The Small Business Subcommittee on Health and Technology, under the chairmanship of Rep. Chris Collins (R-NY), today conducted a hearing to examine the ongoing problems with the Small Business Health Option Program (SHOP) exchanges, exchanges and to seek answers on behalf of America’s small businesses. During the hearing, Chairman Collins specifically asked the Centers for Medicare and Medicaid Services (CMS) witness, Director of State Exchange Group, Mayra Alvarez, about the SHOP enrollment data, however, the administration was again unable to provide the information, despite repeated claims of transparency.
From the very beginning, the SHOPs program has created more uncertainty and confusion for small businesses by delaying rules at least five separate times. A June 2013 GAO report requested by House Small Business Chairman Sam Graves (R-MO) confirmed the administration was ill-equipped for the implementation of the SHOPs, and the program’s record has since confirmed that prediction. SHOPs were meant to simplify the process of purchasing health insurance, expand employee choice and reduce the cost of health coverage for small businesses, but those goals have come nowhere close to being met. 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.
All of these challenges regarding SHOPs have occurred while small businesses are grappling with rising health insurance costs that 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.
“Uncertainty and confusion are a recipe for disaster for small businesses,” said Chairman Collins. “The ability to plan ahead is key for small companies, especially since they don’t have large staffs to deal with tax, regulation, employee benefits and government mandate compliance. So, for the Small Business Health Options Program to be implemented so poorly is a major headache for the nation’s small business community. I’m pleased that CMS sent an official to testify today, but questions still remain about the viability and data collection for this program moving forward. It’s shocking that, after the billions of taxpayer money that has been spent on Obamacare, there was no process created for recording and measuring the SHOP enrollment data on a regular basis. HHS and CMS need to do a better job of operating and tracking the exchanges and communicating what lies ahead for the program.”
The Committee’s first hearing on this topic took place in December 2013. Materials from this hearing are available on the Committee’s website HERE.
Dr. Roger Stark, Health Care Policy Analyst at the Washington Policy Center in Seattle, WA said, “Although the employer mandate is a critical part of the ACA, the SHOP marketplace for small businesses seems to be almost an afterthought in the law. There is no clear evidence of interest on the part of small companies to provide health insurance through a marketplace with tax credits.
The paperwork and regulatory burden in the SHOP exchange are definite hurdles for a small business employer. There is no real free market in the individual exchanges or in SHOP. Proponents will claim that competition exists, yet all insurance plans offered in the exchanges must contain the ten government-mandated essential benefits. Insurance premium prices must be approved by the government. Consequently, individuals and employers only have government-approved plans and not meaningful choices or real competition.”
Adam Beck, Assistant Professor of Health Insurance at The American College of Financial Services in Bryn Mawr, PA said, “The Small Business Health Options Program, or SHOP Marketplace, was designed by the 111th Congress to lower health costs for small business, increase competition and therefore choice for business owners, and simplify the process of offering health coverage. These are laudable goals, however it is my opinion that the SHOP Marketplace as it is currently structured and presented falls short of these goals. I believe the SHOP Marketplace will remain inadequate and continue to enroll relatively few companies so long as three factors remain: the existing tax incentives, the lack of engagement of agents and brokers, and shortcomings in information technology infrastructure.”
Bloomberg BNA: Lawmaker Wants E-Signatures for SBA Loans; Says Proposal Would Cut Application Time
September 18, 2014
Sept. 18 (BNA) -- The Small Business Administration would have to accept electronic signatures in its financing programs under a proposal that the sponsor says would cut the loan application process an average of two to three days.
A 2000 law, the Electronic Signatures in Global and National Commerce Act, made valid e-signatures on binding documents, but their use is not universal. Rep. Sam Graves (R-Mo.) says his bill, the Small Business Loan Simplification Act of 2014, permits participants in SBA financing programs — borrowers and lenders — to use electronic signatures and records in the certification and transmission of documents. The legislation also requires the SBA to accept electronic signatures and records associated with the management of its financing programs.
Graves said a long, complicated loan application process “is often a great impediment for many small businesses to secure the capital they need to get their products or services to market.”
Reform SBA Loan Process
“ The majority of the time spent during the SBA loan application process consists of lenders collecting required documentation and having to seek out the ink signatures of borrowers,” said Graves, who chairs the House Small Business Committee. “The Small Business Loan Simplification Act of 2014 will employ widely used and proven e-signature and records technology to reform the SBA loan process. This will likely cut the application process by an average of 2 to 3 days.”
A committee press release says general bank lending to small businesses hasn't returned to pre-recession levels and cites Federal Deposit Insurance Corporation figures showing that at the end of the first quarter, banks held $585 billion in loans to small businesses, 18 percent lower than in 2008.
Bloomberg BNA: CMS Needs to Provide Congress SHOP Data On Enrollments, Rep. Collins Says at Hearing
By Sean Forbes
September 18, 2014
Republican members of a subcommittee of the House Committee on Small Business insisted at a hearing on Affordable Care Act small business exchanges that the administration must provide hard data to Congress in order to have an unbiased discussion about the effectiveness of the exchanges.
Rep. Chris Collins (R-N.Y.), chairman of the Subcommittee on Health and Technology, said that the Small Business Committee sent letters in January and June to the Department of Health and Human Services and the Centers for Medicare and Medicaid Services requesting enrollment figures for the Small Business Health Options Program (SHOP), but the HHS hasn't supplied any data yet.
Collins several times asked Mayra E. Alvarez, director of the state exchange group in the CMS Center for Consumer Information and Insurance Oversight, about whether the information is available and when the Congress can expect to receive the data. Alvarez didn't have a precise date, but promised that, after the CMS collected the data from the state SHOPs, it would give the information to Congress and the public “as soon as it's available.”
“As soon as it's available,” Collins repeated.
The CMS data will take the bias out of the debate over the SHOPs, but until then people “are just talking past each other,” Collins said.
After the Sept. 18 hearing, Collins told Bloomberg BNA that, “I'm not holding my breath” for the data to arrive soon.
The 90-minute hearing was titled Update on the Small Business Health Options Program: Is It Working for Small Businesses?
Fixing the SHOPs
All the members of the subcommittee, Republicans and Democrats, agreed that the SHOPs aren't perfect and are in need of repair, but differed as to their effectiveness.
Ranking Member Janice Hahn (D-Calif.) said that Medicare, enacted in 1965, also wasn't perfect and is still being improved today, “but that doesn't mean it was bad.” The same can be said for the ACA, she said.
Other witnesses differed on how to fix the SHOPs.
Roger Stark, health care policy analyst for the Seattle-based Washington Policy Center, an independent, nonprofit think tank, said that insurance rates and benefit levels should be set by the insurance market and not by government regulations, and that the state marketplaces should be able to offer an array of insurance plans without having to include the essential health benefits required under the ACA in order to make the market more competitive.
Alvarez disputed that claim, and said that the “biggest problem” with Stark's solution is that it would lead to adverse selection, which would in turn lead to higher costs for employers and plan participants.
Jon Gabel, senior fellow at the independent research organization NORC at the University of Chicago, agreed with Alvarez and said that plans in the exchanges must at least provide a minimum benefits package. Prior to the ACA, many offered plans had very low actuarial value, he said.
Rather than setting limits on copays, coinsurance and deductibles, the ACA established four actuarial value levels of coverage on plans—bronze, silver, gold and platinum—which represent the share of health-care expenses the plan covers for a typical group of enrollees. Most plans prior to the ACA provided less than 80 percent of actuarial value, the level of a gold plan, Gabel said.
The ACA allows employers with fewer than 25 full-time equivalent employees to apply for a temporary subsidy, called the Small Business Health Care Tax Credit, under which they will only have to pay up to half of the premium for their full-time employees.
Rep. Blaine Luetkemeyer (R-Mo.) asked Alvarez for the basis upon which the CMS made its decisions on whether an employer could get the temporary subsidy.
Alvarez said the decisions are based on flexibility and responsiveness to the needs of the market.
“But what's the basis?” Luetkemeyer asked.
“I can definitely get back to you with that information,” Alvarez said.
“Washington’s mounting regulatory burden is destructive to America’s 28 million small businesses and harmful to the economy,” said Chairman Graves. “A recent study found that federal regulations cost $2 trillion in 2012 and that small businesses annually spend $11,724 per employee to comply with federal mandates. The provisions of the Regulatory Flexibility Improvements Act, now part of the Jobs for America Act, ensure that federal agencies fully consider the impact of new red tape on small businesses, and get valuable input from small businesses before a rule is completed. Too often, federal agencies ignore the requirements of the Regulatory Flexibility Act of 1980 (RFA) and implement regulations that impose unnecessary burdens on small businesses. Under this legislation, federal agencies can no longer exploit statutory loopholes to avoid meeting their obligations to America’s job creators. Not all regulations are bad, but many impose heavy costs on small businesses, and unnecessary barriers to growth and job creation should be reduced.”
TIMELINE: In September 2013, the Small Business Committee favorably reported out the Regulatory Flexibility Improvements Act of 2013 (HR 2542). In February 2014, HR 2542 was included as Title III of the ALERRT Act, which passed the House by a bipartisan vote of 236-179. To date, the Senate has failed to act. The transcript and video of Graves’ floor speech on the ALERRT Act can be viewed here. Last Congress, the similar Regulatory Flexibility Improvements Act of 2011 (H.R. 527) passed the House by a bipartisan vote of 263-159, but died in the Senate.
SMALL BUSINESS QUOTE: “Unfortunately, all too often federal agencies view RFA compliance as either a technicality of the federal rulemaking process or, worse yet, as unnecessary. In an effort to ensure that regulations are crafted in accordance with the Congressional intent of the RFA, I urge Congress to seek out ways to improve agency compliance with the Regulatory Flexibility Act.” – Carl Harris, Homebuilder from Wichita, Kansas. (3/14/2013 hearing)
View more quotes HERE.
Reducing unnecessary regulatory burdens for small business has been a priority of Chairman Graves’ tenure at the Committee. In January 2013, the Small Business Committee launched the "Small Biz Reg Watch" initiative, which encourages small businesses to participate in the federal rulemaking process by regularly highlighting new agency proposed rules that may have a significant effect on small firms and encouraging business owners to submit comments to agencies.### Read More
House Small Business Committee Chairman Sam Graves (R-MO) today introduced legislation that will streamline and simplify the loan application process at the Small Business Administration (SBA) by requiring the agency to permit the use of e-signature and electronic records. The Small Business Loan Simplification Act of 2014 (HR 5599) would statutorily bring the SBA up-to-speed with technology already being used by private lenders and other federal agencies. Rep. Steve Chabot (R-OH), Rep. David Schweikert (R-AZ), Rep. Richard Hanna (R-NY), Rep. Tim Huelskamp (R-KS), and Rep. Chris Collins (R-NY) are original co-sponsors.
“Access to capital continues to be a major issue for many small businesses and people trying to start new companies,” said Chairman Graves. “A lengthy and complicated loan application process is often a great impediment for many small businesses to secure the capital they need to get their products or services to market. The majority of the time spent during the SBA loan application process consists of lenders collecting required documentation and having to seek out the ink signatures of borrowers. The Small Business Loan Simplification Act of 2014 will employ widely used and proven e-signature and records technology to reform the SBA loan process. This will likely cut the application process by an average of 2 to 3 days.”
The Electronic Signatures in Global and National Commerce Act (ESIGN) of 2000 made valid the use of e-signatures on binding documents, but the SBA has not yet permitted their use during the application process for its array of financing programs.
General bank lending to small businesses still has not returned to pre-recession levels. According to the Federal Deposit Insurance Corporation, at the end of the first quarter, banks held $585 billion in loans to small businesses, which is 18% lower than in 2008. And the number of loans for $1 million or less held by banks is down about 14% from 2008.
The bill is widely supported by industry, including the leading providers of electronic signature and record technology, the banking community, and a number of organizations representing various types of SBA lenders.
Small Business Loan Simplification Act of 2014 (HR 5599):
• Permits participants in SBA financing programs, both borrowers and lenders, to use electronic signatures and records in the certification and transmission of documents.
• Requires the SBA to accept electronic signatures and records associated with the management of its financing programs.
POLITICO Pro: CMS: No enrollment numbers for SHOP
September 18, 2014
By Brett Norman
A CMS official told a House panel this afternoon that she could not provide enrollment numbers in Obmacare’s small business exchanges.
Mayra Alvarez, director of the state exchange group at CCIIO, said that the agency “is not the source of SHOP enrollment," because businesses did not have online access in the first year, requiring them to apply by paper, through an agent or broker or directly through insurers.
But CMS is “working to get that information from issuers, and as soon as we have it, we will share it with you,” Alvarez told Rep. Chris Collins, chairman of the Small Business Subcommittee on Health and Technology.
CMS has been forthcoming about individual exchange enrollment. This morning, Administrator Marilyn Tavenner told the House Oversight Committee that 7.3 million people were paying Obamacare customers through mid-August — the first update since the administration reported more than 8 million sign-ups after the end of open enrollment in April.
SHOP enrollment in many states this year was minimal. In Washington state, for instance, 11 companies with about 40 employees total enrolled, despite more than 2,000 businesses setting up accounts, according to testimony at the hearing.
Washington was not typical, however. Jon Gabel, a senior fellow of NORC at the University of Chicago, told the hearing that it was the only state with just one insurance company offering coverage through SHOP. He also said “SHOP plans cost less than the plans” outside of the exchange.
The Committee explored telecommunications issues that are important to small firms, including net neutrality, broadband deployment, Universal Service Fund reform efforts, and wireless spectrum availability. The Honorable Thomas Wheeler, Chairman of the FCC, testified about efforts to promote wireless connectivity and ensure reliable systems. Members of the Committee repeatedly conveyed the importance of an FCC agenda that analyzed the intended and unintended consequences of their actions on innovation and rural access for small businesses.
“American small businesses depend more than ever on communications, and advances in technology have opened doors to distant marketplaces from rural America,” said Chairman Graves. “Access to these opportunities is indispensable for small businesses to grow and compete. The technology revolution in the telecommunications industry has fundamentally changed the way small firms do business not only nationally, but worldwide. Continued congressional oversight of the FCC is critical to ensure that burdensome or unnecessary regulation does not hamper innovation and growth for small firms, which are key to our economic recovery.”
Materials from the hearing are available on the Committee’s website HERE.
On Thursday, the Small Business Subcommittee on Health and Technology will conduct an oversight hearing to examine the ongoing implementation problems with the Obamacare Small Business Health Option Program (SHOP) exchanges.
Unfortunately, the program has created more uncertainty and confusion for small businesses, on top of the rising health insurance costs that are increasing for nearly two-thirds of small businesses that provide health insurance to their employees. The Committee has conducted extensive oversight of SHOPs this Congress. In January, House Small Business Committee Chairman Sam Graves (R-MO) requested enrollment numbers and related information from Health and Human Services Secretary Kathleen Sebelius. And again in June, Graves wrote to CMS Administrator Marilyn Tavenner to request information about the SHOP enrollment. To date, the information has not been produced.
The SHOPs have experienced numerous delays and mismanagement, going back to April 2013. Here is a list of all the changes that small businesses are trying to keep up with:
The Small Business Subcommittee on Contracting and Workforce, under the chairmanship of Rep. Richard Hanna (R-NY), today conducted a hearing to examine the declining rate of small business creation over the past 30 years and the state of entrepreneurship during this latest economic recovery.
The rate of new business creation has dropped by nearly 50 percent from 1978. In 1978, there were 12 new businesses created for each existing business while in 2011 this dropped to 6.2 new firms. Under the Obama Administration, entrepreneurial job creation has declined by one-third to 7.8 percent. By comparison, the average rate for entrepreneurial job creation under the previous three presidents was 11.3, 11.2, and 10.8.
“Our economy is facing a crisis that most Americans are not aware of – a decline in entrepreneurship,” said Chairman Hanna. “For the first time in over 30 years, more businesses are dying off than being created. Today’s hearing provided further evidence that Washington must do more to provide a better regulatory and tax environment for enterprise growth. We must not allow a declining rate of business formation and sluggish growth to be considered the new normal, and we should pursue policies which unleash the economic power of entrepreneurship and the American spirit."
Materials from the hearing are available on the Committee’s website HERE.
John Dearie, Executive Vice President, Financial Services Forum, Washington, DC said, “New businesses create an average of 3 million new jobs annually, while existing firms of any age, type, or size, in aggregate, shed a net average of about 1 million jobs each year, as some businesses fail and others incorporate technology and become more efficient. Were it not for new businesses, there would be no net new job creation in most years.”
“…the policy needs and priorities of new businesses are unique. Start-ups are different from existing businesses. While they confront challenges similar to those of existing businesses, their ability to successfully navigate those challenges is more limited.”
Jonathan Ortmans, Senior Fellow, Kauffman Foundation, Washington, DC said, “Congress should… examine the role regulatory accumulation may play in depressing entrepreneurial activity. As new regulations are enacted on top of existing rules, businesses are faced with the challenge of navigating an increasingly complex regulatory regime. A handful of ideas have been proposed to address this challenge, including the establishment of a Regulatory Improvement Commission and the automatic sunset of major rules after a set amount of time.”
Chad Moutray, Chief Economist, National Association of Manufacturers, Washington, DC, said, “Beyond these issues, the best way to increase firm formation is to have a growing economy. Policymakers need to adopt pro-growth measures that will enable manufacturers and other businesses to expand, to hire more workers and to invest in more capital spending. A healthy economy will encourage more participants, and that should spur more entrepreneurship and innovation. The pro-growth priorities of manufacturers include, but are not limited to: passing comprehensive tax reform, providing regulatory relief, expanding trade opportunities, enacting sensible energy policies, investing in more infrastructure, encouraging research and development, and developing the next generation of workers.”
House Small Business Committee Sam Graves (R-MO) today released the following statement on House passage of the Employee Health Care Protection Act (HR 3522), which would give Americans in the group insurance market the opportunity to keep their policies in 2014 through 2019 and also give small businesses and their workers the option to choose plans even if they don’t comply with the Affordable Care Act’s rules.
“Complying with Obamacare has been a nightmare for small businesses. Under the health care law’s rules, costs are increasing for nearly two-thirds of small businesses that provide health insurance to their employees, according to a CMS report released in February. The frequent delays and changes with the Small Business Health Options Program (SHOP) have also made assurances of more competition and choice ring hollow. Despite the President’s promise that you could keep your plan, millions of Americans have had their plans cancelled, and many employees of small businesses are likely to get those notices this Fall. The Employee Health Care Protection Act is desperately needed because it gives small businesses and their workers the option to keep or choose the health plan they want, despite the ACA’s benefit requirements. This will provide more affordable options than what is available under Obamacare.”
The Committee has conducted extensive oversight of the Small Business Health Options Program this Congress. In June, Graves wrote to CMS Administrator Marilyn Tavenner to again request information about the SHOP enrollment. In January, Graves requested enrollment numbers and related information from Health and Human Services Secretary Kathleen Sebelius. To date, the information has not been produced.
List of SHOP delays and mismanagement:
• On April 1, 2013, the Obama Administration announced that the employer health insurance choice on the federal SHOP exchanges would be delayed until 2015, limiting employers to one single plan.
• On June 19, 2013, a GAO report requested by Chairman Graves confirmed the administration was ill-equipped for the implementation of the SHOPs, showing potential for “implementation challenges going forward.”
• On September 26, 2013, HHS announced the SHOPs online enrollment would be postponed from October 1 until November, forcing small businesses to enroll using paper forms. That same day, White House Press Secretary Jay Carney clarified the enrollment would begin on November 1, 2013.
• During a Ways and Means Committee hearing on October 29, 2013, CMS Administrator Marilyn Tavenner said the SHOPs would be operating at the end of November.
• On November 22, 2013, the Administration extended the Obamacare federal exchange signup deadline (for January 1 coverage) from December 15 to December 23.
• On November 27, 2013, the day before Thanksgiving, the Administration announced a fourth SHOP-related delay, postponing online enrollment for a full year.
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