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THE HIGH COST OF SMALL BUSINESS HEALTH 

INSURANCE: LIMITED OPTIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

OCTOBER 20, 2009 

Serial No. 111–75 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 


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COMMITTEE ON ENERGY AND COMMERCE 

HENRY A. WAXMAN, California, Chairman 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER S. MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

JERRY MCNERNEY, California 

BETTY SUTTON, Ohio 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

(II)


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(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

BART STUPAK, Michigan, Chairman 

BRUCE L. BRALEY, Iowa 

Vice Chairman 

EDWARD J. MARKEY, Massachusetts 

DIANA DEGETTE, Colorado 

MIKE DOYLE, Pennsylvania 

JAN SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

DONNA M. CHRISTENSEN, Virgin Islands 

PETER WELCH, Vermont 

GENE GREEN, Texas 

BETTY SUTTON, Ohio 

JOHN D. DINGELL, Michigan (ex officio) 

GREG WALDEN, Oregon 

Ranking Member 

ED WHITFIELD, Kentucky 

MIKE FERGUSON, New Jersey 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 


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C O N T E N T S 

Page 

Hon. Bart Stupak, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 17 

Hon. Phil Gingrey, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 19 

Prepared statement .......................................................................................... 22 

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

California, opening statement ............................................................................. 32 

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

Tennessee, opening statement ............................................................................ 33 

Prepared statement .......................................................................................... 35 

Hon. Bruce L. Braley, a Representative in Congress from the State of Iowa, 

opening statement ................................................................................................ 37 

Prepared statement .......................................................................................... 39 

Hon. Donna M. Christensen, a Representative in Congress from the Virgin 

Islands, opening statement ................................................................................. 42 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 42 

Hon. Betty Sutton, a Representative in Congress from the State of Ohio, 

opening statement ................................................................................................ 44 

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

opening statement ................................................................................................ 45 

Prepared statement .......................................................................................... 46 

Hon. Janice D. Schakowsky, a Representative in Congress from the State 

of Illinois, opening statement .............................................................................. 48 

Hon. Greg Walden, a Representative in Congress from the State of Oregon, 

prepared statement .............................................................................................. 106 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

prepared statement .............................................................................................. 108 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, prepared statement .................................................................................. 110 

WITNESSES

Norman Michael Landauer, Bi-State Muffler & Brake Inc., Davenport, Iowa .. 49 

Prepared statement .......................................................................................... 52 

Bruce Hetrick, Hetrick Communications, Indianapolis, Indiana ........................ 54 

Prepared statement .......................................................................................... 56 

Fred Walker, St. Petersburg Glass and Mirror, St. Petersburg, Florida ............ 60 

Prepared statement .......................................................................................... 62 

Linda J. Blumberg, Urban Institute ...................................................................... 66 

Prepared statement .......................................................................................... 68 

Answers to submitted questions ...................................................................... 123 

SUBMITTED MATERIAL

Hearing memorandum ............................................................................................ 3 

Paper entitled, ‘‘House Bill to Hit Small Businesses with Surtax,’’ dated 

July 23, 2009, by The Heritage Foundation, submitted by Mrs. Blackburn ... 112 

Letter of July 16, 2009, from Members of Congress to House Speaker Pelosi, 

submitted by Mr. Gingrey ................................................................................... 114 

Report entitled ‘‘High-Risk Insurance Pools: A Flawed Model for Reform,’’ 

dated September 29, 2008, by Center for American Progress, submitted 

by Mr. Braley ........................................................................................................ 118 


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(1) 

THE HIGH COST OF SMALL BUSINESS 

HEALTH INSURANCE: LIMITED OPTIONS 

TUESDAY, OCTOBER 20, 2009 

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

The subcommittee met, pursuant to call, at 1:08 p.m., in Room 

2123, Rayburn House Office Building, Hon. Bart Stupak [chairman 

of the subcommittee] presiding. 

Present: Representatives Stupak, Braley, Schakowsky, 

Christensen, Green, Sutton, Dingell, Waxman (ex officio), Burgess, 

Blackburn, and Gingrey. 

Staff Present: Phil Barnett, Staff Director; Bruce Wolpe, Senior 

Advisor; Mike Gordon, Chief Investigative Counsel; Anne Tindall, 

Counsel; Erika Smith, Professional Staff Member; Jennifer Owens, 

Investigator; Ali Neubauer, Special Assistant; Paul Jung, Public 

Health Service Detailee; Julia Elam, Fellow; Sean Hayes, Minority 

Counsel; Alan Slobodin, Minority Chief Counsel, Oversight; Peter 

Kielty, Minority Legislative Analyst. 

Mr. STUPAK. This hearing will come to order. 

Today, we have a hearing entitled The High Cost of Small Business Health Insurance: Limited Options, Limited Coverage. 

Before we begin, I have a unanimous consent request. Committee 

staff have prepared a memorandum that summarizes information 

gathered in our investigation into the small business health insurance market. I ask unanimous consent that the memorandum be 

entered into the record. 

Dr. GINGREY. Mr. Chairman. 

Mr. STUPAK. Mr. Gingrey. 

Dr. GINGREY. Reserving the right to object, Mr. Chairman. I understand majority staff has been working with the insurers to protect confidential medical and business information; and, of course, 

this information was given to the committee in good faith, with the 

understanding that it would not be made public before consulting 

with the companies that provided it. My question, Mr. Chairman, 

is the majority assuring us that there is no confidential or sensitive 

medical or business information in this staff memo, which we just 

got I guess the final version within a couple of hours, that will be 

revealed if we agree with this unanimous consent request? 

Let me ask that again. Is the majority assuring us that there is 

no confidential or sensitive medical or business information in the 

staff memo that will be revealed if we agree to this unanimous consent request? And if the majority cannot guarantee that the staff 


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memo does not include confidential or sensitive information, would 

you amend your unanimous consent request to allow the majority 

and the minority staff to review the memo and make necessary 

redactions before it is included in the record? 

Mr. STUPAK. Mr. Gingrey, all the names of the companies have 

been removed. There is, from our review, no proprietary information or business information that would be inappropriately disclosed. I am very comfortable that there is nothing in there that 

would cause any concern. We redacted most of it. 

This memo was actually done last night. We did have some 

names in there. We did hear some objection from the minority side, 

so we did remove those names so no one would be—— 

Dr. GINGREY. Mr. Chairman, I appreciate that. Again, I know 

that some of these companies—and, obviously, I will not mention 

their names—but they may be in States where there is a very limited market, and I do have some concerns that it would be fairly 

easy to put two and two together and figure out exactly who you 

are referring to. 

Mr. STUPAK. Again, we have reviewed it. We see nothing proprietary. We have run it by everyone that needed to be—I don’t think 

there is any reason to have any concerns. However, if you want 

time to look at it, by the end of the hearing if you say there is a 

line that should be redacted, I will be happy to do so. 

Why don’t we just go ahead and put it in the record, but if you 

have objections at the end of the hearing, when your staff has a 

chance to review it closer, I will be happy to—— 

Dr. GINGREY. Mr. Chairman, I think that is very fair on your 

part. I appreciate that. And we will take you up on that. 

And, with that, I will remove my reserving the right to object 

and go ahead and let you put it in the record. 

Mr. STUPAK. Thank you. The memorandum is in the record; and 

if by the end—the close of this hearing, if there is an objection on 

a line or two, we will have a chance to discuss it and remove that. 

Our purpose here is not to divulge or harm any company’s business practice. We may question their business practice, but we are 

not here to harm their business practice through inappropriate release of information. So, with that, the memo will be made part of 

the hearing record. 

[The information follows:] 


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OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. STUPAK. The chairman and ranking member and the chairman emeritus will be recognized for 5 minutes for an opening 

statement. Other members of the subcommittee will be recognized 

for 3-minute opening statements. I will begin. 

Today’s hearing is the fourth of a series of subcommittee hearings on business practice in the private insurance market. Earlier 

this year, we held hearings on the insurance industry practice of 

terminating coverage after a policyholder becomes sick and files a 

claim. In our investigation, we learned that if your insurance company believes your illness may be costly, they will go back and reexamine your initial application to find any excuse to cancel your 

coverage. As health insurance industry executives brazenly told us, 

this practice, known as rescission, will continue until there is a national health care reform to expressly prohibit it. 

Last week, we held a hearing on the problem of underinsured, 

which occurs when someone has health insurance but their coverage is inadequate, leaving them with a limited coverage when 

they need it the most. We heard compelling stories from Americans 

who purchased insurance, paid their premiums, and expected to be 

protected in the event of a health crisis. When that crisis struck, 

they realized that their insurance was woefully inadequate to cover 

the high costs incurred to treat themselves or their family members. 

Today, we continue our investigation of the private health insurance market with a focus on the challenges faced by small businesses. Small businesses are a cornerstone of the American economy. They are the American dream. They employ 59 million American workers and created a quarter of the Nation’s jobs from 1992 

through 2005. 

In August of 2009, the committee sent document requests to six 

leading health insurance companies that sell policies in the small 

business market, seeking information about how they set premium 

rates and about some of the largest premium rate increases in recent history. What we learned from that investigation was the insurance companies take advantage of lax State laws and regulations in order to purge unprofitable small business policies. 

Because Federal law guarantees small businesses cannot be denied insurance once they have purchased it, insurers impose unpredictable and increasingly unaffordable increases. These unsustainable increases forces a small business to drop their health insurance because it is no longer affordable. Thus, the small business 

is purged. These increases are based on factors that are beyond the 

control of small businesses, such as employee health status, the 

size of the small business, and the age and gender of the employees. 

As a result of these discriminatory pricing practices, small group 

premiums are subject to unpredictable and enormous increases. Insurance companies routinely impose double-digit increases in premiums and, in some case, premiums increase more than 200 percent. 

Some of the more shocking cases that the committee uncovered 

include in January of 2008 an insurance company offered a 232 


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percent premium rate increase to an engineering service company 

in Kentucky. The number of employees on the plan had dropped 

from eight to one. 

In 2009, another insurance company offered a small technology 

firm in Georgia renewal of its current HMO insurance policy at a 

214 percent increase in premiums. The basis of the rate hike was 

that the average worker at that firm became older and/or more 

likely to be female and the size of the company decreased. 

Large annual premium increases can be devastating for small 

firms. As small firms struggle to stay afloat during this economic 

downturn, health insurance costs consume an even greater portion 

of company profits and make it even harder for these companies to 

cover all persons. Even before this most recent economic turndown, 

the cost of employer-sponsored health insurance was the primary 

concern of small businesses. 

The average cost of a family premium for a small business health 

insurance plan is nearly $13,000. This is up 123 percent since 

1999, and the median family income grew only 29 percent over the 

same period. Because of these higher costs, nearly a quarter of all 

small businesses are making the difficult decision to reduce their 

health benefits. 

Small business employees are shouldering a higher burden of 

their costs. Over the last 10 years, worker contributions for health 

insurance premiums have more than doubled, while their 

deductibles have greatly increased. Some businesses have even had 

to take the drastic step of eliminating employer-sponsored coverage 

altogether. 

Less than 50 percent of the smallest firms, those with fewer than 

10 employees, offer coverage. As a result of reductions in small 

group coverage, more than half of all small business employees in 

2007 were either uninsured or underinsured during the year. 

It is clear that the high cost of health insurance is crippling 

small businesses in our country, just when we need our Nation’s 

small businesses to contribute to job growth and economic recovery. 

We must reform our health care system so it does not punish those 

small business owners who choose to do the right thing and provide 

coverage for their workers. 

Today, we will hear testimony from several small business owners about the challenges they face in today’s small group health insurance market. 

Mr. Mick Landauer is the owner of Bi-State Muffler & Brake, Incorporated, for the past 30 years. He has shops in Iowa and Illinois, employing 11 workers. This year, he was quoted a premium 

increase of 42 percent from his current insurer. Mr. Landauer believes that this increase is due to his own congenital heart condition, which has required three heart surgeries in the past and 

probably more in the future. 

This year, instead of accepting this outrageous increase, he opted 

to increase his employees’ deductible to $8,000 per individual and 

$16,000 per family. Next year, he plans to take himself off the company’s plan in order to reduce the insurance rates for his business. 

More importantly, he believes that it is the right thing to do for 

his employees. 


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Mr. Bruce Hetrick owns Hetrick Communications in Indianapolis, Indiana, with 15 employees. His company received double-digit 

rate increases from his carrier earlier this year. 

His insurance plan also covered his late wife, who developed can- cer and incurred over $300,000 in treatment costs in her last year 

of life. In that year, Mr. Hetrick’s health premiums rose 28 percent. 

After his wife passed away, his insurance company requoted the 

policy. The premium increase was rolled back to 10 percent. 

Mr. Fred Walker owns St. Petersburg Glass and Mirror in St. Petersburg, Florida. He has offered health insurance since he started 

his company 15 years ago. His carrier has increased his premium 

rates every year, including a 14.6 percent increase this year. 

To keep his business afloat during this downturn, he was considering dropping health coverage altogether until he found out his 

secretary had breast cancer. He decided to do the right thing and 

maintain his company’s coverage so his secretary could have coverage for her treatment. But, to afford coverage, he had to take a 

plan with a $6,000 deductible. Because the group coverage was renewed, his secretary has been able to obtain the treatment she 

needs for her cancer. 

We will also hear from Dr. Linda Blumberg, an expert on health 

insurance in the small group market, on the effect of health insurance costs on small businesses. 

The U.S. House of Representatives will soon vote on H.R. 3200, 

America’s Affordable Health Care Choices Act of 2009. H.R. 3200 

contains critical insurance reforms that will end abusive insurance 

company practices. Under the bill, insurance companies can no 

longer rescind policies after people get sick based on minor mistakes or technicalities. The bill prohibits the type of annual and 

lifetime caps on coverage that lead many individuals to be uninsured or underinsured, and insurers will no longer be able to discriminate against small businesses based on how small they are or 

the health status of their workers. 

We must reform health insurance so that small businesses can 

compete on a level playing field with large employers and lead the 

way for our Nation’s economic recovery. 

That concludes my opening statement. I would next turn to Mr. 

Gingrey for an opening statement, please. 

OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Dr. GINGREY. Chairman Stupak, thank you. Thank you for holding the hearing. 

Our economy owes most of its success to the people who will testify before the committee today, Americans who work in a small 

business. Their prominent place in the American economy makes 

this hearing today an even more important one. 

Small businesses create jobs and wealth. Surveys have shown 

that companies with as few as 20 employees are often responsible 

for a quarter of the country’s job growth; and, in recent years, the 

vast majority of the United States firms had fewer than 50 employees. 

First and foremost, Congress must enact policies that help these 

businesses grow and promote job creation. As we continue to reVerDate Mar 15 2010 20:04 Aug 27, 2012 Jkt 074846 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 E:\HR\OC\A846.XXX A846

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view potential reforms for the health care system, we must also 

find a way to enact new policies and regulations that will help our 

small business owners provide their employees with quality, affordable health care. 

Since 1999, the average annual cost of a family premium for employer-sponsored health coverage in a small firm has increased 

over 120 percent. That is about 12 percent a year over the 10-year 

period. 

The three small business owners today will testify to a system 

that offers small businesses few options and increasing costs. They 

will all testify to the basic problem facing small business owners. 

With fewer employees, one illness can make health care 

unaffordable for all, for the entire employee group. 

Bruce Hetrick will testify that his wife’s cancer resulted in $300,000 in health care costs. When it came time to renew his policy, the premium was scheduled to increase nearly 30 percent. His 

wife passed away a month before the new premium took effect. 

When the insurance company learned of this, they changed the premium increase to just 10 percent, a particularly cold comfort, I am 

sure. 

Mr. Hetrick, I wish to convey my condolences for your loss and 

thank you for your courage in testifying today. 

Fred Walker’s business was hit hard by the economic turmoil of 

the past 2 years, so much so that in February of this year he had 

decided to discontinue the company’s health care plan. Only then 

he learned that an employee had been diagnosed with breast cancer. For Mr. Walker the choice was easy. He decided to continue 

the employee health care plan, but he was facing a 14 percent increase in the premiums last year. Today, he worries that the next 

premium increase will be much more substantial and very possibly 

unsustainable. 

Mr. Walker, I thank you also for taking care of your employee 

and for being here and appearing before the committee. 

Michael Landauer has been operating the Bi-State Muffler & 

Brake for 30 years. He has been able to offer his employees’ health 

care, but today those costs are spiraling out of control. Over the 

last 2 years alone, his deductibles have quadrupled. Mr. Landauer 

plans to remove himself from his own plan next year because his 

own health care costs are what essentially is driving up the premiums for the rest of his employees. 

Mr. Landauer, thank you again for being here and testifying. 

I note the title of this hearing is The High Cost of Small Business Health Insurance: Limited Options, Limited Coverage. It is a 

sad truth small business owners have few options when it comes 

to purchasing health insurance. 

Congress has an opportunity to enact reforms that address these 

skyrocketing costs. However, I recognize that there are ideological 

differences among this body regarding how we provide small business owners with more affordable health care options. To be frank, 

we do them and millions just like them a disservice by insisting 

that the path to reform is singular, one size fits all. This Congress 

should consider high-risk pools that can be designed to offer those 

with chronic illnesses affordable coverage without requiring their 

co-workers or employees to pay more for their own coverage. We 


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should also give small business owners the ability to choose the 

coverage they want, free of mandates for care that require them to 

purchase services that they don’t need or want. These are but two 

examples of many ideas that Republicans want to share with our 

President and Democratic colleagues, if they would only take the 

necessary time to listen. 

I thank the witnesses again for appearing before the committee 

today. I look forward to your testimonies and the dialogue to follow. 

Thank you, Chairman Stupak; and I yield back the balance of my 

time. 

[The prepared statement of Mr. Gingrey follows:] 


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Mr. STUPAK. Thank you, Mr. Gingrey. 

Mr. Waxman, chairman of the full committee, opening statement, 

please, sir. 

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

Mr. WAXMAN. Thank you very much, Mr. Chairman. 

Today, we are going to hear about the difficulties small businesses face in finding and keeping affordable health care coverage 

for their employees. 

Last summer, Chairman Stupak and I initiated an investigation 

into insurance company practices in the small group market. The 

committee obtained thousands of pages of insurance documents, 

interviewed company executives, and heard stories from numerous 

small business owners. What did we learn? Simply put, the health 

care market for small business health insurance is fundamentally 

flawed. Rising health insurance costs are wreaking havoc on small 

businesses and their employees. As one of today’s hearing witnesses put it, health care and health coverage inflation is small 

business enemy number one. 

Many small business owners, like the ones we will hear from 

today, want to provide health coverage for their employees. It is not 

only the right thing to do, but it also makes good business sense 

because it helps them recruit and retain better employees. But the 

current system stacks the deck against small businesses. Small 

firms pay premiums that are 18 percent higher than what large 

companies pay for the same level of coverage, and insurance companies can legally discriminate against small firms when setting 

premium rates. If a small firm employee gets sick, the insurance 

company can hike up the premium rates in order to recover its 

costs. 

Insurers can also charge discriminatory rates based on the age 

and gender of the small firm’s employees. They can charge higher 

premiums to small businesses that employ older people or young 

women who might get pregnant, and these discriminatory rate-setting practices are perfectly legal under our current health insurance system. 

Moreover, the insurance companies punish small businesses for 

being small. Insurers charge the highest premium to the smallest 

firms, who, unlike large businesses, cannot spread risk among 

many employees. 

Our investigation revealed that annual premium increases can 

be staggering. Insurers take advantage of weak State regulation of 

premium rates in order to purge from their rolls the less profitable 

small group policies, and they do this by making their insurance 

plans too expensive for a small business to afford. 

Small businesses commonly face double-digit increases in their 

health insurance premiums; and insurers impose even steeper rate 

hikes on the small businesses that happen to have a sick employee, 

employ more women than men, or have an older-than-average 

workforce. 

The committee’s investigation revealed that several insurers 

have imposed premium increases of greater than 100 percent on 


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small business customers. Two insurers have imposed rate hikes of 

greater than 200 percent in a single year. 

Given the sky-high costs of small group coverage, it is not surprising that small businesses are less likely than large to offer coverage; and, as premiums skyrocket in this market, the share of 

small businesses that offer group plans continues to decline. 

The committee has investigated a variety of private insurance 

practices, and one common theme has emerged. Insurance companies compete not on the basis of who has the best record of keeping 

their customers healthy but based on who is best at avoiding covering people who need life-saving and expensive health care. When 

we examined the individual health insurance market, we learned 

that companies will cancel policies after a policyholder gets sick 

and files claims. 

In the small group market, insurers don’t cancel policies. Instead, they increase rates to unaffordable levels so they can unload 

small businesses with sick employees from their plans. In each 

case, the insurance companies have created a win-win scenario for 

themselves. If health claims are low, the company collects premiums and makes money. If policyholders get sick, the company 

finds a way to get rid of the unprofitable policy. 

But that is not how insurance is supposed to work. The purpose 

of insurance is to spread risk across large numbers of people so 

that when some people get sick they receive needed care without 

experiencing financial ruin. In today’s private health insurance 

market, too often insurance companies simply aren’t there when 

they are needed the most. It is time to fix this broken system and 

ensure that everyone has access to affordable, reliable insurance. 

Thank you, Mr. Chairman. 

Mr. STUPAK. Thank you, Mr. Chairman. 

Mrs. Blackburn, 3 minutes for an opening statement, please. 

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

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

Welcome to our witnesses. We are glad that you are here. We appreciate your submitting your testimony in advance so that we 

could prepare for the hearing today, and we welcome each of you. 

We will be interested to hear your comments and to get your 

thoughts on the issue that is before us. 

Last week, we had a hearing that has been mentioned. It was 

on the rescissions issue. And as I said then and will restate today, 

I favor patient-centered, free market-oriented health care solutions 

that will keep people covered and employed, which is what we 

want to do. 

And we know that you all want to be able to keep people employed, and I think it is especially important for you, because we 

know that small business firms that employ 500 or fewer individuals, that comprises half, half of the American people that work in 

the private sector. And that should not be lost on us as we look at 

how we approach health care reform. Small businesses have created more than 72 percent of the new jobs created across this counVerDate Mar 15 2010 20:04 Aug 27, 2012 Jkt 074846 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 E:\HR\OC\A846.XXX A846

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try in recent years; and, because of that, we have a true appreciation for what you do. 

I do have concerns with the plans that the Democrats have 

brought forward on health reform. I was looking at some research 

today. Basically, their reform plan includes a $544 billion surtax on 

what is termed ‘‘the rich’’. But we all know that is primarily those 

of you who are small business owners and are going to bear the 

brunt of some of the reform efforts that have been mentioned and 

brought forward. According to data from the IRS, more than half 

of those targeted under the Democrats’ health care surtax are the 

small business owners. 

Now, this is of concern to me because I come from Tennessee, 

where we have had the test case for public option health care. It 

was put in place in late 1994. It is a program called TennCare. 

Our small business owners, while I was in the State Senate 

there, worked with us repeatedly because of their concern for the 

way the program was structured; and what we saw happen with 

the advent of public option health care in our State was that the 

cost of insurance went through the roof for our employers. It escalated more than the national average. And you have heard my colleagues talk about the rate of increase in some of their States. 

We are also concerned as we look at increased taxes and the 

mandates and bureaucracy, and we have read some of the estimates that health reform policies that have been proposed from 

this body would cost as many as 5 and a half million American 

jobs. We don’t want to see health care become such an expense that 

you can’t afford to keep your doors open. I am on your side in making certain that this stays affordable. We are looking at other options. 

I thank you for being here. 

I yield back my time. 

[The prepared statement of Mrs. Blackburn follows:] 


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Mr. STUPAK. I thank the gentlelady for her opening statement, 

but I must correct it. H.R. 3200 does not impose a super tax on 

small businesses. It is on individuals who have incomes more than 

a million dollars. It is not on small businesses. I am sure it was 

just a misstatement or something. I just want to clarify the record. 

Mrs. BLACKBURN. Mr. Chairman, I would love to submit the 

memo I have in my hand, if that would be acceptable. 

Mr. STUPAK. I have no problem with you submitting a memo in 

hand, but you have got to have your facts straight. 

I mean, 1 percent of income between those who make 350 to 

500,000 and 1.5 percent between those that make 500 to a million. 

The issue is there is no extra tax on small businesses. That is what 

your statement said, 500-some billion. That just is not true. It is 

only 1.2 percent of all taxpayers, individual taxpayers, not businesses that would have to pay the surtax. 

Mrs. BLACKBURN. Mr. Chairman, most small businesses file as a 

sub S or file on a regular 1040. And I think 22 members of your 

caucus also have written the Speaker with concerns about this very 

issue for those small businesses. 

I join many of our small business owners. They are not claiming 

party affiliation. They are claiming concern. Many in our State 

have seen it because of the impact of TennCare. 

I raise it not as an item of controversy but as an item of concern 

that I have for our Nation’s small businesses. And I think that, as 

we move forward, you have always been good to work with us on 

issues, and I would look forward to working with you to make certain that we address this so that it does not affect our Nation’s 

small business owners. 

And I appreciate the hearing today. 

Mr. STUPAK. Well, again, let me just state, even if you want to 

call it a subchapter S, the tax is not on business. It is on individuals, and those with the highest 1.2 percent of all taxpayers would 

have to pay it. It is not on businesses. I guess we can argue that 

all day, but it is not on businesses. I want to make that clear. It 

is on individuals. OK? And that is from the Joint Tax Committee. 

Mrs. BLACKBURN. They are business owners, sir. Thank you. 

Mr. STUPAK. I am not arguing where you are getting your income 

from. What I am saying is it is on individual income, not on businesses. 

Mr. Braley for an opening statement, 3 minutes. 

OPENING STATEMENT OF HON. BRUCE L. BRALEY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA 

Mr. BRALEY. Thank you, Mr. Chairman; and thanks to all of our 

witnesses for joining us today. 

The problems that we are here to talk about are all too familiar 

to me as a small business owner for 20 years before I came to Congress. For the last decade that I can recall, the place where I 

worked, where I was a small business owner, faced a minimum of 

15 percent premium increase notices every year and a maximum 

of 47 percent. 

When you are a small business faced with that challenge, you 

have limited options; and one of the options that we pursued almost every year was filling out multiple insurance applications at 


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four, five, six, seven different companies in search of a better option for the employees that we cared about. And yet almost every 

year we were faced with the harsh reality that in my State of Iowa 

80 percent of the health insurance market is dominated by two 

companies; and so there were very, very few cost-effective options 

available to small business owners. 

And I am also very familiar with the impact that one severe illness among your employees or a covered member of their family 

can have on dramatically increasing the cost of a small business’s 

insurance costs. We had employees who were diagnosed with multiple sclerosis. We saw our premiums skyrocket because of the 

enormous costs of caring for that lifelong disease. We had employees diagnosed with cancer, who suffered substantial health care 

costs. That also impacted our next year’s premium costs. 

These are not things that are abstract to small business owners. 

These are the challenges they face every day. And they want to try 

to provide the best possible coverage for their employees. But when 

we see what is happening right now with health care costs projected to go up 10.5 percent again next year, according to the 

health insurance industry itself, we know that that is not just 

going to be a dollar-for-dollar pass through to small businesses. Because if you look at the trends, it is usually about a two-fold or 

three-fold increase in premium costs. 

And that is why, to quote our friends on the other side, free market-oriented health care solutions aren’t working for small businesses. We have had high-risk pools that have been available in 

many States. It has not solved the problem that small business 

owners face. And that is why it is time to look at new, creative solutions like a public health insurance option to inject more competition into a free market system that does not have competition in 

many States and to give small business owners true choices in the 

type of coverage they are looking at to provide to their employees. 

And there was a reference to this surcharge. Well, the IRS has 

done analysis of every congressional district in the country in 

terms of who would be impacted by the surcharge that is in the 

House health care bill; and in the First District of Iowa 99.33 percent of my constituents would not be impacted at all by that surcharge. 

So I want to thank everyone for being here today. I am proud 

to have a witness from my district, Mick Landauer; and I look forward to his testimony. 

[The prepared statement of Mr. Braley follows:] 


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Mr. STUPAK. Thank you, Mr. Braley. 

Mrs. Christensen for an opening statement, please. 

OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A 

REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS 

Mrs. CHRISTENSEN. Thank you. Thank you, Chairman Stupak, 

for holding this hearing. 

Small businesses have a major stake in what we are trying to do 

in health care reform. As a physician and also a former small business owner, of course, and a former 10-year member of the House 

Committee on Small Business, the gravity of this issue and its implications have long been of concern. 

Our Nation’s present and future economic health thrives and 

flourishes based on the viability of our small businesses. They employ more than half of our country’s private sector workforce and 

are currently responsible for three out of four new jobs. Yet, due 

to increasing premium rates and their already very high insurance 

costs, more and more of these businesses find it difficult, if not impossible, to offer their employees health insurance; and this is even 

more acute given the current economic crisis. 

Looking to the future, the Council of Economic Advisers predicts 

that if nothing is done to address insurance plan practices or to 

slow the rise in employer health premium rates now, fewer than 

20 percent of small employers will offer coverage by 2040. 

The success of small businesses depend on a healthy workforce; 

and we all know that when one does not have insurance, needed 

health care is often deferred. Without healthy workers, small businesses cannot thrive. So passing a robust health bill is vital to the 

survival of this engine of our economy. Done right, it will level the 

playing field, giving small businesses the opportunity to offer affordable, quality coverage to their employees at a fair price. 

I would like to also thank the witnesses for being here this afternoon to help highlight this need and the opportunity we have before us to make a difference in the strength of this important sector 

of our economy. 

Thank you. I yield back. 

Mr. STUPAK. Thank you. 

Mr. Dingell for an opening statement. 

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. DINGELL. Mr. Chairman, thank you. 

I thank you, Mr. Chairman, for holding this very important hearing on an issue which is central to our comprehensive health care 

reform efforts. 

The United States spends over $1.9 trillion annually on health 

care expenses, more than any other industrialized nation. These 

costs keep rising and are a major factor in the difficulties facing 

American businesses in remaining competitive and profitable. 

This is strikingly apparent for America’s small businesses. There 

is no doubt that today’s private insurance market is not working 

well for anybody but especially so for small businesses and for their 

workers. They are severely disadvantaged by the current U.S. 


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health care system’s operations relative to their larger counterparts. 

Small business owners and their employees are receiving fewer 

benefits and paying higher costs for health coverage. During the 

past decade, the median family income grew 29 percent, while the 

average annual cost of a family premium on a small firm increased 

123 percent. 

The U.S. health care system imposes also a heavy tax on small 

businesses and their employees, not often noted except by the small 

business people. Small businesses pay up to 18 percent more per 

workers than large firms for the same health insurance policy. 

Some of these higher costs are passed on to small firm employees 

in the form of lower wages or in the form of lesser benefits, and 

some eat into the profits of small businesses that could otherwise 

be used for much-needed investments. 

I have heard from many small business owners in my district 

about their genuine desire to provide health care for their workers. 

Unfortunately, because of the costs, they are simply unable to do 

so. This impacts recruitment, retention, and places them at a very 

real and severe competitive disadvantage. 

I want to express my particular thanks to our witnesses who 

have joined us today. I am happy to tell them that their testimony 

reminds us why it is so crucial that we pass comprehensive health 

care reform this year. 

And, again, I want to commend you, Mr. Chairman, for having 

this hearing. 

We understand that small businesses are critical to job growth 

and innovation in the U.S. economy. They are the key to our economic recovery. 

In drafting comprehensive health reform legislation to the House, 

we have taken aggressive steps to ease the burden currently experienced by small business owners who struggle to provide health 

care for their employees. Under H.R. 3200, small businesses will be 

able to provide and to purchase health insurance through a national insurance exchange, allowing them to choose between a multitude of plans that would provide better coverage at lower costs 

than they could find in the current group market. Those plans 

would also be transparent, and those plans would also meet rigorous standards for the protection of the employer and the employee. 

Small business employees will no longer be penalized for pre-existing medical conditions, a poorer health status, or age. Some 

small businesses that provide health insurance for their employees 

will receive up to a 50 percent small business tax credit to alleviate 

their disproportionately higher costs and encourage better coverage. Additionally, small business owners will benefit as costs for 

the uninsured are no longer shifted onto employers. 

Mr. Chairman, I commend you again for your diligence in this 

matter. Today’s hearing and the investigations that you have been 

conducting highlight the importance of our cause to deliver comprehensive health reform for the American people. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

Mr. STUPAK. Thank you, Mr. Dingell. 

We will hear from Ms. Sutton from Ohio. 


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OPENING STATEMENT OF HON. BETTY SUTTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Ms. SUTTON. Thank you very much, Mr. Chairman; and thank 

you for holding this important hearing. 

And, to the witnesses, I look forward to hearing what you have 

to say. Thank you for coming forward and sharing your experiences 

and your stories to inform our discussion and our policymaking. 

You know, small businesses are the drivers of our economy; and, 

from 1992 to 2005, companies with fewer than 20 employees accounted for a quarter of the Nation’s job growth. 

And Ohio is also experiencing that kind of job growth in small 

businesses. From 2004 to 2005, small businesses created the only 

surplus in new jobs for Ohio. In those years, while larger employers 

saw decreases in employment, the smallest Ohio employers, those 

with one to nine employees, saw large increases. 

Small businesses in Ohio have the ability to thrive, but health 

care costs pose a major impediment to their potential continued 

success. In 2008, Ohio’s small businesses spent $5.3 billion in 

health care premiums, and a Small Business Majority report found 

that the number could rise to 12.5 billion by 2018 without health 

care reform. These high costs led employers to cut benefits or, in 

many cases, not offer them at all. 

In 2008, just 31 percent of Ohio’s small businesses reported paying for health insurance for their employees. Of the ones that did, 

71 percent said that they were struggling to do so; and of the ones 

who don’t provide insurance, more than 75 percent of those said 

they could not afford it. 

Small businesses are not unlike individuals when they are trying 

to buy health insurance for their employees. They don’t have the 

bargaining power and are charged higher prices for plans that are 

less generous. Basically, insurance companies discriminate against 

them, giving them ‘‘take it or leave it’’ plans. 

The rates and services offered can vary greatly, even for companies that are the same size and may be involved in the same business. Over the past year, this subcommittee has been active in exposing and revealing underhanded insurance practices by insurance companies. We are gathering information on the cancellation 

of small business plans as well as the overall business practices of 

insurance companies. 

In a hearing last week, my colleague, Representative Schakowsky, referenced a news story in which an insurance company 

cancelled an entire line of insurance for small businesses in order 

to remove costly beneficiaries from their roles. It is unconscionable 

behavior, pursuing profit without regard to the wake of harm, the 

people that they leave behind stranded not only with health problems but with no way to access the care they need to overcome 

them. 

We must get to the bottom of these harmful practices, and this 

hearing is a good step in that direction. As I said, small businesses 

are part of a growing list of people and institutions, entities that 

need health care reform now in order to succeed. 

And I yield back. 

Mr. STUPAK. Thank you, Ms. Sutton. 

Mr. Green for an opening statement, please. 


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Mr. GREEN. Thank you, Mr. Chairman. 

I would like to place my full statement in the record. 

Mr. STUPAK. Without objection. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. And thank you for holding this hearing. 

Because small businesses, particularly in a tough economy, face 

such a hard decision. Because in my earlier life I actually helped 

manage a small business with 13 employees and had to negotiate 

with insurance companies. We had a bargaining unit, so our line 

employees, our production employees would be covered, but we 

wanted something to cover all 13. And I can tell you a lot of experiences, and I will tell you one. Because we would sign a 3-year contract, and in its first year they would always raise the premium so 

much because they knew we were producing a product and not actually in the business of buying insurance, and it went to where 

we had to go every year almost and threaten to take our work, policy elsewhere. 

But one year they came to me and said, because it was my job 

to negotiate with the insurance company, they came to me and 

said, you have one employee who has had two radical 

mastectomies; and if you exclude that employee, we can give you 

a lot better rate. And I said, you don’t understand. That employee 

is the wife of the owner, and it is a family company, and I will tell 

him you suggested that. They actually pulled it off the table. 

But, you know, that is what employers, small businesses see 

every day, the choice of either cutting employees or cutting your 

health care. And that is why what Congress is trying to do is so 

important, to put small business on a level playing field so they 

can bargain with insurance companies on some type of even field. 

And so, Mr. Chairman, thank you for calling this hearing. Hopefully, it will point up the need that we have for some kind of national health care exchange for small businesses to participate in. 

I know in Texas we tried to do that, with very limited success. 

But, again, thank you, Mr. Chairman. I look forward to the testimony. 

[The prepared statement of Mr. Green follows:] 


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Mr. STUPAK. Thank you, Mr. Green. 

Ms. Schakowsky for an opening statement, please. 

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Ms. SCHAKOWSKY. Thank you very much, Mr. Chairman, for 

holding this hearing that focuses on the problems of small business 

owners and their employees. 

Virtually every business and every household in our country is 

struggling to cope with rising health care costs. It is really Code 

Red for small businesses. 

The Main Street Alliance describes it this way: Quote: Every day 

small businesses are being forced to drop health coverage, lay off 

employees, or shut their doors for good because of the rising costs 

of health care. 

Small businesses can’t afford the cost of doing nothing on health 

care. We can’t afford to see insurance costs continue to skyrocket 

with no bargaining power to keep the insurance companies in 

check. We can’t afford to pay more for less coverage, including 

twice as much in administrative costs as larger groups, with no 

real alternatives. We can’t afford to keep absorbing huge rate hikes 

in this system that gives insurers free rein to discriminate based 

upon our employees’ health status and gender. 

You heard about health status. I hope to ask some questions 

about gender. This is a critical condition confronting many of my 

constituents, people like Marie, who owns a candy store in 

Wilmette. After she and her husband were denied coverage, they 

were finally able to find a policy but one that requires them to pay 

$1,700 each month in premium and out-of-pocket costs. And how 

many small business entrepreneurs can afford that, particularly in 

today’s economy? 

Or Jim Kelly of Glenview, Illinois, who works for a small business that can’t afford to provide coverage to its workers. Jim and 

his wife are forced to take, in his words, a risk. We are paying cash 

for our medication and hoping that nothing major happens until we 

are eligible for Medicare. 

Americans shouldn’t be asked to gamble with their lives. It is 

time for solutions. I hope that we will hear today the changes that 

are essential to keep small business economically strong and small 

business employees healthy, and I think this hearing and action on 

health care reform couldn’t be more timely. 

Thank you, Mr. Chairman. 

Mr. STUPAK. Thank you, Ms. Schakowsky. 

That includes the opening statements by members of the subcommittee. 

We have our first panel of witnesses before us. 

Our first witness, Mr. Landauer, comes from Iowa and is a constituent of Mr. Braley. Mr. Braley is Vice Chair of this subcommittee, so I am going to ask him to take a moment and introduce Mr. Landauer. 

Mr. BRALEY. Thank you, Mr. Chairman. 


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I am proud to introduce Mick Landauer, a constituent of mine 

and the owner of Bi-State Muffler & Brake, Inc., in Davenport, 

Iowa. 

Mick showed up at one of my very first town hall meetings on 

health care in July in the Quad Cities and has been working with 

my office all year on important health care issues, particularly the 

challenges of providing affordable health care coverage for his employees. I want to thank Mick for helping me on this critical issue 

and for being here to share his story with the subcommittee. 

Mr. STUPAK. Thank you. 

And Mr. Bruce Hetrick is with us. He is a small business owner 

from Indianapolis, Indiana. And thanks for being here. I know it 

was difficult. And sorry about the loss of your wife. But it is a story 

I think we all need to know, because I think small businesses face 

it every day. So thank you for being here. 

Mr. Fred Walker is a small business owner from St. Petersburg, 

Florida. I know the economy is not the best down there, so I am 

sure you can give us some insight not just on health care but also 

on economic and what it is doing to your business line on health 

insurance. 

And Dr. Linda Blumberg, who is a Senior Fellow at the Urban 

Institute, expert on small business and insurance; and we look forward to your testimony. 

It is the policy of this subcommittee to take all testimony under 

oath. Please be advised that you have the right under the rules of 

the House to be advised by counsel during your testimony. Do you 

wish to be represented by counsel? 

Everyone is shaking a their head no, so I will take that as a no 

answer. Therefore, I am going to ask you to please raise and raise 

your right hand and take the oath. 

[Witnesses sworn.] 

Mr. STUPAK. Let the record reflect that all witnesses answered 

in the affirmative. They are now under oath. 

We will hear from you with an opening statement 5 minutes 

long. If you have a longer statement, we will include it; and it will 

be made part of the record. 

Mr. Landauer, if you don’t mind, we will start with you. We will 

go from my left and go right across. You might want to turn that 

on, Mr. Landauer. A green light should go on. There we go. Go 

ahead. 

STATEMENTS OF NORMAN MICHAEL LANDAUER, BI–STATE 

MUFFLER & BRAKE INC., DAVENPORT, IOWA; BRUCE 

HETRICK, HETRICK COMMUNICATIONS, INDIANAPOLIS, INDIANA; FRED WALKER, ST. PETERSBURG GLASS AND MIRROR, ST. PETERSBURG, FLORIDA; AND LINDA J. BLUMBERG, 

URBAN INSTITUTE 

STATEMENT OF NORMAN MICHAEL LANDAUER 

Mr. LANDAUER. Thank you, Mr. Chairman, and to all honorable 

members of the congressional subcommittee. I am here today to 

give just one story on the high cost of small business health insurance. 


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I do own my own business. I have owned the company for over 

30 years, and one of the perks we offer at the company is a group 

health insurance policy for the employees who desire coverage. The 

cost is split on a 50–50 basis, and these costs keep rising. 

In 2006, our company paid $17,500 for health insurance. That 

was about 2 percent of the business costs. In 2007, the health insurance costs rose to $22,000. That was 2.4 percent of our costs. In 

2008, health insurance rose to $25,500; and, again, our costs of it 

rose also. In 2009, health insurance through September has cost 

$21,660, which comes out to about $29,000 for the year, and is up 

to 3 percent of our expenses. 

The rates per employee have been climbing tremendously. In 

order to keep them down, our deductible is rising instead. Our 

monthly premiums now are around $400 for a single individual and 

around $850 on the family plan. The deductible is at $8,000 for an 

individual policy and $16,000 for the family plan. The muffler shop 

pays for half the deductibles in 2009. 

Last year, we had deductibles of $4,000 for an individual and 

$8,000 for a family plan, with monthly rates that were quite a bit 

lower. Two years ago, the deductibles were $2,000 for an individual 

and $4,000 for the monthly plan. The monthly rates again were 

lower yet. At our next signing period, I expect the deductibles to 

double once again, with the monthly rates to go up by $50 to $100. 

How can this be? It is because one of our policyholders was born 

with congenital heart disease. He visits a specialist twice a year. 

A routine visit costs anywhere from $1,200 to $1,500. Any specialized tests that may be done can run $10,000 or more. And that employee is me. 

The only way I see to keep both monthly rates and deductibles 

reasonable is by taking myself off our group policy. I will not be 

able to get health insurance, individual or otherwise, as I have 

turned down our company’s group plan that is available to me. 

So I ask you, what options do I have? Pay for my own medical 

costs, in which case I would be forced to sell the business? Quit 

going to doctors, including my congenital heart specialist, even 

though I now have a pacemaker? Or how about moving to Canada, 

which has a national health care plan? But yet again, I would be 

forced to sell my own business. 

To me, owning your own business is the American dream, a 

dream that now seems to be only that, a dream. I turned 53 last 

Thursday and am beginning to wonder how it could all go wrong. 

Is it punishment for not being the typical person? 

I employ 11 people at the muffler shop, including myself, and do 

feel successful in the business world. I am a member of our local 

temple. I am a member of two nonprofit organizations. But I have 

learned anything can change in an instant. 

Anyway, I would like to personally thank you for letting me have 

my time at the hearing. I know that our health insurance landscape does need a change. I know that is an issue with all Americans, as it does affect each and every one of us. I do understand 

there are as many reasons for a change in our health insurance 

system as there are against that change, and I see there is no right 

or wrong answer to the question of health insurance. 


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As for me, I am for a change in the way that health insurance 

policies can be written. Whether we make them national in scope 

or even let the government offer their own policy, I feel it is time 

for a change. Health insurance is not just a purchased item, as is 

car insurance, but rather a part of America that does affect all 

Americans. 

I know you have a difficult task ahead of you, and I wish you 

all the best in trying to solve America’s health care dilemma. I 

wish you the best of luck in the decisions you are going to make 

that will not only impact me but the rest of America as well. Each 

and every one of us are going to be affected by your decisions. 

Once again, thank you for letting me testify before you today. It 

has been my utmost honor to have the privilege of speaking before 

you and trying to give a voice for many other people besides myself. 

[The prepared statement of Mr. Landauer follows:] 


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Mr. STUPAK. Thank you, Mr. Landauer. 

Mr. Hetrick, your opening statement, please. 

STATEMENT OF BRUCE HETRICK 

Mr. HETRICK. Mr. Chairman and members of the committee, 

thank you for the opportunity to talk with you about the impact 

of health insurance on small business. 

My take on our health system comes from three perspectives. 

First, you need to know that I am a hearing-impaired, migrainesuffering, diabetic cancer survivor who is also the father of a cancer 

survivor and the widower of a cancer victim. So I have experienced 

more than my fair share of the American health care system. 

Second, as a professional communicator with a passion for 

human services, I have spent decades working for health educators, 

nurses, doctors, hospitals, health advocates, and the people who 

pay for all of the above. 

Third, I have been a small business owner for 16 years. In that 

role, my colleagues and I have evaluated, purchased, and paid for 

health insurance for our employees and our families. 

Despite my and my family’s health problems, I consider myself 

lucky. I have had health coverage for myself, my spouse, and my 

twin sons throughout my 30-year career. For the most part, the 

policies have covered what they promised to cover, little haggling 

required. When the need was greatest, during my late wife’s cancer 

battle, our insurance company, Anthem Blue Cross/Blue Shield 

sped approvals and denied not a single claim. I am very grateful 

for that. 

On the other hand, I have some frustrations. 

First, health care and health coverage inflation is small-business 

enemy number one. My company pays 80 percent of the employee 

premiums and 50 percent of dependent premiums. That is higher 

than typical for firms like ours, but it helps us to attract and retain 

good people. It also leaves us with a painful choice. Either the cost 

of health coverage cuts into our profits or, if we pass it onto our 

customers, it renders us less competitive. 

Another concern is health insurance rate inequities. If you are a 

big business, you get pricing based on giant risk pools. I mean if 

you are a small company like mine, one staff health crisis can send 

your rates skyrocketing. 

Let me give you one example. My late wife, Pamela Klein, was 

also my business partner. As such, she was covered by our company’s health plan. 

In the last year of her life, the billed charges for Pam’s cancer 

care totaled $300,000. A few months before her death, our health 

insurance renewal came up. Lo and behold, the quoted increase for 

the health insurance portion of our benefits plan was a whopping 

28 percent. That would have been devastating to our company and 

our employees. 

When Pam died just short of the actual renewal date, I had our 

rates requoted. With Pam out of the mix, the increase for the very 

same health coverage was just 10 percent. A 28 percent increase 

reduced to 10 percent because of one person who needed the care 

that we had paid for. 


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One additional concern I will share with the committee involves 

taxes and economic development. Because I own more than 2 percent of an S corporation, my benefits are fully taxed income. My 

employees’ health insurance is a pretax company expense. Mine is 

fully taxed as personal income. In addition, my employees enjoy 

pretax spending accounts for their out-of-pocket medical expenses. 

I am the only person in the company who cannot participate. In 

this country where most jobs are created by small business, that 

is a very powerful incentive to do just the opposite. 

Because we are so overly dependent on employment-based health 

insurance in this country and because we have allowed the denial 

of coverage to those with major maladies and pre-existing conditions, we have created an enormous chasm between haves and 

have-nots. One lost job, paired with one serious or chronic ailment, 

and you are a fiscal goner. 

As Pam and I sat in renowned cancer centers in Indianapolis and 

Houston, getting pricey chemotherapy and sophisticated scans, we 

were grateful for the caregivers, the coverage, the clinical trials, 

and the chance at survival. But we also felt guilty that we were 

getting this because we had money, connections, and jobs. Yet all 

the while, here in the greatest Nation on earth, others facing the 

same predicaments, citizens with the same right to life and health, 

were growing sick and dying with no chance whatsoever. Sadly, 5 

years after Pam’s death, more uninsured Americans than ever still 

are. 

My point today is simple. We need health coverage for all. We 

need it now. But if Congress is going to settle on an employerbased system, then our small businesses need rates and risk pools 

and tax policies that make the provision of health insurance competitive and affordable. We need incentives to create and sustain 

jobs, not incentives to lay people off, close up shop, and go to work 

for large organizations with benefits that we can’t compete with. 

Thank you very much. 

[The prepared statement of Mr. Hetrick follows:] 


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Mr. STUPAK. Thank you, Mr. Hetrick. 

Mr. Walker, your statement, please. 

STATEMENT OF FRED WALKER 

Mr. WALKER. Good afternoon, Mr. Chairman and Members. 

Thank you for having me. 

My name is Fred Walker. I am the owner and operator of St. Petersburg Glass and Mirror in St. Petersburg, Florida. We fabricate 

and install flat glass and aluminum products for the construction, 

remodeling, and emergency recovery industries. 

I founded the company in 1993 with two credit cards and some 

financial support from my family and a whole lot of help from my 

wife. Sixteen years later, I feel lucky to be a survivor of the current 

economic disaster in our community. 

From day one I felt that each employee should have an option 

to be included in a health insurance plan. Over the years we 

learned that the plans are many. You have to shop for a new one 

every year in order to help avoid escalating costs, pre-existing conditions are never covered, and each employee is a unique case. As 

the costs have risen, the financial burden that our company can 

bear has been reduced. We currently pay 50 percent of our policy 

for each employee. Percentages have changed as the policies and 

the premiums have risen. 

I am here today because the economic downturn has had an effect on my business and, consequently, my ability to provide health 

care programs for my employees. 2007 and 2008 were boom years 

for St. Pete glass and mirror. The housing boom was followed by 

a commercial building boom. I had 10 glazers on staff, an assistant 

manager, and a secretary. Every day was busy, and we sometimes 

had more work than we could handle. 

By late 2008, things started slowing down; and I saw the decline 

coming. I started laying off workers that September; and by February, 2009, it looked like I might have to drop our health insurance program altogether. 

I mentioned that one day to my secretary, Mindy; and she immediately made an appointment to have a breast exam. The checkup 

she had been avoiding was breast cancer. I made the decision to 

keep our health insurance program even though the business continued to collapse. Mindy went into treatment and has fared well. 

However, our options are now very limited, and she has recently 

been refused a quote because of pre-existing conditions until she is 

cancer free for 10 years. 

Please also note that I had a sudden bout of seizures from May, 

2008, to November, 2008, which included several days in the hospital; and our recent quote did not exclude me. Apparently, I am 

a lower risk. 

We have operated since June with a staff of four, myself, Mindy 

and two glazers. Everyone takes voluntary time off when there is 

no work. Gross income is roughly one-third of what it should be 

with a workforce that size. Mindy’s treatment is over for now; and 

if she can find another option, I will go on my wife’s policy soon. 

Rebuilding the company appears to be months or maybe years 

away. 


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I thought it was my duty to ask friends, family, and mentors 

their opinions on this issue as I represent them as well. I will paraphrase some of their responses. 

Jack Grayson, owner of Seminole Realty, my cousin, had a 13- 

year battle with his departed wife, Peggy. She had cancer; and I 

quote, ‘‘The last few years, our copays and medication were $3,000 

to $4,000 a month, and we had good insurance. What do the less 

fortunate people do?’’ Peggy passed on in 2000. Jack says we have 

to help those who can’t afford the proper care. 

John Wallace, a general contractor who is my best customer, says 

the bill passed in the Senate last week requiring businesses to provide health insurance will crush small business. 

Lance of Lance’s Moving Company, a customer, walked in off the 

street last week and we were talking about it. Lance related a 

story that his wife had kissed their grandson on the eye when he 

was a baby. She had a cold sore and accidentally gave him herpes 

simplex in his eye. There is no medical insurance available because 

of the pre-existing condition. Lance has spent his life savings and 

is out of options. The boy is 6 years old. 

Most of us use chiropractors, dentists, optometrists, and counselors, as well as medical doctors. These people are as educated 

and vital to our welfare as doctors but not covered under most 

medical plans. 

A friend related a story about a local anesthesiologist who specializes in cardio-pediatric care. His clinic had liability insurance. 

The hospital he worked out of had liability insurance, but his annual premium for his personal liability was $250,000 per year. 

That is triple liability insurance, and where is our money going? 

Finally, my wife, Jane Walker, director of Daystar Life Center in 

St. Petersburg, who takes care of the least fortunate of us every 

day, says there are many people who choose between food, medication, and health care for their loved ones every day. 

Something has to be done. We live in the greatest nation in the 

world, have the resources. This is an issue about people, not politics. Not money, but people. 

Finally, I did find somebody who was happy with their health 

care. Pete and Pat Lamb are dear family friends, and they are both 

over 70 years old. Their combination of Medicare and coinsurance 

has provided for them well. Perhaps that is a starting point. 

Thank you. 

[The prepared statement of Mr. Walker follows:] 


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Mr. STUPAK. Thank you, Mr. Walker. 

Dr. Blumberg, your testimony please. 

STATEMENT OF LINDA J. BLUMBERG 

Ms. BLUMBERG. Mr. Chairman and distinguished members of the 

committee, thank you for inviting me here today to share my views 

on the health insurance challenges facing small businesses and 

their workers. While I am an employee of the Urban Institute, this 

testimony reflects my views alone and should not be attributed to 

the Urban Institute, its trustees, or its funders. 

Small employers are at a significant disadvantage as purchasers 

of health insurance relative to large employers. The consequences 

are clear and consistent over time. Small employers are much less 

likely to offer health insurance coverage to their workers, and 

workers in small firms are much more likely to be uninsured. The 

barriers that small employers face in insurance purchasing come 

on multiple fronts; and as premiums continue to grow faster than 

wages, the declines in small employer-based coverage outpace the 

declines among large employers. Without significant reforms to 

how small group health insurance markets function and to the insurance options that are available to those without employer offers 

of insurance coverage, there should be no expectation that these 

negative trends will abate. 

In 2008, only 36 percent of employers with fewer than 10 workers offered insurance to their workers, compared with 99 percent 

of employers with a thousand or more workers. Plus, declines in 

employer offers over time have been greatest among small employers. 

The employer size differences are most dramatic when looking at 

employers with a low-wage workforce. Among employers for which 

at least half of their workers were low wage, only 18 percent of the 

smallest employers offered health insurance coverage in 2008 compared with 98 percent of the largest employers. 

Between 2000 and 2008, the share of low-wage employers offering coverage to their workers fell almost 28 percent for employers 

with fewer than 10 workers but held steady for the largest lowwage employers. So the differential in offer rates between small 

and large employers is large and growing even larger, and the situation for low-wage firms and their workers is particularly severe. 

Differences in employer offer rates and take-up translate directly 

into differences in insurance coverage for workers. Fully one-third 

of workers employed in firms of fewer than 25 were uninsured in 

2008, compared with 13 percent of those employed by firms of a 

thousand or more. Smaller firms faced much larger administrative 

costs per unit of health benefit purchased. Administrative economies of scale occur because the cost of enrollment and other activities by plans are largely fixed, and insurers have fewer workers 

over which to spread these costs in small firms. In addition, small 

employers experience greater year-to-year variability in medical expenses than do large firms because there are fewer workers over 

which to spread the risk. Insurers charge small employers higher 

premiums as a result. 

Many States allow commercial insurers to adjust small employer 

premiums based on the health status and claims experience of 


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their workers. Almost all States allow significant variations in premium rates as a function of the age of the workers, and many also 

allow adjustments based on the industry of the employer. These 

rating practices create additional difficulties for many small employers to obtain affordable coverage for their workers. 

Another barrier to small employers providing health insurance is 

that the typical worker in a small firm is paid significantly less 

than workers in large firms. The lower wages of small firm workers 

imply that they are less able to pay for health insurance through 

wage reductions. Consequently, their employers are less likely to 

offer such benefits. 

Workers in small firms that do not offer health insurance are 

often left with few options for insurance coverage. In the vast majority of States, there is no guarantee that an individual can purchase health insurance in the individual market; and even if 

nongroup coverage is available, coverage is frequently limited such 

that it may not be adequate to provide these workers with affordable access to necessary medical care. 

A number of provisions in H.R. 3200 would provide significant 

assistance for small employers and their workers. The most important of these, in my opinion, are the establishment of a national 

health insurance exchange, along with significant reforms to insurance market rules, and the provision of subsidies to assist the lowincome population purchase health insurance coverage through the 

exchange. 

Not only would workers in small firms have a choice of insurance 

plan within the exchange, a situation extremely unusual today, but 

those that have been priced out of the market due to health issues 

or an older workforce may have affordable access to coverage for 

the first time. 

In addition, all small groups would see a significant decrease in 

the year-to-year variability of premiums due to greater sharing of 

health risks. In addition, small employers can expect administrative savings from purchasing coverage through the exchange. 

Churning across policies and insurance-related job loss should be 

reduced significantly. 

Finally, with the insurance reforms in the exchange alone, small 

firm workers would still be more likely to be uninsured than large 

firm workers because they tend to be lower income. As a consequence, the financial assistance and purchasing exchange based 

coverage and the expansion of eligibility for the Medicaid program 

that H.R. 3200 would provide are critical elements to expanding 

coverage for low-wage workers and their families. In these ways, 

the proposed legislation would make adequate and affordable coverage available to many more workers of small employers than is 

the case today. 

Thank you very much. 

[The prepared statement of Ms. Blumberg follows:] 


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Mr. STUPAK. Thank you all for your testimony and for being here 

today. We will start with questions. 

Mr. Landauer, you said you have a congenital heart condition. I 

take it you have always disclosed that to the insurance companies? 

Mr. LANDAUER. Yes. 

Mr. STUPAK. Then why have your rates dramatically increased? 

Have you started utilizing the service more? 

Mr. LANDAUER. About 8 years ago, I had my third major oper- ation that was about $500,000. Basically, the past 4 years, they 

have gone up tremendously. I’m using probably $40,000 a year just 

in a test to make sure that they don’t need to do another operation. 

Mr. STUPAK. I guess what was confusing me a little bit, your 

rates have gone way up, but it seems like your surgeries were earlier. I was trying to put some correlation there. That is what I was 

trying to do. 

Mr. LANDAUER. I understand that. Yes, my surgeries were 8 

years ago, my last major surgery, and yet the rates started climbing 4 years ago. 

Mr. STUPAK. Mr. Hetrick, let me ask you a question along the 

same lines. Long before your wife passed on, you had insurance. 

And then you indicated when she got sick, the year she was really 

sick, you had a 28 percent increase. And when she passed on, you 

asked them to recalculate; and it would have been only a 10 percent increase. 

Mr. HETRICK. I am having trouble hearing you. 

Mr. STUPAK. OK. You indicated you have had insurance while 

you were in business, 16 years, or whatever it was? 

Mr. HETRICK. Yes. I started the company 16 years ago. I probably got the first insurance about 14 years ago. 

Mr. STUPAK. And then your wife became ill? 

Mr. HETRICK. Yes. 

Mr. STUPAK. And she was part owner of the business and so she 

was a covered employee? 

Mr. HETRICK. Yes. 

Mr. STUPAK. And then that 1 year your rates increased 28 percent? 

Mr. HETRICK. 28 percent. 

Mr. STUPAK. And, unfortunately, after your wife died, you asked 

them to recompute; and they said, oh, it should have been maybe 

a 10 percent increase? 

Mr. HETRICK. Correct. 

Mr. STUPAK. Just think out loud. I would think all those years 

when I paid for insurance, when I did get sick, I wouldn’t see a 

dramatic increase because I have been paying all those years. 

That’s why I have insurance. So you stabilize your costs and your 

risk, but that does not seem to be the case. It seems like in your 

case your big increase was because, unfortunately, your wife got ill. 

Mr. HETRICK. Right. The only thing that changed, the reduced 

risk factor that was quoted in the e-mail that came to us, was Pam 

died. So, since her death, rates have gone back to somewhat they 

are for other small businesses in America. Our rate increase last 

year was 19 percent. 

Mr. STUPAK. We have insurance and we think we build up a reserve so, when we do get sick, we have been paying all of these 


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years, you would think they would pay the claim. And you said 

they were pretty good about paying, but then you wouldn’t expect 

them to try to pick up that loss all in the next year or two. 

Mr. Walker, you said your secretary—and I compliment you for 

keeping the insurance so she can at least get some coverage here— 

you said refused a quote. Was that your secretary trying to buy an 

individual policy or was your company—your company refused the 

quote because she was on your policy? 

Mr. WALKER. It was an individual policy. Salesmen will walk in 

off the street and want to quote. I always felt it was my duty to 

do the best for my employees and do the best for the company. OK, 

quote us another policy and see if you can beat what we have got. 

This happened just a couple of weeks ago after we were all involved in this. This was a HumanaOne policy. A guy I had known 

just started selling health insurance. He came back and said, here 

is a quote for you, you, and you. Mindy, sorry, we can’t help you. 

So, guys, let’s huddle up and talk about your health insurance. She 

confronted him about it; and he said, until she has been cancer free 

for 10 years, they wouldn’t even give her a quote. 

Mr. STUPAK. So if you dropped her, she would be out of luck? 

Mr. WALKER. Completely out of luck. If she loses her job, if our 

company continues to shrink, she is out of luck. She has no options. 

Mr. STUPAK. Dr. Blumberg, please look at that chart number 3. 

Each of these are small businesses. They have indicated how they 

have struggled to try to keep things afloat, provide insurance, provide reasonable pay for their employees. If you look up at this 

chart, if you look in that book, Mr. Walker, what it shows is loss 

of future small business profits due to health insurance costs over 

the next 10 years. This chart shows that lost profits will skyrocket 

17 times that of the 2009 levels if we do not enact health reform. 

I would like to ask you about the impact of the current health 

care system on small business competitiveness. If we do not enact 

comprehensive reform for the small group insurance market, what 

will the impact of health costs be on small businesses off into the 

future? Does that chart reflect what is going to happen? 

Ms. BLUMBERG. I apologize, Mr. Chairman. I don’t see that. 

Mr. STUPAK. I misspoke. I’m sorry. Tab 11. 

Ms. BLUMBERG. OK, tab 11. 

Clearly, the problem is that small businesses are already starting with one foot in the hole in terms of purchasing health insurance coverage. They simply are not efficient purchasers of coverage 

as a consequence of the way small insurance markets work and the 

marketing costs that are associated with selling coverage small 

group by small group in addition to the limitations with regard to 

risk pooling that there are in the current voluntary small group insurance market. So, already at a disadvantage, their costs of purchasing coverage are high relative to the wages of the individuals 

that they are buying coverage for. 

And what has been going on trend-wise is that the cost of medical care grows faster than income, faster than wages. So it really 

is going to become increasingly difficult over time if nothing 

changes those trends and nothing changes the way that these markets work for small businesses to the point we are already seeing 

incredibly low rates of coverage among the smallest employers and 


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it has got to—it will get much worse over time until it is quite unusual for a small employer to be able to offer coverage at all. 

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

Mr. Gingrey for questions, please. 

Dr. GINGREY. Mr. Chairman, thank you. 

I want to say to all of the witnesses again, thank you for your 

testimony. 

Before I begin my questions, I would like to raise two issues. 

First, the troubles of our three business owner panelists are, unfortunately, not unique. Many in this country are finding it harder 

and harder to afford quality health care. In fact, Federal officials 

just yesterday announced that Medicare premiums for seniors will 

shoot up by over 15 percent, to $110 a month, Part B premium. 

Reducing the cost of health care in this country and making sure 

that those with chronic illnesses can access the same type of affordable insurance as healthy Americans should be two of our main 

goals. Unfortunately, the rising costs of health care is a universal 

problem and one that we do not solve I don’t think with H.R. 3200. 

Second, hearing your testimony today, I would like to suggest a 

market reform that I have long advocated that I think would benefit both those employees with chronic illnesses as well as their 

healthy colleagues. 

High-risk pools—we talked about this a littler earlier, but highrisk pools were created to offer those with chronic illnesses a place 

to purchase health insurance at affordable rates, regardless of their 

chronic conditions. By embracing high-risk pools in the States—and 

I think 28 States actually have embraced them—we have a chance 

to create a unique solution to a unique problem, namely, how a 

tragic illness can disproportionately hit the health care costs of 

small business owners and their employees. 

Mr. Chairman, I raise that concern because I truly believe that 

H.R. 3200 does little to address either of these concerns. Everyone 

in this body wants to reform what ails our current system. I wish 

we could find a way to combine that want for change into an opportunity to sit down and find a common solution to this problem. 

I practiced medicine for nearly 30 years, Mr. Chairman, as you 

know; and I have seen firsthand how policies in Washington impact 

patients back home, for better or for worse. I, like many of my colleagues, just want an opportunity to share our experiences with 

you; and I would like to ask unanimous consent to submit this letter that 22 of your Democratic colleagues submitted to Speaker 

Pelosi back on July 16, 2009. I would like to submit that for the 

record. 

Mr. STUPAK. Let me just take a look at it. 

Dr. GINGREY. Certainly, Mr. Chairman. I appreciate you looking 

at that. 

While you are glancing at the letter, let me ask a question of Dr. 

Blumberg. 

As you know, H.R. 3200 contains a surtax which would apply to any adjusted gross income exceeding $280,000 a year for an individual and $350,000 for a couple filing a joint return. The tax rates 

would range anywhere from 1 percent to 5.4 percent for those earning more than a million. According to 22 House Democrats—that 

is the letter that I submitted to the chairman for inclusion in the 


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record—these taxes would fall largely on small businesses and 

manufacturers. They wrote in a letter to Speaker Pelosi, and I 

quote, that many successful small businesses, the very kind that 

should lead in creating jobs and help us emerge from this very recession, will be taxed at over 50 percent. 

Do you agree with these House Democrats that we should not tax 

small businesses? 

And, before you respond, I want to get the chairman’s response 

to my unanimous consent request. 

Mr. WAXMAN. Could the gentleman state his unanimous consent 

request? 

Dr. GINGREY. Chairman Waxman, absolutely. 

The request is that we submit the letter that was written to 

Speaker Pelosi on July 16, 2009, by 22 House Democrats regarding 

this issue, this concern of the surtax and what adverse effect it 

would have on small businesses and job creation in this country. 

Mr. STUPAK. I have no objection. 

But again, as Ms. Blackburn pointed out before, there is no surtax on small businesses. The surtax is on 1.2 percent. In fact, I 

think in Mr. Braley’s district, 99.3 percent of the people would not 

see any increase. So there is no surtax. 

We will accept the letter that you would like to submit for the 

record. 

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

Mr. STUPAK. It goes on to say, these 21 Members, that health 

care reform should be good for small businesses, and as long as 

small businesses are not unfairly burdened by H.R. 3200, we are 

confident that it can be. And I think we all agree we do not want 

to burden small businesses. 

Dr. GINGREY. Mr. Chairman, I appreciate you accepting that letter for the record. 

Dr. Blumberg, if you would respond. 

Ms. BLUMBERG. My understanding of the bill as it stands right 

now is consistent with that of the chairman’s, that this component, 

this financing component of the bill, would not impact, would not 

be a tax on small business income. It is a tax on high-earning individuals; and, as such, I don’t have any objections in terms of the 

imposition of that type of tax. But I think there has been some misunderstanding of how it would be imposed. 

Dr. GINGREY. Dr. Blumberg, thank you. We will give you a copy 

of that letter that was submitted and will be included in the record 

for your perusal at a convenient time for you to do that. 

I know it is subject to interpretation, but, as Ms. Blackburn 

pointed out, so many of these small businesses are not C corporations, they are sole proprietorships or S corporations, and they file 

as individuals. And basically no matter what number that might 

be—the chairman has indicated it is a very small number—but my 

question—and maybe I can direct it to our small business witnesses as well—if indeed, in addition to having to pay these astronomical increases in your health insurance premium year after 

year after year, you also had to file as an individual these high 

surtaxes from 1 to 5 percent on your income above $280,000, what 

adverse effect would that have on your ability to not only hire people but continue as a growing concern? 


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Maybe we can start with Mr. Landauer. 

Mr. LANDAUER. I’m trying to understand your point. I file an individual income tax return, and I am also an S corporation, but 

that is completely different from my individual income tax. I don’t 

see how it would be affected by your saying—— 

Dr. GINGREY. Thank you, Mr. Landauer. 

Mr. Hetrick, you mentioned in particular the problem you have 

with regard to the way your health insurance premium—you have 

to pay. You don’t get a tax break at all. 

Mr. HETRICK. I am also an S corporation owner, and so I have 

to channel all of the business’s income through my personal return. 

Part of that income is the health insurance premium because it is 

taxable income to anyone who owns more than 2 percent of an S 

corporation. 

Dr. GINGREY. Mr. Walker, I have to yield back. The chairman 

has been awfully generous with the time, but I have run out of 

time. I hope to have a second round. 

Mr. STUPAK. Chairman Waxman for questions. 

Mr. WAXMAN. Thank you, Mr. Chairman. 

The surtax that is in the House bill is a tax on high income individuals, and there is a joint tax committee that said this surcharge 

would have no impact on 96 percent of small business owners. It 

would effect only the highest income, 1.2 percent of taxpayers. So 

I think we are getting a misinterpretation of what the bill provides. 

But let’s look at the reality. Health care costs are going up. They 

are going up overall. So how do we handle those increases in costs? 

If you are in a small business, the insurance companies are saying to you if somebody in your business gets sick, we are going to 

control the costs by making everybody else in that business pay a 

higher premium. That is not controlling costs, that is shifting costs 

onto people who are vulnerable and who have no leverage to fight 

back. 

We had a hearing last week, and there was a man by the name 

of Nathan Wilkes, and he worked for a small company. He loved 

that company. But he had a son with hemophilia which is an expensive, lifelong blood clotting disorder. So the insurance company 

responded by raising the costs of insurance for everyone at Mr. 

Wilkes’s company. It is the same story we are hearing from the 

three of you. Mr. Wilkes described his son’s medical condition as 

a bomb that went off, but everybody else was collateral damage because they couldn’t have insurance any more when it became 

unaffordable. That is no way to hold down health care costs, that 

is simply shifting the costs. 

The shocking thing to me is that what your insurance company 

did to you, Mr. Landauer, Mr. Hetrick, Mr. Walker and Mr. 

Wilkes’s situation, it is perfectly legal. As far as they are concerned, it is the smart way to do business, but it is not acceptable 

in order to get people covered. 

Now, Mr. Gingrey said what we ought to do is have these high 

risk pools. Well, as I have looked at high risk pools around the 

country, it is hard to get into them. And then they put a lifetime 

cap. Sometimes these lifetime caps keep you from ever getting the 

services you need. This can’t be the solution, to give people a lifetime cap when they are sick. 


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Mr. Gingrey said you are going to pay a tax which I think he was 

wrong in saying to those of you in small businesses, but somebody 

is going to pay a tax. It is going to be higher income people, but 

somebody will have to pay more money. If they pay more money, 

which means we can then bring more people into the insurance and 

have basically everybody covered, we are not going to require in addition to any tax, that people pay extraordinarily higher insurance 

costs every year if somebody gets sick. That is going to be outlawed. We are not going to let the insurance companies do that any 

longer. 

Mr. Landauer, do you think that insurers should be permitted to 

charge higher rates to companies in which one person gets sick or 

has a chronic condition? It is an obvious question. Obviously not. 

You know from your own experience how unacceptable it is. Mr. 

Hetrick, you described your own experience with an insurance company imposing steep premium increases due to your wife’s health 

status. I assume you think it is wrong to allow that to happen, 

even though it is legal. 

Mr. HETRICK. Mr. Waxman, I am the son of a life insurance executive, and so I understand underwriting. 

If we are going to allow the underwriting based on groups of 15 

people or 13 people or 3 people, or whatever Mr. Landauer has, 

then the underwriter is going to say, gee, you need to crank up the 

rates. To me the only way we can fix this is put everyone into a 

large group. From my personal perspective, I would love for the 

large group to be 300 million people and we rate the policy that 

way. You folks in Congress haven’t seemed to quite get to the 300 

million people answer yet, which would be universal coverage and 

single payer. 

If we go to a public option, I guess what I am asking you is could 

we come up with a way that small businesses could group together 

into large risk pools so I am not dependent on my 13 people and 

he is not dependent on his 4. 

Mr. WAXMAN. Absolutely. It wouldn’t be a public option, it would 

be pooling people together who can’t get insurance because they 

can’t afford it, can’t get insurance because their employer can’t afford it, can’t get insurance because they have pre-existing medical 

condition. All of these people would be pooled together and they 

would go to an exchange and they would be able to choose a private 

insurance policy, maybe another private insurance policy, maybe a 

third private insurance policy, and perhaps a public insurance policy. It would be their choice. But by pooling people together in this 

exchange, we are in effect pooling the risk and not putting it on 

a small group, and in that way we make the system make sense. 

Allowing insurance companies to punish businesses because someone got sick, especially a small business, makes no sense. And people in businesses buy health insurance so they will be covered if 

they are sick. And small businesses shouldn’t have their success 

impinge on whether an employee gets sick and be able to pay insurance and continue in business. Thank you. 

Mr. STUPAK. Thank you, Mr. Waxman. 

Mr. Braley for questions, please. 

Mr. BRALEY. Thank you, Mr. Chairman. 


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I want to talk briefly about this concept of high-risk pools; and 

I am referring to a report recently called High Risk Insurance 

Pools: A Flawed Model for Reform, dated September 29, 2008. Here 

is the history of high-risk pools: 

The report notes that high-risk pools have been around for over 

30 years and currently exist in 35 States, but they only cover 

207,000 Americans. The biggest barrier to enrollment is cost. Highrisk pools are inevitably expensive, because all of the enrollees 

have medical conditions and could potentially result in costly medical bills, which means the pools cannot spread the risks among 

low-risk and high-risk individuals. 

And the report notes specifically the State of Florida has a high- risk pool that costs $17,517 per enrollee, which is nearly 50 percent 

of the income of those enrollees. And the problem is that most of 

these high-risk pools are already heavily subsidized. Because if you 

take out of your group of insureds those people who add the most 

cost to the pool you are insuring and put them with other people 

who cost a lot of money, it is going to take an extraordinary 

amount of money to cover their health care costs. And that is why 

these high-risk pools are already heavily subsidized. 

So you can’t come in and heavily subsidize a heavily subsidized 

high-risk pool that makes any sense, and that’s why many of these 

subsidies already cover about 50 percent of the pool and an expansion of those programs could cost as much as $100 billion. 

I think the last word in this report says, in every State that covers the uninsurable with a high-risk pool or offers coverage to the 

uninsurable, the very condition that made you uninsurable will be 

included as a pre-existing condition in the high-risk pool, usually 

for 6 to 12 months. That is a conversation stopper for most people. 

And if you have been diagnosed with cancer, you cannot wait 6 

months to start your treatment. 

That’s what is wrong with expansion of high-risk pools as an alternative to doing what we are trying to do, which is create reasonable competition in the marketplace and more options for consumers and small businesses owners. 

Mr. Landauer, I want to make sure people understand the reality 

of what you just described, because insurance terminology can be 

very confusing. But, as I understand your testimony, your firm has 

had to double its deductible for individual and family coverage in 

each of the last 2 years; is that correct? 

Mr. LANDAUER. Yes. 

Mr. BRALEY. And they are currently paying $8,000 for the individual policy and $16,000 for the family plan? 

Mr. LANDAUER. Yes. 

Mr. BRALEY. That means before any insurance coverage kicks in 

for your employees, if they are under the individual policy, they 

have to pay $8,000 out of their pocket? 

Mr. LANDAUER. As the shop owner, I pay half of that right now. 

Mr. BRALEY. Absolutely. And thank God for that and your generosity. 

My point being, until you and your employees match that deduct- ible of $8,000 for individuals or $16,000 for family members, that 

company has been collecting premiums of between $400 and $800 

a month and hasn’t paid a dime? 


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Mr. LANDAUER. Correct. 

Mr. BRALEY. Mr. Chairman, I think that is what is wrong with 

our health care delivery system and the way we pay for it in that 

we expect so much out of hard-working Americans like Mr. 

Landauer or Mr. Hetrick, Mr. Walker, and millions of other small 

business owners, who simply want to have an opportunity to provide their employees with the best coverage possible at an affordable price. That is why the obligation on us is to find a way to give 

them the options they need to do that. 

I think if we have the slide that is part of tab 10, this map shows 

what is wrong with the lack of competition in America right now. 

It shows among the darkest blue the States where 80 to 100 percent of the market is dominated by two carriers. The light medium 

blue is 70 to 79 percent of the market dominated by two carriers 

and the light blue, 60 to 69 percent. 

When you don’t have competition in the marketplace, it goes 

completely contrary to the economic principles that you all have to 

deal with every day in your businesses. And we have got a health 

insurance industry that is supply driven and with limited competition, and that is the problem we need to solve. 

I yield back the balance of my time. 

Mr. STUPAK. Thank you, Mr. Braley. 

Mr. Dingell for questions, please. 

Mr. DINGELL. Thank you, Mr. Chairman. 

First of all, members of the panel, my thanks and my compliments on your excellent testimony. 

Mr. Landauer, according to documents obtained as a part of this 

committee’s investigation, your insurer, Wellmark, offered your 

business a 41 percent increase in premium costs this year; is that 

true? 

Mr. LANDAUER. Yes, it is. 

Mr. DINGELL. How then are you going to budget or even stay 

afloat when you must absorb such huge unexpected increases in 

costs? 

Mr. LANDAUER. By raising the deductible. 

Mr. DINGELL. So, in raising the deductible, you reduce the premium? 

Mr. LANDAUER. Correct. 

Mr. DINGELL. Had you planned for this 41 percent increase in 

premiums? 

Mr. LANDAUER. No, I had not budgeted for it. 

Mr. DINGELL. So let’s assume that your insurance costs will rise 

200 percent in 1 year. What then would you do? 

Mr. LANDAUER. Well, right now, I am taking myself off of insurance; and I do not think it will rise. I think we will pay less next 

year. 

Mr. DINGELL. So you are indicating your cure for this is to remove yourself from insurance coverage? 

Mr. LANDAUER. Correct. 

Mr. DINGELL. Now, Mr. Hetrick, you discuss the importance of 

attracting and retaining good workers. How important is the ability 

of small businesses to offer affordable health coverage to their employees to recruitment and retention of efforts? 


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Mr. HETRICK. I think it is incredibly important. We compete 

every day with Eli Lilly & Company for talent in our community, 

and they have a remarkable benefits package. And for me to get 

that talent and keep them versus that big corporation, I have to 

have wonderful benefits. 

I will tell you, Mr. Dingell, I have had to lay off seven people this 

year in order to retain the health benefits for those of us who remain. So that is one-third of my workforce gone, salaries gone, jobs 

gone, in order to continue to continue paying 80 percent of the 

health care premium and 50 percent of dependent coverage. So it 

is incredibly important to us. 

Mr. DINGELL. I would note here that our committee’s investigation in the small business premium situation has revealed some 

staggering rate increases. Six insurers were surveyed by the committee. Two reported annual premium increases of over 200 percent, two reported several increases of over 100 percent, and all reported numerous double digit increases. 

Now, it is to be noted these astronomical increases are often related to change in health status of employees or other factors that 

you gentlemen, as employers, cannot control, like ages of workers 

or the fact that many of your employees might be women. And this 

has led, as I have indicated, to 200 percent increases in some instances. I find this terrifying. 

Now, Mr. Landauer, again, I understand your deductible is 

$8,000 for an individual policy and $16,000 for a family policy; is 

that correct? 

Mr. LANDAUER. Correct. 

Mr. DINGELL. Now, Mr. Landauer, you expect this to double for 

your plan next year; is that correct? 

Mr. LANDAUER. If I keep everything else the same, yes. 

Mr. DINGELL. Would you want to amplify on that last comment, 

sir? 

Mr. LANDAUER. With my medical costs this year alone, they are 

going to be around $40,000. It doubled last year because they were 

$40,000. It doubled the year before, and they were not even 

$40,000. 

Mr. DINGELL. Now, this I find to be a very troublesome situation. 

I would like to get beyond access to health insurance and to discuss 

the importance of access to care. You provide access to health insurance coverage for your employees, but I would guess that with 

the rising costs of the plan, largely realized through a skyrocketing 

deductible, that access is hindered for your employees. Now tell me 

what are you going to do next year about the plan which is, as you 

say, is going to double? 

Mr. LANDAUER. I am going to take myself off of the plan. 

Mr. DINGELL. As your deductibles increase, do you hear concerns 

from your employees about their ability to confront and afford 

these rising costs that the deductible increase imposes upon them? 

Mr. LANDAUER. I hear more about the monthly cost associated 

with it. 

Mr. DINGELL. Dr. Blumberg, if you please, can you speak to inefficiencies in the current health insurance market and the savings 

that can be realized from addressing them? 


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Ms. BLUMBERG. Well, specifically with regard to small businesses, they are inefficient purchasers, as I mentioned earlier, of 

health insurance coverage as a consequence of the fact that there 

are very high fixed costs involved with selling insurance coverage. 

And so when you are taking a large amount of fixed costs and 

spreading it over a small number of people in a small firm, the administrative costs associated with selling that coverage are very 

high relative to the benefits that people are obtaining. So that is 

one inefficiency. 

Another inefficiency is that over a small risk pool, a small number of people, any individual who has extraordinarily high costs associated with their health care needs can have a very substantial 

impact in a particular year on the expected cost of that group. As 

a consequence, we see these big swings in premiums from year to 

year for small group purchasers. And, obviously, individuals would 

be willing to pay something in order to spread the costs over a period of time in order to smooth out those year-to-year variances, 

but insurance is not sold more than a year at a time, so they are 

stuck with the small pool over which to spread their needs. 

Another inefficiency is, with these big swings of premiums, we 

see a lot of churning every year in insurance plans by small employers. So when they are faced with a big increase, they are constantly trying to find a better price. As a consequence of that moving around to different plans, they are also creating higher administrative costs, which is a dead weight loss efficiency-wise. 

So what we are hoping with health care reform is to address 

these needs on both of those fronts, to first lower administrative 

costs by allowing small group purchasers to purchase coverage in 

the context of a national health insurance exchange. That should 

both lower administrative costs because some of the marketing 

costs, the enrollment costs associated with insurance could be done 

centrally, reducing those costs overall; and marketing costs in particular could be lowered that way through the exchange. 

In addition, by purchasing through a health insurance exchange, 

we would have a situation where the costs associated with each 

small employer could be shared in terms of risk pooling so that the 

risks would not be felt when there is a big change in a particular 

year with a small number of enrollees. 

In addition, if you are allowed to stay within the health insurance exchange over time, even if you change jobs, and because 

there would be less year-to-year variability in the premiums, we 

would see a reduction in the churning that we see now for small 

businesses going from plan to plan. 

In addition, there are some potential inefficiencies associated 

with individuals picking jobs as a consequence of the health insurance choices they face; and if we eliminate the disadvantage that 

people face by going with a small employer as a consequence of the 

more limited insurance options there, then people can pick their 

jobs based on the best fit for their skills instead of insurance 

choices which does potentially create inefficiencies in the job market. 

Mr. DINGELL. My time is up, but I thank you and all of the panel 

members. 


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Mr. Walker, the fact that I didn’t ask you any questions does not 

mean that I’m not impressed with your testimony or don’t appreciate your presence here. 

Gentlemen and lady, thank you very much. 

Mr. WALKER. Thank you. 

Mr. BRALEY [presiding]. The Chair thanks the distinguished 

chairman emeritus and recognizes the gentleman from Texas, Mr. 

Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

From the testimony we have heard today, it is clear that skyrocketing health insurance costs are crippling small businesses, 

and how can we expect small businesses to compete in the market 

when they have to pay 18 percent or more per employee than larger corporations for the same health care plan? 

Mr. Hetrick, you stated in your written testimony that either the 

costs of health care coverage cuts into your profits or, if we pass 

it along to our customer, it renders us less competitive. In the economic downturn like the one we have been experiencing, have you 

been able to pass increased health costs on to your customers, or 

have the costs come out of your bottom line? 

Mr. HETRICK. Could you repeat the question? 

Mr. GREEN. Particularly in tough economic times like we have, 

have you been able to pass any of those costs—increased health 

care costs on to your customers, or does it go to your bottom line? 

Mr. HETRICK. No, we have tried to keep our rates competitive 

with what we have in the market, so it just takes down our profitability. And, quite frankly, we haven’t made a profit for the last 2 

years. I am covering it out of my pocket. 

Mr. GREEN. So my next question is very easy. It makes it real 

difficult to grow if you are not showing a profit for 2 years? 

Mr. HETRICK. That’s correct. 

Mr. GREEN. We have heard insurance premiums for small businesses are highly volatile, which hampers the business’ ability to 

budget. Like I said, in my own experience years ago, premium increases can vary from year to year and are driven by factors that 

small businesses have no control over. 

Without reform, small business health costs will continue to skyrocket. In the absence of meaningful reform, businesses will pay 

nearly $2.4 trillion in health care costs over the next 10 years, and 

they will lose $52.1 billion in profits, and their workers, their employees, will lose $834 billion in wages. 

Dr. Blumberg, do you think, can America’s small businesses remain competitive if we do not reform the health insurance market? 

Ms. BLUMBERG. I think there are real dangers, because I believe 

that the rate of small business provision of health insurance will 

inevitably go down over time, continuing the trends that we have 

seen, that it is going to be very difficult for small employers to compete for labor without some alternative source of insurance coverage for their workers. Because if they are competing for labor 

with larger businesses who can do a better job of providing coverage, it is going to be very difficult for them. 

Mr. GREEN. Mr. Chairman, in my experience, we were a small 

company and we did compete with large employers, some of which 

were across State lines, so they were under Federal law, whereas 


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our company was typically under State law. And as a State legislator for many years, we couldn’t control the cost of health care in 

Texas, and maybe that is why we had the highest number and the 

highest percentage of uninsured. 

We have a lot of small businesses who can’t do it. Somewhere 

along the way, we have to provide that because—provide that assistance and that reform. 

I think H.R. 3200 has some problems, but I think also we need 

to deal with the small business issue that larger companies can 

bargain and get lower rates where smaller businesses can’t. And it 

can’t be done even with State coops. It has to be done on a national 

basis. 

Thank you, Mr. Chairman, for your time. I appreciate our witnesses being here today. 

Mr. STUPAK [presiding]. Thank you, Mr. Green. 

Ms. Schakowsky, for questions please. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman; and thank you so 

much to our witnesses. 

It is almost a rule in politics that we sing the praises of small 

businesses in our country as an engine for our economy, as the biggest creator of jobs. But I think it is high time now that we make 

it possible for you to continue to be those things, and the testimony 

that you have given has been very dramatic. 

I wanted to ask you, Mr. Landauer. You said, what are my options? You said, pay for my own medical costs—I am assuming that 

is what you are saying—in which case I would be forced to sell the 

business. Is that what you are talking about? 

Mr. LANDAUER. Correct. 

Ms. SCHAKOWSKY. And so you are going to sell the business? 

Mr. LANDAUER. If I have any major problems that require extra 

expense, my only option is to sell the business, because the doctors 

are going to require money. 

Ms. SCHAKOWSKY. My goodness. You said, or maybe move to 

Canada. We had a panel of witnesses last week that were advised 

to get a divorce so that the wife could go on Medicaid and be able 

to pay the family expenses. I mean, this is the United States of 

America, and to suggest things or leave options like moving to another country or getting a divorce seemed totally unreasonable. 

I wanted to mention one other thing. We had research from the 

National Women’s Law Center that said that insurers who practice 

gender rating charged 40-year-old women from 4 to 48 percent 

more than 40-year-old men; and the investigation of this committee 

suggested that gender discrimination was even worse. It said, according to internal insurance company data uncovered in our investigation, the exact same policy for a healthy 23-year-old woman 

may cost 143 percent more than a healthy 23-year-old man. 

I wondered if any of you were aware of this gender discrimination in setting rates, if it ever had to become a consideration in hiring? I would be interested to know. 

Mr. Walker. 

Mr. WALKER. I have never used that as a consideration in hiring. 

But certainly I have encountered it. It has to do with pregnancy. 

When women are in the years that they might get pregnant or 

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pany, their rates are considerably higher, sometimes as much as 

double. 

Ms. SCHAKOWSKY. Yes. Mr. Hetrick. 

Mr. HETRICK. I will share with you, on the issue of gender, a fairly funny story, sad story. I am now remarried. My current wife 

runs a national sorority. She has 47 employees at her headquarters, where she is CEO; 45 of them are female. Her insurance 

rates are so high that she cannot even think about insuring the dependents of those employees, because you are insuring 45 women, 

most of child-bearing age. So again it comes down to actuarial tables and underwriting what are the expenses of women versus 

men. There is a difference. And they sock it to you. 

Ms. SCHAKOWSKY. It could also be who sets the rules. But that 

is beside the point. 

Mr. Landauer, have you ever encountered that, or knew about 

the gender discrimination? 

Mr. LANDAUER. I did not know about gender discrimination. We 

have had women who have been part of the company. The last 

woman we had was about 12 years ago. And insurance has become 

a tremendous mess in the past 5 years with us. 

Ms. SCHAKOWSKY. Yes. I want to ask you, Dr. Blumberg, another 

shocking example of insurance company discrimination comes from 

the individual insurance market. In the individual market, some 

insurance companies consider it a preexisting condition when a 

woman has had a C-section or been a victim of domestic violence, 

which can justify denying coverage altogether. From a policy standpoint, is there any good public policy reason why a victim of domestic abuse or a woman who delivered a baby by C-section should be 

shut out of the private health insurance market? 

Ms. BLUMBERG. I don’t think there is any good public policy rationale for it. These are all decisions that are based on expectations 

of future health care spending. And in a system where individuals 

can make decisions about going in or out of the health insurance 

system, where you don’t have everyone in all of the time, people 

will have a tendency to purchase coverage when they think they 

are going to need care. 

As a consequence of this voluntary system, current regulations 

allow the insurance to set these rates to protect themselves against 

that type of adverse selection. And that is one of the main reasons 

why it is important under reform to have an individual requirement of health insurance coverage; because once you have that in 

place, once you have everyone or almost everyone in the system, 

you can prohibit those kinds of practices and stop people from 

being rated up as a consequence of future expectations. 

Ms. SCHAKOWSKY. Thank you. And I want to thank the business 

owners for doing absolutely all you can to make sure that your employees have the coverage that you need. 

And I see at least in two instances, you know, Mr. Landauer and 

Mr. Hetrick have really personally suffered from the rules of the 

game right now. Actually, all of you have. So we will do our best 

to address that. Thank you. I yield back. 

Mr. STUPAK. Thanks. I think we have completed one round. I 

know Mr. Gingrey has a question or two. I probably do. If anyone 


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else, we will go another round with this panel as long as they have 

time. Before I go there, I guess I better go to Mr. Burgess first. 

Dr. BURGESS. I will go second round. 

Mr. STUPAK. OK. Mr. Gingrey, go ahead. 

Dr. GINGREY. Mr. Chairman, thank you very much. And I did 

have a few things that I wanted to ask the witnesses. Obviously, 

what our concern here and what your concern and what you expressed so clearly is the cost of providing health insurance to your 

employees in these small companies. 

And, you know, we are talking about in H.R. 3200, and then the 

two bills over on the Senate side, some pretty massive changes in 

our health care system and health insurance delivery system, 

something that is going to cost at least, I think conservatively, a 

trillion dollars over 10 years. 

And the point I wanted to make and the questions I wanted to 

ask and see how you feel about this, certainly there are those of 

us on the Republican side that feel that we have some good ideas 

too, and that we would like to share, that we would like the Majority and the President to listen to some of these suggestions. 

And let me ask a couple. In regard to your small businesses, and 

I want to ask all three of you—Mr. Walker, I will start with you, 

because I think that is where I ended during the first round. But 

the idea of maybe your glass company or Mr. Landauer’s muffler 

shop, or Mr. Hetrick’s communications shop joining together with 

other small companies, where a pool of a thousand or more created, 

and that you can actually purchase—shop for affordable health 

care for your employees with this larger pool, lower administrative 

costs, spreading the risk—we refer to it sometimes as association 

health plans. I would like your opinion on that as a cost saver. 

I would also like your opinion, Mr. Walker, you mentioned the 

anesthesiologist in Florida that was paying I think something like 

$275,000 a year for medical malpractice insurance. And CBO has 

estimated with malpractice insurance reform, tort reform, product 

liability reform, that we could save $54 billion over 10 years. That 

is a nonbiased CBO estimate, and the President has said it ought 

to be included. And yet none of these bills—nowhere in H.R. 3200 

is there anything about medical liability reform. 

And then lastly, you know, Chairman Waxman was concerned 

about cost shifting. I have a concern that H.R. 3200, it shifts costs, 

but it shifts them on small businesses during an economy where 

we need job creation. And this letter that I submitted for the 

record, the 22 Democrats stated many small businesses, the very 

kind of businesses that should lead in creating jobs, would be taxed 

at over 50 percent. If this were true, would that concern any one 

of our three business owners? Mr. Walker, I will start with you. 

Mr. WALKER. To that last question, certainly not. I have never 

made that kind of money. And I think the number that came out 

was 1 percent of us. 

As to pools, let me say this. Obviously, I am not in the insurance 

business, but if you spread the risk you are going to lower the cost 

to the employee. So as for a risk pool, I wouldn’t say a high-risk 

pool, just a pool in general, let’s put some of those healthy young 

people behind you in the same pool with us so we can lower the 

costs. 


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Next, I have a really good example of something you are talking 

about. There is a duplicity in Florida, I don’t know about the other 

States; I have to insure my employees with workers comp insurance while they are at work. So there are two systems of health 

insurance. Now, a few years back we had a couple accidents on the 

job. I can’t have my guys on a construction site unless we have 

comp. So my answer to fixing that problem was go to an employee 

leasing program. Employee leasing program, technically my people 

don’t work for me. 

Dr. GINGREY. Mr. Walker, excuse me for interrupting you, I am 

about to run out of time. If you don’t mind, address the two questions about association health plans and medical liability reform, 

and then quickly let’s go to Mr. Hetrick and Mr. Landauer. 

Mr. WALKER. I would love to see liability reform. That anesthesiologist is insured three times. That is wrong. 

Secondly, what I was getting at with the workers comp question 

is the spreading of the risk. That is how I was able to retain workers comp. 

Dr. GINGREY. Mr. Hetrick. 

Mr. HETRICK. I am nowhere near the income level to pay for any 

kind of tax. I absolutely agree that we need to have larger risk 

pools. The prescription that you guys come up with for that, I don’t 

know which one is best. I don’t know if it is the exchanges, I don’t 

know if it is cooperatives, I don’t know if it is a public option, I 

don’t know if it is universal payer. I know it needs to be done and 

I know the tax policies need changed so that people who are creating jobs don’t get punished for it. 

Dr. GINGREY. Absolutely, Mr. Hetrick. And Mr. Landauer, real 

quickly. 

Mr. LANDAUER. I agree with Mr. Hetrick on both his answers. 

We do need some sort of reform with the insurance, whether it be 

nationwide, whether it be the single-payer plan, whether groups. 

And am I allowed to ask a question? 

Mr. STUPAK. Sure, go ahead. I don’t know if any one of us can 

answer it. 

Mr. LANDAUER. Those of you who are against a government-run 

plan, are you also against Medicare for the seniors? Because to me, 

that is the government-run plan. So do we do away with Medicare 

for the seniors? 

Dr. GINGREY. Mr. Chairman, I will be glad to try to take a stab 

at that if you will allow. No, we are not. Those of us who are 

against throwing the baby out with the bath water in regard to this 

current reform of our health care system are not opposed, not one 

bit, to Medicare. And many of us sitting on this panel are now eligible for Medicare. And we want it not to be weakened to pay for 

something else. We want it to be strengthened. 

We are concerned very much about the viability of Medicare, 

which within 7 years will be almost insolvent. And we have $35 

trillion worth of unfunded liability over the next 50 years in the 

Medicare program. So when we see $500 billion taken out of the 

current Medicare system, particularly Medicare Advantage, to try 

to insure 15 million people, many of whom are young and healthy 

and don’t want first dollar coverage, it just doesn’t make a whole 

lot of sense. But thank you for your question. 


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Mr. STUPAK. Let me give you the real answer now on that one. 

Actually, it was an amendment in the committee. No one voted to 

cut out Medicare. And under 3200 we expand Medicare by paying 

for preventive testing, mammograms, colon cancer, diabetes, things 

like this. Plus, we try to close that doughnut hole on prescription 

drug coverage because you have that doughnut hole. I don’t think 

anyone is against that. It is just how are we going to structure it. 

That is why we appreciate all of your testimony, because small 

business is one of them we have been struggling with, how best to 

do it; 3200, three bills, they will go through changes, we will have 

a final vote in the House maybe later this month or early next 

month. And then it has to go to Senate. And after it comes back 

from Senate we have a conference. And hopefully after that, hopefully by December we have a final bill. 

I just urge all members to take a look at the reality of the bill 

when we get to that final point in December and cast a vote according to all these hearings we have been having. 

Mr. Burgess hasn’t had a chance to ask a few questions. I am 

going to go to Mr. Burgess, and then I have a few questions, and 

then I think Mr. Braley, and then we will wrap it up. Mr. Burgess. 

Dr. BURGESS. Thank you, Mr. Chairman. 

Mr. Landauer, just to further expound on your observation, the 

issue before us is not—right now the Federal Government owns 

about 50 percent of the health care dollars that are spent in this 

country. And the question is not do we roll that back, but do we 

move more of that dollar into the realm of the Federal Government. There are several of us who are concerned about that. 

I am a physician by trade, ran a small business for almost 25 

years in my community. So I understand a lot of the difficulties 

that have been discussed today. I have lived them firsthand. We 

had a woman testify in front of this committee, or maybe it was 

the Health Subcommittee, who was a pediatrician in Alabama. She 

got my attention because she went into practice the same year I 

did, 1981. There is something that happens in the medical practice 

where you have got to pay attention to what is called the payer 

mix. That is, if you have patients who are covered by Medicaid and 

Medicare, those Federal programs, as good as they are, and many 

people depend on them, but as good as they are, they don’t cover 

the cost of delivering the care in the physician’s office. So the doctor is going to have to make up that cost somewhere else. And typically, with as bad as the health care profiteers, United, Cigna, and 

Aetna are, they do tend to allow that practitioner to be able to 

cover that cost that is not paid for by—that is not covered by Medicare and Medicaid. 

Medicare is designed for doctors to go broke very slowly, but they 

still go broke. Medicaid doesn’t have that same safety mechanism, 

so you go broke much more quickly. 

In this individual’s case, she had 70 percent of her practice was 

now Medicaid in a rural Alabama pediatric practice. And she said 

she is borrowing from her retirement fund to keep her doors open. 

I will tell you, having had some experience with that, and you 

may have encountered this yourself, if you lose money on every 

transaction, very difficult to make it up in volume. And that is 

what she found herself doing. I felt like coming across the podium 


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and saying, Please stop that, because ultimately you are just going 

to spend down your retirement plan and then you are still going 

to be in the same problem you were before. Her problem was too 

much of her practice was now the public option, if you will, Medicaid. 

So that is what worries a lot of us. Are we going to erode the 

ability to be able to continue for doctors around the country to keep 

their practices open if we go to a larger government share. 

There are obviously other things that are involved in that, and 

you have heard many of them today. But that in brief would be my 

answer to your question. Nobody is talking about rolling back the 

part of the public option, if you will, the part of the public insurance that already exists. It is what it is right now, and no one 

thinks that that is going to be removed. 

I would just like to ask—and I apologize, Mr. Chairman, for 

being late. I was at the National Institute of Health for most of the 

day. Reading through the testimony—and I apologize, Dr. 

Blumberg, I don’t think I had yours—but just the testimony of our 

small business owners, it seems like there is a recurrent theme is 

that pooling came up as an issue, and the ability to pool your employees or your people that you are looking to insure. The concept 

of association health plans, where you can pool not just from within 

your own neighborhood, but if it is a group of florists or realtors, 

even doctors’ offices or dentists’ offices, you can pool with like business models even around the country to get a much larger patient 

pool. 

Very difficult to get the young folks behind us to sign up because 

we are talking about an insurance payment that essentially equals 

a bass boat, and they are healthy and the bass are biting, so I don’t 

blame them for not wanting to buy insurance. But if you can pool 

and keep those costs low, that is a way to bring more people in. 

And I think one of you said it, you broaden the base and lower the 

rate. 

Same thing that we should be focusing on for taxes. But are you 

familiar with the concept of association health plans? It is something that has been talked about up here predating my arrival in 

Congress. But have any of you explored that as a possibility or an 

option? I mean you can’t do it now because we don’t let you. But 

if we did let you, would it be an option that you would consider? 

We will just go down the table. Mr. Landauer. 

Mr. LANDAUER. Yes, that would be an option that is very much 

considered. My brother is an accountant in the State of Iowa. And 

he belongs to a State group of accountants for insurance purposes 

only. And that keeps his costs low on insurance. And if they can 

do that for the accountants in Iowa, they should be able to do it 

for the muffler shop owners not only in Iowa, but nationwide. So 

yes, that is a very good option. 

Dr. BURGESS. I tend to think of that as ERISA for the little guy. 

And if it is working well in Iowa, wouldn’t it also be great if he 

could also partner with accountants in Missouri and Oklahoma and 

get an even larger pool from which to then negotiate the rate with 

the insurance company? 

Mr. Hetrick, do you have a thought on that? 


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Mr. HETRICK. You know, I have talked about the risk pool here 

is a good idea, a bigger risk pool for businesses. It still leaves us 

with an employment-based health care system. And it doesn’t help 

the people who lose jobs or change jobs. So it may be part of the 

answer. 

It can’t be the only answer, because I have laid off people this 

year. And the biggest concern about laying people off is that the 

COBRA runs out after a while. And the COBRA is incredibly expensive. And I feel incredibly guilty laying people off, but I had to 

lay some people off in order to keep the other people’s health benefits coming. 

Dr. BURGESS. I am going to get cut off by the Chairman here. 

You are correct about your observations on COBRA. My opinion is 

there are things that are within our purview and ability to modify 

that system and improve that system so it is not so injurious. But 

what about the effect of having an 8 percent payroll tax on your 

looking over the horizon and hiring back employees when the business improves? 

If 3200 has an 8 percent employee tax—— 

Mr. HETRICK. If all health care is paid out of tax dollars? 

Dr. BURGESS. If 3200 were to pass as is today. Certainly not all 

health care is paid for out of tax dollars, because we still leave 17 

million uninsured under 3200. 

Mr. HETRICK. I think you are now down to the fundamental 

question: Is health insurance a responsibility of society to the people who are members of it? And do we all have the shared obligation? 

If you want to talk about—all the solutions that we are looking 

at are trying to find some subset of society to pay for another subset of society. We are asking now for businesses to pay for a large 

portion of society. We ask for the government to pay for some portion of society. 

Dr. BURGESS. We don’t pay for it. We take the money from you. 

We don’t earn any money on our own. We produce nothing. You 

may not have noticed that today. 

Mr. HETRICK. Technically, the best way to spread the risk is to 

put everybody in the risk pool and for everybody to share in the 

cost equally. And this is the situation—— 

Dr. BURGESS. As a practical matter—forgive me for interrupting—but as a practical matter, an 8 percent payroll tax, what 

does that do to you for job creation going forward? As you look over 

the horizon, the job market or the economy is improving, you are 

going to bring people back into your business. But now whether 

someone wants to provide the insurance or not, there is an 8 percent payroll tax affixed to that job. 

Mr. HETRICK. I am sorry, I have trouble hearing. 

Dr. BURGESS. The payroll tax will be the employer mandate, that 

everyone of course will contribute. So is this 8 percent—I mean this 

is one of the largest taxes that has ever been levied upon—one of 

the largest taxes that has ever been levied on small business. Is 

that going to have an effect on your ability to hire in the future? 

Mr. HETRICK. It is still employment-based. You are still basing 

your system on people who work. 


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Dr. BURGESS. But that is the language in 3200 that we have in 

front of us, is that it will be paid for with an employer mandate. 

So people who work, you are correct, will be paying the bills. The 

employers will be assessed a tax, whatever you want to call it, a 

premium of 8 percent of their payroll to cover the cost of the insurance. 

Mr. HETRICK. If I am paying for a tax to get the health coverage 

or paying the insurance company to get health coverage, I want the 

best deal. To me it is like getting my son’s college loans. I had a 

choice between a private lender and a government direct lending 

program. And those two went into competition with each other, and 

it helped drive the rates down on both sides of the deal. 

I would love to see the same thing on the health care. So the 

payment mechanism of it, whether I am paying for a governmentfunded program or paying the insurance company as I am now, I 

want the best deal. 

Dr. BURGESS. So you would—if the best deal were to pay the 8 

percent payroll tax, people would—you would move away from a 

private insurance to the government insurance. That would be a 

business decision that you would make, would be to leave the private system and go to the government system. 

Mr. HETRICK. I want to look—— 

Dr. BURGESS. And that has been one of our concerns as well, that 

we will drive out the private sector. And again, as my response to 

Mr. Landauer, if you erode the private sector—remember, the private sector is paying part of the freight. It is carrying part of the 

load for the public sector. I am not here to apologize for insurance 

companies. They brought a lot of the problems on themselves. Still, 

they fund the government-run insurance currently. We couldn’t run 

our offices without that ability to pick up some from the private 

sector. I am sorry, Mr. Chairman. 

Mr. STUPAK. You used both rounds at once. 

Dr. BURGESS. I knew you missed me all day, so I wanted to take 

full advantage of that. 

Mr. STUPAK. Thank you, Mr. Burgess. 

Just one or two questions to wrap this up. It is my understanding the supplemental report we wanted in earlier comes in 

without objection; is that right, Mr. Gingrey. 

Dr. GINGREY. Mr. Chairman, on that, excuse me, Mr. Burgess, on 

that specific question, while we do not object to the inclusion of this 

staff memo, we again caution the Majority that the inclusion of 

specific examples in States with only a few insurance companies 

could make it apparent which insurance company is being discussed in each example. 

I do waive my reservation, Mr. Chairman, and I yield back. I just 

wanted to make that point. 

Mr. STUPAK. Sure. And on the supplemental report here dated 

October 20th, if there are some redactions you want, just let us 

know and we will put it in there. But I don’t see anything in there. 

Let me ask a question along those lines. In the supplemental 

memo dated October 20th, we talk about group-specific factors. And 

Dr. Blumberg, it may be appropriate to ask you, I mean you have 

your baseline in health care which is based on utilization and ratesetting and that, but then you go into group factors. And for small 


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businesses, it indicated that the group factors are health and 

claims experience of the group, the age of the group, the sex of the 

group, the size of the small business, the number of employees, the 

industry. And then we go to a final part of the rate creating which 

depends on administrative costs, profit that the insurance carrier 

expects, plus the agent’s commissions, plus the taxes. So the small 

business or anyone buying insurance is paying about nine different 

factors for small businesses. 

Is that the same with larger businesses, or does this larger pool 

just sort of wipes out many of those factors? 

Ms. BLUMBERG. Well, the vast majority of the very large businesses are self-insured today. So their costs are based on the risk 

of those that are in the firm. But once you get to a large size, then 

basically the distribution of expenses within the firm looks like the 

distribution of expenses in the population at large. 

And so you don’t have to worry about these things at a micro 

level. You are looking at the whole group. You are basing it on the 

law of large numbers. And so for those medium-sized firms who are 

buying commercial coverage, those are experience-rated as well, 

but they are at lower administrative costs than the small firms are. 

And sometimes they do face difficulties as a consequence of their 

risk. But they are less likely than a small firm to have those big 

risk swings from year to year because of their size. 

Mr. STUPAK. OK. And Mr. Walker, Mr. Hetrick, Mr. Landauer, 

it seemed like your premiums went up as your employees went 

down. Correct? 

Mr. WALKER. That is correct. I am sorry, Mr. Landauer or me? 

Mr. STUPAK. Mr. Walker, go ahead. 

Mr. WALKER. No, as the economy crashed—— 

Mr. STUPAK. Right. 

Mr. WALKER [continuing]. Then we were caught up in the insurance’s ability to climb out of the economy. And they actually raised 

the rates to keep themselves employed, or so it seemed to us. 

Mr. STUPAK. I am from Michigan. Our small businesses are looking at 22 to 40 percent increases in just this year alone, and not 

necessarily because they lost employees; just the economy. And the 

economy is bad in Michigan, and we are just getting hit again. 

Mr. Landauer, do you have anything to add to that, or Mr. 

Hetrick? Just what I was saying, Mr. Hetrick, the number of employees, it seemed like if you lose employees, you said you had to 

lay off employees, therefore your rates then went up because you 

had less of an area to spread a risk over. 

Mr. HETRICK. How many have we cut back? 

Mr. STUPAK. No. Just did you realize that as you dropped employees—you said you had to lay some off to pay for your health 

insurance—then your health care costs actually went up because 

you have less employees to spread that risk over. 

Mr. HETRICK. Since we have fewer people on, the cost went 

down, unfortunately. 

Mr. STUPAK. Oh, yours went down. OK. 

Mr. HETRICK. We also have had 2 years, 2007 and 2008, when 

we had the only single-digit cost increases in our company’s history. It had been double digit every other year except those two. 

Now it is back to 19 percent. 


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Mr. STUPAK. Our committee now for 2 years we have been looking at the private insurance industry, and we have had our last 

three hearings now—it seems like the insurance companies win; if 

you have no claims, they get their money. No claims, they are not 

paying out, they makes profits. People get sick, premiums go up, 

they make profit. You really get sick, they drop you or else they 

will purge a small business from their rolls. It seems like in every 

scenario, the insurance industry still wins. 

Where is their risk? You are all talking about pooling and 

spreading the risk. Where is the risk for the insurance industry? 

I guess I don’t see any. Mr. Walker. 

Mr. WALKER. I can tell you that I bet the three of us, we have 

never met each other, but I will bet you the three of us have lost 

any ability to trust an insurance company because of that situation. And that is why we are probably all three in favor of at least 

a public option. 

Mr. STUPAK. Dr. Blumberg, one more question if I may. There 

are a lot of us that talked about the insurance industry is not subject to antitrust laws. If they raised their rates 18 percent, 28 percent, 22 percent, really nothing you can do about it. There has been 

a lot of discussion about taking away the antitrust exemption. 

Would that create competition in the marketplace to lower some of 

these rates for small or large businesses? 

Ms. BLUMBERG. You know, the situation is very difficult because 

there really is very little in terms of oversight of rating by State 

regulators. And the States are really where the vast majority of 

regulation of the insurance industry is today. And the resources 

there are really concentrated on ensuring that insurers are solvent 

and they meet the minimum solvency requirements. So there is not 

a lot of attention paid to how much the rates are going up and in 

what way they are going up, for whom. 

And so, you know, I am not an antitrust attorney, so I am not 

an expert in that area. But all I would caution is to say that I am 

not as concerned about the antitrust, you know, provisions as I am 

about greater oversight of the way that the insurers are operating. 

Mr. STUPAK. Thank you. Mr. Braley, a question? 

Mr. BRALEY. Thank you, Mr. Chairman. I was a little bit surprised when Dr. Burgess went down the route of talking about this 

onerous 8 percent tax per employee on small businesses. Because 

I was attacked at one of my town hall meetings on health care reform by a small business owner who accused me of giving incentives for businesses to dump existing health care coverage they 

have that is more costly than that 8 percent requirement in order 

to save costs and improve their bottom line. 

So let’s talk a little bit about those numbers. And I would be interested in all of your feedback on this. There are many small businesses in Iowa that employ people who make $20,000 a year or 

less. And when you are looking at the average annual premium for 

a family of four for small businesses at $13,000 a year, let’s talk 

about that number. If you pay an 8 percent surcharge on an employee making $20,000 and they can go into the exchange and buy 

their own product with some supplemental affordability credits, 

that is going to cost a small business owner $1,600. That sounds 

considerably less than $13,000 a year. A $40,000 a year employee, 


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what is that going to cost you if you decide that option? $3,200. 

Somebody making $60,000 a year working for a small business in 

Iowa is doing pretty well, aren’t they, Mr. Landauer? $4,800 a year. 

That is about a third of what it is costing right now to insure a 

family of four. You can make $120,000 a year working for a small 

business, pay 8 percent into the exchange, and pay $9,600, substantially less than it costs right now to insure a family of four. 

So when Congresswoman Blackburn was talking about confidence in the free market-oriented health care solutions to address 

these problems, count me as skeptical. There has been no institutional impediment to associated health care plans addressing the 

needs of small business owners in all 50 States. Have they done 

it? No. That is the problem that we are facing with health care. 

And I would just invite each of you to respond to the problems that 

I have just identified. Mr. Landauer? 

Mr. LANDAUER. Would you repeat the question? 

Mr. BRALEY. I won’t go through the whole thing. I mean isn’t it 

true that as a small business owner, if you are struggling to get 

by and these rising health care costs are tapping every dollar you 

have available to return a profit, that if you have an opportunity 

to pay substantially less by paying 8 percent of your employees’ income into a pool and letting them choose their own health care, 

and if they are eligible they qualify for affordability credits to get 

a health care product that may be better than what you are offering them now, how is that not a positive outcome? 

Mr. LANDAUER. Correct. That is a perfect way of doing business. 

Mr. BRALEY. Mr. Hetrick, do you have any comments about that? 

Mr. HETRICK. Given the choice, I would have to look at which 

was the better deal if the coverage is equal. We have always erred 

on the side of providing quality coverage for our people. 

Mr. BRALEY. And you made a very good point, because you are 

in a market where you are competing for good employees. And one 

of the things we know is that in a free market system, that is always going to provide incentives for employers who want to attract 

the best caliber of employee, to offer a better benefits package to 

their employees. 

Mr. HETRICK. Yes. 

Mr. BRALEY. And that is why in the exchange that we have constructed there is a basic plan, a premium plan, an enhanced plan, 

and a premium-plus plan, so that employers can go in, even though 

they are going to have some basic required elements of coverage, 

and decide what makes most sense for their employees. 

Mr. HETRICK. Absolutely. And if you have got a cheaper way for 

me to pay for that same thing, I will go for the cheaper option. 

Mr. BRALEY. Mr. Walker. 

Mr. WALKER. I have never been able to consider insuring a family of four. It has always been too expensive. But I think for an individual employee, we crunched these numbers last week, and it 

came to just below 5 percent. So at 8 percent for a family of four, 

that is a much better option, no doubt. 

Mr. BRALEY. Dr. Blumberg. 

Ms. BLUMBERG. Well, our analysis has showed that there are 

some advantages for many small employers to being able to use the 

pool and opt to pay a payroll assessment in certain circumstances 


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as opposed to the premium. And they will obviously choose what 

is best for them financially. 

And just in case you are interested, I was not asked directly, but 

I have done quite a bit of analysis of association health plans and 

how they differ from exchanges. And they are really very different. 

One is oriented towards really broad pooling of health care risk, 

which is what you get under the exchanges laid out in H.R. 3200, 

whereas association health plans are really oriented towards further segmentation of health care risk, allowing the healthier firms 

to band together to avoid sharing in the costs of the higher-cost 

small firms. 

Mr. BRALEY. Thank you. 

Mr. STUPAK. Mr. Gingrey, I think you had one more question you 

wanted to ask? 

Dr. GINGREY. Mr. Chairman, thank you. I want to make a couple 

of comments as just sort of a follow-on to what my good friend from 

Iowa, Mr. Braley, just said. 

No question about it, I think he is right, this paying the 8 percent is a lot cheaper than buying and providing health insurance 

from the employees. And corporate America, under the provisions 

of H.R. 3200, will eventually, within 5 years let’s say, drop 110 million of their employees who are currently covered by corporate 

America, and they will let them go right into that exchange. 

And if the final bill has a public option, the government—trust 

me, I am from the government, I am here to help you—Mr. Walker 

said the three businessmen at the table probably agree that they 

don’t trust the insurance industry, trust the government. They will 

absolutely crowd out the marketplace for the private insurers, and 

you will simply have, Mr. Landauer, you definitely then will have 

Medicare for all, and you will have lack of providers, and you will 

have rationing of care. 

And that is why those of us on this side of the aisle are so concerned with the public option. It is a Trojan horse for a singlepayer system. And clearly, because of this 8 percent deal that Mr. 

Braley just talked about, employers across this country will drop 

their coverage of their employees like a hot potato. So it is not really a question, Mr. Chairman, but I appreciate you giving me the 

opportunity. 

Mr. Hetrick, you mentioned earlier about the student loan program. And you said, hey, look, this competition between FFELP 

and the Direct program, this is great, let’s let them compete and 

let’s see who offers a better rate for your child so they can go to 

college and get a college education. Well, the government wanted 

to compete, but now they have crowded out the FFELP, and it is 

all Direct loan program as a bill that we just passed, without my 

vote of course, in the House of Representatives, and there will be 

no competition. It will be all government. 

Same thing with health care. That is my concern. You can comment on that, any one of the four of you, if you would like, if I have 

got time remaining, Mr. Chairman. 

Mr. STUPAK. Dr. Blumberg. 

Ms. BLUMBERG. We looked quite a bit at the public plan option, 

and do not believe that it is going to eradicate private health insurance coverage, even if implemented in the way laid out in the curVerDate Mar 15 2010 20:04 Aug 27, 2012 Jkt 074846 PO 00000 Frm 00110 Fmt 6633 Sfmt 6633 E:\HR\OC\A846.XXX A846

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rent proposal. And in fact, well over 90 percent of the number of 

Americans currently covered by private insurers we believe would 

continue to be—would be covered by private insurers under the reform. 

We are talking about bringing in a lot more people into the system than are insured today. Many of them would be covered 

through private plans. And so because you are increasing the total 

number of coverage, we think roughly 92 percent as many people 

would be covered by private insurance, even in the presence of the 

public plan, perhaps higher than that depending upon the rules of 

getting into the exchange. 

In addition, when you think about situations where there has 

been a public plan competing with private plans, I think one important example to remember is just how badly private insurers did 

want to compete with the Medicare program, and hence we developed the Medicare Advantage program. Now, those private insurers 

have actually been quite advantaged by rules under the Federal 

Government, and in fact have been doing quite well, to the point 

where they have been providing extra—well over extra benefits 

than what the Medicare beneficiaries are entitled to, and increasing costs as a consequence. 

So we do have examples where we have allowed this kind of competition between private plans and a public health plan, and the 

privates have sustained themselves and done quite well. 

Mr. STUPAK. Very good. Well, let me thank you all for coming. 

That concludes our questioning. I want to thank you for your testimony and your coming up here to testify in Washington to give us 

some insight. As you can see, we have differences of opinion on 

health care, and a long way to go, but hopefully we will get something done for the American people. 

Dr. BURGESS. Mr. Chairman. 

Mr. STUPAK. Mr. Burgess? That is it, you are cut off, there is the 

bell. Go ahead. 

Dr. BURGESS. I have some additional questions I would like to 

submit in writing. 

Mr. STUPAK. Yes. I was just going to get to that part. The committee rules, as you know, provide that members have 10 days to 

submit additional questions for the record. And that will be part 

of—this tradition will be kept. You have 10 days to do so, if you 

would like to submit additional questions for the record. 

Therefore, I ask unanimous consent that the contents of our document binder be entered into the record, provided that the committee staff may redact any information that is business proprietary, relates to privacy concerns, or is law enforcement sensitive. 

Without objection, documents will be entered in the record. 

[The information was unavailable at the time of printing.] 

Mr. STUPAK. That concludes our hearing. This meeting of the 

subcommittee is adjourned. 

[Whereupon, at 3:42 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 


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sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 114 here 74846A.055
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sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 118 here 74846A.059
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sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 119 here 74846A.060
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sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 120 here 74846A.061
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sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 121 here 74846A.062
112 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 122 here 74846A.063
113 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 123 here 74846A.064
114 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 124 here 74846A.065
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sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 125 here 74846A.066
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sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 126 here 74846A.067
117 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 127 here 74846A.068
118 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 128 here 74846A.069
119 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 129 here 74846A.070
120 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 130 here 74846A.071
121 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 131 here 74846A.072
122 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 132 here 74846A.073
123 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 133 here 74846A.074
124 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 134 here 74846A.075
125 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 135 here 74846A.076
126 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 136 here 74846A.077
127 


sroberts on DSK5SPTVN1PROD with HEARINGInsert graphic folio 137 here 74846A.078