [are] allowing both the employer and the employee to contribute to the 

9 
medical savings account [and] lowering the deductibles.” WE, Inc. also supports 

legislation to approve AHPs and refundable health care tax credits that 

individuals could use to purchase health insurance. In addition, WE, Inc. avidly 

promotes the creation of a more consumer-driven health care system to increase 

access to affordable coverage for all Americans. 

TERRY NEESE, PRESIDENT, WOMEN IMPACTING PUBLIC POLICY (WIPP)—WIPP is a 

small-business association representing over 425,000 women and minority 

business owners. Member companies are expecting increases in their health 

premiums this year of 12%-72%, and as a result many will be unable to continue 

to offer health insurance to their workers. According to Ms. Neese, a recent 

survey of WIPP members reveals that “providing this benefit is the most 

important benefit they can give to their employees—for both moral and economic 

reasons. With the drastic premium increases, few can provide it fully and [fewer 

and fewer] can provide it even on a shared payment arrangement.” She also 

points out that premiums are just one aspect of the health care crisis. “Finding a 

provider, having choices, managing high administrative costs, growth in litigation, 

and fraud and abuse are problematic.” WIPP proposes and supports AHPs that 

would allow small firms to pool their resources with other small companies and 

purchase insurance at more affordable rates. As such, “AHPs have the potential 

to lower insurance premiums for small firms by freeing employers from direct and 

indirect state taxation, some mandated benefits, and the cost of compliance with 

multiple state regulations.” Ms. Neese is also CEO of Terry Neese Personnel 

Services of Oklahoma City, OK. 

SUMMARY OF PRESENTATIONS BY OTHER PANELISTS AND GUEST 

SPEAKERS 

KATE SULLIVAN, HEALTH CARE POLICY DIRECTOR, U.S. CHAMBER OF COMMERCE— 

Representing the largest association for companies of all sizes, Ms. Sullivan 

commends women business owners for offering coverage in such large numbers 

despite exceedingly high costs because they believe “it is the right thing to do.” 

She lauds the commitment of many women business owners who are in it “for 

the long haul [even though] Congress is making it difficult to do so by passing 

mandates and blocking the opportunity for associations to make this [health] 

coverage more available.” In support of AHPs, she raises two key points. First, 

passage of AHP legislation would enable business owners in states with 

comparatively fewer companies (e.g., Alaska, Montana, and the Dakotas) to 

band together across state lines to create the “critical mass” needed to form an 

AHP and benefit from more affordable health insurance rates. Second, AHPs 

would enable small enterprises with employees in several states to offer a single 

health plan to all its workers and lower their overall cost of health coverage. 

Speaking of a small Virginia-based firm with 35 employees in four states that 

must operate under four different health plans, Ms. Sullivan states, “They are too 

small to self-insure, but if [the owner] could get into an association health plan, 

he could offer a single plan. In fact, he could probably get all of his employees 

10 
together and give them a choice of plans.” Ms. Sullivan also cautions women 

business owners about positions taken by some women’s groups. These groups 

advocate more state mandates and upfront first-dollar coverage, but oppose AHP 

legislation on the presumption that AHPs would limit preventive health care and 

other key services for women and children. 

SECRETARY ELAINE L. CHAO, U.S. DEPARTMENT OF LABOR (DOL)—Business 

owners, consumer groups, and community activists all over the country have 

brought the issues of health care quality, affordability, and timeliness to Secretary 

Chao’s attention. The DOL hosted a major conference last year in which women 

entrepreneurs were able to voice their business concerns. The issue of 

affordable health care for employees was second only to access to capital for this 

group, many of whom witnessed their health insurance premiums increase 12%-

18% or higher in one year. The President has offered a comprehensive plan for 

helping small businesses gain access to affordable health care, which includes: 

the support of AHPs; the expansion and permanence of MSAs; malpractice 

litigation reform; and refundable tax credits for individuals to foster purchase of 

health insurance. AHP legislation will be introduced in the Senate soon that will 

help small businesses gain parity with large businesses offering more affordable 

health care options. (Bigger firms enjoy increased bargaining and purchasing 

power, economies of scale, and administrative efficiencies.) Small firms would 

also benefit from a uniform Federal regulatory structure instead of having to 

comply with 50 different sets of state regulations, as is presently the case. The 

DOL would be the Federal agency responsible for regulating AHPs. It currently 

administers ERISA, the Federal law that addresses employer-based benefits. 

The agency already oversees more than 250,000 health plans covering about 47 

million people. The Secretary is concerned about “cherry-picking” or the selection 

of only young or healthy people for participation in health plans. However, there 

are already a number of mandates in place through ERISA to prevent this 

practice. 

U.S. REPRESENTATIVE DONALD MANZULLO, CHAIR OF THE HOUSE SMALL BUSINESS 

COMMITTEE—Congressman Manzullo recommends that business owners and 

other consumers check the bills they receive from insurance companies, as 

many errors have been noted that can increase the cost of care unnecessarily. 

Another cost driver is the expense associated with the testing and production of 

breakthrough medicines, many of which never reach the market. Also, because 

of the way most insurance contracts are currently written, individuals generally 

are not allowed to specify the types of services they want or need. Business 

owners and consumers should “shop around” for the best insurance prices, 

which can vary dramatically from agent to agent for similar coverage. The use of 

MSAs is also strongly encouraged. AHP legislation passed the House last year 

but died in the Senate. A hearing on AHPs will be held in March, and the 

Congressman believes that AHPs will pass in the Senate and be signed into law 

by the President this year. 

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HECTOR BARRETO, ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION 

(SBA)—As the SBA Administrator, Mr. Barreto directs the delivery of financial 

and business development programs to America’s entrepreneurs through the 

agency’s portfolio of direct and guaranteed business loans and disaster loans, 

valued in excess of $45 billion. Although the issue of providing high-quality health 

care for small businesses has been debated over the years and various 

initiatives have been proposed, Mr. Barreto urged small business owners to act 

now. “I really hope that what comes from our conversation today is a real call to 

action and a real specific action plan, if you will, so that we can make sure that 

we finally take care of this very very serious problem.” Prior to joining the SBA, 

Mr. Barreto experienced firsthand many of the challenges voiced at the 

Roundtable. As a former employee benefits broker, entrepreneur, business 

association executive, and member of a family-owned business, he knows the 

hardship of facing unaffordable premiums and competing for talented employees 

without a high-quality benefits package. Voicing support for AHPs as a major first 

step toward solving the problem, the SBA—as America’s premier small business 

resource—intends to play a key role in facilitating access to affordable health 

plans by small firms once AHP legislation becomes law. 

THOMAS M. SULLIVAN, CHIEF COUNSEL FOR ADVOCACY, SBA—The Office of 

Advocacy within the SBA independently advances the views, concerns, and 

interests of small businesses before Congress, the White House, Federal 

regulatory bodies, and state policymakers. In January, the Office released an 

important report that cites AHPs as a possible solution to the crisis faced by 

small businesses in accessing affordable health insurance. According to the 

study upon which the report is based, “The administrative expenses for insurers 

of small health plans... make up 25%-27% of premiums and 33%-37% of claims. 

This compares with approximately 5%-11% of claims for large companies’ selfinsured plans.” AHPs can address the high administrative costs associated with 

health insurance plans. (Access to the report is available at www.sba.gov.) Mr. 

Sullivan also urges small business owners to advocate for passage of AHPs. 

CARROLL FISHER, INSURANCE COMMISSIONER FOR THE STATE OF OKLAHOMA—As 

past president of the National Association of Health Underwriters and founder of 

the Oklahoma State Association of Heath Underwriters, Mr. Fisher has been 

involved in the insurance industry for decades and has faced the challenges of 

finding affordable health care for some time. He supports AHPs, but only if they 

provide financial solvency. “If we can give financial solvency, we can give a 

marketing advantage to association health plans to help reduce our costs.” Also, 

associations that provide AHPs must be bona fide. Oklahoma recently passed 

legislation that allows associations to band together with small purchasing groups 

in the state to provide more affordable health care coverage. Arkansas has done 

this as well. He is also working on a plan that will give small employers a 

“worker’s compensation alternative health insurance plan” that provides 24-hour 

coverage, so that employers will not have to purchase both worker’s 

compensation and health insurance. 

12 
GREG SCANDLEN, DIRECTOR, GALEN INSTITUTE, CENTER FOR CONSUMER DRIVEN 

HEALTH CARE—The Galen Institute is a non-profit organization dedicated to 

health policy. The employer-based system of health insurance coverage is 

viewed by many as a fractured Federal tax policy, fraught with inequities, in 

which massive subsidies are given to employers to provide health insurance, 

resulting in $140 million in lost revenues annually to the Federal Government. 

Self-employed persons, however, do not receive such generous benefits. Mr. 

Scandlen explains, “If you are self-employed, you also get a smaller subsidy of 

100% deduction, not an exclusion. The exclusion frees the benefit from the cost 

of payroll taxes, as well as income taxes, state and Federal.” Furthermore, 

individuals who are not self-employed who work for firms that do not offer health 

insurance have to pay for their own coverage if they want it, but receive no 

premium assistance. The President’s proposal for refundable tax credits is 

intended to “right this wrong.” Another plausible solution to the affordable health 

care crisis is to allow employers to contribute to their employees’ health benefits 

coverage if they elect to purchase it on their own. Health Insurance Portability 

and Accountability Act (HIPAA) currently restricts this option by stating that such 

action constitutes an employee welfare benefit plan, and therefore is a group 

policy. Also, the Internal Revenue Service recently approved health 

reimbursement accounts (HRAs), which provide another alternative for employer 

firms. As for AHPs, Mr. Scandlen reminds employers of 100 or more workers that 

such companies can self-fund, rendering them free of any type of state 

regulation. 

KRISTIE DARIEN, DIRECTOR OF GOVERNMENTAL AFFAIRS, NATIONAL ASSOCIATION 

FOR THE SELF-EMPLOYED (NASE)—The NASE is the Nation’s leading resource for 

the self-employed and microbusinesses, which are businesses with 10 or fewer 

employees. This organization represents over 250,000 member businesses, 

which have over 600,000 employers, employees, and self-employed individuals 

nationwide. In its recently released survey entitled “Affordability in Health Care: 

Trends in American Microbusiness,” the NASE reports that 70% of 

microbusiness owners say they do not provide health insurance coverage to 

eligible employees, nor for themselves. Nearly all (96%) of these executives 

believe that the cost of health insurance is too unreasonable for their businesses. 

To gain affordable health coverage, the NASE supports AHPs, MSAs, and 

refundable tax credits. Also, reform is needed to fix the inequities in the U.S. tax 

codes that affect self-employed individuals—specifically, those entrepreneurs 

who are Schedule C and Schedule E tax filers who do not receive a business 

deduction for their health insurance premiums. This in effect means that selfemployed persons pay an extra 15.3% on their health insurance. Corporations, 

on the other hand, are allowed to deduct their health insurance premiums as 

ordinary business expenses. 

JESSIE HOWE BRAIRTON, MANAGER OF LEGISLATIVE AFFAIRS, NATIONAL 

FEDERATION OF INDEPENDENT BUSINESS (NFIB)—The NFIB is the largest advocacy 

organization representing small and independent businesses, with about 600,000 

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members. Most of its members have five or fewer employees and have been in 

existence for at least 10 years. About one-fourth of its members are womenowned firms. Since 1986, surveys of NFIB members have ranked rising health 

care costs as the number one issue they face. Many members have experienced 

exorbitant increases of 25%-50%, and increases of 100% have been common. 

Still other very small businesses have encountered premium increases every six 

months instead of annually. In many instances, such high costs have resulted in 

the loss of employee talent to other firms. NFIB aggressively urges enactment of 

legislation to permit AHPs to operate nationwide, and supports the expansion of 

MSAs, flexible spending accounts, and refundable tax credits to allow individuals 

to purchase insurance. From the NFIB’s perspective, “Creation of nationwide 

AHPs is really a matter of righting a wrong which has plagued small employers 

for years. Currently the labor unions, medium-sized businesses, as well as large 

Fortune 500 companies, are allowed to offer health benefits to their employees 

under ERISA. This law exempts those companies and unions from that 

cumbersome task of having to comply with all the regulations and mandates of all 

50 states.” Without this exemption, Ms. Brairton explains, small businesses “pay 

17% more for their health insurance than their big-business counterparts.” 

MERRILL MATTHEWS, JR., PH.D., COUNCIL FOR AFFORDABLE HEALTH INSURANCE 

(CAHI)—CAHI is a research and advocacy association of insurance carriers 

active in the individual, small group, MSA, and senior markets. Its membership 

includes insurance companies, small businesses, providers, non-profit 

associations, actuaries, insurance brokers, and individuals. There is concern that 

AHPs will not be adequately funded because of its guaranteed issue feature, 

which lets everyone into the plan without underwriting or regard for health 

status—a scenario that many feel will not work actuarially and will exacerbate 

instead of alleviate the affordable health care crisis. As for ways to increase 

access to affordable coverage, associations can presently provide state-based 

AHPs to their constituents, as does the National Association for the SelfEmployed, by using an insurance company as the conduit. Another proposed 

solution is to permit reciprocity among health plans wherein a plan approved for 

purchase in one state can be purchased legitimately by someone in another 

state. Still another option would allow small businesses with only a few 

employees to let those employees find their own individual health insurance 

policies, which the employer would pay. Some states have prohibited this activity 

through the use of list bills. Yet another possible solution is to allow exemption 

from HIPAA legislation to address situations in which an individual with a 

condition such as cancer would not have to be admitted to a firm’s health plan 

(which would increase premiums for everyone) but would instead use a state 

high-risk pool. Thirty states currently operate high-risk pools with monies from 

Congress that help fund them. 

14 
APPENDICES 

A. List of Roundtable Participants 

B. Biographies of the Panelists and Guest Speakers 

C. Verbatim Transcript of Roundtable Proceedings 
 

Appendix A: List of Participants 

Moderator: 

Marilyn Carlson Nelson, Chair, National Women’s Business Council 

Presenters (in the order as reflected in the transcript): 

• Rebecca Boenigk, Neutral Posture, Inc., Bryan, TX 

• Mary Quigg, Vandover, St. Louis, MO 

• Leslie Saunders, Leslie Saunders Insurance and Marketing International, 

Tampa Bay, FL 

• Deborah Harrington, Harrington Capital Advisors, Inc. Newport Beach, CA 

• Leeanna Fournier, Providence Pediatric Medical Daycare, Inc. Marlton, NJ 

• Hector Barreto, Administrator, U.S. Small Business Administration 

• Thomas M. Sullivan, Chief Counsel for Advocacy, U.S. Small Business 

Administration 

• Carroll Fisher, Insurance Commissioner for the State of Oklahoma 

• Secretary Elaine L. Chao, U.S. Department of Labor 

• Sheila Brooks, National Board Member, National Association of Women 

Business Owners 

• U.S. Representative Donald Manzullo, Chair of the House Small Business 

Committee 

• Karen Kerrigan, President, Women Entrepreneurs, Inc. 

• Terry Neese, President, Women Impacting Public Policy 

• Kate Sullivan, Health Care Policy Director, U.S. Chamber of Commerce 

• Greg Scandlen, Director, Galen Institute, Center for Consumer Driven Health 

Care 

• Kristie Darien, Director of Governmental Affairs, National Association for the 

Self-Employed 

• Merrill Matthews, Jr., Ph.D., Council for Affordable Health Insurance 

• Jessie Howe Brairton, Manager of Legislative Affairs, National Federation of 

Independent Business 

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Appendix B: Biographies of the Panelists and Guest Speakers 

Marilyn Carlson Nelson was appointed by President George W. Bush in May 

2002 as the Chair of the National Women’s Business Council. Ms. Nelson is the 

Chair and Chief Executive Officer of Carlson Companies, a family-owned 

business that includes operations in more than 140 countries, directly employs 

more than 53,000 (indirectly, 190,000), and in 2001 posted direct sales of $6.8 

billion ($19.9 billion system wide, including franchisees). Most people know 

Carlson Companies by its many brand names, such as Regent International 

Hotels, Radisson Hotels & Resorts, Country Inns & Suites, Radisson Seven Seas 

Cruises, T.G.I. Friday’s restaurants, Carlson Wagonlit Travel, and more. 

Respected in business circles worldwide, Ms. Nelson has been on Fortune’s list 

of the Top 50 “Most Powerful Women in Business” since the list’s inception 4 

years ago. She was also named one of Fortune’s “Women of the New 

Millennium” and saluted as one of the “Top 25 Executives of the Year” by 

Business Week. Carlson Companies has been on Working Woman magazine’s 

list of the 500 Top Women-Owned Businesses since 2000. 

Rebecca Boenigk is the Co-Founder, Chair and Chief Executive Officer of 

Neutral Posture, Inc., a leading provider of ergonomic solutions, high quality and 

innovative products and accessories, and consulting and training since 1989, 

located in Bryan, Texas. The commitment of Neutral Posture to manufacture 

truly ergonomic chairs has led to its phenomenal growth. Net sales for fiscal year 

2000 were approximately $17 million. In addition, during fiscal year 1997, the 

company completed its initial public offering for which it received approximately 

$4.4 million in net proceeds. These funds have strengthened the financial 

position of Neutral Posture and provided capital for continued growth. Along with 

her Co-Founder and Mother, Jaye Congleton, Ms. Boenigk was awarded the 

Ernst and Young’s “Entrepreneur of the Year” award in manufacturing in the 

Houston region. 

Mary Quigg is the Founder and President of Vandover, a human resources 

consulting firm located in St. Louis, MO, which provides outplacement and 

relocation support services across the U.S. and globally. Vandover’s clients 

include Fortune 500 companies such as General Motors, Honeywell, Prudential 

Financial, and Sara Lee Corporation, as well as government entities including the 

Social Security Administration. Vandover serves individuals and families in 

transition from hundreds of locations, backgrounds and professions. 

Leslie Saunders is the Founder and President of Leslie Saunders Insurance and 

Marketing International, a licensed insurance broker placing medical, dental, life, 

disability, 401K, property, liability, and workers’ compensation plans. Her clients 

include women-owned companies in all 50 states and many Fortune 500 

companies. Ms. Saunders’ business is located in Tampa Bay, FL. The company 

is one of the top-ranked woman-owned agencies in the country by revenue and 

was recently named as one of Tampa Bay Business’ “Top 50 Women-Owned 

Businesses.” 

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Deborah Harrington is the Founder, President, and Chief Executive Officer of 

Harrington Capital Advisors, Inc., an investment management firm catering to 

high net worth individuals, corporations and not-for-profit organizations. 

Harrington Capital Advisors provides investment management services through 

individually managed accounts on a discretionary basis. Ms. Harrington is a 

sought after expert in the financial services industry, with more than 20 years of 

experience. Harrington Capital Advisors is located in Newport Beach, California. 

Leeanna Fournier is the President of Providence Pediatric Medical Daycare, 

Inc., located in Marlton, NJ. Providence Pediatric Medical Daycare is a day care 

facility providing services for eligible children between birth and five years of age. 

Programs provided by the facility meet the health, education, and therapeutic 

requirements for children with special nursing needs. The daycare centers are 

staffed by licensed pediatric registered nurses, LPNs, nurse aides, certified early 

childhood education teachers, and teacher’s aides. Ms. Fournier is also heavily 

involved in children’s, minority and women’s issues, which is evident from her 

many local, state, and national affiliations. She was the Founder of Hispanics 

Influencing Public Policy (HIPP) and a National Founding Partner of Women 

Impacting Public Policy (WIPP). 

Hector V. Barreto is the Administrator of the SBA. As SBA Administrator, Mr. 

Barreto directs the delivery of financial and business development programs to 

America’s entrepreneurs. With a portfolio of direct and guaranteed business 

loans and disaster loans worth more than $45 billion, the SBA is the Nation’s 

largest single financial backer of small business. Mr. Barreto has a long history 

in the corporate sector and the small business community and has distinguished 

himself as a passionate advocate for small businesses. Mr. Barreto is past 

Chairman of the Board for the Latin Business Association in Los Angeles and 

served as Vice Chairman of the Board for the U.S. Hispanic Chamber of 

Commerce. 

Thomas M. Sullivan is the Chief Counsel for the Office of Advocacy for the SBA. 

Mr. Sullivan is charged with independently advancing the views, concerns, and 

interests of small business before Congress, the White House, Federal 

regulatory bodies, and state policy makers. Congress created the Office of 

Advocacy in 1976 to serve as the watchdog for small business within the Federal 

Government. Last year the office helped save America’s small businesses over 

$21 billion in money they would have spent attempting to comply with Federal 

regulations. Mr. Sullivan’s dedication to small business can be traced to his 

previous work experience, most recently as the Executive Director of the National 

Federation of Independent Business (NFIB) Legal Foundation, which provides 

guidance on legal issues to small businesses and promotes a pro-small-business 

agenda in the Nation’s courts. 

Carroll Fisher is the elected Insurance Commissioner for the state of Oklahoma. 

The mission of the Oklahoma Insurance Department is to serve and protect the 

insurance-buying public and to enforce the state’s insurance laws and 

regulations impartially and expeditiously. Commissioner Fisher has nearly 40 

years in the insurance industry. Prior to his election in 1998, he owned Carroll 

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Fisher Insurance in Tulsa. As a civic leader, he understands the vital role 

insurance plays in the Oklahoma’s growing economy. Mr. Fisher served as 

President of the National Association of Health Underwriters and President of the 

Oklahoma State Association of Health Underwriters. 

Elaine Chao is the Secretary of the U.S. DOL. Since her confirmation by the 

U.S. Senate on January 29, 2001, she has been dedicated to carrying out the 

DOL’s mission of inspiring and protecting the hardworking people of America. 

She is respected as an effective and articulate champion of the Nation’s 

contemporary workforce, acting quickly to focus the Labor Department on the 

modern realities of workers’ lives. Secretary Chao’s previous Government career 

includes serving as the Deputy Secretary at the U.S. Department of 

Transportation, Chairman of the Federal Maritime Commission, Deputy Maritime 

Administrator in the U.S. Department of Transportation, and Director of the U.S. 

Peace Corps. She brings a wealth of business experience to her current post, 

having worked as Vice President of Syndications at BankAmerica Capital 

Markets Group and a banker with Citicorp. Prior to her nomination as Secretary, 

she expanded her study of policy as a Distinguished Fellow at The Heritage 

Foundation, a Washington-based public policy research and educational institute. 

She was selected as a White House Fellow in 1983. 

Sheila Brooks is a past National Board member of the National Association of 

Women Business Owners (NAWBO). NAWBO is the premier women’s business 

membership organization in the United States and has long been active in 

advocating for women’s business issues at national, state and local levels. 

NAWBO’s mission is to strengthen the wealth-creating capacity of their 

members; to promote economic development; to create innovative and effective 

changes in the business culture; to build strategic alliances, coalitions, and 

affiliations; and to transform public policy and influence opinion makers. Ms. 

Brooks is the Founder, President, and CEO of SRB Production Inc., an awardwinning, full-service television and video production and media consulting firm 

and post-production facility in Washington, D.C. Ms. Brooks has worked tirelessly 

to champion advocacy efforts on behalf of minority and women business owners 

She spends a tremendous amount of time on Capitol Hill meeting with legislators 

regularly to discuss how women entrepreneurs can procure more contracting 

opportunities in the Federal Government, and presenting testimony before the 

U.S. Congress. 

Donald Manzullo was elected to the U.S. House of Representatives in 1992, 

representing his district in Illinois. On January 8, 2003, Representative Manzullo 

was reappointed Chairman of the House Committee on Small Business, which 

oversees SBA and a broad range of issues that matter to small businesses with 

fewer than 500 employees. First appointed Chairman of one of the House's 17 

standing committees in 2001, Mr. Manzullo has held numerous committee 

hearings and drafted several pieces of legislation to increase business 

opportunities and create new jobs for small businesses in northern Illinois and 

throughout the Nation. He led the charge against unnecessary Federal 

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regulations that stifle job growth, and he pushed the Department of Defense and 

other Federal agencies to do more business with small businesses in America. 

Karen Kerrigan is the President and CEO of Women Entrepreneurs Inc. (WE 

Inc.). WE Inc. is a nonpartisan business association that works to improve and 

enhance the economic climate for women’s entrepreneurship. By advocating for 

policy solutions that encourage business ownership by women, and providing 

information and resources to entrepreneurs at all stages of their business 

development, WE Inc. aims to increase economic opportunity and financial 

security for those seeking the risky but rewarding path of entrepreneurship. As a 

well-known small business advocate, Ms. Kerrigan has developed important 

relationships with key individuals in media, government, and the private sector 

that have led to substantive reforms and initiatives to help America's 

entrepreneurial sector. Ms. Kerrigan founded the Small Business Survival 

Committee (SBSC) in 1994, a prominent and respected small business advocacy 

organization with more than 70,000 members nationwide. She now serves as the 

group's Chairman. 

Terry Neese is the President of Women Impacting Public Policy (WIPP). WIPP is 

a national bipartisan public policy organization advocating for women in 

businesses. WIPP represents on Capitol Hill and to the Administration more than 

425,000 women business owners and women in business. Ms. Neese founded 

Terry Neese Personnel Services, which celebrated 25 years in business in July 

2000. With five companies anchored in the personnel industry, her revenues 

exceed $10 million. One of her companies, GrassRoots Impact, a corporate and 

public policy strategies firm with rapid response surveying capabilities, 

represents a number of business organizations and corporations including the 

National Business Association (NBA) on Capitol Hill. GrassRoots Impact’s clients 

include American Express, Intuit, IBM and many other top global corporations. 

Kate Sullivan is the Director of Health Care Policy for the U.S. Chamber of 

Commerce. This national institution represents the unified interests of U.S. 

business as a central organization in touch with associations and chambers of 

commerce throughout the country. Over the course of the past 90 years, the 

Chamber has grown from an initial membership of 878 to more than 3 million 

businesses, nearly 3,000 state and local chambers, 830 associations, and over 

90 American Chambers of Commerce abroad. Prior to joining the Chamber, Ms. 

Sullivan was with a non-profit multiprovider health system in Chicago, where she 

was the Director of Government Programs and was responsible for finance and 

planning for the system’s Medicare and Medicaid clientele. Ms. Sullivan also 

served in various advisory and legislative positions for several Congressional 

members and for the Illinois Governor, Jim Edgar. 

Greg Scandlen is the Director of the Galen Institute's Center for Consumer 

Driven Health Care. The Galen Institute is a not-for-profit nonpartisan research 

organization founded in 1995 and devoted exclusively to health policy. It is noted 

for developing innovative ideas. The Center for Consumer Driven Health Care 

focuses on issues such as the expansion of MSAs, defined contribution health 

benefits including health reimbursement arrangements, rollover of flexible 

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spending accounts, tax credits for the uninsured, direct-to-consumer advertising, 

individual market reform, and the importance of information and choice in value 

purchasing by consumers. Mr. Scandlen was most recently a Senior Fellow in 

health policy at the Dallas-based National Center for Policy Analysis and was 

previously with the Cato Institute. He was Founder and President of the Health 

Benefits Group, a consulting firm; Founder and Executive Director of the Council 

for Affordable Health Insurance, a trade association of insurance companies; and 

Director of State Research at the Blue Cross Blue Shield Association. 

Kristie L. Darien is the Director of Government Affairs for the National 

Association for the Self-Employed. Ms. Darien directs the NASE's legislative 

affairs program in their DC Office. She works closely with the Nation's legislators, 

the Bush Administration, and other small business advocacy organizations to 

ensure that the legislative priorities of the NASE and micro businesses at large 

remain a priority in Congress. Darien also heads the team that manages the 

NASE's grassroots program, which mobilizes NASE members to actively 

participate in protecting the interests of the self-employed. Taking advantage of 

the NASE Web site, Ms. Darien utilizes technology to create an effective 

grassroots program that bridges the gaps between the NASE membership and 

the U.S. Congress and Administration. Prior to the NASE, Ms. Darien served as 

Government Affairs Manager for National Small Business United, where she was 

responsible for monitoring and lobbying on the various small business issues. 

Merrill Matthews, Jr. is the Director of the Council for Affordable Health 

Insurance. The Council for Affordable Health Insurance is a research and 

advocacy association of insurance carriers active in individual, small group, MSA, 

and senior markets. The Council’s membership includes insurance companies, 

small businesses, providers, non-profit associations, actuaries, insurance brokers 

and individuals. Since 1992, the Council has been an active advocate for marketoriented solutions to the problems in America's health care system. Dr. Matthews 

is a public policy analyst specializing in health care, Social Security, welfare and 

Internet issues, and is the author of numerous studies in health policy, as well as 

other public policy issues. He is a visiting scholar with the Dallas-based Institute 

for Policy Innovation and past President of the Health Economics Roundtable for 

the National Association for Business Economics, the largest trade association of 

business economists. He is also a health policy advisor to the American 

Legislative Exchange Council, a bipartisan association of state legislators. 

Jessie Howe Brairton is the Legislative Director on Health Care for the National 

Federation of Independent Business (NFIB). NFIB is the largest advocacy 

organization representing small and independent businesses in Washington, DC, 

and all 50 states. In her capacity at NFIB, Ms. Brairton focuses on health care 

and technology policy. Prior to joining NFIB, Ms. Brairton worked as a 

Legislative Correspondent for the U.S. Senate’s Special Committee on Aging and 

as a Legislative Assistant for Representative Lamar Smith. She was involved in 

advising the congressman on legislation and developments with regard to 

Medicare, Social Security, health care, seniors, tax, budget, education, and small 

business. 

B-5 
Appendix C: Verbatim Transcript 

VERBATIM TRANSCRIPT 

OF 

NWBC ROUNDTABLE 

PROCEEDINGS 

ROUNDTABLE DISCUSSION ON 

AFFORDABLE HEALTH CARE
 

Sponsored by the National Women’s Business Council

At the 

Cannon House Office Building – Room 311

Washington, DC 

February 27, 2003 

Westover Consultants, Inc. 

8630 Fenton Street, Suite 724 

Silver Spring, MD 20910 
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I N D E X
 

Page 

Welcome and Opening Remarks

by Marilyn Carlson Nelson, NWBC Chair 5
 

Presentations 

-by Rebecca Boenigk, Neutral Posture, Inc., Bryan, TX 12


 -by Mary Quigg, Vandover, St. Louis, MO 17


 -by Leslie Saunders, Leslie Saunders Insurance and

Marketing International, Tampa Bay, FL 21 

-by Deborah Harrington, Harrington Capital Advisors,

Newport Beach, CA 25


 -by Leeanna Fournier, Providence Pediatric Medical

Daycare, Marlton, NJ 28


 -by Hector Barreto, Administrator, U.S. Small Business

Administration 32


 -by Tom Sullivan, Chief Counsel, U.S. Small Business

Administration 38


 -by Carroll Fisher, Insurance Commissioner for the

State of Oklahoma 41
 

Open Discussion Period 44
 

Presentations 

-by Secretary Elaine L. Chao, U.S. Department of Labor 57


 -by Sheila Brooks, National Board Member,

National Association of Women Business Owners 71


 -by U.S. Representative Donald Manzullo, Chair of the

House Small Business Committee 73


 -by Karen Kerrigan, President,

Women Entrepreneurs, Inc. 85


 -by Kate Sullivan, Health Care Policy Director,

U.S. Chamber of Commerce 89


 -by Greg Scandlen, Director, Galen Institute,

Center for Consumer Driven Health Care 93


 -by Kristie Darien, National Association for

the Self-Employed 96


 -by Dr. Merrill Matthews, Jr., Ph.D., Council for

Affordable Health Insurance 100


 -by Jessie Howe Briarton,

Manager of Legislative Affairs,

National Federation of Independent Business 105
 

Closing Remarks

by Marilyn Carlson Nelson, NWBC Chair 108
 

KEYNOTE: "---" indicates inaudible in transcript. 

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P R O C E E D I N G S
 

WELCOME AND OPENING REMARKS 

by Marilyn Carlson Nelson, NWBC Chair 

(9:35 a.m.) 

MS. NELSON: Welcome Everyone. I want to welcome 

you all and thank you for taking time to attend and join us in 

a very important roundtable discussion. I think your 

attendance here today actually indicates that you already 

appreciate the issues surrounding the need to provide 

affordable health care, or indeed access to health care, to 

the employees of small business. This is a very important 

issue that is facing women-owned businesses as well as small 

businesses across our country. It is estimated that 60 

percent of the 41 million uninsured Americans reside in 

families employed by the 9.1 million women-owned firms in the 

United States of America. 

This is an issue not only for the families and 

employees of the small businesses and the women-owned firms. 

In a sense this is an issue for the nation at-large because 

the transfer costs from the uninsured are impacting the rising 

cost of health care for the large, corporate employee-bases 

across the country. Women-owned businesses are a vital and 

significant part of the American economy. We are starting 

businesses at two-times the national average. Indeed AfricanAmerican women are even starting businesses at four-times the 

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national average. We currently account for 38 percent of 

businesses in the United States and we employ 27.5 million 

workers and generate $3.6 trillion dollars in revenue. 

Yet, now more than ever, women-owned businesses are 

facing a crisis that is posed by the rising cost of health 

care coverage. When we say women-owned businesses and small 

businesses, we typically are referring to businesses with 

around 500 employees or less, but indeed this is an issue that 

faces businesses of all sizes as you are going to hear as we 

proceed with this morning's roundtable. The National Women's 

Business Council is hosting this roundtable discussion. The 

Women's Business Council is a bi-partisan group that was 

created as an independent source of advice and council to the 

President, Congress and the U.S. Small Business 

Administration. 

We focus on economic issues of importance to women 

business owners. The Council's mission is to provide bold 

initiatives and policies and programs designed to support 

women's business enterprises at all stages of development in 

the public and private sector marketplace. We like to think 

of it from start-up to success to significance, and I believe 

as you listen to our panelists this morning you will recognize 

that these women represent businesses in each piece of that 

particular continuum. Now our mission today is to make sure 

that we add the women business-owners voices on the important 

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issues of how to best solve the problems of affordable health 

care for small business across this country. 

I should introduce myself; my name is Marilyn 

Carlson Nelson. I am delighted to be serving as the Chair of 

the National Women's Business Council. President Bush 

appointed me to this role in May of 2002, to serve a threeyear term. I am also the Chairman and CEO of a not so small 

woman-owned business; it is Carlson Companies. We actually 

are a global organization and we will celebrate our 65th 

birthday this next Sunday, with a global group of executives 

who are getting together to actually make our plans for the 

coming year. Our company has several brands, we consider 

ourselves a family of families; Regent International Hotels, 

Radisson Hotels and Resorts, Country Inns and Suites, Radisson 

Seven Seas Cruise Line, TGI Fridays Restaurants and Carlson 

Wagonlit Travel. 

As a private company, one of the ways that we have 

chosen to grow is to work with entrepreneurs around the world 

because several of our brands have franchisees. Not only did 

my father start the company with a borrowed $50 but he faced 

many of the issues that the women at this table face. The 

entrepreneurs who come to us because of the issues around the 

access to capital, the need to collectively do their 

purchasing and to deal with suppliers and to share information 

and data and to get access to even more capital, are the 

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issues that drive entrepreneurs to come and join us in our 

franchise network. So I feel particularly close not only to 

the issues but also to the people and to the families that are 

impacted. 

We have asked a variety of panelists to speak to you 

today on this subject. Each of them has been selected because 

of their own personal experience as a business owner. Some of 

them will speak to you as leaders of National Women's Business 

Organizations, which represent many hundreds of thousands of 

women-owned businesses, and some will speak to you as 

representatives of an association or an organization that is 

seeking to identify and help us to develop viable solutions. 

We also have several Congressional leaders and members of the 

Administration who will join us throughout the morning to 

discuss their interest in activities involved in this issue. 

We are pleased that many of the invited speakers have joined 

us today. 

I think some of you may hold me responsible for 

bringing a little Minnesota weather to Washington, but 

needless to say I wouldn't have done that purposely because it 

has also made the travel difficult for some of those who were 

to join us. So if I can beg your indulgence that some people 

will be joining us throughout the morning, and it is very 

possible that some will not be able to actually get here in 

time for our presentations. But we have a wonderful 

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representation and we will move through the morning and we 

will welcome them as they are able to come. Our intention 

here today is to have an open discussion on the concerns about 

providing affordable health care insurance to employees, as 

well as having the opportunities to explore several solutions 

that are being proposed. The solutions that we will be 

exploring are Association Health Plans, medical savings, 

accounts and tax credits among others. 

The National Women's Business Council has prepared a 

brief summary which you will find on the table if you haven't 

already discovered it. I found that it is a very good issuein-brief document that will give you a kind of placing of 

these issues and certainly will also, because it has 

references in the back, allow you to reference lengthier 

documentation and discussion of the various proposals. I 

should let you know, because you will also find a press 

release that the National Women's Business Council has 

actually stated our position, which is a position in support 

of Association Health Plan proposals. This is not to the 

exclusion of the other opportunities but certainly as a viable 

way to address this very very serious issue. 

In addition, you will find an agenda and a brief 

biography of the women and the gentlemen who are presenting 

here this morning. The time that is allocated for each 

speaker is a not sufficiently prolonged discussion on each 

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subject, what we are going to do is ask each of them to 

document in writing their presentation so that we can actually 

collect the experiences and include them in a transcript of 

today's proceedings, and that transcript will include perhaps 

a fuller account of the experience that these people have come 

to present. The combined transcript is then going to be 

published by the National Women's Business Council and 

distributed broadly by the Women's Business, Health Care and 

Public Policy Committees, and of course to any press who are 

interested. We anticipate that there will be an opportunity 

to address any questions that you might have from the 

audience, and we will take our roundtable and organize in 

several clusters of presentations and then we will open it for 

the floor and invite you to step to the microphone. 

There aren't going to be any formal breaks as we 

have a long agenda this morning, so feel comfortable to step 

out if you have to to take a call and we will welcome you 

back. To keep all the speakers on schedule I have asked Jill 

Baker, who is a member of the NWBC staff, to indicate to us as 

speakers when there are two minutes remaining, and then she 

will hold up another card to let you know it is time to 

complete your remarks. I think we have covered all of the 

opening comments except that I would like to tell you that we 

are expecting at some point during the morning, we hope that 

Senator Olympia Snowe will be able to join us. She has been a 

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strong supporter of Association Health Plans and perhaps were 

she here at this point in the meeting she would have defined 

Association Health Plans for you. So let me explain that an 

Association Health Plan, or AHP, would allow trade and 

professional associations to band together across state lines 

to purchase health insurance coverage for their members. 

In this way, small businesses that belong to these 

organizations would actually enjoy the same pooling effect 

that larger employers enjoy, enabling them to offer health 

care coverage at lower rates and indeed to have lower rates on 

the administration of those health care costs as well. We are 

very appreciative of the fact that Senator Snowe, along with 

Labor Secretary Elaine Chao and of course the Administrator of 

the SBA, Hector Barreto, have all been parties to the Small 

Business Health Fairness Act H.R. 660, which was introduced 

February 11th with more than 70 co-sponsors and strong bipartisan support. We will welcome Senator Snowe at any time 

that she is able to step into our discussion and I will have 

an opportunity to meet her later in the day so that I can 

share personally, if she is unable to attend, some of the 

stories that we hear this morning. What I would like to do 

now is begin the presentations with the women business-owners. 

We have several women business-owners here before you that are 

going to provide us with an understanding of their personal 

and very real world experiences in providing affordable health 

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care insurance to their employees. 

The businesses being represented today range from 

small start-up companies -- one very brand new one in 

California -- to larger, medium-sized businesses that are 

facing increasing costs and difficulties in meeting the 

demands of attracting and retaining employees with a 

competitive benefit package. Why don't we start with Rebecca 

Boenigk, who is a new friend and also has passionate interest 

in this subject. She is the Co-Founder, Chair and Chief 

Executive Officer of Neutral Posture, a leading provider of 

ergonomic solutions, high-quality, innovative products and 

accessories. She has been doing consulting and training since 

1989. Mrs. Boenigk traveled here today from Bryan, Texas. 

PRESENTATION BY REBECCA BOENIGK 

Neutral Postures, Incorporated, Bryan, Texas 

MRS. BOENIGK: Good morning. As Marilyn said, my 

company manufactures ergonomic chairs and we have been in the 

business since 1989. Our sales for this past year are just 

about $17 million dollars. I am also here from another 

standpoint as I am the Chair of the forum at WBENC, which is 

the Women Business Enterprise National Council. WBENC is the 

certifying agency that certifies women-owned businesses. 

Leslie Saunders is also on the forum at WBENC with me as well. 

When my mother and I founded our company in 1989, 

health care was one of the major issues that we wanted to be 

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able to provide to our employees, and the first year it was 

just the two of us so it wasn't really a big deal. In 1991 

though, we did start providing health care for our employees. 

At this point we have 80 employees, and if you consider that 

our sales are $17 million dollars, our health care costs for 

last year were $480,000. If you average that out, if my 

employees didn’t have health care I could pay them $3 per hour 

more; and for a lot of my employees, that is what they would 

choose to do. We just got our renewal information for this 

coming year and our insurance is going to increase 20 percent. 

Our renewal date is April 1st so our years from an insurance 

standpoint are a little different. 

So instead of being $480,000 it will be $600,000, 

which equates to $4.23 an hour per employee that we are paying 

for health insurance. At our company the average production 

employee is making $9.50 an hour, about 65 percent of our 

employees are production employees and about 35 percent are 

office and executive employees, and that is a huge amount of 

money. A lot of our employees when they first come in say 

they don't want the health insurance, they just want us to pay 

them the money. We don't give them that option we insure 

every employee. We are also one of the few employers that 

will pay 100 percent of the employees cost, and the reason we 

do that is because we took a survey and 35 percent of our 

employees would drop out of the health insurance program if 

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they had to pay $10 a week, which is 25¢ an hour of their 

pay. 

So for $10 a week they would not take the health 

insurance because a lot of them know that they can show up at 

the indigent care hospital and get taken care of and they just 

don't see the need to have that coverage. So we look at it 

from a standpoint of almost being good citizens because we are 

taking that burden off the taxpayers because we are paying it. 

If we elected to do that and we had 30-35 percent of employees 

drop out of the plan, it would save our company $200,000 a 

year because we wouldn't have to pay for the coverage for 

those employees. We also know that one of the main reasons 

that health care is increasing -- 13 percent of our increase 

this year is what the health insurance companies assume health 

care costs will increase next year, and a big part of that 

increase is because of the ridiculous lawsuits that get filed 

and the amount of money that gets paid out. So we really need 

some modification of the legal system and how these lawsuits 

affect all of us. 

I think that I am done even before my two minutes is 

up. 

MS. NELSON: Thank you so much Rebecca, you have 

made several really important points I think. First of all I 

salute you because not every business makes the choice 

especially these days, as we have been reading, to cover all 

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of their employees. It is true for any of us, especially 

those of us that have a large employee base of young people 

who consider themselves very healthy until they end up in the 

emergency room. As an aside I should mention that I serve on 

the Board of Directors of the Mayo Clinic and I have also been 

part of a group for many years, called the Jackson Hole Health 

Group, which is really a collective of individuals who have 

been trying to look at the American health system for 25 

years. I can guarantee you that the most expensive health 

care is health care that has to be delivered to the emergency 

room. It is not preventive care, it is costly and it is 

absolutely a cost that has to be transferred and managed 

somewhere. I think that it is important that this message be 

communicated, that as the large employers worry about their 

rising health care costs they should be allies with all of you 

in lobbying for health care coverage for small business 

because rationalizing the entire system is really the only way 

that we are going to address this and have a healthier America 

and a more productive workforce. 

You also mentioned that it would be almost a 50 

percent increase in your labor costs for your production 

workers. I think that it is important for all of us that are 

concerned about small business and women-owned business in the 

bidding processes, that a fully loaded cost of business for 

small business with that kind of burden of health care, an 

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unequal ability to both deduct the health care benefits and 

have access to affordable health care. That situation 

actually contributes to what one might call an uneven playing 

field when we are bidding for contracts. So again the 

implications of this go far beyond the obvious and I think you 

have done a beautiful job, Mrs. Boenigk, of bringing to our 

attention the implications. And of course your reference to 

the reform of the legal system certainly is an issue of the 

moment and one more factor of the very complex issues around 

the delivery of health. 

I think it would be important to note that most of 

us recognize that some kind of overall system re-engineering, 

to use a corporate term, in terms of the health system of the 

United States is necessary. I have been quoted before and I 

will reiterate, that it is unfair for those of us with 

insurance to tell others to wait until the entire system is 

fixed. It is desperately important that we address this now. 

May I now call on Mary Quigg. Mary is the Founder and 

President of Vandover, a human resource consulting firm that 

provides out-placement and relocation support services across 

the United States and the globe. I imagine that you have had 

more than enough work in the last few years, I think that a 

little bit of my travel and hospitality industry may have 

provided you some opportunities. 

Vandover's client base consists of Fortune 500 

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companies including General Motors, Honeywell, Prudential 

Financial, Sara Lee Corporation, as well as government 

entities including the Social Security Administration, and 

small and medium-sized organizations. Ms. Quigg traveled here 

today from St. Louis, Missouri. 

PRESENTATION BY MARY QUIGG 

Vandover, St. Louis, Missouri 

MS. QUIGG: Thank you. In addition to being here on 

behalf of my business, I am also a member of the Women 

Presidents Organization and I want to speak just for a minute 

about that group and what we have learned. We are having our 

annual conference in Washington and as we speak there are 

about 350 of our 500 members that are here, and just prior to 

our conference our members were polled regarding our most 

important issues. The first one won't surprise any of us, it 

was the state of the economy. The second one was the 

skyrocketing cost of health insurance. Our population is a 

little bit interesting, and some of us were talking at 

breakfast this morning. 

Our WPO member businesses have an average of 85 

employees, $11 million in annual revenues and 16 years in 

business. In total we represent 31,000 employees, $4 billion 

in annual revenue and nearly 6,000 years of business 

experience. Of our members nearly all of us offer health 

insurance and yet nearly every one of us had to remodel our 

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plans in recent years, and while to date no one has dropped 

their coverage as a result of the skyrocketing costs some of 

them are beginning to have to consider that, so that is 

certainly an issue. Personally, I have owned our business 

since 1985 when there were two of us, and today we have 41 

employees. So we have gone through just about every variable 

that you can have on health insurance while you're still under 

50 employees. 

We added health insurance benefits for our employees 

in 1991, so there were six years when our ability to attract 

and retain employees was limited. We had to hire people who 

had coverage from another family member because they couldn't 

get it from us, it just wasn't one of the things that we could 

do. When we started offering coverage it was an exciting 

time, we could stand to get some people onboard that were 

important talents for us. Our benefit has always been 85 

percent funded by our company and we have gone from blended 

rates to experience rates to gender/age-based rates, and we 

just went to a flat rate and I don't exactly understand it as 

well as others in my company. But this is just some of the 

remodeling that we have had to do. We had to change from a 

30-day to a 90-day eligibility period, that was something we 

thought we could do to decrease our costs, but the end result 

is that we ended up having to pay some hiring bonuses to cover 

it from COBRA, so that didn't work. 

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Our increases over the last 10 years have been in 

excess of 125 percent in total, we have changed our deduction 

and we have changed our prescription coverage a little. We 

still have very good coverage and feel we need it in order to 

have access to the talent that we need within our company. 

Our greatest challenge right now is trying to figure out what 

to do with dependent coverage. How much if any of that should 

we or could we be sponsoring? We have offered it but it is 

not a paid benefit at this point. 

Ninety percent of business is small business and in 

order to grow jobs we have to have competitive benefits. I 

look forward to listening to all of you and learning more here 

today. Thank you. 

MS. NELSON: Thank you so much. Mary has raised to 

our attention the fact that in the early days her company went 

without insurance, so either her employees were without 

insurance and then could probably end up in the emergency room 

for their care, or it limited her access to talent. If we 

recognize that women are starting businesses at twice the rate 

of anyone else and that this is an engine of job-creation for 

the nation, I believe it is within all of our interest to move 

forward with plans that will allow those who would like to be 

employed in the high-energy small businesses, where job 

creation is at its most vital and the opportunities are great, 

to allow people to select to work in these operations. In 

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addition to access to talent, she referenced the complexities 

and once again I think that is another issue for small 

business. Perhaps if we had access to Association Health Care 

Plans so that we could pool the cost of administration, it 

would help with the complexity of really understanding the 

offerings and having much more of a sense of confidence that 

you have selected the right plan and the most economic plan 

for your organization, and I think this will come up again 

later in the panel. Now I would like to move to Leslie 

Saunders. 

I would like to ask those who speak to pull the 

microphone really close to you and be certain that you turn it 

on when you speak, and then speak quite close because I think 

that it will help those in the back of the room. Leslie 

Saunders is the Founder and President of Leslie Saunders 

Insurance and Marketing International, a licensed insurance 

broker placing medical, dental, life, disability, 401K plans, 

property, liability and workers compensation for women 

business enterprise companies in all 50 states and many 

Fortune 500 companies. We are very fortunate to have 

Ms. Saunders is here to speak with us today, not only as a 

business owner but as an insurance provider having first-hand 

experience in the difficulties involved in offering affordable 

health plans to employers. Ms. Saunders traveled here today 

from Tampa Bay, Florida. Do you even own a coat? 

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PRESENTATION BY LESLIE SAUNDERS 

Leslie Saunders Insurance and Marketing International, 

Tampa Bay, Florida 

MS. SAUNDERS: Yes. I have two closets, my Florida 

closet and all other locations. I represent three different 

constituencies today as we talk about health care issues: 

consumer, business owner and insurance professional. First, 

as a consumer, a covered employee of my corporation and an 

aging baby-boomer I am concerned with access to health care. 

I have had all of the bone scans, colonoscopies and everything 

else that goes with the territory. 

My husband has a chronic, debilitating disease 

rheumatoid arthritis, and we are concerned with access and 

choice more than cost. We know the importance of being able 

to chose specialists and try new treatments as they become 

available. Secondly, I am the owner of a small business by 

virtue of the number of employees I have. We have a national 

clientele and some of my employees live in states other than 

Florida. Access to health plans that covers all of my 

employees is nearly impossible. 

We are based in Florida and we have many mandated 

benefits in Florida and age-based rates for small groups. My 

employees are older and there is good news and bad news in 

this. We have something in the mandated benefits side called 

mini-COBRA, which means that if someone leaves my employ or 

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anyone else's in Florida they can continue their coverage for 

small businesses much in the same way as the Federal COBRA law 

works. The bad news is that the average employee rates are 

higher than in most states because of the legal climate and 

mandated benefits. Employee rates are around $400 a month for 

a good plan for employees 35 and under, with older employees 

50 and above costing $700 per month and more. 

The average family coverage for one of our groups in 

Broward County that just renewed is $800 per employee and 

$1500 per family. Increases are typically 20 percent per year 

or more and some have been 35 percent. Is it any surprise 

that fewer than 60 percent of employers of small business 

provide any type of health insurance plans for their 

employees? Sometimes it is a choice between dropping health 

insurance or closing the doors. Of course by pooling small 

businesses and providing access across state lines through 

Association Plans, costs would be lower for most employers 

with small companies. 

Competition among providers would increase because 

of the size and demographics of the large association groups. 

Relief from state mandates and Tort Reform would continue to 

lower costs. In many states there are now only two or three 

companies willing to offer plans; choices are limited and 

prices are high. Employers in small companies are forced to 

offer a one-size-fits-all when in fact what I want as the 

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owner may be very different from what my employees want. 

Their situations vary by marital status, age and whether or 

not they have children. 

My third role is as insurance broker. I have been 

designing and implementing all size employee benefit plans 

since 1973. My first client was with me from 1973 until last 

year when their son sold the business and they saw many 

changes through the 29 years. The total monthly premium in 

1973 for 10 employees, some with families, was less than one 

family's rate in 2002. In support of affordable health plans 

let me share some information about some of my own clients. 

The first is a company with a large number of young 

employees, a very diverse workforce and many large families. 

We have a self-funded medical plan with 79 employees, 33 of 

whom have families. We have strong networks, we have a good 

discounting system for claims and some of the discounts are as 

much as 60 percent. Ninety-six percent of all claims are 

under $1,000 and prescription use represents only 12 percent 

of claim dollars. While there are increases they are below 

the national average for small plans, and this is because we 

can cross state lines, we can access national networks and we 

have access to pool with other groups around the country. 

This is how Association Plans would function. 

My largest group, which is a multi-state restaurant 

company operating in airports, whose majority share-holder is 

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a woman -- and Marilyn, they are operating TGI Fridays --

many of their employees, of the 1,400, make between $6 and $8 

an hour. Last year when we looked at the plan we had very 

poor participation and many of the people were selecting to be 

uninsured because they could not afford their cost-share; we 

were not making access that they could afford. We changed the 

mix of the plans and we now offer what we call affordable 

health plans, and this may not be what everyone wants but we 

made it affordable and we offer them lower medical limits and 

to date we have increased the participation and have spread 

the risk well among the members. This is the type of thing 

that has to happen for Association Plans and small employers 

so that we can offer choice and continue to build the number 

of insured employees. Thank you very much. 

MS. NELSON: Thank you Leslie. You bring some very 

interesting points and I think you have expanded our 

discussion to an understanding of the fact that by adopting an 

AHP which would allow the pooling across state lines, it would 

simplify and make much more efficient and effective the 

ability to offer at the lower price and to pool the interests. 

I think she has also called attention to the fact that of all 

the interests that, whether it is an employer or a consumer, 

the opportunity to have choice and to have competition is 

really important to the efficiency of the system and the 

satisfaction of today's consumer. Now I would like to move to 

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Valerie Freeman, who is the Founder and Chair of Imprimis. I 

think Valerie may not have arrived yet. I think she is a 

victim of the snow in Dallas. 

Perhaps we should go on to Deborah Harrington, who 

is the Founder, President and Chief Executive Officer of 

Harrington Capital Advisors. It is an investment management 

firm, catering to high net-worth individuals, corporations and 

not-for-profit organizations. Harrington Capital Advisors 

provides investment management services through individually 

managed accounts on a discretionary basis. Ms. Harrington 

traveled here today from Newport Beach, California. 

PRESENTATION BY DEBORAH HARRINGTON 

Harrington Capital Advisors, Newport Beach, California 

MS. HARRINGTON: Thank you Marilyn. Good morning, I 

am very proud and appreciative to be here and I thank the 

National Women's Business Council and specifically Lindi 

Harvey for extending the invitation to me. I am very 

interested in this dialogue that we are going to have this 

morning and continue to discuss the solutions that are 

available to us. This is a very time-sensitive topic for 

myself and for my firm. As Marilyn mentioned briefly, I am a 

new firm, we just opened our doors in the fall of last year 

and we have over $25 million dollars under management and 

close to $50 million shortly. 

So we are very proud of our beginnings but we are 

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also at a distinct disadvantage like so many have mentioned 

here, because we aren't able to afford to give our new 

employees any sort of affordable health care benefits. I am 

just going to briefly give a little bit more to my bio. 

Harrington Capital Advisors as she mentioned, is a privately 

held firm. We manage investment assets for high net-worth 

individuals, corporations and not-for-profit organizations. 

Our firm provides these investment management services on a 

fully discretionary basis. After spending 20+ years in the 

investment management industry respectively, my husband and I 

founded the firm to provide our clients with an exclusive 

environment in which they feel they are our only clients. 

Harrington Capital Advisors is a firm we dreamed about 

starting since the first days of our careers when we entered 

the financial service industry. 

Certainly one would expect the normal challenges of 

starting a company: the telephone service delays, the printing 

errors found on the stationary, the minor things. Never but 

never would I have anticipated that finding adequate health 

insurance would be a formidable challenge for our start-up 

firm. As we went through the process of obtaining the health 

care benefits for our firm, principally my husband and I, we 

quickly discovered that the health care costs are quite a 

significant factor influencing our bottom line, currently 

representing over ten percent of our cost overhead. We now 

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find ourselves in an unfortunate situation, we have to pay a 

small fortune in insurance premiums for a plan that provides 

us with less in comprehensive benefits than what we would have 

been accustomed to when we were employed with a large, 

publicly held company. It is simply thievery. 

More ever I am less in complement we did the proper 

due diligence and cost-basis analysis that we should have 

because we were pressured into making a decision. Otherwise 

we would have been without health care coverage. Although I 

have an extensive knowledge of the financial markets and 

investment management industry, my lack of familiarity for the 

terminology and the procedure requirements of insurance 

companies leaves me at a distinct disadvantage to evaluate 

various insurance products and to ensure that we are making 

the right decision as a small business owner. From my 

perspective the health care industry intently tries to keep 

the consumers in the dark. How else would they be able to 

charge more in premiums for less in benefit coverage? On that 

note, I welcome the opportunity this morning's venue offers us 

to discuss the critical issues surrounding this topic and to 

hear how the proposed new Legislation can offer assistance to 

me and other small business owners without sacrificing health 

care coverage. 

MS. NELSON: Thank you Deborah. You certainly made 

it clear that for a small start-up, though obviously one on a 

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very successful track, that ten percent of overall costs for 

health care is a dramatic piece of information for us. You 

have also referenced the fact that we would all appreciate 

more transparency in those costs and I think we could probably 

universally add quality in medical care, and that over time 

these issues are going to have to be addressed in addition to 

access and affordability. Now we are going to end this first 

section of this morning's roundtable by introducing Leeanna 

Fournier, who is President of Providence Pediatric Medical 

Daycare. It is daycare services for eligible children between 

birth and five years of age. 

The programs actually provide health, education and 

therapeutic requirements for children with special nursing 

needs. The daycare centers are staffed by Licensed Pediatric 

Registered Nurses (LPNs), Nurses Aides, Certified Early 

Childhood Education Teachers and Teachers Aides. Ms. Fournier 

traveled here today from Marlton, New Jersey. 

PRESENTATION BY LEEANNA FOURNIER 

Providence Pediatric Medical Daycare 

Marlton, New Jersey 

MS. FOURNIER: Hello, I am Leeanna Roman Fournier, 

and I build bridges. I am the President of GAAP, an insurance 

initiative specifically constructed to provide an affordable 

solution to the escalating costs of health care insurance. I 

am a Hispanic female business owner who has successfully 

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developed two multi-million dollar companies in the last five 

years. I am the President and CEO of Providence Pediatric 

Medical Daycares, Incorporated, which provides medically 

fragile children with education and nursing care on a daily 

basis; my business is health care. I sit before you today to 

add real-life data to your investigation and my testimony will 

satisfy many levels of inquiry. 

I come today not only to tell you how difficult it 

is to remain a viable company and expand while at the same 

time providing affordable, quality health insurance to all of 

my employees, but also to disclose to you the cure to this 

plague on our country. I am an entrepreneur, I am the 

Founding member of WIPP (Women Impacting Public Policy), which 

is 430,000 members strong, and I am the President of HIPP 

(Hispanics Influencing Public Policy) and I don't sleep. I am 

committed to providing more than just a paycheck to my 

employees. I am committed to providing quality health care 

insurance, therefore I pay 80 percent of my employees' health 

care premiums. I now know that I cannot continue to do so 

without jeopardizing my company's financial health. 

I need to hire more staff but I cannot afford to pay 

the health care insurance that each would justly require. I 

am at a crossroads like so many of my business colleagues, but 

instead of taking the road I am crossing a bridge. Small 

businesses employ the greatest number of Americans, yet such 

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businesses are being crippled by huge health insurance 

premiums. I think that you will agree with me that there is 

an overwhelming need in this country to provide affordable 

health care insurance. I would like to take this opportunity 

to present a solution to this crisis: GAAP (Government 

Assisted Alternative Program). 

GAAP is an improved version of Associated Health 

Plans. GAAP perfects the system by leveraging State and 

Federal Government employee health insurance plans to obtain 

lower, more affordable health insurance for association 

members participating in the program. We have presented this 

plan to the New Jersey Business and Industry Association, 

which represents over 17,000 business owners; to WIPP, with 

430,000 members strong; to the members of HIPP, a national 

organization of Hispanics; to the New Jersey State Treasury 

Department; and our representatives have several more meetings 

scheduled in the near future. Senator Ted Kennedy called for 

a change in our nation's health care system on January 21st at 

the National Press Club. He suggested that the Federal 

employees health benefit program be open to all individuals 

and small employers seeking coverage; sounds familiar. 

GAAP is an idea that had been in development for a 

long time and has a patent. Although the leveraging concept 

is simple putting it together took significant research. As a 

business owner I feel the time is now to develop a solution to 

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what is a crisis for my bottom line and my ability to remain 

in business for my employees. We want to partner with this 

Administration to make GAAP fully operational in our pilot 

states within the next two years and it is possible. Thank 

you for giving me the opportunity to discuss this innovative 

solution for affordable health care costs today. 

MS. NELSON: Thank you. Rather than having a 

discussion at this point I would like to move on to introduce 

Hector Barreto, who has joined us. We are delighted to have 

the Administrator of the Small Business Administration (SBA) 

here. I know that his colleague Tom Sullivan, the Chief 

Council for the Office of Advocacy for Small Business 

Administration has been with us since we began. Because of 

the SBA's deep concern of this issue, Tom wanted to join us 

early and be certain that he had an opportunity to hear firsthand and to look into the eyes of those who were presenting as 

well as experiencing the transcript. 

Administrator Barreto, I think that you would only 

find that some of your convictions were strengthened if you 

had heard what we have heard so far. Certainly we have heard 

dramatic testimony about the need for access to care and the 

need for affordability to care, but we have heard some of the 

more subtle impacts both on the viability of small businesses 

but also the access to talent, which in its own way is another 

way of creating an uneven playing field if indeed our small 

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businesses are only able to hire those who have either family 

health care or alternative options for health care. We also 

have discussed the fact that AHPs offer us an opportunity to 

pool across state lines to improve the costs of administration 

for small business and to simplify the system and hopefully we 

have also heard a plea for more transparency in both the 

allocation of cost of health care as well as ultimately 

accessibility and quality. 

Administrator Barreto directs the delivery of 

financial and business development programs to America's 

entrepreneurs, and any of you who know him know that he is not 

only an entrepreneur himself but that it comes in his DNA 

because his parents were entrepreneurs. The SBA has a 

portfolio now of direct and guaranteed business loans and 

disaster loans that is worth more than $45 billion dollars. 

SBA is the nation's largest single financial backer of small 

business. The Small Business Administration has announced 

their support for the Association Health Plan proposal. 

PRESENTATION BY HECTOR BARRETO 

Administrator, U.S. Small Business Administration 

MR. BARRETO: Thank you Madam Chair, and thank you 

very much for allowing me the opportunity to be here. I also 

want to commend you for putting this hearing together, I think 

this is very very important and I am very glad to play a part 

in it. By looking around the room and seeing the individuals 

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that are represented around this dais, I know that there is a 

lot of expertise, a lot of knowledge and a lot of experience 

and wisdom, so I am not sure how much I will be able to add to 

the conversation but I would like to state some of the things 

that we have learned from the very beginning of our 

Administration with regards to this issue, both from a 

government role but also in a very personal way and I will 

explain that. We know that this issue about providing quality 

health care for small businesses is really a growing issue and 

this conversation that we are having is not necessarily a new 

conversation, there have been plans and initiatives that have 

been proposed over the years but probably no time has it been 

more important for us to really take action and I really hope 

that what comes from our conversation today is a real call to 

action and a real specific action plan, if you will, so that 

we can make sure that we finally take care of this very very 

serious problem. Obviously one of the key issues for small 

businesses, especially now in these challenging times, is 

their rising costs, and probably no area is rising more 

quickly than their health care costs. 

Many of the people in this room know that when a 

small business is receiving double-digit increases in their 

health insurance premiums it is devastating. Those are not 

costs that can be passed back on to the customers, and often 

times small businesses that were providing benefits have to 

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cease providing benefits all together because of what they 

are experiencing in the marketplace. Sometimes it was never 

an option whatsoever. It is not any accident or surprise that 

the majority of individuals that are uninsured or underinsured work for small businesses, and obviously it has been 

stated many times that the fastest growing segment in our 

economy are the small businesses. Small businesses create the 

most jobs, somewhere between 2/3 to 3/4 of all the new jobs, 

they represent over 50 percent of the workforce and so this is 

really a critical problem. 

You mentioned something just a moment ago that is 

very important, small businesses often times tell us that one 

of their biggest challenges is identifying and keeping 

qualified people in their businesses. Often times when they 

are interviewing or somebody is considering employment, before 

they even ask about what the job pays they ask about the 

benefit package. And if you don't have a good answer often 

times that qualified, talented individual is going to find 

either somebody else that can provide them benefits or find 

some other type of work outside of a small business. So this 

is very very important not only for the present but also for 

the future sustainability of those small businesses. Without 

prompt action, this crisis is only going to continue to grow. 

This is a very urgent situation and there is an 

incredible opportunity for us to do something now. It is one 

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of the reasons that President Bush presented last year, in 

his Small Business Agenda, this whole issue of access to 

affordable health care for small businesses, especially in the 

context of an Association Health Plan. As you have mentioned 

Madam Chair, this is a problem that I know first hand in a 

very personal way. I was born into a small business family 

and I remember how much my parents worried about being able to 

even afford health insurance some 20 years ago. I have also 

had the opportunity to own my own small businesses and I know 

how difficult it is to provide benefits for your employees. 

I also was an Employee Benefits Broker, so I worked 

with small businesses every single day with regards to their 

health insurance costs and other benefits. I used to always 

say that we always put small business in the role of giving 

the bad news to their employees. You know, the premiums have 

gone up again this year and we are going to have to minimize 

your benefits. The premiums went up again this year and we 

can't pay for your dependents. The premiums went up again 

this year and we are going to have to change plans and guess 

what, you are going to have to change you doctor. 

And finally, I can't afford to pay any of your 

benefits or my benefits anymore. So this is really an issue 

that I feel in a very personal way. You also know that I used 

to lead a business association and we were constantly looking 

for solutions for our members. I wish that we would have had 

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an Association Health Plan for the business associations that 

I had an opportunity to lead. As I travel around the country 

and we do small business roundtables, I have done three with 

the President already this year and the question always comes 

up, what can Washington do to help small business in this 

area? 

They are looking for any kind of a solution, and 

obviously when we talk to them about the opportunity to have 

Association Health Plans they become very encouraged. But 

they are also a little bit gun-shy because they may have heard 

this conversation before. Association Health Plans won't be 

the full solution to our health care crisis in the United 

States but it is a big first step in getting us there. As I 

mentioned in a previous hearing that we did with the Senate 

Small Business Committee and also with Secretary Chao, the SBA 

stands ready to play our role in helping small businesses get 

access to these kinds of these plans once legislation is 

passed and this does become law. As you know, we are known as 

America's small business resource, we literally have millions 

of small businesses that come to us every single week and we 

can play a very vital role in facilitating these kinds of 

connections and these kinds of recommendations. 

Again I want to thank you so much, Madam Chair, for 

the opportunity to be here. I would also remind all of the 

individuals on the staeus and in the audience that their voice 

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is a very important voice especially right now, and the calls 

that they can make and the letters and emails that they can 

write will definitely be taken notice of. So I would say that 

we have an incredible opportunity before us and I thank you 

for your leadership Madam Chair and the Women's Business 

Council for everything that they are doing to elevate this 

issue in making sure that we take care of this once and for 

all. Thank you very much. 

MS. NELSON: Thank you so much Administrator 

Barreto, and I think we owe you a real vote of appreciation 

and confidence that together we are going to accomplish great 

things. I think that both your background and the energy that 

you have brought to your role have been quite extraordinary, I 

think it is why we are all here and it is really why we were 

stimulated to actually have this roundtable. We have this 

sense of mounting optimism and hope that all the work of many 

of these people at this table and others that have gone before 

in trying to address these problems, is going to culminate in 

real action this year and we look forward to helping to make 

that happen. So thank you so much. Perhaps now I should call 

on your colleague, Tom Sullivan, who is as I mentioned, at the 

SBA in the Office of Advocacy, and ask Tom to continue to 

speak on behalf of this. 

Mr. Sullivan is charged with independently advancing 

the views, concerns and interests of small business -- of 

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course that includes small, women-owned businesses -- before 

Congress, The White House, Federal Regulatory bodies and State 

Policy-makers. Congress created the Office of Advocacy in 

1976, to serve as the watchdog for small business within the 

Federal Government. Last year the Office helped save 

America's small business over $21 billion dollars that they 

would have spent attempting to comply with Federal 

Regulations. So we are certainly hoping that he casts his 

very effective eye-on-energy on this problem. 

PRESENTATION BY TOM SULLIVAN 

Chief Counsel, U.S. Small Business Administration, 

Office of Advocacy 

MR. SULLIVAN: Thank you Marilyn Carlson Nelson, and 

thank you Women's Business Council for inviting me to 

participate. I am Tom Sullivan, Chief Counsel for Advocacy at 

the Small Business Administration. The Office of Advocacy 

independently pursues a small business agenda. We pursue that 

agenda, really the agenda of everyone here this morning, with 

a team of Attorneys who enforce the requirement that 

government not impose one-size-fits-all rules on small 

business. We also pursue a small business agenda with a team 

of Economists and Researchers who document the importance of 

small business to the Economy, and that function is what 

brings me here this morning. 

I echo but won't repeat the comments of 

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Administrator Barreto, and commend his leadership on this 

important issue this morning. Last month my office released a 

research study entitled, "The Administrative Costs and 

Actuarial Values of Small Health Plans." The study flushedout why health care premiums are so high especially for small 

employers, and with Mrs. Nelson's permission I would like to 

submit a research summary of that for the transcript for this 

morning's session. Most of the report points out the obvious. 

Sometimes detailing the obvious can influence the debate and 

that is my office's intention. 

Ask any small business on Main Street or any of the 

business owners who are here today, whether it would be more 

expensive for one of you to buy something or a group of people 

banding together, maybe you would get something less 

expensive. Then ask whether the process of purchasing becomes 

easier with a group of folks pitching in versus one person 

doing all the work. Basically the details of that simple 

analogy are explained in our report, and some of the answers 

are in that report as well. The administrative expenses for 

insurers of small health plans, according to our report, make 

up 25-27 percent of premiums, 33-37 percent of claims. This 

compares with approximately 5-11 percent of claims for large 

company's self-insured plans, and the report goes further. 

The report cites Association Health Plans (AHPs) as 

a possible solution. AHPs can address the high administrative 

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costs documented in my office's study. I commend the Women's 

Business Council and other elected and representative policy 

leaders who are here to talk about this issue this morning. 

AHPs are one way to address the most pressing issue for women 

business-owners, access to health care. And I want to restate 

Administrator Barreto's plea for the folks who don't live in 

Washington, D.C., that when you get back home don't rest on 

your heels, keep on the offensive on these issues. 

It is not enough that we have sessions like this and 

then stop. The only way to get real solutions on the table, 

passed into law, and then implemented is that we continue to 

point out the problem and possible solutions until they become 

law. Thank you. 

MS. NELSON: Thank you. Thank you for your interest 

and thank you for your support and thank you for advocating on 

our behalf. I can assure you that those at this table are not 

going to stop until we all are successful. Now I would like 

to move to introducing to you the Insurance Commissioner from 

the State of Oklahoma. I think some of the issues have been 

certainly raised and we are deeply appreciative of the 

leadership and the insight that Insurance Commissioner Carroll 

Fisher brings to this issue. 

He is really independently in many people's eyes 

enlightened on the subject and we are very grateful that he 

has traveled here. He is the elected Insurance Commissioner 

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41 

for the State of Oklahoma. The mission of the Oklahoma 

Insurance Department is to serve and protect the insurancebuying public and to enforce the state's insurance laws and 

regulations impartially and expeditiously. Commissioner 

Fisher is on record for his support of Association Health 

Plans, and perhaps he would speak to that now. 

PRESENTATION BY CARROLL FISHER 

Insurance Commissioner, State of Oklahoma 

MR. FISHER: Thank you very much Madam Chairman. I 

am the statewide elected official and I know it is a little 

bit difficult for people to understand that I love my job. I 

was an agent for 35 years and I served the people of Oklahoma 

as an agent. I guess the acronym we might use as a statement 

is, I feel your pain. I have been there, I have sat on your 

side of the desk and I have made presentations as an insurance 

agent. 

I served as the President of the National 

Association of Health Underwriters and I formed the Oklahoma 

State Association of Health Underwriters. I have been and 

have had my life involved in the insurance industry and in the 

health insurance concerns of America, not just in Oklahoma. 

My point that I wanted to bring to you today and the concerns 

that I have for you is that today we are faced with a crisis 

in our health buying of insurance, and I have seen that happen 

over time. I am an old enough guy that I remember the days 

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when we were selling $20 a day health insurance plans and I 

have seen the increase in cost go from where they were to 

where they are today. You have to understand that the 

insurance contract is the poorest read, bestseller on the 

market. 

We don't read our policies, we don't basically 

understand, we have to buy it so we buy it and we try to 

provide for our employees. I commend each of you for your 

concerns that you have about your staff, but I want to make a 

commitment to this Organizations today, that Carroll Fisher is 

your voice inside the NAIC. The National Association of 

Insurance Commissioners is here today at a meeting in another 

hotel, and we are talking about other concerns like feeding 

the market and some other things that are going on in our 

industry as terrorism and other types of coverage. I know 

that there was a meeting earlier and other people from the 

Association came and made a statement on the basis that they 

were representing the NAIC. Today I am not representing the 

NAIC, I am representing Carroll Fisher, someone who is your 

advocate inside the NAIC and someone who is willing to 

champion your cause with other insurance commissioners in the 

nation. 

As the gentleman just said, this is not just a 

problem of today, this is tomorrow and life is so fast that in 

two days tomorrow is going to be yesterday. We can't ever 

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give up on the efforts that we are going to make to provide 

Association Health Plans. And I have concerns about 

Association Health Plans if they do not provide financial 

solvency because that is a real concern that I have. But what 

we have in this country is we have people going out and 

selling insurance on the basis that they are an association, 

and they have damaged the reputation of the idea of 

Association coverage. They have said we're an ERISA Plan and 

we do not have to worry about satisfying the concerns of 

insurance commissioners and so forth, and this has been awful 

because it has hurt us all. 

If we can give financial solvency we can give a 

marketing advantage to Association Health Plans to help reduce 

our costs. I will be your champion to help that happen. In 

Oklahoma we have just passed a law and legislation that allows 

associations to get together with small purchasing groups in 

Oklahoma; get 200 together and we will have the power of 200. 

Arkansas has done this and we are working on that right now. 

Another thing that I want to mention to you that I am doing in 

Oklahoma and I hope this is going to work, I am trying to let 

the small employer have a worker's compensation alternative 

health insurance plan providing 24 hour coverage, so you don't 

have to buy worker's compensation as well as health insurance. 

I think this would have a dramatic impact on the 

cost of health insurance, providing for an alternative benefit 

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for worker's compensation so that we reimburse for actual 

expenses and we are not involved with the attorney-involvement 

that we have in the worker's compensation environment. We are 

working on that very diligently in Oklahoma and I hope we are 

going to lead the nation with an idea that will help small 

businesses. Again, I appreciate the opportunity that you have 

given me to come and express my concerns for you. You have my 

address and my phone number, and if there is any way that I 

can ever be of service with your Commissioner within your 

state, please give me that opportunity to help you. Thank you 

very much. 

MS. NELSON: Thank you, I think you must have been 

hearing some applause as we listened to you approach and your 

willingness to step up to helping the states to understand 

that whatever the residual issues are, that this is a problem 

that must be addressed. The number of uninsured or underinsured in this country just cannot continue so we are very 

very grateful not only for your testimony but your offer to 

help us and I am certain that we will be taking you up on 

that. 

OPEN DISCUSSION PERIOD 

I think this might be an optimal moment to stop and 

to open the floor for questions both from the audience and the 

panelists, if they have any questions of each other or of the 

Commissioner or Mr. Sullivan, the Counselor from the Office of 

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Advocacy. Are there any questions at this point? 

MS. ALLEN: Susan Au Allen, United States Pan Asian 

American Chamber of Commerce. I wonder what type of support 

do we have across this country in the different states? I 

know that the Small Business Administration is in-favor -- we 

have bi-partisan support -- an announcement a couple weeks ago 

with Secretary Elaine Chao. I have been working for years on 

this because I represent over one million Asian-American 

business owners across the country, and many of them are just 

like the small business owners who have testified today have 

the same problem of facing increasing costs. Before this 

became a real national debate as it has become now, I was 

pushing for that for a long time but I was told that the 

resistance came from the state. 

Tom, you are absolutely right, we have got to go to 

the state and agitate and create a lot of noise and kick up a 

lot of dust. I am just wondering if any of you can share any 

insight on whether the states are going to come through. 

Which are the problem states and where are the touch-points 

that we can go and put some efforts in? Thank you. 

MS. NELSON: Perhaps you would like to start. 

MR. FISHER: From the perspective of the Insurance 

Commissioner's side of it, I don't think we have a lot of 

support from the commissioners out there. I've got that 

charge representing this Organization and I hope you will 

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allow me to do that, to go forward trying to convince other 

commissioners to understand the importance of it. I bring a 

little bit of a different perspective to my job because I am 

the only insurance commissioner in the nation that has ever 

sold insurance, so I have an understanding of what's there. 

There are 11 of us that are elected and the rest are 

appointed. We have about 25 new commissioners coming on in 

this next meeting that we will be having in Atlanta at the 

NAIC, and we are going to be talking about people who have 

probably never read their own policy much less had an 

opportunity to understand what we are going through. 

I don't know that from the commissioners' side that 

we have a lot but I will tell you this, that what we do have 

are some people out there that have damaged our reputation as 

the thought of association. But in Oklahoma, if I find an 

unethical agent, his next job is, "Do you want fries with your 

burger?" I will not let them go out and abuse the people of 

my state in an idea that they are writing an Association Plan. 

What we have found are some associations that have gone out 

there that are not bona fide associations. What we have got 

to do is to get Congress to define a bona fide association. 

What we are having are some people coming in and saying, we 

are the Association for the Buying Public, and there is no 

real association there. There is no actual soundness to the 

rates, to provide the promises and the benefits that they have 

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and there is our real concern; we need a bona fide 

association of small employers that want to provide good 

health insurance benefits for their employees. 

MS. NEESE: Madam Chair, I just want to first thank 

the Oklahoma Insurance Commissioner for coming to Washington. 

He and I were in Enid, Oklahoma a few months ago doing some 

filming on a video and began to talk about this issue, and I 

told him at that time that I would be in touch. He has 

graciously come forward as the only insurance commissioner in 

the country to support this issue, and he is really opening 

himself up to some real anguish I am afraid, but I think he is 

the kind of person that can fight that off. But to be our 

advocate inside the Insurance Commissioners is very important. 

The Governors as well have not been helpful on this issue, and 

so as President of Women Impacting Public Policy, we believe 

that we need to get all of our members and all of your members 

that are represented here at the table to go out and talk to 

your Congressmen and your Senators, but you have also got to 

touch your insurance commissioners and you have got to touch 

your Governors and let them know how important this issue is 

to you and your employees. 

You are the voters and you have the voice so I want 

to encourage you to do that. Right now we need to focus 

certainly on the House because we have passed this in the 

House for the last four or five years. We have not had much 

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traction in the Senate, so I would hope that we would all go 

and talk with our Senators about this issue. In particular, 

in terms of introducing the AHP Bill in the Senate, we need to 

focus on a number of Senators over there to get onboard and be 

co-sponsors. So I just want to again go back to the Oklahoma 

Insurance Commissioner and thank him for coming, and I guess 

he got our of Oklahoma okay. I know they were getting 

walloped with ice and snow yesterday. I thank him very much 

and I hope he is ready for the heat. 

MR. FISHER: Terry, thank you very much, I will be 

either famous or infamous after this is over but I have made 

up my mind. I operated under rigid flexibility and I do have 

the opportunity to say I am for this, I support it and I will 

stand proud and tall. Sometimes at the NAIC I feel like I am 

standing alone in Tiananmen Square because I am the only guy 

willing to stand up in front of the tank and not let it run 

over us. But I will take that charge and I will take that 

stand, and I will guarantee you that I will make sure this 

Organization is represented well at the National Association 

of Insurance Commissioners and I will do it proudly. 

MS. NELSON: Thank you. 

MR. SULLIVAN: Marilyn, actually I feel like a leaf 

between two Oklahoma roses, which is very nice. I want to 

actually empower Susan because she raised an interesting point 

and that is, what happens after right now? We all know 

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certainly that there is some vigilance required in pursuing 

this. We also might be worried about where we get our 

information. Do we wait until the transcripts are available? 

I have some insight in how everyone can access that 

information. 

First, as we all know, nothing will ever replace the 

stories and the experience from the small business owners who 

are here and are all over the country. But when it comes to 

rebutting some of the different information, we don't always 

have Mr. Fisher on speed dial but we do have access to the web 

and there is a very good source of information on 

www.AHPsNOW.com. What you will find there is a very wellresearched information, questions/answers that will help arm 

each of you when you are approaching your Governors and your 

Insurance Commissioners and I urge folks to do that type of 

education so that we do read the policies before we try to 

enact them and I think that should be helpful to what we are 

all reaching out to do. 

MS. NELSON: I think that is excellent and I think 

that before the days is done we will hear of a couple of other 

websites as well, but the AHPsNOW.com is an excellent source 

of information on this and what we need is updated information 

so that we can deal with fact with each of the constituents 

and stakeholder groups that Mrs. Neese has mentioned. I think 

that it is an interesting time, Commissioner, that because the 

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crisis that so many states have found themselves in, 

certainly being a Minnesotan we have one of the largest 

deficits facing us of any of the states, which is an 

uncomfortable position for us, we have balanced our budget 

traditionally. At the same time I think that it won't fall on 

deaf ears, and perhaps we'll have a new source of support in 

the larger business community, because the business 

partnerships and business roundtables around the country are 

beginning to understand the transfer cost issue. As was 

mentioned earlier I believe before you arrived, the discussion 

of the number of uninsured employees who find themselves at 

emergency rooms getting the most expensive care, which 

ultimately is transferred to those who are paying for care. I 

think that is no longer a subtle connection but that as 

corporations are having their insurance rates increase at I 

think the average is somewhere from 12-14 percent but some 

states are a lot higher than that, that they are looking for 

causes. 

Again, with the lack of transparency it is not 

always quite clear but looking for cause which lead them back 

to both the uninsured and in some instances to aspects of 

Medicare. If we can be of any help, if we could collectively 

put together a panel for you at any point that could help you 

to sort of amplify your voice or help you to strategize in 

terms of ways to speak to this issue with a representative 

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group from a lot of states that could help connect in the 

minds of the commissioners and I think the Governors as well, 

the economic vitality of the state. If states don't have new 

jobs they end up losing their constituents or with higher 

costs, and we cannot as business owners create jobs unless we 

can afford to hire the employees that it takes to grow our 

businesses. 

MS. HOWELL: I am Julie Howell, I am a Robert Wood 

Johnson Health Policy Fellow this year on the staff of Senator 

Kerry. I just wanted to raise kind of the alternative 

perspective to the Insurance Commissioner from Oklahoma. The 

reason that the NAIC is concerned about AHPs is because of 

some of the negative consequences that can be associated with 

these kinds of plans. In hearings before the Small Business 

Committee two weeks ago, we had Commissioner Sandy Prager from 

Kansas, also a Commissioner and representing NAIC, and she was 

able to articulate some of those concerns. I think the thing 

that is important for all of us to appreciate is the issues of 

the uninsured and of the contribution that small businesses 

can make to that is something that is really appreciated 

across the aisle. 

The concern is that we not make things worse with a 

solution, and that is why there is opposition to AHPs as they 

are currently proposed by the Administration and in H.R. 660. 

I think it is really important for a group like this also to 

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look at those negative consequences. In your own issue brief 

right here, which is really excellent, on the very last page I 

think actually there are some lines got left out from the 

bottom of the third page onto the fourth page, and my 

expectation is that you are talking about high-risk pools at 

the very end of this. The note is made that currently 30 

states have enacted legislations establishing high-risk pools, 

and that states with well-functioning high-risk pools have 

virtually solved the problem of health insurance access for 

their medically uninsurable residents. It is those 30 states 

who are really worried about what AHPs will do to the risk 

pool, because if you pull out those people who are young and 

healthy into a plan that is offered nationally, with all the 

benefits of ERISA, that is great for those people. 

The problem is that the people who get left in the 

risk pool back in the states without that young population are 

going to be paying even higher rates and will be forced out of 

insurance potentially. And it is that issue of what are we 

doing collectively as opposed to what we are doing 

individually that has many of us concerned. So I hope that 

this group will also listen to some of the concerns about AHP 

and appreciate why it is that there is opposition as it is 

currently proposed and some effort at least to change the way 

the legislation would be written or to offer some alternative 

solutions. Thank you. 

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MS. NELSON: Thank you. 

MS. SAUNDERS: I would like to add some commentary 

to this also. As an insurance broker, like Carol, I can 

promise you that in my state of Florida there are probably a 

lot of brokers who are opposed to this as well. Anyone can 

market themselves now as an Association Plan when they really 

are multiple employer welfare associations and they might or 

might not have some re-insurance offshore, anyone can go out 

and start collecting premiums because they are not going to 

start paying claims right away. So the money starts to come 

in before the money starts to go out and the problem arises 

when in fact there are claims that have to be paid that are 

greater than what they have taken in and under the present 

scenarios they sort of fold and go away and leave everybody 

holding the proverbial bag. So that is part of the problem, 

and the other things is that as a person who has to deal with 

all of the different insurance commissioners for non-resident 

licenses, they are very territorial. They don't want to give 

up non-resident license fees and they don't want to give up 

premium taxes, and in an era of deficits states make a lot of 

money on these things. 

So while there are many things that have to be 

looked at to form these purchasing groups or associations, 

there is going to have to be a lot of care and concern that 

goes into this. We still can have a program that works. I 

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have concerns about using the word affordable rather than 

accessible because I'm not sure what affordable means to 

everybody and health insurance still involves collecting 

enough money to pay claims and to pay access to discount 

networks and a lot of other things. There are costs and 

components that go into this. There's re-insurance for 

catastrophic losses, there's pooling charges and there are 

lots of other things. 

If everyone's expectation is that all of a sudden a 

$400 premium is going to be $150 but you are going to get 

everything that you are getting now, that is not the case. 

Because if you look at premiums for groups with over 1,000 

employees, yes they have more choice and yes they have more 

benefits. Are they saving 75 percent of what a small company 

is saving? No they are not, but what they are doing is they 

are a big enough buying group to attract more competition and 

more companies. And we should look at what the Federal 

employees have, they have a great Association. 

The Heritage Foundation has wonderful research and 

position papers that you can access on their website and see 

what they are talking about in plans like the Federal employee 

plan, but I don't know that everyone would consider those 

necessarily affordable. They are affordable but they are more 

accessible and I think we have to start talking about 

accessible because I am not sure what affordable means to me 

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and what affordable means to everyone else. There is a way 

of doing it but we really have to deal with the territorial 

issue among the Insurance Commissioner group and the insurance 

broker group as well. 

MR. FISHER: Madam Chairman, I would just like to 

make one offer if I could. I would like to see the 

possibility that on the agenda, and it would be too quick to 

make it for the March meeting because I'm sure the agenda is 

already set, but I would like to see if there's a possibility 

that in the June Commissioner's meeting that maybe we have a 

special Association Health Plan meeting where you all would 

have an opportunity to talk to commissioners. I will see if I 

can get that on the agenda, where you all could participate, 

express your concerns to commissioners from across the 

country. I would be more than happy to make that offer 

because I think that it might be an effective way to start 

winning over some of the other commissioners with a better 

understanding of their concerns and listening to them as well, 

because they have a little different perspective on what their 

concerns are. I think that dialogue would be very helpful, I 

know there is probably going to be a vote on the legislation 

within the next couple of months but even at that, if we 

started planning today for the June meeting of the NAIC to 

have a special time set aside for those commissioners that 

might be encouraged to come, I would be glad to set that up. 

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MS. NELSON: Thank you Commissioner, I think we 

would appreciate that very much. Any opportunity that we can 

have to present the views but also to create that kind of 

dialogue is truly important. I also appreciate Judy Howell's 

observations and I do hope I can refer you once again to the 

Issue in Brief handouts that are on the table and that 

Ms. Howell referenced, because it is our objective to present 

the alternatives and to collectively address the issue in the 

most positive way for all. At this time it gives me great 

pleasure to welcome Elaine Chao, Secretary of Labor. Since 

her confirmation by the United States Senate on January 29, 

2001, she has been dedicated to carrying out the Department of 

Labor's mission of inspiring and protecting the hard-working 

people of America. 

She is respected as an effective and articulate 

champion of the nation's contemporary workforce and I think 

each of us who has had an opportunity to watch her in action 

and to experience her leadership and her wonderful style and 

enlightened view, has been appreciative of the selection of 

Ms. Chao to take this particular role. Secretary Chao has 

been a leader on the Association Health Plan proposal and she 

has addressed the recent hearing of the Senate Committee on 

Small Business and Entrepreneurship on the very subject. 

Secretary Chao I should invite you to speak and I should 

mention that your arrival is timely because we have come to 

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the point in our deliberations and discussion where we are 

addressing issues like the bona fide definition of Association 

Health Plans. And we have heard of some of the tension 

between the interests of the states in providing the pooling 

opportunities that Association Plans will provide. The fact 

that this has some opposition in the states but that it would 

be at least fundamental to the success of this that the 

associations that were somehow certified to provide this kind 

of pooling did indeed have solvency and were able to provide 

the kind of long-term, sustained support that would be 

necessary if we were indeed to move to this kind of plan. 

It has been mentioned that there have been some less 

than successful attempts by those who were not bona fide 

associations to find ways to act under ERISA and in many cases 

that has kind of perhaps poisoned the well in some people's 

minds. So I know that these are issues that concern you and I 

am aware that you have really stepped up to provide some plans 

for how we could avoid that trap and that we could govern this 

activity in a way that would help it to fulfill what our 

ambition for it is, so with that may I turn the microphone 

over to you. 

PRESENTATION BY SECRETARY ELAINE CHAO 

U.S. Department of Labor 

MS. CHAO: The Commissioner is now an expert on the 

microphones so I appreciate his assistance. First of all 

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thank you very much for the opportunity to be here. I am a 

little new to this structure and this format and I do have 

some formal comments. I don't think it is appropriate since 

this is a much smaller group than I expected so if I can 

submit my formal comments for the record I would appreciate 

that and let's have a discussion on this very important issue. 

First of all, I want to compliment the Chairman. 

Madam Chairman, you have offered tremendous 

leadership on the issues of tourism and the issues of small 

business. You yourself are the CEO of a well-known and much 

respected organization. We know how much you care about 

creating jobs and about creating the right circumstances for 

the economic vitality of our country and I want to thank you 

very much for all of your leadership. For those of you who 

don't know, the Chairman also participated in the Department 

of Labor's Productivity Conference and we appreciated her 

being a speaker and sharing with us some real practical onthe-job issues related to productivity. 

Association Health Plans is one of the solutions 

that is being proposed to help decrease the accelerating costs 

of health care. I know that all of you must be very concerned 

about it because whenever I travel throughout the country with 

business groups, with consumer groups, with community 

activists, one of the major issues that everyone talks about 

is the issue of health care insurance and access to quality, 

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affordable and timely health care. Timely is just as 

important in terms of getting the health care that a 

particular individual needs at a particular time rather than 

having to wait for a very long time to get it. But as your 

material indicates, 41 million Americans do not have health 

care insurance. The interesting thing to note is that the 

majority of people who don't have unemployment insurance are 

indeed working, so it is not that they are not working and 

therefore not having health care insurance, they are working 

and unable to access health care insurance. 

The second interesting fact is that the majority of 

people who don't have health care insurance work for employers 

who have less than 100 employees. So when I first began to 

look at this issue of how to get access to quality, affordable 

health care for a majority of our residents and citizens of 

this country I began to face questions such as the one I just 

raised and I began to talk to employers. We hosted a major 

conference for women entrepreneurs on March 20, 2002, in which 

we asked these women entrepreneurs what their concerns were in 

terms of their workforce. Among the top two concerns that 

these women entrepreneurs mentioned was access to quality, 

affordable health care for the employees. The other, you 

would not be surprised to hear, is access to capital. But 

these women entrepreneurs wanted to offer quality health care 

insurance to their employees, but with health care insurance 

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premiums increasing 12-18 percent in one year alone for this 

group of entrepreneurs and much higher in other instances, 

they could not afford to give their employees, who they viewed 

as members of their own family, access to affordable, quality 

health care. 

So this is an issue of tremendous concern to them. 

This is also a concern to our Administration and the President 

is very concerned about people who do not have health care. 

So the Administration does have a comprehensive program, a 

package proposal that will decrease the accelerating 

escalating cost of health care that we are seeing. Part of 

that involves giving tax credits, part of that proposal 

involves expanding the Medical Savings Account, part of that 

involves malpractice litigation reform because the cost of 

litigation is one of the main factors in driving health care 

costs upward; and then fourthly is Association Health Plans. 

These days, big companies are able to keep health 

care costs low because even if they self-insure they are able 

to spread the cost of health care over a larger group of 

people. So our proposal would allow small business owners, of 

which women small business owners are an increasingly large 

segment, to have parody with large business owners. If large 

business owners can spread the risk over a larger group of 

people and thereby reducing the cost, why should smaller 

businesses not be allowed that same structure? Obviously 

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there are some barriers because small businesses have only a 

limited number of people so they can't have that big pool, 

which is how the Association Health Plan proposal came into 

being. It was thought that if legitimate associations who 

have been in existence for more than three years and whose 

primary mission is not to provide health care but they are a 

bona fide legitimate association, if they would be allowed to 

offer a health plan to their association members, that larger 

pool of people would be created and individuals can be 

covered. 

I am concerned about "cherry picking", which has now 

become a well-known term. We do not want to have legislation 

that would allow individuals or companies or groups, this 

pool, to only allow health people to subscribe. But the 

reality also is that small businesses now are increasingly at 

a competitive disadvantage when they try to hire people, 

because if you are a perspective employee and you had your 

choice of working for a big company with a good health plan or 

working for a small company with no health plan, even if you 

love the small company owner and you are loyal and you want to 

work with them and you like the work, the cost of health care 

is such that you will be propelled to work for the large 

company. So small business are really suffering in terms of 

hiring the people that they need and that is just one example 

of ancillary impacts of this policy decision as well so I am 

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very concerned about cherry picking. In fact, what is 

happening is that small businesses are bearing the brunt of 

healthy people leaving their pool and so they are increasingly 

responsible for those who are less healthy. 

So we allow them to have Association Health Plans 

and that actually helps those that are perhaps not as healthy. 

The other thing you mentioned was the regulatory regime, and I 

don't know what my colleague to right of me thinks about this, 

we are very cognizant that we have to work with the states. 

An idea as big as this has to be worked in conjunction with 

the states but we are concerned about the regulatory maze and 

we want to make it easier for small businesses, not to have to 

go to 50 different states but to have one overall regulatory 

regime. And the third part is that we also want to make sure 

that the Federal Government is able to regulate. We at the 

Department of Labor already administer ERISA. 

ERISA is the law that oversees employer-based 

benefits, so we do have the ability and I believe the 

resources to do a good job in monitoring the bad actors as 

well. That is kind of in a nutshell what I was going to talk 

about but I was going to talk a lot more about the numbers and 

the trends of women's small business, but I think that this 

group knows if very well and I am going to just skip over that 

part and submit that for the record. I would be more than 

glad to hear you concerns because that is what my goal here is 

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as well. The legislation has not been introduced yet. We 

want to listen and to craft the legislation that obviously 

meets the concerns of various constituent groups and 

stakeholders and make sure we are doing the right thing. 

MS. NELSON: Thank you so much Secretary Chao, you 

certainly demonstrated a deep familiarity with the issues and 

the issues that we have been sharing here this morning. 

Perhaps while we have the advantage of your presence, if there 

is anyone who might want to ask a question of Secretary Chao. 

MS. CHAO: Actually, if you don't want me to answer 

questions and you want me to leave because you've got other 

things on your agenda that is okay too. 

MS. NELSON: No because what we have on the agenda 

really is to hear more stories of how individuals have been 

affected by the lack of affordability and access and I am 

certain that you might be interested in hearing those as well. 

I thought that if perhaps there was a question or two and you 

would be gracious enough to address them we would appreciate 

it. 

MS. CHAO: Yes sure, or comments as well. 

MS. BOENIGK: I was just wondering if you do have a 

timeline and when you think the legislation will be presented? 

MS. CHAO: Senator Olympia Snowe held a Small 

Business Committee hearing on Association Health Plans and she 

said she was going to introduce a bill pretty shortly. I 

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think the House will be doing that as well but it is very 

hard to say. Obviously we are going to be doing everything 

that we can to publicize the plight of those who do not have 

health care and how urgently a solution is needed, and how we 

believe that an Association Health Plan is a very common, 

sensible approach, an effective approach to helping Americans 

access quality, affordable health care. 

MS. SULLIVAN: Secretary Chao, on behalf of the 

Chamber and many of the business organizations we really 

appreciate the leadership role that this Administration has 

taken with regard to AHPs. We represent a lot of small 

business but also a lot of large employers who know that 

ERISA -- we are not proposing the Association Plan to create a 

regulatory structure or plans without any regulatory oversight 

at all. In fact, your department regulates hundreds of 

millions of people's health coverage and you have a number of 

mandates and requirements already in ERISA that prevent the 

cherry picking. I think it is important to remind people that 

there is very strong consumer oversight on the regulatory 

initiative begun in the previous Administration and which your 

Administration is carrying out, with regard to claims 

procedures. When people have been denied a benefit and what 

it is that employers have to do, and very much associations 

offering coverage, there are people enrolled in those plans 

who had those same consumer regulatory protections. So we are 

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trying to debunk the notion that these will be plans without 

mandates or oversight. 

MS. CHAO: I am very confident that the Department 

is up to the task of regulating Association Health Plans. As 

was mentioned, we already oversee more than 250,000 health 

plans which cover I believe 47 million people, and that is 

just on the health care side. In addition, we administer and 

regulate all employer-based benefits, pensions, defined 

contribution plans and other types of 401Ks and whatever, so 

we feel that we do have the expertise and the experience to 

protect consumers and to do a good job. 

MS. NELSON: Just quickly because I am aware that 

the Secretary has to be stepping away. 

MS. FOURNIER: Sure. I did go to the State of New 

Jersey and explain to them what we are doing with Associated 

Health Plans and how it would help them. The states are very 

very concerned with the risks and with the plans not being 

properly funded because three HMOs failed in the State of New 

Jersey for not being properly funded and they were licensed. 

So there are a lot of risks and fear in implementing 

Associated Health Plans. I went and I spoke to them about 

GAAP, basically using programs or systems that are already are 

working, because when someone graduates and becomes a doctor 

they ask, where are you going to practice? Well none of us 

here want a physician to practice with us and therefore we 

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want to make sure that the system works. 

I believe that by leveraging existing systems and 

programs will actually help loser the risks with the 

implementation of care, because the system already works. 

There is so much involved with health care and there are so 

many risks that to combine everything and put everything 

together really may not always work. By using programs or 

systems that already exist, for example the State of New 

Jersey Health Care, Federal Health Care and other things that 

are working extremely well, it would lower the risks. But the 

states are fearful and they want to know how the Federal 

Government is going to reach out to them. They can show them 

the way and they can give them the idea but there needs to be 

something in the implementation aspect so that when it is 

implemented it can be implemented quickly with minimum risks 

and with the use of economies of scale, which is really the 

very basis of Associated Health Plans. 

But cherry picking and all of that, anytime you 

develop something that is new you are going to have issues and 

concerns like that. So when you are using a pool of employees 

like the State of New Jersey or any state, the economies of 

scale would help lower the risks on all ends. I am so glad we 

are talking about funding because that is what happens with 

HMOs, they don't plan ahead and thousands of people end up 

without insurance and that is not what we are here for. 

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MS. NELSON: No that absolutely is not. 

MS. CHAO: I appreciate your comments about 

implementation. We will certainly be careful of that because 

implementation is important. I don't know very much about New 

Jersey and if New Jersey has a wonderful program I think that 

is terrific. Unfortunately, I don't think it is across the 

board so it would be helpful if there could be more of that. 

MS. NELSON: If you have another moment, we will let 

Dr. Matthews speak. 

MS. CHAO: Sure. 

DR. MATTHEWS: I want to address just the one thing 

you mentioned on the cherry picking. The terms cherry picking 

and premium skimming are sometimes used, and the notion is 

that insurers are only trying to take the healthy people and 

it sort of implies that there is a big group of sick people 

that they are trying to avoid. It is really the reverse, the 

vast majority of people that are workers are healthy and you 

have got a small percentage of people who are sick and have 

serious medical problems and are going to cost a lot of money. 

The one thing I would point out is that I think there is 

concern on the part of many people that the Association Health 

Plans will not be adequately funded and I think that is a fair 

concern. The notion of letting everyone in is what we call 

guaranteed-issue in the business. That is, somebody can move 

in without having to be underwritten or something of that 

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nature, and it actually exacerbates that problem. 

If you are creating a program with the funding 

structure under legislation for Association Health Plan, I 

have talked to prominent actuaries who have said that the 

system simply cannot work the way it is currently written, 

actuarially, and that was their concern. But they say they 

believe it is exacerbated by the notion that you would let 

anybody in with any kind of medical condition. If you had a 

system, for example, in which a small business has somebody 

who is coming to the pool and has a serious medical condition. 

If that person could move into a state's high risk pool, 30 

states have high-risk pools and Congress passed additional 

funding for them, until that time that the person could 

actually be underwritten and moved into the company plan, it 

might minimize some of those problems. The point that the 

actuaries are telling me is that if you have the kind of 

funding in the legislation in a guaranteed-issue environment, 

that is that we are letting anybody come in and they can't be 

discriminated or underwritten based on their health status, 

you create for that existing legislation a system that simply 

cannot work actuarially. 

So I would raise the question that maybe there is a 

way to work this. This is a problem that we have had with the 

HIPAA legislation. HIPAA legislation created guaranteed-issue 

for small businesses and they are seeing their premiums 

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skyrocket because they have to be able to take those very 

sick people sometimes. 

MS. CHAO: You touch upon the whole issue about unfunded state mandates. I think that is a whole other issue 

about what is actually needed to take care of people and a lot 

of the un-funded state mandates are really Cadillac plans that 

don't respond to the majority of people's concerns. Some of 

the state plans I know, they have insurance for like hair 

transplants. I am not kidding you. So I can debate that that 

and it certainly going to occur. 

DR. MATTHEWS: It is the notion of the guaranteedissue with the current funding structure that I think probably 

creates something that, at least the actuaries are telling me, 

cannot work. 

MS. CHAO: But as a basic concept cherry picking is 

not going to be allowed. 

MS. NELSON: No, I think there is obviously debate 

to be had on these issues. I think the concept of not 

allowing cherry picking and what you have laid forth of making 

certain that we have legitimate associations that have been in 

existence for more than three years. I am certain that there 

will be some oversight of the adequate funding of the plans, 

and that the Organization would have a "raison detra [sic]," 

other than the created, in order to provide these plans and 

that this is the discussion that is taking place. I also 

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appreciate very much, Secretary Chao, that you have become a 

real expert and student all at once of these issues and 

certainly an expert with all the coverage that you already 

provide and the oversight in the area, and I think that when 

the National Women's Business Council decided to support 

Association Health Plans it was with the recognition that your 

Department would be closely involved in the oversight. So we 

thank you so much for joining us and we appreciate all the 

support. 

MS. CHAO: Thank you. I will stay for a couple more 

minutes to hear what else is going on, and thank you for 

having me. 

MS. NELSON: Wonderful, thank you. I would like to 

go to Sheila Brooks. Let me tell you a little bit about 

Sheila, as I am eager for all of you to know Sheila. Sheila 

is the past National Board Member of the National Association 

of Women Business Owners, now though is the premier Women's 

Business Membership Organization in the United States, and was 

active early in advocating for women's business issues in 

Washington and in state capitols. Their mission as an 

organization is to strengthen the wealth-creating capacity of 

their members and to promote economic development, create 

innovative and effective changes in the business culture, 

build strategic alliances, coalitions and affiliations and 

transform public policy and influence opinion-makers. 

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Ms. Brooks will be addressing NAWBO's support of Association 

Health Plans. 

PRESENTATION BY SHEILA BROOKS 

National Board Member, 

National Association of Women Business Owners 

MS. BROOKS: Thank you so much Madam Chair. On 

behalf of the National Association of Women Business Owners, I 

want to thank the National Women's Business Council for the 

invitation to be here. NAWBO wants to first of all applaud 

the National Women's Business Council for its position this 

week on Association Health Plans. Our NAWBO members are in 18 

states across the country and we strongly believe that health 

care should be affordable but that it should also be reliable. 

And it must not trade value for risks to those that it is 

designed to protect; that is so very important. We realize we 

have a challenge before us to get the legislation passed for 

AHPs but it is certainly one that our approximately 8,000+ 

members are committed to. 

You should know that in a recent survey conducted by 

NAWBO, members were more likely to name Association Health 

Plans among the public policy issues of which they want NAWBO 

to focus on, and 58 percent of our members who own employer 

firms offer those health care benefits to their employees, 

including myself, as a small business-owner here, of a 

communications firm in downtown Washington, D.C. I just want 

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to share a quick experience and story that my firm has 

experienced in the last 18 months. We have doubled in size 

just in the last 60 days and we provide all of our employees 

with health care insurance. With such increases comes of 

course a tremendous increase in health care. By the end of 

the year we are projecting tripling our staff, we had a really 

good growth spurt right now but we are still concerned about 

health care insurance. 

Since we opened our doors 13 years ago, with two 

people, we've provided 100 percent health care insurance; 

until 9-11. Following the tragedy of 9-11, as you well know 

most small businesses lost a lot of contracts and business and 

we were very much affected by that, losing about $2.6 million 

dollars in revenues. As a result of that magnitude of loss, 

as a CEO I was forced to make some very hard decisions and I 

had a number of options, which included a 10 percent salary 

cut across the board, lay-offs and for the first time ever a 

cut in our health insurance benefit. A couple of my employees 

had been with me for years and the thought of these actions 

certainly troubled me, but I made the hard decision and 

unfortunately we did have to cut our health care benefits and 

no longer are we offering the 100 percent health care benefit 

and it has been a very disappointing point for all of us. 

Now, as our company rebounds and we expand after 18 months and 

begin to enjoy profitability again, it is at a time that we 

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recoup those losses in dollars from 9-11 but we are still 

faced with the challenge of our health care benefits. 

So the small business community must conjure the 

passion and the zeal for which it is known to fight the good 

fight and provide affordable health care for all small 

businesses. NAWBO will be there Madam Chair, and so will I. 

MS. NELSON: Thank you, thank you, thank you. I 

would like to turn now to Congressman Manzullo, who has joined 

us. He was elected to the U.S. House of Representatives from 

Illinois and has served in the Congress I believe since 1992. 

In January of 2003, Congressman Don Manzullo was reappointed 

Chairman of the House Committee on Small Business, which 

oversees the Small Business Administration and a broad range 

of issues that matter to small businesses with less than 500 

employees. We have asked Congressman Manzullo to outline for 

us the legislative process involved in discussing viable 

solutions, as we have today, regarding the health care 

problems facing small business. 

In fact, I understand that the House Committee on 

Small Business will be holding a hearing not unlike this next 

month on this very important issue. Thank you Congressman. 

PRESENTATION BY U.S. REPRESENTATIVE DONALD MANZULLO 

Chairman, House Committee on Small Business 

MR. MANZULLO: Thank you very much. This is the 

older Small Business Committee room, but this is where the 

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wiser people meet. We have moved our Congressional offices 

from Cannon to Rayburn because it is closer to the Small 

Business Committee over there but it doesn't have the 

chandeliers and it has boring lights that are pressed against 

the ceiling and it doesn't have the ornate carvings that are 

here and it is a real privilege to be here. When you asked me 

to outline the legislative process, I mean, that was attempted 

in 1787 and I don't know if it has ever been accomplished. 

There is a crisis in health care and it is the number one 

issue for small businesses. 

My brother has the family restaurant business that 

was started in 1948 when my folks had a grocery store and went 

into the drive-in restaurant business. I think my dad had the 

second drive-in restaurant in Winnebago County, Illinois, and 

then they converted an old doctor's home that was used as a 

hospital 150 years ago, into the family restaurant. The good 

news is that business is good. The bad news is that he does 

not provide health and accident insurance for his employees 

and there is just no way he could even consider it. Because 

he is only open on weekends he has people who are essentially 

part time and they are otherwise insured. 

Just for my brother and his wife, they got their 

most bargain policy at $850 per month, with a $5,000 

deductible. They shopped around but there were so many riders 

that any pre-existing things that weren't even of consequence 

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would have gone into the new policy so they were forced to go 

with the old coverage on it. Let me just assure you that if 

you hear all these grandiose things -- see, I knew when I 

waved my arms like that you would take my picture. I was with 

the President about two weeks ago in Alexandria, when he 

talked about small business issues and the photography corps 

was there, and when he went like this you could hear all the 

shutters going. I lost my train of thought now. 

MS. NEESE: You said you were with the President 

last week. 

MR. MANZULLO: Oh yes, but that was the joke that 

got me off the subject. It was the rider that made it 

possible for him to shop. I've got Blue Cross/Blue Shield and 

I am always fighting with them. They always pay improperly. 

I don't care what the bill is whenever we call, the amount 

that we actually pay is half of what we are billed and it is 

always something called codes. My wife is a microbiologist 

and because of my insistence she gets the yearly mammogram and 

pap smear. Because she has a medical background she thinks 

that she can -- are you a physician? 

DR. MATTHEWS: Ph.D. 

MR. MANZULLO: Okay, well MDs don't think they have 

to go to the doctor and neither do people in the health 

industry. Every year her OB/GYN submits it to SwedishAmerican Hospital in Rockford, which is a tremendous hospital, 

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and for five years in a row Blue Cross/Blue Shield has said 

that that is not a certified lab. If we had not called we 

would have had to pay it, so my question is, how many people 

will get the bill and not call the insurance carrier and 

contest it? So there are some big time problems going on. In 

fact, I know that Blue Cross/Blue Shield works very hard and I 

know there are about 400 people in the Rockford facility 

dealing with claims, but there has just got to be a better way 

with the administration of medicine than these stupid codes. 

I mean, how many employee hours does it take and how 

many employees does it take just to read a stupid medical 

bill? There is no procedure that is new. These procedures 

have been around for years and some people have said that 

there is a conspiracy within the insurance community itself. 

I wouldn't raise it to that level, but why is it, and you have 

all been through the same thing, that when you contest the 

bill you always save money? Is that correct? 

(Nodding of heads) 

MR. MANZULLO: Okay, and just think about what 

percentage of people get a bill and don't even think about 

calling up and contesting it. So there's some stuff in there. 

I remember years ago there was one study that said you could 

save $20 billion dollars a year if you just had a common form 

of coding these things. AHPs passed in the House last year 

and died in the Senate. We are having a hearing on AHPs I 

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believe it is next week, and I think it will be signed into 

law this year because the President said he would do it. Not 

the end all and be all, the savings may be 10-20 percent. 

Sure that is a lot of money, but in terms of insurance costs 

going up 25-25 percent a year is this really going to put a 

break on the system? What I would suggest, and I get into 

trouble with this, is because an insurance policy is a 

contract you should be able to contract for what you want. If 

you want to go over or draw a contract that doesn't deal with 

organ transplant, in exchange for that you can get -- now I'm 

going to have the transplant people yelling at me, "You can't 

say that, you can't do that!" I can say anything I want but I 

will have to be responsible for the flack that it brings. If 

you go in there and you want to draw a contract that says you 

don't need it for primary care, than I will get all the 

primary care physicians saying that kids won't get their check 

up unless the insurance is ---. Marilyn let me ask you this 

question, and you should remember, all of us can. What did 

you call your health insurance? What was it called? 

MS. NELSON: What was my health insurance called? 

MR. MANZULLO: It was called Major Medical 

Insurance. 

MS. NELSON: Oh sure. 

MR. MANZULLO: The reason it was called major 

medical is because the purpose of insurance was to save your 

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house in the event that something came along. And I wonder 

what percentage of the costs of administration of insurance 

are applied to the day-to-day business of a physician as 

opposed to the major things? You know I will catch heck for 

this. If any of you has had something major that has 

happened, do you notice how efficient the insurance is and how 

much it pays? When our son came down with Lyme Disease, I 

called to see if he needed permission to get -- is it an MRI 

that you get for Lyme Disease? 

MS. FOURNIER: They do blood tests, and sometimes, 

if it is in the joint they withdraw the fluid for testing. 

MR. MANZULLO: Believe me, it was a very major test, 

and the person asked if the doctor ordered it. I said yes, 

and he said I didn't even have to call about it. And the huge 

bills that were racked up, with all of the tests, it was 

several thousands of dollars by the time we were done and I 

think it cost us $25 or $30. At that point it became obvious 

to me as to where the cost of administration is in health 

insurance, and maybe I am wrinkling some feathers around here 

but if the goal is to have affordable health insurance than 

you really have to take a look at the person who is insured. 

Should he or she have the ability to bypass the few Federal 

mandates and mostly the state mandates and come up with a 

policy that can work? In our area, Rockford, Illinois, I got 

a $300,000 grant from the SBA for a pilot program that puts 

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together something similar to what is going on in Michigan, 

where you take the disproportionate share money that normally 

goes to the hospitals that have a disproportionate share of 

Medicaid patients, plus money from the employers and the 

employee. 

You take those three sources and put them into a 

fund and then the pilot program is just started and they are 

offered some very very basic insurance, it does not cover 

organ transplant, it is going to cost about $175 a month for a 

family of four. But what it does is, it is the house-saving 

insurance. It is for people that haven't been able to afford 

insurance for the prior year and it is based on the Muskegon, 

Michigan model. There are things out there that you can take 

a look at, and the problem isn't on insurance but the primary 

care physicians want to make sure they are covered. The 

Chiropractors say this must be a part of it, and I am not 

being critical because it is their job, which is to get as 

much coverage in family as possible. But by the time you 

finish with it the people contracting are not writing their 

own policy. 

The policy is being written by special interest 

groups and by politicians. So where is the freedom to 

contract? Something dramatic has to be done to stop these 

increases and I don’t' believe it is the insurance companies 

that are gouging. The cost of a breakthrough medication, from 

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the time it is in somebody's head to the time that it is all 

the way through the process, it is at least $100 million 

dollars. 

MS. FOURNIER: Can you repeat that? 

MR. MANZULLO: Yes. From the time somebody thinks 

of a breakthrough medicine, until it is developed and goes 

through the testing procedures and everything, is about $100 

million dollars. And not all of these medicines actually get 

marketed because a lot of them fail, so you can't sit back and 

blame it on "the drug companies." I don't think there is a 

big conspiracy going on. Talk to any physician and he can 

tell you about the nothing less than remarkable breakthroughs 

in medications just in the past three years. 

I mean, it is astounding and it is turning medicine 

on its head, and that is not even to talk about the types of 

machinery that are out there and medical devices that are 

available. So just the nature of people wanting to get the 

best medicine means that you cannot project the costs of 

health care based on a simple cost of living because it has 

always outpaced that. But you work on it because there's a 

basic theory, and I agree with it, that the larger your group, 

the more you spread the risk, the lesser your premium and that 

is really what AHPs are based upon. 

MS. NELSON: We are so appreciative of you, 

Congressman Manzullo, and your role and we are looking forward 

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to those hearings that are coming up next week with the Small 

Business Committee. We know that we are very focused on the 

constituents that we represent here today, which are the 9.1 

million women business-owners, and we have actually assessed 

or been given to understand that approximately 7.3 million of 

them would fall in the uninsured area. So if you look at a 

national problem with 42 million uninsured, and those women 

represent 7.3 million in business, many of whom belong to 

organizations that are represented at this table. I think 

that the constituents, between Women Impacting Public Policy 

(WIPP) and other organizations all around the table, with WE 

Incorporated, with NAWBO, with the American Chamber of 

Commerce at this table, I hope you recognize a really powerful 

force of concern. You have articulated many of the 

complexities and the issues that we face in dealing with 

health care across the country. 

Our focus now is on these working men and women, who 

work in not only female-owned but small businesses across the 

country who really are unable to offer health care to their 

employees at today's costs and who do not have access. It is 

a great concern to us and we and our constituencies are 

willing to support those who can support addressing this 

problem. I myself am the CEO of a large business that does 

self-insure and has the opportunity to work across state 

lines, under ERISA, and we recognize the power of pooling. 

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But we also have many small businesses that are associated 

with ours as franchisees who suffer from some of these issues. 

My colleague here, Leslie Saunders, actually has helped some 

of those franchisees who have one or several stores, to find a 

way to access care. But we are focused and we are 

increasingly well organized. We recognize that Association 

Health Plans, Medical Savings Accounts and tax incentives that 

address this population of the working uninsured are 

essential. And that even large business, those of your 

constituents who are large employers in large corporations, 

should also be supportive in that the transfer costs are 

becoming increasingly obvious. That the uninsured who get 

their care in emergency rooms, that the system itself has to 

transfer those costs and deal with them somewhere. We look 

forward to supporting your initiatives and we are grateful 

that you are leading --

MR. MANZULLO: Marilyn, before you kick me out of 

here let me just raise a couple of things. People do not 

realize how dramatically different the prices are when you 

shop, from agent to agent. Let me give you an example. We 

held a hearing back in Rockford on the cost of health care. 

We had a local business person get up, Phil Barbon, who runs 

the Cellular One Dealership, and he said that the insurance 

premiums that he was given for the next year would raise his 

premium from $8,500 to $16,000; and sitting in the audience 

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was Scott Shallock. Scott is from Renwood, which is in 

McHenry County, also a constituent. 

Now, listen to this. After the hearing, Scott went 

up to Phil Barbon and said, "Have you considered getting a 

second insurance company to write your deductible?" Phil 

didn't know anything about it and Phil's insurance man was not 

aware of that. Scott Shallock called Phil's insurance man, 

got him a second company, and the increase went from $8,500 to 

under $10,000. You've got to shop around. I just cannot 

believe the extent of the variations in insurance out there. 

I mean I was astounded so I had my brother start shopping. 

Of course, he got into the problem of the preexisting because Frank is 60 and his wife is 55. The second 

thing is that there is a sleeper out there called Medical 

Savings Accounts and people do not use them. There is an 

interesting couple back home, he is a trial lawyer and she is 

an OB/GYN. He does Medical Malpractice cases. It is the 

craziest thing in the world. They are the sweetest couple you 

would ever want to meet. 

Their insurance premiums just went completely nuts 

because they are both self-employed, he with his law firm and 

she with her medical practice. And he set up an MSA that cut 

their premiums in half. So Mike said, "There isn't anybody in 

town that knows how to set up an MSA." Kate, is that ringing 

a bell over there? 

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84 

MS. SULLIVAN: Yes it sure does. And Richard you 

have given an example I am very familiar with, the State of 

Illinois, I used to work for the Governor of Illinois and we 

worked on a lot the laws that facilitated that. But the 

problem with shopping around is that in many states they don't 

have anywhere to shop around to, there's such a monopoly. I 

talked to someone who was a small business-owner from Alaska, 

and she said they are looking at setting up a state-wide AHP 

there and they still can't get carriers to come in because 

there are so few of them. And in many states with the Medical 

Savings Accounts, they haven't been implemented or they are 

targeted towards individual families such as you described but 

they are not eligible for Federal treatment. 

Everybody should have that kind of opportunity to do 

that on a pre-tax basis, and there is so much more that can be 

done. Some states have been much better on the insurance 

front in fostering competition and in other states they have 

chased the competition right outside the borders. This is why 

Association Plans disseminate more Federal laws and MSAs will 

put more competition and choices out there for both people 

with workplace coverage and people who are purchasing coverage 

on their own. 

MS. NELSON: Perhaps it is a good time to call on 

Karen Kerrigan. Karen is the President and CEO of Women 

Entrepreneurs Incorporated. It is a non-partisan business 

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association that works to improve and enhance economic 

climates for women and entrepreneurs. Karen, I know you have 

a particular long-term interest in this particular subject and 

I thought this would be a good time to hear from you. 

PRESENTATION BY KAREN KERRIGAN 

President, Women Entrepreneurs, Incorporated 

MS. KERRINGTON: On MSAs indeed, I have been working 

on this issue for over ten years now and I am very optimistic 

we will see some action in this Congress particularly because 

MSA expansion, MSA permanency and improvement are in the 

President's budget. First let me congratulate you on pulling 

this whole group together and to the women business-owners who 

traveled here, thank you so much. I mean, truly they are 

representative of the challenges that women business-owners 

are facing throughout this country. Many of them are dealing 

with their health care cost increases in this same manner, 

some are able to absorb it, others are not or they are being 

forced to pass on more of those costs. Certainly all of them 

brought to the table the individual challenges that are making 

the system, in terms of reforming the system, why it is so 

complex. 

With the number of mandates that are out there and 

certainly the legal costs issue. These are things we need to 

keep an eye on as well, Marilyn, because if we don't stem or 

do something about these issues they will undercut the gains 

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that we'll make on AHPs, on Medical Savings Accounts and 

certainly on tax credits. We are very supportive of 

Association Health Plans and a lot of the members of Women 

Entrepreneurs, Inc. certainly would like to see AHPs pass the 

Congress and go to the President's desk. The other thing that 

we hear a lot from women entrepreneurs and all business-owners 

is, how did I get caught in this mess of managing health care? 

How did this all happen? 

What they are asking for and what they would like to 

see is more individuals given responsibility for their health 

care choices and individuals acting like consumers again in 

the system, understanding the costs of health care. Certainly 

the things that I have been involved with over the past ten 

years have been involved in making the system more pricesensitive and more consumer-centered. Medical Savings 

Accounts passed the Congress and were signed by the President 

in 1996. They were a pilot program and we were very happy 

that they were signed due to law, but there's been many 

restrictions that have been imposed on MSAs that have not made 

them a more viable and useable product by health care 

consumers. They need to be made permanent so that there is 

certainty that people know this product is on the market in 

the long-term, then you'll have people marketing the product 

more, then you will have more businesses buying the product, 

so there has to be that certainty. They have to be universal, 

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in that all people have to have access to buying a Medical 

Savings Account. 

If you are an individual who doesn't have insurance, 

that works part time for a business or who works for a 

business, you cannot buy a Medical Savings Account. So all 

businesses over 50, all businesses and all individuals need to 

have access to a Medical Savings Account. The other thing 

that needs to happen --

MR. MANZULLO: Karen, I've got to run. Karen has 

been a frequent witness at our Small Business Committee 

hearings. I want to just thank you all for coming here. 

Please watch out for the weather, we've got a major blizzard 

moving in at about 4:30. I don't want to chase you from this 

fine city but you might want to take a look at that. Fair 

warning, last time Reagan National Airport was closed for two 

days straight and our house isn't big enough to accommodate 

all of you. Listen, you guys keep up the good work, I 

appreciate everything that you are doing. Marilyn, next time 

you come back into town, I may try to get in today but it is 

just impossible. If any of you want to stop by and see me, 

get a hold of my Secretary, Terry Neese, and she can arrange 

it for you. 

MS. NELSON: Thank you so much. 

MS. KERRIGAN: He has heard my schpeal before. The 

other reforms that are important is allowing both the employer 

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and the employee to contribute to the Medical Savings 

Account, lowering the deductibles. These are reforms that did 

pass the House, like AHPs and a lot of other things they went 

over to the Senate and never saw the light of day. At any 

rate, we are very optimistic that MSA expansion and permanency 

will happen this year, particularly because we do have the 

President's support and it is in the budget. Lastly, tax 

credits for the uninsured, refundable tax credits that would 

allow more individuals to purchase insurance, giving them some 

tax benefits that employers currently have. 

All of these types of choices will bring more people 

into the system, make it more competitive and make it more 

responsive. So these are also two things that are on the 

table right now in Congress along with Association Health 

Plans and we look forward to working with you on all these 

things and many more reforms down the road. As you mentioned 

in your remarks, there are some underlying, complex problems 

with the system that need to be addressed in order to truly 

make it a system that is going to have the quality that all 

consumers deserve. Thank you. 

MS. NELSON: Thank you so much and thank you for all 

that you have done to bring us to this point. Kate Sullivan, 

you had a couple of opportunities to respond but perhaps you 

would like to make your statement at this time. 

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PRESENTATION BY KATE SULLIVAN 

Health Care Policy Director, 

U.S. Chamber of Commerce 

MS. SULLIVAN: I think what I would really like to 

do is to draw -- it should be here -- in the back is a 

statement that goes through some of the things about why small 

business is so important to our economy and particularly it 

talks about small business and health care. There are 

probably some good stats there that would help you as you're 

making your cases, although you all probably know this stuff 

by heart. But particularly one of my favorite things is why 

small businesses do offer coverage. You guys should stand up 

and take a bow, 92 percent of small business owners say they 

provide coverage because it is the right thing to do. It is 

important to remind people that we do this and we absorb the 

cost. 

We do what we can and we reluctantly share the costs 

with our employees, often at the expense of a larger paycheck 

or more time off with their families. That makes people know 

that you do this because you are in it for the long haul, that 

Congress is making it difficult to do so by passing mandates 

and blocking the opportunity for associations to make this 

coverage available. The other thing I have over there is the 

Chamber's other proposal for access to health coverage. There 

are 30 separate proposals in there and I think Karen must have 

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read it because she just ticked them all off. I mean, there 

are a lot of things in there including Association Plans, but 

not only to make it more affordable by allowing plans to be 

offered free of state mandates. 

To improve the quality of care by having greater 

disclosure of the prices of coverage and quality outcomes 

data, where it is available. It is astounding how it is so 

not available. There are two points I wanted to raise about 

Association Health Plans. This has been great hearing the 

comments about it. I already talked about this person I spoke 

to in Alaska, who said they were looking at doing a statelevel AHP because it is pretty much all we have right now. 

She said that there are not enough small businesses together 

in the state to interest a carrier to come in. 

I told her that that is exactly why they need to get 

together with the small businesses in Montana and South Dakota 

and North Dakota and those other states that don't have that 

huge, massive number to do a state-by-state AHP. So that is 

one good argument, even if you could do it on a state level 

there still is not that critical mass to bring people 

together. The second example is that I was talking to someone 

who is on our Small Business Council a couple days ago, he is 

in Virginia and he has 35 employees in four states. He runs 

four health plans. His costs went from $120,000 last year to 

$250,000 for those employees. They had a 23 year-old woman 

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who developed cancer. 

He is running four health plans for 35 employees and 

it is a full-time job. They are too small to self-insure but 

if he could get into an Association Plan he could offer one 

single plan. In fact, he could probably get all of his 

employees together and give them a choice of plans if he 

joined an association that had that many choices, and then 

they could also shop around for a consumer driven plan, an 

HMO, something that had a spending account that went with it, 

but he cannot do that right now. My only admonishment to the 

organizations that are here and the businesswomen that are 

here, our challenge is from other women's groups. They do not 

represent women who are out there creating jobs and doing 

this. 

What they are asking Congress to do is to pass more 

mandates. They are telling you that as a woman you should 

oppose Association Health Plans because it means you are not 

going to get your mammogram, your children will not be able to 

get well-baby care, you won't be able to go to an OB/GYN 

because these are things that we do not yet have in Federal 

law but they are trying to get it into Federal law. My 

favorite is that they want up-front first-dollar coverage for 

contraception. I would love first-dollar up-front coverage 

for contraception but the reality is that it comes with a copayment. What I really want is for my insurance to be there 

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when I am diagnosed, God forbid, with something catastrophic 

like breast cancer, or if I have a baby that has special 

needs. 

That is a choice that you have to make. Do you want 

up-front coverage for a $30 per month expenditure or do you 

want your health plan to be there when that $85,000 bill comes 

in for a bone marrow transplant? These are the kinds of 

things that I think women need to be making that case about. 

You know, these are great mandates but we can't afford it and 

I am here doing this for my employees because it is the right 

thing to do. And trust me, come to the Chamber of Commerce or 

NFIB, you are probably going to find a health plan for 

employees that has well-baby care and annual mammograms and 

all the things that women are looking for for their employees, 

or you are not going to choose that plan; it is a competitive 

market. Anyway, I am so pleased that you invited us to be 

here and I really look forward to continue to work with this 

group and all of you on these issues. 

MS. NELSON: Well we look forward to working with 

you. Thank you so much Kate. We have talked a lot in the 

last few minutes about consumer driven health care, you have 

heard that referenced now with Karen Kerrigan and again with 

Kate. I thought it would be an opportune moment to turn to 

Greg Scandlen. Greg is the Director of the Galen Institute, 

Center for Consumer Driven Health Care. The Galen Institute 

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is a not-for-profit that is dedicated exclusively to help 

policy. Greg would you give us some insight from your point 

of view on the subject? 

PRESENTATION BY GREG SCANDLEN 

Director, Galen Institute, 

Center for Consumer Driven Health Care 

MR. SCANDLEN: I will be very quick because the 

storm is coming and we are already running behind. So let me 

just take a couple quick glimpses at some things that have not 

been brought up yet. I agree with almost everything that has 

been said but there are a few small points I would like to 

throw out to you. One thing is Fractured Tax Policy, a 

Federal tax policy. The employer-based system currently 

costs, in foregone revenue, approximately $140 billion dollars 

a year. 

It is the third biggest entitlement program in the 

country after Medicare and Social Security. That is $140 

billion dollars a year, and every time health care costs go up 

25 percent that also goes up 25 percent, without a single 

hearing, without a single question, without a single vote. It 

is a massive subsidy that is exclusive only to employer-based 

health insurance coverage. If you are self-employed you also 

get a smaller subsidy of 100 percent deduction, not an 

exclusion. The exclusion frees the benefit from the cost of 

payroll taxes as well as income taxes; State, Federal, you 

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name it. 

If you are not self-employed and you work for a 

company that doesn't offer coverage, and you have to pay for 

your own coverage, you get nothing; zero, squat, zilch. And 

your employees, if you are not providing coverage, get no 

assistance, no tax break whatsoever when they go out and pay 

their own premium. When they lose their job and exercise 

their COBRA they get no tax break, no subsidy whatsoever. If 

you pay directly for medical services, you get no tax break 

and no subsidy whatsoever, unless it exceeds 7.5 percent of 

your annual gross income, in which case you get to deduct it. 

It is an insane tax policy that cannot stand. 

The President is beginning to move away from that a 

little bit with the idea of refundable tax credits and that is 

only a step in the right direction. Government policy should 

be neutral as far as taxes go when it comes to health care. 

If the government would like us to purchase more health care, 

if they prefer that we spend money on health care rather than 

beer and pizza, that is a fine decision and they should be 

across the board for all health care spending and not just 

employer-based health insurance. As far as regulatory policy, 

both State and Federal regulations are a mess and they've got 

to be fixed. The states have separate blocks of regulation 

for small group coverage, mid-size group coverage and 

individual coverage. 

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They have separate regulations for Blue Cross/Blue 

Shield plans, commercial health insurance companies, HMOs. 

Each state is different, it is a total disaster and it is 

mind-boggling. It is impossible to run an efficient health 

insurance system in this country. On the Federal side we've 

got COBRA, HIPAA, ERISA, we have a whole alphabet soup of 

additional requirements, some of which clash with the state 

requirements and it becomes impossible to obey both the State 

and the Federal laws. So it is no wonder that the market is 

in such a disastrous place. I have a couple of other quick 

things. 

You should be able to contribute to your employees' 

health benefit coverage if they go out and buy their own 

policy but currently you are not. As far as the tax code 

goes, you are perfectly free to do that. You are not able to 

do that because of HIPAA. HIPAA says that if you contribute 

anything towards your workers' benefit, it is an employee 

welfare benefit plan and therefore a group policy, even if it 

is only one person going out and buying their own coverage. 

HRAs have not been talked about very much. 

The IRS came out with new information just this past 

June, allowing you to create for your employees something that 

looks very much like a Medical Savings Account. I don't have 

time to go into it now, contact me if you would like some more 

information on it. It is not as good as a Medical Savings 

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Account but it is available to any-sized employer currently, 

right now, today. And then finally, just one thing on 

Association Health Plans; there is so much garbage being 

spewed out about this issue. If I am an employer with 100 

workers I can go out and self-fund and be perfectly free of 

any kind of state regulations. 

I have a pool that consists of 100 people and there 

are no constraints on me whatsoever from doing that. Many 

employers with only 500 people have a pool of 500 people. It 

is not a particularly effective pooling mechanism just to have 

100 or 500 people, it would be far better if employers like 

that could join an Association Health Plan. I mean, even midsized employers could join an Association Health Plan and have 

coverage as part of a larger pool rather than just these 

microscopic pools that are free of state mandates. That is 

all I wanted to say. Thank you. 

MS. NELSON: Thank you so much. Kristie Darien, 

would you speak to us from the National Association for the 

Self-Employed. She is here on behalf of Robert Hughes, who is 

unable to join us today. 

PRESENTATION BY KRISTIE DARIEN 

National Association for the Self-Employed 

MS. DARIEN: Thank you. The National Association 

for the Self-Employed would first like to thank the National 

Women's Business Council for organizing this roundtable on a 

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very important issue. The NASE is the nation's leading 

resource for the self-employed and micro-businesses, which are 

businesses with ten or less employees. We currently have 

250,000 member businesses representing over 600,000 employers, 

employees, and self-employed individuals nationwide. Today 

this vital segment of the small business population represents 

more than 18 million people and it is important to note that a 

large percentage of the self-employed and micro-businesses are 

women or women-owned. 

In fact, by 2005 it is estimated that there will be 

4.7 million self-employed women. Micro-businesses are the 

drivers of America's economic engine. In fact, the last U.S. 

Census reported that these firms employ more than 12.3 million 

workers with a total annual payroll of more than $309 billion. 

Beyond these tangible contributions, it is also important to 

note that according to an August 2002 survey by USA Today, CNN 

and Gallop, Americans rated people who own and operate small 

businesses as the second most trustworthy group in the nation, 

behind teachers. The chief impediment that micro-businesses 

and the self-employed communities are facing is trying to stay 

afloat during this time of economic stagnation. 

The NASE would like to emphatically state that there 

is a health care crisis amongst the nation's self-employed and 

micro-businesses. We recently released a study, entitled 

"Affordability in Health Care: Trends in American MicroAudio Associates 

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business," which stated that seven out of ten micro-business 

owners report that they do not provide health care coverage to 

eligible employees nor do they have coverage for themselves. 

That roughly equals about 70 percent. Costs were cited as the 

chief reason for this trend. Participants stated that the 

situation is worsening, as health insurance premiums are 

rising at double-digit rates. 

In fact, the study indicated that the cost of health 

insurance premiums incurred by the micro-business owners 

increased by an average of almost 13 percent from 2001 to 

2002. With this in mind, it may not be surprising that 96 

percent of micro-business owners believe that the cost of 

insurance is unreasonable for their business. The NASE feels 

that three proposals, in specific, would be greatly helpful to 

the micro-business and self-employed communities to gain 

access to affordable health care coverage. First and 

foremost, the NASE supports Association Health Plans, and we 

think that it is a very viable option to allow more 

affordability for specifically small businesses. We also 

strongly support health care tax credits and MSEs. However, 

there is one particular issue we would like to bring up that 

has not been discussed in regards to access to affordable 

health care, and that is the self-employment tax deduction for 

health insurance premiums. A core issue facing specifically 

the self-employed, which are those who file their taxes as 

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Schedule C filers, which are Sole Proprietors, and Schedule E 

filers, which are Partnerships, and also two percent owners in 

S-Corporations, is that there is an inherent inequity in the 

tax code. These employees do not receive a business deduction 

for their health insurance premiums. They are not deducted 

for the purpose of the self-employment tax, thus self-employed 

individuals have to pay an extra 15.3 percent on their health 

insurance. C-Corporations, which are large corporations and 

incorporated businesses, are allowed to deduct their health 

insurance premiums as an ordinary business expense. Scheduled 

to phase in this year, is 100 percent deductibility for health 

insurance. However, this does not affect self-employment tax, 

it is strictly for income tax purposes. Thus, in order to 

achieve equity, the NASE would like to have the health 

insurance premiums be deducted as an ordinary business expense 

for the self-employed, thus reducing the cost of health 

insurance by 15.3 percent. NASE feels again that health 

insurance is one of top issues for this specific segment. We 

would also like to point out that a lot of talk is going on 

about small business, but unfortunately the focus has been on 

growth companies and medium-sized business. We feel that more 

focus needs to be put on micro-businesses, businesses with ten 

or less employees, because they are really the backbone of the 

nation's economy. We would like to thank you and the Council 

for allowing us to participate. 

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MS. NELSON: Thank you so much, and we appreciate 

your participation. Now let me turn to Dr. Merrill Matthews, 

who is the Director of the Council for Affordable Health 

Insurance. The Council for Affordable Health Insurance is a 

research and advocacy association of insurance carriers active 

in the individual, small group, MSA and senior markets. Their 

membership includes insurance companies, small businesses, 

providers, non-profit associations, actuaries, insurance 

brokers, and individuals. Since 1992, the Council has been an 

active advocate for market-oriented solutions to the problems 

in America's health care system. 

PRESENTATION BY MERRILL MATTHEWS, JR., Ph.D. 

President, Council for Affordable Health Insurance 

DR. MATTHEWS: Thank you Madam Chairman. I have 

just a few things to add to this. Kate held the discussion 

just a little bit ago about perhaps state-based Association 

Health Plans. Of course, if you created a state-based 

Association Health Plan you would not be able to get to the 

ERISA exemption because that is what has to go through Federal 

law. However, and I would just point this out, there are ways 

for associations right now to offer health insurance and many 

of them do, including the National Association for the SelfEmployed, they just use an insurance company as the conduit to 

sell the policy through the Association. 

So that is one way to do it and use the insurance 

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company to back that. A couple of points that I would make 

that I think you might want to consider at some point in the 

future. Health insurance is structured a little differently 

than a lot of other things that we can buy. If you want to 

buy a food product, let's say a fruitcake, from Connecticut. 

That fruitcake is made under the health laws of the State of 

Connecticut and then it is shipped out to you wherever you 

are, and you can buy it in whatever state you're in and it is 

approved by the state where it is created. 

Health insurance is just the opposite. A policy can 

be created in Omaha or Connecticut or Dallas or Indianapolis, 

but it has to conform to the health insurance laws of the 

state where you reside. You might consider doing something, 

and Congressman Ernie Fletcher has introduced legislation 

along this line, which would say that if the health insurance 

policy is fully approved under one state's legislature and 

health insurance laws, I ought to be able to buy it in another 

state, so that it could cross state lines by doing that. Now 

there will be some discussion among the State Insurance 

Commissioners and Governors and others about whether or not 

they want to do that, but it would create the kind of 

competition in which I think you would find some states 

saying, as happened in banking in Delaware, "We have an 

opportunity to create some very positive health insurance laws 

that people from other states would be willing to buy, and so 

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let's as a state create favorable laws to bring those 

insurers into our state's, create those policies and then we 

will be an exporter of health insurance to people in other 

states." That is one option. 

Another would be, Greg mentioned this with regards 

to HIPAA, but in many cases small businesses have only one or 

two or three employees. Those employees may want to go out 

and buy an individual health insurance policy and in the past 

states have restricted this by what they call a List Bill. 

But ideally what you might be able to do as a small employer 

is if your employee wanted to go out and buy his or her own 

health insurance policy here and another one wants to go out 

and buy an individual policy and you as an employer just want 

to be able to pay those premiums to the policy, you ought to 

be able to do that. That would create a system in which you 

wouldn't necessarily have to offer any type of group insurance 

but you are just letting people buy their own individual 

policies and you as an employer are paying it. 

The third thing I would just mention is an exemption 

from HIPAA legislation. There is some debate among some of 

the members of Congress right now and they are looking at 

implementing legislation that would say that if a small 

business wanted to offer health insurance, and under the 

current law under HIPAA if I come to that small business as a 

sick person -- I've got cancer -- the small business has to 

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bring me into that pool and it affects the premiums of that 

pool. If your state had a high-risk pool and you as the small 

employer could say, we will take you and we will pay your 

health insurance premiums, but you will go under the high-risk 

pool. Of the high-risk pools that 30 states have, some work 

very well and some don’t work as well. We've got money coming 

from Congress right now, $100 million dollars to help fund 

those, but assuming the high-risk pool was working well and 

you wanted that as an option, the person could go in the highrisk pool and the employer makes the premium payments to the 

high-risk pool. 

That way you don't end up affecting your pool, and 

then at such time as that employee is passed the medical 

condition and is able to be re-underwritten again, then the 

employee can move back into your pool. But it lets you take 

advantage of a safety net that's out there without adversely 

affecting your own premiums. Now, if somebody is already in 

the pool and gets sick that is what health insurance is for, 

but this is a person who is coming to the pool and already has 

a medical condition. There is sort of an assent among some 

states and some members of Congress that you ought to have a 

system in which the person accepts. If you do that you end up 

creating some very perverse incentives out there for people to 

wait until they get sick before they buy health insurance. 

Insurance works on the notion that somebody doesn't 

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need something. I don't need auto insurance now because I 

haven't had a car wreck, but I buy the insurance now and then 

I have the car wreck and then the insurance pays. There is a 

growing tendency among some members of Congress and states 

that say, in essence, let the person have the auto accident 

and then call the auto insurance company and get the insurance 

then. If you do that you restructure the incentives and it 

simply can't work. There are people who get medical 

conditions through no fault of their own and we don't want to 

penalize them, but we might be able to find a structure that 

would let them move to a pool that doesn't end up raising the 

premiums for everybody else, and then let them move back in at 

some other point. Thank you Madam Chairman. 

MS. NELSON: Thank you that certainly adds a whole 

other dimension to the discussion. Let's turn now, last but 

not least, to Jessie Howe Briarton. Jessie is the Manager of 

Legislative Affairs for the National Federation of Independent 

Business. NFIB is the largest advocacy organization 

representing small and independent businesses in Washington, 

D.C., and has in all 50 state capitols. Would you please 

speak to us? I think you are going to offer remarks in 

support of Association Health Plans. 

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PRESENTATION BY JESSIE HOWE BRIARTON 

Manager of Legislative Affairs, 

National Federation of Independent Business 

MS. BRIARTON: That is correct. Thank you so much, 

Ms. Nelson, for inviting the NFIB to be here today. I am 

certainly glad to talk a little bit about who our Association 

represents and our support of Association Health Plans. I am 

very fortunate to work for NFIB, and I do have a small 

business background. Both of my grandfathers ran small 

businesses so I do understand that side of it as well. 

NFIB is the largest advocacy on behalf of the 

smallest of the small businesses. Most of our members have 

five or fewer employees and have been in business for more 

than ten years, and actually 25 percent of our members are 

women-owned firms. We represent over 600,000 members in 

Washington, D.C. and across the nation and we are represented 

in every state capitol. A recent Kaiser Family Foundation 

Poll shows that more Americans are worried about the health 

care costs than about losing their jobs, paying their 

mortgage, losing money in the stock market or even being the 

victim of a terrorist attack. Nearly four in ten Americans 

say they are very worried that the amount they pay for health 

services or health insurance will increase. 

Since 1986, we have been polling our members on all 

different types of issues and our members have ranked these 

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issues from 1 to 75. The number one issue, since 1986, has 

been the rising health care costs, and no wonder; our small 

business owners are not experienced. The average, what the 

polls are showing you, which is about 14 percent this past 

year, that they are experiencing 25-50 percent increases hands 

down. Every day I have the opportunity to speak to some of 

our members and even more recently most businesses are 

experiencing annual premium increases but I have also talked 

to owners who have been getting a six-month increase. I would 

like to share with you, in particular, of a woman-owned small 

mining company in Globe, Arizona. 

She lives in a rather rural area but her increase 

last year was 75 percent. This is not just one story but we 

have a multitude of stories where people are seeing increases 

of almost 100 percent; it is not just 25 percent. And she has 

tried to look around for another provider to write coverage 

for her but she has only been able to find one other insurance 

carrier to write a policy, and that was a 55 percent increase. 

In addition to these exorbitant rates, and in the middle of 

her contract year, her husband turned 55, and guess what? His 

premium went up over $200, increasing their rates 33 percent 

yet again. 

If her costs continue to rapidly escalate, she says 

this will be the last year she will be able to offer health 

benefits for her very small mining company. In addition, this 

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will mean losing her key employees and she won't be able to 

compete with the other, larger companies in the surrounding 

areas. This is obviously a very familiar story shared by many 

of you at this table and I would like to submit for the record 

several more small business stories from women-owned firms who 

are NFIB members. NFIB does understand that no one solution 

will be able to cover all of the 41 million uninsured. 

Therefore, we propose a multi-faceted approach that will help 

move countless numbers of Americans off the rolls of the 

uninsured. 

We are aggressively urging enactment of legislation 

that would permit Association Health Plans (AHPs) to operate 

nationwide. We encourage the expansion of Medical Savings 

Accounts and flexible spending accounts, and we also do 

support the concept of allowing individuals to purchase health 

insurance through a tax credit. We have heard a lot about 

AHPs today, and we certainly have been one of the 

organizations leading in the fight of this issue on the Hill 

in trying to educate different members of Congress as well as 

Senators on this issue, in that this legislation is something 

that would offer more competition into the small group market. 

Creation of nationwide AHPs is really a matter of righting a 

wrong, which has plagued small employers for years. Currently 

the labor unions, medium-sized businesses, as well as large 

Fortune 500 companies are allowed to offer health benefits to 

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their employers under ERISA. 

This law exempts those companies and unions from 

that cumbersome task of having to comply with all the 

regulations and mandates of all 50 states. Small firms are 

not able to have such an exemption, and in fact they pay at 

least 17 percent more for their health insurance than their 

big-business counterparts. With 89 percent of the new 

businesses being created by small business owners, shouldn't 

they have more affordable and accessible health care choices? 

At least one-fourth of all firms nationwide, in the United 

States, are run by women, and they should realize the 

importance of supporting H.R. 660, the Small Business Health 

Fairness Act, which has been sponsored by Representatives 

Fletcher, Dooley, Sam Johnson and Velazquez. The AHP 

Coalition just recently launched a website to show our support 

for Association Health Plans. 

To learn more or to show your support and tell your 

personal story, please log on to www.AHPsNOW.com. Thank you 

so much for inviting us here today, and we certainly look 

forward to working with you and aggressively pursuing the 

enactment of AHPs. 

CLOSING REMARKS 

by Marilyn Carlson Nelson, NWBC Chair 

MS. NELSON: Thank you so much for being here and 

adding the voice of those many hundreds of thousands of people 

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that you represent. I want to say thank you very much to 

each of you who has taken your time to be here today and to 

help us sort of raise the level of interest and knowledge on 

this issue and also to join us in trying to bring about some 

real action and change this year. I also wanted to thank 

those who submitted their written statements, which will also 

appear in the transcripts of today's proceedings. And I want 

to thank those of you who are left in the audience for risking 

the storm to stay and join us here. We appreciate again your 

interest, your concern and your action on this very very 

important issue, thank you so much to each and every one of 

you. 

(Whereupon, the meeting was adjourned at 12:35 p.m.) 

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