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S. HRG. 114–215 

KING V. BURWELL SUPREME COURT CASE 

AND CONGRESSIONAL ACTION THAT CAN BE 

TAKEN TO PROTECT SMALL BUSINESSES 

AND THEIR EMPLOYEES 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

AND ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

APRIL 29, 2015 

Printed for the Committee on Small Business and Entrepreneurship 

( 

Available via the World Wide Web: http://www.fdsys.gov 

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(II) 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED FOURTEENTH CONGRESS 

DAVID VITTER, Louisiana, Chairman 

BENJAMIN L. CARDIN, Maryland, Ranking Member 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

TIM SCOTT, South Carolina 

DEB FISCHER, Nebraska 

CORY GARDNER, Colorado 

JONI ERNST, Iowa 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

MARIA CANTWELL, Washington 

JEANNE SHAHEEN, New Hampshire 

HEIDI HEITKAMP, North Dakota 

EDWARD J. MARKEY, Massachusetts 

CORY A. BOOKER, New Jersey 

CHRISTOPHER A. COONS, Delaware 

MAZIE K. HIRONO, Hawaii 

GARY C. PETERS, Michigan 

ZAK BAIG, Republican Staff Director 

ANN JACOBS, Democratic Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS

Page 

Vitter, Hon. David, Chairman, and a U.S. Senator from Louisiana ................... 1 

Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire ............................ 40 

WITNESSES

Cannon, Michael F., Director of Health Policy Studies, Cato Institute, Washington, DC ............................................................................................................. 3 

Blumberg, Linda J., Senior Fellow, Urban Institute, Washington, DC .............. 9 

Anderson, Jeffrey H., Executive Director, The 2017 Project, Washington, DC .. 17 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Anderson, Jeffrey H. 

Testimony .......................................................................................................... 17 

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

Addendum 1 ...................................................................................................... 158 

Blumberg, Linda J. 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 11 

Addendum 1 ...................................................................................................... 141 

Addendum 2 ...................................................................................................... 149 

Responses to questions submitted by Senator Shaheen ................................ 162 

Cannon, Michael F. 

Testimony .......................................................................................................... 3 

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

Addendum 1 ...................................................................................................... 52 

Addendum 2 ...................................................................................................... 64 

Addendum 3 ...................................................................................................... 111 

Addendum 4 ...................................................................................................... 121 

Addendum 5 ...................................................................................................... 134 

Shaheen, Hon. Jeanne 

Opening statement ........................................................................................... 40 

Vitter, Hon. David 

Opening statement ........................................................................................... 1 

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(1) 

KING V. BURWELL SUPREME COURT CASE 

AND CONGRESSIONAL ACTION THAT CAN 

BE TAKEN TO PROTECT SMALL BUSINESSES 

AND THEIR EMPLOYEES 

WEDNESDAY, APRIL 29, 2015 

UNITED STATES SENATE, 

COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, 

Washington, DC. 

The Committee met, pursuant to notice, at 9:36 a.m., in Room 

SR–428A, Dirksen Senate Office Building, Hon. David Vitter, 

Chairman of the Committee, presiding. 

Present: Senators Vitter, Risch, Fischer, Gardner, Ernst, Shaheen, and Hirono. 

OPENING STATEMENT OF HON. DAVID VITTER, CHAIRMAN, 

AND A U.S. SENATOR FROM LOUISIANA 

Chairman VITTER. Good morning, everyone, and welcome to the 

Senate Committee on Small Business and Entrepreneurship’s legislative hearing, the ‘‘King v. Burwell Supreme Court Case and Congressional Action That Can Be Taken To Protect Small Businesses 

and Their Employees,’’ and special welcome and thanks to our 

three witnesses today. 

We will discuss that case, King v. Burwell, and its effect on small 

businesses and their employees if the Court rules in favor of the 

plaintiff, and we will also be examining and discussing alternative 

market-based solutions to health care reform as part of that. 

I want to thank Senator Jeanne Shaheen, our Ranking Member, 

and the other members of the committee for participating both before in setting up this hearing and during, and Senator Shaheen 

is going to be a little late, but will be here in a little bit. 

And, I want to welcome our three witnesses who are all involved 

in this area of public policy. I will introduce them in just a minute. 

The next few months will be really important as we await the 

Supreme Court decision in King v. Burwell. The effect on small 

businesses and individual employees is substantial and I appreciate all of you being here today to express your ideas and perspectives. 

By the end of June, we expect the U.S. Supreme Court to decide 

the legality of the IRS’s regulation that enables Federal health insurance subsidies to be paid to individuals in 34 States who have 

a Federal exchange, not having set up a State exchange. This case 

really is not about ObamaCare per se. It is about whether the execDeShaun on LAP51NQ082 with DISTILLER

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utive branch executes and enforces laws passed by Congress as 

written, in my opinion. 

That is the fundamental issue in King v. Burwell, whether the 

IRS exceeded its authority under the Affordable Care Act by promulgating a final rule that expanded the provision of the health insurance subsidy beyond what was clearly in the statute. King is 

not a constitutional challenge, but, rather, a challenge to the IRS 

regulation as being inconsistent with the Act in light of the statutory language. 

If the Supreme Court decides in favor of the administration, then 

not much changes. But, our purpose here today is to review this 

question from the perspective of a Court decision in favor of the 

plaintiff and to examine the effects of such a decision, the consequences for individuals who have purchased insurance on the 

Federal exchange, the effect on other employees, and actions Congress may want to take. 

This litigation is set against the backdrop of a highly partisan 

legislative battle five years ago and continuing, with the final result the Affordable Care Act passed into law, apparently before it 

was thoroughly read or fully understood by many who voted for it. 

For those who did understand it and who opposed it, including, I 

think, a majority of Americans, it remains clearly unpopular. 

I think that is so for several reasons. It raised their taxes. It 

mandated that they buy a product that, in many cases, they did 

not want. And promised by their President that health insurance 

premiums would go down by $2,500 for those with employer-sponsored insurance, they instead went up an average of $3,500. For 

those in the individual markets, premiums went up 50 percent, on 

average, in the first year the law took effect. It also narrowed the 

selection of health care providers for many by forcing them into 

narrow networks. It limited the number of hours they could work 

for many folks and imposed penalties on individual Americans, 

their families, and businesses that provide their livelihood. 

So, clearly, a larger issue above and beyond the focus of the Supreme Court case and the effects of a ruling in favor of the plaintiff 

is a question of what is the best approach to health care reform. 

The creators of ObamaCare have come down on the side of those 

government mandates and price controls, I believe, because they do 

not fully trust people, giving them the choices and freedom that alternative approaches could yield them. 

On the other hand, when you do trust people, you enable greater 

freedom, freedom to choose that is at the center of an alternative 

approach to health care reform, and I think we will hear about 

those alternatives today from some of our witnesses. 

There are also alternatives to the subsidy currently being offered 

on the Federal exchange, a subsidy in the forms of an advanceable 

tax credit that actually flows directly from the government into the 

pockets of the insurance company, not into the hands of consumers 

under the present system. These alternatives, which we will hear 

about shortly, would help those who may be caught in the lurch if 

the Court sides with the plaintiff and throws down the gauntlet to 

the administration over this poorly constructed law and IRS regulation. 

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At the end of the day, our greatest concern as Senators should 

be the folks we represent, our fellow Americans who sent us here 

to represent them and who, when all is said and done, will be directly affected by the Court’s decision and our decisions. So, when 

the Supreme Court has made its decision, it will be decision time 

for us and we must ask ourselves, how do we best represent those 

fellow citizens. 

Again, I very much look forward to hearing from our witnesses 

and let me introduce them now. 

Michael F. Cannon is the Cato Institute’s Director of Health Policy Studies. With Jonathan Adler, a Professor of Administrative 

and Constitutional Law at Case Western, Mr. Cannon conducted 

the legal and legislative research and wrote the leading scholarly 

treatise that laid the foundation for King v. Burwell and three 

similar challenges. 

After Mr. Cannon, we are going to hear from Linda J. Blumberg 

of the Urban Institute. She is a Senior Fellow there, having joined 

the Institute in 1992. From 1993 through 1994, she was the Health 

Policy Advisor to the Clinton administration during its health care 

reform effort, and she was a 1996 Ian Axford Fellow in Public Policy. She is an expert on private health insurance, both employer 

and non-group, on health care financing, and on health system reform. 

And, finally, we will hear from Jeffrey H. Anderson of the 2017 

Project. He is the Executive Director of the 2017 Project, a Washington, D.C. based organization that is operating at the nexus of 

policy and politics, advancing a conservative reform agenda. Mr. 

Anderson was the Senior Speech Writer at the U.S. Department of 

Health and Human Services from 2008 to 2009, and his other 

writings have been published in the Wall Street Journal, the Weekly Standard, National Affairs, National Review, and a host of other 

publications. 

Again, welcome to you all, and we will start with Mr. Cannon. 

STATEMENT OF MICHAEL F. CANNON, DIRECTOR OF HEALTH 

POLICY STUDIES, CATO INSTITUTE 

Mr. CANNON. Thank you, Mr. Chairman and Ranking Member 

Shaheen, for your invitation to discuss the King v. Burwell case 

concerning the Patient Protection and Affordable Care Act that is 

currently before the Supreme Court. 

King v. Burwell challenges as unauthorized by Congress both the 

premium subsidies that the Internal Revenue Service is issuing in 

38 States whose health insurance exchanges are operated by 

Healthcare.gov and the tax penalties those subsidies trigger. The 

Court heard oral arguments on March 4 and Court watchers expect 

a ruling by the end of June. 

If the Court sides with the challengers, more than 57 million employers and individuals in those 38 States will be freed from the 

ACA’s employer and individual mandates. They include Americans 

like Kevin Pace, a jazz musician whose income fell by $8,000 because his employer cut his hours to avoid the IRS’s illegal taxes. 

They include small business owners who would like to expand and 

hire more workers, but are today prohibited from doing so by the 

threat of illegal taxes. Such a ruling would cause a smaller number 

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of Americans, an estimated 6.7 million, to lose access to subsidies 

that no Congress ever authorized but that the IRS is, nevertheless, 

dispensing illegally. 

The problem with current proposals about how to respond to a 

Supreme Court ruling in King v. Burwell is that Congress is right 

now sitting on top of a scandal bigger than Watergate and it is debating whether to let the burglars keep breaking into DNC headquarters for another two years. It is actually worse than that, because one side of this debate wants to give the burglars guns and 

badges and let them keep breaking into the DNC forever. 

What limited oversight Congress has conducted to date shows 

that the IRS is currently taxing and borrowing and spending tens 

of billions of dollars contrary to the clear limits the ACA imposes 

on the IRS’s power. The IRS’s actions lack—those investigations, 

limited though they are, show the IRS’s actions lack any support 

in either the ACA or its legislative history or any other Federal 

law. Yet, in effect, the IRS pledged—those investigations have 

found that the IRS pledged and ultimately spent taxpayer dollars 

on a multiyear, multi-billion-dollar contribution to the reelection 

campaigns of members of Congress who enacted and a President 

who signed a law that voters and Congress otherwise would have 

scrapped as unworkable. 

By far, the most important thing that members of Congress can 

do to prepare for a King ruling is to launch an investigation that 

fits the scale of corruption exposed by King v. Burwell. Such an investigation would reveal that IRS officials made no serious effort 

to research the statute or its legislative history before expanding 

the reach of the ACA’s taxes and subsidies beyond the clear limits 

imposed by Congress. Such an investigation would reveal the IRS 

did so repeatedly, offering premium subsidies not only in Federal 

exchanges, but to undocumented aliens and lawful residents below 

the poverty line who overestimate their income. 

University of Iowa law professor Andy Grewal recently revealed 

the IRS, quote, ‘‘effectively provides the largest tax credits to persons who do not satisfy the statutory criteria.’’ Those illegal subsidies, likewise, trigger illegal taxes against employers. 

Finally, such an investigation would reveal the IRS tried to hide 

its actions from the public and has been stonewalling Congress on 

this issue of monumental importance for nearly four years. 

I thank you very much for this opportunity, again, Mr. Chairman, and I look forward to your questions. 

[The prepared statement of Mr. Cannon follows:] 

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Chairman VITTER. Thank you very much, Mr. Cannon. 

And, next, we will be happy to hear from Ms. Blumberg. Welcome. 

STATEMENT OF LINDA J. BLUMBERG, SENIOR FELLOW, 

URBAN INSTITUTE 

Ms. BLUMBERG. Thank you very much. Chairman Vitter, Ranking Member Shaheen, and members of the committee, I appreciate 

the opportunity to testify today. The views that I express are my 

own and should not be attributed to the Urban Institute or its 

sponsors. My testimony draws on my own and my colleagues’ research on the ACA, private insurance markets pre- and post-2014, 

and the King v. Burwell case. 

Small employers historically have been much less likely to offer 

health insurance to their employees than large employers, and 

their employees historically have been much more likely to be uninsured. These differences have grown considerably over time, a 

trend that long predates the ACA, with offer rates among small 

employers, particularly small low-wage firms, falling dramatically 

over the last 15 years while remaining steady for large firms. For 

example, offer rates among low-wage firms with fewer than 25 

workers dropped by 46 percent between 2000 and 2013, while offer 

rates across all employers fell by 16 percent. 

In June 2013, prior to implementation of the ACA’s non-group reforms and tax credits for the purchase of coverage, 30.4 percent of 

the self-employed and 23.5 percent of small firm employees were 

uninsured, compared to only 7.6 percent of employees in large 

firms, according to the Urban Institute’s Health Reform Monitoring 

Survey. 

Prior to implementation of the ACA’s coverage provisions, many 

small firm employees, the self-employed, and their dependents had 

only their State’s non-group insurance market as a coverage option. 

These were small markets with limited ability to meet insurance 

need due to very high administrative costs, coverage denials, and 

health status discrimination against those in less than perfect 

health. Thus, the ACA’s reforms of non-group insurance markets 

benefit disproportionately small firm employees and the self-employed, those least likely to have access to employer-based insurance. 

By March of 2015, a year after implementation of the ACA’s reforms, uninsurance among the self-employed had fallen by 10.8 

percentage points, or 36 percent, and among small firm employees 

it had fallen by 10.8 percentage points, or 44 percent. Meanwhile, 

the share of employees receiving offers of health insurance from 

their employers stayed steady across all firm sizes. Thus, the 

ACA’s non-group market reforms foster choice for employment and 

small firm or self-employment, facilitating hiring and entrepreneurship. 

If the ACA’s premium tax credits and cost sharing reductions are 

eliminated in 34 States by a Supreme Court ruling, the number of 

uninsured in these States would increase by a total of 8.2 million 

people in 2016. Additional analyses by place of employment reveal 

that 5.8 million people losing premium tax credits under a decision 

for the plaintiffs, or 63 percent of those losing them, have at least 

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one family member employed by a small firm. Of these 5.8 million 

people, 4.1 million, or 70 percent, would become uninsured. Twoand-a-half million people in self-employed families would lose tax 

credits, 1.6 million of whom would become uninsured. Those who 

retain insurance would face much higher premiums. 

Once tax credits are eliminated, the mix of health risks in these 

non-group insurance markets would change promptly. The healthy 

who lose tax credits would be first to drop their insurance, increasing significantly the market’s average health care costs. As a consequence, the average premiums would increase for the non-group 

markets both inside and outside the new health insurance exchanges as they are treated as a single risk pool. As average premiums increase, even those who would not have received financial 

assistance would reassess their ability to afford coverage, and some 

would leave the markets, become uninsured, and drive premiums 

even higher for those who remained. 

Therefore, another 3.4 million people in small firm families who 

would not have received tax credits regardless of King would face 

substantially higher premiums under a ruling for the plaintiffs, 

and about 840,000 of them would become uninsured. About two 

million people in self-employed families would face large premium 

increases, and about 360,000 of them would become uninsured, 

even though they were never eligible for tax credits. 

If the King plaintiffs prevail, the median person or family buying 

non-group insurance fully with their own funds would pay a premium 55 percent higher to maintain the same coverage that they 

would have had otherwise. For those who otherwise would have 

qualified for the tax credits, the premium increases would be much 

larger. 

Small firm employees, the self-employed, and their family members benefit disproportionately from changes the ACA brought to 

the non-group insurance markets. Thus, they would be disproportionately harmed due to destabilization of these markets engendered by elimination of premium tax credits. New legislation to reinstate the ACA’s financial assistance in any State in which it 

would be prohibited would be required to reverse such damage. 

Thank you very much, and I am happy to answer any questions. 

[The prepared statement of Ms. Blumberg follows:] 

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Chairman VITTER. Thank you very much. I appreciate your being 

here again. 

And last but certainly not least, we will hear from Jeffrey H. Anderson of the 2017 Project. Welcome. 

STATEMENT OF JEFFREY H. ANDERSON, EXECUTIVE 

DIRECTOR, THE 2017 PROJECT 

Mr. ANDERSON. Thank you, Chairman Vitter, Senators. It is good 

to be here. Thank you for the invitation. 

For many years, Americans have expressed a clear desire for real 

health care reform, reform that would lower costs, increase choice, 

and improve the quality of care. Unfortunately, the Patient Protection and Affordable Care Act, commonly known as ObamaCare, has 

taken us in the wrong direction in each of these areas. Moreover, 

ObamaCare consolidates and centralizes power at the expense of 

Americans’ liberty. A nation conceived in liberty is living under a 

health care law predicated on coercion. 

Americans have been waiting for six years for ObamaCare opponents to unite around a free market alternative that deals with 

costs, deals with coverage, and deals with the individual market 

without disrupting the employer-based market. The 2017 Project’s 

winning alternative to ObamaCare would accomplish these goals, 

and the Supreme Court case of King v. Burwell provides a welcome 

opportunity to advance such an alternative. 

If the Court rules that, in states with Federal exchanges, the 

Obama Administration has been paying out subsidies in defiance 

of the law, Congress could choose to pass legislation that would do 

the following: Give the 37 affected States as well as the 13 others 

an off ramp from ObamaCare that would lower costs, secure liberty, and ensure that anyone who wants to buy insurance is able 

to do so. This off ramp should lead to a replacement that would fix 

what the government had already broken in our health care system 

even before ObamaCare was passed. 

For 70 years, the government has provided a tax break for millions of Americans with employer-based insurance, while millions 

of Americans who buy insurance on their own have been denied 

such a tax break. This is unfair and it has undermined the individual market. 

The alternative advanced by the 2017 Project, the group I run, 

would address this unfairness in the tax code by offering simple, 

non-income tested, refundable tax credits to individuals who buy 

insurance through the individual market. Unlike ObamaCare subsidies, which go directly to insurance companies, these would be actual tax credits going directly to individuals or families. For most 

Americans, they would come in the form of a tax cut. 

Because the tax credits would not be income-based, they would 

be far simpler, reduce the IRS’s role, avoid disincentivizing work, 

avoid imposing a marriage penalty, and let every person or family 

quickly compute what they would be getting. Perhaps most importantly, they would finally address the longstanding inequality in 

the tax code for all Americans. 

The 2017 Project’s alternative would offer tax credits of $1,200 

for those under the age of 35, $2,100 for those between 35 and 49, 

and $3,000 for those 50 and over, plus $900 per child. Those who 

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find a policy for less could deposit the savings in a Health Savings 

Account. The alternative would also offer a one-time $1,000 per 

person tax credit for having or opening an HSA. 

According to a GAO report released on the eve of ObamaCare’s 

implementation, tax credits in these amounts would be sufficient 

for healthy Americans to be able to buy insurance even if they paid 

no more than $15 a month of their own money toward the plans, 

except in five States, and people in those States could buy across 

State lines. 

If Congress were to respond to a ruling against the administration in King v. Burwell by offering such non-income tested tax credits, it would benefit millions of middle class Americans who get 

nothing from ObamaCare but the tab. 

According to the Kaiser calculator, the typical single woman who is 40 years old or younger and makes $35,000 a year or more does 

not get a dime in ObamaCare subsidies. She is too young and too 

middle class. Under the 2017 Project’s alternative, she would get 

a $2,100 tax credit to help her buy insurance of her choice. 

Even though it would benefit far more people than ObamaCare, 

such an alternative would actually cost much less. According to the 

nonpartisan Center for Health and Economy co-chaired by Princeton’s Uwe Reinhardt and former CBO Director Douglas HoltzEakin, the 2017 Project’s alternative would save $1.1 trillion in 

Federal spending over a decade versus ObamaCare while increasing the number of people with private health insurance by six million versus ObamaCare. It would also provide common sense consumer protections as well as funding for State-run high-risk pools 

to ensure that no-one could be denied affordable insurance on the 

basis of a preexisting condition. 

If Congress were to give States an off ramp that leads to a simple, flat, age-based tax credit for everyone in the individual market, 

protections for those with preexisting conditions, and the elimination of all of ObamaCare’s liberty sapping mandates, it would be 

a very popular proposal. 

The millions of Americans who have been getting ObamaCare 

subsidies in defiance of the law’s plain language and who will be 

getting nothing in the wake of a ruling against the administration 

would get a generous tax credit to help them buy affordable insurance of their choice. Moreover, because they were already covered, 

if they were to switch to a more affordable plan they could not be 

charged more or denied coverage because of a preexisting condition. 

Meanwhile, the millions, perhaps tens of millions, of middle-class 

Americans who have never gotten anything out of ObamaCare 

would get a long overdue tax break to buy insurance of their 

choice. Such tax breaks would be worth thousands of dollars to millions of Americans, would finally fix what the government has broken through the tax code, and would allow the individual market 

to flourish. 

States deserve an off ramp from ObamaCare that leads to a winning alternative. For six years, Americans have opposed 

ObamaCare and have waited to be offered something better. Now 

is the time to give it to them. 

Thank you. 

[The prepared statement of Mr. Anderson follows:] 

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Chairman VITTER. Thank you very much. 

Now, we will go to questions for members of the panel. I will get 

us kicked off. 

Let me ask Michael and Jeffrey, what specifically would be the 

legal impact of a decision in King v. Burwell in favor of the plaintiff 

on the employer and the individual mandate in those States affected that do not have a State exchange? 

Mr. CANNON. Well, Senator, unfortunately, as with many aspects 

of the ACA, the answer is complex. But, what King v. Burwell does 

is it challenges as unlawful an IRS regulation that purports to authorize premium subsidies—we call them tax credits or cost sharing subsidies—in exchanges established by the Federal Government. The way—so, if the plaintiffs win before the Supreme Court, 

then that rule is invalidated and those subsidies must end when 

the Court’s mandate takes effect. 

Under the employer mandate, an employer is penalized for not 

providing adequate coverage to its workers only if one of those 

workers is eligible for a premium assistance tax credit. So, if the 

Supreme Court invalidates that IRS rule and all those premium assistance tax credits disappear in all 38 States, 38 Healthcare.gov 

States, then no employer in any of those 38 States can be penalized 

under the employer mandate because there are no tax credits to 

trigger penalties against that employer. 

So, if the King v. Burwell challenges prevail, the employer mandate will be a dead letter in 38 States, and any State that wanted 

to exempt its employers from the employer mandate could do so by 

disestablishing their exchange, and there would be an incentive for 

them to do so because they might lose jobs to the States where the 

employer mandate does not operate. 

The connection to the individual mandate is even more complicated, but there is an exemption from the individual mandate for 

people whose coverage is unaffordable or for whom coverage would 

be unaffordable, and the availability of tax credits makes coverage 

affordable for more people. So, if those tax credits disappear, coverage will be considered unaffordable under the law’s definition for 

more people and many more people will be exempt from the individual mandate. 

I have estimated that if the challengers prevail in King v. 

Burwell, then another eight million people, another eight million 

Americans in Federal exchange States will be exempt from the individual mandate. And what that suggests is that if Congress were 

to turn around and—I wanted to say reauthorize, but those premium assistance tax credits were never authorized in the first 

place—if Congress turned around and wanted to reinstate those 

premium assistance tax credits, make them legal, then it would be 

imposing the employer mandate in 38 States where it would not be 

operating and imposing the individual mandate on eight million 

Americans. Likewise, any State that established an exchange after 

King v. Burwell that caused those premium tax credits to start 

flowing again would be imposing the employer mandate on their 

employers and the individual mandate on many of their citizens. 

Chairman VITTER. Okay. Mr. Anderson, number one, do you 

agree with that general legal analysis? Number two, the alternative you proposed, should the Court decide in favor of the plainDeShaun on LAP51NQ082 with DISTILLER

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tiff, would it specifically resurrect either the employer mandate or 

the individual mandate in those States? 

Mr. ANDERSON. I do agree with that, with Michael’s analysis, and 

I—yes—well, no, I am sorry. The alternative that we are proposing 

would not resurrect the individual mandate or the employer mandate in any of the States. It would—the alternative would repeal 

those if it were passed as a stand-alone alternative. 

In the context of King v. Burwell, the proposal we have advocated is that an off ramp be provided to States that would eliminate all of the mandates, the employer mandate, the individual 

mandate, the coverage mandates, and would offer tax credits that 

people could use to buy insurance that they wish. 

Chairman VITTER. So, the alternative you are talking about 

would not resurrect the mandates because in the language you 

would specifically repeal them, among other reasons? 

Mr. ANDERSON. Correct. 

Chairman VITTER. Okay. 

Mr. CANNON. Senator, if I may, I am not a fan of health insurance tax credits because they resemble an individual mandate so 

closely. They effectively tell citizens, either buy a health insurance 

plan that is approved by the government or you will pay more 

money to the IRS. 

Chairman VITTER. Right. 

Mr. CANNON. So, I would dispute what Mr. Anderson said to the 

extent that I think that health insurance tax credits would effectively—creating a new health insurance tax credit would effectively 

reinstitute an individual mandate. 

Chairman VITTER. Okay. But, you would agree, it would not be 

a mandate per se. You are talking about—you are saying it would 

be sort of an incentive. 

Mr. CANNON. It would have the same economic impact as an individual mandate without Congress saying, you must buy health 

insurance. 

Chairman VITTER. Right. Okay. Mr. Cannon, you have also written about a related issue, which is the way Congress and Congressional employees get subsidized health care through the D.C. Small 

Business Exchange. Can you summarize your findings and views 

on the legality of that. 

Mr. CANNON. Well, that is actually a mirror image of the issue 

that is presented by King v. Burwell. In King v. Burwell, we have 

a case where the IRS exceeded its powers under Federal law to 

issue subsidies to people through the—under the Affordable Care 

Act, and in a way, that really prevents Congress from reopening 

the law, or if the IRS were not issuing these subsidies in Federal 

exchanges, then what all those subsidies do is they hide the cost 

of the ACA’s individual mandate and its insurance regulations, and 

if the IRS were not issuing those subsidies, then many more people 

would be exposed to those costs and Congress would be forced to 

reopen the law. 

There is a parallel issue, or parallel problem here in Congress. 

The Office of Personnel Management, which administers the Federal Employees Health Benefits Program, has no authority under 

Federal law to contribute to the premiums for health plans that 

members of Congress purchase through the D.C. Health Insurance 

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38 

Exchange established under the ACA, and yet the Office of Personnel Management is doing so and it has the same effect. It is 

preventing those illegal subsidies—in both cases, are preventing 

Congress from reopening the law. 

I have likened those subsidies to bribes that members of Congress are taking not to reopen the ACA, because there are a lot of 

very important, very powerful special interest groups in Washington, D.C. The most important and powerful special interest 

group in Washington is members of Congress and their staffs. And, 

if they were being harmed by the ACA, if their premiums went up 

because of the ACA, you can bet your bottom dollar that they 

would reopen the ACA and change that. 

That is exactly why, I think, President Obama personally intervened and got the OPM to reverse its decision, because supporters 

of this law, or at least the powers that this law gives to the Federal 

Government did not want Congress reopening this law because 

they did not want Congress to make other changes that would take 

away some of those powers. 

So, I really think it is a—they are almost identical issues where 

executive branch agencies are spending taxpayer dollars without 

Congressional authorization to protect the powers that the ACA 

gives to the Federal Government and to—and, as I said in my 

opening statement, they are really also a campaign contribution to 

the reelection campaigns of the people who voted for this law. 

Chairman VITTER. Okay. Thank you. 

Senator Hirono. 

Senator HIRONO. Thank you, Mr. Chairman. 

I have to say, Mr. Cannon, that it is very astounding to me that 

you have this rather, I would say, a conspiracy theory of those who 

supported ACA. So, I will set that aside, but I find it astounding 

that you accuse those people who support ACA of engaging in illegal campaign contributions. You should pursue that with the appropriate authorities. 

Mr. CANNON. I think I am. 

Senator HIRONO. I think that is through another system. 

Okay. Well, let us get to health care in this country. Both Republicans and Democrats agree that we had a broken health care system. So, I consider the ACA, among other things, to be remedial 

legislation that should be interpreted in a way to effect the purpose 

of the legislation, which is to enable more people to get health insurance. Forty million people in our country did not have any 

health insurance at all. So, we obviously have a very different perspective on what government action should occur. 

I did want to ask Ms. Blumberg, can you provide some more information on how individuals may be hampered by an inability to 

get and pay for health insurance if the decision in King eliminates 

the subsidies as they attempt to become self-employed or start a 

small business. Can you talk a little bit more about the impact to 

these folks. 

Ms. BLUMBERG. Sure. As I was mentioning, there has always 

been a big divide in insurance coverage between workers in small 

firms and the self-employed and those who are employed in large 

firms or who have a family member in a large firm, and that is because the price differential of purchasing insurance coverage—— 

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39 

Senator HIRONO. Yes. 

Ms. BLUMBERG [continuing]. Is very large and always has been. 

So, the administrative cost of selling coverage, for example, to a 

small firm are significantly larger than to a large firm, because as 

someone goes to sell, if they are selling to 5,000 potential enrollees, 

they are getting a lot for that stop relative to if they are selling 

coverage for—a sales call for ten employees and their dependents. 

And, so, the administrative costs of actually selling that coverage 

are higher for a small firm. 

In addition, prior to the implementation of the Affordable Care 

Act’s coverage provisions in 2014, the risk of—the greater risk of 

providing health insurance coverage in a small firm was also an 

issue with those small employers offering. So, a smaller employer 

had fewer workers over which to spread health care risk, and so 

if they had high-cost workers in their pool, they would be charged 

much higher premiums than a firm that had healthier younger 

workers. 

And, so, what the Affordable Care Act does is basically begin to 

spread the health care risk of those in a firm across all of those 

in the small employer market. It also brought down administrative 

costs, to some extent, but administrative costs will always be higher in small firms than large firms for health insurance coverage. 

So, when you provide a non-group market for the first time in 

the vast majority of States that is both stable, does not discriminate by health status, and has lower administrative costs and has 

more transparency in terms of what is being offered and insurers 

are held to be more accountable for what they are offering, then 

what you are doing is not only making it somewhat easier for small 

employers to offer, but you are, in particular, helping out the workers in those firms. 

Senator HIRONO. So, basically, you find it totally appropriate 

that the ACA does provide more of a level playing field for small 

businesses and people in that situation to be able to afford insurance for their employees. 

Ms. BLUMBERG. I think it was completely necessary, because the 

way that the markets were structured before really discriminated 

against them and their workers. 

Senator HIRONO. I hate to interrupt you, but I am running out 

of time. Are you familiar with the 2017 Project that Mr. Anderson 

proposes? 

Ms. BLUMBERG. I had not heard of it before finding out that he 

was going to be testifying here today. Am I familiar with the proposal? 

Senator HIRONO. Well, you might want to take a look at it, and 

I—— 

Ms. BLUMBERG. I have looked at the proposal, yes. 

Senator HIRONO. Do you have any preliminary observations or 

comments? 

Ms. BLUMBERG. I think the main difference between his proposal 

and some of the other similar ones that are out there is that, as 

I was talking about, the ACA is really structured to spread risk 

more broadly, to share the costs of the sick among the majority 

who are healthy and to make it more accessible and affordable and 

adequate for everyone. A lot of the proposals, including the one 

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that Mr. Anderson laid out, is really focused more on segmenting 

risk, separating the risks of the healthy and the sick. This can 

lower the cost, definitely, for those who are healthy, but it makes 

coverage less accessible and less adequate for those who have 

health problems or who have health problems at a given point in 

time. 

Senator HIRONO. I have a really short question for Mr. Anderson. 

Hawaii has had the Prepaid Health Care Law, which mandates 

that all employers with full-time employees provide coverage for— 

health care coverage for their employees, and there is no exception 

for small businesses, and this law has been in place for 40 years. 

The world did not come to an end for businesses in Hawaii. And, 

in fact, it is one of the reasons that Hawaii people are among the 

healthiest in the country. 

Are you familiar with Hawaii’s Prepaid Health Care Law? 

Mr. ANDERSON. Only what you just told me. 

Senator HIRONO. I would ask you, just as I asked Ms. Blumberg 

to take a look at your plan, you might want to take a look at Hawaii’s Prepaid Health Care Law, which has been in place for over 

40 years. Thank you. 

Thank you, Mr. Chairman. 

Chairman VITTER. Thank you, Senator. 

Our Ranking Member has joined us, so we will now go to Senator 

Shaheen for any opening comments and also questions of our witnesses. 

OPENING STATEMENT OF HON. JEANNE SHAHEEN, A U.S. 

SENATOR FROM NEW HAMPSHIRE 

Senator SHAHEEN. Well, thank you very much, Chairman Vitter, 

and I apologize to the panelists for being late this morning. I had 

a previous commitment that, unfortunately, I could not change, so 

thank you all very much for being here. 

I would like to state for the record that I believe that the Affordable Care Act is working. Millions of Americans, including tens of 

thousands of New Hampshirites, now have access to affordable 

health care coverage. 

And despite the success of the law, I do understand that there 

are changes that need to be made to make it work better, especially 

for small businesses. Unfortunately, we have yet to have a real discussion about how to make well-intentioned changes to improve the 

Affordable Care Act and instead we have seen mostly attempts to 

repeal the law or have it destroyed through favorable court cases. 

King v. Burwell, which we are here to talk about this morning, is 

just another attempt to repeal the law with no plan on how to replace it. 

So, I believe this hearing is premature. I appreciate that our 

panelists and the Chairman are very interested in talking about 

the issue. But, we do not yet know how the Supreme Court will 

rule on King v. Burwell, and as someone who voted for it, I understand that the intent of the Affordable Care Act is clear, that it 

provide all Americans with access to affordable health insurance 

regardless of the State in which they live. 

A ruling for the plaintiffs in King v. Burwell will have enormously troubling consequences for families across the country, jeopDeShaun on LAP51NQ082 with DISTILLER

41 

ardizing affordable access to coverage. In New Hampshire, we have 

53,000 people who have received tax credits to help with the cost 

of their insurance premiums and almost three-quarters of them receive some kind of subsidy. If the Supreme Court rules for the 

plaintiffs, many of these people will not only pay higher premiums, 

but many will forego coverage altogether. 

And, it would impact small businesses and their owners. Take, 

for example, Steve, who is a self-employed real estate broker from 

Londonderry. Steve is 61 years old. He had a bypass 11 years ago. 

Because of his medical history, he was unable to purchase health 

insurance. Once the ACA was enacted, he purchased a silver plan, 

and two months later, he had a quadruple bypass. This year, Steve 

pays $246 a month for coverage after the tax credit is taken into 

account. This insurance has saved Steve from financial ruin and it 

has allowed him to continue to work. 

Another example is Bill from Concord. Bill owns his own public 

relations company and he has three young children, one who has 

special needs. Since 2014, Bill and his wife have bought insurance 

on New Hampshire’s marketplace. Prior to the ACA, Bill spent 

about $40,000 a year on health insurance for what he considered 

terrible coverage. He now receives a tax credit, saving about $1,200 

a month on a better plan than he was able to afford previously. He 

says that the tax credit was ‘‘like getting a new client for me’’— 

that is a quote from Bill—and it helped him through a slow year 

in business. 

Now, while I believe there are changes that can and should be 

made to the law, it is clear to me that the ACA is working for individuals, for business owners and for employees, and that a ruling 

by the Supreme Court that undercuts the law would be devastating 

to millions of Americans. 

Again, I thank you all for being here today. I look forward to 

having the opportunity to ask questions and to hearing the discussion. 

Thank you, Mr. Chairman. 

Chairman VITTER. Sure. Absolutely. Do you want to go ahead 

and go into your questions? 

Senator SHAHEEN. Sure. Ms. Blumberg, I think Senator Hirono 

was asking you about how the insurance reforms were working in 

the Affordable Care Act, but I wonder if you could talk about what 

would happen in both the individual market and also with small 

businesses if those tax credits were no longer available to people. 

Ms. BLUMBERG. Sure. Once the tax credits were eliminated under 

a decision for the plaintiffs, the first thing that would happen is 

we would see those who are low-income and who are receiving the 

tax credits to help them afford insurance coverage, the healthiest 

among them would be the first to drop their coverage. It would 

happen quickly because they are billed monthly for their share of 

the premium. So, from one month to the next when this change 

was implemented, if it was, they would see a huge increase in their 

out-of-pocket costs that they would have to pay for a premium. So, 

you would see a big drop in insurance coverage among that population. 

Since that is going to disproportionately occur among those who 

are healthy, what happens is the rest of the pool in the non-group 

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markets in that State, on average, become sicker and more highcost. So, the premiums need to go up in order to compensate that 

so that the insurers are bringing in the right amount of revenue. 

We could talk separately about what happens if that happens in 

the middle of a plan year when rates are already set, because that 

would be a complete situation of chaos for the insurers. But, let us 

say that is not happening in the middle of a plan year for now. 

So, then what happens is everyone else who, even those who 

were not receiving tax credits but were buying in that market, also 

see a big increase in their premiums because the risk pool has 

worsened, and so they, then, need to reevaluate their decisions to 

buy and what is affordable, and a number of them will also leave 

the market, making the premiums increase further and increasing 

the number of uninsured. 

And, many of these people—not all of them, but a very significant percentage of them, over half, are either families that have a 

small firm worker in their family or have a self-employed worker 

or both. And, so, what you are seeing is a very big impact on that 

population precisely because they are among those that are least 

likely to have access to employer-based insurance. This is not going 

to do anything to change the offer decisions of small employers, 

since those are staying pretty steady and even historically have 

been dropping enormously for reasons outside of the Affordable 

Care Act, so—— 

Senator SHAHEEN. When you say—— 

Ms. BLUMBERG [continuing]. Have a lot of impact on that population. 

Senator SHAHEEN. Excuse me for interrupting, but when you say 

this is not going to change what small employers offer, what are 

you—you are referring to the decision, a Court decision? 

Ms. BLUMBERG. Yes. Small employers are historically much less 

likely to offer health insurance to their workers than large employers for a variety of reasons related to the composition of the workforce and the administrative costs involved in selling to small 

groups and risk-related issues. So, those small employers, just because this assistance disappears, is not going to change their decision and make them all offer. They are making those decisions for 

separate circumstances, and what the law has done by reforming 

the non-group market and providing this assistance, it has made 

the non-group market for the first time in almost all of these 

States someplace where you can get adequate, affordable insurance 

coverage with stable premiums, which has not been the case in the 

past. So, it was basically a place to catch these folks without access 

to employer-based insurance, and without that, these markets 

would become much smaller again, much more expensive, and you 

would have a lot more uninsured. 

Senator SHAHEEN. So, I have a lot of small businesses in New 

Hampshire and one of the things that I do hear from them is concern about the current law with respect to small businesses. So, are 

there improvements to the law that you could suggest that would 

help small employers? 

Ms. BLUMBERG. I think I would come at this from two places. 

One, I think that the resources and attention of the early implementation of the Act have been focused with, I think, good reason, 

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on the non-group insurance market. But, as a consequence of that, 

I do not think that the implementation has given enough attention 

and resources to the small group market, and we see that in how 

small the shop exchanges are in most States. 

And, I think there are some things we could do there. I think we 

could do better with regard to both informing small employers 

about the availability of this option. When we talk to folks in different States, many of these small employers do not even know 

anything about the shop. They do not know the value that it is supposed to bring. You know, having a concise, clear explanation about 

what that does that could be worked out across all of the States, 

I think, would be really helpful. 

I think we have to help brokers more see the value here and 

make it easier for them to use the IT system and for there to be 

more business functionality that they are used to getting directly 

from insurers there to make it more attractive to them, because 

they sell the vast majority of policies to small employers still. 

So, I think there are a number of ways there that we can bolster 

the functionality of the shop exchanges and get small employers to 

know more. 

I also think we have an issue in the small group market that 

needs to be addressed with regard to self-insurance, because as we 

spread risk more broadly in small group, those reforms, which 

ended price discrimination against those that had unhealthy 

groups, those rules do not apply to self-insuring firms of any size 

and they do not apply to reinsurance products that make it feasible 

for small employers to self-insure. And, so, as a consequence, I 

think there is a danger that we are setting up an adverse selection 

problem that also is going to cause trouble for—legal problems for 

these small employers that may be moving to self-insurance and do 

not know the legal ramifications of it. So, I think that is another 

area where we can do better to strengthen the small group market. 

Senator SHAHEEN. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman VITTER. Thank you. 

And, next, we will go to Senator Ernst. 

Senator ERNST. Thank you, Mr. Chair. 

Thank you to our panelists for being here today. I appreciate 

your time and thought on this issue. This is a tough issue, and this 

summer proves to be very interesting, I think, for a number of us. 

Mr. Cannon, you mentioned in your statement University of Iowa 

law professor Andy Grewal, who had found that the IRS is also 

issuing subsidies to two other ineligible groups, certain undocumented aliens and lawful residents below the poverty line who 

overestimate their income, and you go on to talk a little bit more 

about that. 

And, interestingly enough, just a couple weeks ago in our Homeland Security and Governmental Affairs Committee, we spoke with 

the Commissioner of the IRS on the challenges regarding 

ObamaCare, and in this committee meeting I asked the Commissioner if the IRS had a backup plan if the subsidies to States with 

Federal health exchanges are struck down, and he reiterated, as so 

many others have, also, that the IRS nor the administration have 

a strategy or a plan if this should happen. And, actually, I think 

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what happened in that committee meeting was everybody was 

doing this, it is not my problem, basically is what it was coming 

down to. Somebody else can deal with this. 

And, in addition, I asked him what the IRS had discussed about 

how ruling in favor of the plaintiff would impact States that have 

a hybrid State-Federal exchange, such as Iowa does, and again, he 

reiterated that the IRS has not thought this through, and again, 

basically, that it is not the IRS’s problem. 

Can you discuss that—really, anyone on the panel, if you would, 

please, talk about some of those issues and how we resolve these 

issues. 

Mr. CANNON. I think that it has been, as you say, a consistent 

message from the administration that there is nothing they can do 

or will do to try to mitigate the impact of the ACA on people in 

Federal exchange States once those subsidies disappear, because, 

remember, all those subsidies do is hide the costs of the ACA from 

consumers, taxpayers. 

So, the administration is doing this for a pretty clear reason. It 

is to try to prejudice the Court against the plaintiffs. If the administration stands there and says that there is absolutely nothing we 

can do and premiums will go up for millions of people if you rule 

for the challenges—and, I should say, I probably agree with everything Ms. Blumberg said about what would happen after a ruling. 

Where we disagree is whether it is the ruling that does that or the 

ACA itself. The whole point of King v. Burwell and the meaning 

of a Supreme Court ruling for the challengers is that those subsidies are illegal and, therefore, what is happening to consumers 

and taxpayers is a result of the ACA itself. So, all that list of 

horribles is—and I agree, they are horrible—are results of the ACA 

and not of the King v. Burwell ruling. 

So, the administration, I think, figures that if it can try to scare 

the Court and thereby prejudice them against the challengers by 

saying there is absolutely nothing we can do, when, in fact, there 

are lots of things that the administration could do. 

Right now, the Secretary of Health and Human Services could 

announce that, as I have mentioned in my written testimony, that 

they will create a special enrollment period to allow people who 

lose—anyone in a Federal exchange State to switch to a lower-cost 

health plan if those subsidies disappear. She could announce that 

right now. She has not done so. 

She could say, we will offer hardship exemptions to anyone who 

loses a subsidy. She could announce that right—so that they would 

not be penalized under the individual mandate. Some would be 

automatically exempt from the individual mandate, others would 

not. She has not done so. 

I do not—I would not approve of this step, but the statute actually gives the Secretary of HHS the authority to protect every 

Healthcare.gov enrollee from losing their coverage through the end 

of 2015. All the Secretary has to do is change the periodic basis on 

which the Treasury Department—because the HHS makes its decision for Treasury—the periodic basis on which the Treasury Department makes those payments to insurance companies, what we 

call advance payment and tax credits to insurance companies, 

change it from a monthly basis to an annual basis. It could send 

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that money to the insurance companies for the rest of the year. Noone would lose those subsidies or their coverage through the end 

of 2015. I think it would be unethical for them to do so, but I do 

not think they would think it is unethical because they think that 

their—or at least they argue that those subsidies are lawful. 

There has been no discussion of this. I think that the only explanation for that is that they are trying to intimidate the Court and 

trying to influence the outcome in that way. So, unfortunately, I do 

not think that the IRS Commissioner was being honest with Congress when he said there have been no discussions of this. 

Senator ERNST. Okay. I appreciate that very much. 

My time has expired. Thank you, Mr. Chair. 

Chairman VITTER. Thank you. 

Now, Senator Fischer. 

Senator FISCHER. Thank you, Mr. Chairman. 

Mr. Cannon, how do you think individuals and businesses are 

likely to react if that subsidy is no longer available? 

Mr. CANNON. I think that they are going to be unhappy, because 

they will be exposed for the first time to the full costs of the very 

expensive coverage that the ACA requires them to purchase. I 

think that they will intuitively understand why their health insurance bills have doubled or tripled, and it is because, once again, the 

Federal Government misled them about this law and how it works, 

just as it did when it promised that if you like your health plan, 

you can keep it. 

If you remember what happened in November of 2013, when people started getting these cancellation notices, they said, wait a second. I was promised by countless supporters of this law that I 

would be able to keep my health plan. It turned out that, notwithstanding what supporters of this law said was their intent, their 

actual intent was to take away your health insurance—the health 

insurance plans from millions of people. 

In this case, we hear from lots of supporters of this law, our intent was to offer subsidies in Federal exchanges, but the same 

thing happened here. What they said did not reflect the law that 

they passed. The law that they enacted said, no subsidies in Federal exchanges. Those residents will be exposed to the full cost of 

the ACA. And, I think that the public will intuitively know who is 

responsible for that. 

Senator FISCHER. Thank you. 

Mr. Anderson, should Congress be ready to have a response that 

is going to lessen that impact on individuals who may lose their 

subsidy, and would you recommend going beyond the scope of limited transition assistance? 

Mr. ANDERSON. Thank you for that question, Senator Fischer. 

Yes, I think Congress—I think it is essential that Congress have 

a response ready. There are families under ObamaCare—let me 

give an example. In Milwaukee, a family of five who makes $30,000 

a year gets more than $20,000 a year in ObamaCare subsidies, and 

the notion that those subsidies could be ruled illegal, disappear 

overnight, and that nothing would happen, I think, is unrealistic. 

So, something is going to happen. 

One scenario is that States that have not set up State-based 

ObamaCare exchanges might do so, which would presumably 

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mean—well, it would mean an expansion of ObamaCare and more 

of a bipartisan quality to it, which, I think, would be very bad from 

the standpoint of those of us who think that we need to repeal 

ObamaCare and move in a totally different direction. 

I think another mistake would be to try to negotiate fixes to 

ObamaCare because this simply is not fixable. 

I think it is very important that Congress put forward a proposal 

that this is a great opportunity to finally unite around an alternative, something that I think Americans have wanted from the 

start of this debate, that actually deals with the issue of health 

coverage and costs. It does not have all of ObamaCare’s intrusions 

upon liberty, its cost increasing mandates, et cetera. 

And, we think a proposal like the one that we advanced at the 

2017 Project would be one that could unify people, and it would not 

only solve the problem of giving people assistance who lose these 

subsidies which could be ruled illegal, but would also finally fix 

this inequality in the tax code for the vast majority of the middle 

class who has really been left out of this whole equation. I mean, 

it does not make any sense that someone should get a generous tax 

break for employer-based insurance and then their next-door neighbor who goes out and buys insurance on their own does not get 

anything. And, that has been the case for 70 years. It did not 

change under ObamaCare and I think it is time to fix that, which 

has been the root of our problem and has helped really keep the 

individual market from being vibrant. 

Senator FISCHER. I agree with you, there is a lot to fix. In fact, 

in Iowa and Nebraska, I do not know if you heard about Co-Opportunity and that co-op under the ACA, one of those established. We 

have a number of individuals and businesses who purchased insurance through that and are really now left high and dry. They are 

not receiving—it closed. They are not getting their money back. 

They have had to purchase insurance, many of them from private 

insurers, in order to cover their employees, and it has really been 

very disturbing that taxpayer dollars were pumped into these and 

then you see it fail and you see the impact on families in my State. 

And, I think it is just a glimpse into the future and what we are 

going to see unfold as we continue this. 

In your opinion, is there a philosophical difference between the 

approach to health care reform that is embedded in the ACA and 

maybe some of the alternatives that have been proposed out there 

by Senator Hatch, for example, or Senator Johnson? 

Mr. CANNON. I think there is a profound philosophical difference, 

and I think the quick version of that would be that ObamaCare basically is top-down control. Its entire treatment of the subject is to 

say, if we want something to happen, let us simply mandate that 

it happen. If we want people to have insurance, let us force them 

to buy insurance. The first time in all of American history the Federal Government has told private citizens they have to buy a product or service from a private company simply as a condition of living in the United States. That is the general approach, the belief 

that you can control a fifth or a sixth of the economy from a centralized planning apparatus in Washington, D.C. 

The other approach is one that respects Americans’ liberty, 

wants to allow people as much freedom as possible to contract with 

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one another, hopefully have as many options available as possible, 

start to see prices come available, actually have the sort of vibrant 

market that we have in most facets of our country where we do not 

have so much government intrusion. 

Senator FISCHER. Well, thank you. I know all of us know people 

who have been helped by the ACA who now have insurance. The 

issue now is their deductibles that they have to meet, and I am 

starting to hear from those people who are not able to meet the 

deductibles even with the subsidy, and I can tell you, in Nebraska, 

I have heard from thousands and thousands of people who have 

been hurt by this because they have lost the insurance that they 

wanted. They have lost the doctor that they had gone to. And, in 

many cases, they have lost the hospital. And, those are cases that 

are so heart-wrenching, because they deal with children, they deal 

with cancer, and certain cancer hospitals now who will not be offering help to those children who so desperately need it. 

Thank you, sir. Thank you, Mr. Chairman. 

Chairman VITTER. Thank you, Senator Fischer. 

And, I think the Ranking Member and I each have a few closing 

questions. Senator Shaheen, why do you not go ahead. 

Senator SHAHEEN. Well, Mr. Chairman, I know that we are supposed to be back at the Senate chamber for Prime Minister Abe’s 

address to Congress, so I am going to defer my questions. Thank 

you. 

Chairman VITTER. Okay. I have just a few closing questions. 

Mr. Cannon, I want to go back to our discussion about the parallel between this ObamaCare issue and the Congress ObamaCare 

issue, because I do agree with you that there are very clear parallels. Do you think there is any statutory basis in ObamaCare for 

giving subsidies for folks on Federal exchanges in States versus 

State exchanges? 

Mr. CANNON. No, there is not, and, in fact, if you read the statute, you will find that it is very carefully worded. It creates a 

very—a tightly worded, carefully crafted scheme that only offers 

tax credits, premium tax credits, in States that establish their own 

exchanges and does so to encourage States to take on that task 

that Congress wanted them to perform, because Congress cannot 

command States to enact Federal programs. Congress did this elsewhere in the ACA. It has told States, as it has told States for almost 50 years now, if you establish a compliant Medicaid program, 

you will get Federal grants to finance that program, and if you do 

not, you get nothing. You get no Medicaid grants. 

Congress offered to States establishment grants, to help them establish an exchange, and it conditioned the renewal of those grants 

on States taking adequate steps or sufficient steps toward establishing an exchange as well as implementing other parts of the 

statute. 

So, Congress does this sort of thing all the time. The statute is 

very clear. The tax credits are authorized only in States that establish their own exchanges, not through Federal exchanges. 

Chairman VITTER. So, you not only think that the language is 

clear, you also think that was not a mistake. 

Mr. CANNON. It was not a mistake, and there is—— 

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Chairman VITTER. And, then, to draw the parallel, do you think 

there is any statutory basis for members of Congress and their 

staff to get the subsidy that they are getting on the Small Business 

Exchange? 

Mr. CANNON. None whatsoever. The ACA itself is silent about 

whether the Federal Government can contribute to the health insurance premiums that members of Congress get through a health 

insurance plan created under the ACA, such as the D.C. Shop Exchange or an individual market exchange. But, the Office of Personnel Management needs some authorization from Congress somewhere in Federal law in order to make those contributions and 

there simply is not. 

Chairman VITTER. Now, there is authorization for that under the 

Federal Employees Health Benefits Plan. 

Mr. CANNON. That is correct. 

Chairman VITTER. But, that is—I assume what you are saying 

is that is different from and does not just magically transfer under 

ObamaCare to the Small Business Exchange. 

Mr. CANNON. Yes. So, those who did not want small Congress to 

reopen the ACA had a problem because the ACA does tell members 

of Congress you can no longer participate in the FEHBP. You cannot get your coverage there anymore. And, you can only get coverage under—you can only get coverage that was authorized by 

this Act, so, basically, coverage through an exchange. 

And, that meant that members of Congress could only get coverage, really, through an individual market exchange or through a 

shop exchange. If they got it through an individual market exchange, then Congress could, in neither case could the Office of 

Personnel Management continue to make contributions to members 

of Congress—premiums for members of Congress and their staff. 

That is explicitly prohibited in individual market exchanges. Employers are allowed to do so through the shop exchange, through 

an exchange such as the D.C. Shop Exchange, but the problem 

there is that those exchanges are only for small businesses—— 

Chairman VITTER. Well, that was going to be my next question. 

In terms of statutory law, the ObamaCare law, is it not clear that 

that D.C. Small Business Exchange we are talking about is limited 

to small employers of 100 employees or less, and it has actually 

been limited by D.C. under the law to 50 employees or less. 

Mr. CANNON. That is correct. And, so, what this committee tried 

to subpoena last week was the document that somebody filed on behalf of Congress with the D.C. Exchange attesting that Congress 

had, I think it was 45 employees, when, in fact, Congress has a 

thousand or more employees. So, someone falsified a Federal document in order to get members of Congress into the D.C. Shop Exchange and facilitate these premium contributions that the OPM is 

not authorized by Federal law to make. 

So, there are two problems there. There are these illegal subsidies that members of Congress are receiving and there is the 

problem that someone falsified the Federal document in order to facilitate those, and I think those are both examples of corruption 

that Congress needs to investigate. 

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Chairman VITTER. And with regard to that fraudulent filing, presumably, that was done because the exchange under clear statutory 

law is limited to employers of 50 employees or less? 

Mr. CANNON. Presumably, yes. 

Chairman VITTER. Okay. Well, thank you all very, very much for 

your testimony, for your work, for your participation. The committee really appreciates it. 

And with that, we are adjourned. 

[Whereupon, at 10:40 a.m., the committee was adjourned.] 

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