```

[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

              PROTECTING AFFORDABLE COVERAGE FOR EMPLOYEES

=======================================================================

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 9, 2015

                               __________

                           Serial No. 114-72

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

      Printed for the use of the Committee on Energy and Commerce
                       energycommerce.house.gov
                                   ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

98-388 PDF                     WASHINGTON : 2016 
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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                 Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California7
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota

                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
BRETT GUTHRIE, Kentucky              GENE GREEN, Texas
  Vice Chairman                        Ranking Member
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois               LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee          KATHY CASTOR, Florida
CATHY McMORRIS RODGERS, Washington   JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILLY LONG, Missouri                 JOSEPH P. KENNEDY, III, 
RENEE L. ELLMERS, North Carolina         Massachusetts
LARRY BUCSHON, Indiana               TONY CARDENAS, California
SUSAN W. BROOKS, Indiana             FRANK PALLONE, Jr., New Jersey (ex 
CHRIS COLLINS, New York                  officio)
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

                                  (ii)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     2
Hon. Brett Guthrie, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     3
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     4
    Prepared statement...........................................     5
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     6
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     7
    Prepared statement...........................................     8
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................    63

                               Witnesses

Monica Lindeen, Commissioner of Securities and Insurance, State 
  of Montana, and President, National Association of Insurance 
  Commissioners..................................................    10
    Prepared statement...........................................    12
    Answers to submitted questions...............................   112
Kurt Giesa, Partner, Oliver Wyman................................    17
    Prepared statement...........................................    19
Mike Kreidler, Washington State Insurance Commissioner...........    31
    Prepared statement...........................................    33
    Answers to submitted questions...............................   115

                           Submitted Material

H.R. 1624, the Protecting Affordable Coverage for Employees Act, 
  submitted by Mr. Pitts.........................................    65
Letter of September 2, 2015, from The 50-100 Coalition, to Hon. 
  John Boehner, et al., submitted by Mr. Guthrie.................    68
Letter of March 26, 2015, from Karen Ignagni, President and Chief 
  Executive Officer, America's Health Insurance Plans, to Mr. 
  Guthrie and Mr. Cardenas, submitted by Mr. Guthrie.............    70
Letter of July 8, 2015, from Amanda Austin, Vice President, 
  Public Policy, National Federation of Small Business, to Mr. 
  Guthrie and Mr. Cardenas, submitted by Mr. Guthrie.............    71
Letter of April 23, 2015, from Todd McCracken, President and 
  Chief Executive Officer, National Small Business Association, 
  to Mr. Guthrie, et al., submitted by Mr. Guthrie...............    72
Letter of March 27, 2015, from Juli Y. McNeely, President, 
  National Association of Insurance and Financial Advisors, to 
  Mr. Guthrie and Mr. Cardenas, submitted by Mr. Guthrie.........    73
Letter of August 31, 2015, from Mike Becker, Executive Vice 
  President and Chief Executive Officer, National Association of 
  Professional Insurance Agents, to Hon. Tim Scott and Mr. 
  Guthrie, submitted by Mr. Guthrie..............................    74
Letter of July 27, 2015, from Joel C. White, President, Council 
  for Affordable Health Coverage, to Mr. Guthrie, et al., 
  submitted by Mr. Guthrie.......................................    75
Letter of March 26, 2015, from Alissa Fox, Senior Vice President, 
  BlueCross BlueShield Association, to Mr. Guthrie and Mr. 
  Cardenas, submitted by Mr. Guthrie.............................    77
Letter of September 8, 2015, from Julia Grant, Vice President 
  Government Relations, Delta Dental Plans Association, to Mr. 
  Guthrie and Mr. Cardenas, submitted by Mr. Guthrie.............    78
Letter of April 9, 2015, from Dave Adkisson, President and Chief 
  Executive Officer, Kentucky Chamber, to Mr. Guthrie, submitted 
  by Mr. Guthrie.................................................    79
Letter of April 21, 2015, from R. Bruce Josten, Executive Vice 
  President, Government Affairs, Chamber of Commerce of the 
  United States of America, to Mr. Guthrie, et al., submitted by 
  Mr. Guthrie....................................................    80
Letter of April 3, 2015,from American Hotel & Lodging 
  Association, et al., to Mr. Guthrie, et al., submitted by Mr. 
  Guthrie........................................................    82
Statement of Cori E. Uccello, Senior Health Fellow, American 
  Academy of Actuaries, September 9, 2015, submitted by Mr. Pitts    84
Letter of May 18, 2015, from Monica J. Lindeen, President, 
  National Association of Insurance Commissioners, et al., to Mr. 
  Guthrie and Mr. Cardenas, submitted by Mr. Pitts...............    92
Statement of the Council for Affordable Health Coverage, ``Impact 
  of Small Group Definition on Employers and Their Employees,'' 
  July 27, 2015, submitted by Mr. Pitts..........................    94
Statement of Third Way, ``Avoiding Health Insurance Rate Shock 
  for Medium-Size Businesses,'' by Jacqueline Stewart and David 
  Kendall, submitted by Mr. Pitts................................    95
Issue Brief of American Academy of Actuaries, ``Potential 
  Implications of the Small Group Definition Expanding to 
  Employers with 51-100 Employees,'' March 2015, submitted by Mr. 
  Pitts..........................................................    98
Statement of National Institute for Health Care Management 
  Foundation, ``Small Business Health Insurance Coverage in a 
  Post-ACA World,'' by Sabrina Corlette, June 2015, submitted by 
  Mr. Pitts......................................................   105
Table, ``Offer rates at firms with less than 50 employees (2010-
  2014),'' State of Washington, submitted by Mr. Pitts...........   107
Issue Brief of America's Health Insurance Plans, ``Why 
  Maintaining the Current Definition of the Small Group Market is 
  Critical,'' May 2015, submitted by Mr. Pitts...................   108

 
              PROTECTING AFFORDABLE COVERAGE FOR EMPLOYEES

                              ----------                              

                      WEDNESDAY, SEPTEMBER 9, 2015

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:17 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Joseph R. 
Pitts (chairman of the subcommittee) presiding.
    Members present: Representatives Pitts, Guthrie, Barton, 
Murphy, Burgess, Blackburn, Lance, Griffith, Bilirakis, Long, 
Ellmers, Bucshon, Brooks, Collins, Green, Schakowsky, 
Butterfield, Sarbanes, Schrader, Kennedy, Cardenas, and Pallone 
(ex officio).
    Staff present: Clay Alspach, Chief Counsel, Health; Noelle 
Clemente, Press Secretary; Andy Duberstein, Deputy Press 
Secretary; Graham Pittman, Legislative Clerk; Heidi Stirrup, 
Policy Coordinator, Health; Josh Trent, Professional Staff 
Member, Health; Gregory Watson, Staff Assistant; Christine 
Brennan, Democratic Press Secretary; Jeff Carroll, Democratic 
Staff Director; Tiffany Guarascio, Democratic Deputy Staff 
Director and Chief Health Advisor; Meredith Jones, Democratic 
Director of Communications, Member Services and Outreach; 
Samantha Satchell, Democratic Policy Analyst; and Arielle 
Woronoff, Democratic Health Counsel.
    Mr. Pitts. Good morning, ladies and gentlemen. The 
subcommittee will come to order, and the chairman will 
recognize himself for an opening statement.

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

    Today's legislative hearing will consider a bipartisan bill 
authored by distinguished members of this subcommittee Vice 
Chairman Guthrie and Mr. Cardenas, along with Representatives 
Mullin and Sinema.
    H.R. 1624 is a bill to amend the Patient Protection and 
Affordable Care Act and the Public Health Service Act to revise 
the definition of small employer. This bill would allow the 
States to continue defining the small group health insurance 
market as employers with 1 to 50 employees.
    Section 1304 of the Patient Protection and Affordable Care 
Act changed the Federal definition of the small group market to 
include employers with 1 to 100 employees. The States, however, 
have been allowed to continue defining the small group market 
as employers with 1 to 50 employees until January 1, 2016. So, 
beginning on or after January 1, 2016, plans sold or renewed 
for employers with 51 to 100 employees will be subject to the 
various small group health plan regulations established by the 
PPACA. These more restrictive rating rules will increase health 
insurance premiums for these employers and reduce flexibility 
in benefit design. The new requirements could also lead some 
employers with 51 to 100 employees to self-insure to avoid 
higher premiums. If that happens, this could result in adverse 
selection in the small group pool and higher premiums for 
employers with 1 to 50 employees. Unless this current law is 
reversed, the disruption in the marketplace will be 
significant. For example, it is estimated that under current 
law, more than 3 million employees will experience a double-
digit percent increase in their health care premiums. 
Ultimately, cost increases for small employers will change 
their choices regarding offering coverage, could change their 
business model, and will ultimately be felt by millions of 
workers.
    Because the impact of current law will vary by State, 
defining the small group market should be left to the States, 
which is a policy envisioned in H.R. 1624. I am pleased to say 
there is considerable support for this legislation in the House 
and the Senate. The flexibility that would be given to States 
with immediate passage of H.R. 1624 would help ensure stable 
small group health insurance markets that reflect the unique 
characteristics in each of the States. If Congress passes H.R. 
1624, premiums will be lower and millions of employees and 
employers by letting them keep the plan they have and like. And 
this is a commonsense policy that deserves our bipartisan 
support.
    [H.R. 1624 appears at the conclusion of the hearing.]
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    Today's legislative hearing will consider a bipartisan bill 
authored by distinguished members of this subcommittee Vice 
Chairman Guthrie (KY) and Mr. Cardenas (CA), along with Reps. 
Mullin (OK) and Sinema (AZ).
    H.R. 1624 is a bill to amend the Patient Protection and 
Affordable Care Act (ACA) and the Public Health Service Act to 
revise the definition of small employer. This bill would allow 
the States to continue defining the small group health 
insurance market as employers with 1-50 employees.
    Section 1304 of the Patient Protection and Affordable Care 
Act (PPACA) changed the Federal definition of the small group 
market to include employers with 1-100 employees. The States, 
however, have been allowed to continue defining the small group 
market as employers with 1-50 employees until January 1, 2016.
    So, beginning on or after January 1, 2016, plans sold or 
renewed for employers with 51-100 employees will be subject to 
the various small group health plan regulations established by 
the PPACA. These more restrictive rating rules will increase 
health insurance premiums for these employers and reduce 
flexibility in benefit design.
    The new requirements could also lead some employers with 
51-100 employees to self-insure to avoid higher premiums. If 
that happens, this could result in adverse selection in the 
small group pool and higher premiums for employers with 1-50 
employees.
    Unless this current law is reversed, the disruption in the 
marketplace will be significant. For example, it is estimated 
that under current law, more than 3 million employees will 
experience a double-digit percent increase in their health care 
premiums. Ultimately, cost increases for small employers will 
change their choices regarding offering coverage, could change 
their business model, and will ultimately be felt by millions 
of workers.
    Because the impact of current law will vary by State, 
defining the small group market should be left to the States--
which is a policy envisioned in H.R. 1624. I am pleased to say 
there is considerable support for this legislation in the House 
and the Senate.
    The flexibility that would be given to States with 
immediate passage of H.R. 1624 would help ensure stable small 
group health insurance markets that reflect the unique 
characteristics in each of the States. If Congress passes H.R. 
1624, premiums will be lower and millions of employees and 
employers by letting them keep the plan they have and like. 
This is a common-sense policy that deserves our bipartisan 
support.
    With that, I yield the remainder of my time to the vice 
chairman of the Health Subcommittee, Mr. Guthrie.

    Mr. Pitts. With that, I yield the remainder of my time to 
the vice chairman of the Health Subcommittee, Mr. Guthrie.

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

    Mr. Guthrie. Thank you, Mr. Chairman. I appreciate the 
committee holding this hearing on such an important issue.
    On January 1, 2016, the definition of the small group 
market is set to change, and with that, millions of employers 
will see dramatic changes to their insurance coverage. 
Employers with 51 to 100 people will be suddenly thrust into a 
new insurance category with dramatically different mandates and 
benefit requirements, and would not be able to continue to 
offer their current plans. Not only would these hard-working 
employees no longer be able to keep their current coverage, but 
the new plans that would be offered are likely to be 
significantly more expensive.
    In response to this looming threat, Congressmen Cardenas, 
Mullin, and Congresswoman Sinema and I joined forces to 
introduce the PACE Act, which would stop the expansion of the 
small group definition. Our bill has the support of leading 
business organizations which represent thousands of companies, 
many of which are family-owned, and millions of hard-working 
Americans from every congressional district. Our bill will 
allow States to determine their own group market size, just as 
they do today. This is a commonsense solution to a real and 
serious problem. Business owners face many challenges today, 
and this bill provides an opportunity to eliminate one major 
cause of uncertainty.
    H.R. 1624 has quickly picked up momentum. Today, we have 
more than \1/2\ the House as cosponsors and nearly \1/3\ of the 
Senate. Support is wide ranging and highlights that this is 
something we can all agree needs to be addressed. This bill is 
a chance to offer a solution, and I look forward to discussing 
this important issue today.
    I want to thank subcommittee chairman Mr. Pitts for 
bringing this important legislation before the subcommittee, 
and I would like to thank my coauthors for their help and to 
advance this crucial legislation, and believe me, they have put 
a lot of work into this in getting the cosponsors we have, and 
I appreciate it.
    I yield back the balance of my time.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the ranking member, Mr. Green, 5 minutes for 
an opening statement.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman. Good morning, and thank 
all of you for being here today, and our witnesses 
particularly. I want to particularly thank a former colleague 
of ours, now commission, Mike Kreidler, who he and I started 
our service in Congress together a few years ago when we both 
had dark hair. But again, welcome to all our panel, and 
particularly to our former colleague.
    Five years ago, Congress acted upon the principle that in 
America, health care is not a privilege for a few, but a right 
for all. Since then, the Affordable Care Act has been 
implemented and reforms have taken place, and there are 
dramatic successes and some challenges, but no doubt the law is 
working. It has changed and even saved American lives. It has 
set this country on a smarter, stronger path. Since the ACA was 
enacted, over 16.4 million Americans gained Affordable 
Healthcare Act, 129 million Americans who now have--could have 
been denied coverage prior to the ACA's passage now have 
access. The uninsured rate is at a historic low. For the first 
time in 50 years, rising healthcare prices have been slowed. 
Savings on healthcare costs of $12 billion resulted from 2010 
and 2013. Both of the number of hospital-acquired conditions 
and patient harms have notably dropped since 2010. In short, 
access to affordable insurance is up, the uninsured rate is 
down, and the quality of care continues to improve. The ACA is 
working.
    It is true the ACA continues to achieve positive outcomes, 
but it is also true there is no such thing as a perfect law. 
There are many opportunities for us to come together and 
constructively build on the ACA's successes. After more than 50 
votes to repeal or weaken the law, multiple politically 
motivated challenges before the Supreme Court, I am pleased to 
be here with my colleagues working in a bipartisan basis to 
improve the law.
    One opportunity for improvement is the subject of today's 
hearing; the small group market. For too long, the small group 
health insurance market has been volatile, subject to 
increasing financial strain. Between 2000 and 2010, the 
percentage of small firms that provided health insurance plans 
to their employees dropped from 43 percent to 33 percent. In 
response to this trend, the ACA addressed the small group 
insurance market to extend consumer protections to even more 
Americans, and to provide long-term stability in a historically 
broken marketplace. The ACA helped small business insurance be 
more affordable, and created a small business health options 
program called SHOP Marketplaces. SHOP was designed to improve 
the employee choice and plan offerings and grow risk pools.
    We have seen steady improvements in our small employer 
market since the enactment of the ACA, and enrollment is 
increasing, more firms are entering the market, and employees 
have new choices and consumer protections.
    Small group health insurance markets have traditionally 
been defined as firms with 50 or fewer employees. Beginning 
next year, the definition will expand to companies with up to 
100 employees. However, while the small group market is 
shrinking, the SHOP Marketplaces remain in their infancy and 
are still evolving. Given their state of maturity, some States 
would prefer this marketplace to achieve greater stability, be 
more fully understood before expanding it to midsized 
employers. The shift in rate-setting policy adds an additional 
source of uncertainty with the changing definition of small 
employers in 2016.
    Protecting Affordable Coverage for Employees Act, 
introduced by Representative Tony Cardenas and Brett Guthrie, 
will permanently change the definition of small group employers 
to those with up to 50 employees. Under this legislation, the 
States would be allowed to choose to expand their small group 
markets, but the default would be to remain at 50 or fewer 
employees.
    I appreciate that a great deal of uncertainty remains in 
the smaller group market. More time before expanding the 
definition is warranted so that the effect of midsized 
employers joining the small group market can be better 
understood. A 2-year delay would likely have allowed the SHOP 
Marketplaces to stabilize, and give insurance 2 years of data 
and experience with new premium rating rules. The legislation 
we are discussing today has broad partisan support.
    I look forward to hearing from our witnesses about the 
legislation, and also the impact of the ACA on the smaller 
group market. The ACA is not an abstract law; it is a set of 
fair rules and tougher protections that have made health care 
in America more affordable and more attainable for millions of 
hardworking Americans. The time to move part partisanship is 
long overdue, and I look forward to turning the page and 
working together to improve the law. It is what the American 
people deserve. And I want to thank our chairman for this 
hearing today, and look forward to hearing from our witnesses.
    And thank you, and I yield back.
    [The prepared statement of Mr. Green follows:]

                 Prepared statement of Hon. Gene Green

    Good morning, and thank you all for being here today.
    Five years ago, Congress acted upon the principle that--in 
America--health care is not a privilege for a few, but a right 
for all.
    Since then, as the Affordable Care Act has been implemented 
and reforms have taken effect, there have been dramatic 
successes and some challenges.
    But there is no doubt this law is working.
    It has changed, and even saved, American lives.
    It has set this country on a smarter, stronger path.
    Since the ACA was enacted, over 16.4 million Americans 
gained affordable health care.
    One hundred twenty-nine million Americans who could have 
been denied coverage prior to the ACA's passage now have 
access.
    The uninsured rate is at a historic low.
    For the first time in 50 years, rising health care prices 
have slowed.
    Savings on health care costs of $12 billion resulted 
between 2010 and 2013.
    Both the number of hospital-acquired conditions and patient 
harms has notably dropped since 2010.
    In short, access to affordable insurance is up, the 
uninsured rate is down, and the quality of care continues to 
improve.
    The ACA is working.
    It is true that the ACA continues to achieve many positive 
outcomes.
    It is also true that there is no such thing as a perfect 
law.
    There are many opportunities for us to come together 
constructively to build on the ACA's successes.
    After more than 50 votes to repeal or weaken this law, 
multiple politically motivated challenges before the Supreme 
Court--I am pleased to be here with my colleagues, working in a 
bipartisan basis to improve the law.
    One opportunity for improvement is the subject of today's 
hearing--the small group market.
    For too long, the small group health insurance market has 
been volatile, and subject to increasing financial strain.
    Between 2000 and 2010, the percentage of small firms that 
provided health insurance plans to their employees dropped from 
43 percent to 33 percent.
    In response to this trend, the ACA addressed the small 
group insurance market to extend consumer protections to even 
more Americans, and to provide long-term stability in a 
historically broken marketplace.
    The ACA helped make small group insurance more affordable, 
and created the Small Business Health Options Program (SHOP) 
marketplaces.
    SHOP was designed to improve employee choice in plan 
offerings and grow risk pools.
    We have seen steady improvements in our small employer 
market since the enactment of the ACA.
    Enrollment is increasing, more firms are entering the 
market, and employees have new choices and consumer 
protections.
    Small group health insurance markets have traditionally 
been defined as firms with 50 or fewer employees.
    Beginning next year, this definition will expand to 
companies with up to 100 employees.
    However, while the small group market is strengthening, the 
SHOP marketplaces remain in their infancy, and are still 
evolving.
    Given their state of maturity, some States would prefer for 
this marketplace to achieve greater stability and be more fully 
understood before expanding it to include mid-size employers.
    The shift in rate-setting policy adds an additional source 
of uncertainty with changing the definition of small employers 
in 2016.
    The Protecting Affordable Coverage for Employees Act, 
introduced by Representatives Tony C rdenas and Brett Guthrie, 
would permanently change the definition of small group 
employers to those with up to 50 employees.
    Under this legislation, States would be allowed to choose 
to expand their small group markets, but the default would be 
to remain at 50 or fewer employees.
    I appreciate that a great deal of uncertainty remains in 
the small group marketplace.
    More time before expanding the definition is warranted so 
that the effect of mid-size employers joining the small group 
market can be better understood.
    A 2-year delay would likely have allowed the SHOP 
marketplaces to stabilize and give insurers 2 years of data and 
experience with the new premium rating rules.
    The legislation we are discussing today has broad bi-
partisan support.
    I look forward to hearing from our witnesses about the 
legislation, and also the impact of the ACA on the small group 
market in general.
    The ACA is not an abstract law.
    It is set of fairer rules and tougher protections that have 
made health care in America more affordable and more attainable 
for millions of hard-working Americans.
    The time to move past partisanship is overdue, and I look 
forward to turning the page and working together to improve the 
law.
    It is what the American people deserve.
    I want thank the chairman for having this hearing today, 
and look forward to hearing from our witnesses.
    Thank you, and I yield back.

    Mr. Pitts. The Chair thanks the gentleman.
    Now recognizes the vice chair of the full committee, Mrs. 
Blackburn, 5 minutes for an opening statement.

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

    Mrs. Blackburn. Thank you, Mr. Chairman. I want to thank 
you for the hearing today. And I think it is so timely because 
we have all been back in our districts and we have heard from 
so many employers and, you know, it didn't matter if they had 8 
or 85 employees, or like some others, 114, 120, 200; the 
uncertainty around health insurance and how you provide that, 
and what the rules are, this is something that has become such 
a fluid and uncertain environment that it is very difficult for 
employers to know that what they have is going to last. It does 
have an effect on small business, it is a damper on hiring and 
on jobs retention, and certainly on business growth. So taking 
an action is important for us to do. As a couple of the 
employers told me, they said, you know, every time we go to one 
of these seminars on how you provide the health insurance now 
and meet the mandates, we are told these are the rules for now. 
It is all subject to change due to the rulemaking, but you 
should be expecting premium increases because the worst is yet 
to come, and that arrives in 2016. So, Mr. Chairman, I thank 
you for the hearing, and Mr. Guthrie for--and the others for 
their work on the legislation.
    And I yield back the balance of my time.
    Mr. Pitts. All right, is anybody else seeking her yielded 
time? No. The Chair thanks the gentlelady.
    Now recognize the ranking member of the full committee, Mr. 
Pallone, 5 minutes for questions.

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

    Mr. Pallone. Thank you, Chairman Pitts, and I welcome 
today's hearing on the Affordable Care Act's required expansion 
of the small group insurance market and H.R. 1624, which 
instead aims to give States the option to expand.
    As everyone knows, I am a strong supporter of the 
Affordable Care Act, and for good reason. Since its passage, 17 
million Americans have gained health insurance coverage, and as 
a result, we have seen the largest reduction in the uninsured 
in 4 decades. The ACA has increased access and reduced 
financial barriers to important preventative services such as 
cancer screenings and well women visits by requiring their 
coverage with no cost sharing. The law also stopped insurers 
from discriminating based on pre-existing conditions, or 
placing annual limits on how much health care they will cover. 
Fewer Americans are struggling to pay their medical bills, and 
fewer are forging--are forgoing care because they can't afford 
it.
    In 2015, nearly 80 percent of individuals shopping for 
coverage on Healthcare.gov could purchase coverage for $100 or 
less after tax credits. With all of the ACA's reforms, from its 
passage to its implementation, we have heard predictions that 
the sky was falling, yet it has not. Premiums have stabilized 
and millions of Americans are no longer one accident, injury, 
or diagnosis away from financial ruin.
    That said, of course, no law is perfect and there is always 
room for improvement. Historically, Congress has been able to 
pass technical fixes and improvements after major legislation. 
A perfect example of this is Medicare, which has continually 
evolved over the course of the last 50 years. Since 1965, we 
have expanded Medicare coverage to include mammograms and 
hospice care. We have learned lessons that convinced us to move 
away from fee-for-service to alternative payment models. The 
ACA will need improvements as well, and it is critical we 
ensure that the ACA works for everyone.
    That is why I am glad that my Republican colleagues are 
ready to put politics aside and look to strengthen the law. 
While I commend the bill's sponsors, Representatives Cardenas 
and Guthrie, for their leadership on this important issue, I 
don't necessarily agree this is the right approach. The small 
group health insurance market is in the midst of several 
reforms as a result of the ACA. The SHOP Marketplaces are still 
in their infancy. With these--while these reforms are still 
underway, experts will tell us that expanding the definition of 
small employers now would add significant uncertainty into our 
small group market. However, a few-year transitional delay 
would provide us with more appropriate research and actuarial 
data to make a smart decision at the appropriate time. I 
believe the benefits of an expanded small group market such as 
added consumer protections and increased stability for small 
employers are important and achievable goals. So I am concerned 
that H.R. 1624 is premature. But I am also mindful of the 
uncertainty that comes with moving forward with the expansion. 
That is why I am pleased to view today as a turning point. As 
opposed to using the ACA as a political football to repeated 
futile attempts to repeal or defund the law, Republicans and 
Democrats have come together in a bipartisan fashion to improve 
and strengthen the ACA, and I am hopeful this spirit can 
continue.
    I yield the remainder of my time to Mr. Cardenas.
    [The prepared statement of Mr. Pallone follows:]

             Prepared statement of Hon. Frank Pallone, Jr.

    Thank you Chairman Pitts. I welcome today's hearing on the 
Affordable Care Act's required expansion of the small group 
insurance market and H.R. 1624, which instead aims to give 
States the option to expand.
    As everyone knows, I am a strong supporter of the 
Affordable Care Act-and for good reason. Since its passage, 17 
million Americans have gained health insurance coverage. As a 
result, we've seen the largest reduction in the uninsured in 
four decades.
    The ACA has increased access and reduced financial barriers 
to important preventive services, such as cancer screenings and 
well-woman visits by requiring their coverage with no cost 
sharing. The law also stopped insurers from discriminating 
based on preexisting conditions or placing annual limits on how 
much health care they will cover. Fewer Americans are 
struggling to pay their medical bills and fewer are forgoing 
care because they can't afford it. In 2015, nearly 80 percent 
of individuals shopping for coverage on HealthCare.gov could 
purchase coverage for $100 or less after tax credits.
    With all of ACA's reforms, from its passage to its 
implementation, we have heard predictions that the sky was 
falling, yet it has not. Premiums have stabilized and millions 
of Americans are no longer one accident, injury, or diagnosis 
away from financial ruin.
    That said, of course, no law is perfect and there is always 
room for improvement. Historically, Congress has been able to 
pass technical fixes and improvements after major legislation. 
A perfect example of this is Medicare, which has continually 
evolved over the course of the last 50 years. Since 1965, we 
have expanded Medicare coverage to include mammograms and 
hospice care. We have learned lessons that convinced us to move 
away from fee-for-service towards alternative payment models. 
The ACA will need improvements as well, and it's critical we 
ensure that the ACA works for everyone.
    That is why, I'm glad that my Republican colleagues are 
ready to put politics aside and look to strengthen the law. 
While I commend the bill's sponsors--Reps. Cardenas and Guthrie 
for their leadership on this important issue--I don't 
necessarily agree this is the right approach.
    The small-group health insurance market is in the midst of 
several reforms as a result of the ACA. The SHOP Marketplaces 
are still in their infancy. While these reforms are still 
underway, experts will tell us that expanding the definition of 
small employers now would add significant uncertainty into our 
small-group market. However, a few-year transitional delay 
would provide us with more appropriate research and actuarial 
data to make a smart decision at the appropriate time. I 
believe the benefits of an expanded small-group market such as 
added consumer protections and increased stability for small 
employers are important and achievable goals. So, I am 
concerned that H.R. 1624 is premature.
    But I am mindful of the uncertainty that comes with moving 
forward with the expansion. That is why I am pleased to view 
today as a turning point. As opposed to using the ACA as a 
political football through repeated, futile attempts to repeal 
or defund the law, Republicans and Democrats have come together 
today in a bipartisan fashion to improve and strengthen the 
ACA. I am hopeful this spirit can continue.
    Thank you, and I yield the remainder of my time to Mr. 
Cardenas.

    Mr. Cardenas. Thank you very much. Thank you, Chairman and 
Ranking Member, for holding today's hearing. I truly appreciate 
the committee's willingness to work on the bipartisan bill that 
would impact so many small businesses. And also I would, once 
again, thank subcommittee chairman Mr. Pitts and also 
subcommittee ranking member Mr. Green.
    H.R. 1624, the Protecting Affordable Coverage for Employees 
Act, introduced by my colleagues, Mr. Guthrie, Mr. Mullin, Ms. 
Sinema, and myself, would stop potential health insurance rate 
shock by allowing States to choose the size of their small 
group market for themselves. That would be an improvement on 
this legislation.
    As a former small business owner myself, I recognize the 
struggle there is to live out and provide for the American 
dream for our employees. I know how difficult it can be when a 
specific sector of small business is affected by bills and laws 
created by local, State, and Federal governments. I am grateful 
for all the benefits that the Affordable Care Act has provided 
since its implementation began, however, no law is perfect. 
When it was first created, Social Security didn't cover 
agricultural and domestic workers. Medicaid didn't begin to 
cover mammograms until 1991. Even with these fundamental 
programs of our Nation's safety net, laws and improvements and 
compromise was necessary to lead to more perfect protection for 
Americans.
    I appreciate the committee's willingness to hold today's 
hearing. I look forward to advancing the PACE Act, and 
continuing to build the committee's record of working 
successfully in a bipartisan fashion.
    I have been married for 23 years, and I am reminded every 
day by my wife how imperfect I am. I have been an elected 
official for 19 years, and I am reminded every single day by my 
constituents how more perfect we need to make our laws. But 
like my marriage, I wouldn't want to have it any other way. Our 
imperfect democracy is beautiful and awesome, especially when 
we work in a bipartisan fashion.
    Once again, I want to thank all of my colleagues on both 
sides of the aisle for all of your participation. Thank you.
    Mr. Pitts. The gentleman yields back. The Chair thanks the 
gentleman.
    That concludes the opening statement. As usual, all 
members' opening statements that are written will be made a 
part of the record, including our chairman, who is at another 
hearing.
    We have one panel today. Let me introduce the panel in the 
order of their presentation.
    First of all, we have Monica Lindeen, Montana Commissioner 
of Securities and Insurance and State Auditor, President of the 
National Association of Insurance Commissioners. Welcome. Then 
Kurt Giesa, FSA MAAA, Partner, Oliver Wyman. And Mike Kreidler, 
Washington State Insurance Commissioner. Your written 
statements will be made a part of the record, and you will be 
each given 5 minutes to summarize.
    And we will, at this time, begin testimony, and I recognize 
Ms. Lindeen, 5 minutes for her summary.

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

                  STATEMENT OF MONICA LINDEEN

    Ms. Lindeen. Good morning, Chairman Pitts, Ranking Member 
Green, and distinguished members of the subcommittee. As you 
said, my name is Monica Lindeen. I am the elected Commissioner 
of Securities and Insurance for the State of Montana, and 
President of the National Association of Insurance 
Commissioners, and I want to thank you for holding this hearing 
on the Protecting Affordable Coverage for Employers, PACE, Act, 
which Vice Chair Guthrie, along with Congressman Cardenas, 
introduced earlier this year.
    The NAIC represents the chief insurance regulators of the 
50 States, the District of Columbia, and 5 U.S. territories, 
whose primary roles are protecting consumers, and promoting 
vibrant and competitive insurance markets. As such, I come 
before you this morning to urge the immediate passage of the 
PACE Act which, as you know, would return the Federal 
definition of small group employers to 1 to 50 employers.
    The ACA changed the Federal definition of the small group 
market to include employers with 1 to 100 employees but allowed 
the States to continue defining the small group market as 
employers with 1 to 50 employees until January 1 of 2016. 
Beginning on or after this date, plans sold or renewed for 
employers with 51 to 100 employees would be subject to the 
various small group regulations established by the ACA, such as 
essential health benefits, different rating pools, actuarial 
value requirements, different medical loss ratio requirements, 
adjusted community rating rules, and others.
    The NAIC has endorsed the PACE Act because it would retain 
State flexibility to set the appropriate limits for the small 
group market, and ensure stable small group markets that 
reflect the unique characteristics and dynamics the play in 
each of the States.
    If this legislation is not signed into law, a series of 
market disruptions could occur. And before I enumerate, I want 
to be clear that the impact will vary by State, which is why 
defining the small group market should be left to the States, 
especially since the legislation does not prevent them from 
changing the definition to include all employers with 1 to 100 
employees as they see fit.
    First, failure to pass the Act would subject employers with 
51 to 100 employees, or midsized employers, to new rating 
restrictions which could result in significant premium 
increases for some groups. Second, employers with 51 to 100 
employees would face additional benefit requirements and cost-
sharing restrictions, which would reduce benefit flexibility 
and could increase out-of-pocket spending. Midsized employers 
have typically had greater flexibility in rates and benefit 
options to choose from. Without this flexibility, midsized 
employers will have to seek out new plans that meet the 
essential health benefit benchmark and actuarial value 
requirements, which could also increase premiums. Lastly, these 
regulations could lead some employers with younger and/or 
healthier employees to self-insure as a way of avoiding higher 
premiums and limited coverage options, which could result in 
adverse selection in the small group pool. This, in turn, could 
increase premiums for employers with 1 to 50 employees.
    As you know, the U.S. Department of Health and Human 
Services has offered a transition option, by publishing 
guidance that they will not enforce certain small group market 
regulations for existing health plans provided by employers 
with 51 to 100 employees if the plan is renewed on or before 
October 1 of 2016, effectively staving off the new regulations 
until October 1 of 2017.
    The NAIC surveyed all 50 States and the District of 
Columbia, and most responded that they will be utilizing this 
transition option. Nevertheless, we believe a more 
comprehensive fix provided by this legislation is necessary in 
order to preserve coverage options for existing and new 
purchasers, and ensure stability for the future.
    The NAIC encourages Congress to act quickly. Most midsized 
employers shop for coverage annually to ensure the best price 
for themselves and their employees, but they need final rates 
and product information by late September in order to make 
these decisions and carry on with the preparing of employee 
communications, open enrollment materials, and the actual 
conducting of open enrollment in advance of the effective date. 
Those employers who may be new entrants into the market in 2016 
also need to know what options will be available to them, so 
quick action would avoid unnecessary confusion and disruption 
as we move into 2016.
    For all the reasons I have articulated this morning, the 
NAIC strongly supports immediate passage of the Act, and thank 
you, and I would be happy to answer any questions.
    [The prepared statement of Ms. Lindeen follows:]
    
    
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    Mr. Pitts. The Chair thanks the gentlelady and now 
recognizes Mr. Giesa, 5 minutes for your summary.

                    STATEMENT OF KURT GIESA

    Mr. Giesa. Thank you, Congressman Pitts, Ranking Member 
Green, and distinguished members of the subcommittee for 
allowing me to speak with you today regarding the impact that 
changing the definition of small employer may have on the 
market for health insurance.
    My name is Kurt Giesa. I am a fellow of the Society of 
Actuaries, a member of the American Academy of Actuaries, and a 
partner at Oliver Wyman Actuarial Consulting.
    Starting in 2016, the Affordable Care Act expands the 
definition of small employer to include midsized employers. 
Historically, no State, nor the District of Columbia, nor the 
Federal Government, has adopted a definition of small employer 
for the purposes of health insurance, which includes employers 
with more than 50 employees. The ACA permitted States in 2014 
and 2015 to expand the definition of the small group market to 
include midsized employers. States considered this possibility 
but no State elected to do so. States have recognized that the 
health insurance market for midsized employers has generally 
functioned well, and also that expanding the definition of 
small group could be harmful to the market where small 
employers currently purchase health coverage. Expanding the 
definition of small employer will mean that issuers will have 
to apply the rules and regulations that apply to small groups 
to midsized employers as well, including those related to 
benefits, actuarial value, and most importantly premiums.
    Currently, issuers are allowed to set premiums for midsized 
employers based on actuarial considerations, matching premiums 
to expected costs. Under the ACA, health plans must use 
modified community rating with limited adjustments in setting 
premiums for small employers. These rules mean that younger, 
healthier midsized groups will be asked to pay more for health 
insurance than they had been paying, and that groups that are 
older and less healthier will pay less. In addition, starting 
with the 2016 plan year, the claims experience of small and 
midsized employers will be pooled in developing premiums. It is 
important to note that these rules only apply to fully insured 
plans. Self-funded employers are not subject to these 
requirements. I expect the number of midsized groups that self-
fund will increase if the definition is expanded, which, in 
turn, would lead to premium increases in the expanded market.
    To better understand this dynamic, I performed an analysis 
on behalf of the Blue Cross Blue Shield Association using data 
from health insurance issuers that I consider to be 
representative in the way they set premiums for midsized 
employers. Specifically, I compared the premium rates these 
issuers were charging their midsized employers to the premium 
rates they will have to charge in 2016. I found that 64 percent 
of midsized group members would see their premiums increase, 
and the average premium increase would be 18 percent as a 
result of the ACA's rating rules. Midsized employers group with 
the highest increases, that is, the youngest and healthiest 
groups, are those most likely to exit the market, either by 
dropping coverage entirely or by self-funding.
    It is not possible to predict exactly which groups are 
likely to leave, but one reasonable assumption is the groups 
facing an increase of 10 percent or more would leave the fully 
insured market. That would mean that about 40 percent of 
individuals who currently obtain their insurance through a 
midsized employer would no longer be part of the fully insured 
group market.
    After the healthiest midsized groups leave the market, the 
new combined market will be composed of the current small 
groups, and older, sicker midsized groups. We estimate that 
this could result in premium increases for small employers in 
the 3 to 5 percent range. In other words, rather than lowering 
prices by pooling small and midsized firms, this expansion 
could increase the average cost of insurance for small firms. 
These estimates are first-year estimates and likely to worsen 
over time as costs increase, and more small and midsized firms 
drop coverage.
    Affordability and stability are the central challenges in 
the health insurance market today. As healthcare costs continue 
to outpace inflation, small firms have found it more and more 
difficult to provide coverage. Congress could avoid adding to 
these costs, and could provide stability to midsized employer 
groups by allowing States to define what constitutes a small 
employer for the purpose of providing health insurance. But in 
order for this to be effective, this change would have to be 
made relatively quickly. One third of midsized groups renew 
their coverage January 1, and these groups are in the process 
of planning for 2016. They will soon have to begin selecting a 
funding vehicle, developing communications, setting 
contribution rates, and conducting open enrollments, so time is 
very tight.
    Thank you, and I look forward to answering your questions.
    [The prepared statement of Mr. Giesa follows:]
    
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    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes Mr. Kreidler, 5 minutes for your summary.

                   STATEMENT OF MIKE KREIDLER

    Mr. Kreidler. Good morning, Mr. Chairman and Ranking Member 
Green, and other members of the subcommittee. Thank you for the 
opportunity to talk about the impact H.R. 1624 will have on 
Washington State's small business health insurance market.
    My name is Mike Kreidler. I am the elected Insurance 
Commissioner for the State of Washington. I am also the 
longest-serving insurance commissioner in the country.
    I am here today on behalf of the people of the State of 
Washington. I am pleased to report that the Affordable Care Act 
is working in our State. Before the Affordable Care Act, we had 
almost 1 million people without health insurance. Today, that 
is down from--and now we are at 14 percent. Today, it is down 
to 8.5 percent; almost a 40 percent drop going back and the 
lowest point that we can go back and find measurements for.
    Steady improvements are also taking place in our small 
employer market. Enrollment is increasing. More insurers are 
entering the market. Rates are going down. We had 8 insurers in 
our small employer market in 2012. Today, we have 12; a 50 
percent increase. Enrollment in our small group market has 
grown from 108,000 people in 2013 to 125,000 today. All but one 
health insurer that came for submission for rates for 2016 
asked for decreases rather than increases. Our largest insurer, 
Regence Blue Shield, asked for a 13.8 percent decrease for 
2016. A big part of that decrease is the anticipation of the 
employer size expanding to 100. Insurers are counting on better 
risks joining the market.
    Making a change, as 1624 proposes, so late in the game will 
be very disruptive to the market in the State of Washington. 
Insurers have already filed for 2016, so they would have to 
modify their plans and rates. Even though they can do it on a 
quarterly, it means an adjustment in midyear after they 
received a promise, and most likely, it would be going up.
    Employers and their employees would lose access to the 
essential health benefits guaranteed under the Affordable Care 
Act. In other words, they get better coverage. Older employees 
would not be protected from rating disparities.
    I understand that Washington State may be further along 
than other States in the implementation of reforms and that our 
experience may be different than others, but I know that we all 
share a common goal of improving health insurance market for 
small business. For too long in our State, we have seen a death 
spiral for the small group market. Now, we are seeing 
improvements. Increasing competition, lower rates, growing 
enrollment are signs of market reforms can work.
    Nearly 70 percent of our small businesses are in the 1 to 
50 employer group. They will benefit by bringing in larger 
employers.
    Some States may need more time to implement these reforms, 
but this bill is not the solution. If it had been started a 
year ago, it would have been much less disruptive. If we delay, 
it would even be better, but certainly not this approach. It 
puts the burden back on the States to implement change that is 
already in motion, and would significantly harm the market that 
is just starting to improve. The Affordable Care Act is 
working, and we are beginning to see real improvement for small 
employers. Changing course now would undermine our progress and 
significantly disrupt our market.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Kreidler follows:]
    
    
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    Mr. Pitts. The Chair thanks the gentleman.
    That concludes the opening statements. We will begin 
questioning.
    I will begin the questioning. Recognize myself 5 minutes 
for that purpose.
    Commissioner Lindeen, the bill we are discussing today, 
H.R. 1624, would reverse a policy in current law and allow the 
States to continue defining the small group health insurance 
market as employers with 1 to 50 employees. Would you please 
explain how many employers and employees across the country 
could face higher premium costs if this bill were not passed by 
Congress in the coming weeks?
    Ms. Lindeen. Mr. Chairman, thank you for the question, but 
I would have to tell you that I do not have that answer for you 
today----
    Mr. Pitts. All right.
    Ms. Lindeen [continuing]. And, in fact, I am not even sure 
that I can give you an answer to that question.
    Mr. Pitts. Mr. Giesa, do you have any response to that?
    Mr. Giesa. I think I can help a bit. The best information 
we have on these questions you are asking comes from the 
insurance component of the MEP Survey, and MEPS shows that we 
have about 1.8 million establishments, not firms but 
establishments, the difference being physical location versus 
legal entity, 1.8 million establishments that would be affected 
by this legislation, and about 12 million employees and--
including dependents, you would essentially double that, so 
about 24 million people we would be talking about being 
impacted by this legislation.
    Mr. Pitts. OK, thank you.
    Commissioner Lindeen, would you please explain the 
practical effect of what would happen in your State of Montana 
if this bill were not passed by Congress in the coming weeks? 
What types of cost increases would Montanans face?
    Ms. Lindeen. Thank you again, Mr. Chairman. Certainly, if 
this piece of legislation were not passed, we are very 
concerned in Montana that we would see some adverse selection 
occur in the small group market, which would obviously then 
increase costs to those employers with employees between 1 and 
50. Certainly, with the increased regulatory burdens on those 
groups between 51 and 100, we really do see that there would be 
more of those employers in that midsized group who would, 
especially if they had healthier, younger employees, look for 
other options. And one of the options that is certainly much 
easier to obtain these days is self-insurance, as a result of 
the stop loss coverage. So definitely, we would see adverse 
selection to the smaller group, and increased costs for those 
folks.
    Mr. Pitts. Do you believe that if H.R. 1624 passed Congress 
and was signed by the President, that consumers would have 
fewer meaningful protections than they do today?
    Ms. Lindeen. I am sorry, could you please repeat that?
    Mr. Pitts. Do you believe that if this passed Congress, was 
signed by the President----
    Ms. Lindeen. Um-hum.
    Mr. Pitts [continuing]. That consumers would have fewer 
meaningful protections than they do today?
    Ms. Lindeen. No.
    Mr. Pitts. No. Would you please explain why the National 
Association of Insurance Commissioners has been so supportive 
of this bill when you have some State insurance commissioners 
suggesting there is no need for the bill in their State?
    Ms. Lindeen. Mr. Chairman, I certainly respect the opinions 
of all the commissioners in every single State, and my 
colleague from Washington is no exception. Just let me say that 
the States have all different markets, and we understand that 
what works in Montana does not necessarily work in Washington, 
and vice versa, and that is why it is really important that we 
have the flexibility to make those decisions at the State 
level.
    Mr. Pitts. OK, I think you and I thank Mr. Giesa said, 
under current law, the premiums for midsized employers with a 
younger population would go up significantly, and this troubles 
me since this could be viewed as a disincentive for offering 
coverage to younger workers. Would you care to comment on the 
types of premium increases younger workers could anticipate? 
Either, or Mr. Giesa.
    Mr. Giesa. Well, based on----
    Voice. Put your mike on.
    Mr. Giesa. As I said, in our work we saw that 64 percent of 
employees would be members of groups that would see an average 
rate increase of about 20 percent. And if you think about 
employees that see, essentially, 40 percent of employees would 
be in groups that would see increases 10 percent or more, and 
those would average well over 20 percent.
    Mr. Pitts. Just talk briefly, I don't have any time left, 
why it is important for Congress to act quickly, and also why 
there is time left.
    Mr. Giesa. Well, the important thing here is small 
employer--or midsized employers right now are in the process of 
planning their 2016 benefit year. A third of the small 
employers renew their coverage January 1. And these employers 
right now are in the process of deciding on their funding 
vehicle, they are thinking about what kind of communication 
materials they will have to put together, what the contribution 
rates will be, and not only that, but the carriers need time to 
get all these types of materials in place as well.
    Mr. Pitts. Thank you. My time has expired.
    The Chair recognizes the ranking member, Mr. Green, 5 
minutes for questions.
    Mr. Green. Thank you, Mr. Chairman. And again, welcome to 
our panel.
    Historically, after passing any large piece of legislation, 
Congress has worked together to enact technical fixes and 
improvements because no law is perfect. And, in fact, I often 
say if you want perfection, you don't come to a legislative 
body, simply because we do things that can boggle our mind. 
Although following--Congressman Cardenas is not here, but we 
know the only thing--perfect thing we can do is when we got 
married, for our wives. But--and I hope my wife is watching.
    The Affordable Care Act has been an exception to this 
tradition and serving as a political football for the last 5 
years. And we haven't done the meaningful tweaks and changes 
that we should do, but today, it seems like it is a starting 
point, and we are here to adjust one small but important aspect 
of the law. Clearly, the small group market is an area where 
Congress can do a great deal to help small businesses, 
employers, and employees who work for them.
    Commissioner Kreidler, in your testimony you stated that 
the small group market has been in a death spiral. Can you 
describe the challenges small business owners have been facing 
in purchase--purchasing health insurance for their employees, 
and that larger employers do not face?
    Mr. Kreidler. Thank you, Representative Green. The big 
difference here is that, for a small employer before the ACA, 
you were having adverse selection from the standpoint that they 
more likely were going to have sicker people inside the 
community-rated small group market, and as a result of that, 
the cost for that insurance continued to rise. Outside, and 
with a large employer that was self-insured, you found that 
they offered broader benefits. Now, that was a real 
disadvantage then for small business to be able to compete with 
larger employers because they had a richer package with the 
large employer than what they could afford to offer, even in 
comparison to what that--on a per capita basis what that large 
employer would have. So it presented some real challenges going 
forward. And we are starting to see some real relief to that 
now by having this larger group come in, 51 to 100, you are 
making it a much more compatible community-rated pool that is 
going to have the wealth of experience from some larger 
midsized, along with the small. It is going to be good for 
small business.
    Mr. Green. OK. We just heard from Commissioner Lindeen talk 
about the impact of the law--this law--or bill in Montana. Can 
you talk about the impact you think it would have in Washington 
State?
    Mr. Kreidler. Well, I certainly can. One aspect of it is 
the--are the filings that we received for 2016 all have to be 
compliant with the--to the 1 to 100. So we have the large 
group--midsized group being melded with the small group market 
right now. And we are seeing, out of the 12 insurers in the 
market, all but 1 of them came and made a request--made the 
request, I haven't made a decision yet, but made a request to 
have lower rates, as much as 16 percent. So we are seeing a 
significant decrease in the market, largely based on these 
midsized employers which offer some--make it a much more stable 
small group market by virtue of their size, and already the 
insurers are responding and saying we think we can offer 
insurance at a better price, more comprehensive coverage than 
what they have seen in the past.
    Mr. Green. Can you describe some of the provisions of the 
ACA that aim to reduce the burdens on small businesses? 
Anything the ACA has done to help the small businesses.
    Mr. Kreidler. You know, I think that the major thing here 
is, by having a common set of benefits, that is the essential 
health benefits and how they are applied, by virtue of having 
that in place, it has really meant that you have been 
successful in starting to develop a much more level playing 
field. And we are finding that for small employers, for the 
first time, now they are going to be in a position to be much 
more competitive with large employers, both for attracting and 
retaining employees, but also that the costs to them are being 
mitigated to the point where it is not a marked disadvantage 
for the small employer up against the big, self-insured 
employer.
    Mr. Green. OK. My last question. Given that the small group 
market is still evolving, some States have expressed concern 
that expanding to include larger employers, as the ACA 
requires, is premature and could create turmoil in the market. 
How would you respond to those concerns about the expansion?
    Mr. Kreidler. Well, every State is different, and you have 
certainly heard that from Monica Lindeen, and I am not going to 
second-guess their position on that from other States. I 
understand it is very different. I am familiar with one State, 
and that is my own State. In our State we are ready, and we are 
going to go forward and we are going to be able to make 
significant changes.
    I would suggest that, without hampering my ability and the 
State of Washington to bring in the 51 to 100 being added, at 
least offer a delay for 2 years. That would make a lot more 
sense, and I think there has been broad support for that, to 
have a delay rather than eliminating that option. I think in 
the long run, by virtue of the 51 to 100, whether it is a 
couple of years out or whether it is today, it is going to have 
a marked improvement for small business, that it only 
advantages them.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the vice chairman, Mrs. Blackburn, 5 minutes 
for questions.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    Mr. Kreidler, I have to tell you, if you were going with me 
in my district, people would not be agreeing with you. They 
don't see this as an advantage, the see it as a burden, and 
more regulation and more interference, and they are just really 
not happy with what they are being left to deal with.
    Mr. Giesa, I want to come to you on something. Commissioner 
Lindeen mentioned, when the chairman asked her what people 
would do if they are booted out of the marketplace, she said 
they will self-insure. So let's go back and let's look at some 
of this, because you have some proponents of the small group 
expansion, that market expansion, saying that is going to help 
to moderate the cost, and then you have the report that came 
from the Academy of Actuaries, I think is--yes, that said the 
premiums will increase because of the less attractive risk that 
comes in. So I would like to get your take on that. What do you 
think is actually going to be what finally hits the market? 
What is the impact that we are going to see?
    Mr. Giesa. Congresswoman, thank you for the question. And 
recognizing the fact that Commissioner Kreidler knows his 
market much better than I do, I can't speak to a given market, 
but what I can say is in my experience across----
    Mrs. Blackburn. Yes, I am asking for a general overview.
    Mr. Giesa [continuing]. Across most States is that we will 
see, as a result of the rate increases, that the young, healthy 
midsized employers will see--when the ACA rating rules are put 
in place, we will see a number of employers choose to self-
fund. It is an option that self-employer--that midsized 
employers do have now, and it is one that they will have much 
more incentive to pursue when the ACA rate restrictions are put 
in place.
    Mrs. Blackburn. And when you are looking at that midsized 
market, do you think that this is going to make them more or 
less competitive? What is going to be the end result for them?
    Mr. Giesa. I don't think it will have a major impact on 
the----
    Mrs. Blackburn. OK.
    Mr. Giesa [continuing]. Competitiveness of----
    Mrs. Blackburn. OK.
    Mr. Giesa [continuing]. Groups.
    Mrs. Blackburn. OK. Commissioner Lindeen, you want to 
weigh-in on either of those questions?
    Ms. Lindeen. Well, definitely, I would concur that those 
employers who do have the younger, healthier groups are going 
to look at the option of self-insuring. It really has become 
much more attractive and easier for these employers in that 
range to look at self-insurance because the stop loss insurers 
have made it easier. They have lowered those attachment points 
to a point where there is minimal risk for the employer, they 
don't have to have a large amount of money or cash upfront in 
order to self-insure, and so for that reason it is definitely 
something that is more attractive. If they are allowed to 
continue as they are, I think you will see them continue to 
purchase in the way that they have been because, certainly, it 
has been working for them. We haven't gotten a lot of 
Complaint.
    Mrs. Blackburn. All right. Let me ask you----
    Ms. Lindeen. Um-hum.
    Mrs. Blackburn [continuing]. One other question before my 
time runs out. When you were talking to employers in your 
State, and they are discussing the uncertainty that is 
embedded, and some of the points that you made in your remarks, 
what is the number one thing that employers complain about when 
they come in? Is it cost, is it access, is it uncertainty, is--
what are the variables, and what do they complain about?
    Ms. Lindeen. Congresswoman, thank you for the question. I 
think that uncertainty is the biggest concern that most 
employers have. I think that once we all know what he rules are 
and can play by those rules, it makes it much easier to make 
decisions moving forward.
    Mrs. Blackburn. Great, thank you.
    Mr. Pitts. The gentlelady yields back. The Chair recognizes 
the ranking member of the full committee, Mr. Pallone, 5 
minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman.
    I wanted to ask my questions of Commissioner Kreidler. Good 
to see you again. In addition to the many reasons I mentioned 
in my opening statement, I support the Affordable Care Act 
because of its positive impact on small businesses. Before the 
ACA, I heard from small businesses in my district that they 
were on their own, they wanted to provide health insurance for 
their employees but it was too risky or too expensive, or too 
difficult to administer. Now, the SHOP Marketplaces created in 
the ACA would give small businesses a new tool that lets them 
research and compare the health insurance options in one place, 
and administer their employees' health care through the Web 
site. And the ACA gave small business owners more peace of mind 
because, by joining a much bigger risk pool, they would no 
longer be vulnerable to sharp swings in their rates based on 
the health of a few employees. And that is why I was concerned 
about the rocky start to the SHOP Marketplace, but it also why 
I believe we should give the small group market a chance to 
stabilize and then expand to groups of 100 or fewer employees.
    So, Commissioner, is it safe to say that one of the goals 
of the new definition of small group insurance in the ACA was 
to expand consumer protections of the small group market to 
additional Americans?
    Mr. Kreidler. Thank you, Congressman. Definitely, that is 
one of the goals is to expand protections, both for the 
employer, but also for their employees. And the Affordable Care 
Act, with the essential health benefits, provides that in 51 to 
100 by being melded into the community-rated pool for small 
business of 1 to 100.
    Mr. Pallone. Now, would adding more larger employers to the 
small group marketplace help with the sustainability of the 
SHOP Marketplaces?
    Mr. Kreidler. From my perspective, definitely. I mean that 
is--we have looked at the filings that have come in, and like I 
say, we have had double digit rate increases from the largest 
insurer in that market. The--what are the reasons. We take a 
look at their actuarial assumptions, and their assumptions are 
largely hedged on the concept here that by bringing in 51 to 
100 to the community-rated small group market of 1 to 50, that 
you improve the vitality of that overall market. So, yes, it 
improves the health.
    Mr. Pallone. OK. And as we know, before the ACA, insurers 
in the small group market were not required to offer essential 
health benefits. Has requiring these insurers to offer 
essential health benefits, such as emergency room visits, 
prescription drug coverage, has that caused turmoil in the 
small group market thus far?
    Mr. Kreidler. Speaking for the State of Washington, no, it 
has not, Congressman, presented a challenge for those small 
employers. In fact, we saw that the carriers had already 
started to move aggressively toward the merger of 51 to 100 
in--that size to the plans that they were offering. They were 
already taking on many of the aspects of what they were going 
to be required to have as of January 1, of 51 to 100. So it was 
already starting to take effect so it was not that disruptive. 
It is relatively smooth in the State of Washington. Can't speak 
for other States and other markets. State of Washington, it was 
one where they were prepared in moving forward successfully.
    Mr. Pallone. Thank you. You mentioned that most of the 
health insurers in Washington State's small group market have 
actually requested rate decreases. Can you describe 
Washington's experience implementing the small group insurance 
reform thus far?
    Mr. Kreidler. So far, we work with stakeholders before we 
made the decision. We could have postponed this until October 
of '16, but working with stakeholders, we made a decision not 
to do that. So we are looking--after working with them, I think 
it is one where, working with the stakeholders, we were 
prepared to do it, particularly the insurers. And again, we 
have 12 insurers now in the State of Washington in the small 
group market, which is a very strong indication, a 50 percent 
increase with the start of the Affordable Care Act, that there 
is real interest in that market and there is opportunity, and 
that is good for small business.
    Mr. Pallone. Now, you mentioned 12 insurers offering 
coverage, how many of them filed to increase rates?
    Mr. Kreidler. One.
    Mr. Pallone. Just one? And what effect do you think the 
expansion of the small group market will have on these rate 
filings?
    Mr. Kreidler. I think what most likely would happen, 
Congressman, is this, that if this legislation passed, these 
carriers would need to come back and adjust their rates, and if 
not their forms, which are the policy language itself, and do 
so after the first quarter. We have never allowed first 
quarter. We like to tell small business that this is the price 
you are going to have for a full year, so we have never done it 
on a quarterly basis, but this would be the--we would be 
prepared to do that, but inevitably, what it would mean is a 
price increase for them. And I don't want to be the one they 
point to and say how come you allowed this price increase to go 
through, and I says, well, after Congress passed 1624, I had no 
other choice but to allow you to raise your rates because you 
didn't have the benefits of 51 to 100 to help hold down the 
rates.
    Mr. Pallone. All right, thank you so much.
    Mr. Pitts. The gentleman yields back.
    The Chair recognizes the chair emeritus of the full 
committee, Mr. Barton, 5 minutes for questions.
    Mr. Barton. Thank you. Thank you, Mr. Chairman. Thanks for 
this hearing.
    As I understand it, if you have, under current law or old 
law, 50 employees or less, you don't have all the mandates and 
you basically set your insurance--health insurance for your 
employees based on what you can afford and what you think the 
market is, but under the redefinition, if you define small 
business from 100--from 50 and go up to 100, then there are all 
these mandates that kick in. Is that correct, Ms. Lindeen? Do I 
understand that correctly?
    Ms. Lindeen. Congressman, I would say that if this proposed 
legislation is not passed and the existing law kicks in, you 
will see additional regulatory requests or burdens put on the 
small businesses.
    Mr. Barton. But I am correct in that, under the old system, 
50 employees or less, you basically--if you decided to have a 
health insurance plan for your employees, it was one that you 
developed in conjunction with the employees and whatever 
insurance company you happened to pick.
    Ms. Lindeen. Yes, I would say that they definitely do work 
with the insurance provider to negotiate the plan and the 
product. Yes.
    Mr. Barton. And under the Affordable Care Act, the 
definition changes, small business to 100, but you also get a 
lot of mandates that you don't currently have. Is that not 
correct?
    Ms. Lindeen. Yes.
    Mr. Barton. Now, Mr.--is it Kridler or Kreidler, or----
    Mr. Kreidler. Kreidler.
    Mr. Barton. Kreidler. I am sorry, Mr. Kreidler.
    Mr. Kreidler. Yes. Not at all.
    Mr. Barton. In Washington State, there is nothing that 
would preclude a small business from trying to join a larger 
group plan, is there? I mean, absent the mandate, if you felt 
it was in your best interest of your employees to go into a 
pool with larger employers, there is nothing that precludes 
that.
    Mr. Kreidler. That is true. We do see some employers that 
wind up doing that, in fact, Congressman.
    Mr. Barton. OK. So the fact that--I mean, the law has 
changed and the implementation date is 2016, and in your State, 
it sounds like you all have done a very good job of trying to 
fast forward the new law, and it appears that it is providing 
some benefits because, apparently, they are getting better 
rates because you are spreading the risk amongst a larger 
number of workers. Is that not correct?
    Mr. Kreidler. Congressman, that is correct. It becomes a 
larger pool--community-rated pool--and, therefore, you have the 
benefits of having more insured, and much less subject to 
having price increases----
    Mr. Barton. Right.
    Mr. Kreidler [continuing]. Just because some people get 
sick.
    Mr. Barton. So it would seem to me that if we pass 
Congressman Guthrie's legislation that kept the definition at 
50, you would have the best of both worlds. You would let 
employers that felt like their current plans were as much as 
they could afford, they could keep it, but you would also let 
employees and employers who felt like, well, we will get a 
better deal if we go into these risk pools that have more 
people, they could still do that, but they wouldn't have to do 
it. They wouldn't have to comply with the mandates that go with 
moving up. So I don't know why we wouldn't pass the bill to let 
the market operate and let people choose. What is wrong with 
that?
    Mr. Kreidler. Congressman, I would say that 51 to 100, that 
it heightens their protections from the standpoint of the 
Affordable Care Act, particularly when it comes to age 
discrimination. You can have an employer with a much younger 
workforce that can offer health insurance at a much better 
price. If you go into a community pool, you have that all 
aggregated, you help to protect the more----
    Mr. Barton. I understand that.
    Mr. Kreidler [continuing]. Older workers, which is really 
very much to their advantage, otherwise you have----
    Mr. Barton. There are--what you say is true. I am not 
arguing what you are saying is not true, but what I say is also 
true. If you let the market operate, you can get the benefits 
of larger pools if--but it should be done on a case-by-case 
basis because in many cases, the mandates in the Affordable 
Care Act do cost more money. There is no question about that. 
If you go from a plan that doesn't have all the coverage 
requirements to a plan that has more, it is going to cost more 
and you are going to pay more. Now, there may be anomalies and 
there may be cases like Washington State where just the local 
situation is such that the benefits of consolidation or 
accumulation, or aggregation, whatever you want to call it, 
overcome the increase in cost in the mandates. But I would 
postulate, and in my State, like Texas, probably it is going to 
cost more overall. So I am supportive of the bill, and I hope, 
Mr. Chairman, that at some point in time we move the bill.
    And my time has expired, so I yield back.
    Thank you for your answers.
    Mr. Pitts. The Chair thanks the gentleman.
    The Chair recognizes the gentleman from Oregon, Dr. 
Schrader, 5 minutes for his questions.
    Mr. Schrader. Thank you, Mr. Chairman. I appreciate it. And 
actually, I appreciate having the hearing on this bill. A good 
bipartisan bill that I think there is honest discussion about 
the pros and cons for the employer groups of 51 to 100, and 
then those groups underneath it, and how best to hopefully 
drive down costs and provide better health care for Americans, 
both the employers, employees, and writ large. So it is a good 
hearing. I am here to learn, actually.
    And to that end, I guess just to get us some basic facts, I 
think that one of you were talking about there is 1.8 million 
employers in that 51 to 100 range, I think. Is that correct?
    Mr. Giesa. Right. There is 1.8 million employers in that 51 
to----
    Mr. Schrader. Establishments.
    Mr. Giesa [continuing]. 100 range that are--right, 
establishments, that are providing health insurance right now.
    Mr. Schrader. And then so how many would--employers would 
there be below that, in other words, 50--to up 50 employees, 
the--what is the number there? I would assume be in the 40 
million range, right, because most employers are small 
employers?
    Mr. Giesa. Did you say employers----
    Mr. Schrader. Yes.
    Mr. Giesa [continuing]. You are asking for?
    Mr. Schrader. Yes.
    Mr. Giesa. Yes, that is almost 90 percent of employers are 
in that----
    Mr. Schrader. Right.
    Mr. Giesa [continuing]. 1 to 50.
    Mr. Schrader. Right. So then the question for us, I guess, 
a little bit would be, you know, to the point of we expand the 
risk pool writ large, it would sound like those smaller 
businesses might get some decrease, obviously, in premiums, 
and, obviously, the guys that haven't had to play with the 
rate--the rating issues and some of the others would see some 
slight increases. And I guess the debate for us is, is that 
enough of a critical mass to reduce things significantly for 
the one group to offset the slight increases perhaps for the 
other group.
    A lot of my experience has been, like Washington, I come 
from Oregon, most--certainly, the individual market, we had all 
of the essential health benefits already required and, you 
know, a lot of the small groups are already going that way. And 
we also had most of our insurers come in asking for rate 
decreases. It is controversial whether it is good to do that 
right now from the standpoint of making sure the business 
market is active and engaged. So there are a number of States, 
I guess, for my colleagues' benefit that are, you know, seeing 
some of the same things that Washington State is seeing also.
    And I just want to--Mr. Kreidler, will you agree everyone 
seems to be pretty on target here, that the accepted definition 
of a small group market employer was under 50 employees? Would 
you agree with that?
    Mr. Kreidler. Correct.
    Mr. Schrader. OK. So the ACA arbitrarily changed that, is--
make a fair statement. And I won't ask you guys that, but----
    Mr. Kreidler. Right.
    Mr. Schrader. And I assume that the reason for that was to 
make sure that there was enough critical--well, I will make 
this statement and you guys react to it. A critical mass to 
keep the insurance rates as reasonable as possible for smaller-
type employers, realizing there would be some adverse 
selection. Mr. Kreidler first, if I could.
    Mr. Kreidler. Absolutely. That was the purpose. I think the 
real question is, is the timing. Don't remove the requirement. 
Maybe postpone it for a couple of years, but--to give some 
States more of a time to kind of gear up for this, and their 
insurers to gear-up for that market. But from the standpoint of 
some States that are prepared to do it today, don't take that 
away from them, essentially throwing us back to the legislature 
to try to get approval. If we want to be successful with 
reforms, you need to have these kind of changes going into 
effect. Some States can do it sooner, like the State of 
Washington and the State of Oregon, but other States are going 
to want to buy more time before they make the jump. But the 
jump is a good one for healthcare reform and for the small 
group market.
    Mr. Schrader. How about Mr. Giesa and Ms. Lindeen?
    Ms. Lindeen. Congressman, if I could, I mean I--
theoretically, expanding the risk pool should drive down 
rates----
    Mr. Schrader. Right.
    Ms. Lindeen [continuing]. But in this case, that is not 
necessarily true because when you take the 51 to 100 employers 
who have healthier, younger employees, and they leave that 
group and then instead leave older, less healthy employees, 
then they are going to have adverse risk, which is not going to 
lower rates----
    Mr. Schrader. Well, that would----
    Ms. Lindeen [continuing]. But it is actually----
    Mr. Schrader. That would be true in any size business, 
including----
    Ms. Lindeen. Correct.
    Mr. Schrader [continuing]. The small businesses. And as I 
am saying, I haven't seen that in my State, and it is not like 
we are seeing that in Washington, either. But I can see where 
it would vary State-by-State.
    Ms. Lindeen. Right.
    Mr. Schrader. You know, one of the big variables is the 
essential health benefits that our States primarily--I guess 
another basic question from me would be, Why do you think large 
group employers and self-insurers were left out of the 
essential health benefits package? Why were they not required 
to have the same essential health benefits? I have my ideas, 
but you would be more informed than I.
    Ms. Lindeen. Well, it is my--I don't believe it was 
actually needed----
    Mr. Schrader. OK.
    Ms. Lindeen [continuing]. And that is why.
    Mr. Schrader. That makes sense.
    Mr. Giesa. I would concur with that.
    Mr. Schrader. Yes. Mr. Kreidler, same thing.
    Mr. Kreidler. I think you have to move eventually to having 
them included. It is just going to be a process over time. Part 
of it right now is going 51 to 100, for some States that are 
ready, delay it but don't eliminate the requirement. Give a 
couple more years for the markets to mature and be able to 
handle the kind of change. We are ready in the State of 
Washington. Oregon is in a comparable position. Other States 
are ready to go right now. But I think for the sake of the 
country, don't eliminate it but postpone it so that you can 
still have the benefits here of giving more people the better 
protections that helping to bring down the cost, particularly 
in this case for small business.
    Mr. Schrader. Thank you all.
    I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the vice chair of the subcommittee, Mr. 
Guthrie, 5 minutes for questions.
    Mr. Guthrie. Thank you, Mr. Chairman. And before I begin, I 
would like to ask unanimous consent to enter into the record 
the following letters of support for H.R. 1624: 50 to 100 
Coalition, America's Health Insurance Plans, NFIB, National 
Small Business Association, National Association of Insurance 
and Financial Advisors, National Association of Professional 
Insurance Agents, Council for Affordable Healthcare Coverage, 
Blue Cross Blue Shield Association, Delta Dental, Kentucky 
Chamber of Commerce, and U.S. Chamber of Commerce.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Pitts. Let me add to that list letters from the 
American Academy of Actuaries, National Association of 
Insurance Commissioners, the Center for Insurance Policy and 
Research, talking points from the Council for Affordable Health 
Coverage, and issue briefs from Third Way, the American Academy 
of Actuaries, and the National Institute of Healthcare 
Management.
    Voice. And this HHS Data.
    Mr. Pitts. And the HHS HRQ MEPS Data.
    Voice. For Washington State.
    Mr. Pitts. For Washington State.
    OK, without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Guthrie. OK, thank you. Thank you so much, and thank 
you all for being here. I am the main sponsor of the bill, and 
with the bill, some of the things that--maybe some of the 
criticisms of the bill I think have been addressed. Working 
with my good friend, Mr. Cardenas from California, Kyrsten 
Sinema, working with Markwayne Mullin, and we have looked at 
that. Some States are ready. So there is a provision in the 
bill for States to move forward if they so choose to move 
forward. And so that seems to take care of one of the concerns. 
The other one is just delay it. And I spent--like my friend 
from Tennessee, I spent a lot of time in my district back in 
August meeting businesses, and every time you go into a 
business it is not just insurance, it is the way we seem to be 
governing here; everything is on an extension, a delay, a 
waiver. I think one you suggested there, say we are just not 
going to enforce the regs if you move forward. The regs are on 
the books, we are just not going to enforce them. And that is 
not a good way to do business. And people plan more than year-
to-year on investment and growing their business. And so, you 
know, putting this into place, I think what's critical is to 
get rid of the uncertainty. And also one of the--I guess I will 
ask Mr. Giesa this: So if you are a fully ACA-compliant plan, 
rate restrictions, essential health benefits, community rating, 
minimum actuarial values, your price is going to be higher--it 
will be a high price. And so if you go before the Insurance 
Commissioner and you are saying you are going to get all these 
new businesses on, you probably--I mean I think it makes sense 
that your rate is not going to go up or increase, because you 
are looking at new customers mandated by the law. But if you 
are in that 51 to 100 where we are trying to address, if you 
are in that and you are offering a health benefit plan that you 
like, you know, the President said if you like it you can keep 
it, your employees like, it is moving forward, you are going 
to--because the high rate of insurance didn't go up doesn't 
mean your premium is not going to--and cost is not just going 
to go up because you are having to buy up to a higher plan, and 
that is what we are trying to address in this bill. Could you 
comment on that? So it is not different from what we are 
hearing from Washington State, I don't think, but it still 
disrupts 51 to 100 employers.
    Mr. Giesa. Well, I think there are a number of employers, 
and this will vary by State and by employer, but employers who 
will see their premiums go up for no other reason than 
additional benefits. They will have to meet a medal value that 
is a little bit higher than they would like, and so they will 
see premiums go up, or they will have to provide benefits that 
they weren't providing, that they will be required to. But I 
think the real dynamic, the thing that most concerns me, is 
this issue of the midsized employers will be given 2 options; 
they can either self-insure or they can go into the fully 
insured small group market, and they will choose the one that 
yields them the lowest cost. And that dynamic will force 
premiums in that small group market up as the--those----
    Mr. Guthrie. So it is counterintuitive of what you would 
think because people--like at the market. And with self-
insuring, it is usually larger employees that self-insure 
because of the bigger risk pool, the more--your--the bigger--
you know, if you have 100 employers, you usually have more 
cash, more ability to--employees ability to do that. And so 
even when you are talking about people leaving, if we leave it 
51 to 100, you are talking about probably people in the 85, 90, 
close to 100 employees, not necessarily the one with 51 
employees, 52 employees, although some people that small can 
self-insure. I am not going to say they can't, but it is more 
difficult the smaller you are. So really not only getting an 
adverse selection of younger people, you are probably getting 
at the higher end of the--of 90 to 100 employees probably self-
insuring. Is that a fair----
    Mr. Giesa. That is a fair statement, but I would like to 
make the point that actually Commissioner Lindeen had made----
    Mr. Guthrie. Um-hum.
    Mr. Giesa [continuing]. It is becoming easier and easier 
for groups to self-insure, and if you go out and look, say, 
Google, level funding, small employer, you will get all kinds 
of hits now from benefits consultants and insurance companies 
who are bringing products to market to encourage this kind of 
selection that we are talking about. So it is becoming much 
easier for groups to access self-insurance than it had been. 
They are understanding this dynamic we are describing right 
now.
    Mr. Guthrie. Well, people are saying--people who choose to 
self-insure, they are saying I can have a known cost and know 
what my risk is buying full insurance plans, and based on that 
price, they say, or I can take risk if I have the cash to--
and--to accept that risk and not put my business at stake. And 
you are right, as the price grows to fully insure, you are 
willing to take more risk to self-insure. And so your--also 
argument is there are other tools, financial tools, out there 
even if you don't have cash in the bank to help cover your out-
of-pocket--it is essentially a high deductible plan is what 
self-insurance is. So there are other opportunities to finance 
the high deductible than just cash out of your business, is 
that what you are saying is developing?
    Mr. Giesa. Exactly right, yes.
    Mr. Guthrie. And they are developing because they know this 
market is going forward.
    Mr. Giesa. Exactly right.
    Mr. Guthrie. So I was like--even though we are hearing 
success in Washington State and others, it is, you know, the 
people with 51 to 100, that is who this bill specifically 
designed who are being disrupted, and so I think giving States 
the flexibility to stay in, given the opportunities for people 
to continue to provide the health insurance if they want to 
provide, I think is a good way to go, and I am glad it has been 
bipartisan and very carefully put together.
    Thank you. I yield back.
    Mr. Pitts. The Chair thanks the gentleman.
    Now recognize the gentlelady from Illinois, Ms. Schakowsky, 
5 minutes for questions.
    Ms. Schakowsky. Thank you. While we are on the topic of 
self-insurance, we have heard a lot of concerns that 
increasingly the small market definition would increase the 
possibility of adverse selection, and that they--the companies 
would go to self-insurance, but today, only 14 percent of these 
midsized companies--these midsized employers are able to self-
insure, and even among firms between 100 and 999 employees, 
only 33 percent self-insure right now.
    So I wanted to ask Mr. Kreidler, can you describe the 
reasons why these small firms self-insure at much lower rates 
than larger companies? Actually, anyone could answer that.
    Mr. Kreidler. Thank you, Congresswoman. I look at they are 
making that choice largely based on the fact that they probably 
have younger, healthier employees and, therefore, they say, you 
know, if I self-insure, I get a better rate. But the reason you 
don't see a lot of them jumping for it is because there are 
risks that are involved in making that decision. I think it is 
imperative because insurance, by its very nature, is a law of 
large numbers. You want to get a large pool, a large group, and 
that helps to hold down costs. It doesn't guarantee that 
everybody is a winner. There are going to be some that are 
losers in that proposition, but it is building that common 
base, but it offers protections that going forward you can't 
have if you have a fragmented market. And hopefully, that is 
one of those areas where we spend some time taking a look at 
what it does to the market as to whether that is an appropriate 
step. The kind of refinements that Ranking Member Green spoke 
to, which is the changes that have always followed major 
legislation that haven't been possible as kind of midcourse 
corrections.
    Ms. Schakowsky. Yes. Before I ask the others if you want to 
comment on that, I wanted to--Ms. Lindeen, when the chairman 
asked you whether or not consumers would lose any benefits of 
this extension and you said, oh, no. But the fact of the matter 
is, right now, under the--on the small group, there is the 
essential health benefits required, you said it is not 
necessary to require it for larger companies. There is premium 
protection regardless of industry for the small groups, 
regardless of coworkers' health, regardless of personal health 
status. There are caps on premium increases based on age. There 
is--prevents premium discrimination based on sex. So how could 
you say that there is no loss, that benefits wouldn't be 
increased for people between 51 and 100?
    Ms. Lindeen. Congresswoman, thank you. Certainly, if there 
was a move to the small group market from 1 to 100, there would 
be additional benefit requirements placed on those employers 
who are at--now currently at 51 to 100, absolutely. What I am 
saying is that there hasn't really been any real complaints and 
issues with that group, and so they--there hasn't been a real 
need that we have been aware of for that to occur.
    Ms. Schakowsky. Among the employers, there hasn't been?
    Ms. Lindeen. Well, I can just tell you what I know 
personally, that we haven't had problems with the employees 
complaining either. Certainly, those employers are negotiating 
the best product design possible, with the best rate design 
possible for their group.
    Ms. Schakowsky. I just want to say that we are looking at 
this, mainly so far----
    Ms. Lindeen. Um-hum.
    Ms. Schakowsky [continuing]. As I can hear, from an 
employer standpoint. The purpose of the Affordable Care Act is 
we have so many individuals who are either uninsured or 
underinsured, and the goal here is to have a healthier society, 
and a standard that we set for all Americans. Basic things. 
Lack of gender discrimination, reducing the age discrimination 
that make it hard for people. So I just think that it is 
important to acknowledge that, and that one of our goals has 
been to make sure that the kinds of standards--I don't have 
time, I would have like to have asked Mr. Kreidler what ready 
means, when a State is ready, but I think we passed the bill in 
2010, and I realize that there was an extension made, was it 
last year, for larger businesses. It seems time to get ready to 
provide quality health care for all of our citizens.
    Thank you. I yield back.
    Mr. Pitts. The Chair thanks the gentlelady.
    Now recognize the gentleman from New Jersey, Mr. Lance, 5 
minutes for questions.
    Mr. Lance. Thank you, Mr. Chairman. Good morning to the 
distinguished panel.
    To Commissioner Lindeen, I have never been in Montana. I 
hope to have the opportunity to visit your beautiful State, and 
I have heard many wonderful things about it.
    I have heard from a number of my constituents that if 
current law is not changed, many employers will either choose 
to self-insure rather than purchase a small group plan, or 
choose to drop coverage rather than purchase coverage in the 
small group market, and thus, pay the employer mandate penalty. 
Commissioner, can you explain in a little more detail from your 
perspective, and you have a great deal of advice, given your 
responsibilities statewide in Montana, the incentives and the 
trade-offs that employers would face in that case?
    Ms. Lindeen. Thank you, Congressman. Certainly, the 
employers are going to have to make a decision, as I think Mr. 
Giesa pointed out, in terms of looking for coverage in the 
expanded small group market, or looking at potentially self-
insuring. And the one thing that I think also, which we haven't 
really touched on today, is in terms of potential market 
disruption as even carriers leaving the small group market. For 
example, we have a carrier in Montana who withdrew from the 
small group market in 2013. Under law, they cannot return for 5 
years unless they get permission from the commissioner, which 
certainly, we would consider. However, some of those insurers 
may decide that they don't want to do it, for a host of 
business reasons, and so they may withdraw completely which 
means then those who they have been covering under the 51 to 
100, they would give up. And in some cases, that could actually 
cause serious financial distress to the company as well.
    Mr. Lance. I am interested, you said that there is a 
provision of not re-entry for 5 years. Is that State law in 
Montana, and is that true in other States as well?
    Ms. Lindeen. Yes. It is Federal, I think HIPAA.
    Mr. Lance. It is Federal law.
    Ms. Lindeen. Um-hum.
    Mr. Lance. So that this would apply across the board, but 
do State agencies such as yours, do you have the ability to 
override that?
    Ms. Lindeen. We would have the ability to say to the 
company, if they wanted to continue in the small--or come back 
to the small group market, to let them in. But then certainly, 
they would have to refile all their forms and rates and so 
forth.
    Mr. Lance. And given your expertise in Montana, do you 
think other companies might choose not to continue in the small 
group market?
    Ms. Lindeen. Well, certainly, every company has got that 
decision to make. I mean if they see the small group market is 
not being as desirable, for whatever reason, they could make 
that decision.
    Mr. Lance. I would image that small group markets might not 
be as profitable a line as larger. I speculate here, but 
certainly, some might leave.
    Other distinguished members of the panel, do you have an 
opinion on what I have asked? Congressman?
    Mr. Kreidler. You know, my impression is that, once you are 
out for 5 years, you can't come back in unless you are totally 
restructured coming back. So once you are out, you are out, and 
that is Federal law that requires that under HIPAA. But my 
experience has been I didn't have companies that dropped out. I 
had some companies that talked about it, not in this market but 
the small group market--or individual market, I should say--and 
we explained to them if you drop out, you are gone for 5 years, 
and they said, well, maybe we can figure out a way. And every 
one of them wound up finding a way to stay in the market so 
they didn't face that particular penalty. But in the case of 
the small group market, like I said, we have had a 50 percent 
increase in the number of carriers in the small group market 
since 2012.
    Mr. Lance. Thank you. Your position, sir?
    Mr. Giesa. Well, in the near term, I can see a couple of 
competitive dynamics in play. One is, not all the companies 
that are operating in the midsized group market now will have 
the administrative capabilities to take on the small group 
market, so when the markets are combined those companies may 
withdraw. The other thing that could happen is if we do see 
this sort of rate spiral happening, we could see companies exit 
the market. We have seen that happen in the past.
    Mr. Lance. Thank you very much. And I yield back 24 
seconds.
    Mr. Pitts. The Chair thanks the gentleman, and now 
recognize the gentleman from Maryland, Mr. Sarbanes, 5 minutes 
for questions.
    Mr. Sarbanes. Thank you, Mr. Chairman. This is a 
fascinating discussion, and my head is kind of exploding 
listening to it a little bit.
    I am trying to understand, Mr. Giesa, I mean you and Mr. 
Kreidler are projecting fundamentally different scenarios as to 
what will happen. Mr. Kreidler's prediction seems to be based 
on information he already has in-hand in terms of the insurers' 
reaction to what will happen in January of 2016. Yours is a 
little more tenuous, I guess, but can you try to explain why 
you think, even though you are projecting premium hikes as high 
as 20 percent because these midsized employers who have the 
ability to go self-insure will choose to do that and pull 
themselves out of this pool, why you are projecting 20 percent 
increases based on that assumption, whereas insurers have 
actually come in in Washington State and are submitting 
requests for premium reductions in all but one case, as I 
understand it, and as high of a reduction, I think you said, as 
16 percent in one instance. So maybe you all could have a 
little colloquy just to try to help me understand why there is 
such a disconnect there.
    Mr. Giesa. Well, I will start. And first, I am not an 
expert in the Washington market, but I think there are some 
uniquenesses in the Washington market about the way the market 
is structured that don't apply to a majority of States. And 
then I will acknowledge the fact that, you know, the little bit 
of the work that I have done is kind of tenuous, but those rate 
increases I was illustrating, the 64 percent seeing 18 percent, 
that is real, that is based on real data. I had underwriting 
decisions that companies made and I said, well, those 
underwriting decisions will have to change under the ACA. So 
that is really what is going to happen to 64 percent of the 
issuers that I considered representative.
    Mr. Sarbanes. Right.
    Mr. Giesa. The other part of this calculation though is, 
who withdraws and what does that have on the rest of the 
market, the impact of those who remain, and that is the part 
that is a little tenuous, subject to speculation, but I want to 
be clear that the rate increases that I was saying would happen 
in the midsized group----
    Mr. Sarbanes. OK, that is fair.
    Mr. Giesa [continuing]. Those are real.
    Mr. Sarbanes. Mr. Kreidler, do you have some anxiety that, 
even though the insurers who submitted rate proposals seem to 
be assuming that the effect that you anticipate will actually 
take hold, that there could be a number of employers in that 
midsized range that would select themselves out and self-
insure, and it could have the impact that is being talked about 
there with, I guess, the potential for them to come in midyear 
based on that activity and then reverse and seek what would 
then be a significant--by comparison, significant rate 
increase, to try to address that situation?
    Mr. Kreidler. Congressman, I will be honest with you, I 
really don't stay awake worrying about it as a major factor. I 
think that there are going to be some employers that are 
midsized that are going to see rate increases. Whether that is 
enough to--for them to want to take the risks of going to the 
self-insured market. All of these businesses, for practical 
purposes, are not in the business of health insurance, they are 
in the business of whatever commercial activity they have. And 
they want to be able to go out and buy a product that is going 
to be able to provide the kind of incentives for their 
employees, to retain employees, to attract employees, so that 
is why they offer it and that is what really matters to them. 
And I think that is going vary somewhat from State to State. In 
the State of Washington, we already saw those midsized moving 
toward the ACA standards even before the requirement went into 
effect. So they are already stepping up to it. One protection 
that it offers right now are certainly for older employees, 
that they don't wind up being biased, paying multiple times 
what a younger employee would have to pay. They have the 3-to-1 
protection. That is good for the older employee. Not so good 
for maybe with a younger workforce, but you have other 
protections and limitations of out-of-pocket expense that 
really play to that small employer, so there are benefits even 
if they wind up paying more. And again, there are always 
winners and losers when you wind up pulling markets together. 
You can't make everybody a winner. You wind up doing the best 
you can, and you see the improvement in the overall health in 
the small group market for employers. That is the positive. You 
want to see that happen. In the long run, it is one of those 
where there are added protections that certainly enhance for 
that small employer, protections, even if they wind up paying 
more initially. But we are seeing very little of that in the 
State of Washington.
    Mr. Sarbanes. Thank you all for your testimony.
    Mr. Pitts. The Chair thanks the gentleman, and now 
recognize the gentleman from Florida, Mr. Bilirakis, 5 minutes 
for questions.
    Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it 
very much. And thank you for your testimony.
    Commissioner Lindeen and Mr. Giesa, I hope I pronounced 
that right, the small business health options plans, or SHOPs, 
have not been a popular option for employers. They have not 
offered much difference from the outside small group market. In 
my district, there are only 2 companies that offer coverage in 
the SHOP, and you can only choose from 3 plans in silver and 
gold. Would the SHOP be more successful if it allowed employers 
to provide a defining contribution, and allowed employees to 
choose a plan, a metal tier, and benefit design that best fits 
their needs, and shouldn't there be greater diversity of 
carriers and benefits designed to truly drive competition?
    Mr. Giesa. Congressman, that is a wonderful question, and I 
think it is certainly worthy of consideration, but it is not 
something that, right now, I am in a position to comment on.
    Mr. Bilirakis. OK, can you get back to me on that? I would 
appreciate that.
    And then, Commissioner Lindeen?
    Ms. Lindeen. Well, Congressman, I certainly understand that 
the more options that we can provide the better, but certainly, 
I can get back to you on a response as well.
    Mr. Bilirakis. Please do.
    Ms. Lindeen. Thank you.
    Mr. Bilirakis. Please do. All right, second question. 
Commissioner Lindeen and Mr. Giesa, according to the CBO, 
``Plans being offered through exchanges in 2014 appear to have 
in general, lower payment rates for providers, narrower 
networks of providers, and tighter management of their 
subscribers use of health care than employment-based plans 
do.'' Less than half of the plans available on the Exchange 
have the Moffitt Cancer Center, the only NCI-designated Cancer 
Center in Florida, within their network. And those that do have 
Moffitt in-network, the coverage may be conditional based on 
where you live. If we push midsized businesses into the small 
business market, will these workers have more options or fewer 
options for health insurance? Will the employees of midsized 
businesses be stuck in narrower networks with fewer providers 
if the small group market is expanded? And again, the question 
is for Commissioner Lindeen and Mr. Giesa.
    Ms. Lindeen. Congressman, I really do want to apologize, I 
don't have a specific answer for you. Certainly, each one of 
the employers is negotiating with the insurer for the best 
product possible, and I am sure that they are looking at the 
networks to ensure that they are hopefully the best network 
possible for their employees because insurance companies 
contract locally and regionally for the providers in those 
networks, and I am sure that the companies and the employees 
are looking very closely at those networks.
    Mr. Bilirakis. Mr. Giesa?
    Mr. Giesa. Yes. Again, thanks for the question. That is an 
excellent one. And they will have fewer employers if the 
midsized employer is forced into the small group market, they 
will have fewer options with respect to benefits. Right now, 
they can design benefits that best fit their needs. In the 
small group market there is really just a, you know, a group of 
benefits they will have to select from.
    And then on your question of networks, I think that does 
deserve consideration. The small group plans, the networks are 
fixed and there is really no negotiation as far as what 
benefits or what providers the employees could see. The only 
way around that would be to self-fund. And so it is conceivable 
that these midsized groups might say, you know, to get access 
to the employers we want--or the providers we want, we need to 
self-fund.
    Mr. Bilirakis. Thank you. Third question, again for 
Commissioner Lindeen and Mr. Giesa. Again, I apologize if I 
mispronounce your names. There appears to be evidence that the 
small group market is shrinking as small businesses drop 
coverage to allow employees access to premium subsidies. Is it 
better for taxpayers to have employers pay for health insurance 
or for the Government to pay for subsidies?
    Ms. Lindeen. Congressman, that is a difficult question. 
Certainly, we have in Montana seen a drop in the small group 
market and folks moving to the individual marketplace for that 
purpose. But at the same time, I can tell you that, at least in 
Montana, I can talk to that experience, in Montana we had about 
20 percent of our population that was uninsured. We have 
actually seen a drop to 15 percent uninsured, and so we are 
seeing more and more folks becoming insured, which I guess for 
societal purposes, and then for the employer, whoever that may 
be, small or large, that is a good thing, and that is a good 
economic impact for the employer and Montana's economy.
    Mr. Bilirakis. Sir?
    Mr. Giesa. Congressman, this is another question that I 
would like the opportunity to get back to you on. I am really 
not in a position to answer that definitively right now.
    Mr. Bilirakis. Please get back to me. I would appreciate 
that very much.
    I yield back, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman. Now recognize 
the gentlelady from North Carolina, Mrs. Ellmers, 5 minutes for 
questions.
    Mrs. Ellmers. Thank you, Mr. Chairman. And the first 
question I have is for Mr. Kreidler on the issue that you are 
here and your concerns, I am just wondering how much you have 
taken into consideration that Washington State has the ability 
to opt out and continue on without being affected by this if 
this bill, 1624, actually goes into effect. Are you aware of 
that?
    Mr. Kreidler. Yes, I am----
    Mrs. Ellmers. OK.
    Mr. Kreidler [continuing]. Congresswoman, aware of it.
    Mrs. Ellmers. I guess that brings me to the next question, 
then, which is, if you are aware of that then I don't 
understand why you have the issue, because you are presenting 
to us that this is something that is working very well in 
Washington State and that you see this moving forward, and hope 
that our bill that we are discussing today does not go into 
effect.
    Mr. Kreidler. There are a couple of problems that I see 
right now. Number 1 is they have already submitted their plans, 
their rates and their forms with me, so this is already in 
progress for going from--with the 51 to 100 being included with 
the--into the small----
    Mrs. Ellmers. Um-hum.
    Mr. Kreidler [continuing]. Group market. That would have to 
be adjusted and rolled back. Most likely, that is going to mean 
in the State of Washington that that is going to be a rate 
increase for small employers----
    Mrs. Ellmers. OK, stopping there though----
    Mr. Kreidler. OK.
    Mrs. Ellmers [continuing]. Washington, again, has the 
ability to not accept this bill, correct? And so, therefore, 
all of those plans that you are moving forward on in Washington 
would remain in place with the Affordable Care Act.
    Mr. Kreidler. In the State of Washington, Congresswoman, I 
do not have that option because State law would effectively be 
reverted to, with the passage of this law, that State law says 
1 to 50. Therefore, 51 to 100 is not an option for me. The 
State would have that option, but----
    Mrs. Ellmers. Right, the State would have that option.
    Mr. Kreidler. But I would still have to go to the 
legislature to get their approval, and they are well underway 
with already making the implementations. And I can tell you 
right now, the chances of having that pass in the State 
legislature are probably zero to none. So as a consequence, the 
benefits that would occur to the small group----
    Mrs. Ellmers. Why----
    Mr. Kreidler [continuing]. Markets----
    Mrs. Ellmers. Why would it be zero to none if--I mean, I 
don't want to--because I have some other questions, but I don't 
understand. You are presenting today that this is working in 
Washington, that it is moving forward, that you feel very 
confidently that it is playing out as is, but yet you believe 
that the option for it passing the legislature in Washington 
would be zero to none?
    Mr. Kreidler. Congresswoman, I think it is pretty much the 
same dynamics that you have in Congress itself. There are 
differences of opinion about the Affordable Care Act and any 
modification to it.
    Mrs. Ellmers. So what you are saying is your opinion is not 
necessarily that of the rest of Washington's opinion.
    Mr. Kreidler. No, I think the rest of Washington would 
agree with me, but on this issue, obviously, it is going to be 
very difficult to get favorable action on the part of the 
legislature, certainly and do it in a timely fashion.
    Mrs. Ellmers. OK. Well, thank you for clarifying that for 
me.
    I do want to ask Ms. Lindeen and Mr. Giesa. The NFIB 
Research Foundation showed that 40 percent of small businesses 
with fewer than 100 employees offered health insurance in 2014. 
So that is 40 percent, which is a 6 percent drop from 2013. 
According to HHS, only 32 percent of businesses with fewer than 
50 employees offered group coverage in 2014, which is a 3 
percent drop from 2013. Showing that trend, or looking at those 
numbers, what is the overall picture, and I know we are talking 
in generalities and I know that is difficult for you because 
you are coming from your own position, but what is going to 
happen with these rates? If we are already seeing that fewer 
businesses are dealing in this way, and we have seen that over 
the last year or 2, how is this going to affect these small 
group rates if this is the trend moving forward?
    Ms. Lindeen. Congresswoman, if I may, that is a really good 
question. I think it really could--should bring us back to the 
fact that we are still in this transition period----
    Mrs. Ellmers. Right.
    Ms. Lindeen [continuing]. With the market being----
    Mrs. Ellmers. Yes.
    Ms. Lindeen [continuing]. Influx. At the same time, I think 
that the markets are beginning to adjust and make sense of what 
happened----
    Mrs. Ellmers. Um-hum.
    Ms. Lindeen [continuing]. And so I think that is why it is 
important for us to not make further changes if we don't have 
to----
    Mrs. Ellmers. OK.
    Ms. Lindeen [continuing]. Unless it is going to be--have a 
positive effect----
    Mrs. Ellmers. A positive--yes, that----
    Ms. Lindeen [continuing]. But----
    Mrs. Ellmers [continuing]. You know that there is certainty 
and that the----
    Ms. Lindeen. Correct.
    Mrs. Ellmers [continuing]. The outcome is going to be 
positive.
    Ms. Lindeen. Correct.
    Mrs. Ellmers. Mr. Giesa, would you like to comment on that?
    Mr. Giesa. Yes, thanks for the question. I think, you know, 
and briefly, the response to your question is if we don't see 
this change made, if the----
    Mrs. Ellmers. Um-hum.
    Mr. Giesa [continuing]. Midsized employers do move into the 
small group market, we will see an acceleration of the process 
you were describing of small groups----
    Mrs. Ellmers. Small groups basically----
    Mr. Giesa [continuing]. Continuing----
    Mrs. Ellmers [continuing]. Decreasing. And so--I am running 
out of time, but if there was one thing that you had to ask us 
in Congress, moving forward, looking forward to this as this 
bill being a positive step forward, what would you say it is? 
What would you like to leave this committee with as far as your 
messaging that we need to know?
    Ms. Lindeen. You need to give the States the flexibility so 
that the markets can be more certain.
    Mr. Giesa. And I would say that time is of the essence 
here.
    Mrs. Ellmers. Time. Time. Thank you very much. Thank you to 
all of you for being here. And thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentlelady. Now recognizes 
the gentleman from New York, Mr. Collins, 5 minutes for 
questions.
    Mr. Collins. Yes, thank you, Mr. Chairman.
    In a prior life, as in about 6 months ago, I was the 
subcommittee chair on Health and Technology for Small Business. 
I had hearing after hearing on the Affordable Care Act, the 
impact on small business, the potential impact on small 
business, if you went back a couple of years ago when some of 
this was just moving through, and I can just categorically 
state it was all negative. Business group after business group 
after business group stepped forward to say here is the 
devastation that is going to occur. You know, with the 
redefinition--I guess I--it is maybe worth reminding folks, 
back in the day before Affordable Care, the definition of a 
large business was someone over 500 employees. It was pretty 
universally accepted. That is a big company. HR Departments, 
you know, lots of folks at management levels, 500-plus. Along 
comes the Affordable Care Act and says, well, no, we are going 
to redefine a large company as anyone with over 50 employees. 
It is like, whoa, 500 down to 50? A lot of companies with 50 to 
55 employees, they don't have an HR Department. They may or may 
not have a full-time bookkeeper, let alone all the 
infrastructure that went with the prior universally accepted 
definition of a large company. So the reverse of that is, 
obviously, a small company used to be anyone up through 499. 
Now it is 49, which is--with my hearings on the Small Business 
Committee, just turned everything upside down. The issues of, 
you know, do I want to grow to 55 employees.
    So I am bringing this up only to point out there has been a 
little bit of a pause for the 51 to 99. They are subject to the 
Affordable Care Act, the employer mandate, but at least during 
this time they could offer, you know, some health benefits that 
may have been more affordable to them. Well, now, all of a 
sudden, it--in pops--if we don't pass this, their costs are, by 
and large, going to go up. They are going to be forced to do 
something and make changes they may not want to do. And I guess 
I would like to point out, when a midsized--or when a small 
company, 51 to 99 for sure, has to absorb higher costs in 
health insurance, or anywhere else, they are generally--they 
have to cut someplace else. We are not talking about companies 
making a lot of money, even paying their owners well, and I 
think it is just a rhetorical comment to say if I have to 
increase costs here and decrease somewhere else, my cuts may be 
in product development, research, marketing, advertising, going 
to trade shows, and just continuing. What does that mean? Less 
growth, fewer jobs, bad for the economy, bad in every way. So I 
just felt like I should at least point out the overarching 
impact that I see on this is less job growth for those 
companies between 51 and 99 employees, because they are going 
to absorb cost increases that have to be offset. They just 
can't go print money or wish upon a star that they didn't have 
that.
    So I guess, you know, Mr. Giesa, you are the actuarial 
expert, and maybe just some comments about--I mean I always go 
back--there is no free lunch. If somebody, as Mr. Kreidler 
says, is going to save money, someone else is going to pay for 
it. You know, it is--this is what happens. You get less, I pay 
more. I always say it is a bad day at the office when you run 
out of other people's money. But--so you have kind of heard my, 
you know, comments here, what would you say, Mr. Giesa?
    Mr. Giesa. Well, this idea of, you know, there are some 
real consumer protections associated with--or that come along 
with being part of the small group market but those benefits 
come at a cost, and we will be asking a group of small--or 
midsized employers to pay that cost. And if they choose not to 
do so, if they choose to sort of withdraw from that 
consideration and say I am going to self-fund, we will see 
costs go up for the small groups and those other groups that 
remain in the market.
    Mr. Collins. And I think we have point out, it is amazing 
how competition works. There are changes going on in the self-
insured market that would have been unheard of 5 years ago, but 
in that, small businesses can be very creative and they have to 
ben entrepreneurial to survive and grow. And I tend to concur, 
we don't know what the answer is but we are incentivizing, I 
wouldn't even call them midsized, they are still small 
companies, somebody with 58, 62 employees, if that is not a 
small company, and that is where I have spent my life, I don't 
know what is, we don't know the outcome but it is going to 
incentivize that move. And when you take those employees out of 
the group market, we all know the price you pay.
    So with that, thank you, Mr. Chairman, I yield back.
    Mr. Pitts. The Chair thanks the gentleman, and now 
recognize the gentleman from Virginia, Mr. Griffith, 5 minutes 
for questions.
    Mr. Griffith. Thank you so much, Mr. Chairman. I do 
appreciate it. Mr. Kreidler, I appreciate you being here today. 
I have some questions for you.
    You talked about increases in the small shops in the State 
of Washington--small shop insurance in the State of Washington. 
In my district, and I represent 22 counties and 7 independent 
cities in the rural parts of Virginia, and as a result of that, 
we found that many of our locations, or at least a certain 
number of them, we don't have but one provider for the small 
shop plans. And so it raises the question that I would ask you, 
is the city of Richmond in the Commonwealth of Virginia has 
lots of small shop plans, my rural counties and some of my 
independent cities don't--some of my rural counties don't, some 
of my independent cities don't, is that your experience in 
Washington or do you have this larger number across the State 
of Washington in all the counties?
    Mr. Kreidler. We have seen an increase in all of the 
counties for the small group market of the number of carriers 
that offer it. Not that many in the shop through the Exchange, 
but in the small group market, we have certainly seen it. But 
rural American is tough. It is tough in the State of 
Washington, and I am sure Commissioner Lindeen has it tough in 
Montana. It is difficult to get the same kind of competition in 
those rural counties that you get in the more urban counties, 
and I understand that.
    Mr. Griffith. Yes. I thought it was interesting, your 
testimony has been very instructive here today because I gather 
that you don't like this bill, but you acknowledged in some of 
the questioning that you did think that for some States that 
weren't as far along as the State of Washington was, that some 
type of a delay might be advisable. So you recognize that at 
least for some States, moving forward right away would be a 
problem and that we as Congress probably ought to take some 
kind of action. Even if you don't like this bill, you would 
look for us to make some action for those States that aren't as 
far along as the State of Washington. Is that correct?
    Mr. Kreidler. Congressman, that is correct.
    Mr. Griffith. Now, I am concerned, I know you come from a 
healthcare background, and I am sure it wasn't your intent, but 
as an old country lawyer, when I see what appears to be, I am 
sure it wasn't the intent, but appears to be a little bit of a 
shell game, it always makes me worry. And I noticed that you 
talked about one of your larger--in your testimony you talked 
about one of your larger insurance companies, and you 
referenced Regence, but it looks like, from what I can 
determine, it was Regence Blue Cross Blue Shield of Oregon, 
which only covers one of the counties that had a decrease and 
about 1,500 folks involved, but that the larger presence in the 
State had a modest--not a large increase, but it had a small 
increase for the Regence Blue Cross Blue Shield of Washington. 
And so it just makes me curious as to--I am sure that those 
1,500 people think that it is very important, but I am just 
curious and it makes me wonder about what it going on there, 
but I have appreciated the rest of your testimony.
    In that regard, Ms. Lindeen, let me ask you. In regard to 
your colleague's experience in the State of Washington, it is 
my understanding that might be somewhat unique because 
Washington actually had State law that enacted small employer 
health insurance changes well before the Federal law was 
enacted, which meant that the bump that all of my people are 
seeing now, the increase in the cost actually occurred before 
the Affordable Care Act, ObamaCare, went into effect there, and 
that most States are going to see that increase coming up now. 
Is that your understanding? In other words, they got ahead of 
the curve so the increases are going to be less there because--
or not--or even decreases there because they were ahead of the 
curve in coming up with some of the requirements that ObamaCare 
requires our small groups now to have.
    Ms. Lindeen. Congressman, I would say that it certainly 
depends on the marketplace in the State. In Montana, we have 
seen mixed results depending on whether it is the mixed--or, 
excuse me, the individual market or the small group market. In 
fact, this year we are--or this coming year, we are going to 
see, unfortunately, some substantial increases in the 
individual market, but in the small group market those 
increases are very limited, between 3 and 7 percent on average.
    Mr. Griffith. OK. I do appreciate that. I am hearing from 
my constituents that they are very nervous about it, and they 
do make decisions, as you have heard others say, that some of 
those small employers are making decision, do they hire the 
51st employee, do they look at expanding, do they continue to 
carry all of the different products, in other words, do they 
lay off one shift perhaps that is doing a product line that is 
not as successful as some of the others and just focus on the 
high-profit areas. When they are on that bubble, these are all 
things that businesses take into account.
    I appreciate Mr. Guthrie for bringing the bill, and others, 
and do appreciate that we need to make some kind of a 
resolution, even if it is not this bill, that we need to do 
something.
    And I yield back. Thank you.
    Mr. Pitts. The Chair thanks the gentleman. Now recognize 
the gentleman from Missouri, Mr. Long, 5 minutes for questions.
    Mr. Long. Thank you, Mr. Chairman.
    Mr. Kreidler, your testimony says the State of Washington 
may be further along in implementing many of the reforms than 
other States. Why have more than \2/3\ of the rest of the 
States opted for the transition option?
    Mr. Kreidler. I think, in no small part, if you are talking 
about the federally facilitated Exchange through the Federal 
Government, is that correct, Congressman? If you are, in that 
situation I think politics played a lot to do with that. We had 
a former insurance commissioner from the State of Pennsylvania 
who headed the operation to assist States establishing their 
own exchanges. When it started, he was fully convinced that 
every State was going to jump to create their own exchange, 
rather than defer to the Federal Government, and yet, as you 
point out, \2/3\ have opted to do it otherwise. I think a lot 
of it had to do with the politics at the time, or the size of 
the State. I think most States were thinking of creating their 
own exchanges. In the long run, there are pluses and minuses as 
to whether you went with the Federal or whether you went with 
State--went with your own route with the State--as the State of 
Washington did.
    Mr. Long. Well, what you are doing may work in Washington--
in the State of Washington, which Mr. Guthrie's bill allows, so 
I think that you could be supported, but the president of your 
national association there at the table with you is saying that 
is what caused problems in other States.
    Mr. Kreidler. Congressman, it is like the body politics, 
you--just because the majority party says this is our position, 
it isn't necessarily what you take as an individual member, and 
I would say the same is true as being an insurance 
commissioner.
    Mr. Long. OK. Commissioner Lindeen, you are testifying on 
behalf of all States, whereas it seems that Commissioner 
Kreidler is only testifying on behalf of the State of 
Washington. Can you talk about what you are hearing from other 
commissioners and consumers across the United States?
    Ms. Lindeen. Congressman, thank you for the question. And, 
certainly, I appreciate the diverse point of view that all of 
the commissioners have across the country, including my 
colleague from Washington, but at the same time, I believe that 
the overwhelming number of commissioners across the country do 
believe that--and do support this piece of legislation because 
they understand that that will give them the flexibility to do 
what is right for their marketplace in their individual States 
because of the diversity.
    Mr. Long. OK, thank you. And, Mr. Giesa, you and others 
have warned that the current law could lead some employers with 
51 to 100 employees to self-insure to avoid higher premiums, 
which could result in adverse selection in the small group 
pool, and higher premiums for employers with between 1 and 50 
employees. Can you explain this adverse selection a bit more?
    Mr. Giesa. Yes, Congressman. Thanks for the question again. 
What we will see, I think, is the midsized employers will be 
looking at 2 options. They will be looking at guaranteed issue 
access to the small group market on a community-rated basis, 
and they will be looking at self-funding. And in some States, 
there is actually a third option and that is States that have 
adopted the transitional policy to stay on their existing 
policy. So these midsized employers will be looking at 3 
different options, saying which one is most financially 
advantageous for me. Those that choose the small group market 
will be the oldest and the sickest, and that will drive up 
premiums in that combined small group, midsized employer 
market.
    Mr. Long. OK, thank you. And thank you all for your 
testimony.
    And with that, Mr. Chairman, I yield back.
    Mr. Pitts. The Chair will recognize the gentleman, Mr. 
Cardenas, 5 minutes for questions.
    Mr. Cardenas. Thank you very much. I just want to say it is 
wonderful to--I have been here 2 \1/2\ years, and this is 
probably the most bipartisan moment I have been working with my 
colleague, Republican Guthrie, on, and Sinema, and a few 
others. I just want to say I appreciate all the efforts of 
the--and the sincere efforts that everybody has put into this 
bill so far.
    And with that, I have a question for--a couple of 
questions, one of them for Commissioner Lindeen. Thank you so 
much for testifying today. My question is, given that this 
legislation would allow States to determine the size of their 
small group market for themselves, do you anticipate any States 
that would make the move to include companies with 51 to 100 
employees, given the new realities of the ACA?
    Ms. Lindeen. Congressman, I am sure that there will be 
States who would make that decision and feel that is the best 
for their marketplace, while others would not.
    Mr. Cardenas. Um-hum, but to have that option, and the 
hopes and expectation that each State will evaluate it based on 
the needs and their understanding of their constituencies and 
their businesses, or what have you, do you see that it could 
possibly provide--should this come--law go into effect, it 
would provide that kind of result that we would hope for?
    Ms. Lindeen. Absolutely.
    Mr. Cardenas. OK. Also, Mr. Kreidler, do you oppose a--
different States from determining what works best for their 
small group markets?
    Mr. Kreidler. Congressman, I would have to say, you know, 
there are places where choice is certainly something that is 
preferred. There are other places where it is not. Before 
healthcare reform, the States had a great deal of latitude to 
do healthcare reform and yet we saw a growing problem of the 
number of uninsured in this country continuing to rise, and we 
saw the amount of spending in the healthcare system that was 
not collected, it was shifted to other payers. It is one of 
those things where we are clearly seeing we needed to have 
improvement, we needed to do it on a national basis, and having 
a national standard is something that really works well. And 
that is why I would be the first to admit that offering to some 
States the opportunity for a couple-of-year delay before this 
went into effect, but don't hamper a State like mine that is 
ready to step up and make the changes right now. But to 
essentially suspend this activity and defer it back to the 
State is a move against healthcare reform in the sense of 
helping to create the kind of large markets, large groups of 
self--or the community-rated pool that you have with the small 
group market that advantages small business. I don't want to 
deny small business those advantages.
    Mr. Cardenas. OK. Commissioner Lindeen, having heard that, 
do you have any comments?
    Ms. Lindeen. Congressman, I think that it is important not 
to deny the small businesses that are currently utilizing a 
product that works for them----
    Mr. Cardenas. Um-hum.
    Ms. Lindeen [continuing]. To be able to continue to do 
that.
    Mr. Cardenas. Um-hum.
    Ms. Lindeen. And so I think that this piece of legislation 
which you are coauthoring is a good thing for those small 
businesses and for their employees, and so I would encourage 
passage.
    Mr. Cardenas. OK. The reason why I ask is because, to me, 
what this legislation would do, which affects an incredibly 
larger piece of legislation, would allow an opportunity where, 
hopefully, very responsible legislators, Governors, et cetera, 
will actually responsibly evaluate this additional tool and 
then use it responsibly. And I feel if they do so, then what 
would happen is, overall, we will get the benefit of those 
States that perhaps choose that they are not going to go to the 
100 model and--because of what is best for their constituency, 
and those that choose to go to the 100 model, they will do so 
because they are--they have the best interest of their 
businesses and their constituents, the workers and their 
families in mind. So, to me, this is a bill that actually 
enhances the opportunity for responsible individuals to go 
ahead and say this is better--this is going to be a better 
environment, and as a result, hopefully, we will have better 
results.
    Thank you very much, and I yield back my time.
    Mr. Guthrie [presiding]. I thank my friend for yielding 
back.
    And seeing no further questions, I appreciate the comments, 
and it has truly been a bipartisan effort and carefully crafted 
bill.
    And I want to remind the members they have 10 business days 
to submit questions for the record, and ask the witnesses to 
respond to these questions promptly. Members should submit 
their questions by the close of business Wednesday, September 
23.
    Without objection, the subcommittee is adjourned.
    [Whereupon, at 12:15 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Fred Upton

    Today we will examine H.R. 1624, the Protecting Affordable 
Coverage for Employers Act, authored by Subcommittee Vice 
Chairman Brett Guthrie. This important bill would provide 
relief for many employers who are on track to face higher 
health coverage costs in coming months if we do not act soon.
    Currently, health insurance offered in the small group 
market must meet certain requirements that do not apply to the 
large group market. Because of a requirement in the president's 
health law, beginning next year businesses with between 51 and 
100 employees will be forced to offer health insurance coverage 
that currently applies only in the small group market.
    These new mandates and requirements will ultimately lead to 
higher premiums for employees. The new plans are also expected 
to have less flexibility with respect to plan design as 
compared to the current plans. Employers with 50 or fewer 
employees also may face disruption under current law, facing 
higher costs and fewer choices over time.
    One of our witnesses today has estimated that roughly two-
thirds of businesses offering coverage to their 51-100 
employees could face an 18 percent increase in premiums. 
Additionally, the American Academy of Actuaries has projected 
more than 150,000 establishments with over 3 million workers 
could be negatively impacted if we do not act.
    I know many employers in my home State of Michigan have 
already seen their health care costs increase, and many more 
are worried about what 2016 may bring.
    According to nonpartisan analysis, enactment of H.R. 1624 
would yield notably lower premiums than currently projected, 
encourage continued health coverage, discourage employers from 
dropping coverage, and help encourage market stabilization. 
Under this bill, businesses and their employees will be able to 
keep their current health care plans and avoid higher premiums 
for coverage with more prescriptive benefit mandates and rating 
restrictions.
    This bill enjoys strong bipartisan support. H.R. 1624 has 
more than 200 cosponsors, and a similar bill in the Senate 
enjoys the support of nearly one-third of the Senate.

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