```

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

                                                         S. Hrg. 114-82

      EXAMINING THE EMPLOYMENT EFFECTS OF THE AFFORDABLE CARE ACT

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

                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 3, 2015

                               __________

          Printed for the use of the Joint Economic Committee

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

SENATE                               HOUSE OF REPRESENTATIVES
Daniel Coats, Indiana, Chairman      Kevin Brady, Texas, Vice Chairman
Mike Lee, Utah                       Justin Amash, Michigan
Tom Cotton, Arkansas                 Erik Paulsen, Minnesota
Ben Sasse, Nebraska                  Richard L. Hanna, New York
Ted Cruz, Texas                      David Schweikert, Arizona
Bill Cassidy, M.D., Louisiana        Glenn Grothman, Wisconsin
Amy Klobuchar, Minnesota             Carolyn B. Maloney, New York, 
Robert P. Casey, Jr., Pennsylvania       Ranking
Martin Heinrich, New Mexico          John Delaney, Maryland
Gary C. Peters, Michigan             Alma S. Adams, Ph.D., North 
                                         Carolina
                                     Donald S. Beyer, Jr., Virginia

                  Viraj M. Mirani, Executive Director
                 Harry Gural, Democratic Staff Director

                            C O N T E N T S

                              ----------                              

                     Opening Statements of Members

Hon. Daniel Coats, Chairman, a U.S. Senator from Indiana.........     1
Hon. Carolyn B. Maloney, Ranking Member, a U.S. Representative 
  from New York..................................................     4

                               Witnesses

Dr. Casey B. Mullilgan, Professor of Economics, University of 
  Chicago, Chicago, IL...........................................     6
Dr. Joseph P. Sergio, President, The Sergio Corporation, South 
  Bend, IN.......................................................     8
Ms. Barbara L. Carroll, Associate Vice Chancellor for Human 
  Resources, North Carolina State University, Raleigh, NC........    10
Dr. Paul N. Van de Water, Senior Fellow, Center on Budget and 
  Policy Priorities, Washington, DC..............................    12

                       Submissions for the Record

Prepared statement of Hon. Daniel Coats..........................    34
Prepared statement of Hon. Carolyn B. Maloney....................    36
Prepared statement of Hon. Kevin Brady...........................    40
Dr. Casey B. Mullilgan, Professor of Economics, University of 
  Chicago, Chicago, IL...........................................    41
Dr. Joseph P. Sergio, President, The Sergio Corporation, South 
  Bend, IN.......................................................    72
Ms. Barbara L. Carroll, Associate Vice Chancellor for Human 
  Resources, North Carolina State University, Raleigh, NC........    79
    Letter dated March 18, 2013, from Terry W. Hartle to the 
      Internal Revenue Service...................................    85
    Letter dated July 16, 2013, from Terry W. Hartle to Mr. J. 
      Mark Iwry..................................................    90
Dr. Paul N. Van de Water, Senior Fellow, Center on Budget and 
  Policy Priorities, Washington, DC..............................    95
Charts submitted by Senator Bill Cassidy:........................
    Chart titled ``Hours Breakdown''.............................    99
    Chart titled ``A Tale of Two Recoveries''....................    99
    Chart titled ``Low-Income Workers Hit Hardest by Recession''.   100
    Chart titled ``Low-Income Workers Have Lost the Most Work 
      Hours''....................................................   100
    Chart titled ``Health Care v. Health Insurance Costs 
      Inflation Rates''..........................................   101
Questions for the Record and Responses submitted by 
  Representatives Maloney and Adams..............................   102

 
      EXAMINING THE EMPLOYMENT EFFECTS OF THE AFFORDABLE CARE ACT

                              ----------                              

                        WEDNESDAY, JUNE 3, 2015

             Congress of the United States,
                          Joint Economic Committee,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:30 p.m. in Room 
562 of the Dirksen Senate Office Building, the Honorable Daniel 
Coats, Chairman, presiding.
    Representatives present: Brady of Texas, Paulsen, 
Schweikert, Grothman, Carolyn B. Maloney of New York, Delaney, 
and Beyer.
    Senators present: Coats, Lee, Cotton, Cassidy, Klobuchar, 
Casey, Heinrich, and Peters.
    Staff present: Barry Dexter, Cary Elliott, Harry Gural, 
Colleen Healy, Christina King, David Logan, Kristine Michalson, 
Viraj Mirani, Barry Nolan, Robert O'Quinn, Brian Phillips, 
Leslie Phillips, Sue Sweet, Aaron Smith, Phoebe Wong.

   OPENING STATEMENT OF HON. DANIEL COATS, CHAIRMAN, A U.S. 
                      SENATOR FROM INDIANA

    Chairman Coats. Normally we would be calling this to order. 
The House is just finishing a series of votes and our House 
colleagues are, as I am told, on the way here. And so we want 
to give them the opportunity to be here when we start. So we 
are going to delay for just a few more minutes and hopefully 
they will be arriving shortly.
    In the meantime, everybody can keep talking and enjoy--you 
do not have to be solemn and silent.
    [Short recess.]
    I am going to call the Committee to order here. What I will 
do is just give my opening remarks before Ms. Maloney arrives, 
Congresswoman Maloney arrives, and introduce our witnesses. And 
then when she arrives, she can give her opening statement and 
we will move on from there.
    This hearing will examine the effects of the Affordable 
Care Act on the labor market, as well as discuss the 
implications of those effects on productivity, on income, and 
the economy at large.
    I want to extend a warm welcome to our Committee witnesses. 
I appreciate you being here today.
    The impact of the Affordable Care Act is particularly 
important to discuss this year now that the delayed employer 
provisions are in effect and employers are now feeling the 
pinch and dealing with the mandated requirements of the Act.
    The ACA contains numerous provisions that penalize workers 
and subsidize those who do not work. In fact, the Congressional 
Budget Office estimates that from 2017 to 2024 the law will 
reduce the total number of hours worked by as much as 2 
percent. People say, well, 2 percent? Well that 2 percent is 
equal to as much as two and a half million full-time equivalent 
workers.
    Obviously that is going to have a significant impact. The 
Congressional Budget Office also reasoned that this would 
result from the, and I quote, ``the new taxes and other 
incentives that they will face and the financial benefits some 
will receive.''
    CBO says that a one percent reduction in total labor 
compensation over the same time frame will likely occur. 
However, even those figures may underestimate the true impact 
of the law because those estimates do not include every 
relevant provision that would affect employment.
    For example, the employer insurance mandates will encourage 
employers to shift workers from full-time to part-time 
employment. We have seen that already.
    The Medicaid expansion will motivate, or could motivate 
many low-wage full-time workers to reduce hours in order to 
obtain coverage. The marketplace exchange subsidies phase out 
abruptly as incomes rise, penalizing workers near those 
thresholds.
    And finally, the series of new taxes on individual income 
and health care services will reduce the incentive to work, 
save, and invest.
    Further, many of these provisions could profoundly affect 
business' abilities to expand, alter workers' hours and 
schedules, and reduce work flexibility for employees.
    New compliance costs in terms of time and resources will 
add significant burden to businesses. Not only does the law 
affect millions of businesses and their employees, but also 
thousands of schools and local governments.
    I have heard from many Indiana schools that are feeling the 
impact and have been forced to cut hours to make ends meet on 
already-constrained budgets. This is hurting not only school 
employees but students from elementary school through college.
    In an era characterized by having to do more with less, 
these institutions appear to be particularly affected by the 
undue burdens of the Affordable Care Act.
    Sadly, too much of the conversation has attempted to focus 
on the proposed benefits, without taking into consideration 
some of the very real and significant costs and their impact 
particularly on employment.
    That is not how a cost-benefit analysis works. It sounds 
more like a benefits-only analysis.
    In addition to these economic burdens, we now know that 
many of the goals of the Affordable Care Act have not been met. 
Emergency room visits continue to rise. Health care costs in 
terms of premiums, co-payments, and deductibles continue to 
rise, some dramatically. Many seem to be saying that they are 
happy to hear that more people are covered, but it is less 
affordable for us.
    CBO estimates that premiums will rise an average of 8.5 
percent annually over the next three years as temporary 
government programs intended to reduce insurer costs are phased 
out.
    In most states, insurers with large market shares have 
proposed rate increases exceeding 20 percent for the next year. 
ObamaCare is about to become much more expensive than has been 
advertised.
    While this law may have provided affordable access to 
health care for some, it has seriously hindered others. Many 
lost their employer-provided insurance and were displaced to 
the exchanges and Medicaid.
    Many lost the ability to keep their plans and their 
doctors. New taxes built into the law still to be implemented 
will have additional negative effects on businesses and its 
workers.
    I think I can speak for many of us, if not all of us, here 
in saying that we would like everybody to be insured and 
receive quality health care when they need it. However, the 
policy on the books is not the solution; instead it has led to 
more unintended problems.
    A one-size-fits-all government-run health care system, in 
my opinion, is not the answer. We are looking for the best 
workable real-world solution for Americans, and I do not 
believe we have hit that mark just yet.
    We should pursue initiatives that truly make health care an 
option for all. Such initiatives should drive down costs by 
increasing competition and transparency, reforming medical 
malpractice, making health insurance portable, promoting 
pooling options for small businesses, and giving states greater 
flexibility in delivering health services.
    Americans deserve a better health care system that puts 
individuals squarely in charge of their health care and does 
not discourage Americans from working and improving their 
earnings.
    We look forward to discussing these ideas, issues, and your 
thoughts with these witnesses in more depth. I would like to 
introduce our witnesses while we are waiting for Ranking Member 
Maloney.
    Let me start with Dr. Casey Mulligan, a Professor of 
Economics at the University of Chicago. He earned his Ph.D. in 
Economics from the University of Chicago, and has also served 
as a visiting professor teaching public economics at Harvard 
University and Clemson University. He recently wrote a book on 
the Affordable Care Act entitled ``Side Effects: The Economic 
Consequences of The Health Reform.''
    Dr. Mulligan, we welcome you here.
    I might say, I was attending graduate school at the 
University of Chicago some time ago when I received the letter 
from Uncle Sam saying he would rather have me in an Army 
uniform. I never made it back to Chicago, let alone even think 
about applying to Harvard. So my life has changed significantly 
with the arrival of the letter.
    Next we have Dr. Joseph Sergio, who is President of The 
Sergio Corporation located in Indiana. Welcome, Doctor. We 
truly appreciate you coming here to testify. Dr. Sergio holds a 
Bachelors and a Masters in Clinical Psychology from Ball State 
University, and a Ph.D. in Organizational Behavior Management 
from the University of Notre Dame. He is the former President 
of the Midwest Region for one of the largest and highest rated 
disaster restoration networks in North America, and completes 
over $1 billion of hurricane restoration each year.
    Dr. Sergio, we thank you for being here. You might want to 
give us a hurricane forecast for this upcoming season here.
    [Laughter.]
    Our next witness is Ms. Barbara Carroll, who has served as 
Associate Vice Chancellor and Chief Human Resources Officer at 
North Carolina State University since 2004. She holds an MBA 
from Vanderbilt's Owen Graduate School of Management. Prior to 
her job at North Carolina State, she held Chief HR roles in the 
University of Georgia Swarthmore College and the University of 
Missouri, St. Louis Campus. Ms. Carroll is a Chair-Elect of the 
National Board of the College and University Professional 
Association for Human Resources, and chairs its National Public 
Policy Advisory Committee.
    Thank you, Ms. Carroll for being here.
    And finally, we have Dr. Paul Van de Water, a Senior Fellow 
at the Center on Budget and Policy Priorities where he 
specializes in Medicare, Social Security, and health coverage 
issues. He is also Director of the Center's Policy Futures 
Initiative. Dr. Van de Water has previously worked at the 
Congressional Budget Office and holds a Bachelor's Degree with 
Highest Honors in Economics from Princeton University, and a 
Ph.D. in Economics from the Massachusetts Institute of 
Technology.
    With that, the timing I think is really, really good 
because I just finished my opening statement. I just finished 
introducing our witnesses. And if you are ready to give your 
statement----
    Representative Maloney. I am ready.
    Chairman Coats [continuing]. I will call on Congresswoman 
Maloney, our Ranking Member.
    [The prepared statement of Chairman Coats appears in the 
Submissions for the Record on page 34.]

OPENING STATEMENT OF HON. CAROLYN B. MALONEY, RANKING MEMBER, A 
               U.S. REPRESENTATIVE FROM NEW YORK

    Representative Maloney. Thank you so much, Chairman Coats, 
and thank all of you for being with us today for this important 
hearing, and I look forward to your statements.
    The Affordable Care Act is one of the most important pieces 
of legislation in a generation. Enacted in early 2010 with many 
of the major provisions taking place in the past year, we are 
beginning to recognize the positive impacts of this ground-
breaking law.
    The Affordable Care Act has expanded health insurance 
coverage in this country and has helped families who could not 
get health care through their employer, who could not afford 
it, or who have what the insurance industry has called ``pre-
existing conditions.''
    Already the Affordable Care Act has helped to reduce the 
health care costs and improve the quality of health care.
    My Republican friends argue that health care reform kills 
jobs. Democrats understand that not having health care kills 
people. A Harvard Medical School study conducted before the 
Affordable Care Act was enacted found that 45,000 deaths each 
year are linked to a lack of health care insurance.
    The Affordable Care Act has led to the largest expansion of 
health care coverage in half a century; 16.4 million people 
have gained health care coverage through the Affordable Care 
Act.
    The Nation's uninsured rate, 11.9 percent, is at the lowest 
level on record. It could be even lower. An additional 4.3 
million people would gain health care insurance by 2016 if 21 
states, many governed by Republican legislatures and governors, 
had not refused to accept the Medicaid expansion contained in 
the Affordable Care Act. This opposition is largely on 
ideological grounds. Any discussion of the possible costs of 
the Affordable Care Act must take place in the context of those 
overwhelming gains in coverage.
    What is less often talked about are the significant 
benefits to those who are already insured. For example, 
insurance companies can no longer deny someone coverage because 
of a pre-existing condition, or drop an individual's coverage 
when she or he gets sick.
    Lifetime limits on benefits are banned, and insurance 
companies must offer preventive services, including mammograms 
and others with no out-of-pocket expenses.
    In addition to these significant improvements in our health 
care system, the ACA has positive economic benefits. As a 
result of the ACA, Americans are no longer forced to remain in 
jobs that are not optimal for them because they are afraid of 
losing their health insurance.
    Economists call this ``job lock.'' The ACA significantly 
reduces it.
    As a result of the ACA, individuals are able to start their 
own businesses, or pursue new opportunities that are a good 
match for their skills.
    As result of the ACA, we have a healthier and more 
productive workforce. Healthier workers are able to spend more 
time in the workforce, less days away from work. They are more 
likely to remain in the labor force and less likely to become 
disabled.
    I want to address directly the claim by some that the 
Affordable Care Act will negatively affect employment. Some 
call it a, quote, ``job killer,'' end quote, and they are dead 
wrong.
    Since the Affordable Care Act became law in March of 2010, 
businesses have created 12.3 million jobs during 62 consecutive 
months of private-sector job growth. That's the longest job 
growth on record. And as you see the chart, it shows the red 
valley, and then job growth and expansion for these 62 
consecutive months.
    In the past year as the Affordable Care Act's major 
provisions have taken effect, the private sector has created 
nearly 3 million private sector jobs. Critics suggest that many 
employees who are working full time would be forced to work 
part time by employers trying to evade the employer mandate.
    They are wrong about this, as well. Only a tiny share of 
employers--approximately one-fifth of one percent--would be 
affected by the ACA requirement. Part-time employment has in 
fact declined, as this chart shows, as a share of total 
employment.
    All of the employment growth has been in full-time jobs. 
See the long blue line going forward, and the red line, part-
time employment.
    The number of workers working part time who would prefer 
full-time work has declined for five consecutive years. Again, 
this chart points this out quite vividly.
    The Affordable Care Act also will reduce the federal 
deficit. CBO estimates that the ACA will reduce the deficit by 
$100 billion between 2013 and 2022.
    The Affordable Care Act has brought about the largest 
expansion of health insurance coverage in 50 years, helped to 
improve health care quality, and reduced health care prices.
    At the same time, employment growth has been strong and 
labor market conditions are continuing to improve. 
Nevertheless, my Republican colleagues in the House have voted 
nearly 60 times to repeal or weaken the Affordable Care Act.
    The reality is that repealing the ACA would cause millions 
to lose their coverage and return us to the days when you could 
not leave your job because you were afraid to lose your health 
care insurance, or could not get coverage in the first place 
because you had a pre-existing condition.
    I cannot tell you how many women came to see me who were 
pregnant and could not get health care because pregnancy was 
considered at that time a pre-existing condition.
    It is critical to remember these huge benefits for the 
insured, the previously uninsured, and the economy as we 
continue our conversation about the Affordable Care Act.
    I look very much forward to hearing the perspective of our 
witnesses this afternoon, and I thank all of you for appearing 
before this Committee, and especially the Chairman for calling 
this important hearing. And I yield back.
    [The prepared statement of Representative Maloney appears 
in the Submissions for the Record on page 36.]
    Chairman Coats. Thank you, Congresswoman.
    And, Dr. Mulligan, I think we will start with you and go 
down the line. If you could summarize your comments, you've 
submitted written reports, and summarize your comments within a 
roughly five-minute time frame, we would appreciate it. It 
gives us more time to deal with and answer questions from our 
colleagues.
    Dr. Mulligan.

  STATEMENT OF DR. CASEY B. MULLIGAN, PROFESSOR OF ECONOMICS, 
               UNIVERSITY OF CHICAGO, CHICAGO, IL

    Dr. Mulligan. Thank you. And good afternoon, Chairman Coats 
and Ranking Member Maloney, and the members of the Committee.
    I appreciate the opportunity and really honor to comment on 
what I've learned about the labor market effects of the 
Affordable Care Act.
    Subsidizing health insurance in order to make it more 
affordable for a significant part of the population, as this 
law does, necessarily involves the creation of disincentives to 
work and earn.
    My testimony characterizes the disincentives created and 
offers estimates of their likely consequences for the Nation's 
economy.
    Results like these are necessary for conducting a full 
cost/benefit analysis, as you mentioned, of the law; but they 
are not sufficient because in my own work I do not have an 
estimate of the health and other benefits of subsidizing health 
insurance, and my analysis is limited to the insurance coverage 
provisions of the law.
    Now the law has disincentives and penalties that add to its 
burden on a family whenever they either earn more or accept a 
job, or both. These are disincentives to earn and work.
    The personal income tax that many of us file in April is 
perhaps the best known example of a tax with disincentives. 
Indeed, the ACA has new income taxes, although primarily 
implicit because the benefits or assistance are withdrawn on 
the basis of income.
    But the ACA contains a second type of tax that is both more 
important and misunderstood even by the experts. I call that 
type of tax ``full-time employment taxes.''
    I brought a little chart to show how they work. I show 
three exhaustive and mutually exclusive employment categories 
here: top, middle, and bottom. An ESI employer refers to an 
employer that offers affordable health insurance coverage to 
its full-time workers. And an ESI worker refers to anyone who 
works for such an employer.
    Now let's look at the relationship between two major ACA 
features--health insurance subsidies and employer penalties--
and employment status, as I have categorized them here. Only 
the top two categories are eligible for the subsidies 
administered through the health exchanges because the law says 
that anyone offered affordable coverage by their employer 
cannot receive the subsidies. The people on the bottom are out 
of luck. That by itself pushes people out of the bottom 
category.
    Let me also point out that this push is not an income tax. 
If people could somehow reduce the number of weeks they work 
full-time without changing their income, they would avoid this 
implicit tax. But if they reduce their income without changing 
their weeks of full-time work, they would not. That is why it 
is not an income tax.
    Only the top category is penalized. Only employers not 
offering coverage pay penalties, and they pay on the basis of 
number of people they have on their full-time payroll.
    Now let's look at the net of the subsidies and penalties, 
at least on average. The bottom category, clearly the net is 
zero. But the top category's net is pretty close to zero, as 
well.
    So the first-order thing that is happening here is 
redistribution from the top and bottom categories into the 
middle category. You can call it, as I do, a tax on full-time 
employment, or you could call it a subsidy to everything but 
full-time employment. But either way, the economics is the 
same.
    This tax can be so large that some people would earn less 
working full time than they are working part-time. In essence, 
the health law has made full-time workers some of the only 
people who have to pay full price for health care, not to 
mention the taxes that have to be paid so the Treasury can 
assist the many people who are not working full-time.
    Given the size and the character of the disincentives, you 
cannot reasonably hope that business will continue as usual in 
the economy while the law is fully phased in.
    I estimate about 3 percent less employment permanently as a 
result of the law, and about 2 percent less national income or 
GDP.
    Economic reasoning and historical evidence tell us that the 
employment and income effects will be more visible in the 
aggregate data than the so-called 29 phenomenon will be. The 
law is being phased in over time, so economics gives us little 
reason to expect these effects as early as 2014. But it will 
not be long--I would say next year or 2017.
    In summary, helping people who cannot or will not purchase 
health insurance has a price in terms of labor market 
efficiency. The ACA creates new income taxes and full-time 
employment taxes that will be directly experienced by about 
half the workforce, and indirectly experienced by essentially 
the entire Nation.
    With more disincentives than we had eight or nine years 
ago, we cannot reasonably expect the labor market to return 
back to where it was then. Thank you.
    [The prepared statement of Dr. Casey B. Mulligan appears in 
the Submissions for the Record on page 41.]
    Chairman Coats. Thank you very much.
    Dr. Sergio.

   STATEMENT OF DR. JOSEPH P. SERGIO, PRESIDENT, THE SERGIO 
                  CORPORATION, SOUTH BEND, IN

    Dr. Sergio. Chairman Coats, Ranking Member Maloney, and 
distinguished Members of the Joint Economic Committee:
    Thank you for the opportunity to address you and to share 
my experience with the impact of the Affordable Care Act on 
small businesses.
    My name is Joe Sergio. I'm the President of the Sergio 
Corporation, a parent company with two operating entities 
headquartered in South Bend, Indiana. I come to you 
representing the small business community.
    By way of introduction, I am a first-generation American 
citizen. My father was an Italian emigrant who realized the 
promise of the American Dream as a small businessman. Our 
family business, the Sergio Corporation, was founded 36 years 
ago and operates two service businesses, including First 
Response, a national award-winning disaster restoration company 
that has been involved in every major hurricane and storm 
disaster response in the past decade or so.
    In 2011, we started a second company called Polar Clean 
America to provide a green, environmentally friendly dry-ice 
blast cleaning industrial service. We do not use water 
chemicals, and we clean everything from nuclear plants to food 
processing plants, pharmaceutical and automotive industry.
    As a small business, we have felt the profound imposition 
of the Affordable Care Act, or as it is known among many small 
business entrepreneurs, ``the unaffordable care act.''
    In order to understand the chilling impact of ObamaCare and 
why it has hurt small business so badly, it is first necessary 
to understand what makes a job creating small business succeed 
and sustain itself through time and through strategic market 
changes.
    To be successful in a small business, you must be able to 
accurately identify, forecast, and control your expenses in 
order to create profits, profits that you can in turn reinvest 
in growing the business.
    Our profits become the engine of our investment in building 
the right team with the proper training and being able to 
utilize cutting-edge technology to create world-class services 
for our clients.
    Small businesses, their advisors, tax professionals, and 
even insurance companies are very frustrated with ObamaCare 
complications and regulations. Regardless of the current 
demonization of profits by Washington, making a profit does not 
make one dishonest or evil.
    Without a profit, there can be no growth in wages, no new 
benefits, no new training, no new equipment, no new vehicles, 
and no research and development that allow us to better compete 
with the rest of the world.
    Profits create the opportunity for growth and development. 
I think that it was best stated by Edmund Pendleton, President 
of the Convention ratifying the United States Constitution, 
when he said, and I quote, ``When you take away somebody's 
profit, you not only remove their incentive to work hard, but 
you shut off the blessing of wealth that would have benefitted 
the entire community.''
    Our businesses have exhausted many options in dealing with 
the requirements of the Act, but now we had to drop a 
traditional PPO for a high-deductible ObamaCare-compliant 
program. As a result, our employees and our companies are 
paying more for an inferior policy.
    Employees are now paying larger co-pays and larger 
deductibles. Some are opting to pay the penalty rather than 
absorb the high cost of ObamaCare. Surpassing 50 employees will 
bring on even more administrative costs and reporting 
requirements such as the onerous new paperwork that will be 
dumped on employers in 2016 by the IRS Forms 1094-C and 1095-C. 
As a result, many small businesses like ours have purposefully 
stayed under 50 employees and utilized more part-time employees 
working under 30 hours per week.
    Also, as a matter of conscience, many employers disdain the 
mandate that requires them to cover abortions. This is viewed 
as un-American and steps on our right to practice our faith 
unencumbered by the government.
    My experience is that most small businesses and insurance 
professionals, as well as employees and families, are 
frustrated and angry due to the failed promise to lower costs 
for the average family by $2,500, and the fact that the one-
size-fits-all law actually caused the price of insurance to 
increase substantially.
    In short, ObamaCare has made building a small business more 
stressful and riskier, and has caused many to pull back and to 
stop growing. As owners, we feel a responsibility to our 
families and our children, but also to all of the employees who 
chose to work together with us on our team, their spouses, and 
their children as well.
    Common sense and a basic understanding of human nature 
tells me that you will always get what you incentivize. You get 
more of what you reward and less of what you punish. ObamaCare 
punishes employment growth and the incentive is to not grow.
    I believe that ObamaCare has damaged the best health care 
system in the world, damaged the American family, and hurt 
employees and employers alike with huge deductibles which the 
average person cannot afford.
    Please work to undo the vast harms that ObamaCare has and 
is causing to the middle class and start over, addressing the 
essential issue of unleashing small businesses to create 
millions of new jobs which could raise most people from being 
at risk and into truly affordable plans.
    As a small business entrepreneur and job creator, I urge 
you to repeal ObamaCare and allow for market innovation within 
the health industry, allow for pooling across state lines, and 
allow small businesses freedom from oppressive requirements, 
new taxes and fees, and increased uncertainty.
    Thank you for the opportunity to share my experience with 
regard to ObamaCare. I look forward to questions.
    [The prepared statement of Dr. Joseph P. Sergio appears in 
the Submissions for the Record on page 72.]
    Chairman Coats. Doctor, thank you.
    Ms. Carroll.

STATEMENT OF MS. BARBARA L. CARROLL, ASSOCIATE VICE CHANCELLOR 
FOR HUMAN RESOURCES, NORTH CAROLINA STATE UNIVERSITY, RALEIGH, 
                               NC

    Ms. Carroll. Honorable Members of the Committee, I would 
like to spend some time talking about the Affordable Care Act 
and its impact on colleges and universities.
    I am the chief HR officer at North Carolina State 
University. I am speaking on behalf of the College and 
University Professional Association for Human Resources, or 
CUPA-HR, which represents more than 1,900 institutions of 
higher ed.
    CUPA-HR supports the goal of ensuring that Americans have 
access to health care. Higher ed has historically provided 
health care benefits for its full-time faculty and staff, so 
the ACA did not create new requirements for our primary 
populations of employees. Where we have encountered new 
challenges, however, is with the unexpected impact on our part-
time professionals, and most notably on our students.
    In my written testimony I discuss our challenges in 
applying the ACA to adjunct faculty paid on a per-course basis, 
and on our work with government agencies to resolve those 
issues.
    I also discuss our concerns with the so-called ``Cadillac 
tax,'' and a recent informal interpretation by the government 
that may threaten our ability to support graduate student 
health coverage.
    But given the time limits, I am going to focus on the issue 
we hear the most about from our CUPA-HR members, which is the 
ACA's impact on students.
    We think of our students, whose primary purpose for being 
on campus is to seek an education rather than to earn a living, 
as just that: students, and not employees. But they are 
currently being swept in under ACA employer mandates. Unless 
addressed, this has a significant economic impact on both 
students themselves and on their institutions.
    The funds that we provide to students for on-campus 
assignments are a form of financial aid to support the 
continuation of the student's degree progress. This type of 
self-help financial aid is a long-standing characteristic of 
federal financial aid policy like the Federal Work-Study 
Program.
    We have not historically covered students under employee 
health care plans or other employee benefit programs like 
retirement plans. The vast majority of students have access to 
health care coverage through their family's plan, or through 
government-regulated student health insurance plans, SHIP 
plans, provided by their institutions.
    Our problem is that the ACA does not specifically exclude 
most student workers from the employer mandate. So today the 
only exemption from the Department of Treasury that they have 
provided is for students' informal work-study programs, an 
exemption that we requested and appreciate, but it does not go 
far enough to address the issues with many other student 
workers.
    Since we have to cover 95 percent of our eligible employees 
in 2016, we are facing the prospect of having to track student 
hours and offer employee health care coverage to any student 
who hits ACA's eligibility thresholds. Offering student workers 
such employee coverage substantially increases the 
administrative burdens, costs, and liabilities.
    Significant new costs result in higher tuition. To avoid 
this, institutions are being forced to cut on-campus work 
opportunities for students, which will particularly impact 
students with limited or no family resources for whom campus 
financial opportunities are their primary source of support, 
other than incurring student debt.
    In many cases, tracking student work hours is difficult, if 
not impossible. When is a grad student who is conducting 
research in a lab under the supervision of a faculty member, 
when are they learning for their own benefit or society's 
benefit versus working for the university's benefit?
    When is a dormitory resident advisor ``working'' versus 
hanging out? Because calculating work hours in these situations 
is impractical, institutions are going to be forced to err on 
the side of caution and impose some dramatic constraints.
    We also provide stipends to students who participate in 
activities such as student government, and student 
publications, drama clubs, radio stations. We certainly do not 
track these students' participation hours as work for an 
employer, and the stipends are a way for institutions to help 
students who otherwise might need to seek off-campus paid 
employment, to participate in these co-curricular enrichment 
activities.
    While the Department of Labor has long recognized that a 
student may receive such payment without creating an employment 
relationship, the Department of Treasury has yet to provide 
such assurances with respect to the ACA.
    As a result, colleges and universities may conclude that 
they must simply stop providing such stipends. These are bad 
outcomes for students, bad outcomes for parents, bad outcomes 
for colleges and universities.
    Along with the American Council on Education and other 
higher-ed associations, CUPA-HR approached Treasury with 
several possible solutions. Both the Department of Labor and 
the Department of Treasury have long acknowledged the unique 
circumstance of students on campus in guidance such as the 
DOL's Exemption of Students from the Fair Labor Standards Act, 
and the IRS's own exemption of students from FICA tax.
    We hope that Treasury will issue guidance that clearly 
exempts students from the ACA employer mandate, as well.
    Another approach would be for Treasury to deem compliance 
if an institution offers its students coverage under an ACA-
compliant SHIP plan. Between one and one-and-a-half million 
students receive coverage under such student health plans.
    Health and Human Services issued regulations on SHIP plans, 
making them minimum essential coverage plans, sufficient to 
meet the ACA. We believe that these solutions are within 
Treasury's discretionary authority and could prevent 
unnecessary negative outcomes for students, parents, and 
institutions.
    I would like to note that Treasury has been quite 
responsive to our requests to meet, and has been willing to 
engage in thoughtful dialogue on these issues. We wish that 
they would act rapidly with respect to the solutions we've 
offered on students.
    So I hope bringing forward some of our most pressing 
economic concerns will help result in some workable solutions.
    I would like to express my gratitude to Members of the 
Committee, and thank you for the opportunity to testify, and I 
would be happy to answer any questions.
    [The prepared statement of Ms. Barbara L. Carroll appears 
in the Submissions for the Record on page 79.]
    Chairman Coats. Ms. Carroll, thank you very much.
    And, Dr. Van de Water.

STATEMENT OF DR. PAUL N. VAN de WATER, SENIOR FELLOW, CENTER ON 
          BUDGET AND POLICY PRIORITIES, WASHINGTON, DC

    Dr. Van de Water. Thank you, Mr. Chairman, Ranking Member 
Maloney, and Members of the Committee; I appreciate the 
opportunity be here this afternoon.
    Five years after its enactment, the Affordable Care Act has 
achieved many of its major objectives and proved wrong its 
critics' most dire predictions.
    The ACA's most visible success, of course, has been to 
increase the number of Americans with health insurance. Some 17 
million more people now have coverage, either through the 
Health Insurance Exchanges, the Medicaid Expansion, or young 
adults being covered on their parents' policies.
    The Congressional Budget Office projects that the number of 
newly insured will swell to 25 million within just a few years.
    Moreover, as Mrs. Maloney said, health reform is increasing 
coverage without adding to the budget deficit. The 
Congressional Budget Office now projects that federal health 
spending will be nearly $700 billion less over the 2011-2020 
period than CBO projected in January 2010, just prior to the 
enactment of the Affordable Care Act.
    Now those are some things that have happened. It is also 
important to note some things that have not happened.
    First, health reform has not been a job killer. The economy 
has experienced the longest stretch of job growth on record. 
Although CBO estimates that health reform will slightly reduce 
total labor compensation, as the Chairman mentioned, that is 
because some people who used to work mainly to obtain health 
insurance will now choose to work somewhat less, not because 
employers will eliminate jobs.
    Second, health reform has not created a nation of part-time 
workers. The share of part-time work rose sharply during the 
recession, as it normally does during recessions, but that 
situation has turned around.
    Since President Obama signed health reform into law in 
March 2010, all of the increase in civilian employment has been 
among people who usually work full-time, and the share of 
involuntary part-timers, workers who would rather have full-
time jobs but cannot find them, continues to fall.
    Third, health reform has not increased insurance premiums. 
From the start, CBO estimated that health reform would slightly 
reduce the growth of premiums for employer-sponsored health 
insurance. And in fact, the CBO has recently reported that 
premiums for private health insurers have grown even less 
rapidly than CBO originally estimated.
    All in all, the economic effects of health reform in the 
short term have been quite small. According to Bloomberg 
Business, and I quote, ``The biggest entitlement legislation in 
a generation is causing barely a ripple in corporate America.''
    Over the longer run, health reform will have several 
additional positive effects on the economy. First, health 
reform will reduce the budget deficit, as CBO has consistently 
estimated.
    Lower deficits will help hold down interest rates, free up 
capital for private investment, and boost long-term economic 
growth.
    Second, health reform will increase labor market 
flexibility. It will reduce job lock, a situation in which 
workers stay in the job only because they need to keep their 
health insurance. As a result, Americans will be more able to 
switch jobs and start new businesses, and the result will be a 
more productive economy.
    Third, health reform will improve health outcomes by 
helping people obtain preventive care and other health services 
and improving the continuity of care. This too will increase 
productivity.
    And finally, and most important, the ACA includes a wide 
range of measures to slow the growth of health care costs, 
which are consuming an ever-increasing share of our economy's 
output and which have contributed significantly to the 
stagnation in workers' real wages in recent years.
    As these provisions take hold, workers will see stronger 
growth in their take-home pay. Slowing the growth of health 
care costs is one of our Nation's most pressing economic 
challenges, and success in that effort will benefit employers, 
workers, and taxpayers.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Paul N. Van de Water appears 
in the Submissions for the Record on page 95.]
    Chairman Coats. Thank you, Doctor.
    We will now go through our order here in terms of the 
system we have set up, which is convoluted, somewhat Rube 
Goldberg, because this is a Joint Committee so we have Senate 
Members of both parties, and House Members of both parties, and 
we have an on-arrival policy as well as a seniority policy, and 
I am just going to go down through the names and do the best we 
can. And if I skip members, talk to me afterward and we will 
work to get you early in there next time. But this is giving my 
staff fits in terms of people coming and going, and so forth.
    Dr. Van de Water, your presentation seemed to be 
significantly in contrast to what was said by the other three 
witnesses, and particularly some of the specifics here relative 
to the impact on the economy, the impact on employment, wages, 
et cetera.
    I have got thousands, thousands of letters and e-mails into 
my office, and testimonials from people all across the State of 
Indiana that would say, ``I don't know what Dr. Van de Water is 
talking about. I was promised that I wouldn't pay a cent more, 
the President made that very, very clear, than what I was 
paying now. I was promised that I could keep my policy, if I 
liked my policy, period, he said. In other words, a done deal.
    I was promised that if I liked my health care plan, I could 
keep my health care plan. And I am not able to do that. I am 
paying a lot more.''
    I just read yesterday, I think it was in The Wall Street 
Journal, of the escalating premiums that are now coming out 
based on the 2015 and future next round of premium costs.
    And then people have said, you know, all of a sudden my co-
pays have gone way up, and my deductibles are out of sight.
    So I guess what I am wondering here is, you know, why the 
disconnect? Does it really go back to the fact that this thing 
was totally oversold when it was passed, and particularly by 
the President when he simply guaranteed the American people by 
using the word ``period'' behind every statement that he made, 
meaning take it to the bank, this is a done deal. You can get 
all this. You can keep your doctor. Your premiums will not go 
up. They'll go down. Your deductibles, co-pays, this is the 
best thing since sliced bread.
    Now as I said in my opening statement, we all want to try 
to find a solution to deal with those who do not have 
insurance, or who are underinsured. The real question is: Is 
this the best thing that we could have come up with? And should 
we not look for some modifications, changes, repeals, start 
over, whatever, to put a product out that better represented 
what was told to the American people would come down?
    And so that is in a sense more of a statement than a 
question. My question is this, and I am going to go to Dr. 
Sergio and anybody else who wants to respond, and certainly Dr. 
Van de Water you can respond to what they say:
    But, Dr. Sergio, Dr. Mulligan I think this applies to you, 
too, the arbitrary levels of 50 in terms of its employment--I 
mean its impact on your decisions on employment, you mentioned 
you have two businesses. Now they are separate businesses. I 
have talked to a lot of businesses who have basically said I 
have had to create separate businesses because it is so 
punitive to get over the 50 mark.
    The other factor here is the 30-hour work week. And it is 
no secret that, in entry-level jobs in particular, chains all 
across the country are simply moving to part-time workers 
rather than full-time workers. I have had that own personal 
experience in my family with children, and even some 
grandchildren now that they say you have a job here but you 
cannot work more than 30 hours because we are not--we just 
cannot afford to do it. Our margins are too slim. And you 
mentioned profits. We cannot afford that.
    Anyway, Dr. Sergio, if you want to respond to that, and 
anybody else. I will let this be my one question here and then 
move on to my colleagues.
    Dr. Sergio. I know for a fact that small businesses create 
about 90 percent of the jobs out here. And I have been involved 
in small business since I was 17. We started our own company, 
my brother and I. We built swimming pools. We paid for our 
education at Notre Dame. Went on to get my education. Another 
brother took that business and built it.
    Everybody in my family has been a small business person. My 
grandparents who came from Italy. My brothers and sisters. And 
so I have been involved with that. I was a consultant with 
small business for a year, and I have worked with them my 
entire life.
    There is a disconnect here between, you know, corporate and 
whatever the statistics are, because none of those match with 
any of the experience that I have. I have never in my life 
experienced so much anger and frustration. As I was preparing 
to come here, I was sort of doing a survey of people as I am 
talking to them, all the way through on the airplane coming 
here, and I did not give away my position, or say where I was 
coming from, but as soon as you mention this, this ObamaCare, 
people start telling you war stories.
    And if you could let them talk for five minutes, they get 
very, very angry and give you specific examples of their health 
care costs going up, and of the various problems.
    I had a college student that I talked to, and he was 
bemoaning the fact that he is trying to make some money to pay 
for school, and his employer will not give him any more than 29 
hours a week.
    And what I have seen is that, because of the uncertainty 
with the costs associated with this, and with all of the 
changes that keep coming as they continue to interpret what 
everything means, even the professionals that we have worked 
with come back, and they are changing. And it is very hard for 
us as business people to predict our costs, and to look at the 
impact on our business so that now, instead of seeing an 
opportunity, going after that opportunity, creating jobs, 
knowing that we can do something very positive, you know, we 
have got to pull back and really look at it and say is it worth 
it doing this, because if we bring in more employees it is 
going to push us over a threshold.
    So that is a big concern to us.
    Chairman Coats. Thank you. And, quickly, Dr. Mulligan, any 
comments you would like to make in this regard?
    Dr. Mulligan. You mentioned the arbitrary thresholds, 30 
hours a week, 50 employees. They are arbitrary. In my 
Profession we call them ``cliffs'' or ``notches.'' Medicaid 
programs had them for a while. And they do not make a lot of 
sense.
    They encourage a lot of economic damage around the 
thresholds, and I think you would probably get both sides of 
the aisle to agree to kind of fix that. But that is not the 
only fix that is needed. You can have it be done smoothly and 
charge businesses for every employee in a more smooth fashion, 
instead of just nailing them at the 50th, and you would still 
have some of the same economic damage we are talking about. You 
would not get such vivid testimony out of it, but you would 
still have damage there.
    Fundamentally, when you are giving stuff to people when 
they do not work and earn, you are going to have a 
disincentive. That is a tough thing to get around.
    Chairman Coats. I think it would only be fair, Dr. Van de 
Water, if I gave you a chance to respond to that.
    Dr. Van de Water. Thank you, Mr. Chairman. You have raised 
a lot of different issues, and I cannot respond to all of them, 
but let me just take one, for example, the issue of requiring 
employers with more than 50 employees to offer health 
insurance.
    Your term, if I remember correctly, I think you called it 
an arbitrary threshold. In a sense, it is an arbitrary 
threshold. One could have chosen 40 or 60, but the key point to 
remember is that it is not an unreasonable threshold.
    Before coming over, I just pulled off the latest tabulation 
from the Kaiser Family Foundation, which does an annual survey 
on employer health insurance coverage. And even back in 2010 at 
the time health reform was being enacted, in that group of 
firms who had 50 to 99 employees, 95 percent of those firms 
offered health insurance to at least some of their employees.
    So the notion that requiring firms with more than 50 
employees to offer health insurance coverage is a tremendous 
burden is something that is belied by the data. That is, in 
fact, something that most firms of that size were doing prior 
to health reform.
    So requiring other firms in that size group also to offer 
health insurance is not something particularly burdensome and 
unreasonable. I could also explain why the 30-hour threshold is 
also a reasonable choice. These choices may seem arbitrary, but 
they were not. They were based on a rational effort to 
structure the law in the best possible way.
    Chairman Coats. I think we can spend a great amount of time 
just debating this very one subject. There are many things to 
talk about here. My time is over, and I turn now to Ranking 
Member Maloney.
    Representative Maloney. Thank you.
    Dr. Mulligan, do you think the Affordable Care Act should 
be repealed in its entirety? Yes, or no?
    Dr. Mulligan. On the first page of my testimony I explain 
that I do not have all the ingredients for a cost/benefit 
analysis. My specialty has been on the economic consequences, 
the labor market consequences. You have to add my results to 
someone who has results on the health side of things.
    You mentioned you think it is making the Nation healthier. 
You may be right. I think that needs to be studied. There are 
parts of the Act that make the Nation less healthy, as well. 
But in the end, I do not have the full cost/benefit analysis to 
reasonably answer that question.
    Representative Maloney. Dr. Sergio, do you favor repealing 
the Affordable Care Act in its entirety?
    Dr. Sergio. Absolutely.
    Representative Maloney. Okay. And, Ms. Carroll, do you 
support complete repeal of the Affordable Care Act?
    Ms. Carroll. CUPA-HR, which I am representing, has not 
taken a position one way or another. We are looking at what 
exists right now and the challenges that it is creating for us, 
but we have not taken a position.
    Representative Maloney. And, Dr. Van de Water, do you think 
the law should be repealed?
    Dr. Van de Water. Certainly not.
    Representative Maloney. Okay. And, Dr. Mulligan--let me go 
to Dr. Sergio--Dr. Sergio, you said it should be repealed. So 
if it is repealed, do you propose to give--how do you propose 
to give Americans protections that do not have health care? How 
do you propose to help people who have pre-existing conditions? 
Pregnancy was considered a pre-existing condition.
    If you repeal it, how are you going to take care of people 
that--we now have 17 million more people who have health care. 
They would lose their health care. How would you propose to 
take care of those people that have lost their health care?
    Dr. Sergio. Well that is a great question, and it is one 
that I do not want to speak for 17 million people, or 9 million 
people, whatever the number is, that has come on. I tend to use 
a lot of good, common sense in small business, along with facts 
and knowledge, and my opinion is that we had a workable, very, 
very strong health care system that needed some adjustment, and 
they threw the baby out with the bath water.
    Representative Maloney. I don't know. The Harvard study 
said 45,000 people were dying each year because of lack of 
health care. On 9/11 we lost 3,000 in that terrible, terrible 
attack----
    Dr. Sergio. No, I am really here to testify not on the 
other statistics. I am testifying on my experience with small 
business and the fact that----
    Representative Maloney. I understand. My point was that if 
we repeal it, people will die because they will not have health 
care.
    But let's go back to Dr. Mulligan. You said that you 
favor--you did not say that you favored repeal, but I would say 
that conservatives have made dire predictions about the impact 
of the Affordable Care Act. And to quote Speaker John Boehner, 
he said it would, quote, ``ruin our economy,'' end quote.
    The Speaker also said it was leading to a, quote, ``net 
loss of people with health insurance,'' end quote. Now The 
Washington Post gave him and that claim four Pinocchios, the 
worst rating in its scale, what it calls ``a whopper.'' But my 
question, Dr. Mulligan, is: Was Speaker Boehner right? Has it 
ruined the economy?
    Dr. Mulligan. I can answer the question, ``Has it ruined 
the economy?'' I don't know what Mr. Boehner has said----
    Representative Maloney. No. Has it ruined the economy? The 
question is: Has it ruined the economy?
    Dr. Mulligan. My prediction, as I said, 3 percent less 
employment. That means 97 percent of the employment you would 
have had would still be there. I don't think the word ``ruin'' 
applies to that.
    Representative Maloney. Okay, but how many consecutive 
months of job growth have we had?
    Dr. Mulligan. You know, I have not run those numbers but, 
yeah, your opening statement, you know----
    Representative Maloney. The longest stretch on record.
    Dr. Mulligan. Right.
    Representative Maloney. And how many people have gained 
insurance since the Affordable Care Act was enacted?
    Dr. Mulligan. You know, I am not up to date on the numbers. 
My book predicts that actually CBO underestimated how many 
people will gain insurance. I am quite bullish, if you will, on 
the number of people who will gain insurance from the law.
    Representative Maloney. It was 17 million.
    Dr. Van de Water, Republican critics have claimed that the 
Affordable Care Act would reduce jobs and lead to an explosion 
in part-time employment. But since it was enacted in March of 
2010, has there been a negative impact on employment?
    Dr. Van de Water. Of course it is all but impossible to 
disentangle the effects of health reform from the effects of 
all the other things that have been going on. But certainly as 
you suggest, all the aggregate data indicate that, to the 
extent health reform may have had any negative effects, they 
are sufficiently small that they do not show up in the 
aggregate data.
    That is why we see this long record of job growth that you 
have talked about, the continuing decline in the share of part-
time employment in the total, the fact that all of the net job 
creation has been in full-time jobs.
    Those data do not prove that there is no negative effect 
whatever, but they do strongly suggest that if there has been 
one, it has been pretty tiny.
    Representative Maloney. And as you pointed out in your 
statement, and the graph that we used showed really that part-
time had remained roughly much the same, but that full-time job 
growth has grown.
    Would you like to elaborate on that?
    Dr. Van de Water. I think both you and I have made the 
point. I do not think there is much to add.
    Representative Maloney. And in the past, some workers have 
been forced to stay in jobs, as you noted, because they were 
not able to leave; they were in job lock; they did not have 
portability.
    One of the benefits is that workers can take their health 
insurance and go to other jobs. What are the costs of job lock 
on individuals? And, I would say, to the overall economy?
    Dr. Van de Water. The cost to individuals is that they have 
to work in a job in which they may be less well suited, less 
able to contribute according to their abilities, and that can 
mean less earnings for them and less output for the economy as 
a whole.
    Representative Maloney. And the ability of an employee to 
take their health care with them, how important do you think 
that is to the economy?
    Dr. Van de Water. Oh, it is extremely important. And it 
also relates to the issue that Dr. Sergio was raising. It also 
allows people to take more initiative in setting up small 
businesses of their own. And we can already see that, people 
engaging in Internet startups and things like that. People 
setting up new businesses in their garage. They can do that 
because they have assured access to health coverage.
    Representative Maloney. So it has been a positive. My time 
has expired.
    Chairman Coats. Thank you.
    Vice Chairman Brady.
    Vice Chairman Brady. Thank you, Mr. Chairman, for hosting 
this meeting. I am sorry for coming in late. I did get a chance 
to read the testimony last evening.
    Dr. Van de Water, I actually think your arguments buttress 
the arguments of the other witnesses, that the Affordable Care 
Act has actually contributed to the worst economic recovery in 
a half a century.
    You mentioned our economy has experienced the longest 
stretch of job growth on record, 60 months, but the truth is we 
are missing--this recovery is so slow and disappointing, we are 
missing 5.7 million jobs that should be back for Americans at 
this point.
    The number of adults in the workforce has actually gone 
backwards slightly since the recovery began--not increased; 
it's actually gone backward a bit. And the labor force 
participation, people actually in the workforce looking for 
jobs, is near a 30-year low.
    And so when people brag--I am pleased we are adding jobs. 
Every month we add jobs is a good thing. But at this 
disappointing pace, boasting about 60 months of this job growth 
is like boasting that my car started for 60 months. It only 
runs 15 miles an hour, but it is really going terrifically.
    In truth, the argument has been made about--and by the 
Chairman, about the impact it has had on business investment 
and job growth are very real.
    So my question to you is, out of fairness, what empirical 
support do you have for the ACA aiding the economy? Because 
just the conclusion that A happened and B happened, and so A 
must have caused it, is like assuming when the ACA started the 
Houston Astros were in the basement. They lost three seasons of 
100 games. They have now rebuilt. They are leading the 
division. That did not occur because of the ACA. That just 
occurred.
    My argument, I think our economy is hurting because of this 
law. So empirical evidence tying directly this law to the 
economy, could you share that with the Committee?
    Dr. Van de Water. Mr. Brady, I think that, you have 
somewhat mischaracterized what I have said. You are absolutely 
right that because one thing has happened at the same time as 
something else, that does not mean that one has caused the 
other.
    But I think I was very careful not to say that the 
Affordable Care Act was causing the job growth. What I was 
responding to was the extreme negative claims that the ACA has 
been a, quote, ``job killer.'' That was a phrase that has been 
used extensively by some of your colleagues.
    I was trying to also rebut the claim that the Affordable 
Care Act has had a major effect on part-time work. Again, it is 
very hard to disentangle in a large, complicated economy such 
as ours, what has caused what.
    But certainly I think that when one looks at the aggregate 
data, it is very hard to conclude that the ACA itself has been 
responsible for slower job growth, or for a big change in the 
mix of job growth.
    For example, it is also undeniable that the recovery has 
not been as strong as most anyone would like. But clearly one 
of the major contributors to that has been the lack of demand 
in the economy. There are other--there are many----
    Vice Chairman Brady. Just to reclaim my time--Mr. Chairman, 
I do not mean to interrupt----
    Dr. Van de Water. No, please.
    Vice Chairman Brady [continuing]. But, you know, back home, 
we live north of Houston. We have a pizza place that is holding 
off on two expansions in two communities directly because of 
the ACA.
    We have another pilot plant, manufacturing plant, that the 
costs have gone up so high for them that they have--it is the 
equivalent of building a new plant and hiring 100 workers--they 
are not doing it.
    And so in real life, we are seeing real job effects. Dr. 
Mulligan, do you want to weigh in on this? I know I am running 
short of time, but on the impact you view? How much slower are 
we because of this as a contributing factor?
    Dr. Mulligan. I wish I had more to offer today, but I tried 
to explain in my testimony really it is too early to directly 
measure the labor market consequences, because the employer 
mandate was not even begun until a few months ago. The 
exchanges are still building up. They rolled out in a terrible 
way.
    So we are kind of in the dark in that sense. On the other 
hand, the ACA is not the first time that we have had a change 
in taxes. And the taxes are real. All you have to do is read 
that complicated law and see all the taxes in there.
    So what I have done is I have gone back to history and say, 
in the past when we had tax changes, and when the British had 
tax changes, and the Swedes had tax changes, what happened to 
their economies?
    And the answer is: They get smaller. And so my estimate, as 
I mentioned, is 3 percent less employment, and 2 percent less 
GDP once this law is phased in, which as I said in my testimony 
may be next year or the year after when we will have the main 
tax components phased in there.
    Vice Chairman Brady. Okay, it is just my gut feel listening 
back home that this is having an impact and is a drag on our 
economy.
    Chairman, thank you.
    Chairman Coats. Thank you.
    We now turn to an actual practicing doctor who also can 
give us some insights in terms of the impact. Thank you, Dr. 
Cassidy.
    Dr. Cassidy. Thank you, Mr. Chairman.
    Dr. Van de Water--could you show my first slide, please?
    [Slide shown.]
    So let me just make the point that if you take part-time 
workers in the aggregate across all quintiles of our 
population, you might not see an increase in the number of 
part-time workers. But what that slide shows--and I am sorry it 
is so small--is that if you break it down into the quintiles, 
the lowest quintile is the one which gets hammered.
    And those are the ones whose recovery from part-time work 
to full-time work has not occurred during this recession. Now--
and I believe this is from Heritage Foundation, which is a 
conservative think tank--but I also notice that Janet Yellen in 
her testimony at the Board of Governors meeting in Chicago of 
last year said that there are 7 million people working part-
time who would like a full-time job. This number is much larger 
than we would expect at 6.7 unemployment based on past 
experience. This partly employed worker is a sign that labor 
conditions are worse.
    Now again if you take the aggregate, it obscures it. But if 
you break it down, it is those most vulnerable workers who are 
being punished by this law.
    Now when you do your research do you break it down into--
you mentioned aggregate data; you specifically used the word 
``aggregate''--have you looked specifically at the lowest 
quintile of income workers?
    Dr. Van de Water. I have to admit to Mr. Cassidy that I am 
not familiar with this particular chart, but what I am familiar 
with, if you look at the restaurant industry as an example, 
which is an industry which hires primarily people lower down in 
the earnings distribution, the workweek has returned 
essentially to pre-recession levels.
    Dr. Cassidy. Now they always had a lot of part-time 
workers. I only have five minutes. I do not mean to interrupt.
    Dr. Van de Water. Go ahead, sir.
    Dr. Cassidy. They always have a lot of part-time workers. 
There is an article, a woman, Naomi Baldman, I think from 
Chicago, that looked at textile workers and the service 
industry. In fact, can we go to our next slide? Maybe I should 
just go to this.
    In this one it's a tale of two recoveries, that slide on 
your right. The red line is lower-income workers, and the blue 
line is higher income. Those are the number of hours as a 
percent change since December 2007.
    You can see again a divergence where the lower income 
worker continues to have lower part-time jobs, lower work weeks 
than the higher wage worker.
    Now isn't that what economic theory would predict? That the 
marginal cost of providing insurance for a low-wage worker is 
higher, and so therefore she or he is more likely to have their 
hours reduced so the employer avoids the penalty?
    Dr. Van de Water. No, actually not. And I think actually 
this goes back to what I would have said partly in response to 
Mr. Brady's point.
    I think if there is one thing that economists generally 
agree on it is that health care, like other fringe benefits, 
represents a form of compensation to the worker. So that 
requiring employers to offer health coverage is for the most 
part--and again there are some exceptions--but for the most 
part, not likely to affect total compensation, but simply to 
affect the mix----
    Dr. Cassidy. But if you're at minimum wage--please, I only 
have two minutes--if you are already at minimum wage, then that 
will be a significant raise for the person who would be a 
minimum-wage worker. Correct?
    Dr. Van de Water. That would be the exception, but most 
workers are not at the minimum wage.
    Dr. Cassidy. And those would be the lowest quintile 
workers. Those would be the ones we found would be the most 
vulnerable to having their hours reduced.
    Dr. Van de Water. Again, when you say ``lowest quintile,'' 
I am not sure which measure you are using to define the 
quintiles. But they are probably part of it.
    Dr. Cassidy. Hourly wage. And so then let me just make a 
couple more points. We are almost out of time.
    You mentioned that the insurance premium increases have 
mitigated. I will point out, there is an article from 
Politico--I do not know if we have that handout--which--oh, is 
that it? Let me point out that when people speak about health 
care costs, this is health care cost in the white line, which 
actually began to decrease prior to ObamaCare.
    This (indicating) is the inflation rate in percentages of 
insurance premium costs, and I will point out that the latest 
headlines are that insurers are asking for as much as a 60 
percent increase in premiums. This is in the individual 
exchange market.
    So if we actually want to look at the effect of the 
ObamaCare law, there is a disconnect now between the 
compounding rate increases of the premiums and health care 
costs.
    By the way, that is a secular trend which began to decrease 
prior to the onset of the law. This is what Dr. Sergio is 
experiencing, workers are finding this (indicating a chart) is 
their reality, not this (indicating) is their reality.
    Lastly, I am out of time, I will make one more point. 
Actually, I am out of time. I will hold my point. Thank you.
    Chairman Coats. Well just before we started here, Dr. 
Cassidy introduced me to his son who is a senior at Penn 
studying economics. I thought when I turned to Dr. Cassidy, a 
medical doctor, I would be getting questions from a medical 
doctor. We were getting questions from someone steeped in 
economics who must have gotten that from his son. So instead of 
the son following the father, the father is following the son.
    Dr. Cassidy. Do not tell my son that. I would point out, 
you cannot disconnect the economics of this, though. When 
someone has a $6,000 deductible, economic theory empirically 
they are foregoing therapy. So as I as a physician am seeing 
people forego therapy because they have a $6,000 deductible, so 
economics is factored in their health care, Mr. Chairman.
    Thank you.
    Chairman Coats. Thank you.
    Representative Beyer. They are all gone.
    Chairman Coats. I was looking down there.
    Representative Beyer. Thank you, Senator, Mr. Chairman.
    Dr. Mulligan, thank you for the excellent analysis. I was 
struck by one of the very first things you said, in quote, ``I 
have no estimate on the health and other benefits of the 
subsidies from the health insurance''--subsidizing health 
insurance, which seemed very honest and accurate. You are only 
presenting the negative impacts through the insurance 
perspective, which you called the 3 percent negative decline 
and 2 percent in GDP.
    We have also seen that the Harvard study showed 45,000 
deaths per year. Obviously if we save 45,000 lives, that is an 
enormous economic investment. If we look at job growth and GDP 
growth from all the positive sides, Medicare, Medicaid, Social 
Security, Disability Insurance, the economic impacts on 
families.
    I have seen various estimates of just what it means to all 
these hundreds of millions of Americans not to have the 
insecurity of a preexisting waiver--or of a preexisting 
condition. And, finally, bankruptcy, because we know the health 
costs are the number one cause for bankruptcies in America.
    How hard would it be as an economist to make some analysis 
of the positive impacts? And can you foresee integrating your 
negative impacts with everything good that's coming from this?
    Dr. Mulligan. I like how you characterized it, except one 
exception. I do not draw the line between positive and 
negative. That is not--I did not----
    Representative Beyer. Job creation and job----
    Dr. Mulligan. Labor market versus health is how I drew the 
line. Okay? And since I have not studied health--I cannot rule 
out the idea that there are positive health benefits. And I 
agree with you, health is extremely valuable and you want to 
put a big price tag on it.
    I am just not sure of the direction. Senator Cassidy here 
mentioned how it might be--there are some forces in the law. 
It's a complicated law pushing toward less health care. Other 
forces toward more health care.
    You want me to sign on to a Harvard study? No way. I found 
the Harvard guys have got the labor market part wrong, and they 
might have got the health part wrong, as well.
    But I agree that the full analysis has to count the health 
benefits, because health, or cost, whatever they are, because 
health is an extremely valuable resource in our world.
    Representative Beyer. Thank you, Dr. Mulligan.
    Dr. Sergio, I very much resonated with your testimony. I 
have been running a small business, a family business for more 
than 40 years. And we have had the sticker shock, too, with the 
health insurance premiums.
    By the way, we had them in 2003, 2004, 2005, 2006. The last 
couple of years have not been any harder than the ones before 
the Affordable Care Act.
    Do you think your business will survive?
    Dr. Sergio. Our business absolutely will, and I think it 
will be through the shear determination of our team of 
employees. We love the people who work for us. We care about 
them. And that is where, you know, we have worked real hard 
over the last three----
    Representative Beyer. Let me jump ahead because I have a 
bunch of points I would like to make, too, but I think you make 
the point. We do survive. We do adapt.
    Dr. Sergio. Yes.
    Representative Beyer. This is not the only new expense we 
have seen in 40 years.
    Dr. Sergio. Our costs went up 24 percent this year. We had 
it flat for the last three years with our health insurance. It 
definitely hurt us very badly and our benefits have decreased 
significantly.
    Representative Beyer. I want to know, where was all this 
health insurance innovation before the Affordable Care Act? Why 
do we suddenly think it is going to show up now when it did not 
show up before?
    Dr. Sergio. Well I think there are some common sense 
solutions. We created some of the problems by not allowing 
pooling across state lines. It was regulation that caused those 
problems. If we would have allowed competition to exist, we 
could have solved many of the problems in that regard.
    Senator Coats had a whole list of great ideas that should 
be examined. And lastly is that, you know, we had so much 
right, I think if we looked at the amount of money that has 
been spent and the amount of human energy that has been 
expended, we could have spent a lot less on that and bought 
every one of the people that did not have insurance a brand new 
Cadillac policy and we still would have been better off.
    That is what I think, that we threw out this program that 
could have been fixed with some common sense practical 
solutions, including pooling, and now it is causing a lot of 
damage and a lot more to come.
    Representative Beyer. We have already seen what it is 
costing your business and my businesses to insure 17 million 
new. It is hard to imagine how we are going to hit 45 or 50 
million just with pooling or a little innovation.
    But Professor Van de Water, CBO says $700 billion less in 
health care costs over this X period of time, I do not know if 
it was 8 years or 10 years. Where does that $700 billion go? Is 
that reflected in business profits, or additional family 
income, or reduced family expenses? Who gets that $700 billion?
    Dr. Van de Water. That accrues in the form of lower federal 
deficits than would otherwise be the case.
    Representative Beyer. So it not just--it is the federal 
deficit that we are considering, rather than overall expenses?
    Dr. Van de Water. Right. That is just looking at the effect 
on the federal budget.
    Representative Beyer. Okay. Great. Mr. Chairman, my time is 
about up, I would defer back.
    Chairman Coats. Congressman Paulsen.
    Representative Paulsen. Thank you, Mr. Chairman.
    I want to follow up on a couple of points, because I think 
we have had some real good back and forth here. The topic of 
the hearing is the employment effects of the Affordable Care 
Act. It is really interesting to me that there are a couple of 
numbers that are real key to point out, which this Committee 
has studied in detail regarding the growth gap and where should 
be, where we could be even if we had had an average recovery 
right now.
    We had negative point seven percent GDP growth last 
quarter. I mean, that is--negative growth? That is 
embarrassing. And from June of 2009 to April of 2014, that is a 
five-year period, it took nearly five years to get back to 
having the exact same number of people working than when the 
recession began in 2007.
    That is the longest period of time to return to the 
starting point in a recession than at any other time in U.S. 
history. And we still have record numbers of people working 
part-time that would prefer to work full-time. Sure the number 
is getting better, but growth has been so slow. And the labor 
force participation rate is still at its lowest point since 
1978.
    Then you have a third of Americans age 18 to 31 that were 
living at home with their parents last year, which is the 
highest percentage in four decades.
    So we certainly have some challenges. I would argue this 
30-hour rule, which we have had some discussion about, is 
interesting to me. When you redefine full-time work at 30 
hours, I am concerned about the impact it has had on employees 
and workers in terms of wages and hours of the medium, lower 
quintile, which we had a conversation about. And not only in 
Minnesota but across the country.
    I remember having a conversation with a restaurant owner in 
Minnesota who owned seven facilities with 535 employees; 41 
percent of his employees were full-time workers. So he made the 
decision to hire them full-time, which is probably abnormal for 
the restaurant industry. But he says because of the new health 
care law, he has essentially had to make the decision now to 
move and shift those folks to 29 hours. So that is a 25 percent 
pay cut for these individuals.
    Of course many of them are probably going to go and try to 
find another part-time job somewhere else, but it is totally 
counterproductive. The law is clearly having an impact there.
    Dr. Mulligan, does your research--because you have done a 
lot of research in some of these areas--does it indicate at all 
that this Minnesota business owner is not alone in making that 
type of a difficult decision? Or can you quantify the impact of 
what the 30-hour rule would be on employers and the wages and 
hours of employees working for them might be?
    Dr. Mulligan. As I mentioned, it is tough to say that in 
the present, but as the law is phased in and we have adjusted 
to it, there is no doubt that you will have what they call the 
29ers, people working 29 hours because of the law and they 
would have been working 35 maybe. Low-wage people might have 
even been working 40.
    My estimates, they are about 4 percent of the workforce 
will be in that situation, as opposed to roughly zero before 
the law.
    Representative Paulsen. Okay. Dr. Sergio, you are a small 
business owner, you are going to survive. You are going to 
persevere. You know, my grandfather is a small business owner. 
My uncles run the company now. Same attitude.
    They went through some real tough times, and they are going 
to persevere. But when you have this 50-employee threshold, you 
start making decisions in a different way. And the fact is, you 
would be doing better now had you not had this artificial 
threshold.
    I mean, how much better would you be doing now? Rather than 
just surviving, you would be thriving, I assume?
    Dr. Sergio. Thank you for that question, because that is 
part of--I do not want to just ``survive,'' I want to thrive. I 
want to grow. I want to create new jobs. I want to give people 
careers.
    I have family members in my business. I have others that 
are not related that are young people that want to grow, and we 
want to keep them. And we cannot do that by just struggling to 
survive. The amount of overhead and the time just to track the 
hours that are coming up here and all the regulation just 
strips out our ability to create wealth--create wealth, create 
value for our clients, and to be able to serve them in a better 
way. That is how you make money. That is how you get the money 
into the system, and you give raises to people, is to create 
value for our clients.
    We spend too much time with our higher level people now 
trying to figure out what does this whole ObamaCare mean? What 
is the impact? How are we going to adjust?
    And for my disaster business, we have a disaster. You know, 
Hurricane Katrina, Superstorm Sandy, you get some inkling that 
it is going to hit. You have some time. You are prepared. We 
are like the fire department, prepared to go out and serve our 
clients.
    Okay, now instead of focusing on the value and providing, 
we have got to stop and think about, okay, how much do we 
need--how much work do we need to pull in here? Because if we 
go ahead and we respond to this, and we bring on part-time 
people, and we bring on some temporary people and we bring on 
some others and it pushes us up over a threshold that puts us 
in a whole new ball game, and all of our expenses change that 
we are not even sure exactly what those expenses are, that is a 
whole other uncertainty that makes it difficult for us to just 
be able to go out and serve our clients and take care of them.
    So, you know, is it something we are going to figure out? I 
hope so. Have we figured it out? Absolutely not. It is very 
stressful to be faced with that. And, you know, I am the case 
study guy here. I mean, we have got all the statistics. It goes 
back. You say, okay----
    Representative Paulsen. You are the small business owner.
    Dr. Sergio. I have not found--and I sincerely have not 
found one company, one person, one employee that has come to me 
and said, boy, this is just great. Everybody I talk to is 
telling me--as a matter of fact, a lady I sat next to on the 
plane, when she heard where I was coming, she said ``give 'em 
hell. This is killing us.'' She had multiple sclerosis. She is 
a fragile lady sitting there on the plane, and she heard about 
what I was doing and she started going into this.
    She said she had lost benefits. Her costs went up. And it 
has got her very, very worried. She looked like she was maybe 
in her late 60s. So I hear this 100 percent. It is not a subtle 
thing. It is 100 percent against the impact so far.
    So that is my contribution here.
    Representative Paulsen. We appreciate your testimony, and 
we have heard many of those similar stories.
    And thank you, Mr. Chairman.
    Chairman Coats. You're welcome.
    Next up is Congressman Schweikert.
    Representative Schweikert. Thank you, Mr. Chairman.
    I am going to do one of those things that is always 
dangerous, and that is to sort of go off script and see if I 
can get some help here from all the incredibly smart people in 
this room.
    One of the projects our office has been working on over and 
over is to actually try to get quality population and datasets. 
Because one of the things that just drives me insane is when we 
are in a committee like this, which is supposed to be a little 
more high brow, shall we be flattering to ourselves, and I 
start to hear the anecdotals.
    So could I beg of the smart people on the panel to work 
with me here? The doctor has walked us through saying there are 
17 million that have been benefitted so far. Okay, of that 17, 
let's walk through the categories.
    How many people are in that? Is it 27 and under population? 
What is my hard number?
    Dr. Van de Water. Somewhere on the order of 3 million.
    Representative Schweikert. Okay, so I have 3 million laying 
there. And we already know the cost modeling within that. It is 
actually--there has been a cost shifting there. My Medicare--
excuse me, my Medicaid expansion, what is my population there?
    Dr. Van de Water. Oh, 5 or 6 million, roughly.
    Representative Schweikert. Would you believe some estimates 
place that number closer to 11?
    Dr. Van de Water. Excuse me?
    Representative Schweikert. Oh, excuse me, Medicaid 
expansion, almost 11? Is that an outlier? Or am I once again 
having this problem of conflicting datasets?
    Dr. Van de Water. I am not sure. My recollection could be 
incorrect. We just need to make this add up to 17.
    Representative Schweikert. So 11 in Medicaid and CHIP. So I 
see a number of heads nodding over there. But let's just 
pretend, and we can always come back because it's my model.
    So now I am looking at 3, and 11, and so if I add that up, 
I am at 14. So you are telling me my rest of my population is 
operating under this law, I have helped how many? And now I 
want to do a breakout of my allocation of administrative and 
overhead costs broken into this population because we are now 
seeing some datasets coming through our office, and I would 
love some help on this, that we may be--everyone saw the 
article about three or four days ago that just a pure 
administrative might be somewhere around $1,374 per enrollee in 
that third category?
    Do you remember the speeches around here for those of us 
watching at home on television that this new health care law is 
going to make things so much more efficient, so much less 
expensive, too. But that does not appear to be what we are 
seeing in the data.
    And then for those of you who come from the study of 
insurance and financial products world, your dollar per, or my 
dollar costs per dollar of coverage we know is also skewed out 
on the curve because of the very high deductibles.
    So we are having these wonderful discussions here, and we 
are talking past each other. I would love just an honest 
conversation that goes beyond aspirational and say what is this 
program really accomplishing? And if we want to help our 
brothers and sisters and those with preexisting conditions, are 
we really doing it the best way?
    And, please, I do not mean for this to be rambling. I am 
actually looking for something I am throwing out, for that 17 
million. Does anyone else have a breakout of what they think it 
is?
    Doctor? Doctor? Doctor? It's like being at a doctor 
convention.
    Dr. Mulligan. I did not really--since it was an employment 
effects event today, I did not come prepared with those 
numbers, but I did recognize a few of the numbers you 
mentioned.
    There is a distinction between a Medicaid expansion and the 
so-called out-of-the-woodwork Medicaid people. So there are 
people who live in the state that did not expand Medicaid, but 
they gained Medicaid anyway because of all the hullabaloo 
around ObamaCare and healthcare.gov and so on. So I think 
probably our 11 million number is adding those two together, 
and it is fine to add them together, but that is I think why 
there was a little misunderstanding between the two.
    Representative Schweikert. Okay. Well I extend this as an 
open call to everyone in the room, Minority staff, Majority 
staff, if you have honest datasets so we can really dig into 
what is really going on here? Because if this is creating as 
much of an economic distortion as it appears it is and a 
misallocation, that is actually the ultimate debate discussion 
we should be having here. Because we are seeing some crazy 
numbers of dollars being spent per dollar of actual insurance 
coverage being provided.
    And I know some folks love a gigantic bureaucracy because 
it employs friends and family, but it is a crazy way to spend 
money.
    And with that, I yield back, Mr. Chairman.
    Chairman Coats. Congressman Grothman.
    Representative Grothman. I guess my first question will be 
for Dr. Mulligan. I was reading his book--wait a minute, you 
wrote the book. Okay, I have two questions for you.
    First of all, when I talk to my employers back home, again 
and again I am finding people having employees who either do 
not want to work full time, or do not want to work at all, or 
do not want to improve themselves and make more money because 
of cliffs that happen in medical coverage designed by the 
government, either Medicaid--in Wisconsin we call it 
``badgercare''--or ObamaCare.
    Could you comment on the influence that combined Medicaid 
plus ObamaCare has on the desirability in our country to work 
more, be it to make $15,000 instead of nothing, or $30,000 
instead of $15,000 or what have you.
    Dr. Mulligan. Yeah, sure. We have assistance programs 
before ObamaCare. It is not the first one. And there were 
cliffs and disincentives in there before.
    I found that when ObamaCare came in on top of all that, it 
reduced on average the incentive to work by about 9 percent. I 
think that was in the last table in my testimony.
    And that is a change in the incentive to work and in the 
direction of disincentive, and I am not sure we have seen a 
change like that much in our history. It is a big change. And 
that is why I am expecting some, let's say, medium size to 
large effects of that in the direction of earning less and 
working less.
    Representative Grothman. Do you believe, combined with 
other government welfare programs, that is one of the major 
reasons, or you elaborate in your book, collectively one of the 
major reasons why our economy has dragged so long? Because we 
have this combined with other programs all designed to 
encourage people not to work?
    Dr. Mulligan. Yes, I do. Our programs have become kind of 
more European in the last, let's say, eight years. And our 
labor market has become more European, which the European labor 
market, in case you don't know, tends to be small.
    Representative Grothman. And do you believe, anecdotally, 
as you talk to employers--and maybe I will ask the others, as 
well--do you believe we are discouraging people from making 
more money? Or another way of putting that is discouraging 
people from working harder in our economy?
    Dr. Mulligan. There is no doubt that the idea of a job is 
being discouraged. I think both parties are influenced by that, 
both the employer and the employee. I cannot really blame one 
side or the other, but there is no doubt that these programs 
have resulted in less employment, less people working, and 
families having less income.
    Representative Grothman. I am having, yeah, I am having 
employers in my district complain that people either do not 
want to work, or take more hours, because it jeopardizes their 
benefits.
    Let me get to another question which I do not think has 
been discussed enough. In addition to the fact that our 
government seems to hate work, our government also seems to 
have a strong bias against marriage. And the idea that if you 
get married to somebody who is making a decent income, you will 
lose your benefits.
    And, you know, I used to think it was a good idea to have 
children raised by mom and dad at home, but I wonder if you 
could comment on the anti-marriage incentives that seem to be 
built into ObamaCare?
    Dr. Mulligan. I am aware--I wish I had done more work on 
it--but I am aware that ObamaCare adds to the marriage tax, if 
you will, because its assistance is based on household income, 
which adds together the two adults, if there are two, but only 
one adult if there is one. So as a result you get a better deal 
out of ObamaCare if as an adult you are living without a 
spouse.
    And I have not been able to grind out any numbers on that 
yet, but I know that is a big factor. And it would be an 
interesting proposal to say, well, what if we gave these out on 
the basis of individual income rather than family income.
    But ObamaCare does not do that, so it taxes marriage.
    Representative Grothman. So in other words, if I am 
somebody making a smaller income and I have an opportunity to 
marry somebody making a larger income, there would be a 
substantial marriage penalty discouraging me from getting 
married.
    Dr. Mulligan. Yes. I have not run the numbers, but I agree 
that it is substantial.
    Representative Grothman. Well it is a good suggestion for a 
future book. Thank you, very much.
    Chairman Coats. Thank you.
    Senator Lee, you are our clean-up hitter. Your timing is 
impeccable. Unless somebody else walks in the door, you get the 
last word.
    Senator Lee. Wonderful. Thank you very much, Mr. Chairman. 
Thanks to all of you for being here.
    Mr. Mulligan, I wanted to start with you. The 
Administration has frequently boasted that the Affordable Care 
Act has somehow answered the issue of job lock for many 
Americans.
    But there do seem to be other types of locks that are 
arguably created by the same legislation. So due to the fear of 
possibly losing subsidies under the Affordable Care Act, do you 
think some workers and some families might find themselves 
locked into certain jobs with fewer hours?
    Dr. Mulligan. ``Lock'' is not an economic term, but they 
will find that if they pursue those new opportunities they will 
actually have to pay for it. They will be working harder and 
have less to spend. There is no doubt about that.
    Senator Lee. Right. And especially considering that the 
Affordable Care Act did not equalize the tax treatment of 
health benefits. So in that respect, are we not still arguably 
hampering economic growth and the general entrepreneurial 
spirit by locking people into being compensated with health 
care? In other words, the failure to correct this problem does 
sort of contribute to that sort of track?
    Dr. Mulligan. By ``problem,'' you mean that there has been 
kind of an implicit subsidy of employer health insurance 
through the tax exclusion----
    Senator Lee. Yes.
    Dr. Mulligan [continuing]. Angle of it? You are right that 
the ACA does not really fix that. It makes it worse in some 
cases. The employer penalty, for example, is pushing more of 
that stuff that you argue we have too much of.
    And then there are other aspects of it that push people out 
of it. So it has made it a lot more complicated and less 
efficient, but it has not really pushed toward solving it.
    Senator Lee. And then, Dr. Sergio, in your written 
testimony you talk about what I will call ``health care 
lockout.'' Can you explain how some of your employees are 
unable to utilize their insurance because they cannot afford 
the deductible, after the premiums that in many instances are 
increased? So that have to pay higher premiums, and then, you 
know, do you maybe have some people who may be foregoing 
insurance and paying the penalty so they can actually afford to 
get their medications and their routine doctor visits?
    Dr. Sergio. There are a variety of responses I have heard. 
I know of--and I am speaking beyond just my company here, 
because I work with enough other small businesses, as well as 
insurance individuals who work with other small businesses, but 
there are people who are foregoing pay increases because then 
they will lose their subsidies, on the very low end.
    But the majority here, the problem is this: A small 
business has a certain amount of money they can spend on labor. 
And you can try to pump some more into that thing to make that 
a little bit larger percentage, but you spend it on your hourly 
rates, you spend it on your benefits. You've got a total amount 
of cost there.
    And what ObamaCare has done is pushed more and more of that 
money that's been budgeted into the benefits side, which then 
hurts the ability to give somebody increases in their day-to-
day compensation and they cannot live on a fixed income like 
that, and they are working harder and harder. Well they've got 
now higher premium costs, and then with the additional cost of 
the deductible they have got to absorb $3,000 on top of that. 
So it is a killer trying to find the funding there for them to 
pay for all of it.
    So it ends up becoming like a major medical policy that 
they do not want to really use unless the wheels are falling 
off on some medical condition.
    I know of some individuals who are to the point now of 
choosing which three pills out of four or five that they are 
supposed to be taking for their medical health because they 
cannot afford them all. And, you know, this is just something 
that is really painful to me because we do care about our 
employees.
    We know a lot about their family conditions and that sort 
of thing, and we want to be working to help them grow. And it 
is just very, very difficult when we have got limited resources 
now to be able to put towards that.
    We have been very, very proud of the strong benefit package 
we have offered our employees. We have paid 50 percent of our 
employees' insurance, as well as all their dependents through 
all these years and, you know, it is getting to the point that 
I sit down with my partners and we do not know what we are 
going to do here. And we actually feel like we are failing our 
employees because we cannot take care of them all well enough.
    Senator Lee. So you've got higher administrative costs, as 
Congressman Schweikert pointed out.
    Dr. Sergio. Yes, absolutely.
    Senator Lee. And then a lot of those higher administrative 
costs then are being borne by individuals who are paying higher 
premiums. Not only are they paying higher premiums but they 
have also got high deductibles.
    Dr. Sergio. Yes.
    Senator Lee. And so while the law might in some 
circumstances be described by its proponents as driving more 
people into health insurance, it might actually be limiting 
their options in terms of actually securing health care.
    Dr. Sergio. Yes.
    Senator Lee. And in some cases dissuading them from doing.
    Dr. Sergio. And the other aspect of it is the younger folks 
that are healthier are looking at it and saying I'm just better 
off paying the penalty and not getting health insurance at all 
because I don't really need it. And this is so incredibly 
expensive I am not going to take it. So now they are not 
covered, either.
    So now they are taking money out of their pockets, sending 
it to some pool in the government. They are not getting any 
coverage on that, and it is pulling healthy individuals out of 
the total pool.
    So then you have just, you know, older folks like me in 
there that have higher costs.
    Senator Lee. Thank you, very much.
    Dr. Sergio. You're welcome.
    Chairman Coats. Thank you. I want to thank our witnesses. 
This was an engaging discussion, an ongoing discussion, and 
obviously there is a lot more to come on this topic. It is 
something we have been deliberating and debating and processing 
now for five years, since the implementation of the Affordable 
Care Act, and clearly we have got a lot of work to do in terms 
of how we would proceed to deal with some of the major issues, 
and real issues, that have been raised today.
    But I want to thank each of our witnesses for their 
participation. And with that, I think we will call it to a 
close. The hearing is adjourned.
    (Whereupon, at 4:15 p.m., Wednesday, June 3, 2015, the 
hearing was adjourned.)

                       SUBMISSIONS FOR THE RECORD

    Prepared Statement of Hon. Dan Coats, Chairman, Joint Economic 
                               Committee
    The committee will come to order.
    I would like to extend a warm welcome to our witnesses. I 
appreciate your being here today to discuss how the Affordable Care Act 
(ACA) has continued to affect the ability of Americans to earn and do 
business. I'm also interested in hearing about the effects this law has 
on our broader economy.
    The impact of the ACA is particularly important to discuss this 
year now that the delayed employer provisions are in effect and 
employers are now feeling the pinch.
    The ACA contains numerous provisions that penalize workers and 
subsidize those who don't work. In fact, the Congressional Budget 
Office estimates that, from 2017 to 2024, the law will reduce the total 
number of hours worked by as much as two percent. That is equal to as 
many as two and a half million full-time-equivalent workers.
    CBO reasoned that this would result from ``the new taxes and other 
incentives they will face and the financial benefits some will 
receive.''
    CBO also estimates a one percent reduction in total labor 
compensation over the same time frame.
    However, even those figures may underestimate the true impact of 
the law because those estimates don't include every relevant provision 
that would affect employment. For example, the employer insurance 
mandates will encourage employers to shift workers from full-time to 
part-time employment. The Medicaid expansion will motivate many low-
wage, full-time workers to reduce hours to obtain coverage. The 
marketplace exchange subsidies phase out abruptly as incomes rise, 
penalizing workers near the thresholds. Finally, the series of new 
taxes on individual income and health care services will reduce the 
incentive to work, save and invest.
    Further, many of these provisions will profoundly affect 
businesses' abilities to expand, alter workers' hours and schedules and 
reduce work flexibility for employees. New compliance costs in terms of 
time and resources will add significant burden to businesses.
    Not only does the law affect millions of businesses and their 
employees, but also thousands of schools and local governments. I have 
heard from many Hoosier schools that are feeling the impact and have 
been forced to cut hours to make ends meet on already constrained 
budgets. This is hurting not only school employees but students from 
elementary school to college.
    In an era characterized by having to do more with less, these 
institutions appear to be particularly affected by the undue burdens of 
the ACA.
    Sadly, too much of the conversation has attempted to focus on the 
purported benefits without taking into consideration some of the very 
real and significant costs. That's not how a cost-benefit analysis 
works; that sounds like a ``benefits only'' analysis.
    In addition to these economic burdens, many of the goals of the ACA 
have not been met.
    Emergency room visits continue to rise. Health care costs in terms 
of premiums, co-payments and deductibles continue to rise. Many seem to 
be saying that they're ``happy to hear that more people are covered, 
but it's less affordable for us.'' CBO estimates that premiums will 
rise an average of 8.5 percent annually over the next three years as 
temporary government programs intended to reduce insurer costs are 
phased out. In most states, insurers with large market shares have 
proposed rate increases exceeding 20 percent for next year. ObamaCare 
is about to become more expensive.
    While this law may have provided affordable access to health care 
for some, it has seriously hindered others. Many lost their employer-
provided insurance and were displaced to the exchanges and Medicaid. 
Many lost the ability to keep their plans and doctors. New taxes built 
into the law still to be implemented will have additional negative 
effects on businesses and their workers.
    I think I can speak for all of us here in saying that we'd like 
everyone to be insured and receive quality health care when they need 
it. However, the policy on the books isn't the solution. Instead, it 
has led to more unintended problems. A one-size-fits-all, government-
run health care system is not the answer. We're looking for the best 
workable, real-world solution for Americans, and I don't believe we've 
hit that mark just yet.
    We should pursue initiatives that truly make health care an option 
for all. Such initiatives should drive down costs by increasing 
competition and transparency, reforming medical malpractice, making 
health insurance portable, promoting pooling options for small 
businesses and giving states greater flexibility in delivering health 
services. Americans deserve a better health care system that puts 
individuals squarely in charge of their health care, and doesn't 
discourage Americans from working and improving their earnings.
    With that, I look forward to discussing these issues in more depth 
with our witnesses today.
    I now recognize Ranking Member Maloney for her opening statement.
   
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 Prepared Statement of Hon. Kevin Brady, Vice Chairman, Joint Economic 
                               Committee
    Chairman Coats, Ranking Member Maloney, Members, and Distinguished 
Witnesses:
    Even though the United States has been technically in a recovery 
for more than five-and-a-half years, our economy remains stuck in 
second gear. In 2014, our economy grew by 2.4 percent, and it actually 
contracted at an annual rate of 0.7 percent during the first quarter of 
this year.
    As of Friday, the ``Growth Gap'' between the Obama recovery and an 
average recovery since 1960 expanded to $1.7 trillion in real GDP. Just 
to catch up with an average recovery, our economy would have to grow at 
an annual rate of 8.7 percent each and every quarter until President 
Obama leaves the White House.
    Today's hearing sheds light on an important cause of the underlying 
weakness of the economy--the unintended, but nevertheless economically 
destructive consequences of disincentives for employment found in 
ObamaCare.
    In a few minutes before this Committee, Dr. Casey Mulligan of the 
University of Chicago will testify:
    Fully phased in, the ACA is likely to permanently reduce weekly 
employment and aggregate work hours three percent, and national income 
two percent, below what they would have been if the law had not been 
passed.
    To some, a two or three percent reduction may not sound like much, 
but based on the recent economic data that means:

      4.3 million fewer Americans employed; and
      A U.S. economy that is $325 billion smaller.

    My friends, those are quite significant negative effects.
    Today's witnesses will not testify that our healthcare system was 
perfect, or without need for reform, prior to the passage of ObamaCare. 
Nor will today's witnesses say every single provision of ObamaCare law 
is bad.
    Today's witnesses will, however, make clear that bypassing regular 
legislative order and enacting a major overhaul of America's health 
insurance system on a strictly partisan basis produced an inferior law, 
from which Americans are suffering economically.
    Economists rightly consider the phase-out of government-provided 
benefits as household income rises, including Medicaid and ObamaCare 
subsidies, as an implicit income tax. Moreover, the effective marginal 
income tax rate--including federal income taxes, federal payroll taxes, 
state income taxes, and the phase-outs of earned income tax credits and 
ObamaCare subsidies--for working families seeking to improve their 
economic conditions is often shockingly high--sometimes even exceeding 
100 percent.
    Indeed, Dr. Mulligan provides an example in which a head-of-
household with three dependents that earns $26 per hour is better off 
financially by moving from full-time work with employer-provided health 
insurance to working 29 hours per week and receiving ObamaCare 
subsidies to buy health insurance through a government-run exchange.
    Not only does ObamaCare create disincentives for Americans to work, 
but ObamaCare also creates disincentives for employers to expand and 
hire more American workers. In 2016, large employers not offering 
health insurance coverage and having 49 full-time employees would owe 
$43,320 in employer penalties for hiring one more full-time worker. 
Moreover, such employers would owe another $2,166 per year for the 51st 
and every subsequent full-time worker added to the payroll.
    The disincentive effects of these penalties are multiplied because 
they are not tax-deductible. At a 39 percent tax rate, the penalty of 
$2,166 has a net after-tax cost to the employer equal to the cost of 
providing an additional $3,298 of wages to employees.
    The negative effects of the employer penalty on less well-paid 
workers is especially pernicious. $3,298 is a much larger percentage of 
$20,000 than $100,000. That creates a strong incentive for employers 
not providing coverage to keep the hours of lower-paid workers to under 
30 hours per week to avoid penalties.
    The choice before us is not limited to ObamaCare or the status quo 
before the law's enactment. We can and must do better. Working 
together, we can implement a new patient-driven, market-based approach 
that still helps those American families who need assistance to buy 
health insurance. We can minimize the unintended economic disincentives 
and negative consequences of ObamaCare.
    I look forward to today's discussion with our witnesses.
    
    
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