[House Hearing, 112 Congress]
[From the U.S. Government Printing Office]


 
                     BARRIERS TO LOWER HEALTH CARE 
                    COSTS FOR WORKERS AND EMPLOYERS 

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

                                HEARING

                               before the

                        SUBCOMMITTEE ON HEALTH,
                     EMPLOYMENT, LABOR AND PENSIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

              HEARING HELD IN WASHINGTON, DC, MAY 31, 2012

                               __________

                           Serial No. 112-62

                               __________

  Printed for the use of the Committee on Education and the Workforce


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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Dale E. Kildee, Michigan
Judy Biggert, Illinois               Donald M. Payne, New Jersey
Todd Russell Platts, Pennsylvania    Robert E. Andrews, New Jersey
Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Bob Goodlatte, Virginia              Lynn C. Woolsey, California
Duncan Hunter, California            Ruben Hinojosa, Texas
David P. Roe, Tennessee              Carolyn McCarthy, New York
Glenn Thompson, Pennsylvania         John F. Tierney, Massachusetts
Tim Walberg, Michigan                Dennis J. Kucinich, Ohio
Scott DesJarlais, Tennessee          Rush D. Holt, New Jersey
Richard L. Hanna, New York           Susan A. Davis, California
Todd Rokita, Indiana                 Raul M. Grijalva, Arizona
Larry Bucshon, Indiana               Timothy H. Bishop, New York
Trey Gowdy, South Carolina           David Loebsack, Iowa
Lou Barletta, Pennsylvania           Mazie K. Hirono, Hawaii
Kristi L. Noem, South Dakota         Jason Altmire, Pennsylvania
Martha Roby, Alabama
Joseph J. Heck, Nevada
Dennis A. Ross, Florida
Mike Kelly, Pennsylvania

                      Barrett Karr, Staff Director
                 Jody Calemine, Minority Staff Director

         SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS

                   DAVID P. ROE, Tennessee, Chairman

Joe Wilson, South Carolina           Robert E. Andrews, New Jersey
Glenn Thompson, Pennsylvania           Ranking Member
Tim Walberg, Michigan                Dennis J. Kucinich, Ohio
Scott DesJarlais, Tennessee          David Loebsack, Iowa
Richard L. Hanna, New York           Dale E. Kildee, Michigan
Todd Rokita, Indiana                 Ruben Hinojosa, Texas
Larry Bucshon, Indiana               Carolyn McCarthy, New York
Lou Barletta, Pennsylvania           John F. Tierney, Massachusetts
Kristi L. Noem, South Dakota         Rush D. Holt, New Jersey
Martha Roby, Alabama                 Robert C. ``Bobby'' Scott, 
Joseph J. Heck, Nevada                   Virginia
Dennis A. Ross, Florida              Jason Altmire, Pennsylvania



                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on May 31, 2012.....................................     1

Statement of Members:
    Andrews, Hon. Robert E., ranking member, Subcommittee on 
      Health, Employment, Labor and Pensions.....................     4
    Roe, Hon. David P., Chairman, Subcommittee on Health, 
      Employment, Labor and Pensions.............................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Fensholt, Edward, J.D., senior vice president, director, 
      compliance services and health reform advisory practice, 
      Lockton Benefit Group......................................     6
        Prepared statement of....................................     8
    Hall, Jody, owner, Cupcake Royale & Verite Coffee............    18
        Prepared statement of....................................    20
    Ramthun, Roy J., president, HSA Consulting Services, LLC.....    12
        Prepared statement of....................................    14
    Streitberger, William, vice president of human resources, Red 
      Robin Gourmet Burgers, Inc.................................    23
        Prepared statement of....................................    25

Additional Submission:
    Chairman Roe: PowerPoint slide, ``Tax Changes''..............    52


     BARRIERS TO LOWER HEALTH CARE COSTS FOR WORKERS AND EMPLOYERS

                              ----------                              


                         Thursday, May 31, 2012

                     U.S. House of Representatives

         Subcommittee on Health, Employment, Labor and Pensions

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The subcommittee met, pursuant to call, at 10:02 a.m., in 
room 2175, Rayburn House Office Building, Hon. David P. Roe 
[chairman of the subcommittee] presiding.
    Present: Representatives Roe, Wilson, Thompson, Walberg, 
DesJarlais, Rokita, Bucshon, Noem, Heck, Ross, Andrews, Kildee, 
Hinojosa, Holt, Scott, and Altmire.
    Also present: Representative Miller.
    Staff present: Andrew Banducci, Professional Staff Member; 
Katherine Bathgate, Deputy Press Secretary; Adam Bennot, Press 
Assistant; Casey Buboltz, Coalitions and Member Services 
Coordinator; Molly Conway, Professional Staff Member; Ed 
Gilroy, Director of Workforce Policy; Benjamin Hoog, 
Legislative Assistant; Barrett Karr, Staff Director; Ryan 
Kearney, Legislative Assistant; Krisann Pearce, General 
Counsel; Molly McLaughlin Salmi, Deputy Director of Workforce 
Policy; Todd Spangler, Senior Health Policy Advisor; Linda 
Stevens, Chief Clerk/Assistant to the General Counsel; Alissa 
Strawcutter, Deputy Clerk; Aaron Albright, Minority 
Communications Director for Labor; Tylease Alli, Minority 
Clerk; Jody Calemine, Minority Staff Director; John D'Elia, 
Minority Staff Assistant; Richard Miller, Minority Senior Labor 
Policy Advisor; Megan O'Reilly, Minority General Counsel; and 
Michele Varnhagen, Minority Chief Policy Advisor/Labor Policy 
Director.
    Chairman Roe. Call the meeting to order, and today before 
we get started we have a guest here today that I would like to 
introduce from my home state. It is William Bell.
    And William, if you would stand up just so people can see 
you here?
    William is--today he drew the short straw. He gets to 
shadow me all day today for the Foster Youth Shadow Day 
program, and he--William entered foster care at age 15 and he 
represents now 3,000 young people in Nashville, Tennessee here 
in Washington. Their foster care youth have come from all over 
the country.
    William is doing great. He is in one of our technology 
centers studying to be an electrician and will finish in 6 
months.
    And, William, welcome today to our hearing. [Applause.]
    A quorum being present, the Subcommittee on Health, 
Employment, Labor, and Pensions will come to order. Good 
morning, everyone.
    I would like to thank our witnesses for being here and 
offering their thoughts during today's subcommittee hearing on 
health care costs.
    With 160 million Americans acquiring health insurance 
through an employer-sponsored plan, job creators clearly play a 
critical role in the nation's health care system. As a result, 
employers know all too well the difficult challenges of 
expanding access to affordable health care.
    To help control the cost of offering insurance employers 
have traditionally maintained a great deal of flexibility over 
the design of their health benefits plan they provide. This has 
led to some tough decisions, especially during times when a 
business is struggling to make ends meet. However, preserving 
an employer's ability to navigate a complex health care market 
even during an uncertain economic environment has served us 
well for decades.
    Many employers have found consumer-directed health care as 
one way to better manage costs on behalf of workers. One 
particularly popular choice is to pair a high deductible health 
plan with a health savings account. This allows individuals to 
guard against the cost of catastrophic medical treatment while 
also setting aside a portion of their pretax income to pay for 
future medical expenses.
    Demand for consumer-directed health plans is on the rise. 
For example, America's Health Insurance Plans report an 
estimated 13.5 million individuals had a health savings account 
last January, compared to just 3.2 million in 2006.
    The popularity of health reimbursement accounts and 
flexible spending accounts among workers is also growing, and 
employers have shown their support, as well. According to the 
Kaiser Family Foundation, nearly 70 percent of employees with a 
workplace-sponsored health savings account received employer 
contributions.
    Consumer-directed health plans offer common-sense options 
to help millions of individuals secure a benefit plan that 
meets their health care needs at an affordable price. 
Unfortunately, recent policy changes threaten the success of 
these important plans.
    President Obama's 2010 health care law placed an arbitrary 
cap on contributions to flexible spending accounts, severely 
limiting the annual amount workers are allowed to save. The law 
also prohibited the use of flexible spending accounts and 
health savings accounts when purchasing over-the-counter 
medications, forcing individuals to spend more time and money 
visiting their doctor to obtain prescriptions.
    Additionally, a bulletin released by the administration 
suggests government bureaucrats are crafting an unusual 
accounting scheme that will severely undervalue the 
contribution workers and employers make to a health savings 
account, which may actually discourage employers from offering 
this benefit in the future.
    I am pleased that the Ways and Means Committee is 
considering legislation today that will help roll back a number 
of these harmful policies, reflecting a commitment by this 
Congress to dismantle the job-destroying health care law. 
However, even though more than 12,000 pages of rules and 
regulations have been written there are still many unanswered 
questions surrounding the law that make it virtually impossible 
for any employer, large or small, to plan for the future.
    We still don't know how the administration will ultimately 
define the ``essential health benefit.'' Up to now the 
administration has operated in the regulatory shadows and 
outside the formal rulemaking process, delivering uncertainty 
instead of the facts on its regulatory proposal. We still don't 
know why the administration chose not to fulfill the intent of 
the law's grandfather provision, choosing instead to raise 
regulatory roadblocks that will significantly alter the health 
care of millions of Americans.
    And we don't know what small businesses will do now that a 
highly touted tax credit has proven to be a failure. A 
Government Accountability Office study reveals the small 
business tax credit has helped few employers, thanks in part to 
the costly administrative burden. As the Associated Press 
reports, the tax credit ``has turned out to be a 
disappointment.''
    Forcing the nation into a costly government-run health care 
scheme is perhaps the greatest obstacle to more affordable 
health care. The American people deserve every opportunity to 
pursue new initiatives that will lower health care costs.
    We should empower individuals and employers to create a 
health care plan that best fits the needs of their families and 
workplaces. Unfortunately, the 2010 health care law stands in 
their way.
    As members of Congress we have a responsibility to examine 
federal policies and hear directly from those who live with the 
consequences. I am pleased that we have a number of employers 
who will share their thoughts on health care costs, as well as 
various experts to help inform the subcommittee of the 
technical aspects of the policies we will address today. I look 
forward to our discussion.
    I will now recognize my distinguished colleague, Rob 
Andrews, the senior Democratic member of the subcommittee, for 
his opening remarks.
    [The statement of Chairman Roe follows:]

        Prepared Statement of Hon. David P. Roe, M.D., Chairman,
         Subcommittee on Health, Employment, Labor and Pensions

    Good morning, everyone. I would like to thank our witnesses for 
being with us and offering their thoughts during today's subcommittee 
hearing on health care costs.
    With 160 million Americans acquiring health insurance through an 
employer-sponsored plan, job creators clearly play a critical role in 
the nation's health care system. As a result, employers know all too 
well the difficult challenge of expanding access to affordable health 
care.
    To help control the cost of offering insurance, employers have 
traditionally maintained a great deal of flexibility over the design of 
the health care benefits they provide. This has led to some tough 
decisions, especially during times when a business is struggling to 
make ends meet. However, preserving an employer's ability to navigate a 
complex health care market, even during an uncertain economic 
environment, has served us well for decades.
    Many employers have found consumer-directed health care as one way 
to better manage costs on behalf of workers. One particularly popular 
choice is to pair a high deductible health plan with a health savings 
account. This allows individuals to guard against the cost of 
catastrophic medical treatment while also setting aside a portion of 
their pretax income to pay for future medical expenses.
    Demand for consumer-directed health plans is on the rise. For 
example, America's Health Insurance Plans reports an estimated 13.5 
million individuals had a health savings account last January, compared 
to just 3.2 million in 2006. The popularity of health reimbursement 
accounts and flexible spending accounts among workers is also growing, 
and employers have shown their support as well. According to the Kaiser 
Family Foundation, nearly 70 percent of employees with a workplace-
sponsored health savings account received employer contributions.
    Consumer-directed health plans offer commonsense options to help 
millions of individuals secure a benefit plan that meets their health 
care needs at an affordable price. Unfortunately, recent policy changes 
threaten the success of these important plans.
    President Obama's 2010 health care law placed an arbitrary cap on 
contributions to flexible spending accounts, severely limiting the 
annual amount workers are allowed to save. The law also prohibited the 
use of flexible spending accounts and health savings accounts when 
purchasing over-the-counter medications, forcing individuals to spend 
more time and money visiting their doctor to obtain prescriptions.
    Additionally, a bulletin released by the administration suggests 
government bureaucrats are crafting an unusual accounting scheme that 
will severely undervalue the contribution workers and employers make to 
a health savings account, which may actually discourage employers from 
offering this benefit in the future.
    I am pleased the Ways and Means Committee is considering 
legislation today that will help roll back a number of these harmful 
policies, reflecting a commitment by this Congress to dismantle the 
job-destroying health care law. However, even though more than 12,000 
pages of rules and regulations have been written, there are still many 
unanswered questions surrounding the law that make it virtually 
impossible for any employer--large or small--to plan for the future.
    We still don't know how the administration will ultimately define 
an ``essential health benefit.'' Up to now, the administration has 
operated in the regulatory shadows and outside the formal rulemaking 
process, delivering uncertainty instead of the facts on its regulatory 
proposal.
    We still don't know why the administration chose not to fulfill the 
intent of the law's grandfather provision, choosing instead to raise 
regulatory roadblocks that will significantly alter the health care of 
millions of Americans.
    And we don't know what small businesses will do now that a highly 
touted tax credit has proven to be a failure. A Government 
Accountability Office study reveals the small business tax credit has 
helped few employers, thanks in part to its costly administrative 
burden. As the Associated Press reports, the tax credit ``has turned 
out to be a disappointment.''
    Forcing the nation into a costly, government-run health care scheme 
is perhaps the greatest obstacle to more affordable care. The American 
people deserve every opportunity to pursue new initiatives that will 
lower health care costs. We should empower individuals and employers to 
create a health care plan that best fits the needs of their families 
and workplaces. Unfortunately, the 2010 health care law stands in their 
way.
    As members of Congress, we have a responsibility to examine federal 
policies and hear directly from those who live with the consequences. I 
am pleased we have a number of employers who will share their thoughts 
on health care costs, as well as various experts to help inform the 
subcommittee of the technical aspects of the policies we will address 
today.
    I look forward to our discussion. I will now recognize my 
distinguished colleague Rob Andrews, the senior Democratic member of 
the subcommittee, for his opening remarks.
                                 ______
                                 
    Mr. Andrews. Thank you, Mr. Chairman. The term ``senior'' 
is so grave.
    Okay. Thanks for your friendship and thanks for this 
opportunity.
    William, welcome to Washington. You are shadowing a person 
with a lot of integrity and ability and we are very hopeful 
that you will be able to achieve great things in your life. 
Welcome. We are happy to have you with us.
    I would like to also thank the witnesses for being here and 
begin with a couple of points in which I would part company 
with the chairman's statement, and then talk about some things 
we have in common that I hope we can work on today to find some 
solutions to our country's problems.
    I do agree that the--we are disappointed with the number of 
businesses that have taken advantage of the tax credit thus far 
to buy health insurance for their employees. I think the record 
will show the reason for that is the credit isn't quite 
generous enough and it doesn't extend to enough employers. And 
frankly, if we could find a way to make it reach more small 
businesses in a more dramatic way, it might increase the 
uptake, and that is something we should work on together.
    With respect to the proposition that we don't want to force 
people into a government-run health plan, I agree completely. 
And that is why the 2010 law does not do that at all. What it 
does is create more choices and more attractive options for 
employers and individuals to find the health care that best 
suits their families.
    There is no government health plan created by the 2010 law. 
What there is are marketplaces set up around the country called 
exchanges that, if you think about it, they are almost like a 
Costco or a Sam's Club, where you can go into a marketplace and 
increase and leverage your purchasing power to get more for 
your business or your family.
    And finally, we heard that it is a job-destroying health 
care law. This is part of the narrative of the season. It is 
the campaign season.
    The fact is, of course, that private sector employers have 
added more than 4 million new private sector jobs since the law 
went into effect in March of 2010. Now, let's talk about what 
we agree on.
    We want to do something so that we can control rising 
health care costs for employers and families while improving 
the quality of health care for employers and families and not 
rationing it or limiting it in any way. And I think there are 
three strategies that would help us achieve that objective.
    One is to encourage more people to take personal 
responsibility for their own health care--diet, exercise, 
wellness checkups--a sense where we all are the CEO of our own 
health care plan, in that respect. To the extent that we can 
educate and encourage people to do that, I think there is 
essential unanimity on that point.
    Second, we need to change the way hospitals and doctors and 
medical organizations deliver health care. Right now, if you 
run an MRI center and I run an MRI center--I am very glad I 
don't run one; I wouldn't be very good at it--if I do more 
procedures than you do I make more money than you do, 
particularly for Medicare. The more procedures you do the more 
money you make.
    We really ought to have a payment system that measures the 
quality of how well we work. If your MRI system or business has 
an outstanding track record of identifying problems early on 
and helping someone heal and recover from them, you should be 
rewarded for your success rate and encouraged to do that; and 
if I am not so good at it, there ought to be some economic 
consequences for me. So changing the way hospitals and health 
care providers provide health care is another important thing 
that we have to do.
    And then finally, I think that we can help achieve this 
goal of more affordable health insurance for employers, and 
families, and individuals by having more competition in the 
health insurance marketplace. Virtually every American lives in 
a health insurance marketplace where only one or two or 
sometimes three health insurance underwriters have 90 or 95 
percent of the market. This is not true of our cell phones; 
this is not true of the groceries we buy; this is not true of 
the coffee that we buy; it is not true of the restaurants we 
eat at; it is not true of the hotels that we stay at; it is not 
true of the banks that we put our money in.
    Competition works in the American economy and there is not 
enough competition among health insurance underwriters.
    I believe the new law facilitates the progress toward each 
of those three points. It can encourage wellness; it can 
encourage reform of our delivery system; and it can encourage 
fruitful competition among health insurance plans to provide 
the best deal for employers and for families.
    These are the issues on which we should focus, and I know 
we have four witnesses this morning who can help us in a very 
significant way.
    I thank you for traveling to be here and I look forward to 
your testimony.
    Chairman Roe. Thank you.
    It is now my pleasure to introduce--excuse me. Pursuant to 
rule 7(c) all members will be permitted to submit written 
statements to be included in the permanent hearing record, and 
without objection the hearing record will remain open for 14 
days to allow such statements and other extraneous material 
referenced during the hearing to be submitted for the official 
hearing record.
    It is now my pleasure to introduce our distinguished panel.
    First is Mr. Ed Fensholt. He is the senior vice president 
and director of compliance services at Lockton Companies LLC, 
Lockton's Benefit Group, in Kansas City, Missouri, and you 
have--your group has testified here before. We welcome you 
back.
    Roy Ramthun is the president of HSA Consulting Services, in 
Washington, District of Columbia.
    Welcome.
    Jody Hall is the founder and owner of Cupcake Royale, in 
Seattle, Washington. I have had the privilege of summiting Mt. 
Rainier four times, so I have been out in your great state many 
times. That doesn't say much about my intelligence, but anyway 
I enjoy it.
    Bill Streitberger is the vice president of human resources 
at Red Robin International, in Greenwood Village, Colorado.
    Welcome.
    Before I recognize you to provide your testimony let me 
briefly explain our lighting system. You have 5 minutes to 
present your testimony. When you begin the light in front of 
the--you will turn green; when 1 minute is left the light will 
turn yellow; and when your time is expired the light will turn 
red at which point I will ask you to wrap up your remarks as 
best you are able to.
    After everyone has testified members will each have 5 
minutes to ask questions of the panel.
    I will now begin with Mr. Fensholt?

        STATEMENT OF ED FENSHOLT, SENIOR VICE PRESIDENT,
                     LOCKTON COMPANIES, LLC

    Mr. Fensholt. Chairman Roe, Ranking Member Andrews, and 
members of the committee, my name is Edward Fensholt and I am a 
senior vice president of Lockton Companies, LLC, the world's 
largest privately-held insurance brokerage and consulting firm. 
We provide employee benefits expertise to 2,500 mostly middle 
market employers.
    We and our clients appreciate the stated goal of the 
Affordable Care Act and very much appreciate the efforts made 
to date by federal agencies to take employer concerns into 
account in crafting regulations and other guidance. Yet there 
is no question that the act has, to this date, bent the health 
insurance cost curve north, not south, and the forecast in that 
regard is growing darker.
    The act requires health care plans to cover individuals 
they did not cover in the past, eliminate lifetime and annual 
dollar maximums, and provide a great many preventive care 
services, including, beginning several months from now, 
contraception drugs and devices at no out-of-pocket cost to the 
enrollee. These mandates have increased our clients' health 
plan costs 2 to 3 percent on average to this point. For some 
sectors the increase is more.
    In 2014 or shortly thereafter plans must reduce waiting 
periods to 90 days and automatically enroll eligible full-time 
employees in coverage. Reductions in waiting periods will add 
up to 25 percent to the cost of plans that now have a 6-or 12-
month waiting period, which is not uncommon in the construction 
and trucking industries.
    Our actuaries expect the automatic enrollment requirement 
to add 4.4 percent to health insurance costs--more than that in 
the retail, restaurant, and hospitality sectors.
    The act levies billions of dollars in excise taxes against 
health insurance, pharmaceutical and medical device 
manufacturing industries, and on third party payers of self-
insured medical claims. The taxes on health insurers and TPAs 
alone amount to $20 billion in 2014. Insurers we have talked to 
and our own actuaries estimate that the price of group health 
insurance in 2014 will rise $10 to $15 per employee per month 
as a result of these excise taxes.
    Of great frustration to our clients are the act's many 
additional administrative burdens. Under federal law and 
regulations today a simple group health care plan is required 
to supply up to more than 50 separate notices, disclosures, and 
reports to enrollees or the federal government, many of these 
more than once. The Affordable Care Act added more than a dozen 
of these.
    Here are some of them: Plans are or will be required to 
notify enrollees regarding the plan's retention of 
grandfathered status, the plan's temporary waiver from the 
annual dollar limit prohibitions, and the availability of 
health insurance exchanges, just to name a few. Employers must 
report the value of medical plan coverage on Forms W-2, not to 
reflect a taxable event but simply because Congress wanted to 
collect the information.
    Plans must supply a four-page, double-sided summary of plan 
coverage in a very hardwired format and at specific times not 
only to enrollees but to individuals who are merely eligible 
for coverage. And plans face fines of up to $1,000 per 
violation of this requirement.
    The ``play or pay'' mandate imposed on all but the smallest 
employers in 2014 and beyond requires significant and frequent 
reporting by employers regarding the employer's specific 
medical coverage offerings, a roster of eligible and enrolled 
employees, and the full-time or part-time status of those 
employees, the cost of the employer's coverage offerings, and 
the employer's and the employee's respective shares of that 
cost, the actuarial value gauged against benchmarks of the 
employer's coverage offerings, and the number of months during 
the year during which an employee and each of his enrolled 
dependents were covered by a plan sponsored by the employer.
    In conclusion, our clients are already drowning under the 
cost of providing robust health insurance to employees. Rather 
than tossing employers a lifeline, the Affordable Care Act is 
in many ways an anchor, albeit a well-intentioned one, by 
piling on additional costs and burdens.
    An Oliver Wyman report out yesterday reveals that two-
thirds of employers surveyed say health insurance cost trend is 
unsustainable even if the trend is reduced 5 percent. And here 
the ACA is adding cost.
    Our clients simply do not understand, Mr. Chairman, why at 
a time when they struggle to supply this valuable fringe 
benefit, now the most expensive element of compensation next to 
wages, Congress would make the process more expensive and more 
complicated rather than less so.
    Thank you.
    [The statement of Mr. Fensholt follows:]

  Prepared Statement of Edward Fensholt, J.D., Senior Vice President, 
  Director, Compliance Services and Health Reform Advisory Practice, 
                         Lockton Benefit Group

    Chairman Roe, Ranking Member Andrews and members of the Committee, 
my name is Edward Fensholt and I am a Senior Vice President of Lockton 
Companies, LLC. Lockton is the largest privately-held insurance 
brokerage and consulting firm in the world. Domestically, Lockton 
employs 2,300 associates in 24 offices nationwide who serve the 
insurance risk needs of approximately 9,000 employer clients from coast 
to coast. Lockton Benefit Group (``LBG'') is the employee benefits 
consulting arm of Lockton Companies, LLC, and provides employee 
benefits consulting services to approximately 2,500 of those clients.
    LBG provides consulting expertise related to qualified and 
nonqualified retirement plans, group life and disability insurance 
programs, voluntary supplemental benefits, dental, vision, and 
comprehensive group medical benefit packages. The majority of our 2,500 
employee benefits clients employ us to assist in the design and 
administration of their group medical insurance programs.
    I am the Director of LBG's Compliance Services Division, and also 
lead our Health Reform Advisory Practice, a multi-disciplinary team of 
professionals formed to steer our clients through the federal health 
reform initiative. On behalf of Lockton I thank you for the opportunity 
to appear here today to share our observations and our clients' views 
regarding the impact of aspects of last year's health reform law on the 
group health plans sponsored by our clients.
    Most LBG clients are ``middle market'' employers, employing between 
500 and 2,000 employees. Our clients include private and governmental 
employers, and employers across many industry segments, including 
construction, healthcare, manufacturing, transportation, retail, 
professional services firms, and the hospitality/entertainment 
industry.
    More than half of LBG's clients maintain self-insured group health 
plans. The others purchase group health insurance from licensed 
insurance companies.
The PPACA Imposes Additional Costs on Employment-Based Health Insurance
    The Patient Protection and Affordable Care Act of 2010 (``PPACA'') 
is a sweeping piece of legislation affecting the health insurance 
marketplace, the Medicaid program, the Medicare program, and health 
care providers from doctors to nurses to hospitals and community health 
clinics. It affects health insurers, group insurance plans (both 
insured and self-insured), the employers who offer them, and the 
employees and their dependents enrolled in those plans. My comments 
today are confined to the cost impacts on the latter, that is, the 
impact of the PPACA on employers who sponsor group health insurance 
plans, and the employees and dependents who receive coverage through 
those plans.
    Let me say at the outset that neither Lockton nor the vast majority 
of its clients have any quarrel with the stated goal of the PPACA, that 
is, to provide health insurance protection to millions more Americans 
who want or need it, but cannot afford it. We and the law's proponents 
may disagree on how that should be provided, who should bear the 
administrative burden, who should pay for the new entitlements and how 
to allocate the nation's financial resources to provide them. But we 
appreciate the stated goal behind the measure.
    As a firm heavily engaged in analyzing the statutory and regulatory 
construct of the PPACA, and advising and shepherding our clients 
through that construct, we have respect for and appreciate the efforts 
of the federal administrative agencies working hard to implement the 
law as Congress has mandated they must. In listening to and speaking 
with officials from the Labor Department, the IRS and the Department of 
Health and Human Services, and analyzing the guidance they have issued 
thus far, it's clear that federal regulators are making a strong effort 
to listen to the employer community, to understand the concerns of 
employers, and to endeavor to balance the needs of employers with the 
needs of those individuals the PPACA was intended to benefit.
    That said, there's no question the PPACA has, to this date, bent 
the health insurance cost curve north, not south. As additional taxes, 
fees and mandates on employer-based health coverage come on line, we 
fear the health insurance affordability forecast will continue to 
deteriorate. Let me mention a few examples for the Committee.
2011 Coverage Mandates
    Health plans are already complying with the obligations to cover 
adult children to age 26 (even if married and non-dependent upon the 
employee), to waiver pre-existing condition restrictions on newly 
enrolled children, and to eliminate lifetime and annual dollar maximums 
on what the PPACA terms ``essential health benefits.'' Most plans in 
our book of business have lost grandfathered status under the PPACA, 
subjecting them to additional mandates such as the obligation to cover 
a wide-variety of preventive care services--including, beginning 
several months from now, well women care, including contraception drugs 
and devices--at no out-of-pocket cost to the enrollee.
    The increase in health insurance costs to employers in our book of 
business, to implement these mandates, has been 2-3 percent. For some 
sectors the increase is more, for some it is less.
    There is also a new nondiscrimination rule that applies to fully 
insured medical coverage. Lockton has clients--such as regional and 
national restaurant chains, retail establishments and other employers 
in the hospitality industry--who currently supply typical medical 
coverage to corporate staff and select others (such as restaurant, 
store or hotel managers) but cannot afford to offer the same level of 
coverage, at the same rate of employer subsidies, to hourly employees. 
Maintaining the status quo, however, might subject these employers to 
excise taxes of $100 per day per hourly employee who does not receive 
an equivalent offer of coverage.
    It is possible, depending on how federal regulators flesh out the 
requirements of the nondiscrimination rule, that these employers will 
simply have to terminate their existing group coverage. However, the 
nondiscrimination rule has yet to be interpreted by the regulatory 
agencies, and therefore our actuaries have not yet estimated the cost 
impact of this mandate.
2014 Coverage Mandates
    Additional coverage mandates apply beginning in 2014. For example, 
health plans must reduce waiting periods to 90 days, and auto-enroll 
eligible full-time employees in available employer-based coverage.\1\ 
Depending on the employer's industry segment, these additional expenses 
can be substantial. For example, our clients in the construction and 
transportation industries--where we find 6-month or even 12-month 
waiting periods--can expect to see significant cost increases. Our 
actuaries tell us these clients with 6-month waiting periods currently 
should see a cost increase of an additional 4% in 2014; those with a 
12-month waiting period should see a cost increase of nearly 25%.
---------------------------------------------------------------------------
    \1\ Federal regulators recently deferred the compliance deadline 
for the automatic enrollment rules, concluding guidance regarding how 
to implement the requirement will not be ready by 2014.
---------------------------------------------------------------------------
    Our actuaries tell us that, across all industry segments other than 
retail and hospitality, our clients can expect to experience a 4.4% 
cost increase attributable to the automatic enrollment requirement.\2\
---------------------------------------------------------------------------
    \2\ In modeling the effect of the automatic enrollment provision, 
our actuaries assumed that 75% of employees who are newly eligible for 
coverage but have not affirmatively enrolled, and who are automatically 
enrolled by the employer, will opt out of coverage.
---------------------------------------------------------------------------
Taxes and Fees
    To at least partially offset the cost of the health reform law, 
Congress (in the PPACA) levied excise taxes against the health 
insurance, pharmaceutical and medical device manufacturing industries, 
and on third-party administrators (TPAs) of medical claims. Of course, 
health insurers and TPAs will simply pass along these additional costs 
in the price of their products.
    The taxes on health insurers and TPAs amount to $20 billion in 
2014. Insurers we've talked to, and our own actuaries, estimate that 
the price of group health insurance in 2014 will rise $10-15 per 
employee, per month (or about 2-3 percent) on account of these excise 
taxes alone.
    Health plans are also subject to a $1 per covered life fee in 2012, 
increasing to $2 per covered life next year and beyond (subject to 
inflation-based adjustments), to pay for ``comparative effectiveness 
research,'' or research into medical ``best practices.''
Administrative Burdens
    Of great frustration to our clients are the many additional 
administrative burdens, and their attendant costs, imposed by the 
health reform law. The majority of our clients want to continue to 
supply health insurance, but they struggle with the cost and the 
federally-imposed complexity of plan administration.
    For example, under federal law and regulations today, a simple 
group health plan is required to supply up to more than 50 separate 
notices, disclosures and reports to its enrollees and the government 
(many of those more than once). Virtually every aspect of plan 
administration, from enrollment to benefit summaries to specific 
eligibility and benefit requirements, to claim processing times and the 
timing, form and cost of post-employment coverage, are now under 
(primarily federal) statutory or regulatory dictates.
    The PPACA has added more than a dozen additional notice and 
disclosure obligations to health plan administration. This frustrates 
our clients immensely. They do not understand why, at a time when they 
struggle to supply this valuable fringe benefit--which is now the most 
expensive element of employee compensation, behind wages--Congress 
would make the process more expensive and more complicated, rather than 
less so.
    A full 80 percent of our clients said, in responding to a survey we 
conducted last year, that they were ``concerned'' or ``very concerned'' 
about the additional administrative complexity created by the PPACA. 
They tell us the additional costs, complexity and uncertainty wrought 
by the PPACA affect their ability to hire additional workers, or to 
retain full-time employees.
    Here are just some of the additional administrative obligations 
imposed upon health plan sponsors by the PPACA:
     Plans are (or will be) required to notify enrollees 
regarding the plan's retention of grandfathered status under the PPACA, 
the plan's obtaining a waiver from the annual dollar limit 
prohibitions, the right of enrollees to designate certain physicians as 
a child's primary care physician, the availability of health insurance 
exchanges, the plan's participation in the Early Retiree Reinsurance 
Program, and the retroactive loss of coverage due to misrepresentation 
or fraud.
     Employers must report the value (employer- and employee-
paid) of medical plan coverage on Forms W-2, not to reflect a taxable 
event, but simply because Congress wanted to collect the information. 
Because many employees change their level of health coverage during the 
taxable year (due to marriage, domestic partnership, divorce, birth or 
emancipation of a covered child, etc.), employers must track the 
changes in values of the coverage, to ensure accurate reporting.
     Although the Employee Retirement Income Security Act 
(ERISA) already required most employers to supply health plan enrollees 
with a ``summary plan description'' summarizing their health coverage, 
the PPACA imposes an additional requirement to supply a four-page 
(double-sided) summary of plan coverage, in hard-wired format and at 
specific times, to not only enrollees but also to individuals merely 
eligible for coverage. Health plans face fines of up to $1,000 per 
violation of this requirement.
     The ``shared responsibility'' obligations imposed on all 
but the smallest employers in 2014 and beyond will significantly 
ratchet up the administrative obligations on employers subject to those 
obligations. o Many employers will face substantial complexity in 
determining when their employees are considered ``full-time'' for PPACA 
purposes, triggering an obligation on the employer to offer them at 
least ``minimum essential coverage'' or risk various penalties. The 
challenge will be particularly acute for seasonal employers. While the 
administrative agencies--the IRS in particular--have done an admirable 
job working to strike a balance between pragmatism and the PPACA's 
literal requirements, we expect the process to remain significantly 
burdensome.
    In order for federal authorities to coordinate employers' ``shared 
responsibility'' obligations with the availability (to the uninsured) 
of taxpayer subsidies in the new health insurance exchange, federal and 
state authorities will need employers to submit detailed reports on a 
regular basis, reports reflecting:
     The employer's specific medical coverage offerings,
     A roster of eligible and enrolled employees, and the full-
time or part-time status of the employees,
     The cost of the employer's coverage offerings, and the 
employer's and employees' respective shares of that cost,
     The actuarial value, gauged against designated benchmarks, 
of the employer's coverage offerings, and
     The number of months (during the year) for which an 
employee, and each of his enrolled dependents, were covered by a plan 
sponsored by the employer.
    Last week came word from Washington that the IRS is re-evaluating 
how to assess the ``affordability'' of an employer's coverage offering 
to a full-time employee. Under the PPACA, if the employer's offer of 
coverage requires the employee to pay more than 9.5 percent of his or 
her household income for coverage, the coverage is considered 
``unaffordable'' and the employee may qualify for taxpayer-supplied 
subsidies to buy insurance in a health insurance exchange. If that 
occurs, the employer will incur a $3,000 annual nondeductible penalty 
with respect to that employee.
    The legislative history to the PPACA is scant, but what history 
exists is clear that the ``affordability'' test was to be applied to 
employee-only coverage, not family coverage. The IRS has initially said 
this is how it interpreted the statute.\3\
---------------------------------------------------------------------------
    \3\ The IRS has also indicated a willingness to allow employers to 
utilize W-2 wages as a surrogate for ``household income'' in the 
affordability calculation.
---------------------------------------------------------------------------
    Now comes word that the IRS might, in fact, require that family 
coverage meet this affordability test. If federal authorities are going 
to require employers to heavily subsidize a full-time employee's family 
coverage, so that family coverage does not cost the employee more than 
9.5 percent of his or her household income, the number of employers 
exiting the group insurance market, and dumping their employees into 
the health insurance exchanges, will be far greater than the 
Congressional Budget Office has estimated to date. That has profound 
implications for the dollars budgeted to supply taxpayer-funded 
subsidies in the exchanges.
    The flight from the group insurance marketplace will most acute in 
industries where the employees tend to be modestly paid, hourly 
workers. Employers will opt to pay the relatively modest $2,000 per 
full-time employee penalty for offering no insurance, rather than pay 
larger subsidies for health insurance for the employees and their 
dependents. Congress can also expect to see many employer sectors 
transition full-time employees to part-time status, to take the 
employees out of the penalty equation.
What Employers Appreciate About the PPACA
    This is not to say that employers are concerned about every aspect 
of the insurance reforms reflected in the PPACA. Some employers who buy 
group insurance (as opposed to self-insuring medical coverage) will 
receive refunds this August from insurers who failed to reach specific 
medical loss ratios in the given state.
    And the PPACA supplies greater leverage to employers to encourage 
employees to make lifestyle changes to improve their health. The law 
allows employers to require unhealthy employees to pay an additional 
amount--up to 30 percent of the total cost the employee's coverage, up 
from 20 percent under pre-PPACA rules--for their health insurance, to 
account for the additional risks they pose to the health plan.
Conclusion
    Lockton greatly appreciates the opportunity to appear before you 
today. In assessing the impact of the health reform legislation, we 
urge you to place yourselves not only in the shoes of those Americans 
who need access to affordable insurance, but in the shoes of the 
employers who supply valued coverage to 160 million of us.
    Employers are burdened and frustrated by aspects of the health 
reform law that add costs and complexity to their health plans, and may 
lead some of them to eliminate group coverage and full-time jobs.
    We welcome the opportunity to work with you to mitigate these 
burdens on the employer community.
                                 ______
                                 
    Chairman Roe. Thank you.
    Mr. Ramthun?

              STATEMENT OF ROY RAMTHUN, PRESIDENT,
                    HSA CONSULTING SERVICES

    Mr. Ramthun. Chairman Roe, Ranking Member Andrews, and 
other members of the committee, I would like to thank you for 
this opportunity to testify before your subcommittee today. My 
name is Roy Ramthun and I am a private consultant here in the 
Washington, D.C. area.
    I would like to take this opportunity to discuss one of the 
bright spots in health coverage benefits, that known as 
account-based health plans--health insurance plans paired with 
an HSA or HRA. These are the fastest-growing product in the 
market for employer-based group health plans.
    It is my opinion that account-based health plans have 
helped to arrest the decline in employer-based health coverage. 
That said, I am uncertain that even account-based health plans 
can overcome the new employer responsibilities and costs of 
complying with the Patience Protection and Affordable Care Act. 
I will touch on some of these issues during my testimony today.
    Account-based health plans now account for about 15 percent 
of all employer-sponsored health coverage. The consulting firm 
Towers Watson states that nearly 60 percent of employers have 
implemented account-based health plans and that number will 
increase to 70 percent by 2013. Twelve percent of employers now 
offer total replacement plans, where account-based health plans 
are the only option offered to employees.
    What is fueling this growth? Certainly one of the reasons 
is the dramatic increase in health insurance costs over the 
past decade. Milliman Incorporated recently reported that 
health care costs for the typical family of four are projected 
to reach over $20,000 through an employer-sponsored PPO plan 
this year.
    In contrast, companies with at least half of their workers 
enrolled in an account-based health plan report that their per-
employee costs are over $1,000 lower than companies without an 
account-based health plan. This is hard evidence for bending 
the cost curve that is so elusive for the rest of our nation's 
health care system.
    Several insurance carriers have similarly reported dramatic 
savings for employers that switch to account-based health 
plans. This potential for reducing health care spending was 
recently confirmed by researchers at the RAND Corporation.
    Their analysis suggests that the health care spending in 
the U.S. could drop by $57 billion per year if account-based 
health plans grow to represent half of all employer-sponsored 
in the U.S. They estimate that the annual savings would be as 
high as $73.6 billion if all these individuals were enrolled in 
HSA plans.
    But account-based health plans are not just about saving 
money. It is also about how the money is saved--by changing how 
employees think about their health and taking action to 
improvement. In my written testimony I address some of the 
common misperceptions about account-based health plans, 
including that account-based health plans don't cover 
preventive services and generally offer skimpier coverage, that 
individuals will forego needed care just to save money, that 
individuals will go bankrupt due to high out-of-pocket costs, 
and that patients will be overcharged and unable to navigate 
the complex world of health care.
    Why isn't every company offering account-based health 
plans? Well, they may have to if the so-called ``Cadillac 
plan'' tax goes into effect in 2018.
    I believe that companies have few other options as 
effective as account-based health plans to keep their costs 
below the thresholds where the excise tax will affect them. 
However, other issues are or will create challenges much sooner 
than 2018.
    For example, employees with HSAs, HRAs, and even FSAs must 
now obtain a prescription from their doctor to seek 
reimbursement for over-the-counter medicines. In 2014 the 
health reform law will require employer-based health plans to 
limit their plan deductibles to no more than $2,000 for single 
persons and $4,000 for family persons. Many employers are 
already offering account-based health plans with deductibles 
above these limits.
    Also in 2014, the law will require employer-based health 
plans to provide a minimum actuarial value of at least 60 
percent. While this sounds reasonable, recent guidance issued 
by the Internal Revenue Service and HHS proposed to devalue the 
typical employer contributions to HSAs and HRAs when 
determining whether a plan provides the minimum actuarial 
value. Thus, some account-based health plans might not meet the 
minimum 60 percent standard.
    In my written testimony I cite statements from the American 
Academy of Actuaries and the Congressional Budget Office 
suggesting that this policy should be changed. I agree 
completely and I believe that employer and employee 
contributions to HSAs should be valued at the full amount of 
the contributions, not adjusted.
    Another issue of concern is the new minimum medical loss 
ratio requirements. Unfortunately, the regulations do not 
adequately take into account HSA or HRA contributions, thus 
making it extremely challenging for account-based health plans 
to meet the MLR requirements, limiting the availability of 
these plans to small-and medium-sized employers in the future.
    In closing, strategies like account-based health plans that 
reduce employer health benefit costs free up money that 
companies can use to stimulate the economy by raising wages, 
creating jobs, or making critical investments for the future. 
We also need to ensure that workers will be permitted to keep 
the coverage they have, as was promised throughout the health 
reform debate.
    Mr. Chairman and members of the subcommittee, I appreciate 
the opportunity to provide this testimony today. I look forward 
to the opportunity to discuss these issues in greater detail 
and am pleased to answer any questions you may have.
    Thank you.
    [The statement of Mr. Ramthun follows:]

            Prepared Statement of Roy J. Ramthun, President,
                      HSA Consulting Services, LLC

    Chairman Roe, Ranking Member Andrews and the other members of this 
Committee, I would like to thank you for this opportunity to testify 
before the Subcommittee on Health, Employment, Labor and Pensions about 
the barriers to lower health care costs for workers and employers. My 
name is Roy Ramthun, and I am a private consultant in nearby Silver 
Spring, MD. My consulting practice focuses primarily on helping 
employers, financial institutions, and consumers to better understand 
and take advantage of the benefits offered by consumer-driven health 
care programs such as Health Savings Accounts (HSAs), Health 
Reimbursement Arrangements (HRAs), and their associated health 
insurance plans.
    I have had the distinct honor to serve our country in positions at 
the Department of Health and Human Services (HHS), the Treasury 
Department, the White House, and the U.S. Senate Committee on Finance. 
While at the Treasury Department, I led the implementation of the 
Health Savings Account program after its enactment in 2003. I started 
my own consulting practice after leaving the White House in 2006 to 
devote my full time and attention to this program and related issues.
    Account-based health plans--health insurance plans paired with HSAs 
and HRAs--are the fastest growing product in the market for employer-
based group health plans. There is no disputing the fact that the 
number of employers offering group health plan coverage to their 
employees has declined as the cost of providing coverage has increased. 
It is my opinion that account-based health plans have helped arrest 
this decline. That said, as employers wrestle with the decisions 
whether or not to continue sponsoring health insurance benefits, I am 
uncertain that even account-based health plans can overcome the new 
employer responsibilities and costs of complying with the Patient 
Protection and Affordable Care Act. I will touch on some of those 
issues during my testimony today.
    Account-based health plans are approximately 10 years old, but have 
grown substantially over the past decade. Estimates vary, but account-
based health plans now account for about 15 percent of all employer-
sponsored health coverage. The Employee Benefit Research Institute 
(EBRI) says approximately 21 million Americans were covered by an 
account-based health plan in 2011, up 40 percent from 2010. The number 
is certainly higher for this year as the number of Americans covered by 
HSA-based plans is approximately 13.5 million, as reported just this 
week by America's Health Insurance Plans (AHIP). There is no reliable 
survey of HRA-based plans, but my best guess is that another 11-12 
million Americans are covered by these plans.
    The consulting firm Towers Watson states that nearly 60 percent of 
employers have implemented account-based health plans, and that number 
will increase to 70 percent by 2013. Twelve percent of employers now 
offer ``total replacement'' plans--where account-based health plans are 
the only option offered to employees--up from 7.6 percent in 2010. 
Enrollment by employees in account-based plans has nearly doubled in 
the past two years, from 15 percent in 2010 to 27 percent in 2012.
    What is fueling this growth? Certainly one of the reasons is the 
dramatic increase in health insurance costs over the past decade. 
According to the 2011 Kaiser Family Foundation/Health Research & 
Educational Trust annual survey of employer benefits, the cost of 
family coverage more than doubled over the previous 10 years (see 
exhibit below). Other surveys suggest that costs may be even higher. 
For example, Milliman Inc. recently reported that health care costs for 
the typical family of four are projected to reach $20,728 through an 
employer-sponsored preferred provider organization (PPO) plan this 
year. The 6.9 percent increase over 2011 is actually the lowest rate of 
increase Milliman has seen in the 10 years of this study.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Contrast that to the experience of employers who have account-based 
health plans. According to Towers Watson and the National Business 
Group on Health, companies that successfully move their employees into 
account-based health plans can achieve significant savings on their 
health benefit costs. For example, companies with at least half of 
their workers enrolled in an account-based health plan report that 
their per-employee costs are over $1,000 lower than companies without 
an account-based health plan. This is hard evidence for ``bending the 
cost curve'' that is so elusive for the rest of our nation's health 
care system.
    Similarly, Aetna reported late last year that employers who 
switched to account-based health plans as their only plan option had 
saved $21.8 million per 10,000 members over the past five years. Aetna 
found that employers who offered an account-based health plan along 
with other traditional plan options (e.g., PPO, HMO) also had realized 
savings, but not as significant--only $8 million per 10,000 members 
over five years.
    Finally, Cigna published a study earlier this year concluding that 
employers can save an average of $9,700 per employee over five years by 
switching to account-based health plans. Given these results, Cigna 
believes that if the share of Americans enrolled in account-based 
health plans rose to 50 percent and achieved the same results as this 
study, the U.S. could save $350 billion over 10 years and the level of 
patient care would improve.
    This potential for reducing health care spending was recently 
confirmed when researchers at the RAND Corporation published in the 
journal Health Affairs the results of their analysis of the potential 
impact of account-based health plans on the American health care 
system. The RAND analysis suggests that if account-based health plans 
grow to represent half of all employer-sponsored insurance in the 
United States, health care spending could drop by $57 billion 
annually--about 4 percent of all health care spending among non-elderly 
Americans. The study acknowledges that HSAs are far more cost-
effective, and estimates that if all of these people were in HSA plans, 
the annual savings would be as high as $73.6 billion. I believe that is 
a conservative estimate.
    But account-based health plans are not just about saving money. 
It's also about how the money is saved--by changing how employees think 
about their health and taking action to improve it. I would like to 
take a few moments to clear up some common misperceptions about 
account-based health plans.
    First, research is increasingly suggesting that lifestyle behaviors 
account for approximately three-quarters of health care spending in the 
U.S. This is likely to only get worse as diet, obesity, lack of 
exercise, and smoking take its toll on our bodies and our health care 
system. Fortunately, account-based health plans cover preventive care 
services and usually do so without applying a deductible or other out-
of-pocket expense. In fact, preventive care was included in the 
original design of HSAs, long before the PPACA made it a requirement of 
all health plans. Data from Aetna, Cigna, EBRI, and others suggests 
that utilization of preventive care services is higher when individuals 
are enrolled in account-based health plans. Additional data suggests 
higher compliance with disease management and treatment regimens for 
individuals with chronic conditions. While there is always a risk that 
people will seek less care when spending their own money (several 
studies have raised this concern), I am not aware of any evidence to 
suggest that the health status of individuals enrolled in account-based 
health plans has declined, and in most cases it appears to be 
improving. Obviously, this is an issue to monitor for the future.
    Second, individuals enrolled in account-based health plans are more 
engaged in their health care. The most recent survey by EBRI suggests 
that enrollees in account-based health plans are more likely to: (1) 
check whether their plan would cover their care; (2) talk to their 
doctor about treatment options and costs; (3) talk to their doctor 
about prescription drug options and costs; (4) ask for a generic drug; 
(5) check the price of service before seeking care; (6) use an online 
cost-tracking tool; and (7) develop a budget to manage health care 
expenses. Similar findings have been reported by insurance carriers.
    Third, HSA-qualified account-based health plans provide true 
catastrophic protection by virtue of their annual limits on out-of-
pocket expenses. Under the PPACA, these limits will be applied to all 
plans starting in 2014, but account-based health plans already provide 
this protection and have been doing so since 2004. These limits apply 
both to medical and pharmacy expenses and therefore provide an 
extremely important benefit to people with chronic conditions and/or 
high annual health care expenses. Most people don't understand that 
their traditional pharmacy coverage likely does not have any limit on 
out-of-pocket prescription expenses.
    Fourth, covered benefits and services are generally identical to 
traditional plans, not ``skimpier'' as some critics believe. What is 
different is the amount of covered benefits paid by the account-based 
health plan. So while the exact same benefits may be covered by each 
plan, the account-based health plan may only cover 60 or 70 percent of 
the cost of covered benefits, whereas a traditional HMO or PPO plan may 
cover 80 or 90 percent of the cost of covered benefits, on average. 
However, the difference in out-of-pocket costs for covered benefits is 
typically offset almost dollar-for-dollar by a difference in premiums. 
For example, a plan with a higher deductible (by $2,000) will typically 
have a premium that is $2,000 lower. Many people understand this 
concept when applied to their auto and homeowners insurance policies, 
but the concept is relatively new to many people for their health 
insurance.
    Fifth, even though individuals enrolled in account-based health 
plans typically have higher out-of-pocket expenses, they still receive 
the benefit of the discounted prices for medical services negotiated by 
their insurance plan. For example, a patient may have an office visit 
with his or her personal physician. While the physician may charge $150 
for each office visit, he usually accepts a discounted fee of $70 to 
$100 depending on the insurance plan. In these cases, the patient would 
pay only $70 to $100, not the full $150 charged by the physician.
    Sixth, there is a growing industry of companies providing 
complementary information and services to help people manage their 
medical care and health care finances. Companies like Compass, Medibid, 
BidRx, Direct Labs, Healthcare Blue Book, change:healthcare, IF 
Technologies, INSNET, and others are responding to the needs of 
patients by providing better information about the price and quality of 
health care services. Another industry is responding to the demand for 
``wellness'' services to help people maintain and improve their health 
to avoid disease and chronic conditions. These companies would likely 
not exist without the growing consumer demand for better value for 
their health care dollar.
    Finally, even though individuals enrolled in account-based health 
plans are typically subject to higher up-front deductibles, most 
employers are providing a contribution of funds to the associated HSA 
or HRA which helps lessen the sting of the deductible. Data from the 
most recent Kaiser Family Foundation/HRET survey indicates that workers 
enrolled in HRA plans receive an annual employer contribution to their 
HRA of $861 for single coverage and $1,539 for family coverage, on 
average. Workers enrolled in HSA plans receive an annual employer 
contribution to their HSA of $886 for single coverage and $1,559 for 
family coverage. With HSAs, unspent funds automatically roll over each 
year. However, approximately 30 percent of workers enrolled in HSA 
plans receive no contributions from their employer. Although I believe 
these individuals primarily work for smaller companies, we all should 
be mindful of government policies that may discourage employer 
contributions in the future, such as changes to tax policy and how 
health plan actuarial values are calculated.
    Why isn't every company offering account-based health plans? They 
may have to if the so-called ``Cadillac plan'' tax in PPACA goes into 
effect in 2018. I believe that companies have few other options as 
effective as account-based health plans to keep their costs below the 
thresholds where the excise tax will affect them ($10,200 for single 
coverage; $27,500 for family coverage). The recent surveys suggest that 
private employers are taking action and moving to account-based health 
plans, but public and non-profit employers appear to be lagging.
    The one exception is the State of Indiana. Indiana has been 
offering account-based health plans to state employees since 2006. In 
2012, its seventh year for account-based plans, 90 percent of Indiana 
state workers with its health insurance coverage participate in an 
account-based health plan. The state says these plans have already 
reduced the state's overall health benefit costs by more than 10 
percent, and only 2 percent have switched back to a traditional plan.
    In the 22 other states where enrollment in account-based health 
plans is voluntary, only 2 percent of government employees have signed 
up. Last year, Arizona, Louisiana, Minnesota, Utah and West Virginia 
joined 18 other states that already offer an account-based health plan. 
If Indiana's program continues to hold down costs while satisfying 
state employees, more states can be expected to try account-based 
health plans.
Barriers to Future Growth
    For larger employers, cost pressures will continue under the PPACA 
as the ``Cadillac plan'' tax looms in 2018. However, other issues are 
or will create challenges much sooner than 2018. For example, employees 
with HSAs, HRAs, and even Flexible Spending Accounts (FSAs) must obtain 
a prescription from their doctor to seek reimbursement for over-the-
counter medicines. The irony is that these medications have been 
approved by the U.S. Food and Drug Administration (FDA) as safe and 
effective for purchase without a prescription. But a provision in the 
PPACA requires individuals to obtain a prescription for these products 
or they will have to pay income tax plus a 20 percent penalty if they 
use their HSA, HRA, or FSA funds to pay for these medicines. This 
provision has been in effect since January 1, 2011.
    In 2014, the PPACA will require employer-based health plans to 
limit their plan deductibles to no more than $2,000 for single persons 
and $4,000 for family policies. Many employers are already offering 
account-based health plans with deductibles above these limits, 
especially employers that have been offering account-based health plans 
for several years. If companies are required to lower their 
deductibles, they will likely see their costs go up and will have to 
raise their premiums offset the lower out-of-pocket costs. This would 
send account-based health plans in the wrong direction!
    Also in 2014, the PPACA will require employer-based health plans to 
provide a minimum actuarial value of at least 60 percent. This means 
the plan must be designed to pay at least 60 percent of the cost of the 
benefits covered by the plan, and the employee/patient must pay the 
remaining 40 percent. While this sounds reasonable, recent guidance 
issued by the Internal Revenue Service (IRS) and HHS reflects a bias 
against account-based plans in favor of traditional first-dollar 
coverage plans. The guidance proposes to devalue the typical employer 
contributions to HSAs and HRAs when determining whether a plan provides 
the minimum actuarial value. Thus, even if an employer is providing the 
same amount of total contributions, the plan might not meet the minimum 
60 percent standard.
    Here is an example of how this could happen. Consider an employer 
that is providing coverage through a traditional PPO group health plan 
at a cost of $5,000 per employee. The company then chooses to switch to 
an account-based health plan and lowers its per-employee premium costs 
to $4,000 but contributes the $1,000 savings to each employee's health 
savings account. From the employer's perspective, his total costs 
remain $5,000 per employee. But under the IRS/HHS guidance, the 
employer's $1,000 contributions to employees' HSAs will not receive 
full credit (e.g. might be cut in half or more) towards the plan's 
actuarial value, putting the employer at risk of not meeting the 
minimum actuarial value of 60 percent. This again sends the wrong 
message to employers about account-based health plans.
    In its comment letter to HHS dated May 16, 2012, the American 
Academy of Actuaries said the following:
    ``This adjustment * * * could have the effect of discouraging 
employers from contributing to HSAs/HRAs. For a given amount of 
employer spending toward health insurance, a higher [actuarial value] 
likely would be achieved by devoting more of those dollars directly 
toward a health insurance program than to an HSA/HRA. To the extent 
that HSAs encourage plan enrollees to seek cost-effective care, 
discouraging this option may run counter to goals of achieving more 
effective use of health care dollars.''
    Likewise, in its 2008 report analyzing major health insurance 
proposals, the Congressional Budget Office (CBO) said that:
    ``* * * the actuarial value of consumer-directed plans would 
include the expected value of any contributions that an insurer or 
employer sponsoring the plan would make to an enrollee's account--so 
that contribution could be set to make the overall actuarial value of 
the consumer-directed plan equal to the value of a conventional health 
plan.''
    I agree completely with the Academy and CBO. I believe that 
employer contributions to HSAs should be valued at the full amount of 
the contribution, not ``adjusted.'' In addition, employee contributions 
made through payroll deduction should be counted as well and in full 
(not ``adjusted''). Currently, the guidance does not provide any credit 
for employee contributions.
    Another issue that will impact the availability of account-based 
health plans to some companies is the new minimum medical loss ratio 
(MLR) requirements under the PPACA. This issue impacts plans sold by 
insurance carriers to small and medium-size companies. Unfortunately, 
the MLR regulations do not take into account HSA or HRA contributions, 
thus making it extremely challenging for account-based health plans to 
meet requirements they were not designed to meet. I have been seeking 
changes to the regulations to reflect the unique circumstances of 
account-based health plans, but no changes have been made so far.
    In closing, we should all keep in mind that premiums paid by 
employers for workers' health benefits are another form of compensation 
in lieu of wages earned by employees. Strategies like account-based 
health plans that reduce employer health benefit costs free up money 
that companies can use to stimulate the economy by raising wages, 
creating jobs, or making critical investments for the future. We also 
need to ensure that workers will be permitted to keep the coverage they 
have, as was promised throughout the health reform debate.
    Mr. Chairman and members of the Subcommittee, I appreciate the 
opportunity to provide this testimony today. I look forward to the 
opportunity to discuss these issues in greater detail with you. I would 
be pleased to answer any questions you have.
    Thank you.
                                 ______
                                 
    Chairman Roe. Thank you.
    Ms. Hall?

           STATEMENT OF JODY HALL, FOUNDER AND OWNER,
                         CUPCAKE ROYALE

    Ms. Hall. Thank you.
    Chairman Roe, Ranking Member Andrews, and members of the 
subcommittee, I am honored to be here today to testify. My name 
is Jody Hall and I own a business called Cupcake Royale, in 
Seattle, Washington. It is a cafe and bakery.
    I am also a leader in a group called the Main Street 
Alliance of Washington that represents over 2,000 small 
business owners because we--our voices weren't heard in groups 
like NFIB. And that was pulled together about 3 or 4 years ago.
    And I founded my business in 2003. When we opened our first 
shop we took a big risk. We were the first cupcake bakery 
outside of Manhattan to open.
    The risk paid off. Our made-from-scratch cupcakes were an 
instant hit and we since have expanded to five locations. I am 
actually here--we started building our sixth location 
yesterday--and am taking time out because I believe in this 
issue. We employ currently 72 employees, 45 FTE equivalents, 
and soon we will cross that 50-FTE threshold.
    This year I was honored as Business of the Year by the 
Greater Seattle Business Association and just wanted to talk a 
little bit about this. I build my business on the notion that a 
good business supports a strong local economy and gives back to 
the community.
    The community includes our employees. If I treat my 
employers well they will treat our customers well and our 
business will do well as a result.
    This includes health care coverage. Since 2004 we have 
offered health care coverage to our employees who work 28 hours 
a week or more and we pay 75 percent of the cost. It is an 
important part of our business values but it is also a huge 
challenge.
    Between 2004 and 2010 we were faced with rate increases 
that exceeded 20 percent--30 percent and up to 40 percent in 
2009. In 2011 our health care costs more than $67,000.
    Before I started my business I worked in corporate America 
for a little coffee company called Starbucks and one of the 
biggest surprises I faced when I left my Starbucks corporate 
job was how little benefit I got as a small business owner. 
Basically I paid twice the amount for half the coverage as a 
small business owner, and that was a big shock. And even now 
businesses our size have very little bargaining power.
    The ACA's state insurance exchanges are finally going to 
change that. A state exchange will give me the opportunity to 
band together with thousands of other small business owners 
across Washington State to get access to better health care at 
better rates.
    Joining a group with hundreds of thousands of participants 
will be a big leap in risk pooling, economies of scale, and 
negotiation clout. We finally would be able to tap into the 
kind of insurance that Starbucks and Microsoft have had all 
along. And by adding competition of an exchange this will 
create efficiency and cost savings in the private sector and 
hopefully bring costs down, I would imagine, if we are a good 
competitor.
    On top of the state exchanges, other parts of the ACA are 
already helping small businesses. The 80/20 value for premiums 
rule is one example. Under this rule rebates for this year 
alone are estimated at $1.3 billion and checks are due out in 
the mail, which will add a nice shot in the arm for the 
economy.
    There also health care law--there are also the health care 
law's rate review provisions, which are helping bring much-
needed transparency to the proposed rate hikes. These 
provisions are making a difference. My rate increase this year 
was a lot lower, and I have heard this from other small 
business owners.
    I would like to make a point about employer responsibility. 
The part of this law is sometimes claimed to be a barrier to 
job creation, and I don't see it this way at all. As a business 
owner who offers health care coverage, the real barrier for me 
is when other businesses my size--or dare I say bigger--don't 
offer health care I am forced to subsidize their costs.
    This health care cost shifting actually costs my business 
hundreds of dollars per employee per year, and this is not fair 
competition. The only way to fix this free-rider problem is 
through a system that combines personal responsibility and 
shared responsibility, a system where all businesses above a 
certain threshold pitch in and nobody takes a free ride.
    On the note of the business tax credit, I think that there 
is an opportunity to make this work for more businesses. For 
example, my business is a restaurant. We are open 7 days a 
week; we staff 16 hours a day. It is hard for restaurants to 
have less than 25 FTEs. So I think by expanding that to 50 or 
75 that would be an opportunity to create a tax credit for a 
lot more businesses.
    So in conclusion, the Affordable Care Act is taking 
critical steps to lower health costs and bring affordable and 
quality coverage within reach for small businesses. And this 
will allow--this kind of work is allowing small businesses like 
me to focus on not how I am going to pay for my health care but 
how I am going to grow my business, hire people, and strengthen 
our local economies.
    Thanks for your time.
    [The statement of Ms. Hall follows:]

                Prepared Statement of Jody Hall, Owner,
                     Cupcake Royale & Verite Coffee

    Chairman Roe, Ranking Member Andrews, and members of the HELP 
Subcommittee, thank you for the invitation to testify before your 
subcommittee on the topic of barriers to lower health care costs for 
business owners and workers. I appreciate the opportunity to share my 
experiences and perspective on these issues as a small business owner.
    My name is Jody Hall. I own Cupcake Royale, a cupcake bakery and 
cafe business in Seattle, Washington. I'm also a leader in the Main 
Street Alliance of Washington, a statewide network of local, 
independent small businesses in Washington State that gives small 
business owners like me a voice on the most pressing public policy 
issues facing our businesses.
    I founded my business in 2003. When we opened our first shop in 
Seattle's Madrona neighborhood with 10 employees, we were taking a 
risk. It was the country's first cupcake bakery to open outside of New 
York City. The risk paid off. Our made-from-scratch-daily cupcakes were 
an instant hit. Over the years, we've expanded to five locations in 
Seattle and neighboring Bellevue.
    Cupcake Royale is recognized as a local institution. We're proud to 
employ 72 people (adding up full-time and part-time workers, we have 45 
full-time equivalents). This year, I was honored as the Small Business 
Person of the Year by the Greater Seattle Business Association. I'll be 
rushing to get home to Seattle tonight to take care of the final 
details for opening a new store in July near Pike Place Market in 
downtown Seattle. That will be our sixth location, and I expect we'll 
be hiring another 15 employees for the new store as we continue to 
grow.
    From day one, I built my business model on the notion that a good 
business supports a strong local economy and gives back to the 
community that supports it. We partner with Washington farmers and 
producers as much as possible: our flour comes from a handful of wheat 
farmers in Eastern Washington who mill it specially for our needs and 
our dairy is local along with fresh fruit from nearby farmers. And we 
donate over 40,000 cupcakes a year to help raise funds for local non-
profits.
    I also built my business on a commitment to treating my workers 
like family. That includes offering health care coverage. We offer 
health care to all employees who work over 28 hours a week and we pay 
75 percent of the cost. It's an important part of our business values 
to offer health care. The way the costs have risen over the last 
decade, it's also been a huge challenge. Between 2004 and 2010, we were 
faced with rate increases routinely exceeding 20 percent--reaching as 
high as 40 percent in 2009. In 2011, our health care costs were more 
than $67,000.
    We've got to take steps as a country to get these costs under 
control. Small businesses--and the country as a whole--can't afford the 
cost of doing nothing. And we've got to do it in smart ways that ensure 
decent quality, promote informed choice, and guarantee good value for 
our health care dollars. That's why I support the Affordable Care Act 
and the measures it includes to lower health care costs while promoting 
quality, choice, and value for small businesses and our employees.
Barriers to Lower Health Care Costs: How the Health Care Reform Law 
        Helps
    Some of the biggest barriers we face to getting decent health 
coverage as a small business stem directly from our size. Before I 
started my business, I worked in corporate America for 13 years, and 
one of the biggest surprises when I decided to go out on my own and 
start my own enterprise was how little we got in terms of health care 
benefits for almost twice the dollars (and these plans only covered 
medical--not dental and vision, which were included in my corporate 
packages). When we have to brave the health insurance market on our 
own, whether with the 10 employees we started with or the 72-plus we 
have now, we're still too small to have any bargaining power, effective 
risk-pooling, or economies of scale.
A State Health Insurance Exchange
    The state insurance exchanges made possible by the Affordable Care 
Act are going to change that. A state insurance exchange will give us 
the opportunity to band together with thousands of other small 
businesses across Washington State. There are more than 120,000 private 
sector firms in Washington State with fewer than 100 employees that 
could be eligible to join the exchange, and these firms employ almost 
900,000 people.\1\
---------------------------------------------------------------------------
    \1\ Agency for Healthcare Research and Quality, Center for 
Financing, Access and Cost Trends, 2010 Medical Expenditure Panel 
Survey--Insurance Component; Table II.A.1(2010) Number of private-
sector establishments by firm size and State: United States, 2010, 
http://www.meps.ahrq.gov/mepsweb/data--stats/summ--tables/insr/state/
series--2/2010/tiia1.htm; Table II.B.1(2010) Number of private-sector 
employees by firm size and State: United States, 2010, http://
www.meps.ahrq.gov/mepsweb/data--stats/summ--tables/insr/state/series--
2/2010/tiib1.htm
---------------------------------------------------------------------------
    I can't wait for Washington's exchange to open its doors for 
enrollment. Joining a pool with hundreds of thousands of participants 
will be a huge improvement in risk-pooling, efficiencies of scale, and 
negotiating clout for my business and for small businesses across the 
state. We'll finally be able to tap into the kind of bargaining power 
that big companies like Starbucks and Microsoft enjoy.
Other Provisions of Health Care Reform that Put Downward Pressure on 
        Insurance Rates
    The health insurance exchange is the biggest thing I'm looking 
forward to from the health care reform law, but there are also other 
provisions that are taking effect already and helping to put the brakes 
on rising insurance premiums.
    One example is the 80/20 value for premiums rule, or ``minimum 
medical loss ratio'' requirement, which requires health insurers to 
spend at least 80 percent of our premium dollars on actual health care 
costs or pay a rebate to consumers. For small business owners who know 
that offering good value to our customers is critical to our survival, 
the idea that we deserve a basic guarantee of value from our health 
insurance companies is common sense. The first rebate checks are due in 
the mail this summer and independent researchers have estimated that 
health insurance customers are going to get back in the vicinity of 
$1.3 billion in premium over-payments. That's a nice shot in the arm 
for small businesses and other insurance purchasers. And it doesn't 
even count downward adjustments in rate hikes taken by insurers to 
comply with the 80/20 rule and avoid owing even more in rebates.
    Another example is the health care law's support for more careful 
review of proposed rate increases. In Washington, where we already have 
strong rate review laws on the books, this part of the law is allowing 
our state to strengthen its systems for collection, analysis, and 
reporting of data, and to increase transparency for consumers.\2\ For 
small businesses in the many states across the country that didn't 
already have strong laws like Washington's, the rate review rules are 
doing even more to bring much-needed scrutiny to double digit rate 
hikes by requiring insurers to publicly post the justifications for 
their proposed increases and ensuring review of these proposed 
increases by insurance experts.
---------------------------------------------------------------------------
    \2\ ``Health Insurance Premium Grants: Detailed State by State 
Summary of Proposed Activities,'' HealthCare.gov, http://
www.healthcare.gov/news/factsheets/2010/08/rateschart.html
---------------------------------------------------------------------------
    These early provisions of the health care law are making a 
difference. My rate increase this past year was a lot lower than I'd 
come to expect from my experience over the past five years. And I've 
heard stories of small business owners across the country who've seen 
their rates held flat this year. Some have even had their rates cut, 
while keeping the exact same coverage.\3\
---------------------------------------------------------------------------
    \3\ ``Health care reform: good for business,'' The Baltimore Sun, 
April 1, 2012, http://www.baltimoresun.com/news/opinion/oped/bs-ed-
obamacare-business-20120401,0,6828504.story
---------------------------------------------------------------------------
Employer Responsibility and Reducing Health Care Costs
    The employer responsibility provision of the ACA is another way the 
law will help lower insurance costs for businesses like mine. This 
piece of the law is often presented as a problem for small businesses. 
I believe the opposite is true. As a business owner who's doing the 
right thing and offering health coverage to my workers, the real 
problem for me is that when other businesses my size (and bigger) don't 
offer health care, I'm forced to subsidize their health care costs. The 
shifting of uncompensated health care costs to businesses that pay for 
health insurance costs my business hundreds of dollars per employee per 
year. How is that fair?
    Opponents of the health care law argue that the employer 
responsibility requirement will hurt job creation. I disagree. More 
than 9 out of 10 businesses with 50 or more employees already offer 
health coverage.\4\ Think about it this way: for every business around 
the 50 FTE threshold that doesn't already offer coverage, there are 
multiple others that do. Right now, the barrier to job creation for the 
businesses that do offer health care--like mine--is the fact that we're 
subsidizing the ones that don't. The only way to fix this is through a 
system of shared responsibility where all businesses above the 
threshold pitch in and nobody takes a free ride at the expense of the 
rest of us.
---------------------------------------------------------------------------
    \4\ Agency for Healthcare Research and Quality, Center for 
Financing, Access and Cost Trends, 2010 Medical Expenditure Panel 
Survey--Insurance Component; Table I.A.2(2010) Percent of private-
sector establishments that offer health insurance by firm size and 
selected characteristics: United States, 2010, http://meps.ahrq.gov/
mepsweb/data--stats/summ--tables/insr/national/series--1/2010/tia2.htm
---------------------------------------------------------------------------
Opportunities to Keep Moving Forward on Health Care
    Does more need to be done to fully fix health care for small 
businesses? Yes. I believe we need to build on the new health care law 
and take further steps to help small businesses, not tear it down and 
throw us back into the broken health insurance marketplace that visited 
rate hikes of 20, 30, and 40 percent on businesses like mine.
    One opportunity to move forward that I would encourage you to 
support is an expansion of the ACA's small business health care tax 
credit. Not enough businesses are benefiting from the credit in its 
current form. While some elected officials are using this news as an 
excuse to criticize the credit and the whole ACA, that's not helpful to 
small businesses. If you want to help us, it would make more sense to 
ask the question, ``What can we do to make this credit work for more of 
our small businesses?''
    For my own business, we're not eligible for the credit because we 
have more than 25 full-time equivalents (FTEs). Why not expand that FTE 
requirement to 50, 75, or even 100 employees? Under a recent proposal 
to expand the credit, I could be eligible for a credit of about 8 
percent of my health care costs--around $5,000. If you've built a 
bridge and you find out not enough cars can get across, you don't blow 
it up, you find a way to build it wider. You have an opportunity to do 
that with the small business health care tax credit. I hope you will 
take it.
Alternative Proposals: Will They Work for Small Businesses?
    Opponents of the Affordable Care Act say they want to replace it 
with something else. Some of these ideas sound good as talking points, 
but what will their real impact be on small businesses?
    We hear a lot about the idea of ``letting health insurers sell 
across state lines.'' This sounds fine, but in reality this is a back-
door way to get around basic protections put in place at the state 
level to make sure when we buy an insurance policy, it's worth more 
than the paper it's written on. ``Across state lines'' is really an 
invitation to insurance companies to throw quality and value out the 
window and start selling junk health insurance. If you want to give 
small businesses more bargaining power, that's what the state insurance 
exchanges in the ACA will do--without compromising the basic standards 
of quality and value we have in place now. The state of Georgia passed 
a ``cross state lines'' law last year and it didn't work: not a single 
out-of-state insurer applied to sell a new product in the state.\5\
---------------------------------------------------------------------------
    \5\ ``No out-of-state insurers offer plans in Georgia,'' Atlanta 
Journal-Constitution, April 30, 2012, http://www.ajc.com/news/no-out-
of-state-1428329.html
---------------------------------------------------------------------------
    Another ``alternative'' we hear a lot about is health savings 
accounts. They're marketed on the idea that they will make people make 
more responsible choices about health care utilization. But the reality 
is HSAs are another form of high-deductible, low-coverage insurance, 
which for many people in many years means paying a monthly premium to 
basically be uninsured. This is not a solution, either--it's just 
shifting more risk and shifting more costs onto small businesses.
Conclusion
    The Affordable Care Act is taking critical steps forward to address 
the barriers to lower health care costs and bring affordable, good 
quality health coverage within reach for small businesses. Many 
businesses are already seeing the benefits as early provisions of the 
law take effect. We have even more to look forward to with the 
establishment of the state health insurance exchanges and other 
provisions that are still on their way.
    We need to keep building on the foundation of the ACA, not tear it 
down. Small businesses across Washington State and across the country 
can't afford to go back to the broken health care marketplace we faced 
before reform. We need to keep moving forward.
    By taking full advantage of the opportunities created by the 
Affordable Care Act, we can break down the barriers to lower health 
care costs and finally level the playing field for small businesses. 
Then business owners like me will be able to focus our full attention 
on building our businesses, creating jobs, and strengthening our local 
economies. Thank you.
                                 ______
                                 
    Chairman Roe. Thank you, Ms. Hall.
    Mr. Streitberger?

       STATEMENT OF BILL STREITBERGER, VICE PRESIDENT OF
                   HUMAN RESOURCES, RED ROBIN

    Mr. Streitberger. Chairman Roe, and Ranking Member Andrews, 
and committee, my name is Bill Streitberger and I am the vice 
president of human resources for Red Robin, and I appreciate 
the opportunity to speak with you today. Red Robin is a casual 
dining restaurant chain with more than 460 locations across the 
United States. We were founded in 1969 in Seattle by an 
independent business man, and during more than 4 decades of 
history we have expanded to 42 states and also operate in two 
provinces in Canada.
    We pride ourselves in being, you know, America's gourmet 
burger experts with over 24,000 team members across the 
country. Every day we serve, you know, millions of guests.
    Red Robin has been able to grow our business at a fairly 
steady pace, opening new restaurants every year even during the 
recent weak economic conditions. In fact, in the last 2 years, 
even in a recessionary--with the recessionary environment that 
saw a number of our restaurant concepts--competitors close 
locations or even go out of business all together we were able 
to open 30 new restaurants and still have another 12 on the 
books to open this year.
    This is important to us for a number of ways. First, 
opening new restaurants allows us to grow our revenues, which 
in 2011 surpassed $900 million. Secondly, by expanding to new 
communities we serve even more of our guests, but more 
importantly, opening new restaurants allows us to add to our 
growing family of team members, creating new jobs at each 
location and in the communities we serve.
    This doesn't include the job expansion that takes place in 
our home office in Greenwood Village, Colorado, just south of 
Denver, as the growing restaurant base creates the need to grow 
in the corporate support function and the additional business 
that we are able to give to over 8,700 vendors and other 
outside entities who we count on for all of our food, supplies, 
services, and oversight that we need to develop and run our 
businesses. We try very hard to buy everything American.
    There is another benefit to a healthy, profitable, growing 
Red Robin business, and it is manifested in the way we give 
back to our communities where we do business. One example of 
this is the great work of our Red Robin Foundation, an internal 
resource. And because of this foundation many of our team 
members receive support when disaster strikes, family 
emergencies, and even a scholarship fund when there is an 
opportunity for a college education.
    In addition, we support our corporate giving program, such 
as contributions to National Center of missing and Exploited 
Children, Special Olympics, and countless other local 
foundations that our team members and the restaurants organize. 
We are proud to say that we like to give back and part of being 
a good neighbor.
    But running restaurants is not a high-margin business. Red 
Robin's net income, as a percentage of revenues, was less than 
3 percent in the last--each of the last 3 years. After we have 
paid our team members, our vendors, our landlords, and all 
other expenses including payroll, property, state, and federal 
taxes, we use the remaining cash to reinvest in our business, 
including opening new restaurants that create more jobs and 
support the surrounding communities.
    When health care and other costs increase we have fewer 
resources to reinvest and grow the business. We can't simply 
pass along higher costs to our customers. As you and your 
constituents know too well, very few Americans have been immune 
to the intense economic pressures in recent years and there is 
very little appetite during these difficult times for even 
marginal increase in retail prices.
    In regards to health care specifically, taking care of our 
team members is part of living our values as a company. We have 
thousands of team members who are eligible to participate in 
the health and welfare plans. In addition to providing these 
team members with these health care benefits we try to create 
and promote a well-being to all of our people, such as our 
LiveWell program, which is--not only encourages healthy choices 
but also provides channels outside the company such as athletic 
events, volunteerism, to promote a healthy and fulfilling 
lifestyle.
    But health care coverage remains an essential component of 
our benefit programs. During the last 3 years Red Robin's 
health care cost per employee increased more than 6 percent 
every year. This is a much greater pace than the growth of our 
guest sales, same store sales, or net income.
    Increasing the burden of health care costs through the 2014 
mandates can negatively impact the ability of companies to grow 
and offer benefits to other employees, forces companies like 
Red Robin to decide on whether to reduce benefits and maintain 
affordable coverage, or accept the burden of increased company 
contributions, limiting our ability to continue to grow and 
create new jobs. Either way, we feel it can be a lose-lose for 
Red Robin and for our existing and prospective new team 
members.
    We hope you will consider the adverse impact of these 
mandates on health care coverage and costs and--that these can 
have on an employer like Red Robin. I know I speak for our 
folks in our restaurants and office when I say that we are 
excited about the prospect of opening new and additional 
restaurants in new communities, creating new jobs, and 
welcoming even more folks into the family.
    As long as we can maintain our financial health, manage our 
business profitably, and overcome any economic and other 
pressures effectively we will continue to grow, and serve more 
guests, and serve more communities in the years to come.
    I want to thank you for your time and your opportunity, 
again, to speak with you.
    [The statement of Mr. Streitberger follows:]

  Prepared Statement of William Streitberger, Vice President of Human 
               Resources, Red Robin Gourmet Burgers, Inc.

    Chairman Roe, my name is Bill Streitberger and I am the Vice 
President of Human Resources for Red Robin. Red Robin is a casual 
dining restaurant chain with more than 460 locations in North America. 
We were founded in 1969 in Seattle, Washington, and during our more 
than four decades of history we've expanded to 42 U.S. states and we 
also have restaurants in two Canadian provinces. We pride ourselves in 
being ``America's Gourmet Burger Expert,'' and our 24,000 Team Members 
across the country every day treat our guests with what we at Red Robin 
call our ``Unbridled'' spirit, which includes living our values of 
Honor, Integrity, Constantly Seeking Knowledge and, most importantly, 
Having Fun.
    On behalf of all of my fellow Red Robin Team Members, I want to 
thank you for the opportunity to appear here today to share our 
thoughts on the potential impact of health care reform on all of us as 
employees, our many guests and the communities we serve.
    In the many years since our first restaurant began serving guests 
on the University of Washington campus, despite the many challenges to 
maintaining a successful and profitable restaurant company, Red Robin 
has been able to grow our business at a fairly steady pace, opening new 
restaurants every year, even during the recent weak economic 
conditions. In fact, in the last two years, even in a recessionary 
environment that saw a number of restaurant concepts close locations or 
even go out of business altogether, Red Robin opened more than 30 new 
company-owned and franchised restaurants, and we have another dozen or 
so new company-owned restaurant openings planned for this year. This is 
important to us in a number of ways. First, opening new restaurants 
allows us to grow our revenues, which in 2011 surpassed $900 million. 
Secondly, by expanding into new communities, we can serve even more of 
our guests, who, by the way, continue to thank us whenever we open our 
first Red Robin in any neighborhood. But most importantly, opening a 
new restaurant allows us to add to our growing family of Red Robin Team 
Members, creating on average approximately 70 new jobs every time we 
open a new location. This doesn't include the job expansion that takes 
place at our home office in Greenwood Village, Colorado, as the growing 
restaurant base creates the need for growth in the corporate support 
function, and the additional business that we give to nearly 8,700 
vendors and other outside entities who we count on for all of the food, 
supplies, services and oversight we need to develop and run our 
restaurants.
    There's another benefit to a healthy, profitable and growing Red 
Robin business, and it's manifested in what we give back the 
communities where we do business. One example of this is the great work 
of the Red Robin Foundation, an internal resource that was created in 
the spirit of our ``Unbridled'' culture. Because of our foundation, 
many of our Team Members receive support when disaster strikes, help 
when there's a family emergency and scholarship funds when there's an 
opportunity to get a college education. In addition, with the support 
from our corporate giving programs such as our past contributions to 
National Center for Missing & Exploited Children and the Special 
Olympics, to the countless local fundraisers that our Team Members 
organize at our restaurants, we are proud to say that giving back is 
part of being a good neighbor.
    Unfortunately, the rising costs of running our business, including 
significant and escalating health care costs, make the prospects for 
continued profitability, job creation and contributions to our 
communities increasingly difficult. Running restaurants is not a high 
margin business. Red Robin's net income as a percentage of revenues was 
less than three percent in each of the last three years. After we've 
paid our people, our vendors, our landlords, and all of our other 
expenses including payroll, property and state and federal taxes, we 
use remaining cash to reinvest in our business, including building new 
restaurants that create more jobs and support the surrounding 
communities. When health care and other costs increase, we have fewer 
resources to reinvest and grow our business. And we can't simply pass 
along higher costs to our consumers. As you and your constituents know 
too well, very few Americans have been immune to the intense economic 
pressures in recent years, and there is little appetite during these 
difficult times for even marginal increases in retail prices.
    In regards to health care specifically, taking care of our Team 
Members is part of living our values as a company. We have thousands of 
Team Members who are eligible to participate in our health and welfare 
benefit plans. In addition to providing these Team Members with health 
care benefits, we try to be creative to promote the well-being of our 
people, such as our LiveWell program that not only encourages healthy 
choices, but also provides channels outside the company such as 
athletic events and volunteerism to promote a healthy and fulfilling 
lifestyle. But health care coverage remains an essential component of 
our Team Member benefits. During the last three years, Red Robin's 
healthcare costs per employee increased more than 6% every year--a much 
greater pace than growth in our guest visits or same store sales. 
Increasing health care costs through mandates that can negatively 
impact the ability of companies to offer attractive benefits to 
employees forces companies like Red Robin to decide either to reduce 
benefits and maintain affordable coverage or accept the burden of 
increased company contributions--limiting our ability to grow the 
business, attract talented people to our organization and add to our 
payrolls. Either way, it's a lose-lose for Red Robin and for our 
existing, and prospective new Team Members.
    We hope you will consider the adverse impact that mandates on 
health care coverage and costs that are not thoughtful and balanced 
will have on employers like Red Robin. I know I speak for my many 
fellow Red Robin Team Members when I say that we are excited about the 
prospect of opening additional restaurants in new communities, 
welcoming even more Team Members into our family and serving our 
communities in the years to come.
    Again, thank you for the opportunity to share our views and work 
with the Committee.
                                 ______
                                 
    Chairman Roe. Well, thank the panel for their testimony.
    And I will now ask Mr. Andrews if he has any questions.
    Mr. Andrews. I do, thank you.
    I would also like to thank the panel for their preparation 
and for great testimony today.
    Mr. Streitberger, did I pronounce your name correctly?
    Mr. Streitberger. Yes, sir.
    Mr. Andrews. Welcome.
    I am very sympathetic with your discussion of trying to 
find ways to reduce the cost growth that you have experienced 
so you can open more stores and hire more people. I think that 
is something we all have in common.
    I want to ask you some questions about the problem in the 
broader context, though, that--you have 24,000 employees. About 
how many of them are eligible to enroll in your health plan?
    Mr. Streitberger. According to the--being at full time 
about 8,000. We hire a great deal of students, part-time 
workers.
    Mr. Andrews. Of the 8,000 that are eligible to enroll do 
you know how many choose to enroll?
    Mr. Streitberger. Around 6,000.
    Mr. Andrews. And if I were making--and tell me if this 
number is off, but if I were making $25,000 or $30,000 a year 
is that the typical wage of someone who is eligible to enroll 
in your plan?
    Mr. Streitberger. Yes.
    Mr. Andrews. Okay. If I was trying to enroll my family, not 
just myself but my family, what would my monthly premium be?
    Mr. Streitberger. Well, we have several plans, and 
depending on how you chose----
    Mr. Andrews. Let's say I chose the least expensive one. I 
know you have a high and a low.
    Mr. Streitberger. The least expensive would be around $350 
a month.
    Mr. Andrews. Okay. So for a person making $30,000 a year 
gross it would be $350 a month--their share--to enroll in the 
plan?
    Mr. Streitberger. Yes.
    Mr. Andrews. Okay. That is a difficult thing to do, I am 
sure you are aware----
    Mr. Streitberger. Correct.
    Mr. Andrews. I want to ask you what--let's talk about your 
part-timers for a minute, that one of your part-timers--I am 
sure some of your part-timers are older workers, too, that----
    Mr. Streitberger. Some are, correct.
    Mr. Andrews. I have gone to restaurants like yours and do 
see people in their late 50s, early 60s, sometimes older. I am 
sure some are there because they like the work experience; 
others really have to work and that is why----
    Mr. Streitberger. Sure.
    Mr. Andrews. Let's take a case of a 61-year-old woman who 
feels a pain in her side, she is one of your part-time 
employees, so she is not eligible to be in your plan, right?
    Mr. Streitberger. Well, they need to average the 30 hours 
or more, correct.
    Mr. Andrews. Okay. So she is 25 hours a week, let's say. 
She is not----
    Mr. Streitberger. Sure.
    Mr. Andrews [continuing]. Eligible to be in your plan. Or 
she is over 30 and just can't afford it because of the cost 
that we just talked about.
    She gets a pain in her side, she goes to the emergency room 
today and they find out she has had appendicitis attack. She 
needs to have her appendix removed.
    She has no health insurance. What should we do? As a 
country, what should our policy be about what happens to her 
and who pays for it?
    Mr. Streitberger. Well, I believe that the country already 
has a safety net for folks that are in positions like that.
    Mr. Andrews. What is the safety net?
    Mr. Streitberger. Well, a lot of these folks use Medicaid 
and Medicare.
    Mr. Andrews. Let's assume she is not eligible for Medicaid, 
which is, frankly, typical of a lot of people. Medicaid 
enrollment, before the new law, of course, was usually 100 
percent at poverty, which in my state meant about $18,000 a 
year for a family of four. Now, we changed that in the new law 
but she is probably not eligible for Medicaid under present 
law. So what should we do?
    Mr. Streitberger. Again, that is something that we try and 
offer to all of our folks. They can, you know, in a case like 
this----
    Mr. Andrews. No, I am not saying what you should do. Don't 
misunderstand me. I am not presupposing you should pay for it. 
I am saying, what should we as a country do to solve that 
problem?
    As I see it there are really a couple of options. We could 
say, ``Well, sorry, you can't get the appendectomy because you 
don't have insurance.'' I don't think you would want to see 
that happen, would you?
    Mr. Streitberger. No.
    Mr. Andrews. Okay. The second thing that we could do is 
expand a public program like Medicaid to include her in it. For 
instance, we could include families making up to $30,000 or 
$35,000 a year under Medicaid. Would you think that is a good 
idea?
    Mr. Streitberger. Well, I think one of the ways to help 
this, as you mentioned in your statement, was to look at ways 
of driving the costs of health care down----
    Mr. Andrews. No, but I understand that and I am all for 
that, but I am talking about this woman in this circumstance 
who needs this appendix taken out today. You think we should 
enroll her in Medicaid and increase the Medicaid eligibility 
limit?
    Mr. Streitberger. If that gets some folks the coverage, 
sure.
    Mr. Andrews. Which is what we did in the Affordable Care 
Act.
    Do you think that she should be required to have health 
insurance for herself or not?
    Mr. Streitberger. No.
    Mr. Andrews. If she is not required, who--and let's say we 
don't get the Medicaid increase that we talked about--who 
should pay her hospital bill?
    Mr. Streitberger. Well again, I am not a tax person or a 
politician, but----
    Mr. Andrews. No, but you are a citizen and a taxpayer----
    Mr. Streitberger [continuing]. You know, people need to 
take personal responsibility for their actions and it is a 
matter of choices.
    Mr. Andrews. Okay. But if she makes----
    Mr. Streitberger. People spend money on houses----
    Mr. Andrews [continuing]. If she makes the choice not to 
buy the health insurance for whatever reason, she is not 
covered Medicaid under this example, who should pay the bill?
    Mr. Streitberger. Again, that is not something I can help 
you with.
    Mr. Andrews. Well, I am not--it is not really an expert 
question. I mean, all of us as citizens, I think, have a stake 
in that answer. There are two choices, right? We could have 
some publicly taxed and funded program that pays for her health 
care or we should--or we could--three choices--we could require 
her to do it and subsidize her purchase, or we could require 
you to do it, as her employer. Which of those three would you 
like to see us do?
    Mr. Streitberger. That is something that we are taking a 
hard look at to see what we as a business can afford.
    Mr. Andrews. I understand. Thank you very much.
    Mr. Streitberger. Thank you.
    Chairman Roe. Thank you, Mr. Andrews.
    Dr. DesJarlais?
    Mr. DesJarlais. Thank you, Mr. Chairman.
    And as I sit and listen to that conversation I noticed the 
ranking member when we started out saying that the ObamaCare 
was not a government health care plan--it was not a government 
takeover of health care--but in that dialogue that I just heard 
it sounds like he is saying exactly that, the government needs 
to take more responsibility and make sure that these people are 
taken care of. So in other words, I think that is exactly what 
the ranking member is insinuating with that last line of 
questioning is that personal responsibility is not really the 
answer, it is more government responsibility, if I understood 
it correctly. And certainly he could chime in if he would like.
    Mr. Andrews. Would the gentleman yield?
    Mr. DesJarlais. Yes, I would.
    Mr. Andrews. Yes. I didn't want to interrupt his time.
    I actually think it is a combination of people with very 
low incomes being in Medicaid and having some personal 
responsibility, people with somewhat higher incomes being in a 
private plan, which is what the law requires.
    Mr. DesJarlais. Okay. And again, we can look at the track 
record right now of our government health care, Medicaid, 
Medicare, and even the V.A., and I think that there is not 
anyone sitting up here that can't agree that it is an abysmal 
failure in terms of economics. The Medicare program, whether 
you are Democrat, Republican, the CBO, AARP, is going broke in 
10 years.
    And we are suggesting somehow that the federal government 
can step in, take over our health care services in this country 
and somehow run them efficiently without rising costs and while 
maintaining a quality of care that is acceptable to patients 
and their doctors. And I just don't see, personally, how this 
is going to work, considering there has been no model set forth 
to this point that has done that. And I have been a family 
practice physician for 20 years and I can say that in my 
experience, talking with businesses around Tennessee's poor 
district that they are very afraid of this health care law and 
what it is going to do to their ability to provide the 
services.
    Ms. Hall, you had stated that, you know, you like to treat 
your employees well and they will treat customers well, and I 
think that is very true. But we have a couple of examples in 
businesses that I visited--Valmont Industries is a large 
business. They have got 5,000 or 6,000 employees. They pay up 
to $12,000 a year per employee, which is a lot of money for a 
health care plan.
    But under the new ObamaCare they could pay a $3,000 penalty 
and not have to provide that health care, and these employers 
would probably get a lesser plan and be put into the public 
health care exchanges. They don't want to have to do that and 
it concerns them greatly, but you can do the math. That is 
$9,000 per employee difference over 6,000 employees. There is 
going to be some bean-counters in that company that are going 
to do the math and see that it just doesn't make sense to 
provide those employees with health care.
    We have a smaller company that is in the same boat. They 
have got a little less than 500 employees, and they would pay 
the $2,000 penalty if they dropped their employees' health care 
coverage and their company would save a couple of million 
dollars. It is hard to look at that and see where it doesn't 
make sense to do that.
    So I do think that this health care law does create a 
situation where employees are going to lose the coverage that 
they had. And we had a little discussion earlier--I think Dr. 
Roe mentioned health savings accounts, and I think Mr. Fensholt 
was talking about--or maybe it was Mr. Ramthun was talking 
about health savings accounts. And really, that is kind of what 
we need to be getting to is personal responsibility, and when 
people have health savings accounts and have skin in the game 
and they have to help make their own decisions then that is the 
kind of responsibility, I think, that we need from the American 
citizens and not the federal government, who is burdening all 
your companies with increased regulation.
    Mr. Fensholt, you talked about what--you know, they are 
piling on regulations--what you have to do just to provide your 
health care--for your employees with the new regulations, and 
it is these increased regulations that are driving up health 
care costs. And frankly, the health care in this country is 
driving our national debt, so the solutions that we need moving 
forward do not come from ObamaCare; it is going to come from 
repealing ObamaCare and taking stepwise fashions and personal 
responsibility.
    And, Ms. Hall, you said that you provide 75 percent of the 
health care coverage to your employees but the cost was only 
$67,000?
    Ms. Hall. We have 45 FTEs and they are all, you know--our 
average age is probably 23, and some of them are obviously 
covered under other plans or opt out even though we highly 
encourage them to be involved.
    Mr. DesJarlais. Okay. Well----
    Ms. Hall. And obviously our costs are lower because we have 
a younger workforce.
    Mr. DesJarlais. Okay. So your example doesn't fit with some 
of the other companies' examples, but I am out of time already 
and I think we might get to two rounds so I will ask more 
questions next time.
    Chairman Roe. Thank you.
    Mr. Kildee?
    Mr. Kildee. Thank you, Mr. Chairman.
    Ms. Hall, I agree with you that instead of repealing the 
health care reform law we should instead work together to make 
it better. Specifically, you mentioned the small business tax 
credit. How would you change this tax credit to make it more 
accessible for small businesses like your own? Are there other 
aspects of the law that you would like to see changed that 
might make it easier for businesses like you by providing----
    Ms. Hall. Yes. I mean, I think that there is--the 25 FTE 
requirement has a salary cap of--is it $50,000 per employee, 
and 25 is--like for us folks, I mean, to run one Red Robin 
needs more than 25 employees, yet we might have--let's say your 
revenues are $5 million and your profits are 3 percent of that. 
That is a lot of burden to ask for--and to look at expanding 
that, especially for restaurant and hospitality, where we 
employ 7 days a week, you know, 16, sometimes 24 hours a day. I 
think a lot more businesses will participate.
    And over 360,000 businesses did participate. That is more 
than all the members in NFIB combined. So it is still a decent 
level of participation, but we could expand that and really 
look at solutions.
    We are problem solvers up here. I started my own business, 
and we are all thinkers around how to make things better. Let's 
figure out a way to address that and make it a more powerful 
incentive and opportunity to give a little--get a little money 
back for doing the right thing by providing health care.
    Mr. Kildee. Do you belong to any small business association 
back in Seattle, or----
    Ms. Hall. Right.
    Mr. Kildee. In that group do you find some small businesses 
who do feel that this bill, which passed by this Congress, can 
be helpful both to themselves, to their employees, and to the 
public in general? Some people picture this as something that 
small business looks upon as not in any way with redeeming 
factors. What do you find amongst the small business people you 
associate with?
    Ms. Hall. Right. The Main Street Alliance was formed after 
health care policy was being written and we were finding--and 
it spans across several states. I think it might be 15 to 20 
states. I am not quite sure. But in Washington there are over 
2,000-plus small business owners, and the reason that this 
alliance was started was because we were misrepresented as 
small business owners.
    And what I said earlier around health care costs, I was at 
Starbucks. I can't remember exactly what I paid. It was a 
similar situation. The company paid 75 percent and I paid 25, 
and I got dental, vision, and amazing health care.
    And when I went to start my own business, obviously I paid 
almost twice that just for the health care coverage. So it is 
astonishing that the engine of our economy, which is small 
business, has to have this--we have to pretty much throw our 
health care out the window. We have to walk away from 
affordable, quality health care to be able to start our own 
business.
    And that is why this--the Main Street Alliance was formed, 
because we were being completely misrepresented. We want 
quality, affordable health care for all, and we don't have 
access to that. So the public option, I thought, was a great--
and something I fought hard for.
    But the exchanges, I think, will also provide a great 
opportunity for bargaining power. And we are very excited in 
Washington State to participate in that and actually shop and 
say no to the one, two, or three insurance providers that get 
to just kind of set rates at will and increase rates without 
any accountability. So we finally will have some clout, and 
that is exciting.
    And I would say that I speak for every business in the Main 
Street Alliance. We are all aligned around this issue. It is 
one of the galvanizing forces of creating this alliance.
    Mr. Kildee. You mentioned also that this past year your 
rate increase was less than in previous years. Can you expand 
on this? Do you attribute this in any way to the health care 
reform law?
    Ms. Hall. I think part of that has to do with the 80/20 
rule. And our health insurance went up only 6.8 percent, which 
is phenomenal. I mean, I think the lowest it has gone up is 15 
percent, and it usually is more like 20 to 30 percent. So it is 
amazing. Like, I was actually relieved at only 6.8 percent.
    And yes, I do think some accountability around spending 80 
percent of that money on actual health care, versus marketing, 
and admin, and things like that, is helping to keep those rates 
at the--at an appropriate level, and also accountability and 
where those rate increases are coming from.
    Mr. Kildee. Thank you very much.
    Ms. Hall. That the ACA brought. Thanks.
    Mr. Kildee. Thank you.
    Chairman Roe. Thank you.
    Dr. Heck?
    Mr. Heck. Thank you, Mr. Chairman.
    And likewise, I thank all the committee members and the 
panel members for being here today. You know, we heard Dr. 
DesJarlais talk about the impact on large employers and 
potentially not providing insurance because it would become 
more cost effective for them to actually pay the fine than to 
provide the insurance.
    And I also have a small--I have a small employer in my 
district, iMAGiNE Communications, that has 11 employees who 
historically has paid 100 percent of their employees' health 
care, and recently they have had to bring it down to 50 percent 
because of increasing costs, and they are uncertain as to how 
much longer they might even be able to do that. And I would 
agree with the opening comments of the ranking member and some 
of the other folks that have talked about the small business 
tax credit, that the requirements to qualify for the credit are 
too stringent and that they phase out too quickly for a lot of 
small companies to benefit.
    But regardless, at full implementation the Affordable Care 
Act is going to require increased coverages from businesses, 
whether it is the mandated services, whether it is the number 
and types of people who must be covered, or how much the 
employer must contribute to that coverage. And what I find even 
more shocking is that even if you do all that as an employer, 
if one of your employees opts out and gets insurance on and 
exchange and receives a subsidy you can still be fined even for 
doing all the right things.
    So I would ask, you know, Mr. Streitberger--which, by the 
way, didn't know you were going to be here today, but I 
actually ate Sunday at one of your restaurants----
    Mr. Streitberger. Thank you very much.
    Mr. Heck [continuing]. In my district. The burger was 
delicious. Love the bottomless fries, although my cholesterol 
doesn't.
    What would you say is the biggest impediment in providing 
low-cost health coverage for your employees? And in a perfect 
world, which laws or regulations would you change to make 
coverage more affordable for you and your employees?
    Mr. Streitberger. Well, I think what would be a big help--
and it was mentioned by Mr. Andrews--is that if we had more 
competition in the marketplace--we, as a public company, we 
have a great deal of competition every day. We are used to it; 
we deal with it and it puts us in a place to do a better job 
and offer better services. I think that would be a great help.
    I also manage the other side of our insurance business on 
workers comp, and in dealing with those two sides of the 
business one thing that hasn't been mentioned and has--and in 
business we are very concerned about, and that would be tort 
reform. I mean, everything that we deal with usually has a 
lawyer attached to it, which does drive up costs. I am sure 
physicians do more testing to make sure that they are making 
the best decision possible, and we see that it really can 
ratchet up the business.
    So I think, again, the competition helping to drive the 
cost down so that we can offer more care, more affordable care 
to our team members. And then also, you know, the outside 
impact of any business, and that would be on that side, the 
tort reform.
    Mr. Heck. Thank you.
    Thank you, Mr. Chair. I yield back.
    Ms. Hall. If I could add to that, actually, I think one of 
the biggest impediments to health care costs is the fact that 
not everybody has to have health care. And I think that if we 
were all involved with some kind of level of personal 
responsibility as well as shared responsibility from the 
employer side we are going to get preventative care and we are 
not going to go to the E.R. when we need help. And if there is 
a safety net for those that need it I think that would 
actually, from what I understand, bring health care costs in 
check and down.
    Chairman Roe. Would the gentleman yield some of your time? 
Just to clear the record up, there were 309,000 small 
businesses that the Treasury Department said that is incorrect; 
the number counted individual partners at firms, not actually 
employees. The real number that GAO found was 100 and--I have 
got it here somewhere--70-something-thousand. So it was 
170,300.
    Ms. Hall. Oh, I have from the White House fact sheet that 
it was, in 2011, 360,000.
    Chairman Roe. Dr. Holt?
    Mr. Holt. Thank you. Thank you, Mr. Chairman.
    I am not sure whom to ask this question of, but let me 
start with Mr. Fensholt. What evidence to do you have that the 
Affordable Care Act is responsible for the increase in premiums 
that employers are--and employees are finding?
    Mr. Fensholt. Well, part of the business of insurance is 
you have very smart people--actuaries and underwriters--who 
look at various laws like the Affordable Care Act and the 
coverage mandates and they ask themselves, ``If we have got to 
begin to cover, for example, adult children to age 26 even if 
living apart from the employee, even if married, even if 
gainfully employed themselves, what additional cost is that 
going to impose on our plans?'' They do the same thing for the 
abolition of lifetime and annual dollar limits on essential 
benefits. And they come up with an estimate.
    What we have seen, in talking to health insurance 
underwriters and our own actuaries, is that--and about half of 
our bulk of business are self-insured plans, so there we are 
dealing with our own actuaries and their claims history. And 
now we have a little track record under these provisions, as 
well. So now you are actually tracking claims incurred by the 
additional enrollees, claims incurred that are required to be 
paid where they wouldn't have been paid before. And you can 
assess a cost to that, and that is where those numbers come 
from.
    Mr. Holt. Yes. And there is a cost, but there is additional 
revenue because you will have more people brought into the 
coverage. Isn't that true?
    Mr. Fensholt. Well, the way this tends to work is that--
let's take, for example, the case of the adult children who 
gain coverage. The adult children who get enrolled under this 
provision tend to be the ones who need the coverage. That is 
why their parents enroll them.
    The adult children of--who are healthy, the parents tend 
not to do that. So that mandate tends to attract some of the 
worst risks in that age category.
    Mr. Holt. Yes, and isn't that the point, that expanding 
coverage, bringing more people into the pool, will address that 
very concern?
    Mr. Fensholt. If you get significantly more healthy people 
into the pool than sick people into the pool. That is the goal. 
That is not happening in this context.
    Mr. Holt. Oh, that is very much what is under this law. 
That is very much----
    Mr. Fensholt. Oh, that is the intent of the law.
    Mr. Holt [continuing]. What is under consideration right 
now.
    I would yield to the ranking member.
    Mr. Andrews. Thanks for yielding 1 second.
    Mr. Fensholt, do you favor the individual mandate, then?
    Mr. Fensholt. I can't speak for my company.
    Mr. Andrews. Understood. What is your personal opinion 
about it?
    Mr. Fensholt. My personal feeling is that the individual 
mandate makes some sense.
    Mr. Andrews. Thank you.
    Mr. Fensholt. Thank you.
    Mr. Holt. Mr. Streitberger----
    Mr. Streitberger. Yes, sir?
    Mr. Holt [continuing]. I would like to pursue Mr. Andrews' 
example of your employee earning $25,000 a year and ask you 
what you mean by ``personal responsibility.'' You said you 
would like to bring personal responsibility into this.
    Mr. Streitberger. Sure.
    Mr. Holt. Let me pursue this for a moment. Let's look at 
the executives in your country--in your company. Are there any 
of the executives in the company who don't carry health care 
insurance?
    Mr. Streitberger. There are some that don't carry it 
through Red Robin.
    Mr. Holt. But do you know any that don't carry health 
care----
    Mr. Streitberger. No.
    Mr. Holt [continuing]. Insurance?
    No.
    Is there any reason to think that this $25,000-a-year 
employee would be less interested in having health care 
coverage than the executives?
    Mr. Streitberger. First, many of those $25,000 to $30,000 
income team members do carry the insurance, and that is where I 
was going with----
    Mr. Holt. But my question is, is there any reason why they 
would be less interested in carrying----
    Mr. Streitberger. Sure. Many of them make personal 
choices----
    Mr. Holt. Not to be insured?
    Mr. Streitberger [continuing]. Not to be insured because 
the money is spent on brand new cars, trips, tattoos. I mean, 
they have other choices. And having raised three children of my 
own I know at that age--the average age of our team members 
they feel they are a little invincible and they make other 
decisions with their money.
    Mr. Holt. So the personal responsibility that you are 
talking about, does that apply to this woman getting 
appendicitis? Is that----
    Mr. Streitberger. Again, we are in a hypothetical 
situation----
    Mr. Holt. Did she fail to take responsibility for her 
appendix?
    Mr. Streitberger. With our team members they have the 
ability to request schedules that could get them to that. In 
his situation why someone would request to be part time all the 
time and then have a health situation, again, we offer choices 
to our team members, full time and part time. And if she chose, 
for reasons I can't explain, to stay part time then that is, 
again, a personal choice.
    Mr. Holt. And it is your choice not to make it more 
affordable to her than you already do so that you can hire more 
employees who will not have this coverage.
    Mr. Streitberger. No, sir. We pay between 60 and 70 percent 
of the premiums currently, and as the gentleman from Lockton 
mentioned, we are one of those self-insured companies, but we--
--
    Mr. Holt. Yes, but you want to grow.
    Mr. Streitberger. We want to grow and create more jobs, 
yes, sir.
    Mr. Holt. More jobs that have that inadequate coverage.
    Mr. Streitberger. More jobs that have the opportunity to 
take out health care, yes, sir.
    Chairman Roe. Mr. Wilson?
    Mr. Wilson. Thank you, Mr. Chairman. Mr. Chairman, I have 
been joined, too, by a foster person. Very proud Jasmine 
Thompson is here as part of the shadowing program. [Applause.]
    And we are looking forward to a big day, spending the day 
with you.
    Additionally, Mr. Streitberger, I have a high regard for 
Dr. Heck's judgment regarding burgers, and so I just want to 
invite you that the Southeast----
    Mr. Andrews. Would the gentleman yield?
    I am just wondering how this bottomless fry thing fits into 
the wellness discussion, as someone who is addicted to the 
french fries and would love the bottomless fries?
    Mr. Wilson. The ranking member is actually correct on this. 
This is good. [Laughter.]
    But you are welcome to the Southeast, so please expand.
    Mr. Streitberger. Yes.
    Mr. Wilson. In fact, with 460 locations we welcome you.
    What are some of the programs that your company has been 
promoting to keep health care costs low for your employees?
    Mr. Streitberger. Every year we look at plan design, based 
on the wants and needs of our team members, what are their 
usage. This past year we went to what we call a high-low plan--
high premium, low deductible, and vice-versa, which the low 
plan offering lower premiums, again, to our team members and 
giving them that choice on how to manage their health care.
    And as I mentioned previously, we are self-insured, so we, 
as a company, take the risk. Our stop-loss is at $250,000, 
meaning for each covered individual we write a check for the 
first $250,000 every year, and then in a plan if it should go 
catastrophic. And that helps us, by taking that risk, to keep 
our premiums low.
    And what has helped that also is last year when we did 
this, knock on wood, we had very good--we didn't have a lot of 
high-risk claims come our way. As Ms. Hall, we have a younger 
workforce, in general, and don't see a lot of issues that way. 
So that helps. But these are all the things that we do.
    Also, our wellness program. We try and promote better 
living, health care in the sense of wellness programs, 
exercising, diet, other activities, you know, for mental 
wellness--anything that we can think of to try and help them 
live a healthier, better life, which would drive down our 
costs.
    Mr. Wilson. Thank you very much.
    Mr. Streitberger. Yes, sir.
    Mr. Wilson. Mr. Ramthun, why do you believe more employees 
are now selecting the consumer-directed health care plans? And 
how do you feel that we should be encouraging health savings 
accounts?
    Mr. Ramthun. I think more and more employees are choosing 
them one, for the premium cost. It is much lower than a 
traditional plan.
    Secondly, they get to keep some of the money. Some of the 
money that used to go to the insurance now goes into their own 
pocket. If they don't spend it they get to keep it; that money 
accumulates from 1 year to the next.
    So we need to make sure that those plans continue to be 
available for workers going forward, and there are ways to make 
that opportunity even better. Several bills have been 
introduced in Congress to do that that would actually expand 
HSAs.
    Mr. Wilson. And you are explaining this fully to employees 
so they know how to participate in the program and have a 
deduction on their pay stub?
    Mr. Ramthun. When my clients ask me to come in I absolutely 
explain all of these things to them. They tend to not 
understand that it is their money in the first place. This 
would otherwise be wages that they would be getting and, you 
know, they could go out and buy insurance on their own.
    To Mr. Andrews' question earlier about what could we do to 
help people with that responsibility, well, number one is the 
tax treatment of insurance that is not acquired through the 
employer. People who buy insurance on their own get absolutely 
no tax benefit except when they deduct their medical expenses, 
and the Affordable Care Act has made that harder.
    The threshold for deducting any medical expenses is going 
up to 10 percent of income where it has been at 7.5 percent. 
And there you can only deduct the amount that is above that 
threshold.
    So there is a huge incentive to get their coverage through 
the employer; many of them still don't take it. One way we 
could help them if they chose not to purchase that coverage 
through their employer is to give them the equal tax benefit if 
they buy the insurance on their own.
    Mr. Wilson. And that really leads to Mr. Fensholt, In 
regard to companies dropping health insurance, what do you see 
as, with the health care takeover, what the consequence will 
be?
    Mr. Fensholt. Well, we are going to see, we think, a 
substantial erosion over time in the employer group market, and 
that will start primarily on the smaller end of the spectrum. 
We have many clients tell us substantially this: They say, ``I 
am not going to be the first to go but I am not going to be 
third.''
    And so if you look at how easy it is for employers to drop 
coverage and reap substantial savings--out of our bulk of 
business on average a client would save about 44 percent off 
their current health insurance spend by dropping coverage. The 
only thing keeping them in the game is that they feel they need 
to attract and retain employees. The moment one of their strong 
competitors goes out of this market they are not going to hang 
around and incur that expense.
    So we think that when the Budget Office in Congress 
estimated that by decade's end maybe 4 million or 5 million 
Americans net will lose their coverage, we think they have 
grossly underestimated that.
    Mr. Wilson. Thank you very much, Mr. Chairman.
    Chairman Roe. I thank the gentleman for yielding.
    Mr. Hinojosa?
    Mr. Hinojosa. Thank you, Chairman Roe.
    I have a statement and some questions I want to ask but I 
want to yield 1 minute to our Ranking Member Andrews.
    Mr. Andrews. Thank you, my friend. I just want to ask Mr. 
Ramthun to follow up on something he said about tax 
deductibility for uninsured people.
    Do you know what the median income is for an uninsured 
person in the country?
    Mr. Ramthun. I do not.
    Mr. Andrews. Median family income is in the 30s. It is 
somewhere between $32,000 and $38,000 a year. Let's say you 
take a person with $35,000-a-year income and they go out to--in 
my district family health insurance would cost them $12,000 to 
$15,000 to buy a family policy. If that were fully deductible 
the in-pocket benefit of that for them would be at a maximum 
about 15 to 20 percent of that. In other words, if it was fully 
deductible, given what their tax liability is.
    So how do you buy a--how do we help a family with a $35,000 
income by giving them a $5,000 or $6,000--it wouldn't be that 
much, excuse me. It would be 20 percent--it would be $2,500 off 
of that. It would still cost them $10,000. How does that help 
them?
    Mr. Ramthun. Well, you could also get them a tax credit.
    Mr. Andrews. Well, that is what the Affordable Care Act 
does. Thank you.
    Mr. Hinojosa. Thank you.
    I am very pleased that the chairman and Ranking Member 
Andrews called this hearing. I was part of a family business 
and I was president of the company and always the one to 
negotiate the insurance policies for our employees, and there 
were 300.
    So I came here before this health care reform took place 
and I saw how we had to stop paying 100 percent of the 
insurance for our employees and went to 50 percent by the 
employees and 50 percent by the company because the premiums 
had been escalating. And I saw that some of the things that are 
being said by the other side are predictions about the negative 
impact of the Affordable Care Act, and what I see is that the 
health care sector has led the way with more than 579,000 new 
jobs because of the increase in people getting insured.
    The premiums for employer-sponsored coverage increased by 
only 9 percent in 2011, but if we look at the previous decade 
we saw that the premiums increased by 113 percent between the 
period of 2001 and 2011. The health care came in in 2010. So 
that means that during the 8 or 9 years without the reform on 
health care we already had close to 100 percent increase. So 
let's not blame this health care reform bill on what happened 
previously and continued to happen, because I was the one that 
negotiated those insurance policy premiums with the insurance 
companies and I know that it wasn't working.
    So I am going to address my first question to Ms. Hall.
    In your testimony, you stated that your business insurance 
was twice as expensive and included no dental or vision. In 
your testimony, I saw that you stated Republicans have offered 
an alternative to offer insurance across the state lines. The 
problem is--or with that, in my opinion, is that any time an 
insured has a problem with a claim they would need to go to the 
insurance commissioner of that state in which it is issued. 
Companies would simply all set up shop in the state where the 
consumer protection laws are the weakest, and so that wouldn't 
allow this program to work.
    So my question to you is, if you were offered a cheap plan 
from an insurance company based on the Mariana Islands how 
pleased would your employees be when they have a problem with 
their claim?
    Ms. Hall. I don't think they would be pleased at all. I 
think that you don't know what you are buying if you are going 
across state lines and you don't have an insurance commissioner 
you could go to to----
    Mr. Hinojosa. Being a businessman, I have a lot of friends 
who had their self-insurance but they were always offshore and 
there were lots of things about their insurance policies that 
were not good for the employees. So that is why I am concerned 
as to our not letting this health care go ahead and be 
implemented over--until 2014 and that we can see a bigger pool, 
as was said by Congressman Holt and others. Once we get the 
pool much bigger and sharing in the cost it is going to be much 
better.
    And I will say this, that in my own experience in my 
congressional district where we have a very high national 
poverty level of folks who are uninsured--40 percent, one of 
the highest in the whole country, compared to 16 percent for 
our nation's uninsured, it is beginning to work. A lot more 
people are insured.
    So I thank you all for coming and giving us an opportunity 
to listen to your point of view.
    I yield back.
    Chairman Roe. Thank the gentleman for yielding.
    Dr. Bucshon?
    Mr. Bucshon. Thank you, Mr. Chairman. I was a practicing 
cardiothoracic surgeon for 15 years prior to coming here, just 
for background, so everyone on the panel knows where I am 
coming from.
    I want to clear up a couple of assumptions that are always 
made, one recently made by Mr. Holt that someone with 
appendicitis, if they didn't have insurance, wouldn't get 
surgery. And I just want to let everybody know, including 
everybody in the country, that is absolutely, totally false, 
that people that have severe medical problems come to the 
emergency room and get taken care of regardless of their 
ability to pay. Hospitals are required to do that. Physicians 
ethically, because of our oath to our patients, do that.
    Myself, personally, have operated on many, many patients 
that had no insurance or had the best insurance money can 
provide, and physicians treat all of those patients the same. 
So I wanted to clear that up.
    The other thing is this assumption that because you have 
health insurance coverage all of a sudden you have miraculously 
developed personal responsibility for your actions. I have had 
patients with the best insurance that money can buy and they 
take no care of themselves at all. They don't take their 
medicine, they smoke, and they don't follow advice of 
physicians.
    I have had people that have no health insurance that are 
diligent about taking care of themselves. They get their 
medications because there are ways for people who don't have 
insurance to do that and they do the best job they possibly can 
to take care of themselves.
    That is not a direct connection, that if we suddenly 
provide people with health insurance we will change people's 
moral character or their behavior. That is not true, in my 
view.
    The other question is I--first question, just briefly, for 
Ms. Hall, do you think the uninsured or the Medicaid population 
overutilize the E.R. the most? Which group?
    Ms. Hall. The underinsured or----
    Mr. Bucshon. Uninsured.
    Ms. Hall. Uninsured or----
    Mr. Bucshon. Or Medicaid?
    Ms. Hall. I wouldn't know.
    Mr. Bucshon. It is the Medicaid population. And the reason 
is because the uninsured come to the emergency room when they 
truly have an emergency, and if you provide services for free 
with no skin in the game people take it willy-nilly, they just 
show up whenever they want because guess what, it is free. That 
data has been proven out many, many times.
    So this assumption that providing--expanding the Medicaid 
system is suddenly going to save us money in the health care 
system is actually, in my view, going to have the complete 
opposite effect. You are going to see a flood of patients 
coming to the emergency room because it is free. So I wanted to 
clear that up.
    So, Ms. Hall, has your business discussed dropping their 
private health insurance plan?
    Ms. Hall. Have we discussed that?
    Mr. Bucshon. Yes. Have you looked at the options of 
financially what will happen if you drop you plan or versus you 
don't if PPACA is fully implemented?
    Ms. Hall. We haven't looked at the options of dropping our 
health care coverage, but we have had to make adjustments with 
these rate increases to--usually----
    Mr. Bucshon. You have never even discussed--you never even 
had on one piece of paper the cost without covering it and the 
cost if you do? Because I would say as a business person that 
would be something that is on everybody--everybody that I talk 
to, that is on their list. They look at that. You have never 
done that?
    Ms. Hall. Absolutely not. I think the most important thing 
that we can do--and this is something I learned from Howard 
Schultz, CEO of Starbucks, directly, is if we take care of our 
people they take care of our customers----
    Mr. Bucshon. Fair enough.
    Ms. Hall [continuing]. They take care of your shareholders.
    Mr. Bucshon. Fair enough.
    Mr. Streitberger, first of all, my son loves your 
hamburgers. I know people have said that, but it is true.
    Mr. Streitberger. Thank you.
    Mr. Bucshon. Evansville, Indiana, he wants to go there 
every time.
    Mr. Streitberger. Thank you.
    Mr. Bucshon. And you may or may not be willing to step out 
on a limb on this--has your company, that you are aware of, 
looked at your options under PPACA as far as what type of 
health insurance coverage versus none that your company 
provides?
    Mr. Streitberger. All options we are currently 
investigating, yes, sir----
    Mr. Bucshon. So the answer is, which is consistent with 
every business person I have talked to, is that an astute 
business person that runs a business has looked at all of these 
options and will make their decision partially based on their 
competition, as was pointed out by Mr. Fensholt, and based on a 
number of factors. But if the financial advantage is so massive 
that they can't compete they will have no choice.
    The other thing is, finally, just to finish up, I would--as 
a physician I would recommend that anyone, including members of 
Congress, that can avail themselves to a city emergency room to 
visit and to get in--really get in the trenches on health care 
and see exactly what actually is happening and--because a lot 
of people want to talk about this issue in the abstract. I have 
been there. A lot of other members have been there. And you 
really can't get a good assessment for some of these things 
without being there. If you can avail yourself to that 
opportunity it would be a good thing.
    I yield back.
    Chairman Roe. Thank the gentleman for yielding.
    Mr. Ross?
    Mr. Ross. Thank you, Mr. Chairman.
    Mr. Streitberger----
    Mr. Streitberger. Yes, sir.
    Mr. Ross [continuing]. We don't have any of your 
restaurants in Florida, and I am apparently missing out, but--
--
    Mr. Streitberger. We are coming there. We are coming there.
    Mr. Ross. I obviously haven't missed too many hamburgers, 
so I am pretty good there.
    Profit per employee--are you familiar with that concept?
    Mr. Streitberger. Yes, sir.
    Mr. Ross. And that essentially would be an alternative to 
50 or more employees in order for the Patient Protection and 
Affordable Care Act to apply. And I came in late--has anybody 
asked you about that?
    Mr. Streitberger. No, sir.
    Mr. Ross. Would you explain why that is a good idea?
    Mr. Streitberger. Well, if I understand the question, we 
have--as a public company, and probably a lot of private 
companies, we look at our profitability in many different ways, 
and profit for employee, or in the case of health insurance, 
the cost per employee, and we try and keep that within a 
manageable rate for the organization as well as an affordable 
one for our team members, as well. And to Mr. Andrews' point, 
some, you know, may find it difficult to pay the premiums based 
on their annual salary----
    Mr. Ross. Well, that affects your margins. I mean, if you 
are on a----
    Mr. Streitberger. Well, at 3 percent----
    Mr. Ross [continuing]. If you are a tech company and your 
profit per employee is, you know, several hundred thousand 
dollars, and in the food industry, you know, it is----
    Mr. Streitberger. Yes. Our business isn't in the clouds. I 
mean, it is in our restaurants and we can't take our work, if 
you will, offshore. I mean, it stays here in the United States.
    Mr. Ross. Would you support a profit per employee, as 
opposed to a threshold of 50 or more employees?
    Mr. Streitberger. Yes, sir.
    Mr. Ross. Mr. Fensholt, you talked about the grandfather 
provision and being able to keep your doctor. Is there anything 
in this act that would allow or require a doctor to keep a 
patient?
    Mr. Fensholt. Not to my knowledge, sir.
    Mr. Ross. So it is somewhat unilateral, I guess. In other 
words, if the doctor is not going to get the reimbursement, if 
the doctor is not going to get the equitable fee for his 
services then he may not keep the patient regardless of how 
much the patient wants to keep the doctor.
    Mr. Fensholt. I think that is a fair statement.
    Mr. Ross. And, Mr. Ramthun, I want to talk to you a little 
bit about the HSAs, and wellness, and portability. And I think 
there are a lot of factors that come into play because I think 
we as a country missed something when we decided to continue 
employee-provided health benefits, because we don't provide 
employer-provided auto insurance, property insurance, and most 
other insurances.
    For some reason, since the end of World War II we have 
provided this as a benefit, and done so to the detriment of the 
employee and to the employer, and to the doctors. And it seems 
to me that a change in health policy would be to allow for 
wellness, as Ms. Hall spoke about being very important, and 
wellness being managed with HSAs that allow the employees to 
have some sense of responsibility
    In other words, when I buy property insurance I get a 
discount if I have a smoke alarm, a fire alarm. I have some 
risk in it. I am paying the premium but I also have the 
discount because of my risk management.
    It would seem to me that a policy in place that would allow 
for the interstate sale of health insurance programs--because 
we have interstate sale of a lot of investment products out 
there that are done, I think, very effectively through consumer 
advocacy enforcement, as well. But across state lines, health 
savings accounts, tax policy that incentivizes somebody to buy 
it, and incentives for wellness, and I think that we have got 
not only somebody who will manage their care better and bring 
down costs but also allow for portability so that the employer 
doesn't have to burden that cost and that the employee can take 
the advantage of not only the deduction but also the choice of 
policy they want. Would you agree with that?
    Mr. Fensholt. That would be a winning combination. And as 
far as not being able to reach across state lines to talk to an 
insurance commissioner, it works in the driver's license 
system. If I am speeding in California and my license is back 
in Maryland they can pull up all the tickets that I have ever 
had in a matter of a few instances, so----
    Mr. Ross. Thank you----
    Mr. Fensholt [continuing]. I think those insurance 
commissioners could work together to----
    Mr. Ross. Oh, no question about it.
    Ms. Hall, you know, you talk about junk insurance companies 
selling across state lines. You know, I have got some concern. 
You mentioned that you would prefer a public option but a 
public option is essentially putting the federal government in 
the business of insurance competing against private industry.
    Ms. Hall. Yes.
    Mr. Ross. And you think that is a good idea. And as I 
understand it, insurance is basically an actuarial assessment 
of risks--of lifetime risk that is backed by capital--capital 
in the form of cash, securities, or reinsurance. And yet, if 
you put the government into the business there is no cash, 
there is no securities, there is no capital. All there is is 
the obligation of the taxpayers, and you could have a 
subsidized market.
    It would seem to me that a public option would be one of 
the worst things we could ever do for this country, and if that 
is the course you want to take then if the price of milk is too 
high why not put the federal government in the milk business?
    Ms. Hall. I mean, the public option is off the table so 
that is no longer an issue. And I guess I disagree, that I 
think the government actually could create a really amazing 
insurance----
    Mr. Ross. A central government function, then?
    Ms. Hall. I mean, I think that you take 50-plus years of 
learning of where we have come and create a system, I think, 
that can be more powerful across all states.
    Mr. Ross. I see my time is up, but I tend to disagree with 
you.
    I yield back. Thank you.
    Chairman Roe. Thank the gentleman for yielding.
    Mr. Rokita?
    Mr. Rokita. Thank you, Mr. Chairman. I thank the chair, and 
the members, and the witnesses for your time today. It is very 
educational. Not only do I learn about health care but I learn 
about milk prices in a centralized economy. And by the way, I 
completely associate with Mr. Ross.
    I had some follow-up questions based on earlier testimony 
and I want to focus first on Mr. Fensholt.
    Sir, did you recall the discussion--excuse me--do you 
recall the discussion about the consumer protection all moving 
to one state--maybe the one state that has the lease, quote-
unquote, consumer protection if we went to selling insurance 
across state lines? Do you recall that discussion just a little 
while ago?
    Mr. Fensholt. Yes, sir.
    Mr. Rokita. Okay. I used to be in the consumer protection 
business. I was a state securities regulator, so I am very 
interested in that line of thinking from Ms. Hall's testimony. 
Do you agree with that?
    Mr. Fensholt. I don't think so, sir. And certainly in our--
in my business, what Lockton does, the bulk of our clients 
provide self-insurance. They are not subject to state 
regulation in any event.
    So we look at health reform from the standpoint of these 
midsize to large employers that provide their own insurance, 
and they are subject only to the whims of the federal 
authorities. And our view and the view of our clients is those 
regulations are simply becoming too burdensome and too 
expensive.
    Mr. Rokita. Right.
    Mr. Ramthun, do you have anything to add to that?
    Mr. Ramthun. No, I don't. Sorry.
    Mr. Rokita. All right. Thank you.
    And, Mr. Streitberger, do you have anything to add to that?
    Mr. Streitberger. No, sir.
    Mr. Rokita. Okay.
    Ms. Hall, do you have anything?
    Ms. Hall. I think that letting insurance companies throw 
quality and value out of the window it seems like--the across 
state lines is just kind of a code for insurance companies to 
not comply with quality, affordable health care coverage.
    Mr. Rokita. So you don't believe that competition would 
occur inside the state?
    Ms. Hall. It just seems like if I live in Washington I can 
go to my insurance commissioner to talk about what is going 
now. You know, insurance is a lot different than a driver's 
license. How many times do you call the Department of Licensing 
about your license? Once every 4 years.
    Mr. Rokita. Well, it is very different. I know that----
    Ms. Hall. And you go to the doctor six times a year----
    Mr. Rokita [continuing]. But that is not my question, so I 
just wanted to see if you had anything to add to your testimony 
in light of what was said.
    Again, to Mr. Fensholt, to offset the health reform law the 
Democrats included a host of new taxes and fees in the medical 
device industry and in the insurance industry.
    Mr. Fensholt. Yes, sir.
    Mr. Rokita. I am a cosponsor of the Medical Device Repeal 
Act, for example. Many others in Congress are, as well. It is 
going to be heard next week for an up or down vote, so I am 
interested to know you and your members' opinions on the effect 
of these taxes and fees. We have heard from the Congressional 
Budget Office that these new taxes will be passed through to 
consumers in the form of higher premiums.
    Mr. Fensholt. No question about it.
    Mr. Rokita. And so consumers are going to be paying for 
these higher taxes, or we are going to have less devices, I 
would imagine.
    Mr. Fensholt. Sir, with all due respect, I think this is 
one of the most disingenuous aspects of the Affordable Care 
Act. You can't levy billions of dollars in excise taxes--
penalty taxes--against entire industry segments and expect 
those business people not to pass that cost on through in the 
price of their products.
    In the case of the taxes and fees on insurance companies 
and third party claim payers, the insurance companies we deal 
with and our own actuaries, as I said in my testimony, expect 
both taxes and fees alone to amount to $10 to $15 per employee 
per month increase beginning in 2014.
    Mr. Rokita. Thank you, sir.
    And then to Mr. Ramthun: Researchers from RAND recently 
wrote in Health Affairs that an increase in consumer-directed 
health plans could reduce annual health spending by about $57 
billion. Are you concerned that the implementation approach by 
this administration--the approach they are taking with respect 
to consumer-directed health plans may actually discourage 
employers from offering these plans?
    Mr. Ramthun. Absolutely. I am very concerned and outlined 
in my testimony several areas where the regulatory issues could 
cause those effects.
    Mr. Rokita. Okay. Thank you.
    I yield back, Chairman.
    Chairman Roe. Thank the gentleman for yielding.
    Mr. Scott?
    Mr. Scott. Thank you, Mr. Chairman. Could any of the 
panelists respond to the effect on individuals and small 
businesses of getting what is essentially the large group rate 
under exchanges rather than what they have to go through now?
    Mr. Fensholt. I couldn't hear the question. I am sorry.
    Ms. Hall. Yes. I missed----
    Mr. Scott. The effect of the exchanges on the rates that 
would be paid by individuals and small businesses. Right now 
the large businesses get the smaller rates. By going under the 
exchanges wouldn't the individuals and small businesses be--
have access to lower rates?
    Ms. Hall. I mean, I am a small business owner, and yes, we 
would have access to lower rates, which is why we support this.
    Mr. Scott. If we have an exchange, what is the expectation 
of the number of companies--insurance companies that would 
actually sign up with a reasonable panel of doctors? Does 
anybody----
    Mr. Streitberger. I don't know.
    Mr. Scott. If the insurance companies have access to the 
exchange, what would that do to their expenses? Would their 
expenses be lower, having access to an exchange, everybody 
going to an exchange rather than having the higher sales force 
to go out and try to sell insurance?
    Ms. Hall. I imagine it would be much lower.
    Mr. Scott. Thank you, Mr. Chairman. I yield back.
    Chairman Roe. I thank the gentleman for yielding.
    I will now take my 5 minutes. First of all, I just want to 
start by saying the problem has been clearly laid out. The 
number one problem of the American health care system is it is 
too expensive. That is number one.
    Number two, it has been brought out we have a group of 
people who work who don't have access to affordable health 
care. And number three, we have a liability crisis. Those are 
the three big problems.
    Let me just give you some down-to-earth examples of what is 
going on out in the real world. Our local hospital system has 
9,000 employees. We have a medical school in our community. 
They just laid off 168 people and did not fill 90 jobs--250 
good jobs went away.
    A small, rural hospital, in anticipation of this, had to go 
borrow $800,000 from the county commission to pay operating 
expenses--not to buy a new CT scanner but to keep their 
hospital doors open. Why is this happening?
    Well, the payer mix is changing in hospitals. You have the 
government-run plans, Medicare and Medicaid, which don't pay 
the cost of the care. And there are less private insurers not 
because of everything getting better, because the economy has 
been bad. That is why. People have lost their insurance and 
people are not going to the--so the payer mix is changed.
    And I think it is great. I have supported the 26-year-olds 
on health insurance. That was one of the things I support to 
begin with. They don't use hospitals. They figured it out. They 
are not the ones that go. You provide the benefit but they 
don't spend the money in the hospital.
    So I talked to our CEO at the local hospital, and that is 
going on all over the country, and you are going to see more 
and more of that. That is from the real world.
    Secondly, the expansion of Medicaid in our state, the 
hospitals now tax themselves 2.5 percent of their gross revenue 
to make up the state part of the Medicaid plan because the 
state doesn't have the revenue to make its match. Well, if you 
expand that I don't know how we are going to pay for it in the 
state of Tennessee, so that expansion is causing great grief 
among our governors who have looked at this, and the expansion 
is 16-to 20-something million.
    I agree, it is not government-controlled health care; it is 
government-regulated health care--incredibly regulated because 
I put up with it for over 30 years trying to jump through those 
hoops that they put out there. I think this--what we ought to 
be looking at is cost, and Mr. Ramthun had a great--his 
testimony showed that the one thing that has been bringing cost 
down for people are consumer-driven plans.
    This is mine; I have a health savings account. That is a 
wonderful way to provide health care for my family because if I 
need something I don't have to call up the insurance company 
and say, ``Can I get this done?'' And if I take care of myself 
in wellness and so forth I keep the money, the insurance money 
doesn't keep the money.
    Where have we seen this done in public policy? And I want--
I know Mr. Rokita is gone, but the state of Indiana has done 
this. We have done this for about 400 employees in our 
practice, and they don't go back to conventional insurance. 
People like this.
    And I would like to have Mr. Ramthun speak to that. When 
you look at the data it is overwhelming--at the money. It is a 
different concept. You have to think about, ``Now I am in 
charge of this debit card. I don't have to call anybody or do 
anything.''
    Could you comment on that?
    Mr. Ramthun. Well, it is very easy to blame the insurance 
for the rising costs of health care in this country, but the 
fact is that most of the employees get their coverage through 
self-funded employers, where the employer is the insurance 
company. So they are not layering on all these other costs that 
everybody thinks are excessive for insurance.
    What they have seen is that the utilization of the health 
care services is what is driving this total spending growth. 
And so it is strategies of personal responsibility, wellness, 
prevention that are making a difference and why the consumer-
driven plans are so successful. There is a financial reward at 
the end of the day for doing so because you get to keep some of 
the money that used to go to pay for your insurance.
    I think we have lost the notion of what real insurance is, 
and so we insure ourselves for all kinds of routine, very low-
cost things where there is absolutely no risk involved. That 
has got to change. Consumer-driven health care is doing that 
and why it is so promising as a strategy to bend the cost 
curve.
    Chairman Roe. Yes. When the rule-makers looked at this, why 
would they treat HSAs differently when it has been shown that 
that is the one thing out there that is lower cost for people? 
Why would that be treated differently?
    Mr. Ramthun. I don't think they fully understand exactly 
how these policies work, and they are used to dealing with 
traditional insurance, which I understand what they are trying 
to achieve through their regulations. These policies are 
different because they don't pay from the very first dollar and 
so there have to be some special considerations made, which I 
have yet to see in the regulations.
    Chairman Roe. And the state employees in Indiana saved--the 
state of Indiana saved 10 percent, which is a huge amount of 
money.
    Mr. Ramthun. Yes. And that has been documented by Mercer.
    Chairman Roe. Yes. Huge amount. And only 2 percent of the 
employees chose to go back to traditional insurance. They 
stayed. When they found out and learned how to use it it is 
very, very good.
    I see my time is expired.
    Mr. Walberg?
    Mr. Walberg. Thank you, Mr. Chairman.
    Appreciate reading the testimonies. Sorry I wasn't here to 
hear them.
    But let me ask Mr. Fensholt, first, at this time 2 years 
ago in our state of Michigan, which led the nation into high 
unemployment and is still working its way out of it. 
Thankfully, in the last 2 years we have had new leadership in 
Lansing--new governor, new legislature--that have been doing, I 
think, things the right direction in reducing the heavy burden 
upon businesses--small businesses, especially, in the state.
    So we have gone from a statewide average 2 years ago of 13 
percent, last year 10.6 percent. My district was at almost 15 
percent and has now dropped to a state average. We are at 8.3 
percent now. Things are starting to turn.
    But in your testimony you discuss how the additional 
complexities of the president's health care law will undermine 
the private sector's attempt to grow. Could you be somewhat 
specific in how many of your clients are concerned with how 
this health care law will affect their businesses? And 
secondly, have they discussed the option of laying off 
employees or dropping health care coverage all together?
    Mr. Fensholt. Yes, sir. We surveyed our clients about this 
time last year regarding the--their concern about the bill, its 
additional costs, its additional administrative burdens, and 
the cost attendant to that. A full 80 percent of our clients 
responded, and about half of our clients responded to the 
survey, which was remarkable--said they were either concerned 
or very concerned about the additional costs, administrative 
burdens imposed upon them by the health care reform law.
    The bottom line is this: There is a tension created by the 
law between the finance offices in these companies who are 
looking at what they are currently spending on health 
insurance--$6,000, $8,000, $10,000, $11,000 per employee per 
year--and the human resource managers who feel they need to 
offer benefits to attract and retain talent. Ultimately, in 
challenging economic times the CFO wins that argument and if 
the business' survival depends on jettisoning health insurance 
they will do it.
    And what this construct does, by offering extraordinarily 
generous federal subsidies to individuals to buy insurance in 
these insurance exchanges if they cannot get it from an 
employer, and it invites employers, in these challenging times, 
to exit that marketplace and allow their employees to migrate 
into the health insurance exchanges. Our fear--and I think our 
clients, many of them view--is that that will simply have to 
happen. They simply cannot continue to sustain these costs and 
without relief in that regard--they would love to do it, but 
without relief in that regard ultimately they will send their 
employees into the health insurance exchanges where they will 
draw federal money to buy coverage.
    Mr. Walberg. Yes, okay. Thank you.
    Mr. Streitberger, maybe I am drawn to ask you questions 
because it is getting near lunch time and Red Robin is an 
interest at this point. But you mentioned that over the last 3 
years, in your testimony, health care costs per employee have 
risen over 6 percent.
    Mr. Streitberger. Yes, sir.
    Mr. Walberg. And that it is--that is before the full 
implementation of PPAC. If the president's health care mandate 
continues to force your prices to rise rapidly how will you 
limit the number of jobs Red Robin can create, and might you be 
forced to shift to a model where some of your workers' hours 
would be reduced, minimized, your company's exposure to the 
employer penalties?
    Mr. Streitberger. Well, those are all things that we are 
going to--that we are currently considering in how to deal with 
2014. And yes, we would have to look at limiting hours that 
team members work, you know, to keep them below that because 
the cost is a--will spiral upwards when this kicks in.
    We do the best that we can, as I mentioned earlier. We are 
self-insured. We pay the bills for our team members, which 
helps keep all our premiums as well as their premiums down. And 
with the lack of competition out there this is going to 
continue.
    Now, ours increased 6 percent over the last 3 years, and a 
lot of that was in plan design and a lot of it with the fortune 
of having low claims history of our current population. So that 
6 percent includes last year, which we were at zero. We kept 
our premiums flat.
    Mr. Walberg. So it could have been worse.
    Mr. Streitberger. This was not health care legislation; 
this was just plan design and a little luck with low claims. 
But we can't count on that every year. Again, we want to keep 
affordable and robust health insurance, health coverage for our 
team members so that we can continue to grow and--but with 
these small margins the more we invest in things such as this, 
the slower we would be forced to grow, and then having to also 
entertain looking at limited hours.
    Mr. Walberg. Thank you.
    And, Mr. Chairman, I think the old saw that said the best 
way to have health insurance is to have a job. This is going 
directly opposite in promoting health care at the expense of 
jobs, which ultimately does away with health care, as well.
    Thank you.
    Chairman Roe. I thank the gentleman for yielding.
    I would now like to take this opportunity to thank our 
witnesses for taking your valuable time, and preparing your 
testimony, and coming to Washington and testifying. It has been 
very enlightening.
    I will now recognize the ranking member for closing 
comments.
    Mr. Andrews. Thank you.
    I also would like to thank each of you for the time and 
preparation, and the inconvenience you suffered. I know one of 
our witnesses is going to go open another store in the state of 
Washington. I wish her well.
    And I hope--Mr. Streitberger, you are opening a lot of 
stores. New Jersey is open to you.
    I do want to express to the chairman my extreme 
disappointment that in scheduling this hearing and having a 
premier hamburger restaurant, premier cupcake vendor, that 
neither were asked to bring samples, evidently, for the members 
of the committee, and I want to express and register my extreme 
disappointment in that--that disappointment.
    Mr. Fensholt. I will second that, Mr----
    [Laughter.]
    Mr. Andrews. The premise of much of the argument against 
the Affordable Care Act is that it is a job-killing health care 
law. Since the president signed the law private sector 
employers in this country have added over 4 million new jobs.
    I think that there is a political dispute about the law; I 
think it is one we ought to have in the election. But I think 
the facts are clear that the argument that this is a job-
destroying health care law is not borne out by the evidence. 
Matter of fact, the opposite is borne out by the evidence.
    But I look at this through the prism of personal 
experiences that some of you help us to edify this morning--all 
of you really have. On Tuesday morning--you want to talk about 
controlling cost--a woman went to a doctor to see how her 
diabetes was being managed. She had a stroke in 2005, mildly 
has been managing her blood sugar through exercise and diet, 
and as just great news about her blood sugar, and about her 
blood pressure, and about her blood tests, which all came back 
looking like she is doing very well.
    She is a Medicare recipient, and I will tell you, I am 
especially glad that the prospect she will have another stroke 
or heart attack are lower because she is my wife's mom. And she 
swims every day, and she counts every carb that she eats, and 
she takes care of herself.
    And we didn't pass a law that said she had to do that. 
Believe me, I can't pass any laws in my household that would 
affect anyone, as far as I can tell. But she made a really good 
personal choice, and she has got a higher quality of life, and 
she is costing the federal Treasury less. We have got to figure 
out a way to increase that behavior in any way we can.
    On Sunday I encountered a constituent. She and her husband 
were music directors for a local Catholic church and the church 
has suffered a downturn in the collection plate because a lot 
of the parishioners are out of work, so the church had to cut 
back and make the two music directors part time instead of full 
time.
    They both lost their health insurance because they were 
part time; the diocese couldn't afford to cover them anymore. 
And the husband, who is six-five and 250 pounds, his pulse was 
down to, like, 41, and my physician friends would understand 
that there was something going on there. So he goes to a local 
emergency room, they look at him, and they say, ``You have got 
a serious problem. You probably need some heart surgery.'' And 
they were uninsured.
    Now, happily, there is an institution in our area called 
the Deborah Heart and Lung Center that is like the Shriners 
concept, that they will see anyone and take care of them 
whether or not they can pay their bill. And they were lucky 
enough to live near a facility like that.
    The man had a pacemaker put in a few months ago and he is 
alive today. I don't think he would be alive today were it not 
for the fortuitous event that that hospital was accessible to 
him.
    That should not happen. These are hardworking, taxpaying, 
mortgage-paying citizens who, through no fault of their own, 
found themselves in a position where they were facing financial 
ruin, and worse than that, loss of life because of lack of 
health insurance.
    That should not happen in this country. And I think that 
this law should stay in effect because it will prevent that 
from happening in this country.
    And then the final thing that I saw this weekend that is a 
very good thing is that on Monday morning I was at Memorial Day 
breakfast at one of my American Legion posts and a friend of 
mine there is an electrical contractor. And last year when I 
saw him he was worried because he had one job left after the 
one he was working on.
    He now has a 4-month backlog of electrical contracting jobs 
waiting for him throughout the rest of the summer and into the 
fall. Now, he is not indicative of every employer in America. 
He is certainly not, you know, a statistically significant 
sample. It is one guy.
    But we have talked about the health insurance bill. He has 
about four or five employees. You know what he has to do under 
the bill? Nothing. Nothing. Because for the truly small 
businesses in the country there are no obligations imposed on 
them because of the understanding of what that costs.
    I would like Mr. Streitberger's company to open 5,000 more 
stores. And I understand we have got to do something to control 
health care costs to make that a realistic and affordable goal. 
And for everyone here I would like to see them grow and be more 
successful and more prosperous.
    I understand the intensity of the political argument about 
this. Boy, do I understand it. We all lived through it the last 
couple years.
    But these are not issues that should be decided by 
ideological jihad; they should be decided by careful reasoning 
of people that want to solve these problems. I think we can do 
that together. I think we should build on this law--fix its 
deficiencies, build on its successes, and put our country in a 
different and better place. And I am confident that we can work 
together and do that.
    I thank you for participating in a meaningful discussion 
that helps us do that, each of you. Thank you.
    Chairman Roe. I thank the gentleman for yielding.
    And I will finish by saying after 31 years of the practice 
of medicine I never saw a Republican or a Democrat heart attack 
in my life. I never delivered a Republican or a Democrat baby 
in my life, and I have delivered lots of them. And I never 
operated on a Republican or Democrat cancer. It is a people 
problem, and unfortunately, this health care law was passed on 
a partisan basis.
    And I agree with the ranking member that we should work 
together in a bipartisan way to solve this, because if not it 
will never be accepted by the American people. Cost is a big 
issue because if you can't afford to buy it then you can't have 
it. I mean, it is that simple.
    The only way I see that you can do this is to either go to 
a consumer-driven system or to a single-payer system where care 
is rationed. I mean, otherwise we are not--nobody is going to 
be able to afford health insurance, even the wealthiest is not, 
among us.
    And the second thing that the ranking member brought up--
Mr. Andrews brought up--which is coverage. There is no question 
there is a gap in coverage. I saw it every day in my practice, 
where there were people who worked hard every day and couldn't 
get affordable health care coverage. We have to address that in 
this country.
    To clear the record up, there is a law called EMTALA that 
was passed, I think, in 1986, where if you show up in an 
emergency room, whether you are legally here in this country, 
illegally, whether you can pay or not pay, we give you care in 
this country. And I am not saying that is the best way to do it 
but it is done.
    And I feel an obligation when someone--I am required and 
would do it. When a patient shows up without a doctor if I am 
on call I am going to take care of that patient in the 
emergency room.
    Physicians, and nurses, and health care people do it every 
single day across this country and don't ask anything for it. 
The problem is it leaves the burden on the hospital to figure 
out how to pay for the bills--how to pay the bills, I should 
say.
    I held a hearing in Evansville, Indiana about a year ago--a 
subcommittee hearing, and a small business person who was an 
IHOP owner was there--something you would, Mr. Streitberger, 
you would be familiar with. He had 800 employees in his 12 
stores and he made about $3,000 per employee--netted about that 
per employee, which he said was, in that business, pretty good, 
and he thought was very good.
    Since he had over 50 employees, if he provided what the 
government said he had to provide, the essential benefits 
package, which we don't know what it is yet and how much it is 
going to cost, then it would cost him--he would be upside-down 
about $7,000 per employee. He calculated--his H.R. people did. 
If he paid the penalty he made no profit, made no money at all. 
So what is he supposed to do?
    Can he raise prices, as you pointed up? He can't do that. 
We have to work through this.
    Another issue that we did hear--a small issue, but very 
much a big issue for me as a practitioner--is having someone 
with a flexible spending account, which should be getting you 
out of the most expensive part of health care, away from the 
doctor, away from the system, lets you make those health care 
decisions yourself and then purchase it with your own money, 
now you are requiring someone to see me to get a prescription 
for Nyquil. I mean, it is crazy when you see that. It makes no 
sense whatsoever.
    You are forcing that person into a higher cost or you are 
forcing that person to make a phone call that day to the 
doctor, wait until it is called in, and add more bureaucracy 
and mandates to me with no payment for it at all, just more 
work to do.
    There is a much simpler way to do it. One of the simplest 
transactions on this planet is a patient coming to see me as a 
physician, me providing a service, and them going out with 
whatever I do that day. And that is where consumer-driven care 
gets the insurance companies out of it, and you insure yourself 
for catastrophic problems--not for a headache or not for a cold 
but for catastrophic things. And it is the only way I can see 
we can actually get the health care costs under control.
    And I think you can do it for our Medicaid population. I 
think they respond exactly--there are folks and some of the 
best shoppers in the world are people who are at lower income. 
They have to be. So they make, probably, better decisions than 
people that have more disposable income.
    I think this has been a great hearing. I certainly 
appreciate all of your testimony, appreciate your being here.
    With no further comments, this meeting is adjourned.
    [Additional submission of Chairman Roe follows:]

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    [Whereupon, at 11:51 am., the subcommittee was adjourned.]