Serial No. 106-47


Printed for the use of the Committee on Education

and the Workforce

Table of Contents













The Subcommittee met, pursuant to call, at 9:30 a.m., in Room 2175, Rayburn House Office Building, Hon. John A. Boehner, Chairman of the Subcommittee, presiding.

Present: Representatives Boehner, Petri, Ballenger, Fletcher, Andrews, Kildee, McCarthy, Tierney, Wu, and Holt.

Staff Present: Mark Rodgers, Workforce Policy Coordinator; Robert Borden, Professional Staff Member; Christopher Bowlin, Professional Staff Member; David Connolly, Jr., Professional Staff Member; Rob Green, Professional Staff Member; Amy Cloud, Staff Assistant; Deborah Samantar, Office Manager; Gail Weiss, Minority Staff Director; Cassie Lentchner, Minority Labor Coordinator; Woody Anglade, Minority Labor Associate; Cedric Hendricks, Minority Deputy Counsel; Marjan Ghafourpour, Minority Staff Assistant/Labor.

Chairman Boehner. Good morning, everyone. The quorum being present, the Subcommittee will come to order.

We want to welcome all of you this morning, especially our witnesses. We appreciate all of you making the effort to be here today to help us understand exactly what is happening in the health insurance marketplace as it relates to costs and coverage.

Under rule 12 B of the Committee rules, any oral opening statements are limited to the Chairman or Ranking Minority Member. If other Members have statements they wish to have submitted, they will be included in the Hearing record without objection. All Members' statements will be inserted into the record.



This Hearing is part of our continuing effort to provide proper context for this Subcommittee as we prepare to undertake one of the most important domestic issues of our day, the vital topic of health care reform. I think all of us are in agreement on the need to proceed with reforms that will guarantee additional protections for patients and ensure accountability in what has come to be known as managed care.

But most Americans would agree that genuine health care reform isn't just about managed care and making it more accountable to patients. Equally important are the concerns of the 43 million Americans who lack health coverage all together. Our continuing challenge is to find ways to expand protection for managed care patients while expanding access to care for the 43 million uninsured.

Our previous Hearings have explored this question from many angles. We have looked at ERISA and how it works. We have looked at claim review procedures and proposals for review of denied claims. We have looked closely at the market-based reforms known as association health plans which many believe have the potential to reduce costs and make quality health care more accessible for those who don't have coverage.

But before we undertake any comprehensive reform of our nation's health insurance system, we must closely consider the impact our actions will have on those who have no health insurance. To put it simply, we must understand why the uninsured are uninsured, and that is part of the purpose of today's Hearing. Rising costs were a key issue during the 1980s when Americans suffered double digit premium increases that put quality health care out of the reach of many, but by the mid-1990s, it was widely believed that the cost problem had been defeated. With the advent of managed care premium stabilization costs in many cases grew at a rate lower than inflation. Now I believe that we have turned yet another corner with studies showing premiums on the rise once again.

Through the years, Congressional action on health care has closely tracked these trends. When premiums were rising in the 1980s and early 1990s, the number of uninsured Americans was approaching 40 million. We had a great debate about cost containment and universal coverage. After 1994, when costs stabilized, many policy makers turned their attention away from the uninsured and focused more exclusively on the quality of health coverage the insured received.

With premiums now back on the rise and the number of uninsured at 43 million and climbing, we have no choice but to consider these problems in tandem. Patient protections on the one hand, costs and coverage on the other. Next week this Subcommittee will consider legislative proposals that many of us believe will deal with both in a measured and balanced way.

I have said at previous Hearings that we must be aware of the trade-offs that occur when we place additional regulations on employer sponsored health plans. More regulations mean higher costs, and higher costs means reduced coverage. We may differ on the degree of that relationship, but I think we can all agree and acknowledge that it does in fact exist. As we begin the legislative process of managing those trade-offs, I thought it would be particularly appropriate for our witnesses to describe to us the atmosphere in which we will be making these decisions.

I should emphasize that these witnesses have not been asked to solve all of our policy challenges in their testimony. They will tell us what is happening out there on the issue of costs and coverage and why it is happening. I would ask all of our Members, if they could focus on those questions as well.






Again, thanks to the witnesses for being here and all of you, and I would yield to my colleague from New Jersey, Mr. Andrews.




Mr. Andrews. Thank you. Good morning. I am very much looking forward to hearing what the witnesses have to tell us this morning. As Chairman Boehner just said, there are some important factual and empirical questions which deserve a thorough hearing, and I am confident that those questions will receive such a hearing this morning.

I am also pleased that this Subcommittee of all the Committees in the House is taking the lead in finally legislating on the issue of the rights of patients and changes in our health care system. Beginning next week, we will commence a process designed to debate and consider all the various options that are available within the jurisdiction of this Committee. It is timely. It is something that Members on our side are looking forward to, and I trust that this morning's testimony will empower us to make even better decisions about the issues in front of us.

With respect to the growing number of Americans without health insurance, it is very important to understand relationships that exist between changes in the costs of private health insurance or employer purchased health insurance and the degree of coverage. It is also important for us to keep in mind issues that may be outside the jurisdiction of this committee but are awfully relevant to the question of getting more people insured.

In addition to looking at the relationship of the cost of private insurance and the number of uninsured persons, Congress should also consider President Clinton's proposal to make Medicare available to more people through a buy-in program or other kinds of mechanisms. Congress should re-examine the efforts to insure more children. I believe that the action that we took in the 1997 Balanced Budget Agreement on a broad bipartisan basis has had a positive effect throughout the country. We need to look to build upon the success of that 1997 legislation to insure more children.

We need to look at some of the proposals that have been made by Members of other Committees, proposals such as that of Congresswoman Johnson from Connecticut that would attempt to insure more individuals by the use of the Internal Revenue Code as a source of public subsidy for the purchase of private insurance.

I think it is important that we not only emphasize the risk of people losing their coverage because of increasing prices, I think it is important that we look at the opportunity of expanding coverage for people by other legislative tools that this Congress has at its disposal, the Tax Code, the Medicaid program, the Medicare program and changes in the insurance marketplace which might make more insurance available to more people at a lower price.

I am confident that today's Hearing is a part of that effort. So I am pleased to be a part of the Hearing. I would also say that we do need some rigorous analysis of the often stated truism that when the price of something goes up there is less of it. How much does the price have to go up to create less of it? How much will prices, in fact, go up? How much price sensitivity is there among those who are already insured? How much price sensitivity is there among those who are not? These are some of the issues that I am sure we will deal with this morning.

I look forward to this morning's testimony. I especially look forward to our efforts which will commence next week to begin to consider changes in the law, and I yield back the balance of my time.

Chairman Boehner. I thank my colleague and friend from New Jersey and all of the Members for making the extraordinary effort of being here this morning, given that the House does not have votes and given that we were here until midnight last night casting votes on the legislative branch appropriations bill.

Today, we have decided to alter our Subcommittee policy and will have two panels of testimony. On the first panel, I am pleased to welcome Dr. Dan Crippen who is the Director of the Congressional Budget Office. Joining him this morning is Dr. William Scanlon from the General Accounting Office where he serves as Director of Health Financing and Public Health Issues. Gentlemen at the table understand we have a 5-minute rule. Your written testimony will be made part of the record. You can proceed Dr. Crippen.




Mr. Crippen. Thank you, Mr. Chairman. From the charge that you outlined in your Opening Statement, as well as the Opening Statement of Mr. Andrews, we say something that is probably obvious but important: What has happened is easier to describe than the why, and not knowing the why makes it even more difficult to prescribe solutions.

Let me say that we should remember our recent past. Despite several factors that might boost health insurance coverage such as the growth of the economy, expansions in Medicaid eligibility, state insurance reforms, federal legislation to improve the portability of health insurance, initiatives to expand insurance for children and several years of slow growth in health insurance premiums, the percentage of Americans who lack health insurance has nonetheless grown. Despite our best efforts, the number of people without insurance is likely to continue to increase.

Health insurance premiums will grow more rapidly than in the recent past, and more low-income families will move off the welfare rolls and Medicaid into entry-level jobs that do not offer coverage. Policies that further increase health care costs and premiums could result in larger reductions in insurance coverage than might otherwise occur.

What I will attempt to do today, Mr. Chairman, is outline what we know about the characteristics of the uninsured population and describe recent trends in health care costs and insurance coverage. According to the Current Population Survey, about 43 million people under age 65 lacked coverage as of 1997. That estimate represents 18.3 percent of the non-elderly population and compares with 14.8 percent who lacked coverage a decade ago. Most uninsured people were in working families, and one-quarter of them were children. More than half of them were in families with income below 200 percent of the poverty level. Low-wage workers and those in small firms are much more likely to lack coverage than other workers. The percentage of the population that is uninsured varies widely from state to state, depending on the characteristics of the workforce and state regulation and law.

Competition among health plans, Mr. Chairman, in the recent past and the associated shift from indemnity to managed care plans have contributed to a dramatic slowdown in the growth of health insurance premiums in the 1990s. On average, the annual rate of increase in premiums fell from double digits in the late 1980s and early 1990s to

2 percent or less in 1995, 1996, and 1997. Over the past year, however, premiums have begun to grow more rapidly again. Some analysts and health plans are predicting increases in the range of 6 percent to 10 percent for this year and next. Others are predicting even larger hikes.

Data from the Current Population Survey indicate that coverage of non-elderly adults fell steadily until 1992, remained relatively stable until 1997, and then began declining again. The percentage of non-elderly adults who were uninsured rose from 15.6 percent to 19.7 percent. Coverage of children increased slightly from 1987 to 1992 and then started to fall. By 1997, 15 percent of children remained uninsured.

Analysis based on those data suggests that the reductions in the coverage rates that occurred between 1987 and 1992, a period in which premiums were growing rapidly, were attributable primarily to lower rates of employer-sponsored insurance. One cannot, however, infer causality solely on the basis of that apparent association. Subsequent declines appear to be attributable mainly to falling rates of Medicaid coverage, with the proportion of the population with employer-sponsored insurance remaining relatively steady through 1997.

Another recent study which was based on data from other surveys taken in 1987 and 1996 found that the proportion of workers with employment-based coverage from any source fell from 76 percent to 73 percent over that period. Studies suggest that the decline generally resulted from lower rates of participation in employer-sponsored plans rather than reductions in the rate at which employers offered coverage.

Health care costs are rising for many reasons, including changes in medical practices, the development of costly new technologies, and greater use of prescription drugs and other services. Government regulation at both the state and federal levels can increase the cost of health insurance and lead to higher premiums. States also regulate the premiums that insurers charge for health policies, often by requiring premiums charged to small firms to fall within specified categories or limits. Consequently, the good risks tend to drop their coverage which raises the average cost of insurance for those who remain in the group.

Employers who offer health coverage would react to the additional cost imposed by health insurance mandates. Employers might respond, as you have heard from other witnesses, to rising health insurance costs by reducing the generosity of insurance coverage, perhaps by raising cost-sharing requirements on beneficiaries or by eliminating benefits. Some employers might drop health coverage altogether. They might also reduce the generosity of other employee benefits or reduce the size of wage increases; as economics tells us, employees tend to pay most of those costs.

Employees and others buying insurance in the individual market would also respond to rising health insurance costs. In general, higher premiums are likely to result in some loss of coverage, although the magnitude of the drop is uncertain.

The number of people without health insurance continues to grow despite the booming economy and expansions in Medicaid eligibility. Rising health care costs have made insurance increasingly unaffordable for many Americans. Proposals that would impose new mandates on health plans and insurers are meant to improve the value of insurance to customers, but they could also increase insurance costs and exacerbate the problem of the uninsured.

Other proposals are intended to increase health insurance coverage by creating a less regulated environment in the small-group market through such vehicles as association plans and health marts. Although those proposals could encourage the entry of some lower-cost health plans, they might also decrease coverage among the higher-risk groups.


Mr. Chairman, despite good economics and good policy intentions, the number of uninsured has continued to grow. It is not altogether clear why. What is clear, however, is that further raising the cost of insurance won't help. Thank you.







Chairman Boehner. Mr. Scanlon.





Mr. Scanlon. Thank you very much, Mr. Chairman and Members of the Committee. I am very pleased to be here today as you discuss the impact of higher health care costs on the problem of the uninsured.

You asked me to present the findings of a study that we did for Senator Jeffords, Chairman of the Senate's Health, Education, Labor and Pension Committee, last July that analyzed the relationship between private insurance premium increases and changes in the numbers of insured. Specifically, I will focus briefly on the trends in the employer's decisions to offer insurance and employee's decision to purchase it and an assessment of the recent studies that have estimated the relationship between premium increases and insurance coverage.

As you have heard from Dr. Crippen, recent studies have shown that employers typically do not stop offering health insurance coverage when premiums increase. Between 1996 and 1998 health insurance premiums, unadjusted for inflation, increased by almost 8 percent per year on average. But despite these increases the fraction of small firms with fewer than 200 employees offering insurance coverage, grew from 46 to 49 percent. At the same time, 99 percent of larger firms were offering insurance. As a result, the fraction of workers that were being offered insurance by their employers grew slightly. However, fewer workers chose to accept that employer-based coverage for themselves or their dependents leaving a smaller portion of the work force covered by employer-based insurance as Dr. Crippen indicated to you.

The fall in the acceptance rate may be partly attributable to what employees were required to pay for insurance in the form of their share of premiums. While the employee's share of single coverage premiums averaged between 12 and 13 percent in 1998, it rose to 33 percent in small firms and 22 percent in larger firms by 1996. Senator Jefford's particular interest was in how much insurance coverage might change because of an increase in premiums due to Federal mandates imposed on health plans. There are relatively few studies that have analyzed the relationship between an increase in the cost of insurance and a change in number of individuals covered. However, two studies by the Lewin Group did attempt to answer this question.

In November 1997, the Lewin Group estimated that 400,000 fewer people might be covered by health insurance if new legislation caused premiums to increase by one percentage point. A second study released in January of 1998 indicated a lower, potential coverage loss of 300,000 individuals for every 1 percent increase in premium.

In our view, these estimates may not be precise or accurate predictions of potential coverage loss. Limitations in the data, methods and assumptions utilized to make the estimate all contribute to our concern. At the heart of the concern is the fact that the information on the premiums employees paid for insurance was not available and had to be imputed. Since how individuals respond to premium changes is the key issue, having only an estimate of premiums employees face and not the actual amount introduces uncertainty into the results.

Our second principle concerned the simplicity of the assumptions made regarding how mandates would influence premiums and premium changes would affect coverage. It was assumed that mandates would uniformly affect premiums of all types of coverage, whereas in reality they would affect different types of coverage to varying degrees, managed care plans the most and indemnity life insurance the next. Individuals may then see a premium for the coverage increase, but rather than foregoing insurance they may opt for another type of coverage with a smaller increase.

Similarly, it was assumed that plan offerings would remain constant except for the mandated changes and the associated premium increases. What has been happening over the past decade or more is that plan offerings have been curtailed or restricted to keep premium increases down and to maximize sales or coverage. Similar changes could occur with the mandates.

Consumers may find that the catastrophic protection insurance offers is still attractive, even if some of the first dollar coverage they had or the flexibility in benefits or providers that they had are sacrificed.

I would like to conclude by making an observation that extends beyond this issue of health care costs and insurance coverage because the work we did for Senator Jeffords was very similar to work we had done for Chairman Bliley of the Commerce Committee in 1996. That work involved an analysis of what would happen if the number of Medicaid enrollees, I am sorry, of what would happen to the number of Medicaid enrollees if the program were converted to a block grant. The conclusion of that work was identical.

Although forecasts have been made with the best data available and built upon a set of reasonable assumptions, forecasts involve inherent uncertainty. At a minimum, forecasts are better discussed as a range. Everyone here is familiar with poll results that will report that 52 percent of people say something with a margin of error, plus or minus 3 percentage points. It also needs to be recognized that forecasts made with the best available data based on a set of reasonable assumptions may result in an estimated range that does not coincide at all with the estimated range based on equally good data and alternative reasonable assumptions.

Forecasting the impact of potential policy changes has become and absolutely should be part of the policy deliberation process. Recognition though of the uncertainty in forecasts also should be part of that process and factored into decisions whether to adopt the policy and in building in safeguards to a policy to accommodate undesirable consequences if forecasts prove erroneous.

Thank you very much, Mr. Chairman. I will be happy to answer any questions you or Members of the Committee may have.





Chairman Boehner. I thank both of our witnesses this morning for coming and sharing their testimony with us. As I read the testimony that you have submitted, it appears clear that to some extent you both would agree that rising costs have some negative impact on access to affordable health insurance. Is that correct?

Mr. Scanlon. Yes.

Mr. Crippen. Yes.

Chairman Boehner. I am going to ask both of you. Of the various legislative proposals you have analyzed can you identify those general types of proposals that would be most costly in terms of additional costs compliance?

Mr. Crippen. Mr. Chairman, we don't have a lot of research evidence on that. One characteristic I could suggest, perhaps, is that some of these proposals would tend to weaken managed care systems, that is to say, blow up the networks or weaken the ability to manage the care. In the stronger form systems, the more it would weaken the systems the more likely it is to cause systemic cost increases. As you threaten what managed care has accomplished, for good or for ill, you also threaten the cost savings that they have been able to engender in the recent past. As a general statement, I think that is about all we know. There are some proposals that have more threat, if you will, to those networks and systems than others.

If, for example, the remedy for a patient recipient was that the judge was able to grant a remedy that would be system-wide, network-wide or managed care plan-wide, clearly that would have more impact than if the remedy was just granted to that individual patient.

Chairman Boehner. You are referring there to a judgment or a decision that would widen the definition of medical necessity?

Mr. Crippen. Well, it could be any of those things, yes. Under ERISA, as you know much better than I, traditionally the remedy is to grant the benefit the applicant was desirous of. In the case of health care, particularly under networks, what the remedy would be is a little less clear. If it was simply the procedure in this case that the patient was desirous of and it didn't affect the plan, that is one result as opposed to a judge perhaps giving a remedy that would affect the whole plan.

Chairman Boehner. Mr. Scanlon.

Mr. Scanlon. Mr. Chairman, I think that in our work we have been struck by both the dynamics of the situation as well as some of the apparent contradictions that seem to emerge. One of the things that we found in looking at managed care organizations is that over time many of the practices that we are talking about in terms of mandate are being increasingly adopted by different managed care organizations, in part because of the fact that interest has focused on these issues and that from a market perspective perhaps it becomes attractive to tell and reassure consumers that you are offering them sort of a better insurance policy.

At the same time, sort of what we are dealing with is a lack of solid evidence but a lot of sort of information or some subjective assessment of what might happen that is inconsistent with some other information. I will give you an example is the issue of sort of appeals. On one level there are concerns about how much appeals would add to the cost of policies and the contradictory information is that there are very few denials reported by plans.

So it doesn't seem to be sort of all in balance. Sorting this out and sorting it out in a dynamic environment has been a very difficult task.

Chairman Boehner. Mr. Scanlon in your testimony if I recall correctly, over the last 10 years or so you have seen an increase in the number of employers offering plans to their employees, yet a decreasing number of employees taking advantage of those offerings by the employer. If I recall your testimony correctly, you have indicated that this possibly could be a result of the employee having to pick up a higher percentage of those premiums. Can you spend a little time talking about what has happened to the employee share of premiums?

Mr. Scanlon. Certainly Mr.Chairman. Immediately prior to 1990 employee's share of premiums averaged about 13 percent in small firms and about 12 percent in larger firms. By 1996, they had increased to a level of about 33 percent in the smaller firms and 22 percent in the larger firms. These are very sizeable increases, especially when you combine them with the fact that the level of premiums were increasing on average about 8 percent a year during that period. So what employees were facing in the form of higher health care costs or health care premiums were very, very real. We would anticipate that some of the response in terms of declining coverage is a result of those higher premiums.

Those premiums would have been even higher if we hadn't seen the kinds of changes that have occurred over this period in terms of insurance offerings. We are talking today about managed care in part because managed care has become very prevalent in the insurance marketplace. In a response to increasing costs managed care has been seen as a means to deal with that, and therefore it has become a much more predominant portion or part of the insurance offerings that workers face.

Chairman Boehner. Of the number of employees who are offered insurance by their employer, how many of these employees across the country actually participate in the plans?

Mr. Scanlon. In 1996 it was about 80 percent, which was down from about 88 percent at the turn of the decade and disproportionate by age groups. Younger people, perhaps with a feeling of invincibility, are more likely to turn down coverage whereas older people are much more likely to accept coverage.

Chairman Boehner. Mr. Andrews.

Mr. Andrews. Thank you, Mr. Boehner. I would like to thank both gentlemen for their testimony and begin with Mr. Crippen.

You make the statement, as I said in the beginning, that it is a truism that when you raise the price of something it becomes less frequently purchased. That seems to be the case, but you also set forth what kinds of price increases make a difference, to whom and under what circumstances. I accept that.

You are aware of the fact that ERISA does not cover millions of covered lives.

About 30 million covered lives or more of people, for instance, who work for local governments who work for other kinds of plans not covered by the ERISA pre-emption. Are you aware of any research which indicates that premium increases in those plans have behaved differently than premium increase patterns in ERISA plans?

Mr. Crippen. I am not aware of any. That doesn't mean it doesn't exist.

Mr. Andrews. I am aware that you haven't been asked to answer that question prior to this morning, but I would ask you and your staff to go back and take a look at that, that we do have a laboratory of sorts here. We have millions of Americans who are provided health insurance by their employers who are not subject to the rules of ERISA, and it would be very instructive to find out whether the patterns of premium increases or decreases have tracked ERISA plans or not. I think that would be an interesting thing for the Committee to find out.





Mr. Andrews. Mr. Scanlon, I want to ask you a question that I don't necessarily subscribe to this position, but it is kind of striking. If someone was brand new to this debate and hadn't thought about it at all, they would find the following data in your testimony and might ask the following question: Between 1995 and 1997 you say that real health insurance premiums remained constant or fell slightly across all plan types. Did the number of uninsured people go up or down between 1995 and 1997?

Mr. Scanlon. It went up.

Mr. Andrews. And prior to 1995, in the 5 years prior to 1995, there was inflation adjusted growth as high as 11.6 percent for indemnity plans and 10.6 percent for HMOs. Did the number of people, uninsured people go down or up during that period?

Mr. Scanlon. It went up.

Mr. Andrews. Did it go up faster in the period prior to 1995, or did it go up slower or did it go up the same?

Mr. Scanlon. I am afraid I am not aware of the difference.

Mr. Andrews. Well, we know something about this. At the beginning of the decade, we used to toss around the number of 40 million uninsured. Now it is 43 or 44, but it would seem to indicate that the rate of growth in uninsured people has been about the same during that seven or 8 year period, hasn't it?

Mr. Scanlon. I think it hasn't changed dramatically, but I wasn't sure whether it changed in one direction or another in those two periods.

Mr. Andrews. Although I don't subscribe to this position, I would like you to consider it. That would appear to support the conclusion that there isn't much of a relationship between the number of uninsured people and price increases at all, that there is a certain steady growth in the rate of uninsured people, at least the number of uninsured people, that occurs in times of high premium increase and low premium increase. What is wrong with that argument?

Mr. Scanlon. Well Mr. Andrews, I think that it is an issue of are there two factors or is there one factor. The price increase and the outcome you are interested in in terms of who is covered and that there are many other factors are influencing whether or not someone is covered. Decisions to offer insurance by employers appear to be often made or most predominantly made for the longer term. They are going to get into this. They are going to continue it. It is not going to be something that they want to take away from their employees when prices rise. So new employers that we have do in terms of an expanding economy is they may not immediately jump into offering insurance to their employees.

We have also heard over this time period about increases in the number of part-time workers and numbers of contract workers. Part of this is a way for an employer to control costs because very often benefits are not offered to such workers.

Mr. Andrews. To come back to something that I asked Mr. Crippen about, it is correct, isn't it, that there are millions of people who are employees and their families who are not subject to ERISA pre-emptions, who therefore are in plans that are subject to state mandates and subject to torte liability for decisions by the plans? Are you aware of any evidence that there are greater rates of premium increases in those plans than in plans covered by ERISA?

Mr. Scanlon. We did some work probably about 5 years ago looking at some of the state mandates and not just the incremental change to premiums. We identified that there were increases in premiums due to the state mandates, though it was a lot smaller than what many people had speculated. How much those contribute to increases over time we haven't measured. Probably one of the difficulties we have here, and I think you have indicated quite rightly that we in some respects have a natural laboratory in terms of people that are covered by ERISA. Unfortunately, we have very little data on the experience of people that are covered by state mandates in any of these different circumstances to be able to make comparisons and to draw judgments.

Mr. Andrews. We have little data, but we do have the commonsense experience that we don't hear complaints from State and local officials about insurance premiums that are any different than the complaints we hear from the private sector. I mean, there isn't any out-swelling of support that says there is a crisis in that sector than doesn't exist somewhere else. Have we heard that?

Mr. Scanlon. Probably the primary factor behind health insurance premium increases has been the changes in medical care and in technology which have forced premiums across the board to increase. I think that the incremental changes that are associated with any one thing are often overwhelmed by that grand change.

Mr. Andrews. Thank you very much.

Mr. Crippen. Mr. Andrews if I could just say, bear with me for 30 seconds, that in terms of economics looking at the premium changes alone doesn't tell you much. You can't reach a conclusion on one side or the other in whatever argument you are constructing.

What is important is the total cost of health care and how that finds its way through to employees as part of this picture if they have more co-pays, deductibles, less coverage, or lower wages in the future. Many of those things can happen that aren't reflected or captured by just the premium number alone. So I think no matter which side of the debate you are taking about, looking only at premiums won't give you much comfort.

Mr. Andrews. I appreciate that.

Chairman Boehner. The gentleman from North Carolina, Mr. Ballenger, who is tieless.

Mr. Ballenger. Thank you, Mr. Chairman. Some of us are relaxed. I am going home. Y'all can stick around if you want to.

I would just like to add that I am a manufacturer who has a plant that is not ERISA, and I read your statistics on the percentage of real annual growth in premiums.

I must say you got 1991 to 1998, and in some of them you actually show a decrease. I can truthfully say I have never seen a decrease in premiums. They go up every year, and I think it has to do with the age of your employees. If you happen to have a firm that has been in existence for some length of time, your age group goes up and so your sickness goes up and so your premiums go up.

I think everything you said that applies to ERISA applies to non-ERISA things. I can remember in 1950 our company paid everything. We take you and cover you and your family and everybody else and it was cheap. But then it came along and we only paid for the employee and this is 5 or 6 years later. Ten years later we went to co-pay. Then we went to we pay 80 percent of the cost "up to" and the employee picked up the difference. Then we limited the amount of money that would be paid in certain cases, and finally we went to self-insurance, and to PPO.

I can truthfully say that our insurance premiums, although we did increase the number of employees, back in the 1950s when we started cost the company about $5,000 a year; I should have it per employee but I don't. It is now costing us about $750 thousand dollars a year. The one thing that scares almost every manufacturer who pays insurance, especially those that self-insure, is that somewhere down the road somebody is going to invent a law up here that makes us liable although we are giving substantial amounts of money.

So it makes us liable for what is going on here, and having obviously only examined ERISA that means you would not have looked at states that have allowed liability to occur. Are there any studies at all that have shown once liability comes to employers, the number of employers that decide to forget it and say we will give you the money and you insure yourself? That is one thing that I hear over and over again from small employers that, you know, if it really gets down to the nitty-gritty and you make us liable because we are self-insuring there is no reason we should carry on.

Mr. Crippen. I am not aware of any specific that looks at states that have adopted liability exposure or increased exposure for it, but the national aggregates don't suggest that happening quite the way you talked about it. That is to say, as both Mr. Scanlon and I said, the number of employers offering some form of health insurance has been relatively constant; actually increased a little in the recent past. So employers aren't abandoning coverage in any systematic way that we can see. There may be a state out there that is not part of that pattern, but I am not aware of it.

Mr. Scanlon. We tried to review that area about a year ago and did not find any work of that type then in part because I think the state entering into this field is relatively limited; Texas being the primary state.

Mr. Ballenger. How often do you find or have you even found at all, states that do allow liability and suits that do occur?

Mr. Scanlon. Well, it is an issue I think of allowing liability in some respects. Not being an attorney I would be very careful here, because it is an issue of whether a state can do something that does approach ERISA plans in terms of liability. What has mostly been an issue is the plan itself, or the issue of what constitutes a benefit determination versus what constitutes medical care. The court cases that have been tried seem to fall into two groups; those where plans are held liable because of the fact that they were involved in delivery of medical care itself, and then cases where they were not held liable because it was considered a benefit decision and therefore pre-empted by ERISA.

Now the employer's role in that, as a non-lawyer, does not seem to be apparent to me. I am not sure whether we will also see this as an area of dynamics. The legal theories are changing, and so where we will see this go and what the employer's role might be is something that is uncertain at this point.

Mr. Ballenger. Well, considering the growth in population and the growth in number of jobs over the last eight or ten years, it would appear to me comparatively speaking that the uninsured population went from 40 million to 43 million. The insured population should have gone up substantially also. Do you have that statistic?

Mr. Scanlon. I don't have the number but the percentage of people that are uninsured has risen slightly.

Mr. Ballenger. Just slightly?

Mr. Scanlon. Well, right.

Mr. Crippen. Depends on which group. The non-elderly adults have grown a couple of points.

Mr. Ballenger. Is there any statistic anywhere that shows, I know it has always been effective back home that when you offer the insurance where they pay for the family or a certain amount of it if the employee happens to be around 19 or 20 where you are going to live forever, they would rather have the money in their pocket? Are there substantial numbers of people that are offered insurance but decide they just don't want to put that little bit of money away?

Mr. Scanlon. Actually, there are for people under 25. The percentage that accepted the insurance that was offered to them dropped 70 percent from 85 percent, whereas among the overall population it is still at 80 percent. This means that older people are much more likely to accept coverage.

Mr. Ballenger. I am just curious. If we pass some federal law, could we pass a law that would mandate that everybody has to accept insurance whether you want it or not? I mean, you know, these youthful kids, they would rather have a beer.

Chairman Boehner. Well, I would note for the gentleman from North Carolina that there is some experience with that as states have mandated auto insurance coverage and the rates of coverage continue to decline. So I am not sure that mandating the purchase of insurance has worked very well in that history.

The gentleman from Michigan, Mr. Kildee.

Mr. Kildee. Thank you, Mr. Chairman. Next Wednesday the Patients Bill of Rights, H.R. 358, will be, to use our terms, ripe for a discharge petition, and I am sure there will be a number of people lining up to sign that discharge petition. Aside from the independence of the judiciary which you mentioned, Mr. Crippen, what other major factors make it so difficult to arrive at a cost estimate of the Patient Bill of Rights?

Mr. Crippen. It is hard. There are a fair number of unknowns about how everyone out there is going to react. We have seen providers, for example, react to other federal legislation in ways we didn't anticipate. So a lot of what we face is the uncertainty of how the legal community, patients, providers and plans will react. What we have done is look at a lot of possibilities, some of which would frighten you, if you will, about the potential costs increase. We put very low probabilities on many of them. So in essence, we have to make some guesses or informed judgments if you will, about the likelihood of any of these cost avenues manifesting themselves. When it is all said and done one of them may or may not occur, but we have put low probabilities on many of them happening and it really is the uncertainty of what is going to happen.

We, for example, asked a number of ERISA attorneys from the outside to help us think about how the Patients Bill of Rights might work under ERISA. Of course, most of them are used to a different set of issues. In fact, it took us about an hour just to establish a vocabulary because what I think of as a plan, they think of as something very different, and so it took us a while to begin to communicate. We have undergone those kinds of efforts to try and understand how the law would work under ERISA as you have proposed it and in turn how people would react to it. There is just a lot of uncertainty, I have to be frank, about how people will react.

My guess is no matter what number you put on an estimate, it is either going to be lower or higher and probably substantially lower or higher than the number you put down. Either the networks will be broken up and the cost savings we have seen in the past will disappear or they won't. There will always be some administrative costs.

So, again, it is a matter of informed judgment of what the reactions of the many players are going to be.

Mr. Kildee. I have been in Congress for 23 years, and the CBO plays a very important role and the most part usually you come up with a more precise figure, and this is probably in my memory probably the vaguest estimate that I can recall. Mainly, again, it seems to come back you mentioned just not sure how a judge may apply a particular case, whether it is, you know, specific or general.

Mr. Crippen. For example, as I alluded to with the Chairman a few minutes ago, if the remedy granted went to the compensation system or the membership of the plan, how many doctors were in or out, those kinds of things, that has a much more profound effect than if a particular procedure was granted to a patient as a remedy. It is those kinds of things we don't know what the judges ultimately are going to do, and we are not sure even from some of the drafting of the legislation how much leeway they would have.

Mr. Kildee. There is no model out there in this country or any other country that you could study?

Mr. Crippen. Not that we found. I am sure we looked for benchmarks wherever we could find them. I do want to say that what our professionals have done is look at each aspect of the bill and try and figure out how it would be implemented; how many people it would take to do the reviews inside and outside, literally how many people. Then work that from a very micro sense up to a macro estimate. So there is a lot of thinking and logic behind it but at the end of the day it is still imprecise.

Mr. Kildee. Do you have any comment on that, Mr. Scanlon?

Mr. Scanlon. Yes, Mr. Kildee. I agree with Dr. Crippen in terms of the difficulty of this task. I mean, I think there are no models in the rest of the world because the American health care system is unique in terms of its heterogeneity. I also think we underestimate, sort of, how much heterogeneity exists under all the labels that we apply.

When we talk about managed care, it ranges from the preferred provider organization to the staff model HMO, and that is changing constantly. We find that if you look at managed care organizations on the west coast that they differ from managed care organizations on the east coast. The question would be if we do anything in terms of changing the requirements for these plans, how are they going to react and how is that going to influence the cost level. At this point in time, that is all sort of an unknown. We don't have the experience from the past to be able to build a good estimate. We always feel very fortunate that it is CBO's job to do estimates and GAO's job to go in and look afterwards and see what the consequences of things were. So we appreciate the sharing of this responsibility.

Mr. Kildee. Well, I really appreciate your uncertain but very candid answer. Some people like to speak with great authority and put a figure on it, but I do appreciate your response. Thank you very much.

Chairman Boehner. Mr. Petri.


Mr. Petri. Thank you very much, Mr. Chairman. I want to start first by commending you for the initiatives you have taken in having this series of Hearings and moving forward with this important legislation. In this area I am struck by the injunction I guess we normally attribute to doctors that the first thing to do is do no harm. We are confronted with a very dynamic, rapidly changing health care system here in the United States. We all know that.

I can't drive through a community in my part of the world where there isn't a new health clinic going up, a hospital wing closing, new types of nursing care, graduated facilities being offered, and enormous changes going on in the health care system. I do think we have to be a little bit careful that with good intentions there is a desire to avoid potential abuse as we go forward. We don't want to end up sort of screwing things up for a lot of people, first of all with good intentions but not understanding it. In that connection, I wonder if you could help us understand some of these statistics a little better.

I am struck by the fact that you said there is a very low rate of uncovered people relatively in the Midwest and in New England as compared with California, probably Texas and Florida and some of those areas of Nebraska. In Wisconsin, we think we have the lowest rate of uninsured people in the country, even though Hawaii has a state mandate that they have to have insurance. We have traditionally had more people covered without a mandate.

Does this have to do with undocumented residents, things like that, as much as it does with some other dynamics? I mean, we may not be really focusing on the problem. The problem is that undocumented people aren't getting insurance coverage or temporary workers aren't getting insurance coverage as opposed to stable people who want coverage and aren't getting it somehow.

In a tight layer market, employers want to provide it. Employees want it. Employers want the coverage to be fair and good in almost every instance because they want to have happy employees, and if they aren't happy they are going to find another job. So there is at least some discipline in this system.

Can we provide better discipline or should we be a little cautious or are there models? Let me just say, a lot of mandates or efforts at mandates do occur and different provisions occur from plan to plan and state to state. I don't know if it is the role to ask you this or not? Can you sense some mandates or provisions that are growing either as options or as definite parts of a plan that seem to be working in terms of not raising the cost too much but making people feel better about it? I am sure people in a competitive marketplace are looking for things like that.

Mr. Crippen. Let me start at the end and go forward. We have not done, and I don't know anyone who has done quite what you suggested to see after implementation at the state level the relative costs of different mandates. As to your larger question, immigration certainly can play a role in the patterns we see state by state. It doesn't have to be undocumented or documented.

Immigrants tend to start after they get here in the relatively lower paying jobs, and those are the kinds of jobs you would expect don't offer insurance coverage or indeed the employees that take it even if it is offered. So if California is a place where immigrants tend to get started in the country, then you wouldn't be surprised that that would have some effect but not necessarily in a sense of documented or undocumented.

The other factors involved are the degrees of unionization, for example. You wouldn't be surprised that the higher degree of unionization tends to have higher coverage. So the work pattern and work force patterns are important as well. The state regulations and mandates as you said, all play into this variation we see across the states which is much more dramatic than I expected.

Mr. Scanlon. Some of the variation that we see in insurance coverage across states is directly related to the Medicaid programs. The very significant differences that exist in both the programs are in terms of who is eligible for coverage as well as how well states have reached out in terms of trying to make people aware that they are eligible and get them actually enrolled. We have, over time, reported on the fact that there are several millions of children that were eligible but were never enrolled. Now with the children's insurance programs, there are much more aggressive efforts to try and get some of those children coverage.

Wisconsin is an example of a state that felt with the children's insurance program they had already been doing a good job. Here they had additional moneys but they were going to have more trouble using them than potentially other states because of a good job they had done historically. That is, I think, a factor that has influenced this variation across different states.

Chairman Boehner. Thank you, Mr. Petri. Mrs. McCarthy.

Mrs. McCarthy. Thank you. I am sitting here just thinking right before I came to Congress, I became a single woman, and I had to pay for my own health care insurance which came out to about $250 a month. When I came to Congress and they offered me health care insurance, it was wonderful. It was great. It was a perk, I guess.

We have so many Federal employees, you know, so obviously we are very large pool. So I am always confused when we have such large pools out there of whether it is large companies and everything else on why their premiums are so much higher than ours. I mean, they are, they are almost tripled I would tend to think, but the thing that I want to talk about is that I talked to an awful lot of young couples.

When I say young couples, they are probably like 30 to 35. They usually have two children, and I consider them making a decent salary. Between the two of them they are probably making 70 to $100,000 a year, and yet they will say to me they don't have health care insurance, and I will say why. Even when going back when I was a young married woman with my husband; and we had our first child, we thought health care insurance was fairly expensive, but we still went for it.

Is the attitude for a lot of people, all right, if I get sick, someone is going to take care of me anyhow, and is that driving up our costs? Because obviously if someone in the government or the State is going to pick up that health care because everyone is going to get health care eventually, one way or the other. If you go in a hospital and you have no health care insurance, you are going to be taken care of. I mean we all know that.

So is that driving up the costs of health care also? I do understand health care has gone up. Technology today is absolutely wonderful. People that we can save today we couldn't save 10 years ago. So that is expensive. Part of your life as far as taking care of someone has gone up.

So with all that we are trying to do and we want to make sure that everybody has basic health care. A majority of people really don't go to the doctors until it is way too late. That is one of the big problems, preventive care, which health care, HMOs, were supposed to do have not lived up to that, and I think if you talk to the Majority Members, by the time we get to a doctor it is like why didn't you see me a month ago. You know, we all tend to do that, and I would think we are a perfect example of the American people. So people wait too long, but I am just curious on if there had been any studies as far as people that should be able to buy health care insurance or at least go into with their employer are not still not doing it.

Mr. Scanlon. I am not aware of studies that have looked at it from the perspective of attitude. I know that we have seen the impact of higher costs in the fact that younger people tend to decline coverage at much higher rates. I think the premise that you always will get coverage is something we should educate more people about. Certainly the coverage for the uninsured has been documented very well as not the same necessarily in terms of the extent of treatment and the quality of treatment that someone with insurance can get. So I think there is a need to have insurance and it is of significant value.

Mrs. McCarthy. I agree with you. I was in nursing for 32 years, and thank God I talked my son into getting health care insurance. Thank you.

Dr. Fletcher. [Presiding.] Thank you. I appreciate the Chairman providing this Hearing and your testimony.

You know, as I look at and have spoken to my constituents and really look at even what most of the general public feels, the number one concern I hear by and large is the cost of health insurance and the rising costs, the ability to afford it and the decisions that families make every day. Are we going to continue to provide health insurance, or are we going to have to stop that so that we can put food on the table, and provide education for children? I remember hearing from a young lady back in 1996 when we were looking at some health care reform in the state, and she spoke of this issue because we did some health care reform that raised the costs and made it less affordable. I think if we don't see a correlation between costs and the uninsured we can't see the forest for the trees.

Everyone that does anything in the market understands if you raise the cost of the product it is going to decrease the number of folks that purchase it. So number one concern is cost. Number two, I think is access to care, making sure that physician and patients decide the care, not insurance companies, not judges, not attorneys. Rather physicians and patients decide the care. There is a great deal of interest in making sure that people can choose their provider, that they want someone that they trust.

You mentioned and I know several states that have increased their mandates and done health care reform, my home state being one example. Our number of uninsured increased from 400,000 to about 507,000. I take for granted some of that could have been Medicaid, but not all of it.

That is a 25 percent increase in uninsured. We did some health care reform that was well intended but very, very misguided. I am just concerned here that we don't have a politically motivated debate with discharge petitions and other things that don't allow us to honestly debate this issue of what is best to address the public concerns and to make sure that the right folks make the decisions, that we don't increase the costs, and that we continue to provide the care and not only that but work to decrease the number of uninsureds and make it more affordable and more available, not less, by some political tools that may try to drive a wedge and really deflect us from what the real concern and interest should be.

Let me ask you, if you increase the price who are the most likely to drop their health insurance? What group of individuals? Mr. Crippen. And Mr. Scanlon, if you could both address that.

Mr. Crippen. We know presumably, more of the same. That is to say we know that lower-wage workers tend to be the most likely to be uninsured. So it would be the lower end of the income scale presumably.

Dr. Fletcher. You agree with that, Mr. Scanlon.

Mr. Scanlon. Very completely.

Dr. Fletcher. What about the young and healthy. Would that be a group that drops it?

Mr. Crippen. As Mr. Scanlon has already said, presumably yes, some at least don't take that now. I mean while it may be an attitude problem as well, it is really an economic rational.

Dr. Fletcher. It is a cost benefit analysis. I am healthy.

Mr. Crippen. And my outlook is, I am not going to need anything for the next 10 years.

Dr. Fletcher. One of the points that you make is individuals that are dropping insurance are those individuals that put money into the system and take relatively small amounts out of the system because they are the low utilizers.

So what we have got if we increase costs? Who we are going to hurt? We are going to hurt the poor and the young families. I think that is what we have seen in our state, and that is why I am very concerned. We can have some very noble ideas in making sure that we do the right things. Yet we increase the cost and decrease insurance on the poor individuals and the low-income families that are in those low-income jobs because they are not able to take insurance because they can't afford the cost sharing aspect of it. We drop out those individuals that put money into the system; the low utilizers that help share the cost. So that is a major concern I have had.

When we talk about increase in liability, let me ask you, in the plans that you have seen come out does it include Medicaid and Medicare? Are they liable in the same way that some of these other plans want to make private plans liable? Have you done any analysis on the cost of that?

Mr. Crippen. No, I think the legislation we have been asked to analyze does not include Medicare and Medicaid.

Dr. Fletcher. How many people are in Medicaid and Medicare?

Mr. Crippen. Medicare has 39 million.

Mr. Scanlon. Thirty-nine million and an additional, approximately 30 plus million in Medicaid.

Dr. Fletcher. So we are talking about 70 to 80 million people that are covered. We have got a great deal of concern expressed by many that we want to make sure that they have this option, and yet they don't have that in Medicaid and Medicare. Is that right?

Mr. Scanlon. No, but they have other protections. Medicare in some respects has already got some of the protections that are in some of the legislation that we have had. They have an appeals process for example.

Dr. Fletcher. An external review process and those sorts of things to make sure that the decisions that are made are appropriate?

Mr. Scanlon. That is right. The other thing that Medicare beneficiaries have today is the ability to opt out of managed care completely. They have more choice in that regard than do many employed individuals in that they can always return to the traditional program and use services.

Dr. Fletcher. Do you think if there were more options that that would be helpful also for employees?

Mr. Scanlon. For employees options are one of our strong views about the reform of Medicare in that we would benefit greatly from quality-based competition among health plans. The same thing is true in the private sector: If employees have choices and plans can compete on the basis of information and quality, we would probably have a much better health system.

Dr. Fletcher. Thank you very much. My time is up. Mr. Tierney.

Mr. Tierney. Thank you, Mr. Chairman. Thank you both for your testimony here today. Let me try not to cover ground already covered and just sort of synopsize here. What I am gathering from you is that if you are trying to project the effective price changes on a plan, you are able to use estimates but you can't get to firm numbers; is that right?

Mr. Scanlon. That is correct.

Mr. Tierney. That is basically because all your estimates are based on assumptions that you were forced to draw?

Mr. Scanlon. Correct.

Mr. Tierney. The assumptions all change. They can vary.

Mr. Scanlon. There can be more than one set of reasonable assumptions.


Mr. Tierney. As you change each one then whatever conclusion you might draw changes. So what we are dealing here are estimates and your best speculation is a guess as to what the result might be.

Mr. Scanlon. Correct.

Mr. Tierney. Let me just ask you also if we were somehow able to arrest the decreasing real value in wages and we are able to give more purchasing power to the individual employees, would we then suspect that more of them might opt to take the coverage that their employers would provide them?

Mr. Scanlon. I would think it would. I mean economics would suggest that health insurance is a good thing and that as incomes rise you would want to consume more of this good thing.

Mr. Tierney. So if we were to raise the minimum wage, for instance, more people in that category might be able to then opt into being covered in some form?

Mr. Scanlon. Not exactly sure what the impact would be because many persons that are going to be affected by minimum wage change would also be eligible for Medicaid.

Mr. Tierney. I have no other questions. Thank you.

Dr. Fletcher. Mr. Holt do you have any questions?

Mr. Holt. No questions at this time, Mr. Chairman.

Dr. Fletcher. I think that probably concludes this unless anyone has any comments. Let me just ask one more thing as we close this out and that is we mentioned Medicare and Medicaid, that they don't have this option that some of the bills have recommended. Why do you think that is that Medicare and Medicaid don't offer the option of some liability?

Mr. Crippen. If you are speaking strictly about liability, you mean federal probably because they are federally-provided programs.

Dr. Fletcher. Do the Medigap HMO's, fall within that category also? Help me out with that.

Mr. Crippen. No, Medigap is strictly private insurance, although it is predicated on a set of regulations. We have set up 10 types of policies that you can buy under Medigap, and the content coverage of those policies are pretty well prescribed by law or regulation. So Medigap is private in that sense. But Medicare and Medicaid are obviously public, federal dollars mostly on-budget.

So I don't know exactly how to answer your question. Some of the provisions that are in the Patient's Bill of Rights, as Mr. Scanlon said already apply to Medicare. And indeed most Medicare recipients, something like 85 percent, are still in traditional fee-for-service not in managed care.

Dr. Fletcher. Let me just make a comment on that. I have dealt with Medicare. It is far from fee-for-service now in the way it is implemented. There is a lot of 'I can't draw a CBC on a patient without putting specific diagnosis and going through things.'

It is far from the old indemnity fee-for-service plans, so let me make that clarification. I haven't seen one of those plans in years. But in any case, it seems that there is a concern of cost? Is that the reason that those may not be liable? The Medigap HMO's I am talking about.

Mr. Scanlon. I would like to try and get you some information because while the proposed legislation doesn't include Medicare and Medicaid, there is an issue of whether or not HMO's that contract with the two programs would have any liability.

Dr. Fletcher. We appreciate that information.

Mr. Scanlon. In the past the assumption has been based on ERISA, and these are not ERISA plans when they are contacting with Medicare or Medicaid. So we will get you some information to clarify this and provide it to your staff.

Dr. Fletcher. Thank you very much.

And if there is no further questions I think we will move to the next panel and thank you all very much.

Chairman Boehner. [Presiding.] It is my pleasure to introduce the second panel of distinguished witnesses. Our first witness on the second panel is Mr. Michael Anderson who is the Manager of Total Health at the 3M Corporation, St. Paul, Minnesota. The second witness will be Tracy Cassidy who is a principal at William M. Mercer, Incorporated. Our third witness will be Dr. Deborah Chollet, who is the Vice President of The Alpha Center, followed by Mr. Charles Kahn, President of the Health Insurance Association of America. And finally Sal Risalvato.

Mr. Risalvato. Close.

Chairman Boehner. Risalvato, excuse me, who owns the Riverdale Texaco in Riverdale, New Jersey. And I think all of the witnesses know that your entire written statement will be included in the record. And I ask that you stay as close as possible to the 5-minute rule.

Mr. Anderson, you may begin.




Mr. Anderson. Good morning, Mr. Chairman, Congressman Andrews, and other Members of the Subcommittee. My name is Mike Anderson, and I am the Manager of Total Health of 3M Company. I am here today on behalf of the Business Roundtable. The Business Roundtable is an association of Chief Executive Officers of leading U.S. corporations representing 10 million Americans whose health care benefits cover approximately 25 million Americans.

I appreciate the opportunity to appear before this Subcommittee to share our health care experiences. I have also submitted written testimony on behalf of the Business Roundtable. 3M employs over 73,000 worldwide with over 38,000 in the United States. We are one of the largest private employers in the State of Minnesota where our headquarters is located. Our health care coverage provides coverage for 140,000 lives in the United States.

I will address four fundamental themes today. First, I will talk about the basics of our plan in order to illustrate how 3Mers have flexibility and choice of doctors, and access to appropriate treatment of their choosing. Second, I will talk about our overall strategic approach to health care that ties to our corporate values. Third, I will discuss how our benefits and how our overall total compensation program looks at cost, quality, and overall value, recognizing we have limits within our total package. Finally, I will talk about the ERISA framework.

So I will start with a quick overview of our 3M health care plan which we offer to employees, retirees, and family members. We have representation in all 50 states with a heavy concentration in Minnesota with almost half of our employees, and the balance in a lot of other small, typically rural communities and medium and large communities. We offer multiple medical plans under one common design to 3Mers. This national plan design gives us the ability to offer comprehensive coverage with affordable premiums. For example, our $100 deductible plan which is our strongest plan option, is $24 a month premium for family coverage.

The plans are ERISA self-insured and are predominantly administered under a preferred provider or PPO organization. Our PPOs offer a broad selection of providers, and with our PPOs we offer direct access to any covered specialist without administrative approval, and we have other network provisions.

Why are health care benefits important to 3M? The foundation of our program really comes from our corporate values and our human resource principles. Our strategy focuses on the important relationship between health and productivity which is significant when you think about not only employees absent from work from illnesses but also impact of employees dealing with chronic conditions or family members that are ill.

Finally, it is important to note that our other human resource programs such as our employee assistance program plays an important role in people's complex health issues and are carefully integrated into our health care program. How do we measure results in what has been our experience? We use a variety of measures in our human resources area to look at, for instance, employee satisfaction where we have very high overall employee satisfaction with 3M as well as high satisfaction with our employee benefits program.

We also look at service quality health care. And finally, of course, look at cost and quality components again under this health and productivity umbrella. Our cost experience has paralleled the industry. In the late 1980s and early 1990s we had double digit inflation. However after a strategic plan was put together and implemented in 1994, the highlights of which are in the written testimony, our trend has been approximately 2 percent per year over the last 5 years.

However, our most recent national experience suggests a trend of 10 to 14 percent average. We recognize many other employers are experiencing premium increases up to 20 percent in some markets. Let me say a bit more about health care costs. Our ability to utilize ERISA allows us to focus most of our expenditures on health care delivery. Our administrative expenses are about 7 percent of overall expenses which are comparatively low. With these results, we have been able to put additional features in our plan like 100 percent coverage for preventive care.

Second, while our package is national in nature we do have significant differences in regional costs which you will see in the written testimony. This is an important issue because our employees are salaried and are paid on a national basis. Consequently, if they ever did quit or discontinue employees benefits, this could result in employees with significantly higher costs and they could depart the health care arena.

What do we expect to happen in the future? It appears health care inflation has arisen. We think the underlying issues of quality, consumer-related issues, cost shifting, and aging population and consolidation all will contribute to this. It is our intention to stay in health care benefits. However, changes in legislation could result in diminished, reduced, or plan elimination.

The final area I will discuss is ERISA. I will also comment on other employers in Minnesota who are part of the Buyers Health Care Action Group. ERISA has provided the umbrella that allows us to be a national plan. The cost savings we have seen have allowed us to reduce our expenses and have comparatively better results than our comparable parts who are working in the insured market in Minnesota. We have passed these savings on in the form of lower premiums and higher wages. We believe we are in a unique position to engage our employees in this complex health related area. And, finally, the ERISA framework is a key important structure for us and the reappearance of costs in this make it imperative that we maintain that tool. Thank you.

Finally, in conclusion, I would say that 3M has actively managed our benefits through collaboration with our providers. Our strategic approach has allowed us to integrate a number of services.

Chairman Boehner. Thank you, Mr. Anderson.





Chairman Boehner. Ms. Cassidy.





Ms. Cassidy. I would like to thank you, Chairman Boehner, and the Committee for the opportunity to appear this morning. For the past 12 years I have been with the firm William M. Mercer, Incorporated. I am a health care consultant, and I primarily work with large employers on the design and management of health care benefits provided to their employees.

Today I am going to address the topic by sharing data with you from the Mercer/Foster Higgins national survey of data on health cost trends. I am going to correlate that to data produced by the Employee Benefit Research Institute in an issues brief on Sources of Health Insurance and Characteristics of The Uninsured. It uses data from the current population survey.

First, taking a look at trends in employer-sponsored health plans, the data that I am going to work from, our survey data, is a survey that was established in 1986. In 1993, we began conducting the survey using a national stratified random sample which means that the results can be projected for all U.S. employers with 10 or more employees.

We had over 4,000 respondents in 1998, and it is the largest most comprehensive survey on this topic. You have several graphs that I am going to speak from that will help you see the trends that I am going to talk about.

In 1998, our survey indicated the first major cost increase in 5 years. It was 6.1 percent. It is the highest rate of increase that we have seen since 1993. Health care costs have far out paced the medical components of the consumer price index which grew 3.4 percent in 1998 versus overall CPI in the U.S. of 1.6 for that same time period. Health care costs are projected to increase approximately 9 percent in 1999.

Migration out of traditional indemnity plans really slowed to a trickle in 1998 following years of sharp decreases. Enrollment in traditional plans eroded to only 2 percentage points in 1998 from 15 percent to 13 percent. Employee enrollment in the more restrictive forms of managed care which would be the HMO's and point of service plans fell slightly in 1998 from 50 percent of overall covered employees in 1997 to 46 percent. And this was quite a surprise for us when the survey data came in. Enrollment in PPO plans the preferred provider organizations, rose from 35 percent to 40 percent. And we think that this shift can be attributed to employee desire for more flexibility.

A big increase in prescription drug costs really helped fuel the overall cost increase. Employers reported an average increase in drug costs of 13.8 percent at their last renewal. There are some factors that have influenced the increase in prescription drug costs. I have listed them in the handout and they are the fact that drug prices have increased. We have new prescription drugs. There has been an increase in prescribing by physicians. Direct to consumer advertising obviously has a very big impact on the cost of prescription drugs as well as the implementation over the past several years of prescription drug card plans. And I would be happy to provide additional information on those factors or provide examples during the question and answer period if you are interested in that. There are other factors that have influenced trends. I mainly pointed to prescription drugs because they have had largest impact on cost increases.

As we shift to the topic of the uninsured, using the EBRI data, what we find is that the percentage of non-elderly insured Americans has been increasing since 1987. We had 14.8 percent uninsured in 1987 compared to 18.3 percent in 1997. However, it is important to note that the portion of Americans covered by employment-based health insurance has increased between 1993 and 1997 from 63.5 percent to 64.2 percent, a slight increase albeit, but it is an increase.

We correlated the data from the EBRI issue brief to the annual cost increase in employer-sponsored health insurance premiums. And that is the final grid in my packet of materials. And there are two important findings from this information. There is an increase in the uninsured from 1987 to 1990 which was an increase of from 14.6 percent to 17.8 percent at the same time that employers were experiencing double digit increases in annual health care costs.

In 1991, the annual rate of increase in cost dropped. It went from an increase of 17 percent to an increase of 13 percent as did the percentage of uninsured. You can see the line correlation on the graph. The interesting thing, though, is as we look to a more recent period in time, the percentage of uninsured from 1996 to 1997 appears to be more closely aligned with the change in the percentage of Americans covered by Medicaid. From 1996 to 1997 the percentage of Americans with Medicaid decreased from 4.2 percent to 3.6 percent while the percentage of the uninsured population increased from 17.5 to 18.2 percent. For the same period, the change in percentage of workers with employment-based insurance really only shifted slightly. It was a change from 72.3 percent to 72.2 percent. So two different periods in time, two very different correlations to a change in the uninsured population.

While there does appear to be a link between the increase in employer health care costs, the increase in the uninsured population and the most recent one is more aligned with Medicaid. With that said, the cost increases that are projected for employer-sponsored benefits for 1999 as well as the year 2000 and beyond could have an impact on the future number of uninsured Americans.

Thank you very much. I appreciate the opportunity to speak to the Committee, and I would be pleased to address questions.

Chairman Boehner. Thank you very much.






Chairman Boehner. Dr. Chollet.





Ms. Chollet. Chairman Boehner, Members of the Committee, thank you for the opportunity to testify this morning about the relationship between health care costs and group insurance coverage of workers and dependents.

I would like to stress that my statement reflects my own views and not that of Alpha Center. I think you will hear from me much of what you have heard from the prior panel and from members of this panel, but I would like to opportunity to give a slightly different perspective on the issue especially from the viewpoint of low-wage workers in this country.

As you are aware, health care costs have continued to rise in the 1990s while inflation in the larger economy has been very low. As a result, health care continues to become even more expensive than other goods and services. Most importantly, it continues also to be more expensive relative to the wages and family income of the minority of workers who earn very low wages.

Most of these workers qualify neither for public assistance nor for the same degree of tax assistance that we offer high-wage and high-income workers under the Federal and State tax codes. Families headed by a worker earning less than 20,000 per year in 1997 which is about a 150 percent of poverty for a family of 3 represent only 17 percent of families of worker families, but they are 54 percent of the uninsured.

The drivers of continued increases in health care costs are complex, and you certainly have heard already about prescription drug prices and the increases over the last several years. However, other factors are at play in the very high premium increases that employers have reported recently.

One important factor relates to the dynamics of the insurance industry itself. After years of aggressive low pricing, insurers seem to have reached the low point in an underwriting cycle. The cycle is defined as aggressive low pricing to gain market share, followed by rising prices as insurers attempt to restore profits. So just as we have seen generally stable or declining premiums over the past 5 to 8 years, the underwriting cycle suggests that we may see a similarly long period of rising insurance prices into the next decade.

Over much of the past 10 years we have observed declining rates of health insurance in coverage among workers, and you heard about that from all of the people who have spoken thus far. This pattern of decline in coverage has reversed during the last several years and rates of employer coverage have begun to rise as record high rates of employment have finally begun to drive some growth of the lowest wages.

Nevertheless, the upward trend of employer coverage that we have observed has not been sufficient, and the number of uninsured Americans continues to rise by about 1 million persons per year.

Most of the uninsured live in families of very low-wage workers. Several factors account for these changes. First, over the last two decades wages at the bottom of the scale have stagnated. As a result, the distribution of wages has widened and so has the distribution of income. Low-wage stagnation coupled with rising employee contributions for coverage in group plans appears to explain much of the fall in take-up rates that we have observed among low-wage workers since 1987 even when they are offered an employer plan.

Second, low-wage workers are four times more likely to be employed in small firms where health insurance premiums with the same benefits are much higher than are high-wage workers. In 1997, 21 percent of workers earning less than $20,000 a year, remember that is again that 150 percent of poverty approximately for a family of three, were in firms of fewer than 10 employees compared to only 5 percent of high-wage workers.

While low-wage workers are less likely to be insured in firms of any size, a low-wage worker in a small firm is about one-fourth as likely to have employer-sponsored coverage as a worker earning $40,000 or more in a large firm. About 28 percent of low-wage workers in small firms have employer coverage either directly or as a dependent compared to 95 percent of high-wage workers in large firms.

During the last two decades the states have launched a number of experiments to increase employer coverage, especially in small firms. These experiments included low-cost insurance programs that were made low cost either via subsidized provider or by provider discounts which subsidized the plan, or they were bare-bones insurance plans that offered meager benefits.

More recently all states, some only in compliance with federal law, have enacted insurance reforms to make health insurance more accessible to high risk workers. Other efforts, including the formation of purchasing cooperatives have had no significant effect on insurance costs.

The lessons from the efforts are important. First, employers and perhaps also employees distrust experiments. They are reluctant to make an investment in buying a health insurance plan that may not be there in a year or two.

The second is that in order to make significant gains in coverage in small firms, significant subsides are required to reduce the costs to low-wage workers substantially. Small discounts are inadequate for these workers.

Finally, employers and workers want standard health benefits that offer good coverage for most health care services. Given standard benefits they presume standard quality because they have no real basis for discerning differences in quality.

Many states have begun to consider reforms targeted to these lessons. They include patient protection, but with respect to access for low-wage workers they also include permanent subsidized health insurance programs such as those in Minnesota and Washington and programs that help low-wage workers buy into employer coverage when it is offered such as those in Oregon and Illinois. Others are considering options for allowing parents to buy into the state's children health insurance program or ways to extend Medicaid eligibility to very low workers who are not now eligible.

However, as the states continue to struggle with the disparity between the cost of health care and the resources of low-wage workers, many analysts are reconsidering the federal tax treatment of employer-sponsored health benefits. The current code is inequitable by any standard, and it greatly favors high-wage and high-income workers over low-wage and low-income workers. All efforts to reduce health care costs are important such as revising the federal tax treatment of employer-sponsored benefits. For example, replacing the current exemption with refundable tax credits is likely to be the broadest and most successful avenue to resolving the growing problem with the uninsured.

I thank you again for the opportunity to address you this morning. And I would be pleased to answer questions or help you at any time.






Chairman Boehner. Thank you. Mr. Kahn.




Mr. Kahn. Thank you, Chairman Boehner. I am pleased to be here today to discuss the relationship between health care costs and America's uninsured.

Before I begin, I think it is important to note that health care costs and health insurance premiums are not one and the same. Health costs are a broad concept including all expenditures for goods and services related to health care, included but not limited to payments by insurers of third parties, out of pocket spending, and even government outlays.

Premiums on the other hand refer to the amount paid by private policy holders for health care coverage for certain personal health costs. Health costs obviously have a profound effect on premiums, but other factors also affect the level and growth in premiums over time such as costs of assuring solvency and the management of risk as well as changes in cost sharing and plan design. Today, I will refer to both trends in costs in premiums, but I wanted to make clear initially the differences between the two.

In response to the double digit inflation in the 1980s, employers became much more price sensitive purchasers of health coverage. Together insurers and employers made innovations and changes in coverage that benefit consumers by containing premium decreases, offering new health plan options, and enhancing coverage for preventative care and other services. As a result premium increases dropped dramatically to the low single digits in the late 1990s. This is reflected in chart handout number one which you have before you and is included in my testimony.

The growth of managed care and the resulting drop in premiums not only saved tens of billions of dollars but kept up to 5 million more Americans covered by their employers. Overall the employer-based system has been remarkably effective in covering American workers and their dependents.

The number of people covered by the employer-paid group health insurance has grown dramatically over the last 50 years. Nine out of ten firms with more than 50 employees offer health insurance. Even smaller firms one out of two offer health coverage to their workers. That amounts to 152 million Americans today covered by private employer-paid health insurance up from 145 million just a few years ago.

Despite the success in keeping costs of premium growth down, the number of Americans without health insurance, however, has continued to climb over this decade. Today, there are 44 million uninsured Americans. By the end of the next decade, there will be at least 53 million. And if the economy sours, that number could rise into the 60 millions.

The major reason that certain Americans are uninsured is because they simply cannot afford coverage. As you can see from chart two in your packets, the cost of coverage takes a much greater and growing bite out of the total compensation of poor Americans than it does out of those who are better off.

And the data reveals that 60 percent of the uninsured have incomes under 200 percent of the poverty line. The primary reason health insurance premiums rise is that health care is so expensive and that expenses continue to grow. Technological progress, breakthrough medical devices and prescription drugs, improvements in the medical procedures as well as the aging of the population all contribute to growth.

Currently, the coverage drivers of health care are drugs. Clearly drugs contribute to improving health of Americans. At the same time, the rapid increase in both the price and use of drugs could make drug coverage in particular and health insurance generally less affordable. If you look at chart number three in your handout, you will see that the drug growth now out paces the growth of hospital and physician spending and is projected to comprise over 9 percent of health expenses by 2000 which is double what it was in 1980. Moreover, hospital and physician expenses have continued to climb at the same time. While managed care can help moderate cost growth, there are cost drivers that will remain beyond the control of employers and health plans.

Further, so called patient protection legislation and other mandates also contribute to the cost of coverage. My chart number four illustrates that there has been a 25-fold increase in the number of state mandates since 1970. According to a recent study by Dr. Gail Jensen and Dr. Michael Morrisey, Ph.D., HIAA, nearly one out of every four uninsured Americans lacks coverage because of the price tag of state mandates.

These mandates have raised premiums by up to 13 percent for many businesses and the lion's share of the cost of these mandates has been born disproportionately by small employers. While most of the adverse legislation I cite has taken place at the state level, Congress has joined in recent years in promoting legislation that has detrimental effects on employers and the health care of consumers. Instead, we believe that helping to insure more Americans by making coverage more affordable should be job one for the Congress. So-called patient protection legislation would move in the opposite direction. It would drive up premiums and undermine the ability of many employers to offer coverage. Mr. Chairman, I thank you for the opportunity to share our views here today and am happy to answer any questions.





Chairman Boehner. Mr. Risalvato.





Mr. Risalvato. Thank you, Mr. Chairman, and Members of the Committee. I appreciate very much the opportunity to come here today and tell you my story.

I am in business today in the service station business 21 years, 2 months and 8 days. And in 1983, I decided it was a good idea to provide health care benefits for my employees. I did it for a number of reasons.

One, I am a concerned employer. Two, at the age of 24 I was what we could call today a health care deadbeat. I did not have any health insurance for myself. Three, in the service station industry it was not uncommon unless you were an auto mechanic in a dealership to have health care benefits.

So I knew what the pay scales were in other shops, I knew that my pay scale was competitive, but an added benefit would be to provide something for my employees that they weren't going to get somewhere else unless they went to work in a dealership. So I did this to compete. I need to compete for employees, and I need to compete for customers. And this was a way of competing for employees.

Now, we need to follow the history of how this whole health care crisis came about. A lot of employers did exactly what I did. It was far less expensive to provide these benefits than it was to provide pay increases. And big business during the 1980s started to let people go. I mean they increased their profits by eliminating workers. Small business was picking up those workers, and that is where the small business population has grown. that is why small business has hired most of the people that have grown this economy and have grown the work force.

So to compete with big business, I needed to do this as well. But most people were having these policies, these health care policies that literally kept them from even knowing what the cost of health care was. They had low deductibles, they went into the doctor, they paid these low deductibles. Once they met their deductible it did not matter what the final cost of health care was.

And large employers were not only providing the policies but were paying for the entire cost. We have seen that shift a little bit. It is one of the ways that I have maintained being able to provide health benefits. To this day, something I am very proud of is I have never taken a penny from an employee to pay for health care. I have always maintained the policy of paying 100 percent.

But the things that I have done to be able to maintain that have been heroic. I can't even remember the name of the insurance company that I had last year. I would need to go look in a ledger to see who I wrote the check out to under that column of health care because we are constantly changing. If we don't change them, they change their name.

We saw these increases, and they were huge increases. I spoke before this Committee on this same subject on April 30 of 1992; different name of the Committee and different Leadership. But I asked then for some marketplace reforms. I asked you to consider the burden that was being placed on small businesses and not only the burden,

but I even tend to see this here today. It is almost a tendency to blame small businesses because small business have so much of the work force and the problem is that a larger percentage of small business do not provide health care benefits. But I need to make something very, very clear here today. The reason is cost, period.

Gentlemen, when you hear hoof beats you better look for horses. And we have a cost problem. If the cost wasn't so high, more small businesses would provide it. Let's get back to this big business, small business ratio. Proctor & Gamble just let 15,000 or say they will let 15,000 people go. Where are those 15,000 people going to work? Probably the same place that many of the other displaced big business workers have gone in the past 15 years, to small business.

They are either going to go to work for a small business that is expanding because that is how small business gains profits, they expand. So they will go to work for a small business in a large role, maybe in a role as a consultant. Or they may start their own enterprise. But in all of these instances, these 15,000 people not only don't have health care anymore but they don't have jobs either. If they go to small business they will at least have a job. And then there is going to be that struggle to get the health care. If the cost were lower, then there would be more likelihood that they would have the health care.

So what I am asking you is to please go back, keep your eye focused on the fact that the problem is cost, and that is a direct cost to small business. I am asking you to please take into consideration some of the things that I asked for in 1992.

One of them is the ridiculous tax policy that we have somehow maintained of not allowing a 100 percent deductibility of cost for a small business owner. Let me say this. I did not know when I took on health care benefits for my employees that I could not deduct my share. I am not sure that I would have gone through with it, certainly not in that year, maybe a year or two or three later, but it may have changed my mind.

Since I have been so involved in the issue there are many small employers that have discussed this with me and they say, do you know I can't deduct my portion? I started looking into it, and I am almost embarrassed to say, you are correct. Now, yes, we have changed that over the years. First of all Congress made me come back here every year begging to please continue the little deduction that we had. Now we have phased it in, and we are going to have the 100 percent thank you very much. But I certainly think it will be more helpful if we have that now rather than later and don't phase it in.

The other thing is to please give us some marketplace reforms. Allow us to group together to try and get some bigger purchasing power. Above all, please when you are considering these pieces of legislation, do not consider mandates. Mandates will keep the costs rising. And it is that rising cost that keeps small business from carrying and providing health care for its employees.

Thank you very much. I appreciate that you listened to my story, and I also will be very happy to answer any questions.






Chairman Boehner. We will thank all the witnesses for taking their time to come in this morning and share your perspective with the Committee.

Mr. Risalvato, as cost increases to your business are occurring, how have you handled providing insurance to your employees? Are they paying the higher co-share? Do they have different policies? And what is the participation among your employees?

Mr. Risalvato. Okay. I would love to answer that question. The participation among my employees has always been 100 percent, and the reason for that is I have never taken a penny from them. So they have never had to chip in. It is really not a difficult decision for them.

How have I coped with these costs? Well, when I first started to realize that these were escalating, I was better able to afford them so it took awhile before I caught on and said, hey, wait we have got a problem developing here.

I then started to switch insurance companies. And every year I needed to have a new bid for the health care premium, and a new company would always come in and beat out everybody else. And then a year later when the premium came due again the policy came due, there would always be that exorbitant cost.

And I would always bring in the agent again, and we started to do that. One of the very innovative things that I did that leads me to ask you to please give small business some leeway because small business can't compete and self-insure the way big business can. I too sort of self-insured, and I saved a lot of money.

How I did that was I went to my employees and found out that none of them had in the previous year spent more than $15 dollars out of pocket. I had a $250 deductible. I raised the deductible on my policy, and, by the way, it was one of the years I stayed with the same insurance company because the rate went down so drastically. I raised the deductible from $250 to $500. And I told each of the employees that if this year, you present to me all of your out-of-pocket expenses when you reach $15 I will pay the difference between the 15 and the 25. And from there on, you are on your own as you would have been in the previous policy. I saved $6,000 in premiums. And I did not have to reimburse any of the employees one penny.

Now, that is an example of sort of self-insuring, although I don't have the ability financially or legally to get into any kind of a self-insurance situation. But if you address things like the health insurance pools, the AHP's you are more likely going to get small businesses into areas where maybe programs like that could be put in place. And a small business could look and save some money and get into the providing of health care coverage.

Chairman Boehner. You mentioned the mandates and urged us to avoid mandates.You didn't have a chance, I don't think, to expound on them. You believe that mandates increase the cost of insurance.

Mr. Risalvato. We have a few different mandates that I would like to discuss. Yes, mandates have to increase the cost on insurance. If you require an insurance company to pay for certain items, in vitro fertilization, hair transplants, all kinds of reproductive procedures and things like that, you know what? I want my employees... I care about them... I want to make sure if any of them are ill, or need serious surgery that we can take care of that.

And that is far more important than seeing to it that the reproductive capabilities are taken care of. They are very, very expensive. It is just not the responsibility of myself as an employer, and certainly the rest of society should not have to take up these types of issues. Yes, let's take a little responsibility and help people to make sure that their basic needs are addressed. I believe we can do that. Mandates will not allow that.

Chairman Boehner. Mr. Anderson, you mentioned that your cost increases this year and you expect to be in the 10 to 14 percent range. Can you expound on why you expect these increases?

Mr. Anderson. Yes. We have, as we have been looking at our cost increases, begun to see that kind of pattern. Most of the industry has projected that, and we have seen that experience over a relatively short time period. Our experience has shown though that you have to look at costs over a longer time period. But the fact that we have seen it over the relatively short period and the rest of the industry is seeing it, leads us to believe that the trend is real.

Chairman Boehner. Have you seen any changes in the participation rates of your employees in your plan as you have had to increase costs? Although your participants don't pay much of a copay to join the plan as I recall.

Mr. Anderson. Right. No, we have not. I think we have a similar situation in that our plan is no longer free, but with the premiums that employees pay, and with the co-insurance, the cost sharing level is so low that we have not seen that. Also employees, unless they can show us they have other coverage, are basically required to have coverage. Our dependents are not. But, no, we have not seen that because of the nature of the way we have structured our plan to date. That is not to say in the future, if costs did increase, that that could change if we change our cost sharing structure.

Chairman Boehner. Mr. Anderson, how important are the health benefits you offer to your employees in the company? How important are those benefits to you as an employee? How important is that to you?

Mr. Anderson. This historically has been really important too, both in terms of the company and the employee. I mentioned we continuously monitor our employee satisfaction in a number of areas, and it has continued to be very high in the area of health care.

The Corporation again places a very high emphasis on this for a number of reasons. Obviously, it is a competitive issue in terms of the offering. But also, I mentioned this health and productivity concept. We know even today we lose almost 1,000 employees a year out on illnesses at any given point in time. We are aware that that is really not the full value of the impact of health care and that we have a lot of people trying to deal with illnesses, et cetera. So it is very important. It is really a strategic piece of our total compensation package for us. And again our employees have always placed very high emphasis on it.

Chairman Boehner. Mr. Andrews.

Mr. Andrews. Thank you. I appreciate the testimony of each of the witnesses, and I especially want to welcome Mr. Risalvato back. I think I was here the day you were here in 1992 when the Committee had its correct name. And you have been a forceful and articulate advocate for our State particularly on small business issues. I have enjoyed our work together. I believe you were at the White House Conference on Small Business, right? That is how we first got to know each other.

Mr. Kahn, I wanted to ask you a couple of questions, examine the basis of your conclusions. You oppose the Patients Bill Of Rights because you assert it would drive up health care costs, increase the number of uninsured, and could destroy the fabric of the employment-based system. I wanted to examine the basis for those conclusions which I assume begins on page 1, the third paragraph of your statement where you say that as both the states and the federal government more aggressively pursue so-called patient protection legislation, and other mandates, there is mounting evidence that these reforms also have increased costs and have added significantly to the ranks of the uninsured.

I am going to assume that you are referring mostly to the states since we haven't enacted a Patients Bill Of Rights here in Washington at the federal level.

Mr. Kahn. In Health Insurance and Employee Accountability Act there were some amendments later that were mandates.

Mr. Andrews. You think they contributed significantly to this conclusion that you have made?

Mr. Kahn. I think all the factors in that legislation did, but particularly the state legislation has contributed to the factors.

Mr. Andrews. Let's look at the state legislation. On page 10 you examine the issue of litigation costs in defensive medicine. You give us, actually the top of page 11, you talk about the 1995 Stanford study which examined hospital outlays in states that have adopted reforms limiting liability awards. Did you look at premiums for those states or just hospital outlays?

Mr. Kahn. Well, as I said in my statement and as I say there, the primary driver of premiums are health care costs. So that all of these items that increase health care costs have an effect on premiums. And, in a sense, when I talked about the fabric of the system being undermined, the insurance industry is regulated and it will remain regulated into the future. We can provide coverage for all the mandates. The question though is will small business and will other employers continue to provide coverage.

Mr. Andrews. But did the study look at other factors other than hospital outlays? The study that you cite makes the statement that hospital outlays in States with liability reforms limitations were, on the average, 5 to 9 percent less than States that did not have those reforms. Did you look at any factors other than hospital outlays?

Mr. Kahn. Well, that would affect hospital and physicians costs in states that have liability limits.

Mr. Andrews. Did you look at premiums? Did the study look at premiums in the 1995 Stanford study?

Mr. Kahn. It looked at costs and costs affect premiums.

Mr. Andrews. But did it compare premiums in the States that affected those changes and the states that did not?

Mr. Kahn. I would have to go back to the study.

Mr. Andrews. That is the only piece of evidence cited under the litigation cost section. On your benefit mandate section, you make reference to a Jensen-Morrisey study done on behalf of your association. We may already have this in our archives. If we do not, I would like to request a copy of study.

Mr. Kahn. Here is the study. I would be happy to have it put in the record.

Mr. Andrews. We may well have it. And the basis of your analysis here is that specific mandates on employers would have quantifiable increases on costs. Fifteen percent for mandated coverage for routine dental services. Does the Dingell Bill mandate routine dental services?

Mr. Kahn. No, I think the Dingell Bill does not.

Mr. Andrews. Thirteen percent for mandated coverage for psychiatric hospital stays. Does it mandate psychiatric hospital stays?

Mr. Kahn. I think it is highly probable in the legislative process that some kind of mental health parity provision could be added.

Mr. Andrews. Is it in the Bill now?

Mr. Kahn. No, it is not in the bill at the current time.

Mr. Andrews. Twelve percent for mandated coverage for visits to psychologists is that in the Dingell Bill?

Mr. Kahn. No, sir. That is not in the Dingell Bill, but the issues regarding medical necessity and liability have been scored by the Congressional Budget Office as adding costs. And there are a number of other issues that are now being considered by Congress including changing the antitrust laws regarding physicians that would increase costs and my point is...

Mr. Andrews. Which are not in the Bill in front of us. The other study you make reference to is the Custer study which concludes that the probability of a person being uninsured goes up by 28.5 percent if certain mandates are imposed by states, small group community rating. Is that in the Dingell Bill? Is that imposed by the Dingell Bill?

Mr. Kahn. No, it is not.

Mr. Andrews. Guaranteed issue, is that in there?

Mr. Kahn. No that was an analysis of state laws and showed that states with certain types of regulation had higher costs than other states.

Mr. Andrews. I ask you these questions because it seems to me that the analyses and the conclusions on which you cite in your testimony don't bear upon the Bill that is in front of us.

You make a sweeping conclusion about the Bill, but then you don't really cite any evidence that talks about mandates that are in any relevance to the Bill. How can you draw the conclusion based upon these pieces of evidence?

Mr. Kahn. Let me answer that in two ways. One the Congressional Budge Office has shown that the provisions in the Bill would have an effect on the way insurance operates in all its forms and would increase costs to consumers.

Second, I will go back to my point about the Health Insurance Portability And Accountability Act. That Bill was signed into law in August of 1996. In September of 1996, that law was amended with two mandates, one regarding maternity and the other regarding mental health.

I won't get into the value judgment of whether those were good or bad mandates. My point is that once you go down the road of legislating this area first, the legislation you are considering will increase costs and, second, it provides an opportunity for amendment. And we have experienced both state level and with HIAA at seeing that mandates are clearly on the table and frequently added when you go into these kinds of reforms. That is my point.

Mr. Andrews. I do understand that. And I would yield back the balance of my time.

Chairman Boehner. Mr. Petri, do you have any questions?

Mr. Petri. Yes, just one or two.

First of all I understand, is it Dr. Chollet, that you are a Minority witness so I shouldn't be pleased with some of your testimony. I am because as one who has been troubled with the structure of the way we deliver health care, and understanding because of World War II and price controls of that time to attract and keep workers, employers started providing fringe benefits and that got outside of the controls. One of the principal benefits that employers at that time provided was health care. Before that doctors used to make house calls, and it was a totally different industry than it has turned out to be today.

The system that we have today does leave a lot of people slipping through the cracks. It is also very regressive when you go through who gets the benefits and the quality care and so on. So, I have been one who has advocated for many years that we should try to figure out some way to either give small business 100 percent tax deductibility or give no one tax deductibility and use that revenue for a voucher or some sort of credit to the general public to buy basic health insurance. That would be a lot fairer and then people could add onto that.

It would probably mean a lower cost health care system with high quality for all Americans. So everyone would benefit, even some of the higher income people because the costs would be better controlled from the bottom up than we are able to do by our current approach. And I am glad to hear from you that there are some; it was totally unrealistic 10, 15, 20 years ago. There is increasing interest in looking at it.

The other area that is related to this is that we have gone through a major effort, and fairly successful, in trying to move people from the world of welfare to the world of work, but we still have a second big piece there. That is the low-income worker trap, because when you are getting Medicare, you are getting rent supplements, you are getting food stamps, and you are getting the earned income tax credit. Say you have two kids at minimum wages making $11,000 a year, hurray, and we raise that up and you make $15,000 a year. With all the phase-outs and your marginal tax rates, if you look at not just taxes, but all the benefit phase-outs, often is in excess of 100 percent. You are worse off when you raise the minimum wage or you do something for people in that category even with the best of intentions. Going to a health care voucher would be a major step toward breaking that and helping people.

Republicans are for supply-side economics. Incentives make a difference. Incentives are negative for people and very marginal for people in that $10- to $22,000 income range, and we have a major effort as a country to address that. If we can get health care right, it may help that a great deal.

But my question after that little speech is that at least in one version of your testimony, you were talking about the growing rate of people working for small businesses, and that we should be sensitive to trying to help small business employees get health coverage. Some of us have favored trying to help association plans so that people could band together through trade associations or others and get health insurance. Does that make sense with proper provisions, or should we continue to stand back and allow states to close those down because they don't meet various state insurance requirements?

And in that connection too, Mr. Risalvato, you didn't mention any gas station association plans. Do those exist in New Jersey, or is that an option you have worked with from time to time?

Ms. Chollet. Let me respond to your questions in several ways. I find it ironic that we are concerned about increasing costs at the margin when in fact the tax structure and the distribution of low-wage workers in this country are stacked so that that impact is maximized. The tax structure is presumably outside the purview of this Committee, and certainly the wage structure is not within your power, but the system is stacked to make cost increases have the maximum impact for low-wage workers who are predominantly in small firms. The early version of our testimony, and I apologize for that confusion, had a problem in it and it was not clear.

Employment in small firms has not grown since 1990. In fact, employment in firms over 1,000 represents the greatest segment of growth in the work force. It is not in small firms. Nonetheless, low-wage workers are very concentrated in small firms. They are four times as likely to be in a firm of under 10 as are workers who earn $40,000 or more, so that wage distribution in small firms coupled with the high cost of insurance in small firms associated largely with administration and marketing are kind of a double whammy in the system.

The Association Health Plan proposal is problematic. On the one hand it is possible that firms could band together and bargain for a better set of benefits or a set of benefits that is better tailored to the needs of the particular employers and employees who have participated in the association. There has been absolutely no evidence that association plans or purchasing cooperatives as they have been established by any state or by any private organization have succeeded in significantly reducing the cost of health insurance.

The one place where these kinds of associations can save costs is in selective participation by employers who happen to have low-cost workers. So one of the largest concerns is that we would take an insurance market that already is unstable in some ways, struggling to keep costs down, and select out healthy workers, low-wage workers, young workers, put them in association plans where they will pay a rate that reflects their low risk, and everybody else has rising health care costs who cannot get into that association for whatever reasons. So that kind of bias selection problem is a big one even if these association plans can be made stable.

Mr. Risalvato. If I understand your question, you are asking me is there anything available to me right now in my industry, and I am not aware of any. I can just throw out an example. I am the President of the local business association in my community. I wonder what it would be like if I was able to bring all the businesses together in my community and go to various insurance companies and say, okay, I have this number of lives to ensure. Give me your best deal. I have to think there has got to be some kind of purchase power there.

Ms. Chollet. If Mr. Risalvato did that and bore all the marketing costs and all the administrative costs that the insurer otherwise would be incorporating, capitalizing on the cost of the health plan, yes, you would get a lower cost health plan, but you would be bearing those administrative costs directly as opposed to those costs through a health plan.

Chairman Boehner. Mr. Holt.

Mr. Holt. I wanted to get a little bit of the structure of the health plans beyond just the basic premium price, although I have a question about that, too. But first let me ask Dr. Chollet and Mr. Kahn in particular and others if you have comments.

I noticed when you talk about the increasing share of prescription drugs in the cost, it doesn't seem to correspond with a negative or decrease in the cost of hospitalization. I suspect there is probably some savings in hospitalization with increased use of medications, and I am wondering whether your studies, it may be beyond the scope of your studies, show anything about the relationship between the coverage for prescription medication and the overall cost.

Ms. Chollet. I am not aware of a study that does that, although I would imagine we would find a negative correlation. I am not sure the causality would be strong.

Mr. Kahn. I don't have a study, but just from my anecdotes of discussions with people from the companies that I represent, my sense is that for given conditions there clearly is some substitution effect. I think the numbers bear this out in terms of overall costs. We still see hospital costs and physician costs increasing, so that I can't say that some of these added expenditures for prescriptions aren't helping us in reducing the other costs, but the other costs are still expanding.

Just to give you an example, I know with Ford Motor Company right now, I think that out of the $1.5 billion they spend directly on health care, 21 percent last year was hospital, and 19 percent was for drugs. Those numbers are going to cross, and the drugs are going to become a much larger percentage. A lot of that is for new drugs or replacement drugs that are more expensive than other drugs.

So it is very hard to come up with a substitution effect. Although clearly, without question whether it is the cholesterol drugs or other drugs, they are helpful to people and they provide better health care.

Mr. Holt. Mr. Risalvato says it is cost, cost, cost at least in the decision of what to offer. Although as you described your history, it sounds like it was not exclusively costs that led you to make the decisions of what to offer.

I would like to ask the other panelists in particular to comment. If you could list briefly, very briefly, the other factors that determine in your judgment and in your studies, whether employers offer the coverage and whether the factors that determine what employees choose in addition to just premium cost.

Ms. Chollet. It can be, in addition to costs, the adequacy of the benefit whether the benefit is perceived as so meager as not to be useful to the employee. This can be the perception about plans that have very narrow benefits, have very, very high deductibles relative to the ability of their employees to pay, don't have the generous offer Mr. Risalvato made, or have plans that have very low limits on coverage. It also can relate to the options that are available at a particular cost.

There is some evidence that after considering cost, employees when confronted with a managed care option like to have a provider that is known to them. So that can be an issue as well. There certainly is some evidence that if employers, and probably mostly employers, perceive their insurance option as something that is not stable or they are not able to sustain, for some reason they are much, much less interested in starting down that road. Cost probably accounts for the first three to five reasons.

Mr. Kahn. I think cost is clearly not the only factor in this decision-making process, because the numbers that were related earlier regarding the type of products that people want and employers are providing, the fact that the HMO kind of product is a little bit less popular and the PPO product is growing, and the PPO product is basically an open network choice product and, as in almost all cases, is more expensive is telling you that even though cost is a factor, that employers and employees are willing to have more of their compensation spent on health to get that extra amount of choice.

So I think there are things going on here other than simply cost, and those trends and the type of products people are purchasing illustrate that.

Mr. Risalvato. Mr. Holt, if I could also just address what you commented on. Yes, I did stress cost, and you said that obviously there had to be other factors because I made the decision to still provide the benefits. So there were other things, and, yes, there were competitive factors.

But let me say this. It has been a great struggle, and I was willing to do that, whereas other employers may not have. I can also say that it may not have been a wise decision. I have struggled to keep my doors open for the last 2 years. I may not be in business 2 months from now. I have exhausted all avenues of taking on new capital. If I add up what I have spent in those years paying for my employees' health care and had that in a lump sum today, it is not even a thought. I have capitalization to continue my business.

So, yes, I still got past that cost factor, whereas other employers may not have. All that I am saying to this Committee is that you must consider that small business owners must take that into account. I did. I made my decision. I made my bed. I will lie in it, but cost is it.

Mr. Anderson. I will take a shot at that as well. Our decision as I think about health care; I guess I would step back and say we, as many companies, compete globally, and so we make decisions about where we invest, what we offer our employees, et cetera. It has really become complex in terms of how we address it. So for us the value of benefits, health care packages as well as total compensation is something we continually look at. The trade-off between costs and so on we will continue to struggle with. But as I said earlier, we also are very interested and concerned about the impact that health has on our employees, so we are trying to really balance a lot of issues. We are operating under this competitive market now that will drive us to continually look at this and probably have to make some of the trade-offs, more than we have had to make in the past.

Mr. Holt. Thank you, Mr. Chairman.

Chairman Boehner. Dr. Fletcher.

Dr. Fletcher. Thank you, Mr. Chairman. I certainly appreciate each of you and the testimonies. I know in my experience I have gone through the frustration of dealing with managed care. I understand why providers have a great deal of concern about making sure they can provide care for their patients without going through a great deal of bureaucracy or without refusal of being paid.

I think one of the things we focused on is we have looked at some of the Bills that Members of this Committee are proposing, making sure that those decisions are made by physicians, external review that is binding, and that it is physicians also attempting not to drive up the cost. I think as we have heard all of the discussion here, it seems like cost and choice come down really to a lot of the factors that influence an individual whether they purchase the insurance and take the option that the employers have given them, or whether they don't.

Let me ask some questions. Mr. Anderson, I just want to say you all have a plant that makes all of the Post-It notes in our District, and we appreciate that. I visited there and talked to many of the employees. You provide excellent health care, and I know if they have got a problem that the insurance may not want to cover, they go talk to the folks there, and they get it covered and do an excellent job. They haven't had any problems with that. So I know it is the very responsible employer members we have in this country that provide most of the insurance, and I appreciate that.

Dr. Chollet, I think we share very similar concerns, as to how we get the low-income individuals covered? Let me ask you about something. Have you reviewed the association health plans legislation that has been presented? I think Mr. Talent introduced that.

Ms. Chollet. No sir not in detail.

Dr. Fletcher. I think one of the things you may find that you will be very pleased with is the fact that it doesn't allow selection as you talked about. As a group comes in, an employer group, they have to take all comers so they can't do the selection that you are talking about. Basically it would be a guaranteed issue for that group. So I think we have addressed many of the concerns that you will find you would be very favorable toward.

We did legislation in Kentucky. One of the things they did which I actually disagreed with is they carved out Associations from some of the mandates in the state. The reason they did that is because of lobbying by the Associations, because they realized that they saved a great deal of money by forming the Associations. So clearly I think the market understands that. People understand if they can do that.

If Mr. Risalvato could look at NFIB, or maybe one of the other Associations that he may be a member of or have access to and join with them and purchase there where they have already had the administrative costs, do you think that would decrease the cost for him and allow him and businesses like him to cover more individuals?

Ms. Chollet. Once again sir, if there is another party bearing these administrative costs and in effect, subsidizing the employer to participate so that the insurer is not incorporating the administrative costs of marketing and enrollment and dis-enrollment. If some other party is doing that, and the employer is not paying for that, then yes, it will give you lesser cost insurance for a small firm.

Dr. Fletcher. Let me take your recommendation and give it to Mr. Anderson.

Mr. Anderson, from what we have heard, you probably ought to provide insurance on a local basis because your administrative costs for combining and doing some larger negotiation are much increased. I mean, that is of what I am hearing. In other words, because of the administrative costs, the Associations are making sure that they do the marketing. Then the Associated Health Plans have to actively market to all those individuals. You know, surely the gains of an economy of scale can be realized.

I would encourage you to take another look at the Association Health Plan, because I think it does help address the concerns that we both have. I am sure it is not perfect. Nothing we do is, but I hope it answers that.

Mr. Risalvato, I just appreciated your testimony. You know, I wish we could just hear the resounding clarity of small business folks that are struggling to do the right thing like you have done. That is provide some tax reform, and provide some opportunities for small business and other folks to offer the kind of insurance that you have done and , obviously made the sacrifice for it. So I just wanted to thank you for your testimony.

Mr. Risalvato. I thank you for thanking me.

One of the things that is very, very important to myself and my small business colleagues is the fact that sometimes we feel as if we get the blame for this. Not only do I think we should not get the blame, I think there should be considerable appreciation and thanks for exactly what we have done.

I would like to add that the National Federation of Independent Business has a study that will show the benefit of significant cost savings by the AAHPs that would be in direct contrast to Dr. Chollet.

Dr. Fletcher. Thank you very much.

Chairman Boehner. Mr. Kahn, as you and Mr. Andrews were asking and answering questions about the Patient's Bill of Rights and the Dingell Bill, it was obvious to me you know an awful lot about it and must have reviewed it. Can you tell me what the impact of the Dingell Bill would be on the Federal Employees Health Plan or on Medicare?

Mr. Kahn. Well, it would be extremely significant in two respects. One, medical necessity in Medicare, historically since the beginning of the program, has been controlled by HCFA, the agency operating Medicare. There is no discussion of that being passed off to providers and beneficiaries, albeit beneficiaries can appeal in Medicare if they have a problem with a decision. It is Medicare that makes the final decision.

Second, in terms of liability, Medicare is the government. So in both cases and in the case of the Federal Employees Plan, I don't believe that it will be affordable to apply all of the aspects of the Dingell Bill to it either.

Chairman Boehner. Does it apply? Does the Dingell Bill apply to the Federal Employees Health Plan?

Mr. Kahn. No, it does not apply. The issue of medical necessity and liability are outside of law, and so it doesn't apply.

Chairman Boehner. Why would it apply to all employers and all people in private insurance markets around the country, but not to the Federal Employee Health System or Medicare?

Mr. Kahn. Well, we think it would be better if it was not done and didn't apply anywhere.

Chairman Boehner. I understand that.

Mr. Kahn. I guess the question of equity would immediately emerge. That is why I think there would be great reticence in opening up Medicare to the same rules that you would expect to apply to the Federal side in that bill.

Mr. Andrews. If the gentleman would just yield for a second, I can take a shot at answering his question.

Subject to whatever limitations of sovereign immunity might arise, decisions by Medicare or by HCFA are not protected by any sort of tort immunity now. If someone feels the federal government has made an improper decision, they have the right to sue them now. We just simply equalize the situation.

Could I ask Mr. Kahn another question?

Chairman Boehner. Yes.

Mr. Andrews. I was very interested in the statement that one out of every four uninsured people in America is uninsured because of state health benefit mandates. That is in your written statement.

Mr. Kahn. That would be the analysis from Jensen and Morrisey.

Mr. Andrews. Do you agree with that conclusion?

Mr. Kahn. I think there is a relationship, and we believe there is a relationship between costs and no insurance, and that is the Jensen and Morrisey conclusion.

Mr. Andrews. Could you just describe to me the way by which that is derived? What is the assumption? How much and what percentage of the premium cost is allocated to state mandates?

Mr. Kahn. Well, the point is that the state mandates increase in cost, and CBO has produced analysis that indicates how many people are uninsured at each additional percentage of cost. That is the analysis of Jensen and Morrisey.

Mr. Andrews. Do they assume that state mandates are responsible for 20 percent, 30 percent, 15 percent? What is it? Do you know what it is?

Mr. Kahn. We gave a percentage that was the percentage at the margin that Jensen and Morrisey projected. It was one in four.

Mr. Andrews. If you take that conclusion, it implicitly states that if we abolish all these State mandates, just got rid of them, the price would drop by some number. The price of health insurance would drop by some number. What is that number? What is the study based on?

Mr. Kahn. Well, it would vary from state to state, but the number would be significant and pick up hundreds of thousands, if not millions, of more people. That is the answer.

Mr. Andrews. I would give you the opportunity to supplement the record.

Mr. Kahn. I would be happy to.

It would vary from state to state because, as the study indicates, the number of mandates vary from state to state. There are some states with a small number of mandates, and there are others with tens of mandates. So we will be happy to do that.

Mr. Andrews. I would be interested in the answer. Thank you very much, Mr. Chairman.

Ms. Cassidy. I have the answer to that question for Maryland, which is a heavily mandated state for health insurance benefits. Our estimate is that the cost of mandates is about $600 per policy per year, or about 15 percent of the policy cost for the year.

Mr. Andrews. Fifteen percent of the policy cost. So if Maryland were to adopt a statute repealing its mandates, what kind of mandates are we talking about here?

Ms. Cassidy. Everything from minimum stay for maternity, to mental health parity, to all of the medical-related insurance mandates.

Mr. Andrews. So if Maryland were to pass a law that says you can sell a health insurance policy without any mandatory coverage at all, just whatever can be negotiated between the buyer and the seller, it is your conclusion that it would be a 15 percent reduction in the premium?

Ms. Cassidy. [Nodding in the affirmative.]

Mr. Andrews. Again, I would offer Mr. Kahn the chance to supplement the record that way.

Mr. Kahn. If I could add a point. In Maryland the State Legislature, I think, became so antsy over time about the number of mandates they had added, that they have even set up a medical board to give them advice. This is because many of these mandates are not simply to cover various kinds of conditions, but they are provider mandates so that chiropractic and other kinds of services would be covered. It is not simply disease-oriented. It is also provider-driven. I think that is another important point.

Ms. Cassidy. Over 20 of them were introduced this year.

Chairman Boehner. Didn't Maryland finally pass a statute that said that if they were going to add another mandate, they had to drop one? Is that correct, Mr. Kahn?

Mr. Kahn. Yes.

Mr. Andrews. I assume, Ms. Cassidy, these are non-ERISA plans we are talking about, right?

Ms. Cassidy. Yes. They would be insured plans, yes.

Mr. Andrews. Do you know what percentage of covered lives in Maryland are non-ERISA plans?

Ms. Cassidy. I do not.

Mr. Andrews. I would be interested in that answer, the question being is the sample large enough to draw a valid conclusion.

Mr. Kahn. I don't know in Maryland per se, but from our research, we believe that about 50 percent of employer plans are self-insured. The other 50 percent are not, so that they would be subject to state regulation.

Chairman Boehner. In my experience as a state legislator on the insurance committee, about half the lives in the state were covered by self-funded plans.

Mr. Andrews. But this is in Ohio, right? That is hardly a conclusion one can apply to the rest of the country.

Chairman Boehner. I want to thank my colleagues for coming today. I want to thank all of you for coming, especially our witnesses, and we will see, I am sure, most of you next week. We are adjourned.

Whereupon, at 12 noon, the Subcommittee was adjourned.