[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE EMPLOYER MANDATE: EXAMINING THE
DELAY AND ITS EFFECT ON WORKPLACES
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH, EMPLOYMENT,
LABOR, AND PENSIONS
AND THE
SUBCOMMITTEE WORKFORCE PROTECTIONS
OF THE
COMMITTEE ON EDUCATION
AND THE WORKFORCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, JULY 23, 2013
__________
Serial No. 113-28
__________
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 Robert E. Andrews, New Jersey
Joe Wilson, South Carolina Robert C. ``Bobby'' Scott,
Virginia Foxx, North Carolina Virginia
Tom Price, Georgia Rubeen Hinojosa, Texas
Kenny Marchant, Texas Carolyn McCarthy, New York
Duncan Hunter, California John F. Tierney, Massachusetts
David P. Roe, Tennessee Rush Holt, New Jersey
Glenn Thompson, Pennsylvania Susan A. Davis, California
Tim Walberg, Michigan Rauul M. Grijalva, Arizona
Matt Salmon, Arizona Timothy H. Bishop, New York
Brett Guthrie, Kentucky David Loebsack, Iowa
Scott DesJarlais, Tennessee Joe Courtney, Connecticut
Todd Rokita, Indiana Marcia L. Fudge, Ohio
Larry Bucshon, Indiana Jared Polis, Colorado
Trey Gowdy, South Carolina Gregorio Kilili Camacho Sablan,
Lou Barletta, Pennsylvania Northern Mariana Islands
Martha Roby, Alabama John A. Yarmuth, Kentucky
Joseph J. Heck, Nevada Frederica S. Wilson, Florida
Susan W. Brooks, Indiana Suzanne Bonamici, Oregon
Richard Hudson, North Carolina
Luke Messer, Indiana
Juliane Sullivan, 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,
Tom Price, Georgia Ranking Member
Kenny Marchant, Texas Rush Holt, New Jersey
Matt Salmon, Arizona David Loebsack, Iowa
Brett Guthrie, Kentucky Robert C. ``Bobby'' Scott,
Scott DesJarlais, Tennessee Virginia
Larry Bucshon, Indiana Rubeen Hinojosa, Texas
Trey Gowdy, South Carolina John F. Tierney, Massachusetts
Lou Barletta, Pennsylvania Rauul M. Grijalva, Arizona
Martha Roby, Alabama Joe Courtney, Connecticut
Joseph J. Heck, Nevada Jared Polis, Colorado
Susan W. Brooks, Indiana John A. Yarmuth, Kentucky
Luke Messer, Indiana Frederica S. Wilson, Florida
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
TIM WALBERG, Michigan, Chairman
John Kline, Minnesota Joe Courtney, Connecticut,
Tom Price, Georgia Ranking Member
Duncan Hunter, California Robert E. Andrews, New Jersey
Scott DesJarlais, Tennessee Timothy H. Bishop, New York
Todd Rokita, Indiana Marcia L. Fudge, Ohio
Larry Bucshon, Indiana Gregorio Kilili Camacho Sablan,
Richard Hudson, North Carolina Northern Mariana Islands
Suzanne Bonamici, Oregon
C O N T E N T S
----------
Page
Hearing held on July 23, 2013.................................... 1
Statement of Members:
Andrews, Hon. Robert R., Ranking Member, Subcommittee on
Health, Employment, Labor, and Pensions.................... 16
Courtney, Hon. Joe, Ranking Member, Subcommittee on Workforce
Protections................................................ 17
Roe, Hon. Phil, Chairman, Subcommittee on Health, Employment,
Labor, and Pensions........................................ 2
Prepared statement of.................................... 3
Walberg, Hon. Tim, Chairman, Subcommittee on Workforce
Protections................................................ 4
Prepared statement of.................................... 15
Statement of Witnesses:
Holtz-Eakin,Douglas President, American Action Forum......... 65
Prepared statement of.................................... 67
Pollack, Ron Executive Director, Families USA,............... 58
Prepared statement of.................................... 60
Richardson, Jamie T., Vice President, White Castle System,
Inc........................................................ 43
Prepared statement of.................................... 45
Turner, Grace-Marie, President, Galen Institute.............. 31
Prepared statement of.................................... 34
Additional Submissions:
Mr. Courtney:
Bureau of Labor Statistics, U.S. Department of Labor,
News Release........................................... 101
Letter dated July 16, 2013, from the Congressional
Research Service....................................... 19
Letter dated July 22, 2013, from DeVivo, John,
Willimantic Waste Paper Co., Inc.,..................... 29
Sturdevant, Matthew, The Harford Courant................. 26
The New York Times, Health Plan Cost for New Yorkers Set
to Fall 50%............................................ 24
Fudge, Hon. Marcia L., statement for the record 143
Fudge, Hon. Marcia L., a Representative in Congress from the
State of Ohio, questions submitted for the record to:
Mr. Pollack.............................................. 146
Mr. Richardson........................................... 148
Response to questions submitted:
Mr. Pollack.............................................. 150
Mr. Richardson........................................... 153
Chairman Walberg:
Letter dated April 24, 2013, from the United Union of
Roofers, Waterproofers and Allied Workers.............. 9
Seven House-Passed Bills President Obama Signed that
Repeal or Defund Parts of His Health Care Law.......... 74
Letter dated July 11, 2013, from International
Brotherhood of Teamsters............................... 11
The Wall Street Journal, Mort Zuckerman: A Jobless
Recovery Is a Phony Recovery........................... 5
Letter dated July 18, 2013,from the National Electrical
Contractors Association................................ 14
THE EMPLOYER MANDATE: EXAMINING THE DELAY
AND ITS EFFECT ON WORKPLACES
----------
Tuesday, July 23, 2013
House of Representatives,
Subcommittee on Health, Employment, Labor,
and Pensions,
joint with
Subcommittee on Workforce Protections
Committee on Education and the Workforce,
Washington, D.C.
----------
The subcommittees met, pursuant to call, at 10:02 a.m., in
Room 2175, Rayburn House Office Building, Hon. David P. Roe
[chairman of the Health, Employment, Labor, and Pensions
subcommittee] presiding.
Present from Health, Employment, Labor, and Pensions
subcommittee: Representatives Roe, Wilson, Price, Salmon,
Guthrie, DesJarlais, Roby, Heck, Brooks, Messer, Andrews,
Courtney, and Polis.
Present from Workforce Protections subcommittee:
Representatives Walberg, Kline, Price, DesJarlais, Rokita,
Hudson, Courtney, Andrews, Bonamici.
Also present: Miller
Staff present: Andrew Banducci, Professional Staff Member;
Katherine Bathgate, Deputy Press Secretary; Owen Caine,
Legislative Assistant; Molly Conway, Professional Staff Member;
Ed Gilroy, Director of Workforce Policy; Benjamin Hoog, Senior
Legislative Assistant; Nancy Locke, Chief Clerk; Brian Newell,
Deputy Communications Director; Krisann Pearce, General
Counsel; Molly McLaughlin Salmi, Deputy Director of Workforce
Policy; Todd Spangler, Senior Health Policy Advisor; Alissa
Strawcutter, Deputy Clerk; Joseph Wheeler, Professional Staff
Member; Aaron Albright, Minority Communications Director for
Labor; Tylease Alli, Minority Clerk/Intern and Fellow
Coordinator; Daniel Foster, Minority Fellow, Labor; Eunice
Ikene, Minority Staff Assistant; Brian Levin, Minority Deputy
Press Secretary/New Media Coordinator; Leticia Mederos,
Minority Senior Policy Advisor; Michele Varnhagen, Minority
Chief Policy Advisor/Labor Policy Director; Michael Zola,
Minority Deputy Staff Director; and Mark Zuckerman, Minority
Senior Economic Advisor.
Chairman Roe. A quorum being present, the joint hearing of
the Subcommittee on Health, Employment, Labor, and Pensions and
the Subcommittee on Workforce Protection will come to order.
I would like to thank my colleague from Michigan, Tim
Walberg, the chairman of the Subcommittee on Workforce
Protections for agreeing to hold this joint hearing on the
``Employer Mandate: Examining the Delay and Its Effect on the
Workplace.''
Today we will have opening statements from the chairman and
ranking members of each subcommittee. With that, I will
recognize myself for my opening statement.
Good morning. First, let me welcome our colleagues from the
Subcommittee on Workforce Protections. I would also like to
thank our guests for being with us this morning. We have
assembled an excellent panel of witnesses and look forward to
your testimony.
Three weeks ago the American people were joining friends
and family to celebrate the Fourth of July holiday and hotdogs
and fireworks. Little did they know the Obama administration
was about to set off some fireworks of its own.
Through a blog post on the Treasury Department's Web site,
the administration announced it would delay for 1 year
enforcement of a vital piece of the recent health care law; the
employer mandate.
The delay provides workplaces a temporary reprieve from an
onerous mandate; however, it does not alter the fact the law is
fatally flawed. Regardless of when the employer mandate is
implemented, it will destroy jobs and force Americans to accept
part-time work when what they desperately need are full-time
jobs.
That is why the House will continue to demand permanent
relief for all Americans. In the meantime, we will conduct
oversight of the President's decision and determine what it
means for our nation's workplace. To that end, there are a
number of questions that need to be answered.
For example, does the President have the authority to
unilaterally delay enforcement of the law? It is well-
recognized a President can decide not to enforce a law he
believes is unconstitutional. Yet there is nothing in the
President's decision to suggest he believes the employer
mandate is unconstitutional.
Quite the opposite, President Obama signed the bill into
law and his Justice Department defended the law before the
Supreme Court. Can a President disregard the law because it is
politically inconvenient or the federal bureaucracy is running
behind schedule?
We also have to ask who was involved in this decision and
when it was ultimately made. In June, Health and Human Services
Secretary, Kathleen Sebelius, testified before the full
committee that implementation of the law was proceeding along
just fine.
The senior Democratic member of the committee responded to
the secretary's testimony by saying, ``This is all good news
and stands in stark contrast to the claims we have been hearing
from the other side for 3 years. Now is not the time to reverse
course.''
Yet weeks later the administration did just that by
reversing course on a critical piece of the President's
signature health care law. Was this a last minute decision with
no coordination with other federal agencies?
Or was this a carefully orchestrated effort developed long
before the decision was announced? Is the administration
planning to reverse course on other aspects of the law?
We hoped that an administration official would provide
answers to some of these questions. That is why Chairman
Walberg and I invited Howard Shelanski, administrator for the
Office of Management and Budget's Office of Information and
Regulatory Affairs, to testify.
However, the OMB refused to make Mr. Shelanski available,
stating his office was not involved in the employer mandate
delay. It is troubling to learn an office in charge of
overseeing federal regulatory policy wasn't involved in this
monumental decision. It simply raises new questions. Congress
and the American people deserve answers.
I look forward to our discussion, and I will recognize my
distinguished colleague, Tim Walberg, the chairman of Workforce
Protection Subcommittee for his opening remarks.
Mr. Walberg?
[The statement of Chairman Roe follows:]
Prepared Statement of Hon. Phil Roe, Chairman, Subcommittee on Health,
Employment, Labor, and Pensions
Good morning. First let me welcome our colleagues from the
Subcommittee on Workforce Protections. I would also like to thank our
guests for being with us this morning. We have assembled an excellent
panel of witnesses and we look forward to their testimony.
Three weeks ago the American people were joining friends and family
to celebrate the July Fourth holiday with hotdogs and fireworks. Little
did they know the Obama administration was about to set off some
fireworks of its own. Through a blog post on the Treasury Department's
website, the administration announced it would delay for one year
enforcement of a vital piece of the recent health care law - the
employer mandate.
The delay provides workplaces a temporary reprieve from an onerous
mandate; however, it does not alter the fact the law is fatally flawed.
Regardless of when the employer mandate is implemented, it will destroy
jobs and force Americans to accept part-time work when what they
desperately need are full-time jobs. That is why the House will
continue to demand permanent relief for all Americans. In the meantime,
we will conduct oversight of the president's decision and determine
what it means for our nation's workplace. Toward that end, there are a
number of questions that need to be answered.
For example, does the president have the authority to unilaterally
delay enforcement of the law? It is well recognized a president can
decide not to enforce a law he believes is unconstitutional. Yet there
is nothing in the president's decision to suggest he believes the
employer mandate is unconstitutional. Quite the opposite, President
Obama signed the bill into law and his Justice Department defended the
law before the Supreme Court. Can a president disregard the law because
it's politically inconvenient or the federal bureaucracy is running
behind schedule?
We also have to ask who was involved in this decision and when it
was ultimately made. In June Health and Human Services Secretary
Kathleen Sebelius testified before the full committee that
implementation of the law was proceeding along just fine. The senior
Democratic member of the committee responded to the secretary's
testimony by saying, ``This is all good news and stands in stark
contrast to the claims we've been hearing from the other side for three
years... Now is not the time to reverse course.''
Yet weeks later the administration did just that by reversing
course on a critical piece of the president's signature health care
law. Was this a last minute decision with no coordination with other
federal agencies? Or was this a carefully orchestrated effort developed
long before the decision was announced? Is the administration planning
to ``reverse course'' on other aspects of the law?
We hoped an administration official would provide answers to some
of these questions. That is why Chairman Walberg and I invited Howard
Shelanski, administrator for the Office of Management and Budget's
Office of Information and Regulatory Affairs, to testify. However, OMB
refused to make Mr. Shelanski available, stating his office was not
involved in the employer mandate delay. It is troubling to learn an
office in charge of overseeing federal regulatory policy wasn't
involved in this monumental decision, and it simply raises new
questions. Congress and the American people deserve answers.
With that, I will now recognize my distinguished colleague
Representative Andrews, the senior Democratic member of the
subcommittee, for his opening remarks.
______
Mr. Walberg. Thank you, Mr. Chairman.
Good morning.
I appreciate the chairman for presiding over this joint
hearing and express my appreciation to our witnesses for
sharing their expertise and their time with us today.
We are well-acquainted with the challenges surrounding the
employer mandate, which forces businesses to provide
government-approved health insurance or pay higher taxes.
It seems with each passing day there are new reports of
employers facing tough choices thanks to this particular
provision in the health care law. The mandate applies to
businesses with 50 or more full-time workers and defines such
workers as employees who work 30 or more hours.
Our two subcommittees have broad jurisdiction over policies
governing employee and employer relations. I can't think of
another federal law that considers full-time work as 30 hours.
In fact, the Fair Labor Standards Act established the 40-
hour work week for the purposes of federal overtime
requirements, and it has been a hallmark of America's workplace
for 75 years. Yet the health care law took a different
approach, creating a perverse incentive for businesses to cut
hours to avoid higher taxes.
Today roughly 12 million Americans are unemployed; many in
my district. More than 8 million individuals are working part-
time hours but need a full-time job. According to Mort
Zuckerman, editor in chief of the U.S. News and World Report,
the President's health care law shares some of the blame.
In a recent op-ed in the Wall Street Journal, Zuckerman
describes the growing reliance on part-time workers and writes
this and I quote--``Little wonder that earlier this month the
Obama administration announced it is postponing the employer
mandate until 2015, undoubtedly to see if the delay will
encourage more full-time hiring.''
Mr. Zuckerman goes on to explain again, and I quote--``But
thousands of small businesses have been capping employment at
30 hours and not hiring more than 50 full-timers, and the
businesses are unlikely to suddenly change that approach just
because they received a 12-month reprieve.''
I ask unanimous consent to submit for the record the op-ed
of Mort Zuckerman.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] T2142.001
[GRAPHIC] [TIFF OMITTED] T2142.002
[GRAPHIC] [TIFF OMITTED] T2142.003
Chairman Roe. Without objection, so ordered.
Mr. Walberg. Thank you, Chairman Roe.
The decision to delay enforcement of the employer mandate
is the confirmation that the law is in fact, and I quote a
senator, ``A train wreck''. Republicans have long-cited the
failings in the law and our concerns have been dismissed as
political rhetoric.
Yet the more we learn about the law, the more problems we
encounter and the bigger the opposition grows. Even union
leaders, once strong supporters of the law, are beginning to
realize it is hurting workers.
In a statement released in April, the union, United Union
of Roofers, Waterproofers, and Allied Workers called for
``repeal or complete reform,'' of President Obama's health care
law.
According to union President Kinsey Robinson, and I quote--
``In the rush to achieve its passage, many of the act's
provisions were not fully conceived, resulting in unintended
consequences that are inconsistent with the promise that those
who were satisfied with their employer-sponsored coverage could
keep it.''
Mr. Chairman, I ask unanimous consent this statement be
included in the hearing record.
[The information follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Chairman Roe. Without objection.
Mr. Walberg. I thank the chairman.
Just recently officials with the International Brotherhood
of Teamsters, United Food and Commercial Workers, and the
UNITE-HERE warned democrat leaders that without changes the law
and I quote--``Will shatter not only our hard-earned health
benefits, but destroy the foundation of the 40-hour work week
that is the backbone of the American middle class.''
The union representatives continued, and I quote--``We can
no longer stand silent in the face of elements of the
Affordable Care Act that will destroy the very health and well-
being of our members along with millions of other hardworking
Americans.''
I ask unanimous consent this letter be inserted in the
record.
[The information follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Chairman Roe. Without objection, so ordered.
Mr. Walberg. Thank you.
Finally, earlier this month the International Brotherhood
of Electrical Workers and the National Electrical Contractors
Association wrote to Chairman Kline, and they said this: ``We
cannot afford to sit on the sidelines as this law imposes
increased benefit costs, fees, and new taxes on our plans. In
addition, the health care law exempts all employers with less
than 50 employees from offering health care coverage. This
creates a vast competitive disadvantage for the 4,500 National
Electrical Contractors Association contractors nationwide that
responsibly provide coverage for their employees.''
I again ask unanimous consent that this letter be inserted
into the record.
[The information follows:]
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Chairman Roe. Without objection.
Mr. Walberg. Thank you.
I believe we can do better than misguided policies that
destroy full-time jobs. As public opposition grows, I am
hopeful we can repeal the law and begin developing solutions
that will lower health care costs and provide new opportunities
for America's workers.
Thank you again, Mr. Chairman, for holding this hearing,
and I yield back.
[The statement of Mr. Walberg follows:]
Prepared Statement of Hon. Tim Walberg, Chairman, Subcommittee on
Workforce Protections
Good morning. I want to thank Chairman Roe for presiding over this
joint hearing and express my appreciation to our witnesses for sharing
their expertise with us today.
We are well acquainted with the challenges surrounding the employer
mandate, which forces businesses to provide government-approved health
insurance or pay higher taxes. It seems with each passing day there are
new reports of employers facing tough choices thanks to this particular
provision in the health care law. The mandate applies to businesses
with 50 or more full-time workers and defines such workers as employees
who work 30 or more hours per work.
Our two subcommittees have broad jurisdiction over policies
governing employee and employer relations. I can't think of another
federal law that considers full-time work as 30 hours. In fact, the
Fair Labor Standards Act established the 40-hour work week for the
purposes of federal overtime requirements, and it has been a hallmark
of America's workplaces for 75 years. Yet the health care law took a
different approach, creating a perverse incentive for businesses to cut
hours to avoid higher taxes.
Today roughly 12 million Americans are unemployed; more than 8
million individuals are working part-time hours but need a full-time
job. According to Mort Zuckerman, editor in chief of U.S. News and
World Report, the president's health care law shares some of the blame.
In a recent op-ed in the Wall Street Journal, Zuckerman describes the
growing reliance on part-time workers and writes, ``Little wonder that
earlier this month the Obama administration announced it is postponing
the employer mandate until 2015, undoubtedly to see if the delay will
encourage more full-time hiring.''
Mr. Zuckerman goes on to explain, ``But thousands of small
businesses have been capping employment at 30 hours and not hiring more
than 50 full-timers, and the businesses are unlikely to suddenly change
that approach just because they received a 12-month reprieve.''
I ask unanimous consent to submit for the record the op-ed by Mort
Zuckerman.
[Chairman Roe: ``Without objection.'']
Thank you, Chairman Roe.
The decision to delay enforcement of the employer mandate is the
confirmation that the law is in fact a ``train wreck.'' Republicans
have long cited the failings in the law and our concerns have been
dismissed as political rhetoric. Yet the more we learn about the law,
the more problems we encounter and the bigger the opposition grows.
Even union leaders - once strong supporters of the law - are beginning
to realize it's hurting workers.
In a statement released in April, the United Union of Roofers,
Waterproofers and Allied Workers called for ``repeal or complete
reform'' of President Obama's health care law. According to union
President Kinsey Robinson, ``In the rush to achieve its passage, many
of the act's provisions were not fully conceived, resulting in
unintended consequences that are inconsistent with the promise that
those who were satisfied with their employer sponsored coverage could
keep it.''
Mr. Chairman, I ask unanimous consent this statement be included in
the hearing record.
[Chairman Roe: ``Without objection.'']
Thank you, Mr. Chairman.
Just recently officials with the International Brotherhood of
Teamsters, United Food and Commercial Workers, and UNITE-HERE warned
Democratic leaders that without changes the law ``will shatter not only
our hard-earned health benefits, but destroy the foundation of the 40
hour work week that is the backbone of the American middle class.'' The
union representatives continued, ``We can no longer stand silent in the
face of elements of the Affordable Care Act that will destroy the very
health and well-being of our members along with millions of other
hardworking Americans.''
I ask unanimous consent this letter be inserted into the record.
[Chairman Roe: ``Without objection.'']
Thank you, Chairman Roe.
Finally, earlier this month the International Brotherhood of
Electrical Workers and the National Electrical Contractors Association
wrote to Chairman Kline, ``We cannot afford to sit on the sidelines as
this law imposes increased benefit costs, fees, and new taxes on our
plans. In addition, [the health care law] exempts all employers with
less than 50 employees from offering health care coverage. This creates
a vast competitive disadvantage for the 4,500 NECA contractors
nationwide that responsibly provide coverage for their employees.''
I ask unanimous consent this letter be inserted into the record.
[Chairman Roe: ``Without objection.'']
Thank you, Mr. Chairman.
I believe we can do better than misguided policies that destroy
full-time jobs. As public opposition grows, I am hopeful we can repeal
the law and begin developing solutions that will lower health care
costs and provide new opportunities for America's workers. Thank you
again Mr. Chairman for holding this hearing.
______
Chairman Roe. Thank you for yielding.
I will now recognize Mr. Andrews, the ranking member, for
his opening statement.
Mr. Andrews. Thank you, Mr. Chairman and Chairman Walberg.
I am pleased to be joined by my friend Joe Courtney who is
the ranking Democrat on his subcommittee.
I read the rest of Mr. Zuckerman's article that just got
put into the record, and I want to read a part of it.
He talks about his concerns about the health care law and
then he says, and I am quoting--``What the country clearly
needs are policies that will encourage the modernization of
America's capital stock where investment in modern production
has plunged to the lowest level in decades. Policy should also
be targeted to nourish high tech industries, which in turn will
inspire the design and manufacture of products in the United
States. This means preparing a skilled workforce, especially
engineers, suitable to work in manufacturing and increasing the
number of visas available for foreign graduate students.''
This I assume is the predicate to the 39th attempt to
repeal the health care law. So far, the majority is 0-38. Now
there are some other issues confronting the country as Mr.
Zuckerman talks about: skilled workers to make our economy
grow.
Last week, the majority brought to the House floor an
education bill that was opposed by the U.S. Chamber of Commerce
because the Chamber of Commerce said it basically watered down
standards and did not encourage the kind of skills American
students need.
An immigration bill that is broadly supported by business,
law enforcement, evangelicals, civil rights communities, many
others across the country that won 68 votes in the United
States Senate sits stagnant in this body.
As of now, there is no plan to move any kind of immigration
bill to the floor that would in Mr. Zuckerman's words,
``Increase the number of visas available to foreign graduate
students.''
So we are back again with half of an effort in which the
majority criticizes what it does not like in the Affordable
Care Act and that is what this morning I assume will be devoted
to.
It ought to be devoted to the second half of the effort
though, and I am going to read from an article from Associated
Press from last Friday.
``Three years after campaigning on a vow to repeal and
replace President Obama's health care law, House Republicans
have yet to advance an alternative for the system they have
voted more than three dozen times to abolish in whole or in
part.''
My friend from Michigan just said he hopes we can, quote--
``begin working'' on an alternative.
Officially the effort is quote--``in progress,'' and has
been since January 19, 2011, according to gop.gov, a
leadership-run Web site, but internal divisions, disagreement
about political tactics, and the President's 2012 reelection
add up to uncertainty over whether Republicans will vote on a
plan of their own before the 2014 elections, or if not by then,
perhaps before the President leaves office more than 6 years
after the original promise.
Now, ladies and gentlemen, I think we have a choice today.
We can engage in yet another session where people say what they
do not like about the Affordable Care Act, and that has value,
but even if you don't like the Affordable Care Act, that only
does half the job.
And I would challenge each of the witnesses, if they in
fact are opposed to the Affordable Care Act, and my friends on
the Committee who are opposed to the act tell us what you would
do instead.
What is your plan?
What is your plan to reduce health care costs? What is your
plan to insure tens of millions of uninsured Americans? What is
your plan to ensure greater consumer protections in the
insurance industry? What is your plan to improve the quality of
health care delivery in the United States of America? We would
love to hear it.
So I am sure we will--I read the written statements. They
are all very good. I would certainly consent to them being put
in the record in their entirety, and I would invite the
witnesses--wing it. Tell us what you would do instead to make
things better.
I yield back.
Chairman Roe. I thank the gentleman for yielding.
I would now like to recognize Mr. Courtney for his opening
statement.
Mr. Courtney. Thank you, Chairman Roe.
And thank you to the witnesses for being here this morning.
Again, the chairman's opening comments talked in kind of
dark foreboding terms about whether or not President Obama
overreached constitutionally in terms of the postponement of
the employer mandate tax.
I would encourage all of my colleagues--as well as anyone
listening--it would be helpful to just maybe pick up the phone
and call the Congressional Research Service and ask them
whether or not the IRS has the authority to postpone
statutorily defined programs and whether or not they have done
it in recent years.
And the fact of the matter is the answer will be the report
which I am holding in my hand which shows that four times in
just recent years, the last 2 years, the IRS has postponed
implementation of IRS programs, some under the Bush
administration, some under the Obama administration, again, it
is well-established law under the U.S. Code 7805, that the IRS
has that authority.
In this instance, after soliciting comments from employer
groups all across the country, they made what I think was a
commonsense decision which is that the definition of a 30-hour
employee, seasonal employees was frankly still elusive and
again, using well-established authority they delayed and
postponed.
And I would ask unanimous consent to have the CRS report
admitted to the record.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Roe. Without objection.
Mr. Courtney. Thank you, Mr. Chairman.
In the meantime, events continue to chug along. The New
York exchange announced last week and the headline in the New
York Times is ``Health plan costs for New Yorkers set to fall
by 50 percent.''
Somebody who was a small employer just a very short time
ago, that would be news that we would greet with great
celebration, and again, without a mandate, people can shop now
with a coherent, understandable marketplace and make those
decisions for themselves and their employees.
In the Hartford Current, where I come from in the state of
Connecticut, federal health officials' rates on public
exchanges are lower than expected, which again is the filings
that we have in the state of Connecticut, again I would ask
that these two articles also be admitted to the record with
unanimous consent.
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Chairman Roe. Without objection.
Mr. Courtney. So the fact of the matter is, is that very
shortly we are going to see rate filings which are below the
Congressional Budget Office projections from 2010 in terms of
the average cost of premiums.
That should be our focus right now in terms of implementing
and making sure that people are going to have the benefit of
subsidies, small business tax credits, and a structured
marketplace where private insurers--and by the way, we have a
few of them in the state of Connecticut--are going to be able
to sell their products in a much more user-friendly, small
business-friendly fashion rather than the hieroglyphics that
the existing marketplace presently calls for.
And again, lastly, I have a letter from an employer in my
district, Willimantic Waste with about 230 employees, which he
submitted last night, actually applauding the President's
decision saying that, yes, they did listen. We are excited and
looking forward to the opportunity to let the exchange unfold
and make its prices available for both their part-time
employees and people in the community of Windham, which is a
distressed area of the state of Connecticut.
And I would ask that Mr. DeVivo's comments from the
Willimantic Waste Paper Company, again, just supporting the
President's decision, also be entered into the record.
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Chairman Roe. Without objection.
Mr. Courtney. That is my last one.
Lastly, I would just say, you know, we are now holding a
hearing on measures that we voted on last week. We were
promised by the new majority regular order when they took
control of this Congress. Not only is this bill rushed to the
Floor without hearing, we are now holding a hearing after the
fact. There is not a high school student council that would
follow this type of process.
Again, I appreciate the witnesses for being here today, but
the fact of the matter is Mr. Andrews said, we have the poison
of sequester seeping through the U.S. economy. We have
infrastructure needs that need to be addressed. We have a CR
looming. We have a debt ceiling looming. Seventeen days left
until October 1st of legislative days, and we are now holding a
hearing on a bill that already passed.
I mean, give me a break.
Again, thank you for being here. I look forward to the
exchange. We can do this until the cows come home, but the fact
of the matter is the real issues that face and the real
challenges that face the U.S. economy are not being addressed
here today in this committee room or any other committee room
in the House of Representatives, and frankly, the public
deserves better.
I yield back the balance of my time.
Chairman Roe. I thank the gentleman for yielding.
Pursuant to committee Rule 7(c), all members of both
subcommittees 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 statements, questions for the record, and
other extraneous material referenced during the hearing to be
submitted in the official hearing record.
It is now my privilege to introduce our witnesses.
Our first is Ms. Grace Marie Turner, the president of the
Galen Institute, a health care policy research organization
located in Alexandria, Virginia.
Welcome.
Mr. Jamie Richardson is vice president of government and
shareholder relations for the White Castle Systems, Inc. in
Columbus, Ohio.
Welcome.
Mr. Ron Pollack is executive director of Families USA in
Washington, D.C.
Welcome, Mr. Pollack.
And Dr. Douglas Holtz-Eakin is the president of the
American Action Forum in Washington, D.C.
Welcome.
Before I recognize each of you to provide your testimony,
let me briefly explain our lighting system.
Y'all have been here many times. You will have 5 minutes to
present your testimony. When you begin, the light in front of
you will turn green. At 1 minute left, it will turn amber, and
then when your time has expired, the light will turn red. At
that point, I will ask you to wrap up your remarks as best as
possible.
After everyone has testified, members will each have 5
minutes to answer questions and because this is a combined
hearing, I am going to stick pretty closely to the 5 minutes.
So first, I would like to thank you for being here, and I
will start with Ms. Turner.
STATEMENT OF MS. GRACE-MARIE TURNER, PRESIDENT, GALEN
INSTITUTE, ALEXANDRIA, VA
Ms. Turner. Thank you, Chairman Roe.
Thank you, Chairman Walberg.
Thank you to Ranking Member Andrews, Ranking Member
Courtney, and to Chairman Kline, and members of the committee
for the opportunity to testify today.
I am Grace-Marie Turner, president of the Galen Institute.
We are a nonprofit research organization focusing on free-
market ideas for health reform and have been working for 20
years on market-based solutions, including a book called
``Empowering Healthcare Consumers Through Tax Reform.''
I would welcome the opportunity to talk with you about some
of our ideas.
Businesses large and small across America have been making
painful decisions to lay off employees, cut workers' hours, and
make do with fewer workers than they really need. This is not
what you would expect in a recovering economy.
The clear distorting fact is the Affordable Care Act,
especially the employer mandate. The decision by the
administration to delay the reporting requirements for the
mandate were certainly welcomed by business, but they also add
to the questions and the concerns that both employees and
employers have about the law.
The statute does say that the mandate is to begin in 2014,
not 2014--2015, as the administration is now directed. Because
of the House vote last Wednesday the house did pass legislation
to give the administration legal authority to postpone the
mandate; however the administration said in a puzzling
statement of administration policy that the President would
veto the legislation to delay the mandate should it reach his
desk even though he had delayed the mandate administratively.
No wonder businesses are confused.
CMS administrator, Marilyn Tavenner--I do think it is still
relevant to discuss this because businesses are impacted, plans
had been made in preparation for the 2014 trigger date, and CMS
administrator, Marilyn Tavenner was asked--testified last
week--if she was consulted, and she said she was not.
You did invite Howard Shelanski from the Office of
Management and Budget who said their office is not involved,
and therefore, wouldn't testify.
And the commerce committee of Michael Burgess questioned
the treasury official last week to ask him about the timeline
of the decision. The official was not able to provide the date
of the decision, who made it, and whether that person was in
the Treasury Department or the White House.
Certainly a decision with this significance and this much
impact on both the law and other aspects of the law as well as
businesses needs to have been reviewed and vetted thoroughly.
Employers are more confused than ever.
A recent survey by the U.S. Chamber of Commerce found that
71 percent of the small businesses say the health law will make
it harder for them to grow. An earlier Gallup poll found that
41 percent of the small businesses had frozen hiring because of
the law. One in five said that they had already reduced the
number of hours for their employees ``as a specific result of
the Affordable Care Act.''
While most employers want to provide health insurance, not
all can and still keep their prices competitive. For companies
with very tight profit margins, the mandate can send their
bottom lines from black to read.
Some critics have argued that if all businesses were forced
to provide health insurances and raise prices, they would not
lose customers because everybody would be operating on the same
ground rules, but customers are smarter than that. They will
postpone or delay purchases. They will substitute and that
business would simply vanish.
A 1-year delay in the reporting requirements for the
employer mandate is largely irrelevant some say, but offering
insurance isn't the same as people accepting insurance.
Our proponents of the mandate and the law say that because
97 percent of business, large companies that are subject to the
mandate, already provide health insurance that it really
doesn't matter because it is not going to change their
behavior.
But a study by Duke University professor Chris Conover has
found that 46 percent of the uninsured actually work for these
large firms, the great majority of which are due to provide
health insurance. So this delay and the mandate really do have
a significant effect.
And while the law tried to lock in employer coverage, it
may very well have the opposite effect of incentivizing
employers to drop it instead. They just have another year to
make their plans.
Further, the health law is redefining a full-time work week
as 30 hours, rather than 40, and we heard as Chairman Walberg
said even our organized labor is very upset about this
redefinition.
Many small businesses are already cutting workers' hours
back to 25 hours because they know with some slack in shifts,
that they could get to the 30 hours. If you were to--there are
some proponents of changing the definition, amending the law to
say it is a 40-hour work week.
I recommend that you not do this because employers will
then say, well let's just have this; they will say well, we
have to cut hours to 35 hours. You are going to continue to
chase this. The only solution is repealing this law and
repealing particularly the mandate.
The risk complexities and delays and confusion surrounding
Affordable Care Act strongly indicate that the only responsible
path is to delay implementation of the exchanges and related
subsidies especially until taxpayers can be assured that this
money is being spent wisely.
And one final thought; Congress could authorize funds to
help states develop or strengthen high risk pools so people
with pre-existing conditions who are waiting for the exchange
coverage to begin on January 1 could get coverage immediately.
Thank you, Mr. Chairman, for the opportunity to testify.
[The statement of Ms. Turner follows:]
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Chairman Roe. Thank you, Ms. Turner.
Mr. Richardson?
STATEMENT OF MR. JAMIE T. RICHARDSON, VICE PRESIDENT, WHITE
CASTLE SYSTEM, INC., COLUMBUS, OH
Mr. Richardson. Thank you, Chairman Roe and Walberg,
Ranking Members Andrews and Courtney, and members of the
Subcommittees on Health, Education, Labor, and Pensions and
Workforce Protections of the House Education and Workforce
Committee. Thank you for the chance to testify regarding
employer mandate and the impact a recent announcement of
transition relief on employers and employees
My name is Jamie Richardson. I serve as vice president of
White Castle, which means I get to sell hamburgers for a
living. It is an honor to be here and share our perspective on
behalf of our company and the National Restaurant Association.
White Castle is the taste America craves. We believe good
business, great food, and responsible citizenship should all go
together. At White Castle, we first opened our doors in 1921,
and to this day, we are a family-owned, privately-held company.
The majority of our nearly 10,000 team members work in our
406 restaurants across 12 states. At White Castle, we put
people first. We have offered a health insurance program and a
benefit since 1924.
Our benefits package is one of the main reasons so many of
our colleagues remain with the company for so long; 27 percent
of our team members has been with us 10 years or more. More
than one in four have been with us 10 years or more.
We are proud of that fact, but we are humbled by their
loyalty, and we are committed to continuing to make White
Castle a rewarding place to be.
As restaurants throughout the country implement new
requirements of the health care law, we face unprecedented
challenges that must be addressed. We are committed to
addressing those challenges, and to do that effectively, we
need Congress' help.
Allow me to be frank.
First, the definition of full-time employee in this law
does not reflect our workforce needs or our employees' desire
for flexible work schedules.
Second, the calculation to determine whether a business is
a large or small employer is unnecessarily complicated and
especially burdensome for small businesses.
Third, automatic enrollment must be eliminated to avoid
confusion and potential financial hardship for employees and an
increased burden for employers.
I would like to tell you today that White Castle's growth
has continued uninterrupted. I would like to tell you we have
continued to open more restaurants in more neighborhoods
providing more jobs and serving more customers.
I would like to tell you that, but I can't. In fact, White
Castle's growth has halted.
Last year when I testified before the House Oversight and
Government Reform Committee, we had 408 White Castle
restaurants. Today, we have 406.
In the 5 years prior to the health care law, we were
opening an average of eight new White Castle restaurants each
year. In 2013, we plan to open just two.
While other factors have slowed our growth, it is the
mounting uncertainty surrounding the health care law that has
brought us to a standstill.
In addition to the employer-shared responsibility section
of the law, the employer reporting requirements are key for
employers. The two requirements make up a large part of what
employers must do to comply with the law.
The administration's July 2 announcement and July 9 IRS
notice 2013-45 provides transition relief and voluntary
compliance in 2014 for the employer reporting requirements
under Tax Code Section 6055 and 6056, and hence the employer
shared responsibility requirements employer mandate under Tax
Code Section 4980H.
As early as October 2011, the National Restaurant
Association, as part of the Employer for Flexibility and
Healthcare Coalition submitted comments requesting transition
relief.
Proposed rules on the employer mandate were published in
the Federal Register on January 2, 2013, but employers have
been waiting for rules or guidance on employer reporting.
We welcome this transition relief to understand and comply
with the rules on reporting and how it interacts with the
mandate and employer mandate rules.
Employers need rules with enough lead time to set up
systems that will track data on each full-time employee and
their dependents and then report this data to the IRS annually.
We are eager to see the proposed rule that the
administration's stated it plans to issue later this summer.
Of particular concern are the flow of information and the
timing of reporting and communication employers must make to
multiple levels and layers of government. Streamlining employer
reporting will help simplify the process.
Restaurants and other employers have advocated for a common
sense, single, annual reporting process by employers to the
Treasury Department each January 31.
That would provide perspective general plan information and
wage information to the affordability Safe Harbors as well as
retrospective reporting as required by Tax Code Section 6056 on
individual full-time employees and their dependents.
To conclude, while we appreciate the transition relief,
restaurants across America still face challenges only Congress
can address; the definition of a full-time employee, the
determination of who is an applicable large employer under the
law, and the elimination of the automatic enrollment provision.
We are both proud and grateful for the responsibility of
serving America's communities, creating jobs, boosting the
economy, and serving our customers. We are committed to working
with Congress to find solutions that foster growth and truly
benefit the communities we serve.
Thank you.
[The statement of Mr. Richardson follows:]
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Chairman Roe. Thank you, Mr. Richardson.
Mr. Pollack?
STATEMENT OF MR. RON POLLACK, EXECUTIVE DIRECTOR, FAMILIES USA,
WASHINGTON, DC
Mr. Pollack. Chairman Roe, Walberg, Ranking Members Andrews
and Courtney, Chairman Kline, Ranking Member Miller, in my
written testimony I covered three topics.
One, the numerous ways the Affordable Care Act is already
providing significant benefits and protections for many
millions of Americans.
Two, the additional and even more significant ways that the
Affordable Care Act will provide meaningful help for an
increasing number of Americans.
And number three, how the 1-year delay of the employer
mandate is much ado about very little.
I will be happy to respond during the Q&A session about the
sky is falling rhetoric about how the Affordable Care Act
impacts on jobs.
With respect for the committee's time, I will not repeat
the written testimony that was submitted to the committee in
advance and suffice, it will be in the record.
Instead, I hope it will be helpful to offer a frank
perspective about the current context of the continuing debate
about the Affordable Care Act.
A number of months ago, after the November elections,
Speaker Boehner appropriately said that the Affordable Care Act
is the law of the land. However, both before and since that
time, opponents of the Affordable Care Act have demonstrated an
obsession about obstructing the law of the land.
This obsession with obstruction has taken at least eight
forms and they are often absurd, in some instances ironic, and
all are contrary to the best interests of families across
America.
The first and most farcical manifestation of this obsession
is the repetitive, perhaps unprecedented and certainly futile
series of repeal votes here in the House. By most counts, it is
now 39 such votes.
Second, people across America have been subjected to an
incessant barrage of false charges about Obamacare. Most
obvious and pernicious has been the claim that the legislation
creates death panels. Other examples abound.
Third, opponents of the Affordable Care Act have pushed
states to refuse to set up new health insurance marketplaces.
Most ironically, it has been these efforts that have caused the
federal government to set up the marketplaces instead,
something that one might think is anathema to conservative
thinking.
Fourth, some Obamacare opponents have filed two federal
lawsuits to prevent middle class and moderate income families
in states with federal marketplaces from receiving tax credit
premium subsidies. Here again, irony is rampant.
Even though they are unlikely to succeed, if they did
succeed, it would be taxpayers in the most conservative states
that would be harmfully affected.
Fifth, Obamacare opponents are attempting to prevent states
from implementing the Medicaid expansion. Tragically, in the
states that have not yet committed to the expansion, many
millions of those in greatest need in America will continue to
be uninsured.
Thankfully, nine conservative Republican governors have
said this is helpful for their states.
Sixth, the Senate's Republican leaders sent letters to the
commissioners of national sports leagues, the NFL, NBA, Major
League Baseball, urging them to refrain from informing their
fans about new opportunities under the Affordable Care Act.
Seventh, state legislative opponents of Obamacare have
promoted and in a number of instances adopted legislation
designed to impeded church and social service agencies from
helping Americans learn about the benefits of the Affordable
Care Act.
These new laws are absurdly designed to force such public
spirited groups to secure licenses before they can go about
their public education efforts.
And eighth, the conservative group, FreedomWorks, is
campaigning to get young adults to opt out of coverage with
online video training and educational manuals to spread the
word on college campuses. The campaign is called ``Burn Your
Obamacare Draft Card.''
These efforts demonstrate a clear and perhaps unprecedented
obsession with obstructing the law of the land, and they may
reflect desperation because the clock is ticking.
Americans will soon receive significant new benefits and
protections and will understand how the Affordable Care Act can
improve their lives as the first coverage enrollment periods
begin in October and benefits become available in January.
This obsession with obstruction is unworthy of America's
families across the nation. Hopefully, in the not-too-distant
future, this obsession with obstruction will end.
Moving forward, since no legislation, including the
Affordable Care Act, is perfect, it will be far more productive
if the law's many proponents and opponents work together and
constructively to improve the law and help to strengthen
America's health care system.
We look forward to participating in that process.
[The statement of Mr. Pollack follows:]
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Chairman Roe. Thank you, Mr. Pollack.
Dr. Holtz-Eakin?
STATEMENT OF MR. DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN
ACTION FORUM, WASHINGTON, DC
Mr. Holtz-Eakin. Thank you Chairman Roe and Walberg,
Ranking Members Andrews and Courtney, and Chairman Kline,
Ranking Member Miller, for the chance to be here today. It is a
great privilege.
Clearly, the employer mandate is going to have strong
incentive effects on growth and employment, the mix of full and
part-time, and the kind of compensation workers will receive.
It has been well-recognized that for example, in large
firms, those above 50, the best outcome one can get is zero,
and that would be a firm that is already offering coverage to
everyone and it satisfies the requirements of the law, and the
law has no impact; it is redundant.
Past that and as Grace-Marie Turner pointed out, about 46
percent of the uninsured in these large firms, there will be
impacts on them. They will have to cover health insurance
costs. Those resources will compete with the chance to hire or
otherwise expand payrolls. In small firms, there is a sharp
cliff at 50 employees where you would expect growth to be
impacted.
Below that, the very tax credit that is meant to ameliorate
the impact of the mandate in fact has quite perverse growth
incentives, penalizing those firms that grow above 25
employees, penalizing those firms that pay higher average
wages. All of this is a strong anti-growth impact from the
mandate itself.
This takes place in the context of the other taxes, roughly
$1 trillion over the next 10 years and regulations embodied in
the Affordable Care Act, it is hard to describe this as a pro-
job growth piece of legislation.
We have heard a lot of testimony and the incentives are
quite clear under the mandate to move to part-time employees
and the data are quite clear that we are seeing an increasing
trend toward part-time employment in the United States. All
that remains is for scientific studies to link the two closer
together. It is conjecture at this point, but it is quite
strongly persuasive.
The third impact is on the kinds of compensation that
employees will get. Obviously, a requirement to provide health
insurance moves the mix toward insurance and away from cash
wages at a time when we have seen a stagnation in the cash
wages of American workers. Median family incomes have declined
during this recovery for example and this will impede the
growth even further.
This has the strongest impact on low-wage workers. Imagine
a minimum-wage worker whose employer is required to cover
health insurance. You can't lower the cash wages of that
individual. Instead, there is an incentive to no longer employ
them or move them to part-time employment. It is bad news for
the worker.
Or, and this is one of the most striking impacts, the
arithmetic is quite compelling that for workers up to about 300
percent of the poverty line, it is in the combined interest of
the employee and the employer to arrange for that individual to
get their insurance in the exchanges and pick up the federal
subsidies.
As result, one would expect that to the extent firms and
workers pursue this, we would see churn not only in their
insurance coverage, but in the provider networks underneath
that; nothing that anyone describes as a desirable outcome from
a health policy point of view.
These incentive effects have been in the law from the first
drafts and have been quite broadly discussed. We are now
starting to see evidence of these impacts. The most strong
evidence that we have to date are the polls, some of which are
included in my written testimony, where employers are reporting
that they have in fact pulled back on their hiring, moved to
part-time workers, are worried about the costs of the health
care law, and that this is impeding their business operations.
The decision to waive enforcement for a year doesn't change
any of those basic long run incentives, and I think it is the
strong reading of the economics literature that permanent
incentives have much stronger impacts than temporary ones.
We have been through this debate in the context of stimulus
where one-time policies often don't have much bang for the
economic buck and we will see that again in this context.
To the extent that there will be an impact, the one thing
it does do is for those employers who have decided to get out
of the business of providing health insurance, they have a 1-
year firesale on the chance to do that. There is no penalty.
They can accelerate their movement of employees into the
exchanges.
This would raise the taxpayer cost clearly more quickly
than it would otherwise, and given the sort of knock-on effects
of this lack of enforcement on the ability to collect
information about the eligibility for subsidies, on the size of
subsidies, when we expect the taxpayer costs to be larger than
it need be, and there is also some concern that it would impact
the ability to enforce the individual mandate. The lack of
complete reporting will be difficult in 2014.
So this is a--the mandate has been a contentious issue from
the beginning. The waiver is again, just bad news. There is no
good news here from the point of view of employees and
employers trying to grow and provide the compensation packages
that they want.
Thank you.
[The statement of Mr. Holtz-Eakin follows:]
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Chairman Roe. Thank you, Dr. Holtz-Eakin.
Mr. Walberg?
Mr. Walberg. Thank you, Mr. Chairman.
If I might, the distinguished ranking member mentioned the
efforts in the House to repeal Obamacare and also to address
some of the concerns especially the closing concerns of Mr.
Pollack.
I would like unanimous consent to insert into the record a
list of seven House-passed bills President Obama signed into
law that repeal or defund parts of Obamacare.
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Chairman Roe. Without objection.
Mr. Walberg. Dr. Holtz-Eakin, 75 years ago, the Fair Labor
Standards Act was established and it established a 40-hour work
week for purposes of federal overtime requirements. The
President's health care law is the first and only federal law
that considers a full-time employee is one that works 30 hours
a week or more.
I would like, if you could, to expand your thoughts as to
how this provision as well as the rest of the employer mandate
act as a disincentive for hiring employees in positions over 30
hours a week.
Mr. Holtz-Eakin. Well, the arithmetic is quite clear. You
will have to incur substantial health care costs if you have
full-time employees.
I promise you that employers think about this. It is
absolutely in their fiduciary obligations to look at both the
continuation of coverage and the continuation of full-time
employment.
I did it as an employer at a think tank. You have to look
at this. So I think there is a concern.
It also makes it more complicated. You are now complying
with two sets of regulatory standards, one at 40, one at 30. It
makes life harder for small businesses, many whom are not
expert in compliance with federal regulations.
So I think, you know, the notion that this is going to be a
good news story either for the total number of employees or the
number of full-time employees is it just hard to make.
Mr. Walberg. Mr. Richardson, if your employees like their
health care coverage, will they be able to keep it? You have
had coverage since 1924.
Mr. Richardson. We have had coverage since 1924, and our
full-time team members are eligible and 80 percent of those
team members take the coverage.
The biggest challenge for us right now is this new
definition of full-time. You know, we chose to use 35 hours as
a full-time definition.
When we look at what this will translate to, our highest
hope is to allow everyone who has benefited from that insurance
to be able to hold onto it, but when we look to the future, we
can't foresee a future where we are able to hire new hires as
full-time employees.
We think transparency equals trust and so our focus is
going to be on for those who have the insurance, doing
everything we can within our power to make sure we are still
providing that, but that for new hires, we tell them coming in,
we are not going to be able to provide that because we are
hiring you as part-time, which we would schedule it around 25
hours a week.
Mr. Walberg. Okay.
Transparency, you mean trust, I must chastise you for
wearing that tie that is causing a craving for sliders in me
right now with hundreds of White Castle sliders on that tie,
but I will forgive you.
Mr. Richardson. We were aiming for subtle, but I am glad
you picked up on it.
Mr. Walberg. I picked up on it.
Mr. Richardson, for many months now the top concern that
employers and employees throughout Michigan tell me about is
that employer mandates, 30 hours equivalency for full-time
employment is leading to less opportunity, less take-home pay,
and losses of health insurance.
Last month I had the opportunity to question the Secretary
of Health and Human Services, Secretary Sebelius, as to the
devastating economic effect of this new requirement.
She told me and this committee that since the benefits
didn't start until January 1 of 2014, she was, and I quote--
``Not at all confident that some of the speculation of what may
or may not happen will actually happen.''
And so, Mr. Richardson, are the loss of hours and health
benefits caused by this law just speculation in the restaurant
industry?
Mr. Richardson. In restaurants across America, we are
concerned. We were thankful for some temporary relief, but it
is beyond concern. It is extreme anxiety because we know the
costs that are coming are real.
Just the change in the definition of full-time for White
Castle alone, and we literally sat in meetings the last week in
June talking about this before the July 2 announcement, but
when we look at the band of team members we have between 30 and
35 hours and calculate the added cost, we are looking at a 35
percent increase in our cost for health insurance to be able to
provide a greater number--
Mr. Walberg. So this has a huge effect on your planning, as
well, in moving forward?
Mr. Richardson. Yes. We invest $30 million a year in our
health insurance program and it would be north of $8 million or
$9 million more per year.
Mr. Walberg. And you have already said it is cutting back
on the number of new stores that you plan to put in place.
Mr. Richardson. It stopped us in our tracks when it comes
to growth and expansion.
Mr. Walberg. I thank each of the witnesses and I see my
time is ending, so I will yield back.
Chairman Roe. Thank the gentleman.
Yield to Mr. Andrews?
Mr. Andrews. Thank you.
I thank the witnesses. I want to talk about a family where
you have two working adults and they make $45,000 a year. And
one of the adults works for a business with 100 employees; she
is one of 100 employees at her business.
The family doesn't have health insurance--they have a
couple of children--because neither of the employers offer
health insurance that the two adults work for. Does everyone on
the panel agree it should be a goal of our national policy to
get that family health insurance? Anybody disagree with that?
Okay.
Ms. Galen--Ms. Turner, excuse me, how do you think we
should do that? How should we get that family covered?
Ms. Turner. The most important thing is to make that
insurance affordable for families. As I said in my testimony,
the chances that one or the other of those parents, those
working adults, may have health insurance offered to them in
the workplace; it is considerable.
Mr. Andrews. Let's talk--in my state, that family would pay
at least $15,000 for a decent policy. So they have an income of
$45,000 gross. How do we get them the policy? What do you think
we should do?
Ms. Turner. I think that we need to reform the tax
treatment of health insurance significantly to provide a
greater incentive for people to purchase--
Mr. Andrews. What does that mean? You wrote an article in
2009 that talked about I guess a credit for that family of
$5,700. Do I have that right?
Ms. Turner. That was one of the proposals at the time. I
think if you were to provide a refundable--
Mr. Andrews. Okay. You did that. Let's go with that
proposal. Let's go with that for a second.
That would cover $5,700 of the cost, but what about the
other $10,000 or so? Where should that come from?
Ms. Turner. I believe, first of all that health insurance
will become much more affordable if people were purchasing the
policies themselves, if the policy were portable, if they were
able to buy a longer-term contract with that health insurance,
and the family was able to make decisions about what they
wanted as far as deductibles, expansion of networks, et cetera.
Mr. Andrews. Of course, the reality is that 95 percent of
Americans live in a health insurance market today where the top
two companies have at least 85 percent or 90 percent of the
market share, so the kind of competition that would drive that
down doesn't really exist.
How would you induce the competition among insurers to
drive that cost down?
Ms. Turner. If people were not confined to the health
insurance policies in their states, they would have a broader
range of coverage if they were able to purchase coverage across
state lines--
Mr. Andrews. Of course, under the Affordable Care Act, the
exchanges permit any insurer who wants to come into a state
exchange and compete to do so. So doesn't the Affordable Care
Act solve that problem?
Ms. Turner. Only with the limited band of bronze, silver,
gold, platinum policies. People need a much broader range of
policies to find policies that are affordable to them--
Mr. Andrews. Go back to your $5,700 proposal. Where would
the money come from to pay for that? I also read that you have
a $5,000 debit card for low income people, whatever that means.
Where would the money come from to pay for this tax credit for
people?
Ms. Turner. We currently spend--current tax subsidy for
health insurance for people that get health insurance at the
workplace is about 250 billion a year and it is very
regressive. It goes disproportionately to people with higher
incomes and with better paying jobs--
Mr. Andrews. So you would reallocate that.
Ms. Turner. I would reallocate that so that more of that
money would go to people--
Mr. Andrews.--Mr. Richardson's company deducts the health
insurance costs for himself and his fellow employees, you would
do away with that deduction?
Ms. Turner. I would not change the employer deduction for
health insurance. If they want to continue to offer it, it is a
form of compensation for employees. The employee exclusion
however could be portable--
Mr. Andrews. So you would keep the employer deduction, so
he gets to continue to do that, but the employee exclusion
would be done away with.
Ms. Turner. Yes. Would be replaced.
Mr. Andrews. So if Mr. Richardson's employer still provided
him with health care, you would tax him on the value of that
payment that they made?
Ms. Turner. We would readjust the tax system--
Mr. Andrews. You would raise his taxes, basically.
Ms. Turner. He gets his $5,700 tax credit rather than a
deduction which this family of making $45,000 a year would get
a very small portion--
Mr. Andrews. Do you think this could be paid for all within
the realm of the--you said $300 billion not $250 billion in
your article--all within the realm of the $300 billion
expenditure a day? You wouldn't have to go beyond that?
Ms. Turner. Absolutely. I don't think the people who are
making $250,000 a year, half a million dollars a year need to
get the most generous tax benefits for health insurance or the
exclusion.
Mr. Andrews. So you would raise their taxes to pay for
them.
Ms. Turner. They will do just fine for themselves. This
family making $45,000 a year needs help and they need more help
than they are getting now and will get from the Affordable Care
Act.
Mr. Andrews. It is kind of interesting that your proposal
is to provide tax subsidies to people paid for by a tax on
higher income people which is of course what the Affordable
Care Act did.
I yield back the balance of my time.
Chairman Roe. I think the gentleman for yielding.
Dr. DesJarlais?
Mr. DesJarlais. Thank you, Mr. Chairman.
Ms. Turner, we will continue with you. What do you believe
is the biggest burden for employers in Obamacare?
Ms. Turner. Oh my goodness, that is a big list. Obviously,
the one at the table is this employer mandate because it is so
distorting. You know, really causing employers it have to
redesign their workforces.
I was looking at some Labor Department numbers, Dr.
DesJarlais, that showed that last year there were six full-time
workers hired for every one part-time employee.
This year, there is a one full-time employee for every four
part-time employees. It has absolutely flipped. Employers
already are being forced to make decisions. It is hugely
distorting, but I would say that they would tell us what they
told us all along. The biggest issue is cost.
Mr. DesJarlais. What would you suggest that we as members
of Congress can do to help alleviate this?
Ms. Turner. The first thing is to not only convince the
Senate to delay the employer mandate to buy us time and the
individual mandate, I believe they are tied together, to buy us
time to really rethink and get to a system that would provide
health insurance for this family making $45,000 a year in a way
that allows them to choose the kind of policy they want, allow
that policy to be portable, not have them be tied to the
workplace to get that job, to get that policy.
Mr. DesJarlais. Your testimony addressed the recent
comments made by union leaders stating that Obamacare will
destroy the 40-hour work week and harm the middle class.
Can you please explain why the unions are concerned about
the law and the effects of Obamacare has on their members?
Ms. Turner. You know, the unions seem to have believed that
the main benefit of the law would have been to not only provide
health insurance, universal coverage, I believe that is really
an important goal, but to also allow people to have health
insurance that as I said, don't have it now.
But they are--they didn't focus on the issue of how this is
going to affect multiple employee welfare associations where
they provide health insurance for clusters of smaller companies
and they are not going to get the--they have no eligibility for
subsidies as others do who go to the exchanges directly.
They believe that this will make their employees less
competitive than employers who are not unionized who can go to
these exchanges for their coverage.
So they have seen and they have also seen the huge cost of
these mandates and this coverage and they are saying, wait a
minute, nobody told us about this.
Mr. DesJarlais. Thank you.
Mr. Holtz-Eakin, has anything changed for employees or
rather employers in light of the administration's recent
decision to delay the employer mandate for 1 year?
Mr. Holtz-Eakin. Nothing fundamental. They face the same
long run incentives that they had prior to the waiver. As I
mentioned in my opening remarks, the only thing that has really
happened is there is an incentive to move more quickly if you
are choosing to get out of the business of providing employer-
sponsored insurance and that, I think, is a real concern.
Mr. DesJarlais. Thank you.
Mr. Richardson, as vice president for government and
shareholder relations for a multistate business, can you speak
to anything in the new law that will offset cost and reduce
coverage expenses for your company?
Mr. Richardson. For us, as we have looked at the law, we
see and predict big cost increases and that is where our
anxiety has been. I think in some ways if this were a rock
opera, some might think it is ``Stairway to Heaven.'' For a lot
of us in the employer community, it feels more like ``Highway
to Hades.''
But maybe now it is time to take a sad song and make it
better because we think this time is giving us a chance to fix
the parts of the law that really are unworkable and are really
going to make it difficult for us to continue to employ people
and create jobs. So that is where we are hopeful.
Mr. DesJarlais. All right. From Led Zeppelin to AC/DC and
we have the Beatles. Very good.
What would you say is the biggest impediment to providing
low-cost health coverage for your employees?
Mr. Richardson. For us, the biggest impediment is the
impending law and just trying to understand what it means. As a
company that fights each day for 10,000 employees, we have
invested in health care since 1924. So it is a commitment we
have made and make and we have allowed that to be a big focus
for us because we enjoy the flexibility it provides us in terms
of having that dialogue with our team members. So being the
mandate part is difficult.
Mr. DesJarlais. Okay, thank you.
My time is about to expire.
Thank you all for your comments.
I yield back.
Chairman Roe. Thank the gentleman for yielding.
Mr. Courtney?
Mr. Courtney. Thank you, Mr. Chairman.
Mr. Pollack, in your litany of benefits in your written
testimony regarding the Affordable Care Act, again, you listed,
in my opinion, an impressive array of benefits for young
Americans, 3 million who now have coverage because of the age
26 modification, which again would have been obliterated in one
of the iterations of the Repeal Obamacare Act; the seniors who
are getting help from the donut-hole, which again is this
gaping, 100 percent deductible created in the Medicare act a
number of years ago; the medical-loss ratio measure.
Again, my hometown of Vernon, Connecticut received $170,000
refund for its health plan, for its town employees that
actually helped fill a budget hole in their Board of Education
account.
So again, there are many, many benefits which have already
occurred since 2010, but I would like to again, go back to Ms.
Turner's comment that in terms of employers, the biggest issue
is obviously cost of health care.
And since 2010, I mean, isn't it a fact that we are
actually seeing an historic lower rate of growth in terms of
the health care system as a whole, but in particular in terms
of the Medicare system?
Mr. Pollack. Mr. Courtney, I was sitting somewhat bemused
by some of the comments about, in effect, the sky is falling
with respect to employment opportunities as a result of the
Affordable Care Act.
The data says something very differently. If you look at
the Bureau of Labor Statistics, since March 2010, when the
Affordable Care Act passed, over 90 percent of the gains in
employment are due to additional full-time positions, not part-
time positions.
Over the past 12 months, ending June of 2013, 116,000
additional workers per month were in full-time jobs while just
16,000 additional workers per month in part-time jobs. And the
average work week actually since June of 2009 has increased by
0.7 hours, it is now approximately the same as it was prior to
the recession.
But what is actually interesting is we have had experiences
with legislation like the Affordable Care Act in Massachusetts
and in Hawaii. So let's take a look at what has happened in
Massachusetts and Hawaii. According to the Urban Institute, in
Massachusetts there has been no evidence of significant shifts
toward part-time work compared to the rest of the nation.
Now in Hawaii, they don't have a 40-hour requirement or a
30-hour requirement. They have a 20-hour requirement in Hawaii
which requires all employers to provide coverage for those
workers with employment of 20 hours a week.
There has been only a 1.4 percent increase of employees
working less than 20 hours a week and we have now seen studies
from the University of California's Labor Center that workers
at greatest risk of work hour reduction represents at most, 1.8
percent of the U.S. workforce. So the sky is not falling.
Mr. Courtney. And again, just to go back to my--just the
cost growth though, I mean, is also a very encouraging trend
that is out there in terms of just overall health care costs
and the Medicare system in particular.
Mr. Pollack. Yes, there is no question that what we have
seen with respect to cost, Medicare is a perfect example, there
has been a moderation of increase in cost.
Now I can't say to you that is due completely to the
Affordable Care Act. I think that would be a clear
exaggeration. Certainly, some of this has to do with what
happened in the recession and some people seeking less health
care.
But certainly, the Affordable Care Act has had a salutary
impact with respect to it. Again, I am not saying it is the
full reason, but it certainly is a part of the reason.
Mr. Courtney. And that is exactly what Mr. Holtz-Eakin's
successor reported recently, which is that again, some of the
moderation in the Medicare cost growth was ACA-related,
particularly in terms of the moderation of payments to the
managed care plans.
So there, you are right. You can't ascribe all of it to
that, but clearly it hasn't aggravated the situation and things
like hospital readmission policies, which is again, costing
more efficiencies in the health care system with again, smarter
reimbursement to providers of managed care services.
CBO has definitely concluded that has had a beneficial
effect in terms of moderating cost growth, which is what I
think everybody wants.
Mr. Pollack. And it certainly is a wholesome thing for us
to be paying more for quality of care than quantity of services
and that is a direction we are taking incrementally and I think
that is going to be very helpful.
Thank you.
Chairman Roe. I thank the gentleman for yielding.
Dr. Heck?
Mr. Heck. Thank you, Mr. Chairman.
Thank you all for being here today and providing your
testimony.
Like Mr. Richardson, I have a friend who owns a restaurant
chain where I live in Nevada; certainly nothing to the scale of
White Castle, but had five outlets, was in the process of
building his sixth and in the five outlets that he had, he had
about 250 employees, provides some insurance, but his insurance
does not meet the new essential benefit requirements.
So I was asking him, ``What are you going to do? What are
you going to do to meet the requirements of the law?'' He said
well, he could change his plan to meet the essential benefits
requirements which would then increase the cost.
He could adjust the hours; you know, he has got a big
concern about the 30-hour work week especially in a restaurant
business where it is a second job for some, or there are
college students and they like the flexibility of being able to
work 18 hours this week, 32 hours the next week.
So that was going to cause him an increased cost for
bookkeeping as well as all of the other costs associated with
the regulatory compliances or he would pay $420,000 a year in
his penalty, and he had to decide which one would actually be
more cost-effective for him because his concern was he didn't
want to stop providing the insurance.
He wanted to do what was right for his employees and
continue to provide his insurance that his employees had that
they enjoyed; didn't necessarily meet the requirements, but
that was his option.
Increase the cost by changing the policy and all of the
regulatory burdens or just getting out of it and paying a
$420,000 fine.
As I mentioned, he was doing this--we had this discussion
while he was building his sixth outlet and I asked him, ``If
you knew all this was going to happen before you broke ground
on your sixth outlet, would you have added it?'' He said,
``Absolutely not,'' and that would have been another 50 to 60
people that wouldn't have had a chance for a job in my
district.
Dr. Holtz-Eakin, do you see other options for employers
other than this pay the penalty or change your work hours or
meet the plan requirements if you offer something less than
that? Are there other ways that employers are going to be able
to meet the intent of the law and provide insurance to their
employees?
Mr. Holtz-Eakin. They have very limited options. When you
run down the menu, you either pay penalties or you move the
part-time people or you provide the insurance and meet the
costs of hitting the essential benefits.
Mr. Heck. What impact is there on the self-insured Taft-
Hartley type plans? Is it the same as it is in on somebody, an
employer who is buying insurance from a broker insurance
company versus those that are self-insured Taft-Hartley plans?
Mr. Holtz-Eakin. They are not identical, but I am not 100
percent sure of the difference. We can get back to you on that.
Mr. Heck. Okay. If you could, please. And one thing I just
want to say, there has been a lot of--I think everybody agrees
we want people to have increased access to quality health care
at a lower cost and I agree with Mr. Pollack.
We want to reward quality not quantity and I think some of
the discussions that we have been having in other committees on
reforming the sustainable growth rate formula is looking at
doing just those kinds of things for Medicare, but increasing
access to health insurance doesn't necessarily mean you are
increasing access to health care.
I am an emergency medicine doctor by trade and I can tell
you that a large portion of people we see in the emergency
department are the uninsured. Certainly, because it is the only
place they can go. The only place where you can take care of
somebody any time of day regardless of chief complaint,
regardless of ability to pay.
So now we are going to have roughly 30 million more people
if the numbers hold out through the fact that they will have
insurance and they are going to call for an appointment and
they are going to be told, well, we can see you in about 3
months because we don't have the infrastructure to take care of
those people.
So what are they going to do? They are still going to come
to the emergency department because they are not going to wait
for 3 months. And as we all know, the emergency department is
the most expensive place in our health care industry to try to
receive care.
So I think the jury is still out and like you say, there is
a lot of speculation. You know, it was mentioned, New York is
going to see a 50 percent decrease in premiums, but New York
has one of the most restrictive state regulatory environments
for health insurance to begin with, so they probably have no
place to go but down.
My state, Nevada, it is estimated that we are going to see
a 30 percent increase in premiums in the individual and small
group markets.
So still a lot of unanswered questions, but I appreciate
you being here and presenting your viewpoints.
And I yield back the balance of my time.
Chairman Roe. Thank you, Dr. Heck.
Ms. Bonamici?
Ms. Bonamici. Thank you very much, Mr. Chairman.
And thank you to all of the witnesses for being here.
We just heard from a colleague on the other side of the
aisle that we all agree that we need to make health care more
accessible and more affordable, and I think you would all agree
with that premise and I certainly believe that is what the
Affordable Care Act is intended to do.
I am a little concerned about the discussion about
confusion out there and Mr. Pollack raised that issue. I want
to point out that just yesterday I read an article in Forbes,
with all due respect to my colleague from Indiana, this is
about Indiana and how they announced that premiums were going
to significantly increase through the exchange.
But what they did instead of doing what other states were
doing and basing their projections on the silver and bronze
plans which most people will buy, they used the gold and
silver--excuse me, the gold and platinum as well and here is
what the article said that resulted in.
``That is like saying the average cost of a car in an
Indiana dealership is $100,000 because it sells $20,000 Fords,
$60,000 BMWs, and $220,000 Lamborghinis. Technically true, but
highly misleading.''
So I am a little concerned about how a lot of this
information is out there in the public in a way that is causing
people to panic and to not understand what is really going on,
and the article goes on to say that it becomes difficult to
understand how anyone could avoid acknowledging that the
disingenuous behavior of the anti-Obamacare forces truly knows
no bounds.
And, you know, with all due respect, I understand that we
have some very qualified witnesses here and I appreciate that,
but what we need to be doing is being out there talking with
people about what really is going to happen when for example
the marketplace insurance exchanges go up.
My home state of Oregon for example, the Affordable Care
Act already has had a positive impact. In my district alone,
one-fifth of the state of Oregon, 106,000 seniors are now
eligible for free preventive care, 90,000 women can access
preventive care without a co-pay, up to 45,000 children can no
longer be denied coverage based on preexisting condition, for
the low income and sick, the Affordable Care Act can be life-
changing, even lifesaving.
Oregon is certainly leading the way with an early insurance
exchange, which I am proud to say was established in a
bipartisan way. I was in the state legislature when--bipartisan
legislature--did enabling legislation for that exchange.
The marketplace called Cover Oregon has done a great job,
is on track to be up and running on time.
Certainly, Ms. Turner, you talked about market-based
solutions. That is what the insurance exchanges are. It is
working the way it is supposed to. When our preliminary costs
were made public, two insurers actually contacted the insurance
division and asked if they could lower their rates, exactly
what the marketplace is intending to do.
Mr. Pollack, you did a great job of explaining the benefits
of the Affordable Care Act. So can you talk a little bit about
the increased accountability for insurers and how that is
affecting the affordability of health care?
I know that in the first district already more than 230,000
individuals have saved money due to the provisions that prevent
insurance companies from spending more than 20 percent of their
premiums on profits and administrative overhead and have
received millions of dollars in rebates already.
So can you talk a little bit about that increased
affordability and how that is affecting health care?
Mr. Pollack. Sure. As one of the key accountability
measures is how much of the premium dollar is now spent
actually on health care as opposed to other purposes;
marketing, advertising, agents' fees, administration, profits,
and that makes the product a whole lot more cost-effective when
you say at least $0.80 out of the dollar and, in some
instances, $0.85 out of the dollar must be spent on actually
providing care.
Certainly, there is greater accountability for insurers in
terms of they cannot deny coverage to people due to preexising
conditions. They can't charge a discriminatory premium based on
health status. They can't charge higher premiums based on
gender. I think all those things are very wholesome matters.
I would say one thing about your earliest comments and that
is there is confusion among the American public about what is
in the Affordable Care--no question that is true, and that is
because we have had a very contentious political dialogue so
far in the country, and I think we are going to see a
transformation of that in the months and weeks ahead.
And that is we are going to have a personal conversation,
not a political conversation, and by a personal conversation I
mean: how does it affect an individual, how does it affect his
or her family, how does it affect neighbors and friends?
And I think the more we have that conversation, and that is
going to increase in the weeks ahead, I think people will have
a far greater appreciation of how the Affordable Care Act will
benefit them.
Ms. Bonamici. Thank you.
I see my time has expired. I yield back. Thank you, Mr.
Chairman.
Chairman Roe. I thank you for yielding.
Mr. Rokita?
Mr. Rokita. I think both chairmen.
Ms. Turner, do you think insurance exchanges are free
market?
Ms. Turner. The exchanges are when you have Washington
setting the rules for what the health insurance has to be, 60
percent, 70 percent, 80 percent, 90 percent actuarial value
with so many rules and regulations with consumers having a
choice of only four plans that are basically cookie-cutter, no,
I don't believe so.
I believe that consumers on their own would find and the
market would provide many more choices.
Mr. Rokita. Right. In fact, do you think we have those
choices now or not?
Ms. Turner. No, we don't have those choices now, and I
think that is really was the challenge that we should have been
addressing is what can we do--
Mr. Rokita. Because we really don't have a free fluid
market.
Ms. Turner. That is right.
Mr. Rokita. And why not?
Ms. Turner. We don't have a free fluid market because
consumers aren't able to be consumers. The tax treatment of
health insurance so incentivizes in the past.
People get their health insurance through their workplace
where they are told this is the choice that we can offer. They
may or may not like it, but that is all they get.
If we had a free open market where people were able to shop
for their own insurance, their health care is a different
thing, shop for their own insurance, then they would be able to
force the market to provide much more affordable and diverse
options.
Mr. Rokita. Thank you.
And following along on that same line of questioning to Dr.
Holtz-Eakin, how much of the insurance market or even the
health care market is run by the government through programs or
regulations?
Mr. Holtz-Eakin. All of it at some level. This is a highly
regulated--
Mr. Rokita. All of it?
Mr. Holtz-Eakin. Yes. We have standards for providers,
licensing. We have standards in the state insurance markets. We
have enormous public payer programs in Medicare and Medicare
and now the Affordable Care Act. It is hard to describe any of
this as market driven.
Mr. Rokita. Okay. So Mr. Pollack testifies that he would
rather keep going in this direction. What would that lead to?
Mr. Holtz-Eakin. I am deeply concerned about the future
under the Affordable Care Act.
Mr. Rokita. How would the members of Mr. Pollack's
organization fare into the future if we keep going down this
road?
Mr. Holtz-Eakin. Number one, in the end, it is the quality
of the economic growth that determines the incomes you have to
spend on everything including health care, and this is bad
economic policy from the word go.
Number two, it left unreformed to a great extent programs,
Medicare and Medicaid, that are intended to serve our seniors
and poor but do so in quite a substandard fashion. We have not
gotten rid of fee-for-service medicine. We haven't solved the
problems in Medicaid. Those problems are going to remain and
indeed expand if we go down this path.
We have set up on the care side an enormous incentive for
consolidation and monopoly power. That is not going to lower
anyone's costs. It is going to raise costs.
And, you know, on the insurance side, we have essentially
turned this into a large, nationally regulated utility, and I
don't think we are going to get good performance out of it.
Mr. Rokita. Thank you very much.
Mr. Richardson, switching it up a little bit, how do you
and your company handle employees who have pre-existing
conditions?
Mr. Richardson. They are included on the insurance so we
take care of that, you know, that way.
Mr. Rokita. Do you have any idea how much your increase in
cost is? Have you ever done that kind of analysis?
Mr. Richardson. I don't have a specific number on that. We
can put the study to it and get back with you a specific
number.
Mr. Rokita. The point is, the private sector is handling
pre-existing conditions? Yes or no? What is your opinion?
Mr. Richardson. Yes, and I think what we started to do
another way, and I welcome Congressman Andrews' comment on
thoughts and ideas, is one of the things that helped us a lot
at White Castle is a real focus on wellness.
So we started paying for preventative visits covering 100
percent of the co-pay and we have seen that have a real
positive impact, just in terms of general, common-sense
solutions that help our people.
Mr. Rokita. And why did you start doing that? What was your
motivation?
Mr. Richardson. Costs were increasing and we were looking
for ways to--first and foremost, we care about our 10,000
people, but we also recognized that it could provide us the
chance to have lower health care costs.
Mr. Rokita. And do you find that they--you probably have a
wide disparity of income salaries and hourly wages across your
organization. What differences do you find across those wages
and salaries and incomes in terms of how people react or care
for themselves or their families in terms of their health?
Mr. Richardson. Well, first and foremost, our founder
believed in providing freedom from anxiety and recognizing the
dignity of each team member. So if we are lucky enough and we
do our job, we are able to have someone stick around and be
part of our team for the long haul.
And what we know is more of what is in common that if we
provide good education and good access and awareness of what
the benefit is, it is going to be there for people when they
need it the most.
So I don't know if I could call out specific disparities,
but I know that we are in a lot of urban areas, we are in rural
areas, suburban areas, but we try to focus on what is in common
which is that freedom from anxiety that our plan provides.
Mr. Rokita. Thank you.
I see my time has expired.
Chairman Roe. Thank the gentleman for yielding.
Mr. Polis?
Mr. Polis. I thank the Chair.
First, I wanted to engage Ms. Turner. In your remarks, you
mentioned, quote--``No wonder businesses are confused.'' It
would seem to me that it is confusing for businesses that after
the President administratively delayed the employer mandate,
Congress is taking up legislation that authorizes the President
to do what he already did.
To your knowledge, is anyone suing the President to stop
him from this administrative delay?
Ms. Turner. I am not aware of that, Congressman.
Mr. Polis. Nor am I, so it would seem like the only
confusion that is being caused is by this Congress. I think the
actions of the President were clear, to delay the employer
mandate to 2015 from 2014. If there is any confusion, it is
because Congress is running a bill--ran a bill, and now has a
hearing to do what the President already did.
I also was wondering if the gentlelady is aware of some
recent polling information that 42 percent of the American
public are unaware that Obamacare is in force.
Has Ms. Turner seen that, perhaps when it came out a few
weeks ago?
Ms. Turner. I have, yes.
Mr. Polis. And, do you have any idea why nearly half the
American public might be so misinformed as to believe that
Obamacare is not in fact the law of the land? Any hypotheses or
suggestions?
Ms. Turner. This has been such a huge political battle
because so many of us feel that this really is an affront to
freedom and it is a bigger battle than just health care--
Mr. Polis. Well, reclaiming my time, the question was not
do you support or oppose the Affordable Care Act or Obamacare.
The question was do you think it is in force because you know,
I know Ms. Turner was concerned about the ``confusion'' that
she cited in her comments.
It would seem to me that it is reasonable to believe that
42 percent of the American public believe Obamacare is not in
force. That could very well be because in fact this body, this
House, continues to vote time after time after time after time
to repeal Obamacare.
And of course for those who aren't part of that, as engaged
in the process as we are here, they might not realize that
those are simply symbolic votes. So if Ms. Turner is concerned
about--Ms. Turner, if you are concerned about the
``confusion,'' that businesses and individuals have about
Obamacare, don't you feel that this Republican strategy of
repeatedly repealing all our parts of Obamacare in the House
actually contributes to that very confusion that you were
concerned about?
Ms. Turner. Well, but as the chairman was saying, seven, I
think Mr. Walberg was saying, seven of those nearly 40 votes
have actually resulted in legislation being signed into law to
amend or repeal parts of this law. So it is not futile--
Mr. Polis. Well, reclaiming my time, again, Obamacare has
not been repealed. The Affordable Care Act has not been
repealed.
Ms. Turner. Provisions have.
Mr. Polis. Do you agree with that statement or has
Obamacare been repealed?
Ms. Turner. Provisions of it have.
Mr. Polis. So would you say as a whole Obamacare has been
repealed?
Ms. Turner. No. I said seven--
Mr. Polis. Has Obamacare substantially been repealed?
Ms. Turner. Not substantially.
Mr. Polis. Okay.
Ms. Turner. But key elements--
Mr. Polis. Reclaiming my time, I want to go to Mr.
Richardson.
Our time is limited.
I thank Ms. Turner.
Are you supportive of the President's action in
administratively delaying the employer mandate to 2015?
Mr. Richardson. Congressman, if we were going to bring out
a hot and tasty new sandwich but something wasn't right and we
needed to look at what to do much better--
Mr. Polis. Reclaiming my time. I am not talking--I don't
want to know about sandwiches. I know that you serve them
perhaps, but my question is are you personally supportive of
the President administratively delaying the employer mandate to
2015 instead of 2014?
Mr. Richardson. White Castle is grateful that we have got
the chance for maybe some common sense dialogue about how we
can address other issues like 40 hours per week, a better
definition of full time--
Mr. Polis. Well, again, are you supportive--yes or no--of
the President's actions to delay the employer mandate or do you
only talk about--
Mr. Richardson. We were relieved when we heard the news
that the employer mandate was going to be delayed in hopes that
it gives us the chance to address--
Mr. Polis. Reclaiming my time. Reclaiming my time. You were
relieved. And are you personally or is your company confused at
all about whether the employer mandate is enforced in the year
2014?
Mr. Richardson. I think a lot of times people like to think
of this as tic-tac-toe. This is a 64-box Rubik's cube and
everything we do has--
Mr. Polis. Reclaiming my time. The employer mandate is not
in effect in 2014 due to administrative action as Ms. Turner
also mentioned, as far as we know the President has not been
sued to stop, that it is not enforced, there is no 64-box
Rubik's cube. There is no employer mandate in 2014 thanks to
the President's actions, which you are relieved he took--
Mr. Richardson. We are relieved, but we know it is coming
soon.
Mr. Polis. Again, to be clear, are you confused about
whether the employer mandate goes into effect in 2014 and if
so, why?
Mr. Richardson. Our confusion is more around how we are
going to be able to comply with the laws. We continue to wait
for guidance and regulations.
You know, as a good corporate citizen, we are going to
comply with the law, but what is confusing to us is trying to
understand where do we go from here.
Mr. Polis. But are you clear on the fact that the employer
mandate does not impact your business in 2014 thanks to
President Obama's administrative action?
Mr. Richardson. We are thankful that appears to be the
case.
Chairman Roe. I thank the gentleman for yielding.
Mr. Salmon?
Mr. Salmon. Thank you.
Mr. Richardson, the way I see it for employers they have
four choices. You can add to or take away if you so desire.
Number one would be maintain coverage and absorb the cost
increases. Two, maintain coverage and pass on the costs to
workers and consumers. Three, decrease employee work hours to
avoid full-time requirements; or four, drop coverage altogether
and pay a penalty.
Do you see any other alternatives?
Mr. Richardson. No, Congressman, I think the difficulty for
us is in restaurants, we are focused on hospitality and that is
a very people intense and big investment that we are making in
our people and our profit per employee as an industry is a $750
compared to a typical industry where that is about $10,000. So
it hits us harder.
Mr. Salmon. I met with folks from the American Restaurant
Association. I don't know if you guys remember, but I talked to
several of the convenience store CEOs--not convenient stores
but fast food CEOs and they said that most of their employees
truly believed with the passage of Obamacare that they were
going to get free health care.
They then said that when they learned that they were going
to have to pay something on their premiums even as low as $100,
most of them would opt to not take it. And then to add insult
to injury, once they decide to not take it, they will be facing
a tax. Do you see that as a slippery slope for some of your
employees as well? Do a lot of them believe that President
Obama was giving them free health care?
Mr. Richardson. The bigger challenge for us will be with
team members who have insurance now--we have offered it since
1924--is waiting to see what we are able to provide, and our
biggest concern is it won't be able to be as rich a benefit of
what we are providing now and we won't have the opportunity to
allow that to be available to as many people.
Mr. Salmon. I am going to ask for your speculation. I am
going to ask Ms. Turner as well. Do you believe that the
President took this executive action to postpone the employer
mandate because he wants to make sure that it is easier on
employers or do you think he did it out of political concerns?
Ms. Turner. It is very difficult to assess anybody else's
motivations, but if they believe that this was going to change
employers' behavior in hiring full-time workers for 1 year, I
think that was really misguided.
The fact that so few of the other agencies within the
government understood or were even consulted; CMS, OMB, or
treasury about this decision suggests that it was made in the
White House.
Mr. Salmon. Well, let me ask this question then. It has
been over 3 years since the bill was passed and signed into
law. Is it reasonable to assume that one more year will allow
for the government, businesses, individuals, and insurers to
understand the law much less comply with it?
Ms. Turner. I think it is going to add to their confusion
and I think that the confusion also is the reporting
requirements have been delayed but some employers are very
concerned whether or not that means that whether or not they
are still required to actually comply with the mandate.
Perhaps an employee would sue them saying they have been
harmed even though they weren't making the reporting
requirements they weren't providing the health insurance that
was still on the books as they mandate it. So that is a very
different situation.
I don't think it is going to change their behavior. The
June jobs report showed that the number of part-time employees
that was hired were 360,000 that month and that 240 full-time
jobs were lost. So employers are now making decisions about how
to restructure the workforce. They are not going to change that
after a year.
Mr. Salmon. And I think the next question I was going to
ask has already been answered. Isn't it reasonable to assume
that one more year will ensure it will be a workable system? I
think you are saying you don't believe it will.
Do you believe it can, Mr. Richardson?
Mr. Richardson. Yes.
Mr. Salmon. Do you agree with her?
Mr. Richardson. Yes.
Mr. Salmon. That a year really doesn't do much to change
this?
Mr. Richardson. No. The train is coming around the bend. It
gives us more opportunity for common sense dialogue about what
we can do to really address the core issues that are going to
raise employer costs and make it harder to create jobs and
bring prosperity to people who are aching for it.
Mr. Salmon. And I am about to run out of time, but I would
like to say that even though one member of this panel says that
Obamacare is going swimmingly and that it is actually
increasing the number of full-time jobs in our economy,
recently my community college district announced that they were
going to take 1300 employees and change them from full-time
status to part-time status because they can't envision having
to come into compliance with the costs and the trouble
associated with Obamacare.
And lastly, I might point out that in the recent letter
from the Teamsters where they said that the 40-hour work week
as we know it will be dead and gone--there are a lot of folks
out there--I don't know that you would call it the sky is
falling, but they are recognizing this thing for what it is.
It is a job killer and a year doesn't buy us anything other
than postponing the killing of those jobs--
Chairman Roe. The gentleman's time is expired.
Mr. Salmon. It is killing me with a thousand cuts.
Chairman Roe. Thank the gentleman for yielding.
Ranking Member Miller?
Mr. Miller. Thank you very much.
I want to thank the panel.
One of the hallmarks for the critics of the
administration--I know this has always been--that there is a
great deal of uncertainty and we passed through sort of a great
period of uncertainty 2 years ago.
It looks to me like much of the uncertainty now much of
which is real in the economy is also certainly around this bill
is manufactured for the sake of uncertainty so that people
question it.
I think we see a difference in Ms. Bonamici's state and in
my state where people rolled up their sleeves and said how do
we make this work across our state, across our economy, and
there seems to be much less uncertainty when I talked to my
employment community from the largest like Chevron to small
businesses across the cities and towns that I represent.
And interestingly enough, most of them say that if they
have the business, this is of minor concern, but their concern
is about economic growth and the economy and it is interesting
also that you sort of see more and more economists from the
right and from the left, however you want to characterize
economists, suggesting that the big enemy at this particular
point in terms of certainty is a question of the continued
sequestration that is dampening growth across the country and
then the question of the debt limit; will the Congress of the
United States, the United States as a country meet its
obligations and honor its debt.
But when I talked to small business people, as they say, I
have got the book of business, this health care law is neither
here nor there. If I don't have a book of business, I have got
problems and I have got health care problems.
Today, one of your--I don't know, the rival, but in your
business--Sonic was asked this very pointed question; are you
changing your work hours, are you changing your workforce
because of health care? And he said we are growing.
We have a great rollout of a new product. No. We are adding
stores, adding people because we are growing. Then they
compared them to McDonald's apparently which has had a little
bit of dip here or something.
And that is what I hear on the street. Now some of it is
anecdotal, some of this they don't know, but it really isn't
this. It is about whether or not this economy can develop a
wage base so that people have money to spend on Main Street.
That is what I hear from small businesses. And so I think
politically in this town we are going to agitate this health
care bill until we have got people absolutely confused. And
yes, we can chew up that year, Mr. Richardson, you keep saying
we can figure out how to do this but I don't know that there is
goodwill here because this is all--this hearing is
manufactured.
We already know what the President did. We could have a
hearing on how do we handle this; what changes are necessary.
But that is not happening. I think as Mr. Pollack has pointed
out, we have been going through this now for months and months
and months and I just go back to the real question--the real
question is whether or not, you know, we had people like FedEx
tell us the greatest drop in business in the history of the
company was when Congress was playing with the debt limit in
July; worldwide, the business just stopped.
I had small business people who had international book of
business tell me exactly the same thing. Orders stopped.
Because for the first time in history it was suggested that
maybe we weren't going to honor our debt. This would really
teach the federal government a lesson.
No, it would teach the business community a lesson. And so
I just--Mr. Eakin's and Mr. Pollack, I would just like to know
where you sort of see this question of growth being determined
here.
Obviously, if you have a declining book of business or you
have a stagnant book of business, this gets magnified rather
dramatically as opposed to if you have a book that seems to be
growing. And everybody says, well, we are growing. We are
growing, you know, anemically, but we are growing. The third
and fourth quarter will be better somehow.
Mr. Pollack. You know, Mr. Miller, many of us I think often
say that really growth in the economy comes from small
businesses and small businesses actually come out very well
with respect to the Affordable Care Act.
Take the smallest businesses, those with fewer than 25
workers, they are now eligible for tax credit, premium
subsidies, not everyone to be sure, but those tax credit
premium subsidies now go up to 35 percent of the cost of
providing health care for their workers. Come January 1, it
will be 50 percent.
So with respect to growth of the economy and more jobs, I
think you have to look at small businesses that are not
affected by the employer mandate and who are now eligible for
tax credit premium subsidies.
Mr. Miller. Mr. Holtz-Eakin, I don't know how much time you
have before that turns red, but--
Mr. Holtz-Eakin. I am sorry?
Mr. Miller. If you wanted to comment on the question.
Mr. Holtz-Eakin. No, I think that small business tax
credits are a red herring, it is temporary at best. It doesn't
change the fundamental characteristics of the law--
Mr. Miller. I am asking about the question of growth--
Mr. Holtz-Eakin. I think growth is the top priority for
this country right now and if you look at the Affordable Care
Act from the perspective of growth policy, it is not good
policy.
You don't levy $1 trillion in taxes, impose a big
regulatory burden, and create a large new entitlement program
when we have many that are already broken and bleeding red ink.
That is not a path for growth.
Chairman Roe. Thank the gentleman for yielding.
Mr. Messer?
Mr. Messer. Thank you, Mr. Chairman. I appreciate the
opportunity to speak about this important topic today.
I certainly thank the panelists as well.
I have to tell you, I am from Indiana's Sixth Congressional
District. It is a rural district, 19 counties in east, central,
and southeastern Indiana. It certainly has its high number of
White Castles and we have had public forums in my district in
both Dearborn County and Hancock County and the number one
concern raised by small business owners in our district is they
look at the challenges they face in the next several years is
the implementation of this act. They see it as the highest cost
in front of them. They see it as the greatest amount of
uncertainty, and they are doing their best to respond.
In my opinion, and I want to direct this question to Mr.
Holtz-Eakin, it is my opinion that they, the congressional
budget office dramatically underestimates the amount of
employers that will be forced to drop or reduce employees to
part-time status due to Obamacare.
As a former CBO director, what do you think will be the
impact on the federal budget if more employers drop coverage or
reduce hours of than the CBO has originally estimated?
Mr. Holtz-Eakin. We certainly know that if employers drop
coverage, individuals go to the exchanges. These are very rich
subsidies in the exchanges. That is a big burden on the
taxpayer.
I have done the arithmetic as I mentioned. This is in the
financial interests of both the firm's and the employees for
employees getting compensation after about 300 percent of the
poverty line.
The CBO relies heavily on the notion that high wage workers
benefit from a different federal subsidy which is the tax
exclusion and that they will want to hold onto the federal
subsidy and that nondiscrimination rules will at best require
those firms to offer every employee the insurance.
I am less sanguine about that thin firewall holding and I
am afraid the taxpayer is about to pick up a big bill.
Mr. Messer. Yes. And I have to tell you, listening to the
folks in my district, from the school systems in my district,
to the small business employers in my district, I am convinced
whether the consequences are intended or not that placing the
Obamacare requirement on employees that have 30 hours or more
has become the biggest attack on the 40-hour work week in
decades.
Employers are responding. I know that anecdotally. Mr.
Richardson, if you could expand just a little bit about--has
that been a consideration within your business?
Mr. Richardson. It has been a huge consideration for us,
and I think what we are seeing is I know a lot of times people
talk about bifurcation of income. We are going to see
bifurcation of scheduling. As we look ahead to implementation,
we are looking at a $9 million increase in our health care
costs if we don't make adjustments.
So we have consciously said and we want to be transparent
with our team members so they can know what to expect. If you
are full-time, you are going to stay full-time, but if you are
part-time, we are going to be scheduling part-time at 25 hours
a week or less. That is not what we would do under normal
circumstances. That is not what we have done for 92 years.
Mr. Messer. It is not good for your business, and it is not
good for your employees either, right? Both suffered.
Ms. Turner, if you could expand just a little bit--you
alluded in earlier questioning to the fact that you are seeing,
in the economy, the rise of part-time jobs by I believe in
response to the Affordable Care Act. If you could comment on
that.
Ms. Turner. Yes, Mr. Chair--Congressman, because there is a
look back period. So those businesses have to start
restructuring their businesses now when they believe the
employer mandate was going into effect in 2014.
And I think that the thing that we have to pay attention to
is how this is affecting the most vulnerable people in society;
people who are trying to get their foot on the ladder of
economic opportunity, people who are barely getting by on a 40-
hour week, often minimum wage.
They are having their hours cut to 30, 25, some of them
losing their jobs entirely. People, we find, learn today a new
survey that a third of doctors are seriously considering
leaving the practice of medicine. Even those who have health
insurance are going to have a hard time getting to see a doctor
to see them.
So there are a so many distorting factors throughout the
economy and now we have a delay of the employer mandate but not
the individual mandate.
So even though the businesses, big businesses are not
required to provide health insurance, individuals still have to
provide that. So I think that when we look at who we are trying
to help, this is hurting them the most. We still have 30
million uninsured even if everything goes right.
Mr. Messer. Yes. Ms. Turner said it better than I would
have said it myself, so I yield back the balance of my time.
Thank you.
Chairman Roe. Thank the gentleman for yielding.
I think Mr. Hudson is next.
Mr. Hudson. Thank you, Mr. Chairman.
I think the witnesses for being here today. I know you have
busy schedules.
You know, I talked to business people back home. I go home
every weekend, every chance I get and I travel to my district.
I talk to business people who are struggling with, you know,
projecting costs for their business.
Mr. Richardson, you talked about in your testimony some of
the effects of the auto enrollment provision. As you may be
aware, I have introduced a bill to repeal this requirement,
H.R. 1254. Could you just outline some of the problems that
your company would face with auto enrollment and can you
quantify the impact this provision will have on your business?
Mr. Richardson. We support repeal of the auto enrollment
because it hurts our team members and the way we look at it is
43 percent of White Castle team members are under the age of
26, so with auto enrollment, on that 91st day, they are
automatically enrolled in the plan and their check get smaller
and it just creates an unnecessary burden. It is redundant, and
to us it is one of those areas where this new window of time
before implementation hopefully gives us a chance to address
that so employers can do what they do best, create more jobs.
Mr. Hudson. Absolutely. Could you tell us sort of how you
are projecting what your costs are going to be with auto
enrollment and what that impact specifically will be?
Mr. Richardson. A lot of the costs is in how to design the
right ISIT systems to be able to monitor and track, but beyond
that, we know that there is going to be this back-and-forth
type of thing happening.
So in terms of quantifying, I don't have an exact number
for you other than we can look at the people costs, the labor
costs, and the time costs and our number one focus is having
engaged team members.
If you are in the hospitality business, you want people to
be happy being able to focus on guests. We don't think we will
have as good an opportunity to do that if were trying to
explain to them, well, let us work this out and, you know,
follow your wishes.
So it really gets between us and our team members and
builds a wall that we think need not be there.
Mr. Hudson. I appreciate that. I hear that from a lot of
employers. The first time an employee is going to see money
missing from their check, they are going to then come to the
employer and say why did you do this to me. So I understand
that. I appreciate it.
What other problems do you see with the implementation of
this requirement affecting companies?
Mr. Richardson. I think some of the bigger challenges are
going to be, you know, we are a medium-size restaurant chain,
but if you start to look at the range and different sizes of
restaurants and how that is going to impact them and once you
get to that threshold where auto enrollment is forced upon you,
some chains might have a global footprint and it may come
easier for them, but it really disproportionately, like many
parts of the law, falls harder on those of us who employ more
people as ambassadors.
So it is really attacks the fee on our ability to keep our
people happy and to deliver our service model.
Mr. Hudson. I appreciate that.
And, Mr. Chairman, I yield back.
Chairman Roe. Thank the gentleman for yielding.
Dr. Price?
Mr. Price. Thank you, Mr. Chairman, and I apologize for
coming late but I have reviewed the testimony.
I appreciate everybody's comments.
I want to focus on a couple of things. One, I heard that
some friends on the other side of the aisle said there weren't
any alternatives and I just want to point out that there are
significant alternatives.
H.R. 2300 is one that is now in its third Congress and it
incorporates what we call patient-centered health care, which
is patients and families and doctors making medical decisions,
not Washington, D.C. or insurance companies. So we do have
wonderful alternatives, and I would urge my colleagues to read
them.
I want to ask a couple specific question. Dr. Holtz-Eakin,
the regulatory burden that exists in the employer mandate is
significant. Now, for big businesses, it is significant, but
they have got stacks of folks that do this stuff all the time.
And so although it is a burden and I think it cuts into
jobs that they can create, but I want to focus in on the small
businesses. If you are the mom and pop grocery store down the
corner and you have got four or five employees or you are in
the franchise business and you have got multiple restaurants
and you have got employees that will come under this burden,
what happens to small businesses? Where do they have to get
that money? Does it affect their business? Does it affect jobs?
Mr. Holtz-Eakin. All the testimony from every small
businessman who has talked about complying with the regulatory
burden says that it is a big burden.
This burden comes in the form of time and that is time away
from focus on the business, which is the core mission of
management, or its money. You have to hire outside expertise.
It is often quite expensive. That money cannot be plowed back
into the business. It can't be used to hire new workers or
expand payrolls.
And most small businesses are very cash flow dependent. So
this is going to hit them at a time when they are struggling
for cash flow because is a weak economy.
We have seen it in the official reports as well. The CBO
reported that these were unfunded mandates of significant size
and the employer community. We have seen it in the
administration's own rulemaking where they have to identify
economically significant rules and--is littered with them.
So I don't think that there is any question about the cost
side of this equation.
Mr. Price. And the cost side to businesses, we sometimes
get hung up on that and don't finish that paragraph. What that
results in, does it not, is actually fewer jobs being available
in those small businesses?
Mr. Holtz-Eakin. Yes. I mean, prior to your arrival, you
can think of the Affordable Act from many dimensions, but if
you look at it from the dimension of economic growth policy, it
is bad economic growth policy.
Mr. Price. Hurts businesses, hurts jobs--
Mr. Holtz-Eakin. Yes.
Mr. Price.--hurts the economy.
Ms. Turner, I appreciate all of the work that you do in
health care. You have been a real champion for what I have
mentioned as patient-centered health care.
I am curious as to the comments that you made about the
employer mandate and what we are mandating and are we not with
this in the individual mandate just ceding the definition of
health care--health coverage to Washington?
Ms. Turner. Absolutely.
Mr. Price. Why is that a problem?
Ms. Turner. Your legislation, which I think is really such
an important model for people to look for when people say the
conservatives don't have free market solutions, we absolutely
do. And I thank you for your tremendous work on H.R. 2300 over
several congresses.
What we see in the marketplace is a growing movement toward
policies that make sense for businesses and employees.
The number of health savings accounts has grown to 15
million in less than 10 years. Businesses are looking to find
health insurance that is affordable that gives employees
protection if they have major health costs as well as providing
an option so that they can have preventive care to make sure
that the policy also covers routine doctors' visits for
preventative measures.
That is the direction people were going because that is
more affordable. But the health law says no, Washington knows
best.
We are going to tell you what you have to and it is going
to go through the roof and we are going to have even more
economic and health policy dislocations.
Mr. Price. Violating all of those principles, access and
cost-effectiveness.
Dr. Holtz-Eakin, I want to visit very quickly the issue
that kind of flew under the radar screen with this announcement
2 weeks ago on the employer mandate delay and that is that the
individual attestation saying that they are eligible--
individuals are eligible for a subsidy. What is that going to
do to the cost? Do you have any estimates on that you have
looked at?
Mr. Holtz-Eakin. I don't have a numerical estimate, but I
know which direction it goes. More people will be eligible for
bigger subsidies than would be otherwise and what is already
likely to be an expensive program.
Mr. Price. Why is that?
Mr. Holtz-Eakin. You don't have the ability to do the
verification, and I would be surprised if people attest to be
poorer and less qualified than they really are.
Mr. Price. And if they attest for something that actually
isn't true in retroactively, retrospectively, does the IRS not
have the authority to come in and then tax them for what they
claimed?
Mr. Holtz-Eakin. There are limitations on reclaiming excess
payments already in law, and I would say that the
administration has already announced that it won't enforce the
individual mandates in states that don't do the Medicaid
expansion. It has deferred enforcement of the employer mandate.
We will see what happens with enforcement of recapture
provisions.
Mr. Price. Thank you, Mr. Chairman.
Thank you.
Chairman Roe. I thank the gentleman for yielding.
I will now yield myself 5 minutes.
To start out with, I agree that one of the things that we
should do and it is a laudable is to expand coverage to people
to as many people in our country as we can, and we spent twice
per capita what any other country does.
There is so much waste and we could not have made a health
care bill more complicated than this with 22,000 pages, and all
the money that goes into the infrastructure of this bill
doesn't go to patient care. It doesn't go to actually me as a
doctor, actually seeing a patient and performing a procedure or
evaluating their problem.
Let me just explain to you what happened in Tennessee and
this is absolutely going to happen here. When Tennessee we
started a health care reform in 1993 called TENNCare.
The plan we offered as Dr. Holtz-Eakin said, these
subsidies, and I will talk about that in a second, was richer
than I could afford to provide myself and provide my employees.
So what happened? Fifty percent of the people who got
health insurance through TENNCare had private health insurance
and dropped it. What has happened on the under 26? Sixty
percent of those young people, they just basically switched to
their parents plan and when they hit 27, they are going to have
a plan that is two or three times more expensive than it would
have otherwise been, and that is a fact.
The original sin didn't occur in Genesis. The original sin
occurred when we had a different tax treatment for individuals
and companies as far as health insurance was concerned, so that
it has created an imbalance, and this imbalance in cost and
what it costs as an individual and what it costs with the tax
subsidy you get when you work for a company.
I held a hearing in Concorde, North Carolina where--Mr.
Hudson's district--just about 2 months ago. We went through
business after business. A community college was going to cut
the number of hours that a community college could teach; a
faculty member, about half, 40 percent or so of their faculty
were adjunct.
I talked to my own community colleges in my district.
Exactly the same thing. I have talked to supermarkets. I have
talked to restaurant chains.
Mr. Richardson, you brought up something I think that was
very important. I have never heard of because it wasn't a
business I was used to, but how much money you made per
employee. And I think you talked about $750, and I talked to
other companies where they make $1200 per employee in that
particular business.
If you have a cost that goes above that, you have nothing;
you are either going to have to raise your prices high enough
that people can't afford it--and let me just read in this
industry--this is from Sonny's Barbecue, which is very good in
North Carolina, I might add.
Research shows that since the recession, 70 percent of
people have changed their eating habits out by reducing or even
eliminating dining out according to the National Restaurant
Association. Increasing menu prices should be the last resort.
That is the last thing you can do because people just quit
coming, and if that happens, you lose jobs.
Other things that frustrate me with this bill is that in
the self-insured market, we haven't even talked about that, how
that is an effect on jobs. Mr. Horn, who is a textile
manufacturer in North Carolina provided 80 percent. He provided
20 percent in his employees, he covered everything
preventative, and put a wellness program in, and what did he
get for this?
He got a $63 per employee fee which costs him tens of
thousands of dollars. My local community, my local city that I
was mayor of is going to get $177,000 bill and probably will
get an exchange fee on top of that to indemnify insurance
companies.
So this thing was made terribly complex, and I have no
earthly idea why this was ever politicized. Why health care was
a Democrat or Republican issue. We should have worked on it
together instead of in a partisan way to help solve these
problems.
I came here to do that. I specifically got elected to this
Congress to help do that and was shut out of the debate. It was
very frustrating for me in my job. And I want to talk to you
all a little bit about--Mr. Pollack, I want to ask you one
question.
Do you think premium support is a good idea for seniors in
Medicare?
Do you think premium support is a good idea in the Medicare
plan for seniors?
Would it be a good idea for that plan?
Mr. Pollack. The Medicare program works very well today--
Chairman Roe. No, I am just asking you--switching to that
plan--
Mr. Pollack.--and so I would not want to play with a
formula that is working very well.
Chairman Roe.--so it is not working--
Mr. Pollack. One of the things that--
Chairman Roe. I am a senior. Let me just go ahead and
reclaim my time.
So it is a bad idea when I turn 65, but it is a good idea
if you are under 65 if you get one of the--you wholeheartedly
support that for people now who are low income, correct? In the
Affordable Care Act? But all of a sudden, I turn 65 and it is a
bad idea.
Mr. Pollack. I didn't say it was a bad idea.
Chairman Roe. You just didn't support it.
Mr. Pollack. I did not say it was a bad idea. I did say
that the Medicare program is functioning very well. My
colleague, Mr. Holtz-Eakin was lamenting--
Chairman Roe. My time is expired. I am sorry, but I am
going to hold myself to my 5 minutes.
Mr. Pollack. All right.
Chairman Roe. I appreciate very much the witnesses taking
their time today and you really have been a terrific panel.
I appreciate all of the folks that showed up.
And Mr. Andrews is not here, so I will ask Mr. Courtney if
he has any closing statements he would like to make.
Mr. Courtney. Thank you, Mr. Chairman. Mr. Andrews would be
very disappointed in me if I didn't speak up and defend our 5
minutes here.
Thank you again for your courteous conduct of the hearing
and the witnesses for being here today.
There are a couple bits of housekeeping I would like to
point out. Dr. Price is absolutely correct. He has introduced
H.R. 2300. It has been referred to this committee and no action
has been taken.
I wish we had spent the time this morning having a hearing
on your bill rather than a bill that has already been voted on
in the House last week. And again, the point that a number of
people were making here is that again, we have had repeated
votes in the House rushed to the Floor without committee
process, normal committee process, repealing, abolishing,
modifying, whatever, and H.R. 2300 which again, I respect the
gentleman for making a good faith offer to try and reform the
system, but how come we don't have that hearing? Instead having
a hearing on a bill that has already gone through the process.
Again, we did not hear one shred of evidence this morning
that the IRS's actions taken under well-established law, U.S.
Code 7805 to delay implementation of a program which they have
done on a repeated basis, again, fully documented by the
Congressional Research Service was somehow improper or
inappropriate.
I mean, the fact is they used again authority which they
have done a number of times. There have been no lawsuits. There
have been no gotchas in any of those instances, and I would
challenge any of the witnesses on a later date to present
evidence in terms of the IRS decisions in the past that have
resulted in that outcome.
The fact is that this issue is off the decks for a full
year. We can focus on what really matters, which is getting
these exchanges up and running. In my state, we have four
insurers that have filed in the individual market, four
insurers that have filed in the small business market; they are
going through the rate review process.
And again, all indications are they are going to come in
well below what the Congressional Budget Office projected back
in 2010.
And again, I come from being a small employer. I understand
the impact it has and this is, in my opinion, going to be a
good day for small employers when they have a structured,
intelligible marketplace with a benefit plan that they can
compare and shop around as opposed to the Wild West, which
exists in the small group market today.
Again, there are a couple of--you know, we have heard so
many facts and figures about full-time and part-time. Again,
from the Bureau of Labor Statistics, I would just ask, Mr.
Chairman, to enter into the record a chart which shows that
from June of 2012, a year ago, to June--excuse me--yes, June of
2013, the U.S. economy has added 1,392,000 full-time jobs.
In exactly the same period of time, according to the
Bureau, the U.S. economy has added 195,000 part-time jobs. So
the notion that somehow there are these incentives that we have
heard ad nauseum about here today is in fact, you know,
rebalancing away from full-time jobs.
The numbers don't lie. That is from the Bureau of Labor
Statistics, and again, I would ask that it be made part of the
record.
[The information follows:]
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Chairman Roe. Without objection.
Mr. Courtney. And lastly, again, Towers Watson which is a
highly respected health care management firm, again, surveyed
people back in June, showed 98 percent--they have not and are
not considering asking current full-time employees to change to
part-time status.
This is before the President's decision; 95 percent have
not and are not considering making greater use of contract
workers; 89 percent have not or are not considering
discontinuing employer-sponsored health coverage for some or
all active full-time employees.
So, you know, look at, folks, this bill is--the horse is
out of the barn. You know, the House passed the bill. Again, it
is a nullity. It has no effect legally. Congressional Budget
Office says it has no budget impact.
The Senate frankly should focus its time on much better
issues such as sequestration which again, 690,000 DOD civilian
employees lost 20 percent, will lose 20 percent of their
paycheck for the next 11 weeks.
In my community of Groton, Connecticut, with 8,000 sailors
and thousands of--that is what is hurting small business today
is having 690,000 federal employees lose 20 percent of their
paycheck for the next 11 weeks.
That is hurting people's ability to go out and buy
hamburgers or clothing or gas, or rent, not, you know, again,
an issue that has been taken off the table for a full year.
That should be the focus of this Congress. I hope in the
future that this economy--that this Committee is going to focus
on real issues that are actually inhibiting growth in the
economy and not talking about, again, a bill that has already
passed last week.
Our process deserves better and the people of this country
deserve better.
And I yield back.
Chairman Roe. I thank the gentleman for yielding.
Mr. Walberg?
Mr. Walberg. I thank the chairman for holding this hearing,
and it would have been nice to have had it at a reasonable time
before action was taken in a blog by the President.
It is a discussion that we ought to have. This has
certainly given us the opportunity to have that discussion. It
ought to go on.
Churchill, having Hillsdale College in my district, and a
Churchill aficionado as the president of that school, I am
reminded of a statement that I think applies very well here,
Mr. Chairman.
Churchill said that some people regard private enterprise
as a predatory tiger that needs to be shot. Others view it as a
cow that needs to be milked. Too few people see free enterprise
as a healthy horse pulling a sturdy wagon.
I want to say thank you to Dr. Holtz-Eakin, Ms. Turner, and
Mr. Richardson for defending that truth of what private
enterprise is about; a healthy horse pulling a sturdy wagon
that benefits all, that provides jobs, that provides
opportunity.
Thank you for giving us real world experience and
discussion opportunities that we all should have had a long
time ago.
Mr. Pollack, thank you for giving statistics and the other
side of the story, but I must admit that the sky is falling
argument doesn't cut it. If it were just that, it would mean
nothing to us, but rather it is the fact that the foundations
of this great country of liberty and opportunity with personal
responsibility are being bombarded and cracked, in certain
cases at the point of falling in destruction.
This is the discussion that should have taken place in
2009. It was not allowed. Under the cover of darkness this
mandate was put through as well as the rest of the health care
law and liberties were bombarded, and I don't care what you can
say about statistics and numbers, it is real live people that
we ought to be concerned with.
I mentioned earlier--and why don't we let them speak again
as opposed to just a chairman speaking, give them voice.
When a Democrat Senator, Mr. Chairman, says, ``This is a
train wreck,'' when the United Union of Roofers, Waterproofers,
and Allied Workers call for repeal or complete reform, when the
International Brotherhood of Electrical Workers and National
Electrical Contractors Association wrote just recently to our
chairman, ``We cannot afford to sit on the sidelines as this
law imposes increased benefit cost fees and new taxes on our
plans. In addition, the health care law exempts all employers
with less than 50 employees from offering health care coverage.
This creates a vast competitive disadvantage for the 4500
contractors nationwide that responsibly provide coverage for
their employees.'' And then finally, the International
Brotherhood of Teamsters, United Food and Commercial Workers,
and UNITE-HERE say this, ``It will shatter not only our hard
earned health benefits but destroy the foundation of the 40-
hour work week that is the backbone of the American middle
class''--middle-class--that we are so concerned about, as we
ought to be.
And then they said, ``We can no longer stand silent in the
face of elements of the Affordable Care Act that will destroy
the very health and well-being of our members along with
millions of others hard-working Americans.''
Those aren't statistics, Mr. Chairman. Those are lives.
Those are people that are being impacted and we ought to have
this debate before, after, during whatever goes on.
And isn't it true that in our civics classes we were told
that not only laws can be implemented, but they can be
repealed, and that takes a discussion.
More importantly, it involves people like a 59-year-old
single mother who called my office 4 weeks ago in tears and
said to my staff, ``This morning I was told by my employer, a
home health care provider in Albion, Michigan that I am being
cut from my 38 hours to 28 hours because of Obamacare.''
She says that, ``When I have 38 hours as a home health care
provider,'' a tough job, ``I also worked at a restaurant on the
weekends to make the additional so I could pay my mortgage. I
am 59 years old. I will probably keep my waitress job for the
few hours on the weekend, but where am I going to get the rest
of the resources to pay my mortgage? And then, how am I going
to buy my own health care?''
That is reality, Mr. Chairman. I applaud you for holding
this hearing today. I applaud you for putting a panel together
that brought reality across the board and why this discussion,
why this debate needs to continue.
And I yield back.
Chairman Roe. I thank the gentleman for yielding.
And I will close by saying thank you all for being here. It
has been a great discussion. You know, I have never seen a
Republican or a Democrat heart attack in my life. I have never
operated on a Republican or Democrat cancer in my life. It is
just people who have these problems and we should have gotten
together as a people in a bipartisan way.
And the only thing bipartisan about the Affordable Care Act
was the vote to not accept it. That was bipartisan. In our
state, we had half the people who had private health insurance
and then dropped it to get on the public system. What happened
in 10 years was our cost tripled.
And what happened was a democratic governor at that time,
cut the roles. That was a very painful going through that. I
remember that very well and also reduced the benefits because
we have to have a balanced budget. We can't run a budget that
runs with these huge deficits.
And Dr. Holtz-Eakin, I can absolutely assure you what will
happen is with these very rich subsidies, employees and
employers will figure out to drop those, and as Mr. Walberg, I
have had a very similar experience where a server at home at a
restaurant had her hours cut from full-time to 29 hours. This
is a divorced woman in her 50s who had to make her own way.
Now misses 8 hours; she will miss an entire week's worth a
month, and she did have an insurance policy. Now she doesn't.
And you are seeing that over and over and over across the
country. Go out and talk to people. It is real out there, and I
know that if you don't believe that--I don't know what all
these hearings I have held--I have held three of them around
the country--I have heard the same thing now for 2 years
everywhere I go.
It does not affect as much the large group and the biggest
problem as Ms. Turner pointed out in health insurance in this
country is the cost of it. If we could bring the cost down then
you would have a much more--you would have many more people
that would have health insurance.
And it is a huge challenge now and one of the reasons the
costs are so high is the regulatory burden. There is no
question about that. I looked at the cost that added to my
practice that added no value to the patients whatsoever, none,
just more boxes for me to check, and if I didn't check enough
boxes, I didn't get paid.
So we do need to simplify this. It is a huge issue, and I
agree with Mr. Polis, and I applaud the President for delaying
this. I would applaud him for delaying the mandate for
individuals.
I would applaud him to overturn this entire bill and start
over again with something that is patient-centered, where
doctors and patients make those decisions, and get the
insurance companies out of making those decisions and certainly
get the federal government out of making those decisions. Put
the people in charge of that back in charge.
You know, it is an amazingly complex. I don't argue with
anybody who wanted to increase the coverage. And Mr.
Richardson, you have clearly pointed out as you have proudly so
that your company has offered health insurance coverage for
almost 80 years to your employees.
In our practice, even before I began, over 50 years we have
offered coverage. I don't know how much longer you are going to
be able to do that and afford to do that. And that is one of
the frustrations because we want to do that, and it is the
right thing to do, to do that to help your employees.
I thank all of the members for being here, and I certainly
thank all the witnesses.
And with no further comments, the meeting is adjourned.
[The statement of Hon. Fudge follows:)
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[Questions submitted for the record and their responses
follow:]
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[Whereupon, at 12:08 p.m., the subcommittees were
adjourned.]
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