[Senate Hearing 113-347] [From the U.S. Government Publishing Office] S. Hrg. 113-347 AFFORDABLE CARE ACT IMPLEMENTATION: EXAMINING HOW TO ACHIEVE A SUCCESSFUL ROLLOUT OF THE SMALL BUSINESS EXCHANGES ======================================================================= HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP UNITED STATES SENATE ONE HUNDRED THIRTEENTH CONGRESS FIRST SESSION __________ NOVEMBER 20, 2013 __________ Printed for the Committee on Small Business and Entrepreneurship Available via the World Wide Web: http://www.fdsys.gov ---------- U.S. GOVERNMENT PRINTING OFFICE 88-463 PDF WASHINGTON : 2013 ----------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP ONE HUNDRED THIRTEENTH CONGRESS ---------- MARY L. LANDRIEU, Louisiana, Chair JAMES E. RISCH, Idaho, Ranking Member CARL LEVIN, Michigan DAVID VITTER, Louisiana TOM HARKIN, Iowa MARCO RUBIO, Florida MARIA CANTWELL, Washington RAND PAUL, Kentucky MARK L. PRYOR, Arkansas TIM SCOTT, South Caarolina BENJAMIN L. CARDIN, Maryland DEB FISCHER, Nebraska JEANNE SHAHEEN, New Hampshire MICHAEL B. ENZI, Wyoming KAY R. HAGAN, North Carolina RON JOHNSON, Wisconsin HEIDI HEITKAMP, North Dakota WILLIAM M. COWAN, Massachusetts Jane Campbell, Democratic Staff Director Skiffington Holderness, Republican Staff Director C O N T E N T S ---------- Opening Statements Page Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana. 1 Risch, Hon. James E., Ranking Member, and a U.S. Senator from Idaho.......................................................... 8 Heinrich, Hon. Martin, a U.S. Senator from New Mexico............ 18 Witness Testimony Nold, William, Deputy Executive Director, Office of The Kentucky Health Benefit Exchange, Frankfort, KY......................... 11 Hickey, Martin, M.D., CEO, New Mexico Health Connections, Albuquerque, NM................................................ 18 Allen, David, President and CEO, David Allen Enterprises, LLC, Boulder, CO.................................................... 24 Greenblatt, Drew, Owner, Marlin Steel Wire Products, Baltimore, MD............................................................. 31 Salter, Sheila A., Founder and CEO, EARLY2SURG, Chapel Hill, NC.. 43 Evans, Connie, President and CEO, Association for Enterprise Opportunity, Arlington, VA..................................... 50 Kofman, Mila, Executive Director, D.C. Health Benefit Exchange Authority, Washington, DC...................................... 58 Borzi, Hon. Phyllis C., Assistant Secretary, Employee Benefits Security Administration, U.S. Department of Labor, Washington, DC............................................................. 79 Cohen, Gary, Deputy Administrator and Director, Center for Consumer Information and Insurance Oversight, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, Baltimore, MD.................................. 87 O'Brien Markowitz, Marianne, Regional Administrator, Region V, U.S. Small Business Administration, Chicago, IL................ 98 ................................................................. Alphabetical Listing and Appendix Material Submitted Allen, David Testimony.................................................... 24 Prepared statement........................................... 27 Barker, Andy Letter dated November 15, 2013, to Senator McConnell......... 253 Borzi, Hon. Phyllis C. Testimony.................................................... 79 Prepared statement........................................... 81 Additional comment for the record............................ 205 Cohen, Gary Testimony.................................................... 87 Prepared statement........................................... 89 Dayton, Mark Letter dated November 20, 2013, to Chair Landrieu............ 239 Department of Health & Human Services ASPE Issue Brief............................................. 259 Enzi, Hon. Michael B. Prepared statement........................................... 112 Evans, Connie Testimony.................................................... 50 Prepared statement........................................... 52 Greenblatt, Drew Testimony.................................................... 31 Prepared statement........................................... 33 Heinrich, Hon. Martin Opening statement............................................ 18 Hickey, Martin Testimony.................................................... 18 Prepared statement........................................... 21 Kaiser Family Foundation List of Total Health Insurance Exchange Grants............... 256 Kofman, Mila Testimony.................................................... 58 Prepared statement........................................... 60 Landrieu, Hon. Mary L. Opening statement............................................ 1 Meredith, Griffin L. Letter dated November 19, 2013, to Senator McConnell......... 252 Nold, William Testimony.................................................... 11 Prepared statement........................................... 13 Documents submitted for the record........................... 133 O'Brien Markowitz, Marianne Testimony.................................................... 98 Prepared statement........................................... 100 Pickering, Kathy Letter and report titled ``Understanding the Implications of the Affordable Care Act: Enrollment, Education and Taxes''. 206 Politico Article titled ``Only 5 Enrollments Completed in D.C. Obamacare Exchange''....................................... 255 Risch, Hon. James E. Opening statement............................................ 8 Responses to post-hearing questions from: Mila Kofman.............................................. 118 Hon. Phyllis C. Borzi.................................... 120 Gary Cohen............................................... 122 William Nold............................................. 127 Marianne O'Brien Markowitz............................... 131 Rubio, Hon. Marco Prepared statement........................................... 116 Salter, Sheila A. Testimony.................................................... 43 Prepared statement........................................... 45 State by State Enrollments, Cancellations, and Premium Increases November 20, 2013.............................................. 241 AFFORDABLE CARE ACT IMPLEMENTATION: EXAMINING HOW TO ACHIEVE A SUCCESSFUL ROLLOUT OF THE SMALL BUSINESS EXCHANGES ---------- WEDNESDAY, NOVEMBER 20, 2013 United States Senate, Committee on Small Business and Entrepreneurship, Washington, DC. The committee met, pursuant to notice, at 10:00 a.m., in Room 428-A, Russell Senate Office Building, Hon. Mary L. Landrieu (Chair of the Committee) presiding. Present: Senators Landrieu, Shaheen, Heinrich, Booker, Risch, Vitter, Scott, Fischer, Enzi, and Ron Johnson of Wisconsin. OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, AND A U.S. SENATOR FROM LOUISIANA Chair Landrieu. Good morning, everyone, and if we could take our seats and welcome to this important hearing this morning. The purpose of today's hearing is to explore the success stories of the rollout of the Affordable Care Act in states throughout the country where teamwork and cooperation has proven to be exceedingly effective. We will also hear from a federal panel that will talk about the federal rollout and some of the challenges that have presented themselves. Normally, we have the federal panel first and the state panel second. But at the discretion of the Chair, I reversed it but required the federal leaders to be here to hear from the state exchanges and from individual business owners about how the situation could be improved. I would like to begin by quoting, I think it was Mark Twain who said, ``A lie can get halfway around the world before truth gets out of bed in the morning and puts its boots on.'' So, this morning we are going to try to give truth a chance. Thank you for joining us for this hearing. The Affordable Care Act passed, as we all know, in March of 2010 and was signed into law by the President three days later. That was over three and a half years ago. Last year, the Supreme Court upheld one of the essential components of this law, including the no free rider provision, requiring full participation through private and public health insurance marketplaces. The goals of the Affordable Care Act at the time we passed the law were implemented for creating a workforce that was healthy because only a healthy workforce can be a strong workforce and America needs the strongest workforce we can get so we can continue to have the strongest economy in the world. Those were the goals three and a half years ago. That is the hope and promise today. There were four specific goals of the Affordable Care Act. One, to slow skyrocketing health care costs and reduce what America spends on health care as a share of our GDP. It was rising from 15 percent to 16.5 and headed very soon to 19. That trend has been reversed. To use the power, not of the government but of the private sector competition, the proven power of private sector competition to rein in costs and improve quality care and coverage. To provide the first opportunity in the history of our country, whether union or nonunion, middle, high, or low income wage earner, whether self-employed, small or large business to access affordable quality health care. And one of the most exciting and under appreciated features of the Affordable Care Act and one that this Committee has focused a great deal of work is that it provided for the first time a key to Americans to unlock them from job-lock which prevents individuals in every state, including my own, from starting a new business because the risk associated with leaving full and good employment with full and good health care coverage causes them to stay sometimes in companies where they themselves might even do a better job starting their own providing disruptive technology or good services. I am proud to hand many of our entrepreneurs that key and intend to do so. According to the Robert Wood Johnson Foundation, nearly 1.5 million Americans, including 25,000 Louisianians, will become self-employed thanks to this bill, allowing them to fulfill their dream of becoming entrepreneurs, to pursue their dreams, to create the product or the system or service that they have dreamed about and have health insurance which was not possible before the Affordable Care Act. Fourth, to provide coverage to millions of low income and working-class families that work 40, 50, and 60 hours a week and worked for decades and yet could not afford health care in the United States of America. The way that this bill has been crafted, they will, if the governors would expand Medicaid, to be able to choose their hospitals, doctors, and have health care. Unfortunately, many of our governors are standing in the way. This is the hope and vision that we fought for. It is still worth fighting for now. The focus of today's hearing will be specifically, though, on coverage options and access to our small businesses or businesses regardless of size, and I want to be clear. This is about the self-employed, about the growing percentage of our population that call themselves contractors because of the way our economy is structured to be very flexible and independent, small businesses below 50 and small businesses above. Now, we all know the rollout of the federal marketplace for individuals as not worked as well as we had hoped. We know that there are many challenges. We will hear about those today. But thank goodness there are bright examples throughout the United States where the ACA's vision is working and we are going to hear from those states today. Specifically, we are going to hear from representatives leading the implementation of the SHOP marketplaces now open at the state level to understand both the challenges and the successes experienced by those states who accepted the responsibility to build their own exchanges, who accepted the challenge of the Federal Government to say we cannot always do things right. Here, we will give you the option to do it. Some of our governors were brave enough to do so; others were not. Usually, this Committee hears from federal officials, as I said, but I have asked them specifically to be in the room because they need to hear the best practices about what is going on around the country so they can get a better understanding of what we are trying to do. We will also be hearing from representatives of federal agencies, et cetera. Now, let me go into a few more things and the time that I take will be given equally to the minority. Before we begin, I would like to take a moment to put today's discussion into context. As we were debating the Health Reform Act in 2009 and I was here and robustly engaged in that debate and helped to design the system that we have now which was a compromised system between a government-run, single-payer system and a medical savings account system with no floor or no safety net, we designed this. It was particularly for 96 percent of all businesses that employ fewer than 50 people who were struggling to remain competitive and we were focused on helping them. Small businesses were paying an average of 18 percent more than big business for health insurance that was not the same quality and they saw their health care costs increase faster than the prices of products and services they were selling. The record says four times faster than the rate of inflation between 2001 and 2009. After the number of employers offering coverage remained relatively flat in the 1990s, average annual family premiums for workers at small businesses increased by 123 percent, from 5700 in 1999 to 12,700 in 2009. So, in the rate of increase was going up substantially before the Affordable Care Act which is one of the reasons it was passed to try to taper down those rates and get them lower. The percentage of small firms offering coverage started falling from 65 percent to 59 percent, and it was spiraling downward. It is no wonder that since 1986 one concern for every small business every year has been access to affordable care and this is not from a liberal think tank. This is the finding of the National Federation of Independent Business. They have testified before our Committee on many occasions. This made reform, in my mind, imperative and the small business health care marketplace an important tool towards increasing choice and competition, reducing costs for small business and providing coverage to their employees that serve as the backbone of this American economy and a model for the world. A SHOP is an online marketplace where small businesses with 50 or fewer employees can purchase health insurance for their employees voluntarily because under the Affordable Care Act they are not required, the businesses are not required, employees can. Functioning SHOP marketplaces will give small business owners the tools they need to be smart consumers as they choose affordable options for their businesses without damaging their bottom line and leveling the playing field with large businesses through improved access to affordable health benefit options for their employees. Many are like family. I cannot tell you how many small business owners have come up to me over the course of the last several years and said, Senator, I would love to offer my people insurance but I cannot find it anywhere; and because my best friend to help me start this businesses wife has cancer, we are now completely priced out. How am I going to keep my business because I feel badly because I do not want to ask him to leave? If he would leave, I could get insurance for my businesses. That is a choice I do not think Americans should be making and I do not want anyone in Louisiana to make that choice or have to make that choice. At the end of this month, small businesses with 50 or fewer full-time equivalents will be eligible, but not required, to purchase and provide coverage to their employees. Beginning in 2006 (sic), all SHOPs will be open to employees with up to 100 individuals. Pooling these eligible, or FTEs, pooling these eligible small businesses and larger groups will spread risk, allowing insurers to stop charging higher premiums that accompany the greater uncertainty about the likely health care costs of small groups. The new SHOP marketplaces will allow small businesses to compare plans easily which was never, hardly ever possible before, taking the administrative burden off employers and allowing them to get back to running their businesses which they do best, not filing paperwork to get health insurance. It was a broken market. We intend to fix it. According to a 2009 Business Roundtable Report, the administrative costs to small businesses through the exchanges would be reduced by as much as 22 percent. I would like my staff to put up what is happening around the states, and I would like people's eyes to focus on what is happening in a good way and still challenging ways. This is the United States of America. You will recognize it. Declared state-based exchanges are in red. Planning for partnership exchanges are in the gray area, and those states that defaulted to the Federal Government, and I want to underscore this because mine is one of them, states that had a chance to set up an exchange for their small businesses that were given every opportunity, and in the case of my State was also attached with a check for $16 billion to help make it work, was rejected by my governor and by many governors. And instead they defaulted, at their own choice, not my choice, at their own choice, not at President Obama's choice, to let the Federal Government set up their exchanges and then did nothing of virtually to help. It is no wonder some of them are not working. But today we are going to have the opportunity to talk to those governors and those states, both Republican and Democrat, that did step up and lead, that did take what was offered to them and set up exchanges that could work for their small businesses. Each state has the flexibility to decide how they want to operate their health insurance marketplaces. As you can see on this map, there are four different categories that each of the 50 states and the District of Columbia fit into. Some states have what they call federally-facilitated exchanges which means that they are not choosing to set up their own market and leaving it to the Federal Government. Unfortunately, that would be mine. I wish I had been given that choice but unfortunately that was one mistake in the bill, leaving it up to governors, maybe not a mistake but in some cases it was it seems. Other states are operating partnership exchanges where the Federal Government operates the marketplace in conjunction with the state. Some states chose a partnership with the Federal Government. We will see how that is working. And another group of states have split exchanges where the Federal Government runs the individual marketplace and the state runs the SHOP marketplace. The final category is made up of states that run both, their own individual and small business marketplaces. These states cover approximately one third of the population of the United States. This is a big country, and it goes way beyond the Beltway of Washington D.C. You are going to hear today about one third of the population that is either working really, really well or it is working to some degree and with some changes could work better and a few places where they are having some serious challenges. But you are going to hear from people that are at least trying. Kentucky and the District of Columbia are included in this category. We will be hearing from representatives of these exchanges during our first panel this morning. In total, there are 18 states plus the District of Columbia running their own SHOP exchanges. And for the record, since this is so important, I want to put these states in the record. California, Colorado, Connecticut, the District of Columbia--not a state yet, maybe one day--Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, and Washington State. In all parts of our country, some with Republican governors, some with Democratic governors, some with Republican legislators, some with Democratic legislators, but all with people who need leadership to help them find health care that they can afford. Nearly 40 percent of all the Nation's small employers are in these states. That is who we are focused on today. We all know that the rollout of the individual insurance exchange website has been disappointing to say the least, but today's hearing is focused on implementing the rollout of the SHOP exchanges which is the focus of our Committee where we had a lot of input into how this bill was designed to emphasize the need for a better rollout, not just for individuals but for small businesses. Today, as I said, we are joined by states who accepted this challenge and responsibility to create state-based exchanges and did it well, as well as those who are having difficulty. For those states that have made the decision to operate their own SHOP marketplaces, we are already seeing evidence. I am not going to repeat everything that is in the testimony but I will say that for Kentucky, I was completely happy to see and I spoke to Governor Beshear, Kentucky did what I thought we should do and I have a bill to correct this, to use their licensed health agents to sell the policies which is a brilliant idea. We did not do that unfortunately. And so, they hit the ground running because their agents were already licensed and understood the market well and were able to sell. We will hear more about that. That is Kentucky, and you will hear more about Kentucky. In D.C., between October 1 and 13, they had more than 84,000 visitors to their website. What I loved about the testimony from D.C., and you will hear more about it, is that instead of the Chamber of Commerce dragging its feet, he says, the D.C. Chamber of Commerce, the Greater Washington Area Hispanic Chamber, and the Restaurant Association partnered to build this exchange and put their muscle and their brainpower behind it, and it is probably one of the most successful in the country. Nearly 700 employer accounts have been created using their site. Finally, in New Mexico, and our senator is here, has seen similar success as well. They accepted the leadership challenge, and today 1,143 small businesses with 3,192 employees have been registered, required information with the New Mexico exchange. If they all fully enroll with the average number of dependents, that would be a potential total of 8,000 members, and it has just been opened for a very short period. We will hear more about that. Making the ACA work the way it was intended is what I intend to try to do. There are others that have different goals. Ensuring that these marketplaces work the way they were intended when we passed the Act is vital to helping the businesses in our country and families that depend on these businesses to get the help that they need to stay healthy. And most importantly for me as a mother, not just to stay healthy physically but to be mentally free of the worry that any day your business is one day away from bankruptcy or your family is one accident away from bankruptcy. There is no price that you can put, in my view, on peace of mind. I do not know any economist in the world that could price it but I could tell you as a mother that it is very costly. The SHOP marketplaces need to work so that small-business owners can easily and efficiently compare the different plans available for themselves which they were never able to do, and their employees can pick the plan that makes the most sense. Now, opponents of the law, and there are many, are fixated, fixated on the problems of the law as opposed to the promise that it holds. I believe this is wrong. These problems, while challenging, are fixable. We have fixed many things in the United States, big things, bold things, and great things. This is something we can fix. And regardless of how we voted for the ACA, whether we liked it or not, it is the law of the land; and in my view, it deserves to be fixed, not repealed. We have the responsibility to make the Affordable Care Act work, not because of politics but because of the people. This is not about President Obama. It is about the people of the United States of America. It is about the millions of small business owners who want desperately to provide quality, affordable health care to their employees who dreamed about building a business, who love the people that they work with, and they were never able to find something that they could afford or count on. And if they did, they had to compromise below their standards because I know Americans pretty well and they are very generous people. And it is about people like Kiwi Armstrong from Baton Rouge, and independent construction worker. He works on big projects in both oil and gas onshore and off. We have a lot of those people. Because of the nature of his employment, he works on several different projects throughout the course of his year and he is not a member of a labor union. In 2012, he got nine different W-2s. He works hard every day. But the shifting nature of his employment means he cannot get coverage through his employers. When he tried to get Blue Cross Blue Shield through his last steady job, they denied him because of type II diabetes. Because of the Affordable Care Act, he can get coverage on the health insurance marketplace. It will be there when he needs it, and give him flexibility to work any project he wants without worrying about whether it will provide coverage or not. This is why we are having this hearing today. We are having this hearing to make sure we are doing everything possible to make sure that this Act works for small business owners and their employees. My goal for this hearing is it will not be occasion for grandstanding but rather an opportunity to focus on the work before which is fixing what is broken. And to do that, we have to be honest with each other and open to hear testimony about what is working, what is not working; and when we find something that is not working, how it can be fixed. Some of our witnesses today are also small business owners that have yet to realize the benefits that their colleagues in states where these exchanges are working. Some of these businesses are in states where the governor has basically said, no, we are sorry, we do not want to help you. I am sorry that you all are in those states but that is the situation. I am going to add one thing for the record and turn it over to my Ranking Member. There was a study that came out yesterday that I want to put into the record, a tax study, I have it here. This study came out this week. The Supreme Court's ACA decision and its hidden surprise for employers. This report is about Medicaid expansion, and the key finding is, states that do not expand Medicaid leave employers exposed to higher shared responsibility of payments under the Affordable Care Act. The associated cost to employers could total $876 million to $1.3 billion each year in the 22 states that have opposed or leaning against or remain undecided. By way of example, the decision in Texas to forgo Medicaid expansion may increase federal tax penalties on Texas employers by $299 to $448. Now, this is from a completely nonpartisan Jackson Hewitt, I think they prepared tax returns. I do not think they are a stakeholder group to anyone. So, because of the decision that Governor Perry made, his decision, not President Obama's, is going to cost his businesses more. Now, I am going to turn this over to Senator Risch. He can have as much time as I did which I think is probably about 20 minutes, 25 minutes, and then we will go to, your statements will be submitted to the record and then we are going to go directly to our testimony. I thank all of my colleagues for coming this morning. OPENING STATEMENT OF HON. JAMES E. RISCH, RANKING MEMBER, AND A U.S. SENATOR FROM IDAHO Senator Risch. Well, thank you very much, Madam Chairman. First of all, I commend you for holding this hearing, but probably not for the reasons that you think. Certainly, when you throw hundreds of billions of dollars against the wall, something is going to stick; and to try to use the handful of things that actually have worked in this 3,000 pages of legislation and nobody knows how many pages of regulations and say, okay, well, it is working because this small part is, really is to ignore the overall problem. Again, I commend you for your courage in holding this hearing; and more importantly, Madam Chairman, I commend you for your statement that you helped to design this system that we have today. I suspect that as we go forward trying to find people who will admit to having had some part in this is going to be like trying to find somebody that admitted voting for Richard Nixon. This has been a catastrophic failure across America. And you talked about the truth and you know, the American people, they do not understand all the niceties and all the complexities of health care and health care insurance and what have you. But they know when they have been lied to, and the polling is incredibly strong, indicating that they believe that they have been lied to. And once the American people believe they have been intentionally lied to, it really causes difficulties in trying to solve problems. This does not bode well as we go forward. You provided your list of successes and one of them was Idaho. When I was Governor, I appointed the gentleman who now sits as the Director of the Department of Health and Welfare. My successor kept him on and he is a really good guy. He came out of the insurance industry. I am not exactly sure if you were boasting that Idaho is one place where Obamacare is working. But I can tell you that it is a disaster in Idaho. Perhaps it is not in Louisiana, but it is a disaster in Idaho. I know that you brought in some people from Kentucky to talk about some of the good things. I believe that Kentucky is working better than other places, although that is not a very high bar. I have got a couple of letters I want to put into the record from insurers who are working in this area in Kentucky, and I am just going to read parts of them as an indication of what is actually happening in Kentucky. This is from Houchens Insurance Group from Bowling Green, Kentucky. This is written by their Executive Vice President. He says, ``We are writing to you to explain what we are seeing here in Kentucky and throughout other parts of the country that Houchens Industries, Incorporated, and the Houchens Insurance Group serves regarding our clients' implementation of the Affordable Care Act.'' ``While Houchens, with over 18,000 employees, is not a small company, our insurance group, HIG, serves over 1000 small businesses with their insurance needs throughout Kentucky and the United States. The remainder of this letter lays out what we are seeing. For an agency to represent its' customers responsibly, we need to be able to share all options available. At this point, Kentucky's Healthcare Connection, Kynect, presents us with more challenges than solutions. To date we have not enrolled any groups in the Small Business Health Options Program, SHOP, primarily because of the confusion the system has created. Business owners are anxious and frustrated as to what they have to do in order to get pricing. Creating an account within Kynect and then assigning an agent takes a considerable amount of time and is not something they should have to do while managing their business.'' He then goes on to list many more of the problems with Kentucky's system. The other letter comes from The Benefits Firm, another company in Kentucky. And again, their Senior Vice President writes, ``Kentucky has been viewed by other states and people in Washington, D.C., as a state that most things have gone correctly with the Health Insurance Market place. While it is true that Kynect has been operating properly, especially compared to the Federally Facilitated Marketplace, there are still many unresolved problems. In particular, I would like to address the SHOP exchange. Logistically and technologically, we are not having the same success with the SHOP exchange as we are with individuals in Kynect in Kentucky. This week, I have reached out to numerous employee benefit brokers in Kentucky, none of which have finished a SHOP exchange application. While I do believe that the technical hindrance is part of the problem, it is not the primary obstacle to the success of the SHOP exchange. I firmly believe there are flaws to this system that the current law cannot overcome. Numerous businesses that I have worked with decided that with PPACA there are advantages to their business through Kynect. However, the advantage to their business is to drop their employer-sponsored health plan and allow each of the individuals and families to enroll in Kynect.'' And then he goes on and explains why that is a very good financial decision for small businesses. So, there is no doubt you are going to find some things that happened here that are good. But, like I say, when you throw these kinds of hundreds of billions of dollars at something, you are bound to find that. Lastly, I would like to focus on what has been something that has really undermined the confidence of the people of America in this. When the President stood up as many times as he did, and particularly Democrat senators stood up as many times as they did, looked in the camera and said, if you liked your health care plan, you can keep it, those of us who listened to that the first time said that that is impossible. Where the government was going to lay out all of these new requirements in the new health care plans, no plan would exist. So, I do not know how the President of the United States could stand up and say that, and then repeat it over and over and over again, when his people had to tell him that the policies no longer existed. Somebody should have said, ``Mr. President, stop saying that. You are going to get hit over the head with this.'' And of course now, the chickens have come home to roost. And that is where we are. You know, we tried to change this. My good colleague, Senator Enzi, introduced Senate Joint Resolution Number 39, and we had a vote on the Senate floor on September 21, 2010. And that resolution which, if passed, would have become the law of the United States said, if you like your plan, you can keep it. But we were not able to pass that were we, Senator Enzi? There was a straight partyline vote with all Republicans voting for Senator Enzi's bill saying just like the President had promised and every Democrat voting against that promise. It is really unfortunate that it has come to that. Well, here we are again trying to apply lipstick to this pig; and no matter how many times it is said, the American people are not buying it. The numbers are deteriorating every day as far as the confidence of the American people--not only in what has happened here, but particularly in going forward--what we are going to do about this catastrophe. And that is a problem that I think you and your colleagues are going to have a very, very difficult time wrestling with. But the good news is we are Americans and we are free. We are going to have an election next November and the Americans again are going to have a say in this. And everybody is going to be able to stand up and say, look, I did this, I helped design this system, I had my hands involved in this. So, put me back there and see if I cannot do a little bit better next time, and the American people are going to decide whether or not that is enough. And that is exactly as it should be in America. And, as with all other issues we have had in America, even though this is what someone would call a man-made disaster, we will get through this. We are Americans. We know how to fix these problems and we will do it. With that, I yield back, Madam Chair. Chair Landrieu. Thank you very much, Senator. Let us begin on the panel with our first panelist, and then I am going to call on Senator Heinrich to introduce the gentleman from his State. But let me start with Mr. William Nold, Deputy Executive Director of the Office of Kentucky Health Benefit Exchange. Then we have Mr. David Allen, President and CEO of David Allen Enterprises. I am sorry. We are going to go in the order of Mr. Nold, go ahead. I will come back and introduce everyone else. Go ahead. Thank you. STATEMENT OF WILLIAM NOLD, DEPUTY EXECUTIVE DIRECTOR, OFFICE OF THE KENTUCKY HEALTH BENEFIT EXCHANGE, FRANKFORT, KY Mr. Nold. Chairman Landrieu, Ranking Member Risch, and members of the Committee, we really appreciate the opportunity---- Chair Landrieu. You are going to have to speak into your mic. Just lean into it. Thank you. Mr. Nold. We appreciate the opportunity to come over here to D.C. this morning and to share Kentucky's experience with our exchange which we call, as Senator Risch said, we call it kynect. It is a combined exchange in the sense that both our SHOP and our individual, for administrative purposes, operates under one name. My name is William Nold, and as the Senator said, I am the Deputy Executive Director of the Office of the Kentucky Health Benefit Exchange. It is a long title and we have got a lot of responsibilities. I have submitted a written statement and also some other documents that I assume will be made part of the record. Chair Landrieu. We do. That will be part of the record and you have four minutes and 10 seconds. Mr. Nold. Yes, ma'am. My next note was time is limited. But I think a little time should be spent to talk about the landscape in Kentucky as it has existed for a number of years. Our population is about 4.4 million. 640,000 of those individuals are uninsured. Of grave concern to our governor, however, is the health status of our State. We are 44th in overall health status, 50th in smoking, 40th in obesity, 41st in diabetes, 50th in cancer deaths, 49th in heart disease, 43rd in cholesterol counts, 48th in heart attacks. You know, we began our implementation of this law immediately after it was passed. But as you know, many of the provisions in the law were related to insurance matters early on and the exchange seemed like it was far off, year 2010, and the exchanges really do not have to be operational until 2014. But we began immediately to try to bring consensus among all the stakeholders in Kentucky about what we were wanting to do with this exchange when the time came. Everyone in our State wanted us to do a state-based exchange, everyone. I think Deb Moessner, who is the President of Anthem in Kentucky, probably said it best. She said, ``If I am going to be regulated, I want to be regulated across the Kentucky River, not the Potomac River.'' And that kind of said it all, I think. Although a lot of the stakeholders were opposed to this law, they realized that, you know, at least until the Supreme Court would make its decision that we were stuck with it. And it is a good thing that we are stuck with it. That is the way we found it anyway. So, of course, we continued to meet with Governor Beshear along the way, making decisions about what we were going to do, and so he wanted to wait until after the Supreme Court had ruled to really dig into this and get moving on it and that is what he did. And so, we presented all the pros and cons to our governor about what we should do or what we should not do, and he kind of stopped us. He said look, he said, and he is a lawyer, he had read the bill. He said this bill provides a unique opportunity for Kentucky to improve these health statistics. I want you to do everything that you can do to use this bill, not let this bill use me, but to use this bill to improve our health. And that has been the charge that we have accepted and have gone with ever since. You know, my time is getting short here. I do want to share with you, you know, we went live on October 1, down for a few hours, not down, slowed up for a few hours. Got that all straightened out and we have been running ever since and helping people get enrolled, not only in our SHOP but also in the individual market. So, I guess the message from our governor is that he was very strong in his opinion that the best way we could improve the health of our State was to go the state-based exchange route. And then also what we have done is that we have gotten agents involved. Right now, 94 percent of the small insurance policies in our State, small employer insurance policies, are offered through agents. Chair Landrieu. Try to wrap up please. Mr. Nold. Yes, ma'am. Well, to summarize, and again this is in particular with regard to the SHOP, since we went live on October 1, we have had 193 small businesses that have started applications to be eligible for an employer coverage. [The prepared statement of Mr. Nold follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chair Landrieu. I am sorry. I am going to have to stop you there. We have so many people to testify, and I really appreciate and you have a wonderful statement. We have put it in the record. Thank you, Mr. Nold, but we are going to have to go to our second panelist. Senator. OPENING STATEMENT OF HON. MARTIN HEINRICH, A U.S. SENATOR FROM NEW MEXICO Senator Heinrich. Thank you, Chair Landrieu for holding this hearing on the rollout of the Affordable Care Act small business exchanges. With attention squarely focused on implementation challenges at the national level, a deep understanding of how our small businesses are fairing in securing meaningful, affordable health insurance coverage for their employees is timely and essential to the economic well-being of Americans. Just an introduction, okay. Well, I am delighted and honored to be here today to introduce one of our invited panelists, Dr. Martin Hickey. He will describe to you in detail the success of the New Mexico SHOP. Dr. Hickey is not only a member New Mexico Health Insurance Exchange Board but he is also the CEO of the New Mexico Health Connections, a co-op, not-for-profit plan formed under the Affordable Care Act to provide health insurance to small groups and individuals in New Mexico. He is also a general internist who first practiced on the Navajo Nation, and he has dedicated himself to developing rural health programs. Over the past three decades, he built a distinguished career in health systems administration and delivery system reform across the country and we are fortunate to have him in New Mexico. I give you, Dr. Hickey. Chair Landrieu. Thank you. Dr. Hickey, please and you have five minutes. STATEMENT OF MARTIN HICKEY, M.D., CEO, NEW MEXICO HEALTH CONNECTIONS, ALBUQUERQUE, NM Dr. Hickey. Chairman Landrieu, Ranking Member Risch, and distinguished Senators, thank you for the opportunity to testify today about the early success of the New Mexico small business exchange. New Mexico legislated a state-based exchange board in March of just this year. The board consists of 13 highly representative members of groups including small business, consumers, Native Americans, Hispanics, physicians, hospitals, health insurers. Within five months, the board and it's very capable CEO and team selected an experienced private exchange vendor, developed a statewide plan for marketing, trained over 500 health care guides, set the rules for an open market exchange, and succeeded in launching a fully operational enrollment website, Be Well New Mexico, on October 1. In this time of national glitches and confusing rhetoric, the board, our very supportive governor, Susanna Martinez, the exchange health insurers, and all New Mexicans are very proud of the early enrollment successes that I will detail. You got a background on myself. I have been CEO and a senior manager in insurance companies, medical groups, hospitals. I have seen this business from every single side. And what I am so proud of is that I have always dwelt to on fixing access to care, and I can tell you that this board that has come together from literally both sides of the aisle in New Mexico, has come together passionately to assure access to care. New Mexico is 23 percent uninsured, second only to Texas, has 200,000 uninsured and 118,000 of them are eligible for financial assistance. And the Board gets this. Only 47 percent of the population has employer-sponsored insurance, the lowest in the Nation which has an average of 58 percent. Our State exchange is unique from most others and we call it a hybrid. Because the exchange formed so late, we did not have time to implement an individual exchange this year. We were, however, able to procure a competitive contract with Get Insured, an information technology company with seven years of experience in building private exchanges. Next month, they will begin work on implementing the technology for an individual exchange which will be ready to rollout for enrollment in October of 2014. In the meantime, we have had to depend upon the federal exchange, but Be Well New Mexico has a calculator, is educational; and when the federal exchange becomes fully operational, people will be informed. The small business exchange is also unique in that it not only offers employers a choice of plan but offers choice to each of their employees as well. The employer enters the site, selects a metal level and a reference plan. The employer designates a percentage of premiums that will be covered. That then creates a dollar amount made available to the employee for premium support in whatever plan the employee chooses. Thus, the employees have a choice of any plan of any carrier at that metal level at whatever cost. That is what is so great about New Mexico health insurance exchange for small businesses and their employees. Choice, choice, and choice. You know what? Even better it works, and it is easy. I did it for my family last week and it was like going down a water slide. There is even a calculator to help an employee choose the right plan based upon generalized use of health care in the past. I think the following quote from a small business in Albuquerque, an attorney with four employees, sums it up best. ``I was very pleasantly surprised. I thought it was going to be an administrative nightmare and it literally took me 15 minutes. They gave me a quote that would save me $1,000 over what I was paying. I thought this was going to be an all-day thing so I had a Diet Coke handy, was well rested and had a good lunch, and it was almost disappointing that it was so easy. I was blown away.'' So, to date, as you said, Senator, 1,143 small businesses in our little State with a number of employees is essentially propelled us to a potential, once all the enrollment finishes up by the end of the month, of over 8,000 members which already meets the goal that the board had set for the State, and we still have got the rest of the year and all next year to go. So, as I said, about 500 personal assistors and brokers are very heavily involved as well. The other thing you emphasized was cost, and basically I will tell you that our superintendent estimates that the rates for next year will be no more than five percent of what they were this year, when the American Society of actuaries said it would be a 34 percent increase. He also set up a very competitive process. I know. I had to go through it. So, New Mexico small employers now have a great opportunity to cover their employees and do so with a sense of choice and low rates and a system that works. [The prepared statement of Dr. Hickey follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chair Landrieu. Thank you, Dr. Hickey. My only question is are you available to come to Washington? [Laughter.] Chair Landrieu. All right. We will go now to Mr. David Allen. STATEMENT OF DAVID ALLEN, PRESIDENT AND CEO, DAVID ALLEN ENTERPRISES, LLC, BOULDER, CO Mr. Allen. Madam Chairperson, members of the Committee, thank you for the opportunity to speak with you today about the affects of the Affordable Care Act on my small business and our experience with the Colorado State insurance exchange. I am the owner and operator of Flatirons Practice Management. We are an independent medical billing company in Boulder, Colorado. We provide medical billing and practice management services to several hundred health care providers in eight states. I currently employ 33 full-time personnel. Obviously, we are well below the employer mandate threshold of 50 FTEs yet we provide company-paid health insurance to our employees anyway under a small-group plan and have for many years. We do so because we can and we feel that it is the right thing to do. I myself worked as an employee for other companies before choosing self-employment and I relied on my employers for access to health insurance. Unfortunately, it has been increasingly hard for me to continue to provide health insurance for my employees. Second only to payroll, health insurance is our next largest expense. Even with annual inflation rates in the one to two percent range, our premiums have increased every year by 20 percent or more. As much as I wish I could simply pass this along to my customers, they too are experiencing the same pressures to manage rising expenses in their small businesses. We have done some creative things over the years to reduce the magnitude of the premium increases while maintaining the integrity of our coverage and have been successful in continuing to pay for 100 percent of the cost of the premiums for our employees. One such tactic was to select an insurance policy that covers only generic pharmaceuticals. Anyone who requires a pharmaceutical that is only available as a brand name product has to purchase it out-of-pocket. As a result of the Affordable Care Act, our carrier has discontinued this policy as it does not meet the minimum standards as stipulated under the law. Due to this one change, our premiums are now scheduled to increase by 52.3 percent in January 2014. Clearly, absorbing this expense in order to continue to provide the same benefit to my employees is entirely unrealistic. I will have no choice but to require my employees to contribute substantially to the cost of their premiums. The irony is that none of my employees currently take any brand name prescriptions or expect to in the foreseeable future. This law has turned what was a potential expense for my employees into a guaranteed expense for my employees for something they neither need nor want. Since the Affordable Care Act is what caused this problem for me, I decided to embrace it and turned to the state SHOP insurance exchange in hopes that it would provide me with more affordable and appealing options. The first obstacle I encountered was that the website would not allow me to create an account. After my fourth failed attempt, I initiated an on-line chat with one of the exchange support personnel and was told after close to an hour of waiting that they were having technical difficulties with creating accounts and I should try again later. I did eventually create an account and download the census template. I then began the frustrating experience of attempting to upload the census. I tried unsuccessfully several times and received nonsensical errors such as ``wrong file type'' when the file I was attempting to upload was the very template that I downloaded from the website. After initiating my second on-line chat, it eventually came out that my web-browser might be at fault. I find it unfortunate that the website did not disclose any browser limitations before I wasted yet another hour spinning my wheels. Upon switching browsers, I was able to get the website to acknowledge the file that I was attempted to upload but it ultimately rejected the file on the basis that the date of hire field was not formatted correctly. My third on-line chat resulted in validation that my data was, in fact, formatted correctly and the website was again experiencing technical difficulties. Growing increasingly impatient, I resorted to having my assistant manually type the information into the website. What should have taken us minutes to complete instead took us hours. Having finally uploaded our census, I received 34 insurance plan options from which to choose. I found it challenging to objectively compare and contrast them with our current plan and its 2014 equivalent because we currently offer a tolerable $750 annual deductible to our employees and the lowest annual deductible available to us under the state exchange is $1,500. In short, the only way we can markedly reduce the cost of our health insurance through the state exchange is to select a policy with a dramatically higher deductible thus shifting the financial burden from me to my employees. Frankly, I could do this on my own without the assistance of the exchange and have consciously chosen not to pursue high deductible plans in the past because of the financial strain that it would create for my employees. Instead, we opted to make concessions that did not cause a financial strain such as forgoing brand name pharmaceuticals. On the surface, my company stands to benefit from the Affordable Care Act on the basis that more people will consume health care services provided by my clients thus resulting in more business for me. But this theory hinges on the affordability of the insurance available to the populace. If my experience is any indication of the unintended consequences of this law, it would appear that the Affordable Care Act accomplished the polar opposite of what the law was designed to do. Thank you for your attention. [The prepared statement of Mr. Allen follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chair Landrieu. Thank you. Our next witness is Mr. Drew Greenblatt. Please identify your state and the kind of exchange you have. And Mr. Allen, just for the record, you are in Colorado with a state-run exchange that is obviously, according to your testimony, has some difficulties. Mr. Greenblatt, what is your state and what kind of exchange do you have? Mr. Greenblatt. Maryland state and we have the SHOP exchange but it is starting in April. Chair Landrieu. And is it a federal exchange? Mr. Greenblatt. I believe Maryland State is trying to do it on its own but I am not positive. Chair Landrieu. A state-run exchange? Mr. Greenblatt. State run. Chair Landrieu. Okay. STATEMENT OF DREW GREENBLATT, OWNER, MARLIN STEEL WIRE PRODUCTS, BALTIMORE, MD Chair Landrieu. Chairwoman Landrieu, Ranking Member Risch, and members of the U.S. Senate Committee on Small Business and Entrepreneurship, thank you for the opportunity to testify before you today. I am Drew Greenblatt, and I am president and owner of Marlin Steel Wire Products, based in Baltimore, Maryland. Marlin is a manufacturer of wire baskets, wire forms and precision sheet metal fabrications. We make it 100 percent in the USA. We make it here and we ship it to 36 countries, and my favorite is we export to China. I am pleased to testify on behalf of the National Association of Manufacturers. I am on the Executive Committee of National Association of Manufacturers. Since you are the Small Business Committee, I thought you would be interested to know that our average member has 35 employees. 97 percent of us provide health insurance for our employees. I mention this because the health and safety of our workers is critical to manufacturers. As a matter of fact, at Marlin, my company, we hit a huge milestone two weeks ago. We have gone 1800 days without a lost time accident, the thing that I am most proud of in running this company. This commitment to a safe workplace and the overall health of our employees is critical. To me, offering high-quality health care coverage is part of that mix. Finding this good coverage is personally important to me because my family is in the same plan as all of my employees. So, we are all in this together. Generally, I have come to expect my health insurance costs to go up about 8 to 12 percent a year. I was startled, I was shocked when our health insurance went up 49 percent this year. I want to provide health insurance for my employees and their families. We have been doing it for 15 years since I bought the company. But now because it is so high, our plan, in effect, is not viable because it is not affordable. Ultimately, we were able to secure an alternative coverage plan for my employees because our term ended December 1. My premium, however, is still going up 10 percent. The plan I purchased includes benefits I do not really need nor do my employees want. This is key. The affordability, it has gone up. The cost has gone up despite all the promises our costs would go down. If I told my clients we are raising your prices 49 percent, they would laugh at me. 49 percent is out of control. Even if I sat down and explained to them, listen you are going to have some new features, they do not want to hear about it; and this is the environment we are in. I recently discovered the SHOP exchange of Maryland was delayed until April. I am not sure what products it offers. This is the kind of instability that is harmful to our economy. See, we do not know how much our employees are going to cost this year. We do not know how much they are going to cost next year. How do I quote jobs against my competitors in China? How can I win jobs that are three-year and five-year contracts when I do not know how much my costs are going to be? I know that the ACA law is not going away and any change is going to have to happen through bipartisan legislation. I urge legislators on both sides of the aisle to look at all the health care laws that are not working and please fix them. This will not get better with finger-pointing. This is not going to get better with rhetoric or regrets over broken promises. We need practical approaches right now. Cost was and is and remains our main issue. Reducing the cost of care makes a health care delivery system more efficient and directly impacts the access to coverage. Chair Landrieu. Please wrap up. I am sorry. You have 56 seconds. Mr. Greenblatt. 56 seconds. Driving up the cost of coverage and then providing subsidies to some just camouflages the underlying problem. I may not be a supporter of the current system but I would support changes that allow me to continue to provide high quality health care to my employees at a reasonable price. Thank you for the opportunity to testify today. [The prepared statement of Mr. Greenblatt follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chair Landrieu. Thank you, Mr. Greenblatt, for your excellent testimony, and I am not seeing well with my cold but you did a very good job and I thank you for focusing on fixing it as opposed to the rhetoric associated with another proposal. All right. Ms. Salter. STATEMENT OF SHEILA A. SALTER, FOUNDER AND CEO, EARLY2SURG, CHAPEL HILL, NC Ms. Salter. Good morning, Madam Chair Landrieu, Ranking Member Risch, and other distinguished members of the Committee. I am honored to be here today and to share my negative impact Obamacare has had on my small business and me. My name is Sheila A. Salter and I am the sole proprietor of early2surg. I reside in North Carolina and that is a state that has defaulted to the federal exchange. My company is a marketing/consulting business and the mission is to improve or accelerate the development and commercialization of surgical devices. My primary customers are startup device companies. I have been in health care for over 35 years. I am well aware of the weaknesses and strengths within our health care system. I do not think there is a person in this great country of ours who does not wish for every individual to have affordable health care. Obamacare has negatively impacted my business and filled me with uncertainty. I am my business. I planned for many years to have my own business. I invested my time and my money to begin early2surg this past February. Now, because I have no employees, I am not eligible for SHOP at this time but it would be a reality if and when I could afford to expand. That is in my business plan. Now, I would like to direct you to either the screen or you have in front of you a chart that I submitted. You know, I was shocked back in September when I received notice from Blue Cross Blue Shield that my health care plan was going to be canceled and it was going to be replaced by one that had been chosen for me at the tune of $584 a month. Now, if you look at the chart, we all need to be clear on this. There is one health care plan. When I hear people talk about, oh, you know, go to the exchanges, shop, shop, shop. You have one plan. Okay. That plan includes the benefits listed in the left-hand column. Now, you can see Sheila's plan. Sheila's plan was the one that I chose. I chose my services. I have done that all these years. I chose those services, chose that deductible for $202 a month. Now, with Obamacare, I have to have those 10 essential benefits. Now, I challenge anybody in this room to look at the services that I selected for myself, noting that I am 61. I know I do not look it and I have no children or history of alcohol or drug abuse yet. Okay. [Laughter.] But does anybody here really think that I need all these services on the left-hand column? I do not think so. To have those choices removed from me, to have the government tell me, Sheila, this is what is best for you, I really, I mean shocked is not the word. It is unacceptable. It is unacceptable now. It is going to be unacceptable 12 months from now and I am going to never accept for someone to make my health care choice for me. The only thing that exchanges do, and I have gone on the exchanges, you have the selection of what is your deductible, what is your co-pay, what you are going to do for prescription, are you going to be in network or out of network. But I do not care if you are a man or a woman, you are going to have maternity and newborn care, you are going to have pediatric services, and you are going to have services that you may or may not need. You know, that I think there should be a fix to it. I am open to work with anyone to fix that. So, how has it affected my business? Well, it has impacted how am I going to establish my business, grow my business, expand my business. All of that is going to be delayed. And as you know, the website is not working exactly up to par but I am concerned with the security of the website. You know, if I have identity theft, if any of us have identity theft, we all know what the consequence of that is. You know, it could wipe me out to the point I would never recover. So, you know, in our health care business we have a motto, first do no harm. I want to see everybody have affordable health care. That is a given but, you know, there are some fixes that need to be made and I am happy to help with that. Thank you again. [The prepared statement of Ms. Salter follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chair Landrieu. Thank you very much. Ms. Evans. STATEMENT OF CONNIE EVANS, PRESIDENT AND CEO, ASSOCIATION FOR ENTERPRISE OPPORTUNITY, ARLINGTON, VA Ms. Evans. Good morning, Chair Landrieu, Ranking Member---- Chair Landrieu. Welcome back. Ms. Evans. Thank you very much for having me back. Ranking Member Risch and members of the Committee, my name is Connie Evans and I am the president and CEO of the Association for Enterprise Opportunity, AEO, the national member organization and the voice of micro-business in the United States. For more than 21 years, AEO and its more than 450 member and partner network of non-profit lenders and business development organizations have provided critical services, access to capital and business counseling to under served entrepreneurs in micro-businesses all across the country. The importance of our topic today, health insurance and its value to micro-businesses can not be overstated. Similarly, our discussion of how certain elements of the Affordable Care Act are changing the health care landscape could not be timelier. Before we proceed to the topic, however, I would like to give the Committee some statistics about micro-businesses, those businesses with under five employees, that AEO released just last week. The report, Bigger Than You Think, the Economic Impact of Micro-Business in the United States, tells a powerful story of how the Nation's smallest businesses make an outsized contribution to our economy. There are 26 million micro-businesses in the United States or about 92 percent of all businesses. The ripple effect of direct, indirect, and induced economic activities of these firms is quite impressive. Total employment of more than 41 million Americans, total economic impact of nearly $5 trillion, and total revenue contributions of $135 billion to federal, state, and local governments just in 2011. In other words, although these main street businesses are small, their combined impact is quite significant. Despite advantages, however, many would-be entrepreneurs are reticent to leave their jobs due to concerns about health care access. For decades the inability to obtain health insurance has been a barrier for those who are interested in starting a business. It is well documented that access to health insurance drives employee decisions. Before the ACA removed pre-existing conditions as a barrier to obtaining health insurance, employees often chose to stay with employers even though they were unhappy with their employment. The inability to access health insurance prevented those who might have otherwise left their jobs and start businesses. As the Chair expressed this morning, indeed, the Robert Wood Johnson Foundation does project that nearly 1.5 million Americans, including 25,000 just in the Chair's home State of Louisiana, will become self-employed thanks to insurance reforms of the Affordable Care Act. The entrepreneurs and micro-businesses that AEO members serve have had the unfortunate choice of hamstringing their revenues by providing health insurance to their employees or losing their employees to larger companies who can provide that insurance. The ACA he reforms to the health insurance market, in our opinion, were necessary and we hoped that these changes would lead to better prices and more choices. Our optimism is based largely on the exchanges, also referred to as new marketplaces, which allow individuals or small businesses to pool together statewide to obtain insurance. It is with profound disappointment that the federal rollout of this program is in complete disarray. While most of the government's attention has been focused on fixing the individual exchange, and the small business exchange or SHOP has been treated as a secondary concern. We fear that implementation of the federally facilitated SHOP will continue to suffer delays. Even though the law requires individuals to obtain health insurance by March 2014, many plans for individuals and businesses end at the end of 2013. Decisions about coverage have to be made whether or not the Federal Government can successfully rollout the exchanges. We note that many individuals have received notices saying that their coverage will be discontinued because that plan does not comply with the ACA and the insurance companies have advised these customers to shop in the exchanges but, of course, the exchanges are not up and running so there is much frustration over what to do in the meantime. Do they just go without insurance and allow a gap in coverage? What do they tell their employees? In closing, our message is not based on any political leaning or philosophical notion regarding health insurance. We just want it to work. We urge the Congress and the Administration to come together to make it work for the 26 million micro-businesses on the front lines of our economy. Thank you for the opportunity to appear before you today and I look forward to answering any questions the Committee may have. [The prepared statement of Ms. Evans follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chair Landrieu. Thank you very much and all of you for your testimony. It was all helpful to helping us work forward to try to fix this bill for the benefit of our small businesses and individual contractors and self-employed. I am going to take five minutes for questions. We will do a five-minute round alternating--I am sorry, Mila. I am so sorry to miss you. I will tell you this cold is really knocking me for a loop. Ms. Mila, go right ahead, Ms. Mila Kofman. STATEMENT OF MILA KOFMAN, EXECUTIVE DIRECTOR, D.C. HEALTH BENEFIT EXCHANGE AUTHORITY, WASHINGTON, DC Ms. Kofman. Thank you. Thank you very much, Madam Chairwoman Landrieu and thank you Ranking Member Senator Risch, and members of the Committee. My name is Mila Kofman and I am the Executive Director of the District of Columbia's Health Benefit Exchange Authority, otherwise known as DC Health Link. Senator Landrieu, thank you so much for your leadership and advocacy on behalf of the Nation's small businesses, both for your home State and nationwide. It is truly I appreciated all the work that you have done through the years for the small business community. It is my honor to be here today to share with you what we have done here in the District of Columbia. The District was an early leader with the Affordable Care Act implementation. In March of 2012, Mayor Gray signed legislation creating the DC Health Benefit Exchange Authority. We are a private- public partnership with seven voting members who are small business owners and experts in health insurance and health care financing. We also have four government members who serve as nonvoting. In the District, it really did take a village to bring success to date. We had a very strong partnership with all of our agents, government agencies. We also had a very strong partnership early on in our policy decisions. We had policy workgroups, stakeholders who helped us make our policies and set our priorities. We had strong support from Mayor Gray and his entire administration as well as the City Council and Congresswoman Norton. We had the political support we needed to move forward. We also had strong relationships in collaboration with the business community here in the District, business associations who represent the small business owners here. We also had strong support from the Federal Government and especially Gary Cohen and his entire team. On October 1, we opened for business; and as you know, it was reported that we were one of four states that opened on time and did not go down and we have not gone down. We are fully open for business and we welcome everyone, every individual who lives in the District, every small business that is in the District, and now I look forward to serving many of you and your staff. It was a great pleasure to be designated as a provider of health benefits to all of you. I want to know that we had very strong partnerships with our insurance industry. We have four major insurance companies selling to small businesses through DC Health Link and I think the best insurance companies in the Nation, Aetna, United, CareFirst Blue Cross Blue Shield, and Kaiser Permanente. They offer 267 different products to small businesses, something for everyone. If you want zero deductible plan, it is there. If you want an HSA high deductible health plan, it is there, and everything in between at all price points. Our carriers offer nationwide physician and provider networks as well as very robust local and regional networks, and we are very proud to offer full employer and employee choice. So, when a small business comes in, it is very easy to create an account. DCHealthLink.com is our web address. When a small business comes in, the small business decides how much to contribute and what options to offer to employees. For the first time, a small business can offer the types of options that only in the past have existed for the large employers. A small business can pick what to contribute and pick a level of benefits like the gold level and employees have 112 different products to choose from. The small business gets one invoice and we clearly say how much the small business has to contribute and how much to withhold from the paychecks of employees. We also did not, we decided to take advantage of the private market innovations so we did not negotiate rates or benefits. We let the insurance companies compete and, boy, did they compete. After we made all of their premiums public, one company came back in lowering their rates twice. Another company came in and lowered their rates once and a third company came in and lowered their rates and offered additional product. So, we have seen real private market competition work. When insurance companies compete, small businesses and individuals benefit from that competition. Chair Landrieu. Please try to wrap up please. Ms. Kofman. Thank you, Madam Chair. I just want to note and thank the D.C. Chamber of Commerce, the Greater Washington Area Hispanic Chamber of Commerce, and the Restaurant Association of the Metropolitan Washington area. They had been our strong partners, and they are part of our success. I also want to note that the insurance brokers especially of the National Association of Health Underwriters has also been a critical part to our success. I look forward to answering any questions you may have. [The prepared statement of Ms. Kofman follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chair Landrieu. Thank you very much. Before I start my line of questioning, I would like to submit for the record a letter from the State of Minnesota, the governor, Mark Dayton, who was a member of the Senate, and he quotes, and I will put the rest in the record, Mnsure, which is--sure's focus on small business as a result of our State's decision to create a Minnesota-made exchange that best provides for the needs of Minnesotans. Virtually every health care organization, business organization or respected expert strongly supported our state exchange in designing something that would work for us. And he could not be here. Minnesota could not testify, but they have some excellent information. I would like to submit that to the record with no objection. Let me respond in my time first to my good friend and Ranking Member's reference to my not supporting Senator Enzi's amendment. Senator Enzi is here. He can most certainly explain his amendment. But I want to say for the record the reason that I voted against it, and I remember the Democratic caucus, is because it would have eliminate the cap on lifetime limits. So, people could basically exceed their limits and I thought that was wrong and it would also have knocked young adults off their parents plans which is one of the strongest features of the Affordable Care Act. So, I would say Senator Enzi, of course, can defend himself in his rebuttal. His bill which I voted against and many Democrats did not keep the promise. It gutted in the bill. Now, I have a bill that will actually keep the promise and happily last week in the House of Representatives both Republicans and Democrats overwhelmingly voted to support some version of the Keep Your Promise Bill that would extend that for a year. That would help you, Ms. Salter, because you could actually keep your plan. So, I wanted to put that in the record. My first question would be to you, Ms. Salter. When did you start your current business? Ms. Salter. I just started my business this past February. Chair Landrieu. Okay. So, you have been in business about nine months. Ms. Salter. Uh-huh. Chair Landrieu. And you are just starting. Now, I want to put into the record that not only if my bill could pass, and I hope that you could support it or a version of it, you could keep the plan that you want. But if you chose to go to another plan, I want to put in the record, if you make $27,500 a year in your business, assuming you have no additional income, you will actually save $4,986 because of the premium that you and your business will receive. If you make $32,000 a year, your annual cost of your premium, even in North Carolina where the State itself chose not to help you by setting up their own exchange--they let it be set up by the Federal Government--so, your State made that decision, not to us--you would save, you would pay every year $919 and you would save $4,257. If your business makes $35,000 in your first year and it goes up to 40 or 45,000, your premium, you would still save $2,823. So, I am sorry that your exchange is not working as well. That is what we are here to do. But there are some benefits that hopefully you can come to appreciate as we move forward. Ms. Kofman, let me ask you. The D.C. exchange has gotten some very good feedback, and as you said, both bipartisan, Republican and Democrat. It is understood. What would you say are the two most important features that caused your exchange to be so beneficial to your small businesses? Was it the way it was designed, was it the cooperative nature, what was it and what would you recommend to others trying honestly to fix this and to make it work for their small businesses? Ms. Kofman. Thank you, Madam Chair. There were several elements that were critical to us. We wanted to build the exchange from the ground up, community- based effort, priorities, policies that we adopted were very much stakeholder driven. The decisions we made reflect the stakeholders who were involved in helping us build DC Health Link. The other critical part to us is the huge choices that are available to small businesses, 267 different products, everything, HMOs, PPOs, no deductible, high deductible, everything from all of the major insurance companies. And our value proposition is we want to make it as easy as possible to small businesses to be able to offer coverage and offer small businesses the kind of clout they never had in the past, the clout that large employers have enjoyed for many, many years. That as well as the business community in the District stepping up to the plate, putting politics aside and helping us make hard decisions and helping us to build this DC Health Link to provide services that small businesses need and want and are desperate for in terms of affordability and predictability and an opportunity to offer great options to their workers. So, it took a village and the small business community was definitely a strong part of it. Chair Landrieu. Thank you so much. Senator Risch. Senator Risch. Madam Chairman, back to the Enzi proposal again. I heard your explanation. You voted against it because it eliminated lifetime caps that were required under Obamacare and it eliminated the 26-year-old coverage which was required under Obamacare. But this is exactly the point. You did not promise us that if we politicians like your policy, we are going to let you keep it. You said, if you like your policy, you can keep it. There were a lot of people that wanted to buy policies that cost less and that did not have lifetime caps lifted, and there were a lot who wanted to buy plans that did not cover their 26-year-old. But you did not let us do that and that is the problem. The American people want to be free. We are smart people. We can make our own decisions. We do not need the Government telling us what we have to have. And that is the biggest complaint I get from Idahoans, from Americans, saying why are the politicians in Washington, D.C., constantly telling us what we should do for ourselves. And that is the basic problem with all of this. Whenever you try to socialize an industry or nationalize an industry like has been done here, it has never worked. It has been tried in every communist country in the world. It has been tried in all kinds of socialist countries, and it never works, and it is not going to work here. Well, let me ask a couple of questions. First of all, Mr. Nold, I am told that there have been 150,000 small group plans that have been canceled in your state. Is that true? Mr. Nold. Sir, I am not familiar with the number there. At the Department of Insurance is the agency that handles the mechanisms for that. I will be glad to provide that information to you. Senator Risch. Well, I have got it. They said there are 150,000 small group plans that have been canceled. On the other side of the ledger through November 8th, 309 have signed up again. That is a big problem it seems to me. We have 150,000 canceled and 309 signed up. Mr. Nold. Certainly with the small group, it is to note that the open enrollment period that affects individuals is not the same with small groups. There is a continuous open enrollment period available to small groups. They can sign up anytime during the year. Senator Risch. Got it. Ms. Kofman, first of all, let me say that it is really encouraging to hear that you were one of five, did you say, that made the rollout work October 1. Is that what you said? Ms. Kofman. In the morning of October 1, Bloomberg news was reporting we were one of four jurisdictions---- Senator Risch. Four. Ms. Kofman [continuing]. That went live without a glitch that morning. Senator Risch. That is really good to hear that they were working. People were able to sign up. They were able to get on and do what they wanted to do. That is a really, really good thing. What is the population of the District? Ms. Kofman. We are a small population jurisdiction, about 640,000. Senator Risch. I am told that in the first month with you up and running, no glitches, everything is working well and with that kind of a population, that you had only five enrollees in the first month. Is that true? Ms. Kofman. No, that is not true. Senator Risch. What is the number? Ms. Kofman. I can provide your office with the exact numbers. We did issue the most recent numbers as of November 13. We had close to 700 employer accounts created. In terms of individuals who completed their applications both for premium reductions and full premiums, we were at about 1350 for full- price applications and close to 2000 for reduced price. Each application could be a family of 10. We only count applications. In terms of account holders who selected a plan, over 1100 account holders selected a health plan and 565 account holders said they wanted to be invoiced to pay. Now, they are not required to pay until December 15. So, I just want to make sure that people who are residents of the District are reminded of that. We are not asking for people to pay early. If they want coverage to be effective January 1, they do have to make their payment by December 15. Senator Risch. So, by my calculation then, a little under one percent of the population in the District signed up. Would that be fair? Ms. Kofman. I can provide you better numbers. Right now folks who are shopping and making decisions, there is a lot of activity through DCHealthLink.com. I am encouraging both small businesses and individual shoppers to take their time. Selecting health insurance is not an easy decision and if you are not working with a broker who can help you through it, you really do have to take your time. I can tell you as a former insurance regulator myself, insurance is very complicated. Consumers who get a 150-page document which is their insurance contract which has the exclusions and what is included is very complicated. So, although we have made it much easier through our webpage to shop and compare apples to apples, we provide four-page coverage summaries that make it much easier than before to shop. It is still not a quick decision and we encourage everyone to take their time. Chair Landrieu. Thank you, Ms. Kofman. Senator Booker, and let me welcome you to this Committee and welcome you to the United States Senate. I look forward to your leadership. You have already been a champion of small business and you are just a perfect person to join us in our effort to help them. Senator Booker. Thank you very much, Chairwoman. I want to thank you and I want to thank the Ranking Member. These are the things you need to teach the new guy, how to turn on your microphone. But I want to thank the Chair and I want to thank the Ranking Member both who took times out of your busy schedule to sit and meet with me and help me get along my way. This is such an important issue for the State of New Jersey that I am very grateful to have the opportunity. I want to thank all the panelists. They have been informative. I wish we had more time and I look forward to reading more of your testimony that was submitted into the record. Mr. Greenblatt, first of all, I appreciate your Jersey connection, a guy who vacations in Jersey, and you have some Jersey boy aura sp to you. [Laughter.] I want to say to you, first and foremost, as the geologists say, you rock. And you rock not because of your Jersey connection because I feel one of a kinship with you, both you and I in the last month have come down to Washington. You get to go home I think; I am going to stick it out here and battle it out. But you deal with pragmatism and I have had to deal with it. I cut 25 percent of my employees as a mayor. One of the reasons I had to cut so much is because health costs were going up so much, my taxpayers could not afford it. I had to balance the budget for every year. So do you. And the challenge that you have which I have seen working with local manufacturers in my city that I wanted to expand is that you said you export products to China. Right? Mr. Greenblatt. Yes. Senator Booker. You are competing globally, right? Mr. Greenblatt. Absolutely. Senator Booker. I would like you a lot and when you compete globally, you are competing against countries in Europe and Asia and across the globe, right? Mr. Greenblatt. Absolutely. Right. Senator Booker. And many of those countries have different health care systems and most of those countries, most of our competitor Nation's have much lower health care costs, right? Mr. Greenblatt. Absolutely. This is a challenge for us. Take Canada, their health insurance is included, is part of the system but their taxes are 15 percent. Our taxes are 40 something percent. Senator Booker. God bless you. Mr. Greenblatt. This makes it challenging to compete with Canada. Senator Booker. I want to compete with Canada in every way except for Toronto, their Mayor, they have challenges there. [Laughter.] So, my point to you is that your pragmatism I love because this is not about politics, it is not about the pugilism that is profoundly prodigious sp in Washington. It is about solving problems, lowering costs, giving access; and small business people like you want to compete with the big boys. Right? Mr. Greenblatt. Absolutely. Senator Booker. And what I see in my city is many folks have a hard time keeping employees who could easily go to other companies who have better health insurance plans. In fact, you probably know people that will go to a company and get less salary for better health insurance. Is that not correct? Mr. Greenblatt. I think that is one of our positive attributes that we have such a good plan. Senator Booker. Right. And so the key here, and the goal here, is to make sure that we take this variable which has made small businesses get so crushed in the past that it helps them be more competitive, not only in keeping employees locally but also competing against other countries that have lower health care costs, call it socialism or whatever you want, they have lower health care costs and you are competing against them because you internalize those costs and many of those companies do not. Right? Mr. Greenblatt. You are right. Senator Booker. So, that is the pragmatism. We are not here to score political points. I do not care about in the next election. I care about solving the problems. And when you look at polls, they might not like politicians but most people are saying right now, fix the dagnab thing which you are saying. Right? Mr. Greenblatt. Absolutely. Senator Booker. And so, Mr. Hickey, who has no New Jersey connection. Dr. Hickey. Actually I do. [Laughter.] Senator Booker. You do. In my last 90 seconds, sir, would you please, you are well down the field. You have a functioning exchange. You heard the good Jersey boy, Mr. Greenblatt, and Mr. Allen's problems. Could you please tell us what the future could look like for them and how to solve the very real problems they brought up? Dr. Hickey. Number one, put together an exchange board that is from both sides of the aisle but, as you say, they care about the people of New Jersey. Our board has people---- Senator Booker. I am sorry to interrupt you, sir. I do not know if you know about my governor. He is a very quiet, soft- spoken not to many people know who he is. [Laughter.] But he did not participate in the exchanges. We have one of the best local insurance-based knowledge there is and we did not engage in that in New Jersey. We left it up to the Federal Government. So we are way behind you in Kentucky, not a place that we like to be in New Jersey. But continue. Or New Mexico. Dr. Hickey. Yes. And that board being made up of people even though they were vitriolic against the ACA. Once they got on that board, they said we have an obligation, a fiduciary duty to the people of New Mexico, and we are going to make this work. Senator Booker. Right and left coming together. Dr. Hickey. Right. And we all came together. We have a great Chairman. He is also a doctor. We all came together and we met and we met and we met and resolved the issues. We hired an excellent CEO and we hired a company, a previous private exchange vendor, a SHOP in a box is what we call it, and it already worked and we knew it would work. Senator Booker. My time has expired but we do not have time. People are hurting right now. We have got to fix this before the next election and I appreciate you showing us the way forward. Chair Landrieu. Thank you very much, Dr. Hickey. Senator Enzi. Senator Enzi. Thank you, Madam Chairman. I had not anticipated getting into my Congressional Review Act. But since it has been brought up several times, I will. One of the reason that it included some things that you would prefer not to have in it is that when the Federal Register is published and says that there is going to be this huge cost of people losing their insurance even though the President has promised that if they like their insurance they can keep it, your choice is not to pick from the things that are in there. You have to reverse the whole regulation. The whole regulation would have made it possible for people to keep their insurance if they liked it. So, you also have a very limited time to be able to bring up a Congressional Review Act and have that kind of a forced eight-hour debate and then up or down vote on a regulation. And I took advantage of that window. After that window closes, the only people that can make a difference would be through the majority leader which means that the majority side could have brought up things that would have left out the one or two things that were in that regulation that they did not like and they could have made it so that people could keep their insurance if they liked it provided it did not have those two things. That is not how it works and there has not been any effort in the meantime to do that. Now that it has been exposed, there is a tremendous effort and interest, and Senator Johnson has a bill that would comply with what I think the Chairman said would be acceptable to go ahead and fix it so that people who like their insurance can keep it, although it should have been done three years ago so that the insurance companies would have had the opportunity to adjust to the time, to have their actuarial stuff together for this particular time and I think it would have helped out businesses. There are actually three changes that I would like to make in Obamacare; and if we made those three changes, it would make more of a difference in jobs and the economy than the stimulus package did. One of those would be to change those hours for part-time from 30 to 40, and that is kind of the standard by the Small Business Administration, and this is the Small Business Committee. So, I would hope that we would do that. I had a 10-step plan for fixing health insurance before the President ever became a Senator, and one of the things in that was small business health plans, and we had an opportunity to do that that would allow small businesses to group together through their association, any association, across state lines, nationwide, so they would have a big enough group that they could effectively negotiate with any insurance company. There is another proposal that would have allowed them to self-insure on those big groups. Those would have provided a lot of advantages for small business. Those are not available. Small business owners in Wyoming are asking me what can be done. Wyoming did not do an exchange. It is the least populated state in the Nation. It is less populated than the District of Columbia, and we have a lot of miles between places, and we have extremely small towns, and we only have two insurance companies that are interested in serving there. Under prescription part D, we only had two companies providing prescriptions until we did prescription part D. And one of the things that surprised us, suddenly 48 companies wanted the business in Wyoming even though it was a small populated state. What was the effect? Before the law even went into effect, it dropped prices by 25 percent and gave people choices. We could have had that same thing here but we do not. So, I want to thank you all for the testimony that you had. I had some pretty specific questions that I would ask just quickly. Mr. Allen, you mentioned that drugs cost 52 percent more because of the name brand requirement. Could you expand on that just a little more? Mr. Allen. Yes. So, the plan that we have presently covers only generic drugs, and the difference in premiums to go to the new policy that includes the brand-name drugs, the difference in the premium is 52.3 percent. Senator Enzi. I think you said that none of your employees were using brand-name drugs? Mr. Allen. That is correct. In preparation for my testimony today, I did a poll among my employees and not one single person is presently taking or has any plans to take any pharmaceuticals that are only available as a brand-name product. Senator Enzi. Thank you. I think there are a number of great examples there, and I appreciated Mr. Greenblatt's comments about his sales to China and how he bids those three or five years in advance, and sometimes he could not use a little bit of stability in what his prices are going to be, and he is not getting that under the exchange. I thank the Chair. Chair Landrieu. And I thank the Senator from Wyoming. Senator Shaheen, who also comes from a small State, just to put for the record as the Senator knows, there are 576,000 people in Wyoming less than in the District of Columbia. One chose the exchange, one chose not. Senator. Senator Shaheen. Thank you very much, Chair Landrieu and Ranking Member Risch for holding the hearing. Thank you all for being here. I am sorry I missed your spoken testimony this morning but I do think it is very important for all of us to hear from small businesses. In New Hampshire, 96 percent of our employers are small businesses. It is a brilliant foundation of our economy, and the frustrations that you have shared are ones that I think everybody on this panel appreciates and shares in terms of how to make this law work and what we can do better. You know, one of the biggest concerns that I have heard from New Hampshire small businesses is about the cost of health care, and Mr. Greenblatt, you and Senator Booker engaged in a back and forth on that this morning. But small businesses currently in New Hampshire are paying 18 percent more than large businesses because of administrative costs. So, finding a way to address the challenges that you face is going to be critical. And you know, looking at what we can do to fix this legislation I think is very important. In that vein, I have all offered a bill that would delay open enrollment in the individual market because that is the immediate problem that we are facing in New Hampshire, and I did that because we want to make sure that people have time to enroll. Now, fortunately with the SHOP exchanges, that is an ongoing opportunity. But New Hampshire like Wyoming, like a number of other states, also has not chosen to do a state to exchange; and so we are very much struggling with what is happening at the federal level. I wonder for Mr. Nold and Ms. Kofman as you have participated in state exchanges that are working, if you could talk about the reaction of those businesses that are enrolled in the SHOP exchanges in the District of Columbia and in Kentucky and how they are feeling at this point about the product that they are getting. Mr. Nold, maybe you would go first. Mr. Nold. Sure. As you are aware, the enrollment process will in the small-group exchange, the SHOP exchange, is really a two-step process. The first step is the employer themselves will come to the exchange and shop and try to determine which plans they want to offer to their employees. Once they go through that process and pick the plans that they want to offer, then the employees are given a 30-day open enrollment opportunity to go on line and pick the one they want. So, it takes a little longer in the SHOP to really get to the point where you actually are enrolling. So, that process has to be completed. That is, the open enrollment period for the employees has to be completed. We have a participation requirements in Kentucky that says that 75 percent of the employees have to participate. If they do not, then the employer, so that takes time. We have gotten to the point where now employers have selected plans and the open enrollment period is ongoing where employees can come in and choose. So, what I am trying to say is that it is difficult to say how that is all going to happen. It is again predicting the future. So, but we are very, very encouraged about the numbers. I mean, we have had over 93 employers that have gotten to the point where their employees are now picking plans. Senator Shaheen. Great. Thank you. Ms. Kofman. Ms. Kofman. Thank you. I will just share with you a theme small businesses have shared with me of their experience. So, one small business is growing and they never offered coverage in the past. So, this is the first time they can offer coverage to their workers and themselves because if the workers are not covered it is likely the owner is not covered either. So, one small business was very excited about that. Another small business I spoke to on October 1 said, the owners said, based on his quick review of all the products he will save 12 percent, at least 12 percent. At that point in time he has not made a decision of the products he wanted to offer. And another small business I spoke to said they were very happy not to be paternalistic any longer. They can just decide how much to contribute and let their employees decide which HMO or PPO or insurance company to select. So, anecdotally, small businesses that I have talked to have been very, very pleased with the product offerings, the range of offerings, and the price is. Senator Shaheen. Thank you. Thank you, Madam Chair. Chair Landrieu. Thank you very much. Senator Johnson, thank you for joining us. Senator Johnson. Thank you, Madam Chair. In solving any problem, in negotiation, the first thing you want to do is figure out what you can agree on. There are a couple of things I can agree right off the bat with you, Madam Chair. You know, we need to fix this bill, and there is a lot to fix. Secondly, it sounds certainly in your opening statement that you are giving states a lot of credit and we are having real problems on the federal level. I agree. The federal level I do not think has any capability of doing this. The states are far better, a far better place to start solving these problems. So, I want to start my first question with Mr. Nold. Did Kentucky need a 1600-page bill with 20,000 plus pages of regulations to do this small business exchange? Mr. Nold. Uh---- Senator Johnson. Quickly. [Laughter.] You could have done it on your own. Could you not? Mr. Nold. We tried to do it back in 1990, the early 1990s and it---- Senator Johnson. You did not need a federal bill. Did you? Doctor Hickey, did you really need a 1600-page bill and 30,000 pages, 20 or 30,000 pages of regulations, to do this in New Mexico? Dr. Hickey. That set up some of the rules and regulations, Senator, but we had a 60-page bill creating the exchange. Senator Johnson. So, you could have done it far easier. We did not need a federal solution. We did not need to take over one sixth of our economy to start doing these things. So, again I will stipulate. Another thing we agree on. I think a small business exchange is a good idea. It is a sharing of the risk pool. Dr. Hickey. Right. Senator Johnson. It is a good idea. Dr. Hickey. Right, right. And we had a very supportive Republican governor doing it and a Democratic legislature and they compromised on this bill and we moved right out of the gate. I think states are a great place to start. Senator Johnson. To paraphrase Senator Booker, this is not about politics. It should not be. It is really about solutions. I would say it is really about recognizing reality. It is about telling the truth. In fact, the matter is the American people have not been told the truth. Let us talk about cost. You know, we were guaranteed that if you pass this law, the cost for an average family plan would be reduced by $2500 per year. Ms. Salter, by the way, did a great job here. I want to ask you, because you have the exact experience, if you have a health care plan and that add, we will say, ambulatory patient services, is that going to increase the cost or decrease it? Ms. Salter. If I have one now? Senator Johnson. Yeah. Ms. Salter. It will increase. Senator Johnson. Doctor Hickey, if you add emergency hospital services to that, is that going to increase the cost or decrease it? Dr. Hickey. They are automatically covered. Senator Johnson. But again, in other words, if you add coverages to a health insurance plan, is that going to increase the cost or decrease the cost? Dr. Hickey. That generally will increase the cost but the state, again coming back to the state, the state had the authority under the federal bill to decide what essential benefits were going to be covered. Senator Johnson. But again, I am just talking about the truth of what promises were made here and we were promised that the health care law would actually decrease costs but all of the added costs, all the added coverages, all the added mandates have increased costs. Correct? Dr. Hickey. Sir, if I could point out to you that 25 percent of the premiums that you pay today goes to cover the uninsured and the services they get from wherever they get them from. So, in fact, I think, is where the opportunity, once those people get covered, the insurance companies will have a major opportunity---- Senator Johnson. Right, that is ---- Dr. Hickey [continuing]. To lower the cost. Chair Landrieu. Please let him answer. Senator Johnson. But that is really not---- Chair Landrieu. Please let him answer. Senator Johnson [continuing]. What the business people are experiencing. Chair Landrieu. Senator Johnson, please let him answer. Go ahead. Senator Johnson. Well, I have such limited time here so I have got to move quickly. I do want to talk about the other totally broken promise. Fraud, and it is massive fraud. It was a political deception that if you like your health care plan you could keep it. While I do appreciate that Senator Enzi pointed that out if you like your health plan you can keep it which again I appreciate Madam Chair's, her attempt, but her bill only covers those individuals who participate in the individual market where we are going to see, I believe, because of those increase in cost, 49 percent, 52 percent increase in insurance premiums, we are going to see a massive loss of employer-sponsored coverage coming next year. So, I guess I would certainly encourage Madam Chair to take a look at my bill which actually is all inclusive, and it is not quite so onerous on forcing insurance companies to do what they may not be able to do because of state regulators. So, I would really like you to take a look at your law versus my law and I would like to start working with you folks to actually start giving Americans in the freedom, allow them to keep their ability to choose the types of health care plans that they can afford, that they actually want. So, thank you, Madam Chairman. Chair Landrieu. Thank you. I will look forward to doing that. Your bill, of course, guts be Affordable Care Act. Mine fixes it. We will talk about that later. Senator Vitter. Senator Vitter. Thank you, Madam Chairman. First of all, I wanted to give a quick update. At one of our last hearings about Obamacare and small business, we had a very compelling witness from Louisiana, Larry Katz, the owner of Dot's Diner. And unfortunately--I have followed up with him in response to his testimony, and unfortunately, it has gone from bad to worse due to he was forced to cancel policies he provided before in particular so that many of his employees could still be eligible for a subsidy on the exchange. Now, he followed the law by giving 90-day notice and he also asked and hired a consultant to come in to help his employees with the Obamacare exchange application. However, all the website problems have pretty much shut down their ability to purchase insurance on the federal exchange for now. The consultant next coming in December 1st which gives them two weeks to enroll. If his employees go to the individual market, they will see an average premium increase of 54 percent; and if they cannot get plans there on the exchange, there will be 30 individuals who were previously happy with their employer-based coverage who will not have any coverage. So, that is a very real-world but unfortunate update. In terms of questions, Ms. Kofman, I wanted to ask you a few particularly based on Congress and congressional staff going to the D.C. SHOP exchange under the special carveout rule for Congress. Are there more than 50 members of Congress or employees that will procure insurance on this D.C. SHOP exchange? Ms. Kofman. I am sorry. All of the enrollment for employers is protected information, and I am not able to share with you any specific details about the Congressional enrollment. Senator Vitter. Based on the size of Congress, 535 members and the size of their employee base, would you expect that number to be more than 50? Ms. Kofman. More than 50 people enrolling? Senator Vitter. Yes. Ms. Kofman. Oh, yes, I am sorry. I did not understand your question. That is correct. The provision under the Affordable Care Act that speaks about Congressional enrollment essentially overrides the small business size and that is how you are able to avail yourself of the same choices that small businesses have in the District. Senator Vitter. Correct. Is there any other large employer, meaning over 50, who gets the same treatment and gets to go to that exchange? Ms. Kofman. So, At this time, the Congressional provision-- the Congressional prevision only applies to Congress. In 2016-- -- Senator Vitter. Forget about the Congressional provision. Right now, for 2013, 2014, going into 2014 is there any other large employer who has the opportunity to go to the D.C. SHOP exchange or whose employees can? Ms. Kofman. In the city, we made a decision to limit the size of the small business market to up to 50 workers. Senator Vitter. So, Congress is the only large employer who gets that special treatment? Ms. Kofman. It is a function of one of the provisions in the Affordable Care Act. Senator Vitter. Okay. And is there any large employer who gets this huge subsidy well above the normal income-based subsidies of Obamacare in that exchange? Ms. Kofman. So, small businesses in the District, they also, many contribute 100 percent to the premium just as you have heard from other witnesses. Small businesses, especially nonprofits, in the District provide platinum plus level of coverage to their workers and contribute 100 percent. Many contribute 100 percent toward the premiums so they do better than Congress. Senator Vitter. But again, Obamacare has a clear distinction between under 50 and over 50. So, my question was. Are there any other large employers, which means over 50, who go to an exchange, go to the D.C. SHOP exchange at all or go there and contribute this big subsidy? Ms. Kofman. So, in the District, we do not allow larger employers to come in. In 2016, larger employers up to 100 can come in starting in 2016, and then it will be a policy decision for the District whether or not to expand the DC Health Link to larger-sized employers. Senator Vitter. What, in your opinion, justifies this completely different and better treatment for Congress? Ms. Kofman. Congress gets the same treatment as all small businesses in the District. You have the same---- Senator Vitter. Congress is not a small business. It is not under 50 employees. Ms. Kofman. So, by going through DC Health Link, you get access to everything that small businesses in the District get. By choice---- Senator Vitter. I understand. Chair Landrieu. Your time is up. Senator Vitter. But my question is. What in your opinion justifies this completely different---- Chair Landrieu. Senator Vitter, I am very sorry. Your time is up so let me answer that question. The Federal Government is not a small business. The Federal Government is a large business and the Federal Government, Congress, employees, postal workers as you know very well because you have studied this issue very well is under the same as large businesses in America; and that insurance premium is shared between the worker and the government, their employer. Now, that is not the subject of this hearing. We can talk about it. We have debated it. You have had ample time to debate that on the floor. So, if you do not mind that, let us take that debate to the floor. Senator Vitter. Madam Chair, can I briefly the respond? Chair Landrieu. No, you may not and your time---- Senator Vitter. Can I briefly respond? Chair Landrieu. I will give you 20 seconds to respond because you have a lot of time on the floor on this issue and Ms. Kofman does not. Senator Vitter. Well, I certainly did not have a 25-minute opening statement here so I would just like to briefly respond. Chair Landrieu. You have plenty time on the floor. You can respond. Ms. Kofman does not have the time. Senator Vitter. You are right that Congress is not a small business. It is a large employer and it is treated completely differently than any other large employer and far better by being able to go to this exchange, the only large employer that is allowed to do that. And by being able to get a huge subsidy, only large employer that is able to do that for this period or any time soon. Chair Landrieu. And if your bill passes, the only large employer that will not be able to get insurance would be you and your staff. Thank you all very, very much. I really appreciate it. It has been an excellent hearing. We are going to go to the second panel. [Pause.] Excuse me. Welcome back. Thank you all so much and let us begin with our second panel. If you will just briefly introduce yourself. In light of the time, we would like to extend this for another 30 minutes. It is very, very important. Most of the members have left accept Senator Vitter and myself. So, we will stay here and debate this or get testimony on the record. If you would proceed please--I am sorry. Senator Booker is also here. If you would introduce yourself briefly and begin. Ms. Borzi. STATEMENT OF HON. PHYLLIS C. BORZI, ASSISTANT SECRETARY, EMPLOYEE BENEFITS SECURITY ADMINISTRATION, U.S. DEPARTMENT OF LABOR, WASHINGTON, DC Ms. Borzi. Thank you, Madam Chair. Good morning, or I guess it is afternoon by now, to you, Chair Landrieu. Chair Landrieu. Can you speak into your mic please? You have got to lean and I am very sorry. It is uncomfortable but you have to lean forward. Ms. Borzi. Thank you very much for inviting me here this morning. I am Phyllis Borzi. I am the Assistant Secretary of Labor for the Employee Benefits Security Administration and I am here today to discuss the Department of Labor's activities related to communicating with small business about the opportunities and requirements that exist under the Affordable Care Act. The department's Employee Benefits Security Administration or EBSA is committed to helping small businesses and employees understand and benefit from the law. The health insurance market place premium tax credits and notices to employees of coverage options available through the marketplace are all designed to expand access to affordable health coverage. For small businesses, the small business health options program, the SHOP exchange, offers one-stop shopping to enable small businesses to find and compare private health insurance options. The SHOP is administered by HHS and the states. The marketplaces will help individuals and small businesses evaluate their private health insurance options for coverage effective January 1, 2014. The new Fair Labor Standards Act Section 18B notice gives employees information about coverage options available through the marketplace and, if applicable, information about their employer-offered coverage. Employers covered by the FLSA are required to provide this key notice of coverage options to each employee no later than October 1, 2013. For all new employees hired after that date, employers have to provide the notice within 14 days of the employee's start date. Now, although there is a statutory duty on employers to provide this notice, there is no fine or penalty under the statute for failing to do so. On May 2, the department issued Technical Release 2013-2 providing guidance on the coverage options notice, as well as model notices. We are increasingly using model notices in an effort to be helpful to small businesses because a model notice makes the notice requirement far less burdensome. Without a model notice, employers need to figure out for themselves how to comply with statutory requirements or hire somebody to help them. EBSA worked with HHS and our other sister agencies to develop the model notices. We also received feedback from employers. The model notice serves as a compliance assistance tool for employers but employers are not compelled to use these notices. There is one model notice for employers who offer health plans to their employees and a second one for employers who do not offer health plans. These notices are posted on our website in multiple formats for easier use by employers and are also available in Spanish. The two model notices make the process for shopping for health care coverage easier for both employers and employees. For example, the model notice for employers who offer health care coverage deliberately contains more information than the minimum statutory requirements for this notice. Why? Because then employees will have more information about their coverage options inside and outside of the marketplace. This also creates efficiencies for employers because the extra information in the model notices matches exactly the marketplace employer coverage tool designed by HHS which is part of the single streamlined application for the coverage in the marketplace. This means that an employer who uses our model notice will not face additional requests for information from the marketplace about coverage with respect to the employee because the model notices satisfy both the FLSA and the HHS requirements. Outreach and compliance assistance are very high priorities for EBSA. We partner with HHS, Treasury, IRS, and the Small Business Administration using a multifaceted approach that---- Chair Landrieu. Please try to wrap up. Ms. Borzi. Certainly--coordinated online information linked to other agencies, webinar trainings and compliance and participant assistance. In addition, we have benefit advisors that are available to assist small employers with compliance both through our website and through our toll-free hotline. I think I will stop there and be happy to take any questions. [The prepared statement of Ms. Borzi follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chair Landrieu. Thank you very much. Mr. Cohen, please introduce yourself briefly and get into your testimony. Thank you. STATEMENT OF GARY COHEN, DEPUTY ADMINISTRATOR AND DIRECTOR, CENTER FOR CONSUMER INFORMATION AND INSURANCE OVERSIGHT, CENTERS FOR MEDICARE AND MEDICAID SERVICE, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, BALTIMORE, MD Mr. Cohen. Thank you, Chair Landrieu and members of the Committee. I am Gary Cohen. I am privileged to serve as Director of the Center for Consumer Information and Insurance Oversight within the Centers for Medicare and Medicaid Services, and thank you for the opportunity to discuss the many benefits the Affordable Care Act provides for small businesses. I was very pleased, as I know you were Madam Chair, to hear from our state partners from Kentucky and New Mexico and the District of Columbia about their successes in building small business marketplaces at the state level. From the very beginning we encouraged every state to set up their own marketplaces because we believe that states were in the best position to create those marketplaces in hallway that would best serve the residents of their states. We have worked very closely and, indeed, every day with our state partners to help them stand up those exchanges, and we take great pride in the success that they have had. But I think it is also important to remember that the reforms of the Affordable Care Act are not just about the exchanges. They go beyond the exchanges to the entire small business market. As you know did in your opening statement, Madam Chair, many small businesses that would like to offer health benefits to their employees have faced significant challenges in the market as it exists today. Premiums have been going up, double digit, 20 plus percent every year. Small businesses have been charged 18 percent more for the same type of coverage that the larger employers pay; and most importantly, they were subject to wide variations and high volatility in premiums based on the type of work that the business did, based on the health status and demographic characteristics of their employees. So, a small construction company would pay more than an accounting firm of the same size for the same coverage. Small employers often face significantly higher rates if they had older workers or more women in their workforce than others. Because of the small risk pool, if even one employee became sick, rates for the entire company would skyrocket. The Affordable Care Act is changing all of that and transforming this market. Most importantly, we are expanding the risk pool to all of the small business enrollees in an entire state. We are spreading the risk among all of those employers. We are saying that you cannot charge more just because some people get sick or are women, and there are limits to how much more you can charge people because of their age. So, the whole point of this is for the small business market to function more like the large group market has functioned and, as you noted, Madam Chair, where premiums have been significantly lower. In addition, what we have said is that insurance should be real insurance. It should not run out just as soon as you have an illness that requires a hospital visit. It should provide the essential benefits that were determined by states and were pegged in most cases to what was prevalent in the small group market today. So, these are not a bunch of new benefits that nobody ever thought about or wanted to have. This is what small businesses had today and what we said is that it is the type of coverage that is real coverage so that people do not find that if they become sick and they all of sudden have to go to the doctor or go to the hospital, oh, you do not have that coverage. You do not have hospital coverage. You do not have prescription drug coverage. It is real coverage. Now in addition, the Affordable Care Act created the small business health care tax credit to help small employers of 25 or fewer employees who earn an average of less than $50,000 a year, and if the employer pays at least 50 percent of the premium cost of their employees, they qualify for a tax credit. That tax credit has been in effect and hundreds of thousands of small businesses have already benefitted from it. Beginning in 2014, the tax credit increases to up to 50 percent of the employers contribution to their employees health care costs. I just want to touch very briefly on some of the things that we have done to make sure that small businesses are aware of these benefits and options, and in particular I want to say that we have worked very closely with the agent-broker community. We understand that most small businesses do obtain coverage from an agent, using an agent or a broker. We have done a series of many webinars and trainings for literally tens of thousands of agents and brokers who participated in those so they can understand how to participate in the SHOP exchange. In addition, our regional offices have conducted many, many workshops and programs across the country to inform small business about the benefits of the Affordable Care Act. Thank you very much. [The prepared statement of Mr. Cohen follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chair Landrieu. Thank you very much. Ms. Markowitz. STATEMENT OF MARIANNE O'BRIEN MARKOWITZ, REGIONAL ADMINISTRATOR, REGION V, U.S. SMALL BUSINESS ADMINISTRATION, CHICAGO, IL Ms. Markowitz. Chair Landrieu and members of the Committee, thank you for having me here today to discuss SBA's efforts to educate small businesses about the Affordable Care Act. As SBA's Regional Administrator for Region V, I serve as the agency's principal representative for Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin. In this role, I oversee SBA's Affordable Care Act outreach through our seven district offices in the Midwest. America's 28 million small businesses are the backbone of our economy, creating two out of every three net new jobs and employing half of America's work force. At SBA, we are committed to providing entrepreneurs with the tools and the resources they need to start and grow businesses. This includes an aggressive outreach effort around the Affordable Care Act to ensure that small business owners have the facts that they need to make sound business decisions for their businesses and their employees. With a nationwide network of 68 district offices, SBA is uniquely positioned to provide outreach and education on the Affordable Care Act. Since February 2013, we have participated in more than 1200 Affordable Care Act outreach events reaching over 68,000 small business owners and stakeholders across the country. I have personally presented at over 20 health care forums, and my team in Region V has participated in an additional 100 plus events throughout the Midwest. These events are often hosted in partnership with local chambers and other community organizations and enable SBA to connect with a wide range of entrepreneurs. In conjunction with our federal partners at the Department of Health and Human Services, the Department of Labor, and other agencies, SBA provides small business owners with the most updated information on the Affordable Care Act. We continue to educate entrepreneurs on issues such as the impact of the law based on a businesses size, the tax credits available for small companies, and the eligibility and enrollment details relevant to the individual marketplace. I cannot emphasize enough that there is a great deal of misinformation about the health care law and the small business community. In my travels, I frequently meet with small business owners who are anxious and apprehensive about how the Affordable Care Act may impact their business. When I speak at outreach events, many entrepreneurs, regardless of the size of their business, often mistakenly believe that they will be affected by the employer shared responsibility rules. I am able to reassure them that this is not the case. In fact, 96 percent of all businesses and most of the businesses that I encounter in these sessions are too small to be impacted. Of the remaining four percent, the vast majority already provide health care that meets these standards required by the law. When entrepreneurs have access to accurate information, they are able to have their questions answered. They can leave better equipped to make educated decisions about what is best for their unique business. SBA also promotes the benefits available to small businesses through the SHOP marketplace. Whether it is a state- run exchange or a federal program, these new marketplaces are designed to give small businesses with generally up to 50 full- time employees the same purchasing power and options enjoyed by larger companies. While there is no requirement for employers to participate, the marketplaces provide a tremendous opportunity for many small business owners who want to purchase quality, affordable health insurance for their employees. In addition to these efforts, SBA has developed a robust online and digital toolkit that complements our in-person counseling activities and provides business owners with on- demand access to the latest information about the Affordable Care Act. We have created extensive online content at both SBA.gov and businessUSA.gov. These sites together receive more than 2 million visitors per month. We also launched a direct enewsletter which reaches more than 1 million subscribers. In participation with the Small Business Majority since July, we have held more than 35 Affordable Care Act one-on-one webinars for small businesses across the country. These popular online sessions which take place every Thursday have reached more than 16,000 entrepreneurs and have been very well received. SBA leverages our extensive resource partner network to help educate small businesses on the Affordable Care Act. Earlier this year, we held a series of apprehensive webinar trainings for our Small Business Development Centers, our Women's Business Centers and our SCORE counselors. Working with over 1 million entrepreneurs annually, these partners are able to expand our Affordable Care Act outreach efforts and serve as a resource on the law in their communities. As the Affordable Care Act continues to be implemented, SBA is committed to collaborating with our federal partners in ensuring that small business owners have the facts and resources they need to understand and benefit from the law. Thank you again for the opportunity to testify today. I look forward to your questions. [The prepared statement of Ms. Markowitz follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Chair Landrieu. Thank you. Our hearing has gone 15 minutes over time but this is so important I want to continue the questioning. I think we have gotten a lot of valuable testimony on the record as we continue to try to fix and improve the Affordable Care Act. But let me ask all three of you briefly my first question. We have the Department of Labor represented here, Ms. Borzi. We had the Center for Medicaid and Medicare, CMMS. We have Small Business Administration. The three of you all are primarily responsible to helping implement the Affordable Care Act at the federal level, and there has been undoubtedly justified criticism of what has happened so far at the federal level and in those states where governors, mostly Republican but some Democrats, have refused to set up their own exchange and ask you to come in and do it. There has been some difficulty. So, my question is. What are you going to promise to do better, what are you working on specifically? And I want 30 seconds each of you starting with you, Ms. Markowitz. And what did you learn this morning that could help you do a better job? Starting with you. Ms. Markowitz. Sure. Thank you, Chairman Landrieu. Chair Landrieu. Speak into the mic. You have to press your back button. Ms. Markowitz. Sorry. What the SBA is focused on is outreach and we continue more than ever to get the word out to small businesses. One of the biggest problems that we run into is the misinformation in the small business community. Chair Landrieu. Which is purposefully I think in large measure but go ahead. Ms. Markowitz. It is very prevalent. Most of the rooms that I walk into are filled with small businesses. They are nowhere near the size that would be impacted by the employer shared responsibility provision and yet they are positive that they will be impacted by this. So, we cleared that up. Chair Landrieu. Just for the record, could you clear that up now that when you walk into a room it is mostly filled with businesses that are of what size? Ms. Markowitz. Well under 50 employees. Chair Landrieu. And are they affected by it at all? Ms. Markowitz. Not at all. Chair Landrieu. So, no business in America that is under 50 employees are affected at all by the employer shared responsibility. Ms. Markowitz. No. In fact, that represents 96 percent of all overall businesses. In addition to not being impacted by the employer shared responsibility, those 96 percent of businesses have, you know, access to new benefits and protections that they never had before. So, often I walk into a room and there can be a very negative perceptions of this Act and they have not begun to explore the benefits that are available to them because they are so confused by the misinformation. Chair Landrieu. Okay. Mr. Cohen. Mr. Cohen. Thank you. What we are doing and I will not surprise you, we are working very hard to improve the online experience. I am pleased to say that we actually have made significant improvements, and I keep hearing every day that more and more people are able to get through the application in a reasonable period of time and get enrolled in coverage. There is actually a story on NBC news today is the story about the healthcare.gov roll out outdated, and I think it is. I think we have moved on significantly from where we were before. In terms of what I learned today, I was really impressed by all the three states talking about the involvement of their stakeholder communities, and I think we have done that. But it is different at the federal level frankly than it is at the state level but I think we need to work really hard to make sure that we are working with the agent-broker community, the issuer community, the consumer community, the small business community, and so forth to make sure that everybody gets to the benefits of this law. Chair Landrieu. Ms. Borzi. Ms. Borzi. I have had the same experience that my colleagues had. I do a lot of small business roundtables. There is a lot of misinformation. People, not only do they not understand that the employer responsibility penalty does not apply to them, what I found remarkable is that they do not understand that the small business tax credit is already available, has been available since the law was signed, and these are small businesses who are trying to do the right thing by their employees which is providing coverage. I know, Madam Chair, that you are very interested in the notice requirement that we administer. We are trying very hard to make sure that people understand that this can be an opportunity for small businesses to understand a little bit better about their responsibilities and I certainly will promise you that we will work closely with your staff and the others, the staff of the other members of the Committee, to try to make the experience of having to fill out these forms clearer and easier. Chair Landrieu. I appreciate that. In my last few minutes, I want to submit the forms that the Department of Labor put out that I found very, very confusing, new health care insurance marketplace coverage. First of all, it should have said that if you receive this as an employer and you are under 50 people, disregard it. It is not appropriate for you. Over 50, this is what, and so I am going to submit something that we have come up with that might be a more clear form, and I hope that you all will work on that. Once the website gets up, people can have a better walk- through experience because the consumer experience with this is extremely important. So, thank you all very much and I will come back a few. I think it is Senator Johnson and then Senator Booker. Senator Johnson. Thank you, Madam Chair. Mr. Cohen, in general what is happening to the insurance premiums, the gross premiums now, not after taxpayer subsidy, what is happening to the insurance premiums of young, healthy individuals under the Affordable Care Act? Mr. Cohen. I think they vary a lot from state to state and even within a state, region to region. I do not think it is possible to make a, you know, broad, general statement about that. Senator Johnson. I would like to enter into the record, I guess it is the Republican staff Committee has put together a summary sheet of what is happening, and I can say, for example, in the State of Illinois somebody 27 years old, a male is going to an experienced a 104 percent increase, a female about a 42 percent---- Chair Landrieu. Could you clarify, though, is that with subsidies or without? Senator Johnson. That would be the gross premium. Chair Landrieu. That is without subsidy. Senator Johnson. Yes. Chair Landrieu. But the bill has subsidies in it so let the record---- Senator Johnson. I understand that. Chair Landrieu [continuing]. Reflect that so we will not be confused. Senator Johnson. The point being is the only way that anybody is going to, not the only way, but one of the prevalent ways that people actually see their share of health premiums reduced is because taxpayers are going to subsidize their care. In Wisconsin--let me finish, Madam Chair--in Wisconsin, the cost of a male 27 years old will increase about 125 percent, a female about 77 percent. While that has to do really with the fact that we are a community rating, we are limiting the insurance premium rate on older, sicker individuals and we are increasing the premiums, making the younger, healthier people pick up that burden, right? Is that not correct? Is that not redistribution? Mr. Cohen. Well, what I think we are hoping to do is increase the number of younger people who are actually covered because the rate of coverage is---- Senator Johnson. Right. So, they can get in the pool and pay a lot more than they were currently paying in the individual marketplace. Correct? Mr. Cohen. Well, what---- Senator Johnson. I mean---- Mr. Cohen. We are expanding the risk pool so we can spread the risk across the whole population. That is the idea behind the law. Senator Johnson. Mr. Cohen, let me ask you as the expert in the CMMS. When did you realize that what the President was saying that if you like your health care plan you can keep your health care plan, if you like your doctor you can keep your doctor period, when did you--did you believe that ever? Mr. Cohen. The law provides that issuers could continue plans as grandfathered plans as long as they wanted to into the future. So that the law---- Senator Johnson. Well---- Mr. Cohen [continuing]. The law was designed to enable that what the President said. Senator Johnson. Yes, but my---- Mr. Cohen [continuing]. To be true and it was really up to the insurance industry to make decisions as they have in the past. Senator Johnson. Let me explore that. My bill, If You Like Your Health Plan You Can Keep It Act uses the President's exact same language in the bill. The problem with the President's, the grandfather clause in the Affordable Care Act, yeah, you can keep your plan as long as you totally change it. What we did is we took out these as long as you totally change it, we did not force some of those initial essential health benefits on to those plans. So, the fact of the matter is you could not keep your plan unless you changed it. Mr. Cohen. Grandfathered plans are not subject to the essential health benefit requirements. Senator Johnson. But there are other things they are subject to, guaranteed issue, maximum, over the lifetime maximum. Mr. Cohen. No. They are not subject to guaranteed issue. In fact, it is quite the opposite you cannot add more people onto a grandfathered plan under the law. Senator Johnson. I am not asking to add more people. Mr. Cohen. Well, guaranteed issue, that is what you are talking about. Senator Johnson. Well, okay. Lifetime maximums. We will get you the list of the changes required in that grandfather clause because we extract that in my bill. But anyway getting back to my question. Did you believe that if people like their health care plan they would be able to keep it, across-the-board that nobody would lose their health care plan if they wanted it? Mr. Cohen. I believe that the law provided an opportunity for insurance companies to have grandfathered plans which would make President's---- Senator Johnson. What about---- Mr. Cohen [continuing]. Promise to be true and it was also true that the large majority of Americans who have employer- sponsored coverage through large employers were also able to keep their plans. Senator Johnson. But every American? I mean, for example, did you realize that state high risk pools like in Wisconsin which covers 22,000 Wisconsinites, did you believe those things would still be available after implementation of Obamacare? Mr. Cohen. Well, before the Affordable Care Act, every American was not able to keep his or her health plan. You could lose it---- Senator Johnson. That is not what we are talking about. Mr. Cohen [continuing]. Because you could lose it if you got sick---- Senator Johnson. Listen. We are talking about the promise made that if you like your health care plan you can keep it. I have got a couple in Wisconsin, both cancer victims, that have been dropped, will be dropped from the high risk pool because it becomes obsolete January 1. You knew that as a health care expert, correct? Mr. Cohen. The law did not require states to drop their high risk pools. The law allows states to continue the high risk pools. So, I do not think that is a requirement of the law. That was a decision made by the State of Wisconsin. Senator Johnson. But you knew those things would be gone? Mr. Cohen. No. Senator Johnson. You really believed, did you really believe that every American would be able to keep their health care plan and their doctor? You believe that to be a true statement? Mr. Cohen. Well, there is nothing in the law that requires anybody to lose their doctor. Senator Johnson. I am just asking you whether you believe that. Mr. Cohen. I believe that the law contained provisions that would enable that to be true but it also is a private market solution. So, it is not government mandated health care. It is up to insurance companies what products they offer in the marketplace. Insurance companies were given the option, the ability to maintain the existing plans as grandfathered plans, and if they do that, people are able to keep those plans. Senator Johnson. Are you surprised---- Mr. Cohen. That is the choice---- Chair Landrieu. I am sorry. Time. Senator Johnson. Are you surprised millions of Americans are losing their health care plan? Are you surprised by that? Mr. Cohen. Well---- Senator Johnson. Are you surprised? Just yes or no. Are you surprised that millions of Americans are losing health care plans? Mr. Cohen. I am not surprised or unsurprised. I did not have an opinion as to what the market would do. I knew what the law provided. Chair Landrieu. Senator Johnson, thank you for sharing such clarifying comments. Senator Booker. Senator Booker. First of all, I want to thank the Chair. You held this hearing at a difficult time with a lot of political noise and nonsense and rancor. You know, it reminds me of a great President who once said, it is not the critic counts, it is not the man who points out that the strong man stumbles or the doer of deeds could have done better, it is the person actually in the arena whose face is marred with blood and sweat. It is not the man in the arena this time; it is the woman. Thank you for holding this hearing and bringing right and left together to discuss practically what is going to help Americans. And so, I have a very simple question which is fueled by my frustration. I want to form a new caucus already and I have only been here 20 days, and it is the what is going to grow American businesses, what is going to help small businesses which, as you rightfully pointed out, are the job creators right now that are driving our economy right now. And what was before, I do not want to go back. I am not putting this country in reverse to go back to a time where small businesses were getting crushed because they were losing good employees because they did not have health insurance. Small businesses were getting crushed because those who tried to step up to the plate and provided insurance in a globally competitive market who were competing as countries who fixed this problem with lower health care costs, forcing small businesses to either internalized this or put their workers in the corner. We have got to figure out a way to fix this in a way that is going to grow and strengthen small businesses. The idea in itself is very good, that we can find a way to create a competitive business environment for small businesses so they do not have to worry about this fear. I agree with the Ranking Member. This is about freedom from fear. I know tons of businesses that lived in that fear. So, the one thing that has already been discussed that you forget rhetoric, practically you are seeing what I am seeing, is that when you go around the State of New Jersey there is so much confusion fueled by politicians and media of folks about the facts. 96 percent of businesses are not affected here, and yet I have small businesses in New Jersey who think somehow it is going to shake them and are not even aware that there are federal subsidies to help them. And so, in this state of mass confusion, fueled by media and politicians, please tell me from your experience what is the best way to cut through all this mishegoss--that is a Jersey term--all this mishegoss and get to what the facts are? How can we get the truth to small businesses who need to be freed, liberated from fear and know how this actually could help them? Anybody? Ms. Markowitz. Well, thank you, Senator. Senator Booker. With a name like O'Brien Markowitz, you are about bringing things together, building bridges. [Laughter.] Ms. Markowitz. This is true. You know, it is really about outreach and education and bringing the focus onto the benefits that are available for the 96 percent of small businesses that are not only not affected by the employer shared responsibility provision but that have all of these benefits that they cannot focus on because of the misinformation, and that is what we as an agency are entirely focused on. We work with our federal partners. HHS has been a great partner in this outreach as have some of our state partners. Once a business gets rid of that fear that you allude to which is very real, they can focus on the fact that there are these tax credits, be very excited about focusing on and exploiting those for their business. They understand more about the broader reform and that they cannot be discriminated for having a diverse workforce, for employing women, for employing sicker or older employees. I mean, these are things that once a business find out about the 80-20 rule and they understand that all of these benefits are available to them because of this important reform, they are very excited about it and that is what we are out there doing, creating more outreach and creating more educational opportunities. Senator Booker. So if you witness the relief, even the excitement from real companies, who you do not ask them if they are Republican or Democrat, you just ask how can we help the company and you see it which I have seen with my eyes, the relief many businesses feel. Can I ask you very pragmatically, when you are explaining things, is there anyone change or anything practically that we could do here in Washington, besides listen to ourselves speak, to actually help this bill get a little better than it is now? Practically is there anything that you might want to suggest that could help this Committee? Ms. Markowitz. I mean, honestly, what you are doing today is very helpful, bringing the focus on to the truth, you know, and the benefits that are available for small businesses. I think as the exchanges move forward and I know HHS is working around the clock. For instance, in my outreach before the launch, the focus on these businesses is really on the broader reform once they get through the misinformation. After the launch, it really is surprisingly it remained on that. They were not so focused on the website issues. They are really focused on this broader reform and how it impacts their business. The elephant in the room was the pricing, and now that the launch has happened for the SHOP exchanges, even though they may not be fully functional, and HHS is working on that, there is pricing information. So, with this information, it is just more information. The businesses can go away, do the analysis and figure how SHOP can eventually be a resource for their business. It is really all about information, education, outreach, and getting the truth out and cutting through all of the misinformation. Mr. Cohen. Very quickly I would just add, you know, one of the reasons why the states' exchanges have been so successful is frankly they had had resources available to them to do a lot of this outreach because under 1311 we were able to give them grants and we have been limited in terms of what we were able to do. Chair Landrieu. And why were you limited? Mr. Cohen. Just because of the appropriation. We do not have funding under the appropriation process to do as much. We do outreach but to do as much as we would like to do so that is one area if we could work together in a bipartisan way just to get in the facts out, that would be wonderful. Chair Landrieu. Ms. Borzi, your last word. Ms. Borzi. Just one quick thing. The thing that troubles all businesses regardless of size, but it is particularly important for small businesses, is uncertainty. So, there is lots of misinformation but there is also lots of uncertainty because they keep hearing that it is going to be repealed, it is going to be changed, this is going to happen, that is going to be happening. It is very important as all of us go out to be able to say to small businesses, this is what is going to happen when, because it is not just 96 percent of them are not affected. It is that this Act can actually give you positive benefits like more choice, the ability to get coverage which you were not able to get for your employees before. Chair Landrieu. Thank you very much. This has been an excellent hearing and let me particularly thank Senator Booker. This has been an extraordinary first full hearing for you attend. Senator Booker. You always remember your first. Chair Landrieu. Yes, and you will remember this one, and it has been an extraordinary privilege to be here with you. And Senator Johnson thank you for participating all the way to the end. I started this morning by saying, and I knew this hearing would be full of a lot of strong opinions, but I started this morning by saying, as Mark Twain said, that a lie can go half way around the world before truth gets out of bed and puts its boots on in the morning. This hearing was held to get the truth out about the benefits of the Affordable Care Act to small business and the challenges that are presented to us. As Americans, I think if we work together, we could meet those challenges. The meeting is adjourned. [Whereupon, at 12:34 p.m., the Committee was adjourned.] APPENDIX MATERIAL SUBMITTED [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]