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95–253 2015

S. HRG. 114–82 

EXAMINING THE EMPLOYMENT EFFECTS OF THE 

AFFORDABLE CARE ACT 

HEARING 

BEFORE THE

JOINT ECONOMIC COMMITTEE 

CONGRESS OF THE UNITED STATES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JUNE 3, 2015 

Printed for the use of the Joint Economic Committee 

( 
(II) 

JOINT ECONOMIC COMMITTEE 

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress] 

SENATE 

DANIEL COATS, Indiana, Chairman 

MIKE LEE, Utah 

TOM COTTON, Arkansas 

BEN SASSE, Nebraska 

TED CRUZ, Texas 

BILL CASSIDY, M.D., Louisiana 

AMY KLOBUCHAR, Minnesota 

ROBERT P. CASEY, JR., Pennsylvania 

MARTIN HEINRICH, New Mexico 

GARY C. PETERS, Michigan 

HOUSE OF REPRESENTATIVES 

KEVIN BRADY, Texas, Vice Chairman 

JUSTIN AMASH, Michigan 

ERIK PAULSEN, Minnesota 

RICHARD L. HANNA, New York 

DAVID SCHWEIKERT, Arizona 

GLENN GROTHMAN, Wisconsin 

CAROLYN B. MALONEY, New York, Ranking 

JOHN DELANEY, Maryland 

ALMA S. ADAMS, PH.D., North Carolina 

DONALD S. BEYER, JR., Virginia 

VIRAJ M. MIRANI, Executive Director 

HARRY GURAL, Democratic Staff Director 
(III) 

C O N T E N T S 

OPENING STATEMENTS OF MEMBERS

Hon. Daniel Coats, Chairman, a U.S. Senator from Indiana .............................. 1 

Hon. Carolyn B. Maloney, Ranking Member, a U.S. Representative from 

New York .............................................................................................................. 4 

WITNESSES

Dr. Casey B. Mullilgan, Professor of Economics, University of Chicago, Chicago, IL .................................................................................................................. 6 

Dr. Joseph P. Sergio, President, The Sergio Corporation, South Bend, IN ........ 8 

Ms. Barbara L. Carroll, Associate Vice Chancellor for Human Resources, 

North Carolina State University, Raleigh, NC .................................................. 10 

Dr. Paul N. Van de Water, Senior Fellow, Center on Budget and Policy 

Priorities, Washington, DC ................................................................................. 12 

SUBMISSIONS FOR THE RECORD

Prepared statement of Hon. Daniel Coats ............................................................. 34 

Prepared statement of Hon. Carolyn B. Maloney ................................................. 36 

Prepared statement of Hon. Kevin Brady ............................................................. 40 

Dr. Casey B. Mullilgan, Professor of Economics, University of Chicago, Chicago, IL .................................................................................................................. 41 

Dr. Joseph P. Sergio, President, The Sergio Corporation, South Bend, IN ........ 72 

Ms. Barbara L. Carroll, Associate Vice Chancellor for Human Resources, 

North Carolina State University, Raleigh, NC .................................................. 79 

Letter dated March 18, 2013, from Terry W. Hartle to the Internal 

Revenue Service ............................................................................................ 85 

Letter dated July 16, 2013, from Terry W. Hartle to Mr. J. Mark Iwry ..... 90 

Dr. Paul N. Van de Water, Senior Fellow, Center on Budget and Policy 

Priorities, Washington, DC ................................................................................. 95 

Charts submitted by Senator Bill Cassidy: ...........................................................

Chart titled ‘‘Hours Breakdown’’ ..................................................................... 99 

Chart titled ‘‘A Tale of Two Recoveries’’ ......................................................... 99 

Chart titled ‘‘Low-Income Workers Hit Hardest by Recession’’ .................... 100 

Chart titled ‘‘Low-Income Workers Have Lost the Most Work Hours’’ ........ 100 

Chart titled ‘‘Health Care v. Health Insurance Costs Inflation Rates’’ ....... 101 

Questions for the Record and Responses submitted by Representatives 

Maloney and Adams ............................................................................................ 102 

(1) 

EXAMINING THE EMPLOYMENT EFFECTS OF 

THE AFFORDABLE CARE ACT 

WEDNESDAY, JUNE 3, 2015 

CONGRESS OF THE UNITED STATES, 

JOINT ECONOMIC COMMITTEE, 

Washington, DC. 

The Committee met, pursuant to call, at 2:30 p.m. in Room 562 

of the Dirksen Senate Office Building, the Honorable Daniel Coats, 

Chairman, presiding. 

Representatives present: Brady of Texas, Paulsen, Schweikert, 

Grothman, Carolyn B. Maloney of New York, Delaney, and Beyer. 

Senators present: Coats, Lee, Cotton, Cassidy, Klobuchar, 

Casey, Heinrich, and Peters. 

Staff present: Barry Dexter, Cary Elliott, Harry Gural, Colleen 

Healy, Christina King, David Logan, Kristine Michalson, Viraj 

Mirani, Barry Nolan, Robert O’Quinn, Brian Phillips, Leslie Phillips, Sue Sweet, Aaron Smith, Phoebe Wong. 

OPENING STATEMENT OF HON. DANIEL COATS, CHAIRMAN, A 

U.S. SENATOR FROM INDIANA 

Chairman Coats. Normally we would be calling this to order. 

The House is just finishing a series of votes and our House colleagues are, as I am told, on the way here. And so we want to give 

them the opportunity to be here when we start. So we are going 

to delay for just a few more minutes and hopefully they will be arriving shortly. 

In the meantime, everybody can keep talking and enjoy—you do 

not have to be solemn and silent. 

[Short recess.] 

I am going to call the Committee to order here. What I will do 

is just give my opening remarks before Ms. Maloney arrives, Congresswoman Maloney arrives, and introduce our witnesses. And 

then when she arrives, she can give her opening statement and we 

will move on from there. 

This hearing will examine the effects of the Affordable Care Act 

on the labor market, as well as discuss the implications of those 

effects on productivity, on income, and the economy at large. 

I want to extend a warm welcome to our Committee witnesses. 

I appreciate you being here today. 

The impact of the Affordable Care Act is particularly important 

to discuss this year now that the delayed employer provisions are 

in effect and employers are now feeling the pinch and dealing with 

the mandated requirements of the Act. 
2 

The ACA contains numerous provisions that penalize workers 

and subsidize those who do not work. In fact, the Congressional 

Budget Office estimates that from 2017 to 2024 the law will reduce 

the total number of hours worked by as much as 2 percent. People 

say, well, 2 percent? Well that 2 percent is equal to as much as two 

and a half million full-time equivalent workers. 

Obviously that is going to have a significant impact. The Congressional Budget Office also reasoned that this would result from 

the, and I quote, ‘‘the new taxes and other incentives that they will 

face and the financial benefits some will receive.’’ 

CBO says that a one percent reduction in total labor compensation over the same time frame will likely occur. However, even 

those figures may underestimate the true impact of the law because those estimates do not include every relevant provision that 

would affect employment. 

For example, the employer insurance mandates will encourage 

employers to shift workers from full-time to part-time employment. 

We have seen that already. 

The Medicaid expansion will motivate, or could motivate many 

low-wage full-time workers to reduce hours in order to obtain coverage. The marketplace exchange subsidies phase out abruptly as 

incomes rise, penalizing workers near those thresholds. 

And finally, the series of new taxes on individual income and 

health care services will reduce the incentive to work, save, and invest. 

Further, many of these provisions could profoundly affect business’ abilities to expand, alter workers’ hours and schedules, and 

reduce work flexibility for employees. 

New compliance costs in terms of time and resources will add 

significant burden to businesses. Not only does the law affect millions of businesses and their employees, but also thousands of 

schools and local governments. 

I have heard from many Indiana schools that are feeling the impact and have been forced to cut hours to make ends meet on already-constrained budgets. This is hurting not only school employees but students from elementary school through college. 

In an era characterized by having to do more with less, these institutions appear to be particularly affected by the undue burdens 

of the Affordable Care Act. 

Sadly, too much of the conversation has attempted to focus on 

the proposed benefits, without taking into consideration some of 

the very real and significant costs and their impact particularly on 

employment. 

That is not how a cost-benefit analysis works. It sounds more 

like a benefits-only analysis. 

In addition to these economic burdens, we now know that many 

of the goals of the Affordable Care Act have not been met. Emergency room visits continue to rise. Health care costs in terms of 

premiums, co-payments, and deductibles continue to rise, some dramatically. Many seem to be saying that they are happy to hear that 

more people are covered, but it is less affordable for us. 

CBO estimates that premiums will rise an average of 8.5 percent 

annually over the next three years as temporary government programs intended to reduce insurer costs are phased out. 
3 

In most states, insurers with large market shares have proposed 

rate increases exceeding 20 percent for the next year. ObamaCare 

is about to become much more expensive than has been advertised. 

While this law may have provided affordable access to health 

care for some, it has seriously hindered others. Many lost their employer-provided insurance and were displaced to the exchanges and 

Medicaid. 

Many lost the ability to keep their plans and their doctors. New 

taxes built into the law still to be implemented will have additional 

negative effects on businesses and its workers. 

I think I can speak for many of us, if not all of us, here in saying 

that we would like everybody to be insured and receive quality 

health care when they need it. However, the policy on the books 

is not the solution; instead it has led to more unintended problems. 

A one-size-fits-all government-run health care system, in my 

opinion, is not the answer. We are looking for the best workable 

real-world solution for Americans, and I do not believe we have hit 

that mark just yet. 

We should pursue initiatives that truly make health care an option for all. Such initiatives should drive down costs by increasing 

competition and transparency, reforming medical malpractice, making health insurance portable, promoting pooling options for small 

businesses, and giving states greater flexibility in delivering health 

services. 

Americans deserve a better health care system that puts individuals squarely in charge of their health care and does not discourage Americans from working and improving their earnings. 

We look forward to discussing these ideas, issues, and your 

thoughts with these witnesses in more depth. I would like to introduce our witnesses while we are waiting for Ranking Member 

Maloney. 

Let me start with Dr. Casey Mulligan, a Professor of Economics 

at the University of Chicago. He earned his Ph.D. in Economics 

from the University of Chicago, and has also served as a visiting 

professor teaching public economics at Harvard University and 

Clemson University. He recently wrote a book on the Affordable 

Care Act entitled ‘‘Side Effects: The Economic Consequences of The 

Health Reform.’’ 

Dr. Mulligan, we welcome you here. 

I might say, I was attending graduate school at the University 

of Chicago some time ago when I received the letter from Uncle 

Sam saying he would rather have me in an Army uniform. I never 

made it back to Chicago, let alone even think about applying to 

Harvard. So my life has changed significantly with the arrival of 

the letter. 

Next we have Dr. Joseph Sergio, who is President of The Sergio 

Corporation located in Indiana. Welcome, Doctor. We truly appreciate you coming here to testify. Dr. Sergio holds a Bachelors and 

a Masters in Clinical Psychology from Ball State University, and 

a Ph.D. in Organizational Behavior Management from the University of Notre Dame. He is the former President of the Midwest Region for one of the largest and highest rated disaster restoration 

networks in North America, and completes over $1 billion of hurricane restoration each year. 
4 

Dr. Sergio, we thank you for being here. You might want to give 

us a hurricane forecast for this upcoming season here. 

[Laughter.] 

Our next witness is Ms. Barbara Carroll, who has served as Associate Vice Chancellor and Chief Human Resources Officer at 

North Carolina State University since 2004. She holds an MBA 

from Vanderbilt’s Owen Graduate School of Management. Prior to 

her job at North Carolina State, she held Chief HR roles in the 

University of Georgia Swarthmore College and the University of 

Missouri, St. Louis Campus. Ms. Carroll is a Chair-Elect of the National Board of the College and University Professional Association 

for Human Resources, and chairs its National Public Policy Advisory Committee. 

Thank you, Ms. Carroll for being here. 

And finally, we have Dr. Paul Van de Water, a Senior Fellow at 

the Center on Budget and Policy Priorities where he specializes in 

Medicare, Social Security, and health coverage issues. He is also 

Director of the Center’s Policy Futures Initiative. Dr. Van de Water 

has previously worked at the Congressional Budget Office and 

holds a Bachelor’s Degree with Highest Honors in Economics from 

Princeton University, and a Ph.D. in Economics from the Massachusetts Institute of Technology. 

With that, the timing I think is really, really good because I just 

finished my opening statement. I just finished introducing our witnesses. And if you are ready to give your statement—— 

Representative Maloney. I am ready. 

Chairman Coats [continuing]. I will call on Congresswoman 

Maloney, our Ranking Member. 

[The prepared statement of Chairman Coats appears in the Submissions for the Record on page 34.] 

OPENING STATEMENT OF HON. CAROLYN B. MALONEY, 

RANKING MEMBER, A U.S. REPRESENTATIVE FROM NEW YORK 

Representative Maloney. Thank you so much, Chairman 

Coats, and thank all of you for being with us today for this important hearing, and I look forward to your statements. 

The Affordable Care Act is one of the most important pieces of 

legislation in a generation. Enacted in early 2010 with many of the 

major provisions taking place in the past year, we are beginning 

to recognize the positive impacts of this ground-breaking law. 

The Affordable Care Act has expanded health insurance coverage 

in this country and has helped families who could not get health 

care through their employer, who could not afford it, or who have 

what the insurance industry has called ‘‘pre-existing conditions.’’ 

Already the Affordable Care Act has helped to reduce the health 

care costs and improve the quality of health care. 

My Republican friends argue that health care reform kills jobs. 

Democrats understand that not having health care kills people. A 

Harvard Medical School study conducted before the Affordable 

Care Act was enacted found that 45,000 deaths each year are 

linked to a lack of health care insurance. 

The Affordable Care Act has led to the largest expansion of 

health care coverage in half a century; 16.4 million people have 

gained health care coverage through the Affordable Care Act. 
5 

The Nation’s uninsured rate, 11.9 percent, is at the lowest level 

on record. It could be even lower. An additional 4.3 million people 

would gain health care insurance by 2016 if 21 states, many governed by Republican legislatures and governors, had not refused to 

accept the Medicaid expansion contained in the Affordable Care 

Act. This opposition is largely on ideological grounds. Any discussion of the possible costs of the Affordable Care Act must take 

place in the context of those overwhelming gains in coverage. 

What is less often talked about are the significant benefits to 

those who are already insured. For example, insurance companies 

can no longer deny someone coverage because of a pre-existing condition, or drop an individual’s coverage when she or he gets sick. 

Lifetime limits on benefits are banned, and insurance companies 

must offer preventive services, including mammograms and others 

with no out-of-pocket expenses. 

In addition to these significant improvements in our health care 

system, the ACA has positive economic benefits. As a result of the 

ACA, Americans are no longer forced to remain in jobs that are not 

optimal for them because they are afraid of losing their health insurance. 

Economists call this ‘‘job lock.’’ The ACA significantly reduces it. 

As a result of the ACA, individuals are able to start their own 

businesses, or pursue new opportunities that are a good match for 

their skills. 

As result of the ACA, we have a healthier and more productive 

workforce. Healthier workers are able to spend more time in the 

workforce, less days away from work. They are more likely to remain in the labor force and less likely to become disabled. 

I want to address directly the claim by some that the Affordable 

Care Act will negatively affect employment. Some call it a, quote, 

‘‘job killer,’’ end quote, and they are dead wrong. 

Since the Affordable Care Act became law in March of 2010, 

businesses have created 12.3 million jobs during 62 consecutive 

months of private-sector job growth. That’s the longest job growth 

on record. And as you see the chart, it shows the red valley, and 

then job growth and expansion for these 62 consecutive months. 

In the past year as the Affordable Care Act’s major provisions 

have taken effect, the private sector has created nearly 3 million 

private sector jobs. Critics suggest that many employees who are 

working full time would be forced to work part time by employers 

trying to evade the employer mandate. 

They are wrong about this, as well. Only a tiny share of employers—approximately one-fifth of one percent—would be affected by 

the ACA requirement. Part-time employment has in fact declined, 

as this chart shows, as a share of total employment. 

All of the employment growth has been in full-time jobs. See the 

long blue line going forward, and the red line, part-time employment. 

The number of workers working part time who would prefer fulltime work has declined for five consecutive years. Again, this chart 

points this out quite vividly. 

The Affordable Care Act also will reduce the federal deficit. CBO 

estimates that the ACA will reduce the deficit by $100 billion between 2013 and 2022. 
6 

The Affordable Care Act has brought about the largest expansion 

of health insurance coverage in 50 years, helped to improve health 

care quality, and reduced health care prices. 

At the same time, employment growth has been strong and labor 

market conditions are continuing to improve. Nevertheless, my Republican colleagues in the House have voted nearly 60 times to repeal or weaken the Affordable Care Act. 

The reality is that repealing the ACA would cause millions to 

lose their coverage and return us to the days when you could not 

leave your job because you were afraid to lose your health care insurance, or could not get coverage in the first place because you 

had a pre-existing condition. 

I cannot tell you how many women came to see me who were 

pregnant and could not get health care because pregnancy was considered at that time a pre-existing condition. 

It is critical to remember these huge benefits for the insured, the 

previously uninsured, and the economy as we continue our conversation about the Affordable Care Act. 

I look very much forward to hearing the perspective of our witnesses this afternoon, and I thank all of you for appearing before 

this Committee, and especially the Chairman for calling this important hearing. And I yield back. 

[The prepared statement of Representative Maloney appears in 

the Submissions for the Record on page 36.] 

Chairman Coats. Thank you, Congresswoman. 

And, Dr. Mulligan, I think we will start with you and go down 

the line. If you could summarize your comments, you’ve submitted 

written reports, and summarize your comments within a roughly 

five-minute time frame, we would appreciate it. It gives us more 

time to deal with and answer questions from our colleagues. 

Dr. Mulligan. 

STATEMENT OF DR. CASEY B. MULLIGAN, PROFESSOR OF 

ECONOMICS, UNIVERSITY OF CHICAGO, CHICAGO, IL 

Dr. Mulligan. Thank you. And good afternoon, Chairman Coats 

and Ranking Member Maloney, and the members of the Committee. 

I appreciate the opportunity and really honor to comment on 

what I’ve learned about the labor market effects of the Affordable 

Care Act. 

Subsidizing health insurance in order to make it more affordable 

for a significant part of the population, as this law does, necessarily 

involves the creation of disincentives to work and earn. 

My testimony characterizes the disincentives created and offers 

estimates of their likely consequences for the Nation’s economy. 

Results like these are necessary for conducting a full cost/benefit 

analysis, as you mentioned, of the law; but they are not sufficient 

because in my own work I do not have an estimate of the health 

and other benefits of subsidizing health insurance, and my analysis 

is limited to the insurance coverage provisions of the law. 

Now the law has disincentives and penalties that add to its burden on a family whenever they either earn more or accept a job, 

or both. These are disincentives to earn and work. 
7 

The personal income tax that many of us file in April is perhaps 

the best known example of a tax with disincentives. Indeed, the 

ACA has new income taxes, although primarily implicit because 

the benefits or assistance are withdrawn on the basis of income. 

But the ACA contains a second type of tax that is both more important and misunderstood even by the experts. I call that type of 

tax ‘‘full-time employment taxes.’’ 

I brought a little chart to show how they work. I show three exhaustive and mutually exclusive employment categories here: top, 

middle, and bottom. An ESI employer refers to an employer that 

offers affordable health insurance coverage to its full-time workers. 

And an ESI worker refers to anyone who works for such an employer. 

Now let’s look at the relationship between two major ACA features—health insurance subsidies and employer penalties—and 

employment status, as I have categorized them here. Only the top 

two categories are eligible for the subsidies administered through 

the health exchanges because the law says that anyone offered affordable coverage by their employer cannot receive the subsidies. 

The people on the bottom are out of luck. That by itself pushes people out of the bottom category. 

Let me also point out that this push is not an income tax. If people could somehow reduce the number of weeks they work full-time 

without changing their income, they would avoid this implicit tax. 

But if they reduce their income without changing their weeks of 

full-time work, they would not. That is why it is not an income tax. 

Only the top category is penalized. Only employers not offering 

coverage pay penalties, and they pay on the basis of number of people they have on their full-time payroll. 

Now let’s look at the net of the subsidies and penalties, at least 

on average. The bottom category, clearly the net is zero. But the 

top category’s net is pretty close to zero, as well. 

So the first-order thing that is happening here is redistribution 

from the top and bottom categories into the middle category. You 

can call it, as I do, a tax on full-time employment, or you could call 

it a subsidy to everything but full-time employment. But either 

way, the economics is the same. 

This tax can be so large that some people would earn less working full time than they are working part-time. In essence, the 

health law has made full-time workers some of the only people who 

have to pay full price for health care, not to mention the taxes that 

have to be paid so the Treasury can assist the many people who 

are not working full-time. 

Given the size and the character of the disincentives, you cannot 

reasonably hope that business will continue as usual in the economy while the law is fully phased in. 

I estimate about 3 percent less employment permanently as a result of the law, and about 2 percent less national income or GDP. 

Economic reasoning and historical evidence tell us that the employment and income effects will be more visible in the aggregate 

data than the so-called 29 phenomenon will be. The law is being 

phased in over time, so economics gives us little reason to expect 

these effects as early as 2014. But it will not be long—I would say 

next year or 2017. 
8 

In summary, helping people who cannot or will not purchase 

health insurance has a price in terms of labor market efficiency. 

The ACA creates new income taxes and full-time employment taxes 

that will be directly experienced by about half the workforce, and 

indirectly experienced by essentially the entire Nation. 

With more disincentives than we had eight or nine years ago, we 

cannot reasonably expect the labor market to return back to where 

it was then. Thank you. 

[The prepared statement of Dr. Casey B. Mulligan appears in the 

Submissions for the Record on page 41.] 

Chairman Coats. Thank you very much. 

Dr. Sergio. 

STATEMENT OF DR. JOSEPH P. SERGIO, PRESIDENT, THE 

SERGIO CORPORATION, SOUTH BEND, IN 

Dr. Sergio. Chairman Coats, Ranking Member Maloney, and 

distinguished Members of the Joint Economic Committee: 

Thank you for the opportunity to address you and to share my 

experience with the impact of the Affordable Care Act on small 

businesses. 

My name is Joe Sergio. I’m the President of the Sergio Corporation, a parent company with two operating entities headquartered 

in South Bend, Indiana. I come to you representing the small business community. 

By way of introduction, I am a first-generation American citizen. 

My father was an Italian emigrant who realized the promise of the 

American Dream as a small businessman. Our family business, the 

Sergio Corporation, was founded 36 years ago and operates two 

service businesses, including First Response, a national award-winning disaster restoration company that has been involved in every 

major hurricane and storm disaster response in the past decade or 

so. 

In 2011, we started a second company called Polar Clean America to provide a green, environmentally friendly dry-ice blast cleaning industrial service. We do not use water chemicals, and we clean 

everything from nuclear plants to food processing plants, pharmaceutical and automotive industry. 

As a small business, we have felt the profound imposition of the 

Affordable Care Act, or as it is known among many small business 

entrepreneurs, ‘‘the unaffordable care act.’’ 

In order to understand the chilling impact of ObamaCare and 

why it has hurt small business so badly, it is first necessary to understand what makes a job creating small business succeed and 

sustain itself through time and through strategic market changes. 

To be successful in a small business, you must be able to accurately identify, forecast, and control your expenses in order to create profits, profits that you can in turn reinvest in growing the 

business. 

Our profits become the engine of our investment in building the 

right team with the proper training and being able to utilize cutting-edge technology to create world-class services for our clients. 

Small businesses, their advisors, tax professionals, and even insurance companies are very frustrated with ObamaCare complications and regulations. Regardless of the current demonization of 
9 

profits by Washington, making a profit does not make one dishonest or evil. 

Without a profit, there can be no growth in wages, no new benefits, no new training, no new equipment, no new vehicles, and no 

research and development that allow us to better compete with the 

rest of the world. 

Profits create the opportunity for growth and development. I 

think that it was best stated by Edmund Pendleton, President of 

the Convention ratifying the United States Constitution, when he 

said, and I quote, ‘‘When you take away somebody’s profit, you not 

only remove their incentive to work hard, but you shut off the 

blessing of wealth that would have benefitted the entire community.’’ 

Our businesses have exhausted many options in dealing with the 

requirements of the Act, but now we had to drop a traditional PPO 

for a high-deductible ObamaCare-compliant program. As a result, 

our employees and our companies are paying more for an inferior 

policy. 

Employees are now paying larger co-pays and larger deductibles. 

Some are opting to pay the penalty rather than absorb the high 

cost of ObamaCare. Surpassing 50 employees will bring on even 

more administrative costs and reporting requirements such as the 

onerous new paperwork that will be dumped on employers in 2016 

by the IRS Forms 1094–C and 1095–C. As a result, many small 

businesses like ours have purposefully stayed under 50 employees 

and utilized more part-time employees working under 30 hours per 

week. 

Also, as a matter of conscience, many employers disdain the 

mandate that requires them to cover abortions. This is viewed as 

un-American and steps on our right to practice our faith 

unencumbered by the government. 

My experience is that most small businesses and insurance professionals, as well as employees and families, are frustrated and 

angry due to the failed promise to lower costs for the average family by $2,500, and the fact that the one-size-fits-all law actually 

caused the price of insurance to increase substantially. 

In short, ObamaCare has made building a small business more 

stressful and riskier, and has caused many to pull back and to stop 

growing. As owners, we feel a responsibility to our families and our 

children, but also to all of the employees who chose to work together with us on our team, their spouses, and their children as 

well. 

Common sense and a basic understanding of human nature tells 

me that you will always get what you incentivize. You get more of 

what you reward and less of what you punish. ObamaCare punishes employment growth and the incentive is to not grow. 

I believe that ObamaCare has damaged the best health care system in the world, damaged the American family, and hurt employees and employers alike with huge deductibles which the average 

person cannot afford. 

Please work to undo the vast harms that ObamaCare has and is 

causing to the middle class and start over, addressing the essential 

issue of unleashing small businesses to create millions of new jobs 
10 

which could raise most people from being at risk and into truly affordable plans. 

As a small business entrepreneur and job creator, I urge you to 

repeal ObamaCare and allow for market innovation within the 

health industry, allow for pooling across state lines, and allow 

small businesses freedom from oppressive requirements, new taxes 

and fees, and increased uncertainty. 

Thank you for the opportunity to share my experience with regard to ObamaCare. I look forward to questions. 

[The prepared statement of Dr. Joseph P. Sergio appears in the 

Submissions for the Record on page 72.] 

Chairman Coats. Doctor, thank you. 

Ms. Carroll. 

STATEMENT OF MS. BARBARA L. CARROLL, ASSOCIATE VICE 

CHANCELLOR FOR HUMAN RESOURCES, NORTH CAROLINA 

STATE UNIVERSITY, RALEIGH, NC 

Ms. Carroll. Honorable Members of the Committee, I would like 

to spend some time talking about the Affordable Care Act and its 

impact on colleges and universities. 

I am the chief HR officer at North Carolina State University. I 

am speaking on behalf of the College and University Professional 

Association for Human Resources, or CUPA–HR, which represents 

more than 1,900 institutions of higher ed. 

CUPA–HR supports the goal of ensuring that Americans have access to health care. Higher ed has historically provided health care 

benefits for its full-time faculty and staff, so the ACA did not create 

new requirements for our primary populations of employees. Where 

we have encountered new challenges, however, is with the unexpected impact on our part-time professionals, and most notably on 

our students. 

In my written testimony I discuss our challenges in applying the 

ACA to adjunct faculty paid on a per-course basis, and on our work 

with government agencies to resolve those issues. 

I also discuss our concerns with the so-called ‘‘Cadillac tax,’’ and 

a recent informal interpretation by the government that may 

threaten our ability to support graduate student health coverage. 

But given the time limits, I am going to focus on the issue we 

hear the most about from our CUPA–HR members, which is the 

ACA’s impact on students. 

We think of our students, whose primary purpose for being on 

campus is to seek an education rather than to earn a living, as just 

that: students, and not employees. But they are currently being 

swept in under ACA employer mandates. Unless addressed, this 

has a significant economic impact on both students themselves and 

on their institutions. 

The funds that we provide to students for on-campus assignments are a form of financial aid to support the continuation of the 

student’s degree progress. This type of self-help financial aid is a 

long-standing characteristic of federal financial aid policy like the 

Federal Work-Study Program. 

We have not historically covered students under employee health 

care plans or other employee benefit programs like retirement 

plans. The vast majority of students have access to health care cov-
11 

erage through their family’s plan, or through government-regulated 

student health insurance plans, SHIP plans, provided by their institutions. 

Our problem is that the ACA does not specifically exclude most 

student workers from the employer mandate. So today the only exemption from the Department of Treasury that they have provided 

is for students’ informal work-study programs, an exemption that 

we requested and appreciate, but it does not go far enough to address the issues with many other student workers. 

Since we have to cover 95 percent of our eligible employees in 

2016, we are facing the prospect of having to track student hours 

and offer employee health care coverage to any student who hits 

ACA’s eligibility thresholds. Offering student workers such employee coverage substantially increases the administrative burdens, 

costs, and liabilities. 

Significant new costs result in higher tuition. To avoid this, institutions are being forced to cut on-campus work opportunities for 

students, which will particularly impact students with limited or 

no family resources for whom campus financial opportunities are 

their primary source of support, other than incurring student debt. 

In many cases, tracking student work hours is difficult, if not impossible. When is a grad student who is conducting research in a 

lab under the supervision of a faculty member, when are they 

learning for their own benefit or society’s benefit versus working 

for the university’s benefit? 

When is a dormitory resident advisor ‘‘working’’ versus hanging 

out? Because calculating work hours in these situations is impractical, institutions are going to be forced to err on the side of caution 

and impose some dramatic constraints. 

We also provide stipends to students who participate in activities 

such as student government, and student publications, drama 

clubs, radio stations. We certainly do not track these students’ participation hours as work for an employer, and the stipends are a 

way for institutions to help students who otherwise might need to 

seek off-campus paid employment, to participate in these co-curricular enrichment activities. 

While the Department of Labor has long recognized that a student may receive such payment without creating an employment 

relationship, the Department of Treasury has yet to provide such 

assurances with respect to the ACA. 

As a result, colleges and universities may conclude that they 

must simply stop providing such stipends. These are bad outcomes 

for students, bad outcomes for parents, bad outcomes for colleges 

and universities. 

Along with the American Council on Education and other highered associations, CUPA–HR approached Treasury with several possible solutions. Both the Department of Labor and the Department 

of Treasury have long acknowledged the unique circumstance of 

students on campus in guidance such as the DOL’s Exemption of 

Students from the Fair Labor Standards Act, and the IRS’s own exemption of students from FICA tax. 

We hope that Treasury will issue guidance that clearly exempts 

students from the ACA employer mandate, as well. 
12 

Another approach would be for Treasury to deem compliance if 

an institution offers its students coverage under an ACA-compliant 

SHIP plan. Between one and one-and-a-half million students receive coverage under such student health plans. 

Health and Human Services issued regulations on SHIP plans, 

making them minimum essential coverage plans, sufficient to meet 

the ACA. We believe that these solutions are within Treasury’s discretionary authority and could prevent unnecessary negative outcomes for students, parents, and institutions. 

I would like to note that Treasury has been quite responsive to 

our requests to meet, and has been willing to engage in thoughtful 

dialogue on these issues. We wish that they would act rapidly with 

respect to the solutions we’ve offered on students. 

So I hope bringing forward some of our most pressing economic 

concerns will help result in some workable solutions. 

I would like to express my gratitude to Members of the Committee, and thank you for the opportunity to testify, and I would 

be happy to answer any questions. 

[The prepared statement of Ms. Barbara L. Carroll appears in 

the Submissions for the Record on page 79.] 

Chairman Coats. Ms. Carroll, thank you very much. 

And, Dr. Van de Water. 

STATEMENT OF DR. PAUL N. VAN de WATER, SENIOR FELLOW, 

CENTER ON BUDGET AND POLICY PRIORITIES, WASHINGTON, DC 

Dr. Van de Water. Thank you, Mr. Chairman, Ranking Member 

Maloney, and Members of the Committee; I appreciate the opportunity be here this afternoon. 

Five years after its enactment, the Affordable Care Act has 

achieved many of its major objectives and proved wrong its critics’ 

most dire predictions. 

The ACA’s most visible success, of course, has been to increase 

the number of Americans with health insurance. Some 17 million 

more people now have coverage, either through the Health Insurance Exchanges, the Medicaid Expansion, or young adults being 

covered on their parents’ policies. 

The Congressional Budget Office projects that the number of 

newly insured will swell to 25 million within just a few years. 

Moreover, as Mrs. Maloney said, health reform is increasing coverage without adding to the budget deficit. The Congressional 

Budget Office now projects that federal health spending will be 

nearly $700 billion less over the 2011–2020 period than CBO projected in January 2010, just prior to the enactment of the Affordable Care Act. 

Now those are some things that have happened. It is also important to note some things that have not happened. 

First, health reform has not been a job killer. The economy has 

experienced the longest stretch of job growth on record. Although 

CBO estimates that health reform will slightly reduce total labor 

compensation, as the Chairman mentioned, that is because some 

people who used to work mainly to obtain health insurance will 

now choose to work somewhat less, not because employers will 

eliminate jobs. 
13 

Second, health reform has not created a nation of part-time 

workers. The share of part-time work rose sharply during the recession, as it normally does during recessions, but that situation 

has turned around. 

Since President Obama signed health reform into law in March 

2010, all of the increase in civilian employment has been among 

people who usually work full-time, and the share of involuntary 

part-timers, workers who would rather have full-time jobs but cannot find them, continues to fall. 

Third, health reform has not increased insurance premiums. 

From the start, CBO estimated that health reform would slightly 

reduce the growth of premiums for employer-sponsored health insurance. And in fact, the CBO has recently reported that premiums 

for private health insurers have grown even less rapidly than CBO 

originally estimated. 

All in all, the economic effects of health reform in the short term 

have been quite small. According to Bloomberg Business, and I 

quote, ‘‘The biggest entitlement legislation in a generation is causing barely a ripple in corporate America.’’ 

Over the longer run, health reform will have several additional 

positive effects on the economy. First, health reform will reduce the 

budget deficit, as CBO has consistently estimated. 

Lower deficits will help hold down interest rates, free up capital 

for private investment, and boost long-term economic growth. 

Second, health reform will increase labor market flexibility. It 

will reduce job lock, a situation in which workers stay in the job 

only because they need to keep their health insurance. As a result, 

Americans will be more able to switch jobs and start new businesses, and the result will be a more productive economy. 

Third, health reform will improve health outcomes by helping 

people obtain preventive care and other health services and improving the continuity of care. This too will increase productivity. 

And finally, and most important, the ACA includes a wide range 

of measures to slow the growth of health care costs, which are consuming an ever-increasing share of our economy’s output and 

which have contributed significantly to the stagnation in workers’ 

real wages in recent years. 

As these provisions take hold, workers will see stronger growth 

in their take-home pay. Slowing the growth of health care costs is 

one of our Nation’s most pressing economic challenges, and success 

in that effort will benefit employers, workers, and taxpayers. 

Thank you, Mr. Chairman. 

[The prepared statement of Dr. Paul N. Van de Water appears 

in the Submissions for the Record on page 95.] 

Chairman Coats. Thank you, Doctor. 

We will now go through our order here in terms of the system 

we have set up, which is convoluted, somewhat Rube Goldberg, because this is a Joint Committee so we have Senate Members of 

both parties, and House Members of both parties, and we have an 

on-arrival policy as well as a seniority policy, and I am just going 

to go down through the names and do the best we can. And if I 

skip members, talk to me afterward and we will work to get you 

early in there next time. But this is giving my staff fits in terms 

of people coming and going, and so forth. 
14 

Dr. Van de Water, your presentation seemed to be significantly 

in contrast to what was said by the other three witnesses, and particularly some of the specifics here relative to the impact on the 

economy, the impact on employment, wages, et cetera. 

I have got thousands, thousands of letters and e-mails into my 

office, and testimonials from people all across the State of Indiana 

that would say, ‘‘I don’t know what Dr. Van de Water is talking 

about. I was promised that I wouldn’t pay a cent more, the President made that very, very clear, than what I was paying now. I 

was promised that I could keep my policy, if I liked my policy, period, he said. In other words, a done deal. 

I was promised that if I liked my health care plan, I could keep 

my health care plan. And I am not able to do that. I am paying 

a lot more.’’ 

I just read yesterday, I think it was in The Wall Street Journal, 

of the escalating premiums that are now coming out based on the 

2015 and future next round of premium costs. 

And then people have said, you know, all of a sudden my co-pays 

have gone way up, and my deductibles are out of sight. 

So I guess what I am wondering here is, you know, why the disconnect? Does it really go back to the fact that this thing was totally oversold when it was passed, and particularly by the President when he simply guaranteed the American people by using the 

word ‘‘period’’ behind every statement that he made, meaning take 

it to the bank, this is a done deal. You can get all this. You can 

keep your doctor. Your premiums will not go up. They’ll go down. 

Your deductibles, co-pays, this is the best thing since sliced bread. 

Now as I said in my opening statement, we all want to try to find 

a solution to deal with those who do not have insurance, or who 

are underinsured. The real question is: Is this the best thing that 

we could have come up with? And should we not look for some 

modifications, changes, repeals, start over, whatever, to put a product out that better represented what was told to the American people would come down? 

And so that is in a sense more of a statement than a question. 

My question is this, and I am going to go to Dr. Sergio and anybody else who wants to respond, and certainly Dr. Van de Water 

you can respond to what they say: 

But, Dr. Sergio, Dr. Mulligan I think this applies to you, too, the 

arbitrary levels of 50 in terms of its employment—I mean its impact on your decisions on employment, you mentioned you have two 

businesses. Now they are separate businesses. I have talked to a 

lot of businesses who have basically said I have had to create separate businesses because it is so punitive to get over the 50 mark. 

The other factor here is the 30-hour work week. And it is no secret that, in entry-level jobs in particular, chains all across the 

country are simply moving to part-time workers rather than fulltime workers. I have had that own personal experience in my family with children, and even some grandchildren now that they say 

you have a job here but you cannot work more than 30 hours because we are not—we just cannot afford to do it. Our margins are 

too slim. And you mentioned profits. We cannot afford that. 
15 

Anyway, Dr. Sergio, if you want to respond to that, and anybody 

else. I will let this be my one question here and then move on to 

my colleagues. 

Dr. Sergio. I know for a fact that small businesses create about 

90 percent of the jobs out here. And I have been involved in small 

business since I was 17. We started our own company, my brother 

and I. We built swimming pools. We paid for our education at 

Notre Dame. Went on to get my education. Another brother took 

that business and built it. 

Everybody in my family has been a small business person. My 

grandparents who came from Italy. My brothers and sisters. And 

so I have been involved with that. I was a consultant with small 

business for a year, and I have worked with them my entire life. 

There is a disconnect here between, you know, corporate and 

whatever the statistics are, because none of those match with any 

of the experience that I have. I have never in my life experienced 

so much anger and frustration. As I was preparing to come here, 

I was sort of doing a survey of people as I am talking to them, all 

the way through on the airplane coming here, and I did not give 

away my position, or say where I was coming from, but as soon as 

you mention this, this ObamaCare, people start telling you war stories. 

And if you could let them talk for five minutes, they get very, 

very angry and give you specific examples of their health care costs 

going up, and of the various problems. 

I had a college student that I talked to, and he was bemoaning 

the fact that he is trying to make some money to pay for school, 

and his employer will not give him any more than 29 hours a week. 

And what I have seen is that, because of the uncertainty with 

the costs associated with this, and with all of the changes that 

keep coming as they continue to interpret what everything means, 

even the professionals that we have worked with come back, and 

they are changing. And it is very hard for us as business people 

to predict our costs, and to look at the impact on our business so 

that now, instead of seeing an opportunity, going after that opportunity, creating jobs, knowing that we can do something very positive, you know, we have got to pull back and really look at it and 

say is it worth it doing this, because if we bring in more employees 

it is going to push us over a threshold. 

So that is a big concern to us. 

Chairman Coats. Thank you. And, quickly, Dr. Mulligan, any 

comments you would like to make in this regard? 

Dr. Mulligan. You mentioned the arbitrary thresholds, 30 hours 

a week, 50 employees. They are arbitrary. In my Profession we call 

them ‘‘cliffs’’ or ‘‘notches.’’ Medicaid programs had them for a while. 

And they do not make a lot of sense. 

They encourage a lot of economic damage around the thresholds, 

and I think you would probably get both sides of the aisle to agree 

to kind of fix that. But that is not the only fix that is needed. You 

can have it be done smoothly and charge businesses for every employee in a more smooth fashion, instead of just nailing them at 

the 50th, and you would still have some of the same economic damage we are talking about. You would not get such vivid testimony 

out of it, but you would still have damage there. 
16 

Fundamentally, when you are giving stuff to people when they 

do not work and earn, you are going to have a disincentive. That 

is a tough thing to get around. 

Chairman Coats. I think it would only be fair, Dr. Van de 

Water, if I gave you a chance to respond to that. 

Dr. Van de Water. Thank you, Mr. Chairman. You have raised 

a lot of different issues, and I cannot respond to all of them, but 

let me just take one, for example, the issue of requiring employers 

with more than 50 employees to offer health insurance. 

Your term, if I remember correctly, I think you called it an arbitrary threshold. In a sense, it is an arbitrary threshold. One could 

have chosen 40 or 60, but the key point to remember is that it is 

not an unreasonable threshold. 

Before coming over, I just pulled off the latest tabulation from 

the Kaiser Family Foundation, which does an annual survey on 

employer health insurance coverage. And even back in 2010 at the 

time health reform was being enacted, in that group of firms who 

had 50 to 99 employees, 95 percent of those firms offered health 

insurance to at least some of their employees. 

So the notion that requiring firms with more than 50 employees 

to offer health insurance coverage is a tremendous burden is something that is belied by the data. That is, in fact, something that 

most firms of that size were doing prior to health reform. 

So requiring other firms in that size group also to offer health 

insurance is not something particularly burdensome and unreasonable. I could also explain why the 30-hour threshold is also a reasonable choice. These choices may seem arbitrary, but they were 

not. They were based on a rational effort to structure the law in 

the best possible way. 

Chairman Coats. I think we can spend a great amount of time 

just debating this very one subject. There are many things to talk 

about here. My time is over, and I turn now to Ranking Member 

Maloney. 

Representative Maloney. Thank you. 

Dr. Mulligan, do you think the Affordable Care Act should be repealed in its entirety? Yes, or no? 

Dr. Mulligan. On the first page of my testimony I explain that 

I do not have all the ingredients for a cost/benefit analysis. My specialty has been on the economic consequences, the labor market 

consequences. You have to add my results to someone who has results on the health side of things. 

You mentioned you think it is making the Nation healthier. You 

may be right. I think that needs to be studied. There are parts of 

the Act that make the Nation less healthy, as well. But in the end, 

I do not have the full cost/benefit analysis to reasonably answer 

that question. 

Representative Maloney. Dr. Sergio, do you favor repealing 

the Affordable Care Act in its entirety? 

Dr. Sergio. Absolutely. 

Representative Maloney. Okay. And, Ms. Carroll, do you support complete repeal of the Affordable Care Act? 

Ms. Carroll. CUPA–HR, which I am representing, has not taken 

a position one way or another. We are looking at what exists right 
17 

now and the challenges that it is creating for us, but we have not 

taken a position. 

Representative Maloney. And, Dr. Van de Water, do you think 

the law should be repealed? 

Dr. Van de Water. Certainly not. 

Representative Maloney. Okay. And, Dr. Mulligan—let me go 

to Dr. Sergio—Dr. Sergio, you said it should be repealed. So if it 

is repealed, do you propose to give—how do you propose to give 

Americans protections that do not have health care? How do you 

propose to help people who have pre-existing conditions? Pregnancy 

was considered a pre-existing condition. 

If you repeal it, how are you going to take care of people that— 

we now have 17 million more people who have health care. They 

would lose their health care. How would you propose to take care 

of those people that have lost their health care? 

Dr. Sergio. Well that is a great question, and it is one that I 

do not want to speak for 17 million people, or 9 million people, 

whatever the number is, that has come on. I tend to use a lot of 

good, common sense in small business, along with facts and knowledge, and my opinion is that we had a workable, very, very strong 

health care system that needed some adjustment, and they threw 

the baby out with the bath water. 

Representative Maloney. I don’t know. The Harvard study 

said 45,000 people were dying each year because of lack of health 

care. On 9/11 we lost 3,000 in that terrible, terrible attack—— 

Dr. Sergio. No, I am really here to testify not on the other statistics. I am testifying on my experience with small business and 

the fact that—— 

Representative Maloney. I understand. My point was that if 

we repeal it, people will die because they will not have health care. 

But let’s go back to Dr. Mulligan. You said that you favor—you 

did not say that you favored repeal, but I would say that conservatives have made dire predictions about the impact of the Affordable Care Act. And to quote Speaker John Boehner, he said it 

would, quote, ‘‘ruin our economy,’’ end quote. 

The Speaker also said it was leading to a, quote, ‘‘net loss of people with health insurance,’’ end quote. Now The Washington Post 

gave him and that claim four Pinocchios, the worst rating in its 

scale, what it calls ‘‘a whopper.’’ But my question, Dr. Mulligan, is: 

Was Speaker Boehner right? Has it ruined the economy? 

Dr. Mulligan. I can answer the question, ‘‘Has it ruined the 

economy?’’ I don’t know what Mr. Boehner has said—— 

Representative Maloney. No. Has it ruined the economy? The 

question is: Has it ruined the economy? 

Dr. Mulligan. My prediction, as I said, 3 percent less employment. That means 97 percent of the employment you would have 

had would still be there. I don’t think the word ‘‘ruin’’ applies to 

that. 

Representative Maloney. Okay, but how many consecutive 

months of job growth have we had? 

Dr. Mulligan. You know, I have not run those numbers but, 

yeah, your opening statement, you know—— 

Representative Maloney. The longest stretch on record. 

Dr. Mulligan. Right. 
18 

Representative Maloney. And how many people have gained 

insurance since the Affordable Care Act was enacted? 

Dr. Mulligan. You know, I am not up to date on the numbers. 

My book predicts that actually CBO underestimated how many 

people will gain insurance. I am quite bullish, if you will, on the 

number of people who will gain insurance from the law. 

Representative Maloney. It was 17 million. 

Dr. Van de Water, Republican critics have claimed that the Affordable Care Act would reduce jobs and lead to an explosion in 

part-time employment. But since it was enacted in March of 2010, 

has there been a negative impact on employment? 

Dr. Van de Water. Of course it is all but impossible to disentangle the effects of health reform from the effects of all the 

other things that have been going on. But certainly as you suggest, 

all the aggregate data indicate that, to the extent health reform 

may have had any negative effects, they are sufficiently small that 

they do not show up in the aggregate data. 

That is why we see this long record of job growth that you have 

talked about, the continuing decline in the share of part-time employment in the total, the fact that all of the net job creation has 

been in full-time jobs. 

Those data do not prove that there is no negative effect whatever, but they do strongly suggest that if there has been one, it has 

been pretty tiny. 

Representative Maloney. And as you pointed out in your statement, and the graph that we used showed really that part-time had 

remained roughly much the same, but that full-time job growth has 

grown. 

Would you like to elaborate on that? 

Dr. Van de Water. I think both you and I have made the point. 

I do not think there is much to add. 

Representative Maloney. And in the past, some workers have 

been forced to stay in jobs, as you noted, because they were not 

able to leave; they were in job lock; they did not have portability. 

One of the benefits is that workers can take their health insurance and go to other jobs. What are the costs of job lock on individuals? And, I would say, to the overall economy? 

Dr. Van de Water. The cost to individuals is that they have to 

work in a job in which they may be less well suited, less able to 

contribute according to their abilities, and that can mean less earnings for them and less output for the economy as a whole. 

Representative Maloney. And the ability of an employee to 

take their health care with them, how important do you think that 

is to the economy? 

Dr. Van de Water. Oh, it is extremely important. And it also 

relates to the issue that Dr. Sergio was raising. It also allows people to take more initiative in setting up small businesses of their 

own. And we can already see that, people engaging in Internet 

startups and things like that. People setting up new businesses in 

their garage. They can do that because they have assured access 

to health coverage. 

Representative Maloney. So it has been a positive. My time 

has expired. 

Chairman Coats. Thank you. 
19 

Vice Chairman Brady. 

Vice Chairman Brady. Thank you, Mr. Chairman, for hosting 

this meeting. I am sorry for coming in late. I did get a chance to 

read the testimony last evening. 

Dr. Van de Water, I actually think your arguments buttress the 

arguments of the other witnesses, that the Affordable Care Act has 

actually contributed to the worst economic recovery in a half a century. 

You mentioned our economy has experienced the longest stretch 

of job growth on record, 60 months, but the truth is we are missing—this recovery is so slow and disappointing, we are missing 5.7 

million jobs that should be back for Americans at this point. 

The number of adults in the workforce has actually gone backwards slightly since the recovery began—not increased; it’s actually 

gone backward a bit. And the labor force participation, people actually in the workforce looking for jobs, is near a 30-year low. 

And so when people brag—I am pleased we are adding jobs. 

Every month we add jobs is a good thing. But at this disappointing 

pace, boasting about 60 months of this job growth is like boasting 

that my car started for 60 months. It only runs 15 miles an hour, 

but it is really going terrifically. 

In truth, the argument has been made about—and by the Chairman, about the impact it has had on business investment and job 

growth are very real. 

So my question to you is, out of fairness, what empirical support 

do you have for the ACA aiding the economy? Because just the conclusion that A happened and B happened, and so A must have 

caused it, is like assuming when the ACA started the Houston 

Astros were in the basement. They lost three seasons of 100 games. 

They have now rebuilt. They are leading the division. That did not 

occur because of the ACA. That just occurred. 

My argument, I think our economy is hurting because of this 

law. So empirical evidence tying directly this law to the economy, 

could you share that with the Committee? 

Dr. Van de Water. Mr. Brady, I think that, you have somewhat 

mischaracterized what I have said. You are absolutely right that 

because one thing has happened at the same time as something 

else, that does not mean that one has caused the other. 

But I think I was very careful not to say that the Affordable Care 

Act was causing the job growth. What I was responding to was the 

extreme negative claims that the ACA has been a, quote, ‘‘job killer.’’ That was a phrase that has been used extensively by some of 

your colleagues. 

I was trying to also rebut the claim that the Affordable Care Act 

has had a major effect on part-time work. Again, it is very hard 

to disentangle in a large, complicated economy such as ours, what 

has caused what. 

But certainly I think that when one looks at the aggregate data, 

it is very hard to conclude that the ACA itself has been responsible 

for slower job growth, or for a big change in the mix of job growth. 

For example, it is also undeniable that the recovery has not been 

as strong as most anyone would like. But clearly one of the major 

contributors to that has been the lack of demand in the economy. 

There are other—there are many—— 
20 

Vice Chairman Brady. Just to reclaim my time—Mr. Chairman, I do not mean to interrupt—— 

Dr. Van de Water. No, please. 

Vice Chairman Brady [continuing]. But, you know, back home, 

we live north of Houston. We have a pizza place that is holding off 

on two expansions in two communities directly because of the ACA. 

We have another pilot plant, manufacturing plant, that the costs 

have gone up so high for them that they have—it is the equivalent 

of building a new plant and hiring 100 workers—they are not doing 

it. 

And so in real life, we are seeing real job effects. Dr. Mulligan, 

do you want to weigh in on this? I know I am running short of 

time, but on the impact you view? How much slower are we because of this as a contributing factor? 

Dr. Mulligan. I wish I had more to offer today, but I tried to 

explain in my testimony really it is too early to directly measure 

the labor market consequences, because the employer mandate was 

not even begun until a few months ago. The exchanges are still 

building up. They rolled out in a terrible way. 

So we are kind of in the dark in that sense. On the other hand, 

the ACA is not the first time that we have had a change in taxes. 

And the taxes are real. All you have to do is read that complicated 

law and see all the taxes in there. 

So what I have done is I have gone back to history and say, in 

the past when we had tax changes, and when the British had tax 

changes, and the Swedes had tax changes, what happened to their 

economies? 

And the answer is: They get smaller. And so my estimate, as I 

mentioned, is 3 percent less employment, and 2 percent less GDP 

once this law is phased in, which as I said in my testimony may 

be next year or the year after when we will have the main tax components phased in there. 

Vice Chairman Brady. Okay, it is just my gut feel listening 

back home that this is having an impact and is a drag on our economy. 

Chairman, thank you. 

Chairman Coats. Thank you. 

We now turn to an actual practicing doctor who also can give us 

some insights in terms of the impact. Thank you, Dr. Cassidy. 

Dr. Cassidy. Thank you, Mr. Chairman. 

Dr. Van de Water—could you show my first slide, please? 

[Slide shown.] 

So let me just make the point that if you take part-time workers 

in the aggregate across all quintiles of our population, you might 

not see an increase in the number of part-time workers. But what 

that slide shows—and I am sorry it is so small—is that if you 

break it down into the quintiles, the lowest quintile is the one 

which gets hammered. 

And those are the ones whose recovery from part-time work to 

full-time work has not occurred during this recession. Now—and I 

believe this is from Heritage Foundation, which is a conservative 

think tank—but I also notice that Janet Yellen in her testimony at 

the Board of Governors meeting in Chicago of last year said that 

there are 7 million people working part-time who would like a full- 
21 

time job. This number is much larger than we would expect at 6.7 

unemployment based on past experience. This partly employed 

worker is a sign that labor conditions are worse. 

Now again if you take the aggregate, it obscures it. But if you 

break it down, it is those most vulnerable workers who are being 

punished by this law. 

Now when you do your research do you break it down into—you 

mentioned aggregate data; you specifically used the word ‘‘aggregate’’—have you looked specifically at the lowest quintile of income 

workers? 

Dr. Van de Water. I have to admit to Mr. Cassidy that I am 

not familiar with this particular chart, but what I am familiar 

with, if you look at the restaurant industry as an example, which 

is an industry which hires primarily people lower down in the 

earnings distribution, the workweek has returned essentially to 

pre-recession levels. 

Dr. Cassidy. Now they always had a lot of part-time workers. 

I only have five minutes. I do not mean to interrupt. 

Dr. Van de Water. Go ahead, sir. 

Dr. Cassidy. They always have a lot of part-time workers. There 

is an article, a woman, Naomi Baldman, I think from Chicago, that 

looked at textile workers and the service industry. In fact, can we 

go to our next slide? Maybe I should just go to this. 

In this one it’s a tale of two recoveries, that slide on your right. 

The red line is lower-income workers, and the blue line is higher 

income. Those are the number of hours as a percent change since 

December 2007. 

You can see again a divergence where the lower income worker 

continues to have lower part-time jobs, lower work weeks than the 

higher wage worker. 

Now isn’t that what economic theory would predict? That the 

marginal cost of providing insurance for a low-wage worker is higher, and so therefore she or he is more likely to have their hours 

reduced so the employer avoids the penalty? 

Dr. Van de Water. No, actually not. And I think actually this 

goes back to what I would have said partly in response to Mr. 

Brady’s point. 

I think if there is one thing that economists generally agree on 

it is that health care, like other fringe benefits, represents a form 

of compensation to the worker. So that requiring employers to offer 

health coverage is for the most part—and again there are some exceptions—but for the most part, not likely to affect total compensation, but simply to affect the mix—— 

Dr. Cassidy. But if you’re at minimum wage—please, I only 

have two minutes—if you are already at minimum wage, then that 

will be a significant raise for the person who would be a minimumwage worker. Correct? 

Dr. Van de Water. That would be the exception, but most workers are not at the minimum wage. 

Dr. Cassidy. And those would be the lowest quintile workers. 

Those would be the ones we found would be the most vulnerable 

to having their hours reduced. 
22 

Dr. Van de Water. Again, when you say ‘‘lowest quintile,’’ I am 

not sure which measure you are using to define the quintiles. But 

they are probably part of it. 

Dr. Cassidy. Hourly wage. And so then let me just make a couple more points. We are almost out of time. 

You mentioned that the insurance premium increases have mitigated. I will point out, there is an article from Politico—I do not 

know if we have that handout—which—oh, is that it? Let me point 

out that when people speak about health care costs, this is health 

care cost in the white line, which actually began to decrease prior 

to ObamaCare. 

This (indicating) is the inflation rate in percentages of insurance 

premium costs, and I will point out that the latest headlines are 

that insurers are asking for as much as a 60 percent increase in 

premiums. This is in the individual exchange market. 

So if we actually want to look at the effect of the ObamaCare 

law, there is a disconnect now between the compounding rate increases of the premiums and health care costs. 

By the way, that is a secular trend which began to decrease prior 

to the onset of the law. This is what Dr. Sergio is experiencing, 

workers are finding this (indicating a chart) is their reality, not 

this (indicating) is their reality. 

Lastly, I am out of time, I will make one more point. Actually, 

I am out of time. I will hold my point. Thank you. 

Chairman Coats. Well just before we started here, Dr. Cassidy 

introduced me to his son who is a senior at Penn studying economics. I thought when I turned to Dr. Cassidy, a medical doctor, I 

would be getting questions from a medical doctor. We were getting 

questions from someone steeped in economics who must have gotten that from his son. So instead of the son following the father, 

the father is following the son. 

Dr. Cassidy. Do not tell my son that. I would point out, you cannot disconnect the economics of this, though. When someone has a 

$6,000 deductible, economic theory empirically they are foregoing 

therapy. So as I as a physician am seeing people forego therapy because they have a $6,000 deductible, so economics is factored in 

their health care, Mr. Chairman. 

Thank you. 

Chairman Coats. Thank you. 

Representative Beyer. They are all gone. 

Chairman Coats. I was looking down there. 

Representative Beyer. Thank you, Senator, Mr. Chairman. 

Dr. Mulligan, thank you for the excellent analysis. I was struck 

by one of the very first things you said, in quote, ‘‘I have no estimate on the health and other benefits of the subsidies from the 

health insurance’’—subsidizing health insurance, which seemed 

very honest and accurate. You are only presenting the negative impacts through the insurance perspective, which you called the 3 

percent negative decline and 2 percent in GDP. 

We have also seen that the Harvard study showed 45,000 deaths 

per year. Obviously if we save 45,000 lives, that is an enormous 

economic investment. If we look at job growth and GDP growth 

from all the positive sides, Medicare, Medicaid, Social Security, 

Disability Insurance, the economic impacts on families. 
23 

I have seen various estimates of just what it means to all these 

hundreds of millions of Americans not to have the insecurity of a 

preexisting waiver—or of a preexisting condition. And, finally, 

bankruptcy, because we know the health costs are the number one 

cause for bankruptcies in America. 

How hard would it be as an economist to make some analysis of 

the positive impacts? And can you foresee integrating your negative 

impacts with everything good that’s coming from this? 

Dr. Mulligan. I like how you characterized it, except one exception. I do not draw the line between positive and negative. That is 

not—I did not—— 

Representative Beyer. Job creation and job—— 

Dr. Mulligan. Labor market versus health is how I drew the 

line. Okay? And since I have not studied health—I cannot rule out 

the idea that there are positive health benefits. And I agree with 

you, health is extremely valuable and you want to put a big price 

tag on it. 

I am just not sure of the direction. Senator Cassidy here mentioned how it might be—there are some forces in the law. It’s a 

complicated law pushing toward less health care. Other forces toward more health care. 

You want me to sign on to a Harvard study? No way. I found the 

Harvard guys have got the labor market part wrong, and they 

might have got the health part wrong, as well. 

But I agree that the full analysis has to count the health benefits, because health, or cost, whatever they are, because health is 

an extremely valuable resource in our world. 

Representative Beyer. Thank you, Dr. Mulligan. 

Dr. Sergio, I very much resonated with your testimony. I have 

been running a small business, a family business for more than 40 

years. And we have had the sticker shock, too, with the health insurance premiums. 

By the way, we had them in 2003, 2004, 2005, 2006. The last 

couple of years have not been any harder than the ones before the 

Affordable Care Act. 

Do you think your business will survive? 

Dr. Sergio. Our business absolutely will, and I think it will be 

through the shear determination of our team of employees. We love 

the people who work for us. We care about them. And that is 

where, you know, we have worked real hard over the last three—— 

Representative Beyer. Let me jump ahead because I have a 

bunch of points I would like to make, too, but I think you make 

the point. We do survive. We do adapt. 

Dr. Sergio. Yes. 

Representative Beyer. This is not the only new expense we 

have seen in 40 years. 

Dr. Sergio. Our costs went up 24 percent this year. We had it 

flat for the last three years with our health insurance. It definitely 

hurt us very badly and our benefits have decreased significantly. 

Representative Beyer. I want to know, where was all this 

health insurance innovation before the Affordable Care Act? Why 

do we suddenly think it is going to show up now when it did not 

show up before? 
24 

Dr. Sergio. Well I think there are some common sense solutions. 

We created some of the problems by not allowing pooling across 

state lines. It was regulation that caused those problems. If we 

would have allowed competition to exist, we could have solved 

many of the problems in that regard. 

Senator Coats had a whole list of great ideas that should be examined. And lastly is that, you know, we had so much right, I 

think if we looked at the amount of money that has been spent and 

the amount of human energy that has been expended, we could 

have spent a lot less on that and bought every one of the people 

that did not have insurance a brand new Cadillac policy and we 

still would have been better off. 

That is what I think, that we threw out this program that could 

have been fixed with some common sense practical solutions, including pooling, and now it is causing a lot of damage and a lot 

more to come. 

Representative Beyer. We have already seen what it is costing 

your business and my businesses to insure 17 million new. It is 

hard to imagine how we are going to hit 45 or 50 million just with 

pooling or a little innovation. 

But Professor Van de Water, CBO says $700 billion less in 

health care costs over this X period of time, I do not know if it was 

8 years or 10 years. Where does that $700 billion go? Is that reflected in business profits, or additional family income, or reduced 

family expenses? Who gets that $700 billion? 

Dr. Van de Water. That accrues in the form of lower federal 

deficits than would otherwise be the case. 

Representative Beyer. So it not just—it is the federal deficit 

that we are considering, rather than overall expenses? 

Dr. Van de Water. Right. That is just looking at the effect on 

the federal budget. 

Representative Beyer. Okay. Great. Mr. Chairman, my time is 

about up, I would defer back. 

Chairman Coats. Congressman Paulsen. 

Representative Paulsen. Thank you, Mr. Chairman. 

I want to follow up on a couple of points, because I think we have 

had some real good back and forth here. The topic of the hearing 

is the employment effects of the Affordable Care Act. It is really 

interesting to me that there are a couple of numbers that are real 

key to point out, which this Committee has studied in detail regarding the growth gap and where should be, where we could be 

even if we had had an average recovery right now. 

We had negative point seven percent GDP growth last quarter. 

I mean, that is—negative growth? That is embarrassing. And from 

June of 2009 to April of 2014, that is a five-year period, it took 

nearly five years to get back to having the exact same number of 

people working than when the recession began in 2007. 

That is the longest period of time to return to the starting point 

in a recession than at any other time in U.S. history. And we still 

have record numbers of people working part-time that would prefer 

to work full-time. Sure the number is getting better, but growth 

has been so slow. And the labor force participation rate is still at 

its lowest point since 1978. 
25 

Then you have a third of Americans age 18 to 31 that were living 

at home with their parents last year, which is the highest percentage in four decades. 

So we certainly have some challenges. I would argue this 30-hour 

rule, which we have had some discussion about, is interesting to 

me. When you redefine full-time work at 30 hours, I am concerned 

about the impact it has had on employees and workers in terms of 

wages and hours of the medium, lower quintile, which we had a 

conversation about. And not only in Minnesota but across the country. 

I remember having a conversation with a restaurant owner in 

Minnesota who owned seven facilities with 535 employees; 41 percent of his employees were full-time workers. So he made the decision to hire them full-time, which is probably abnormal for the restaurant industry. But he says because of the new health care law, 

he has essentially had to make the decision now to move and shift 

those folks to 29 hours. So that is a 25 percent pay cut for these 

individuals. 

Of course many of them are probably going to go and try to find 

another part-time job somewhere else, but it is totally counterproductive. The law is clearly having an impact there. 

Dr. Mulligan, does your research—because you have done a lot 

of research in some of these areas—does it indicate at all that this 

Minnesota business owner is not alone in making that type of a difficult decision? Or can you quantify the impact of what the 30-hour 

rule would be on employers and the wages and hours of employees 

working for them might be? 

Dr. Mulligan. As I mentioned, it is tough to say that in the 

present, but as the law is phased in and we have adjusted to it, 

there is no doubt that you will have what they call the 29ers, people working 29 hours because of the law and they would have been 

working 35 maybe. Low-wage people might have even been working 40. 

My estimates, they are about 4 percent of the workforce will be 

in that situation, as opposed to roughly zero before the law. 

Representative Paulsen. Okay. Dr. Sergio, you are a small 

business owner, you are going to survive. You are going to persevere. You know, my grandfather is a small business owner. My 

uncles run the company now. Same attitude. 

They went through some real tough times, and they are going to 

persevere. But when you have this 50-employee threshold, you 

start making decisions in a different way. And the fact is, you 

would be doing better now had you not had this artificial threshold. 

I mean, how much better would you be doing now? Rather than 

just surviving, you would be thriving, I assume? 

Dr. Sergio. Thank you for that question, because that is part 

of—I do not want to just ‘‘survive,’’ I want to thrive. I want to grow. 

I want to create new jobs. I want to give people careers. 

I have family members in my business. I have others that are 

not related that are young people that want to grow, and we want 

to keep them. And we cannot do that by just struggling to survive. 

The amount of overhead and the time just to track the hours that 

are coming up here and all the regulation just strips out our ability 

to create wealth—create wealth, create value for our clients, and 
26 

to be able to serve them in a better way. That is how you make 

money. That is how you get the money into the system, and you 

give raises to people, is to create value for our clients. 

We spend too much time with our higher level people now trying 

to figure out what does this whole ObamaCare mean? What is the 

impact? How are we going to adjust? 

And for my disaster business, we have a disaster. You know, 

Hurricane Katrina, Superstorm Sandy, you get some inkling that 

it is going to hit. You have some time. You are prepared. We are 

like the fire department, prepared to go out and serve our clients. 

Okay, now instead of focusing on the value and providing, we 

have got to stop and think about, okay, how much do we need— 

how much work do we need to pull in here? Because if we go ahead 

and we respond to this, and we bring on part-time people, and we 

bring on some temporary people and we bring on some others and 

it pushes us up over a threshold that puts us in a whole new ball 

game, and all of our expenses change that we are not even sure exactly what those expenses are, that is a whole other uncertainty 

that makes it difficult for us to just be able to go out and serve our 

clients and take care of them. 

So, you know, is it something we are going to figure out? I hope 

so. Have we figured it out? Absolutely not. It is very stressful to 

be faced with that. And, you know, I am the case study guy here. 

I mean, we have got all the statistics. It goes back. You say, 

okay—— 

Representative Paulsen. You are the small business owner. 

Dr. Sergio. I have not found—and I sincerely have not found 

one company, one person, one employee that has come to me and 

said, boy, this is just great. Everybody I talk to is telling me—as 

a matter of fact, a lady I sat next to on the plane, when she heard 

where I was coming, she said ‘‘give ’em hell. This is killing us.’’ She 

had multiple sclerosis. She is a fragile lady sitting there on the 

plane, and she heard about what I was doing and she started going 

into this. 

She said she had lost benefits. Her costs went up. And it has got 

her very, very worried. She looked like she was maybe in her late 

60s. So I hear this 100 percent. It is not a subtle thing. It is 100 

percent against the impact so far. 

So that is my contribution here. 

Representative Paulsen. We appreciate your testimony, and 

we have heard many of those similar stories. 

And thank you, Mr. Chairman. 

Chairman Coats. You’re welcome. 

Next up is Congressman Schweikert. 

Representative Schweikert. Thank you, Mr. Chairman. 

I am going to do one of those things that is always dangerous, 

and that is to sort of go off script and see if I can get some help 

here from all the incredibly smart people in this room. 

One of the projects our office has been working on over and over 

is to actually try to get quality population and datasets. Because 

one of the things that just drives me insane is when we are in a 

committee like this, which is supposed to be a little more high 

brow, shall we be flattering to ourselves, and I start to hear the 

anecdotals. 
27 

So could I beg of the smart people on the panel to work with me 

here? The doctor has walked us through saying there are 17 million that have been benefitted so far. Okay, of that 17, let’s walk 

through the categories. 

How many people are in that? Is it 27 and under population? 

What is my hard number? 

Dr. Van de Water. Somewhere on the order of 3 million. 

Representative Schweikert. Okay, so I have 3 million laying 

there. And we already know the cost modeling within that. It is actually—there has been a cost shifting there. My Medicare—excuse 

me, my Medicaid expansion, what is my population there? 

Dr. Van de Water. Oh, 5 or 6 million, roughly. 

Representative Schweikert. Would you believe some estimates 

place that number closer to 11? 

Dr. Van de Water. Excuse me? 

Representative Schweikert. Oh, excuse me, Medicaid expansion, almost 11? Is that an outlier? Or am I once again having this 

problem of conflicting datasets? 

Dr. Van de Water. I am not sure. My recollection could be incorrect. We just need to make this add up to 17. 

Representative Schweikert. So 11 in Medicaid and CHIP. So 

I see a number of heads nodding over there. But let’s just pretend, 

and we can always come back because it’s my model. 

So now I am looking at 3, and 11, and so if I add that up, I am 

at 14. So you are telling me my rest of my population is operating 

under this law, I have helped how many? And now I want to do 

a breakout of my allocation of administrative and overhead costs 

broken into this population because we are now seeing some 

datasets coming through our office, and I would love some help on 

this, that we may be—everyone saw the article about three or four 

days ago that just a pure administrative might be somewhere 

around $1,374 per enrollee in that third category? 

Do you remember the speeches around here for those of us 

watching at home on television that this new health care law is 

going to make things so much more efficient, so much less expensive, too. But that does not appear to be what we are seeing in the 

data. 

And then for those of you who come from the study of insurance 

and financial products world, your dollar per, or my dollar costs per 

dollar of coverage we know is also skewed out on the curve because 

of the very high deductibles. 

So we are having these wonderful discussions here, and we are 

talking past each other. I would love just an honest conversation 

that goes beyond aspirational and say what is this program really 

accomplishing? And if we want to help our brothers and sisters and 

those with preexisting conditions, are we really doing it the best 

way? 

And, please, I do not mean for this to be rambling. I am actually 

looking for something I am throwing out, for that 17 million. Does 

anyone else have a breakout of what they think it is? 

Doctor? Doctor? Doctor? It’s like being at a doctor convention. 

Dr. Mulligan. I did not really—since it was an employment effects event today, I did not come prepared with those numbers, but 

I did recognize a few of the numbers you mentioned. 
28 

There is a distinction between a Medicaid expansion and the socalled out-of-the-woodwork Medicaid people. So there are people 

who live in the state that did not expand Medicaid, but they gained 

Medicaid anyway because of all the hullabaloo around ObamaCare 

and healthcare.gov and so on. So I think probably our 11 million 

number is adding those two together, and it is fine to add them together, but that is I think why there was a little misunderstanding 

between the two. 

Representative Schweikert. Okay. Well I extend this as an 

open call to everyone in the room, Minority staff, Majority staff, if 

you have honest datasets so we can really dig into what is really 

going on here? Because if this is creating as much of an economic 

distortion as it appears it is and a misallocation, that is actually 

the ultimate debate discussion we should be having here. Because 

we are seeing some crazy numbers of dollars being spent per dollar 

of actual insurance coverage being provided. 

And I know some folks love a gigantic bureaucracy because it 

employs friends and family, but it is a crazy way to spend money. 

And with that, I yield back, Mr. Chairman. 

Chairman Coats. Congressman Grothman. 

Representative Grothman. I guess my first question will be 

for Dr. Mulligan. I was reading his book—wait a minute, you wrote 

the book. Okay, I have two questions for you. 

First of all, when I talk to my employers back home, again and 

again I am finding people having employees who either do not 

want to work full time, or do not want to work at all, or do not 

want to improve themselves and make more money because of cliffs 

that happen in medical coverage designed by the government, either Medicaid—in Wisconsin we call it ‘‘badgercare’’—or 

ObamaCare. 

Could you comment on the influence that combined Medicaid 

plus ObamaCare has on the desirability in our country to work 

more, be it to make $15,000 instead of nothing, or $30,000 instead 

of $15,000 or what have you. 

Dr. Mulligan. Yeah, sure. We have assistance programs before 

ObamaCare. It is not the first one. And there were cliffs and disincentives in there before. 

I found that when ObamaCare came in on top of all that, it reduced on average the incentive to work by about 9 percent. I think 

that was in the last table in my testimony. 

And that is a change in the incentive to work and in the direction of disincentive, and I am not sure we have seen a change like 

that much in our history. It is a big change. And that is why I am 

expecting some, let’s say, medium size to large effects of that in the 

direction of earning less and working less. 

Representative Grothman. Do you believe, combined with 

other government welfare programs, that is one of the major reasons, or you elaborate in your book, collectively one of the major 

reasons why our economy has dragged so long? Because we have 

this combined with other programs all designed to encourage people not to work? 

Dr. Mulligan. Yes, I do. Our programs have become kind of 

more European in the last, let’s say, eight years. And our labor 
29 

market has become more European, which the European labor 

market, in case you don’t know, tends to be small. 

Representative Grothman. And do you believe, anecdotally, as 

you talk to employers—and maybe I will ask the others, as well— 

do you believe we are discouraging people from making more 

money? Or another way of putting that is discouraging people from 

working harder in our economy? 

Dr. Mulligan. There is no doubt that the idea of a job is being 

discouraged. I think both parties are influenced by that, both the 

employer and the employee. I cannot really blame one side or the 

other, but there is no doubt that these programs have resulted in 

less employment, less people working, and families having less income. 

Representative Grothman. I am having, yeah, I am having 

employers in my district complain that people either do not want 

to work, or take more hours, because it jeopardizes their benefits. 

Let me get to another question which I do not think has been 

discussed enough. In addition to the fact that our government 

seems to hate work, our government also seems to have a strong 

bias against marriage. And the idea that if you get married to 

somebody who is making a decent income, you will lose your benefits. 

And, you know, I used to think it was a good idea to have children raised by mom and dad at home, but I wonder if you could 

comment on the anti-marriage incentives that seem to be built into 

ObamaCare? 

Dr. Mulligan. I am aware—I wish I had done more work on it— 

but I am aware that ObamaCare adds to the marriage tax, if you 

will, because its assistance is based on household income, which 

adds together the two adults, if there are two, but only one adult 

if there is one. So as a result you get a better deal out of 

ObamaCare if as an adult you are living without a spouse. 

And I have not been able to grind out any numbers on that yet, 

but I know that is a big factor. And it would be an interesting proposal to say, well, what if we gave these out on the basis of individual income rather than family income. 

But ObamaCare does not do that, so it taxes marriage. 

Representative Grothman. So in other words, if I am somebody making a smaller income and I have an opportunity to marry 

somebody making a larger income, there would be a substantial 

marriage penalty discouraging me from getting married. 

Dr. Mulligan. Yes. I have not run the numbers, but I agree that 

it is substantial. 

Representative Grothman. Well it is a good suggestion for a 

future book. Thank you, very much. 

Chairman Coats. Thank you. 

Senator Lee, you are our clean-up hitter. Your timing is impeccable. Unless somebody else walks in the door, you get the last 

word. 

Senator Lee. Wonderful. Thank you very much, Mr. Chairman. 

Thanks to all of you for being here. 

Mr. Mulligan, I wanted to start with you. The Administration 

has frequently boasted that the Affordable Care Act has somehow 

answered the issue of job lock for many Americans. 
30 

But there do seem to be other types of locks that are arguably 

created by the same legislation. So due to the fear of possibly losing 

subsidies under the Affordable Care Act, do you think some workers and some families might find themselves locked into certain 

jobs with fewer hours? 

Dr. Mulligan. ‘‘Lock’’ is not an economic term, but they will find 

that if they pursue those new opportunities they will actually have 

to pay for it. They will be working harder and have less to spend. 

There is no doubt about that. 

Senator Lee. Right. And especially considering that the Affordable Care Act did not equalize the tax treatment of health benefits. 

So in that respect, are we not still arguably hampering economic 

growth and the general entrepreneurial spirit by locking people 

into being compensated with health care? In other words, the failure to correct this problem does sort of contribute to that sort of 

track? 

Dr. Mulligan. By ‘‘problem,’’ you mean that there has been kind 

of an implicit subsidy of employer health insurance through the tax 

exclusion—— 

Senator Lee. Yes. 

Dr. Mulligan [continuing]. Angle of it? You are right that the 

ACA does not really fix that. It makes it worse in some cases. The 

employer penalty, for example, is pushing more of that stuff that 

you argue we have too much of. 

And then there are other aspects of it that push people out of it. 

So it has made it a lot more complicated and less efficient, but it 

has not really pushed toward solving it. 

Senator Lee. And then, Dr. Sergio, in your written testimony 

you talk about what I will call ‘‘health care lockout.’’ Can you explain how some of your employees are unable to utilize their insurance because they cannot afford the deductible, after the premiums 

that in many instances are increased? So that have to pay higher 

premiums, and then, you know, do you maybe have some people 

who may be foregoing insurance and paying the penalty so they 

can actually afford to get their medications and their routine doctor 

visits? 

Dr. Sergio. There are a variety of responses I have heard. I 

know of—and I am speaking beyond just my company here, because I work with enough other small businesses, as well as insurance individuals who work with other small businesses, but there 

are people who are foregoing pay increases because then they will 

lose their subsidies, on the very low end. 

But the majority here, the problem is this: A small business has 

a certain amount of money they can spend on labor. And you can 

try to pump some more into that thing to make that a little bit 

larger percentage, but you spend it on your hourly rates, you spend 

it on your benefits. You’ve got a total amount of cost there. 

And what ObamaCare has done is pushed more and more of that 

money that’s been budgeted into the benefits side, which then 

hurts the ability to give somebody increases in their day-to-day 

compensation and they cannot live on a fixed income like that, and 

they are working harder and harder. Well they’ve got now higher 

premium costs, and then with the additional cost of the deductible 
31 

they have got to absorb $3,000 on top of that. So it is a killer trying 

to find the funding there for them to pay for all of it. 

So it ends up becoming like a major medical policy that they do 

not want to really use unless the wheels are falling off on some 

medical condition. 

I know of some individuals who are to the point now of choosing 

which three pills out of four or five that they are supposed to be 

taking for their medical health because they cannot afford them all. 

And, you know, this is just something that is really painful to me 

because we do care about our employees. 

We know a lot about their family conditions and that sort of 

thing, and we want to be working to help them grow. And it is just 

very, very difficult when we have got limited resources now to be 

able to put towards that. 

We have been very, very proud of the strong benefit package we 

have offered our employees. We have paid 50 percent of our employees’ insurance, as well as all their dependents through all these 

years and, you know, it is getting to the point that I sit down with 

my partners and we do not know what we are going to do here. 

And we actually feel like we are failing our employees because we 

cannot take care of them all well enough. 

Senator Lee. So you’ve got higher administrative costs, as Congressman Schweikert pointed out. 

Dr. Sergio. Yes, absolutely. 

Senator Lee. And then a lot of those higher administrative costs 

then are being borne by individuals who are paying higher premiums. Not only are they paying higher premiums but they have 

also got high deductibles. 

Dr. Sergio. Yes. 

Senator Lee. And so while the law might in some circumstances 

be described by its proponents as driving more people into health 

insurance, it might actually be limiting their options in terms of actually securing health care. 

Dr. Sergio. Yes. 

Senator Lee. And in some cases dissuading them from doing. 

Dr. Sergio. And the other aspect of it is the younger folks that 

are healthier are looking at it and saying I’m just better off paying 

the penalty and not getting health insurance at all because I don’t 

really need it. And this is so incredibly expensive I am not going 

to take it. So now they are not covered, either. 

So now they are taking money out of their pockets, sending it to 

some pool in the government. They are not getting any coverage on 

that, and it is pulling healthy individuals out of the total pool. 

So then you have just, you know, older folks like me in there that 

have higher costs. 

Senator Lee. Thank you, very much. 

Dr. Sergio. You’re welcome. 

Chairman Coats. Thank you. I want to thank our witnesses. 

This was an engaging discussion, an ongoing discussion, and obviously there is a lot more to come on this topic. It is something we 

have been deliberating and debating and processing now for five 

years, since the implementation of the Affordable Care Act, and 

clearly we have got a lot of work to do in terms of how we would 
32 

proceed to deal with some of the major issues, and real issues, that 

have been raised today. 

But I want to thank each of our witnesses for their participation. 

And with that, I think we will call it to a close. The hearing is adjourned. 

(Whereupon, at 4:15 p.m., Wednesday, June 3, 2015, the hearing 

was adjourned.) 
(33) 

SUBMISSIONS FOR THE RECORD 
34 

PREPARED STATEMENT OF HON. DAN COATS, CHAIRMAN, JOINT ECONOMIC

COMMITTEE

The committee will come to order. 

I would like to extend a warm welcome to our witnesses. I appreciate your being 

here today to discuss how the Affordable Care Act (ACA) has continued to affect the 

ability of Americans to earn and do business. I’m also interested in hearing about 

the effects this law has on our broader economy. 

The impact of the ACA is particularly important to discuss this year now that the 

delayed employer provisions are in effect and employers are now feeling the pinch. 

The ACA contains numerous provisions that penalize workers and subsidize those 

who don’t work. In fact, the Congressional Budget Office estimates that, from 2017 

to 2024, the law will reduce the total number of hours worked by as much as two 

percent. That is equal to as many as two and a half million full-time-equivalent 

workers. 

CBO reasoned that this would result from ‘‘the new taxes and other incentives 

they will face and the financial benefits some will receive.’’ 

CBO also estimates a one percent reduction in total labor compensation over the 

same time frame. 

However, even those figures may underestimate the true impact of the law because those estimates don’t include every relevant provision that would affect employment. For example, the employer insurance mandates will encourage employers 

to shift workers from full-time to part-time employment. The Medicaid expansion 

will motivate many low-wage, full-time workers to reduce hours to obtain coverage. 

The marketplace exchange subsidies phase out abruptly as incomes rise, penalizing 

workers near the thresholds. Finally, the series of new taxes on individual income 

and health care services will reduce the incentive to work, save and invest. 

Further, many of these provisions will profoundly affect businesses’ abilities to expand, alter workers’ hours and schedules and reduce work flexibility for employees. 

New compliance costs in terms of time and resources will add significant burden to 

businesses. 

Not only does the law affect millions of businesses and their employees, but also 

thousands of schools and local governments. I have heard from many Hoosier 

schools that are feeling the impact and have been forced to cut hours to make ends 

meet on already constrained budgets. This is hurting not only school employees but 

students from elementary school to college. 

In an era characterized by having to do more with less, these institutions appear 

to be particularly affected by the undue burdens of the ACA. 

Sadly, too much of the conversation has attempted to focus on the purported benefits without taking into consideration some of the very real and significant costs. 

That’s not how a cost-benefit analysis works; that sounds like a ‘‘benefits only’’ analysis. 

In addition to these economic burdens, many of the goals of the ACA have not 

been met. 

Emergency room visits continue to rise. Health care costs in terms of premiums, 

co-payments and deductibles continue to rise. Many seem to be saying that they’re 

‘‘happy to hear that more people are covered, but it’s less affordable for us.’’ CBO 

estimates that premiums will rise an average of 8.5 percent annually over the next 

three years as temporary government programs intended to reduce insurer costs are 

phased out. In most states, insurers with large market shares have proposed rate 

increases exceeding 20 percent for next year. ObamaCare is about to become more 

expensive. 

While this law may have provided affordable access to health care for some, it has 

seriously hindered others. Many lost their employer-provided insurance and were 

displaced to the exchanges and Medicaid. Many lost the ability to keep their plans 

and doctors. New taxes built into the law still to be implemented will have additional negative effects on businesses and their workers. 

I think I can speak for all of us here in saying that we’d like everyone to be insured and receive quality health care when they need it. However, the policy on the 

books isn’t the solution. Instead, it has led to more unintended problems. A one-sizefits-all, government-run health care system is not the answer. We’re looking for the 

best workable, real-world solution for Americans, and I don’t believe we’ve hit that 

mark just yet. 

We should pursue initiatives that truly make health care an option for all. Such 

initiatives should drive down costs by increasing competition and transparency, reforming medical malpractice, making health insurance portable, promoting pooling 

options for small businesses and giving states greater flexibility in delivering health 

services. Americans deserve a better health care system that puts individuals 
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squarely in charge of their health care, and doesn’t discourage Americans from 

working and improving their earnings. 

With that, I look forward to discussing these issues in more depth with our witnesses today. 

I now recognize Ranking Member Maloney for her opening statement. 
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PREPARED STATEMENT OF HON. KEVIN BRADY, VICE CHAIRMAN, JOINT ECONOMIC

COMMITTEE

Chairman Coats, Ranking Member Maloney, Members, and Distinguished Witnesses: 

Even though the United States has been technically in a recovery for more than 

five-and-a-half years, our economy remains stuck in second gear. In 2014, our economy grew by 2.4 percent, and it actually contracted at an annual rate of 0.7 percent 

during the first quarter of this year. 

As of Friday, the ‘‘Growth Gap’’ between the Obama recovery and an average recovery since 1960 expanded to $1.7 trillion in real GDP. Just to catch up with an 

average recovery, our economy would have to grow at an annual rate of 8.7 percent 

each and every quarter until President Obama leaves the White House. 

Today’s hearing sheds light on an important cause of the underlying weakness of 

the economy—the unintended, but nevertheless economically destructive consequences of disincentives for employment found in ObamaCare. 

In a few minutes before this Committee, Dr. Casey Mulligan of the University of 

Chicago will testify: 

Fully phased in, the ACA is likely to permanently reduce weekly employment and 

aggregate work hours three percent, and national income two percent, below what 

they would have been if the law had not been passed. 

To some, a two or three percent reduction may not sound like much, but based 

on the recent economic data that means: 

• 4.3 million fewer Americans employed; and 

• A U.S. economy that is $325 billion smaller. 

My friends, those are quite significant negative effects. 

Today’s witnesses will not testify that our healthcare system was perfect, or without need for reform, prior to the passage of ObamaCare. Nor will today’s witnesses 

say every single provision of ObamaCare law is bad. 

Today’s witnesses will, however, make clear that bypassing regular legislative 

order and enacting a major overhaul of America’s health insurance system on a 

strictly partisan basis produced an inferior law, from which Americans are suffering 

economically. 

Economists rightly consider the phase-out of government-provided benefits as 

household income rises, including Medicaid and ObamaCare subsidies, as an implicit income tax. Moreover, the effective marginal income tax rate—including federal income taxes, federal payroll taxes, state income taxes, and the phase-outs of 

earned income tax credits and ObamaCare subsidies—for working families seeking 

to improve their economic conditions is often shockingly high—sometimes even exceeding 100 percent. 

Indeed, Dr. Mulligan provides an example in which a head-of-household with 

three dependents that earns $26 per hour is better off financially by moving from 

full-time work with employer-provided health insurance to working 29 hours per 

week and receiving ObamaCare subsidies to buy health insurance through a government-run exchange. 

Not only does ObamaCare create disincentives for Americans to work, but 

ObamaCare also creates disincentives for employers to expand and hire more American workers. In 2016, large employers not offering health insurance coverage and 

having 49 full-time employees would owe $43,320 in employer penalties for hiring 

one more full-time worker. Moreover, such employers would owe another $2,166 per 

year for the 51st and every subsequent full-time worker added to the payroll. 

The disincentive effects of these penalties are multiplied because they are not taxdeductible. At a 39 percent tax rate, the penalty of $2,166 has a net after-tax cost 

to the employer equal to the cost of providing an additional $3,298 of wages to employees. 

The negative effects of the employer penalty on less well-paid workers is especially pernicious. $3,298 is a much larger percentage of $20,000 than $100,000. That 

creates a strong incentive for employers not providing coverage to keep the hours 

of lower-paid workers to under 30 hours per week to avoid penalties. 

The choice before us is not limited to ObamaCare or the status quo before the 

law’s enactment. We can and must do better. Working together, we can implement 

a new patient-driven, market-based approach that still helps those American families who need assistance to buy health insurance. We can minimize the unintended 

economic disincentives and negative consequences of ObamaCare. 

I look forward to today’s discussion with our witnesses. 
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