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85–450 2014

CHALLENGES FACING AMERICA’S BUSINESSES 

UNDER THE PATIENT PROTECTION AND AFFORDABLE CARE ACT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JUNE 26, 2013 

Serial No. 113–60 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

TIM MURPHY, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

GREGG HARPER, Mississippi 

PETE OLSON, Texas 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

BRUCE L. BRALEY, Iowa 

BEN RAY LUJAN, New Mexico 

EDWARD J. MARKEY, Massachusetts 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

PETER WELCH, Vermont 

PAUL TONKO, New York 

GENE GREEN, Texas 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Tim Murphy, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

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

Hon. Diana DeGette, a Representative in Congress from the state of Colorado, 

opening statement ................................................................................................ 4 

Hon. Fred Upton, a Representative in Congress from the state of Michigan, 

opening statement ................................................................................................ 6 

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

Hon. Henry A. Waxman, a Representative in Congress from the state of 

California, opening statement ............................................................................. 8 

WITNESSES

Michael Brey, Owner, Hobby Works ...................................................................... 10 

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

Answers to submitted questions ...................................................................... 118 

Jeffrey S. Kelly, CEO, Hamill Manufacturing Company ..................................... 15 

Prepared statement .......................................................................................... 17 

Answers to submitted questions ...................................................................... 121 

Steve Lozinsky, Vice President, Sparkle and Shine Cleaning Services, Inc. ...... 23 

Prepared statement .......................................................................................... 24 

Hugh Morrow, President, Ruby Falls, LLC ........................................................... 26 

Prepared statement .......................................................................................... 28 

Answers to submitted questions ...................................................................... 124 

William Daley, Legislative and Policy Director, Main Street Alliance ............... 57 

Prepared statement .......................................................................................... 59 

Katie Mahoney, Executive Director, Health Policy, U.S. Chamber of Commerce ..................................................................................................................... 68 

Prepared statement .......................................................................................... 70 

Answers to submitted questions ...................................................................... 128 

Michelle R. Neblett, Director of Labor and Workforce Policy, National Restaurant Association .............................................................................................. 89 

Prepared statement .......................................................................................... 91 

Answers to submitted questions ...................................................................... 131 

Neil Trautwein, Vice President and Employee Benefits Policy Counsel, National Retail Federation ....................................................................................... 102 

Prepared statement .......................................................................................... 104 

Answers to submitted questions ...................................................................... 137 

(1) 

CHALLENGES FACING AMERICA’S BUSINESSES UNDER THE PATIENT PROTECTION 

AND AFFORDABLE CARE ACT 

WEDNESDAY, JUNE 26, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:15 a.m., in room 

2123, Rayburn House Office Building, Hon. Tim Murphy (chairman 

of the subcommittee) presiding. 

Present: Representatives Murphy, Burgess, Blackburn, Gingrey, 

Scalise, Harper, Olson, Gardner, Griffith, Johnson, Long, Ellmers, 

Barton, Upton (ex officio), DeGette, Schakowsky, Butterfield, 

Welch, Tonko, Green, and Waxman (ex officio). 

Also Present: Representative Sarbanes. 

Staff Present: Sean Bonyun, Communications Director; Karen 

Christian, Chief Counsel, Oversight; Andy Duberstein, Deputy 

Press Secretary; Julie Goon, Health Policy Advisor; Brad Grantz, 

Policy Coordinator, O&I; Sydne Harwick, Legislative Clerk; Brittany Havens, Legislative Clerk; Sean Hayes, Counsel, O&I; Andrew Powaleny, Deputy Press Secretary; Brian Cohen, Minority 

Subcommittee Staff Director, Senior Policy Advisor; Hannah Green, 

Minority Staff Assistant; Stephen Salsbury, Minority Special Assistant; and Matthew Siegler, Minority Counsel. 

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA 

Mr. MURPHY. Good morning. I convened this hearing of the Subcommittee on Oversight and Investigations entitled ‘‘Challenges 

Facing America’s Businesses Under the Patient Protection and Affordable Care Act.’’ 

Today, we will hear firsthand from business owners about the 

impact the healthcare law and its costs and requirements are having on their employees and their families, the people they care 

about deeply. 

First, I’m pleased to introduce a constituent from my district, Mr. 

Jeffrey Kelly. Mr. Kelly is a CEO and owner of Hamill Manufacturing Company, a 62-year-old company based in Penn Township, 

Pennsylvania. Like many small businesses across the country, 

Hamill is loyal to its employees, and Mr. Kelly recognizes that proVerDate Nov 24 2008 15:52 Jan 27, 2014 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-60 CHRIS
2 

viding benefits to employees is not only the right thing to do, but 

attracts better employees and helps to drive success for all. 

Yet as Mr. Kelly will testify today, since passage of the 

healthcare law, his companies premiums have risen 46 percent— 

that’s 46 percent. And as Mr. Kelly and other business owners look 

forward to full implementation of the Affordable Care Act in a few 

months, their brokers and insurance agents have warned them to 

brace for the higher fees and taxes associated with the healthcare 

law. 

Questions remain for families, workers and employers because 

there is a huge gap between what they hoped for and what they 

got. Good intentions do not guarantee good results. 

Today, I’m sure the witnesses will continue to hear the same 

promises from supporters of the Affordable Care Act. Mr. Kelly, I 

don’t think you’ll find much comfort in the fact that even though 

your premiums keep going up, supporters of the law today will tell 

you that if you look at the numbers the right way, premiums are 

going down. 

In addition to the rising costs for businesses, the witnesses today 

will also explain how the law’s requirements will directly impact 

workers. Steve Lozinsky operates a cleaning service that he has 

grown from 1 employee to over 200. Mr. Lozinsky’s business is run 

on a tight margin. When he bids on contracts, the costs of his service is often the determining factor. With less than 6 months to go 

until the Affordable Care Act is implemented, Mr. Lozinsky is 

weighing three options for his company. Option one is to reduce 

every employee’s hours to less than 30 hours per week. Option 2 

is to fire 100 employees. And there’s a third option: going out of 

business. Mr. Lozinsky is a real-world example of how the employee mandate is causing havoc for American families. 

Members on this committee may have their own opinions on 

whether the passage of the Affordable Care Act was the right decision, but we cannot disagree on the facts. The costs and the requirements of this law are forcing many businesses across the 

country to make difficult decisions, decisions that will impact the 

strength and growth of their companies, the wages of the workers, 

their ability to hire new staff. 

And the witnesses before us today are not outliers. Last week a 

Gallup poll revealed that 41 percent of small businesses have frozen hiring because of the Affordable Care Act. Meanwhile the same 

Gallup poll found that 19 percent of small businesses have reduced 

their number of workers because of the law. And that is remarkable. Nearly one-fifth of the Nation’s small businesses have reduced 

employment because of the Affordable Care Act. 

Uncertainty over the impact of this law is building a mere 

months from full implementation. The nonpartisan Government 

Accountability Office told this committee last week that implementation of the law is behind schedule. Premiums continue to climb, 

although this hasn’t stopped the law’s defenders from claiming otherwise. Competition has failed to materialize as well, and not only 

are we hearing stories about insurers sitting out exchanges in 

places like New Hampshire, North Carolina and California, last 

week we learned that one of the Nation’s largest insurers was simVerDate Nov 24 2008 15:52 Jan 27, 2014 Jkt 037690 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-60 CHRIS
3 

ply going to exit California because of the individual insurance 

market altogether. 

Meanwhile stories continue to break about cash-strapped local 

governments cutting hours of workers because they simply cannot 

afford the healthcare law. 

Again, I want to thank our witnesses before us today, and it 

takes courage to come here and talk about the nuts and bolts of 

your businesses. And we all greatly appreciate your taking the time 

to do so. 

[The prepared statement of Mr. Murphy follows:] 

PREPARED STATEMENT OF HON. TIM MURPHY

Today, we will hear firsthand from business owners about the impact the health 

care law and its costs and requirements are having on their employees and their 

families—the people they care about deeply. 

First, I am pleased to introduce a constituent from my district, Mr. Jeffrey Kelly. 

Mr. Kelly is the CEO and Owner of Hamill Manufacturing Company, a 62-year-old 

company based in Penn Township, Pennsylvania. Like many small businesses across 

the country, Hamill is loyal to its employees. Mr. Kelly recognizes that providing 

benefits to employees is not only the right thing to do, but attracts better employees 

and helps to drive success for all. 

Yet, as Mr. Kelly will testify today, since passage of the healthcare law, his company’s premiums have risen 46 percent. And as Mr. Kelly and other business owners look forward to full implementation of the Affordable Care Act in a few months, 

their brokers and insurance agents have warned them to brace for the higher fees 

and taxes associated with the healthcare law. 

Questions remain for families, workers, and employers because there’s a huge gap 

between what they hoped for and what they got. 

Good intentions don’t guarantee good results. 

Today, I’m sure the witnesses will continue to hear the same promises from supporters of the Affordable Care Act. Mr. Kelly, I don’t think you’ll find much comfort 

in the fact that even though your premiums keep going up, supporters of the law 

today will tell you that if you look at the numbers the right way, premiums are 

going down. 

In addition to the rising costs for businesses, the witnesses today will also explain 

how the law’s requirements will directly impact workers. Steve Lozinsky operates 

a cleaning service that he’s grown from one employee to over 200. Mr. Lozinsky’s 

business runs on a tight margin. When he bids on contracts, the cost of his services 

is often the determining factor. With less than six months to go until the Affordable 

Care Act is implemented, Mr. Lozinsky is weighing three options for his company. 

Option one is reduce every employees’ hours to less than 30 hours per week. Option 

two is fire 100 employees. There is a third option—go out of business. Mr. Lozinsky 

is a real-world example of how the employee mandate is causing havoc for American 

families. 

Members on this committee may have their own opinions on whether passage of 

the Affordable Care Act was the right decision but we cannot disagree on the facts: 

the costs and requirements of this law are forcing many businesses across the country to make difficult decisions, decisions that will impact the strength and growth 

of their companies, the wages of their workers, and their ability to hire new staff. 

The witnesses before us today are not outliers. Last week a new Gallup poll revealed that 41 percent of small businesses have frozen hiring because of Obamacare. 

Meanwhile, that same Gallup Poll found that 19 percent of small businesses have 

reduced their number of workers because of the law. That is remarkable: nearly one 

fifth of the nation’s small businesses have reduced employment because of the Affordable Care Act. 

Uncertainty over the impact of this law is building mere months from full implementation. The nonpartisan Government Accountability Office told this committee 

last week that implementation of the law is behind schedule. Premiums continue 

to climb-although this hasn’t stopped the law’s defenders from claiming otherwise. 

Competition has failed to materialize as well; not only are we hearing stories about 

insurers sitting out the Exchanges in places like New Hampshire, North Carolina, 

and California, last week we learned that one of the nation’s largest insurers was 

simply going to exit the California individual insurance market altogether. MeanVerDate Nov 24 2008 15:52 Jan 27, 2014 Jkt 037690 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-60 CHRIS
4 

while, stories continue to break about cash-strapped local governments cutting 

hours of workers because they simply cannot afford the healthcare law. 

Again, I want to thank our witnesses before us today. It takes courage to come 

here and talk about the nuts and bolts of your businesses, and we all greatly appreciate you taking the time to do so. 

# # # 

Mr. MURPHY. With that, I’m going to turn the remainder of my 

time over to Dr. Burgess. 

Mr. BURGESS. I thank the chairman. And I also want to join with 

thanking the witnesses for being here, taking time away from your 

families and out of your productive lives to share your stories with 

us. It is important that you do so. 

So the President promised when he signed the Affordable Care 

Act that it would add hundreds of thousands of new jobs to the 

United States economy. But as we get closer and closer, 6 months 

and 5 days, to full implementation, it becomes apparent that job 

loss, not job creation is the actual result. 

Look, business owners, I know, because I was one before coming 

to Congress, you tend to be goal-directed. The natural inclination 

of a business owner is to want to expand and grow. But instead of 

facilitating this growth, the healthcare law incentivizes businesses 

to decrease their workforce, and even provides an outlet for employers to drop employees by providing Federal subsidies in the exchange. 

The Affordable Care Act not only burdens many workers with 

lower wages, fewer hours, reduced job growth, but it also increases 

the possibility of business failure. At a time when the country is 

finally beginning to find relief from the severe recession and high 

unemployment, it’s not the time to discourage economic growth. 

Let’s remove the hurdles that the President has placed on economic 

growth and job creation and empower our businesses to propel the 

United States toward full economic recovery. 

I thank the chairman for the recognition. I will yield back the 

time. 

Mr. MURPHY. The gentleman yields back. 

I now recognizes the ranking member of the committee Ms. 

DeGette for her opening prepared statement, 5 minutes. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you very much, Mr. Chairman. I really appreciate your holding this hearing. 

As we have been discussing for a long time, ensuring that the Affordable Care Act is properly implemented is a top priority for me 

and should be for all of us. 

I agree with you that there is a great deal of confusion and even 

fear about what the Affordable Care Act will mean for businesses 

and their employees. Just like everybody else on this committee, I 

hear this every week when I go home to Denver from all sizes of 

businesses. 

I hope the hearing can help clear up some of the confusion and 

bring to light some of the very real benefits this law is already proVerDate Nov 24 2008 15:52 Jan 27, 2014 Jkt 037690 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-60 CHRIS
5 

viding to businesses and their employees. I also hope that it can 

help key in for us some of the areas that we need to improve and 

have further hearings on in this oversight subcommittee. 

I do just want to mention several key pieces of the Affordable 

Care Act that are already benefiting small businesses. The Affordable Care Act contains tax credits that can reduce the cost of small 

businesses’ health insurance by 35 percent. Four million businesses 

are eligible for this tax credit, and nearly 400,000 have already 

taken advantage of it. Beginning next year, the value of the tax 

credit will rise to 50 percent of an eligible small business’ health 

insurance costs. I hope we can work together to help educate our 

small businesses about this important benefit of the health reform 

law. 

On Friday of last week, I met with a group of small businesses 

at one of our small business incubators in Denver, and I asked 

these small businesses how many of them really wanted to offer insurance to their employees. All of them raised their hand. Every 

single one of them raised their hand. And then I said to them, did 

you know that you will be eligible for a tax credit of up to 50 percent of your costs? And most of them were unaware of that. So I 

think there’s a big education process that we need to undertake to 

let people know the benefits they can get. 

Something else that the Affordable Care Act will help with is it 

contains medical loss ratio provisions to limit overhead and administrative waste by insurance companies. Now, I heard from the 

chairman—and I hear from small businesses all the time—that 

premiums increased dramatically the last couple of years, and that 

is correct. That is exactly why we passed this bill, and that’s why 

we put the medical loss ratio provisions in the bill, because insurance rates have just been going wild the last number of years. 

So the provisions that we put into effect in the bill have already helped with $1.6 billion in rebates by insurance companies to consumers, and they have also contributed to $5 billion in premium 

savings over the past 2 years. But in the next few months, nearly 

6 million business owners and employees will get over $310 million 

in rebate checks from their insurance companies. And these medical loss ratio provisions are only going to continue to work to bend 

the curve of the increase in premiums that our small businesses 

have been seeing. 

The Affordable Care Act contains a number of long-overdue, commonsense reforms that are driving down the costs of health care 

and pushing waste out of the system. And as these reforms are 

have gone into effect, we have seen a persistent slowdown in the 

core cost of health care. Medicare cost growth is at historic lows. 

PricewaterhouseCoopers found that overall healthcare cost growth 

was at its lowest level in 50 years. So this slowdown, combined 

with the other provisions of the ACA, will help small businesses 

begin to afford healthcare coverage. 

But we all know the biggest changes are going to come in 2014. 

Small businesses will have the opportunity to purchase health insurance on the State or Federal marketplaces. They will benefit 

from increased competition. There will be more of a choice in 

healthcare plans with quality benefits, and businesses are going to 

be able to compare them side by side. 

6 

Businesses will also no longer be in danger of facing significant 

cost increases just because one of their employees becomes ill or 

has an accident. 

Of course, there is also a new responsibility for business owners. 

Many will be required for the first time to provide minimal health 

insurance for their employees. I can understand why businesses 

are nervous about this, but while the benefits are great, the burden 

is not likely to be as high as folks fear. If a business has less than 

50 employees, there’s no penalty if they do not over offer coverage. 

If there are more than 50 employees, it’s likely that the coverage 

they already have complies with the law. If they don’t offer coverage, there’s going to be new options to give people coverage. 

And so I know there is a lot of healthy skepticism. I hear it from 

my constituents, too. I look forward to working with you, Mr. 

Chairman, and the witnesses here today to help implement this bill 

so that it works for everybody and gives high-quality health insurance for all Americans. 

Thank you very much. 

Mr. MURPHY. The gentlelady yields back. 

I now turn to the chairman of the full committee Mr. Upton for 

5 minutes. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Thank you, Mr. Chairman. 

One of my top priorities as chairman of this committee has been 

rigorous oversight of the Affordable Care Act to learn more about 

how the law is being implemented and how it is impacting Americans and the Nation’s jobs creators. 

Last month, the committee released a report based on actual 

data provided by the Nation’s leading insurers that chronicled the 

looming premium rate shock in store for millions. And just last 

week the nonpartisan GAO released a report requested by this 

committee about implementation, and the findings raised additional red flags. 

The GAO found that despite having over 3 years to prepare, this 

administration is woefully unprepared for implementation, and the 

missed deadlines and delays show potential for further challenges 

ahead of the October 1st enrollment date. 

Today we are here to learn more about how the Affordable Care 

Act is affecting business owners and their employees. It’s our job 

creators who are on the front lines of implementation. They have 

a very important story to tell, and I would like to welcome our witnesses and thank them for taking the time to be here for this important discussion. 

Like many small businesses across the country, the choices facing the business owners who will testify this morning are not easy 

ones. Because of the cost of the law and its requirements, these 

businesses will have to make gut-wrenching decisions whether they 

can keep the employees that they have, whether they will have to 

lay off employees or reduce their hours, and whether or not they 

can continue offering health insurance altogether. These are not 

hypotheticals issues; these are real questions businesses are facing 

today. 

7 

And we’ll hear today for some businesses the costs of the law 

may force them to close their doors, reduce their hours. Despite the 

President’s promise that the law would lower costs for businesses 

and families, the testimony of these witnesses reveals that the Affordable Care Act is not, in fact, affordable to a number of them 

and for many of the small business owners across the country. 

Sadly, job creators large and small across the country are facing 

very difficult, similar decisions. In Michigan, a medical device manufacturer announced that it would lay off 1,000 folks—1,000 employees from across its global workforce because of the Affordable 

Care Act. 

The healthcare law’s threat to job creators and job growth is real, 

and I worry about similar announcements that will be all too common. Our rigorous oversight will continue as we fast approach the 

law’s full implementation. 

And I yield the balance of my time to Mrs. Blackburn from Tennessee. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

One of my top priorities as chairman of this committee has been rigorous oversight of the Affordable Care Act to learn more about how the law is being implemented and how it is impacting Americans and the nation’s job creators. Last 

month, the committee released a report, based on actual data provided by the nation’s leading insurers, that chronicled the looming premium rate shock in store for 

millions. And just last week, the nonpartisan Government Accountability Office released a report requested by this committee about implementation, and the findings 

raised additional red flags. The GAO found that, despite having over three years 

to prepare, the administration is still woefully unprepared for implementation and 

the missed deadlines and delays show potential for further challenges ahead of the 

October 1st enrollment. 

Today, we are here to learn more about how the Affordable Care Act is affecting 

business owners and their employees. It is our job creators who are on the frontlines 

of implementation—they have a very important story to tell, and I would like to 

welcome our witnesses and thank them for taking the time to be here for this important discussion. Like many small businesses across the country, the choices facing the business owners who will testify this morning are not easy ones. Because 

of the costs of the law and its requirements, these businesses will have to make gut 

wrenching decisions—whether they can keep the employees they have; whether they 

will have to let employees go or cut their hours; or whether they can continue offering health insurance altogether to their employees. These are not hypothetical 

issues. These are real questions businesses are facing right now. As we will hear 

today, for some businesses, the costs of this law may force them to close their doors. 

Despite the president’s promise that this law would ‘‘lower costs for businesses and 

families,’’ the testimony of these witnesses reveals that the Affordable Care Act is 

not, in fact, ‘‘affordable’’ for many of the nation’s small business owners. 

Sadly, job creators large and small across the country are facing similar difficult 

decisions. In my home state of Michigan, a medical device manufacturer announced 

it would lay off over 1,000 employees from across its global workforce because of the 

Affordable Care Act. The health care law’s threat to job creators and job growth is 

real, and I worry similar announcements will soon be all too common. Our rigorous 

oversight will continue as we fast approach the law’s full implementation. 

# # # 

Mrs. BLACKBURN. I thank the chairman for yielding. 

I welcome all of our witnesses, and I especially want to welcome 

a Tennessean, Mr. Hugh Morrow, who is a constituent of Congressman Fleischmann’s, and he is out of the Chattanooga area and has 

a wonderful location there. He’s president of Ruby Falls, and Ruby 

8 

Falls is this Nation’s largest and deepest waterfall that is open to 

the public. 

So welcome, Mr. Morrow. We look forward to your perspective on 

how the Affordable Care Act is going to affect you, your business, 

seasonal, part-time workers, and how that law’s definition of a fulltime employee affects you. 

So welcome to all, and I yield the balance of my time to the 

gentlelady from North Carolina Mrs. Ellmers. 

Mrs. ELLMERS. Thank you, Madam Vice Chairman, and at this 

time I am introducing my witness, Mr. Lozinsky from North Carolina. It is my honor to do so today. 

Mr. Lozinsky and I became friends while discussing many of the 

issues that he had concerns about—with health care lawbeing implemented, or, as we call it, the Affordable Care Act, Obamacare, 

the Unaffordable Care Act. And since that time we’ve had many 

discussions, and I have actually witnessed the changes that have 

occurred in his business and the concerns that he has had. 

His business was started a number of years ago in 1998 with 1 

employee, now having 240 employees. He is a small business 

owner. He loves his employees, they are family, and he has expressed this to me many times. He is very concerned. Thank you 

for being here today and the bravery that you’re showing coming 

forward to discuss this issue. 

Mr. MURPHY. The gentlelady yields back the balance of her time. 

I now turn to Mr. Waxman, the ranking member of the full committee, for 5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. 

My hope is that this can be a productive hearing. We need to 

educate small businesses about their new benefits and new responsibilities under the law and make sure that we’re on the right track 

to have the State and the Federal marketplaces for small businesses to purchase insurance up and running by October 1. 

But I’m concerned that today’s hearing will be just another exercise in fear mongering and misinformation, a continuation of the 

Republican strategy on healthcare reform for more than 3 years 

now. After all, we’ve faced 37 times efforts to repeal the law in part 

or in its entirety on the House floor. And even one of our Republican’s witnesses today said, I quote, ‘‘little patience,’’ unquote, for 

this fruitless effort. 

Well, Mr. Chairman, I held a series of forums with small businesses in my district. These business owners wanted to know what 

the law requires, the benefit it offers, and where they can get more 

information. This is the law after all, and they needed the basic 

facts about the law, not the propaganda. 

It was helpful for them to know that businesses with fewer than 

50 employees do not face a penalty if they offer no coverage to their 

employees. It was helpful for them to know that the Affordable 

Care Act does not require employers to provide coverage to parttime and seasonal workers. They are gratified to learn that beginning on January 1, 2014, they’ll be able to use the marketplaces 

9 

to choose from a wide variety of healthcare plans for their employees, and that they’ll benefit from new transparency and competition in the marketplaces, that they will not have to worry about 

their premiums skyrocketing because one of their employees becomes ill or has an accident, and that they may be eligible for tax 

credits to pay for up to 50 percent of the cost of coverage. 

My colleagues who have expressed a great deal of concern about 

this issue, or employers that may have to close their doors should 

be reminded, 95 percent of employers in this country with 50 employees or more already have healthcare coverage for those employees. So when we hear about people closing their door, well, we hear 

that for anything the government hopes to do. Whether it’s to protect people in the workplace from hazards or exposure to chemicals 

that may harm them, or to regulate the businesses in which they 

act, we hear it all the time, they’re going to have to close their 

doors. 

Mr. Chairman, we should be joining together to make sure the 

Affordable Care Act is implemented effectively, not wasting time on 

dozens of votes to repeal the law. I noticed that one of our witnesses that the Democrats suggested, Mike Brey, for example, is a 

business owner who knows that quality health coverage is a valuable way to attract quality employees. He has seen health insurance premiums rise dramatically in the years before reform. He’s 

starting to see new competition amongst insurers, and finally he 

sees an opportunity to get costs under control. 

Members of Congress have an important jobs in the months 

ahead. Our constituents are coming to us looking for help in understanding their new benefits and new responsibilities. We have an 

obligation to give them the facts about the law and to help them 

understand their options in a fair and straightforward way. I hope 

all members of this committee will join with me in that effort. Our 

goal should be to educate, not scare or mislead. 

Mr. WAXMAN. I want to yield a brief period of time to the gentleman from Maryland Mr. Sarbanes to introduce his witness. 

Mr. SARBANES. I thank the gentleman for yielding. I appreciate 

the committee giving me the opportunity to join the hearing today. 

I’m excited to welcome Michael Brey here, who is a constituent 

of mine from Annapolis, Maryland. 

Michael, as you can see, Members of Congress will walk over hot 

coals to welcome their constituents here to these hearings. It hasn’t 

been that difficult today because the committee has indulged me. 

But we are excited to have Michael here. He is the founder and 

president of Brey Corporation, which he started back in 1992. He 

acquired Hobby Works, which is a unique toy store offering models, 

trains, planes, boats, games, in 1993, and since that time he has 

increased Hobby Works to five locations in Maryland and Virginia. 

The sales have grown 600 percent to $5 million in 2012. 

Michael may be familiar to some of you because he is someone 

who is a strong advocate for small businesses. He has worked with 

Members on both sides of the aisle over time in both the House and 

Senate on how healthcare issues impact small businesses, and we 

are very excited to have him here and hear his discussion of why 

he thinks the Affordable Care Act offers real opportunities for relief 

to his business. 

10 

Thank you, Michael, for being with us. 

I yield back. 

Mr. MURPHY. The gentleman’s time has expired. 

So now all of our witnesses have been introduced. I will do it one 

more time here. Our first witness is Michael Brey. He owns Hobby 

Works, a company he started in 1992. It has grown to five stores 

in the Virginia and Maryland area. 

Our second witness is Jeff Kelly, CEO and owner of Hamill Manufacturing Company, the family-owned business, precision machining and fabricating company serving many defense industry-related 

needs. 

Our third witness, Steve Lozinsky, vice president of Sparkle and 

Shine Cleaning, providing construction and entertainment cleaning 

along with janitorial services. 

And last witness is Hugh Morrow, president of Ruby Falls, the 

Nation’s largest and deepest waterfall open to the public. Because 

of the seasonal nature of his business, Mr. Morrow has both fulltime and part-time employees. 

I’m now going to swear in the witnesses. You are all aware that 

the committee is holding an investigative hearing and when doing 

so has the practice of taking testimony under oath. Do any of you 

have any objections to testifying under oath? 

All the witnesses answered negative. 

Now, the chair then advises you that under the rules of the 

House and the rules of the committee, you are entitled to be advised by counsel. Do any of you desire to be advised by counsel during your testimony today? 

And all of the witnesses say no. 

So in that case if you would all please rise, raise your right hand, 

and I’ll swear you in. 

[Witnesses sworn.] 

Mr. MURPHY. You are now under oath and subject to the penalties set forth in Title 18, section 1001 of the United States Code. 

You may now each give a 5-minute summary of your written statement. We will recognize first Mr. Brey for 5 minutes. 

TESTIMONY OF MICHAEL BREY, OWNER, HOBBY WORKS; JEFFREY S. KELLY, CEO, HAMILL MANUFACTURING COMPANY; 

STEVE LOZINSKY, VICE PRESIDENT, SPARKLE AND SHINE 

CLEANING SERVICES, INC.; AND HUGH MORROW, PRESIDENT, RUBY FALLS, LLC 

TESTIMONY OF MICHAEL BREY 

Mr. BREY. Well, thank you, Chairman Murphy, Ranking Member 

DeGette and members of the committee for having me. As you 

heard, my name is Mike Brey, owner of Hobby Works, a hobby and 

toy shop I acquired in 1992, which I’ve since expanded to five locations in Maryland and Virginia. I also volunteer my time and entrepreneurial expertise to help other small business owners and 

small business advocacy groups find solutions to problems that we, 

small business owners, face every day. 

One of the fastest-growing problems is the nonstop rising cost of 

health insurance, and that’s what I’m here to talk about today. 

From the very beginning, I offered health insurance coverage to 

11 

keep and retain my good employees, and one of the first questions 

people ask me when you’re hiring is if you provide health coverage. 

And I have taken some pride in being able to say, yes, and the coverage we’re offering you is the same coverage that the president of 

the company and his family are on. 

My business has been successful, and we’ve been able to grow, 

but my ability to keep my workers happy and secure by providing 

health insurance coverage has eroded. Our health plan once cost 

100 bucks a person, all of which was covered by the company. Over 

the years our premium has tripled. My employees have seen their 

costs increase fivefold as they pay more of the premium for worse 

coverage. My workers are burdened by high deductibles, and so 

they put off preventive care for themselves and their children by 

avoiding the doctor. 

Passage of the Affordable Care Act was the first thing in years 

that gave me some hope that this endless spiral of escalating costs 

and declining quality of coverage might finally end. I’m looking forward to full implementation of the Affordable Care Act next year 

when our State exchange opens and more cost-containment provisions go into effect. Perhaps then I will finally start to have the 

certainty and stability every business owner craves. 

There are benefits of the ACA for my small business. Long before 

anybody ever heard of Obamacare, the high cost of health insurance was one of my top business concerns. Costs skyrocketed for 

many years while quality of coverage decreased. The status quo 

was utterly unacceptable. Doing nothing would have wreaked 

havoc on mine and other small business owners’ bottom lines and 

our ability to create jobs. 

An MIT economist, Jonathan Gruber, did an analysis of the consequences of doing nothing. He found that without reform employers would pay trillions, $2 trillion, in healthcare costs by 2018, 

costing several hundred thousand jobs, $800 billion in small business wages, and $50 billion in profits. Those numbers show why 

passage of the Affordable Care Act was so important. 

There have been objections from small business owners about 

this law, but I believe that that discontent is largely based on misinformation and myths. One myth I hear all the time is that small 

businesses will go out of business because they’ll be required to 

provide costly health insurance to their employees. This is simply 

not true. Ninety-six percent of businesses in this country have 

fewer than 50 full-time employees, which means they’re essentially 

unaffected. Of the 4 percent who do have more than 50 employees, 

96 percent of them already offer insurance. So that leaves less than 

two-tenths of 1 percent—not 2 percent; two-tenths of 1 percent of 

small businesses that have more than 50 full-time employees that 

don’t offer insurance that will be impacted. That’s a pretty small 

segment of the community. 

I’m one of those employers with fewer than 50 full-time equivalent employees, and starting next year I’ll be able to use our State 

SHOP Exchange to purchase coverage. This is huge. In Maryland 

we haven’t had a lot of choice. This exchange will allow me to pool 

together my buying power with other small business owners when 

purchasing insurance. Presumably with a larger—with more competition and a larger pool, the market will become more competiVerDate Nov 24 2008 15:52 Jan 27, 2014 Jkt 037690 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-60 CHRIS
12 

tive, and prices will stabilize, maybe, maybe even come down as a 

result. And I crave this kind of predictability. 

Another way the law will help me is to rein in the hidden costs 

in the system, like shouldering the burden, the huge burden, of uninsured receiving medical care. When everybody is required to have 

insurance, there won’t be the need to pass those costs on to me. 

The Affordable Care Act isn’t perfect and won’t solve all of our 

business problem overnight, but it is the first meaningful law in 

decades that meets many small business core needs in regards to 

rising healthcare costs. In this fragile economy, policies that allow 

me to spend less on health premiums, and reinvest more of my 

profits, and create more jobs is what I need the most. 

Implementing and strengthening the Affordable Care Act is the 

only logical path forward to lowering the overall cost of health care, 

providing more options for coverage for small business owners like 

myself, and enabling small businesses to resume our traditional 

role as primary job generators. 

I would like to thank the committee for having me and giving me 

the opportunity to address you today. 

Mr. MURPHY. Thank you. 

[The prepared statement of Mr. Brey follows:] 

13 


85450.001

HOUSE ENERGY AND COMMERCE SUBCOMMITTEE ON OVERSIGHT ON 

SMALL BUSINESSES AND HEALTHCARE 

JUNE 26, 2013 

MICHAEL BREY 

Fonnder & President, Brey Corp. t/a 

HOBBY WORKS 

Good morning, Chainnan Murphy, Ranking Member DeGette and members of the committee. 

My name is Mike Brey, I'm the owner of Hobby Works, a hobby and toy store I acquired in 1992, which 

I've since grown to five locations with stores in Maryland and Virginia. I volunteer my time and 

entrepreneurial expertise to help other small business owners and small business advocacy groups find 

solutions to problems we business owners face every day. One of the fastest growing problems is the 

non-stop rising cost of health insurance. That's what I'd like to talk to you about today. 

Almost from the start, r offered health insurance coverage to keep and retain good employees. One of the 

first questions people ask about when you're hiring is if you provide health insurance. j've always taken 

great pride in being able to say, "The coverage we're offering is the same coverage the President of the 

company and his family are on." 

While my business has been successful and we've been able to grow, the ability to keep my workers 

happy and secure by providing health insurance coverage has eroded. Our health plan once cost $100 per 

person, most of which was covered by the company. Over the years our premium has tripled. My 

employees have seen their costs increase five times as they pay more of the premium and face a higher 

deductible. My workers are burdened by high deductibles and are putting off preventive care for 

themselves and their children and avoiding the doctor. The passing of the Affordable Care Act was the 

first thing in years that gave me hope that this spiral of escalating costs and depreciating quality of 

coverage might finally end. 

I'm looking forward to full implementation of the Affordable Care Act next year when our state exchange 

opens and additional cost containment provisions go into effect. I may finally start to have the certainty 

and stability I need when it comes to health insurance premiums and choices of plans. 

Benefits ofthe ACA for my small bnsiness 

The high cost of health insurance has been one of my top business concerns for the past decade. As I 

mentioned, costs have continued to skyrocket while quality of coverage has decreased. The status quo 

was completely unacceptable. Doing nothing would have wreaked havoc on my and other small business 

owners' bottom lines and our ability to create jobs. Advocacy group Small Business Majority**, 

commissioned MIT economist Jonathan Gruber to conduct an analysis on the consequences of doing 

nothing. Gruber's analysis found that, without refonn, small employers would pay $2.4 trillion in 

healthcare costs by 2018, costing 178,000 jobs, $834 billion in small business wages and $52.1 billion in 

profits. 

Those numbers show why passage of the ACA was so important. 

There have been objections from small business owners about this law, but I believe that that discontent is 

largely based on misinfonnation and myths. One myth I hear all the time is that small businesses will go 
14 


85450.002

out of business because they'll be required to provide costly health insurance to their employees. That's 

just not the case. Lets look at the numbers: 96% of all businesses in this country have fewer than 50 fulltime employees, which means they won't be required to offer insurance at all. Of the 4% who do have 

more than 50 employees, 96% of them already offer insurance. So, that leaves 0.02% of small businesses 

that have more than 50 full-time employees and don't offer insurance that will be impacted. That's a very 

small segment of our community. 

Going back to the m~ority of small businesses, I'm one ofthose employers with fewer than 50 full-timeequivalent employees. Starting next year, I'll be able to use our state small business health insurance 

exchange to purchase coverage. This is huge. In Maryland, we don't have a lot of choice in insurance 

providers. In fact, we only have three. The Small Business Health Options (SHOP) exchange will allow 

business owners like me to pool our buying power when purchasing insurance. With a larger pool of 

businesses, ideally we will have more insurers offering coverage, and therefore more options to choose 

from. Presumably, this will make the market more competitive and I expect prices to come down as a 

result. Simply knowing I'll be able to shop for other plans as insurers change and costs fluctuate makes 

me feel more secure. 

Another way the law will help me personally and rein in costs across the system is that up until now, a 

huge and largely unknown cost associated with private health insurance has been a hidden cost passed 

onto the insured when the uninsured receive medical care. When an uninsured individual receives care 

they can't fully pay for, health providers recoup a portion of unpaid-for care by passing the costs on to the 

insured with higher rates and premium costs. When everyone is required to have insurance, there won't be 

the need to pass those costs on. 

Many provisions of the ACA are key to making health insurance more accessible and affordable for small 

businesses like mine. In addition to the exchanges, a multitude of cost containment provisions will go into 

effect next year that will help lower costs throughout the system. And as a businessman, it's important to 

me the country balance its books. The ACA helps lower costs while reducing the federal deficit by more 

than $200 million by 2020 and more than $1 trillion over the 10 years after that. 

The ACA isn't perfect and it won't solve all of our health insurance problems overnight. However, it is 

the first meaningful law in decades that meets many of small businesses' core needs in regards to rising 

healthcare costs. In this fragile economy, policies that allow us to spend less on health premiums so we 

can keep more of our profits to reinvest in our companies and create jobs are what we need the most. 

Conclusion 

Implementing and strengthening the Affordable Care Act is the only path forward to lowering the overall 

cost of health care, providing more options for coverage for small business owners like myself and 

enabling small businesses to resume our traditional role as primary job generators. Thank you for giving 

me the opportunity to address the committee today. 

**1 am a member of Small Business Majority's Network Council where I advise them of my ideas and 

feelings regarding problems and issues facing small businesses like mine; and try to find pragmatic 

solutions to those problems. Small Business Majority is a national small business advocacy organization 

that works to find solutions to the biggest problems facing small businesses today. 
15 

Mr. MURPHY. Mr. Kelly, you’re recognized for 5 minutes. 

TESTIMONY OF JEFFREY S. KELLY 

Mr. KELLY. Good morning. Chairman Murphy, members of the 

committee, thank you for the opportunity to testify today. 

My name is Jeff Kelly, CEO and owner of Hamill Manufacturing, 

a veteran-owned family business based in Penn Township, Pennsylvania. The company was started by my father in a chicken coop in 

1952 in our backyard. Our first contract was for parts for the 

U.S.S. Nautilus, the first nuclear-powered Navy ship. Hamill has 

produced critical components for every naval reactor built since, 

and we plan to continue to do so. 

Our company is made up of machinists, welders, inspectors, engineers, administrators, among others. There are about 125 of us in 

the Hamill family, and I cannot stress that point enough that 

Hamill, just like thousands of other small businesses, our employees are our family. I plan to retire in 4 years, at which point 

Hamill will be 100 percent ESOP. Currently the employees own 49 

percent of the company. 

We pay well. Our average salary is about $50,000, which, combined with our company size, means we are largely on our own and 

will not benefit from most of the subsidies and tax credits from the 

Affordable Care Act. 

We offer good benefits to help to attract and retain talent. In 

southwest Pennsylvania companies like ours compete against much 

larger employees who can offer higher wages and more easily absorb increased healthcare costs. The irony of this: The cost of our 

generous plans are increasing so rapidly that we can no longer provide regular wage increases, which we need to attract and retain 

the best talent. 

Our healthcare costs for the fiscal year ending March 10—March 

31, 2010, were 795,000. Today with the same number of employees, 

they are 1.2 million. And we have—would have been 1.8 million 

were it not for changes we made to prevent catastrophic increases 

difficult for any small business to absorb. 

The future should be bright, but current and future healthcare 

costs cloud it. The Affordable Care Act is proving to be unpredictable and unaffordable. Since the passage of the law in 2010, our 

healthcare premiums have increased 46 percent. It would have 

been 20 percent higher if we had not taken some extraordinary 

means to hold the increase to 20 percent. A nearly 50 percent increase in healthcare costs is virtually impossible for small business 

to absorb, let alone a two-thirds increase. 

To avoid the additional 20 percent, we changed carriers, doubled 

our deductible from 2,500 per individual and 5,000 per family to 

5,000 and 10,000. We also instituted an aggressive wellness program and charged a premium for all employees and spouses who 

are tobacco users. The higher deductible was misleading since we, 

as the employer, cover 95 percent of the employees’ costs, meaning 

the company covers 4,500 or 9,000, while the employee pays a 500 

individual and 1,000 family deductible. That means the amount the 

company will pay each year actually depends on how many employees and by how much they exceed their nominal deductible. In the 

past fiscal year, those additional costs were $110,000, money we 

16 

could have used to hire two employees or increase wages to retain 

employees. 

So we track two numbers, the premiums we pay and the company portion of the plan deductible. Currently the company pays 

80 percent of the premium, while the employee pays 20 percent of 

the balance. In time we will have to ask employees to share more 

of the expense towards a 60/40 split. The speed with which we 

move to that position will depend on how steep the future cost 

curve is. That may in turn cause us to lose valuable employees. 

Talk about a no-win situation. 

In addition to the actual cost involved with having a companysponsored healthcare plan, one cannot overstate how much management time and resources are spent on administering the plan. 

One wonders if running or starting a small business is really worth 

the effort. 

I want to be clear: This is not just about how much our company 

pays for health care. I know many believe the Affordable Care Act 

will lower costs for small businesses, but the opposite has occurred 

for us. As implementation nears, insurance companies are pushing 

down as many increases as they think employers can absorb. 

Unlike the Federal Government, we in small business have to 

budget for future costs today. How can I develop a business strategy for 2014 when I can’t estimate future costs? 

We will manage next year, but I’m most concerned about when 

our company becomes 100 percent employee owned. I doubt they 

will like running a healthcare provider, which is what we’re becoming, instead of a manufacturing company that they thought they 

were getting. 

Thank you for the opportunity to testify before you today and 

bring attention to this serious problem. 

Mr. MURPHY. I thank the gentleman. 

[The prepared statement of Mr. Kelly follows:] 

17 


85450.003

Written Testimony 

of 

Mr. Jeff Kelly 

CEO & Owner, Hamill Manufacturing Company 

Before the 

U.S. House of Representatives Energy and Commerce 

Subcommittee on Oversigbt and Investigations 

Wednesday, June 26, 2013 

Chainnan Murphy, members of the Committee, thank you for the opportunity to testifY today. My 

name is Jeff Kelly, CEO and Owner of Hamill Manufacturing, a 62 year old company based in 

Trafford, Pennsylvania, 

Our [lIst contract was for parts for the USS Nautilus, the [lIst nuclear powered naval vessel. 

Hamill has produced critical components for every naval Nuclear reactor built since, and we hope 

to do that for the foreseeable future, 

I own 51 % of the company and my employees own 49% - we set up an ESOP in 20 I 0, The long 

range plan is to be 100% employee owned when I retire in 4 years. We think we run our business 

the right way - customer and employce centric! 

Our company is made up of machinists, welders, inspectors, technicians, contract administrators, 

purchasing people, engineers and administrators. There are about 125 of us in the Hamill family 

and I cannot stress that point enough at Hamill, just like at thousands of small businesses across 

the country, our employees are our family. We pay well; our average salary is about $50,000, 

which combined with our company size, means we are largely on our own and will not benefit 

from most of the subsidies and tax eredits under the Affordable Care Act 

We offer good benefits, not just because it is the right thing to do but because it gives us an edge in 

recruiting and retaining the most talented employees but we can only do so much. In Southwest 

Pennsylvania, companies like ours compete against much larger employers who can offer higher 

wages and more easily absorb increased health care costs. At Hamill, we hired a co-op student his 

senior year of high school and completely paid for his four year apprenticeship program and he 

became a Journeyman machinist for us. He developed Hodgkin's Lymphoma, underwent a 

stem-cell transplant, but when he returned, we promoted him to a methods engineer and moved him 

to a different part of the plant in an environment that met his needs. After 11 years of employment, 

he left for higher wages at a larger manufacturer. 

The irony is, our generous plans combined with increased health care costs are now resulting in us 

losing employees because we cannot inerease wages like before. We try to provide wage inereases 

every 12-18 months but this year we could not because we are paying a lot more for health care. 

Our total health care costs for the Fiscal Year ending March 31, 20 I 0 were $795,000. Today, with 

the same number of employees, they are $1.2 million and would have been $1,8 million were it not 

for changes we had to make to prevent a catastrophic increase difficult for any small business to 

absorb, 
18 


85450.004

As you'll see, not only is health care becoming unaffordable for Hamill, health care is increasingly 

burdensome for our employees and their families who are facing stagnant wages and higher 

deductibles, co-pays, and monthly premiums. In the 2000/2001 health care plan year, the employee 

paid only $12 a month for a family plan. Today, an employee pays $222 per month to ensure their 

family has health ins urance -

We tend to keep our people for a long time. Our average age is 47. Our average length of service is 

13 years and the median service is 9 years. We take the long view in managing the company. We 

hire interns and train our machinists in a Pennsylvania approved apprenticeship program. We 

provide vision and dental coverage at no additional cost to the employee and make sure each pcrson 

in our shop feels like they are part of our Hamill family. 

The future should be bright, but current and future healthcare costs cloud it. The Affordable 

Healthcare Act is proving to be unpredictable and unaffordable. Since the passage oflaw in 2010, 

our health care premiums have risen 46%. They would have been 20% higher if we had not taken 

some extraordinary means to hold the increase to 46%. A nearly 50% increase in health care costs 

is virtually impossible for a small business to absorb let alone a two-thirds increase. To avoid the 

additional 20%, we changed carriers, doubled our deductibles from $2,500/$5,000 to 

$5,000/$10,000 (individual/family), instituted an aggressive wellness program and charged a 

premium for all employees/spouses who are tobacco users. 

The higher deductibles are misleading, since we as the employer cover 95% of the employees 

costs. Meaning, the company covers $4,500/$9,000 - difference between the employee share of the 

deductible ($500 individual/$1 ,000 family) and the real deductible of $5,000/$1 0,000. That means 

the amount the company will actually pay over a year depends on how many employees and by 

how much they go over their nominal deductible. In the 2012/2013 plan year, twenty-two of our 

covered members reached the deductible for an additional cost of $11 0,000 to the Hamill 

Manufacturing money we could have used to hire two employees or increase wages. 

So we track two numbers, the premiums we payor are likely to pay and the company portion of 

the plan deductible. Additionally, the company pays about 80% of the premium while the 

employees pay the 20% balance. But I will tell you what we told our employees. Because so many 

of our jobs are critical to our operation, we just can't get rid of people if our healthcare costs 

continue to increase significantly. We will have to ask the employees to share more in the expense. 

We'll move to a 60/40 employer/employee cost breakdown position from our current 80/20 

position. The speed with which we move to that position will depend on how steep the future cost 

curve is. 

Our broker tells us that next year we can expect a premium increase of 10% if we have a "good" 

year in terms of claims. He says we can expect to be at or above that level of increases for the 

foreseeable future. It sounds like we will continue to increase at rates well above inflation. 

Additionally, there a number of new fees associated with the ACA that kick in on January 1,2014 

which will add $11,500 in this plan year and $49,000 next year. 

Long before the ACA, we placed a strong emphasis on the health of our employees through a 

wellness program. At Hamill, we have a monthly walking challenge, a Biggest Loser Competition, 

held a Wellness Fair in 2012, have discounted health and wellness programs offered through our 

health insurance, and provide monthly healthy living seminars. In addition, we also offer 

reimbursements for tobacco cessation programs. This is part of our strategy to maintain a healthy, 

happy, and productive workforce while hopefully slowing the annual rate increases we face. 

To stay competitive, Hamill will be forced to fmd ways reduce the impact of health care costs. We 

will have to ask our employees to share more costs. This really isn't desirable because of the 

morale and retention issues we would face. Skilled labor - having, fmding and developing it - is 
19 


85450.005

the most important factor in any current or future success. Hamill faces a very competitive labor 

market because of the number of OEM's operating in SW PA. We have already had apprentices 

and skilled workers poached by some of these larger fIrms. 

In addition to the actual costs involved with having a company sponsored healthcare plan, one 

cannot overstate how much management time and resources are spent on administering the plan. 

Throw in hours of time spent on trying to keep costs manageable, dealing with brokers and a 

limited number of providers, communicating with employees and trying to influence employees to 

take wellness seriously, you are left wondering if running or starting a small business is really 

worth the effort. 

The attitude that has come to prevail in this country is that businesses should be social welfare 

agencies especially as regards healthcare. I don't think our employees want that, I know the 

employer doesn't want that, and I guarantee that when the employees own 100% of Hamill in four 

years - they will not want that. Hamill is fortunate enough to be of a size where it has a two-person 

Human Resources Department. Many small companies are not so fortunate. It is distressing to 

think what nightmares the A CA will impose on the small business trying to do right by its 

employees. 

Manufacturing goods and providing services to our customers is our number one priority. Being a 

social benefIts agency is not within our area of expertise, nor should it be. ACA is adding an 

impossible level of complexity to the already tough job of running a business, which competes not 

only in SW PA but globally against low cost countries. 

I want to be e1ear this is not just about how much our company pays for health care. I know 

many believe the Affordable Care Act will lower costs for small businesses - but we have yet to 

see that and quite the opposite. As implementation nears, insurance companies are pushing down 

as many increases as they think employers can absorb. At the time, some in Washington promised 

increased competition to lower rates, which may be the case in other parts of the country but not in 

Southwest Pennsylvania where we really only have two providers. 

Further complicating factors, while we are considered a small business by the federal government 

in almost all other areas, we don't qualifY under the arbitrary standards developed by lawmakers 

under the ACA. Since we have 125 employees, Hamill is above the 100 limit for companies to 

participate in the Small Business Health Options Plan (SHOP). And even if we did qualify, I live 

in state which will have a federally facilitated SHOP exchange which means my employees won't 

have an option to choose a plan to fIt their needs and who knows what other delays and surprises 

regulators have in store. 

We just started our Fiscal Year on April 1 and had planned to hire 12 new employees this year 

including four summer interns - representing a major jump in employment for us as we try and 

grow the business. However, how am I going to pay for them? Exeluding the interns, if I hire eight 

people at an average salary of $50,000 a year that is $400,000 in additional payroll. But that is not 

the problem. If they have families, that is an additional $ I 0,545 per employee for health care 

coverage and that is just the premiums. If two of them hit the deductible limit that is another $9,500 

per employee cost to the company. 

So the total cost of a new hire today for just salary and health care is over $70,000 before I've paid 

any taxes, retirement contributions and other benefIts. While this is part of running a business, 

spending over $20,000 per year on health care coverage for an employee making $50,000 in wages 

is no way to run a successful business. And just wait until my broker calls and says he's adding 

another increase due to unintended consequences of the Affordable Care Act. 

Several years ago, I served as Chairman of the National Tooling and Machining Association, with 

nearly 1,500 manufacturing companies located across the country. I remain active there and with 

other defense industry suppliers and I hear the same stories everywhere. Uncertainty, 

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the health care law. Employers are starting to receive notices of new "user fees", new coverage 

requirements, and rate increases. 

While the federal government may run its budget differently, at a small business, we have to plan 

for future years today. How can I develop business strategy for 2014 when I have no way of 

knowing what health care inereases are ahead. We will manage next year, but I am most concerned 

about when I retire in four years and tum the company over to the employees who will own 100% 

of the business. I doubt they will like running a health care provider which is what we're on track 

to become instead of the manufacturing business they thought they were getting. 

There is no question that the federal government needed to act and reform our health care system. 

But a one size fits all approach, with arbitrary standards and impractical requirements is not going 

to work and certainly is not lowering costs. Our company far exceeds most of the requirements and 

benefits set out under the ACA but why does it feel like we're being punished for doing the right 

thing all these years with higher premiums, deductiblcs, and co-pays? 

I served my country in the Marine Corps and all of us at Hamill arc serving our country today by 

manufacturing critical products for our nation's defense. That is what we are good at, 

manufacturing and being the best at what we do in customer service and the way we treat our 

employees. None of us want to be in the health care business but the Affordable Care Act puts me 

as the employer in that position when all we want to do is make parts to keep our country safe. 

Thank you for the opportunity to testify before you today and bring attention to this important 

issue. We need sensible solutions to this problem which allows us to compete regionally and 

globally and strengthen manufacturing in America. 
21 


85450.007

85450.008

Health Insurance Cost Comparison for Plan Years '08/'09, '09/'10, '10/'11, '11/'12, 

'12/'13, and 

$130000.00 

$125000.00 $120000.00 $115000.00 $110000.00 $105000.00 

... 

III $100000.00 0 

U $95000.00 

$90000.00 $85000.00 $80000.00 $75000.00 $70000.00 $65000.00 $60000.00 $55000.00 $50000.00 

$45000.00 $40000.00 $35000.00 

'" '" "> !>< <:> I!fonth '\ 'b "> ",<J ",'" ",'" 

2

2222

·.·20
23 

Mr. MURPHY. Mr. Lozinsky is recognized now for 5 minutes. 

TESTIMONY OF STEVE LOZINSKY 

Mr. LOZINSKY. Good morning. Thank you for the opportunity to 

speak. 

My wife Kathy and I run a cleaning company in Apex, North 

Carolina, with 240 employees. We are very concerned on how this 

law will affect our employees. With a $2,000 fine for every employee after 50, we cannot afford the $380,000 a year that the law 

will cost us. It looks like our only option will be to cut our employees’ hours to less than 30 hours a week, but this will have a devastating effect on our employees’ paychecks and their ability to pay 

their bills. 

Most of our employees are minorities, and we also have programs 

to hire felons that cannot find work anywhere else. So this law that 

was supposed to help your lower-income workers will end up hurting my lower-income workers. 

We try to be fair and follow the law and pay all of our employees 

over minimum wage, but because of some of our competition pay 

their employees off the books or as 1099 employees, they already 

start off with a competitive advantage against us because they 

don’t pay unemployment insurance, compensation, Social Security 

and Medicaid. So with the implementation of this law, they’re not 

going to follow this law either, so that just gives them another competitive advantage bidding against us. 

Ninety percent of our jobs are bid, so it’s a very, very small, 

small margin, and it’s a very tight competition. So our competition 

who don’t play fair, this will give them an extra competitive advantage against us. 

But I’m not here to criticize the law; I’m here to try to find a solution to our specific problems for our employees and to try to better their—better them. So any suggestions you have will be greatly 

appreciated. Thank you. Sorry, I’m a little nervous. 

Mr. MURPHY. You are doing a great job. Thank you, Mr. 

Lozinsky. 

[The prepared statement of Mr. Lozinsky follows:] 

24 


85450.009

Sparkle & Shine Cleaning Service Inc. 

1017 Classic Road Apex, NC 27539 

www.sparkle-shinecleaning.com 

(919)466-9001 Fax (919}466-9002 

Monday, June 17th, 2013 

Energy Commerce Commission 

House of Representatives 

212 S Rayburn House Office Building 

Washington, DC 20515 

Dear Distinguished Committee Members: 

Sparkle & Shine Cleaning Service is a family owned and operated cleaning 

service started by Kathy Lozinsky in 1998 with (1) employee. We have grown to 

approximately 240 employees. We have 3 divisions. We do construction cleaning for 

about 120 customers. We do entertainment cleaning for a majority of large venues in 

the Raleigh, NC area and NCSU. We also do janitorial service for 20 buildings in Wake 

County. 

OUf work force is 85% minorities, including over 50 convicted felons that could 

not find work anywhere else. We have 2 convicted felons that have worked their way 

up to Project Managers making over $50,000.00 per year. One of these employees just 

celebrated his 10-year anniversary with us. He was in jail and worked in a Work 

Release Program then started as a laborer and has worked his way up to Project 

Manager. 

I give you this background on our company to show you whom this law will hurt 

because I cannot afford the $2,000.00 per employee fee attached to this law. That 

would be $380,000.00 per year. 190 employees @ $2,000.00 each after the first 50 are 

exempt. 

We are looking at 3 options and none of them will be good for our employees. 

1) Get all employees under 30 hours. Most of our employees 

work 40 hours or more and the overtime money helps them survive 

and if they go from 45 hours to 30 hours, most will not survive. One 

example is, I have a couple with 3 kids that works for us and both 

husband and wife work around 45 hours a week, so if I have to cut 

their hours to 30 hours with the overtime they will lose, it will cost them 

30% of their income and they will not be able to pay their bills. 
25 


85450.010

2) Try to down size to around 100 employees (layoff 140 employees) and 

hope that we can afford the $100,000.00 fine, but that is doubtful and 

3) Close up and layoff 240 people. 

A couple of other issues that have been affected by this law. 

1) Because of the financial uncertainty of this law, we have not 

expanded at our prior pace (approximately 10% a year, so there is 25-

30 people we did not hire this year. 

2) Also, we try to give back to our community, giving $20,000 a year to 

charities, like the Special Olympics, Durham Rescue Mission and 

many others. But with the financial uncertainty of this law, we have 

suspended payments this year. 

Some people say 'well, just raise your price and you will be ok'. That is not an 

option for us as our margins are very small and we only get 1 out of 10 jobs we bid. 

Also a lot of our competition plays unfairly and pays their employees under the table or 

as 1099 employees, even though it is illegal. That gives them 15% on us to start 

because they do not pay Workman's Compensation, Unemployment, Social Security or 

Medicaid. These same companies will not pay for health care on these employees so it 

gives them an extra discount compared to us. 

So I am respectfully asking this committee to help me help my employees. We 

have a lot of great people working for us and I would hate to see them lose their job or 

see their hours cut. So, please, any suggestions you have will be greatly appreciated. 

Steven Lozinsky 

Vice President 

Sparkle & Shine Cleaning Service, Inc. 

2 
26 

Mr. MURPHY. Now, Mr. Morrow, you’re recognized for 5 minutes. 

Make sure your mic is on, and pull it close to you. 

TESTIMONY OF HUGH MORROW 

Mr. MORROW. Good morning, and thank you, Mr. Chairman and 

members of this committee. I’m here today representing the Ruby 

Falls and its employees. Ruby Falls is an 84-year-old small business that employs over 100 strong in the height of our season, and 

it’s supported by approximately 40 full-time employees year round. 

Ruby Falls is better known as the tallest underground waterfall 

open to the public. We’ve been mentioned in such lists as the top 

seven natural wonders in the U.S.A., and number two waterfall— 

underground waterfall by World Reviewer travel site on Earth. A 

simple way to explain what we are, you take a 260-foot elevator 

ride down into the cavern, walk 2,000 feet into a limestone mountain, and when you arrive at the falls, you’re 1,100 feet underground and view a 145-foot waterfall. People have been doing this 

for over 80 years. During 2013, we will host close to 400,000 people. It truly is a unique experience that has spanned generations. 

Since 2008, Ruby Falls has had its challenges, as most small 

businesses have in the travel and leisure area. Disposable incomes 

have been down, the cost of travel and energy prices have been up, 

so, being reliant on the drive-in market, we have struggled. 

Fortunately, Ruby Falls has thrived over the 5 years. Our workforce is comprised of full-time and part-time workers that are second to no organization in this country. I could not be prouder to 

be representing them today. 

This group is a homogeneous mix of Ruby Falls career employees, retirees, and those working while transitioning to other jobs, 

and a mix of students both high school and college age. Our payroll 

has increased 27 percent over the past 4 years, and this does not 

include the contract labor, such as technicians, plumbers and electricians that we retain. 

Many people ask me how do we keep such a great group? The 

main reason is that we fit and conform to where they are in their 

life situation. One of those options is that we offer full-time qualifying employees health insurance that is 100 percent employer paid 

for the individual coverage. How can an employer manage these 

costs? We have crafted the plan that works for both us and our employees that focuses on their needs, not the needs of every American. 

Now, because we have to combine the full-time employees with 

part-time employees that choose to work for us part time, our fulltime equivalents will exceed 50 employees. Why is this important? 

Because we are in this category, we will not be able to buy insurance at the benefit levels that work for our business, and we’ll have 

to move to higher levels that are mandated by the Affordable Care 

Act. 

And since 2006, we have seen premium increases that have not 

exceeded 5 percent, but this past year we saw 21 percent and are 

projected to see higher than 30 percent increases for 2014. We are 

working in a very competitive market, as I mentioned earlier. Absorbing these costs and passing them on to our customers is not an 

option. 

27 

We have spent more time analyzing the effects of this law than 

creating memories for our visitors. For the first time in my career, 

business growth and creating jobs has become a secondary task. 

You know, why invest capital? Significant cost increases we will 

see because of the increased mandated benefits will reduce our 

ability to grow going forward. As I mentioned, we have grown our 

payroll 27 percent, invested over 2 million in capital and expansion, and invested in the Chattanooga and surrounding Tennessee 

community. Ruby Falls is the first U.S. attraction to be certified by 

Green Globe, an international achievement, for our environmental 

stewardship of our business. A huge part of that certification was 

a reduction of power usage, and we were the first solar-powered 

cave in the U.S. Yes, solar power is an important part of our ongoing plan. 

Throughout these tough economic times, we have operated on 

less resources, reassigned and eliminated nonproductive positions, 

reduced inventory, but have still managed to increase customer 

satisfaction and revenues. The expenses created by the Affordable 

Care Act are not affordable and will force us to reduce payroll, 

share in the cost, reduce investments and growth, or a combination 

of all three. None of these solutions create jobs. 

I represent our team by saying the coverage we have we would 

like to keep, but the coverage we are being mandated to have is 

unaffordable. More people have healthcare coverage available today 

because we grew our business. We hope to continue to do that 

going forward just as we have in the past. And thank you for your 

time and attention. I look forward to your questions. 

[The prepared statement of Mr. Morrow follows:] 

28 


85450.011

Challenges Facing America's Businesses Under the 

Patient Protection and Affordable Care Act 

Subcommittee on Oversight and Investigations 

Hugh Morrow, President, Ruby Falls LLC. 

Good Morning. Thank you Mr. Chairman and members ofthis committee. My 

name is Hugh Morrow and I am here today representing Ruby Falls and its 

employees. Ruby Falls is an 84 year old small business that employs over 100 

strong in the height of our season and is supported by approximately 40 core 

full-time employees year round. Ruby Falls is better known as the tallest 

underground waterfall open to the public. We have been mentioned on such lists 

as a top 7 Natural Wonders in the USA and listed as the #2 underground 

waterfall on earth by World Reviewer travel site. A simple way to explain what we 

are: you take a 260' elevator ride down into a cavern and walk over 2000' feet 

into a limestone mountain. When you arrive at the falls you are 1100' 

underground and view a 145' waterfall. People have been doing this for over 

80 years. During 2013, we wilt host close to 400,000 people. It truly is a unique 

experience that has spanned generations. 

Since 2008 Ruby Falls has had its challenges as have most small businesses that 

are associated with travel and leisure. Disposable incomes have been down and 

the cost of travel and energy prices have been up so those that are reliant on the 

drive-in market have struggled. 

Fortunately Ruby Falls has thrived over the past 5 years. Our work force that Is 

comprised of full-time and part-time workers is second to no organization in the 

country and I could not be prouder representing them today. 
29 


85450.012

This group is a homogeneous mix of Ruby Falls career employees, retirees, 

those working while transitioning to other jobs and a mix of students both 

high school and college age. Our payroll has increased by 27% over the past 4 

years and this does not include the contract labor such as technicians, plumbers 

and electricians that we retain. Many people ask me how do we keep such a 

great group. The main reason is that we fit and conform to where they are in their 

life situation. One of those options we offer to our full-time qualifying employees 

is health insurance that is 100% employer paid for the individual coverage. 

How can an employer manage to cover those cost? We have crafted a plan that 

works for both us and our employees that focuses on their needs not the needs of 

every American. 

Now because we have to combine the full time employees with the part time 

employees that choose to work for us part-time, our full time equivalents will 

exceed the 50 employee's threshold. Why is this important? Because we are in 

this category, we will not be able to buy insurance at the benefit levels that work 

for our business and will have to move to a higher levels that are mandated by 

the Affordable Care Act. Since 2006 we have not seen any premium increases 

exceeding 5% but this past year we saw 21% and are projected to see higher than 

30% increases for 2014. We are working in very competitive market as I 

mentioned earlier so absorbing these cost or passing them on to the customer is 

not an option. We have spent more time analyzing the effects of this law than 

creating memories for our visitors. 

For the first time in my career, business growth and creating jobs has become a 

secondary task. You ask yourself why grow? Why create jobs? Why invest 
30 


85450.013

capital? 

The significant cost increases we will see because of the increased mandated 

benefits will reduce our ability to do this going forward. 

As I mentioned earlier since 2008, we have grown our payroll by 27%, invested 

approximately $2 million in capital and expansion spending and invested in the 

Chattanooga and surrounding Tennessee community. Ruby Falls was the first US 

attraction to be certified by Green Globe an international achievement for our 

environmental stewardship of our business. A huge part of that certification was 

our reduction in power usage and we were the first solar powered cave in the US. 

Yes, solar power is an important part of our ongoing plan. 

Throughout these tough economic times we have operated on less resources, reassigned and eliminated non-productive positions, reduced inventory but have 

still managed to increase customer's satisfaction and revenues. The expenses 

created by the Affordable Care Act are not affordable and will force us to reduce 

payroll, share in the cost, reduce investment in growth or a combination of all 

three. None of the solutions create jobs. 

I represent our team by saying the coverage we have, we would like to keep but 

the coverage we are being mandated to have Is unaffordable. More people today, 

have healthcare coverage available today because we grew our business. 

We hope to continue to do that going forward just as we have in the past. 

Thank you for your time and attention to these matters and I hope to answer your 

questions should you have any for me today. 
31 

Mr. MURPHY. I thank the panel. 

I was looking at pictures before of the falls. We would love to 

have a hearing there sometime. It would be nice. 

I will go on with questions, and I will recognize myself first for 

5 minutes. 

Mr. Kelly, you testified today that since passage of the affordable 

care law, your premiums have continued to climb. Could you elaborate on the amount of your recent premium increases, and do you 

expect more in the future? 

Mr. KELLY. We do. As I said, it was a 46 percent. That’s since 

2010. There was one big year, which was last year, that was 23— 

well, actually was 23 percent. The initial premium request that 

came in from Highmark was 42 percent. We were able to—we had 

to double our deductible, and we had to basically tell them we were 

going to leave them if they don’t—we ended up with a 23 percent 

increase. That was last year. 

This year we moved to from Highmark to HealthAmerica, and we 

still had a 15 percent increase, and that was when we doubled our 

deductibles again. 

Mr. MURPHY. Can you give me an idea of what the cash amount 

of that percentage is? 

Mr. KELLY. Well, I can actually—— 

Mr. MURPHY. If you don’t have it handy. I was just wondering 

with regard to percentage, but I just wonder how much. But that’s 

something that comes out of the employees’—— 

Mr. KELLY. A couple hundred thousands dollars. 

Mr. MURPHY. I was wondering what that was per employee. 

How has it impacted your ability to plan for the future? Are you 

able to hire or expand? 

Mr. KELLY. We have to figure out what we’re going to do to keep 

employees. You know, what we’re faced with in southwestern Pennsylvania, our competitors are large OEMs; it’s not other small businesses. And they typically can offer higher wages and richer 

healthcare plans. So when I ask my employees to take—pay more 

of the premium plus have a higher deductible, even though we 

cover 95 percent of the deductible, it still means less money in 

their pocket. So I just had a welder walk out the door the other 

day because under our new healthcare plan, there was a certain 

procedure that was covered under Highmark, wasn’t covered under 

HealthAmerica. He said his wife needed this procedure. He left and 

went to the L8 company. And that’s happening, and I expect it to 

happen more regularly. 

Mr. MURPHY. So you’re saying—your conclusion is that the way 

health care is going is affecting your ability to recruit or train 

workers? 

Mr. KELLY. Absolutely, Congressman. We’re not—we’re very, 

very careful about hiring somebody today. Where we would—I need 

welders, and I need machinists, but frankly I’ve got to be very, very 

careful, because knowing that when you hire somebody, you’re 

going to pay at least 50,000 in wages, another $20,000 in benefits, 

you have to be very cognizant of what that’s going to mean to your 

bottom line. 

Mr. MURPHY. So supporters of this law have claimed that directly 

costs have gone down, or with tax credits it’s going to lower your 

32 

costs and allow you to keep the coverage you currently enjoy. First 

of all, are you able to take advantage of these tax credits? 

Mr. KELLY. No. 

Mr. MURPHY. Why is that? 

Mr. KELLY. Because we’re 125 people. We’re too big. 

Mr. MURPHY. It cuts off at a much lower number. 

Mr. KELLY. This gentleman talked about 96 percent of the small 

businesses, but the 4 percent of the small businesses that are well 

over 50 people—small business think if you have less than 750 people, you’re a small business. If you’re a manufacturer, I think in 

some of our Federal contracts, if we have less than 500 people, 

we’re a small business. So what’s the definition of a small business? Maybe under Affordable Care Act it’s 50, but there’s a lot of 

people in that sweet spot. 

I was the chairman of the NTMA, the National Tooling and Machining Association, in 2007, and I traveled the country. I talked 

to colleagues all over the country, and many of them are well over 

50 people. And every one of them is going to be affected by higher 

premiums and higher costs. And I can hear right now from my colleagues across the country they’re very careful about hiring people. 

What we’re doing is looking at automation and productivity using 

machine tools. I’d rather invest in a machine tool than a person 

right now because I don’t have to pay health care for a machine 

tool. 

Mr. MURPHY. So robotic things instead of people. 

Mr. KELLY. Yes. 

Mr. MURPHY. Mr. Lozinsky, are you able to take advantage of the 

tax credits that they’re being touted here? 

Mr. LOZINSKY. No. I mean, even if it pays 50 percent of my 

healthcare costs at $450,000 a year, I still couldn’t afford half—I 

still couldn’t afford the 50 percent. 

Mr. MURPHY. My understanding is the tax credit is only available if you fewer than, what, 25 employees? I think you’re beyond 

that? 

Mr. LOZINSKY. Yes, we’re at 240. 

Mr. MURPHY. Mr. Morrow, you’re beyond that level, too, so the 

tax credits don’t apply? 

Mr. MORROW. We’ll be right at 51 employees. 

Mr. MURPHY. I see. 

Mr. Kelly, again, so if someone operates a business, with the full 

implementation of the law coming out, let me ask this: Do you believe it’s easy to even understand what the expectations are in 

terms of what this is going to impact in the future? 

Mr. KELLY. I don’t believe so. I’ve talked to my broker at length, 

and he’s a very close personal friend of mine. In fact, he just sent 

me an email the other day to tell me that there are four fees that 

are going to go into effect next year starting January 1: the patient-centered outcome research fee, the transitional reinsurance 

fee, the risk adjustment fee, and the insurer’s tax. 

Those fees alone next year in the 3 months that are involved, 

from January to March, are going to cost me $11,000. In the full 

year, from April 1, 2014, to 2015, it’s going to cost Hamill an additional $48,000. That’s for no more better coverage, no change; those 

33 

are just additional fees that are coming down the road because of 

the ACA. 

Mr. MURPHY. Thank you. I see my time has expired. 

By the way, thank you for your service in the Marine Corps. 

Ms. DeGette is recognized for 5 minutes. 

Ms. DEGETTE. Thank you very much. 

I just want to ask a quick little series of questions to try to kind 

of clarify where we need to go to help small business be able to afford insurance. 

Mr. Morrow, you offer insurance to all of your full-time employees right now, correct? 

Mr. MORROW. Correct. 

Ms. DEGETTE. And, Mr. Kelly, you do also, correct? 

Mr. KELLY. That is correct. 

Ms. DEGETTE. And Mr.—is it Brey? 

Mr. BREY. Brey. 

Ms. DEGETTE. Brey. And you offer insurance to all of your employees, correct? 

Mr. BREY. Correct. 

Ms. DEGETTE. And, Mr. Lozinsky, I would assume that you 

would like to offer insurance if you could afford to do it from a cost 

perspective; is that right? 

Mr. LOZINSKY. If I could afford to do it, of course. 

Ms. DEGETTE. And I think, Mr. Morrow, the cost of insurance is 

not cheap, and it’s been going up for some number of years; is that 

right? 

Mr. MORROW. We’ve not seen substantial increases until this 

past year. 

Ms. DEGETTE. OK. Mr. Kelly, I think you testified that it’s been 

going up quite a bit in the last few years. 

Mr. KELLY. Yes, it has. 

Ms. DEGETTE. And, Mr. Brey, you, too? Have you seen insurance 

increases? 

Mr. BREY. Oh, yes, for nearly a decade. 

Ms. DEGETTE. I’m wondering if you could, Mr. Brey, talk to us 

about why you think it’s important to give health insurance to your 

employees. 

Mr. BREY. Well, when you’re one of those guys, young men or 

whatever, working for somebody else in a low-wage job, like I did 

a long time ago, you always say to yourself things like, well, you 

know what? If I ran the company, I would do blank. And so, working in a front-line retail job as I did, if you were offered insurance, 

it was crap insurance or—— 

Ms. DEGETTE. And it was unusual that people were offered insurance in jobs like that; not just young men, but young women, 

too. 

Mr. BREY. If you were offered it at all, and that’s always bothered me. So it’s something I sought to do differently right from the 

beginning. 

Ms. DEGETTE. And you have done it from the beginning. And has 

it hurt your ability to grow as a company? 

Mr. BREY. We’ve grown 5-, 600 percent over a period of time. We 

survived through the recession. We added employees. 

34 

Ms. DEGETTE. OK. And do you think that the fact that you offer 

health insurance helps you attract good employees? 

Mr. BREY. Yes, absolutely. 

Ms. DEGETTE. OK. Mr. Kelly, now, you testified that your health 

insurance costs have increased about 50 percent in the last 3 years; 

is that right? 

Mr. KELLY. Yes. Actually the costs—the premiums were 46 percent; the costs were 42 percent. 

Ms. DEGETTE. It went from 795,000 to 1.2 million, correct? 

Mr. KELLY. Correct. 

Ms. DEGETTE. And, Mr. Brey, I think you testified the health insurance costs for your company have grown the last number of 

years, too; is that correct? 

Mr. BREY. Yes, that’s correct. 

Ms. DEGETTE. And do you know if your health insurance has cost 

about the same as your larger competitors’, or has it cost more? 

Mr. BREY. For a small group in Maryland, it costs more, because 

we’re not—— 

Ms. DEGETTE. I think that’s true in Colorado and probably every 

place else. 

Mr. BREY. We have from one to three providers at any given 

point in time. 

Ms. DEGETTE. And what about shopping for coverage? Was it 

easy to compare plans side by side, or did you have to hire brokers? 

What did you do? 

Mr. BREY. I guess in the sense that in Maryland there is so little 

competition, they all offer identical plans at roughly the same 

price, it makes it easy to compare pricing, but it doesn’t make it 

easy to find affordable coverage or a variety of coverage. 

Ms. DEGETTE. And this has been going on for quite a while; is 

that right? 

Mr. BREY. Yes, that’s correct. 

Ms. DEGETTE. OK. And, Mr. Kelly, your costs have been going 

up for quite a while, too; is that right? 

Mr. KELLY. Yes, that’s correct. 

Ms. DEGETTE. So what we’re trying to figure out here with the 

Affordable Care Act, we’re trying to figure out how to bend that 

cost curve, and that’s part of what we’re—that’s part of what we’re 

trying to figure out, but we’re also trying to figure out how to make 

it accessible for folks. 

Mr. Lozinsky, that’s one reason why I think about employers like 

you who are employing—you’re employing lower-paid workers, but 

you still want to be able to get them insurance. Are your people 

eligible for Medicaid? 

Mr. LOZINSKY. I’m assuming, yes, a lot of them are. 

Ms. DEGETTE. So that would be helpful. You could get those folks 

enrolled, and you wouldn’t have to pay a penalty, did you know 

that, under the new bill? 

Mr. LOZINSKY. No. 

Ms. DEGETTE. Part of what I think we need to do is get this word 

out to employers. There’s a lot you can do. 

Mr. Morrow, I was thinking about what you said. You said you’ve 

got 40 full-time employees, right? 

Mr. MORROW. Approximately. 

35 

Ms. DEGETTE. So technically you would be under the 50-employee limit under the Affordable Care Act, right? 

Mr. MORROW. No. 

Ms. DEGETTE. Except for the part-timers that somebody is telling 

you that they’re—are these part-timers year round, or just seasonal 

part-timers? 

Mr. MORROW. These part-timers are year round. 

Ms. DEGETTE. OK. So they’re going to be put together in a group, 

and you believe that’s going to take you over 50 employees. So I 

think that’s an area we should look at as well, because you want 

to offer your people insurance if it’s appropriate for them, right? 

Mr. MORROW. We currently do, yes. 

Ms. DEGETTE. Yes. And you just don’t want to have to go broke 

doing it. 

Mr. MORROW. Correct. 

Ms. DEGETTE. I think that’s everybody’s goal here. 

OK. Thank you very much, Mr. Chairman. 

Mr. MURPHY. The gentlelady’s time has expired. 

Now I turn to the vice chair of the full committee Dr. Burgess 

for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Mr. Morrow, let me just ask you a question. You do have seasonal employees, correct? 

Mr. MORROW. Correct. 

Mr. BURGESS. So if I were to go to one of your typical seasonal 

employees on January 1st of 2014, the year this thing is implemented, and I were to asking them to estimate their earnings for 

the coming year, would they be able to give me an answer? 

Mr. MORROW. Well, most of our seasonal employees are in the 

summer, so January would not be a good time, but in the summer, 

yes, they should be able to. 

Mr. BURGESS. But here is the point: On January 1st of 2014, 

they’re going to be asked—as they apply for this Affordable Care 

Act insurance, they’re going to be asked what their earnings are for 

this year coming up. And many people, myself included when I ran 

a medical practice, would have difficulty coming up with that figure. 

So if they’re wrong when they estimate that number, and they 

underestimate their earnings, they will receive a subsidy to buy 

health care in the exchange if you don’t provide the insurance for 

them. And then they could be required to pay that back if their actual earnings, as reported to the IRS—so that information will be 

available to the government, so they could be required to pay that 

money back. 

Is your experience that your typical seasonal employee would 

hold money in an account in case they had to pay it back to the 

government at the end of the year? 

Mr. MORROW. No, sir, they do not do that. 

Mr. BURGESS. Yes. I wouldn’t think so, because I wouldn’t do it 

either. And we’ve had other people on other panels, and you deal 

with that issue of how are you going to estimate your earnings 

when you’re a lawyer in solo practice, when you’re a doctor in a 

group practice; how are you going to estimate your earnings over 

the coming year when it’s entirely contingent upon factors that are 

36 

completely beyond your control, such as the economy and other 

things that may be affected? 

Now, I think we’re all getting a clear understanding as the law 

comes toward completion, or at least the 2014 completion, and I 

have a copy here if anybody wishes to reference it, but it’s pretty 

difficult to know what the road ahead is. And it’s difficult for us 

to be able to advise you of the road ahead. And I daresay, although 

it’s difficult to get answers out of the agency, have any of you contacted the Department of Health and Human Services or the Office 

of Personnel Management—if your State doesn’t do an exchange, 

the Federal Government is going to do it for you—have any of you 

contacted them for information about what the next year looks 

like? 

And I daresay they wouldn’t be able to tell you, so I don’t blame 

you for not making that contact, but that has historically has been 

a difficulty. 

Now, Mr. Lozinsky and, I think, Mr. Morrow, you both reference 

the fact that you deal with competitive environments. You deal 

with the fact that there are other people out there competing for 

the same space, and the same entertainment dollar in Mr. Morrow’s case, and the same cleaning dollar in Mr. Lozinsky’s case. 

Tell me—and both of your businesses have over 50 employees; is 

that correct? Mr. Lozinsky, are you over 50? 

Mr. LOZINSKY. Yes. Oh, yes. 

Mr. BURGESS. And, Mr. Morrow, you’re over 50? 

Mr. MORROW. Yes. 

Mr. BURGESS. So what is the fine that people talk about that you 

might face? Do you have a clear understanding of what that fine 

is? Say you have an employee you’re providing insurance, but they 

go and say, I want the subsidy in the exchange. I don’t want your 

insurance, Mr. Morrow, I want the subsidy. Do either of—and either of you feel free to answer—do you have an idea of what that 

fine is and why it’s there? 

Mr. LOZINSKY. I don’t. I just know that if you can’t afford to pay 

for insurance for your employees, the government is going to fine 

you I think it’s $2,000 the first year and then $3,000 the second 

year. 

Mr. BURGESS. And I appreciate you may not know the specifics. 

I daresay people on this panel don’t know the specifics. But are you 

aware, as confusing as this law is, we’re not done with you yet? 

The Senate is working today, this very day, on S. 744, a major immigration overhaul for this country. As a consequence of that law, 

there will be a group of individuals who are called registered provisional immigrants who will not be—will not have the Affordable 

Care Act available to them. The President told us this 2 or 3 years 

ago when he came to Congress. So they will be outside. 

So, Mr. Lozinsky, can you imagine a competitor who would staff 

their rolls with people who are RPIs and therefore outside the requirements of the Affordable Care Act? Can you imagine having to 

compete with that as a business? 

Mr. LOZINSKY. No. That’s part of the problem, because most of 

our competition, like I said, they’re either below 50 employees, or 

they pay their employees off the books, or they make them 1099 

employees. 

37 

Mr. BURGESS. And yet you offer employment to a group of individuals—we got 22 million unemployed in this country, and you 

offer employment to some of the hardest people to employ; is that 

correct? 

Mr. LOZINSKY. That is correct. 

Mr. BURGESS. How does it make you feel that your government 

is to going to set up your competition to make your business model 

essentially extinct? 

Mr. LOZINSKY. I mean, I’m very concerned about it. 

Mr. BURGESS. Of course you are, and I understand it. I appreciate you all being here. I share your concern, too, sir. Thank you. 

Mr. MURPHY. Now I recognize the gentleman from Texas Mr. 

Green for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

And like a lot of us, these hearings—and I know there’s issues 

with this law, and there’s issues with any law that Congress 

passes. And a lot of us on our side of the aisle have tried to sit 

down and say, OK, what can we do to make it better for the witnesses that are here today? And that’s our issue. 

Instead of talking about how bad it is, the law is going to be the 

law. The Supreme Court upheld it. We passed 33 times last Congress in the House and 1 time this Congress. It’s not going to 

change, so maybe we ought to quit saying how bad it is and say, 

OK, let’s get a list of things to fix it. And we’re not seeing that in 

this House of Representatives. All we’re seeing is let’s paint it bad. 

Well, I have information that says, for example, in California 

they’re going to set up their own State exchange. The premiums 

are going down, and also they announced that there’s going to be 

at least five different insurance carriers. 

In an earlier life I managed a small business with 13 employees. 

Part of our employees were union bargaining unit. We had the option to go into the union plan, or have a plan that met that for all 

our employees, including our front office. And my job was to negotiate benefits with those carriers, and like some of you, I couldn’t 

get anyone to negotiate. We couldn’t get the top-tier companies particularly. So we would battle every year. And we were seeing the 

same percentage increases as you have seen in your time, but we’re 

also seeing that some of those percentage increases are going down. 

And maybe we ought to hear from that. I’d like to hear from Secretary Sebelius and some of the Members who—the information 

that we’ve gotten come to that. 

So, I’m glad you all are here, but we really need to find out what 

can we do to fix it, because the law is not going to go away, and 

we have to deal with it. But in this House of Representatives, we’re 

not dealing with it. All we’re doing is saying, the dam is going to 

break, and we’re going to get flooded. Well, wouldn’t it be nice to 

say, OK, let’s deal with it and see how we can come up with some 

better things? 

But as we know on October 1st, the State exchanges—or the national exchange. I’m from Texas, and we’re not to going to have any 

State participation in our State exchange, so we will have a national exchange. And I’m looking forward to having at least five 

plans, whether they’re from the Blue Cross, Aetna, you name it, because when I was in business, we couldn’t get five companies to 

38 

give us a price. In fact, my experience was we signed a 3-year contract, but it was always premium reopened the first year, and so 

ended up having to negotiate premiums every year on a 3-year 

plan. And I know that’s the experience you all are having, because 

we didn’t go through the—we didn’t decide to only cover five of our 

employees under our bargaining unit and then try and find for the 

other seven or eight employees we had. 

Small business have the right to be nervous about health reform, 

but a lot of us who voted for that made sure there were things in 

there to help small business. You know, the 50 employees, that’s 

the same thing for minimum wage. That’s not new law. If you’re 

over 50 employees, you have to pay minimum wage. And so now 

you’re going to have to cover your employees with some type of 

health care. And each of you have particular issues, and I wish 

Congress would take those issues and say, let’s put together legislation to do it. 

Instead of, as some of my colleagues said, talk about how bad it 

is, let’s see how we can fix it. When I managed a business, that’s 

what we did. If I lost a customer, I’d say, wait a minute, what did 

we do wrong that that customer left us? We’re not seeing that in 

this House of Representatives, and that’s what’s frustrating. 

I have a district, though, in Texas that’s 44 percent of my constituents who work did not have insurance through their employer; 

only 32 percent did. It’s a very urban area. I have some of the biggest companies in the country; refineries, big chemical plants, service companies for the oil and gas industry. But, again, 44 percent 

of my constituents who worked didn’t have any insurance through 

their employer. So that’s why there was a lot of support for this, 

because those employers were not providing health care, and they 

were showing up in our emergency rooms. And those of us who had 

insurance were continuing to see those premiums increase because 

somebody was paying that bill for those folks showing up in the 

emergency rooms. 

Mr. Brey, is it fair to say that the health insurance market for 

your small business has been problematic for quite a while? 

Mr. BREY. Yes. You have anywhere from one provider choice to 

three provider choices. 

Mr. GREEN. There was a reason why Congress passed the Affordable Care Act with the health insurance market for individuals in 

small businesses were dysfunctional. 

I also served in the State legislature. We tried to create plans, 

but the problem is that if you have a high-risk plan, and all you 

have are people with high risk, nobody can afford it, including employers. 

And I went through the experience some of you had. Since I negotiated it, our insurance carrier came in and said, this lady in 

your plan had a double mastectomy. If you separate her and get 

an individual plan for her, we can save you money. And I explained 

to them, I said, I’ll be glad to share that with the owners, because 

that happened to be the owner’s wife. And so, and I’m glad that 

company did not do that. And they wouldn’t do it for the owner’s 

wife, and they didn’t do it for any of the 12 employees that we had. 

But the Affordable Care Act hopefully will solve some of these 

problems as of January the 1st, and the SHOP marketplaces will 

39 

allow more competition, more transparency. That was the other 

reason. When I would see those premiums increase every year—— 

Mr. MURPHY. Gentleman’s time has expired. 

Mr. GREEN [continuing]. I never understood why, why they did. 

But, anyway, I appreciate you all being here and explaining your 

problem. Now, if we would do our jobs and try and fix some of 

these problems—— 

Mr. MURPHY. Thank you. Gentleman’s time has expired. Appreciate that. Thank you. 

I now recognize Mr. Olson for 5 minutes. 

Mr. OLSON. I thank the chair. And welcome to our witnesses. 

I go home to Texas 22 every weekend, and I get out and go to 

small businesses to hear how they’re impacted by Obamacare. I’ve 

been to property management companies, oil, and gas service companies, even block-walked an area of Spanish-language businesses 

in historic Rosenberg, Texas. In broken English in Rosenberg, these 

three words which were said over and over and over, sum up 

Obamacare’s impact on every family business in Texas: Bad. Hurts. 

Stop. 

There are many job-killing, growth-stunting parts of Obamacare. 

My questions will focus on a small part of the law which is hurting 

the very people the law is supposed help, Americans working minimum-wage and low-skilled jobs. They’re being locked into a future 

of stagnant wages and few opportunities for personal prosperity. 

I’m talking about that small section which defines a full-time employee as someone who works 30 hours per week. My staff has 

done some research. There are over 100 regulations with different 

definitions of a full-time employee. Obamacare is the first to define 

it so clearly and so broadly, 30 hours per week. 

A new name has emerged in American business: 29ers, people 

only being employed for 29 hours because of Obamacare. And I will 

follow up my questions from my colleague from Texas, Mr. Burgess. 

Mr. Lozinsky. Sparkle and Shine, your testimony says, has 240 employees, 85 percent of which are minority employees or people trying to get a new start from being incarcerated. 

Mr. LOZINSKY. Correct. 

Mr. OLSON. In light of your testimony, you have three options: 

going forward with Obamacare, reduce everybody’s hours to something below 30, make them 29ers; can fire 140 employees, 60 percent of your company, fire them, lose their jobs; or close up shop. 

In ancient Greece those choices are hemlock, cyanide, or poison 

mushrooms. 

Can you describe how you came to realize these were your only 

three options, and have you talked to your employees about what 

their future is going to look like? 

Mr. LOZINSKY. No, we have not talked to our employees yet. 

We’ve been trying to research what our opportunities are. We have 

talked to our management staff already and asked them to get— 

to start getting a list of the 50 people, because the first 50 are exempt. So all of our project managers are getting their main, key 

people, a list to us so that we can have our 50 that can still be fulltime, and then we’ll have to make tough decisions on the other 190, 

on what kind of hours we can give them. But we have not discussed it with our rank-and-file help yet. 

40 

Mr. OLSON. Do you think anyone will say, great, I want to work 

for 30 hours instead of 40 or more? 

Mr. LOZINSKY. No, I don’t think so. Like I said in my letter, we 

have husband and wives that work for us. Like I said, we have a 

husband and wife that works for us. They have three kids. They 

work 45 hours a week. So they get paid 40 regular time and 5 overtime. And it’s—and it’s tough for them to survive on that amount 

of money. So cutting them back to 29 hours would be devastating 

for their family and their kids. 

Mr. OLSON. Thank you. 

This next question to you, Mr. Morrow. You have the largest and 

deepest waterfall in America, and you must be careful saying that 

in this committee because we have some Texans here, and bigger 

is better in Texas. That sounds like a challenge to me in many 

ways. But your business is seasonal, as came out with your discussion with my colleague Mr. Burgess. And you’ve got 40 full-time 

employees now, 100 seasonal employees. If you cross these guys 

and the one-season ones, do most of your season employees work 

for at least 40 hours per week, more than 30? 

Mr. MORROW. Yes, they will work full time during—mainly between Memorial Day and Labor Day. 

Mr. OLSON. And so they will be full-time employees. You’ll cross 

50. So you have to yield to Obamacare. You have to provide 

healthcare to these employees, all these new ones, or somehow 

modify your business; is that correct? 

Mr. MORROW. Correct. 

Mr. OLSON. Can you talk to me about how the employees suffer 

because of these changes? 

Mr. MORROW. The employees are going to suffer through increased cost. We have paid their premiums 100 percent since I’ve 

been with the company 7 years ago, and it’s been part of our family 

of support for them. We are going to have to pass on part of that 

expense when we see 30, 40 percent increases in our premium. 

They will have to share in that cost going forward, which will reduce their incomes. 

Mr. MURPHY. Gentleman’s time has expired. 

Mr. OLSON. Thank you. Yield back. 

Mr. MURPHY. Now turn to the gentleman from New York, Mr. 

Tonko for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. 

Our Secretary of HHS Sebelius has been quoted as saying many 

were priced out, locked out, or dropped out of healthcare insurance 

coverage in the years ensuing before—the pre-Affordable Care Act 

days. The question is, did U.S. companies or did you know counterparts that were unable to get insurance written for their companies 

at all? Any of you, to any of the gentlemen of the panel. 

Mr. KELLY. I can say that in southwestern Pennsylvania I’ve had 

fellow manufacturing companies tell me that it’s increasingly difficult to find somebody that would insure them without some huge 

premium increase. 

If you wouldn’t mind, Mr. Congressman, I’d like to make a comment to what Mr. Green said. He said you guys were complaining 

about the fact that—that you’re looking for solutions, you’re tired 

of the—the hits that Obamacare is taking. I’m going to give you a 

41 

perspective of a businessman, if I might. I don’t know whether I 

have that leeway, but I would happy to do that. 

You know, in my view, the Affordable Care Act was designed to 

get 30 million Americans that weren’t insured insured. The one 

thing it doesn’t do and hasn’t done at all is to address the real 

problem. That’s cost. In southwestern Pennsylvania you have basically one juggernaut, UPMC, University of Pittsburgh Medical Center. They own 60 percent of the doctors and about 80 percent of the 

hospitals. There’s no competition. 

You haven’t even addressed cost. One of the great drivers of cost 

is malpractice insurance. Not one word was written in the Affordable Care Act about tort reform. 

Mr. BREY. This is not true. In Maryland in April they—Maryland 

announced—we had six people announced to participate on the 

SHOP exchange. I’ve never had anywhere close to six options. 

Mr. KELLY. I know that people tell me all the time that the reason that doctors practice so much defensive medicine is because of 

malpractice insurance. I know, I talk to doctors all the time about 

that fact. My cardiologist tells me that. He said that’s the real reality. 

Mr. BREY. I serve on the board of directors, the finance committee of a $100 million health insurance—— 

Mr. JOHNSON. This is not a debate. 

Mr. KELLY. So I’m just saying from a perspective of a business 

person, I believe that if you want to get past the fact that the Affordable Healthcare Act really is about putting more people in—insuring those people, fine, you’ve made that step, but you haven’t 

done anything to really address the major driver of costs. And if 

you can get costs under control, then things probably would work 

better. But they’re not going to happen until costs can be driven 

down. You have to start addressing what are the causes of costs 

to be so high. 

You know, and Congressman Murphy knows this, in southwestern Pennsylvania you basically have an oligopoly of providers. 

You have one big, big provider, and he basically can charge whatever he wants. There’s no competition really. It’s a real problem. 

And it’s one problem that, because of so many special interests, you 

people really won’t have the courage to face that problem. 

So that’s what my—as a business person, I’m going to challenge 

you folks to come up with a way to really take on some things that 

are really difficult. 

Mr. TONKO. Right. 

Mr. Kelly, I think my question to you, all of you as a panel, was 

the affordability and accessibility of health care pre the Affordable 

Care Act. I was hoping to glean some information on that. 

And in terms of the bending of the cost curve, that is indeed part 

of the effort here with the Affordable Care Act by making certain 

we go forward and rewarding the quality of care rather than just 

the number of tests or procedures performed. 

And, Mr. Brey, I would ask if you had something to offer that— 

to the previous statement made, I would like to hear that now, and 

then we can move forward. 

Mr. BREY. Well, listen, there was—I’ve seen a lot of cost increases long before I ever heard the term ‘‘Affordable Care Act’’ or 

42 

‘‘Obamacare.’’ I served on the board of directors of a finance committee of a hospital system, and our crushing cost was the burden 

of the uninsured. And I guess it’s interesting to me that back then 

everybody—I was the evil conservative businessman because I 

thought everybody should pay their fair share. It wasn’t fair to 

me—to me to be paying for those people. And now here I am, I’m 

testifying for the liberal side. My views haven’t changed. 

So, I have seen—I’ve gone for 18 years in small group never having real choice, and now six insurance—five insurance companies 

have definitely said that they’re going to participate in Maryland 

SHOP exchange, and there’s one on the fence. So that may be six. 

So I may be doubling my pool of choices. We’ll see if it actually 

happens. 

Mr. MURPHY. Gentleman’s time has expired. 

Mr. TONKO. I’m sorry. I yield back, Mr. Chair. 

Mr. MURPHY. Thank you. 

Now turn to Mr. Long for 5 minutes. 

Mr. LONG. Thank you, Mr. Chairman. 

Thank you all for being here today. 

Mr. Brey, how are your sales this year, year to date, over last 

year’s sales? Do you find your business has improved, stayed the 

same, declined in sales? 

Mr. BREY. Our business has declined for the first half of this 

year. 

Mr. LONG. It’s declined? 

Mr. BREY. Yes, sir. 2011 and 2012, coming out of the recession, 

were exceptionally strong years for us. And because we’re in this 

Maryland-Virginia area, I think that there’s been a little bit of uncertainty that has made the first half of the year less than optimal. 

But May, May finished very strong, June is going great, and so far 

the summer looks really good. 

Mr. LONG. So your thoughts about the Bush tax cuts expiring. 

Whenever you said that by letting the Bush tax cuts expire, allowing the tax rates to go back to where they were will help bolster 

the economy and with it your customer base, the middle class. So 

that didn’t work out like you thought it would. 

Mr. BREY. Say that again. 

Mr. LONG. Your comments about letting the Bush tax cuts expire, letting the Bush tax cuts expire on people over 250,000. 

Mr. BREY. Well, we did—— 

Mr. LONG. The vast majority—let me finish. The vast majority of 

small business owners simply won’t be affected. Allowing the tax 

rates to go back to where they were will help bolster the economy 

and with it your customer base, the middle class. 

Mr. BREY. But instead what you did is you let payroll taxes go 

up on people making $40,000 a year, and in exchange for going 

from 250,000 to $400,000 on that tax break. I mean, that’s what 

happened in January. My guys making 40 grand a year managed— 

you know, 40- to $50,000 a year managing one of my stores saw 

their payroll taxes increase. So what we did is we took the money 

right out of the pockets. 

Mr. LONG. We’re talking apples and oranges. The Bush tax cuts 

were above 250,000 people is what you were talking about, which 

43 

those did go back up on January 1 or January 2, if I remember 

right. So—— 

Mr. BREY. I think it was over 400,000, though. 

Mr. LONG. But how does letting taxes go up on people above 250- 

bolster the middle class? I mean, that’s money that’s paid to the 

government, to us, Congressmen and Senators and people here in 

Washington that are—— 

Mr. BREY. My objection at the time was it appeared—Congress 

appeared to be making a trade-off, the trade-off being allowing payroll taxes to go up on middle-class workers in exchange for keeping 

tax rates low on high-income—on high-income earners. 

Mr. LONG. Say that again. 

Mr. BREY. I said, my perception at the time, which was in January, I think is when you’re talking about—my perception at the 

time was that Congress appeared to be making a trade amongst 

the Members, letting payroll tax—the payroll tax cuts expire on 

middle-class workers, and in exchange Democrats would hold 

down—would—would let tax rates—would—we would make the cut 

from—go from 250-—instead of the cutoff being 250-, would go to 

400-. At the time that was the debate that appeared to be taking 

place, and that’s when those comments were made. 

Mr. LONG. This was back in October, not January. 

Mr. BREY. I’m sorry. I’m sorry. October. 

Mr. LONG. OK. But I’m just trying to get—I mean, you’re of the 

opinion that the Affordable Care Act is indeed affordable, and we 

need to work things out here in Washington. We need to work for 

the American people. We need to make health care more affordable 

for everyone, we all agree to that. Health care needs to be reformed, granted. 

I sit here representing the Seventh District of Missouri, southwest corner of Missouri, Springfield, Joplin, Branson down in the 

southwest corner. And there’s a company at home that started out 

with one store back in the ’60s, and now they have 53,000 employees. And when they—when the CEO comes to me and says, I’m 

going to you; I’m going to Roy Blunt, U.S. Senator; I’m going to 

Claire McCaskill, U.S. Senator, one Republican, one Democrat, to 

explain to you all how devastating this Obamacare actually is, and 

I said, OK, I’m here to listen. He said, we provided great health 

care for our employees for years. They loved it. It was affordable, 

it was doable. Their estimate—Mr. Kelly, who found his rates going 

up by 46 percent, I’m sure they’ll want to talk to you because the 

way they calculated it, theirs are going to go up by 120 percent. 

They’ve already told all their part-time employees—I don’t know 

how many are part time out of this 53,000—that they will no 

longer cover their health insurance next year. And they—so 120— 

I forget what the dollar figure is here, wasn’t actually for this 

panel, but I was just curious when I—trying to hear all the good 

things you say and all the good things that Mr. Green—looks like 

he’s gone, but that Mr. Green has to say about this—— 

Mr. BREY. But that is a tragedy, but that was going on, like I 

said, before I ever heard of the Affordable Care Act. 

Mr. LONG. Well, not according to these folks who have 53,000 

employees. 

44 

But anyway, I appreciate it. I don’t have any time, but if I did, 

I’d yield it back. 

Mr. MURPHY. Gentleman’s time expired. 

Now go to Mr. Butterfield for 5 minutes. 

Mr. BUTTERFIELD. Thank you very much, Mr. Chairman. 

And thank the four of you for your testimony today. 

I think I’m going to begin my part by asking each of you a yes 

or no question. That seems to work very well with Mr. Dingell 

when he does it. Starting with you, Mr. Brey, do you accept the 

goal of the Affordable Care Act to make affordable insurance available to every single American? That’s a goal of the Affordable Care 

Act. Do you embrace that goal? 

Mr. BREY. I do. 

Mr. BUTTERFIELD. Yes. 

You, Mr. Kelly. 

Mr. KELLY. Yes. 

Mr. BUTTERFIELD. Mr. Lozinsky? 

Mr. LOZINSKY. Yes. 

Mr. BUTTERFIELD. And Mr. Morrow? 

Mr. MORROW. Yes. 

Mr. BUTTERFIELD. All right. Do you believe that an employee is 

happier and therefore more productive when they can cover their 

healthcare costs? 

Mr. BREY. Yes, sir. 

Mr. KELLY. Yes. 

Mr. LOZINSKY. Yes. 

Mr. MORROW. Ours at Ruby Falls are. 

Mr. BUTTERFIELD. All right. 

Finally, do you agree or disagree that a good corporate citizen 

would look for responsible ways to comply with the law? 

Mr. BREY. Yes, sir. 

Mr. KELLY. Yes. 

Mr. LOZINSKY. Yes, sir. 

Mr. MORROW. Yes, sir. 

Mr. BUTTERFIELD. Thank you. And that’s what I anticipated your 

testimony would be. 

Let me go to you, Mr. Lozinsky. You are—you have a business 

that is a skip and a jump from my congressional district. I’m over 

in Durham and surrounding area. And so thank you very much for 

coming today—— 

Mr. LOZINSKY. We have—— 

Mr. BUTTERFIELD [continuing]. And thank you for what you do. 

And I particularly took interest in the spirit of your testimony. 

You said that you came here today looking for solutions, and I like 

that. And that’s the way a good businessman or -woman should 

conduct themselves. And I also want to thank you for offering jobs 

to low-income people in the Wake County area. That is commendable. 

Mr. LOZINSKY. We have quite a few people that actually live in 

Durham also. Probably about 25 percent of our employees are from 

Durham. 

Mr. BUTTERFIELD. And you also said that some of your workforce 

are convicted felons. 

Mr. LOZINSKY. Yes. 

45 

Mr. BUTTERFIELD. And that’s a big deal in my world, because we 

have so many young men who rehabilitated their lives, they are 

looking for an opportunity, and you seem to be giving out a better 

opportunity. 

Mr. LOZINSKY. Yes—— 

Mr. BUTTERFIELD. When this committee wrote the bill some 

years ago, and I’ve been on this committee now for some years, as 

many of my colleagues, a different group was in the leadership of 

this committee at the time. But when we wrote the bill, we anticipated that poor people would need insurance, and so we created 

what we call Medicaid expansion, which would cover employees or 

individuals from zero percent of the Federal poverty level to 133 

percent. Many of those are working for you. 

Mr. LOZINSKY. Right. 

Mr. BUTTERFIELD. And so it seems—Ms. DeGette mentioned this 

in her question—it seems that some of your employees would qualify for the Medicaid expansion if it existed in North Carolina. The 

problem is that your legislature and my legislature and your Governor and my Governor have chosen to decline to expand the Medicaid program in our State, and so the option that would normally 

be available to your low-income workers doesn’t exist. And so if you 

have any influence with our State legislature and Governor, if you 

would join some of us in trying to convince them to try to rethink 

this whole thing. We need full participation. 

Let me now ask you, are your employees currently covered with 

insurance? 

Mr. LOZINSKY. My employees? 

Mr. BUTTERFIELD. Yes. Health insurance. 

Mr. LOZINSKY. No, the majority of them are not. Once our employees get to be at the supervisor and the project manager level, 

yes, then we offer them health care. So we have—we pay insurance 

on about—I think it’s around 22 people right now. 

Mr. BUTTERFIELD. But your minimum-wage earners do not have 

insurance—— 

Mr. LOZINSKY. Correct. 

Mr. BUTTERFIELD [continuing]. Because you simply can’t afford 

it—— 

Mr. LOZINSKY. I can’t afford—— 

Mr. BUTTERFIELD [continuing]. At this point. Yes. 

Mr. LOZINSKY. My margins are very small, and yes. 

Mr. BUTTERFIELD. We anticipated that. And we had hoped under 

this act that those people that you speak of, that you care about 

and I care about, would be able to go across the street and qualify 

for the Medicaid expansion, and it’s not happening. And that’s very 

disappointing. 

Let me use my final minute with you, Mr. Kelly. And you mentioned a minute ago that you clearly understand that this is the 

law of the land. I would hope that you would find some way in 

Pennsylvania to try make this thing work. You haven’t gotten 

where you are today in business without being smart, and shrewd, 

and strategic and visionary in your approach. I wish that you could 

find some way to find—to make this thing work. 

Forty-six percent of your premiums have gone up 46 percent 

since 2010. I understand the pain. I understand the problem that 

46 

that poses to your company. And I would certainly hope that you 

would find some way to really make this thing work. You say that 

the average wage—and correct me if I’m wrong—I think you said 

the average wage was somewhere around $50,000 for your employees? 

Mr. KELLY. Average wages for our employees. 

Mr. BUTTERFIELD. Commendable. Wonderful. But that’s for a single individual. And I would hope that that individual’s spouse 

would also be gainfully employed at some other location in Pennsylvania, and he or she would be making 40- or 50- or $60,000. 

That’s a $100,000 family. And I would hope that that family would 

be able to find some way, some way to afford health insurance because they need it, you know they need it, I know they need it, and 

I hope that you could get creative and help your employees get insured. 

Thank you for listening. I’ve run out of time. I yield back. 

Mr. MURPHY. Thank you. Gentleman’s time has expired. 

Now I turn to Ms. Ellmers of North Carolina for 5 minutes. 

Mrs. ELLMERS. Thank you, Mr. Chairman. 

Mr. Lozinsky, we’ve had numerous conversations on this issue. 

And I again commend you for coming forward, especially in the 

spirit that you’re doing so, which is looking for solutions. But as 

we all know, many times in order to find the solutions, you also 

have to identify what the problems are, and you have to be willing 

to make changes that are necessary to do so. 

With that, I would like to say I know that you have looked at 

this issue. I know this is something that’s very important to you 

because you care very much about your employees, again pointing 

out that many of these individuals are low income; many of these 

individuals, 85 percent, are minority; and you employ those who 

have formerly been in prison; and now you’re giving them—you and 

Kathy have offered them a second chance. 

Some of the discussion here today has focused around the idea 

that many of your employees, because they are low income, would 

therefore be able to qualify for Medicaid. Are some of them already 

on Medicaid, to the best of your knowledge? 

Mr. LOZINSKY. To the best of my knowledge, I think, yes, quite 

a few of them are. 

Mrs. ELLMERS. And I guess my question to you is—and looking 

at this, and the testimony that you’ve submitted, you’ve pointed out 

that, basically what you’ll have to do is cut back employees to 

under 30 hours, or what we’re now calling the 29ers, because essentially at 29 hours you’re not obligated. 

Mr. LOZINSKY. Correct. 

Mrs. ELLMERS. The point being, do your employees want to be 

cut back? 

Mr. LOZINSKY. No, definitely not. 

Mrs. ELLMERS. Do your employees want to work more than 40 

hours? 

Mr. LOZINSKY. Yes. Most of our employees do work—our business 

is not like 9:00 to 5:00. 

Mrs. ELLMERS. Right. 

Mr. LOZINSKY. They go do certain amount of jobs during the day. 

And, believe me, when we have Saturday work, they line up for the 

47 

overtime. And the majority of our employees, at least in our construction division, work more than 40. And they are always begging to work Saturday so they can pick up that extra time-and-ahalf money. 

Mrs. ELLMERS. Absolutely. So the point here is that these are individuals who want to better their lives. These are individuals who 

want to work, earn an income. You are an employer that wants to 

offer these jobs. You want to grow as a business; do you not? 

Mr. LOZINSKY. Yes, I do. Yes. 

Mrs. ELLMERS. In the present situation, facing the implementation of the Affordable Care Act, do you see your business growing? 

Mr. LOZINSKY. No. Well, this is the first year since we’ve started 

that we haven’t grown, and that was pretty much our decision because we don’t know what the effects of this law is. We don’t want 

to hire more people and have to lay them off, or hire more people 

and have to get them over—over 30. So what we’ve been trying to 

do is just bid on jobs for our present customers who haven’t been— 

we haven’t been trying to expand our customer base this year because last year we were pretty much getting close to 300 employees, and in—because of what the effect this law was going to be on 

that, we haven’t—we haven’t tried to grow this year until we—and 

hopefully we come up with a solution for us, and then we will hopefully continue to grow. 

Mrs. ELLMERS. Let me ask a question about the employees that 

you have which have former prison records that you and Kathy 

have employed. In the event that you do have to layoff employees, 

and I’m assuming that some of them would—would be those individuals who are getting a second chance at bettering their lives, 

how easy is it going to be for them to get a job out there? Especially in this economy? 

Mr. LOZINSKY. I don’t know what the job market is around us. 

I’m sure it’s not going to be easy. There’s been a lot of them that 

have come to us and said, you know, nobody else would give them 

a chance. And they really appreciated what we did. 

Like I said in my letter, I had one former inmate that’s just celebrated his 10-year anniversary with us. He actually worked for 7 

months out of a work release program from Raleigh, the central 

prison. And he works at a work release program. Then he came to 

work for us, and he started as a laborer. And, like I said, last week 

he celebrated his 10-year anniversary. He’s now moved up to a 

project manager, and he makes over $50,000 a year. 

Mrs. ELLMERS. That is wonderful. 

I have about 30 seconds left, so I would like to ask each and 

every panel member here, are you aware that the CBO has actually come forward and said that even after implementation in 10 

years of the Affordable Care Act, there would still be 30 million 

people left uninsured? Are you aware of that, yes or no? 

Mr. BREY. I’m aware of that. 

Mrs. ELLMERS. You are aware. 

Mr. KELLY. Yes. 

Mrs. ELLMERS. Mr. Kelly. 

Mr. KELLY. Yes. 

Mr. MORROW. I was not aware of that. 

48 

Mrs. ELLMERS. Yes, 30 million will still be left uninsured, and 

that is, again, by the nonpartisan Congressional Budget Office. 

So thank you, gentlemen. I yield back the remainder of my time. 

Mr. MURPHY. Gentlelady yields back. 

Now turn to Ms. Schakowsky for 5 minutes. 

Ms. SCHAKOWSKY. Mr. Kelly, I heard you talking about the bending the cost curve. We have to do something about the cost of 

health care. The fact of the matter is that the increases that have 

been overall—I realize averages don’t apply to everyone—but are at 

about a 50-year low right now in healthcare costs over the last year 

or so. And this has to do with—just heard this today from Secretary Sebelius, but it’s also CMS and Pricewaterhouse that would 

document that. Because you’re exactly right, and the Affordable 

Care Act took steps to address the core problem of rapidly increasing healthcare costs, requires insurance companies to operate more 

efficiently. It subjects premiums to independent review. Some 

States actually have the right, their insurance commissioner, to 

modify rates and bring them down. And it requires that at least 

80 percent, every—80 cents on every dollar—go to health care now; 

can’t go to CEO salaries or to marketing costs. And many enrollees 

in insurance policies have gotten rebates around the country equaling billions of dollars. We’re beginning to now reward the quality 

of care rather than just the number of tests and the procedures 

performed. That gets at the issue, too, of, we were talking about 

the doctors that are doing defensive medicine. 

So while it’s still early to say for certain, there is increasing evidence that the reforms in the ACA are on their way, overall and 

over time, to drive down costs while improving healthcare quality 

and health outcomes. And if you’ve received a 46 percent increase 

over the last little while, this is not untypical. This is not about the 

Affordable Care Act, which hasn’t gone into effect yet. And this is 

typical of what has been happening over the years. 

You have seen—I mean, sometimes I listen to these arguments, 

and I think, well, gee, it must have been great in the insurance 

market before the Affordable Care Act came along. And, of course, 

we know that that is absolutely not the case. 

I don’t know if you wanted to comment at all. 

Mr. KELLY. Well, I don’t know—I must be in a different universe, 

Congresswoman, because we have not experienced a reduction of 

any kind. Yes, costs have been going up long before the Affordable 

Care Act. They seem to have accelerated, unfortunately. Maybe it’s 

because insurance companies are starting to pack—they’re taking 

advantage of the opportunity, the window that’s available, to just 

jack the prices up because they know, after the so-called reforms 

that are going to go into effect, that maybe the game will be up. 

However, for example, I mentioned to Congressman Murphy that 

there are four fees that go into effect next year because of the Affordable Care Act. That’s going to add $40,000—$48,000 to my 

costs without any change in coverage or anything else. That’s just 

$48,000 in additional fees. Now, I don’t know how that’s bending 

the cost curve down. If the Affordable Care Act is going to mandate 

that fees be levied on insured people, insured—in the companies 

that provide the insurance, I don’t see that. I’m sorry, I don’t see 

that. 

49 

So you’re going to have to show me where in the law that there 

are prescriptions that are going to drive costs down. I don’t see it. 

In our market it’s just not going to happen. When you have two 

basic providers of healthcare in southwestern Pennsylvania, UPMC 

and Highmark, they own all the doctors and the hospitals, there’s 

no incentive for them to cut their costs. I don’t see it happening. 

I’m sorry. 

Ms. SCHAKOWSKY. Well, we’re all going to have to, as Members 

of Congress, work with our constituents and with our healthcare 

providers to make this thing work. 

But getting back to sort of the theme that Mr. Green was raising 

before, what we’re finding in this House of Representatives is rather than a willingness to sit down and talk about what are the 

snags in this legislation, this Affordable Care Act, this Obamacare, 

and figure out how to do it, it’s just a continuous drumbeat of repeal, repeal, stop, get over it. We—as the United States of America, 

we are capable, as most other industrialized countries are, of constructing a system that is going to work for our people and for our 

businesses to provide healthcare. We could do this. 

Mr. KELLY. Haven’t you reaped what you’ve sown? By that I 

mean this—— 

Mr. MURPHY. Gentlelady’s time has expired. I need to move on. 

The gentlelady’s time has expired. 

Thank you, Mr. Kelly. 

Mr. Griffith of Virginia is recognized for 5 minutes. 

Mr. GRIFFITH. Thank you very much. 

Mr. Kelly, reap what you sew. Tell me what you were going to 

say. 

Mr. KELLY. What I was going to say was if you look at the history of this law—— 

Ms. SCHAKOWSKY. I really resent that. 

Mr. KELLY. Well, I’m sorry you resent that. 

But the reality is that the law was passed without any support 

on the Republican side. So here you are, you force something down 

the throats of—and it’s—I feel this way as a business person— 

you’re forcing this down my throat. I’ve got no say in the process. 

You had no say in the process. And now because it’s not going very 

well, because the implementation is difficult, all of a sudden it’s— 

you folks are—are the problem, and I find that really reprehensible 

that that is said. 

I think if you would have—I think if it had been really a spirit 

of comity and bipartisanship 4 years ago, perhaps what we would 

have would be something that would be implementable and affordable, but it hasn’t turned out that way. I’m sorry. 

Ms. DEGETTE. Will the gentleman yield? 

Mr. GRIFFITH. I will not at this time. I only have 4 minutes left. 

Mr. Kelly, would you agree with me that there’s more than just 

snags in this bill? There’s more than just a few snags? 

Mr. KELLY. Absolutely. Absolutely. 

Mr. GRIFFITH. And I would have to say that among the things 

that my constituents tell me are snags, and what I’ve heard testimony here today, is we’ve got the long-term care insurance part 

didn’t work out, so they abandoned it; the catastrophic coverage 

that was to be the interim step cost a lot more than was originally 

50 

projected to cost; the insurance rates didn’t react the way they 

thought they were going to do, we haven’t seen any real savings 

there; the Secretary is—is having to go out and look for more 

money to try to get folks to enroll in the programs and to do the 

things that they want to do; we’ve got the 29ers that we’ve referred 

to several times today, which both—even if we were to change it 

tomorrow, the Commonwealth of Virginia has a law coming in July 

1 that says that they can’t have part-time workers that work 

longer than that because they don’t want to have to pick up that 

cost; the Medicaid, forcing the States to do the Medicaid expansion—forcing the States to do the Medicaid expansion was ruled 

unconstitutional by the Supreme Court. 

You know, you’ve got problem after problem after problem. And 

I kind of think this is—is similar to Blacksburg High School in my 

district. The roof of the gym caved in, and the debate began do we 

just build a new gym, or what about the rest of the building? And 

it caved in because of structural defects. And the ultimate decision 

was they condemned the rest of the building, and they are going 

to build a new Blacksburg High School. 

Sometimes when the construction, the initial part of putting 

something together, putting a building together, is so poor, you 

have to just say, OK, let’s start over. Let’s go back and see what 

we can do to build something that does work for the American people, that does lower costs, that does expand coverage in the ways 

that we want to, and doesn’t cost people the hours at work or jobs. 

Would you not agree with that, Mr. Kelly? 

Mr. KELLY. Absolutely. 

Mr. GRIFFITH. And Mr. Lozinsky? 

Mr. LOZINSKY. Sure. 

Mr. GRIFFITH. And, Mr. Morrow, as a businessman, if something 

is structurally flawed, don’t you sometimes have to just say, OK, 

we’re going to scrap that, bulldoze it, and start over? 

Mr. MORROW. In our business, sometimes we do that, yes. 

Mr. GRIFFITH. I mean, I think everybody who’s been in business 

very long has run into that position where they have to do that, 

or they have to go back and say, that didn’t work. And I would submit to you all and to this committee that that’s where we are on 

this particular plan. It was built poorly; it’s not going to work as 

currently designed. I don’t know how many patches we could put 

on it. I don’t think we could put enough patches on it to fix it; I 

think we have to tear down the building and start rebuilding. 

And so I would ask you all, have any of you all run into the 29- 

hour problem in your particular business where you have had to 

stay to employees, we’re only going to give you 29 hours? 

Mr. LOZINSKY. Yes. 

Mr. GRIFFITH. Mr. Lozinsky, I think you mentioned that earlier. 

Mr. LOZINSKY. Yes, I have. 

Mr. GRIFFITH. And I will tell you, I’m going to ask you this. I 

have a business in my district. See if you all have had this problem 

or if you know folks who do. This business has been in existence 

more than 30 years. It now has 59 employees. They have three 

shifts. One of the shifts they just started a few years ago. So the 

businessman came to me and he said, I just left my folks—this was 

a couple months ago, now, and I don’t know what decision he ultiVerDate Nov 24 2008 15:52 Jan 27, 2014 Jkt 037690 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-60 CHRIS
51 

mately made. He says, here are my decisions: I can layoff the third 

shift, marginally profitable. I, you know, worked for years to get it 

off the ground, but I can lay off the third shift and get below the 

50 employees so I’m in the same position that Mr. Brey—he didn’t 

use Mr. Brey’s name, obviously—but I can be in a position where 

I’m not covered by this bill. I can pay $40,000 in the fines, or I can 

pay 60-some thousand dollars and cover everybody. And I’ve been 

covering—kind of like you, Mr. Lozinsky. He’s got a lot of folks that 

don’t last in the business. He’s in a business where some come in 

and stay for a couple of months, and then they move on, but some 

stay for a while. And when they stay for a while, they get a supervisory position. 

Mr. LOZINSKY. Correct. 

Mr. GRIFFITH. And he’s been covering all those folks for years. 

So he said, my choices are for the first time in over 30 years don’t 

grow my business anymore, cut back, and lay folks off, pay a fine, 

or pay $40,000 fine or $60,000 increase. And he doesn’t know what 

he’s going to do, and he’s wringing his hands over it. Have you all 

found that to be true as well? 

Mr. LOZINSKY. I have, yes. 

Mr. KELLY. Yes. 

Mr. GRIFFITH. I yield back. 

Mr. MURPHY. Gentleman yields back. 

Now turn to the gentleman from Louisiana Mr. Scalise for 5 minutes. 

Mr. SCALISE. Thank you, Mr. Chairman. Appreciate you having 

this hearing. 

I appreciate all of our panelists for coming and taking time away 

from your businesses, because I think as you, Mr. Kelly, pointed 

out at the beginning of this, it seems like the voice of the smallemploying business owner was left out of this debate back when 

this bill came through. 

In fact, this committee, it was here in this committee room that 

we had those hearings for hours and hours and combed through— 

I remember reading through the bill when it was this high, and it 

got higher. And there were so many bad provisions that we saw 

that could devastate small businesses, could devastate families who 

have good health care that they like. 

But there were all those lofty promises, too, you know, the President’s promise, if you like what you have, you can keep it. That 

promise has been broken to so many Americans already when the 

law hasn’t even taken effect yet, just businesses that are looking 

at this saying there’s no way that they can comply, that provide 

good health care to their employees today. We remember the 

Speaker at the time, Nancy Pelosi, her famous quote: We have to 

pass the bill so that you can find out what’s in it. Well, now you 

know what’s in it and, as all of have testified, the different impacts 

it’s having. 

But when I go home every weekend and talk to small business 

owners in southeast Louisiana, I’m hearing the same things. You 

know what, Mr. Lozinsky, what you talk about with your small 

business, you know, you’re competing against people that are also 

going to be handling this bill differently, and all of a sudden it 

makes changes to the way you’re going to have to do business. 

52 

You know, my colleague from Texas, Pete Olson, talked about the 

29ers, and we’ve heard about them from so many of our businesses. 

There are restaurants in Louisiana that everybody in this room has 

heard of, famous New Orleans restaurants, that have the same 

problem, because the law—there’s so many perverse incentives in 

this law that literally force you to contemplate reducing the number of your workers. You’re rewarded in Obamacare if you lower 

the number of workers you have. You’re rewarded in Obamacare if 

you reduce the hours to your employees. That’s what you all are 

facing. What kind of perverse incentive is that where the Federal 

Government is encouraging you to reduce your workforce? And yet 

that’s what’s going on in this law, and we’re seeing it all around 

the country. 

And so, when those of us who say you need to rip up the foundation and actually go and fix the problems— Mr. Kelly, you talked 

about costs, and we ought to be focused on fixing the cost. This bill 

actually raises the cost of health care. We’ve seen that from so 

many different reports and, in fact, States that are grappling with 

it. In Louisiana, the estimates are over 54 percent increase in 

healthcare costs due to the impacts of the law. 

Since passage of this law in 2010, what have you seen in terms 

of increases in your healthcare costs? 

Mr. KELLY. Well, the cost—premiums are 46 percent. The actual 

costs, because we pay some of the deductible, is 46 percent. 

Mr. SCALISE. Forty-six percent higher? 

Mr. KELLY. Higher. 

Mr. SCALISE. But, wait, you were promised that they would be 

lower. How could that be? 

Mr. KELLY. Well, I never thought that that was—— 

Mr. SCALISE. I think a lot of us didn’t either. Unfortunately, 

you’re seeing that in the real world. And that takes into account 

the changes you made, right? You doubled the—you doubled the 

deductibles, you even changed carriers, and even with those 

changes you still saw increases; is that right? 

Mr. KELLY. Yes. Congressman, the thing that’s so frustrating as 

a business owner is that it’s the amount of time now that we spend 

looking at not the strategic path of where the company is going to 

go in terms of market share, in terms of who your customers are 

going to be and what opportunities you’re going to have. We’re 

spending an inordinate amount of time on how are we going to 

manage this leviathan that’s out there. This healthcare costs that 

are already greatly increased and appear to be on a path—there’s 

a hockey stick. And it’s not on global warming. The hockey stick 

in—this is my view, it’s a personal opinion, it’s on the healthcare 

costs. 

Mr. SCALISE. You don’t have to take our word for it, but one of 

the lead authors of the bill in the Senate, one of the architects of 

the law in the Senate, Senator Baucus, called it a train wreck coming down. That was his words. He called this a train wreck. And, 

of course, you all are the ones sitting at the end of the track where 

it’s coming. 

I want to ask you, Mr. Lozinsky, because you’re considering those 

kind of options of how many employees do you lay off; is that correct? 

53 

Mr. LOZINSKY. Well, I don’t know. I think best bet would be the 

29 option. 

Mr. SCALISE. So you’re going to have to lower the number of—— 

Mr. LOZINSKY. We will lose a lot of employees because they won’t 

be able to survive on 29 hours. 

Mr. SCALISE. What a shame. 

Mr. LOZINSKY. So it will be very hectic. And the sad part about 

it is, our best employees are the ones that are—want to work the 

most and want to work the most hours, and those are the ones that 

we will lose. 

Mr. SCALISE. What a shame. 

I’m almost out of time. I want to ask Mr. Morrow one question. 

The supporters of the healthcare law promised that the law 

would lower costs for your business. Is that true for your company? 

Mr. MORROW. No. We’ve seen a lot more increases and heavier 

increases this past year. 

Mr. SCALISE. Thank all of you for your time and your testimony. 

I yield back the balance of my time. 

Mr. MURPHY. Gentleman yields back. 

Now recognize the gentleman from Ohio Mr. Johnson for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman. And I, too, want to 

thank our witnesses for being here today. 

You know, I think oftentimes the complexities of the law and the 

discussions that we get into, we tend to overlook the cultural 

changes that’s going to result long term. I came from a background 

as a kid where I looked for an opportunity to get a job and to go 

to work, whether it was on the farm, later in restaurants and seasonal-type work. You folks come from industries that provide that 

opportunity. 

Today we have millions of college students that are working their 

way through school, working hard, going to class in an effort to 

keep from becoming indebted to the Federal Government with huge 

student loans. 

So, you know, I just want to comment before I begin asking questions that this is going to have far-reaching implications, far beyond just the benign discussion of health care. It’s going to have 

societal and cultural changes as industries like yours have to pare 

back and pull back, and are unable to grow and hire, and laying 

off workers. It’s not going to be good. 

Mr. Morrow, you testified that—that—let me go back. My colleague pointed out just a minute ago one of the big promises of the 

healthcare law was to—if you like your current health insurance, 

you can keep it. Do you believe that your employees like and enjoy 

the healthcare coverage that you’ve provided to them up until now? 

Mr. MORROW. Yes, I do. They helped us architect that plan. For 

instance, prescription drug coverage was extremely important to 

them, so we spent more money in that area for them, and we also 

spent a lot of money on well health care for preventative 

healthcare. We have health fairs. In fact, we had an employee that 

we found prostate cancer in its early stages through a simple 

health fair. Saved his life. He’s on Medicare; he doesn’t go to the 

doctors, he said. And I caught this. So, yes, we constructed it with 

their input for the best coverages possible. 

54 

Mr. JOHNSON. Do you think you’re going to be able to sustain 

that? Are you going to be able to provide that same level of health 

care that was promised to all Americans by the President? Do you 

think you’re going to be able to do that? 

Mr. MORROW. I don’t think we are, because the costs are going 

to become prohibitive for us to do it through our family at Ruby 

Falls as private healthcare coverage. 

Mr. JOHNSON. Mr. Lozinsky, Mr. Kelly, either of you have a comment on that? Are you going to be able to provide the same 

healthcare coverage in the future that you’ve provided in the past? 

Mr. KELLY. Based on where we’re headed, I don’t know how we 

can. We really value—I mean, we’re becoming an ESOP. My employees already own 49 percent of my company. They’re going to 

own 100 percent. Nobody can value their employees more than 

somebody who says, I’m going to actually give you the company. 

They’re not paying for that; under the ESOP rules, they are going 

to have ownership of the company. 

My concern for them is when they have to sit down and manage 

the company and have to decide those really tough questions—by 

the way, we have a health committee that looks at these increases 

that we get every year. They decide what they’re going to do to 

keep us competitive. It’s not me. And so, honestly, I don’t know 

what they’re going to be able to look at in 4 years and say, what 

are the choices that we have? 

Mr. JOHNSON. Sure. 

Mr. KELLY. Do they get rid of their fellow employees? 

Mr. JOHNSON. Let me move on quickly. We just saw a report a 

couple weeks ago, the State of Ohio, for example, the Ohio Department of Insurance says we’re going to see an 88 percent increase 

in premiums, a staggering increase for college students. And a lot 

of that is because we’ve seen a change in the risk pool composition. 

The younger are going to be paying higher premiums, who are 

healthy, to subsidize the more senior folks, who may be unhealthy. 

In your situations with your employees, do you think young people are going to pay these higher insurance premiums, or are most 

of them going to opt for the penalty? Any of you. Mr. Morrow. 

Mr. MORROW. I would going to say they’re going to opt for the 

penalty. 

Mr. JOHNSON. OK. Mr. Kelly? 

Mr. KELLY. I believe that’s what they’ll do. 

Mr. JOHNSON. Mr. Lozinsky. 

Mr. LOZINSKY. Yes, I would think so. 

Mr. JOHNSON. Mr. Chairman, I’ve exceeded my time, and I yield 

back. 

Thank you, gentlemen. 

Mr. MURPHY. Thank you. 

Now recognize the gentleman from Georgia Mr. Gingrey for 5 

minutes. 

Mr. GINGREY. Mr. Chairman, thank you. 

I want to first go to Mr. Lozinsky, because, Mr. Lozinsky, as I 

heard your testimony and response to some of the other questions, 

and you mentioned that there are a lot of former felons that you’ve 

been good enough to hire in your business in North Carolina, and 

you were talking with Mr. Butterfield earlier about that, there was 

55 

a discussion about the Medicaid program and Medicaid expansion. 

But just a few minutes ago, you said that if you have to cut to 29 

hours a week to avoid the expense of health care, that a lot of these 

people won’t be able to make it; they’ll have to find another job—— 

Mr. LOZINSKY. Correct. 

Mr. GINGREY [continuing]. Just to make do. I couldn’t help but 

think, in your unique situation, some of these people that you 

talked about, you would be forcing them back into the only other 

skill set that they know so as to support themselves and their families. And wouldn’t that be a tragedy, when you’ve gone to all of the 

tremendous Good Samaritan work to give them the opportunity to 

set their lives straight. 

Mr. LOZINSKY. Well, I sure hope not. The employees are really 

good. 

Mr. GINGREY. Well, I hope not, too. 

But let me go back to that issue of Medicaid, because I think this 

needs to be clarified for everybody, and they need to understand. 

Why do you think in drafting this bill that they wanted to—the 

Democratic majority wanted to expand Medicaid coverage to 33 

percent above the poverty level? We say 133 percent, but the poverty level is 100 percent. They expand it to 33 percent, because 

quite simply if you had all of those people in that window between 

33 percent—between a hundred—zero and 400 percent of the Federal poverty level, you think about the cost of the subsidies that 

the Federal Government—that this Federal Government would be 

paying, especially those who were at 33 percent above the Federal 

poverty level, they would probably be paying something like 75, 80 

percent of the premiums. 

So to put it on the backs of the States where there’s this matching program, this FMAP, granted there’s a couple of years where 

the Federal Government pays for all of it, then there’s another year 

or two where the Federal Government pays for 90 percent of it, but 

it’s a loss leader, just like a used car lot or a grocery store; come 

on in, get something, and first thing you know, it’s not there anymore. And I’ll guarantee you in 4 or 5 years—and that’s what these 

Governors are looking at. They know that once that expansion occurs in 4 or 5 years, that FMAP is going to go back to 50–50, 60– 

40, 55–45. And they’re going to have no money for anything but 

Medicaid; no money for public safety, no money for public schools. 

An absolute train wreck, as Chairman Baucus said. 

So that is a scheme to keep those people out of the exchange 

where it would be just Federal dollars supplementing their health 

insurance premium. So just wanted to bring that out. 

Real quickly, I’d like to thank all of the witnesses. It’s sobering 

to hear the trouble and uncertainty that your businesses face. I 

have, unfortunately, heard much of the same from small businesses 

back in my home State of Georgia, if you can’t tell by the accent. 

I have heard from the overbearing compliance burden that businesses must endure to ensure they are not breaking the law. Instead of investing money in their workforce or expansion, they are 

forced to hire consultants and law experts. This is no way to create 

new jobs and incubate small business growth. 

I spoke to another constituent, an owner of a welding company, 

that pays high wages and benefits to its employees, who has deVerDate Nov 24 2008 15:52 Jan 27, 2014 Jkt 037690 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-60 CHRIS
56 

cided to hire subcontractors or automated equipment instead of hiring new workers due to the fact that he is just under the 50-employee threshold. 

Based on a U.S. Chamber of Commerce poll, 72 percent, 72 percent of small business executives would have a harder time hiring. 

Mr. Chairman, it’s clear the President’s healthcare law is placing 

an undue burden on our small businesses. 

And quickly, in these last few seconds, to all of the witnesses, 

three of you operate businesses where in the future you’ll be faced 

with a choice of providing coverage or paying a penalty. Have any 

of you looked at the feasibility of this and which is cheaper? Can 

we start with Mr. Brey and just go right down real quickly? 

Mr. BREY. As we expand, I intend to continue attempting to provide coverage. I have not looked into which would be cheaper. 

Mr. GINGREY. Mr. Kelly. 

Mr. KELLY. Doesn’t really apply to me because we’re—— 

Mr. GINGREY. Mr. Lozinsky? 

Mr. LOZINSKY. From what I understand as of now, the fine is 

cheaper. I did read a couple days ago where there might be a—just 

a basic preventive plan that kind of skirts the law, but will satisfy 

the law, and that comes in at around $50 a month per an employee. So that’s something that I just found out about a couple 

days ago that I’ll look more into. But I didn’t look into it before. 

Mr. GINGREY. Mr. Morrow? 

Mr. MORROW. It would be cheaper for us to pay the penalty, but 

it’s not part of our culture with our family. 

Mr. GINGREY. Well, I understand that. 

I’m beyond my time. I’m sorry, Mr. Chairman. I yield back. 

Mr. MURPHY. Thank you. I thank the gentleman. 

I also thank this panel. It’s very helpful to have the information 

from all of you. We deeply appreciate it. We’re trying to get our 

hands and minds around this issue, and the testimony provided 

today has been very helpful to us. So thank you so much. 

This first panel is dismissed, and while the second panel is taking their seats, I will introduce them all so we can be moving forward here. 

So let me describe our second panel here. Our first witness is 

going to be Mr. Daley. Bill Daley is the legislative and policy director for the Main Street Alliance. The Main Street Alliance is a national network of State and locally-based small business coalitions. 

Our second witness is Katie Mahoney. She is the executive director of health policy at the United States Chamber of Commerce. 

She has more than 13 years of healthcare experience in hospital 

and health plan operations as well as healthcare policy. 

She is responsible for the healthcare regulation portion of the 

healthcare policy portfolio. 

And our third witness is Michelle Neblett. She is the director of 

labor and workforce policy for the National Restaurant Association. 

She is responsible for labor and workforce issues, including health 

care. 

Our fourth witness is Neil Trautwein. He is the vice president 

and employee benefits policy counselor for the National Retail Federation. In this role he serves as NRF’s lead advocate and strateVerDate Nov 24 2008 15:52 Jan 27, 2014 Jkt 037690 PO 00000 Frm 00062 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-60 CHRIS
57 

gist on healthcare policy and legislation, and manages NRF’s exclusive health and employee benefits committee. 

I thank all the members for being here. 

I’m now swearing the witnesses. So, as you’re aware, the committee is holding an investigative hearing; when doing so has a 

practice of taking testimony under oath. Do you have any objection 

to taking testimony under oath? 

All of the witnesses say they have no objections. 

The chair then advises you that under the rules of the House and 

the rules of the committee, you are entitled to be advised by counsel. Do any of you desire to be advised by counsel during your testimony today? 

And all of the witnesses decline. 

In that case, if you will all please rise and raise your right hand, 

I’ll swear you in. 

[Witnesses sworn.] 

Mr. MURPHY. All of the witnesses responded that they do. 

Well, you are now under oath and subject to the penalties set 

forth in Title 18, section 1001 of United States Code. 

You may now each give a 5-minute summary of your written 

statement. We’ll start with Mr. Daley. You are recognized for 5 

minutes. 

TESTIMONY OF WILLIAM DALEY, LEGISLATIVE AND POLICY 

DIRECTOR, MAIN STREET ALLIANCE; KATIE MAHONEY, EXECUTIVE DIRECTOR, HEALTH POLICY, U.S. CHAMBER OF 

COMMERCE; MICHELLE R. NEBLETT, DIRECTOR OF LABOR 

AND WORKFORCE POLICY, NATIONAL RESTAURANT ASSOCIATION; AND NEIL TRAUTWEIN, VICE PRESIDENT AND EMPLOYEE BENEFITS POLICY COUNSEL, NATIONAL RETAIL 

FEDERATION 

TESTIMONY OF WILLIAM DALEY 

Mr. DALEY. Mr. Chairman, thank you very much for the opportunity, and thank you, Mr. Chairman and Ranking Member 

DeGette. 

I am Bill Daley. I work for the Main Street Alliance. We represent about 12,000 small business owners with organizations in a 

dozen States and at-large members throughout the country. Our 

members are very supportive of the passage of the Affordable Care 

Act because of the market that they’ve confronted over the last decade at least for small businesses. It’s been a disaster. You’ve already heard testimony about the price that they’ve had to pay. The 

biggest challenge we face is affordability, and I must say that at 

least in some surveys now, we’re beginning to see some hope. 

The actual filings that are being made under the Affordable Care 

Act that have been surveyed, there are nine States where there are 

actual filings of rates, are coming in under CBO estimates. And as 

you heard others state earlier today, there is evidence that the 

healthcare cost trend is slowing, so we can be hopeful. 

There are reasons for us to be hopeful about the market, too, because it simplifies paperwork. It gets rid of a lot of the problems 

we’ve encountered trying to get quality care and benefits. Many of 

our businesses have not purchased health care because they didn’t 

58 

think it was worth it, given the exclusions, the rescissions, the preexes, and the low benefits that were available. So our members are 

hopeful that they will benefit from the Affordable Care Act and 

look forward to its implementation. 

On the matter of the question of employer mandates, again, let’s 

make it clear: Under 50 employees, those mandates do not apply, 

and over 50, some 94 percent of the companies are already qualified. So you’re talking about a very narrow sector of the economy 

when you talk about this issue. 

On the matter of the 30 hours, I must also point out that only 

approximately 1 percent of the entire workforce in the United 

States falls into the category that’s being discussed. So as you look 

at these problems, please try to keep them in perspective. 

I also want to just mention the question of paperwork and simplicity. One of the issues our members raise constantly confronting 

bureaucracies is that they have the daunting task filling out the 

forms. They look forward to the simplicity of qualifying for insurance through exchanges and the new simplified online processes. 

They also have found, and our members have come here to testify, 

that qualification for the credits under the Affordable Care Act, 

which many of them are getting, took very little time and was 

greatly beneficial to them. 

And you’ve all heard a lot of these other issues already today. I 

just want to mention one other thing, and it’s the functionality of 

the markets at the State level. You heard testimony about Medicaid. In those States where Medicaid is not being implemented, indirect costs will continue to fall back into the market, and risk will 

continue to fall back into the market, creating affordability difficulties. 

In a number of States that are implementing their own exchanges, there are still some questions about competition and how 

well it will actually function, and we do hope that you will continue 

to monitor that. But overall we think the act is poised to be a success for small businesses, we look forward to its implementation, 

and we appreciate the opportunity to come and present our remarks to that effect. 

Mr. MURPHY. Thank you, Mr. Daley. 

[The prepared statement of Mr. Daley follows:] 

59 


85450.014

Small business owners. Small business values. 

Small Businesses and the Implementation of the Affordable Care Act 

Statement on Behalf of the Main Street Alliance 

By 

William Daley 

Legislation and Policy Director 

United States House of Representatives 

Committee on Energy and Commerce 

Subcommittee on Oversight and investigations 

Jnne 26, 2013 
60 


85450.015

Chairman Murphy, Ranking Member DeGette, and Members of the Subcommittee, 

It is an honor to be here this morning to provide information and perspective to you about 

the implementation of the Affordable Care Act on behalf of small business owners in the Main 

Street Alliance network. I am William Daley, Legislation and Policy Director for the Main Street 

Alliance. 

Permit me to begin with a few words about the Main Street Alliance. Our growing 

network of state-based small business coalitions represents over twelve thousand small business 

owners through affiliates in a dozen states from Maine to Montana, in addition to at-large 

business owners spread throughout the country. Our priorities and positions at the national level 

are set by our National Steering Committee, a leadership body of25 small business leaders 

drawn from our state affiliates. Our national network operates as a program of the non-profits 

Alliance for a Just Society and Community Organizations in Action. 

Because it is our mission to create opportunities for small business owners to speak for 

themselves on issues that impact their businesses and their local economies, I am sorry that the 

short notice for this hearing precluded arranging for one of the business members of our National 

Steering Committee to appear here today. 

My statement will focus on three issues associated with the continued debate about the 

ACA that are important to our small business owners: 

• Premium Costs 

• The Impact of the Employer Responsibility Requirement; and 

• Paperwork. 
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85450.016

Finally, 1 would like to close with some ideas about implementation at the state level and the 

importance of Medicaid expansion to the success of the insurance exchanges and the goal of 

making health care affordable for small businesses. 

Premium Costs 

Our members are very supportive of the Affordable Care Act and encourage its 

implementation. The problems that small businesses have had providing insurance for their 

employees before health care reform have been well documented in study after study. Surveys of 

our members and other small businesses point to affordability as the major reason for the fact 

that so many small business owners have been unable to offer health insurance to their 

employees - and in many cases are unable to get it for themselves and their own families. Our 

members also have questioned the value of what they found available in the market because 

benefits were weak and policies were subject to limits and preexisting condition exclusions. 

At the same time, small employers were asked to pay an average of 18% more than large 

employers for comparable coverage. As premiums increased. many small businesses abandoned 

insurance and coverage fell.' The markets became victims of adverse selection that forced 

premiums even higher. 

So when we hear warnings about "sticker shock" under the ACA, we have to suggest that 

sticker shock is something small businesses have experienced every year for many years, long 

before the ACA came along. Double digit increases in premiums have been commonplace year 

after year. Our members look to provisions of the ACA with the hope that this trend will finally 

abate. 

On the 20th of this month Avalere Health Care, a private consulting firm, released a report 

outlining their findings that health insurance premiums for the new exchanges are actually 
62 


85450.017

coming in below previous CBO estimates.ii Their findings are based on actual rate filings that 

are now available, not on theories or estimates by the insurance industry. 

To be clear, only nine states have actual rate filings, but the early news is better than the 

term "sticker shock" would imply. Furthermore, these findings are strictly about rate filings and 

do not take into account the savings that many consumers, including our own members, have 

received from rebates returned to them thanks to the Medical Loss Ratio limits in the ACA. Nor 

do these findings factor in either the premium subsidies that will be available to the majority of 

insurance exchange consumers starting next January or the small business tax credits currently 

being used by hundreds of thousands of small businesses. 

We note that these findings come fast on the heels of studies showing that overall rates of 

inflation in health care are lessening. Two recent studies published in Health Affairs document 

that the lowered rate of inflation in health care appears to result from factors that go beyond the 

deflationary effect of the Great Recession and appear to be structural.!I1 

So, while our members are very concerned about the cost of health care coverage, there 

are hopeful signs. Continued progress in controlling costs will depend on the function of the 

insurance exchange marketplaces that are to open next January. 

Market Risk and Coverage Requirements 

Markets respond to risk. Earlier, I observed that our health insurance markets were 

plagued by adverse selection before the passage of the ACA. When the Congress fashioned the 

ACA, it showed great awareness of this problem. That is why one of the underlying premises of 

the Act is that pretty much everyone is going to be in the pool. This is the origin of the individual 

and employer responsibility requirements. 
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85450.018

How will these provisions of the ACA affect small employers? It simply must be 

emphasized that the employer mandate does not apply to a business with under fifty employees. 

This means that over 95% of businesses in the country will not be affected by this provision of 

the law. Since we hear a whole lot about this provision, permit me also to observe that among the 

firms with 50 or more employees, 94% of these firms already provide health insurance to their 

employees. When we do the math we find that this provision will affect only one quarter of one 

percent of all firms. 

Challenging though the requirement to offer health coverage might be for this tiny 

number of companies that do not provide insurance already, the fact is we need them in the pool 

along with everyone else. The broader the pool, the easier it will be for insurance companies to 

offer everyone a good price. 

Furthermore, while our small businesses may not be impacted by the employer mandate, 

most of their employees will be subject to the individual mandate. Since group prices have 

always been less than individual market prices, good, strong small group markets will make it 

more possible for our firms to join with their employees and offer group coverage, to the benefit 

of everyone. 

Therefore, it is pertinent to note some features ofthe market provisions in the ACA that 

will help make products more attractive: 

• The first thing is that the products will be worth buying -- minimum essential benefits, no 

lifetime limits, no rescissions if people get sick, no preexisting condition exclusions, and 

strong medical loss ratio requirements - will mean that insurance will have more actual 

value. 

• Second, medical underwriting - the practice of increasing a group's premiums when 

someone gets sick - will no longer be possible. 
64 


85450.019

• Third, there are market adjustment provisions in the ACA that will help contain risk for 

insurers. 1l1ese include risk adjustment, reinsurance to share high risk cases, and 

community rating that will help provide greater predictability for insurers. 

• Fourth, there is improved competition. Rates will be transparent, easy to compare in an 

"apples to apples" way, and insurance companies will offer uncompetitive rates at their 

peril. 

Three other factors must also be recommended to you for your consideration: 

I. Whatever the potential insurance risk impacts involved in bringing millions of previously 

uninsured individuals into the market, they surely will be offset by the premium subsidies 

provided through the insurance exchanges. 

2. One ofthe great benefits of the ACA is the reduction in cost shifting associated with the 

care for the uninsured that is inevitably translated into higher costs for everyone through 

greater utilization of emergency rooms. 

3. Young employees can be brought into the pool through qualified catastrophic plans, thus 

reducing cost shifting further and expanding the insurance pools. 

We hear that all of this is going to cause a great rush away from insurance coverage by 

those who now provide coverage. There are credible analyses that substantially undermine this 

contention.;Y In fact, employer coverage in Massachusetts actually increascd under that state's 

pioneering health care reforms. 

This idea that employers would so readily drop their health coverage directly contradicts 

an important issue that our small business owners have offered to me repeatedly, which is this: 

the ability to provide health insurance places big companies at a competitive advantage over 

small ones. It defies reason to suggest that firms that now use good health benefits to attract and 

retain a quality workforce are going to throw that tool away. 
65 


85450.020

The same principle will apply to issues associated with the 30 hour dividing line between 

full time and part time employees. While some companies may mess with employee hours to 

avoid health care costs, most will find this technique administratively costly and offensive to 

employees who can go elsewhere. This is affirmed by a recent study by the human resources 

firm Towers Watson that found that over 98% of firms have no plans to change their employee 

hours because of this law.' 

.lust to illustrate this point I note a story in the Dallas Business Journal on the 20th of this 

month quoting Scott Gordon, CFO of a restaurant company that has 2,800 employees: 

"Some restaurant chains plan to cut employees' hours to stay under the 30-hour 

cap, but Gordon said Front Burner has ruled that out. "That's not the route that we're going to 

look at," he said. "We're going to do what's right for the restaurants. We don't think that cutting 

employees' hours is the right way to handle implementation of this. We value our employees and 

we value that they want to work for us, and we don't want to give them a reason to go work 

somewhere else."vi 

Taken all together these provisions of the law not only pose no threat to the economy, 

they are a benefit.. It is impossible to avoid pointing out in this context that an estimated 

1,500,000 new sole-proprietor businesses will be made possible because the ACA will free these 

entrepreneurs to go build new businesses without fear of losing health care. VII What a wonderful 

thing for economic freedom in America. 

Paperwork 

One issue that is often raised as a concern for small business owners is the time and 

complexity involved in dealing with insurance paperwork. Surveys of our members identify this 

as a barrier to participation in insurance plans. The improved simplicity of applying for and 

choosing insurance options under the ACA will be an additional attraction to small businesses. 
66 


85450.021

The on-line application process will be much simplified and the availability of comparative 

shopping will help small business owners and their employees to find plans that meet their needs 

more easily. 

Enrollment in insurance plans is not the only application process our members will use 

under the ACA; there also is the matter of qualifying for the ACA's small business tax credits. 

Admittedly ours are small businesses, but they do not appear to find this process very daunting. 

Two of our members have come before committees of the House to testify on this. Matt Hisel, 

co-director of a recycled building materials business in Missoula, Montana testified in November 

20 II that it took him less than half an hour to qualiJY his firm for the credits. Louisa 

McQueeney, CFO of a fruit packing and shipping business in Lantana, Florida testified in April 

of this year that it took her about an hour to qualiJY her finn for over $7,000 in tax credits. 

If we can get access to good insurance and credits through these new systems, the time 

involved will be well spent. 

(I must observe in parentheticals here that while there are many voices raised in the 

Congress about this "burden on small businesses," there are almost no voices being raised about 

the imposition of the E-Verify bureaucracy on small businesses in the immigration debate.) 

Medicaid and Market Costs 

Finally, a word about Medicaid expansion and market costs. Given the decision by the 

Supreme Court that made Medicaid expansions optional at the state level, it is important to 

observe that there will be negative repercussions on some exchanges in states that fail to move 

forward with Medicaid expansion. Medicaid is a critical substructure for good markets because it 

works to remove risk from the exchange pools and to reduce cost shifting. Tn states where the 

Medicaid expansion is rejected, we will see the unfortunate consequence of newly eligible 

consumers with incomes under 100% of poverty without any access to coverage at all. They will 
67 


85450.022

not quality for subsidies and they will not quality for Medicaid. Their costs will shift to all of us 

and there will be an indirect impact on the price of insurance for small businesses. This dynamic, 

often ignored in the debates in states over Medicaid expansion, should give state lawmakers and 

Governors a new sense of urgency to move forward with the Medicaid expansion opportunity 

and reduce cost-shifting instead of increasing it. 

Thank you for permitting me to offer these remarks. 

, HealthCare.gov, Health Insurance Premiums: Pa,t High Costs Will Become the Present and Future W7thout 

Health Reform (Jan. 28, 2011). 

ii "Avalere Health analysis of health insurance rate filings publicly available as of June 12, 2013." See also the 

analysis by Rick Ungar in the July 1st Edition of Forbes entitled "The Dull Knives Come Out As Anti-Obamacare 

Forces Falsely Attack California Healthcare Exchange Prices." 

'" Alexander J. RvuLTeresa B. Gibson, M. Richard McKellar and Michael E. Chernew, "The Slowdown In Health 

Care Spending In 2009-11 Reflected Factors Other Than The Weak Economy And Thus May Persist," Health 

Affairs, May 2013 and M, Cutler David, and Nikhil SahnL, If Slow Rate Of Health Care Spending Grlmth Persists. 

Projections Mav Be Off By $770 Billion. Health Affairs 32, no. 5. 

;V I n addition to the CBO analysis, see the analysis by J.P. Morgan as reported by Russ Britt, 

"Will firms 'dump' employees into health-insurance exchanges?' in Health Exchange, March 

14,2013. 

v See the report on the Towers Watson survey by Dan Cook;"Major employers won't skirt 

PPACA" at BenefitsPro, June 14,2013. 

~ Bill Hetheock, "How Front Burner restaurants are navigating health insurance reform: Dallas Business Journal, 

Jun 20, 2013. 

"" Linda J. Blumberg, Sabrina Corlette, and Kevin Lucia. "The Affordable Care Act: Improving Incentives 

for Entrepreneurship and Self-Employment :Timely Analysis oflmmediate Health Policy Issues." Robert Woods 

Johnson Foundation, May 2013. 
68 

Mr. MURPHY. Ms. Mahoney, you are recognized for 5 minutes. 

TESTIMONY OF KATIE MAHONEY 

Ms. MAHONEY. Thank you, Mr. Chairman and Ranking Member 

and other members of the subcommittee, for the opportunity to participate in today’s hearing. We appreciate the focus on the challenges facing America’s business under the health reform law and 

believe we must all do what we can to help employers and their 

employees deal with the challenges of implementation. 

I’m Katie Mahoney, executive director of health policy at the U.S. 

Chamber of Commerce. With our diverse membership we’re particularly cognizant of the problems facing small businesses as well 

as large corporations. While the Chamber opposed the health reform law during the legislative debate, we are moving forward to 

help our member companies understand and comply with the law. 

To that end, we continue to work with the regulators to mitigate 

the burdens and challenges of implementation and with Members 

of Congress to provide relief to business. 

Our vision of reform continues to be one where Americans can 

access affordable healthcare coverage, receive innovative and highquality care, and realize better health. 

Tomorrow the Chamber will release a report with recommendations to improve access to affordable coverage and drive greater 

healthcare value. While the report outlines ways to improve the 

system, today’s hearing focuses on the system created by the health 

reform law, and that is where I will focus my comments. 

As the first panel outlined, despite the goal of the employer mandate, the health reform law is eroding the employer-sponsored system and forcing employers to consider significantly changing their 

workforce not because these changes make sense for their customers or their employees, but because they are necessary to keep 

their doors open. In many cases, employers are not hiring new employees; they’re canceling expansion plans, reducing employee 

hours, and dropping the affordable healthcare coverage that they 

had previously provided for their employees. 

Beyond the statistics, the real-life conversations we have with 

businesses are perhaps the most remarkable. What is most shocking during these opportunities is the complete confusion as to what 

the law will require. While we’re eager to explain recent regulatory 

developments, we find ourselves still outlining the basics of the 

law, such as what constitutes an applicable large employer and the 

difference between a full-time equivalent and a full-time employee. 

So what are we to do? We’re working hard to educate our members, regulators, Members of Congress and the public. First, for our 

members, we’ve created a new Web site, Health Reform Law 101, 

which has a variety of interactive resources including a coverage or 

penalty chart, an employer mandate penalty calculator, an interactive timeline, and an FAQ page. We are getting great feedback 

on these resources. 

Secondly, we’ve been working with the regulators, submitting 

comments and meeting with the administration to highlight problems with the regulations promulgated to implement the law. We 

filed 62 comments to date to mitigate implementation burdens at 

every opportunity. 

69 

For example, one key point that we’re focused on now is encouraging the Treasury to use its discretion to not tax the tax, but to 

exclude the portion of the premiums collected to pay for the health 

insurance providers fee from gross income for reporting purposes. 

This important and feasible regulatory approach would save small 

businesses unnecessary premium increases of between 45- and $70 

billion over 10 years. 

Third, we’ve been educating Members of the House and Senate 

and pushing for relief with regard to several critical provisions. 

First and foremost, our focus is on the employer mandate and how 

it will hurt employees as well as employers. Unfortunately, and 

perhaps ironically, because of the mandate not only are employees 

not receiving healthcare coverage, they’re now losing full-time 

wages. To rectify this we continue to push for changes and believe 

that restoring the definition of full-time employment to the traditional 40 hours per week is a critical step in the right direction. 

Fourth, our efforts to educate the public will be even more important in the coming months as the administration begins its PR 

campaign. We need to have an honest discussion about what the 

law does and does not do. Selling the law to the public instead of 

educating the public about the law is going to lead to further confusion and frustration. 

Beyond the employer mandate, the list of problematic provisions 

is long, and several constantly rank as the most dire for business. 

the health insurance tax, the essential health benefit package requirements, the limits on out-of-pocket maximums and deductibles 

will all increase premiums and reduce flexibility, continuing to contribute to the one-size-fits-all vision of health care under the 

PPACA. It’s like forcing all car manufacturers to make only cars 

with leather seats, DVD players, GPS systems, sunroof, and seat 

warmers, where many people could only afford a more modest car 

at a lower price. 

In conclusion, regardless of our opinions of the law, it is being 

implemented. It is critical that everyone, businesses, regulators, 

Members of Congress and the public, do what we can to mitigate 

the harm on Americans, our economy and innovation. We must engage in an honest discussion, not a sales pitch, to inform individuals about the law and to take every opportunity to ease burdens, 

administrative burdens, preserve flexibility, and reduce premium 

increases. 

Finally, we urge business to continue to innovate and work within the confines of the law to develop and offer coverage options that 

employees value. We urge the regulators to adopt a compliance assistance approach as opposed to strict enforcement. We urge our 

elected representatives to pass legislation that would restore common business standards for the definition of ‘‘full-time employee,’’ 

and we urge the public to be inquisitive and cautious as they assess the information available to understand the law. 

Thank you. 

Mr. MURPHY. Thank you, Ms. Mahoney. 

[The prepared statement of Ms. Mahoney follows:] 

70 


85450.023

ON: 

TO: 

BY: 

DATE: 

The Challenges Facing America's Businesses under the 

Patient Protection and Affordable Care Act 

The House Energy and Commerce Committee 

Subcommittee on Oversight and Investigation 

Katie Mahoney 

Executive Director, Health Policy 

U.S. Chamber of Commerce 

June 26, 2013 

fh.,,; Chambtr'" mi%ioH is 10 

political and social system based on 

inct..'11tiyc. initiath~. oPP011unity and responsibility. 
71 


85450.024

The U.S. Chamber of Commerce is the world's largest business federation 

representing the interests of more than 3 million businesses of all sizes, sectors, 

and regions, as well as state and local chambers and industry associations. The 

Chamber is dedicated to promoting, protecting, and defending America's free 

enterprise system. 

More than 96% of Chamber member companies have fewer than 100 

employees, and many of the nation's largest companies are also active members. 

We are therefore cognizant not only of the challenges facing smaller businesses, 

but also those facing the business community at large. 

Besides representing a cross-section of the American business community 

with respect to the number of employees, major classifications of American 

business-e.g., manufacturing, retailing, services, construction, wholesalers, and 

finance--are represented. The Chamber has membership in all 50 states. 

The Chamber's international reach is substantial as well. We believe that 

global interdependence provides opportunities, not threats. In addition to the 

American Chambers of Commerce abroad, an increasing number of our members 

engage in the export and import of both goods and services and have ongoing 

investment activities. The Chamber favors strengthened international 

competitiveness and opposes artificial U.S. and foreign barriers to international 

business. 

Positions on issues are developed by Chamber members serving on 

committees, subcommittees, councils, and task forces. Nearly 1,900 business 

people participate in this process. 

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Statement on 

"The Challenges Facing America's Businesses 

Under the Patient Protection and Affordable Care Act" 

Submitted to 

THE HOUSE ENERGY AND COMMERCE COMMITTEE 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION 

By 

Katie Mahoney 

Executive Director, Health Policy 

U.S. Chamber of Commerce 

on behalf of the 

U.S. CHAMBER OF COMMERCE 

June 26, 2013 

The U.S. Chamber of Commerce would like to thank Chairman Murphy and Ranking Member 

DeGette, and other members of the subcommittee for the opportunity to participate in today's 

hearing. We appreciate this hearing's focus on the challenges facing America's businesses under 

the health reform law; it has been our focus for quite some time, dating back in fact to the 

legislative debate that began over 4 years ago. Indeed, it is critical that we understand how the 

law is affecting companies across the board -large and small - and that we do all we can to help 

business deal with the challenges. 

I am Katie Mahoney, Executive Director of Health Policy at the U.S. Chamber of Commerce. I 

have more than 13 years of health care experience in hospital and health plan operations, as well 

as health policy. At the Chamber, I am responsible for developing and advocating the 

organization's policy on health and working with members of Congress, the administration, and 

regulatory agencies to promote the Chamber's health policy. 

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The U.S. Chamber of Commerce is the world's largest business federation, representing more 

than three million businesses of every size, sector and region. More than 96 percent of the 

Chamber's members are small businesses with 100 or fewer employees, 71 percent of which 

have 10 or fewer employees. Yet, virtually all ofthe nation's largest companies are also active 

members. We are particularly cognizant of the problems of smaller businesses, as well as issues 

facing the business community at large. 

The Chamber opposed the Patient Protection and Affordable Care Act ("PPACA") during the 

legislative debate because it does very little to control the rise of unnecessary health care 

spending. Instead, the law imposes benefit mandates, requirements, taxes and penalties that not 

only will increase the cost of coverage, but will also limit the flexibility that employers and 

employees alike need to choose coverage options that they can afford. Perhaps ironically, it was 

four years ago this month that the Chamber testified before both the House Committee on Ways 

and Means and the Senate Health, Education, Labor and Pensions Committee as to our 

significant concerns on these very points. 1

•

2 

However, as we all know, the law's implementation continues. And as it does, it will be 

increasingly important to monitor and highlight whenever possible the effect the law is having on 

businesses and employees, as well as to the extent possible search for opportunities to provide 

relief. To be sure, the health care system was and continues now more than ever to be in dire 

need of reform. Our vision of reform continues to be one focused on improving the ability of all 

I "Health Reform in the 21st Century; Proposals to Reform the Health System," The House Committee on Ways and 

Means, June 24. 2009. 

2 "Roundtable Discussion - Health Care Reform Legislative Options," The Senate Health, Education, Labor and 

Pensions Committee, June 1 J. 2009. 

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Americans: to access affordable health care coverage; to receive innovative and high-quality 

care; and to realize better health. 

I would like to take this opportunity to reiterate our view that reform must not end here. While 

we continue to struggle with the implementation of the PPACA, we must also look to the future 

and strive to achieve true reform. Tomorrow, the Chamber will be releasing a report with 

proposals to advance access to affordable coverage and to improve health care value. While this 

will outline what needs to be done to improve the system, today's hearing focuses on the system 

created by the PPACA under the auspice of "reform." And that is where I will focus my 

remarks .. 

THE FACTS 

First, let's consider the facts and statistics of employer-sponsored coverage prior to the 

enactment of the PPACA: 

• Prior to the enactment of the PPACA, more than half of all Americans received health 

insurance benefits voluntarily provided by their employers. 

• The employer-based system voluntarily provided health benefits to over 178 million 

Americans. 

• Overwhelmingly, employees were satisfied with these benefits and want their employers 

to continue providing it to them. 

• Further, employers were spending over $500 billion on health benefits each year. 

Recent analyses indicate that despite the goal of the employer mandate - ostensibly to increase 

employer-sponsored coverage - the PPACA is eroding the employer-sponsored system. There 

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are several work-forc·e changes that employers are now being forced to make because of the law. 

These changes include not hiring new employees, canceling expansion plans, reducing 

employees' hours, and dropping health care coverage for their employees. In fact, when asked 

about these choices in a recent Gallup poll: 

• 41 % of small-business owners say they have held off on hiring new employees; 

• 38% have pulled back on plans to grow their business; 

• 19% have ITstuced their number of employees: 

• 18% have cut employee hours in response to the health care law; and 

• 24% have thought about eliminating healthcare coverage for their employees. 3 

In the same vein, the Chamber's Small Business Outlook Survel released in April 2013 found 

that: 

• The requirements of the health care law are now the biggest concern for small businesses, 

having bumped economic uncertainty from the top spot which it had held for the last two 

years. 

• Of small business respondents, 77% say the health care law will make coverage for their 

employees more expensive, and 71 % say the law makes it harder for them to hire more 

employees. 

• As a result of the employer mandate, 32% of small businesses plan to reduce hiring, and 

31 % will cut back hours to reduce the number of full-time employees. 

3 Gallup, HalfofSmall Business Think Health Law Bad For Them, May 10,2013, available at: 

http://,,ww.gall up,com/po 1111623 86/hal f-small-busi ness-th i nk -health-Iaw-bad,aspx. 

4 U.s, Chamber of Commerce, "Ql U,S. Chamber of Commerce Small Business Outlook Survey," April20J3, 

available at http://,,'w\\,,uschambersmallbusinessnation,com/community I q 1-20 13-small-business-survey. 

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To better understand precisely why employers are making these choices, which the Chamber and 

others forewarned about, there are still more statistics quanti tying the underlying cause: the 

increasing cost of coverage. 

• 55% of small-business owners expect the monev they pay for health care to increase.s 

• More than half of employers now feel that taxes on insurance companies and 

drug/medical devices will ultimately increase employer costs.6 

• According to a survey of 996 individuals conducted in March 2013 by the International 

Foundation of Employee Benefit Plans, most organizations estimating costs associated 

with the ACA (88.3%) expect the law will increase their organization's health care costs 

this year.7 

• The Diamond/Willis Health Care Reform Survey 2012-2013 (survey of more than 1,200 

employers): 61% of survey respondents indicate that the total impact of all health care 

reform changes has increased costs.8 

REAL-LIFE EXAMPLES 

And these are not just statistics - we are hearing this from our member companies and have been 

for the past three years. In fact, we have had nine member companies testity on how the law will 

harm their business. These businesses run the gambit in size and industry ranging from a 

company with 10 employees to one with 1,000 employees, and include restaurants, service 

companies, entertainment companies, construction suppliers and remodeling companies. 

5 Gallup, May 10,2013. 

6 Diamond Willis Health Reform Survey, 2012-2013, page 12. available at: 

http://w\\'w.willis.comJdocumentslpublicationsilndustrjeS!Healthcare!HealthCareReformSurvev 2012 2013.pdfp 

7 International Foundation of Employee Benefits Plans, 2013 Employer Sponsored Health Care: ACA's Impact, 

Survey Results, March 2013, http://op.bna.com/dlrcases.nsf/id/kpin-97vt56/$File/21 03ACAlmpactSurvev .pdf 

8 DiamondtWillis, The Health Care Reform Survey 2012-2013, February 2013, 

http://,,'xw.will is.com! documents!pub Ii cations!! ndustries!Hcalthcare/HealthCareReformSurvev 2012 2013 .pdf 

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Individuals representing Chamber member companies that have testified in the House and the 

Senate since the enactment of the PPACA include: 

1. Mary Miller, the owner of a Cincinnati based janitorial company with 320 full-time 

employees;9 

2. Arnold Baker, the owner ofa New Orleans concrete supply company with 60 

employees;]O 

3. Dan Withrow, the executive of a Kentucky pallet distribution company with 10 

employees;]] 

4. Brian Vaughn, a Georgia franchisee owner of 4 Burger King restaurants with 182 

employees;]2 

5. Phil Kennedy, the owner ofan Oklahoma lumber company with 45 employees;13 

6. Brett Parker, the executive of a bowling alley company with 6 locations in 4 states and 

538 employees;14 

7. Bill Feinberg, the owner of a kitchen and bath remodeling company in Fort Lauderdale 

with 40 employees;15 

8. Scott Womack, a Ohio IHOP franchisee owner of 12 restaurants in Ohio and Indiana and 

1,000 employees; and16 

9 "Examining the Impact ofObamaCare on Job Creators and the Economy." House Committee on Oversight & 

Government Reform, July 10, 2012. 

10 "What Would the APA DoT' The House Committee on Judiciary, October 25, 2011. 

11 "Health Refonn and Health Insurance Premiums: Empowering States to Serve Consumers, Senate Committee on 

Health, Education, Labor and Pensions, August 2. 20 II 

12 "Small Businesses and PPACA: If They Like Their Coverage, Can They Keep it?" House Committee on Small 

Business, Subcommittee on Healtheare & Technology, June 28, 2011. 

13 "True Cost ofPPACA: Effects on the Budget and Jobs," The House Committee on Energy and Commerce's 

Subcommittee on Health, March 30, 20 II. 

14 "The Pressures of Rising Costs on Employer Provided Health Care," The House Committee on Energy and 

Workforce Subcommittee on Health, Employment, Labor and Pensions, March 10, 2011. 

15 "Putting Americans Back to Work: The State of The Small Business Economy," The House Committee on Small 

Business, February 16.2011. 

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9. James Wordsworth, the owner of a Virginia restaurant with 200 employees. 17 

To be sure - as the hearings' titles suggest - these business owners know that: 

• ObamaCare will have a detrimental impact on job creators and the economy; 

• Regulations implementing PPACA are discouraging growth; 

• Health reform is increasing health insurance premiums; 

• Small businesses can't keep their coverage, even if they like it; 

• The true cost of the PPACA is having a damaging effect the budget and jobs; 

• The law is increasing the pressures of rising costs on employer provided health care; 

• The health reform law will curtail the ability to put Americans back to work and the small 

business economy; 

• The health care law is negatively impacting jobs, employers, and the economy; and 

• The small businesses consensus is that the PPACA is harmful. 

And the feedback we have heard certainly doesn't end there. My colleagues and J, both at the 

Chamber and in other employer associations, are constantly invited to talk with member 

companies, industry trade associations, and local and state chambers of commerce about the law. 

The appetite for accurate information continues to be voracious. What is perhaps most shocking 

during these speaking opportunities is the complete confusion around the country as to what the 

law will require of business. While we arrive ready to explain recent regulatory developments 

such as the affordability safe harbors and options for verifying minimum value, we find 

ourselves still explaining the basics of the law, such as what constitutes an "applicable large 

16 "Health Care Law's Impact on Jobs, Employers and the Economy," The House Committee on Ways and Means, 

January 26, 20 II. 

17 "Common Ground: Finding Consensus on Health Reform. the Small Business Perspective," The House 

Committee on Small Business, June3, 2009. 

9 
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business" and why in some states an applicable large business would be buying coverage in the 

small group market. Instead we focus on the bare basics which are still very confusing. As we 

try to explain, there are basically four scenarios that an employer could face: 

• An employer falls under the 50 full-time equivalent employee ("FTE") threshold and is 

not an applicable large employer. 

1. The employer is not required to offer coverage and doesn't. 

2. The employer is not required to offer coverage but does. Unfortunately in order 

to offer coverage, they have to now purchase a plan that complies with a myriad 

of benefit requirements that make all coverage options in the small group market 

more expensive than the modest and affordable coverage options that were 

available in the past. 

• The employer has more than 50 FTEs and has to offer coverage to all full-time 

employees and their children under 26 years of age. 

3 Employer offers affordable. minimum value coverage. 

4. Employer doesn't offer affordable, minimum value coverage. 

Despite these simple sounding scenarios - the outcome under each scenario is complicated by 

two subsequent factors: the penalty trigger and the penalty calculation. 

Trigger: The penalty for an applicable large employer is triggered when one full-time employee, 

without access to affordable, minimum value employer-sponsored coverage who is not eligible 

for Medicaid, obtains a premium tax credit and uses it to purchase coverage on the exchange. 

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Penalty Calculation: Once the trigger is tripped, the calculation determines the penalty. This is 

where we see lots of blank stares because there will be situations, where an applicable large 

employer is required to offer coverage and doesn't but is not penalized and where an applicable 

large employer is required to offer coverage and does but is penalized. There are two 

calculations that are used when the trigger is tripped which depend on the employer's decision 

on offering coverage. 

• If an applicable large employer offers coverage (any coverage, not necessarily affordable 

or minimum value coverage) to all full-time employees and dependents, and the trigger is 

tripped, the calculation is: 

o $2,000 x (total number of full-time employees minus the 30 full-time employees). 

• If an applicable large employer doesn't offer coverage to all full-time employees and 

their dependents, and the trigger is tripped, the calculation is the lesser of: 

o $3,000 x (number of full time employees receiving a premium tax credit) or 

o $2,000 x (total number of full-time employees minus the 30). 

All of this is even more complicated when you consider that the trigger requires an employee 

below 400% of federal poverty level ("FPL") to not only qualify but also use the premium tax 

credit to purchase coverage on the exchange. This may become increasingly less probable when 

the cost of coverage, even with the premium tax credit, is more than employees can afford. 

WHAT ARE WE TO DO? 

EDUCATE! 

Clearly, the importance ofthis hearing is tremendous and while we wiII continue to speak with 

businesses in Washington and around the country about the new requirements that law imposes 

on employers, we are engaging in other ways too. With a law that has regulations that when 

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stacked reach 7 feet in height to date, the law itselfis not all that you need to read to "know what 

is in it." In several critical ways, we are striving to educate our members, regulators, legislatures 

and the public. 

EDUCA TING CHAMBER MEMBERS 

First, for our members, we created a brand new website title "Health Reform Law 101" which 

has a variety of interactive resources. The website includes: 

• "Employer Mandate" - an explanation of what the employer mandate is and how it 

works - including WHO has to offer coverage, WHAT is required to avoid the penalty, 

TO WHOM coverage must be offered, OR ELSE what could happen, followed by three 

example scenarios.ls 

• "Coverage or Penalty Chart" - a charted decision tree that outlines the employer 

mandate. 19 

• "Employer Mandate Calculator" - a two-step interactive calculator where businesses can 

assess their potential penalty under the employer mandate.20 

o Step I: Helps businesses assess if they are required to offer coverage. 

• A business enters the number of part -time hours worked in a month and 

the number of full-time employees to figure out how many FTEs they 

employ. 

o Step 2: Helps a business assess if they may have to pay a penalty. 

Ifbased on the calculation in Step I, the business has more than 50 FTEs 

and is therefore an applicable large employer, the calculator begins a 

]8 https:/!"",,\\w,uschamber.com!sites/defaultJfiJeslfile attach/HealthcareEmplovceMandate One-Pager Revised.pdf 

19 https:!/W\V\\!.u~chamber.com!sites/defauIUtiles!file attach/HealthcareEmploveeMandate OncPagcr Revised.pdf 

20 http://IV\nl'.uschamber,com/health-reform/calculator 

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second step to help the business assess the potential penalty based on 

whether they offer coverage to all full-time employees and dependents 

and the number of full-time employees with household incomes between 

100-400% of FPL who are not eligible for Medicaid. 

o Clearly, it will be hard for many employers to know precisely how to answer 

each prompt on the calculator but it provides an educational resource and serves 

as a tool which businesses can use to run various scenarios and assess potential 

penalties. 

• "Added Cost Table" - a chart that highlights the new taxes and effective dates to educate 

businesses on revenues raised by various tax provisions in the PPACA.21 

• "Interactive Timeline" - a responsive tool that outlines when key provisions of the law 

will take effect and briefly describes each provision.22 

• "FAQ page" offers in depth answers and definitions to help business understand the 

nuances of the employer mandate.23 

• "Press Room and Video Pages" - provide links to Chamber publications and Chamber 

videos featuring members and chamber executives discussing health reform?4, 25 

These resources have been very well received, We have had 56,000 total views since the website 

was launched in October 2012. It is also worth noting that we have been working for nearly a 

decade now to educate our member companies on the benefits of workplace wellness programs 

and also have some material on this effort as well. 

21 http://www.uschambcr.comlhealth-reform/added-costs 

22 http://www.uschamber.comlhealth-reform/timeline 

23 http://w\\w.uschamber.com/health-reform/frequentlv-asked-questions 

24 http://\\ww.uschamber.com/hcalth-reform/press 

25 http://\\ww.uschamber.com/health-rctorm/video 

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EDUCA TING THE REGULATORS 

Second, we have been heavily involved in educating the regulators by submitting comments and 

meeting with the Administration to highlight problems with the regulations promulgated to 

implement the law. We have filed 62 comments to date in response to regulatory materials 

ranging from 8 Interim Final Rules, 3 Final Rules, 20 Requests for Comments, 21 Proposed 

Rules, I Information Collection Request, 2 Amendments to the Interim Final Rules, 6 Requests 

for Information and 1 Frequently Asked Question. It is important to mitigate implementation 

burdens at every opportunity. For example, one key point that we are focused on now is 

encouraging the Treasury to use its discretion to not "tax the tax" but exclude the portion of 

premiums collected to pay for the health insurance providers fee from gross income for reporting 

purposes.26 This important and feasible modification would save small businesses unnecessary 

premium increases of between $45-70 billion over ten years.27 

EDUCATING MEMBERS OF THE HOUSE AND SENATE 

Third, we have been educating members of the House and Senate about the impact of a number 

of provisions and are pushing for relief on several critical provisions. First and foremost, for 

business - our focus is on the employer mandate and how it will hurt employees, as well as 

employers. Particularly in this economy, employees want jobs and wages; they want to be able to 

earn a living. Instead, to avoid a penalty that will - for many - bankrupt the business, businesses 

are reducing their employee's hours and therefore overall wages. The result, employees are not 

only not receiving health care coverage, they will now in many cases be losing full-time wages. 

26 Skadden, Arps. Slate. Meagher & Flom. "Annual Fee Imposed on Health Insurance Providers under Section 90 I 0 ofthe 

Patient Protection and Affordable Care Act: Exclusion from Gross Income of Recoveries of the Fee from Policyholders." page 1. 

27 Quantria Strategies. LLC, Prepared by Mary M. Schmitt and Judy Xanthopoulos, "Effect o!'the Health Insurer Fee in the 

Affordable Care Act (ACA) on Health Insurance Premiums" June 3, 2013. 

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To rectify this, we continue to push for changes to the employer mandate and believe that 

restoring the definition of full-time employment to what was commonly accepted before 

PPACA's enactment is a critical step. 

EDUCATING THE PUBLIC 

Fourth, our efforts to educate the public are likely going to be even more important in the coming 

months as the Administration begins its PR campaign. Instead of promising free care, we need 

to have an honest discussion about what the law does and does not do. Yes, an individual will no 

longer have to pay a copayment when they see a physician for preventive services but that does 

not mean the service is free. And to say that it is, is simply dishonest. Individuals will still pay 

for these services when they purchase health insurance to cover these services and in fact - the 

premiums to pay for the health insurance to cover these services with no copayments is likely to 

be higher. Selling the law to the public instead of educating the public about the law is going to 

lead to further confusion. 

Beyond educating the public about the health reform law, we also need to have an honest 

conversation about the state of our country's entitlement programs. Medicare and Medicaid are 

on an unsustainable trajectory. Last week the Chamber began a national campaign to educate the 

public about the future of these programs face if we do nothing. Before we can even begin to 

talk about a solution, we must all recognize that there is a problem. To retort, as some did, that 

"the American people really do not want to cut benefits for Social Security, Medicaid and 

Medicare" is to further deny the problem. If the American people don't want to cut benefits, we 

need to address this problem proactively and rationally now. 

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PARTICULARLY PROBLEMATIC PROVISIONS 

While the list of problematic provisions is long, there are a number that consistently rank as the 

most dire for business. These provisions each increase the cost of coverage and limit flexibility, 

contributing to the one-size fits all vision of health care coverage under PPACA. It is like 

requiring that all car manufacturers only build and sell cars with leather seats, DVD players, GPS 

systems, sunroofs, and seat and steering wheel warmers when many people prefer more modest 

cars at a lower price. I am not sure that people fully realize that the law places specific 

requirements as to what coverage can be sold in the individual, small group and even to some 

extent the large group market. There will no longer be plans for sale that cover a more modest 

list of benefits, and have varying deductibles. Depending on whether we are talking about the 

individual, small group or large group market, many of the plans that people liked are not or will 

not be available in 2014.28 And clearly, as car-manufacturers know, the more comprehensive 

and extensive a product is, the more it will cost. Some ofthe provisions that are of particular 

concern to the business community, regardless of whether they purchase coverage in the small 

group or large group market include: 

I. Essential Health Benefits: While all plans in the individual and small group market have 

to cover the essential health benefits ("EHBs"), plans in the large group market cannot 

include annual or lifetime dollar limits on any essential health benefits. Broad 

requirements for EHBs could inhibit the strategies that employers and plans are using to 

:8 Of course in a superficial way it may be easy to blame the insurance companies for premiums increasing but it is 

important to acknowledge that these companies are having to comply with new benefit mandates and rating 

restrictions which will necessitate higher premiums. These new requirements include: no pre-existing condition 

exclusions, no annual or lifetime dollar limits on essential health benefits, no recessions, when children are covered 

on their parents' plans they must be offered coverage until the age of26, in the small group and individual markets 

plans must cover the essential health benefits. New rating restrictions prohibit plans from varying premiums: based 

on health status; beyond the age rating band of3-1; beyond prescribed geographic rating bands and beyond a 1-1.5 

variation for tobacco usc. 

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support high-value care. For example, if EHBs are interpreted to include generous 

coverage for costly services where less expensive but effective alternative treatments or 

providers exist, premiums will rise significantly. Even though this provision most 

directly affects plans in the individual and small group markets and the individuals or 

businesses that buy them, there is an increasing ripple effect on plans and businesses 

purchasing coverage in the large group market not only as they struggle with how to 

control costs when they choose to cover essential health benefits but also as the 

regulations specify how minimum value is assessed.29 

2. Deductible limits: The law limits the size of deductibles that plans in the small group 

market can impose to $2000 per individual and $4000 per family which could severely 

limit some plans offered in conjunction with health saving accounts. 

3. Out-of-pocket limitations: A uniform cap on out-of-pocket maximums potentially applies 

to all plans and will inhibit the ability of many plans with tiered networks to impose 

higher out-of-pocket costs when an individual receives treatment from a lower-quality 

provider. 

4. Health insurance providers fee: The health insurance tax, as it is commonly referred to, 

will only be passed onto consumers in the form of higher premiums according to both the 

Congressional Budget Office and the Joint Tax Committee. 

5. Transitional reinsurance fee: The transitional reinsurance fee is a fee imposed on all 

group health plans to stabilize the individual market for years 2014, 2015 and 2016. 

Regulations clarified the size of this fee would be $63 per covered life, which is 

significantly higher than many businesses anticipated when the law was enacted. 

29 The minimum value NPRM issued on May 3. 2013 indicates that several methods are available to determine 

whether a plan meets the 60% minimum value requirement: the minimum value calculator; if the plan design mirrors 

the safe harbors in terms ofdeductibles cost-sharing and out-of-pocket limits; and certification by an actuary. 

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As a Chamber board member with a 30-year-old small business recently told meWe have been providing health insurance for our 20 employees and their 

families at no cost to the employee, but our company-paid insurance 

premiums have gone up 96% over the past 4 years. I am concerned that 

the increased cost of the PPACA will require us to start passing on some 

of the cost to our employees and/or reduce other benefits like dental, 

vision, and life insurance and pay increases. I am concerned that the 

increase in essential benefits, the lowering of deductibles and out of 

pocket expenses, along with the many taxes (especially the Health 

Insurance Tax) will increase costs to a point that prevents us from 

continuing to pay the total cost of health insurance for our employees. 

Then there are the continuously nagging concerns that persist not because the law dictates 

changes but because of indications that regulators and states may choose to require certain 

changes anyway: 

I. Regulation of stop-loss: Because the law imposes many more new requirements on fullyinsured small group plans, there is speculation that some small employers may choose to 

self-insure their group plans. There have been reports that the administration plans to 

potentially regulate stop loss coverage at the federal level by establishing minimum 

attachment points, prohibiting the sale of stop-loss policies to small businesses, or regulating stop-loss policies in the same way as small-group health insurance. 

2. Challenges to ERISA pre-emption: Many states are considering legislation that would 

impose state fees, taxes, and administrative burdens on self-insured plans that have 

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historically held ERISA preemption from state mandates. This will only add additional 

confusion and costs to employer-sponsored coverage and should be prohibited. 

CONCLUSION 

Despite many promises that health reform would lead to lower premiums, improve access to 

affordable coverage and allow people to keep the plans that they have if they like them, we are 

continuing to learn the true ramifications of the law. While many predictions of how the law 

would work have not been met, we must all move forward - business, the regulators, members of 

Congress and the public to do what we can to mitigate the harm. Clearly. the law and the 

implementing regulations are very complicated regardless of whether you supported or opposed 

the law. What we must do is engage in an honest discussion to educate our country about the 

law and take every opportunity - regulatory, legislative, and educational- to reduce 

administrative burdens, preserve flexibility, and reduce premium increases. To that end we urge 

the regulators to adopt a compliance assistance approach as opposed to strict enforcement. We 

urge Congress to pass legislation that would restore common business standards for the 

definition of a full-time employee. We urge the public to be inquisitive and cautious as they 

assess the information available to understand the law. We urge business to continue to innovate 

and work within the confines of the laws to develop and offer coverage options that serve their 

employees. 

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89 

Mr. MURPHY. Ms. Neblett, you are recognized for 5 minutes. 

TESTIMONY OF MICHELLE R. NEBLETT 

Ms. NEBLETT. Chairman Murphy, Ranking Member DeGette, 

members of the Subcommittee on Oversight and Investigations of 

the House Energy and Commerce Committee, thank you for the opportunity to testify before you today regarding the challenges restaurant and food service operators are facing in implementing the 

2010 healthcare law. 

My name is Michelle Neblett. I’m the director of labor and workforce policy for the National Restaurant Association. We are the 

leading trade association for the restaurant and food service industry, which is comprised of 980,000 restaurant and food service outlets employing 13.1 million people, who serve 130 million guests 

daily. Our industry employs about 10 percent of the U.S. workforce, 

and restaurants are employers of choice for many looking for flexible work schedules. As a result, we employ a high proportion of 

part-time and seasonal workers. Much of our workforce could also 

be considered young invincibles, as 43 percent of the employees are 

under age 26. 

The National Restaurant Association is active in helping our operators understand the requirements of the healthcare law. We 

have conducted numerous Webinars and countless educational sessions in partnership with our State restaurant associations and as 

part of our annual trade shows. We have detailed, written materials, and through our Health Care Knowledge Center Web site, we 

are trying to provide a one-stop place where an operator can go to 

understand the law’s requirements. 

In my role I have traveled around the country conducting these 

educational sessions and answering operators’ questions as they 

work through how to comply with the law. What I have learned is 

that this is one of the most challenging requirements placed on the 

restaurant and food service industry that any can recall, and it is 

clear that the law cannot stand as it is today. 

While the restaurant association has worked since enactment to 

constructively shape the regulations, legislative action is needed as 

there are limits to what can be done through the regulatory process. 

With a little more than 3 months until open enrollment begins 

October 1st in the exchanges, an employee notification about those 

exchanges by employers must go out as well. The time for restaurant and food service operators to comply is now. The overarching challenge our members face with this law is to first understand its complexity and interwoven requirements. 

By far the definition of ‘‘full-time employee’’ under the law possess the greatest challenge for my industry. The statute defines 

‘‘full time’’ as an average of 30 hours a week in any given month. 

This is not based on existing law or traditional business practices. 

Certainly restaurant and food service operators, like many businesses, have traditionally used a 40-hour workweek. 

One of the attractive benefits of working in our industry is the 

flexibility to adjust one’s hours to suit their own needs. However, 

for the first time, under the law, the Federal Government has 

drawn a bright line as to who is part-time and who is full-time. As 

90 

a result, employers with variable-hour workforces and flexible 

scheduling must be deliberate about scheduling hours, because 

there is now a greater financial impact with potential liability for 

employer penalties if employees who do work full-time hours are 

not offered coverage. If the definition is not changed to align better 

with workforce patterns, there is concern that the flexibility so 

many employees value in our industry will no longer be widely 

available, and structural changes to our labor markets could occur. 

The applicable large employer determination is also too complex 

and stifles small employers’ ability to manage their workforces, 

plan to expand their businesses, and prepare to offer coverage. The 

automatic enrollment provision is a concern that could cause financial hardship for some employees and greater confusion as well, 

without increasing access to coverage. 

Finally, these challenges clearly demonstrate a need for broader 

transition relief without threat of penalty or subsidy recapture for 

good-faith compliance by both employers and employees. We believe it is appropriate to provide time for employers to make plan 

and system changes and for employees to understand their options 

under the law. 

In conclusion, thank you again for the opportunity to testify before you today regarding the challenges restaurant and food service 

operators face as they implement the law. The National Restaurant 

Association is dedicated to providing restaurant and food service 

operators with the information they need to face these challenges 

and to make the best possible decisions they can for their employees and their businesses. 

Thank you. 

Mr. MURPHY. Thank you. 

[The prepared statement of Ms. Neblett follows:] 

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HEARING: CHALLENGES FACING AMERICA'S BUSINESSES UNDER THE PATIENT 

PROTECTION AND AFFORDABLE CARE ACT 

BEFORE: SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

El'<13RGY & COMMERCE COMMITTEE 

U.S. HOUSE OF REPRESENTATIVES 

By: MICHELLE R. NEBLETT 

DATE: 

DIRECTOR, LABOR & WORKFORCE POLICY 

NATIONAL RESTAURANT ASSOCIATION 

JUNE 26,2013 
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Statement for the hearing 

"Challenges Facing America's Bnsinesses Under the Patient Protection and 

Affordable Care Act" 

Before the 

Snbcommittee on Oversight & Investigations, 

Energy & Commerce Committee, 

U.S. House of Representatives 

By 

Michelle R. Neblett 

Director, Labor & Workforce Policy 

On behalf of the 

National Restaurant Association 

June 26, 2013 

Chairman Murphy, Ranking Member DeGette, and members of the Subcommittee on 

Oversight & Investigations of the House Energy & Commerce Committee, thank you for this 

opportunity to testify before you today regarding the challenges restaurant and foodservice 

operators are facing in implementing the 2010 health care law. 

My name is Michelle Neblett and I am the Director of Labor & Workforce Policy at the 

National Restaurant Association. The National Restaurant Association is the leading trade 

association for the restaurant and foodservice industry. Its mission is to help its members 

establish customer loyalty, build rewarding careers, and achieve financial success. The industry 

is comprised of 980,000 restaurant and foodservice outlets employing 13.1 million people who 

serve 130 million guests daily. Restaurants are job creators. Despite being an industry of 

predominately small businesses, the restaurant industry is the nation's second-largest privatesector employer, employing about ten percent of the U.S. workforce.! 

In my role with the Association I am responsible for health care policy, but also to help 

educate the industry about the law and the implementing regulations. Since the law's enactment, 

I have traveled throughout the country to explain employers' responsibilities under the law and 

help our members understand the impact it will have on their employees and businesses. 

I 2013 Restaurant Industry Forecast. 
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What I have learned is that this is one of the most challenging requirements placed on the 

restaurant and food service industry and it is clear that the law cannot stand as it is today, While 

the National Restaurant Association has worked since enactment to constructively shape the 

regulations, legislative action is needed as there are limits to what can be done through the 

regulatory process, With a little more than three months until open enrollment begins October 1

st 

on the exchanges, and employee notification about the exchanges by employers, the time for 

restaurant and foodservice operators to get ready to comply is here, 

The overarching challenge our members face in complying with the law is to first 

understand the complicated and interwoven requirements of the law, By far, the definition of 

full-time employee under the law poses the greatest challenge as it does not reflect current 

workforce practices and could have a detrimental impact on a restaurant operator's ability to 

continue to offer flexible schedules for some employees, The applicable large employer 

determination is too complex and stifles smaller employers' ability to manage their workforces, 

plan to expand their businesses and prepare to offer health care coverage, The automatic 

enrollment provision could cause financial hardship and greater confusion about the law for 

some employees, without increasing their access to coverage, Finally, transition relief without 

threat of penalty or subsidy recapture is needed for good faith compliance by employers and 

employees to provide time for employers to make plan and systems changes, and employees to 

understand their options. 

COMPLYING WITH THE HEALTH CARE LAW IS CHALLENGING FOR RESTAURANT AND 

FOODSERVICE OPERATORS GIVEN THE UNIQUE CHARACTERISTICS OF THE INDUSTRY 

Since the law was enacted in 2010, we have been taking steps to educate the restaurant 

and foodservice industry about the requirements of the law and the details of the Federal 

agencies' guidance and regulations. We have conducted numerous webinars, educational 

sessions in partnership with our state restaurant associations and during our annual trade show 

this past May, as well as detailed written materials. Through our Health Care Knowledge 

Center website, we are trying to provide a one-stop place an operator can go to understand the 

law's requirements. All these efforts are done to help operators breakdown the complex law as it 

is not easy to understand how the implementing rules from the three departments interconnect 

and relate to one another. 

The unique characteristics of our workforce create compliance challenges for restaurant 

and foodservice operators within this law. As a result, many of the determinations employers 

must make to figure out how the law impacts them - for example the applicable large employer 

calculation - are much more complicated for restaurants than for other businesses who have 

more stable workforces with less turnover. 

Restaurants are employers of choice for many looking for flexible work schedules and 

the ability to pick up extra shifts as available. As a result, we employ a high proportion of parttime and seasonal employees. We are also an industry of small businesses with more than seven 

out of ten eating and drinking establishments being single-unit operators. Much of our 

workforce could be considered "young invincibles," as 43 percent of employees are under age 26 
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in the industry.2 In addition, the business model of the restaurant industry produces relatively 

low profit margins of only four to six percent before taxes, with labor costs being one of the most 

significant line items for a restaurant? 

Business owners crave certainty and one of the most difficult things to predict about the 

impact of this law are the choices employees will make. Will they accept restaurant operators' 

offers of minimum essential coverage more than they do today? Will exchange coverage be less 

expensive than what our operators can afford to offer under the law? Will our young workforce 

choose to pay the individual mandate tax penalty instead of accepting the employer's offer of 

coverage in 2014,2015 and beyond? Future take-up rate of coverage is very hard to predict 

given many new factors, but could mean a significant increase in the costs restaurant and 

foodservice operators must take on when offering coverage. 

All of these factors combine to complicate what a restaurant and foodservice operator 

must consider when implementing the necessary changes in their business to comply with the 

law. Below we walk through some of the challenges of the law in the order restaurant and 

foodservice operators would as they figure out how the law impacts their employees and their 

business. 

ApPLICABLE LARGE EMPLOYER DETERMINATION 

The statute lays out a very specific calculation that must be used by employers to 

determine if they are an applicable large employer and hence subject to the Shared 

Responsibility for Employers and Employer Reporting provisions. Because of the structure of 

many restaurant companies, determining who the employer is may not be as easy as it would 

seem. 

Aggregation rules in the law require employers to apply the long standing Common 

Control Clause4 in the Internal Revenue Code (Tax Code) to determine if they are considered 

one or multiple employers for the purposes of the health care law. While these rules have been 

part of the Tax Code for many years, this is the first time many restaurateurs, especially smaller 

operators, have had to understand how these complicated regulations apply to their businesses. 

The Treasury Department has not issued, nor to our knowledge, plans to issue, guidance to help 

smaller operators understand how these rules apply to them. Restaurant and food service 

operators must hire a tax advisor to determine how the complicated rules and regulations 

associated with this section of the Tax Code apply to their particular situation. It is common that 

business partners of one restaurant company own multiple restaurant companies with other 

partners. These restaurateurs consider each operation to be separate small businesses, but 

because there is common ownership, under the rules many are discovering that all the businesses 

can be considered as one employer for purposes of the health care law. 

2 Bureau of Labor Statistics, U.S. Department of Labor. 

3 2013 Restaurant Industrv Forecast. 

4 Internal Revenue Code, §4l4 (b),(c),(m),(o). 
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Once a restaurant or food service operator detennines what entities are considered one 

employer, they must detennine their applicable large employer status annually, For larger 

employers, it is clear that they have more than 50 full-time equivalent employees employed on 

business days in a calendar year, However, given we are an industry of small businesses and that 

restaurants are labor intensive and require many employees to operate successfully, many small 

businesses will have to complete this calculation annually to detennine their responsibilities 

under the law, 

As you might imagine, operators on the bubble of 50 full-time equivalent employees are 

trying to understand what they must do to complete this complicated calculation each year, 

Generally, an employer must consider the hours of service of each of their employees in all 12 

calendar months each year, However, the Treasury Department has allowed for transition relief 

in 2013 for businesses to use as short as 6 months to do this calculation, The Treasury 

Department recognized the fact that small businesses, who may not currently offer health 

coverage, will need time to determine their status and then negotiate a plan with an insurance 

carrier, However, there remain questions about the process in later years when January through 

December must be considered for status beginning the following January 1", Will small 

employers just reaching the applicable large employer threshold find that they determine they are 

large on December 3 I, 20 I 4, for example, and must offer coverage a day later on January I, 

2015? Rules are needed to clarify when such employers must offer coverage in future years. 

The applicable large employer detennination is complicated. Employers must detennine 

all employees' hours of service each caleudar month, calculate the number of FTEs per month, 

and finally average each month over a full calendar year to determine the employer's status for 

the following year. The calculation is as follows: 

1. An employer must first look at the number of full-time employees employed each 

calendar month, defined as 30 hours a week on average or 130 hours of service per 

calendar month. 

2. The employer must then consider the hours of service for all other employees, 

including part-time and seasonal, counting no more than 120 hours of service per 

person, The hours of service for all others are aggregated for that calendar month and 

divided by 120. 

3. This second step is added to the number of full-time employees for a total full-time 

equivalent employee calculation for one calendar month. 
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4. An employer must complete the same calculation for the remaining 11 calendar 

months and average the number over 12 calendar months to determine their status for 

the following calendar year. 

This annual detennination is administratively burdensome and costly, especially for those 

employers just above or below the 50 FTE threshold who must most closely monitor their status 

- most likely smaller businesses. Many restaurant operators rely on third-party vendors to 

develop technology or solutions to help them comply with these types of requirements but 

vendors are backlogged and solutions are not easily accessible at this time. 

OFFERING COVERAGE TO FULL-TIME EMPLOYEES 

The health care law requires employers subject to the Shared Responsibility for 

Employers provision to offer a certain level of coverage to their full-time employees and their 

dependents, or face potential penalties. The statute arbitrarily defines full-time as an average of 

30 hours a week in any given month. This 30-hour threshold is not based on existing laws or 

traditional business practices. In fact, the Fair Labor Standards Act does not even define fulltime employment. It simply requires employers to pay overtime when nonexempt employees 

work more than a 40-hour workweek. As a result, 40 hours a week is generally considered fulltime in many U.S. industries. Certainly in the restaurant and foodservice industry, operators 

have traditionally used a 40-hour definition of full-time. Adopting such a definition in this law 

would also provide employers the flexibility to comply with the law in a way that best fits their 

workforce and business models. 

Compliance based on a 30-hour a week definition is further complicated by the fact that 

sometimes it is difficult to know who the full-time employees are in a restaurant or foodservice 

setting. For restaurant and foodservice operators who are applicable large employers, it is not 

easy to predict which hourly staff might work 30 hours a week on average and which will not. 

During the peak seasons, hourly employees can be scheduled for more hours as customer traffic 

increases, but then reduced as business slows. One of the attractive benefits of our industry is 

the flexibility to change your hours to suit your own personal needs. However, for the first time 

under this law, thc federal government has drawn a bright line as to who is full-time and who is 

part-time. As a result, employers with variable workforces and flexible scheduling must be 

deliberate about scheduling hours because there is now a greater financial impact with potential 

liability for employer penalties if employees who work full-time hours are not offered coverage. 

If the definition is not changed to align better with workforce patterns, there is concern that the 

flexibility so many employees value will no longer be as widely available in the industry and 

structural changes to our labor market will occur. 

The industry appreciates that the Treasury Department has recognized that it may be 

difficult for applicable large employers to detennine employee's status as full-time or part-time 

on a monthly basis, causing churn between employer coverage and the exchange or other 

programs. Such coverage instability is not in the employee's best interest and so the restaurant 

and foodservice industry is pleased that the Lookback Measurement Method is an option that 

applicable large employers may use. 
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While the Lookback Measurement Method's implementing rules are complex it could be 

helpful for both employers and employees, Employers will be better able to predict costs and 

accurately offer coverage to employees they are required to do so. Employees whose hours 

fluctuate (variable hour and seasonal employees) have the peace of mind of knowing that if their 

hours do decrease form one month to the next, coverage will not be cut short before the end of 

their stability period. 

CHALLENGES FOR ApPLICABLE LARGE EMPLOYERS OFFERING COVERAGE TO THEIR FULLTIME EMPLOYEES AND THEIR DEPENDENTS 

Once an applicable large employer has determined to whom coverage must be offered, he 

must make sure that the coverage is of 60 percent minimum value and considered affordable to 

the employee, or he may face potential employer penalties. 

Minimum value is generally understood to be a 60 percent actuarial test; a measure of the 

richness of the plan's offered benefits. This is a critical test for employers especially as it relates 

to what an employer's group health plan covers and hence what the premium cost will be in 

2014. As I mentioned before, business owners like certainty, and that means the ability to plan 

for their future costs. Employers are eager to know what their premium costs will be under the 

new law. Minimum value is key to determining that information. 

On February 25, 2013 the Health and Human Services Department did include the 

Minimum Value Calculator, one of the acceptable methods to determine a plan's value, in its 

Final Rule, Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation. 

Minimum value can now be determined using this calculator or other options, but still it is 

difficult to anticipate premium costs so far in advance. Data is not usually available until a few 

months before the employer's plan year begins. This gives operators a short timeframe within 

which to budget and make business decisions in advance of the new plan year. 

Employers must also ensure at least one of their plans is affordable to their full-time 

employees or face potential penalties. A full-time employee's contribution toward the cost of the 

premium for single-only coverage cannot be more than 9.5 percent of their household income, or 

else the coverage is considered unaffordable. Employers do not know household income, nor do 

they want to know this information for privacy reasons. However, employers needed a way to be 

able to estimate before a plan is offered if it will be affordable to employees. What employers do 

know are the wages they pay their employees. Almost always, employees' wages will be a 

stricter test than household income. Employers are willing to accept a stricter test in the form of 

wages so that they know they are complying with the law and are provided protection from 

penalty under a safe harbor. The Treasury Department will allow employers to use one of three 

Affordability Safe Harbors based on Form W -2 wages, Rate of Payor Federal Poverty Line. We 

believe that the option of utilizing these methods will be helpful to employers as they determine 

at what level to set contribution rates and their ability to continue to offer coverage to their 

employees. 
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The law speaks to affordability for employees but is silent regarding whether the 

coverage required to comply with the Shared Responsibility for Employers section of the law is 

affordable to employers, As restaurant and foodservice operators implement this law, 

considering all of the interlocking provisions, some will be faced with difficult business 

decisions between offering coverage which they cannot afford with a finite dollar for benefits, 

and paying a penalty an option they do not want to take, but is equally unaffordable to them as 

well, We encourage policymakers to address the cost of coverage so that the employersponsored system of health care coverage will be maintained, 

AUTOMATIC ENROLLMENT REQUIREMENT 

Applicable large employers who employ 200 or more full-time employees are also 

subject to the Automatic Enrollment provision of the law, This duplicative mandate requires 

these employers to enroll new and current full-time employees in their lowest cost plan ifthe 

employees have not opted-out of the coverage. This provision also interacts with the prohibition 

on waiting periods longer than days and effectively means that on the 91 sl day, employers must 

enroll a new full-time hire in their lowest cost plan if they do not tell their employer that they do 

not want to be enrolled. Employee premium contributions will begin to be collected and the 

industry is concerned that it could cause financial hardship and greater confusion about the law, 

especially amongst our young employees. Since 43 percent of restaurant employees are under 

age 26 and more likely to be moving from job to job or eligible for enrollment in parents' plans, 

many are likely to inadvertently miss opt-out deadlines and will be automatically enrolled in 

their employer's health plan causing significant, unexpected financial hardship. 

Automatically enrolling an employee and then shortly thereafter removing them from the 

plan when the employee opts-out only increases costs unnecessarily without increasing our 

employee's access to coverage as the law intended. Since the health care law's employer shared 

responsibility provision already subjects large employers to potential penalties if they fail to 

offer affordable health care coverage to full-time employees and their dependents, the autoenrollment mandate is redundant. It adds a layer of bureaucracy and burdens businesses without 

increasing employees' access to coverage. 

Some compare automatically enrolling employees in health benefit plans to automatically 

enrolling them in a 401(k) plan, but this isn't a good parallel, The financial contribution 

associated with health benefits can be much larger, for example: 9.5 percent of household 

income toward the cost of the premium for employees of large employers versus an average 3 

percent automatic 401(k) contribution.s The financial burden on employees of automatic 

enrollment in health benefit plans would be much greater than that of 401 (k) plans. Additionally, 

401(k) rules allow employees to access their contributions when they opt-out of automatic 

enrollment; however health benefit premium contributions cannot be retrieved. 

5 "Disparities in Automatic Enrollment Availability," Bureau of Labor Statistics, August 2010. 
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Restaurateurs will educate their employees about how this provision impacts them, but if 

an employee misses the 90-day opt-out deadline, a premium contribution is a significant amount 

of money, which can be a financial burden, Since the same full-time employees must be offered 

coverage by the same employers subject to the Automatic Enrollment provision and the Shared 

Responsibility for Employer provisions, we believe the automatic provision is unnecessary and 

should be eliminated, 

Congressmen Richard Hudson and Robert Pittenger have introduced H.R. 1254, the 

Auto Enroll Repeal Act. Enactment of this measure would eliminate this requirement that could 

hurt both employees and employers, 

NONDISCRIMINATION RULES Now WILL ApPLY TO FULLy-INSURED PLANS 

The health care law applies the nondiscrimination rule that self-funded plans cannot offer 

benefits in favor of their highly-compensated individuals now to fully-insured plans. This rule is 

not in effect as the Treasury Department has put implementation on hold until further guidance 

has been issued in this complex area, Under the law, these rules apply to all insured plans, 

regardless of where they are offered by an applicable large employer or a small business, The 

restaurant and foodservice industry is watching this rule closely as it could impact what future 

plan offerings and compliance with the law, 

Current group health plan participation rules often forces operators to carve out the group 

of employees who will participate in the plan, In our members' experience, these are almost 

always a group that would be considered in the top 25 percent based on compensation, 

However, management carve-outs are not just for upper level executives who may 

receive richer benefit plans than the rest of the employees, In the restaurant and foodservice 

industry, management-only plans are sometimes the only option that operators have to provide 

health care coverage to those employees who want to buy it and pass participation requirements 

at the same time, As a result, these plans are quite common in the industry, 

The rules the Treasury Department writes to apply non-discrimination testing to fullyinsured plans could have an impact on our industry, Regardless of how they are written, 

restaurant and foodservice operators will need sufficient transition time to apply these rules as it 

could create upheaval for plans and employers alike, 

ApPLICABLE LARGE EMPI"OYER REPORTING REQUIREMENTS 

A key area of implementation that employers have received no guidance on are the 

employer reporting requirements: the required information reporting under Tax Code §6055 and 

§6056 from the Internal Revenue Service and the Treasury Department. These employer 

reporting requirements are a key link in the chain of the law's implementation, They represent a 

what could be a significant employer administrative burden, 
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Of particular concern is the flow of information and the timing of reporting employers 

must make to multiple levels and layers of government. Streamlining employer reporting will 

help ease employer administrative burden and simplify the process, The information provided 

by employers under Internal Revenue Code §6055 and §6056 is critical in this process and can 

be used by the Treasury Department to verify if an individual had an offer of affordable 

minimum essential coverage of minimum value from an applicable large employer. The 

information provided by employers must be compared by the Internal Revenue Service to verify 

eligibility determinations made by the Exchanges for premium tax credits or cost-sharing 

reductions, The information can also be used to determine employer penalty liability, The 

restaurant and foodservice industry, along with other employer groups, have advocated for a 

single, annual reporting process by employers to the Treasury Department each January 31 st that 

would provide prospective general plan information and wage information for the affordability 

safe harbors, as well as retrospective reporting as required by Tax Code §6056 on individual fulltime employees and their dependents, 

We are anxious for guidance to be issued as employers cannot just flip a switch and 

produce the detailed information reports required by the statute, It will take time for employers 

to set up systems, or contract with vendors, to track and maintain the data needed to comply with 

the law. I recently spent time with our industry group of chief financial officers and tax directors 

and spoke with them about the detailed information they will have to track and report on all fulltime employees and dependents. The reporting will include not only the employees who remain 

with the restaurant for the entire year, but even our seasonal staff and others who may only stay 

for a couple of months. Health plan benefit information as well as individualized payrollsourced information may be required to be merged to produce the report needed under the law. 

Regardless, it is sure to be a large amount of data, and hard to know based just on the statute, 

how programmers or our vendors should set up internal systems now to be able to accurately 

track this information. Compliance with these requirements, once we see the final rule, will take 

time to plan, budget, and execute, even within the most sophisticated systems. 

TRANSITION RELIEF 

Until the January 2, 2013 Federal Register publication of the Treasury Department's 

Proposed Rule regarding the Shared Responsibility for Employers provision, employers did not 

have any firm rules on which they could plan and make business decisions. Up until this time, 

proposals and guidance had been issued with numerous opportunities for public comment, but 

nothing had the weight of regulation. This proposed rule, while not finalized, does provide 

employers assurances that the rules proposed can be relied upon until further rules are issued. 

Within this proposed rule, the Treasury Department provided targeted transition relief. While 

appreciated, we believe that further transition relief is critical. 

The timeframe for compliance is short and getting shorter, and safe harbor protections for 

good-faith compliance by employers in the law's early phases is necessary. Employers are still 

missing essential pieces of guidance and regulation necessary to construct their systems, make 

plan design changes and communicate with their employees. Under the threat of tax penalties 

for not getting this exactly right the first time, some employers may opt-out of offering coverage 
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to their employees and choose to pay the penalties instead. This is not what the restaurant and 

foodservice industry wants, but it may be a result of employers having to make difficult 

decisions under very uncertain conditions. The process should not discourage employers and 

employees from participating in the new system and so a good-faith compliance standard is 

appropriate. As with implementation of any law this size, it will take some time for the hiccups 

in the processes to be worked out and employers and employees should be allowed adequate 

time to come into compliance and understand all their options. 

CONCLUSION 

Since enactment of the law, the National Restaurant Association has worked to 

constructively shape the implementing regulations of the health care law. Nevertheless, there are 

limits to what can be achieved through the regulatory process alone. Ultimately, the law cannot 

stand as it is today given the challenges restaurant and foodservice operators face in 

implementing it. 

Broader transition relief is needed for employers and employees attempting to comply 

with the law in good-faith as time is short to make the significant changes required by the law 

and understand options. Key definitions in the law must be changed: The law should more 

accurately reflect the general business practice of 40 hours a week as full-time employment. The 

applicable large employer determination must be more workable. The duplicative automatic 

enrollment provision should be eliminated as it could unnecessarily confuse and financially harm 

employees. 

The National Restaurant Association looks forward to working with this subcommittee 

and all of Congress on these and other important issues to improve health care for our 

employees. We continue our active participation in the regulatory process to ensure the 

implementing rules consider our industry workforce's unique characteristics. 

Thank you again for this opportunity to testify today regarding the challenges restaurant 

and foodservice operators face as they implement the law. Uncertainty and fear of the unknown 

is prevalent but the National Restaurant Association is working to provide our industry clear, 

accurate information to understand the requirements of the law and regulations. 
102 

Mr. MURPHY. Mr. Trautwein, you are recognized for 5 minutes. 

TESTIMONY OF E. NEIL TRAUTWEIN 

Mr. TRAUTWEIN. Thank you, Chairman Murphy, Ranking Member DeGette and honored members of the committee. I appreciate 

the opportunity to appear before you today to discuss the challenges of ACA implementation and how we in the business community, particularly retailers, are reacting to those challenges. 

My name is Neil Trautwein, and I’m a vice president with the 

National Retail Federation. NRF is the voice of the retail industry 

worldwide, everybody from the very largest to the very smallest, 

and everybody in between. Our membership also includes chain 

restaurants and online retailers. 

We figure our members support everybody from stores to supply 

chain, one in four jobs in the American economy today. So it’s particularly important that the transition moves smoothly. 

We continue to have concerns about the ACA, but we’re also 

working very hard to help educate our members on what’s coming, 

when, where and how. We’ve worked hard and productively with 

the administration to help address and smooth wherever possible 

particular provisions in ACA implementation. Yet we still remain 

worried by fast-approaching deadlines for implementation. Our Nation can’t afford to have the ACA stumble out of the gates as it 

makes its debut. 

We’ve been closely engaged in the regulatory process ever since 

the ACA was signed into law, probably after the—before the ink 

dried on it. We’ve met numerous times with the regulators, and 

we’ve submitted numerous written comments. 

For retails, our part-time and variable-hour employees are a particular challenge for us. Some may become full-time and move on 

to long-term careers in retail. Others value the great flexibility that 

part-time work provides. Many of the most useful regulatory approaches that have been developed to deal with these problems, 

such as the look-back/stability period, in turn breed additional complexity and are a challenge to implement. 

One very significant challenge is the 30-hour rule for full-time 

coverage. As my colleagues have said, most of us have long assumed that 40 hours, consistent with Federal overtime rules, is a 

normal full-time workweek. A 30-hour definition forces retail employers to manage to a new standard. The requirement to provide 

an equal period of stable coverage to the look-back adds to the 

stakes, complexity and anxiety employers have over this provision, 

who will be forced to fine-tune our workforce and adjust the balance between full-time and part-time in order to meet the new realities. 

This is time, effort and money spent on compliance rather than 

on retail or chain restaurant sales. 

For variable-hour employees who don’t reach that standard, as 

my colleagues have said, it means less money in their pockets. 

We strongly support the efforts that have been commented on to 

redefine full-time work at 40 hours as is traditional. We respectfully ask that this and other steps to address the shortcomings of 

the ACA be addressed before it becomes fully effective. Later on 

103 

may be too late to really make a difference in the amount of change 

coming. 

We respectfully don’t agree with those who either argue full implementation or full repeal are the only options. We think we need 

to move ahead on specific changes. We have responsibilities in the 

here and now, and our members have responsibilities to their employees, their stores, shareholders and communities. We’ll bend 

every effort we can to mitigate the impact of the ACA on the retail 

and chain restaurant industries. 

We also urge Congress to consider an outright delay in the provisions in order to allow businesses to spool up and create the systems they will need to manage these requirements. Alternatively, 

Congress could consider a soft rollout and more compliance-oriented in order to help them move through this. 

Again, I greatly appreciate the opportunity to appear before you 

today. We urge you to be wary of the pace of ACA implementation. 

This could have the effect of freezing employers and forcing them 

away from providing coverage. At a minimum it’s going to pressure 

our ability to continue to provide coverage. We hope to work with 

you to mitigate those harmful effects. 

Thank you. 

Mr. MURPHY. Thank you. 

[The prepared statement of Mr. Trautwein follows:] 

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85450.053

National Retail Federation Testimony 

Hearing on 

Challenges Facing America's Businesses Under the 

Patient Protection and Affordable Care Act 

Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

Liberty Place 

325 7th Street NW, Suite 1100 

Washington, DC 20004 

800.NREHOW2 (800.673.4692) 

202.783.7971 fax 202.737.2849 

www.nrf.com 

United States House of Representatives 

June 26, 2013 

E. Neil Trautwein 

Vice President and 

Employee Benefits Policy Counsel 
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85450.054

Chainnan Murphy, Ranking Member DeGette and honored members of the Committee, good 

morning. I thank you for the opportunity to appear before you today and to share our views 

regarding the Patient Protection and Affordable Care Act (also known as the ACA) and the 

challenges facing American businesses as they prepare to implement changes pursuant to the 

ACA. My name is Neil Trautwein and I am a vice president and the Employee Benefits Policy 

Counsel with the National Retail Federation (NRF). 

As the world's largest retail trade association and the voice of retail worldwide, NRF represents 

retailers of all types and sizes, including chain restaurants and industry partners, from the United 

States and more than 45 countries abroad. Retailers operate more than 3.6 million U.S. 

establishments that support one in four U.S. jobs - 42 million working Americans. Contributing 

$2.5 trillion to annual GDP, retail is a daily barometer for the nation's economy. NRF's This is 

Retail campaign highlights the industry's opportunities for life-long careers, how retailers 

strengthen communities, and the critical role that retail plays in driving innovation. www.nrf.com 

NRF continues to have concerns about the ACA, though we have worked hard to help educate 

our members on their future obligations and opportunities. We have also worked hard with the 

Administration to smooth implementation wherever possible. We still remain greatly worried by 

the fast-approaching deadlines for key issues affecting coverage in every market, especially in 

light of the torrent of regulations released to date from the Administration. Our nationparticularly employers - cannot afford for the ACA to stumble out of the starting gate. We fear 

that as time diminishes between now and January 2014, a cascade of additional last minute 

regulations will create added confusion and thus could encourage more employers to back out of 

coverage. 

NRF and ACA Implementation 

NRF has been closely engaged in the regulatory process ever since the ACA was signed into law. 

We have met numerous times with regulators and have submitted written comments on key 

concerns. We have assisted in submitting joint coalition comments as well. We have not been 

litigants against the ACA and also did not submit amicus comments in the ACA case before the 

Supreme Court. 

We credit the regulatory agencies] for working hard and cooperatively to implement the complex 

ACA, a difficult task by any measure. The Administration early on focused on OUf industries 

because of the variable nature of retail and chain restaurant employment. Many retail and 

restaurant employees do not fit neatly into full and part-time categories and compliance with the 

unprecedented levels of change under the ACA will be particularly challenging. Our members 

are not enjoying the challenge of compliance. 

Part-time and variable hour employees are a particular challenge. This segment of the retail and 

chain restaurant workforce tends to be more mobile and may work for multiple establishments. 

Some may become full-time and move on to long-tenn careers in retail; others value the greater 

flexibility of part-time work. Some of our most productive employees are part-time and would 

not have it any other way. 

1 Departments of Health and Human Services, Labor and Treasury. 
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Retail and restaurant jobs are not just found behind cash registers; our industries present a wide 

array of career opportunities. Rewarding professional careers can be found in retail in such areas 

as design, loss prevention, real estate and human resources, among many others. Retail and 

chain restaurant human resources officials are quite understandably busy with ACA 

implementation these days, but they are far from alone in their focus. In the past two weeks, I 

have also spoken to different member groups of chief financial officers and corporate general 

counsel. The myriad challenges of ACA implementation are foremost in their minds. 

Many of the regulatory approaches developed in response to the challenges of the retail and 

chain restaurant workforce - such as the "look-back/stability period" have in tum bred 

additional complexity. One truly significant challenge is ACA's definition of "full-time" for 

coverage eligibility at 30 hours per week on average. 

Most of us have long assumed full-time mark to be 40 hours, consistent with federal overtime 

rules. A 30-hour definition forces retail employers to manage to a new standard: whether or not 

an employee is above or below the 30-hour level on average during the look-back period. The 

requirement to provide a consequently newly eligible employee stable coverage for a period of 

time equal to the look-back period, regardless ofthe employee's present eligibility, adds to the 

stakes and retailer concerns. 

Retail and chain restaurants will be forced to fine tune the balance between full and part-time, 

focusing on employee status on a real-time basis. This is time, effort and money spent on 

compliance rather than retail or chain restaurant sales. For variable hour employees who do not 

meet the new full-time standard, this will mean less income in their pockets and consequently 

less likelihood of obtaining coverage on their own. 

NRF strongly supports efforts to redefine full-time coverage eligibility at 40 hours per week, 

hopefully with flexibility for employers to define a lower standard, if they so desire. We 

respectfully urge that this and other steps to help soften the impact on employers be taken before 

the ACA is fully implemented. Later may be too late. 

We have little patience for those who argue that either full implementation of the ACA or full 

repeal of the law are the only alternative options. This is not an academic or political question to 

us. We have responsibilities here and now to our employees, stores, shareholders and 

communities. We will bend every effort to help mitigate the adverse impact of the ACA on the 

retail and chain restaurant industries. Our members would not long remain our members were 

we to do otherwise. 

Affordable Care Act and Employers 

Change is coming to employer-sponsored health plans at a torrential pace. NRF has worked hard 

to help our members understand what their options and future responsibilities will be through 

various webinars, presentations and web-based materials. I spend a good bit of time speaking to 

diverse retail and other employer audiences as well. 
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The learning curve among retailers and chain restaurants is steep and still growing: in effect, 

compliance is a higher degree of difficulty for our members because of our unique workforce. 

Key regulatory questions are as of yet unanswered, even at this very late date. 

We continue to urge Congress and the Administration to consider an outright delay of up to one 

year in implementation of the employer requirements to help facilitate a smoother transition and 

less disruption of existing coverage. Alternatively, you might consider a soft roll out with 

emphasis on compliance assistance rather than regulatory adherence and penalty enforcement. 

Any relief-particularly relief that supports employer-based coverage will be welcome. 

NRF, Allied Coalitions and tbe Affordable Care Act 

NRF has actively encouraged the fair and effective implementation of the ACA (as it is current 

law) despite our continued opposition to the law itself. We see no inconsistency between the two 

positions; we owe it to our members to help make the law as workable as possible. We stand 

ready to assist any effort to improve upon implementation of the ACA. 

We are engaged in a number of allied coalition efforts on ACA implementation. For example, 

NRF chairs the Essential Health Benefits Coalition2 (EHBC) and participates in the leadership of 

the Coalition for Choice and Competition3 (CCC) and Employers for Flexibility in Health Care 

(EFHC). The number of coalitions addressing aspects of ACA implementation has grown so 

much as to require a degree of coordination between them. NRF established and chairs the 

Employers' Health Care Clearinghouse, which meets on a monthly basis to do just that. 

These coalitions are deeply substantive and deal with specific ACA implementation concerns. 

They also have served a useful role in developing and coordinating views and comments among 

allied employer interests. 

Conclusion 

Again, NRF greatly appreciates the opportunity to appear before you today. Given the 

complexity of requirements under the ACA, we urge this Committee and Congress to consider 

delaying full implementation. We urge you to be on guard against the pace of ACA 

implementation and the consequent potential to drive employers away from providing coverage. 

Retailers and other employers can and should be powerful advocates for positive change. But, in 

most cases, health care and health benefits are not our stock in trade or business. It is in our best 

interest to keep our employees healthy and at work, but not at any cost. The ACA will - at a 

minimum - pressure our ability to continue to provide coverage and help drive positive change. 

We hope to work with you to help mitigate these effects. NRF stands ready to help the 

Administration and Congress make the ACA more workable, so long as it remains the law ofthis 

land. 

2 www.ehbcoalition.org 

3 www.choiceandcompetitioncoalition.org 
108 

Mr. MURPHY. I thank all the panelists. I’ll start off by asking 

questions for 5 minutes. 

Just for the record, Mr. Daley, I appreciate your testimony. You 

made reference to an article that actually a number of Members 

have been talking about, and that is something from Health Affairs, I think May of this year, which was doing some analysis of 

healthcare costs and them declining and flattening out. I call attention to a couple of the articles. 

Kaiser Family Foundation did a study, and it said that that some 

of the leveling off of health care costs actually began in 2002. The 

New England Journal of Medicine article from last summer said 

that the leveling off has been going on since 2005. And the Health 

Affairs article made references to a couple of parts. One is the job 

loss and economy. That’s a fraction of the leveling off; am I correct? 

That’s a fraction, but not the whole explanation for leveling off of 

healthcare costs and some declines? 

Mr. DALEY. Actually—I’m uncertain I can be heard, but actually 

the article pointed to the recession as a considerable contributor to 

leveling off. However, not only that article, but another, both found 

that there were structural changes in the healthcare system itself 

long term, and that would, in fact, reduce the growth of costs. 

Mr. MURPHY. Yes. I just want to go on the record as saying 

those—what they refer to in that—articles in Health Affairs was 

the out-of-pocket costs for employees have gone up, and then it 

says it has shifted from the employers to the employees. And that’s 

been a significant part of the impact as well, as well as I think the 

article also referenced a reduction of rate of new technology. 

I just wanted to make sure we had that fact on the record for 

Members to note that these articles are not referencing the Affordable Care Act as making this more affordable. They’re saying the 

structural things you said. No, we don’t have big technologies introduced, the economy has been down, and employers are basically 

shifting costs to employees. Some employees are seeking the health 

care less. 

But let me go on to a couple other things for Ms. Mahoney, Ms. 

Neblett and Mr. Trautwein. What do you hear from business owners about the burden of complying with the healthcare law in terms 

of the time requirements and their costs of just compliance? 

Ms. Mahoney, what do you hear there? 

Ms. MAHONEY. I think some are savvy, and they say, wow, I’m 

really overwhelmed with what all I’m going to have to do to comply. I’m talking to my broker, I’m looking at what the reporting 

limits are going to be, it’s a lot. Others are, I think, just really 

shell-shocked. 

I mean, it’s really remarkable when we travel the country, I 

know my colleagues do as well, to speak with small businesses that 

really have no understanding of the kind of basic function of the 

law and what all it will require, and sort of their brilliant ideas 

about how to circumvent it, whether it’s letting their spouse or 

their child take a bigger portion of ownership. And we all appreciate that there are laws of common control and aggregation that 

are going to be very confusing to kind of navigate with regard to 

those possible solutions. 

109 

So I think it depends on what segment of the employer community you’re talking about, what segment of the country, not only 

just size, but industry. 

Mr. MURPHY. Let me move on. 

Ms. Neblett, what are you hearing? 

Ms. NEBLETT. Yes. I think our operators are small businesses, 

midsized businesses, large businesses, and so we have a range of 

operators that we’re talking to. And some have H.R. departments, 

and have the benefit of benefit consultants and attorneys and others to help them. 

We’re talking to a lot of those smaller operators, those right on 

the bubble of 50 FTEs, when we go out and speak a lot, those just 

over that threshold, and the complexity is, one, to get over and 

then dive into the details, because the details really do matter in 

this. 

Mr. MURPHY. Mr. Trautwein, I only have a minute left. 

Mr. TRAUTWEIN. I share the same experience. I’ve been very surprised by the—by how much of an all-hands effort it is for larger 

companies, everybody from H.R., who you would expect, but also finance, legal, information technology and on down the line. But 

when you go down that chain, it gets to be a lot more frustration, 

and these are the same people we’re trying to help educate. 

Mr. MURPHY. Let me ask this: My assumption is you’re going 

around the country trying to explain the healthcare bill, and none 

of you are undermining the healthcare bill and saying, here is how 

you get away from it; am I correct? 

All the panelists say yes. 

So you’re out actually teaching the people how to comply with 

the bill; is that correct? 

Ms. NEBLETT. That’s correct. 

Ms. MAHONEY. Yes. 

Mr. MURPHY. Now, given that, do they have enough information 

on how to comply, and is it working? Quickly. 

Ms. MAHONEY. No. And I think my biggest concern is that the 

effort to educate will turn more into a campaign style of selling. I 

know this is a very controversial issue, but—or law, but to sell, for 

example, preventive services as free care, I think, is—— 

Mr. MURPHY. So it’s an issue that it just has to do with how this 

is sold or how this is pitched, or fundamental in the law itself there 

are flaws that are difficult for them to comply with? Real quick. 

Mr. TRAUTWEIN. I think the Achilles heel of the law is its complexity, and we heard differences on applicable size and number of 

hours on the first panel. It’s a tough law to understand. 

Mr. MURPHY. Thank you. 

Ms. NEBLETT. I think it’s complex, but there are also some very 

specific challenges, especially from my industry and industries like 

mine, that it makes it particularly difficult. 

Mr. MURPHY. We appreciate getting the details from you then. 

I yield now to Ms. DeGette for 5 minutes. 

Ms. DEGETTE. Thank you, Mr. Chairman. 

I want to start out by thanking the three people over here, Ms. 

Mahoney, Ms. Neblett and Mr. Trautwein, because even though all 

three of your organizations oppose this legislation, you are all 

110 

working assiduously to try to implement it in an appropriate way 

for your members, and I really appreciate that. 

The other thing I would wish is that my colleagues on the other 

side of the aisle, I’ve been saying this for a long time, let’s put bygones be bygones. This bill is here now. We’ve had 37 votes to repeal it, and it’s not going away. So what I think we should do, and 

I know the chairman agrees with me on this, I think we should be 

really working on ways to make it work better for small businesses 

and for everybody, because the ultimate goal is to give high-quality 

health insurance to all Americans. 

And we heard this last panel of small business people. Some of 

them I know don’t agree with me. They all said they want to offer 

insurance to their employees, and I would think that would be true 

of all of your members, that they all want to be able to do that. 

Mr. Daley, is that correct? Yes or no. 

Mr. DALEY. Ours, absolutely. 

Ms. DEGETTE. Ms. Mahoney? 

Ms. MAHONEY. Yes. 

Ms. DEGETTE. Ms. Neblett? 

Ms. NEBLETT. Yes. 

Ms. DEGETTE. And Mr. Trautwein? 

Mr. TRAUTWEIN. Yes. 

Ms. DEGETTE. And all of you are bringing suggestions to the 

table that I think we need to look at, because I don’t—we’re still 

trying to revise Medicare, and it was passed in 1964. So definitely 

we should be working on that. And like your 40-hour suggestion 

that you’re making and other suggestions, I think we should sit 

down and talk about that instead of sitting here and quoting things 

that were said when the bill was passed on both sides of the aisle. 

And, Ms. Mahoney, you’re nodding your head, so I assume you 

would agree with that. 

Ms. MAHONEY. I would agree. I think one point I would make is 

the need for flexibility. 

Ms. DEGETTE. Yes. And this kind of goes to the other point you 

made, which I like, which is—and this goes on both sides of the 

coin, too—is we should be educating people, not trying to sell this. 

And that’s true. You know, we shouldn’t be having commercials 

saying, this is great for everybody, and it’s free. And we shouldn’t 

be having commercials saying, this is terrible, and don’t do it. And 

I agree with that. 

And the other thing I agree with that all four of you said is as 

I go in my district and around Colorado, there is a lot of confusion 

about what the Affordable Care Act is. So I welcome your—I got 

the names of your Web sites, and I welcome your participation and 

your partnership in trying to explain to people, small businesses in 

particular, what this does. And there is so much misinformation 

out there. 

I do want to ask a couple of questions. 

Mr. Daley, I think I already asked this, but your sense would be 

that small businesses really do want to offer their employees insurance; is that correct? 

Mr. DALEY. I think that’s a surveyed and universal almost, they 

want to. 

111 

Ms. DEGETTE. They want to, but yet over the last number of 

years, small businesses have been really the hardest hit by great 

increases in insurance prices and also less ability to get affordable 

plans for their employees; is that right? 

Mr. DALEY. Absolutely. The markets have been adversely selected, there is tremendous cost, and it’s very difficult—— 

Ms. DEGETTE. And part of what happened for small employers, 

this was in your testimony, they had to pay 18 percent more than 

large insurers for complete coverage; is that right? 

Mr. DALEY. That is correct. 

Ms. DEGETTE. And a lot of those plans, people were thrown out 

if they had preexisting conditions, or if they hit the caps, or issues 

like that; isn’t that correct? 

Mr. DALEY. That’s why many of them don’t buy, because the 

quality of the insurance isn’t very good. 

Ms. DEGETTE. You know, I had mentioned before I did this this 

little town hall meeting with some small businesses in Denver last 

Friday, and there was a small company, and the woman said, my 

husband and I own this company, and we have a child with severe 

handicaps. She said, it doesn’t pay for my employees to go into my 

insurance plan because it would cost so much for them. 

I’m sure that happens a lot with small business; is that right? 

Mr. DALEY. We just had a personnel person had a stroke, and everybody’s premium went up $1,000. 

Ms. DEGETTE. Everybody’s premium went up. 

Now, one last thing, and I hope all of you know this, several people mentioned we don’t want a one-size-fits-all, and I agree with 

that. But under the Affordable Care Act, just within the exchanges 

we have several different levels of plans, and we also have catastrophic plans for younger workers that would help with Ms. 

Neblett’s employees. So, in fact, we have a variety of options, it’s 

not that everybody has to have one plan; is that right? 

Mr. DALEY. That’s correct. 

Ms. DEGETTE. But what we do is we make it so there’s a minimum level of coverage so if somebody gets sick, they actually have 

insurance that they can use; is that right? 

Mr. DALEY. I think you need to be clear that there are standards 

pegged to employer responsibility, that there are certain levels of 

offering that need to be made. There are different offerings in the 

exchanges that are available. 

Ms. DEGETTE. Thank you very much. And thanks again to all of 

you for coming. I look forward to working with you as we sort this 

all out. 

Mr. MURPHY. I now recognize the gentleman from Texas Mr. 

Olson 5 minutes. 

Mr. OLSON. I thank the chair. 

And welcome to the second panel. A special thanks to you, Ms. 

Mahoney, for the help the local Chambers have done back home in 

Texas 22. They’ve given me access to your member organizations, 

and I go there and listen to them. I appreciate that. And I get the 

challenges they’re facing in Texas 22. 

And many of these businesses are restaurants. So I need to 

thank you, Ms. Neblett, for all the hard work you’ve done at the 

National Restaurant Association. 

112 

As you know, Texans love to eat out. And when I want to get a 

pulse on an issue, I go get some barbecue, some Tex-Mex, go to a 

burger joint, a steakhouse, Chinese food place, Indian food place 

and get a full belly and a full mind. So thank you, thank you, 

thank you. 

My questions will focus on Obamacare’s prosperity-threatening 

definition of 30 hours of work as a full-time workweek. 

Almost a year ago, I toured a steakhouse in Pearland, Texas. It 

was heartbreaking. Owners painfully telling their employees in the 

future they’d be limited to 30 hours—less than 30 hours, 29 hours, 

the 29ers, per week. Many of these kids—and they were kids working part time, full time, 40 hours a week and going to school. They 

were single moms raising a son or a daughter, who did not have 

the flexibility to find another job. They need to have the job they 

had for 40 or more hours. 

And my questions are for all four of you; first with you, Ms. 

Neblett. Since this train wreck is coming, it sounds like you really 

have no information to advise your membership. If you do have information, please tell me what you’re advising. If not, what do we 

need to give you so your members can make informed decisions 

about the future? 

Ms. NEBLETT. Thank you. 

We help explain and lay out the law’s requirements for our members, explain the regulations. And, as Neil mentioned, the lookback/stability period is very helpful, although still complex to implement for those variable-hour and seasonal employees when a 

large employer is offering coverage. 

But I think we need a one-stop place for information about the 

law. I think that would be very helpful from the Federal Government’s perspective. And I think we really need to take a close look 

at this definition, because it is having potential impacts on the employees in terms of hours and wages. 

Mr. OLSON. Mr. Trautwein? 

Mr. TRAUTWEIN. We’re engaging in similar efforts talking about 

different options. If you look at the law, there’s a neon sign saying 

that it’s cheaper to pay a penalty than to provide coverage if you’re 

in that applicable large-employer size. But there are other options, 

and the last panel talked about some of the newer things, and 

strategies of satisfying the A penalty, but not the B penalty, and 

all this is contrary and foreign to the process of running a retail 

or chain restaurant store. And that’s part of the problem and part 

of the frustration in the employer community. 

Mr. OLSON. Mr. Daley. 

Mr. DALEY. I need to point out that the Towers Watson, which 

is a huge H.R. firm across the river in Virginia, did a survey of employers about the 30 hours and found that almost none of them 

plan to change the way they treat their employees. There are reasons for that. It’s difficult administratively to mess around with 

more employees in order to bring your workforce down under that 

30-hour lid. It offends your employees if you make them 29 rather 

than when they were 35. And again, keep in mind, as I said in my 

testimony, the category that this affects is around 1 percent of the 

entire U.S. workforce. 

113 

Mr. OLSON. Yes, sir. One further comment. I have a little bit of 

time here. Some of my colleagues on the other side of the aisle 

have been saying we’re just after this because it’s politics. It’s not 

politics. This 30-hour provision needs to be fixed. It’s a big problem 

in your businesses, and we’re trying to fix it, and that’s why we’re 

having this hearing. 

And one other thing we talked about, Mr. Trautwein. You 

brought up talking about so-called large businesses. Every business 

I’ve talked to back home has more than 50 employees, every single 

one that provides health care now likes that, they get better employees, they keep them longer, and they want to give them health 

care. But they have to compete, and one of the competitors drops 

out and goes in the exchanges, they will do it. Everyone has told 

me that. So they won’t be able to keep their health care. That was 

a false promise. 

I yield back. Thank you. 

Mr. MURPHY. Thank you. 

Mr. Long is recognized for 5 minutes. 

Mr. LONG. Thank you, Mr. Chairman, and thank you to the 

panel taking your time to be here today. I know our first panel ran 

over a little longer than what we all anticipated, but thank you all 

for being patient and being here. 

And as we have heard here today, the impact of this legislation 

known as the Affordable Care Act will have a major and often 

harmful impact on businesses small and large across our Nation. 

One particular company based out of my district, which is a Fortune 500 company—this is a Fortune 500 company that started 

with one little store, one dream in a guy’s mind that he could start 

a business back in the 1960s. So he opened his first store. Fortune 

500 company. Now they employ 56,000 employees in retail stores 

across the United States. 

And they have a desire to continue offering affordable healthcare 

plans like they’ve been offering for all these years to their employees, to their workforce. Unfortunately, after making the calculations, the total impact of the law on its benefit package, the company estimates that full implementation of the Affordable Care Act 

will ultimately increase their annual net cost 120 percent, or $100 

million. And what the CEO has told me from his lips to my ears 

is that it’s going to be worse coverage, not as good a coverage as 

what they have now, and it’s going to cost 120 percent more. 

In order to address these dramatic new costs, the company has 

already announced to its part-time employees they will no longer 

be offered the coverage that they currently receive. Additionally, 

they’re exploring ways to reduce their number of full-time employees by moving them to part-time work, the 29ers as we call them 

today. 

Mr. Trautwein, I have a question for you that I would like to direct you. Are your member businesses similar to this company experiencing the same difficult decisions? 

Mr. TRAUTWEIN. The short answer is they vary greatly in terms 

of their approach, but it’s at least part of the decisionmaking process and the balance, and fine tuning that balance between full time 

and part time. And, again, they would much rather be making 

114 

sales or doing other business-related activities, and they don’t want 

to be thinking about these things. 

Mr. LONG. Do you find it pretty widespread across the country—— 

Mr. TRAUTWEIN. I think it is. 

Mr. LONG [continuing]. With the companies? 

And I just want to say for the record—is the ranking member 

gone? 

Mr. MURPHY. She is here in absentia. 

Mr. LONG. OK. I was hoping we had at least one person on the 

other side to hear this, but there’s this constant—and my friend 

Jan Schakowsky often says she hears this constant drumbeat from 

our side of the aisle about repeal and replace Obamacare. 

There are good things about Obamacare. When I ran the first 

time for Congress, it had just passed. It was all out there in the 

media. Everyone knew health care needed to be tackled, needed to 

be handled, needed to be changed. And there are good things about 

Obamacare. I’m willing to admit that. There’s the allowing kids to 

stay on their parents’ plan until they’re 26, preexisting conditions. 

Insurance providers used to be risk takers, and over the years they 

kind of became risk averters. So there are good things, and I’m 

willing to admit that. 

I would hope that the other side of the aisle, when we’re trying 

to work through these things to help companies, help individuals 

to get good, affordable health care and keep the insurance that 

they have, would come across and admit there are some bad things 

about the Affordable Care Act so we can all get together, instead 

of we get in these meeting after meeting, hearing after hearing 

where they sing the praises that everything is coming up roses on 

Obamacare. And it’s simply not true. 

Now, not everything is disastrous about Obamacare. That’s not 

true either. There are some good parts of it. But I would wish that 

we could work together, and I wish I had someone to talk to on the 

other side of the aisle, but apparently they have other things to do, 

bigger fish to fry, I guess I could say. 

But anyway that is just kind of my statement going forward trying to resolve these problems, because there are good and bad 

things about it, and we need to come to that realization instead of 

just coming in on one side saying everything’s coming up roses, and 

the other side saying that everything’s going to heck in a 

handbasket. 

So, again, I just want to thank you all for being here today, and 

I yield back. 

Mr. MURPHY. The gentleman yields back. 

I now go to Mr. Griffith from Virginia for 5 minutes. 

Mr. GRIFFITH. Thank you all very much for being here today. 

And I saw most of you were here listening to the testimony of the 

previous panel, and I do appreciate that. 

Ms. Neblett, one of the concerns that I have and have had with 

Obamacare is that a number of the restaurants in my area, particularly the fast-food restaurants, indicated when I was first elected—and I was elected the same time Mr. Long was, 2 years and 

a piece ago now—they indicated that if there weren’t some relief 

from this act, that their marginal stores would have to close down. 

115 

And I have noticed over the course of the last 2-and-a-piece years 

that some of these restaurants have, in fact, closed down in my district. 

Now, the economy not being good, and the fact that apparently 

our position in this country in my district, which is a coal district, 

which is adverse to coal, at least according to the President, that 

has not helped matters any. But have you all seen a trend where 

some of the more marginal stores are closing down because they 

don’t want to have to deal with Obamacare in the first place? 

Ms. NEBLETT. I think it’s very hard to pinpoint exactly why, as 

you said, the economy has been slow, and businesses that are on 

the margin have—will always tend to go out of business. But 

there’s no doubt that this is a complex law. It does add a lot of time 

in terms of trying to figure out what you need to do, and costs in 

terms of either the penalties or offering coverage is a big factor, 

and these are all things that operators are trying to figure out and 

deal with. 

Mr. GRIFFITH. And here is—one of the concerns that I have is 

that I believe this bill is all built with pieces interconnecting. And 

so one of the difficulties I think we have in trying to work out some 

interesting compromises—and we’ve talked about the 29ers, and a 

lot of folks are saying, well, let’s just move it back up to where it 

was at 40 hours a week. The problem is I believe that—and I 

wasn’t here when it was passed, but I believe that the reason that 

they lowered it down to the 29 was they felt they’d get more people 

actually buying in. They had the Medicaid expansion component. 

Then they had the component of we’re going to lower that, you 

have to cover folks down if they’re working the 30 hours, because 

they needed to pick up those employees between 30 and 40 hours 

to make the numbers work on how many people were going to be 

pulled in the system, how many people were going to be insured, 

and, of course, the bigger the pool, the less expensive the insurance. 

So my fear is we raised that number up to 40, we solved that 

problem, but then we’ve made the overall cost of Obamacare greater because we have not—we don’t have that group invested in 

doing—that 29-to-30 group invested in being a part of the program. 

So I have some real concerns there, and I’m wondering if any of 

your members and, Ms. Mahoney and Ms. Neblett particularly, if 

any of your members have expressed those concerns as well. 

Ms. MAHONEY. Our members haven’t expressed that concern. I 

think for them their focus is on how their businesses are run—— 

Mr. GRIFFITH. They’re drowning, and they’re looking for anything 

they can grab onto. 

Ms. MAHONEY. Well, how their businesses have run historically, 

how they can continue to keep their businesses going in a way 

that’s best for their employees, and this is a big wrench in that 

piece. I don’t think they’re aware of kind of the economic matrix 

that may have gone on to the funding of it and who gets in and 

who gets out. I think they’re just working—— 

Mr. GRIFFITH. And I think that’s where it’s a problem for us to 

come in and try to tweak it here or tweak it there, and everybody 

keeps saying, well, why don’t you all just try to fix it? I believe that 

the way it was constructed is such that if you pull out any major 

116 

piece, the whole house of cards collapses. And it may have already 

happened with the fact that there’s not the forced Medicaid expansion, which was a part of the program to make sure that everybody, you know, was going to be brought into the system one way 

or the other. 

And so I have some real concerns with trying to do piecemeal 

fixes when you pull a piece here, and it unravels something else 

over here. And I think if we try to fix it, we’re going to spend years 

trying to repair what I believe is a structurally flawed from the 

very beginning concept that will not work. And I do appreciate that 

you all are just looking for solutions because you have lots of businesses that are in trouble and that are going to have to lay off people. 

And I would make this one last point. I’ve got about 30 seconds 

left. While the people who were only working 29 hours may only 

be 1 percent of the workforce now, I suspect that it’s going to be 

a lot larger come this time next year, because when you have the 

entire Commonwealth of Virginia saying we’re not—the State of 

Virginia says we’re not going to have part-time workers at any 

more than 29 hours, when you look at the counties in my district 

that are looking at the same kind of policy, when you look at the 

grocery stores and the fast-food places and the other businesses 

across the country that are looking at sending people down to 29 

because of the huge cost savings if they only work 29 hours, I think 

you’re going to see that that’s a lot more than 1 percent, Mr. Daley. 

And I yield back. 

Mr. LONG. Will the gentleman yield just a second? 

Mr. GRIFFITH. Well, I’m out of time. I don’t have a second to 

yield, but by unanimous consent I’d be happy to—— 

Ms. DEGETTE. No. I object. 

Mr. MURPHY. We’re out of time at this point. 

Ms. DEGETTE. Oh, if you want to apologize that’s OK. That’s fine. 

Mr. MURPHY. Do you want to say something. Mr. Long? 

Mr. LONG. Pardon? 

Mr. MURPHY. Did you have a quick comment to make, Mr. Long? 

Mr. LONG. Yes, if I could. 

When I prepared my line of questioning, the ranking member 

was in the room, and I’m sure if you watch the video, you will see 

I turned around to speak to her, and she was not there. And might 

I offer her my apology if my comments came off as being smart alec 

or whatever. They did not intend to be. I did not intend to turn and 

see until I turned around, and I was surprised you weren’t there. 

And I really think that we need to work together as Republicans 

and Democrats. And like I said in my comments, and I understand 

you were with your art student, which I’m going to meet mine after 

a while, which is a great program, and I apologize to you. I don’t 

know if you’ll accept it or not, but it’s a harsh call—— 

Ms. DEGETTE. I’m always happy to accept an apology. I appreciate it. And what I’m trying to do here is the same thing you’re 

trying to do, which is to solve a problem. And we can’t do it if we’re 

going to, A, demagogue this issue, or, B, attacking each other. 

Mr. LONG. Right. And that was my whole point not for it to end 

like it did when I was trying to be helpful, and I apologize. 

117 

Ms. DEGETTE. And I’m happy that you recognize that, and I accept your apology. 

Mr. MURPHY. Thank you. I appreciate you all for tuning into Dr. 

Murphy’s group therapy session. Stay tuned tomorrow for more 

good comments on how we can work together. 

Ms. DEGETTE. Mr. Chairman, I just have one final comment, 

which is very brief and aside from the fact that we do hope we can 

work together on all of these issues. 

Ms. Neblett said that small businesses need one resource to go 

to to figure out answers to the questions and to bust some of these 

myths. I would suggest that you put on your Web site 

healthcare.gov. That is the central Web site that the HHS has put 

up. And then we’ll continue to work with you on trying to get this 

message out better all around the country. 

Thank you, Mr. Chairman. 

Mr. MURPHY. Thank you. 

I thank all the panelists here today. I thank the Members. And 

I ask unanimous consent that the written opening statements of 

other Members be introduced in the record. So without objection, 

the documents will be entered in the record. 

And, again, I want to thank all of the panelists from both panels 

here and all the Members who participated in today’s hearing. I remind Members they have 10 business days to submit questions for 

the record, and I ask that all the witnesses also agree to respond 

promptly to any of the questions. 

And with that, I adjourn this hearing. Thank you. 

[Whereupon, at 1:05 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

118 


85450.057

Mr. Michael Bre)' 

Q\vncr 

lIobbyWorks 

354 Domer Avenue 

LaurcL MD 20707 

Dear Mr. Brey: 

ONE HUNDRED THIRTEENTH CONGHESS 

COMMITIEE ON ENERGY AND COMMERCE 

.Iuly 12,2013 

Th~mk you Subcommittee on Oversight and Investigations on 

'Wednesday, June 26~ to testify at the bearing entitled "Challenges Facing America~s Businesses 

Under the Patient Protection and Affordable Care Act." 

Pursuant to the Rules of the Comm-ittee on Energy and Commerce, the hearing record remains 

open for tell husiness days to penni! Members to submit additional questions for the record) which are 

attached. The format of your responses to these questions should be as follows: (1) the name of the 

Member whose question you are addressing. (2) the complete text of the question you are addressing in 

boldt and (3) your ansv,-'cr to that question in plain text. 

To facilitate the printing of the hearing record, please respond to these questions by the c1o::.c of 

business on Friday, July 26, 2013. Your responses should be e~mai1ed to the Legislative Clerk in \Vord 

format at htittanv.havens@m4.U.hous£.:Z.,qJ: and mailed to Brittany Havens, Lcgblativc Clcrk~ Committee 

0n Energy and Commerce. 21:25 Rayburn House Office Building, Washing1on; D.C. 20515, 

Thank you again for your time and effort preparing and delivering testimony bethre the 

Subcommittee. 

Sint'crc!y, 

Chairrnan 

TimMUl'~ Subcommittee on OYersight and Investigations 

cc: Diana DeGeHe. Ranking Member. Subcommiuee on Oversight and Investigations 

Allacnmcllt 
119 


85450.058

Attachment - Additional Questions for the Record 

The Honorable Time Murphy 

1. How many employees do you have? 

a. Hobby Works has 50 employees. 

2. What kind of insurance do you currently offer? Will that insurance be 

available for your employees in 2014? 

a. We currently offer three plans through CareFirst: 

i. BLUE CHOICE $30/40, $1,000 IP Copay RX: $100 Ded. 

$15/25/50 

ii. CAREFIRST BLUE CHOICE HSA $1,200 Ded., $20/$30 Copay, 

$250 IP Copay RX: Combined Ded. with Medical $0/25/45 

iii. CAREFlRST HMO HSA CORE $2,700 Ded. $30 Copay $1,000 

IP Copay 100% RX: Combined Ded. with Medical 75%" 

3. What percentage of that insnrance do you cover the cost for? Do you cover 

the whole family? 

a. We offer a flat $ contribution for Single and Family, so the percentage 

varies slightly. As costs have risen our contribution percentage has 

declined (from nearly 100% ) over time. Currently the contribution is 

about 36%. 

b. I am not sure I understand exactly what you mean by the "Do you cover 

the whole family?" question. We do offer Spouse, Child, and Family 

coverages. Family plans have a higher $ contribution from the company 

to help offset the significantly higher plan cost. 

4. What is the average salary/wage of your employees? 

a. Managers average $44,0 I 9/yr in base salary, not including the company's 

contribution to health insurance. 

b. Hourly rates vary from $7.25/hr to $14.00/hr. The weighted average for 

hourly Associates is $9.18Ihr, not including the company's contribution 

to health insurance. 

5. You wrote in your testimony that 96 percent of businesses have fewer than 50 

employees, and of those over 96 percent already offer insurance. What is the 

source ofthis data? 

a. There are several sources for this data, I used data available from the 

White House, the SBA and Kaiser Foundation. Here are some links to online sources for that information: 

i. 

ii. 
120 


85450.059

6. Do you have plans to expand above 50 employees? 

a. Yes. We plan to open two additional locations in the next 18 months, 

which would put us well over 50 employees. 

7. How many of your employees currently purchase the insurauce you offer? 

How many do not purchase it? 

a. Ten (10) eligible Associates purchase the insurance we offer, two (2) do 

not. 
121 


85450.060

Me JclTKcl1y 

CEO 

Hamill Manuf:1cturing Company 

500 Pleasant Vallev Road 

Trafford, PA 15085 

Dear Mr. Kelly: 

July 12.2013 

Thank you before the Subcommittee on Oversight and Investigations on 

\\lcdncsday, June 26, testify at the hearing entitled "ChaHengcs Facing America's Businesses 

Under the Patient Protection and Affbrdahle Care AcC' 

Pursuant to the Rules of the Committee on Ene.r&.')' and Commerce, the hearing record remains 

open tbr ten business days to pennit Members to :mhmit additional questions for the record, which are 

attached. The format of your responses to these questions. should be as follows: (1) the name of the 

Member whose question you arc addressing. (2) the complete text of the question you are addressing in 

hold. and (3) your answer to that question in plain text. 

To facilitate the printing of the hearing r(~c0rd. please respond to these qUCS(!(lllS by the close of 

business on Friday. July 26. 201,3. Your responses should be e-maiJed to the Legislative Clerk in Word 

fixmat at hrittany,haven£tlm!§iLhQJlS~X and mailed to Brittany 1 Ia\'ens~ Legislative Clerk, Committee 

on Energy and Commerce, 2125 Raybum House Otlice Building, \Vashingtoll 1 D,C. 20515. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee, 

Sincerely, 

Chainmm 

TimMurphY~ \.r 0- Subcommittee on Oversight and Invesligations 

cc: Diana DcGettc. Ranking Member, Subcommittee on Oversight and Investigations 

AttadllTIcnt 
122 


85450.061

Mr. Jeff Kelly 

CEO 

Hamill Manufacturing Company 

Response to Questions for the Record from June 26, 2013 Hearing 

"Challenges Facing America's Businesses Under the Patient Protection and 

Affordable Care Act." 

1. What changes do you believe would be the most helpful so your business can continue 

to hire workers and expand? 

On the question of what recommendations I would have to reign in the cost of health care and 

health insurance: 

1. Defund Obamacare. The uncertainty that has been created in the marketplace about what 

the law will truly cost is driving up premiums to astronomical levels in some areas of the 

country. 

2. Make a serious attempt to reduce the amount of defensive medicine that is being 

practiced by enacting tort reform that would put caps on malpractice cases. For trial 

lawyers, our health care system has become a goldmine. 

3. Allow companies and associations to shop for insurance coverage across state lines. We 

need more competition in the market. 

4. Break up the health provider oligopolies that are forming. For example in SWPa, UPMC 

owns most of the hospitals and doctors' practices which has greatly reduced competition. 

5. Challenge the non-profit status of many big health care providers. Again using UPMC as 

an example, look at the money they spend on marketing, executive compensation among 

other non-essential expenditures. I'm guessing that 10-15% of health care costs could be 

wrung out of their expenditures in those two areas alone. 

6. If Obamacare is not defunded, then insure that Congress (including the staff)and all 

federal employees have to participate in whatever programs the law mandates. This alone 

would cause the law to be abrogated very quickly. 

2. You testified that since 2010 your health care premiums have risen 46 percent-have 

you had any discussions with your insurance broker or agent about why this is the 

case? 

On the matter of our 46% increase in costs and 42% increase in premiums, this was the insurance 

company's explanation: 

1. In 2012 our claims exceeded the premiums paid. 
123 


85450.062

My counter argument is that was not the case in other years we were insured by the carrier. 

When we had a "good" year in terms of claims, we never saw a reduction in the premium 

offered. 

2. The insurer looked at emerging claims and made a subjective judgment about what the 

premium level should be. 

Those claims may never have reached the level of expense expected when they were actually 

paid. For example we had a dependent of an employee go through a stem cell transplant to fight 

cancer (she subsequently died). The bill was actually paid by Medicare. I believe the insurance 

company counted that as an expected claim when formulating the premiums to be charged to 

Hamill in the subsequent year. 

3. The insurance company explained that there was a large inflation factor placed on the 

expected claims for the following year 

I expect that based on the health care cost curves that is pretty standard practice. 

2 
124 


85450.063

CHAinMAN 

COMMITTEE ON ENERGY AND COMMERCE 

Mr. Hugh J\4nrrow_ Jr. 

President 

Ruby Falls, LtC 

J 720 South Scenic f·lighway 

Chattanooga. TN 37;109 

Dcar Mr. !v1orrow: 

July 12, 2013 

rhank you before the SubcOrnHtittee on Oversight and Investigations on 

\Vcdnesday, June 26. to testify at the hearing entitled <'Challt'ngcs facing America':; Businesses 

Under the Patient Protection and Affordable Care Act:-

Pursuant to the Rules of the Committee (m Energy and Commerce. the hearing record remains 

open fortcl1 busines.s days to permit iv1embcl's to submit additional questions for the record, which are 

attached. The format OfYOUf responses to these questions should be as follows: {I) the name of the 

Member whose question you arc addrcssillg, (2) the complcti;.~ text of tht' question you are addr('ssing in 

bold. and (3) your answer to that question in plain text. 

To facilitate the priming of the hearing record, please respond to these questions by the close of 

business on Friday. July 26, 2013. Your responses should be e-Illailed to the Legislative Clerk in \Vord 

format at briWJJ1Yotm:y.5.m.si!-vmaiLhQusc,gov and l11ailed to Brittany Havens, Legislative Clerk, Committeeon En('rgy and Commerce, 2125 Rayburn House Office Building. Washington, D.C. 20515. 

Thank you again for your time und effort preparing and delivering testimony before the 

Subcommittee. 

Sincerely, 

~~ Tim Murph;'· U q Chairman 

Suhcommittee on Oversight and Investigations 

cc: Dianu DcGcttc, Ranking \1cmber, Subcommittee on Oversight and Investigations 

Attachment 
125 


85450.064

Response to Questions for the Record 

Hugh Morrow, Jr., President, Ruby Falls, LLC 

To: The Honorable Tim Murphy 

1. Can you describe how Ruby Falls' seasonal employee needs are being impacted by 

the health care law? How are you planning to handle this? 

It is my understanding the seasonal employees are not included in the law due to their 

short tenure. We will not include them in our insurable group. However, during every 

busy season we identify people that we would like to continue their employment. These 

could be students, teachers or others that have a space in their schedule and may stay on 

for an additional period. The way the ACA is written we would have to now limit their 

hours to 29 and/or not bring them on at all. Our employment practices are based on 

flexibility during our 12-hour day/7-day per week/364-day schedule. We are closed 

Christmas Day. 

2. A huge issue in the debate ofthe health care law is the definition of "full time" 

employees as those working over 30 hours per week. What do you think of this 

definition and how has it impacted Ruby Falls and its planning for the future. 

As with the law, Ruby Falls has used 30 hours as our standard of full time worker. 

However, by mandating this we lose our flexibility in supporting our employee. As 

stated many of our employees that rely on us for healthcare coverage may only be able to 

work 30 hours. We need these talented and trained people. Because of the mandated 30 

hours rule we will have to create a category of 29-hour employees and limit their hours. 

This will create an expense and administrative nightmare. Secondly, we will have to 

require, for instance, a retiree not necessarily over the age of 65 who wants to work four 

8-hour shifts per week will either have to move to 29 hours or work 40 hours to lessen 

our need for shorter hour workers. Also, all of these hours go towards our full time 

equivalent calculations which as of now takes us to 51 employees. Weare looking to cut 

hours to hopefully reduce us to 49 FTE's. 

3. Do you believe that other owners and operators of tourist attractions or seasonal 

businesses 

Yes, the general feedback is the administration of this law is burdensome. Most of the 

cave owners and operators are smaller than us and fall under the 50 FTE limit. 

4. What steps will you take to address your rising health care costs? 

As mentioned in my testimony three ways, reducing payroll or eliminating jobs, sharing 

of the cost by allowing the employee to cover part of their premium which at this point 

they do not or by having them purchase their insurance through the exchanges, or finally 
126 


85450.065

by reallocating funds to cover the increased cost by lowering our investment in expansion 

and the surrounding community. 

Over the past few years we have invested in new attractions on campus to remain fresh 

and competitive in the market place. Our attendance has continued to grow and has 

almost reached back to the pre-2008 levels. We could not be more excited about our 

business prospects and would like to continue to invest in new fixtures, environmental 

technology, and people. 

Price increases are not an option. We just completed a study by the University of 

Tennessee Tourism Department that shows we are at the top threshold for pricing in our 

business category. Simply raising price is not the answer and would severely damage our 

business and customer base. 

We also invest heavily in philanthropic endeavors throughout the city and surrounding 

area. Education, scholarships, youth functions, land trusts, churches, and other civicminded charities rely on these funds. The cost of health care premiums rising will curtail 

our ability to continue at the levels of the past. 

S. You mentioned tbat you employ a number of bigb school and college age individuals 

---do you find tbat these individuals purchase healtbcare. 

No, most are seasonal workers or part-time and do not request health insurance. The 

feedback that I get is they do not see a need or are covered under their parent's policy. 

6. You testified the "We have spent more time analyzing tbe effects oftbis law than 

creating memories for our visitors." Can you elaborate on tbis? What 

administrative burdens bave you encountered? 

We run a simple business. We facilitate 400,000 people to walk into a mountain and see a 

beautiful waterfall 1,100 feet underground. We do this with a smile, courteous 

information, clean grounds, well-maintained facilities and attention to detail. This 

morning I met a couple from Lake Mary, FL that lived near a friend of mine and we 

talked about their neighborhood. I hope I made their stay here personable and special. 

This afternoon I am replying to your questions with no customer contact. We should be 

training and encouraging our employees not chasing them out the door at 29 hours. We 

are a friendly and fun place. 

Secondly, we must keep our facility updated to receive guests. We need state-of-the-art 

point of sale equipment, computers, mechanical systems, and safety systems. Our focus 

by our management staff on the mandates of this law takes our eye off this ball. 

Finally, Ruby Falls was founded during the Great Depression. We have survived for 84 

years including a World War, 911, and multiple recessions. Our people will adjust to this 

law and we will not shut our doors any more than the sky fell during the "sequester". 

However, we will employ less people, we will have less capital for acquisitions and 

expansion, and will not be able to reach our full potential for our customer. We feel 
127 


85450.066

through offering health care benefits, matching IRA and other benefits to our employees 

that make a career here, we were doing things the right way. Now we find that through 

mandated rules and benefit levels these benefits will not be affordable for us in the future. 
128 


85450.067

UPTON, 

CHAIRMAN 

COMMITTEE ON ENERGY AND COMMERCE 

],vls:. Katie Mahoney 

Executive Director 

J icaIth Policy 

(5.S. Ch(lmb~r of Commerce 

1615 II Street, ~,w. 

Washington, D,C. 20062 

Dear \b. ivlahonc);: 

July 12.2013 

Thnnk you for appearing before the Subcommittee on Oversight and Investigations t'l]1 

\\'cclnesday, June 26. 20U. io tcstii)i at the hearing t:ntitlcd "Challenges Facing America's Businesses 

Cnder the Patient Protection and Affordable Care Act," 

Pursuant to the Rules: of the Committee on Energy and Conun~rc~, the hearing r~cl)rd remains 

open for ten business days to permit Members to submit additional questions for the record. which arc 

attached. The format of your responses to these questions should be as follows: (1) the name of the 

Member whose question you are addressing, (2) the complete text of the question you are addressing in 

bold, and (3) your answer to that question in plain text. 

To nlcilitatc the printing of the hearing record. please respond to these questions by the close of 

busine,s-s on July 26, 2013. Your responses should be e-mailed to the Legislative Clerk in Word 

)JJJ.\!ml;)~lill.\'~®!lll!~!llli~&Y.and mailed to Brittany Havens. Legislati\,t~ Clerk. Comll~ittce 

Office Building, Washington, D,C. 20515. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcolnmittcc. 

Sincerely, 

:r:~h~ Chainnan 

Subcommittee on Oversight and Investigations 

cc: Diana DeGette, Ranking i\lcmbcr. Sub~ol1l11littce on Oversight and Investigations 

Attachment 
129 


85450.068

Response to Questions for the Record from Katie Mahoney, Executive Director, Health Policy 

U,S. Chamber of Commerce 

July 25, 2013 

Questions from The Honorable Michael C. Burgess: 

J. Do employers have an incentive to stop employing U.S. citizens and instead employee (sic) 

Registered Provisional Immigrants to avoid paying a penalty? 

Employers fill jobs by finding candidates who meet the requirements to perform in an open job 

for the business. In consulting with the U.S. Chamber of Commerce's Immigration Policy 

experts, I understand that the employment eligibility confirmation process only is permitted after 

hiring (once the employer has offered and an employee has accepted a position). We know of no 

lawful means, except after hiring, for an employer to confirm as an employment practice whether 

job applicants hold a particular immigration status. Therefore, not only is it impermissible for an 

employer to ask for job applicants' immigration status prior to already selecting a candidate to 

fill a job, it is counter-intuitive to normal business operations to select workers based on an 

immigration status instead of skill set. 

The question also presumes a fair amount of certainty regarding how the "free rider" (employer 

mandate) penalties will work once implemented. However, until the IRS issues future guidance 

or regulations as to both the information reporting requirements and the associated penalties (the 

so called "free rider" penalties), it is difficult to assess how business practices may change based 

on the intersection between the implementation of these health care law requirements and 

possible immigration reform provisions. 

Significantly, the phrasing of this question ignores the fact that economic analysis shows that the 

undocumented, working in lesser-skilled jobs, complement instead of compete with native-born 

workers. Economists looking at today's labor force find disproportionately higher numbers of 

foreign born workers who are the least educated (no high school degree) and most educated 

(doctorate) and find that most-native born workers are not directly competing with immigrants 

for jobs.' Even when native-born workers and immigrants work in the same occupation or 

industry or the exact same business, researchers find these differences lead to task 

specialization.2 Thus, immigrants and native-born workers complement each other far more 

often than they compete.3 

2. How would the increased hiring ofRPIs in place of U.S. citizens affect the U.S. job market? 

Again in consulting with our immigration policy experts here, the U.S. Chamber of Commerce 

does not believe there will be hiring ofRPIs to replace U.S. citizens. 

Moreover, if Congress ultimately passes legislation providing an eamed lawful status for 

workers who are currently undocumented, it is expected that, in addition to increases in federal 

income taxes paid, there will be a general expansion of employment for native-born workers. A 

I Pia Orren ius and Madeline Zavodny, From Brawn To Brain: How Immigration Works/or America, 2010 Annual 

Report (Dallas, TX: Federal Reserve Bank of Dallas, 2010). 

2 Giovanni Peri, "The Effects of Immigrants on U.S. Employment and Productivity," FRBSF Economic Letter 20 I 0-

26 (San Francisco, CA: Federal Reserve Bank of San Francisco, August 30,2010). 

1 Michael Greenstone and Adam Looney, Ten Economic Facts About Immigration (Washington, D.C.: The 

Hamilton Project, Brookings Institution, September 2010). 
130 


85450.069

recent study by an economic forecasting firm, Regional Economic Modeling Inc., examined the 

impact of the U.S. job market if those individuals living here illegally were to gain legal status 

and concluded there would be a net gain in overall jobs and an increase in gross domestic 

product over both the short and long-term.4 

4 Frederick R. Treyz, Ph.D., Corey Stottlemyer, and Rod Motamedi, "Key Components oflmmigration Reform: An 

Analysis of the Economic Effects of Creating a Pathway to Legal Status, Expanding High-Skilled Visas, & 

Reforming Lesser-Skilled Visas," (Washington, D.C.: REM!, July 17,2013). 
131 


85450.070

Ms, Michelle Neblelt 

Director 

Labor and \,rorkforce Policy 

National Restaurant Association 

2055 L Street. Suite 700 

Washingt(}n~ D,C. 

Dear !'vis. Neblett: 

HENRY A. 'WAXMAN, CAUfORNLA. 

July 12.2013 

rhank you tor appearing before the Suhcommittee on Oversight and investigations Oil 

\Vcdnesday, June 26. :2013, to testify at the hearing entitled "Challenges Facing America's Businesses 

Under the Pmlt."TIt Protection and Affordable Care Act" 

Pursuant to the Rules of the Committee on Energy and Cmnmer\:e. the hearing record remains: 

open tor ten business days to pennit Members to submit additional questions for the record. which arc 

attached. The fonnat of your respollses to these questions should be as follows: (I) the name of the 

Member \vhose question you are addre~sing, (2) the complete text of the question you arc addressing in 

bold, and (3) your answer to that question in plain text. 

To facilitate the printing of the hearing record, please respond to these questions by the dose of 

husiness on Friday, July 26, 2013. Your responses should he c-mailcd to the Legislative Clerk in \Vord 

format at hri!Jany.havcnsi@mail.house.govandmailedto Brittany lIavens, Legislative Clerk. Committee 

on Energy and Commerce, 2125 Rayburn llouse Office Building, \Vashington, D.C. :20515. 

Thank you again for your time and effort preparing and delivering testimony before the 

Subcommittee. 

Si11cerely~ 

Chairman 

Subcommittee on Oversight and Investigations 

ce: Diana OcGeHe, Ranking Member, Subcommittee 011 Oversight and Investigations 

Attachment 
132 


85450.071

July 24, 2013 

The Honorable Tim Murphy 

Chairman 

Subcommittee on Oversight and Investigations 

Committee on Energy & Commerce 

U.S. House of Representatives 

2J25 Rayburn House office Building 

Washington, DC 20515-6115 

Re: Responses to: Questions for the Record from Chairman Tim Mnrphy, 

Subcommittee on Oversight and Investigations (July 12, 2013) 

Dear Chainnan Murphy, 

Thank you for the opportunity to testify, on behalf of the National Restaurant 

Association, before the Subcommittee on Oversight and Investigations on June 26, 2013, at the 

hearing entitled "Challenges Facing America's Businesses Underthe Patient Protection and 

Affordable Care Act." 

I am writing in response to your July 12, 2013 letter with a request for me to answer 

questions for the record submitted by Members of the Subcommittee. Below, please find my 

responses. 

The Honorable Tim Murphy: 

Q. 1: Why is the current definition of a fun time employee (30 hours), incorrect? What 

nmnber of hours would your organization prefer? 

Internal Revenue Code Section 4980H, as added by Section lS13(d)(4) oftlle Patient Protection 

and Affordable Care Act (PPACA) (PL 111-148), defines a full-time employee "with respect to 

any given month, an employee who is employed on average at least 30 hours of service per 

week." This definition is problematic for the restaurant and foodservice operators as 3D-hours a 

week does not reflect traditional business practices in the industry that consider 40-hours a week 

to be full-time employment. 

The Fair Labor Standards Act does not define full- or part-time employment but does require 

employers to pay overtime when nonexempt employees work more than a 40-hour workweek. 

As a result, restaurant and foodservice operators have structured their businesses around this 

definition. Given these facts, many other industries have also followed this approach. For these 
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The Honorable Tim Murphy 

July 24,2013 

and the additional reasons stated below, we would prefer the definition offull time 

employee in PPACA to follow the conventional40-hour per week approach. 

Also, it is common for restaurant and foodservice operators to categorize team members as 

salaried and hourly employees and not use full- or part-time definitions. Salaried employees are 

generally those in management positions. Hourly employees generally hold a number of other 

positions within a restaurant's operations and for many; their hours of service can vary week to 

week depending on a number of factors. 

As a result, it is difficult to predict which hourly employees will be considered full-time or parttime each month, and hence who must be offered coverage so to avoid an employer penalty. It is 

the reason the industry supports the Treasury Department's "Lookback Measurement Method" to 

determine if variable hour and seasonal employees are full-time. 

Beyond the complication of figuring out who is full- or part-time, the law's definition of 30-

hours drastically different than what was generally used before this law - has the potential to 

impact our workforce and businesses beyond health care. One reason so many employees are 

drawn to restaurant jobs is the flexibility to change your hours to suit your own personal needs. 

However, the law's definition of fUll-time employee at 3D-hours a week may limit restaurant 

operators' ability to continue to offer their hourly employees these flexible schedules. The 

reason being, that employers with variable workforces and flexible scheduling must be deliberate 

about scheduling hours because there is now a greater financial impact of potential employer 

penalties for not offering coverage to full-time employees. 

If the definition of full-time employee is not changed to 40-hours a week, which aligns better 

with our workforce patterns, the flexibility that so many employees value from employment in 

our industry may no longer be as widely available, and structural changes to labor markets could 

occur. Such changes could have workforce implications beyond the employer-sponsored health 

benefits the law addresses. 

The Honorable Tim Murphy: 

Q. 2: Your testimony discusses at length the problematic nature of automatic enrollmentcan you describe why this will be such a problem for your industry? 

The Automatic Enrollment provision of the law is problematic for restaurant and foodservice 

operators and their employees for two reasons. First, it could cause confusion and potential 

financial harm for some employees, and second, it will increase restaurant and food service 

operators' compliance burden without increasing employees' access to coverage. 

Automatic enrollment interacts with the requirement that waiting periods cannot be longer than 

90 days. This means that certain employers must enroll new full-time employees in their lowestcost plan unless the employee opts-out before their 91st day. 

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The Honorable Tim Murphy 

July 24,2013 

In the restaurant and food service industry, health care benefits are generally administered 

through a central Human Resources department, not by the general manager of each restaurant 

location. Enrollment options and plan materials are mailed to the employee's residence. If the 

mail is not opened in time and employees understand they must opt-out if they do not wish to 

enroll in coverage, employee premium contributions, possibly in the form of payroll deductions, 

may begin to be collected on the 91 51 day. 

Restaurant and foodservice operators will educate their employees about how this provision 

impacts them, but if an employee misses the 90-day opt-out deadline, a premium contribution is 

a significant amount of money up to 9.5 percent of wages - that would be an unexpected 

financial burden. Unlike 401 (k) automatic enrollment contributions that average 3 percent and 

can be retrieved by the employee, health care benefit premium contributions would constitute a 

larger percentage of an employee's wages and cannot be retrieved. 

The automatic enrollment provision also places additional burdens on certain employers without 

any additional benefit to the employee. This redundant requirement duplicates the offer of 

coverage these same employers must make under the Employer Shared Responsibility provision 

or face penalties. 

Said another way, the full-time employees an employer is required to automatically enroll are the 

same employees to whom the employer must offer coverage under the employer mandate. The 

only difference is that automatic enrollment is not an opt-in benefit, it is an opt-out based on the 

law. 

Similar to our concerns about how cost of coverage could increase if variable hour employees 

churned between employer coverage and exchange coverage, we are concerned about how the 

cost of coverage could be impacted for all employees if new hires do not opt-out in time, are 

enrolled and then ask to be taken off the plan the next month. 

Much like the expanded 1099 reporting requirement that was repealed, this requirement adds a 

layer of bureaucracy and burdens restaurants as the enrollment and cancellation process must be 

done manually since benefit administration is not done electronically. Employee access to a 

computer in their restaurant location for benefits purposes is not common in the industry. 

For both these reasons, the Automatic Enrollment provision is problematic and potentially 

harmful to employees and employers. It is duplicative; burdening restaurant and foodservice 

operators without increasing employees' access to coverage. 

The Honorable Tim Murphy: 

Q. 3: Why is the definition of a ''large employer" so difficult for your industry? What 

would you recommend be done to make this definition more workable? 

To determine the law's impact on a restaurant, business owners must first determine if they are 

one or multiple employers - usually done by an CPA or tax attorney - and then calculate 

whether they are considered small or large businesses under the law. The statute prescribes a 

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The Honorable Tim Murphy 

July 24,2013 

very specific and unique calculation that is complex and forces even small businesses with just 

fewer than 50 full-time equivalent employees to track employees' hours of service by calendar 

month. 

Once the employer has been established, employees' hours of service must be tracked on a 

calendar month basis. The employer then uses the calculation monthly to determine the number 

of full-time equivalent employees and then average each monthly calculation over all 12 

calendar months to determine if they are considered large or smalL This process must be 

completed annually. 

Operators on the cusp of 50 fUll-time equivalent employees are struggling to understand how to 

complete this complicated calculation each year. It is especially difficult because our systems 

(scheduling, payroll, etc.) are not set up to do this unique tracking on a calendar month basis and 

calculation annually. Many operators rely on third-party vendors to help them comply with such 

a requirement and options have been slow to come to market. This delays an operator's ability to 

understand the impact of the law on their business and employees and make decisions about 

offering coverage. 

Our members tell us that this calculation needs to be simplified to reduce the burden of figuring 

out whether you are a small or large employer under the law. While we have not determined the 

best way to address the complexity of the applicable large employer determination, there are 

several options. 

First, the tracking and aggregation of part-time employees' hours of service is the greatest 

challenge for operators. Removing the equivalents from the calculation would eliminate this 

challenge. 

Second, the threshold could be raised from 50 full-time equivalent employees to a higher point 

where more employers have the resources to track and complete the calculations, and fewer 

small businesses would be impacted. 

Third, the calculation itself could be changed so that it uses another, simpler way to count 

employees or hours of service that would align with methods commonly used in payroll systems 

or other employer systems. 

Finally, we believe that at the very least an administrative period is needed between when a 

small employer determines they are large, and when their coverage must be effective. Will a 

small employer who determines on December 31, 2016 that they are now a large employer and 

have to find a plan and offer coverage that is effective the next day on January 1,2017, orface 

employer penalties? Currently, that is how the law is written and if not addressed could create 

further confusion for small businesses after the first year of implementation of the law. 

Congress should remove the unnecessary burden created for small businesses by the complex, 

annual calculation used to determine if an employer is an applicable large employer under the 

law. 

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The Honorable Tim Murphy 

July 24, 2013 

Thank you again for the opportunity to testify before the Subcommittee and to respond to the 

above questions for the record. The National Restaurant Association looks forward to working 

with you and all your colleagues in Congress to address the challenges our members face as they 

implement this law. 

Sincerely, 

}1!~~U16JfMichelle Reinke Neblett 

Director 

Labor & Workforce Policy 

Cc: The Honorable Diana DeGette, Ranking Member, Subcommittee on Oversight and Investigations 

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85450.076

July 12, 2013 

Mr. Neil Trautwein 

Vice Prc~ident~ Employee Benefits Policy Counsel 

Govcmmcnt Relations 

Nation Retail Federation 

3257th N,W., Suit" I JOO 

\Vashin6rton, 20004 

Dear Mr, Trautwein: 

Thank you for appearing hefore the Subcommiuec on Ovcl'sight ~md lnvcl'tigatiolls on 

Wednesday, June 26, 2013, to testify at the hearing entitled "Challenges Facing America's Businesses 

Under the Patient Protection and Affordable Care Act:' 

Pursuant to the Rules of the Committee DB Energy and Commerce. the hearing record remains 

open for ten business days to permit Members to submit additional questions for the record, which arc 

attached. The foonat of your responses to these questions should be as follows: (l) the name of the 

Member whose question you are addressing, (2) the compiete text of the question you arc addressing in 

bold~ and (3) your answer to that question jn plain text 

To facilitate the printing of the hearing record} please respond to these questions by the close of 

business 011 Friday~ July :!6. 2013. Your responses should be c-mailcd to the Legislative Clerk in \Vord 

formaf at brittany,havcn.s..C!W1J.9jl.hou.sc.uov and mailed to Brittany Ilavens, Legislative Clerk~ Committee 

Oil Energy and Commerce. 2125 Rayburn House Ot1lce Building:~ \Vashington. D.C. 20515, 

Thank you again for your time and effort preparing and delivering testimony be-fol'e the 

Subcornmittee. 

Sincerely. 

1:-.*" Tim Murphy 

Chairman 

Subcommittee on Oversight and Investigations 

cc: Diana DeGcHe, Ranking Memher. Subcommittee on Over::.ight and lm<e5>tigations 

Attachment 
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85450.077

Additional Questions for the Record The Honorable Tim Murphy 

Answers from: E. Neil Trautwein, Vice President, Employee Benefits Policy Counsel, National 

Retail Federation. July 22, 2013 

1. You wrote in your testimony that "our members are not enjoying the challenge of 

compliance." What have you heard from your membership about the administrative burdens 

of the health care law? 

a. The Affordable Care Act (ACA) poses myriad special challenges to retailers and 

chain restaurants, particularly because of the large numbers of part-time or variablehour employees we employ. Determining eligibility for coverage, managing the 

volatility of our workforce (e.g. turnover and variable hours), managing the 30-hour 

definition of full-time, reporting workforce information to different exchanges on a 

state by state basis - all of these are leading concerns for our members. We have 

spent a lot oftime working to educate our members on their responsibilities under the 

ACA. 

2. You mentioned in your testimony that "key regulatory questions are as of yet unanswered, 

even at this very late date"-what regulatory guidance or certainty on the law would your 

organization like to hear from the administration? 

a. A number of regulations are still pending, most prominently the regulations to spell 

out the reporting specifications to the exchanges. Other areas have been addressed 

but incompletely (e.g., comparing tip income for affordability determinations). 

3. Have you heard any examples of employers reducing their number of employees? If so, 

please explain. 

a. Not beyond some well publicized examples our members have been reticent about 

this information becoming public. They would much rather the public think about 

retail or chain restaurant brands than employment practices. 

4. Have you heard of any retailers reducing employee hours? If so, please explain. 

a. Please see my previous answer. 
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85450.078

5. Have you heard of any retailers halting plans to expand or hire more staff because of the 

health care law? If so, please explain. 

a. I have heard this anecdotally - that certain franchised operations have been reluctant 

to open new franchised locations - but not on a company-wide basis. I have also not 

heard of specific hires to implement the ACA, but know that it has become more than 

a human resources challenge for affected companies. Finance, legal and infonnation 

technology staff are commonly cited as participating in ACA compliance efforts.