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21–104 2016

THE DELAY OF THE EMPLOYER MANDATE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JULY 10, 2013 

Serial No. 113–HL06 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

TIM GRIFFIN, Arkansas 

JIM RENACCI, Ohio 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

ALLYSON SCHWARTZ, Pennsylvania 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

JENNIFER M. SAFAVIAN, Staff Director and General Counsel 

JANICE MAYS, Minority Chief Counsel 

SUBCOMMITTEE ON HEALTH 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

JIM MCDERMOTT, Washington 

MIKE THOMPSON, California 

RON KIND, Wisconsin 

EARL BLUMENAUER, Oregon 

BILL PASCRELL, JR., New Jersey 


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C O N T E N T S 

Page 

Advisory of July 10, 2013 announcing the hearing ............................................... 2 

WITNESSES 

Avik Roy, Senior Fellow, Manhattan Institute for Policy Research .................... 7 

James C. Capretta, Senior Fellow, Ethics and Public Policy Center, and 

Visiting Fellow, American Enterprise Institute ................................................ 26 

William J. Dennis, Jr., Senior Research Fellow, National Federation of Independent Business ................................................................................................. 37 

Sean Falk, President and Owner, WolFTeaM LLC, and Nachogang LLC, 

on behalf of the International Franchise Association ....................................... 44 

Timothy Stoltzfus Jost, Robert L. Willett Family Professor of Law, Washington and Lee University School of Law .......................................................... 48 

SUBMISSIONS FOR THE RECORD 

Associated Builders and Contractors, statement .................................................. 86 

University of Minnesota, statement ....................................................................... 88 


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THE DELAY OF THE EMPLOYER MANDATE 

WEDNESDAY, JULY 10, 2013 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:04 a.m., in 

Room 1100, Longworth House Office Building, Hon. Kevin Brady 

[Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON HEALTH 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3625 

Wednesday, July 3, 2013 

No. HL–06 

Chairman Brady Announces Hearing on 

the Delay of the Employer Mandate 

House Ways and Means Health Subcommittee Chairman Kevin Brady (R–TX) 

today announced that the Subcommittee on Health will hold a hearing on the 

Obama Administration’s recent decision to delay the information reporting requirements and penalties associated with the employer mandate in the Affordable Care 

Act until 2015. This hearing will allow the Subcommittee to focus specifically on the 

Administration’s ability to make regulatory enforcement decisions on statutory provisions in law. The hearing will take place on Wednesday, July 10, 2013, in 

1100 Longworth House Office Building, beginning at 10:00 a.m. 

In view of the limited time available to hear from witnesses, oral testimony at 

this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

On Tuesday July 2, 2013, a posting on the U.S. Department of the Treasury’s 

(Treasury) tax blog announced that the employer reporting requirements and the 

employer mandate tax penalties ‘‘will not apply until 2015.’’ The announcement 

came as a surprise to opponents and proponents of the law, and it raises new questions about how the shift will affect other aspects of the Affordable Care Act. The 

Ways and Means Committee has raised significant concerns about implementation 

status of all aspects of the Affordable Care Act, with a particular emphasis on the 

impact of the employer mandate on jobs and the economy. The Obama Administration repeatedly testified to the Committee that implementation of the law is on 

track, and Administration officials emphasized that no delays were expected. The 

hearing will examine what led to the decision to delay the employer mandate, what 

authority Treasury is relying on to delay statutory provisions with clear implementation dates and Treasury’s analysis of how the delay will impact other aspects of 

the healthcare law. 

In announcing the hearing, Chairman Brady stated, ‘‘The employer mandate 

is a flawed provision that has resulted in lost jobs, fewer hours and a loss 

of wages, while doing nothing at all to make health insurance more affordable—which is what individuals, employers and workers want and need. A 

1-year delay will not undo this damage. I want to know why, after repeated 

assurances that everything was on track and that no more deadlines would 

be missed, that the Administration has taken this action. It is time for the 

Administration to explain to the American people why it’s acceptable to 

grant this delay, while at the same time taking no action whatsoever to 

provide any relief from the individual mandate.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on the Obama Administration’s decision to delay the employer mandate and the employer information reporting requirements under the Affordable Care Act. 


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DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance 

with the formatting requirements listed below, by the close of business on 

Wednesday, July 24, 2013. Finally, please note that due to the change in House 

mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House 

Office Buildings. For questions, or if you encounter technical problems, please call 

(202) 225–1721 or (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TDD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov

f 

/. 

Chairman BRADY. The Subcommittee will come to order. We are 

examining the Treasury Department’s strangely timed announcement that it is delaying the enforcement of ObamaCare’s employer 

mandate for 1 year. 

For the last several months, we have heard the White House repeatedly pledge to Congress and the American people that the 

President’s Affordable Care Act will be ready on schedule; absolutely taken to the bank. 

In fact, Secretary Sebelius recently insisted before this very Committee that the White House would not miss another ObamaCare 

deadline, not one, not again. 

Shortly thereafter, the Nation learned in a blog post of the embarrassing failure by the White House to have this major pillar of 

the new law in place on schedule. 


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The Treasury Department’s announcement confirms our concerns. ObamaCare is simply not ready. This Committee has serious 

questions about how and why this alarming decision was made and 

the effect that delaying this key provision will have on other provisions of the law, specifically the directive that individuals purchase 

either Government-approved health care or pay a tax. 

There are also questions about the unprecedented manner in 

which it was announced on an obscure Treasury blog site just 2 

days before the 4th of July holiday. 

We invited Treasury officials to testify today to explain to the 

American people the rationale for the delay and how they announced this major setback. However, they declined to appear. 

Let me be clear. This Committee intends to get an explanation 

and will plan on Treasury officials appearing at a date in the near 

future. 

Let’s also be clear about what this decision means. This 1-year 

reprieve does not solve the problems of local businesses struggling 

to comply with ObamaCare. The consequences of the mandate still 

remain. 

Employers are still required to provide Government-mandated 

coverage or pay a substantial tax. Many local businesses continue 

to cut workers’ hours and workers’ paychecks as they grapple to 

meet the Affordable Care Act’s definition of a ‘‘full-time employee.’’ 

Many businesses are laboring to find more money for rising 

healthcare costs for themselves and their workers as costs increase, 

and jobs are still at risk, up to 3.2 million in the franchise industry 

alone, as local companies struggle with the onerous ObamaCare requirements. 

For patients, families and their children, you have to wonder. If 

ObamaCare is not ready for business, is it ready for my family? A 

lot of lives are at stake. Quality health care is critical. 

Everyone is aware the White House has missed almost every key 

deadline in preparing this healthcare law for individuals and families as well. 

The White House says it is listening to the concerns of our Nation’s businesses, but are they ignoring the voices of American families and taxpayers. 

Unlike businesses and labor unions, which have been granted a 

reprieve, there have been no delay of the individual mandate, forcing average Americans to buy Government-approved health insurance or pay a tax. 

These families and individuals are also facing higher costs and 

sky rocketing premiums. They have no relief from the new taxes 

in ObamaCare. 

Today, 3 years after the passage of the President’s signature 

healthcare law, the majority of Americans disapprove of this law. 

Who is listening to them? 

If the Government mandate to buy insurance has been postponed 

for businesses and labor unions, out of fairness, should it not be 

postponed for families and individuals as well? 

While the White House continues to suggest ObamaCare will be 

ready on October 1, the stunning delay of the employer mandate 

calls that into question. 


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Look at the pattern of delays and failures that have occurred 

since implementation began. The Class Act proved unworkable and 

was abandoned. The onerous 1099 reporting mandate was overwhelmingly repealed. The exchanges promised for small businesses 

failed to be ready on time and were delayed. Significant parts of 

the law were found unconstitutional, 34 States have chosen not to 

build State exchanges. 

The technology intensive data hub that is key to ObamaCare is 

not ready. The navigator grants have not gone out to local communities. On and on, the list is growing, not shrinking, as we get closer to October 1. 

Clearly, the roll out of ObamaCare is in disarray and experts 

question whether the White House is competent enough to administer its own massive healthcare law. 

The employer mandate delay also can have profound impact on 

the Federal budget and raises numerous questions. How much less 

will the Government collect because of the delay? 

How many more people will end up being forced into the exchanges? Without employer reporting requirements, how can we 

ensure subsidies are only going to those without offers of affordable 

insurance? 

Again, it is unfortunate that no Treasury officials are here to answer these important questions. The American people, Congress 

and this Committee deserve these answers and we will get them. 

What we do know is ObamaCare is making health care more expensive, costing Americans their jobs, shrinking their paychecks, 

and preventing families from keeping the health care they have 

and they like. 

Instead of simply delaying enforcement of certain provisions of 

ObamaCare, it is clear this law must be repealed. 

Before I recognize the Ranking Member, Dr. McDermott, for the 

purposes of an opening statement, I ask unanimous consent that 

all Members’ written statements be included in the record. Without 

objection, so ordered. 

I now recognize Dr. McDermott, Ranking Member, for his opening statement. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. I suppose we 

could spend the morning talking about how and why the policy was 

changed and how it was announced. I might have preferred a different approach, but it is not my job to speculate on best practices 

for the White House. 

It is my job, it is our job actually, to continue to shape and guide 

reform so that it best serves the American people, to focus on policy, not on politics. 

There has been a lot of noise on both sides of the aisle over what 

this shift means but nobody really knows. I did not spend my 4th 

of July combing over the implications of the change and I doubt 

there is anybody on the dias that did. 

I am trying to adjust and dissect this plan on the back of a galloping horse before we have a chance to properly consider it, which 

is completely unwise. We are back in session 2 days and here we 

are having a hearing on something that was announced before the 

4th. 


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I am sure it is tempting for those who stood against reform and 

progress from the beginning to see this as a chance to rip 

ObamaCare apart again yet another time. The irony of objecting to 

the delay of a program you have been trying to stop is no doubt 

lost on this room. 

We are even going to get a 38th vote shortly to repeal it, so you 

know where one half of this room is coming from. The fact is 

ObamaCare is largely unaffected by the delay. It was always designed to be built on current coverage and fill in the gaps. The employer responsibility requirements are just a piece of that puzzle 

that make up universal coverage. 

The marketplace exchanges are on track to open on March 1 

(sic). My State is well out there. I have been talking to people over 

the 4th of July and they are raring to go. There are many places 

in this country that have geared up for this. Places like Texas have 

not, and that is another issue. 

Premium filings are coming in lower than expected in Washington, California, and other States. Oregon’s 2014 filings show 

premiums slashed by as much as 35 percent. 

Reality dramatically contradicts the rhetoric that you hear in 

here. 

We do not know exactly what the landscape will look like in January, but it is entirely possible this decision will actually help the 

consumers. They will have a chance to have access to the exchanges. Employees who remain uncovered will be able to find assistance through tax credits and other subsidies in the Federal 

marketplace or the State exchange. 

The delay will also give businesses time to adjust and for the 

community to work with Treasury to work out the most efficient 

and effective way to comply for the law. For 95 percent of the employers who already offer coverage to their employees, we have 

every reason to believe they will continue to do so. 

Microsoft, Amazon, Boeing, they are not going to stop offering to 

their people. 

Massachusetts saw no drop in employer coverage under 

Romneycare. In fact, in the 7 years since its implementation of universal health insurance, employer coverage has actually increased 

slightly, but more importantly, it is better for us to delay this and 

get it right than to rush and get it wrong. 

I would like to put it in a little historical context here. In 1966, 

when I was beginning my medical practice, medical workers were 

traveling door to door—Medicare workers were traveling door to 

door trying to enroll seniors with 100 million leaflets that were 

printed before the bill was signed into law or passed out of the 

Congress. 

They were already up and running. They got a jump start. They 

printed it without appropriated funds, and usually those doors 

were slammed in their face. 

The American Medical Association denounced the program as the 

first step towards socialism, and agency administrators wondered 

if hospitals would be overrun with the sick and the elderly patients 

stretching out for blocks. 

You can read this in the history. I am not making this up. This 

is what was going on in 1966. 


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The Bureau of Health Insurance began operating without oversight and often without regard to formal requirements of rulemaking simply hoping things would fall into place. Forty-seven 

years later, Medicare is the bedrock of our social safety net. It is 

the standard bearer of a Government that works, and a big part 

of what saved us then was everyone was working together to get 

it off the ground. 

Congress intentionally wrote flexible conditions and the Administration was allowed to make changes as they saw fit. They were 

willing to take chances to ensure success. 

Let’s consider the path before us. Before we burn the bridge behind us, the President is not going to reverse this decision so nothing that happens today is going to make any difference, so let’s see 

where it goes. 

More importantly, let’s remember to whom we are accountable. 

It is not pollsters or cable news anchors or the President’s campaign team. 

Our only job in this Committee is to fulfill the promise to American citizens of affordable health care. We are having this hearing 

to hear from you why this is not going to work. That is what it is 

all about. The supposition of this hearing is that it is all over, it 

is dead. 

Let’s see if that is true. I yield back the balance of my time. 

Chairman BRADY. Today we will hear from five witnesses. Avik 

Roy, Senior Fellow from the Manhattan Institute. James Capretta, 

Senior Fellow with Ethics and Public Policy Center. William Dennis, Jr., Senior Research Fellow at the National Federation of Independent Business. Sean Falk, President and Owner of WolFTeaM 

LLC, and Nachogang LLC, and Timothy Jost, the Robert L. Willett 

Family Professor of Law, Washington and Lee University School of 

Law, who is accompanied by his wife, Ruth, today. 

Mr. Roy, you are recognized for 5 minutes. 

STATEMENT OF AVIK ROY, SENIOR FELLOW, 

MANHATTAN INSTITUTE FOR POLICY RESEARCH 

Mr. ROY. Chairman Brady, Ranking Member McDermott, and 

Members of the Health Subcommittee, thanks for inviting me to 

speak with you today with the Affordable Care Act employer mandate. 

My name is Avik Roy. I am a Senior Fellow at the Manhattan 

Institute for Policy Research in which capacity I conduct research 

on health care and entitlement reform. 

In my remarks today, I will focus on three questions. First, does 

the employer mandate the Affordable Care Act achieve its goals? 

Second, what are the ramifications of the White House’s decision 

to delay the mandate by 1 year? 

Third, what would be the policy impact of H.R. 903, the American Job Protection Act, which would repeal the employer mandate 

in its entirety? 

While the Affordable Care Act strives to achieve many things, 

the law’s primary goal is to move the United States as close as possible to universal health insurance coverage. Does the employer 

mandate help to achieve this goal? My view and the view of many 

others across a spectrum is it does not. 


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According to the Medical Expenditure Panel Survey, 97 percent 

of firms with 50 or more workers already offer health benefits. 

Now, 97 percent is not 100 percent, of course, and not all firms 

that offer coverage offer it to every employee. 

The ACA’s employer mandate perversely incentivizes employers 

to avoid hiring low-income workers, precisely the type of workers 

who tend to be uninsured. As the Center on Budget and Policy Priorities put it in 2009, in essence, affected firms would pay a tax for 

hiring people from low or moderate-income families. 

The penalties associated with the employer mandate are only 

triggered if a worker is not offered what the ACA deems ‘‘affordable 

coverage,’’ and if the worker then gains subsidized coverage on an 

ACA-sponsored insurance exchange. 

As a result, employers have three incentives. First, to hire fewer 

full-time workers. Second, offer so-called ‘‘unaffordable coverage’’ 

for which the penalties are lower. Third, hire illegal immigrants or 

workers from high-income families who are not eligible for exchange subsidies. 

For the Affordable Care Act, low-income individuals would still 

be able to gain subsidized health insurance but they will be tagged 

with a Scarlet ‘‘S’’ for gaining those subsidies, because to employers, hiring subsidized individuals will be far more costly than hiring unsubsidized ones. 

A 1-year delay of the employer mandate does give the Administration more time to implement the law, but a delay does not fundamentally alter the perverse incentives I have just described. It 

simply gives employers an additional year to restructure their 

workforces accordingly. 

A 1-year delay does, however, impact other important provisions 

of the ACA. In order to gain eligibility for exchange subsidies, an 

individual must prove he has not been offered ‘‘affordable coverage’’ 

from his employer. 

Now that the reporting requirements of the employer mandate 

have been delayed, it may be difficult for him to establish that. 

Hence, it appears that CMS will rely on applicants’ attestations, 

the so-called ‘‘honor system,’’ to dispense subsidies in some cases. 

Similarly, the ACA’s individual mandate only works if the Government can verify whether or not a worker is full-time or parttime, whether he has been offered affordable or ‘‘unaffordable coverage,’’ or none at all. 

H.R. 903, the American Job Protection Act, is a bipartisan bill 

that was introduced last February by Dr. Boustany and others and 

referred to this Committee. It would repeal the employer mandate 

by striking the relevant sections of the Internal Revenue Code and 

the Affordable Care Act. 

Repealing the employer mandate would eliminate the perverse 

incentives I described earlier. Most importantly, it would encourage 

the transition away from costly, inefficient employer-sponsored coverage, and towards portable, individually owned insurance policies. 

As you all know, economists have long advocated for this transition and repealing the employer mandate would go a long way toward achieving it. In this way, H.R. 903 could emerge as a major 

policy advance. 


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Some analysts have raised concerns that such a transition would 

be costly due to the increased spending on exchange subsidies that 

would result. However, in March 2012, the CBO estimated that if 

an additional 14 million workers moved from employer based to exchange based coverage, the deficit would actually decrease by $13 

billion over 10 years. This is because the increase in exchange subsidies is offset by a reduction in lost revenue from the tax exclusion 

for employer-sponsored insurance. 

It will be important for H.R. 903 to be adjusted in order to take 

into account its impact on the disbursement of subsidies in the individual mandate. 

The individual mandate, for example, could be replaced with a 

more limited open enrollment period for participating in ACA certified insurance plans. This would achieve the individual mandate’s 

goal of curbing adverse selection without the mandate’s intrusiveness or constitutional injury. 

I will conclude by recalling that Scarlet S. We all want an economy in which those at the bottom of the ladder have the opportunity to find gainful employment and good health. The employer 

mandate harms those it is intended to help. Instead of delaying it, 

we should repeal it. 

Thanks again for having me. As an addendum to my written testimony, I have included three articles from Forbes in which I further expand on these issues. I look forward to your questions and 

to being of further assistance to this Committee. 

[The prepared statement of Mr. Roy follows:] 


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Chairman BRADY. Thank you. 

Mr. Capretta. 

STATEMENT OF JAMES C. CAPRETTA, SENIOR FELLOW, ETHICS AND PUBLIC POLICY CENTER, AND VISITING FELLOW, 

AMERICAN ENTERPRISE INSTITUTE 

Mr. CAPRETTA. Mr. Chairman, Ranking Member McDermott, 

and Members of the Subcommittee, thanks for the opportunity to 

be here today. 

The decision by the Administration to abandon the employer 

mandate for 2014 and to allow applicant income attestations in 

some instances were only announced last week. It will take some 

additional time before the full implications are known. 

Nonetheless, in my testimony, I will try to provide some initial 

observations about what they might mean. Technically, the Administration did not announce a delay in the employer mandate. What 

was announced was an 1-year delay in the reporting requirements 

necessary to enforce the mandate. 

The Administration simply noted in its announcement that the 

delay in collecting the relevant data would necessarily mean a simultaneous delay in determining which employers owed shared responsibility payments. Thus, the entire employer mandate structure was put off for a year through the back door of an administrative decision to not collect information. 

Some have questioned the Administration’s legal authority to 

take this action. It is certainly clear that what the Administration 

is doing is not consistent with the intent of the statute Congress 

put in place to mandate and a reporting system to enforce it to 

begin in 2014, not 2015. 

I am not a lawyer. I will leave it to others to debate whether the 

Administration can stretch the meaning of the words in the statute 

to justify what they are doing. 

I would only note that no one has yet disputed that it is clearly 

inconsistent with what Congress intended. 

The employer debate is terribly flawed policy. It is harmful to 

lower-income workers, to job growth, and to the strength of the 

broader economy. The structure of the mandate’s effects on employment and job growth are well known. They were obvious even before enactment. 

For starters, the law exempts any employer with under 50 workers from the mandate’s requirements. Not surprisingly, firms are 

adjusting to stay beneath this 50-worker threshold. Exactly what 

we do not need in the current economy. 

The structure of the mandate’s penalties, as already mentioned, 

provides powerful incentives for employers to avoid hiring lower income workers. 

For instance, if you are a restaurant and you have the option of 

hiring a worker who you were going to pay low wages to from a 

middle-class neighborhood or a lower-income neighborhood, you 

might pick the middle-class neighborhood because the probability 

is they would be less likely to draw subsidies under the exchange 

and therefore induce a penalty on the employer. It creates a terrible bias in the law. 


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The law also exempts part-time workers from the penalty structure and establishes 30 hours per week as the upper limit for determining which workers are considered part-time. 

We have seen story after story around the country now about 

firms adjusting and even local governments adjusting to push their 

workers below this 30-hour per week threshold. 

In addition, it was known in advance of enactment that the employer mandate as designed in the healthcare law would be terribly 

burdensome to enforce. 

Former Congressional Budget Office Director Robert Reischauer 

made this point publicly to a meeting of journalists in 2009, stating 

it would be an immense hassle on the administrative front as he 

urged a different approach. Last week’s announcement made it 

clear that he was absolutely right. 

The Administration’s decision not to enforce the mandate does 

not alter these problematic effects. Employers that are today hesitant to hire workers to go above the 50-worker threshold or to 

move their part-time workers above 30 hours a week are not going 

to turn their plans upside down based on an 1-year delay. 

The recent unilateral decisions by the Administration will have 

significant budgetary consequences. CBO estimated that the employer penalties were supposed to generate $10 billion in 2015 

based on reporting in 2014. It is hard to imagine they are going 

to collect that $10 billion now. In fact, I assume it is gone. 

Moreover, it is quite clear that the whole structure for enforcing 

the employer requirements has now been put into question. If you 

listen to the employer community, they say it is basically unworkable and will never generate the income it was supposed to generate. 

In CBO’s original estimate, they assumed $140 billion from these 

employer payments. Does anyone believe we are going to collect 

that much money from something that is so controversial? 

Finally, the reliance on income attestation, in some instances in 

the exchanges, is very likely to result in more erroneous payments. 

In 2012, according to the Treasury Inspector General for Tax Administration, the Federal Government paid out up to $13.6 billion 

in erroneous EITC payments, a system that has many more data 

checks, also has been in place for more than two decades, and has 

lots of enforcement tried to be built into it, and probably less complicated than the premium credits in the healthcare law. 

Relying on the ‘‘honor system’’ is very likely to result in numerous and large scale erroneous payments. 

The Administration’s recent decision to delay significant parts of 

the healthcare law is an invitation to Congress to revisit the law, 

too. 

I would urge this Committee and this Congress to consider statutory delay of the employer mandate, a simultaneous statutory 

delay in the individual mandate, and a strong look at delaying the 

entire exchange process until it is clear that the data systems protect taxpayers. 

Thank you. 

[The prepared statement of Mr. Capretta follows:] 


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Chairman BRADY. Thank you. 

Mr. Dennis, you are recognized. 

STATEMENT OF WILLIAM J. DENNIS, JR., SENIOR RESEARCH 

FELLOW, NATIONAL FEDERATION OF INDEPENDENT BUSINESS 

Mr. DENNIS. Thank you, Mr. Chairman. My name is William 

Dennis. I am a Senior Research Fellow at the NFIB Research 

Foundation. 

When you are ill prepared, as a general rule, it is advisable to 

delay, postpone or even cancel. In this case, small business people, 

small business owners certainly are receptive to the delay. 

There has certainly been no information or certainly inadequate 

information for them to make the decisions, which are necessary to 

operate under this program. 

The delay, however, changes nothing, just kind of delays it, 

moves it back a year, including small business reticence to hire and 

to invest. 

The exception, of course, is the diminished confidence in the ability of this Administration and perhaps any administration to get 

something of this size done correctly or even to do it at all. 

Let’s assume for a moment that everything gets straightened out 

next week. There is guidance, rules, and all that sort of thing, and 

obviously that is not going to happen, but let’s make that assumption. 

Small business still has a major information problem. Small 

business owners get their information generally through secondary 

channels. Secondary channels are accountants, lawyers, and 

Websites of trade associations, so on and so forth. 

That means that in order to inform the small business population generally, it is a two-step process. You have to educate the 

educators. The educators then in turn will educate the population. 

Quite frankly, if we are looking at 2015, January 1, 2015, they 

are still going to have to hustle to get information out to small 

businesses that will help them with compliance issues. That says 

nothing for any recordkeeping that they are going to have to start 

with on January 1, 2014, depending on how the rules are subsequently interpreted. 

As I mentioned, the substantive issues really have not changed. 

They are the same, they are just moved back a year. I have identified five that I would just like to mention, although there are some 

others I am sure others would highlight. 

The first obviously is the full-time/part-time issue, the 35 hours/ 

30 hours. I am not sure I know of anyone who disagrees this has 

become a real problem and a real disincentive to hiring. 

Parenthetically, some would argue that only 3 percent of small 

businesses are affected by this employer mandate. This provision 

alone shows that number is silly because this provision will affect 

literally hundreds of thousands if not millions because those with 

and those without are going to have to consider this when they 

make their decisions on health insurance. 

The second is the so-called ‘‘look back rules.’’ This effectively is 

going to require enormous amounts of paperwork because they are 

going to have to start keeping hourly records on salaried employees. 


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Fifty-five percent of small businesses have at least some salaried 

employees. They are not keeping hours now. They do not have systems in place. They would not normally have systems in place to 

do this. 

Clearly, if we were going to look at these people on an hourly 

basis to qualify as full-time employees, they are going to have to 

have hourly records, which is a massive new recordkeeping problem. 

The determination of affordability is number three. I am not 

really sure what to say because we never had any rules, proposals, 

and it looks like it may be difficult but who knows. That is really 

up in the air. 

Number four are the business aggregation rules, and this is the 

sleeper. This is the one that I think has huge potential significance 

and for two reasons. Many owners have more than one business, 

many businesses have more than one owner. What combination or 

combinations constitute a single entity? 

Now we get to the second problem. This has been answered by 

putting these combinations under the ERISA rules. The ERISA 

rules are some of the most complicated rules known to mankind. 

In fact, there is only a very small segment of the legal population, 

employee benefit group that can even interpret this thing. 

Here you may have as many as 100,000 businesses needing some 

type or should have some type of interpretation, understanding or 

whatever, and only a very, very small community is going to be 

there to satisfy that. 

Last, five, the mandate per se, it is a relic in a sense. It is tied 

to health insurance. It ties health insurance to employment. We 

should be going exactly in the opposite direction. Effectively, we are 

freezing the past when we should be looking to the future. 

Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Dennis follows:] 


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Chairman BRADY. Thank you, Mr. Dennis. 

Mr. Falk, you are recognized. 

STATEMENT OF SEAN FALK, PRESIDENT AND OWNER, 

WOLFTEAM LLC, AND NACHOGANG LLC, ON BEHALF OF THE 

INTERNATIONAL FRANCHISE ASSOCIATION 

Mr. FALK. Chairman Brady, Ranking Member McDermott, and 

Members of the Subcommittee, thank you for your invitation to testify at today’s hearing. 

I am honored to speak with you regarding the Affordable Care 

Act. I believe my role as a franchise/small business owner gives me 

an unique perspective that is not heard often enough in Washington. 

Franchise/small businesses have been particularly affected by the 

Affordable Care Act, and I hope to express the concerns of myself 

and that of our industry as a whole. 

My name is Sean Falk and I own and operate 12 franchise business units. As a former United States Marine, I understand the demand for hard work. As a business owner, I had the luxury of 

working any 80 hours of the week that I choose. With 43 full-timeequivalent employees, I am a proud participant in a diverse franchise community, which supports nearly 18 million jobs. 

You may recognize some of the businesses I operate, Salsarita’s 

Fresh Cantina, Great American Cookies, Mrs. Field’s Cookies, and 

Pretzelmaker. 

I bought my first franchise in 1998, and through 2008, I was 

opening on average more than one location per year. I am also a 

member of the International Franchise Association, and I am here 

today to represent the Association and the entire franchise community. 

Government actions play an important role in my business decisions. As a business owner, I cannot make future business plans 

when Congress plans and extends regulations for only 1 year at a 

time or changes them with only 6 months before implementation. 

While my fellow small business owners and I applaud the Administration for delaying the implementation of the employer mandate due to the continued ambiguity of the law and its compliance 

requirements, it does not solve the fundamental problems associated with the ACA and its impact on business operations and future job growth. 

We have to plan well in advance for significant changes in the 

law. Receiving key regulations less than 3 months before a new requirement goes into effect does not provide ample time for employers and small business owners to successfully adapt their businesses to remain economically stable. 

Implementation of the Affordable Care Act has presented an 

enormous challenge to me as a small business owner. Navigating 

the constant changes, waivers, extensions, regulations and clarifications of an already cumbersome law has diverted my focus from 

developing my business and creating new jobs. I am facing the legalities of healthcare exchanges, the employer mandate, and fulltime equivalents, whether it is in 2014 or 2015, all of these tasks 

take me away from my core mission of growing my business. 


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There are very few Government resources to guide small business owners through this process. 

The franchise industry has two specific changes that could be 

made to the ACA to help small business owners like myself comply 

with the law without hurting our businesses. 

Number one, increase the 30-hour threshold that qualifies an 

employee as full-time to 40 hours a week. Second, increase the 50 

full-time-equivalent employee threshold that requires employers to 

provide coverage to full-time employees. 

Currently, I employ 43 full-time-equivalent employees. If my 

business grows and I create jobs, I will also drastically increase my 

costs due to the employer mandate. This has an undeniable impact 

on my bottom line, which is my livelihood as a business owner, and 

it is making me reconsider opening new locations. 

Also, I may be forced to reduce my employees’ hours to less than 

30 hours per week so that they do not require full-time status 

when I do expand. 

With these challenges and changes, I fear it may be a struggle 

just to keep the doors open on my 12 existing businesses. 

I would relish the opportunity to grow my business, but the recent Government regulatory burdens placed on my small businesses and the uncertain economic climate have given me reason 

for pause. 

I have to weigh the pro’s and con’s of the ACA before deciding 

on future growth. I hope policymakers will consider focusing their 

energies on addressing the burdens small business owners face 

within the employer mandate, whenever it is implemented. 

It is time to address these fundamental challenges facing our industry that are keeping small business owners and entrepreneurs 

on the side lines and from creating new jobs. 

Thank you for the opportunity and I look forward to answering 

any questions you may have. 

[The prepared statement of Mr. Falk follows:] 


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Chairman BRADY. Thank you. 

Mr. Jost, you are recognized. 

STATEMENT OF TIMOTHY STOLTZFUS JOST, ROBERT L. 

WILLETT FAMILY PROFESSOR OF LAW, WASHINGTON AND 

LEE UNIVERSITY SCHOOL OF LAW 

Mr. JOST. Thank you for this opportunity to address you today. 

You have now heard 20 minutes of criticism of the Affordable Care 

Act and I have 5 minutes to respond. I wish I had 20 minutes to 

respond because a lot of what has been said is inaccurate and a lot 

of questions that have been raised have answers. I will try to confine my remarks. 

On January 1, 2014, millions of uninsured and uninsurable 

Americans will become eligible for coverage under the Affordable 

Care Act. The ACA expands coverage through five major mechanisms. 

These are the premium tax credits, which will make care affordable to millions of lower- and middle-income Americans, expand 

Medicaid for lower-income Americans, which in spite of the Supreme Court’s decision will still extend Medicaid coverage to millions next year. 

Provisions that protect Americans from preexisting conditions 

from being denied insurance or charged higher premiums, the individual responsibility provision that asks Americans who cannot afford health insurance to purchase it or pay a tax, and finally the 

employer mandate, which requires large employers to offer affordable and adequate coverage to their full-time employees or risk facing a tax penalty to offset the cost the public will incur of covering 

their employees. 

Ninety-five percent of employers with 50 or more employees already offer health coverage in the absence of a mandate, but this 

mandate is there to encourage employers to maintain or expand 

coverage and discourage them from dropping it. 

On January 2, 2013, the Treasury Department announced it was 

delaying for 1 year the ACA employer and insurer reporting requirements. Treasury had heard from businesses, and I think we 

have heard this morning, that they needed more time to comply. 

Because it is impractical to implement the mandate without the 

reporting, enforcement was delayed until 2015. This decision raises 

four issues. First, was it legal. 

ACA’s employer responsibility provisions do have an effective 

date of January 1, 2014. The reporting requirements, however, 

apply ‘‘At such time as the Secretary may prescribe.’’ 

Also, the ACA requires the IRS to assess and collect penalties in 

the same manner as penalties under Chapter 68 of the Internal 

Revenue Code, and the IRS frequently abates Chapter 68 penalties. 

The IRS claims authority under Section 7805 and points to a 

long history of both Republican and Democratic Administrations 

delaying implementation of tax provisions when time and resource 

constraints have made immediate implementation impractical. 

A second question is whether delay jeopardizes the implementation of other ACA requirements, particularly provisions dealing 

with eligibility for premium tax credits. 


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The law was never intended—exchanges were never intended to 

rely on insurer and employer reports, which are supplied long after 

tax credits are granted, to determine an applicant’s employer coverage. 

In a final rule released last Friday, the Administration set out 

a system for gathering and verifying information needed to determine individual eligibility. It is described in my written testimony. 

I would be happy to explain it in as great length as you would 

please. 

It is not an honor system. Much of our tax reporting system is 

a honor system. This is not an honor system. Furthermore, false 

reporting carries a $250,000 fine and is a felony. 

The third question is whether the delay is justifiable from a policy perspective. The announcement was greeted favorably by a wide 

range of business and insurance interests who were concerned 

about the complications of reporting. The moratorium should allow 

employers and insurers to adjust their IT systems to make reporting possible beginning in 2015. 

In the meantime, employers will know how many of their employees if any are getting premium tax credits and will have time 

to adjust their coverage offering’s to make sure they are in compliance by 2015. 

There is little evidence that employers will rush to exit employee 

coverage in the meantime. All the many reasons employers have 

for offering coverage today will continue to exist and the lack of one 

more incentive is not going to drive them to drop coverage. 

Finally, will the delay otherwise impede the implementation of 

the ACA. Congress in 2010 gave the Administration an enormous 

task, preserving our current employment and private-insurancebased system while modifying it to serve all Americans. 

This Congress has made that task immensely more difficult by 

starving the Administration of the resources they need to do this 

task. The Administration continues to reiterate that the most important reforms, the premium tax credits and the exchanges, will 

be fully functional by January 1, 2014, and I know of no evidence 

to the contrary. 

Delaying the less essential employer mandate will make the Administration’s job easier, not harder, and is likely to minimize potential confusion for employers and employees alike. 

If you actually care whether ACA implementation will help your 

constituents, take action immediately to appropriate the money 

needed to get the job done. If you are not willing to help with the 

job of ACA implementation, you have no standing to complain of 

delays. 

Thank you. 

[The prepared statement of Mr. Jost follows:] 


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Chairman BRADY. Thank you. I have questions for Mr. 

Capretta, Mr. Roy and Mr. Falk. Mr. Capretta, you talked about 

fairness in your testimony that you submitted to us, that if the employer mandate is going to be delayed, it will only seem fair if the 

individual mandate is as well. Why should large companies be relieved of the responsibilities but not workers. 

You talk about is it fair to threaten tax penalties on the uninsured under these delays. 

Can you explain why you feel that way? 

Mr. CAPRETTA. Yes. Certainly the law requires that individuals 

beginning in 2014 sign up with the Government approved insurance, either through their employer or through the exchanges, or 

they pay a penalty of the greater of $95 or 1 percent of their household income. That will be enforced in the tax system through what 

they are filing in taxes probably early in 2015. 

Look at the situation we have now, where you have many employees potentially not getting an offer of coverage from their employers because the employer requirements have now been suspended for a year. Moreover, we do not know if they were offered 

coverage through their employer. 

Moreover, in many of the exchanges around the country, in at 

least one State, only one plan is being offered, and in many States, 

maybe two plans being offered, so the choices are going to be quite 

limited. 

Is that the circumstances upon which you want to start imposing 

on many lower income families a tax for not signing up for coverage? They made the judgment that the employer system was not 

ready to be enforced in 2014. It is quite obvious to me that the individual mandate is also not ready to be enforced in 2014. 

I would absolutely urge this Committee and the Congress that if 

you are going to delay one, you should delay both. 

Chairman BRADY. Thank you. Mr. Roy, if ObamaCare is not 

ready for businesses, is it ready for our families? You are a healthcare expert. Let’s assume it is your family, your child is ill, your 

spouse needs treatment, is ObamaCare ready for your family in 

your opinion? 

Mr. ROY. No, I would not only echo Mr. Capretta’s points but I 

would point out that the cost of coverage on the ACA exchanges is 

going to be much higher than what currently exists in the individual market for health insurance. Not only are we requiring 

through the individual mandate that individuals and families purchase insurance coverage, we are requiring them to buy coverage 

that in many cases is two to three times the cost of coverages available today. 

Chairman BRADY. For some, their healthcare costs will go up 

dramatically? 

Mr. ROY. That is correct. 

Chairman BRADY. Mr. Falk, you were not here a few years ago, 

but you are hearing history rewritten today. A few years ago, the 

employer mandate was taunted as one of the twin pillars of 

ObamaCare upon which this massive new law depended upon, and 

every effort by Republicans on this dias to eliminate the employer 

mandate was greeted with outrage, and claimed we were trying to 

gut ObamaCare. 


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Today, you hear a different story, that the employer mandate, no 

big deal, really just an after thought that has no impact on businesses like yours. In fact, what we hear today is this 1 year reprieve is the greatest thing since sliced bread. 

Is the employer mandate impacting your business and your ability to hire, and is this reprieve what you seek, this 1 year temporary reprieve, is that what you think is the solution? 

Mr. FALK. I think the 1 year reprieve really does not do anything to address the problems of the mandate itself. The mandate 

does affect me, although I am not under it right now, it does prevent me from growing my business to become even larger. As I told 

you, for 10 years, I opened up about 1.5 locations per year on average, and I want it to grow forever. Since 2008, I have really slowed 

that down. 

Chairman BRADY. For every one of those, how many people are 

you hiring when you have a new franchise? 

Mr. FALK. Each location is anywhere between 10 and 25 people, 

probably about three of those people on average are full-time, the 

rest are part-time. I am in a business where I have a lot of firsttime employees, high school or college people or people who are 

just trying to make ends meet by getting a part-time job. The fulltimers are not as numerous as the part-timers. 

Chairman BRADY. For you, the employer mandate is not a small 

thing? 

Mr. FALK. It is not a small thing at all. I have been nominated 

and selected as Franchisee of the Year many times, and I am very 

engaged with my franchise system. I am very engaged with the 

IFA. I am very engaged in business in general. 

I am embarrassed to say that I really have no idea about the employer mandate and where to find information. I do not know how 

to report, where to report, what the requirements are. It is coming 

up, I know that. I still do not have any information on it. I am 

upset to know that I have to worry about all these things rather 

than just grow my business and provide jobs. This takes up all my 

time now. 

I do not want to call out Mr. McDermott but he said on the 4th 

of July, he did not spend his 4th of July worrying about the announcement and the changes, well, I did, as a business owner, I 

worked on the 4th of July. I worried about it. I fielded calls from 

other franchisees asking what this meant on the 4th of July. 

Chairman BRADY. Thank you. I would just point out, I appreciate Mr. Jost being here, but the IRS, the tax system, is not an 

honor system. At least the IRS uses $10 billion a year to enforce 

that honor system. 

The claim that the Administration has been starved just has no 

basis in fact. In fact, HHS used $8 billion to create out of thin air 

a bonus program for Medicare Advantage, to postpone the cuts before the election. I just wonder if they would like to have that $8 

billion that they squandered back, now that they are claiming they 

do not have the ability to implement. 

Mr. JOST. Can I respond to that? 

Chairman BRADY. Sure. 


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Mr. JOST. With respect to the first question about the tax system being an honor system, certainly some parts of our tax system 

are covered by reporting, but many parts are not. 

I would remind you that this Congress repealed the 1099 requirement, which was supposed to take small businesses, or businesses off the honor system with respect to reporting purchases of 

goods of more than $600, and the CBO projected that lost $22 billion in revenue by putting businesses on the honor system. 

The tax gap in the United States in 2006 was estimated to be 

$385 billion of uncollected taxes. Those taxes were uncollected because we do essentially have an honor system for many parts of 

our—— 

Chairman BRADY. What we are learning from the IRS investigations is our agents apparently are spending all their time pursuing 

political agendas rather than enforcement of our current law. 

Again, ObamaCare and HHS squandered $8 billion on a program 

they made out of thin air and got hammered on because they 

squandered that. 

Again, back to the issue here, is it fair to demand that businesses—that workers and their families have a Government mandate when we have given a reprieve for businesses. 

Dr. McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. It strikes me that 

the issue here is basically not about the delay because the businesses asked for the delay and the Government gave it to them. 

That is off the table. 

The real issue here is whether you want ObamaCare or not and 

are you going to do it, and are you going to have any kind of mandates in it. 

From the very start, everybody has understood that for a system 

to work, you have to have everybody in. Justice Scalia in his oral 

questioning on this case in the Supreme Court when talking about 

the mandatory coverage provisions said, ‘‘My approach would be 

say if you take the heart out of the statute, the statute is gone. 

There is going to be a deficit that is to be made up by the mandatory coverage provisions.’’ 

All that money has to come from somewhere, so you just are put 

to a choice, I guess, bankrupting the insurance companies and the 

whole system comes tumbling down, or else enacting a Federal 

subsidy program which is what the insurance companies would 

like. 

It is clear there is a difference between the employer mandate 

and the individual mandate. The individual mandate is the core of 

the issue. If we do not require Americans, we are going to continue 

to have people who are free riders, who walk into the emergency 

room, get taken care of, and you and I who have insurance pay for 

it, $1,000 a year. What this system is doing is saying let’s everybody pay what we can. 

I listened to Mr. Falk and I am really sorry that you had such 

a bad weekend. Healthcare.gov is on the computer. You can look 

in there. There is a section for small business. I am sure you have 

looked at it already and you can read, obviously, so you know what 

is there. 


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Mr. Jost, explain what is really going to happen to individuals 

when this law is implemented or in January, as people enroll from 

September or October 1 to January, what is going to happen to 

them? 

Mr. JOST. Thank you. One thing I would like to point out to 

begin with is the individual mandate is already being phased in, 

so if we are trying to level the playing field that is what HHS is 

doing. 

The first year of the sanction for not complying with the indi- vidual mandate is $95, and again, that is only if you do not fit into 

one of the many exemptions to the rule or you can afford health 

insurance otherwise. 

It then phases up over 3 years. Well, we are essentially doing the 

same thing now for businesses. We are saying you do not have to 

comply the first year, but you do have to get serious about compliance after that. 

As far as leveling the playing field, that is in a sense what the 

Administration is doing, although I am not sure I appreciate the 

way they did it. 

In terms of what happens now, on October 1, the exchanges are 

going to open their doors. People who cannot afford health insurance, people who find insurance unaffordable, people who are ineligible for Medicaid, can show up at the exchanges and sign up. 

There are going to be many insurers, insurance agents and brokers 

and navigators and community assistors, enrollment counselors 

and others trying to get them in that door. 

I have a good friend at church who a week ago discovered that 

she had a big lump on her back. She went to see a doctor in the 

emergency room. The doctor said it could be cancer, I can operate 

on it, but you will have to pay me a quarter of my fee up front. 

She is uninsured. As of January 1, she is going to be able to get 

health insurance. She is going to be able to get health insurance 

she can afford. She will be able to get medical care. That is what 

is going to happen. 

On the individual mandate—— 

Mr. MCDERMOTT. How will they go about verifying whether 

she is eligible for a subsidy or not? 

Mr. JOST. She will go to the exchange, and this is what came 

out in the rules, and I frankly spent 18 hours on Saturday reading 

the 600-page rule. 

Mr. MCDERMOTT. Thank you. 

Mr. JOST. If anybody wants to know what it says, you can go 

to my blog at HealthAffairs.org, and it is there. 

The way the verification system works for income is the first 

thing, the exchange will log into the data hub, which will have information from the IRS, from Social Security, from Homeland Security. It will verify that the person is a citizen or legal resident, and 

the amount of income they reported the prior year. 

If the income is essentially the same, there is not a problem. If 

they are reporting now my income has significantly decreased, the 

Federal exchanges, which will operate in two-thirds of the States, 

will ask for verification of that. 

The State exchanges for the first year have the flexibility of instead doing a statistical sampling, so they will for a sample of the 


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people in the exchange, they will ask for verification of income, but 

the rest, they will not for the first year, to relieve the burden from 

the State exchanges. 

Chairman BRADY. Thank you. Mr. Jost, perhaps we can return 

to you in another line of questioning. Time has expired. Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. I hate to see a dictatorship come into this country, but it sure looks like that is what 

is happening with health care. 

Mr. Capretta, many have raised a concern of the impact of 

ObamaCare on the Federal Government and our budget and the 

criticism was there was over $1.8 trillion in spending, and many 

of the pay-fors were in fact budget gimmicks. They claimed the 

Class Act would raise $80 billion. The Administration shut it down 

because they admitted it was fiscally unsustainable. Congress repealed it. 

The 1099 reporting requirement, an outrageous reporting requirement on business, raised $22 billion. Congress repealed that. 

Both the House and Senate have voted to repeal the medical device tax because it is costing jobs and hurting medical innovation. 

That tax raised over $30 billion. 

Now the employer mandate is delayed, lost at least $10 billion 

in 2014 alone in penalties. As you point out, if this never goes into 

effect, that is another $140 billion. 

With the lack of employer reporting, there will be more errors 

and more subsidies so the cost of ObamaCare is just going up and 

up and up. 

Mr. Capretta, is ObamaCare now officially a fiscal time bomb 

and can it be considered a drain on our economy and the American 

family? 

Mr. CAPRETTA. Yes, the short answer is yes. It was always a 

fiscal time bomb. It has been made more so by the fact that the 

Administration is implementing something that was not passed. As 

you indicated, you enumerated many of the instances. There are a 

few more. 

There is a health insurance tax that was enacted as part of this 

law that applies only to fully insured products but not self insured 

plans. It is a huge distortion in the insurance marketplace, pushing 

a lot of people that probably should not self insure towards self insurance to avoid the tax. Another bad idea, it probably will not survive the long term. 

You mentioned the employer mandate. Obviously, at $140 billion, 

it looks to be in question. The individual mandate is tied to it in 

a lot of ways. They are thinking they are going to collect about $45 

billion over the next decade from the individual mandate payments. At least in the first year, I very much question whether 

they can collect $2 billion. 

You now have a system that it is hard to figure out whether people have an affordable offer of coverage from their employer. There 

is going to be a lot more people presumably in the exchanges getting subsidies that actually got an affordable offer of coverage. 

Finally, you know they cut about $700 billion out of the Medicare 

program as part of this. They essentially double counted the 


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money. They spent the money in this new entitlement program and 

they are counting on those reserves to pay future Medicare claims. 

The whole thing was built on a house of cards. It is not fiscally 

sustainable. This is one more element, I think, the announcement 

last week that shows it was built on financing that we cannot 

count on. 

Mr. JOHNSON. Docs like to get paid, you know. I am not sure 

they are going to under this system. I remember when I was stationed in England in the Air Force, as you know, they have that 

system over there. I walked into the doc’s office with my son and 

they said are you paying. I said yes. Come right in, ahead of about 

100 people that were waiting out there. That is the way you make 

health care work. 

Mr. Capretta, I think it is officially a fiscal time bomb. You said 

that. Can it be considered a drain on our economy and the American family? 

Mr. CAPRETTA. I think last week’s announcement by the Administration was a concession that it was. One thing that strikes 

me, it is quite clear that employers are going to the Administration 

and saying hey, this is costing jobs, if you look at the recent data, 

there is lots of evidence that small businesses are not growing as 

fast, they are moving people into part-time work. 

The Administration, I am sure, is hearing this from lots of people 

around the country, their allies that are trying to promote the law. 

If it was a bad idea to enforce this in 2014, I cannot imagine it 

is going to be a good idea in 2015. They are going to have a real 

problem, I think, justifying making this a permanent part of the 

law going forward. 

Yes, it is a burden on the economy and frankly I think the Administration conceded as much. 

Mr. JOHNSON. Thank you, sir. Thank you, Mr. Chairman. I 

yield back. 

Chairman BRADY. Thank you. Mr. Thompson is recognized. 

Mr. THOMPSON. Thank you, Mr. Chairman. Thank you for having today’s hearing and thanks to all the witnesses for being here. 

I do not think you can claim that anybody is excited about this 

delay. I do not like the delay any more than anybody else. I would 

suggest it is better to do the delay and to get this right than not 

do the delay and get it wrong. 

This is important stuff. I think it is important to point out that 

we did not do healthcare reform because we did not have anything 

else to do one day. We did not wake up and say nothing is going 

on, let’s do healthcare reform. 

Healthcare reform was in response to a national crisis. I do not 

think we can downplay that. We had folks who were not insured. 

We all know that. We had people that were a layoff away from having no insurance at all or a sickness away from having no coverage 

at all. That is devastating to everybody, including the business 

community. 

We had a system where we had uncompensated care costs in 

every hospital and every district across this country. Every one of 

us had millions of dollars of annual uncompensated healthcare 

costs to our medical providers and to our hospitals. The system was 

broken, and that is what we tried to fix. 


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It is important that we get it right. It is important that we insure folks. I believe that we are going to hit other snags along the 

way. I do not think there is any program of any importance where 

this is not going to be the case. 

I know that people across this country, people in my State, in 

particular in California, are working very hard to make sure that 

affordable health care and healthcare insurance are available to 

people who need it. 

Mr. Dennis, you talked about some business issues. What is your 

business? What business do you own? 

Chairman BRADY. Could you hit that microphone? 

Mr. THOMPSON. What business do you own? 

Mr. DENNIS. Excuse me. I’m a Senior Fellow with the NFIB Research Foundation. So I—— 

Mr. THOMPSON. But you had mentioned some of the challenges 

that businesses were facing. I can tell you without question the 

businesses in my district want this to work. 

And, Mr. Falk, you talked about the lack of information. Does 

your association not provide its members with help in regard to 

many different programs, including healthcare reform? 

Mr. FALK. Absolutely. I have been to 15 to 20 different conferences that we have had. 

Mr. THOMPSON. I know that local Chambers of Commerce do 

it. I know that other business associations do it. 

Mr. FALK. Yes, yes. 

Mr. THOMPSON. I have had a number of town hall meetings in 

my district for business folks. 

Mr. FALK. Yes. 

Mr. THOMPSON. For small owners to come in and get answers 

to these questions. 

Mr. FALK. But the problem, Mr. Thompson—excuse me—is that 

it—— 

Mr. THOMPSON. Excuse me. Let me. I have got a limited 

amount of time. 

It is important that you do have these answers, and it is important for all of us to make sure that we work to provide those. 

Mr. Jost, do you see this delay in the employer responsibility provision impacting access to healthcare insurance in States like California who have been working diligently to set up their exchanges? 

Mr. JOST. I do not think this will have a significant impact. I 

think the delay of the individual mandate would have a significant 

impact. 

I am a consumer representative to the National Association of Insurance Commissioners and talk to a lot of regulators and insurers, 

and they would be very, very worried if the individual mandate 

would be delayed because as weak as it is, it is what is going to 

keep insurance markets from collapsing once we open the door to 

people with preexisting conditions and offer Federal tax credits to 

help people get insured. 

Mr. THOMPSON. Mr. McDermott had mentioned that one of the 

reasons this was postponed was in response to business requests. 

I know you are not privy to discussions at Treasury, but do you believe it is fair to say that one of the reasons is that they have been 

hearing from businesses that they need it? 


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Mr. JOST. Absolutely, and I included in my testimony statement 

by, I think, six major associations, like AHIP, like the Employee 

Benefits Council, that came out strongly affirming this when it was 

announced. 

Mr. THOMPSON. And is this unprecedented? Have Administrations delayed implementation? 

Mr. JOST. Not at all. The Administration, in fact, has released 

a list of times when other Administrations, including the previous 

Administration, have delayed effective dates for—— 

Chairman BRADY. Thank you. Your time has expired. 

Mr. Ryan. 

Mr. RYAN. Thank you. 

If this is not a case for the need to simplify government, I do not 

know what is. This law is literally just unraveling before our eyes. 

I do not know how you can conclude that this is not a total fiasco. 

Mr. Falk, I want to give you a chance to respond in a second, 

but, Mr. Capretta, you are a well-known budget and policy fiscal 

expert, healthcare expert. Give me a sense of what the Administration was looking at as they saw this employer mandate unfolding 

from a perspective of what it was going to do to the economy and 

what it was going to do to health insurance markets. 

What were the actuarial estimates, the various ranges? I know 

Deloitte put out a big study as to what would have happened to 

people with employer-sponsored health insurance once this mandate came about. If you recall, the law was sold on the premise 

that if you like what you have got, you can keep it. 

And so, you know, for those of us who were here when this law 

was written, this is a law that was written which was never intended to go into law. I mean, the law as written was a Senate bill 

written basically on Christmas Eve with the intent to get into conference, then rewrite the law, fix it with the House, and then pass 

a final version. 

But because they lost a Senate race in Massachusetts, because 

they did not have the ability to go back to the Senate again and 

pass an improved version, they took the bill that they wrote in duress on Christmas Eve and shoehorned that into law, which is 

what we have today. 

And so we see all of these shoes dropping, all of this happening. 

What do you think the Administration was looking at? Because we 

will have Treasury here. We want to dig into their actuarial models 

and the rest. What were they looking at happening in the employer-sponsored health insurance market from your judgment because you look at the same numbers? 

Mr. CAPRETTA. I think they were looking at two things. If you 

go back and look in 2009 and read what Dr. Reischauer said about 

the design of this particular employer mandate, I think the Treasury Department working with the employer community figured out 

it is essentially unenforceable because of the massive data requirements they are imposing on employers all across the country. 

So they figured out, number one, this thing was way, way too 

much of a burden just to comply with it, with employers having to 

file these forms, filling out details about the insurance they were 

offering. It is a massive new burden, and employers are going to 

them saying, ‘‘You have got to be kidding me. We have to change 


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every IT system in the country to comply with this thing. It ain’t 

going to work.’’ 

I think the Treasury Department kind of figured that out, and 

they said, ‘‘Look, we cannot do this. It is going to be devastating. 

It will be a total mess.’’ 

The second thing I think they figured out is what you are alluding to, which is that, you know, they are kind of stuck at this point 

though because they have this massive subsidy system going in 

through the exchanges, and the reason the employer mandate was 

there in part was because they wanted to make sure there was not 

a huge exodus out of the employer system. Okay? 

So they put this massive system in place to say, hey, if you are 

of a certain size, you have go to report. You have got to provide the 

coverage. 

Now that that is gone at least for 1 year, they may be stuck with 

actually it is easier for employers just to dump their people into the 

exchanges. Now, you know, I am not sure that that is what they 

are—you know, there is a lot of cynicism going around about what 

they are up to here, but I really do not know if that is their game 

plan, but certainly the employer mandate was put in there in part 

to create a firewall, as they called it, around the employer system 

and not allow leakage into the exchanges, which would drive up 

the budgetary cost. 

Treasury has probably figured out that, look, the burden we are 

going to impose for 1 year on the employer system was so much 

it was going to cost jobs. It was going to be very disruptive. It was 

going to probably explode and actually not work. Therefore, you 

know, they were stuck between a rock and a hard place, and they 

picked the easy way out. 

Mr. RYAN. Yes, and so we see estimates where anywhere from 

20 to 60 million people could have lost their employer-sponsored 

health insurance over a long period of time and gotten dumped into 

the exchanges, and so we have the exchanges where we are, as Mr. 

Roy pointed out, in some cases doubling and tripling the cost of 

health insurance. So through the regulations we are imposing 

much, much higher health insurance costs on people, but we will 

subsidize them with taxpayer dollars. So make health insurance 

more expensive, and then subsidize it so the consumer does not feel 

the price as much. The taxpayer bears the burden. The employer 

has a mandate. The employer has a greater incentive to just stop 

offering health insurance to their employees. 

Most employers are sitting around the table thinking, ‘‘Well, if 

my competitor is going to drop health insurance and put their employees in the exchange, all I have got to do is pay a $2,000 per 

person, you know, tax indexed at inflation versus, you know, $10 

to $20,000 a family plan.’’ 

Once the employer makes that decision, it is not long after that 

their competitors will have to make the same decision and dump 

their employees into the exchange, and the costs are going to explode. 

Mr. Johnson walked you through the charade of the Pay-Fors. I 

cannot see that this ruling right here will do nothing more than 

further explode the cost of this thing. 


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There is so much more I could get into, but in the interest of 

time, I will not. 

Thank you. 

Chairman BRADY. Thank you. Your time has expired. 

Mr. Kind is recognized. 

Mr. KIND. Thank you, Mr. Chairman. 

I want to thank the panelists for your testimony here today. I 

think it is always helpful for us to have these discussions. 

And, Mr. Falk, I especially appreciated your testimony today, you 

know, the challenges that you are facing as a small business 

owner, but to my good friend from Wisconsin, I mean, the same 

point could be made on the opposite side. 

I was back home last week, as we all were, for the 4th of July, 

and I met with a small business owner with 55 employees. He says, 

‘‘Ron, I am glad there is an employer mandate as part of it because 

as a small business owner, when I first created this business I bent 

over backwards to make sure that my employees had affordable 

healthcare coverage, and yet right now I look down the street, and 

I have got competitors who are not doing it.’’ 

And he is providing affordable coverage with 55 employees because he thinks it is the right thing to do. It helps with recruitment. It helps with retention, and he feels it is the right thing to 

do for his employees. 

And, in fact, over 95 percent of businesses over 50 are already 

providing coverage even though there is no requirement for them 

to do so because they have made a business calculation that it is 

in their best interest for recruitment and for retention and because 

it is the right thing to do to try to provide healthcare coverage. 

So I think the same argument can be made on the other side. 

Mr. Falk, you said you have 43 employees. Are you right now providing healthcare coverage for them? 

Mr. FALK. Actually I have over 100 employees. It is 43 full-time 

equivalents, and, yes, I do provide for my full-time employees. I do 

not think the argument is there, the argument that you made. I 

think the argument is more the Band-Aid and the reporting requirements. 

Mr. KIND. But you are currently providing coverage for yours? 

Mr. FALK. For the full-timers, yes. 

Mr. KIND. Let me just ask the panel right down the line a simple question. Mr. Roy, what is your recommendation for this Congress, to fully repeal the Affordable Care Act or to fix certain features of it to make it work better? 

Mr. ROY. I think that repealing and replacing the Affordable 

Care Act would be an optimal policy outcome. 

Mr. KIND. Mr. Capretta, what is your recommendation, to fully 

repeal or to fix? 

Mr. CAPRETTA. I am for repealing and replacing it. 

Mr. KIND. Mr. Dennis, what is your recommendation to the Congress? 

Mr. DENNIS. Repeal and replace. 

Mr. KIND. Mr. Falk. 

Mr. FALK. If it does not get replaced enough, repeal it. 

Mr. KIND. Mr. Jost. 


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Mr. JOST. I think that there are some things that need to be 

fixed, and I think they can be fixed if this Congress would set its 

mind to that task. 

Mr. KIND. My dad probably gave me the best political advice as 

a young kid growing up. He said, ‘‘Son, you are going to face two 

critics in life, people who criticize you because they want to see you 

do better and those who criticize you because they want to see you 

fail.’’ 

I think that is the major obstacle that the Affordable Care Act 

faces today, is there is so much opposition for political reasons 

alone to see that this thing fails and not whether it is going to help 

small business or help Americans throughout the country, and that 

is the real tragedy with these type of hearings and the discussion 

that we are having under the Affordable Care Act today. 

Mr. Dennis, you are a representative of the NFIB. Every year I 

introduce the SHOP Act, which became the basis of the health insurance exchanges. The NFIB was fully supportive of it. We did not 

have an employer mandate as part of the legislation, but when I 

introduced the bill there were an equal number of Republicans and 

Democrats that supported it. 

And now, Mr. Jost, we have had seven States now report back 

on what the rates would be for small businesses entering the 

SHOP exchanges, and they are coming in below what current rates 

are, and it is because what the exchange does is it sets up competition and transparency, finally empowering small businesses to 

have the same type of leverage that large businesses have today. 

Mr. Dennis, do you know what percentage of your membership 

at NFIB have 50 or fewer employees? 

Mr. DENNIS. Fifty or fewer? 

Mr. KIND. Yes. 

Mr. DENNIS. Probably dealing with about 85 percent, something 

like that. 

Mr. KIND. I have got a chart. I guess we ran it off, your membership list in that, but it showed those with 40 or more employees 

is roughly a little bit less than 7 percent of your members. 

Mr. DENNIS. Yes. 

Mr. KIND. So around 93 percent of them are below 50 employees. 

Mr. DENNIS. That is correct. 

Mr. KIND. So they are not even going to be impacted right now 

on the employer mandate; is that right? 

Mr. DENNIS. No, that is not correct. 

Mr. KIND. And what type of information are you sending out to 

those members in regards to the Affordable Care Act today? 

Mr. DENNIS. Well, we have basically a whole series of programs 

where we try and disseminate information to the members, printed 

as well as calling and conference type things. We send staff out. 

Mr. KIND. Good. I am glad you are doing that because there is 

a whole lot of misinformation being sent out misinforming people, 

I think, deliberately again to scare them and to make sure that 

this legislation fails. 

Mr. Falk, are you also a member of NFIB? 

Mr. FALK. No, I am not. 

Mr. KIND. Okay. 


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Mr. FALK. Sorry. 

Mr. DENNIS. That is all right. 

[Laughter.] 

Mr. KIND. I did not want to put you on the spot next to Mr. 

Dennis at all now, but Mr. McDermott did point out we have got 

healthcare.gov. We have got SBA.gov. There are a lot of sites that 

small businesses can go to get just the facts, and that is what I am 

hearing from folks back home more than ever. We just want the 

facts of what is happening and what we need to do to prepare for 

what is coming up. 

And so if we can just focus on that and have honest conversations like we are trying to have today, I think all of us would be 

much better off. 

Thank you, Mr. Chairman. 

Chairman BRADY. Your time has expired. 

Mr. Nunes. 

Mr. NUNES. Thank you, Mr. Chairman. 

I will just say that Republicans want health care to be successful. They want the American people to have good quality health 

care, and what we see this as is not about some political issue 

about having the bill fail. We see this as definitely something that 

leans toward socialism, and socialism has been known around the 

globe to fail time and time again. 

So I remind my friends on the other side of the aisle, as you may 

remember from the 2010 debate, these were the claims that we 

were making, was this was trying to centralize the healthcare system in Washington which has failed around the globe. 

We want to improve health care. Now, I have a question that I 

am going to give to Mr. Capretta and to Mr. Jost. I do not know 

what part of the law the Administration is using to allow to just 

say that this mandate on the employer side can just be ignored, 

and I do not know why my friends on the other side of the aisle 

are not insisting that the letter of the law is followed. 

So Mr. Capretta, do you know what waiver that they used, what 

part of the Affordable Care Act or ObamaCare was used? What are 

they citing to essentially waive this requirement? 

Mr. CAPRETTA. In the blog post that has been referenced, they 

cite the reporting requirements is where they are going for a delay. 

So they are not actually going into the structure of the mandate 

itself to say it can be delayed. They are going to the section that 

requires employers to report on what they are doing regarding 

health insurance. 

But there has been an inquiry sent by your leadership in the 

House to the President and his team asking that very question. I 

think they have been asked by the press, and they have not responded yet. So I do not know. There has been no official response 

from the Administration about their legal reasoning about how 

they could do this. 

Mr. NUNES. What is your personal opinion, Mr. Capretta? 

Mr. CAPRETTA. My personal opinion is that—well, I am not a 

lawyer. Let me stipulate that. Mr. Jost is a lawyer. So he can answer some of the questions about the legal part of it, but I think 

it is quite obvious on its face this is not what Congress intended. 

Whatever the legal, you know, however they might stretch some of 


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the statute to say, ‘‘Well, you know, we can interpret this,’’ this is 

not what was intended. 

I mean, obviously the employer mandate was supposed to go into 

effect in 2014. They established a reporting system that was supposed to go into effect in 2014. If you read the statute, it is pretty 

obvious that is what was intended, but you know, I do not know 

whether they can stretch the language to do something different. 

Mr. NUNES. Thank you, Mr. Capretta. 

Mr. Jost. 

Mr. JOST. There was a CRS report on this yesterday, and it referenced an earlier CRS report that referenced the Trap case, which 

is the leading case in this area. 

The IRS is relying on its general rulemaking authority, and what 

the Trap case said, which is a D.C. Circuit case which is the leading case in this area, is that when a question rises as to whether 

an Administration can delay enforcement of a law, it is subject to 

a rule of reason. Where Congress had provided a timetable or other 

indication that may supply content, although in the D.C. Circuit 

and several other circuits the courts have held that that does not 

make an absolute requirement. 

But other things that can be considered are whether it would 

damage human health and welfare, whether the court should consider the expediting delayed action or other agency activities of the 

higher and competing priority, in other words, resource constrained; what are the interests that would be prejudiced by the 

delay. 

So I think looking at the judicial legal authority here, I think 

that they do have some room. 

Mr. NUNES. Okay. So unions have been granted waivers. Other 

special interests have been granted waivers. Now you have done an 

employer waiver. Why can you not do an individual mandate waiver? 

Mr. JOST. Well, in fact, in the first place, I am not sure what 

you are referring to with respect to unions. There was a waiver 

that was included in the statute for a delay of the annual limits 

requirement, and some unions received a delay under that, although a lot of businesses did as well. 

Mr. NUNES. So let me—— 

Mr. JOST. Can I just finish? 

Mr. NUNES. Can the White House grant an individual waiver? 

That is my question. 

Mr. JOST. The statute—— 

Mr. NUNES. For an individual mandate. 

Mr. JOST. The statute permits a hardship waiver and in regulations that were published about a week or two ago, the Administration interpreted that very broadly. There will be many, many people who will qualify for a hardship waiver, but of course, there are 

already, I think, seven or eight other exemptions, including an exemption for everybody who cannot afford coverage. 

So the individual mandate has been very widely misunderstood. 

It is not a requirement that applies to everyone. 

Mr. NUNES. So why not just do an individual mandate waiver 

also at the same time? 


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Mr. JOST. Because people who can afford health insurance ought 

to buy health insurance. They ought not to wait until they get sick 

and then assume that their neighbors will take care of them. It is 

an individual responsibility requirement, is what it is called. 

Mr. NUNES. Mandated by the government. That is not individual—— 

Mr. JOST. Yes, just like—just like—— 

Mr. NUNES [continuing]. Responsibility or individual liberty. 

That is socialism. 

Mr. JOST. Just like government requires that you get car insurance. 

Mr. NUNES. Yield back. 

Chairman BRADY. All time has expired. 

Mr. Pascrell. 

Mr. PASCRELL. Yes, Mr. Chairman. 

When all else fails, then you have got to send up the red flags: 

socialism, apocalypse now. And we heard it again just recently. 

Well, I resent the fact that, first of all, you accused those folks 

who sat hour after hour in putting the legislation together of doing 

a Christmas Eve swing. Months after months, listened to many 

people on this issue. 

Is this perfect? There is not a piece of legislation that ever came 

through this body that was perfect. So we need change. You cannot 

deny that ObamaCare—we will use your term—is helping millions 

of Americans. Do you want chapter and verse? I will give it to you. 

You cannot deny that most employers offer health insurance 

even without a mandate, and small businesses will be exempt. 

You have no ideas on health reform yourself. In fact, those you 

put before the Congress your own party rejected. So you cannot 

have it both ways. 

More important, more important, it is better to be right than 

fast. And, Sam, you know that better than anybody on this panel. 

Things change. Things need to be corrected. So, Mr. Falk, when 

you say that the information is not existing, I will give you the information. We have got it in print now. 

Mr. FALK. I did not say it did not exist, sir. 

Mr. PASCRELL. Well, it is here. 

Mr. FALK. I agree. 

Mr. PASCRELL. It is interesting. In fact, on the first page of the 

regulations that you referred to, you have not looked at anyway. 

It is a very interesting part of this legislation, the medical loss 

ratio. Do you know what that is, sir? 

Mr. FALK. No, I do not, sir. 

Mr. PASCRELL. Let me tell you what the medical loss ratio is, 

and that is insurance companies now must provide and spend a 

specified percentage of premium dollars on medical care, which 

they never had to do before. This is very critical to everybody. 

There are a lot of good things in this legislation. I am glad you 

are the only panelist on the left of Mr. Jost. That said, well, if it 

cannot be fixed enough, then maybe I would repeal it. 

This is all about repeal. They do not want to change it. They 

want to do away with it. The election is over. The Supreme Court 

decision has been rendered. But we are going to continue to try to 


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do away with this entire piece of legislation, which is reforming 

health care. 

Now, Mr. Roy, the more than 95 percent of businesses are small 

businesses. They have got fewer than 50 employees that would not 

be subject to this mandate. Do you agree with me so far? 

Mr. ROY. Not subject to this mandate is not a static term because businesses grow and—— 

Mr. PASCRELL. Do you agree with me or disagree with me. 

Mr. ROY. I disagree with you. 

Mr. PASCRELL. Good. An approximately 200,000 large businesses with more than 50 employee are subject to the employer responsibility requirement. Of these 200,000 large employers, at least 

95 percent already offer health insurance to their employees. 

Do you agree with that statement, Mr. Jost? 

Mr. JOST. Yes. 

Mr. PASCRELL. You agree. 

Do you agree with Mr. Jost? 

Mr. ROY. I do agree, but as I mentioned that does not mean that 

all of those employees are covered. 

Mr. PASCRELL. And what do you mean by that? 

Mr. ROY. Ninety-five percent or 97 percent, as I mentioned in 

my remarks, 97 percent of businesses with greater than 50 or more 

employee do offer health benefits, but not necessarily to all employees. A significant number of the uninsured are actually people who 

are employed by those firms. 

Mr. PASCRELL. Mr. Jost, do you think that it seems likely that 

employers who currently offer coverage right now would start dropping their health insurance all of a sudden? 

Mr. JOST. No. 

Mr. PASCRELL. Why not? 

Mr. JOST. Particularly if they know that it is going to come back 

in 2015. 

Mr. PASCRELL. This is all I have been hearing over here, but 

why do you not think so? 

Mr. JOST. Well, number one, the main reason employers offer 

health insurance to their employees is for recruitment and retention. Employees expect health insurance. 

Another reason is that there are huge tax subsidies that are already there, which was mentioned by Mr. Capretta and Mr. Roy. 

Mr. PASCRELL. Yes. 

Mr. JOST. If we wanted to have the largest tax increase in 

American history by abolishing the employer tax deductions and 

exclusions, we could talk about that. I am not sure that many 

Members on this Committee want to do that. 

Mr. PASCRELL. I would. 

Mr. Roy, do you agree with Mr. Jost? 

Mr. ROY. I do agree that it would be desirable to move away 

from an employer-sponsored system to an individually-sponsored 

system. 

Mr. PASCRELL. Thank you very much, Mr. Chairman. 

Chairman BRADY. Thank you. 

Mr. Roskam. 

Mr. ROSKAM. Thank you, Mr. Chairman. 


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So are we looking for perfect in response to my friend from New 

Jersey? We are not looking for perfect. We offered 30 amendments 

when we were in the minority that were swatted away by the majority late into the night, not considered, not adopted. Many of 

them were thoughtful attempts to improve the bill. So we are not 

looking for perfect. 

What we are looking for is even a reasonable characterization of 

what was promised. What was promised to the American public by 

the President of the United States was you get to keep your physician. If you like him, you get to keep him. Do you remember that? 

That is not true. 

Average healthcare costs per family are going to go down $2,500 

a year. Do you remember that? That is not true. 

So we are looking for a reasonable assimilation of the representation to the public by the President of the United States and his Administration during the course of the debate. That is long gone. 

That is far in the distance. That is never going to happen. 

And so now here we are, and we are debating and we are considering what is clearly an embarrassment. And it is an embarrassment that we could see a foreshadowing of it when then Speaker 

of the House Nancy Pelosi said this out loud. She said, ‘‘We have 

to pass this bill so that you can see what is in it.’’ Wow, she just 

does not disappoint. 

And here we are. So now we have got a situation where essentially the Administration for years has been pumping sunshine. For 

years the Administration when asked, ‘‘How are you doing this exactly? How is this great feat coming to fruition?’’ and this Committee and in all sorts of public representations has been told, ‘‘It 

is fine. It is great. We have got it under control. In fact, we have 

got a wonderful plan for your life, and it is going to be absolutely 

terrific.’’ 

And now what happens? Later before a holiday weekend the Administration on a blog post essentially whispers, ‘‘It is not working. 

Oops. This is a mess.’’ 

Yeah, but you know what? You may not be able to hear me, but 

the whole country heard that whisper, and it was a blog post. We 

were admonished a couple of minutes ago to go check Websites. Go 

check Websites? It is ridiculous. 

So now here we are, and I have a prediction to make. My prediction is this, that the ObamaCare statute, the Affordable Care 

Act as it has been enacted is unsustainable. It is unsustainable because of a whole host of reasons. The architecture is fundamentally 

flawed, and it is an edifice that is now wavering. 

And one of two things is going to happen. Many of the proponents, not all, but many of the proponents of ObamaCare, actually their heart’s desire is the single-payer system, and they will 

tell you that. They admitted that during the course. They could not 

get single-payer. Their fallback position was the public option. 

Could not get the public option. Fallback position was ObamaCare. 

That is their heart’s desire, a single-payer system. 

That is one way that this could go. The other way it could go, 

and it is my hope that it goes in a very different direction, and that 

is toward a consumer-oriented healthcare system. So do we want 


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to repeal this? You bet your life. Caught red-handed, we absolutely 

want to repeal this. We want to replace it. 

The red herring argument that we heard a couple of minutes ago 

from my friend from Wisconsin, Mr. Kind, was that somehow a desire to see something fail is somehow unjust. No, what we want, 

as Mr. Nunes said, is we want to see health care improved, but we 

have got a far different vision, a vision that was blocked out during 

the debate in this Committee in this room late at night during the 

debate on ObamaCare, but now it is coming to fruition, and we 

have got an opportunity to remedy this. 

And my sense is that the public is waking up. The public has an 

awareness there was a false claim, and they want to redeem now 

that false claim and revisit the false representation that was made 

to them, and it is their hope that this Congress is part of that solution, and I have every confidence that we can do this, that we can 

have patient-oriented, consumer health care that empowers patients and physicians to meet one another and have an absolutely 

terrific system without big government telling us what is right and 

what is wrong. 

I yield back. 

Chairman BRADY. Thank you. 

Mr. Rangel. 

Mr. RANGEL. Thank you, Mr. Chairman, for the courtesy that 

you have extended in allowing me to participate in these very, very 

important hearings. 

And to my friend and colleague, Mr. Roskam, I join with the sunshine pumpers, and I think that is what all of us are. We really 

try hard to improve the quality of life for Americans, and we have 

these hearings to see whether or not there are storms or impediments, to see whether or not we are doing the right thing. 

And so I want to welcome all of you to come to help us to make 

certain that if we are on the wrong track, you can help us by improving the work that we are doing as a Congress. 

Now, it is my basic understanding that with the exception of Mr. 

Jost, the other four witnesses support repeal. So there are no sunshine pushers there. You believe that we ought to get rid of this, 

and I assume out of the four, with the exception of Mr. Falk, right 

now none of you have a small business. You do not make payrolls 

and you do not have responsibilities for healthcare and pension 

benefits for anybody; is that correct? 

And I would assume further that you are not just volunteering 

your thoughts. The three of you are experts in what you do unlike 

Mr. Falk, and you get paid for what you do the same way doctors 

and lawyers get paid. Calling you lobbyists would not be a stigma. 

It would be just a label as to what your business is. Am I correct 

in that assumption, Dr. Roy? 

Mr. ROY. No. I am not a lobbyist. I am a Senior Fellow with the 

Manhattan Institute, which is a nonpartisan policy research institute, where I have actually articulated alternatives to the Affordable Care Act that would provide universal coverage. 

Mr. RANGEL. So you do not get any compensation—no, no. You 

are extremely qualified in research. I read that, but you do not get 

paid to take a position? In other words, you would not be here, 

your firm, the research outfit, if you were supporting or trying to 


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improve the health care. You are here basically, your income is 

based on the fact that that is your professional position. I mean, 

you are not a doctor. You are not—— 

Mr. ROY. I would strongly, strongly disagree with you. I have articulated—— 

Mr. RANGEL. Do not disagree. Just say what it is. 

Mr. ROY. Yes, I am sorry. My position—— 

Mr. RANGEL. I am asking. 

Mr. ROY. My positions are on the record. I write them every day 

on the Internet. I have not only advocated—— 

Mr. RANGEL. I am asking you whether you get paid for advocating your position. That is all. I do not doubt that you are professional with it. 

Mr. ROY. I do not get paid to advocate any particular position. 

I—— 

Mr. RANGEL. Well, when you were working for the person that 

was running for President, did you get paid for advocating a health 

position with him? 

Mr. ROY. No, I did not. 

Mr. RANGEL. You are a volunteer professional. 

Mr. ROY. I volunteered for the Romney campaign, yes. 

Mr. RANGEL. But I mean in the positions that you take on 

health care, you do not get compensated for it. 

Mr. ROY. I do not get compensated for taking any particular position on any particular piece of legislation. 

Mr. RANGEL. So what you are doing is volunteer contribution 

you are making to help us on the Committee and others to understand your position. You are not a doctor, but you do have a professional position, right? 

Mr. ROY. I have articulated my view about the Affordable Care 

Act. I have done so here today 

Mr. RANGEL. And you have done it eloquently, but the only person I am concerned with is Mr. Falk because it appears to me that 

it is his opinion that would help us understand better what we 

have done and how we can do it better. 

And incidentally, I am an infantryman and my son is a Marine, 

and so I cannot say anything unkind except Semper Fi because you 

guys in the Marines, I want to thank you for your service, but 

whatever they put in your water, I can understand that you are 

just as excited about your business as you have been for serving 

our great country. I want to thank you for your service. 

Now, with all of the people that you hire, approximately parttime and full-time, what is the breakout of that? I know you have 

more part-time than full-time. 

Mr. FALK. Absolutely. Probably about 15 percent of my employees are full-timers, but that is by choice. Most of the people that 

I employ are first time employees. They are high schoolers, college 

kids. 

Mr. RANGEL. No, I know, but if you needed full-time, you would 

hire full-time. 

Mr. FALK. Absolutely, and I offer most of my employees—— 

Mr. RANGEL. Supply and demand. 

Mr. FALK [continuing]. As many hours as they want. 


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Mr. RANGEL. Okay. But you said that those who work full-time, 

the 15 percent, they get health care. 

Mr. FALK. I offer health care to them. 

Mr. RANGEL. They accept it. 

Mr. FALK. Not all the time. 

Mr. RANGEL. But you offer health care not because you are a 

nice guy. It is a part of good business, is it not, to make certain 

that the workers have access to health care? 

Mr. FALK. It is because I am a nice guy, and it is good for business. It is about providing an opportunity for my employees. I want 

to take care of them because they are very valuable to me. 

Mr. RANGEL. So if we—— 

Chairman BRADY. Thank you. All time has expired, Mr. Rangel. 

Mr. RANGEL. Could I just ask one concluding question, Mr. 

Chairman? 

Chairman BRADY. Perhaps we can follow up or we can submit 

in writing. 

Mr. RANGEL. That means that I cannot ask the question. 

Chairman BRADY. That would be the correct assumption. 

Mr. RANGEL. All right. Thank you, Mr. Chair. 

Chairman BRADY. I would also like to point out for the record, 

your qualifications, none of yours are in question today. You may 

have different views and different beliefs, but you are here because 

you care about the issue. You are expert in the issue. You are impacted by the issue, and on behalf of the Committee we are pleased 

that you are here with us today. 

Mr. RANGEL. And I want to join with the Chairman in his observation. 

Chairman BRADY. Thank you. 

Mr. Gerlach. 

Mr. GERLACH. Thank you, Mr. Chairman. 

First, Mr. Roy and Mr. Capretta, a macro questions if we can. 

We have not talked too much about this during this hearing, but 

since the enactment of ObamaCare to this point when this employer mandate has been temporarily suspended for a year, what 

do you think the overall impact of the enactment has had on GDP 

growth relative—and also add in Mr. Dennis as well for NFIB— 

what is your thought on the impact of the slow growth we have had 

in the GDP over the past few years relative to the implementation 

or the proposed implementation of this enactment? 

What impact has it had on the decisions of our business, our job 

creators relative to their decisions to hire and expand? 

Mr. CAPRETTA. Well, I do not think I have seen an academic 

estimate of that. So, you know, it is necessarily a subjective kind 

of responsive I am going to have to give. 

There has been a lot of information coming through the system 

even at the Federal Reserve level where they have noted that employers are responding to the incentives of the healthcare law by 

limiting the hiring they are doing. So if the direction is clear, it is 

negative, but the size and quantity of it, you know, that is a little 

bit harder for me to put a number on that. 

I would say that there have been many reasons why the economy 

has performed poorly in a certain sense in this post-recession period, but this is certainly one of the reasons. 


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Mr. ROY. I would add that what we have seen is a substantial 

shift from full-time employment to part-time employment. So we 

have record high numbers of people who are part-time workers and 

lower and lower numbers of full-time workers, and that is a transition I would expect to continue as small- and medium-sized employers wrestle with the employer mandate, another reason why it 

would be a great policy to repeal the employer mandate. 

Mr. GERLACH. Mr. Dennis. 

Mr. DENNIS. Now, we keep data and produce it monthly on the 

status of the small business economy, and it has been quite clear 

that over the last few years things have not gone well. The difficulty is—and that is all since 2010—the difficulty is trying to pull 

out what is actually the macro economic issues from the problems 

put forward by ObamaCare. We simply just cannot tear them apart 

as to which is which. 

Clearly, it has had some impact on their general view of the requirements that are before them and the costs that are before 

them. We do have some data suggesting recently that they are becoming increasingly concerned about political issues rather than 

economic issues as an impediment to their growth. 

Political is a very wide term and it could be a whole series of 

things. 

Mr. GERLACH. Mr. Falk, you indicated that you think it is important to provide health insurance to your full-time employees, 

and you also indicated that your part-time employees are offered 

the opportunity to work more hours if they want to. 

Does that working more hours at some point lend to the prospect 

that you might get to a point where you would hit the 50 full-time 

employee threshold, and if so, what that then means in terms of 

your ability to conduct your businesses, your 12 units? 

Mr. FALK. Well, it definitely is something I take into consideration. At my current size, I do not think that I will go over that 

threshold immediately. 

Mr. GERLACH. And what has been happening with your current 

insurance premiums over the past few years for the health insurance you are providing your full-time employees? Has that been 

steady? 

Mr. FALK. No. 

Mr. GERLACH. Have they been going down? 

Mr. FALK. Every year it has gone up. I mean, it is true. I mean, 

it is not a myth out there that my insurance premiums for my employees that we share the premium, where I still pay the majority, 

it costs me more and it costs them more every year. 

Mr. GERLACH. And can that be tied to the continuing pressures 

of the ObamaCare requirements that the health insurance industry 

continue to pay a billion dollars’ worth of assessment to the Federal Government each year, which in turn gets passed on to the 

employers that pay those premiums to the insurance company, the 

lifting of the policy cap part of the enactment, the extension of coverage to those 26 years of age; do you think all of those factors as 

they continue under ObamaCare lend themselves to increasing premiums for the job creator on the street? 

Mr. FALK. No, Mr. Gerlach, I do not know. Mr. Rangel is very 

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perts in what they do in health care. If I were to tell them that 

they have, you know, until July to get 12 businesses up and running and there was a Website out there that they could go to figure 

it out, I am sure they would be overwhelmed as well. 

So this takes up all of my time right now. 

Mr. GERLACH. Very good. Thank you. I appreciate it. 

Chairman BRADY. Thank you. 

Dr. Price. 

Mr. PRICE. Thank you, Mr. Chairman, and I want to commend 

you for holding this hearing. 

This is a remarkably important topic as we move forward with 

the calamity that is confronting the country right now. 

Just to set the record straight, Republicans are for health reform. 

We are for positive health reform. We are for reform that recognizes that patients and families and doctors ought to be making 

medical decisions and not Washington, D.C. So there are wonderful, positive solutions. I am sorry my friend from New Jersey has 

left, but I will remind him once again, as I did in our last hearing, 

that H.R. 2300 is there for his perusal, and I would encourage him 

to take a peek at it. It embraces those positive solutions. 

Mr. Kind talked about this being all about politics. Well, now, 

you talk about politics. Here is an announcement from the Administration coming out on a blog post from the IRS, a blog post. So 

now we have governance by blog post, I guess, that delays the reporting requirements. It does not delay the law. It delays the reporting requirements for employers for a year that just so happens 

to fall after the 2014 election. Talk about politics. 

I would encourage my friends to open their eyes to the political 

activity of the Administration. 

Mr. Jost, you said, ‘‘If you actually care’’ you would throw more 

money at this program. Well, with all due respect, if the individuals who wrote this law actually cared about the health care of this 

country, they might have investigated the consequences for physicians taking care of those patients, as I did for over 20 years. They 

might actually have talked to folks like Mr. Falk, who are out there 

trying to run a business and create jobs instead of doing what we 

have clearly identified and has been actually admitted to by folks 

on the other side of the aisle when they are honest behind closed 

doors that this was not to be the final product, as Mr. Ryan talked 

about again. 

This is a delay in the reporting requirement. This does not 

change the law one iota, not one iota, and so, Mr. Falk, I want to 

commend you for what you are trying to do out there, to navigate 

the remarkable waters of this destructive law. 

You mentioned in response to Mr. Thompson, and I had a question. You said there was some concern about getting information 

and you were having difficulty doing that, and he did not allow you 

to respond. I would like to give you an opportunity to present the 

challenges that you have got in getting information. 

Mr. FALK. Right. One of the things I wanted to respond to him 

about was I have been to 15 to 20 different conventions, and we 

have had a briefing about health care every time, but every time 

it is a different briefing. That target continues to move, and with 


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every new policy or extension or waiver or consideration that they 

are giving to somebody else, I still do not know what to do. 

And he is right. Yes, there is a Website out there, healthcare.gov. 

It just got announced publicly a couple of weeks ago. I understand 

that, and I will go there, and I will look up all of the information 

I can. 

But, see, I am engaged. I am here. I do all of these events. I do 

all of these conferences on business. There is probably 75 percent 

of small business owners who have no idea what is going on. They 

do not know about healthcare.gov. 

Mr. PRICE. I can say I have been to healthcare.gov. It is wonderful, beautiful site, but it does not do a thing to assist you in trying 

to figure out how you are supposed to comply with the reporting 

requirements that have now been delayed. 

When you spend all of this time trying to comply with government regulations like this and rules that are incomprehensible, 

what is the consequence to your employees and to your business 

and to job creation? 

Mr. FALK. Well, again, all of these guys are experts, but they 

really are not creating any jobs. I am trying to create jobs and grow 

my business, but right now I am fortunate enough to be a large 

enough small business owner that I have an operations manager 

and I have an administrative assistant, but I do not have a government relations person on my staff, like maybe Microsoft or Boeing 

has as Mr. McDermott talked about earlier. So I have to shoulder 

all of these burdens to find out what is going on with health care 

and how it is going to affect me, my employees and my business. 

My business is what provides me an income for my family, the 

profit that I make. So if these costs continue to take out the profit, 

I am going to decide either to not grow or to close some of my 

lower-performing units because they are just not going to make 

enough money, and therefore, it is going to take jobs away. 

Mr. PRICE. Take jobs away, exactly. 

Mr. FALK. Yes. 

Mr. PRICE. Mr. Roy, I want to touch on the point that you were 

making about part-time workers. I have had employers in my community tell me they are decreasing the number of full-time workers 

to part-time workers because of this law. In fact, 322,000 increase 

in part-time workers, involuntary part-time workers to 8.2 million 

in June. 

Can you describe the consequences that are happening in the 

real world, bringing about increasing part-time workers and how 

destructive that is to jobs? 

Mr. ROY. You know, we have heard a lot of talk today about 

what the right thing to do is or what employers would do if they 

care. We have not heard a lot about what the incentives are, and 

the incentives are very clear with the employer mandate. It is to 

restructure to part-time workers because then you do not have to 

offer coverage to those part-time workers. That is just the plain as 

day economic incentive in this law and that is what will drive activity. 

Chairman BRADY. The time has expired. 

Mr. PRICE. Thank you, Mr. Roy. 

Thank you. 


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Chairman BRADY. Thank you. 

Mr. Buchanan. 

Mr. BUCHANAN. Yes, thank you, Mr. Chairman. 

I wanted to mention as someone who has been in business 30 

years before I got here that we have two chambers in our area, 

about 2,000 each in Sarasota and Manatee Counties. Ninety-three 

percent, 90 percent are 50 employees or less. The Florida chamber, 

I was very active with them, 137,000 businesses in that chamber, 

93 percent or less 50 employees or less. 

The number one issue, not in the last 3 years; I would say in the 

last 13 to 15 years, and I would be interested in your comment on 

this, Mr. Dennis; the number one issue is the rising cost of health 

care. In our area, we had one employer that has been somewhat 

successful. His costs last year, a larger employer, went up $1.5 million. 

But the other end of that spectrum that I deal with mainly when 

we do town halls, and we all do town hall meetings, one woman 

stood up and she said, ‘‘I have six employees. My healthcare cost 

has gone from $1,000 to $2,000 for a family of four.’’ 

That is the thing that is crazy. It is unbelievable. They said they 

were going to cut the cost 25 percent. I am just looking at reality 

with a lot of businesses. They get their bill every year. I had a 

pharmacist that I walked in the other day. His bill came in, 27 percent increase. He negotiated out 12 percent. The employees are 

kicking in more. The coverage is not quite as good. So they get it 

down to about 12 percent, but that is the reality. 

This is doing nothing to bend the cost on health care in the last 

3 years even though it was supposed to come down 25 percent. 

Mr. Roy, I want to go to your point, one point that you made, 

because that is what I see in our area, and that is the uncertainty 

that people are feeling about not expanding, not growing, and not 

creating jobs. 

But you said that healthcare cost already has or is going to double or triple. Is that what you said or how did you say how healthcare costs are going up substantially? And then give me a little 

more background on where you are getting your information from. 

Mr. ROY. Well, healthcare costs, the cost of health insurance is 

increasing for everyone, but it is going to particularly increase for 

people who shop for coverage themselves, the so-called individual 

or non-group market. That is where the Affordable Care Act’s 

heavy regulation of the individual insurance market will drive up 

the cost of insurance plans in that market by two to three times 

for some workers, and on an average it seems like it is—— 

Mr. BUCHANAN. So you are saying a worker might pay what 

now, based on your numbers, and what are they going to pay in 

somewhat the future? 

Mr. ROY. So, for example, in the State of California where I have 

done extensive research, the average increase for unsubsidized individuals shopping for insurance in the non-group market will increase by about 70 percent. 

Mr. BUCHANAN. That is what I am hearing. 

Mr. Falk, I want to just first applaud you because we need in 

this country to be competitive with China and India more startups, more entrepreneurs, more people willing to take risk, more 


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people who are willing to sign a note at the bank and put everything at risk. So I applaud you and what you are doing. 

But you said something about planning, and everybody that is in 

business or I have always done some kind of planning, but one of 

the factors is the uncertainty factor. One of the factors is cost going 

forward for employees. 

It used to be someone said the other day in his business 22 percent. Now when you hire someone for 50,000, you have got to figure 

almost on 40 percent in terms of his experience, but in terms of 

your business, how many jobs do you think maybe you have not 

created or businesses you might not open as a result of dealing 

with the uncertainty? 

Mr. FALK. Well, as I said, from 1998 to 2008, about one and a 

half locations per year on average; from 2008 until today, 5 years, 

I have only opened up two locations, and that was just last year. 

So I would say that, you know, I probably could have opened up 

another six to eight locations. As I get bigger I can probably move 

a little bit more aggressively because I have more assets, but I 

have chosen not to do that because of the uncertain economy and 

all of the regulation changes that happened, not just with the ACA, 

but with taxation and everything else, but the ACA is the most important regulation right now that is on my mind. 

Mr. BUCHANAN. Thank you. 

Mr. Dennis, I was going to mention you said multiple entities. 

How many? Is that a huge issue within the NFIB or is that in a 

list of five or six things more at the bottom of the list? 

Because I have got a lot of people where their wife owns a business and they own a business and it is family related. Their son 

has a business, and they are very, very concerned, again, about the 

uncertainty. 

Mr. DENNIS. Well, the truth is we do not know exactly how big 

it is. I think it is what I call a sleeper issue because we just do 

not know exactly how broad this extends. For example, of all small 

businesses that have 20 or more employees, there is only about 35 

percent of those that have a single owner. Most of them have multiple owners. 

And then you talk about business owners themselves, and 39 

percent of them own multiple businesses, and they do this in combinations, and of course—— 

Chairman BRADY. Your time has expired. I am sorry, Mr. Dennis. 

Mr. BUCHANAN. Thank you, Mr. Chairman. 

Chairman BRADY. You are welcome. 

Mr. Smith is recognized. 

Mr. SMITH. Thank you, Mr. Chairman, and thank you to all of 

our witnesses today. I know that you have a great perspective and 

expertise on both sides of the issue, and these are discussions that 

I think are healthy and need to be had. 

We know that the American people want our healthcare systems 

to work. There is growing skepticism that the more the government 

gets involved, the more expensive it becomes, and actually people 

can be harmed, and that is a growing concern and one that I think 

we all share. 


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Mr. Jost, you are an expert on the President’s healthcare bill, 

and I appreciate that. I think you have probably studied that a 

great deal. This component that we have discussed here today we 

are told is not ready for enforcement, and do you think there are 

other components that might share the same view of yours or are 

there other parts that perhaps you think need to be delayed as 

well? 

Mr. JOST. Well, I think that the Administration right now is in 

a triage mode. Seriously, they do not have the resources to implement all of the provisions on time. 

Mr. SMITH. So it is a lack of resources? 

Mr. JOST. Much of it is a lack of resources. Another part of it 

is the way this law was intended to be implemented, the States 

were going to take much of the responsibility. For political reasons, 

the States have declined to do that. So the Administration has 

ended up with a much bigger job than they otherwise would have 

had. 

So I think they are under a lot of pressure. I think they are trying to decide what needs to be done right now, what can wait a little bit. 

There have been a couple of other provisions. Another provision 

that relates to business is the nondiscrimination in favor of highly 

compensated employees provision, which says that for businesses 

who are insured, they cannot offer a better package to their highly 

compensated employees than they can to their lower compensated 

employees. That raises a lot of difficult issues which we could probably spend another hearing talking about, but they have said that 

provision fortunately says nothing happens until they put out regulations. 

So they are trying to figure that out. That is going to interface 

with this one. So I think that they have decided—they do not talk 

to me any more than they talk to you—but I think they have decided just from my observation that they are going to focus on what 

is absolutely essential, which is the premium tax credits, the individual mandate to keep the insurance markets from collapsing, getting the exchanges up and running, and things like the employee—— 

Mr. SMITH. Now, when you say the premium tax credits, is that 

the small business tax credit that I constantly hear from folks back 

home that it is so complex? 

Mr. JOST. No, this is the individual tax credit. The small business tax credit is already out there. 

Mr. SMITH. Do you feel that a lot of small businesses are eager 

to take advantage of that and find it to be an efficient use of resources? 

Mr. JOST. A nonprofit that my wife is on the board of has taken 

advantage of that and has found that it has allowed them to extend 

insurance to their employees. A lot of other small businesses have, 

but you are right. Many have found that it is really limited to 

small business, very small business with very low wage employees. 

So it does not apply to a lot of small businesses. 

But I think the Administration is moving ahead with the resources they have and the time they have to do the essential, 


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which is to get health insurance to people who are uninsured and 

who need health care. 

Mr. SMITH. Thank you. 

Mr. Dennis, if you could reflect a bit perhaps on the small business perspective on this small business tax credit, the feedback I 

get from constituents is that it is much more hassle than it is 

worth, and it only adds to the complexity of our already very overly 

complex Tax Code. 

Mr. DENNIS. Yes, the small business tax credit, I do not know 

whether I want to call it totally a fiasco, but it really has not done 

very much, and the good part of the reason was that it was not 

structured very well, I think, and it is very complex. 

The second one is that it is a bit of a bait and switch in the sense 

that it brings you in and gives you credit for a while, and after a 

while it goes away. So it gives you this incentive to make an obligation, if you will, and then once you have made the obligation and 

gone on for a year or two, then it is gone. 

So it has not been successful in the sense of very few people or 

very few businesses have taken advantage of it. There have been 

a few businesses that have taken advantage of it. In all likelihood 

they would have been offering health care anyway, but it was apparently enough of a stimulus to help out a little bit. 

Mr. SMITH. Okay. Thank you. I yield back. 

Chairman BRADY. Thank you. 

Mr. Kelly is recognized. 

Mr. KELLY. Thank you, Mr. Chairman, and I thank the panel 

for being here. 

I especially want to talk to Mr. Falk, because I am also a small 

business person, but I think that when you look at this whole activity that is taking place right now, and I think the piece that is 

missing more than any other is the relationships that you build 

with the folks that work with you. Being an employer and having 

associates, we have about 110, 115 people at any one given time, 

but the relationship is a lot different. I am an automobile dealer. 

It is not a front end machine. It is not a piece of equipment. It is 

a person, and what we are talking about today is people. 

We are talking about is it fair for everybody. Does it make sense 

for the American people? Is it really providing what it was supposed to provide? And because the infrastructure cannot be put in 

place, now it is being delayed, and being delayed. It is not being 

waylaid. It just being delayed. 

Because people need to understand. You as an individual, and 

Mr. Rangel said something about you. You are a good guy, and I 

am sure the people that you paid—we pay every 2 weeks, on the 

6th and 21st actually—they think I am a good guy, but only if I 

can pay them, and they do not work for me because they like me. 

They work for me because they like me, but they additionally can 

provide for their families. 

This piece of legislation though has made it so difficult for people 

that get up every day and do not walk into Congress, but walk into 

their business, that have to worry about payday and have to worry 

that you have got to sign the front half of the check so that your 

employee can sign the back half of the check, and doggone it, that 

had better be able to work. 


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I think what is missing here, and I really find it unusual that an outfit that is running $17 trillion in the red is able to sit down 

and give anybody business advice. Give me a break. 

Now, most of the things that we run, small businesses are not 

only family-owned. They are family-operated. Tell me about the 

people because I have got to tell you. I have been to baptisms. I 

have been to first communions. I have been to weddings. I have 

also been to funerals. So we follow each other the whole way 

through life. These are people. These are people that we get to 

know. They are part of who we are, and that is what makes us successful. 

But this law separates you. You are no longer able to be a good 

guy. You are a guy now that is keeping them from attaining something because the government mandated that it be done. Now, you 

do not want the employee mandate? No, you do not have to worry 

about that. Why? It is not because small businesses asked for it. 

It is because there is no infrastructure in place to handle it. Come 

on. Be a little bit honest about this, right? 

And I think the American people have witnessed this, and they 

now know that if it waddles like a duck and quacks like a duck, 

it is a duck. This is a bad piece of legislation that does not serve 

its purpose, and some of my colleagues said ahead of time if you 

like what you have, you can keep it. If you like your doc, you can 

keep it. I am 65 now, and if I want to sit down with my kids and 

decide what my medical future is, forget that deal. That is not 

going to happen. 

But now the individual mandate is still in place. My question to 

you because you live with these folks; you work with them every 

day, and when you said you worked how many hours a week? 

Mr. FALK. In the 80 hours. 

Mr. KELLY. Eighty, and I know on 4th of July because we are 

open 4th of July, too. 

Mr. FALK. Yes. 

Mr. KELLY. But it is not just about that because we know when 

you run your own business you do work half days, and it does not 

matter whether it is the first 12 or the second 12. 

Mr. FALK. Right. 

Mr. KELLY. And some days you have to work a little overtime, 

but you live it. That is my point. You live it, and we have driven 

a wedge between you and the people who work with you, who work 

for you, who work towards your mutual success. 

Tell me how hard it is, and, Mr. Roy, maybe you can chime in. 

There is so much uncertainty with this. This is what makes it difficult, and we do not know tomorrow. What is the next shoe to 

drop? What else are they going to hold back on? 

Mr. ROY. Yes. So it is not just because there is regulatory uncertainty because the law makes so many dramatic changes to the 

way employers deliver health insurance. It is also that the regulations have been coming out piece by piece and contradicting each 

other. 

So, for example, and this is not even about small business, but 

this is about States, the States that have been trying to roll out 

these exchanges, I mean, they are usually Democratic States, 

right? So these Democratic States, these exchanges directors are 


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saying, you know, ‘‘We designed the exchange. We built the exchange, and then HHS comes along and completely changes all of 

the regulations about how the exchange must be designed, and we 

have to go back and start over and rebuild our systems from 

scratch.’’ 

And that happened so many times in the last 12 to 24 months 

that at a certain point, a lot of these State exchange directors said, 

‘‘We give up. We are going to ignore HHS and just set up the exchange because if we do not, we will not meet the October 1 deadline to get the exchange going.’’ 

So it is not merely that the laws are poorly designed and that 

businesses are facing this. Individuals are facing this. State governments are facing this, the regulatory uncertainty because the 

law is so complex and so difficult to administer, and the employer 

mandate is Exhibit A. 

Mr. KELLY. And I understand, and that is why I wanted Mr. 

Falk, because it is about a relationship that exists between the 

owner of the business and those folks that work with them in a 

common effort to be successful. Both parties participate in it and 

both parties benefit from it. 

I know it is going to be hard on you. 

Chairman BRADY. All time has expired. I would like to thank 

our witnesses for their testimony today. It has been an eye-opening 

discussion. Clearly we need to get real answers also from the 

Treasury Department, and we will do so next week. 

Just as a reminder any Member wishing to submit a question for 

the record will have 14 days to do so. Any questions submitted I 

would ask the witnesses to respond in a timely manner, which I 

know you will. 

With that, thank you again, and so the Committee is adjourned. 

[Whereupon, at 12:04 p.m., the Subcommittee was adjourned.] 

[Submissions for the Record follow:] 


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