Investment Disclosure Act of 2003

Madam Speaker, pursuant to House Resolution 283, I call up the bill (H.R. 660) to amend title I of the Employee Retirement Income Security Act of 1974 to improve access and choice for entrepreneurs with small businesses with respect to medical care for their employees, and ask for its immediate consideration in the House.

Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, the most pressing crisis that we face in health care today is the number of Americans who lack basic health insurance benefits. It is a problem that can be illustrated by just a few numbers, so let us just look at the facts.

Today, 41 million Americans are uninsured. This problem is not going to go away, and we have a responsibility to confront it. With health care costs continuing to rise sharply across the country, more and more employers and workers are sharing the burden of increased premiums. Employer-based health insurance premiums leaped an average of 15 percent in 2003, the largest increase in at least a decade, according to a study just released June 11 by the Center for Studying Health System Change. We know that for every 1 percent increase in coverage, additional price increase, 300,000 more people lose their health insurance, according to a 1999 study by the Lewin Group, a national health care and human services consulting firm.

The second number is 60. Sixty is the percentage of the 41 million uninsured Americans who either work for a small business or who are dependent upon someone who does. So let us remember, there are 60 percent of the uninsured where they or one of their dependents works every day for a company that likely does not offer health insurance. Many of these Americans work for small employers who cannot afford to purchase quality health insurance benefits for their workers. Notably, the 2002 Census Bureau statistics show that employer-sponsored health care coverage has declined because small businesses with less than 25 workers have been forced to drop coverage because of rising health care costs. These small employers are denied the ability to purchase quality health benefits that compare with the coverage that large, multi-State corporations and unions have been offering to their workers for decades.

The last number is $130 billion. Yes, $130 billion is the cost to the American economy every year of poor health and premature deaths amongst those 41 million Americans who lack basic health insurance coverage, according to a study released just this week by the Institute of Medicine. Madam Speaker, $130 billion a year of additional costs to our society and disproportionately aimed at the 41 million Americans that do not have any health insurance.

The implications of these numbers are tragic, not just for employers who cannot afford the high cost of health insurance, but the millions of uninsured families who are being denied access to quality care. Clearly, we need to focus on providing affordable health care to the uninsured as well as ensure that employers who provide health benefits to their employees are not forced to drop coverage because of rising premiums and high administrative costs.

The Small Business Health Fairness Act, which we have on the floor today, responds to this problem and can help reduce the high cost of health insurance for small businesses and uninsured working families. By creating association health plans, which would be strictly regulated by the Department of Labor, small businesses could pool their resources and increase their bargaining power with benefit providers, which will allow them to negotiate better rates and purchase quality health care at a lower cost.

President Bush addressed this point directly last year during his speech at the Women's Entrepreneurship Summit when he said, ``Small businesses will be able to pool together and spread their risk across a large employee base.

It makes no sense in America to isolate small businesses as little health care islands unto themselves. We must have association health plans.

Well, the President is right, and we should help level this playing field so that small businesses can afford to offer the kind of quality coverage that large companies and unions do across America today.

Importantly, the bill gives AHPs the freedom from costly State mandates because small businesses deserve to be treated in the same fashions as corporations like GM and UPS, and unions who receive the same exemption so that they can offer high quality plans and benefits to their workers. Clearly, State health care mandates are useless to families who do not have the health care coverage in the first place. And if you do not have health care coverage, State mandates requiring health plans to offer specific benefits to those they cover do you and your family no good at all.

Let us be clear on the protections this bill provides workers, however, because it includes strong safeguards to protect workers. In fact, the solvency standards in the bill go far beyond what is required any single employer plan or labor union plan under law. And despite the bipartisan nature of this bill, some misinformation has been spread about the bill that I would like to take a moment to correct.

The measure protects against cherrypicking because we make clear that the AHPs must comply with the 1996 Health Insurance Portability and Accountability Act, HIPAA, which prohibits group health plans from excluding or charging a higher rate to high-risk individuals with a high-claims experience.

Under our bill, sick or high-risk groups or individuals cannot be denied coverage. In addition, AHPs cannot charge higher rates for employers with sicker individuals within the plan, except to the extent already allowed by State law based on where the employer is located.

The bill also contains strict requirements under which only bona fide professional and trade associations can sponsor an association health plan, and therefore does not allow sham association plans set up by health insurance companies to go out and do what some did over the next decade or so. These organizations must be established for purposes other than providing health insurance and they have to be in existence for at least 3 years prior to the passage of this bill.

This campaign of disinformation belies not just the need for the bill, but the bipartisan support behind it. Not only is it strongly supported by the President of the United States, President Bush and Secretary Chao at the Department of Labor, but it has more than 160 bipartisan co-sponsors, including my colleague, the gentleman from Texas (Mr. Sam Johnson), the subcommittee chairman; the gentleman from Kentucky (Mr. Fletcher), the former member of our committee, now on the Committee on Energy and Commerce; or the Democrat member, the gentleman from California (Mr. Dooley); and the Democrat member, the gentlewoman from New York (Ms. Velazquez).

It is noteworthy and significant that Republicans and Democrats alike are joining together to deal with the crisis affecting more than 41 million uninsured Americans. Uninsured workers deserve the security of knowing that health care is not just a dream but a reality for them and for their families. This bill can help make that happen.

Madam Speaker, I reserve the balance of my time.

Madam Speaker, I yield myself 15 seconds. What we want to do in this bill is to give small employers the same advantages in the marketplace that large companies and unions have today. And that is the real secret behind this. Why can they not go out as a group and design a plan that would meet their needs just like a big company can for their employees?

Madam Speaker, I yield 4 minutes to the gentleman from Kentucky (Mr. Fletcher), the author of this bill and someone who has worked on it for many, many years.

Madam Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks on H.R. 660.

Madam Speaker, I yield 2 minutes to the gentlewoman from New York (Ms. VELAZQUEZ).

(Ms. VELAZQUEZ asked and was given permission to revise and extend her remarks.)

Madam Speaker, I yield myself 30 seconds.

The foundation of our health insurance market in the United States is employer-provided coverage set up through ERISA, the Employee Retirement Income Security Act of 1974. It covers 150 million American lives. We are trying to allow small employers who belong to statewide associations, national associations, the opportunity to band together to create an insurance policy that will benefit not only the small business but, more importantly, their employees.

Madam Speaker, I yield 2 minutes to the gentlewoman from Tennessee (Mrs. Blackburn).

Madam Speaker, as I said earlier, this bill does have broad bipartisan support. I am happy to yield 2 minutes to the gentleman from Maryland (Mr. Wynn).

Madam Speaker, I am pleased to yield 2 minutes to the gentleman from California (Mr. Dooley), one of my good friends and colleagues on the Committee on Agriculture.

Madam Speaker, I yield myself the balance of my time. We could look at the problem of the 41 million Americans through many different lenses, and we could talk about solutions. We believe that we are bringing a solution here where we are showing the glass half full.

My colleagues on the other side want to look at this solution as a glass that is half empty. The fact is that 41 million Americans have no health insurance, and we in this Congress, over the last decade, have talked about it and talked about it and talked about it. As a matter of fact, we brought this bill to the floor on two occasions before today, and unfortunately the other body did not see fit to move the legislation. But we are not going to quit because if we do not help these 41 million Americans who have no health insurance, guess what, they are going to continue to get sicker. They are going to end up getting treatment later in their illness, and they are going to continue to pile up massive amounts of healthcare debt that by and large they do not pay for, those who purchase health insurance pay for in terms of higher fees.

We have heard all of the discussion about the fact that we do not mandate this coverage and mandate this coverage.

The reason that we have the crisis in many States is because they have mandated every coverage known to man be stipulated in each of the policies, whether they need the coverage or not. Large employer plans do not have mandates other than two small mandates that are in ERISA. Neither did the union plans. They cover virtually all of these diseases and all of these treatments because that is what their employees want. We know that bare-bones policies do not work because employers do not buy them and their employees do not want them. And if we look at the best plans in America, they happen to be large employer plans, union plans that cover broad healthcare coverage and those employees love those plans.

Why would we not allow small businesses to come together, and whether it is through the Ohio Chamber of Commerce or the National Restaurant Association or the Lumbermen's Association, or how about the Farm Bureau, why would we not allow them to allow their members to come together where they could offer them a package of healthcare plans? Maybe it is one or two, maybe it is four or five potential plans that their members would get to choose from.

Take the issue of farmers, I have got a lot of farmers in my district. They are independent contractors. Their ability to go out and buy health insurance on not on their own is about zero unless they wants to pay $1,000 to $2,000 a month. If they were allowed to come together with other farmers around Ohio, other farmers around the country, guess what? They would get much better coverage than they are getting today at far less cost, and why should we not give them the opportunity to do this?

So I say to my colleagues as we end the general debate today, this is a good bill. It has strong bipartisan support, and I urge my colleagues to support the underlying bill.

Mr. Speaker, I am opposed to the gentleman's amendment and claim the time in opposition.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, instead of embracing this bipartisan bill like many of their colleagues, some House Democrats have, instead, offered a substitute that is really no alternative at all.

Their plan does nothing to address one of the real issues that is really at the heart of this debate, and that is cost. In fact, it takes us exactly in the wrong direction of where we are trying to going, raising costs for small businesses and imposing with new mandates on employers. Instead of relying on competition that AHPs would provide, thereby lowering costs, their alternative could drive small employers out of business altogether.

Moreover, the substitute comes with a $50 billion price tag establishing a complex new Federal program that includes health care subsidies for certain small businesses and some workers who work in small businesses. It would establish a national Government-subsidized health care plan that attempts to model itself after the Federal Employee Health Benefits Plan, but instead imposes a new mandate such as requiring small employers to pay 50 percent of their premiums for employees.

However, unlike the Federal Employee Health Benefits Plan that is exempt from costly State mandates and regulations, coverage offered under this substitute would subject this plan to the more than 1,500 State mandates that make up about 15 percent of the rising cost of health insurance. In addition, in order to qualify, the substitute imposes new mandates on employer plans. For example, the substitute mandates that employers provide health care coverage to every employee who has been employed for at least 3 months.

In addition, it mandates that employers pay 50 percent of the cost of health care premiums for employees and that they cover all dependents of their workers. Well meaning, but in the end, these mandates will prohibit employers from proceeding. Self-employed individuals, however, are not covered by the substitute and would receive no benefits.

So let us make clear this fact. Small businesses today have the highest health care premiums of any other group. Premiums increased this year by at least 15 percent, the highest increase in a decade. And premiums are even higher for small businesses that see increases of 40 to 50 percent a year as employers continue to get out of small group activities and States. In fact, the increase in the uninsured this year, now 41 million Americans, was made up entirely of small business workers who lost their health care coverage because their employers could not afford to continue to provide this benefit.

So in answer to this, the substitute proposes to raise the cost to those small employers by adding new coverage requirements and subjecting it to more than 1,500 State mandates. And then we are going to spend $50 billion worth of Federal taxpayers' money to subsidize this coverage.

In contrast, AHPs use the strengths of the employer-based system that cover about 150 million American lives today, and we rely on the private market. The benefits of competition, the economies of scales that are enjoyed by large unions and large companies all across the country to help lower costs and to provide better coverage for their workers.

AHPs allow small businesses to access the benefits of ERISA that are currently offered to large employers and unions. ERISA exempts large employers and unions from State mandates so that they are able to offer a quality benefit package from one coast to another or in just several adjoining States.

This uniformity reduces the cost so that more of the health care dollar that they are spending can actually go to benefits for their employees, and the lowering of the administrative costs also allows these companies and unions to offer more benefits to their members.

Through ERISA, employers and unions are able to offer benefits that best fit the needs of their employees. Their small business counterparts deserve the same opportunity to craft benefit packages that are both high quality and affordable.

The substitute would offer employers a difficult Hobson's choice: Meet these conditions, which may strap a business to the point of going under; or face limited and costly alternatives to health care coverage; or they can just do what they do today, offer no health care coverage to their employees.

Instead of making it possible for small businesses to access more affordable coverage, their coverage options will actually be more expensive, and then we are going to finance it with higher taxes.

While AHP legislation would be implemented quickly, the Democrat substitute might take years to get up and running because we are going to require the Department of Labor to design this, then to figure out how they are going to sell it, and then figure out how they are going to parcel out the $50 billion. If the appropriation does not go through, then you have got a plan with no financing behind it at all.

So, let me make myself clear, if I have not already: I believe our Nation's employer-sponsored health care system is a huge American success story. Employers provide coverage for the vast majority of our Nation's population, and almost 150 million Americans have coverage through ERISA.

The Committee on Education and the Workforce and the Department of Labor through our oversight of ERISA have jurisdiction over employer- sponsored health care, and I support the employer-based system to address the problem of the uninsured.

However, the way that the substitute does that is not by building on our strengths to offer really good plans. The mandates in their bill will basically say to small employers, you either offer the best health care plan in the entire market that is possible to your employees, or you get no help at all.

I think the strengths of the current system are good, and I think building on those by allowing Association Healthcare Plans will, in fact, work.

This bill is being supported by our nation's small business associations. The NIFB, the National Retail Association, the National Association of Wholesale Distributors, the National Association of Homebuilders, the U.S. Chamber of Commerce and others strongly support this bill, and the same groups oppose the substitute that we have before us.

So I hope Members will join me in offering assistance to our Nation's small businesses by supporting the underlying bill, and I ask my colleagues to reject the substitute we have before us.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I thank my good colleague for yielding me this time.

We have heard about these studies today; and the gentleman knows that is the study, or at least has heard me say that the study done by Mercer is very similar to the study done by the Congressional Budget Office, and they are both flawed. They are very flawed. They do not take into account the fact that we have anti-cherrypicking language in the bill, and they assume in their studies that cherrypicking would be allowed.

Secondly, they assume that there would not be any difference in the administrative fees for running the plan. The fact is that we have studies that show that up to 8 million of the uninsured would have access to affordable, quality health insurance.

Let me also point out exactly what our bill does. The gentleman from New Jersey just said in the State of New Jersey, for a single person to buy a

health insurance plan is about $6,000 and family coverage is about $12,000. The average cost for a large employer for the cost of their health insurance is about $3,300 for a single person and about $5,500 for a family.

I yield to the gentleman from New Jersey.

Mr. Speaker, I made some phone calls to find several plans that were both in the same area.

The fact is, that is exactly what this bill does. It allows small employers to band together to get themselves into a larger pool to design their own plan so that they can, in fact, offer better coverage at lower cost to their employees.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, would the gentleman yield?

Mr. Speaker, the 15 percent reduction is only the reduction in the administrative costs of running the plan. When you begin to look at what pooling and larger pools will do, it brings the costs down significantly.

Mr. Speaker, we believe that the average reduction for a small employer would be somewhere between 15 and 30 percent.

I do, Mr. Speaker.

Mr. Speaker, I yield 4 minutes to the gentleman from Georgia (Mr. Isakson), a member of our committee.

Mr. Speaker, will the gentleman yield?

Mr. Speaker, the gentleman referred to his ability to offer a package under ERISA to your 220 employees on the business you managed, but what about those 900 real estate agents that work as independent contractors for this company, who had to go out and fight on their own, day in and day out, to get a policy for themselves or for their family? And under this bill, if I am correct, the National Association of Realtors or the Georgia Realtor Association could offer a group plan to their real estate agents which would bring their costs down substantially.

Mr. Speaker, I yield 1 minute to the gentleman from Pennsylvania (Mr. Shuster).

Mr. Speaker, I yield 2 minutes to the gentleman from Texas (Mr. Burgess)

Mr. Speaker, I yield 1 minute to the gentleman from South Bend, Indiana (Mr. Chocola).

Mr. Speaker, I am pleased to yield 2 minutes to the gentleman from Georgia (Mr. Gingrey), a member of our committee.

Mr. Speaker, I am pleased to yield 1 minute to the gentleman from Texas (Mr. Sam Johnson), the chairman of the Subcommittee on Employer-Employee Relations, the gentleman who shepherded this bill through our committee.

(Mr. SAM JOHNSON of Texas asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, we have 41 million Americans who do not have health insurance. As I said before, Congress has been talking about this for a decade. And while the underlying bill will not solve the entire problem, it will help in addressing the needs of the uninsured.

As we heard before, some 60 percent either work for or have a dependent who works for a business, and so they have jobs. We are not talking about the poor here, because the poor get covered by Medicaid. We are talking about people who go to work every day, but they happen to work in an industry that maybe does not traditionally cover health insurance, or they work for a small employer who just cannot afford it because they are locked in a small State insurance pool.

We know what the cost of health insurance and these increases do. It creates more uninsured. In the Wall Street Journal today, CALPERS, the country's largest health plan, is set to increase premiums on an average of 17 percent for the next year, a 17 percent increase from the largest health care plan in the country. It is time that we step up and take action.

The underlying bill will in fact help small businesses create more coverage for more people. Small businesses. And who are small businesses? How about the dry cleaner down the street or the convenience store? How about the farmers in America today who have to go fend for themselves as an individual in the marketplace? They may be by themselves, maybe just family coverage. How about the real estate agents we talked about before, independent contractors, and others who may be self-employed that have to go fight to get insurance in very small risk pools in many States? If we allow them to come together with large State associations, national associations, and to group themselves, they can have real coverage for a much more reasonable cost.

This is the right thing to do today, to help those who pay high premiums; and it is also the right thing to do to help those who have no insurance at all. Those plans that are out there covered under ERISA are the Cadillac of plans in the country. Why not let small employers have the same advantage.

Mr. Speaker, I rise in opposition to the motion to recommit.

Mr. Speaker, the underlying bill seeks to address the needs of 41 million Americans who have no health insurance. What the motion to recommit does is essentially mandate coverage on association health care plans. If you have no health insurance, a mandate will do you no good. What we seek to do with the underlying bill is to cover more people. Sixty percent of the people who are uninsured either work in a small business or have a relative that works in a small business. What we are trying to do here is level the playing field so that small businesses can buy health insurance for their employees just like large companies and unions can do today.

Under ERISA, there are but several small mandates. We do not mandate every coverage. But if you ask employees of large companies and you ask employees and members of large unions, they will tell you that they have the best health care plans in America. These large plans in our country have great benefits. They cover virtually all the illnesses and all the diseases that are there. But they are allowed to design one benefit issue for each of these mandates that covers all 50 States. It may not read the same in every particular State. What we are trying to do with the underlying bill is to give small businesses the same advantage in the marketplace that big businesses have today.

I would urge my colleagues at this hour, reject the motion to recommit and vote for the final passage of this bill.

Madam Speaker, it is my opinion that H.R. 660 will hurt the ability of small employers to access insurance coverage. Contrary to creating larger pools of small employers, H.R. 660 will fragment the small group insurance market into a myriad of smaller and smaller pools with healthy small firms separated from those firms with sick employees. The basic fabric of small employer insurance--that healthy and sick must be pooled together to create cross-subsidies--will be irreparably torn to the detriment of all small firms. Small firms will be returned to the unstable and erratic marketplace of the 1980's-- before states imposed small group reform protections. Specifically, the dissenting Members of the Committee find that H.R. 660 will lead to:

(1) Higher Premiums for Most Small Firms and Rampant Discrimination

(II) Widespread AHP Failure and Millions of Dollars in Unpaid Claims

(III) More Uninsured--Particularly Among the Most Vulnerable

(IV) Consumers Stripped of Their State Protections

(V) No Administrative Cost Savings

(1) Higher Premiums for Most Small Firms and Rampant Discrimination

H.R. 660 would allow insured Association Health Plans (AHPs) to avoid covering the oldest and sickest smallest employers by charging them unaffordable rates that would not be allowed if the AHP was subject to state law. As a result, the Congressional Budget Office (CBO) found that 80 percent of small employers would see their premiums increased as a result of the passage of H.R. 660. A June 2003 Mercer study predicts health insurance premiums will increase by 23 percent for small employers that continue to purchase state regulated insurance.

Under H.R. 660, insured AHPs could ``forum-shop'' for the state with the weakest rating rules (a handful of states lack any formal premium restrictions). Once the AHP's policy is approved in a weekly regulated state, the AHP may sell the coverage across the country without regard to the rating rules in the remaining 49 states.

For instance, New York is normally a community rating state that does not allow variation of rates between small employers because of differences in the health status of their employees. But an insured AHP could sell coverage in New York that charges much higher premiums to small employers with sick employees. This will allow the AHP to attract low-risk employers from the state regulated pool--a practice known as ``cherry-picking''. Employers with sick employees would remain in the state regulated pool because they would be effectively barred from the AHP through the quotation of exorbitant rates. The Small Business Administration 2003 study on Association Health Plans describes it as follows:

``Thus AHPs located in states with the less stringent state

laws could offer insurance to the lower cost groups that are

now forced to subsidize higher cost groups in those states

that require community rating or narrow rate ``bands.''

The American Academy of Actuaries warns against this exemption of AHPs from state rating rules:

``The result would be that small employers whose employees

are greater health risks are more likely to obtain coverage

from the private health insurance market, where rates are

limited, than through AHPs, who may not have the same

limitations. State small group legislation sought to

eliminate this sort of selection in the market by requiring

health insurers to put all their small groups in one pool and

to limit the premium charged to one employer relative to

another. Introducing AHPs that are not required to adhere to

the same rating rules brings selection back into the market.

The consequence will be that the rates for the two pools will

diverge, causing further instability in an already fragile

marketplace.''

The Committee had an opportunity to clarify this critical point during the Committee mark-up. Representative Majette (D-GA) offered an amendment that would have prohibited AHPs from varying the rates of small employers beyond the variance allowed under state law. The Committee rejected this amendment.

Indeed, it appears that proponents of AHP passage have long held evasion of state rating rules as a key objective. In ``Insuring the Uninsured through Association Health Plans,'' the AHP proponent National Center for Policy Analysis argues against premium rating restrictions in the small group market because they ``keep premiums artificially low for the sickest groups and artificially high for the healthiest.'' NCPA argues that ``in a competitive market, every new person in a plan will tend to be charged a premium that reflects the expected costs of that person's health care at the time of entry into the plan. . . . However, in health insurance the tradition is to scorn new entrants for `cherry picking.' Yet cherry picking is nothing more than trying to satisfy consumer needs better than a rival.''

It is also important to recognize that H.R. 660 would allow discrimination against small firms with sick employees before and after enrollment with an AHP. In this cruel ``bait and switch'' game, a small firm believes it has secure health insurance coverage only to find it placed in jeopardy when an employee falls ill. The Small Business Administration 2003 study describes the post-enrollment discrimination process:

The House legislation, however, would also permit some of

the abuses of the insurance principle that led states to

adopt the rate reform legislation in the early 1990's. Some

states still permit insurers to use forms of durational tier

rating based on claims experience or ``reunderwriting'', the

practice of processing claims information in a manner similar

to the initial underwriting process, typically using

diagnosis-based or other risk adjustment to determine like

future claims experience and appropriate rerating action. The

association's insurer could offer very low rates as long as

all of a group's members are in good health, but increase the

premium to reflect the fully anticipated cost when one or

more group members develop expensive health conditions. AHPs

would be mainly regulated by DOL which does not have the

resources and experience of state insurance departments. \7\

The ability of AHP's to forum shop for the most lenient state means that a small firm enrolled in an AHP who has an employee contract cancer, or another dread disease, could

face an immediate--and unlimited--premium increase. The AHP would not necessarily have to wait until renewal to impose this premium increase and the premium increase could be of such a magnitude that the small firm would have no choice but to drop coverage. Although the firm could return to the state regulated market on a guaranteed issue basis, the premiums offered by regulated carriers would be very high because of the fact that AHPs had ``cherry picked'' the low-risk firms away from the state regulated pool. Ultimately, this dramatic adverse selection will drive carriers from the unsustainable state regulated small group market leaving high-risk small firms with no access to coverage within a short period following AHP passage.

With regard to self-funded AHPs, H.R. 660 allows them to differentiate the premiums of small firms based on health status to the extent state law allows. This is contrary to the Committee's stated objective of furthering the ability of AHPs to play the same role that large employers play under ERISA. Section 702 (b) of ERISA--added by the Health Insurance Portability and Accountability Act--clearly prohibits large employers from charging similarly situated employees different premiums based on their health status:

A group health plan, and a health insurance issuer offering

health insurance coverage in connection with a group health

plan, may not require any individual (as a condition of

enrollment or continued enrollment under the plan) to pay a

premium or contribution which is greater than such premium or

contribution for a similarly situated individual enrolled in

the plan on the basis of any health status-related factor in

relation to the individual or to an individual enrolled under

the plan as a dependent of the individual.

This means that two computer engineers working in Seattle for Microsoft can expect to pay the same premium for their employer group health plan--even though one is very sick with cancer and the other perfectly healthy. Under H.R. 660 however, a sick computer engineer's firm could be charged a much higher premium than a healthy computer engineer's firm even though both firms are members of the same Association--perhaps a Seattle Association dedicated to technology start-ups.

Clearly H.R. 660 is not furthering the ability of small employers to access the stability of large employer coverage; instead it is retracting the stabilizing protections small employers enjoy under current state law. Furthermore, limiting a self-funded AHP's ability to rate based upon health status to state law will not limit an AHP's ability to ``cherry-pick'' from the state regulated market. Ample opportunity for risk selection remains, including:

Rating based upon age and gender: H.R. 660 would exempt AHPs from state rules that limit the ability to increase a firm's premiums based on the age and gender of employees. Older individuals typically generate claims costs nearly seven times those of younger individuals. In fact, actuaries consider age as a very close proxy for health status. Young females typically generate significantly higher claims than those of their male counterparts. With the unlimited age/gender rating flexibility granted under H.R. 660, AHPs could offer very low rates to firms with low-cost younger workers, draining the state regulated pool of the types of firms needed to keep premiums stable for firms dominated by older individuals or women in their childbearing years.

Geographic ``Redlining'': H.R. 660 allows AHPs flexibility to determine their geographic service area. AHPs would be free to avoid geographic locations with high health care costs. They could choose to avoid certain parts of a city with populations with a high prevalence of expensive illnesses. For instance, Hispanic Americans have a disproportionately high rate of diabetes, and the African American community has been particularly hard hit by AIDS. AHPs could avoid selling coverage in minority neighborhoods--or charge a much higher premium to firms located in those areas--as a proxy for rating for health status. AHPs also could avoid geographic locations where significant portions of residents engage in high-risk occupations--they could avoid lumberjacking towns or farming communities. The League of United Latin American Citizens and the National Council of La Raza recognize these risks and have opposed H.R. 660.

Exclusion of Very Small Firms: So-called ``baby groups''--firms with fewer than 5 employees--are actuarially very expensive to insure. Their claims expenses generally are much higher than those of firms with more employees. HIPAA requires insurers to accept these very small groups and states require insurers to pool these very small firms with the rest of the small group pool. H.R. 660 would allow AHPs to exclude very small firms from their membership altogether (e.g. establish a ``mid-sized'' business association) or accept the small firms as members but charge them much higher premiums than their larger counterparts.

The use of age, gender, geography and firm size in rating practices provide the flexibility necessary for self-funded AHPs to limit their covered lives to low-risk, low-cost firms. Opponents to this legislation recognize that the rampant cherry picking H.R. 660 will foster will hurt all small firms in the long run. That is why the American Academy of Actuaries and the National Association of Insurance Commissioners are joined in their opposition to H.R. 660 by the following business organizations:

National Small Business United

28 Chambers of Commerce

Four Farm Bureaus

10 Local Small Business Associations (e.g. New Hampshire High Tech Council)

17 Labor Organizations

(II) Widespread AHP Failure and Millions of Dollars in Unpaid Claims

The General Accounting Office (GAO) reported that a previous 1974 preemption of state law for Multiple Employer Welfare Arrangements (note: all AHPs are MEWAs) left nearly 400,000 consumers with over $123 million in unpaid bills. H.R. 660 will force this sad history to repeat itself--but the unfortunate results will be magnified since the growth of the internet and other communications channels will allow unsound AHPs to attract vulnerable members at a much more rapid rate.

Former Chief Counsel for the Senate Permanent Subcommittee on Investigations and Inspector General for the Department of Defense Eleanor Hill warns:

AHPs are fundamentally the same types of organizations as

many MEWAs that have, in the past, been sponsored through

associations. If exempted from state regulation, AHPs would

pose the same kinds of unacceptable risks to consumers. . . .

Nothing in this legislation would prevent the same

proliferation of plan failures and consumers losses that

occurred when these types of organizations were last clearly

exempt from state regulation.\8\

Former FDIC and Resolution Trust Corporation Chairman Bill Seidman also has issued warnings regarding the exemption of AHPs from state oversight: ``I am concerned that it places consumers at risk and could set the stage for a taxpayer bailout similar to the one necessitated by the savings and loan failures of the 1980's.

AHP failures will be driven by three fundamental weaknesses in H.R. 660:

1. DOL Lacks Resources and Expertise to Takeover State Regulation of Self-funded AHPs

2. Insured AHPs will Exist in a Regulatory Vacuum, with Neither the States or DOL Able to Regulate

3. Solvency Standards are Inadequate

DOL Lacks Resources and Expertise to Takeover State Regulation of Self-

funded AHPs

Transferring regulatory authority of self-funded AHPs to DOL will represent a monumental change in the scope of DOL's regulatory responsibilities. Although it is often quoted that DOL currently administers ERISA for current group health plans--DOL's role is very limited. They are not responsible for reviewing reserve levels or assuring that actuarially fair premiums are charged and they are not in constant monitoring mode as state insurance commissioners are. DOL has admitted that its enforcement efforts under ERISA are:

. . . considerably different from and often more limited than

the remedies generally available to the states under their

insurance laws. In this regard, it is important to note that,

in many instances, states may be able to take immediate

action with respect to a MEWA upon determining that the MEWA

has failed to comply with licensing, contribution or reserve

requirements under State insurance laws whereas investigating

and substantiating a fiduciary breach under ERISA may take

considerably longer.

In fact, H.R. 660 does not even authorize the Secretary to immediately terminate a failing AHP's operations. Instead, it directs the Secretary to apply to the appropriate United States district court for appointment as trustee to administer the termination of the plan.

A 2002 General Accounting Office (GAO) report found that DOL's Office of Pension and Welfare Benefits Administration (PWBA) is understaffed for its current responsibilities. With regard to pension responsibilities, the report found that DOL faces an ``overabundance of work'' as well as ``limited investigative resources'' and ``staff shortages.'' It found that a review to determine pension plan noncompliance with ERISA would ``require PWBA's full investigative staff 90 years to fully and accurately complete.

Similarly in 1997, Assistant Secretary of Labor Olena Berg testified: ``An infrastructure adequate to handle the new responsibilities [for Association Health Plans] replicating the functions of 50 state insurance commissioners, simply does not exist.'' Berg noted that the current staff would be able to review each health plan once every 300 years.

H.R. 660 includes no provisions that would address this problem. No additional resources or retraining dollars for DOL are included.

Insured AHPs will Exist in a Regulatory Vacuum, with Neither the States

nor DOL able to Regulate

H.R. 660 includes very broad preemption language that appears to authorize an insured

AHPO to sell insurance coverage nationwide and disregard the laws of 49 states once its policy is approved in one state. Thus once an AHP has an approved filing in Michigan, it could sell insurance coverage to New Yorkers. But who would protect the interests of New York policyholders? The New York state insurance commissioner will not know which consumer protection laws are or are not included in Michigan statute. And even if the New York commissioner was an expert regarding Michigan law, it is unlikely he would be authorized to enforce such protections. The enforcement authority of insurance commissioners is generally limited to the enforcement of their state's laws--not the laws of other states. Conversely, it is unlikely the Michigan insurance commissioner is authorized to take action against an insurer for behavior against a resident of another state. His role is to protect the interests of his residents.

Thus, the insured AHP would exist in a regulatory vacuum. State insurance commissioners' hands would be tied by the Federal preemption provisions, and the Department of Labor's oversight authority is quite limited with regard to insured AHPs--the focus being on the initial certification of meeting the Board and other requirements to be considered a ``bona fide'' association. This regulatory vacuum will allow fraudulent and sham operations to flourish. Premium dollars will have disappeared into personal off-shore bank accounts before any action by regulators can be taken, leaving consumers uninsured and providers with large unpaid medical bills.

Solvency Standards are Inadequate

The National Association of Insurance commissioners, the American Academy of Actuaries and others have all criticized H.R. 660 for inadequate solvency standards. H.R. 660 allows AHPs to maintain as little as $500,000 in surplus and caps even the largest AHPs at a $2,000,000 requirement--an amount equivalent to just two premature million dollar babies in a neo-natal intensive care unit. This is contrary to typical state solvency regimes which use open-ended rules, recognizing that the larger an AHP grows the larger a capital base is necessary. The American Academy of Actuaries notes:

The proposed rules governing the minimum surplus

requirements for AHPs do not account for the growth of the

AHP. Historically, there have been many examples of AHP-like

organizations becoming insolvent. Following such events, most

states enacted solvency standards. To maintain the benefit of

these standards to consumers, the surplus standards should be

similar to the minimum requirements for Heath Risk-Based

Capital (RBC) developed by the National Association of

Insurance Commissioners (NAIC). Also the bills at issue rely

on affordable reinsurance vehicles that do not currently

exist in today's marketplace.

Former Resolution Trust Chairman Bill Seidman warns that ``The Savings and Loan experience teaches us that a lack of adequate solvency standards or investment guidelines can quickly lead to financial failures.'' The NAIC also criticizes H.R. 660 as including ``woefully inadequate capital reserve requirements'' and further cautions:

The most troubling aspect of the NFIB plan is it lacks

sufficient oversight to ensure that financial struggles do

not result in failures. Under the NFIB legislation, the AHP

would work with an actuary chosen by the company to set

reserve levels with little or no government oversight to

ensure the levels are sufficient or maintained. Also, that

AHP is required to ``self-report'' any financial problems. As

we have seen in recent months, relying on a company-picked

accountant or actuary to alert the government of any problems

can have dire consequences for the consumers who expect to

have protection under their health plan.

The combination of a regulatory vacuum for insured AHPs, an understaffed and inexperienced DOL and inadequate solvency standards lay the seeds for a large crop of devastating AHP failures and frauds across the country that injures thousands of consumers. Organizations with vast experience in health care fraud--such as the National Association of Attorneys General--recognize that opposition to H.R. 660 is imperative because ``State oversight and regulation is the best way to insure that plans remain solvent and that consumers are protected against fraud.

(III) More Uninsured, Particularly Among the Most Vulnerable

A June 2003 Mercer study performed for National Small Business United indicates that an additional one million individuals would lose coverage and become uninsured if H.R. 660 became law. A 1999 Urban Institute study predicted the uninsured would increase by 250,000 if AHPs were exempt from state law and the Congressional Budget Office (CBO) indicated that as many as 100,000 of the sickest individuals could lose coverage.

While these reports differ in nagnitude, they all predict that AHPs will worsen the uninsured problem, not solve it as proponents contend.

(IV) Consumers Stripped of Their State Protections

States have enacted a broad pantheon of state consumer protections in the last decade. A sampling of these protections include:

44 states ensure access to independent review;

48 states limit how much insurers can charge sicker groups;

50 states impose detailed requirements to assure fair marketing;

50 states require mammography screening coverage; and

47 states require diabetic supplies and education.

Self-funded AHPs would be exempt from state consumer protection laws under H.R. 660. Insured AHPs could forum shop for the state with the least consumer protection laws and only use those limited protections when selling in the remaining 49 states. The Committee accepted an amendment by Rep. Van Hollen (D-MD) that would apply state prompt payment laws to insured AHPs. This amendment did not apply any other state consumer protection laws to insured AHPs, nor did it apply state prompt payment laws to self-funded AHPs. With one stroke, passage of H.R. 660 would eliminate thousands of state consumer protections across the country.

(V) No Administrative Cost Savings

Numerous research reports have reviewed Association Health Plans and all found that lower premiums offered by AHPs would stem from ``cherry- picking''--because the AHP limits its coverage to the healthiest small employers--and the avoidance of state mandated benefits. The 2003 Small Business Administration Study found:

From an objective standpoint, AHPs are likely to lead to

moderately lower insurance premiums from a combination of

lower direct and indirect taxes, avoiding anti-selection and

other cross subsidies, avoiding some mandated benefits and

avoiding the cost to comply with multiple state regulations.

The Congressional Budget Office assumed no administrative savings from AHPs and predicted that nearly two-thirds of any cost savings from AHPs would result from attracting healthier members from the existing insurance pool, with virtually all of the remaining savings stemming from reduced benefits.

A June 2003 Mercer study estimates that AHPs would gain a pricing advantage through risk selection, not greater administrative efficiency. The modeling estimates that the average morbidity (a measure of whether a firm is ``sick'' or ``healthy'') of firms enrolling in AHPs would be 21 percent lower than the average morbidity of small employers in the market today.

These reports found no administrative savings for AHPs because AHPs would need to perform the same functions as insurers today--enrollment, billing, claims administration. Providing health insurance to small firms is resource intensive because the insurer is often providing the types of services that a large employer receives internally from a dedicated employee benefits department. Research report after research report indicates that AHPs cannot avoid those costly functions and that their prime avenue for costs savings is ``cherry picking'' and benefit reduction.

Conclusion

Exemptions from state law for Association Health Plans have been tried and failed before. Far from being a solution to the plight of the small employer, H.R. 660 would exacerbate the cost and stability problems in the small employer market. Consumers will find themselves uninsured just when they need coverage the most--when they fall ill. And providers will be left with millions in unpaid medical bills. Furthermore, H.R. 660 will undo the small group reforms woven together by states over the last decade to respond to the damage and pain that rampant cherry picking imposed on the small employer community in the late 80's.

Madam Speaker, I thank the gentleman from New Jersey for yielding me this time and also commend him for his leadership and the energy he has shown on this subject, as well as the ranking member, the gentleman from California (Mr. George Miller).

Madam Speaker, there is a serious problem throughout America in regards to the rising cost of health insurance, double-digit premium increases. As I travel around my congressional district in western Wisconsin visiting businesses large and small alike, it is the number one topic on their lips, the difficulty of being able to provide health insurance coverage for their employees with the double-digit increases that they are facing today.

Part of the problem in western Wisconsin deals with the inadequacy of Medicare reimbursement rates, which then is cost-shifted on to the private plans; but also part of the problem is the number of uninsured and the cost shifting that occurs when they receive treatment. We saw the statistics a little earlier, 41 million uninsured. Those numbers are going up. Between 50 and 60 percent of the uninsured are employees working in small businesses. It is a crisis situation out there, and I have not met a small business owner yet that is happy with the fact when they cannot provide some basic health coverage for their employees. Unless we deal with it in an honest and, I think, straightforward plan, the numbers will only get worse.

There are some here today that think H.R. 660 is the answer to the crisis we are all experiencing in our own districts. I happen to disagree. I think there are some serious flaws with H.R. 660. I believe that, at best, the underlying legislation would do very little to address the plight of the uninsured. There is a recent CBO analysis that said that, at best, we might be able to extend additional coverage for half a million Americans, a far cry from the 41 million who are currently uninsured or the 25 million who are working right now in small businesses. At worst, there is a Mercer report that shows that because of the premium increases in other health plans, we could see another million Americans losing their health insurance coverage because of H.R. 660.

What also is a major problem is that it exempts State laws. These are community value judgments made in each of our States in regards to what health care practices should be covered for the citizens. Yet the legislation today is calling for a preemption of that State law, an eradication of the federalism that has existed in this country for a very long period of time. It is one of the reasons why we have so many people opposing the legislation, from the National Governors' Association, from the Democratic Governors' Association and Republican Governors' Association, the State Attorneys General Association, not to mention the Association of Insurance Plans, as well as the National Conference of State Legislatures.

Why would you, if you believe in the free market, as I think most of us do, and believe in price competition, try to set up an uneven system where you have two different sets of plans playing by two different sets of rules? It does not make sense. If you are going to force price competition in the free market system, you need to have everyone playing on a level playing field playing by the same set of rules, such as the State laws that exist right now, rather than exempting a whole category of people.

I think our substitute offers a better alternative, and I would encourage our colleagues to support that.

Madam Speaker, I offer an amendment in the nature of a substitute.

Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, we have had I think a very enlightening discussion so far today in regards to the real impact of these associated health plans, what they are potentially capable of doing and what the danger of them are. As the gentleman from New Jersey (Mr. Andrews) has been citing repeatedly, there is an objective study there indicating the potential impact if this legislation enacted of increasing the ranks of the uninsured throughout the country by an additional million people. That is heading in the wrong direction considering we have 41 million uninsured today, many of them, between 50 and 60 percent of that 41 million, working in small businesses throughout our Nation.

We have a serious issue that requires a serious response and a serious plan to provide some real relief for small business employers to their employees. These are people who wake up every morning. They go to work. They play by the rules. They are asking for basic health care coverage like their neighbors next to them.

Unfortunately, H.R. 660 pulls up a little bit short in a couple of respects. First of all, it creates a current two-tiered system exempting the health care plans from currently State-regulated requirements. These are decisions made by State legislatures reflecting community values in regards to what type of health care coverage is important for their citizens, for their communities, for the society at large. And what is being proposed now is exempting a whole category of health insurance plans from basic health coverage such as cancer screening, mammographies, prenatal care, maternity care, diabetes, autism coverage in some States, and for those whoever worked with autistic children understand the importance of treating autism is early recognition, early intervention, and a lot of times that will not occur unless there are health plans that provide such coverage, and if we do not intervene early in these children's lives, there are exponentially greater costs for society at large down the road.

We offer a substitute, which I believe addresses the challenge that we are facing as a Nation more honestly and more fairly. The Democratic alternative that I have worked on with the gentleman from New Jersey (Mr. Andrews) and others on the committee would provide direct assistance to small businesses and their employees, another shortcoming of H.R. 660. There is no incentive, there is no help financially to enable employers to provide this type of coverage for their employees. And everyone I know is familiar with the small business employer that is operating on the margin, oftentimes losing money rather than making money.

And if there is not some type of financial incentive that our substitute bill offers it is unlikely that they are going to be able to extend their health insurance coverage to their employees who currently do not have them.

What our substitute would do is it would direct the Department of Labor to establish a small employer health benefit plan similar to the Federal Employee Health Benefits Plan. Many of the Members of Congress here today are members of the Federal Employee Health Benefits Plan. I have not encountered too much criticism of the health plan that Members of Congress are receiving. I think small business owners and their employees should be given the same opportunity on an affordable basis. The program would contract with State license insurers to offer a minimum insurance package for all employees of businesses of fewer than 100 people. Small businesses would be eligible for a premium assistance under our plan as would employees earning below 200 percent of the poverty level.

This alternative has the potential of providing health insurance coverage to 33 million Americans who currently go without it today. The number stands in stark contrast to the estimated 550,000 that the Congressional Budget Office has calculated under H.R. 660.

Perhaps most importantly, our plan is paid for under the budget resolution that the majority party has passed earlier this year. It fits within the budget confines by providing these premium assistance to small business employers, and to those employees at 200 percent less of poverty, providing financial assistance and the financial means to actually access health plans and provide coverage for their employees. H.R. 660 does not provide any of those means.

What we may see under their budget resolution coming back at us shortly is some form of tax credit or some type of tax deduction, which is not going to help the numerous employees and small businesses operating at 200 percent or less poverty level, who are paying very little Federal income taxes in order to qualify for such credits, unless they are willing to extend that coverage to those employees. But wait a minute. We are right now engaged in a heated debate over a child tax credit on these very same principles; so it is doubtful that they are going to be able to provide that type of tax relief to employees who need it and cannot afford health plans generally.

I mean there is a reason why the National Governors Association, Republican and Democratic governors alike, are in opposition, why the State Attorney Generals Association is opposing, why the State legislatures throughout the country are opposing, why many consumer interest groups and health care providers are opposing H.R. 660, because they fear that the ultimate income will be expanding the ranks of

the uninsured rather than reducing that number.

I think we all have the best intentions in the plans that we are advocating here today to try to reverse course on the 41 million, to try to provide small businesses with an opportunity of providing some health care coverage for their employees, but we believe there is a right and there is a wrong way of doing it. We believe that the Democratic substitute being offered which does not preempt State law, which does provide some financial assistance, premium assistance for small employers, which is paid for under the budget resolution is the way to go if we are truly interested in reducing the number of the uninsured in this country, and thereby affecting the premiums that other health plans have to pay.

Because if the uninsured get sick or get hurt, they still go in, they still access, they still get care, but those costs are then shifted on to those plans that pay for it. Our plan would reduce the number of uninsured and thereby save costs and help reduce the premium increases that so many of our employers, large and small, are experiencing today. And with that, I encourage my colleagues to support the substitute. Vote no on the H.R. 660.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, this is modeled after the Federal employee health plan.

Mr. Speaker, I yield 2 minutes to the distinguished gentlewoman from California (Ms. Woolsey), a very knowledgeable member of the Committee on Education and the Workforce.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, let me quickly dispel a couple of myths. We have heard a couple of occasions new mandates are going to add costs to the employers.

First of all, there are no new mandates under the substitute. We merely respect State law. We do not require compliance. It is a voluntary program. If small business employers do not think it is a good financial deal for them, they do not have to join. There is nothing mandating their requirement.

We have also heard the word ``taxes'' being used, too. Let me reiterate, this is paid for in their own budget resolution. So there is no new taxes that we are talking about with respect to this substitute.

Mr. Speaker, I yield such time as he may consume to the gentleman from New Jersey (Mr. Andrews), the coauthor of this alternative bill.

(Mr. ANDREWS asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I shudder to think we may be making major policy based on a few phone calls here today.

Mr. Speaker, I yield 1 minute to the gentleman from New Jersey (Mr. Andrews).

Mr. Speaker, would the gentleman yield?

Mr. Speaker, with all due respect to the gentleman from Illinois, my good friend, that is why our substitute is much better. We have one comprehensive pool that small businesses can buy into if they choose, therefore leveraging their bargaining power.

Mr. Speaker, one of the strengths of the labor union is they are there representing the workers. They leverage the number of workers there, and they are representing their interests, and they oftentimes reduce wages in order to get a better health care plan.

Mr. Speaker, I yield such time as she may consume for the purposes of a colloquy to the gentlewoman from Minnesota (Ms. McCollum), a former State legislator and a colleague on the Committee on Education and the Workforce.

Mr. Speaker, would the gentlewoman yield?

Mr. Speaker, it would be, because we respect existing State law.

Again, it is not mandated unless the State offers that right now.

That would be covered.

That would also be covered under our substitute.

That is right.

Yes, it would.

It would, indeed.

Mr. Speaker, will the gentlewoman yield?

One other significant difference between our substitute and H.R. 660 is ours would have a uniform premium rate for all employees. Employees could not be discriminated against with higher premium rates because they happen to be sicker than their fellow employees in the workforce. Ours would establish a uniform insurance premium rate for them so there would not be that type of price discrimination against the sicker in our population.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, again, we state that our substitute is fully paid for under the budget resolution, so we are not asking for new money. And with due respect to my friend from Georgia, we would hope a lot of employers would continue to offer the basic health care coverage that exists today. But the reason there were so many State battles throughout the country in State legislatures is because many of them were not. That is why these hard-fought battles need to be respected, and our substitute does.

Mr. Speaker, I yield 3 minutes to the gentlewoman from the Virgin Islands (Mrs. Christensen).

Mr. Speaker, I yield 2 minutes to the gentlewoman from New York (Mrs. McCarthy), a distinguished member of the Committee on Education and the Workforce.

Mr. Speaker, I yield 2 minutes to the gentleman from Texas (Mr. Hinojosa), a distinguished member of the Committee on Education and the Workforce.

(Mr. HINOJOSA asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, this is a very important debate that we are having today. Just to correct one of the things just stated by the previous speaker, the Department of Labor, just like H.R. 660, would be in charge of administering the substitute plan that we have before us today. They would actually contract with state-licensed insurers to offer basic insurance plans.

The significant difference, though, is that we are asking everyone to play on a level playing field, to respect States' rights, and to not have Federal preemption. Because for those who believe in the free market system, which I think most of us do, it can only work if everyone is playing by the same rules instead of trying to establish a two-tier system. And that, I believe, is going to be the best hope we have, through price competition, of keeping a check on rising premium costs.

There has been a lot of citing of statistics throughout the afternoon, a lot from the Congressional Budget Office, and so I will provide for the Record a letter from the Congressional Budget Office stating their analysis of H.R. 660.

Mr. Speaker, I would encourage our colleagues, in conclusion, to support the substitute, one that does provide an opportunity for more small employers to provide health care coverage to their employees, one that respects State law, one that provides some premium assistance so they can afford it. I encourage support of the substitute and a ``no'' vote on H.R. 660.

Mr. Speaker, the letter referred to above is as follows:

U.S. Congress,

Congressional Budget Office,

Washington, DC, June 18, 2003.

Hon. George Miller,

Senior Democratic Member, Committee on Education and the

Workforce, House of Representatives, Washington, DC.

Dear Congressman: This letter responds to your request of

June 17, 2003, for additional information on CBO's estimate

of the impact of H.R. 660 on enrollment in the health

insurance markets for small employers and self-employed

workers. We expect that the effects of the bill would be

fully reflected in those markets by 2008, and all of the

following numbers refer to that year.

Under current law, CBO estimates that approximately 30.1

million people will be enrolled in health insurance offered

by plans in the state-regulated small group insurance

market. Under the bill, CBO estimates that combined

enrollment in state-regulated plans and association health

plans (AHPs) would rise by about 550,000 people to a total of

30.7 million people. Of this, approximately 23.2 million

people would retain coverage in the state-regulated market.

About 7.5 million people would be enrolled in AHPs, including

the additional 550,000 people who would not have been covered

by any small-employer plan under current law, and 6.9 million

people who would have been covered in the state-regulated

market.

The same consideration apply to self-employed people. We

estimate that approximately 4.7 million people will be

enrolled in state-regulated coverage purchased by self-

employed workers under current law. Under H.R. 660, CBO

estimates that combined enrollment through state-regulated

insurers and AHPs would rise by about 70,000 people to 4.8

million people. Of this, approximately 3.8 million people

would retain state-regulated coverage. About 1.0 million

people would obtain coverage through AHPs, including the

additional 70,000 people who would not have been insured

under current law, and 0.9 million people who would have been

covered in the state-regulated market.

If you would like additional information on this estimate,

the CBO staff contact is Stuart Hagen, who can be reached at

225-2644.

Sincerely,

Douglas Holtz-Eakin,

Director.

Mr. Speaker, on that I demand the yeas and nays.

Madam Speaker, I yield myself such time as I may consume.

(Mr. ANDREWS asked and was given permission to revise and extend his remarks.)

Madam Speaker, I rise in strong opposition to this bill.

The chairman of the committee is precisely right, that the problem of massive amounts of people not having health insurance is the central problem in health care. Most of the 41 million

Americans who have no health care who are adults work for a living. And most of those adults who work for a living work for a small business, so there is an intuitive appeal to an argument that says let us help make it easier for small businesses to acquire health insurance.

In fact, the substitute that the gentleman from Wisconsin (Mr. Kind) and I will be offering later in this debate does that, and we would urge our colleagues to support that.

The reality, though, is that small businesses who do not provide health care for their employees do not do so because the gap between what they can afford to pay and what they have must pay is huge. It is immense. Even the most optimistic proponents of this bill admit that the premium savings that could be generated by this bill will slender indeed, usually in the single digits of percentage points, if that.

The reality is small businesses are not going to be able to afford to expand health care without significant public subsidies. That is a fact. The majority has drained well in excess of $2 trillion from the public Treasury with its insatiable appetite for tax cuts, and as a result, there is no money in the till. There is no money to provide those necessary subsidies. So this is the fig leaf. This is the shallow argument that says we can do something to help those small businesses.

Frankly, this bill belongs in the Orwellian hall of fame for misnomers of a piece of legislation. It is called the Small Business Health Care Fairness Act. With respect to small businesses, it provides nothing in subsidies for employers who cannot afford health insurance, not a dime. It provides for market reforms that offer an illusory and ultimately empty promise of lower premiums.

It is not a health care bill because what it does is supplant benefits that have been provided by State legislatures across this country by Republicans and Democrats, benefits that guarantee women breast cancer care, benefits that guarantee people with diabetes care for their illness, benefits that guarantee pregnant women and small children important care, benefits that protect consumers when they have been wronged by their HMO. Because this bill invalidates and wipes out those protections, the National Governors Association, Republicans and Democrats, oppose this bill. Because this bill invalidates those protections, the Attorneys General of a huge majority of the States oppose this bill. Because the bill eliminates protections for mammograms, for diabetes care, for well baby care, wipes them out, the insurance commissioners across this country oppose the bill.

It is not a health care bill. It is a political bill designed to paper over the fact that the majority already spent the money it needs to provide real relief.

Finally, it is called fairness. Where is the fairness in creating two sets of rules for those who attempt to buy health insurance for their employees? Because that is what this bill does. It sets up one set of rules where all the protections and regulations and safeguards that most people enjoy are wiped off the books for AHPs, and then another set of rules where the remaining insurance companies must compete on an unlevel playing field. Many of us who support the substitute believe in market competition, but we believe in market competition on a level playing field. That is not what this bill does.

One of the of the most respected health care analysis firms in this country, Madam Speaker, Certified Public Accountants and Associates, looked at this bill and that firm concluded that the chairman would have to change one of his charts because he started with a chart that says there are 41 million uninsured. If this bill is enacted, the chairman will have to change his chart and X out the 41 and put 42 uninsured, because that firm has concluded that the net effect of this bill will be to drive up the premiums for insurance companies who are not AHPs, drive them up so high that it will result in the loss of coverage for one million more Americans.

This bill is an illusion. It should be defeated. Later in this debate, the gentleman from Wisconsin (Mr. Kind) and I will be presenting a substitute which we believe truly addresses the real needs of small businesses in America's uninsured.

Madam Speaker, I reserve the balance of my time.

Madam Speaker, I yield myself 15 seconds.

Madam Speaker, I think it is important to point out for the record that the gentleman did admit that the benefit protections like mammogram screenings are, in fact, wiped out by the bill before us.

The bill before us will take away health coverage for more than 1 million people and add to the uninsured.

Madam Speaker, I yield 3 minutes to the gentleman from Wisconsin (Mr. Kind), who has offered a plan that will actually decrease the number of uninsured, which we will talk about later.

Madam Speaker, I yield such time as he may consume to the gentleman from California (Mr. George Miller), the leader of our committee and one of the leading opponents of this plan that would take health care coverage away from 1 million people.

Madam Speaker, I yield 4 minutes to the gentleman from North Dakota (Mr. Pomeroy) who, as a former insurance commissioner from North Dakota, has direct experience with AHPs running out of money and not paying their claims.

Madam Speaker, I yield 3 minutes to the gentlewoman from New York (Mrs. McCarthy).

Madam Speaker, I yield myself 30 seconds. The gentleman is correct. At the end of the day, the question is whether one has health insurance or not. At the end of the day if this bill is enacted, 1 million more people will not have health insurance than do today because of the damage that this bill does. That is one of the reasons why State legislators across this country oppose this bill. Our next colleague is someone who served in the Minnesota State legislature, who fought for laws that protect women against discrimination. She will point out that this law does not do that.

Madam Speaker, I am happy to yield 3 minutes to the gentlewoman from Minnesota (Ms. McCollum).

Madam Speaker, one of the Members who is opposed to expanding the ranks of the uninsured by 1 million people and, therefore, opposes this bill is the gentleman from New York (Mr. Meeks) to whom I yield 3 minutes.

Madam Speaker, I yield myself 30 seconds. I want to again reemphasize that the objective analysis of this bill, contrary to what we have heard repeatedly today, is that it will increase the number of uninsured persons. It will do so because those who are not in AHPs who must still comply with the mandated benefits and other consumer protection laws will experience an escalation in premiums which will cause a reduction in coverage. We believe the record is clear, that the passage of this bill will increase the number of uninsured persons by 1 million people.

Madam Speaker, I reserve the balance of my time.

Madam Speaker, for all the reasons we have stated, we oppose the bill.

Madam Speaker, I yield back the balance of my time.

Mr. Speaker, I would like to thank the gentleman from Wisconsin (Mr. Kind) for all the leadership he has shown on this, all the hard work he has done, and his usual, thoughtful approach to this problem.

Understand the desirability of the substitute versus the underlying bill. It would be helpful to think of a person who runs a tool and die shop with a dozen employees, or a cafe with 15 or 20 employees. Under the majority's Republican underlying bill, the most optimistic people believe there would be about a 15 percent premium savings for that employer. I think that is unduly optimistic, but let us give them the benefit of the doubt.

In my State, it costs about $6,000 to provide a health care package for an individual, and about $12,000 for family coverage. That means for that individual plan, the price would drop from $6,000 down to about $5,100. For the owner of that tool and die shop or that cafe, even if that price drop would occur, it is not nearly enough to afford the premiums that would be involved.

The majority's bill provides zero to the owner of that tool and die shop or that cafe to help them buy those premiums.

The substitute goes to the majority's budget resolution, identifies, as the majority did, $50 billion over 5 years, without any increase in taxes or revenues, as the gentleman from Wisconsin (Mr. Kind) just said, and uses that $50 billion creatively and wisely to provide subsidies to what we estimate would be 5 million employers and 16 million employees.

The person running the tool and die shop or the cafe, even if you are right, and we think you are wrong, meaning the majority, even if that person enjoys a reduction in premiums from $6,000 down to $5,100, it is not enough to increase coverage.

The plain fact is this: people who are employing people at the bottom of the wage ladder in low-margin businesses are not going to be able to afford the price of health insurance unless there is a significant subsidy. That is a fact. It is a fact the majority would choose to ignore, because the majority has taken over $2 trillion from the public Treasury that could be used to address the problem of 41 million uninsured people and flushed that money away. This substitute is an appropriate way to close that gap.

I also again want to reiterate that we believe you do not have to make this false choice between people being covered, as our various States would have them covered, with mammogram protection, with diabetes care, with prenatal and well-baby care. You do not have to make the choice between providing those vital benefits and no coverage at all.

The Mercer study shows that the underlying bill from the majority will result in an increase of 1 million people to the ranks of the uninsured. Eight million people, the CBO now tells us, will move from regular protected plans into these new unprotected, at-risk AHPs. We will get the worst of both worlds: eight million people for whom there is no guaranteed coverage against breast cancer, against diabetes, against the other diseases and conditions people worry about, and an increase in the number of uninsured.

The plan that the gentleman from Wisconsin (Mr. Kind) has taken the lead on would do the opposite. It will address the real needs of the owner of that tool and die shop and the real needs of the owner of that cafe by providing him or her with a meaningful subsidy that would help purchase health insurance benefits for his or her employees. There is a 5 million person difference when it comes to employers, a 16 million person difference when it comes to employees, and all the difference in the world when it comes to the approach here.

The plan the gentleman from Wisconsin (Mr. Kind) has put forward will work. It will work within the contours of the majority's own budget resolution. It provides real help and real aid to those who need it, not the empty promise of the majority's bill.

I urge our colleagues on both sides of the aisle to support the Kind substitute.

Mr. Speaker, would the gentleman yield?

Mr. Speaker, would the gentleman care to cite the source of that statistic?

Mr. Speaker, I thank the gentleman for yielding me this time.

I understand there are variations in plan costs around the country. I would once again say, however, that the most enthusiastic proponents of the AHP plan do not talk about a reduction of the magnitude that the chairman of the full committee just talked about; they talk, at best case, about a 15 or 16 percent premium reduction.

If you live in a market that has a $6,000-per-person premium, which I do, that is nowhere near a $2,700 reduction which the chairman's phone calls have uncovered.

I yield to the gentleman from Ohio.

Mr. Speaker, reclaiming my time, what premium benefit then would the chairman claim would result from this bill?

I yield to the chairman to tell us what premium benefit he predicts would result from the underlying bill.

Fifteen and 30 percent. That is a new number for us, Mr. Speaker.

Mr. Speaker, would the gentlewoman yield?

Mr. Speaker, and it is also true, is it not, like I said to my colleague from Minnesota, that in the underlying bill that the majority offered, that each one of those State protections that the gentlewoman just outlined would be invalidated?

Mr. Speaker, if the gentlewoman would further yield, what the gentlewoman is saying is that if the insurance industry chooses to keep these protections, it may; but if it chooses not to, the person who is covered under the plan does not get any of the coverage the gentlewoman just spoke of; is that correct?

Mr. Speaker, if the underlying bill becomes law, 4 million American women who presently are guaranteed breast cancer care will only have it if the insurance companies they move to decide to let them have it. We can change that by voting ``yes'' on this motion to recommit. The question is simple: Do we want our mothers and our sisters and our daughters and our

wives to rely upon the whims of the insurance industry or the power of our votes? If you want to guarantee that this care goes forward, the only way to do it is to vote ``yes'' on the motion of the gentlewoman from New York. I urge a ``yes'' vote.

Mr. Speaker, I demand a recorded vote.

Mr. Speaker, as the chairman of the Committee on Small Business, our Nation's small businessmen and -women tell me over and over that accessible and affordable health care is their number one priority. I have heard from thousands of small employers in America who have been pleading for options to help them manage their surging health care costs. In fact, so many letters came in, we put them into a binder called ``Health Care Horror Stories from America's Small Employers.'' The NFIB assisted us in putting this together for us.

The small business owners tell us regularly how they struggle to provide their workers with health insurance but, each year, they face double-digit increases. Small business owners tell me they do not know how much longer they can continue to provide health care for their employees. Mom and pop businesses tell me they want to provide health care for their employees, but they cannot because of the expense of the policy. My own brother who runs a family restaurant is drowning in the surging costs and the exorbitant costs of health care insurance. This is a family business. We know personally what it costs when you are little, when you have a very small pool. People like my brother Frank are horrified at the thought of not being able to have insurance.

As one of my small business constituents wrote, ``I have always wanted to take care of my employees and provide them with competitive benefits and wages, but each year it gets more and more difficult. Our health insurance costs were raised 43 percent last year and 34 percent this year.''

Another constituent: ``Health care costs and insurance are draining us. Last year we had a 14 percent increase, and now the costs are going up 21 percent again. I have nowhere else to go.''

So they go out of business because they cannot afford insurance.

Today we bring forward a great option, association health plans, to help control these outrageous costs. Of the 41 million Americans with no health insurance, 60 percent of these are small entrepreneurs, their families and their employees.

Why should the small businesses of this country not have the same right to band together as local labor unions do to purchase their insurance in large pools? That is all this is. It is just that simple. The more people you have in the pool, the cheaper the rates are for the insurance. It is a matter of equity. The little guys out there, the people that are struggling, why can they not have the same right, the same legal right to get together as labor unions? Why does there have to be a double standard, to allow labor unions to get together and do the smart thing, which they have been doing for 60 or 70 years, and using the union as the center post around which to buy their insurance, and allow associations as a center post around which to buy insurance for the small business people?

It is simply a matter of equity, it is a matter of fairness, and the biggest argument that we have here is this: the larger the pool, the lower the rate. There is not anybody here on the floor today or in this country that can dispute that fact. My brother is a pool of two, him and his wife, at the restaurant.

As the Chairman of the Small Business Committee, our nation's small business men and women tell me over and over that accessible and affordable health care is their number one priority.

I have heard from thousands of small employers in America who have been pleading for options to help them manage their surging health care costs.

Small business owners tell me regularly how they struggle to provide their workers health insurance, but each year they face double digit increases.

Small business owners tell me they don't know how much longer they can continue to provide health care for their employees because each year the premiums rise, their coverage decreases and out of pocket expenses soar.

``Mom and Pop'' businesses tell me how they want to provide healthcare for their employees, but they cannot because of the expense for a policy that covers less then ten people.

My own brother, who runs the family restaurant, is staggering at the exorbitant cost of health care insurance.

They are horrified at the thought of leaving their workers high and dry without health insurance.

As one of my small business constituents wrote, ``I've always wanted to take care of my employees and provide them with competitive benefits and wages, but each year it is getting more and more difficult. Our health insurance costs were raised 43 percent last year and 34 percent this year and there is nothing we can do about it.``

Another constituent writes, ``Health care costs and insurance are draining us. Last year, we had a 14 percent increase. Now, the costs are going up 21 percent again. I have nowhere to go.''

They are hopeless. Our entrepreneurs, whose ingenuity and hard work ethic have driven the American economy, have run out of options to battle this crisis. They need our help.

And today, we bring forward a great option--Association Health Plans--to help them control these outrageous costs and continue offering vital health insurance to their employees and their families.

Of the 41 million Americans with no health insurance, 60 percent are small entrepreneurs, their families and their employees.

One of the reasons small businesses cannot afford health coverage for their employees is that they are unable to achieve the economies of scale and purchasing power of larger corporations and unions.

Small businesses suffer from unequal treatment--what they want most is a level playing field when it comes to health care.

Large corporations and labor unions use the purchasing power of thousands of employees to offer affordable health insurance to their workers.

Small business owners have to find their insurance on an individual basis, making it very difficult and expensive to find affordable health coverage.

The premiums that small businesses pay for health insurance are typically 20-30 percent higher than those of large companies or unions which can self-insure.

Additionally, the administrative costs incurred by small businesses are likewise higher than those of large businesses; 25-27 percent versus 5-11 percent for large businesses.

Association Health Plans can provide hope to those who lack health care by expanding the pool of people and bringing down costs by 15 to 30 percent.

For small businesses, that savings can mean the difference between providing health care or not.

That savings can be the difference between profitability or losing money.

In March, I held a Small Business Committee hearing on this very topic.

The Washington State Farm Bureau testified to the success they have enjoyed operating an AHP for the last 3\1/2\ years.

Traditionally, farmers have had great difficulty buying health insurance because their business is usually made up entirely of their family.

Of those who have taken advantage of the Washington State Farm Bureau's AHP, 25 percent did not have health insurance prior to enrolling.

Additionally, the Washington State Farm Bureau AHP has operated with a 99 percent retention rate.

The proof is irrefutable. AHPs work.

I urge all of my colleagues to support H.R. 660.

I yield to the gentleman from Wisconsin.

Mr. Speaker, reclaiming my time, that is a government- run pool with a government-run subsidy, and that will end up like every other government-run program: it will bankrupt the country, and the small businessperson will be at the end of it.

Try this. See if this works. This is so simple. If it works for the labor unions, why can it not work for Frank and Mary Ann Manzullo?