Congressional Quarterly: Graves: SBA Rule Change Would Hurt Small Businesses
November 19, 2014
By Shawn Zeller
House Small Business Committee Chairman Sam Graves and the Small Business Administration are quarreling again over a new administration move to increase the size of firms eligible for government contracts set aside for small companies.
Graves, R-Mo., wrote this month to Khem R. Sharma, the chief of the SBA’s size standards division, to protest the agency’s proposal in September to allow larger companies in 30 industries to apply for the set-asides.
It would, for instance, set the bar for book publishers seeking small business contracts at up to 1,000 employees, twice the current 500. Companies that extract natural gas or oil could employ 1,250 workers, up from 500.
Graves’ concern is over the agency’s plan to eliminate a special exemption that allows information technology firms with up to 150 workers to win large contracts to advise agencies on their hardware and software needs and to then buy and install the equipment. The SBA would do away with the 150-worker rule and limit eligible firms to $25.5 million in revenue.
SBA says it is changing the rules to adjust to changes in the business world. The IT rule change might help agencies better coordinate IT procurement to ensure government computer systems work well together, a common problem now, by ensuring better-equipped firms get the deals.
But Graves, as well as some advocates for small businesses and the IT firms themselves, say this would hurt many small companies because the cost of computer equipment would be counted against the $25.5 million. For firms with 150 employees and a $25.5 million government contract, “simply paying for supplies and the salaries of employees will cause the company to run a deficit,” Graves wrote, arguing SBA should keep the head-count standard.
The American Small Business League, a California-based group that’s long criticized the SBA for not helping more small companies win government deals, is threatening to sue the agency if the rule is finalized. Lloyd Chapman, the league’s president, says the proposal is “absurd and laughable” and that it would “devastate thousands of small businesses.”
But Sharma notes the agency is merely carrying out the mandate it received in a 2010 law (PL 111-240) to review all of its size standards for small business contracts every five years. The bill was enacted by a Democratic Congress over Republican objections. Sharma notes many of the size standards haven’t been adjusted since the 1970s and are out of step with the current contracting market.
When the SBA moved to increase some of the size standards in 2011, Graves – who’d become chairman of the Small Business Committee that year – objected on the grounds that they would hurt some small firms, and the agency scaled back its plans.
The following year, at Graves’ urging, Congress included provisions in the fiscal 2013 defense authorization (PL 112-239) aimed at making it harder for the agency to raise size standards by requiring the SBA to conduct more comprehensive reviews of the affected industries. Graves contends that the September proposed rule violates that law.
The main trade group for government contractors, the Professional Services Council, says although Graves’ concerns about the change in IT contracting rules may be legitimate, it generally supports the SBA’s efforts. “We’ve felt for a long time that the size standards do not reflect the current market realities for federal procurement,” says Alan Chvotkin, the group’s executive vice president.
House Small Business Committee Chairman Sam Graves (R-MO) today urged the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps) to withdraw the “Waters of the United States” proposed rule to expand the reach of the Clean Water Act (CWA), due to the agencies’ failure to examine the impacts of the proposal on small entities as required by the Regulatory Flexibility Act (RFA). The agencies certified the proposed rule as one that will not have a significant economic impact on a substantial number of small entities.
In a comment letter, Graves wrote, “Based on the testimony from the hearings and the Committee staff’s analysis, the Committee disagrees with the agencies’ certification of the Proposed Rule. Contrary to the agencies’ assertions, the Proposed Rule will increase the geographic scope of CWA jurisdiction and small entities will be directly affected. The EPA should have conducted a Small Business Advocacy Review (SBAR) panel to get input from small entities and performed an initial regulatory flexibility analysis (IRFA) assessing the impacts of the Proposed Rule on small entities as required by the RFA. Unfortunately, the agencies did not do so and instead engaged in arbitrary and capricious rulemaking.”
A particular concern is the rule’s failure to clarify what specifically are “Waters of the United States,” which is one reason the regulation was deemed necessary.
“For a large business with access to lawyers and civil engineers deciphering these terms would be very problematic. For small entities such as a rural town government, a farmer or a home builder, the determination of whether a water body is an adjacent water under the Proposed Rule will be well nigh impossible due to the inherent vagueness. This inherent vagueness portends significant civil liability if the small entity is incapable of ascertaining whether it needs a permit under §§ 402 or 404 of the CWA,” Graves continues.
“The agencies failed to comply with the requirements of the RFA and their rationales appear to be nothing more than pretexts to avoid consideration of impacts on small businesses, small governmental jurisdictions and small not-for-profits as directed by Congress.”
Graves concludes, “As it now stands, the Proposed Rule will clarify little, lead to significant litigation (including challenges that might prohibit enforcement against small entities), and ultimately undermine the agencies’ mission of protecting the waters of the United States from degradation. The only logical course for the agencies is to rescind the proposal and reissue it after fully complying with the RFA so the end result will be a logical, non-arbitrary rule that actually clarifies definitions and protects the waters of the United States.”
The Committee held a hearing on this proposed rule on May 29, 2014. Small business leaders have overwhelmingly maintained that the rule creates more confusion, would be economically detrimental on many levels, and wouldn’t improve water quality. Also in May, Graves and Members of the Committee wrote to EPA Administrator Gina McCarthy and Assistant Secretary of the Army Jo-Ellen Darcy, who oversees the U.S. Army Corps of Engineers, to urge withdrawal of the pending rule.
The Government Accountability Office (GAO) today released a report, requested by House Small Business Committee Chairman Sam Graves (R-MO), showing that enrollment for the state-operated Small Business Health Options Program (SHOP), created by the Affordable Care Act, was significantly lower than expected. No data was released for the federally-operated SHOP, but CMS told GAO it anticipates similarly low enrollment numbers. This report’s release comes just days after the Obama administration predicted that overall enrollment for next year is expected to be 30% lower than expected.
The Committee has documented continued mismanagement with the SHOPs going back to the summer of 2013, when another GAO report requested by Graves, confirmed the administration was ill-equipped for its rollout, and cited potential for “implementation challenges going forward.” This year, Graves has repeatedly pressed the administration to provide data on the enrollment and updated compliance timeline of federal and state SHOPs, but the data has not been provided. During a September 18 Small Business Subcommittee hearing, Centers for Medicare and Medicaid Services (CMS) Director of State Exchange Group, Mayra Alvarez, was asked about SHOP enrollment data, yet the administration was still unable to provide the information. Today’s GAO report is the first federal government release of SHOP performance data.
“Obamacare’s SHOPs have been fraught with errors and high costs from the very beginning,” said Chairman Graves. “The administration touted the SHOP as a way for small companies and their employees to benefit from more health insurance competition and choice, and ultimately lower prices. Instead, we have seen that costs are increasing for nearly two-thirds of small businesses that provide health insurance to their employees and the majority of small business owners paid more per employee for health insurance in 2013 than in 2012.”
Graves continued, “The lack of specific federal SHOP enrollment data confirms that CMS initially created no mechanism to monitor or measure its performance after enrollment began. It is apparent that the Obama administration didn’t prioritize the SHOP exchange in the law. Small businesses and taxpayers deserve better.”
GAO Report Highlights:
• As of June 1, 2014, enrollment for the SHOPs was significantly lower than expected, and, at its current pace, is unlikely to reach expectations by the end of 2014.
• Most state SHOPs had multiple plans available, but some states had counties with no plans. For example, in Washington state, SHOP plans were only available in a few counties, and the state had only 8 employers enrolled.
• The average number of employees per business enrolled in SHOPs is 3.7 employees.
• Many state SHOP features were delayed and enrollment was low as of June 2014 and key SHOP features, such as online enrollment and employee choice, were delayed for all federal SHOPs and some state SHOPS.
• The primary incentive for many small businesses to enroll in SHOPS was to utilize the small business health care tax credit. But the credit is so narrow, complex and temporary that it has been an insufficient incentive to enroll. Although the President’s Council of Economic Advisors and stakeholder groups initially estimated over 4 million small businesses would be eligible for the credit, a 2012 GAO report showed only a small fraction (170,300) actually claimed it.
Congressional Quarterly: Small Business Exchanges Find Few Customers So Far, Study Shows
November 13, 2014
By John Reichard
Only 76,000 people working for 12,000 small employers were covered through plans offered by the health law’s small business exchanges as of June, the Government Accountability Office reported Thursday.
That figure – reflecting 18 state-based small business exchanges – is vastly lower than Congressional Budget Office projections, said House Small Business Committee Chairman Sam Graves, R-Mo.
The Congressional Budget Office estimated that 2 million employees would enroll in so-called SHOP coverage this year, Graves said in a press release. The health law requires each state to have a Small Business Health Options Program that is administered either by the state or through the federal government.
The Obama administration still hasn’t released enrollment numbers for the “federally facilitated” SHOP exchanges it runs in 33 states. It says, however, that they are comparable to the numbers for SHOPs created on their own by 17 states and the District of Columbia.
The low enrollment figure gives Republicans another opening to attack the health law as they prepare for the next session of Congress and a new series of attacks on the overhaul.
“Obamacare’s SHOPs have been fraught with errors and high costs from the beginning,” Graves said.
GAO detailed the slower-than-scheduled startup of the SHOPs and the features they offer.
The exchanges were supposed to open in all states by Oct. 1, 2013. In all but four states, SHOPs were accepting enrollment applications by that date but important promised features were typically not ready, including online enrollment, and “employee choice” features.
Though insurer competition in the SHOPs was supposed to drive down premiums, the GAO found prices comparable to coverage outside of the exchanges.
The typical small business owner that provides coverage also picks the plan. The idea of SHOPs, in part, is to give their employees a menu of coverage options to choose from. Many state-created SHOPs offer this feature, but none of the federally facilitititated ones do, GAO found.
The same is true of online enrollment, which exists in most of the state-run SHOPs but not at all in the exchanges operated by the federal government, the report said.
What small business owners have gained, however, is the ability to see plan information such as premiums and benefits online on web sites in all of the states.
And federal officials are preparing to implement online enrollment for federally run SHOPs for 2015, GAO said. Employee choice will be available next year in 14 states with SHOPs operated by the federal government, though 18 states took up a government offer to delay that feature until 2016.
Enrollment figures for the federally run SHOPs will be made public early next year.
Most bosses are offering their workers a menu of coverage options in states where the option is available, the study found. “Exchange officials in Kentucky and Rhode Island said that approximately 65 and 61 percent of enrolled employers, respectively, decided to offer their employees a choice of plans,” GAO said.
The added features will bring many more customers to the SHOPs, exchange backers say. So too will more aggressive marketing, closer coordination with insurance agents and the fact that employers after 2016 won’t be able to renew coverage that doesn’t comply with the health law, which will make them more likely to start shopping at the small business exchanges.
Others predict the SHOPs won’t be a big draw because the tax credits they offer small businesses end after this year. The exchanges may not be able to charge lower premiums.
House Small Business Committee Chairman Sam Graves (R-MO) released the following statement in response to the President’s comments regarding net neutrality and regulating the Internet:
“The Internet was born and bred from American ingenuity and innovation and has been one of, if not the most, successful drivers of economic growth here and abroad for the past 20 years. Small businesses have come to depend on and utilize the Internet in ways not even imagined two decades ago, allowing them to compete across town and across the globe. In that time, the Internet has remained free of burdensome regulations that had the potential to curb its growth or limit its role in our economy. I was troubled by President Obama’s announcement supporting regulation of the Internet as a utility under Title II of the Communications Act. Doing so has the real potential to stifle economic growth, hurt small businesses and the jobs they have created.”
In September, the Committee held a hearing with Federal Communications Commission Chairman Thomas Wheeler on telecommunications issues that are important to small firms, including net neutrality, broadband deployment, Universal Service Fund reform efforts, and wireless spectrum availability.
“In mid-September, the Internal Revenue Service (IRS) published numerous draft forms and instructions for compliance with the tax provisions of the Affordable Care Act. These documents are lengthy, complex and confusing to tax preparers who serve America’s small businesses,” the letter states.
The letter from Chairman Graves specifically inquires about two complicated and lengthy forms that millions of small businesses may encounter for the first time in tax preparations. Form 8965 is required for those claiming an exemption, and includes 15 pages of forms, instructions and worksheets.
“As you know, the Congressional Budget Office estimated that 30 million people could be subject to the individual mandate penalty, and 23 million of them may qualify for an exemption. This means that millions of small business owners may be forced to rely on these forms and instructions to determine whether they are entitled to an exemption and to claim it,” Graves states in the letter. “In addition, we are told that the Department of Health and Human Services (HHS) will issue some or all of the hardship exemptions. The forms mention those exemptions and that HHS or the exchanges will issue them, but do not explain when taxpayers must apply for them, when or how that decision will be communicated, what appeals process will be used, and how long the exemption will be effective.”
Similarly, Form 8962, which is required for taxpayers who wish to claim a premium tax credit, is 12 pages of forms, worksheets and instructions.
Graves concluded, “Most small businesses do not have tax advisors, attorneys or accountants on their staff. They must rely on outside assistance to navigate these complicated tax rules. On all of the above issues, is the IRS working with HHS to educate small business owners about these new forms and issues? What steps has the IRS undertaken to listen to the concerns of small business owners and their tax preparers?”
In his letter, Graves requests a response by October 22, 2014, to allow small businesses the necessary time for tax preparations. The full Graves letter to the IRS is available HERE.
Bloomberg BNA: House Republican Challenges IRS on Complicated ACA Forms
By Brett Fergusen
October 8, 2014
Oct. 8 (BNA) - Draft forms and instructions for compliance with the Affordable Care Act are long and confusing, presenting tax preparers for small businesses with daunting new tasks, the chairman of the House Small Business Committee told IRS Commissioner John Koskinen.
Rep. Sam Graves (R-Mo.) asked for an accounting by Oct. 22 of what the tax agency is doing to help. In an Oct. 8 letter, Graves referred to Internal Revenue Service Form 8965 for claiming an exemption from the individual health insurance mandate. A draft of the form has “15 pages of complicated forms, instructions and worksheets,” which “millions of small business owners may be forced to rely on,” he said. Graves also referred to Form 8962 for claiming a premium tax credit, which involves 12 pages of worksheets and instructions.
Tax preparers have told the committee that the IRS hasn't issued guidance on the due diligence requirement they will face, according to Graves, who asked Koskinen whether the IRS was working with the Department of Health and Human Services to educate small business owners about the forms and issues, and what the IRS is doing to listen to the concerns.
Bloomberg BNA: House Republican Challenges IRS on Complicated ACA Forms
October 8, 2014
Small businesses and their tax preparers face the daunting tasks of understanding and completing new tax forms to comply with provisions of the Affordable Care Act, the chairman of the House Small Business Committee said.
“Most small businesses do not have tax advisors, attorneys or accountants on their staff. They must rely on outside assistance to navigate these complicated tax rules,” Chairman Sam Graves (R-Mo.) said in an Oct. 8 letter to IRS Commissioner John Koskinen.
Graves asked Koskinen to respond by Oct. 22 on whether the Internal Revenue Service is working with the Department of Health and Human Services to educate small business owners about the forms and issues, and what the IRS is doing to listen to the concerns of owners and tax preparers.
Tax preparers have told the committee the IRS hasn't issued guidance on the due-diligence requirement they will face, he said.
In his letter, Graves referred to Form 8965, Health Coverage Exemptions, which is used to claim an exemption from the individual health insurance mandate. A draft of the form has “15 pages of complicated forms, instructions and worksheets,” which “millions of small business owners may be forced to rely on to determine if they are entitled to an exemption and to claim it,” he said.
Graves also referred to Form 8962, Premium Tax Credit (PTC), which involves 12 pages of instructions and worksheets. The form is used to calculate the tax credit amount for qualified health plans purchased through a health insurance marketplace.
The Congressional Budget Office estimates that the individual mandate penalty may apply to 30 million people, of which 23 million may qualify for an exemption, Graves said.
The forms mention exemptions but “do not explain when taxpayers must apply for them, when or how that decision will be communicated, what appeals process will be used, and how long the exemption will be effective,” he wrote.
The IRS released draft instructions for Forms 8962 and 8965 in September (183 DTR G-2, 9/22/14).
Separately, the IRS reminded small employers about the value of the health care tax credit that begins in 2014.
“The maximum credit is 50 percent of premiums paid for small business employers, and 35 percent of premiums paid for tax-exempt small employers, such as charities,” the IRS said in an e-newsletter released Oct. 8.
The e-newsletter explains eligibility requirements and benefits and provides links to resources for more information.Read More
WASHINGTON, DC – The House Small Business Committee Chairman Sam Graves (R-MO) today released the following statement regarding the Small Business Administration (SBA) Office of Advocacy’s new position that the Environmental Protection Agency (EPA) should withdraw their Waters of the U.S. rule:
“The SBA Office of Advocacy is saying what our Committee and small businesses all across America have been saying since April – the EPA Waters of the U.S. Rule is an unnecessary regulatory overreach and will have costly economic consequences,” said Chairman Graves. “I applaud the SBA Office of Advocacy for speaking up for small businesses, putting it at odds with another agency in the Executive Branch. They are 100 percent correct in their analysis of this rule-making process – the Waters of the U.S. Rule hasn’t been properly analyzed and it was created without legitimate small business input. I continue to maintain that the EPA must withdraw this rule.”
In April, the EPA and the Army Corps of Engineers proposed a rule that would redefine “waters of the United States” under the Clean Water Act. The Small Business Committee held hearings on the economic impact of this rule and the EPA rulemaking process on May 29, 2014 and July 30, 2014. In May, Graves and members of the Committee also wrote to EPA Administrator Gina McCarthy and Assistant Secretary of the Army Jo-Ellen Darcy, who oversees the U.S. Army Corps of Engineers, to urge withdrawal of the rule. Among their concerns, the EPA and Corps of Engineers did not adequately assess the impact of their proposed rule on small businesses and the EPA failed to conduct a Small Business Advocacy Review panel, as required by the Regulatory Flexibility Act. In September, the House passed the Waters of the United States Regulatory Overreach Protection Act (HR 5078), which would prohibit the EPA and the Army Corps of Engineers from finalizing their proposed rule.
House Small Business Committee Chairman Sam Graves (R-MO) today released the following statement about the ongoing problems of the Small Business Health Options Program (SHOP) one year into Obamacare’s troubled operations.
“From the time then-Speaker Pelosi proclaimed Obamacare should be passed ‘so you can find out what’s in it’ to today’s one-year anniversary of this burdensome law’s botched implementation, the administration has wildly over-promised and painfully under-delivered every step of the way. The past year has been littered with problems, including rising costs, cancellation notices and a faulty $2 billion website. Likewise, Obamacare’s Small Business Health Options Program has fallen woefully short of any kind of acceptable standard. To this day, the administration is unable to answer basic questions such as how many are enrolled in the program – the question this Committee has asked repeatedly since January. Instead of simplifying the health insurance process for small businesses, the SHOPs program has created confusion and uncertainty with five delays along the way. Small businesses have paid the price of this inept management. Many questions remain, including this straightforward one: How many small businesses are enrolled?”
During the recent September 18, 2014 hearing of the Small Business Subcommittee on Health and Technology, Chairman Chris Collins (R-NY) specifically asked the Centers for Medicare and Medicaid Services (CMS) witness, Director of State Exchange Group, Mayra Alvarez, about the SHOP enrollment data, yet the administration was still unable to provide the information, despite repeated claims of transparency. Beginning in January, Chairman Graves has repeatedly pressed the administration to provide data on the enrollment and updated compliance timeline of federal or state SHOPs, but the requests have gone unanswered. A June 2013 GAO report requested by Chairman Graves confirmed the administration was ill-equipped for the implementation of the SHOPs, as evidenced by the program’s track record since. The Committee’s first hearing on the SHOPs mismanagement took place in December 2013.
The SHOPs challenges have occurred while small businesses are grappling with rising health insurance costs; in fact, costs are increasing for nearly two-thirds of small businesses that provide health insurance to their employees. And the National Federation of Independent Business found that 64 percent of small business owners paid more per employee for health insurance in 2013 than in 2012.
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