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Main Street Alliance

January 26, 2011

Statement for the Record
J. Kelly Conklin & David Borris
On behalf of the Main Street Alliance

House Committee on Ways & Means
Hearing on Health Law’s Impacts on Jobs, Employers, and the Economy
January 26, 2011

Statement for the Record, Committee on Ways & Means Hearing on Health Law Impacts
J. Kelly Conklin and David Borris, Main Street Alliance Executive Committee
January 26, 2011

Chairman Camp and Members of the Committee,

We appreciate this opportunity to provide written testimony on behalf of the business owners in the Main Street Alliance network for the January 26 hearing on the health care law’s impact on jobs and the economy.

The Main Street Alliance is a national network of small businesses dedicated to ensuring that small business owners have the opportunity to speak for themselves on issues that impact their businesses, their employees, and their local economies. In 2009, we both had the opportunity to testify before the Committee on Ways & Means on the topic of health care, sharing our personal stories and speaking about the urgency of reforming health care to make it work for small businesses.

The January 26 hearing was called to explore the impact of the new health care law on economic growth and job creation. From our perspective, this impact is clear and positive: from the new small business tax credits to new protections like rate review and a value for premiums requirement, the health law is already throwing a lifeline to small businesses and creating opportunities for businesses to offer health coverage, save money on premiums, and plow those savings back into business investment and job creation.

While some may raise concerns about the employer responsibility requirement for businesses with more than 50 workers, the fact remains that 95 percent of our nation’s businesses have less than 50 workers (and so would not be subject to this requirement), and 95 percent of businesses with more than 50 workers already offer health coverage. Indeed, this provision only reinforces what the vast majority of larger employers already do, and ensures that responsible employers who offer good-paying jobs with health benefits aren’t undercut by competitors who shun these responsibilities.

A much bigger issue – indeed, a true threat to small businesses and our ability to create jobs – is runaway health insurance rates. For example, in early 2010 (before the health care law was passed), one of us received a letter from our insurer offering to renew our current coverage at an increase of 124 percent. The escalation of health insurance rate increases is simply not sustainable for small businesses. Thankfully, the health care law includes a series of provisions that will begin to rein in these increases and cut costs for small businesses like ours. These provisions include:

Small Employer Health Premium Tax Credits
Business owners in our network from Portland, Maine to Portland, Oregon are already benefiting from the new tax credits effective for tax year 2010. Jim Houser, owner of Hawthorne Auto Clinic in Portland, Oregon with 15 employees, expects to receive a credit of over $10,000 on his health insurance bill. That’s serious savings for a small business. Jim has described the tax credit as a “time machine,” turning the clock back on his insurance rates.

Premium Rate Review
After years of enduring double-digit rate increases with no recourse, small businesses like ours are encouraged that our states have new tools and new resources to review insurance rates and require insurers to provide justification for unreasonable rate increases. This is one of the most direct ways to protect small businesses and help us do our part to create jobs and grow the economy. There is a high level of market concentration in the health insurance industry and true competition – competition based on consumer value rather than competition based on cherry-picking risk pools – is largely absent. That is why we need robust rate review – to ensure that we’re getting a fair shake.

Medical Loss Ratio Requirements
As small business people, we understand that the most important thing about a business is the value you provide to your customers. Yet the insurance industry has lost sight of that. The new minimum medical loss ratio requirements will restore a focus on providing us with value for our premium dollars. And if insurers fail to meet this basic standard, insurance customers like us will receive cash rebates starting next year – potentially to the tune of hundreds of millions of dollars.

State Insurance Exchanges
The state insurance exchanges due to come online in 2014 will level the playing field for small businesses. By creating a mechanism whereby we can band together and shop for coverage in one large pool, the exchanges will give us bargaining power, risk pooling, and greater choice.

The repeal of the health law or the undermining of its core provisions would cause serious harm to small businesses (see attached fact sheet). Certainly, there are improvements that can and must be made to the law. For example, the 1099 reporting provisions and the paperwork burden they would create demand immediate attention. We were heartened that a majority of House members voted to fix this problem last summer (HR 5982, 7/30/2010), and we are confident that the current Congress will get this problem fixed with appropriate speed. We are also confident these types of improvements can be made without undermining the core cost containment provisions and other protections contained in the Affordable Care Act.

The year 2010 saw a dramatic uptick in the percentage of small businesses offering health coverage: among businesses with 3-199 employees, the offer rate increased by 9 percentage points; among those with 3-9 employees, the offer rate increased 13 points, from 46 percent to 59 percent. This is a promising trend, and we need to keep forging ahead, not return to the flawed health care system of the past.

With proper implementation of the health care law, we can truly level the playing field for small businesses like ours. The law promises to benefit small businesses and the American economy by stabilizing our health insurance costs and allowing us to focus on what we do best: creating jobs and providing important goods and services to communities across America.

Thank you,

J. Kelly Conklin                   David Borris
Owner, Foley-Waite Associates, Inc.           Owner, Hel’s Kitchen Catering
Bloomfield, NJ                   Northbrook, IL

Bad for the Bottom Line: How Rolling Back the Affordable Care Act Would Harm Small Businesses

Small Businesses are Moving Forward on Health Care
The percentage of small businesses offering health coverage to their employees rose significantly in 2010. For businesses with 3-199 employees, the health insurance offer rate increased 9 percentage points. This increase was driven by an even greater spike among the smallest businesses: the offer rate among businesses with 3-9 workers rose 13 percentage points, from 46 percent to 59 percent.

Repeal of the Affordable Care Act Would Harm America’s Small Businesses
Attempts to cast repeal of the Affordable Care Act (ACA) as “good for small businesses” obscure what repeal would actually do. Here are the facts:

Repeal would raise taxes for small businesses that qualify for the new premium tax credits.

Starting for tax year 2010, small businesses may be eligible for health premium tax credits valued at $38 billion over a ten year period.  As many as 4 million businesses may qualify for a credit, and about 1.2 million businesses could qualify for the maximum credit of 35 percent of their insurance contributions (increasing to 50 percent in 2014).

Up to 16.6 million people are employees of small businesses that will be eligible for the credit between 2010-2013.

Repeal would leave small businesses vulnerable to continuing price gouging by insurers.

The ACA gives states new tools and resources to require insurers to justify their rate increases.

Without robust rate review, insurers will continue to raise rates at their whim. The most recent example: Blue Shield of California, which recently announced combined rate hikes of up to 59 percent, and then thumbed its nose at the state’s insurance commissioner when he attempted to delay the hikes.

Repeal would eliminate the guarantee of a basic standard of value for premium dollars.

Under the ACA, if insurers fail to meet new minimum medical loss ratios (MLR), they’ll owe a rebate to customers.

Projections for the small group market give a mid range estimate of $226 million in rebates, or about $312 per person receiving a rebate, for 2011. Individual market estimates add another $521 million.

Repeal would gut consumer protections for small business owners, employees, and their families.

The ACA puts in place important consumer protections: for example, a ban on pre-existing condition exclusions, new limits on insurance caps, and the ability to keep children covered up to age 26. These protections directly benefit health insurance customers in the small group and individual markets where small businesses get coverage.

Repeal would renege on the promise of choice, bargaining power, and risk pooling in insurance exchanges.

Starting in 2014, small businesses with up to 50 employees (100 in some states) and self-employed people will be able to band together to shop for coverage in state insurance exchanges, gaining bargaining power and leveling the playing field with insurers. An estimated 29 million people will get coverage through the exchanges by 2019 (5 million in small businesses that buy in as a group, and 24 million more buying in on their own).

Repeal would be bad for our national bottom line.

The Congressional Budget Office estimated the repeal bill would add $230 billion to the federal deficit over 10 years, and much more over the following decade.

The final word on health care repeal: It’s bad business for small business.

Contact Information

J. Kelly Conklin
Foley-Waite Associates, Inc.
225 Belleville Avenue
Bloomfield, NJ 07003-3666
(973) 743-0700

David Borris
Hel’s Kitchen Catering
3027 Commercial Avenue
Northbrook, IL 60062
(847) 205-5125

The Main Street Alliance
3518 S. Edmunds St.
Seattle, WA 98118
(603) 831-1835