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PROTECTING AFFORDABLE COVERAGE FOR 

EMPLOYEES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 9, 2015 

Serial No. 114–72 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

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 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California7 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

BRETT GUTHRIE, Kentucky 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

GENE GREEN, Texas 

Ranking Member 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

DORIS O. MATSUI, California 

BEN RAY LUJA ́ N, New Mexico 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

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

Prepared statement .......................................................................................... 2 

Hon. Brett Guthrie, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 3 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

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

Prepared statement .......................................................................................... 5 

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, opening statement ............................................................................ 6 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 7 

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

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

prepared statement .............................................................................................. 63 

WITNESSES

Monica Lindeen, Commissioner of Securities and Insurance, State of Montana, and President, National Association of Insurance Commissioners ........ 10 

Prepared statement .......................................................................................... 12 

Answers to submitted questions ...................................................................... 112 

Kurt Giesa, Partner, Oliver Wyman ...................................................................... 17 

Prepared statement .......................................................................................... 19 

Mike Kreidler, Washington State Insurance Commissioner ................................ 31 

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

Answers to submitted questions ...................................................................... 115 

SUBMITTED MATERIAL

H.R. 1624, the Protecting Affordable Coverage for Employees Act, submitted 

by Mr. Pitts ........................................................................................................... 65 

Letter of September 2, 2015, from The 50–100 Coalition, to Hon. John 

Boehner, et al., submitted by Mr. Guthrie ......................................................... 68 

Letter of March 26, 2015, from Karen Ignagni, President and Chief Executive 

Officer, America’s Health Insurance Plans, to Mr. Guthrie and Mr. 

Ca ́ rdenas, submitted by Mr. Guthrie ................................................................. 70 

Letter of July 8, 2015, from Amanda Austin, Vice President, Public Policy, 

National Federation of Small Business, to Mr. Guthrie and Mr. Ca ́ rdenas, 

submitted by Mr. Guthrie ................................................................................... 71 

Letter of April 23, 2015, from Todd McCracken, President and Chief Executive Officer, National Small Business Association, to Mr. Guthrie, et al., 

submitted by Mr. Guthrie ................................................................................... 72 

Letter of March 27, 2015, from Juli Y. McNeely, President, National Association of Insurance and Financial Advisors, to Mr. Guthrie and Mr. Ca ́ rdenas, 

submitted by Mr. Guthrie ................................................................................... 73 

Letter of August 31, 2015, from Mike Becker, Executive Vice President and 

Chief Executive Officer, National Association of Professional Insurance 

Agents, to Hon. Tim Scott and Mr. Guthrie, submitted by Mr. Guthrie ......... 74 

Letter of July 27, 2015, from Joel C. White, President, Council for Affordable 

Health Coverage, to Mr. Guthrie, et al., submitted by Mr. Guthrie ................ 75 

Letter of March 26, 2015, from Alissa Fox, Senior Vice President, BlueCross 

BlueShield Association, to Mr. Guthrie and Mr. Ca ́ rdenas, submitted by 

Mr. Guthrie ........................................................................................................... 77 

Page

IV 

Letter of September 8, 2015, from Julia Grant, Vice President Government 

Relations, Delta Dental Plans Association, to Mr. Guthrie and Mr. 

Ca ́ rdenas, submitted by Mr. Guthrie ................................................................. 78 

Letter of April 9, 2015, from Dave Adkisson, President and Chief Executive 

Officer, Kentucky Chamber, to Mr. Guthrie, submitted by Mr. Guthrie ........ 79 

Letter of April 21, 2015, from R. Bruce Josten, Executive Vice President, 

Government Affairs, Chamber of Commerce of the United States of America, to Mr. Guthrie, et al., submitted by Mr. Guthrie ....................................... 80 

Letter of April 3, 2015,from American Hotel & Lodging Association, et al., 

to Mr. Guthrie, et al., submitted by Mr. Guthrie .............................................. 82 

Statement of Cori E. Uccello, Senior Health Fellow, American Academy of 

Actuaries, September 9, 2015, submitted by Mr. Pitts ..................................... 84 

Letter of May 18, 2015, from Monica J. Lindeen, President, National Association of Insurance Commissioners, et al., to Mr. Guthrie and Mr. Ca ́ rdenas, 

submitted by Mr. Pitts ......................................................................................... 92 

Statement of the Council for Affordable Health Coverage, ‘‘Impact of Small 

Group Definition on Employers and Their Employees,’’ July 27, 2015, submitted by Mr. Pitts .............................................................................................. 94 

Statement of Third Way, ‘‘Avoiding Health Insurance Rate Shock for MediumSize Businesses,’’ by Jacqueline Stewart and David Kendall, submitted 

by Mr. Pitts ........................................................................................................... 95 

Issue Brief of American Academy of Actuaries, ‘‘Potential Implications of 

the Small Group Definition Expanding to Employers with 51–100 Employees,’’ March 2015, submitted by Mr. Pitts .......................................................... 98 

Statement of National Institute for Health Care Management Foundation, 

‘‘Small Business Health Insurance Coverage in a Post-ACA World,’’ by 

Sabrina Corlette, June 2015, submitted by Mr. Pitts ....................................... 105 

Table, ‘‘Offer rates at firms with less than 50 employees (2010–2014),’’ State 

of Washington, submitted by Mr. Pitts .............................................................. 107 

Issue Brief of America’s Health Insurance Plans, ‘‘Why Maintaining the Current Definition of the Small Group Market is Critical,’’ May 2015, submitted by Mr. Pitts .............................................................................................. 108 

(1) 

PROTECTING AFFORDABLE COVERAGE FOR 

EMPLOYEES 

WEDNESDAY, SEPTEMBER 9, 2015 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:17 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Joseph R. Pitts 

(chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Guthrie, Barton, Murphy, Burgess, Blackburn, Lance, Griffith, Bilirakis, Long, Ellmers, 

Bucshon, Brooks, Collins, Green, Schakowsky, Butterfield, Sarbanes, Schrader, Kennedy, Ca ́ rdenas, and Pallone (ex officio). 

Staff present: Clay Alspach, Chief Counsel, Health; Noelle 

Clemente, Press Secretary; Andy Duberstein, Deputy Press Secretary; Graham Pittman, Legislative Clerk; Heidi Stirrup, Policy 

Coordinator, Health; Josh Trent, Professional Staff Member, 

Health; Gregory Watson, Staff Assistant; Christine Brennan, 

Democratic Press Secretary; Jeff Carroll, Democratic Staff Director; 

Tiffany Guarascio, Democratic Deputy Staff Director and Chief 

Health Advisor; Meredith Jones, Democratic Director of Communications, Member Services and Outreach; Samantha Satchell, 

Democratic Policy Analyst; and Arielle Woronoff, Democratic 

Health Counsel. 

Mr. PITTS. Good morning, ladies and gentlemen. The subcommittee will come to order, and the chairman will recognize himself for an opening statement. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Today’s legislative hearing will consider a bipartisan bill authored by distinguished members of this subcommittee Vice Chairman Guthrie and Mr. Ca ́ rdenas, along with Representatives Mullin 

and Sinema. 

H.R. 1624 is a bill to amend the Patient Protection and Affordable Care Act and the Public Health Service Act to revise the definition of small employer. This bill would allow the States to continue defining the small group health insurance market as employers with 1 to 50 employees. 

Section 1304 of the Patient Protection and Affordable Care Act 

changed the Federal definition of the small group market to include employers with 1 to 100 employees. The States, however, 

2 

have been allowed to continue defining the small group market as 

employers with 1 to 50 employees until January 1, 2016. So, beginning on or after January 1, 2016, plans sold or renewed for employers with 51 to 100 employees will be subject to the various small 

group health plan regulations established by the PPACA. These 

more restrictive rating rules will increase health insurance premiums for these employers and reduce flexibility in benefit design. 

The new requirements could also lead some employers with 51 to 

100 employees to self-insure to avoid higher premiums. If that happens, this could result in adverse selection in the small group pool 

and higher premiums for employers with 1 to 50 employees. Unless 

this current law is reversed, the disruption in the marketplace will 

be significant. For example, it is estimated that under current law, 

more than 3 million employees will experience a double-digit percent increase in their health care premiums. Ultimately, cost increases for small employers will change their choices regarding offering coverage, could change their business model, and will ultimately be felt by millions of workers. 

Because the impact of current law will vary by State, defining 

the small group market should be left to the States, which is a policy envisioned in H.R. 1624. I am pleased to say there is considerable support for this legislation in the House and the Senate. The 

flexibility that would be given to States with immediate passage of 

H.R. 1624 would help ensure stable small group health insurance 

markets that reflect the unique characteristics in each of the 

States. If Congress passes H.R. 1624, premiums will be lower and 

millions of employees and employers by letting them keep the plan 

they have and like. And this is a commonsense policy that deserves 

our bipartisan support. 

[H.R. 1624 appears at the conclusion of the hearing.] 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

Today’s legislative hearing will consider a bipartisan bill authored by distinguished members of this subcommittee Vice Chairman Guthrie (KY) and Mr. 

Ca ́ rdenas (CA), along with Reps. Mullin (OK) and Sinema (AZ). 

H.R. 1624 is a bill to amend the Patient Protection and Affordable Care Act (ACA) 

and the Public Health Service Act to revise the definition of small employer. This 

bill would allow the States to continue defining the small group health insurance 

market as employers with 1–50 employees. 

Section 1304 of the Patient Protection and Affordable Care Act (PPACA) changed 

the Federal definition of the small group market to include employers with 1–100 

employees. The States, however, have been allowed to continue defining the small 

group market as employers with 1–50 employees until January 1, 2016. 

So, beginning on or after January 1, 2016, plans sold or renewed for employers 

with 51–100 employees will be subject to the various small group health plan regulations established by the PPACA. These more restrictive rating rules will increase 

health insurance premiums for these employers and reduce flexibility in benefit design. 

The new requirements could also lead some employers with 51–100 employees to 

self-insure to avoid higher premiums. If that happens, this could result in adverse 

selection in the small group pool and higher premiums for employers with 1–50 employees. 

Unless this current law is reversed, the disruption in the marketplace will be significant. For example, it is estimated that under current law, more than 3 million 

employees will experience a double-digit percent increase in their health care premiums. Ultimately, cost increases for small employers will change their choices regarding offering coverage, could change their business model, and will ultimately be 

felt by millions of workers. 

3 

Because the impact of current law will vary by State, defining the small group 

market should be left to the States—which is a policy envisioned in H.R. 1624. I 

am pleased to say there is considerable support for this legislation in the House and 

the Senate. 

The flexibility that would be given to States with immediate passage of H.R. 1624 

would help ensure stable small group health insurance markets that reflect the 

unique characteristics in each of the States. If Congress passes H.R. 1624, premiums will be lower and millions of employees and employers by letting them keep 

the plan they have and like. This is a common-sense policy that deserves our bipartisan support. 

With that, I yield the remainder of my time to the vice chairman of the Health 

Subcommittee, Mr. Guthrie. 

Mr. PITTS. With that, I yield the remainder of my time to the 

vice chairman of the Health Subcommittee, Mr. Guthrie. 

OPENING STATEMENT OF HON. BRETT GUTHRIE, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF KENTUCKY 

Mr. GUTHRIE. Thank you, Mr. Chairman. I appreciate the committee holding this hearing on such an important issue. 

On January 1, 2016, the definition of the small group market is 

set to change, and with that, millions of employers will see dramatic changes to their insurance coverage. Employers with 51 to 

100 people will be suddenly thrust into a new insurance category 

with dramatically different mandates and benefit requirements, 

and would not be able to continue to offer their current plans. Not 

only would these hard-working employees no longer be able to keep 

their current coverage, but the new plans that would be offered are 

likely to be significantly more expensive. 

In response to this looming threat, Congressmen Ca ́ rdenas, 

Mullin, and Congresswoman Sinema and I joined forces to introduce the PACE Act, which would stop the expansion of the small 

group definition. Our bill has the support of leading business organizations which represent thousands of companies, many of which 

are family-owned, and millions of hard-working Americans from 

every congressional district. Our bill will allow States to determine 

their own group market size, just as they do today. This is a commonsense solution to a real and serious problem. Business owners 

face many challenges today, and this bill provides an opportunity 

to eliminate one major cause of uncertainty. 

H.R. 1624 has quickly picked up momentum. Today, we have 

more than 1⁄2 the House as cosponsors and nearly 1⁄3 of the Senate. 

Support is wide ranging and highlights that this is something we 

can all agree needs to be addressed. This bill is a chance to offer 

a solution, and I look forward to discussing this important issue 

today. 

I want to thank subcommittee chairman Mr. Pitts for bringing 

this important legislation before the subcommittee, and I would 

like to thank my coauthors for their help and to advance this crucial legislation, and believe me, they have put a lot of work into 

this in getting the cosponsors we have, and I appreciate it. 

I yield back the balance of my time. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the ranking member, Mr. Green, 5 minutes for an 

opening statement. 

4 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman. Good morning, and thank 

all of you for being here today, and our witnesses particularly. I 

want to particularly thank a former colleague of ours, now commission, Mike Kreidler, who he and I started our service in Congress 

together a few years ago when we both had dark hair. But again, 

welcome to all our panel, and particularly to our former colleague. 

Five years ago, Congress acted upon the principle that in America, health care is not a privilege for a few, but a right for all. Since 

then, the Affordable Care Act has been implemented and reforms 

have taken place, and there are dramatic successes and some challenges, but no doubt the law is working. It has changed and even 

saved American lives. It has set this country on a smarter, stronger 

path. Since the ACA was enacted, over 16.4 million Americans 

gained Affordable Healthcare Act, 129 million Americans who now 

have—could have been denied coverage prior to the ACA’s passage 

now have access. The uninsured rate is at a historic low. For the 

first time in 50 years, rising healthcare prices have been slowed. 

Savings on healthcare costs of $12 billion resulted from 2010 and 

2013. Both of the number of hospital-acquired conditions and patient harms have notably dropped since 2010. In short, access to 

affordable insurance is up, the uninsured rate is down, and the 

quality of care continues to improve. The ACA is working. 

It is true the ACA continues to achieve positive outcomes, but it 

is also true there is no such thing as a perfect law. There are many 

opportunities for us to come together and constructively build on 

the ACA’s successes. After more than 50 votes to repeal or weaken 

the law, multiple politically motivated challenges before the Supreme Court, I am pleased to be here with my colleagues working 

in a bipartisan basis to improve the law. 

One opportunity for improvement is the subject of today’s hearing; the small group market. For too long, the small group health 

insurance market has been volatile, subject to increasing financial 

strain. Between 2000 and 2010, the percentage of small firms that 

provided health insurance plans to their employees dropped from 

43 percent to 33 percent. In response to this trend, the ACA addressed the small group insurance market to extend consumer protections to even more Americans, and to provide long-term stability 

in a historically broken marketplace. The ACA helped small business insurance be more affordable, and created a small business 

health options program called SHOP Marketplaces. SHOP was designed to improve the employee choice and plan offerings and grow 

risk pools. 

We have seen steady improvements in our small employer market since the enactment of the ACA, and enrollment is increasing, 

more firms are entering the market, and employees have new 

choices and consumer protections. 

Small group health insurance markets have traditionally been 

defined as firms with 50 or fewer employees. Beginning next year, 

the definition will expand to companies with up to 100 employees. 

However, while the small group market is shrinking, the SHOP 

Marketplaces remain in their infancy and are still evolving. Given 

their state of maturity, some States would prefer this marketplace 

5 

to achieve greater stability, be more fully understood before expanding it to midsized employers. The shift in rate-setting policy 

adds an additional source of uncertainty with the changing definition of small employers in 2016. 

Protecting Affordable Coverage for Employees Act, introduced by 

Representative Tony Ca ́ rdenas and Brett Guthrie, will permanently change the definition of small group employers to those with 

up to 50 employees. Under this legislation, the States would be allowed to choose to expand their small group markets, but the default would be to remain at 50 or fewer employees. 

I appreciate that a great deal of uncertainty remains in the 

smaller group market. More time before expanding the definition 

is warranted so that the effect of midsized employers joining the 

small group market can be better understood. A 2-year delay would 

likely have allowed the SHOP Marketplaces to stabilize, and give 

insurance 2 years of data and experience with new premium rating 

rules. The legislation we are discussing today has broad partisan 

support. 

I look forward to hearing from our witnesses about the legislation, and also the impact of the ACA on the smaller group market. 

The ACA is not an abstract law; it is a set of fair rules and tougher 

protections that have made health care in America more affordable 

and more attainable for millions of hardworking Americans. The 

time to move part partisanship is long overdue, and I look forward 

to turning the page and working together to improve the law. It is 

what the American people deserve. And I want to thank our chairman for this hearing today, and look forward to hearing from our 

witnesses. 

And thank you, and I yield back. 

[The prepared statement of Mr. Green follows:] 

PREPARED STATEMENT OF HON. GENE GREEN

Good morning, and thank you all for being here today. 

Five years ago, Congress acted upon the principle that—in America—health care 

is not a privilege for a few, but a right for all. 

Since then, as the Affordable Care Act has been implemented and reforms have 

taken effect, there have been dramatic successes and some challenges. 

But there is no doubt this law is working. 

It has changed, and even saved, American lives. 

It has set this country on a smarter, stronger path. 

Since the ACA was enacted, over 16.4 million Americans gained affordable health 

care. 

One hundred twenty-nine million Americans who could have been denied coverage 

prior to the ACA’s passage now have access. 

The uninsured rate is at a historic low. 

For the first time in 50 years, rising health care prices have slowed. 

Savings on health care costs of $12 billion resulted between 2010 and 2013. 

Both the number of hospital-acquired conditions and patient harms has notably 

dropped since 2010. 

In short, access to affordable insurance is up, the uninsured rate is down, and the 

quality of care continues to improve. 

The ACA is working. 

It is true that the ACA continues to achieve many positive outcomes. 

It is also true that there is no such thing as a perfect law. 

There are many opportunities for us to come together constructively to build on 

the ACA’s successes. 

After more than 50 votes to repeal or weaken this law, multiple politically motivated challenges before the Supreme Court—I am pleased to be here with my colleagues, working in a bipartisan basis to improve the law. 

6 

One opportunity for improvement is the subject of today’s hearing—the small 

group market. 

For too long, the small group health insurance market has been volatile, and subject to increasing financial strain. 

Between 2000 and 2010, the percentage of small firms that provided health insurance plans to their employees dropped from 43 percent to 33 percent. 

In response to this trend, the ACA addressed the small group insurance market 

to extend consumer protections to even more Americans, and to provide long-term 

stability in a historically broken marketplace. 

The ACA helped make small group insurance more affordable, and created the 

Small Business Health Options Program (SHOP) marketplaces. 

SHOP was designed to improve employee choice in plan offerings and grow risk 

pools. 

We have seen steady improvements in our small employer market since the enactment of the ACA. 

Enrollment is increasing, more firms are entering the market, and employees 

have new choices and consumer protections. 

Small group health insurance markets have traditionally been defined as firms 

with 50 or fewer employees. 

Beginning next year, this definition will expand to companies with up to 100 employees. 

However, while the small group market is strengthening, the SHOP marketplaces 

remain in their infancy, and are still evolving. 

Given their state of maturity, some States would prefer for this marketplace to 

achieve greater stability and be more fully understood before expanding it to include 

mid-size employers. 

The shift in rate-setting policy adds an additional source of uncertainty with 

changing the definition of small employers in 2016. 

The Protecting Affordable Coverage for Employees Act, introduced by Representatives Tony C rdenas and Brett Guthrie, would permanently change the definition 

of small group employers to those with up to 50 employees. 

Under this legislation, States would be allowed to choose to expand their small 

group markets, but the default would be to remain at 50 or fewer employees. 

I appreciate that a great deal of uncertainty remains in the small group marketplace. 

More time before expanding the definition is warranted so that the effect of midsize employers joining the small group market can be better understood. 

A 2-year delay would likely have allowed the SHOP marketplaces to stabilize and 

give insurers 2 years of data and experience with the new premium rating rules. 

The legislation we are discussing today has broad bi-partisan support. 

I look forward to hearing from our witnesses about the legislation, and also the 

impact of the ACA on the small group market in general. 

The ACA is not an abstract law. 

It is set of fairer rules and tougher protections that have made health care in 

America more affordable and more attainable for millions of hard-working Americans. 

The time to move past partisanship is overdue, and I look forward to turning the 

page and working together to improve the law. 

It is what the American people deserve. 

I want thank the chairman for having this hearing today, and look forward to 

hearing from our witnesses. 

Thank you, and I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognizes the vice chair of the full committee, Mrs. 

Blackburn, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE 

Mrs. BLACKBURN. Thank you, Mr. Chairman. I want to thank 

you for the hearing today. And I think it is so timely because we 

have all been back in our districts and we have heard from so 

many employers and, you know, it didn’t matter if they had 8 or 

85 employees, or like some others, 114, 120, 200; the uncertainty 

7 

around health insurance and how you provide that, and what the 

rules are, this is something that has become such a fluid and uncertain environment that it is very difficult for employers to know 

that what they have is going to last. It does have an effect on small 

business, it is a damper on hiring and on jobs retention, and certainly on business growth. So taking an action is important for us 

to do. As a couple of the employers told me, they said, you know, 

every time we go to one of these seminars on how you provide the 

health insurance now and meet the mandates, we are told these 

are the rules for now. It is all subject to change due to the rulemaking, but you should be expecting premium increases because 

the worst is yet to come, and that arrives in 2016. So, Mr. Chairman, I thank you for the hearing, and Mr. Guthrie for—and the 

others for their work on the legislation. 

And I yield back the balance of my time. 

Mr. PITTS. All right, is anybody else seeking her yielded time? 

No. The Chair thanks the gentlelady. 

Now recognize the ranking member of the full committee, Mr. 

Pallone, 5 minutes for questions. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Chairman Pitts, and I welcome today’s 

hearing on the Affordable Care Act’s required expansion of the 

small group insurance market and H.R. 1624, which instead aims 

to give States the option to expand. 

As everyone knows, I am a strong supporter of the Affordable 

Care Act, and for good reason. Since its passage, 17 million Americans have gained health insurance coverage, and as a result, we 

have seen the largest reduction in the uninsured in 4 decades. The 

ACA has increased access and reduced financial barriers to important preventative services such as cancer screenings and well 

women visits by requiring their coverage with no cost sharing. The 

law also stopped insurers from discriminating based on pre-existing 

conditions, or placing annual limits on how much health care they 

will cover. Fewer Americans are struggling to pay their medical 

bills, and fewer are forging—are forgoing care because they can’t 

afford it. 

In 2015, nearly 80 percent of individuals shopping for coverage 

on Healthcare.gov could purchase coverage for $100 or less after 

tax credits. With all of the ACA’s reforms, from its passage to its 

implementation, we have heard predictions that the sky was falling, yet it has not. Premiums have stabilized and millions of Americans are no longer one accident, injury, or diagnosis away from financial ruin. 

That said, of course, no law is perfect and there is always room 

for improvement. Historically, Congress has been able to pass technical fixes and improvements after major legislation. A perfect example of this is Medicare, which has continually evolved over the 

course of the last 50 years. Since 1965, we have expanded Medicare 

coverage to include mammograms and hospice care. We have 

learned lessons that convinced us to move away from fee-for-service 

to alternative payment models. The ACA will need improvements 

8 

as well, and it is critical we ensure that the ACA works for everyone. 

That is why I am glad that my Republican colleagues are ready 

to put politics aside and look to strengthen the law. While I commend the bill’s sponsors, Representatives Ca ́ rdenas and Guthrie, 

for their leadership on this important issue, I don’t necessarily 

agree this is the right approach. The small group health insurance 

market is in the midst of several reforms as a result of the ACA. 

The SHOP Marketplaces are still in their infancy. With these— 

while these reforms are still underway, experts will tell us that expanding the definition of small employers now would add significant uncertainty into our small group market. However, a few-year 

transitional delay would provide us with more appropriate research 

and actuarial data to make a smart decision at the appropriate 

time. I believe the benefits of an expanded small group market 

such as added consumer protections and increased stability for 

small employers are important and achievable goals. So I am concerned that H.R. 1624 is premature. But I am also mindful of the 

uncertainty that comes with moving forward with the expansion. 

That is why I am pleased to view today as a turning point. As opposed to using the ACA as a political football to repeated futile attempts to repeal or defund the law, Republicans and Democrats 

have come together in a bipartisan fashion to improve and 

strengthen the ACA, and I am hopeful this spirit can continue. 

I yield the remainder of my time to Mr. Ca ́ rdenas. 

[The prepared statement of Mr. Pallone follows:] 

PREPARED STATEMENT OF HON. FRANK PALLONE, JR. 

Thank you Chairman Pitts. I welcome today’s hearing on the Affordable Care 

Act’s required expansion of the small group insurance market and H.R. 1624, which 

instead aims to give States the option to expand. 

As everyone knows, I am a strong supporter of the Affordable Care Act-and for 

good reason. Since its passage, 17 million Americans have gained health insurance 

coverage. As a result, we’ve seen the largest reduction in the uninsured in four decades. 

The ACA has increased access and reduced financial barriers to important preventive services, such as cancer screenings and well-woman visits by requiring their 

coverage with no cost sharing. The law also stopped insurers from discriminating 

based on preexisting conditions or placing annual limits on how much health care 

they will cover. Fewer Americans are struggling to pay their medical bills and fewer 

are forgoing care because they can’t afford it. In 2015, nearly 80 percent of individuals shopping for coverage on HealthCare.gov could purchase coverage for $100 or 

less after tax credits. 

With all of ACA’s reforms, from its passage to its implementation, we have heard 

predictions that the sky was falling, yet it has not. Premiums have stabilized and 

millions of Americans are no longer one accident, injury, or diagnosis away from financial ruin. 

That said, of course, no law is perfect and there is always room for improvement. 

Historically, Congress has been able to pass technical fixes and improvements after 

major legislation. A perfect example of this is Medicare, which has continually 

evolved over the course of the last 50 years. Since 1965, we have expanded Medicare 

coverage to include mammograms and hospice care. We have learned lessons that 

convinced us to move away from fee-for-service towards alternative payment models. 

The ACA will need improvements as well, and it’s critical we ensure that the ACA 

works for everyone. 

That is why, I’m glad that my Republican colleagues are ready to put politics 

aside and look to strengthen the law. While I commend the bill’s sponsors—Reps. 

Ca ́ rdenas and Guthrie for their leadership on this important issue—I don’t necessarily agree this is the right approach. 

9 

The small-group health insurance market is in the midst of several reforms as a 

result of the ACA. The SHOP Marketplaces are still in their infancy. While these 

reforms are still underway, experts will tell us that expanding the definition of 

small employers now would add significant uncertainty into our small-group market. However, a few-year transitional delay would provide us with more appropriate 

research and actuarial data to make a smart decision at the appropriate time. I believe the benefits of an expanded small-group market such as added consumer protections and increased stability for small employers are important and achievable 

goals. So, I am concerned that H.R. 1624 is premature. 

But I am mindful of the uncertainty that comes with moving forward with the 

expansion. That is why I am pleased to view today as a turning point. As opposed 

to using the ACA as a political football through repeated, futile attempts to repeal 

or defund the law, Republicans and Democrats have come together today in a bipartisan fashion to improve and strengthen the ACA. I am hopeful this spirit can continue. 

Thank you, and I yield the remainder of my time to Mr. Ca ́ rdenas. 

Mr. CA ́ RDENAS. Thank you very much. Thank you, Chairman and 

Ranking Member, for holding today’s hearing. I truly appreciate 

the committee’s willingness to work on the bipartisan bill that 

would impact so many small businesses. And also I would, once 

again, thank subcommittee chairman Mr. Pitts and also subcommittee ranking member Mr. Green. 

H.R. 1624, the Protecting Affordable Coverage for Employees Act, 

introduced by my colleagues, Mr. Guthrie, Mr. Mullin, Ms. Sinema, 

and myself, would stop potential health insurance rate shock by allowing States to choose the size of their small group market for 

themselves. That would be an improvement on this legislation. 

As a former small business owner myself, I recognize the struggle there is to live out and provide for the American dream for our 

employees. I know how difficult it can be when a specific sector of 

small business is affected by bills and laws created by local, State, 

and Federal governments. I am grateful for all the benefits that the 

Affordable Care Act has provided since its implementation began, 

however, no law is perfect. When it was first created, Social Security didn’t cover agricultural and domestic workers. Medicaid didn’t 

begin to cover mammograms until 1991. Even with these fundamental programs of our Nation’s safety net, laws and improvements and compromise was necessary to lead to more perfect protection for Americans. 

I appreciate the committee’s willingness to hold today’s hearing. 

I look forward to advancing the PACE Act, and continuing to build 

the committee’s record of working successfully in a bipartisan fashion. 

I have been married for 23 years, and I am reminded every day 

by my wife how imperfect I am. I have been an elected official for 

19 years, and I am reminded every single day by my constituents 

how more perfect we need to make our laws. But like my marriage, 

I wouldn’t want to have it any other way. Our imperfect democracy 

is beautiful and awesome, especially when we work in a bipartisan 

fashion. 

Once again, I want to thank all of my colleagues on both sides 

of the aisle for all of your participation. Thank you. 

Mr. PITTS. The gentleman yields back. The Chair thanks the gentleman. 

10 

That concludes the opening statement. As usual, all members’ 

opening statements that are written will be made a part of the 

record, including our chairman, who is at another hearing. 

We have one panel today. Let me introduce the panel in the 

order of their presentation. 

First of all, we have Monica Lindeen, Montana Commissioner of 

Securities and Insurance and State Auditor, President of the National Association of Insurance Commissioners. Welcome. Then 

Kurt Giesa, FSA MAAA, Partner, Oliver Wyman. And Mike Kreidler, Washington State Insurance Commissioner. Your written statements will be made a part of the record, and you will be each given 

5 minutes to summarize. 

And we will, at this time, begin testimony, and I recognize Ms. 

Lindeen, 5 minutes for her summary. 

STATEMENTS OF MONICA LINDEEN, COMMISSIONER OF SECURITIES AND INSURANCE, STATE OF MONTANA, AND PRESIDENT, NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS; KURT GIESA, PARTNER, OLIVER WYMAN; AND 

MIKE KREIDLER, WASHINGTON STATE INSURANCE COMMISSIONER 

STATEMENT OF MONICA LINDEEN 

Ms. LINDEEN. Good morning, Chairman Pitts, Ranking Member 

Green, and distinguished members of the subcommittee. As you 

said, my name is Monica Lindeen. I am the elected Commissioner 

of Securities and Insurance for the State of Montana, and President of the National Association of Insurance Commissioners, and 

I want to thank you for holding this hearing on the Protecting Affordable Coverage for Employers, PACE, Act, which Vice Chair 

Guthrie, along with Congressman Ca ́ rdenas, introduced earlier this 

year. 

The NAIC represents the chief insurance regulators of the 50 

States, the District of Columbia, and 5 U.S. territories, whose primary roles are protecting consumers, and promoting vibrant and 

competitive insurance markets. As such, I come before you this 

morning to urge the immediate passage of the PACE Act which, as 

you know, would return the Federal definition of small group employers to 1 to 50 employers. 

The ACA changed the Federal definition of the small group market to include employers with 1 to 100 employees but allowed the 

States to continue defining the small group market as employers 

with 1 to 50 employees until January 1 of 2016. Beginning on or 

after this date, plans sold or renewed for employers with 51 to 100 

employees would be subject to the various small group regulations 

established by the ACA, such as essential health benefits, different 

rating pools, actuarial value requirements, different medical loss 

ratio requirements, adjusted community rating rules, and others. 

The NAIC has endorsed the PACE Act because it would retain 

State flexibility to set the appropriate limits for the small group 

market, and ensure stable small group markets that reflect the 

unique characteristics and dynamics the play in each of the States. 

If this legislation is not signed into law, a series of market disruptions could occur. And before I enumerate, I want to be clear 

11 

that the impact will vary by State, which is why defining the small 

group market should be left to the States, especially since the legislation does not prevent them from changing the definition to include all employers with 1 to 100 employees as they see fit. 

First, failure to pass the Act would subject employers with 51 to 

100 employees, or midsized employers, to new rating restrictions 

which could result in significant premium increases for some 

groups. Second, employers with 51 to 100 employees would face additional benefit requirements and cost-sharing restrictions, which 

would reduce benefit flexibility and could increase out-of-pocket 

spending. Midsized employers have typically had greater flexibility 

in rates and benefit options to choose from. Without this flexibility, 

midsized employers will have to seek out new plans that meet the 

essential health benefit benchmark and actuarial value requirements, which could also increase premiums. Lastly, these regulations could lead some employers with younger and/or healthier employees to self-insure as a way of avoiding higher premiums and 

limited coverage options, which could result in adverse selection in 

the small group pool. This, in turn, could increase premiums for 

employers with 1 to 50 employees. 

As you know, the U.S. Department of Health and Human Services has offered a transition option, by publishing guidance that 

they will not enforce certain small group market regulations for existing health plans provided by employers with 51 to 100 employees 

if the plan is renewed on or before October 1 of 2016, effectively 

staving off the new regulations until October 1 of 2017. 

The NAIC surveyed all 50 States and the District of Columbia, 

and most responded that they will be utilizing this transition option. Nevertheless, we believe a more comprehensive fix provided 

by this legislation is necessary in order to preserve coverage options for existing and new purchasers, and ensure stability for the 

future. 

The NAIC encourages Congress to act quickly. Most midsized 

employers shop for coverage annually to ensure the best price for 

themselves and their employees, but they need final rates and 

product information by late September in order to make these decisions and carry on with the preparing of employee communications, 

open enrollment materials, and the actual conducting of open enrollment in advance of the effective date. Those employers who may 

be new entrants into the market in 2016 also need to know what 

options will be available to them, so quick action would avoid unnecessary confusion and disruption as we move into 2016. 

For all the reasons I have articulated this morning, the NAIC 

strongly supports immediate passage of the Act, and thank you, 

and I would be happy to answer any questions. 

[The prepared statement of Ms. Lindeen follows:] 

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Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

Mr. Giesa, 5 minutes for your summary. 

STATEMENT OF KURT GIESA 

Mr. GIESA. Thank you, Congressman Pitts, Ranking Member 

Green, and distinguished members of the subcommittee for allowing me to speak with you today regarding the impact that changing 

the definition of small employer may have on the market for health 

insurance. 

My name is Kurt Giesa. I am a fellow of the Society of Actuaries, 

a member of the American Academy of Actuaries, and a partner at 

Oliver Wyman Actuarial Consulting. 

Starting in 2016, the Affordable Care Act expands the definition 

of small employer to include midsized employers. Historically, no 

State, nor the District of Columbia, nor the Federal Government, 

has adopted a definition of small employer for the purposes of 

health insurance, which includes employers with more than 50 employees. The ACA permitted States in 2014 and 2015 to expand the 

definition of the small group market to include midsized employers. 

States considered this possibility but no State elected to do so. 

States have recognized that the health insurance market for 

midsized employers has generally functioned well, and also that expanding the definition of small group could be harmful to the market where small employers currently purchase health coverage. Expanding the definition of small employer will mean that issuers 

will have to apply the rules and regulations that apply to small 

groups to midsized employers as well, including those related to 

benefits, actuarial value, and most importantly premiums. 

Currently, issuers are allowed to set premiums for midsized employers based on actuarial considerations, matching premiums to 

expected costs. Under the ACA, health plans must use modified 

community rating with limited adjustments in setting premiums 

for small employers. These rules mean that younger, healthier 

midsized groups will be asked to pay more for health insurance 

than they had been paying, and that groups that are older and less 

healthier will pay less. In addition, starting with the 2016 plan 

year, the claims experience of small and midsized employers will 

be pooled in developing premiums. It is important to note that 

these rules only apply to fully insured plans. Self-funded employers 

are not subject to these requirements. I expect the number of 

midsized groups that self-fund will increase if the definition is expanded, which, in turn, would lead to premium increases in the expanded market. 

To better understand this dynamic, I performed an analysis on 

behalf of the Blue Cross Blue Shield Association using data from 

health insurance issuers that I consider to be representative in the 

way they set premiums for midsized employers. Specifically, I compared the premium rates these issuers were charging their 

midsized employers to the premium rates they will have to charge 

in 2016. I found that 64 percent of midsized group members would 

see their premiums increase, and the average premium increase 

would be 18 percent as a result of the ACA’s rating rules. Midsized 

employers group with the highest increases, that is, the youngest 

18 

and healthiest groups, are those most likely to exit the market, either by dropping coverage entirely or by self-funding. 

It is not possible to predict exactly which groups are likely to 

leave, but one reasonable assumption is the groups facing an increase of 10 percent or more would leave the fully insured market. 

That would mean that about 40 percent of individuals who currently obtain their insurance through a midsized employer would 

no longer be part of the fully insured group market. 

After the healthiest midsized groups leave the market, the new 

combined market will be composed of the current small groups, and 

older, sicker midsized groups. We estimate that this could result in 

premium increases for small employers in the 3 to 5 percent range. 

In other words, rather than lowering prices by pooling small and 

midsized firms, this expansion could increase the average cost of 

insurance for small firms. These estimates are first-year estimates 

and likely to worsen over time as costs increase, and more small 

and midsized firms drop coverage. 

Affordability and stability are the central challenges in the 

health insurance market today. As healthcare costs continue to outpace inflation, small firms have found it more and more difficult to 

provide coverage. Congress could avoid adding to these costs, and 

could provide stability to midsized employer groups by allowing 

States to define what constitutes a small employer for the purpose 

of providing health insurance. But in order for this to be effective, 

this change would have to be made relatively quickly. One third of 

midsized groups renew their coverage January 1, and these groups 

are in the process of planning for 2016. They will soon have to 

begin selecting a funding vehicle, developing communications, setting contribution rates, and conducting open enrollments, so time 

is very tight. 

Thank you, and I look forward to answering your questions. 

[The prepared statement of Mr. Giesa follows:] 

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Mr. PITTS. The Chair thanks the gentleman and now recognizes 

Mr. Kreidler, 5 minutes for your summary. 

STATEMENT OF MIKE KREIDLER 

Mr. KREIDLER. Good morning, Mr. Chairman and Ranking Member Green, and other members of the subcommittee. Thank you for 

the opportunity to talk about the impact H.R. 1624 will have on 

Washington State’s small business health insurance market. 

My name is Mike Kreidler. I am the elected Insurance Commissioner for the State of Washington. I am also the longest-serving 

insurance commissioner in the country. 

I am here today on behalf of the people of the State of Washington. I am pleased to report that the Affordable Care Act is working in our State. Before the Affordable Care Act, we had almost 1 

million people without health insurance. Today, that is down 

from—and now we are at 14 percent. Today, it is down to 8.5 percent; almost a 40 percent drop going back and the lowest point that 

we can go back and find measurements for. 

Steady improvements are also taking place in our small employer 

market. Enrollment is increasing. More insurers are entering the 

market. Rates are going down. We had 8 insurers in our small employer market in 2012. Today, we have 12; a 50 percent increase. 

Enrollment in our small group market has grown from 108,000 

people in 2013 to 125,000 today. All but one health insurer that 

came for submission for rates for 2016 asked for decreases rather 

than increases. Our largest insurer, Regence Blue Shield, asked for 

a 13.8 percent decrease for 2016. A big part of that decrease is the 

anticipation of the employer size expanding to 100. Insurers are 

counting on better risks joining the market. 

Making a change, as 1624 proposes, so late in the game will be 

very disruptive to the market in the State of Washington. Insurers 

have already filed for 2016, so they would have to modify their 

plans and rates. Even though they can do it on a quarterly, it 

means an adjustment in midyear after they received a promise, 

and most likely, it would be going up. 

Employers and their employees would lose access to the essential 

health benefits guaranteed under the Affordable Care Act. In other 

words, they get better coverage. Older employees would not be protected from rating disparities. 

I understand that Washington State may be further along than 

other States in the implementation of reforms and that our experience may be different than others, but I know that we all share a 

common goal of improving health insurance market for small business. For too long in our State, we have seen a death spiral for the 

small group market. Now, we are seeing improvements. Increasing 

competition, lower rates, growing enrollment are signs of market 

reforms can work. 

Nearly 70 percent of our small businesses are in the 1 to 50 employer group. They will benefit by bringing in larger employers. 

Some States may need more time to implement these reforms, 

but this bill is not the solution. If it had been started a year ago, 

it would have been much less disruptive. If we delay, it would even 

be better, but certainly not this approach. It puts the burden back 

on the States to implement change that is already in motion, and 

32 

would significantly harm the market that is just starting to improve. The Affordable Care Act is working, and we are beginning 

to see real improvement for small employers. Changing course now 

would undermine our progress and significantly disrupt our market. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Kreidler follows:] 

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Mr. PITTS. The Chair thanks the gentleman. 

That concludes the opening statements. We will begin questioning. 

I will begin the questioning. Recognize myself 5 minutes for that 

purpose. 

Commissioner Lindeen, the bill we are discussing today, H.R. 

1624, would reverse a policy in current law and allow the States 

to continue defining the small group health insurance market as 

employers with 1 to 50 employees. Would you please explain how 

many employers and employees across the country could face higher premium costs if this bill were not passed by Congress in the 

coming weeks? 

Ms. LINDEEN. Mr. Chairman, thank you for the question, but I 

would have to tell you that I do not have that answer for you 

today—— 

Mr. PITTS. All right. 

Ms. LINDEEN [continuing]. And, in fact, I am not even sure that 

I can give you an answer to that question. 

Mr. PITTS. Mr. Giesa, do you have any response to that? 

Mr. GIESA. I think I can help a bit. The best information we have 

on these questions you are asking comes from the insurance component of the MEP Survey, and MEPS shows that we have about 1.8 

million establishments, not firms but establishments, the difference 

being physical location versus legal entity, 1.8 million establishments that would be affected by this legislation, and about 12 million employees and—including dependents, you would essentially 

double that, so about 24 million people we would be talking about 

being impacted by this legislation. 

Mr. PITTS. OK, thank you. 

Commissioner Lindeen, would you please explain the practical effect of what would happen in your State of Montana if this bill 

were not passed by Congress in the coming weeks? What types of 

cost increases would Montanans face? 

Ms. LINDEEN. Thank you again, Mr. Chairman. Certainly, if this 

piece of legislation were not passed, we are very concerned in Montana that we would see some adverse selection occur in the small 

group market, which would obviously then increase costs to those 

employers with employees between 1 and 50. Certainly, with the 

increased regulatory burdens on those groups between 51 and 100, 

we really do see that there would be more of those employers in 

that midsized group who would, especially if they had healthier, 

younger employees, look for other options. And one of the options 

that is certainly much easier to obtain these days is self-insurance, 

as a result of the stop loss coverage. So definitely, we would see 

adverse selection to the smaller group, and increased costs for 

those folks. 

Mr. PITTS. Do you believe that if H.R. 1624 passed Congress and 

was signed by the President, that consumers would have fewer 

meaningful protections than they do today? 

Ms. LINDEEN. I am sorry, could you please repeat that? 

Mr. PITTS. Do you believe that if this passed Congress, was 

signed by the President—— 

Ms. LINDEEN. Um-hum. 

38 

Mr. PITTS [continuing]. That consumers would have fewer meaningful protections than they do today? 

Ms. LINDEEN. No. 

Mr. PITTS. No. Would you please explain why the National Association of Insurance Commissioners has been so supportive of this 

bill when you have some State insurance commissioners suggesting 

there is no need for the bill in their State? 

Ms. LINDEEN. Mr. Chairman, I certainly respect the opinions of 

all the commissioners in every single State, and my colleague from 

Washington is no exception. Just let me say that the States have 

all different markets, and we understand that what works in Montana does not necessarily work in Washington, and vice versa, and 

that is why it is really important that we have the flexibility to 

make those decisions at the State level. 

Mr. PITTS. OK, I think you and I thank Mr. Giesa said, under 

current law, the premiums for midsized employers with a younger 

population would go up significantly, and this troubles me since 

this could be viewed as a disincentive for offering coverage to 

younger workers. Would you care to comment on the types of premium increases younger workers could anticipate? Either, or Mr. 

Giesa. 

Mr. GIESA. Well, based on—— 

VOICE. Put your mike on. 

Mr. GIESA. As I said, in our work we saw that 64 percent of employees would be members of groups that would see an average 

rate increase of about 20 percent. And if you think about employees 

that see, essentially, 40 percent of employees would be in groups 

that would see increases 10 percent or more, and those would average well over 20 percent. 

Mr. PITTS. Just talk briefly, I don’t have any time left, why it is 

important for Congress to act quickly, and also why there is time 

left. 

Mr. GIESA. Well, the important thing here is small employer—or 

midsized employers right now are in the process of planning their 

2016 benefit year. A third of the small employers renew their coverage January 1. And these employers right now are in the process 

of deciding on their funding vehicle, they are thinking about what 

kind of communication materials they will have to put together, 

what the contribution rates will be, and not only that, but the carriers need time to get all these types of materials in place as well. 

Mr. PITTS. Thank you. My time has expired. 

The Chair recognizes the ranking member, Mr. Green, 5 minutes 

for questions. 

Mr. GREEN. Thank you, Mr. Chairman. And again, welcome to 

our panel. 

Historically, after passing any large piece of legislation, Congress 

has worked together to enact technical fixes and improvements because no law is perfect. And, in fact, I often say if you want perfection, you don’t come to a legislative body, simply because we do 

things that can boggle our mind. Although following—Congressman 

Ca ́ rdenas is not here, but we know the only thing—perfect thing 

we can do is when we got married, for our wives. But—and I hope 

my wife is watching. 

39 

The Affordable Care Act has been an exception to this tradition 

and serving as a political football for the last 5 years. And we 

haven’t done the meaningful tweaks and changes that we should 

do, but today, it seems like it is a starting point, and we are here 

to adjust one small but important aspect of the law. Clearly, the 

small group market is an area where Congress can do a great deal 

to help small businesses, employers, and employees who work for 

them. 

Commissioner Kreidler, in your testimony you stated that the 

small group market has been in a death spiral. Can you describe 

the challenges small business owners have been facing in purchase—purchasing health insurance for their employees, and that 

larger employers do not face? 

Mr. KREIDLER. Thank you, Representative Green. The big difference here is that, for a small employer before the ACA, you were 

having adverse selection from the standpoint that they more likely 

were going to have sicker people inside the community-rated small 

group market, and as a result of that, the cost for that insurance 

continued to rise. Outside, and with a large employer that was selfinsured, you found that they offered broader benefits. Now, that 

was a real disadvantage then for small business to be able to compete with larger employers because they had a richer package with 

the large employer than what they could afford to offer, even in 

comparison to what that—on a per capita basis what that large 

employer would have. So it presented some real challenges going 

forward. And we are starting to see some real relief to that now 

by having this larger group come in, 51 to 100, you are making it 

a much more compatible community-rated pool that is going to 

have the wealth of experience from some larger midsized, along 

with the small. It is going to be good for small business. 

Mr. GREEN. OK. We just heard from Commissioner Lindeen talk 

about the impact of the law—this law—or bill in Montana. Can you 

talk about the impact you think it would have in Washington 

State? 

Mr. KREIDLER. Well, I certainly can. One aspect of it is the—are 

the filings that we received for 2016 all have to be compliant with 

the—to the 1 to 100. So we have the large group—midsized group 

being melded with the small group market right now. And we are 

seeing, out of the 12 insurers in the market, all but 1 of them came 

and made a request—made the request, I haven’t made a decision 

yet, but made a request to have lower rates, as much as 16 percent. 

So we are seeing a significant decrease in the market, largely 

based on these midsized employers which offer some—make it a 

much more stable small group market by virtue of their size, and 

already the insurers are responding and saying we think we can 

offer insurance at a better price, more comprehensive coverage 

than what they have seen in the past. 

Mr. GREEN. Can you describe some of the provisions of the ACA 

that aim to reduce the burdens on small businesses? Anything the 

ACA has done to help the small businesses. 

Mr. KREIDLER. You know, I think that the major thing here is, 

by having a common set of benefits, that is the essential health 

benefits and how they are applied, by virtue of having that in 

place, it has really meant that you have been successful in starting 

40 

to develop a much more level playing field. And we are finding that 

for small employers, for the first time, now they are going to be in 

a position to be much more competitive with large employers, both 

for attracting and retaining employees, but also that the costs to 

them are being mitigated to the point where it is not a marked disadvantage for the small employer up against the big, self-insured 

employer. 

Mr. GREEN. OK. My last question. Given that the small group 

market is still evolving, some States have expressed concern that 

expanding to include larger employers, as the ACA requires, is premature and could create turmoil in the market. How would you respond to those concerns about the expansion? 

Mr. KREIDLER. Well, every State is different, and you have certainly heard that from Monica Lindeen, and I am not going to second-guess their position on that from other States. I understand it 

is very different. I am familiar with one State, and that is my own 

State. In our State we are ready, and we are going to go forward 

and we are going to be able to make significant changes. 

I would suggest that, without hampering my ability and the 

State of Washington to bring in the 51 to 100 being added, at least 

offer a delay for 2 years. That would make a lot more sense, and 

I think there has been broad support for that, to have a delay rather than eliminating that option. I think in the long run, by virtue 

of the 51 to 100, whether it is a couple of years out or whether it 

is today, it is going to have a marked improvement for small business, that it only advantages them. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the vice chairman, Mrs. Blackburn, 5 minutes for 

questions. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

Mr. Kreidler, I have to tell you, if you were going with me in my 

district, people would not be agreeing with you. They don’t see this 

as an advantage, the see it as a burden, and more regulation and 

more interference, and they are just really not happy with what 

they are being left to deal with. 

Mr. Giesa, I want to come to you on something. Commissioner 

Lindeen mentioned, when the chairman asked her what people 

would do if they are booted out of the marketplace, she said they 

will self-insure. So let’s go back and let’s look at some of this, because you have some proponents of the small group expansion, that 

market expansion, saying that is going to help to moderate the 

cost, and then you have the report that came from the Academy of 

Actuaries, I think is—yes, that said the premiums will increase because of the less attractive risk that comes in. So I would like to 

get your take on that. What do you think is actually going to be 

what finally hits the market? What is the impact that we are going 

to see? 

Mr. GIESA. Congresswoman, thank you for the question. And recognizing the fact that Commissioner Kreidler knows his market 

much better than I do, I can’t speak to a given market, but what 

I can say is in my experience across—— 

Mrs. BLACKBURN. Yes, I am asking for a general overview. 

41 

Mr. GIESA [continuing]. Across most States is that we will see, 

as a result of the rate increases, that the young, healthy midsized 

employers will see—when the ACA rating rules are put in place, 

we will see a number of employers choose to self-fund. It is an option that self-employer—that midsized employers do have now, and 

it is one that they will have much more incentive to pursue when 

the ACA rate restrictions are put in place. 

Mrs. BLACKBURN. And when you are looking at that midsized 

market, do you think that this is going to make them more or less 

competitive? What is going to be the end result for them? 

Mr. GIESA. I don’t think it will have a major impact on the—— 

Mrs. BLACKBURN. OK. 

Mr. GIESA [continuing]. Competitiveness of—— 

Mrs. BLACKBURN. OK. 

Mr. GIESA [continuing]. Groups. 

Mrs. BLACKBURN. OK. Commissioner Lindeen, you want to 

weigh-in on either of those questions? 

Ms. LINDEEN. Well, definitely, I would concur that those employers who do have the younger, healthier groups are going to look at 

the option of self-insuring. It really has become much more attractive and easier for these employers in that range to look at selfinsurance because the stop loss insurers have made it easier. They 

have lowered those attachment points to a point where there is 

minimal risk for the employer, they don’t have to have a large 

amount of money or cash upfront in order to self-insure, and so for 

that reason it is definitely something that is more attractive. If 

they are allowed to continue as they are, I think you will see them 

continue to purchase in the way that they have been because, certainly, it has been working for them. We haven’t gotten a lot of 

Complaint. 

Mrs. BLACKBURN. All right. Let me ask you—— 

Ms. LINDEEN. Um-hum. 

Mrs. BLACKBURN [continuing]. One other question before my time 

runs out. When you were talking to employers in your State, and 

they are discussing the uncertainty that is embedded, and some of 

the points that you made in your remarks, what is the number one 

thing that employers complain about when they come in? Is it cost, 

is it access, is it uncertainty, is—what are the variables, and what 

do they complain about? 

Ms. LINDEEN. Congresswoman, thank you for the question. I 

think that uncertainty is the biggest concern that most employers 

have. I think that once we all know what he rules are and can play 

by those rules, it makes it much easier to make decisions moving 

forward. 

Mrs. BLACKBURN. Great, thank you. 

Mr. PITTS. The gentlelady yields back. The Chair recognizes the 

ranking member of the full committee, Mr. Pallone, 5 minutes for 

questions. 

Mr. PALLONE. Thank you, Mr. Chairman. 

I wanted to ask my questions of Commissioner Kreidler. Good to 

see you again. In addition to the many reasons I mentioned in my 

opening statement, I support the Affordable Care Act because of its 

positive impact on small businesses. Before the ACA, I heard from 

small businesses in my district that they were on their own, they 

42 

wanted to provide health insurance for their employees but it was 

too risky or too expensive, or too difficult to administer. Now, the 

SHOP Marketplaces created in the ACA would give small businesses a new tool that lets them research and compare the health 

insurance options in one place, and administer their employees’ 

health care through the Web site. And the ACA gave small business owners more peace of mind because, by joining a much bigger 

risk pool, they would no longer be vulnerable to sharp swings in 

their rates based on the health of a few employees. And that is why 

I was concerned about the rocky start to the SHOP Marketplace, 

but it also why I believe we should give the small group market 

a chance to stabilize and then expand to groups of 100 or fewer employees. 

So, Commissioner, is it safe to say that one of the goals of the 

new definition of small group insurance in the ACA was to expand 

consumer protections of the small group market to additional 

Americans? 

Mr. KREIDLER. Thank you, Congressman. Definitely, that is one 

of the goals is to expand protections, both for the employer, but 

also for their employees. And the Affordable Care Act, with the essential health benefits, provides that in 51 to 100 by being melded 

into the community-rated pool for small business of 1 to 100. 

Mr. PALLONE. Now, would adding more larger employers to the 

small group marketplace help with the sustainability of the SHOP 

Marketplaces? 

Mr. KREIDLER. From my perspective, definitely. I mean that is— 

we have looked at the filings that have come in, and like I say, we 

have had double digit rate increases from the largest insurer in 

that market. The—what are the reasons. We take a look at their 

actuarial assumptions, and their assumptions are largely hedged 

on the concept here that by bringing in 51 to 100 to the community-rated small group market of 1 to 50, that you improve the vitality of that overall market. So, yes, it improves the health. 

Mr. PALLONE. OK. And as we know, before the ACA, insurers in 

the small group market were not required to offer essential health 

benefits. Has requiring these insurers to offer essential health benefits, such as emergency room visits, prescription drug coverage, 

has that caused turmoil in the small group market thus far? 

Mr. KREIDLER. Speaking for the State of Washington, no, it has 

not, Congressman, presented a challenge for those small employers. 

In fact, we saw that the carriers had already started to move aggressively toward the merger of 51 to 100 in—that size to the plans 

that they were offering. They were already taking on many of the 

aspects of what they were going to be required to have as of January 1, of 51 to 100. So it was already starting to take effect so it 

was not that disruptive. It is relatively smooth in the State of 

Washington. Can’t speak for other States and other markets. State 

of Washington, it was one where they were prepared in moving forward successfully. 

Mr. PALLONE. Thank you. You mentioned that most of the health 

insurers in Washington State’s small group market have actually 

requested rate decreases. Can you describe Washington’s experience implementing the small group insurance reform thus far? 

43 

Mr. KREIDLER. So far, we work with stakeholders before we made 

the decision. We could have postponed this until October of ’16, but 

working with stakeholders, we made a decision not to do that. So 

we are looking—after working with them, I think it is one where, 

working with the stakeholders, we were prepared to do it, particularly the insurers. And again, we have 12 insurers now in the State 

of Washington in the small group market, which is a very strong 

indication, a 50 percent increase with the start of the Affordable 

Care Act, that there is real interest in that market and there is opportunity, and that is good for small business. 

Mr. PALLONE. Now, you mentioned 12 insurers offering coverage, 

how many of them filed to increase rates? 

Mr. KREIDLER. One. 

Mr. PALLONE. Just one? And what effect do you think the expansion of the small group market will have on these rate filings? 

Mr. KREIDLER. I think what most likely would happen, Congressman, is this, that if this legislation passed, these carriers would 

need to come back and adjust their rates, and if not their forms, 

which are the policy language itself, and do so after the first quarter. We have never allowed first quarter. We like to tell small business that this is the price you are going to have for a full year, so 

we have never done it on a quarterly basis, but this would be the— 

we would be prepared to do that, but inevitably, what it would 

mean is a price increase for them. And I don’t want to be the one 

they point to and say how come you allowed this price increase to 

go through, and I says, well, after Congress passed 1624, I had no 

other choice but to allow you to raise your rates because you didn’t 

have the benefits of 51 to 100 to help hold down the rates. 

Mr. PALLONE. All right, thank you so much. 

Mr. PITTS. The gentleman yields back. 

The Chair recognizes the chair emeritus of the full committee, 

Mr. Barton, 5 minutes for questions. 

Mr. BARTON. Thank you. Thank you, Mr. Chairman. Thanks for 

this hearing. 

As I understand it, if you have, under current law or old law, 50 

employees or less, you don’t have all the mandates and you basically set your insurance—health insurance for your employees 

based on what you can afford and what you think the market is, 

but under the redefinition, if you define small business from 100— 

from 50 and go up to 100, then there are all these mandates that 

kick in. Is that correct, Ms. Lindeen? Do I understand that correctly? 

Ms. LINDEEN. Congressman, I would say that if this proposed 

legislation is not passed and the existing law kicks in, you will see 

additional regulatory requests or burdens put on the small businesses. 

Mr. BARTON. But I am correct in that, under the old system, 50 

employees or less, you basically—if you decided to have a health insurance plan for your employees, it was one that you developed in 

conjunction with the employees and whatever insurance company 

you happened to pick. 

Ms. LINDEEN. Yes, I would say that they definitely do work with 

the insurance provider to negotiate the plan and the product. Yes. 

44 

Mr. BARTON. And under the Affordable Care Act, the definition 

changes, small business to 100, but you also get a lot of mandates 

that you don’t currently have. Is that not correct? 

Ms. LINDEEN. Yes. 

Mr. BARTON. Now, Mr.—is it Kridler or Kreidler, or—— 

Mr. KREIDLER. Kreidler. 

Mr. BARTON. Kreidler. I am sorry, Mr. Kreidler. 

Mr. KREIDLER. Yes. Not at all. 

Mr. BARTON. In Washington State, there is nothing that would 

preclude a small business from trying to join a larger group plan, 

is there? I mean, absent the mandate, if you felt it was in your best 

interest of your employees to go into a pool with larger employers, 

there is nothing that precludes that. 

Mr. KREIDLER. That is true. We do see some employers that wind 

up doing that, in fact, Congressman. 

Mr. BARTON. OK. So the fact that—I mean, the law has changed 

and the implementation date is 2016, and in your State, it sounds 

like you all have done a very good job of trying to fast forward the 

new law, and it appears that it is providing some benefits because, 

apparently, they are getting better rates because you are spreading 

the risk amongst a larger number of workers. Is that not correct? 

Mr. KREIDLER. Congressman, that is correct. It becomes a larger 

pool—community-rated pool—and, therefore, you have the benefits 

of having more insured, and much less subject to having price increases—— 

Mr. BARTON. Right. 

Mr. KREIDLER [continuing]. Just because some people get sick. 

Mr. BARTON. So it would seem to me that if we pass Congressman Guthrie’s legislation that kept the definition at 50, you would 

have the best of both worlds. You would let employers that felt like 

their current plans were as much as they could afford, they could 

keep it, but you would also let employees and employers who felt 

like, well, we will get a better deal if we go into these risk pools 

that have more people, they could still do that, but they wouldn’t 

have to do it. They wouldn’t have to comply with the mandates 

that go with moving up. So I don’t know why we wouldn’t pass the 

bill to let the market operate and let people choose. What is wrong 

with that? 

Mr. KREIDLER. Congressman, I would say that 51 to 100, that it 

heightens their protections from the standpoint of the Affordable 

Care Act, particularly when it comes to age discrimination. You can 

have an employer with a much younger workforce that can offer 

health insurance at a much better price. If you go into a community pool, you have that all aggregated, you help to protect the 

more—— 

Mr. BARTON. I understand that. 

Mr. KREIDLER [continuing]. Older workers, which is really very 

much to their advantage, otherwise you have—— 

Mr. BARTON. There are—what you say is true. I am not arguing 

what you are saying is not true, but what I say is also true. If you 

let the market operate, you can get the benefits of larger pools if— 

but it should be done on a case-by-case basis because in many 

cases, the mandates in the Affordable Care Act do cost more 

money. There is no question about that. If you go from a plan that 

45 

doesn’t have all the coverage requirements to a plan that has more, 

it is going to cost more and you are going to pay more. Now, there 

may be anomalies and there may be cases like Washington State 

where just the local situation is such that the benefits of consolidation or accumulation, or aggregation, whatever you want to call it, 

overcome the increase in cost in the mandates. But I would postulate, and in my State, like Texas, probably it is going to cost more 

overall. So I am supportive of the bill, and I hope, Mr. Chairman, 

that at some point in time we move the bill. 

And my time has expired, so I yield back. 

Thank you for your answers. 

Mr. PITTS. The Chair thanks the gentleman. 

The Chair recognizes the gentleman from Oregon, Dr. Schrader, 

5 minutes for his questions. 

Mr. SCHRADER. Thank you, Mr. Chairman. I appreciate it. And 

actually, I appreciate having the hearing on this bill. A good bipartisan bill that I think there is honest discussion about the pros and 

cons for the employer groups of 51 to 100, and then those groups 

underneath it, and how best to hopefully drive down costs and provide better health care for Americans, both the employers, employees, and writ large. So it is a good hearing. I am here to learn, actually. 

And to that end, I guess just to get us some basic facts, I think 

that one of you were talking about there is 1.8 million employers 

in that 51 to 100 range, I think. Is that correct? 

Mr. GIESA. Right. There is 1.8 million employers in that 51 

to—— 

Mr. SCHRADER. Establishments. 

Mr. GIESA [continuing]. 100 range that are—right, establishments, that are providing health insurance right now. 

Mr. SCHRADER. And then so how many would—employers would 

there be below that, in other words, 50—to up 50 employees, the— 

what is the number there? I would assume be in the 40 million 

range, right, because most employers are small employers? 

Mr. GIESA. Did you say employers—— 

Mr. SCHRADER. Yes. 

Mr. GIESA [continuing]. You are asking for? 

Mr. SCHRADER. Yes. 

Mr. GIESA. Yes, that is almost 90 percent of employers are in 

that—— 

Mr. SCHRADER. Right. 

Mr. GIESA [continuing]. 1 to 50. 

Mr. SCHRADER. Right. So then the question for us, I guess, a little bit would be, you know, to the point of we expand the risk pool 

writ large, it would sound like those smaller businesses might get 

some decrease, obviously, in premiums, and, obviously, the guys 

that haven’t had to play with the rate—the rating issues and some 

of the others would see some slight increases. And I guess the debate for us is, is that enough of a critical mass to reduce things significantly for the one group to offset the slight increases perhaps 

for the other group. 

A lot of my experience has been, like Washington, I come from 

Oregon, most—certainly, the individual market, we had all of the 

essential health benefits already required and, you know, a lot of 

46 

the small groups are already going that way. And we also had most 

of our insurers come in asking for rate decreases. It is controversial 

whether it is good to do that right now from the standpoint of making sure the business market is active and engaged. So there are 

a number of States, I guess, for my colleagues’ benefit that are, you 

know, seeing some of the same things that Washington State is 

seeing also. 

And I just want to—Mr. Kreidler, will you agree everyone seems 

to be pretty on target here, that the accepted definition of a small 

group market employer was under 50 employees? Would you agree 

with that? 

Mr. KREIDLER. Correct. 

Mr. SCHRADER. OK. So the ACA arbitrarily changed that, is— 

make a fair statement. And I won’t ask you guys that, but—— 

Mr. KREIDLER. Right. 

Mr. SCHRADER. And I assume that the reason for that was to 

make sure that there was enough critical—well, I will make this 

statement and you guys react to it. A critical mass to keep the insurance rates as reasonable as possible for smaller-type employers, 

realizing there would be some adverse selection. Mr. Kreidler first, 

if I could. 

Mr. KREIDLER. Absolutely. That was the purpose. I think the real 

question is, is the timing. Don’t remove the requirement. Maybe 

postpone it for a couple of years, but—to give some States more of 

a time to kind of gear up for this, and their insurers to gear-up for 

that market. But from the standpoint of some States that are prepared to do it today, don’t take that away from them, essentially 

throwing us back to the legislature to try to get approval. If we 

want to be successful with reforms, you need to have these kind of 

changes going into effect. Some States can do it sooner, like the 

State of Washington and the State of Oregon, but other States are 

going to want to buy more time before they make the jump. But 

the jump is a good one for healthcare reform and for the small 

group market. 

Mr. SCHRADER. How about Mr. Giesa and Ms. Lindeen? 

Ms. LINDEEN. Congressman, if I could, I mean I—theoretically, 

expanding the risk pool should drive down rates—— 

Mr. SCHRADER. Right. 

Ms. LINDEEN [continuing]. But in this case, that is not necessarily true because when you take the 51 to 100 employers who 

have healthier, younger employees, and they leave that group and 

then instead leave older, less healthy employees, then they are 

going to have adverse risk, which is not going to lower rates—— 

Mr. SCHRADER. Well, that would—— 

Ms. LINDEEN [continuing]. But it is actually—— 

Mr. SCHRADER. That would be true in any size business, including—— 

Ms. LINDEEN. Correct. 

Mr. SCHRADER [continuing]. The small businesses. And as I am 

saying, I haven’t seen that in my State, and it is not like we are 

seeing that in Washington, either. But I can see where it would 

vary State-by-State. 

Ms. LINDEEN. Right. 

47 

Mr. SCHRADER. You know, one of the big variables is the essential health benefits that our States primarily—I guess another 

basic question from me would be, Why do you think large group 

employers and self-insurers were left out of the essential health 

benefits package? Why were they not required to have the same essential health benefits? I have my ideas, but you would be more informed than I. 

Ms. LINDEEN. Well, it is my—I don’t believe it was actually needed—— 

Mr. SCHRADER. OK. 

Ms. LINDEEN [continuing]. And that is why. 

Mr. SCHRADER. That makes sense. 

Mr. GIESA. I would concur with that. 

Mr. SCHRADER. Yes. Mr. Kreidler, same thing. 

Mr. KREIDLER. I think you have to move eventually to having 

them included. It is just going to be a process over time. Part of 

it right now is going 51 to 100, for some States that are ready, 

delay it but don’t eliminate the requirement. Give a couple more 

years for the markets to mature and be able to handle the kind of 

change. We are ready in the State of Washington. Oregon is in a 

comparable position. Other States are ready to go right now. But 

I think for the sake of the country, don’t eliminate it but postpone 

it so that you can still have the benefits here of giving more people 

the better protections that helping to bring down the cost, particularly in this case for small business. 

Mr. SCHRADER. Thank you all. 

I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the vice chair of the subcommittee, Mr. Guthrie, 

5 minutes for questions. 

Mr. GUTHRIE. Thank you, Mr. Chairman. And before I begin, I 

would like to ask unanimous consent to enter into the record the 

following letters of support for H.R. 1624: 50 to 100 Coalition, 

America’s Health Insurance Plans, NFIB, National Small Business 

Association, National Association of Insurance and Financial Advisors, National Association of Professional Insurance Agents, Council for Affordable Healthcare Coverage, Blue Cross Blue Shield Association, Delta Dental, Kentucky Chamber of Commerce, and U.S. 

Chamber of Commerce. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. Let me add to that list letters from the American 

Academy of Actuaries, National Association of Insurance Commissioners, the Center for Insurance Policy and Research, talking 

points from the Council for Affordable Health Coverage, and issue 

briefs from Third Way, the American Academy of Actuaries, and 

the National Institute of Healthcare Management. 

VOICE. And this HHS Data. 

Mr. PITTS. And the HHS HRQ MEPS Data. 

VOICE. For Washington State. 

Mr. PITTS. For Washington State. 

OK, without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

48 

Mr. GUTHRIE. OK, thank you. Thank you so much, and thank 

you all for being here. I am the main sponsor of the bill, and with 

the bill, some of the things that—maybe some of the criticisms of 

the bill I think have been addressed. Working with my good friend, 

Mr. Ca ́ rdenas from California, Kyrsten Sinema, working with 

Markwayne Mullin, and we have looked at that. Some States are 

ready. So there is a provision in the bill for States to move forward 

if they so choose to move forward. And so that seems to take care 

of one of the concerns. The other one is just delay it. And I spent— 

like my friend from Tennessee, I spent a lot of time in my district 

back in August meeting businesses, and every time you go into a 

business it is not just insurance, it is the way we seem to be governing here; everything is on an extension, a delay, a waiver. I 

think one you suggested there, say we are just not going to enforce 

the regs if you move forward. The regs are on the books, we are 

just not going to enforce them. And that is not a good way to do 

business. And people plan more than year-to-year on investment 

and growing their business. And so, you know, putting this into 

place, I think what’s critical is to get rid of the uncertainty. And 

also one of the—I guess I will ask Mr. Giesa this: So if you are a 

fully ACA-compliant plan, rate restrictions, essential health benefits, community rating, minimum actuarial values, your price is 

going to be higher—it will be a high price. And so if you go before 

the Insurance Commissioner and you are saying you are going to 

get all these new businesses on, you probably—I mean I think it 

makes sense that your rate is not going to go up or increase, because you are looking at new customers mandated by the law. But 

if you are in that 51 to 100 where we are trying to address, if you 

are in that and you are offering a health benefit plan that you like, 

you know, the President said if you like it you can keep it, your 

employees like, it is moving forward, you are going to—because the 

high rate of insurance didn’t go up doesn’t mean your premium is 

not going to—and cost is not just going to go up because you are 

having to buy up to a higher plan, and that is what we are trying 

to address in this bill. Could you comment on that? So it is not different from what we are hearing from Washington State, I don’t 

think, but it still disrupts 51 to 100 employers. 

Mr. GIESA. Well, I think there are a number of employers, and 

this will vary by State and by employer, but employers who will 

see their premiums go up for no other reason than additional benefits. They will have to meet a medal value that is a little bit higher 

than they would like, and so they will see premiums go up, or they 

will have to provide benefits that they weren’t providing, that they 

will be required to. But I think the real dynamic, the thing that 

most concerns me, is this issue of the midsized employers will be 

given 2 options; they can either self-insure or they can go into the 

fully insured small group market, and they will choose the one that 

yields them the lowest cost. And that dynamic will force premiums 

in that small group market up as the—those—— 

Mr. GUTHRIE. So it is counterintuitive of what you would think 

because people—like at the market. And with self-insuring, it is 

usually larger employees that self-insure because of the bigger risk 

pool, the more—your—the bigger—you know, if you have 100 employers, you usually have more cash, more ability to—employees 

49 

ability to do that. And so even when you are talking about people 

leaving, if we leave it 51 to 100, you are talking about probably 

people in the 85, 90, close to 100 employees, not necessarily the one 

with 51 employees, 52 employees, although some people that small 

can self-insure. I am not going to say they can’t, but it is more difficult the smaller you are. So really not only getting an adverse selection of younger people, you are probably getting at the higher 

end of the—of 90 to 100 employees probably self-insuring. Is that 

a fair—— 

Mr. GIESA. That is a fair statement, but I would like to make the 

point that actually Commissioner Lindeen had made—— 

Mr. GUTHRIE. Um-hum. 

Mr. GIESA [continuing]. It is becoming easier and easier for 

groups to self-insure, and if you go out and look, say, Google, level 

funding, small employer, you will get all kinds of hits now from 

benefits consultants and insurance companies who are bringing 

products to market to encourage this kind of selection that we are 

talking about. So it is becoming much easier for groups to access 

self-insurance than it had been. They are understanding this dynamic we are describing right now. 

Mr. GUTHRIE. Well, people are saying—people who choose to selfinsure, they are saying I can have a known cost and know what 

my risk is buying full insurance plans, and based on that price, 

they say, or I can take risk if I have the cash to—and—to accept 

that risk and not put my business at stake. And you are right, as 

the price grows to fully insure, you are willing to take more risk 

to self-insure. And so your—also argument is there are other tools, 

financial tools, out there even if you don’t have cash in the bank 

to help cover your out-of-pocket—it is essentially a high deductible 

plan is what self-insurance is. So there are other opportunities to 

finance the high deductible than just cash out of your business, is 

that what you are saying is developing? 

Mr. GIESA. Exactly right, yes. 

Mr. GUTHRIE. And they are developing because they know this 

market is going forward. 

Mr. GIESA. Exactly right. 

Mr. GUTHRIE. So I was like—even though we are hearing success 

in Washington State and others, it is, you know, the people with 

51 to 100, that is who this bill specifically designed who are being 

disrupted, and so I think giving States the flexibility to stay in, 

given the opportunities for people to continue to provide the health 

insurance if they want to provide, I think is a good way to go, and 

I am glad it has been bipartisan and very carefully put together. 

Thank you. I yield back. 

Mr. PITTS. The Chair thanks the gentleman. 

Now recognize the gentlelady from Illinois, Ms. Schakowsky, 5 

minutes for questions. 

Ms. SCHAKOWSKY. Thank you. While we are on the topic of selfinsurance, we have heard a lot of concerns that increasingly the 

small market definition would increase the possibility of adverse 

selection, and that they—the companies would go to self-insurance, 

but today, only 14 percent of these midsized companies—these 

midsized employers are able to self-insure, and even among firms 

50 

between 100 and 999 employees, only 33 percent self-insure right 

now. 

So I wanted to ask Mr. Kreidler, can you describe the reasons 

why these small firms self-insure at much lower rates than larger 

companies? Actually, anyone could answer that. 

Mr. KREIDLER. Thank you, Congresswoman. I look at they are 

making that choice largely based on the fact that they probably 

have younger, healthier employees and, therefore, they say, you 

know, if I self-insure, I get a better rate. But the reason you don’t 

see a lot of them jumping for it is because there are risks that are 

involved in making that decision. I think it is imperative because 

insurance, by its very nature, is a law of large numbers. You want 

to get a large pool, a large group, and that helps to hold down 

costs. It doesn’t guarantee that everybody is a winner. There are 

going to be some that are losers in that proposition, but it is building that common base, but it offers protections that going forward 

you can’t have if you have a fragmented market. And hopefully, 

that is one of those areas where we spend some time taking a look 

at what it does to the market as to whether that is an appropriate 

step. The kind of refinements that Ranking Member Green spoke 

to, which is the changes that have always followed major legislation that haven’t been possible as kind of midcourse corrections. 

Ms. SCHAKOWSKY. Yes. Before I ask the others if you want to 

comment on that, I wanted to—Ms. Lindeen, when the chairman 

asked you whether or not consumers would lose any benefits of this 

extension and you said, oh, no. But the fact of the matter is, right 

now, under the—on the small group, there is the essential health 

benefits required, you said it is not necessary to require it for larger companies. There is premium protection regardless of industry 

for the small groups, regardless of coworkers’ health, regardless of 

personal health status. There are caps on premium increases based 

on age. There is—prevents premium discrimination based on sex. 

So how could you say that there is no loss, that benefits wouldn’t 

be increased for people between 51 and 100? 

Ms. LINDEEN. Congresswoman, thank you. Certainly, if there was 

a move to the small group market from 1 to 100, there would be 

additional benefit requirements placed on those employers who are 

at—now currently at 51 to 100, absolutely. What I am saying is 

that there hasn’t really been any real complaints and issues with 

that group, and so they—there hasn’t been a real need that we 

have been aware of for that to occur. 

Ms. SCHAKOWSKY. Among the employers, there hasn’t been? 

Ms. LINDEEN. Well, I can just tell you what I know personally, 

that we haven’t had problems with the employees complaining either. Certainly, those employers are negotiating the best product 

design possible, with the best rate design possible for their group. 

Ms. SCHAKOWSKY. I just want to say that we are looking at this, 

mainly so far—— 

Ms. LINDEEN. Um-hum. 

Ms. SCHAKOWSKY [continuing]. As I can hear, from an employer 

standpoint. The purpose of the Affordable Care Act is we have so 

many individuals who are either uninsured or underinsured, and 

the goal here is to have a healthier society, and a standard that 

we set for all Americans. Basic things. Lack of gender discriminaVerDate Mar 15 2010 14:56 Feb 09, 2016 Jkt 037690 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X72AFFORDABLECOVERAGEPENDING WAYNE
51 

tion, reducing the age discrimination that make it hard for people. 

So I just think that it is important to acknowledge that, and that 

one of our goals has been to make sure that the kinds of standards—I don’t have time, I would have like to have asked Mr. Kreidler what ready means, when a State is ready, but I think we 

passed the bill in 2010, and I realize that there was an extension 

made, was it last year, for larger businesses. It seems time to get 

ready to provide quality health care for all of our citizens. 

Thank you. I yield back. 

Mr. PITTS. The Chair thanks the gentlelady. 

Now recognize the gentleman from New Jersey, Mr. Lance, 5 

minutes for questions. 

Mr. LANCE. Thank you, Mr. Chairman. Good morning to the distinguished panel. 

To Commissioner Lindeen, I have never been in Montana. I hope 

to have the opportunity to visit your beautiful State, and I have 

heard many wonderful things about it. 

I have heard from a number of my constituents that if current 

law is not changed, many employers will either choose to self-insure rather than purchase a small group plan, or choose to drop 

coverage rather than purchase coverage in the small group market, 

and thus, pay the employer mandate penalty. Commissioner, can 

you explain in a little more detail from your perspective, and you 

have a great deal of advice, given your responsibilities statewide in 

Montana, the incentives and the trade-offs that employers would 

face in that case? 

Ms. LINDEEN. Thank you, Congressman. Certainly, the employers 

are going to have to make a decision, as I think Mr. Giesa pointed 

out, in terms of looking for coverage in the expanded small group 

market, or looking at potentially self-insuring. And the one thing 

that I think also, which we haven’t really touched on today, is in 

terms of potential market disruption as even carriers leaving the 

small group market. For example, we have a carrier in Montana 

who withdrew from the small group market in 2013. Under law, 

they cannot return for 5 years unless they get permission from the 

commissioner, which certainly, we would consider. However, some 

of those insurers may decide that they don’t want to do it, for a 

host of business reasons, and so they may withdraw completely 

which means then those who they have been covering under the 51 

to 100, they would give up. And in some cases, that could actually 

cause serious financial distress to the company as well. 

Mr. LANCE. I am interested, you said that there is a provision of 

not re-entry for 5 years. Is that State law in Montana, and is that 

true in other States as well? 

Ms. LINDEEN. Yes. It is Federal, I think HIPAA. 

Mr. LANCE. It is Federal law. 

Ms. LINDEEN. Um-hum. 

Mr. LANCE. So that this would apply across the board, but do 

State agencies such as yours, do you have the ability to override 

that? 

Ms. LINDEEN. We would have the ability to say to the company, 

if they wanted to continue in the small—or come back to the small 

group market, to let them in. But then certainly, they would have 

to refile all their forms and rates and so forth. 

52 

Mr. LANCE. And given your expertise in Montana, do you think 

other companies might choose not to continue in the small group 

market? 

Ms. LINDEEN. Well, certainly, every company has got that decision to make. I mean if they see the small group market is not 

being as desirable, for whatever reason, they could make that decision. 

Mr. LANCE. I would image that small group markets might not 

be as profitable a line as larger. I speculate here, but certainly, 

some might leave. 

Other distinguished members of the panel, do you have an opinion on what I have asked? Congressman? 

Mr. KREIDLER. You know, my impression is that, once you are 

out for 5 years, you can’t come back in unless you are totally restructured coming back. So once you are out, you are out, and that 

is Federal law that requires that under HIPAA. But my experience 

has been I didn’t have companies that dropped out. I had some 

companies that talked about it, not in this market but the small 

group market—or individual market, I should say—and we explained to them if you drop out, you are gone for 5 years, and they 

said, well, maybe we can figure out a way. And every one of them 

wound up finding a way to stay in the market so they didn’t face 

that particular penalty. But in the case of the small group market, 

like I said, we have had a 50 percent increase in the number of carriers in the small group market since 2012. 

Mr. LANCE. Thank you. Your position, sir? 

Mr. GIESA. Well, in the near term, I can see a couple of competitive dynamics in play. One is, not all the companies that are operating in the midsized group market now will have the administrative capabilities to take on the small group market, so when the 

markets are combined those companies may withdraw. The other 

thing that could happen is if we do see this sort of rate spiral happening, we could see companies exit the market. We have seen that 

happen in the past. 

Mr. LANCE. Thank you very much. And I yield back 24 seconds. 

Mr. PITTS. The Chair thanks the gentleman, and now recognize 

the gentleman from Maryland, Mr. Sarbanes, 5 minutes for questions. 

Mr. SARBANES. Thank you, Mr. Chairman. This is a fascinating 

discussion, and my head is kind of exploding listening to it a little 

bit. 

I am trying to understand, Mr. Giesa, I mean you and Mr. Kreidler are projecting fundamentally different scenarios as to what will 

happen. Mr. Kreidler’s prediction seems to be based on information 

he already has in-hand in terms of the insurers’ reaction to what 

will happen in January of 2016. Yours is a little more tenuous, I 

guess, but can you try to explain why you think, even though you 

are projecting premium hikes as high as 20 percent because these 

midsized employers who have the ability to go self-insure will 

choose to do that and pull themselves out of this pool, why you are 

projecting 20 percent increases based on that assumption, whereas 

insurers have actually come in in Washington State and are submitting requests for premium reductions in all but one case, as I 

understand it, and as high of a reduction, I think you said, as 16 

53 

percent in one instance. So maybe you all could have a little colloquy just to try to help me understand why there is such a disconnect there. 

Mr. GIESA. Well, I will start. And first, I am not an expert in the 

Washington market, but I think there are some uniquenesses in 

the Washington market about the way the market is structured 

that don’t apply to a majority of States. And then I will acknowledge the fact that, you know, the little bit of the work that I have 

done is kind of tenuous, but those rate increases I was illustrating, 

the 64 percent seeing 18 percent, that is real, that is based on real 

data. I had underwriting decisions that companies made and I said, 

well, those underwriting decisions will have to change under the 

ACA. So that is really what is going to happen to 64 percent of the 

issuers that I considered representative. 

Mr. SARBANES. Right. 

Mr. GIESA. The other part of this calculation though is, who 

withdraws and what does that have on the rest of the market, the 

impact of those who remain, and that is the part that is a little 

tenuous, subject to speculation, but I want to be clear that the rate 

increases that I was saying would happen in the midsized 

group—— 

Mr. SARBANES. OK, that is fair. 

Mr. GIESA [continuing]. Those are real. 

Mr. SARBANES. Mr. Kreidler, do you have some anxiety that, 

even though the insurers who submitted rate proposals seem to be 

assuming that the effect that you anticipate will actually take hold, 

that there could be a number of employers in that midsized range 

that would select themselves out and self-insure, and it could have 

the impact that is being talked about there with, I guess, the potential for them to come in midyear based on that activity and then 

reverse and seek what would then be a significant—by comparison, 

significant rate increase, to try to address that situation? 

Mr. KREIDLER. Congressman, I will be honest with you, I really 

don’t stay awake worrying about it as a major factor. I think that 

there are going to be some employers that are midsized that are 

going to see rate increases. Whether that is enough to—for them 

to want to take the risks of going to the self-insured market. All 

of these businesses, for practical purposes, are not in the business 

of health insurance, they are in the business of whatever commercial activity they have. And they want to be able to go out and buy 

a product that is going to be able to provide the kind of incentives 

for their employees, to retain employees, to attract employees, so 

that is why they offer it and that is what really matters to them. 

And I think that is going vary somewhat from State to State. In 

the State of Washington, we already saw those midsized moving toward the ACA standards even before the requirement went into effect. So they are already stepping up to it. One protection that it 

offers right now are certainly for older employees, that they don’t 

wind up being biased, paying multiple times what a younger employee would have to pay. They have the 3-to-1 protection. That is 

good for the older employee. Not so good for maybe with a younger 

workforce, but you have other protections and limitations of out-ofpocket expense that really play to that small employer, so there are 

benefits even if they wind up paying more. And again, there are 

54 

always winners and losers when you wind up pulling markets together. You can’t make everybody a winner. You wind up doing the 

best you can, and you see the improvement in the overall health 

in the small group market for employers. That is the positive. You 

want to see that happen. In the long run, it is one of those where 

there are added protections that certainly enhance for that small 

employer, protections, even if they wind up paying more initially. 

But we are seeing very little of that in the State of Washington. 

Mr. SARBANES. Thank you all for your testimony. 

Mr. PITTS. The Chair thanks the gentleman, and now recognize 

the gentleman from Florida, Mr. Bilirakis, 5 minutes for questions. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. I appreciate it very 

much. And thank you for your testimony. 

Commissioner Lindeen and Mr. Giesa, I hope I pronounced that 

right, the small business health options plans, or SHOPs, have not 

been a popular option for employers. They have not offered much 

difference from the outside small group market. In my district, 

there are only 2 companies that offer coverage in the SHOP, and 

you can only choose from 3 plans in silver and gold. Would the 

SHOP be more successful if it allowed employers to provide a defining contribution, and allowed employees to choose a plan, a metal 

tier, and benefit design that best fits their needs, and shouldn’t 

there be greater diversity of carriers and benefits designed to truly 

drive competition? 

Mr. GIESA. Congressman, that is a wonderful question, and I 

think it is certainly worthy of consideration, but it is not something 

that, right now, I am in a position to comment on. 

Mr. BILIRAKIS. OK, can you get back to me on that? I would appreciate that. 

And then, Commissioner Lindeen? 

Ms. LINDEEN. Well, Congressman, I certainly understand that 

the more options that we can provide the better, but certainly, I 

can get back to you on a response as well. 

Mr. BILIRAKIS. Please do. 

Ms. LINDEEN. Thank you. 

Mr. BILIRAKIS. Please do. All right, second question. Commissioner Lindeen and Mr. Giesa, according to the CBO, ‘‘Plans being 

offered through exchanges in 2014 appear to have in general, lower 

payment rates for providers, narrower networks of providers, and 

tighter management of their subscribers use of health care than 

employment-based plans do.’’ Less than half of the plans available 

on the Exchange have the Moffitt Cancer Center, the only NCI-designated Cancer Center in Florida, within their network. And those 

that do have Moffitt in-network, the coverage may be conditional 

based on where you live. If we push midsized businesses into the 

small business market, will these workers have more options or 

fewer options for health insurance? Will the employees of midsized 

businesses be stuck in narrower networks with fewer providers if 

the small group market is expanded? And again, the question is for 

Commissioner Lindeen and Mr. Giesa. 

Ms. LINDEEN. Congressman, I really do want to apologize, I don’t 

have a specific answer for you. Certainly, each one of the employers 

is negotiating with the insurer for the best product possible, and 

I am sure that they are looking at the networks to ensure that they 

55 

are hopefully the best network possible for their employees because 

insurance companies contract locally and regionally for the providers in those networks, and I am sure that the companies and 

the employees are looking very closely at those networks. 

Mr. BILIRAKIS. Mr. Giesa? 

Mr. GIESA. Yes. Again, thanks for the question. That is an excellent one. And they will have fewer employers if the midsized employer is forced into the small group market, they will have fewer 

options with respect to benefits. Right now, they can design benefits that best fit their needs. In the small group market there is 

really just a, you know, a group of benefits they will have to select 

from. 

And then on your question of networks, I think that does deserve 

consideration. The small group plans, the networks are fixed and 

there is really no negotiation as far as what benefits or what providers the employees could see. The only way around that would 

be to self-fund. And so it is conceivable that these midsized groups 

might say, you know, to get access to the employers we want—or 

the providers we want, we need to self-fund. 

Mr. BILIRAKIS. Thank you. Third question, again for Commissioner Lindeen and Mr. Giesa. Again, I apologize if I mispronounce 

your names. There appears to be evidence that the small group 

market is shrinking as small businesses drop coverage to allow employees access to premium subsidies. Is it better for taxpayers to 

have employers pay for health insurance or for the Government to 

pay for subsidies? 

Ms. LINDEEN. Congressman, that is a difficult question. Certainly, we have in Montana seen a drop in the small group market 

and folks moving to the individual marketplace for that purpose. 

But at the same time, I can tell you that, at least in Montana, I 

can talk to that experience, in Montana we had about 20 percent 

of our population that was uninsured. We have actually seen a 

drop to 15 percent uninsured, and so we are seeing more and more 

folks becoming insured, which I guess for societal purposes, and 

then for the employer, whoever that may be, small or large, that 

is a good thing, and that is a good economic impact for the employer and Montana’s economy. 

Mr. BILIRAKIS. Sir? 

Mr. GIESA. Congressman, this is another question that I would 

like the opportunity to get back to you on. I am really not in a position to answer that definitively right now. 

Mr. BILIRAKIS. Please get back to me. I would appreciate that 

very much. 

I yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman. Now recognize the 

gentlelady from North Carolina, Mrs. Ellmers, 5 minutes for questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman. And the first question 

I have is for Mr. Kreidler on the issue that you are here and your 

concerns, I am just wondering how much you have taken into consideration that Washington State has the ability to opt out and 

continue on without being affected by this if this bill, 1624, actually 

goes into effect. Are you aware of that? 

Mr. KREIDLER. Yes, I am—— 

56 

Mrs. ELLMERS. OK. 

Mr. KREIDLER [continuing]. Congresswoman, aware of it. 

Mrs. ELLMERS. I guess that brings me to the next question, then, 

which is, if you are aware of that then I don’t understand why you 

have the issue, because you are presenting to us that this is something that is working very well in Washington State and that you 

see this moving forward, and hope that our bill that we are discussing today does not go into effect. 

Mr. KREIDLER. There are a couple of problems that I see right 

now. Number 1 is they have already submitted their plans, their 

rates and their forms with me, so this is already in progress for 

going from—with the 51 to 100 being included with the—into the 

small—— 

Mrs. ELLMERS. Um-hum. 

Mr. KREIDLER [continuing]. Group market. That would have to be 

adjusted and rolled back. Most likely, that is going to mean in the 

State of Washington that that is going to be a rate increase for 

small employers—— 

Mrs. ELLMERS. OK, stopping there though—— 

Mr. KREIDLER. OK. 

Mrs. ELLMERS [continuing]. Washington, again, has the ability to 

not accept this bill, correct? And so, therefore, all of those plans 

that you are moving forward on in Washington would remain in 

place with the Affordable Care Act. 

Mr. KREIDLER. In the State of Washington, Congresswoman, I do 

not have that option because State law would effectively be reverted to, with the passage of this law, that State law says 1 to 

50. Therefore, 51 to 100 is not an option for me. The State would 

have that option, but—— 

Mrs. ELLMERS. Right, the State would have that option. 

Mr. KREIDLER. But I would still have to go to the legislature to 

get their approval, and they are well underway with already making the implementations. And I can tell you right now, the chances 

of having that pass in the State legislature are probably zero to 

none. So as a consequence, the benefits that would occur to the 

small group—— 

Mrs. ELLMERS. Why—— 

Mr. KREIDLER [continuing]. Markets—— 

Mrs. ELLMERS. Why would it be zero to none if—I mean, I don’t 

want to—because I have some other questions, but I don’t understand. You are presenting today that this is working in Washington, that it is moving forward, that you feel very confidently 

that it is playing out as is, but yet you believe that the option for 

it passing the legislature in Washington would be zero to none? 

Mr. KREIDLER. Congresswoman, I think it is pretty much the 

same dynamics that you have in Congress itself. There are differences of opinion about the Affordable Care Act and any modification to it. 

Mrs. ELLMERS. So what you are saying is your opinion is not necessarily that of the rest of Washington’s opinion. 

Mr. KREIDLER. No, I think the rest of Washington would agree 

with me, but on this issue, obviously, it is going to be very difficult 

to get favorable action on the part of the legislature, certainly and 

do it in a timely fashion. 

57 

Mrs. ELLMERS. OK. Well, thank you for clarifying that for me. 

I do want to ask Ms. Lindeen and Mr. Giesa. The NFIB Research 

Foundation showed that 40 percent of small businesses with fewer 

than 100 employees offered health insurance in 2014. So that is 40 

percent, which is a 6 percent drop from 2013. According to HHS, 

only 32 percent of businesses with fewer than 50 employees offered 

group coverage in 2014, which is a 3 percent drop from 2013. Showing that trend, or looking at those numbers, what is the overall picture, and I know we are talking in generalities and I know that 

is difficult for you because you are coming from your own position, 

but what is going to happen with these rates? If we are already 

seeing that fewer businesses are dealing in this way, and we have 

seen that over the last year or 2, how is this going to affect these 

small group rates if this is the trend moving forward? 

Ms. LINDEEN. Congresswoman, if I may, that is a really good 

question. I think it really could—should bring us back to the fact 

that we are still in this transition period—— 

Mrs. ELLMERS. Right. 

Ms. LINDEEN [continuing]. With the market being—— 

Mrs. ELLMERS. Yes. 

Ms. LINDEEN [continuing]. Influx. At the same time, I think that 

the markets are beginning to adjust and make sense of what happened—— 

Mrs. ELLMERS. Um-hum. 

Ms. LINDEEN [continuing]. And so I think that is why it is important for us to not make further changes if we don’t have to—— 

Mrs. ELLMERS. OK. 

Ms. LINDEEN [continuing]. Unless it is going to be—have a positive effect—— 

Mrs. ELLMERS. A positive—yes, that—— 

Ms. LINDEEN [continuing]. But—— 

Mrs. ELLMERS [continuing]. You know that there is certainty and 

that the—— 

Ms. LINDEEN. Correct. 

Mrs. ELLMERS [continuing]. The outcome is going to be positive. 

Ms. LINDEEN. Correct. 

Mrs. ELLMERS. Mr. Giesa, would you like to comment on that? 

Mr. GIESA. Yes, thanks for the question. I think, you know, and 

briefly, the response to your question is if we don’t see this change 

made, if the—— 

Mrs. ELLMERS. Um-hum. 

Mr. GIESA [continuing]. Midsized employers do move into the 

small group market, we will see an acceleration of the process you 

were describing of small groups—— 

Mrs. ELLMERS. Small groups basically—— 

Mr. GIESA [continuing]. Continuing—— 

Mrs. ELLMERS [continuing]. Decreasing. And so—I am running 

out of time, but if there was one thing that you had to ask us in 

Congress, moving forward, looking forward to this as this bill being 

a positive step forward, what would you say it is? What would you 

like to leave this committee with as far as your messaging that we 

need to know? 

Ms. LINDEEN. You need to give the States the flexibility so that 

the markets can be more certain. 

58 

Mr. GIESA. And I would say that time is of the essence here. 

Mrs. ELLMERS. Time. Time. Thank you very much. Thank you to 

all of you for being here. And thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentlelady. Now recognizes the 

gentleman from New York, Mr. Collins, 5 minutes for questions. 

Mr. COLLINS. Yes, thank you, Mr. Chairman. 

In a prior life, as in about 6 months ago, I was the subcommittee 

chair on Health and Technology for Small Business. I had hearing 

after hearing on the Affordable Care Act, the impact on small business, the potential impact on small business, if you went back a 

couple of years ago when some of this was just moving through, 

and I can just categorically state it was all negative. Business 

group after business group after business group stepped forward to 

say here is the devastation that is going to occur. You know, with 

the redefinition—I guess I—it is maybe worth reminding folks, 

back in the day before Affordable Care, the definition of a large 

business was someone over 500 employees. It was pretty universally accepted. That is a big company. HR Departments, you know, 

lots of folks at management levels, 500-plus. Along comes the Affordable Care Act and says, well, no, we are going to redefine a 

large company as anyone with over 50 employees. It is like, whoa, 

500 down to 50? A lot of companies with 50 to 55 employees, they 

don’t have an HR Department. They may or may not have a fulltime bookkeeper, let alone all the infrastructure that went with the 

prior universally accepted definition of a large company. So the reverse of that is, obviously, a small company used to be anyone up 

through 499. Now it is 49, which is—with my hearings on the 

Small Business Committee, just turned everything upside down. 

The issues of, you know, do I want to grow to 55 employees. 

So I am bringing this up only to point out there has been a little 

bit of a pause for the 51 to 99. They are subject to the Affordable 

Care Act, the employer mandate, but at least during this time they 

could offer, you know, some health benefits that may have been 

more affordable to them. Well, now, all of a sudden, it—in pops— 

if we don’t pass this, their costs are, by and large, going to go up. 

They are going to be forced to do something and make changes 

they may not want to do. And I guess I would like to point out, 

when a midsized—or when a small company, 51 to 99 for sure, has 

to absorb higher costs in health insurance, or anywhere else, they 

are generally—they have to cut someplace else. We are not talking 

about companies making a lot of money, even paying their owners 

well, and I think it is just a rhetorical comment to say if I have 

to increase costs here and decrease somewhere else, my cuts may 

be in product development, research, marketing, advertising, going 

to trade shows, and just continuing. What does that mean? Less 

growth, fewer jobs, bad for the economy, bad in every way. So I just 

felt like I should at least point out the overarching impact that I 

see on this is less job growth for those companies between 51 and 

99 employees, because they are going to absorb cost increases that 

have to be offset. They just can’t go print money or wish upon a 

star that they didn’t have that. 

So I guess, you know, Mr. Giesa, you are the actuarial expert, 

and maybe just some comments about—I mean I always go back— 

there is no free lunch. If somebody, as Mr. Kreidler says, is going 

59 

to save money, someone else is going to pay for it. You know, it is— 

this is what happens. You get less, I pay more. I always say it is 

a bad day at the office when you run out of other people’s money. 

But—so you have kind of heard my, you know, comments here, 

what would you say, Mr. Giesa? 

Mr. GIESA. Well, this idea of, you know, there are some real consumer protections associated with—or that come along with being 

part of the small group market but those benefits come at a cost, 

and we will be asking a group of small—or midsized employers to 

pay that cost. And if they choose not to do so, if they choose to sort 

of withdraw from that consideration and say I am going to selffund, we will see costs go up for the small groups and those other 

groups that remain in the market. 

Mr. COLLINS. And I think we have point out, it is amazing how 

competition works. There are changes going on in the self-insured 

market that would have been unheard of 5 years ago, but in that, 

small businesses can be very creative and they have to ben entrepreneurial to survive and grow. And I tend to concur, we don’t 

know what the answer is but we are incentivizing, I wouldn’t even 

call them midsized, they are still small companies, somebody with 

58, 62 employees, if that is not a small company, and that is where 

I have spent my life, I don’t know what is, we don’t know the outcome but it is going to incentivize that move. And when you take 

those employees out of the group market, we all know the price you 

pay. 

So with that, thank you, Mr. Chairman, I yield back. 

Mr. PITTS. The Chair thanks the gentleman, and now recognize 

the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you so much, Mr. Chairman. I do appreciate it. Mr. Kreidler, I appreciate you being here today. I have 

some questions for you. 

You talked about increases in the small shops in the State of 

Washington—small shop insurance in the State of Washington. In 

my district, and I represent 22 counties and 7 independent cities 

in the rural parts of Virginia, and as a result of that, we found that 

many of our locations, or at least a certain number of them, we 

don’t have but one provider for the small shop plans. And so it 

raises the question that I would ask you, is the city of Richmond 

in the Commonwealth of Virginia has lots of small shop plans, my 

rural counties and some of my independent cities don’t—some of 

my rural counties don’t, some of my independent cities don’t, is 

that your experience in Washington or do you have this larger 

number across the State of Washington in all the counties? 

Mr. KREIDLER. We have seen an increase in all of the counties 

for the small group market of the number of carriers that offer it. 

Not that many in the shop through the Exchange, but in the small 

group market, we have certainly seen it. But rural American is 

tough. It is tough in the State of Washington, and I am sure Commissioner Lindeen has it tough in Montana. It is difficult to get the 

same kind of competition in those rural counties that you get in the 

more urban counties, and I understand that. 

Mr. GRIFFITH. Yes. I thought it was interesting, your testimony 

has been very instructive here today because I gather that you 

don’t like this bill, but you acknowledged in some of the quesVerDate Mar 15 2010 14:56 Feb 09, 2016 Jkt 037690 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X72AFFORDABLECOVERAGEPENDING WAYNE
60 

tioning that you did think that for some States that weren’t as far 

along as the State of Washington was, that some type of a delay 

might be advisable. So you recognize that at least for some States, 

moving forward right away would be a problem and that we as 

Congress probably ought to take some kind of action. Even if you 

don’t like this bill, you would look for us to make some action for 

those States that aren’t as far along as the State of Washington. 

Is that correct? 

Mr. KREIDLER. Congressman, that is correct. 

Mr. GRIFFITH. Now, I am concerned, I know you come from a 

healthcare background, and I am sure it wasn’t your intent, but as 

an old country lawyer, when I see what appears to be, I am sure 

it wasn’t the intent, but appears to be a little bit of a shell game, 

it always makes me worry. And I noticed that you talked about one 

of your larger—in your testimony you talked about one of your 

larger insurance companies, and you referenced Regence, but it 

looks like, from what I can determine, it was Regence Blue Cross 

Blue Shield of Oregon, which only covers one of the counties that 

had a decrease and about 1,500 folks involved, but that the larger 

presence in the State had a modest—not a large increase, but it 

had a small increase for the Regence Blue Cross Blue Shield of 

Washington. And so it just makes me curious as to—I am sure that 

those 1,500 people think that it is very important, but I am just 

curious and it makes me wonder about what it going on there, but 

I have appreciated the rest of your testimony. 

In that regard, Ms. Lindeen, let me ask you. In regard to your 

colleague’s experience in the State of Washington, it is my understanding that might be somewhat unique because Washington actually had State law that enacted small employer health insurance 

changes well before the Federal law was enacted, which meant that 

the bump that all of my people are seeing now, the increase in the 

cost actually occurred before the Affordable Care Act, ObamaCare, 

went into effect there, and that most States are going to see that 

increase coming up now. Is that your understanding? In other 

words, they got ahead of the curve so the increases are going to be 

less there because—or not—or even decreases there because they 

were ahead of the curve in coming up with some of the requirements that ObamaCare requires our small groups now to have. 

Ms. LINDEEN. Congressman, I would say that it certainly depends on the marketplace in the State. In Montana, we have seen 

mixed results depending on whether it is the mixed—or, excuse me, 

the individual market or the small group market. In fact, this year 

we are—or this coming year, we are going to see, unfortunately, 

some substantial increases in the individual market, but in the 

small group market those increases are very limited, between 3 

and 7 percent on average. 

Mr. GRIFFITH. OK. I do appreciate that. I am hearing from my 

constituents that they are very nervous about it, and they do make 

decisions, as you have heard others say, that some of those small 

employers are making decision, do they hire the 51st employee, do 

they look at expanding, do they continue to carry all of the different products, in other words, do they lay off one shift perhaps 

that is doing a product line that is not as successful as some of the 

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others and just focus on the high-profit areas. When they are on 

that bubble, these are all things that businesses take into account. 

I appreciate Mr. Guthrie for bringing the bill, and others, and do 

appreciate that we need to make some kind of a resolution, even 

if it is not this bill, that we need to do something. 

And I yield back. Thank you. 

Mr. PITTS. The Chair thanks the gentleman. Now recognize the 

gentleman from Missouri, Mr. Long, 5 minutes for questions. 

Mr. LONG. Thank you, Mr. Chairman. 

Mr. Kreidler, your testimony says the State of Washington may 

be further along in implementing many of the reforms than other 

States. Why have more than 2⁄3 of the rest of the States opted for 

the transition option? 

Mr. KREIDLER. I think, in no small part, if you are talking about 

the federally facilitated Exchange through the Federal Government, is that correct, Congressman? If you are, in that situation I 

think politics played a lot to do with that. We had a former insurance commissioner from the State of Pennsylvania who headed the 

operation to assist States establishing their own exchanges. When 

it started, he was fully convinced that every State was going to 

jump to create their own exchange, rather than defer to the Federal Government, and yet, as you point out, 2⁄3 have opted to do it 

otherwise. I think a lot of it had to do with the politics at the time, 

or the size of the State. I think most States were thinking of creating their own exchanges. In the long run, there are pluses and 

minuses as to whether you went with the Federal or whether you 

went with State—went with your own route with the State—as the 

State of Washington did. 

Mr. LONG. Well, what you are doing may work in Washington— 

in the State of Washington, which Mr. Guthrie’s bill allows, so I 

think that you could be supported, but the president of your national association there at the table with you is saying that is what 

caused problems in other States. 

Mr. KREIDLER. Congressman, it is like the body politics, you— 

just because the majority party says this is our position, it isn’t 

necessarily what you take as an individual member, and I would 

say the same is true as being an insurance commissioner. 

Mr. LONG. OK. Commissioner Lindeen, you are testifying on behalf of all States, whereas it seems that Commissioner Kreidler is 

only testifying on behalf of the State of Washington. Can you talk 

about what you are hearing from other commissioners and consumers across the United States? 

Ms. LINDEEN. Congressman, thank you for the question. And, 

certainly, I appreciate the diverse point of view that all of the commissioners have across the country, including my colleague from 

Washington, but at the same time, I believe that the overwhelming 

number of commissioners across the country do believe that—and 

do support this piece of legislation because they understand that 

that will give them the flexibility to do what is right for their marketplace in their individual States because of the diversity. 

Mr. LONG. OK, thank you. And, Mr. Giesa, you and others have 

warned that the current law could lead some employers with 51 to 

100 employees to self-insure to avoid higher premiums, which could 

result in adverse selection in the small group pool, and higher preVerDate Mar 15 2010 14:56 Feb 09, 2016 Jkt 037690 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 C:\USERS\WLAUFERT\DESKTOP\114X72AFFORDABLECOVERAGEPENDING WAYNE
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miums for employers with between 1 and 50 employees. Can you 

explain this adverse selection a bit more? 

Mr. GIESA. Yes, Congressman. Thanks for the question again. 

What we will see, I think, is the midsized employers will be looking 

at 2 options. They will be looking at guaranteed issue access to the 

small group market on a community-rated basis, and they will be 

looking at self-funding. And in some States, there is actually a 

third option and that is States that have adopted the transitional 

policy to stay on their existing policy. So these midsized employers 

will be looking at 3 different options, saying which one is most financially advantageous for me. Those that choose the small group 

market will be the oldest and the sickest, and that will drive up 

premiums in that combined small group, midsized employer market. 

Mr. LONG. OK, thank you. And thank you all for your testimony. 

And with that, Mr. Chairman, I yield back. 

Mr. PITTS. The Chair will recognize the gentleman, Mr. 

Ca ́ rdenas, 5 minutes for questions. 

Mr. CA ́ RDENAS. Thank you very much. I just want to say it is 

wonderful to—I have been here 2 1⁄2 years, and this is probably the 

most bipartisan moment I have been working with my colleague, 

Republican Guthrie, on, and Sinema, and a few others. I just want 

to say I appreciate all the efforts of the—and the sincere efforts 

that everybody has put into this bill so far. 

And with that, I have a question for—a couple of questions, one 

of them for Commissioner Lindeen. Thank you so much for testifying today. My question is, given that this legislation would allow 

States to determine the size of their small group market for themselves, do you anticipate any States that would make the move to 

include companies with 51 to 100 employees, given the new realities of the ACA? 

Ms. LINDEEN. Congressman, I am sure that there will be States 

who would make that decision and feel that is the best for their 

marketplace, while others would not. 

Mr. CA ́ RDENAS. Um-hum, but to have that option, and the hopes 

and expectation that each State will evaluate it based on the needs 

and their understanding of their constituencies and their businesses, or what have you, do you see that it could possibly provide—should this come—law go into effect, it would provide that 

kind of result that we would hope for? 

Ms. LINDEEN. Absolutely. 

Mr. CA ́ RDENAS. OK. Also, Mr. Kreidler, do you oppose a—different States from determining what works best for their small 

group markets? 

Mr. KREIDLER. Congressman, I would have to say, you know, 

there are places where choice is certainly something that is preferred. There are other places where it is not. Before healthcare reform, the States had a great deal of latitude to do healthcare reform and yet we saw a growing problem of the number of uninsured in this country continuing to rise, and we saw the amount 

of spending in the healthcare system that was not collected, it was 

shifted to other payers. It is one of those things where we are clearly seeing we needed to have improvement, we needed to do it on 

a national basis, and having a national standard is something that 

63 

really works well. And that is why I would be the first to admit 

that offering to some States the opportunity for a couple-of-year 

delay before this went into effect, but don’t hamper a State like 

mine that is ready to step up and make the changes right now. But 

to essentially suspend this activity and defer it back to the State 

is a move against healthcare reform in the sense of helping to create the kind of large markets, large groups of self—or the community-rated pool that you have with the small group market that advantages small business. I don’t want to deny small business those 

advantages. 

Mr. CA ́ RDENAS. OK. Commissioner Lindeen, having heard that, 

do you have any comments? 

Ms. LINDEEN. Congressman, I think that it is important not to 

deny the small businesses that are currently utilizing a product 

that works for them—— 

Mr. CA ́ RDENAS. Um-hum. 

Ms. LINDEEN [continuing]. To be able to continue to do that. 

Mr. CA ́ RDENAS. Um-hum. 

Ms. LINDEEN. And so I think that this piece of legislation which 

you are coauthoring is a good thing for those small businesses and 

for their employees, and so I would encourage passage. 

Mr. CA ́ RDENAS. OK. The reason why I ask is because, to me, 

what this legislation would do, which affects an incredibly larger 

piece of legislation, would allow an opportunity where, hopefully, 

very responsible legislators, Governors, et cetera, will actually responsibly evaluate this additional tool and then use it responsibly. 

And I feel if they do so, then what would happen is, overall, we 

will get the benefit of those States that perhaps choose that they 

are not going to go to the 100 model and—because of what is best 

for their constituency, and those that choose to go to the 100 model, 

they will do so because they are—they have the best interest of 

their businesses and their constituents, the workers and their families in mind. So, to me, this is a bill that actually enhances the opportunity for responsible individuals to go ahead and say this is 

better—this is going to be a better environment, and as a result, 

hopefully, we will have better results. 

Thank you very much, and I yield back my time. 

Mr. GUTHRIE [presiding]. I thank my friend for yielding back. 

And seeing no further questions, I appreciate the comments, and 

it has truly been a bipartisan effort and carefully crafted bill. 

And I want to remind the members they have 10 business days 

to submit questions for the record, and ask the witnesses to respond to these questions promptly. Members should submit their 

questions by the close of business Wednesday, September 23. 

Without objection, the subcommittee is adjourned. 

[Whereupon, at 12:15 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Today we will examine H.R. 1624, the Protecting Affordable Coverage for Employers Act, authored by Subcommittee Vice Chairman Brett Guthrie. This important 

bill would provide relief for many employers who are on track to face higher health 

coverage costs in coming months if we do not act soon. 

Currently, health insurance offered in the small group market must meet certain 

requirements that do not apply to the large group market. Because of a requirement 

64 

in the president’s health law, beginning next year businesses with between 51 and 

100 employees will be forced to offer health insurance coverage that currently applies only in the small group market. 

These new mandates and requirements will ultimately lead to higher premiums 

for employees. The new plans are also expected to have less flexibility with respect 

to plan design as compared to the current plans. Employers with 50 or fewer employees also may face disruption under current law, facing higher costs and fewer 

choices over time. 

One of our witnesses today has estimated that roughly two-thirds of businesses 

offering coverage to their 51–100 employees could face an 18 percent increase in 

premiums. Additionally, the American Academy of Actuaries has projected more 

than 150,000 establishments with over 3 million workers could be negatively impacted if we do not act. 

I know many employers in my home State of Michigan have already seen their 

health care costs increase, and many more are worried about what 2016 may bring. 

According to nonpartisan analysis, enactment of H.R. 1624 would yield notably 

lower premiums than currently projected, encourage continued health coverage, discourage employers from dropping coverage, and help encourage market stabilization. 

Under this bill, businesses and their employees will be able to keep their current 

health care plans and avoid higher premiums for coverage with more prescriptive 

benefit mandates and rating restrictions. 

This bill enjoys strong bipartisan support. H.R. 1624 has more than 200 cosponsors, and a similar bill in the Senate enjoys the support of nearly one-third of the 

Senate. 

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