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Statement of Michael B. Enzi
If You Like What You Have You Can’t Keep It
June 22, 2010
 
Mr. President, before coming to Washington, I ran a shoe store in Gillette, Wyoming.  I stocked the shelves, I worked with the customers to fit them with shoes, I ran the cash register, I placed the orders with suppliers, I cleaned the toilets and did the bookkeeping. In short, I was a one man show. Not quite accurate. My wife was there and we had a couple clerks, but we all had the same responsibilities.  My wife helped a lot and grew the business while I was mayor of Gillette, but we were kind of a one family show, so I know first-hand the struggles and challenges that America’s small businesses face. We face them on a daily basis and that’s why I’m so concerned about the recent action by the Obama Administration.
 
Earlier this week, the Administration published a 121 page interim final rule that will have a major negative impact on millions of small businesses across the country.  This new rule, which implements just 2 pages of the health care law pertaining to “grandfathered health plans”, will increase the costs these businesses pay for health insurance.  This new rule violates the President’s repeated promises from last year, that under  the new health care law, if you like what you have you can keep it. 
 
A chart on page 54 of the rule states the Departments of Treasury, Labor, and Health and Human Services estimate that between 39 and 69 percent of businesses will lose their “grandfathered health plan” status.  This means these businesses’ health plans will not be able to keep their current plans, but will be required to comply with all of the expensive mandates included in the new law.  This will, in turn, drive up the costs for these plans, making them even more unaffordable for small businesses.
 
As a former small business owner, I understand how small businesses are struggling every day to find the resources to provide health insurance to their employees.  Rather than making it easier for these businesses to continue to provide this coverage, the new regulation will actually make it more likely that employers will simply drop their health insurance coverage altogether.
 
I have a copy of the chart to show the folks back home. This chart shows the Administration’s own estimates, which indicate that about half of Americans won’t be able to keep what they have. 
 
The picture is even worse for small businesses.  HHS estimates by 2013, up to 80 percent of small businesses could lose their grandfather status.  The plans that do lose their grandfather status will have to abide by a whole slew of new federal mandates. 
 
Mr. President during my days as a shoe store owner, I would not have had the luxury to read a 121 page interim final rule and try to determine what I needed to do to keep my health insurance plan.  And if my small business was one of the 80 percent of small businesses that the Administration thinks will lose their current status, then I’d be forced to pay a lot more for coverage. 
 
Now, one of the most disturbing aspects of the new rule is that it will actually make it harder for employers to make changes that will hold down the cost of their health care.  Once this interim final rule becomes effective on July 12 of this year, less than a month from now, large and small businesses will have few options for both keeping costs in check and maintaining their grandfathered status.  If an employer does any of the following things to manage their costs, they lose the health care they have:
 
If they eliminate any benefits, they lose their grandfather status. 
 
If they increase coinsurance rates, they lose their grandfather status.  
 
If they increase deductibles or out-of-pocket limits beyond minimum levels, they lose their grandfather status. 
 
If they increase copayments beyond minimum levels, they lose their grandfather status. 
 
If they decrease the employers’ share of the premium by more than 5 percent, they lose their grandfather status. 
 
If they add an annual limit OR decrease the annual limit, they lose their grandfather status. 
 
If they change their health insurance carrier, they lose their grandfather status.  Which, is the most of important one of those, the very last one. If they change their health insurance carrier, they lose their grandfather status. The only way you have a chance of holding those costs down is to bid out the insurance. It made a huge difference in our business. The first time that we did that, and we were several years of staying with the same company and having huge increases, the first time we bid it out, we found out we could save very substantially and so we bought the lower bid insurance and then the company that we’d been dealing with for several years came to us and said, why did you change? We said, well, we got a much lower price. They said, why didn’t you ask us for a lower price. We said that isn’t the way we sell shoes, that isn’t the way you should sell insurance. If a business changes their health insurance carrier, they will lose their health insurance status. Even if it provides the same things that the other one was providing, which is what you would do in a bid just an attempt to keep your health care costs down and avoid having to do the other things that we mentioned would lose grandfathered status.
 
In short, if employers do almost anything to help slow the growth in their health insurance costs, they will lose the limited protections against the expensive new mandates in the bill.  It is worth noting the 2 pages in the law, just 2 pages – I think it was 2,700 pages in the law – 2 pages causes all of this, that create the grandfathered plans are a blank slate.  The law doesn’t say anything about cost sharing requirements or coinsurance rates.  The Administration made up all of these provisions and requirements.  They didn’t have to write these rules in a way that precludes half of Americans from keeping what they have. 
 
The reality is that the Administration doesn’t want you to keep what you have.  They certainly like that talking point, but they don’t actually want you to keep what you have.  They don’t want grandfathered plans to exist.  They want to force all Americans to buy only insurance plans that are defined and approved in Washington.  It is just one more Washington take-over.
 
Throughout the rule, the Administration makes the assumption that a large number of plans will place a high value on remaining grandfathered.  Why do they make this assumption?  Because the Administration recognizes employers realize the mandates and burdens included in the health care bill will drive up premiums and costs for large businesses, small businesses, and individuals.  The Congressional Budget Office estimates costs will increase by 10 to 13 percent for Americans purchasing coverage on their own – this represents a $2100 increase for families purchasing coverage. 
 
Page 112 of the rule lists the thirteen new mandates included in the health care law that do not apply to grandfathered plans.  However, based on the Administration’s own calculations, it looks like 39 to 69 percent of employers will now be forced to comply with these 13 new mandates when they lose their grandfather status.   
 
Even for the small number of plans that manage to keep their grandfather status, the reality is that the new law will still impose expensive new mandates that will increase their costs.  The new health care law requires all plans, including grandfathered health plans to comply with certain provisions in the new health care law.  Page 112 of the interim final rules lists five sections detailing the new mandates that apply to grandfathered health plans for plan years beginning on or after September 23, of this year.  Another section becomes effective in 2014. 
 
This bill was sold as letting people keep what they have, but the devil’s always in the details.  Do a little digging, and it is clear, Americans won’t be able to keep they have.  I’d like to read a paragraph on page 112 of the regulation, it says:
 
“Provisions applicable to all grandfathered health plans. The provisions of Public Health Service Act section 2711 insofar as it relates to lifetime limits, and the provisions of Public Health Service Act sections 2712, 2714, 2715, and 2718, apply to grandfathered health plans for plan years beginning on or after September 23, 2010. The provisions of PHS Act section 2708 apply to grandfathered health plans for plan years beginning on or after January 1, 2014.”
This means that health plans are now prohibited from having lifetime limits on the dollar value of benefits for any participant or beneficiary.  Even though this section becomes effective starting after September 23 of this year, the Departments have not issued any regulations or guidance telling plans how to implement this new requirement. 
 
Section 2712 says health plans shall not rescind such plan or coverage, except that this section shall not apply to a covered individual who has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact.  We haven’t seen any guidance or regulations on this section either.
 
Section 2714 says that all “kids” under the age of 26 can stay on their parents’ health insurance policy.  This popular provision has gotten a lot of attention from the media and the Administration.  Because of the popularity, this is the one area where the Administration has actually written an interim final rule which becomes effective July 12, 2010, even though the comments are not due until August 11, 2010.  In other words, they’re not going to read any of the comments until that goes into effect. In the rule, the Administration includes an analysis saying this provision is expected to increase premiums by 1 percent.  That might not sound like a lot on its own, but remember this is only one of the six provisions that all health plans, even grandfathered plans, will be force to comply with.  If each of the other five provisions also drive up premiums by similar amounts, that would equal a 6 percent increase on top of whatever increase results from normal medical inflation.   
 
Section 2715 says all plans must give enrollees a government approved summary of benefits and coverage explanation describing the benefits included in the plan.  The interesting thing about this section is that Secretary Sebelius has until next March to publish the standards that plans have to use when they draft these documents, but the plans have to give their enrollees the documents starting this September.  How is that possible?  If plans don’t have these documents ready, they can be fined up to $1000 per enrollee.  So the standards won’t be ready until next year, but the plans still have to comply this year, or they face a $1000 per enrollee fine.  Common sense rode a horse right out of Washington.  Maybe it was never here to begin with. 
 
Section 2718 says all plans for big businesses have to spend at least 85 cents out of every premium dollar they get paying claims and plans for small businesses and individuals have to spend at least 80 cents out of every premium dollar they get paying claims.  This may sound like a good idea, but again the devil’s in the details.  The National Association of Insurance Commissioners is responsible for defining the terms used in these calculations and coming up with some recommendations about how to implement this section.  The Secretary asked them to make these recommendations earlier than when the law says, but they have been having some difficulty.  The difficulty is that states know that implementing these provisions will put health plans out of business.  When the plans go out of business, the Americans enrolled in those plans will lose their coverage.  This is a real problem that the Insurance Commissioners are grappling with.  Unfortunately, Republicans warned our colleagues on the others side about this problem last December, but we were ignored.
 
Section 2708 becomes effective in 2014 and says that plans can’t apply waiting periods that exceed 90 days.  Again, this provision sounds like a great idea, and some states are already doing this, but this is one more thing that will drive up costs.  No single rain drop thinks it is responsible for the flood; these provisions may sound like good ideas when looked at by themselves, but taken together, they will drive up premiums to the point health care is unaffordable.
 
All these sections I’ve been talking about are the mandates that apply to all plans, even grandfathered plans.  There is a whole other list of mandates that do not apply to grandfathered plans, but apply to all new plans.  Page 112 of the rule, I will refer you to that. I won’t read it here. It has a lot of references again. Even though these sections aren’t supposed to apply to grandfathered plans, the truth is about half of all Americans will lose their grandfathered plan and will be forced to buy plans that include additional mandates. But if you’re enrolled in a union health plan, have no fear. Different rules apply to you. The Administration’s favorite special interest group gets special treatment under this rule.  This is exactly the kind of political cynicism that this Administration campaigned against two years ago.  Page 48 of the rule says “this estimate does not take into account collectively bargained plans, which can change issuers during the period of the collective bargaining agreement without loss of grandfather status”.  Keep reading, because page 50 says “for fully insured group health plans, another change that would require a plan to relinquish grandfather status is a change in issuer”.  The bottom line: big labor can change issuers, but small businesses cannot change issuers.  The ability to change issuers is something that keeps insurance companies competing against each other to see who can offer the best product at the lowest price.  Take that competition away, and prices will go up--for everyone but union plans. 
 
The simple truth is, because this new rule will drastically tie the hands of employers, few employers are expected to pursue grandfathered status.  That means more than half of the Americans who like what they have won’t be able to keep it.  As I said earlier, this is not a mistake.  This is exactly what the President and the majority controlling Congress wants.  They want all Americans to be forced to buy the kind of health insurance they think you should have.  Never mind that you can’t afford it.  Never mind that employers faced with the choice of either paying for health insurance or paying a new penalty will be less likely to hire new workers and will probably even have to lay off workers.  Simply put, this rule states: Washington knows best. Never mind that the President promised Americans who like what they have can keep it.  This new rule is pretty clear: if you like what you have you CAN’T keep it.
 
Thank you Mr. President, I yield the floor.