Good morning. We're here today to address an issue that is consistently referred to as the single most important issue to small business owners across the country—their ability to provide quality, affordable health insurance options for their employees, their families and themselves.

The truth is that the most effective, efficient, and fair solution to the small business health crisis is through fundamental health care reform, and lately there seems to be an appetite for this. Recently, we have seen unlikely alliances between traditional rivals like Wal-Mart and SEIU, urging Washington to come up with a solution that guarantees quality affordable coverage for every American by 2012. Such a goal should be within our reach.

Done the right way, health care reform would solve the three health care challenges facing small businesses. It would give them access to functioning insurance markets, it would ensure that they and their employees receive adequate care when they need it, and it would improve the affordability of offering and purchasing insurance.

My own state of Massachusetts has done this by creating a central purchasing exchange for individuals and small businesses, offering financial help to low-income residents, and requiring that all individuals acquire coverage.

Unfortunately, we have a failure of executive leadership in Washington today – a President that proposes in his budget to limit funding for low-income kids on the CHIP program and make changes to the Federal tax law that promote a flawed individual insurance market at the expense of quality health care benefits.

The President proposes a new standard deduction for those who have health insurance. The amount of this deduction is not based on annual actual health care expenses. The President's health care proposal is bad for small businesses in two ways: First, while small employers would get a tax deduction for coverage for themselves and their family, they would not be required to provide a similar benefit to their employees.

Second, small businesses that currently offer health insurance to their workers would be less able to do so under the President's plan. If just one of their employees gets sick, the insurance premium would easily exceed the amount of the deduction, thereby imposing tax penalties on all the workers or causing the small business to drop coverage all together.

This is the second time we have seen a misguided tax incentive proposed by the Administration that is suppose to improve access health care. The Administration continues to push for health savings accounts (HSAs) that would do little for the many who lack insurance and could reduce the value of benefits and raise the costs for those that have insurance.

Whether the President is with us or not, this Congress must move forward by passing legislation that puts us on the road to real health care reform. As a Finance Committee member, I will do everything I can to ensure that our reauthorization of the Children's Health Insurance Program (CHIP) this year makes a giant stride toward covering each and every one of the 11 million uninsured children under 21 in this country – I have a bill, called Kids First, which would do just that.

Second, and the reason for us coming together here today, is that we must provide relief and new options for our small businesses that are hit especially hard by our broken health care system.

The statistics paint a vivid picture of the struggle for America's small businesses. Since 2000, premium prices have gone up by a total of 87 percent, compared with relatively stagnant growth in worker wages and inflation.

As a result of these increases, a mere 48 percent of firms with 10 or fewer employees are offering health benefits. This percentage is down from 58 percent just five years ago.

Between 2001 and 2005, the number of uninsured employees increased by 3.4 million, two-thirds of whom come from low-income families. This increase brings the number of uninsured employees and self-employed to a staggering 23 million Americans.

This is an unacceptable trend. We're here today to look at ways to reverse it.

Here's what we know has happened since we last discussed this topic in this hearing room: In the absence of leadership from Washington, states have stepped in to help fill the gap for small businesses.

I am proud that Massachusetts has taken particular leadership – enacting a plan that seeks to give small businesses the advantages of a large insurance pool while helping individuals afford the cost of quality coverage without regard to health status.

But in an era of skyrocketing costs, we should not presume that states will be able to go it alone. Some states, like Massachusetts, are taking the lead and they need help that we in Washington can provide. Policies like targeted refundable tax credits to small businesses that are providing coverage would supplement state purchasing pools and financing incentives.

Earlier this year, I introduced S.99 – Small Business Health Care Tax Credit Act. This tax credit will cut the cost of health insurance by up to 50 percent for small business owners with less than 50 employees. It will enable small businesses to provide health insurance for their low- and moderate-income employees. Until we can enact proposals that will help reduce the cost of health care for small and large businesses alike – such as health information technology, which the RAND Group estimates could save an astounding $81 billion per year – this tax credit legislation provides an appropriate option for increasing health insurance coverage for small businesses and their employees.

Another innovative, market based approach to stabilizing the employer market is through reinsurance. We need to help small businesses get out from under the heavy financial burden of expensive cases. We know that the high costs of treating the sickest patients are driving up the price tag for everyone else and taking a huge toll on our businesses. Just one percent of the population accounts for over 20% of health care expenses. The bottom half of all claims accounted for just three percent of all health care expenses.

The federal government ought to make a new deal with employers and health insurers. Here's the deal: we will reimburse a percentage of the highest cost cases if you include preventative care and health promotion benefits in your plan and implement practices proven to make care affordable. This means lower costs and lower premiums for both employers and employees. I intend to introduce reinsurance legislation this spring.

So we can help states that are innovating on behalf of small businesses and the uninsured. But we should not stop there, because not every state will take up the fight.

Proposals like the Durbin-Lincoln Small Employer Health Benefits Plan would take a proven concept – the plan offered to Federal employees and members of Congress – and create a similar purchasing pool for small businesses. This is a plan that I pitched as part of my 2004 campaign.

Most importantly, as we begin a new congressional session, we should keep our commitment to small business owners that we will find a solution to this problem. All proposals should be on the table, not just proposals that come from one side of the aisle or the other. Senator Snowe and I have worked very closely on this issue in the past and I look forward to once again seeking common ground with my friend from Maine.