issue. the exchange proposals and the bills and an idea of the exchange itself. and now let me turn to the aforementioned sarah collins, the vice president for the affordable health insurance program atom co moderator of today's program. she is an economist and also the main author of the papers you have analyzing the provisions of the respected reform bills available as handouts. sara? .. and house reform bills and where people are estimated to gain coverage under the bills, in particular, the number of people covered through the exchanges, and then discuss why we need an expert -- and insurance exchange and the type of reform bills

that are before congress, and what the key issues are in terms of structure and implementation as we move forward. everyone knows by now the broad outlines of the bills. they both came for near universal health insurance coverage by focusing on the strongest aspects of the employer based health system, medicaid, and the children's health insurance program and by regulating the individual and the weakest parts of the current system, in each bill would bring sweeping changes to the markets which have previously fallen nearly exclusively and of the regulatory purview of states by samisen new federal rules requiring insurance caris to accept anyone who applies, but a good rating based on health status and implement a chance. the bills would create a new health insurance exchange, operated either at the national or state level for individuals and businesses to purchase health insurance coverage,

sliding scale premium subsidies and cost-sharing would improve of portability and reduce under insurance and essential standard benefit package with different levels of cost-sharing passats support for plans to the exchange coming income eligibility for medicaid, increased to 133 percent of poverty, a large employers required to offer coverage or contributed acosta and every one of our nearly everyone would be required to have health insurance coverage. in terms of where people would gain are estimated gain coverage under the bill these are estimates from the congressional budget hypophysis remain prominent source of coverage and about 160 to 70 million people under the bills, the exchanges are estimated to provide a new source of coverage to 30 million people either individuals or employees of small companies. a small to mid-size companies bonwit purchase and coverage to the exchange would bring about five to 9 million into the

exchange's sell 30 million covered under the exchange's under both bills and coverage to the medicaid program rises expected 35 to 50 million come of people uninsured in estimated to fall from 56,000,018,000,000 of the house bill and 23 million and to the senate bill. with so what is the purpose of an insurance exchange in the context of broad based health reform proposed in the bills? in the bills on existing health insurance system. the individual and small group insurance markets are very poorly organized and now, there are substantial barriers to obtain coverage, market rules and consumer protections where widely across states. plans are often difficult for people to understand. large percentage of premium dollars goes to administrative costs and their lack of economies of scale and market competition is based on avoiding risk rather than enhancing value. so exchanges can be designed to

provide structure and oversight to insurance markets with goals of improving consumer protections coming enhancing transparency as a benefit package, laurie premium reducing health care costs and changing the competition dynast -- dynamic from risk to value. the key provisions of the exchanges in terms of their viability over time and their ability to provide comprehensive coverage to reduce costs include strong and market reforms inside and outside the exchanges, broader risk pulling requirement to have coverage, benefit standards to ensure comprehensive coverage an informed choice. a sliding scale opinion and cost-sharing subsidies should only be available through exchanges and the authority to negotiate premiums are set rules of participation for health plans to negotiate premiums. a choice of high value plans.

timothy jost is going to provide detail on the differences between the house and senate bills on the exchanges as he does in his excellent paper included in your packet today. i'm going to skip the slide and leave that discussion before 10 a. and guess there's some of my views are the key issues we are in the structure and lamentation of the exchanges as we move toward. those include the federal versus state operation or control of the exchange, exclusivity of the exchange and by that i mean whether as a exchange becomes the whole market for the individual end or the small group markets are allowed to exist outside of the exchange. the extent to which the exchange has the authority to negotiate premiums and set rules a plan participation and whether the rules for participation are aimed at encouraging plan innovation and value in health plan design. and finally whether the exchange will have the ability long-term to risk a gesso the competition

focus on value and not risk. thank you. >> thanks very much, before we move to our panel let me just do a little housekeeping here. in your package will find a lot of a good background material including speaker biography information, much more extensive and then we will have time to give them orally. and you'll find a power point presentation is that you may find hard to read on the screen in your package as well. if you are watching on c-span and have access to a computer, you can find copies of everything that the folks here have been there kits at our web site which is www.to all health.org. and for the record we did not get a letter from c-span asking us to open this to the cameras. [laughter] we volunteered it. there is a webcasts and a

podcast available probably monday at the website kaiser network.org. which -- i'm sorry -- at ksf.org. i've got to change that. which stands for kaiser family foundation, think a ranch to the folks he made that possible. you'll find copies of the material there as well as at our website. and in a few days you'll find on our site a transcript of today's session which a lot of people find useful in reviewing things very quickly. at the appropriate time you have question cards in the materials coming green cards that you can use to write questions and haven't answered by our panelists, there are also some microphones that you can use at the appropriate time and poland the program i would appreciate if you allowed and leave with us

the blue evaluation forms in your pockets. now, let's get to the program. we've got a very knowledgeable group of experts and panelists today, they got a broad range of experience, we're going to hear brief presentations and then have lots of time for discussion and your questions. let's start leading off today, timothy jost from the washington and lee university school faculty. author as cyrano did of the paper on exchanges that provides jumping off point for our discussion today. tim has written several books on health policy topics not to mention his co-author ship of the note leading casebook on health law called, sketchily anathema health law. in [laughter] now in its sixth edition. whether you agree with him are not on a particular subject i think you'll find his analysis compelling in writing couldn't and accessible for a lawyer or

anybody else. so thanks for being with us and we look forward to your conversation. >> thank you very much. i must say as an aging law professor power point is still something i am not very comfortable with so i will do my best to move my slides along but you might also listen to what i have to say. if there's anything we can predict with almost absolute certainty about the health reform legislation that will emerge from congressional negotiations in the next month it is that the legislation will include a health insurance exchange. the health insurance exchange is quite simply in organized market for the purchase of health insurance. the exchange's most familiar to us at the massachusetts connector represented by mr. king stale, and the federal employees health benefits program. the advantage program, medicare part b systems of switzerland and other lands, arguably also germany also contains many elements of an exchange.

the health alliances and around which the clinton health plan was bills were exchanges appear, as were in our state base and private purchasing cooperatives which have been tried repeatedly and sometimes with success over the past two decades. connecticut business and industry association represented here today one represents a successful private purchasing cooperative. of course, while each of these models can be called an exchange, they are, in fact, quite different. indeed, the models represented by the house and senate bills are different in very significant ways. the focus of my paper and of my brief presentation this morning is on how the house and senate bills differ and on which model is most likely to result in the exchange spenser's past the goals that an exchange is intended to fulfill. first, quickly let me ask the question, why do we need exchange? what do we expected to accomplish for us?

this change is intended to play in number of roles in health care reform. in this era briefly went over this but let me go over it again -- first is expected to be the managed competition among health insurance plans. it's hope that the exchange will focus competition on price and quality rather than on a risk avoidance and will thus make health insurance more affordable and thus more accessible. second, the exchange is expected to create a sizable risk pool that will together with the insurance reform found elsewhere in the bill allowing insurance risk to be more efficiently managed, reducing the incidence of adverse selection by insurance and the practice that risk selection by insurers. third, it is hoped that the exchange will reduce administrative costs by simplifying marketing and premium collecting and by eliminating risk-based underwriting and simplifying the

packages that insurance companies put together for insurance as well. fourth, the exchange offers the possibility of making health insurance markets more transparent and facilitating consumer choice among health insurance plans by standardizing plan offerings and providing more and better information about health insurance options. fifth, the exchange may play a regulatory role in helping to make insurers more accountable. in particular it could serve as a forum for reallocating risk among insurers and for guaranteeing that those who sell comprehensive health-insurance coverage that those insurers sell comprehensive health insurance coverage with manageable cost sharing and that they market their plans fairly, respond properly to consumer claims and complaints as well. sixth, the exchange will likely play a role in facilitating other key features of the health care reform legislation. such as the payments opinion

credits or even perhaps the imposition of the individual or employer mandates. in many respects the house and senate bills provisions governing exchanges are quite similar. both the house and senate bills for example, a permit individuals and then on group market in the employees of small employers to purchase health insurance to the exchange. who both require twice that health plans offered to the exchange offer standardized essential benefit packages that are arranged by tears basically based on cost-sharing or actuarial value to facilitate consumer choice. both bills contain an extensive range of transparency and disclosure requirements to facilitate choice and improving surer accountability. both provide a premium subsidies which will cover over half of uninsured individuals and then on group markets and there are only available through the

exchange purdah both give the exchange some discretion over whether and not to offer health plans and thus some bargaining power with insurers. both bills generally outlawed risk underwriting by insurers and pre-existing conditions exclusions and both bills contain a program for reallocating risk among insurers of the programs in the two different plans for risk allocation are very different. both finally allow grandfathered plans to exist outside the exchange which will undermine its ability to pull risk. the bills however differ in key respects. now which approach is in the end taken will have a profound influence on implementation ineffectiveness. and what the house bills put responsibility for trading exchanges on the national government. the house bill creates a national exchange but allows states that can create an effective alternative exchanges and presumably massachusetts to

opt out. the senate bill, on the other hand, places the responsibility for foreign exchanges on the states. it depends on each of the state's two person -- legislation that will mirror the federal legislation in terms of the insurance reforms and in terms of trading exchanges and then to proceed to creativity to state its own exchange and substantive exchanges. if the state declines the invitation to do so or at the department of health and human services determines a state is failed to do something hhs can set up an exchange in the state or contract with a nonprofit organization to do so. but this will depend on the federal government and effectively determining a state has failed to comply with the law and stepping in after the fact. the state exchanges are also it should be noted an unfunded mandate, no federal money in the legislation for the states to implement the exchanges, they're going to have to pay for them

themselves presumably by taxes that will be imposed on insurers appear godwin the bill provides only startup funds for the exchanges and expects them to be self supporting once they're on their way. stake base changes we have, in fact, served in bandages, including perhaps a better knowledge of local insurance markets and regulatory environment. but national markets offer larger risk pools and greater efficiency, you don't have to set up 50 exchanges each with its own programs coming each with its own capacity to do all the functions exchange will do, you can have one program. the federal government already has one extensive experience swap with iran in exchange like programs the medicare advantage program, the medicare part d drug program, the latter to include in -- risk adjustment programs which we will probably be part of the exchange or at least part of the insurance

regulations system. most importantly a national program promises uniformed implementation will of the exchange. in some states want to go beyond the federal program, the house bill allows them to do that. but it does not -- it does me no state will be allowed to lag behind, then the state will be allowed two simply refuse to set up in exchange and then have the federal government step in belatedly and tried to clean up the mess. the second biggest difference between the house and senate bill is the exclusivity of the change. the house bill requires all of the non group health-insurance coverage other than grandfathered coverage sold to the exchange. the senate bill allows non grew market to exist outside the exchange and does not require policies sold outside the exchange to meet all the requirements that must be met by

qualified plans better sold to the exchange. this leaves the door i believe wide-open for adverse selection by enrollees and risk selection by insurers against the exchange. on both bills also allows small group market to exist outside the exchange which i think to some extent threatens the same difficulty. now the senate bill partially compensates for its open market by requiring insurers to include all insurers in and out of the exchange in the same risk pool and requires issuers of qualified health and plans to charge the same premiums in and out of the exchange for the same plan by requiring insurers outside the exchange to cover the same essential benefits in the same tears of actuarial value and finally the senate bill offers is a risk reallocation program both inside and outside the exchange. it but the senate bill i believe this is the door open for insurers to decide to stay completely out of the exchange,

to set up plans that are configured to attract the best risk away from the exchange and leave the exchange with more expensive high risk groups. thus the senate bill will also require greater amount to regulatory oversight because it will require the state's income and not the exchange but the state's to collect enough data on plants inside and outside the exchange said that it can risk just between plants in and out. that it seems to me that it's far easier simply to require all insurance in the non group market to be sold it to the exchange. a third difference involve the authority of the exchange with respect to health plans. in particular is the exchange merely offered one ever plans insurers make available or doesn't have regulatory authority as well. both the house and senate bills contemplate in exchange with some regulatory authority making

and ensures disclose certain information or participate in the risk assessment program for example. the house bill goes further however and explicitly contemplates the exchange receiving bids from the insurers in negotiating the terms of the insurance plans with the insurers. while the terms of these negotiations are not specified, the legislative language leaves room open for example for the exchange to duchenne with respect to issues like premiums, medical loss ratios, administrative costs etc. the manager's amendment to the senate bill, on the other hand, also allows the exchange to take excessive premium increases into account this refine plans and, in fact, requires generally that the exchange certify plan some general language like being in the best interest of the insurer's parent so i believe that the senate bill is well leaving discretion for the

exchange particularly after the manager's amendment to negotiate with plans with respect to issues like premium. of there are other differences between the bills that we can address and question, the house bill still includes public plan may be for another few hours. [laughter] to be offered to the exchange. the senate bill, of course, includes these multistate plans that are offered through opm said the senate bill at two layers one exchange on top of another exchange which can lead to an interesting dynamics. the senate bill bars undocumented workers from purchasing insurance through the exchange, the house bill only bars them for receiving premium subsidies. the senate bill has strong for transparency and disclosure requirements. i believe the transparency and disclosure requirements in the senate bill are exceptionally good. and requires the exchange to raise health plans which is not in the house bill. of the senate bill requires a qualified health plans to provide quality assurance

programs which the senate -- house bill does not. neither bill and i don't know how much opportunity there is to slip in anything at the last minute but neither addresses the question of privacy of health data. in the hands of the exchange. and under current hipaa statutes and regulations i don't see that the exchanges are automatically covered. so it seems to me that that is simple fix that could require some attention. the key point, however is although the exchange holds great promises health policy tool we also have history of pretty disappointing experience with exchanges, we're went to hear about good experiences with exchanges today but a number of states that try them and failed. we have a chance to get right with this legislation per pound to come up with a powerful tool for improving access control and cost perhaps you can control quality of health insurance and health care. and it's very important that congress gets the right and i

think the commonwealth fund and the alliance for sponsoring this meeting today to allow us to talk about this. thank you. >> thank you, tim, and by the way, in his paper there's an executive summary of fronts. the text in the back and which between them is one of the new discharge you're ever going to see that summarizes the differences and similarities of the two bills and i commend that to you. next turn in is jon kingsdale. the quicker to pass over there, thank you. john is the executive director of the biggestl world pilot of a real world insurance exchange. this side of the federal employee plan a. that would be the commonwealth health insurance connector authority set up by the massachusetts landmark from 200. john's work for more than 20

years and the private insurance world, he taught at the harvard law public-school, even did a stint at reporting for forbes magazine and many of you have called him i know for answers one during the debate has to try to shape this language, not just on the exchange but on related topics. john, welcome back. why to have a. >> thank you. that was very helpful introduction from sarah and tim on the basics and i don't know how much further i'm going to go so in case i lose you in is easy to do any insurance and i have been in it since the civil war and i usually lose myself, the take away here is humility. there's more that we don't know then that we do now. about how the house and senate versions wishes would actually play out. i'm pleased that philip vogel is here, he runs exchange next door in connecticut which both of ours are six stages and we couldn't be more different. his is basically for small employers and rss for

individuals, just to give one example so when you see the house version or senate version you have seen the one at thousand permutations that may play out to. that said, the me try to shed a little light. once i start from the premise that this is perhaps the most challenging domestic implementation of a domestic policy initiative at least in this century, that's easy, that's all i10 years, but i would go back maybe another century of. it is personal and complicated. it is partisan to say the least and then, of course, cost control which is far more ambitious than we were in massachusetts. we did access expansion and we're now actually working on cost control because that means taking money away. always a popular activity that's even harder and so the house and senate administration are congratulated for taking on the two toughest issues in american politics i think that once.

on and has been noted as exchanges have failed so i feel a little like the 14th century or 15 century european mapmakers describing china tier incognita one and i have a personal bias frankly that implementation is 90% of the game. there are a lot of posts here focused on the act but i actually believe it's based on implementation of. a lot of humility. i would start with saying that the way to improve the odds that an exchange of any sort will work is to define a very realistically a very limited set of objectives and i won't go into the details but when i hear some of the objectives set forth in policy papers that ran to the half-dozen or does objectives for exchanges i shudder. it knowledge second in, say for the witnesses in a spell. i will get into that and then

try to resource them for whenever exchange we come up with adequately for implementation. most of it was an exchange operator will have to encounter has not even been thought of it. it will depend on circumstances as they have a whole new set of realities spiritoso realistic objectives -- i think there are maybe three that are partly to coble. one is to reduce administrative costs of buying insurance. there is tremendous waste if you will or cost in in the distribution of insurance particularly in non group and small group and the insurance and that he is clearly a target that we ought to be able to improve it. secondly to improve consumers' shopping hub buying experience and particularly in the non group and a small group and of the market. just by way of illustrating this side to this day four years after we got started to get up and running gets stopped and

saint by people who use help connector in massachusetts to buy insurance themselves are for the 22 year-old kids because instead of spending half the morning trying on a telephone to compare four sets of insurance policies from four different carriers and then coming with a bunch of scribbled notes they can go on our website and typically 20 to 30 minutes compare fairly reasonably comparable products, push a button and get enrolled and i wouldn't underestimate the importance for success in implementation of massive health reform just being able to serve your customers well. and then finally adding some price resistance to the premium satyrs and i used to be one on the health plan. most of the cost try to price for they don't control, they are generated by doctors and pharmaceutical companies etc. and through negotiation and managed competition choice he may be able to handle the little price resistance and a little more fortitude on the part of

negotiators and take down as i say through administrative efficiency some of what they retain premiums as well. so those are three fairly modest goals. now to how to improve or work with what we have on the table in front of us. there are some weaknesses in both bills. first of all, industry resistance. to get very basic in exchange is an automated storage for insurance. you don't run a store if you don't have products and there's simply no way to compel why a producer to sell-through you appear and even if you require us to close up all their stores. they're pretty good about finding the store they want to sell-through. so one thing would be their resistance to exchange. and this will you can deal with him making exclusive change. that's one way and certainly that's practical for non group that's completely impractical in this country or group insurance

small or large. make additional segments evolutionary appear to see if these changes work and build on his track record, can, in fact, invite participation both customers and producers. and then provide for some flexibility particularly when you get beyond on group markets, small group is a local market, different in connecticut and massachusetts not to speak of mississippi or alaska and data are provisions in the house bill i'm pretty convinced will end up having absolutely zero small employers use the national exchange. we can talk about that if you want. secondly adverse elections is a major issue. this is a whole complex option, new rules and all these encourage adverse selection. is the easiest way to make your bottom line as a carrier positive one way to counter that would be an exclusive channel

for non group and a risk digesting within that. a second way is claims based risk adjustment but it has to be across the entire market segments so if your risk of adjusting for small group you can't just do it in the exchange, you have to do across the entire market. forgoing the large group market, if that is an option for large groups and they can do choice themselves, the only large employers who are likely to get into the exchange are the ones that somebody else wants to dump their. and thirdly, cost control tools. thank you for plan selection, that is critical. the house is clear on that. the senate is a little money year, but it is pretty clear. -- a little muddier, but it is pretty clear. in massachusetts, for example, over three years, the connector has come to standardized benefits. but in 2007 when we started, we

did not know which products would step -- would sell and which would be preferred. we had to evolve over time and then automate, automate, automate. there are a tremendous amount of administrative inefficiencies to begin with. >> turning to the house legislation for a minute, i think one of the problems, and tim referred to as what i called market and sensitivity. and as i said,t's only one of several reasons why there's likely to be zero. i say zero small group or dissipation in the national exchange. another one, another reason that all the premiums are supposed to flow directly from employers to carriers. so having a model where joe's gas station with five employees have to get billed to five different tears and/or to offer choice is pretty much a nonstarter. so i would suggest maybe folks, the strength of that, it's far less complex, less nuanced, most

small businesses don't change dates. delegate and decentralize where possible. it's clearly hampered either focus on a washington-based or national management structure. and then finally, emphasize the customer experience. again, this is where policy hits reality. this is where the backlash will be very real and very tangible for that god-awful big monster created in washington, and it doesn't actually get the insurance when i go online. secondly, there's a whole issue about regulation versus pretending. the house vision is for an exchange to be more of a regulator and i think the senate suggests. maybe that can be done, but there's got to be a limited set of goals. a considerable amount of independence for the agency that administers this. e-health choice administration to figure out what works, to try different things, do not be

micromanaged by a board of directors, made up of 435 representatives and senators. i would minimize the policing role particularly to sell insurance which is the mission of an exchange, nobody buys it, you haven't done anything. are going to have to be somewhat of a policeman and maybe that means regulating more through state division then some at national exchange which is try to read that the producer of the product while it sells the product. then finally, i think customer experience as i alluded to before is potentially a weakness in the house version. and their flexibility facing in and not prescribing every element of transparency, encouraging pilots would be very helpful. turned to the senate, i think there are a number of problems and i'm going to have a fourth would. scale economies is clearly one.

there will be much more skill, and is a web-based electronic store, fixed cost are pretty substantial, and scale is critical to administrative efficiency and national is by definition bigger than state-by-state. but you can make that the exclusive channel for nongroup. i think that's worth about, in massachusetts that would be subsidized, 300,000 people. at that point, even a modest sized exchange has gotten 90 to 90 percent of the scale economies out of volume. so 300,000 is a pretty good, at that point you're not getting much incremental savings from growth. developing national utility function. a national web-based tool that state changes could use. geographic portability. particularly any nongroup market they move, they split her time but the key here is a national players, not a national store. that could be supplemented by

reciprocal arrangements are much regional plans and by federal standard of interoperability among state-based exchanges. consistent performance, clearly and consistency of performance is a problem. there some conventional wisdom, thinks noted on the powerpoint. finally i would add, dependence on state interest, energy, support and resources in somewhat of an achilles' heel. there is a provision or the feds to step in, but given the controversy out of date that has come to characterize this anti-reform effort, there is a realistic process some states will do everything they can to actually make this tale. to be perfectly blunt and depending on them, to run the exchange. could be problematic. then finally, i would turn to the last point about resourcing and evolving exchanges. we are entering into a period of passes made at least a decade of

re- legislating, a try, figuring this out. so some degree of independence for exchanges to figure out what works. focusing their funding, i like the senate version much better, which has funding tied to sales, a surcharge on the premiums you actually transactions actually happening with the exchange that i think that folks is the exchange properly on most core mission. to get a whole bunch of people injured. secondly, clear objectives but flexible means. we just don't know. there so much more that we don't know than what we do know about how these things are going to work. drive as i said to electronic transactions and to auditors. there is a huge wash of billions of dollars annually in these exchanges and a very, very murky set of auditing instructions. then finally, rigorous evaluation over to. psychopaths helpful. thank you.

>> thank you, john. our final speaker is phil vogel. he is senior vice present at cbia, a division of the connecticut business industry association, cbia. he is in its third decade at cbia, and the services corporation offers health insurance among other things to the thousands of members of cbia. is also spent a dozen years in private insurance business directly. even a certified life underwriter for more than 30 years. his division has led the way and setting up a statewide health insurance purchasing alliances that allows workers in the small business members of cbia to choose among several different companies policies. so we're really anxious to hear the kind of experience that you had, and the success you've had. phil, thank you for doing.

>> dicky. i think you've heard a lot of good ideas from the panelists, and the probably going to repeat some of that i'm going to try to take in the private sector on little bit. as we've operated, at one point it was called hipaa because we really designed cbia health connections during the clinton era under the managed competition model thinking that you could set out an exchange and people would make decisions based on price network, satisfaction, quality of. that's what we're trying to do when introduced our program. i'm going to repeat some of things that were sent there because i think there's a lot of very good things said, but when going to try to do is give you a view into the private sector and into an exchange that's been running for over 15 years. as i said, cia is a not-for-profit. we run the program out of a for-profit subsidiary, cbi citicorp. we pay our taxes for any of the services that we paid that would

provide. basically, coming from a state that is very high insured, we'll have an uninsured rate of 10% or so. we have very high mandates. we have a lot of other practices in place, yet we are able to compete in the private sector. nobody has to come and buy through us. this is totally voluntary at a small business were to come to our exchange and buy through us. we look at a very, very competitive marketplace and how we work. so what i'd like to do is take you through that a little of what we are, why we are successful. i need to give you background. in connecticut of the rating rules that would have put under because those allow the rules that were talked about federally and both the house and senate bills. what we do and may be some of the lessons that we've learned over time. and in some of the opportunities. we introduce our program in january 1995.

is an employee chased moppet what does that because it means we have for health plans that we contract with. each employee can choose from one of those for health plans at a whole wide range of benefits from benefit levels from those companies. we have over 5000 companies, over 75000 members in connecticut that produces a. one of the things, one of the things john emphasized and 10, is really look at the adverse selection. one of the hallmarks of the program would refer start was we sat back and we try to standardize the benefits between the four health plans so we could avoid adverse selection. so we have come very close to having standardize benefits between the four health plans, starting on day one, in 1995. as i said we tried to determine and set this program out under the managed competition, the choice is based on price, network. as things have evolved people make make decision on formula

that different networks have and the satisfaction rate. overtime, we had an objective when we first start of having quality data that patient and individuals and employers could make decisions on, and that data is still not available at this point in time. so why do we think we've been successful? first, we think we've brought employee choice to the marketplace for employees and to employers. but one of the things we know is the employees trust their employers. and they want to buy their insurance through their employers and they trust them. but we have to make sure that we add that to the entire marketplace to each individual, to each company, to each of the insurers so that the entire market is getting a win-win win. that's how we try to manage our program throughout. there's been an evolution as we look to a program of where we started a. we try to set out specific rules, but we had to change

dramatically over the last 15 plus years that we've been doing this. as john mentioned, health insurance is very, very personal. it touches each individual. it touches their families. in each situation is different and unique to try to figure out how you can attract to make sure that you are marketing to each of those individuals and satisfied their specific needs. we have stayed true to our mission the entire time, and only focus on small business. we didn't get distracted and go into large business, into the nongroup business. we stay true to keeping our objectives, as john was saying, keep your objective straightforward and make sure you concentrate on those objectives and not get distracted. from the private sector and of course i'm going to be biased because i'm coming in from the private sector side, from our standpoint, innovation is absolutely the key. you have to be able to set out

to be able to change and adapt. when we started this, we hired employees so that we could administer our program. and i said to think too to those employees were hired in. number one, i guarantee you to think that i guarantee you change, and i guarantee you we forgot something. that was the only two things that were totally for started with them. and that's come true because we have changed dramatically over the time. they have to have -- we have the ability to change as we go forward. selection issues as i said, adverse selection is right in this. when you're competing in the outside market, it is critical that adverse selection is a void. and i'm going to talk about the background of that into slides. as we go forward. what we do, from cbia standpoint is we look like one large employer to the health plan, but we do everything.

and i have to say one of the differences from our exchange is that we are the exchange in the sense that we have designed a program and where to go shoot all the contracts of the health plans etc., but we are also the administrative. so we're doing the day-to-day operations in the sense that we will do all of the proposing of what the race would be in the benefits, if a company is looking for a quote. we will actually sell it, and raleigh, hold enrollment meetings if need be. handle any of the billing problems with an eligibility of the health plans on a daily basis, collect premiums, remit premium. there's one simple bill that goes out to the employer. so we are trying to provide everything needs to be taken place through all the indications, through all the different segments that were serving. we do differ from that standpoint. so what have we learned? well, we learn, number one, --

actually, i think i skipped once lied, which was great for. let me come back to this light for one second or that's the ratebase is. paced laws in connecticut in the early '90s. what that did was give us adjusted community rating so there was no decisions that could be made based on claims that there are no great fans, no nothing so that we have just a commuter rating. we have guarantee issue, guaranteed renewable only. we do have some rating factors being the age, area, etc. etc. that can change some of the rights. we do have a research pool behind the scenes. by this piece has been very important for us. it helps with the adverse selection so that the marketplace is not trying to make decisions based on risk. that's what john and tim have talked about has been very, very important. as a backdrop, that has been

very important for us and a lot of things are included in both the state -- both the federal bill and the house and the senate. some of the lessons as we move forward, i talked about a little about the adverse selection. we have tried to avoid adverse selection from day one. one of the problems is if you're simply looking for administrative expenses, and just as they did ministered expenses we have a real problem. because even in the bills that they talk about in the group marketplace they are looking for an 85% loss ratio, even if you save a little bit there you're not hitting the 80 or 85% which is a claims dollar. that's would have to look at. you've got to try to figure out how can we change the risk profile underneath to help look

at the claims i. i have a real problem with putting the loss ratios in their only because it stifles innovation. it stifles the ability of companies to invest in what they would do to help manage the care, help consult on the care or help drive some of the claim cost that we are talking about. i can comment on some of the broker compensation variances, but we have not allowed any in our programs whatsoever. and they also look to make sure we are consistent with what the market does outside of the exchange. some of the things to think about. there's an unintended consequences. we use the unattended consequences all time for what may take place if we make certain decisions. some of the -- i really think some of the age pieces, the house has a two to one great band on pricing. the senate is talking about three to one. that can be a real problem

unless there are very, very strong individual mandates because if the individual -- if individuals or small businesses start to drop out, the one who will drop out are the healthy risks. we will end up with a high risk pool, high rates, higher health situation. and that will lead us in a major problem. there are going to be problems in trying to figure out the subsidies, and just when you take a look at multiple funding sources and where those dollars are coming in from, and how to handle part-time employees, etc., those will be situations. the whole risk adjustment, premium redistribution becomes an issue because you know, if you are redistricting premiums, it becomes very tricky because you may be redistributing premiums to the care that is not as sufficient or working on the risk and reducing the risks like they should be and you are reducing pricing, helping them reduce their price. and i just find focus on those

and behavior change. that's a big piece that john and i were talking about prior to us coming up your. but i think the culture of, as we move forward, we have to look at this, how do we bring something to the small business and nongroup market that if large-company's are doing today? they are trying to figure out how to make a healthier population, how to invest and reduce risks within a population. it's a very, very difficult. we have companies in connecticut that we talked to all the time that are doing this. the large companies, trendlines, have flat. if we don't bring that into the small business marketplace and the nongroup, we will just exacerbate and continue the problem. i've got a couple of questions for you. and i guess i expect

everyone pretty much knows how many of you know how much you weigh. well, probably most of you would say, i know that. the question is how many of you know your numbers? the numbers being how many of you know your blood pressure, how many would know your cholesterol, your hdl and ldl? how many would know your glucose. how many would know your bmi? and the bodyweight index. the question is, as we go forward, we can't just look at it administrative expenses and just say, the exchange will only reduce expenses. it needs to do more than that. it needs to move forward into how do we actually change the overall -- the underlying population, the health of the population, if you have multiple risk factors how do we get that to reduce to where they only have one risk factor i think we have to look at that as we move forward and it's something i'm not hearing much about. i think it's very important as we go forward. >> now you get a chance to join the conversation.

as i said you can go to one of the microphones that you can fill out a green card. let me take the occasion while we're waiting for our audience, to do either or both of those things, to invite any of the panelists would like to make some additional comments or responses, to do that now. we have tim jost. just three quick comment. one is i agree with john that the small business part of the exchange in both the house and senate bill is very problematic as to how that's going to work. and other than the very obvious things like size of the group that participate when you start getting into the details of how is this going to work. it gets very complicated. and in particular the senate bill seems to me to be rather poorly thrashed out. the problem that john specifically identified of the premiums being paid to the company rather than through the exchange is an artifact of the

budget process. cbo put out a maroon random in the spring as to how it's going to score health care reform. one of the things it it said is that if premiums are paid through the exchanges, that becomes revenues and expenses of the federal government. which means that any money then that gets, all of a sudden cost of health care reform has gone up grammatically. and i'm sure that congress didn't want to go there. but it is going to be very problematic, particularly because every individual as i understand it in both the house and senate bill is going to be individually underwritten with respect to the rating factors that remain, which means a small business is going to be paying a different printer for every one of its employees based on age or the other factors that are included. so just to respond to that, i agree that's a real problem, but i think that's what the problem is there. secondly, with respect to the medical loss ratio.

under the house bill, and i believe it's two in the senate bill as well, medical loss ratios are defined to exclude the costs of improving quality of care. so i think things like disease management programs and chronic care pro grams will not be considered part of their administrative costs. so i think there is some room there for flexibility and innovation. and inserted with respect to a list and incentives, the senate bill in fact includes a number of provisions to encourage plans for dissipate through the exchange to provide various quality incentives including wellness programs. one of the things that was added by, i think added by the manager's amendment to the senate bill was provision for funding of small businesses to provide wellness programs like larger businesses increasingly have. one of the problems that i have, and i think a lot of us have, is

focusing excessively on title i of the bill and forgetting the other eight titles to the bill. there's a lot on prevention and willis in the back of the bill. some of which is going to help out small businesses. so i just wanted to point out those things. and also to thank the other purchase events, because i learned uch whe you people. and one of those participants has a comment. john? >> on the first point, about the cbo ruling on the impact on the federal budget. i have been reading the federal budget on my way down this morning, because it is a critical piece of technological -- technicality, that i would necessarily that i'm not a position to dispute that my only point is if that's the controlling consideration, i do not believe there will be any small grougroup enrolled.

for small employers who are suffering horribly with rate increases. it's a problem. i would reduce by the way and suggesting as code indicating that under the senate version where states are given the option to run premiums to their exchange or not, and where there's a broad range of benefits that are qualified health plans down 60%, actuarial value, that under that construction, a premium, the private sector premiums would not be on budget. they would be -- the revenues would be offset by the expense, only thing that would be on budget. but my larger point of course is that however the cbo's technical reading is resolved, one cannot look to an exchange which is an automated yellow pages to be a vehicle of competition and choice for small employers. >> just to stick with the. there is language in there that says even though expenditures

are run through the states, if they are administering the program under federal direction, that the states may be considered as agents of the federal government for budget purposes. so i'm not sure the senate can completely avoid this but i think you're right, that they probably are going to have an easier time of pointing at running it to the states. i would hate to see the whole program driven by that. >> cvo runs a lot of things. [laughter] >> i picked that up this year. yes, we have folks at the microphones that let me just ask you to get by yourself and ask anyone who stands up and asked a question, to be as brief as you can so we can get to as many questions as we possibly can. >> al milliken, a.m. media. how do the exchanges affect the public and private funding for abortion coverage? >> under the senate bill,

exchanges have to, i believe, provide at least one plan that does not cover a portion. beyond that, and under the senate bill, under the housebuilder was a provision they had to cover at least one that did and one didn't. i think that came out in the stiff backed amendment. beyond that, i mean i think the rules for abortion are the rules for abortion. and the exchanges aren't very much involved in them. >> the only comment i would add on that is, again, this is a perspective of a retailer, if you will. the requirements to fundamental moral issue that the stor had two products for everyone real product. and put twice as you go into a supermarket. the most critical short resource

is shelf space. so when the issue is okay, take two products, one with and one without abortion. put them together. you have just made it twice as hard to shut. probably not a major consideration for people to their core about abortion, but if you're thinking about exchanges which is the topic of our session today, it's actually a real problem. >> we have tons of questions on cards, which leads me to tell you if you have an urgency about getting your question asked, we may have done a bait and switch it because you may not get your question asked from green card. you may have to stand up and be heard. let's start with a very straightforward question. can you compare the administrative costs to states in the senate and house bills?

>> the administrative costs to states in the house -- in the house bill are minimal, because they -- and state wants to run an exchange, it can. it will have to take matching funds for doing that. but if the state chooses not to run an exchange, it has no administrative costs involved. in the senate bill, the states are responsible, both for enforcing the law and for running the exchanges. the cost of running the exchanges, the presumption is will be borne by the insurers who will pay some kind of a surcharge. as they do in massachusetts i believe. but the cost of enforcement will be borne by the state that it's an unfunded mandate. so the administrative costs to the state under the senate bill i think will be considerable. >> if i can, i guess i would take issue with that term, unfunded mandate.

clearly in the house, if the state doesn't offer the service it doesn't have to pay anything. on the other hand, it's perfectly unclear what level of federal subsidies, if any will be a viable to states from federal treasury and from the federal budget to pay for state exchange. on the other hand, actually i think having the states that run exchanges, surcharge the transaction which is why they are in business and have to manage the costs of their services in a competitive market as a perfectly reasonable way, and focuses the objectives of the local or regional or state exchange on its fundamental objective. which is to get people insured and the most affordable way. so i actually would take some issue with you in describing it as an unfunded mandate. >> i was talking about the afford the cost, not the cost of running the exchange. but yes.

>> let me just follow-up to a related question here, that knows health insurance is regulated state level today. if the exchange is created at a federal level, who would staff the federal exchange and how much wood creating that new structure and running it cost? does anybody have a notion about that? i don't never seen anything in the cost estimates. >> the federal exchange would be run by the commission which is a new administration is going to be created under the house bill. the cost of running the exchanges is to be appropriated by the federal government based on funds collected from the penalty for the employer and individual mandate. and i don't know what the cost is that cbo has put on the. and that, i'm not sure that there is a cost that has been put on that by cbo.

>> sarah, you have some cards. >> how will the senate approach the 50 state exchanges work and attend smaller states with under 1 million population? >> if i can magnify that, t i don't think we haven't time to put into your packets. joe and his colleagues, which asserts that you need at least 100,000 lives in exchange to make a viable. i think a further problem is that, since any senate bill the exchange is not exclusive in the nongroup mar m of the senate is a considerable number of people will stay outside the exchange and eight nongroup market, i think that you're going to be dealing with some very small exchanges that i think that going to have a problem with providing insurers

with a viable risk pools, and also attracting enough in shuras that they can be viable. in a small state that now the senate bill contemplates the possibility of regional exchanges. of course, the state could always forgo the exchange and let the federal government run it, or contract to run it. but i think that again, that's i think part of the problems that i was pointing to with respect to the size of a viable risk pools. >> so if you take a business approach, this is an analysis to this, you're basically three sets of cross. you have got the business function in selling interest that you got the fixed costs and you've got what tim is referring to as some of the mandated function, the unfunded mandate which i think makes a good point about. which is the regulatory function, policing functions and subsidy distribution functions. and i guess i would draw your attention to the fact that it's

really the fixed overhead costs of the business functions that are largely where the economy to scale from having size. when phil's folks on the phone with a player xyz a explaining to joseph cas cassidy to identiy the others to form and and why they can take somebody more for health benefits and somebody else under the regulation, or what the differences between pbo and an hmo or any of the other myriad of questions involved in servicing a client and selling, that's largely credible cost. you could have a centralized and some in washington involved or in baltimore or whatever. in less or no more.ld cost which are going to have the skill economy on, and some of the regulatory enforcement things are also highly variable. i think we have the skill economies are in some of the

revelatory functions, the website, corporate overhead, overall management of the mandate. and there i think, i don't know about the 100,000 as a reasonable trigger point for adequate risk pulling, but the insurance we have in massachusetts somewhere between about 50 and 1000 is where you get, you start to get diminishing returns on the scale for those web-based functions. if you really turn out to be some superduper stuff you could do with 10 million people, which is going to any state exchange would have come and you can have a national utility function run by the fed. that when even for their own exchange and whatever 23 state to whatever step up to the line they could and should make that ever able to the states that do have their own exchanges. >> go right ahead. >> i'm christine monahan with a national partnership for women's and family. i was when it comes to golf what you mentioned with a regional

exchanges, the satellite which prevails and various states, how do they reconcile the difference state laws like rating rose and other regulations? would all have to harmonize to get the same laws if they are under the same exchange? >> i've got a very brief and. that's a really good question, and it is in my skill compared to the same question for 50 states. and one exchange. it's a very good issue, to be perfectly frank, maybe it's happened, but i have not and i hear a discussion with folks on the hill heard an in depth discussion of harmonizing national or regional exchanges with local, with state and insurance regulation. and i know in massachusetts, we work hand in glove with the state division. so if we want to take an existing product author market, because we're standardizing our

benefits, phil and i both alluded to that, that directly impacts the message division regulations on preserving access for the existing members of that product you would like. and that's something we work out in conjunction with the massachusetts division interested so the national or new england exchange want to do something similar, they have to do with 50 or six different agencies and sets of rules around to switching out a product within the exchange. it's a really good question and it's magnified on a national scale. >> i will agree with that. with john's comment, because anytime we're making changes within our exchange for middleware offering in the private sector, we are taking a look, we're talking to the insurance department and sometimes meeting with the insurance department to determine what to do forward. and as i said are there, it touches everybody. is local.

so i think as a place out it's going to play out more at the state level. it's got to chordate with the state. >> one response to that though is that i anticipate considerable standardization of the state insurance laws under health care reform. probably under both bills. but the house bill -- basically the way to house the works is i see it it doesn't nationalize insurance regulation and such. what it does is it says that the national government, we are doing a national health care reform. the national government specifically the commission for health choices, is accountable. is responsible. for the enforcement and implementation of this law. and then there's lots of language about coordination consultation, joint efforts with the states to try to implement the law. but number one, a lot of the issues that are currently

addressed by at least state marketing and consumer protection laws are addressed by this law and resume it will become fairly uniform, that they do not preempt state law. it's not a race of. but cover a lot of areas that are covered by state law and to the extent that a state law would prevent the implementation of the law that outlaws will be preempted. secondly, a lot of the difference among the states currently is in terms of mandates. under both federal and state law, if a state wants to mandate coverage beyond the essential benefit coverage, is going to have to pay for that coverage for anyone receiving a premium subsidy. and my expectation is that that's going to create a race to the door to get rid of a lot of state mandates that very from state to state. so i guess my response is that number one, we're going to see more uniforms, more uniformity between state law and federal health law once this law is adopted. and number two, that in any event the federal law, the house

bill at least has this attitude of cooperation and coordination that i think is going to help work through those problems. but that will be an issue. the fear that i have a sort of the reverse of that, if you go in the senate approach, a lot of states frankly are pretty weak on insurance regulation. and they're going to stay that way and they are going to be responsible and a number of states have already indicated they don't like the law and they don't want to have anything to do with it. but i'm not sure they're all going to opt out that i think some of them may well just sort of sit there, and then see if the federal government will call the bluff. i think that's going to be a real disaster. >> i agree with some other things that are going to come together, they guaranteed we do believe and some of the rating rules and how you rate are going to come together. some of the pieces are going to be very far apart. connecticut is one. you talk mandates, that's something we talk about all the time. connecticut has a very high list of mandate, and i've been in the

business a long time and i've never seen one mandate reversed. >> are they going to be willing to pay for all of them out of their own pockets to? i can't say. i don't know. >> let me jump in. i am shocked you begin to realize that mike 10 member board will seriously begin after enactment to debate whether we should have our own status as the penalties for of mcc. etc. on top of an addition to the federal one. that's how states think of the way they do things. even if there is a lot of goodwill in a federal piece of legislation. >> was in cc stand for. >> minimal credible coverage. we have our own in massachusetts.

and i have just begun to realize how difficult that set of conversation is going to be with our governor, legislators and my own board, about do we see that to the federal standard or do we overlay hours on top of the federal standard? after all, it's a revenue source for our state treasury right now. >> go right ahead pic. >> matthew governor. i have to question. the first you mentioned that undocumented workers wouldn't be allowed to purchase an exchange under the senator. could you talk more about what options might be available to them if they want to go for private insurance, if there was even a possibility? the second questiois exemption d that market was forced into the exchange, how do you think their benefits, do you think they would be better off worse off in an exchange versus a large group? >> can you be the second question. >> the second question is the tax benefits for employers went

away and hypothetically people in large group market and loss of benefits it would to the national exchange instead of going through employers, how they might appear in the exchange versus getting benefits through employers? >> i mean, with respect to the first question, under the senate bill, presumably undocumented -- >> i think the hope is they will go home. [laughter] >> if they don't, which i think they're unlikely to. i live in a town with a great many undocumented workers. if they don't, then under the senate bill they continued -- continue to buy health insurance in the nongroup market. if that provision were incorporated into the house bill, and the house bill exclusive nongroup market is only available through the exchange. i suppose they would not legally be able to buy health insurance. and i think that's a real problem. i might be missing something there.

>> the second part of the question is what happens with a large companies, you know, benefits one way and each individual is buying through the exchange in their own individual coverage. i think that's what the question was. if you really take a look at many of the large companies today, their benefits are probably richer than what individuals would purchase for themselves in an exchange. so they probably would definitely be their benefits of the eye of a less. and i would expect from what takes place in a larger cup is a lot of programs have in place, the cost would be probably slightly higher. >> i can imagine that happening, although the cadillac tax bothered me. this was said that many people like the amt. that is going to grow and grow and grow and grow. and at some point we're going to see a very high percentage of the market, subject to that. that's going to be a dramatic cut in employee benefits, if not there is emanation altogether.

but i don't -- none of the democrats right now are talking about abolishing, at least that's not going to be in this legislation. >> two thirds of the population today are buying through their employers. an just't imagine that much dislocation in a quick time frame. >> can i just tie those two pieces together? what happened under this legislation, if anything, to undocumented immigrants who are now covered under employers sponsor plans? are they legally going to be able to continue? >> well, they are not supposed to be employed. [laughter] smack the legislation does not otherwise address that. >> i wanted to ask john in particular but any of you can answer, my assumption has been

that the smaller group market, which shrank dramatically that most ballplayers, they are now low. most ballplayers if you believe the economist might give workers more money and go shop in exchange as individuals as opposed to trying to preserve the small employer groups. and so you were really hard on the house bill on the small employer pays. so i just wondered, you're in a state we have a lot of experience that i just wanted you could speak, would that be so bad to go the individual markets? >> actually i am really glad you asked that plays because i probably as you don't miscommunicated i don't have a problem with the house version focusing on nongroup. and that's i think we have a mandate and you try to get thirty-day people nearly injured, many of whom need subsidies. that's a huge undertaking and a very upper bedazzling national exchange. i think that can work that i just don't think it's going to

work for small group. to your real question, which is so is a small group kind of going away, i wouldn't bet my firstborn on it. him as you know, with the union, there's nothing more meaningful as may be the second most important element of compensation after pay is health insurance benefits. and i know massachusetts is exceptional, but there still a lot of small businesses around the country. when they are competing for your or my services, whether they offer health benefits, as opposed to, well, yeah, somehow we can prove we pay you $1000 more a year for you to go off to this exchange or some place else, or on your own and buy it, there's really not much of a comparison between those two offers. so i think you've got, eunuch, 50% or so of the small businesses employing a lot more a 50 percent of the employees of small businesses across the country offering group

insurance. i would not expect that to significantly diminish. particularly because now you have the added incentive as an employer that your employees have to go buy it. they are really looking to you, the employer, not all to help organize the choice, but fundament to get the money with which tax preferred to go buy it. so i don't see a small group going away at all. >> plus both provide incentives to cover their employees, short-term and they are not that huge. but the cbo does see them as having a significant effect. >> professor joseph, could you go a bit more into how difficult it would be to plant outside exchangeable inside it? also the senate bill with hhs would be the best entity to administer that system are witty exchanges be? >> under the senate bill there

are actually three different risk adjustment mechanisms. two of them short-term, one of them long-term. one of them is a reinsurance program which is to operate for three years but one of them is a risk program which i can't -- i just keep thinking this ended up in the wrong bill. because it talks about hhs paying premiums and hhs isn't paying premiums or so i don't know how that works. i will be interested to see. the third is a risk adjustment program that would take money from insurers with good risk and give it to injures with bad risks. and that i believe is to be operated not through the exchange but through some other kind of entity. the state is supposed to contract with. i guess the problem that i see with that is -- than what the house bill does is simply risk adjustment. the premiums for the premium subsidies. to account for risk. and that it seems to me is

pretty doable parity will be dealing with in the exchange. you're going to have a lot of data on the plans that are in the exchange in who they are ensuring. it seems to me that's very noble although it doesn't really address the problem of small group, although maybe john is right and they will be no problem with a small group. because in the house do you have small group in and out of the exchange. with respect to the senate bill, however, with his risk adjustment program. it can. academic there are states now, a number of states that have reinsurance and risk adjustment tools but i just think it's going to require collecting a lot of information that the states would not otherwise collect. >> first of all i just want to really thank the alliance and the commonwealth and a panelist for a great session that it's been really informative. i'd like additional clarity on how exchanges can help small

businesses, which i do is maybe a little odd coming from consumers union. but i feel like this is very not clear at all. there are big businesses between the bills in both of them, small businesses can purchase both in and outside the exchange that and i think i heard a palos sake there's really no other way to do it. one of the bills the tax grants are available on both sides. and the other building can only get them in the exchange. in this inability exchanges are separate. should those two exchanges be together? and finally, what can we do to make sure -- another thing that is very odd is in the house bill, i think, individuals and small groups are pulled together in the exchange, but then there's a separate outside the exchange. could that possibly create, make rates higher for individuals and nongroup adjustments? i know that's a lot, so in general, i would just like to do the panelist thoughts on what's a good way to help small

businesses with respect to exchange design? thank you. >> let me start with just the exchange itself and the question i think was the first, why is it good for small businesses. if you think about it, come back and say, let's say you work stippling what aid much smaller crowd and i would say we're one small business. and try to equate that way. but if you think about it, exchange brings simplicity and brings the choice for employees based on their specific needs. we offer four different health plans and a range of benefits. each employee can choose a specific network that they want. why is that important? typically at a company is using a benefit they will choose someone carrier. that carrier will have one network. they will have one set of formularies. and the employees, and typically in small business decision is

based on where the owner wants to go. either the owner decide for the price of the company, or based on where their doctors are in which network. so in this situation, typically, the employee now the, okay, i don't necessarily have to go to the owners cite them even though the owners trying to provide a very good benefit, they can now choose based on where the pediatrician is, the ob/gyn, based on the formularies. based on anything they know, even from a satisfaction site. and hopefully in some point we'll have transparency of provider quality and rates so they can make those decisions as well. and is going to really -- it leads to a high satisfaction rate. we do a survey of the companies that participate in a program every single year, and we get very, very high satisfaction. we going to a lot of different questions and what their experience is within the exchange. so that's really an exclamatiexplanation within one

eighth small business dissatisfaction to each business and the employees. i don't know if we want to add, >> i would like to think that there's a great opportunity to come back to my theme, of my talk on humility. jim explained the theory of choice and managed competition reasoning well. more ex-pensive plan, the grandmother had a come whatever there was to pay for. frankly, if they're using their own money, god bless them. let them make that decision. and presumably that's our experience that most buydown and as price pressure which hopefully stiffens the spines of the insurers to either take it misted cost out of go get a better deal from hospitals that contract with pixar that is the theory of managed competition and choice that you asked a whole lot of other questions. i want to be humble and want to ask other people in this room in the city to be humble. we don't know the answers to most of those questions.

and that's why i think we need to delegate whoever's doing it. some real resources, expertise and some latitude to learn and adjust and figure it out and make changes as you go along. >> joyce friedman from internal medicine is. i'm interested in what happens to the role of insurance agents and brokers with exchanges, both after provisions for that in the house or senate bills and what the experience has been in massachusetts and connecticut. >> so i think we both use brokers. massachusetts and nongroup market is non-programmers and. there were no brokers in a really. that's where we focused in our exchange so far is nongroup. so we haven't changed market practice. don't use brokers there. now you contest is, i'm going to be an example coming back to lindsay's question in my humility. with california, where brokers typically drive the nongroup

market. there are 3 million nongroup injured in california. there were or 6000 in massachusetts, now about 90000. thanks to reform. the broker particularly gets 10% or more a premium in the first year. so very different broker situation. if washington were to dictate how to do with brokers and massachusetts and california on day one, hard fast rule, he would have to very different outcomes no matter what the rule was. and very possibly chaos in both states. so hard to know, but where brokers are there, they play an important function. we can argue about how much they are paid, about what their synods aren't so forth. there is a real function there. one of the reasons is no brokers in the nongroup market we have the gear teeth renewal. in other states, brokers in the nongroup market are critical to finding a carrier who will take

them. so it's very different state to state that. >> in the group market place, the broker plays from our standpoint very important role. our average size company that we ensure is seven or eight employees that they don't have a human resources department. they don't have -- some of them don't have access to the internet. they don't piscitelli speak english. there so many different aspects to it that the broker typically is meeting with those employees and helping them through a very complex, as we will keep saying, their personal decision. and so they actually have played a very important role for us. we did not -- when we first started in 1985, we kind of change at. but we a market rate that's basically the same in the exchange as they would get outside the marketplace. go back to california for something. the california hipaa was a public sector exchange they came up in 1995 as well. they came up with a program they

said basically the employer could determine if they wanted to use a broker, and they would be -- here's what the cause would be if they want to add on that broker. 75 percent at the beginning i believe you the broker to begin with, and their sales were not as robust as we said we will meet the market. and then their sales were much better although there's other situations, especially the adverse selection issue that they had to do -- by california hipaa had to do with that the open market did in which we are a real problem for the. and the california hipaa is not a viable program and mark. >> it was interesting to see the evolution of agents and brokers. because originally the house bill said nothing about and been part of the blue dog amendment says the role of agents and brokers shall not be adversely affected, or something like that. and finance committee bill originally said that secretary

shall come up with rules for setting commissions for brokers, and that disappeared in the manager's amendment. so is obviously that brokers and agents, you can see this in the trade press as well, have been following this very closely and are very interested in making sure that they continue to have a role. i think it's right with respect to the small group market, agents and progress will continue to have a role. it's hard for me to see that agents and brokers, if you fully implement an exchange in the nongroup market, it's hard for me to see that aging and brokers go to add the iu of 10% when you think of all the other things that help your cause are supposed to cover. . .

compensated commensurately. i don't see any need for 10 or 20% origination fees -- it's like if you could buy a through web based travel platforms and still had to pay a travel agent every time you drove. anyway, you have heard me. >> we have time for questions from the folks standing of the microphones. first in the back of the room. >> linda bennett with asked me and thank you to the panelists and to the commonwealth fund and the alliance for putting this together. my question is about the state

exchanges and the history. because in terms of going to scale, this health care reform is proposing to put 30 million people in to search of an exchange and that's a large scale in terms of having it happen in day one. i wanted to ask you, what have been the obstacles for more states taking on a running in exchange that would move us towards that level of scale? and then looking at what those obstacles are if you could sort of look to the filter of the senate bill which puts it on to states first and then if they default or reduce war are not so great in doing it to the fed steps in a. and what in the senate panel helps states to overcome that obstacle so we get on day one, if 20 million, 25 million show what it's going to work. >> as a great question in and my

somewhat in formed -- i've read all the literature and read the exchanges that most data exchanges have failed because the value proposition in the absence of a mandate in the absence of subsidies went to the exchange, for the exchange to step in and materially improve the purchase experience and the affordability and value for small employers which is where they've been focused and phil has done a great job but the value with a modest value proposition. a member of my board, he's an expert in insurance and runs a business in connecticut, he checked out cb a and was the concept. in a better deal. it's not like -- it's hard to believe. [laughter] i think even feel would admit you can get the same product for 20% less for his association. the value proposition has been a way overblown, a lot of states jump in in anticipation of the reform and the clintons, try

this, and found that it wasn't really sustainable. it was different about the senate and house versions is that subsidies would be 100 to tens of millions of people in connection with purchasing through exchanges. that's a huge difference, that's all the difference in the world. i guess the scale economies and a half in the enterprise and the opportunity to develop what's taken 15 years and i imagine cross subsidy from his parents' association to create the value which is still probably in the measure did a couple of points on the premium and people mover couple points -- on not underestimating that and it's great work. what's the value for unsubsidized exchange in massachusetts? it's literally the difference between spending a half-hour on our website and being able to seek comparable products and make an intelligent choice and having to spend a day on a telephone and try to read your note to dan today as a decision

making process but as the price difference? absolutely not. its the same price in exchange as outside. we areea differences except if you have a mandate and subsidies to pay for the insurance. >> to things. >> now the rebuttal. >> i agree except there was no -- our parents did not help us -- but in a lot of states looking at trying to bring up exchanges and a lot of it came to what was happening outside the marketplace and how that would have to run the exchange and trading rules are different all over the country and that many of the state's we talked to were not going to get critical mass and we keep talking about the critical mass. i don't know if 100,000 is the right but now we have run the 75,000 and now it's smaller than that, but they have not been able to really over, that barrier of some of the market

forces outside the exchange, they need to be similar to what's inside the exchanges or there will be real problems if they overrun exchanged. this would take me longer to explain exactly what the pieces were but that is where the states have had to be careful in this is why they haven't been able to come live. >> warren greenberg from george washington university. i think someone had mentioned that that standard benefit package is would be in both the house and senate bills. i see them as crucial and i like to ask this question, as far as standardized benefit packages do you mean also standardize co insurance rates and copayment rates as well? would that be included in the benefit? ended two, who would design a standardized benefit packages? who would be responsible for leaving in psychiatric care, leaving in mental care, leaving in dental care and so forth?

>> the answer to that in both the house and the senate bill, there's a concept of essential benefits and it lists the kind of things that need to be covered in like inpatient hospital care and physician services, like pediatric preventive services, pediatric vision and other services, but then if leads to a process which is lined out in great detail and i don't heavily committed to memory in both bills but it's a process that would be administrative process that would run through hhs i think in the senate bill. i think run by the end commission with rep advisory board in the house thing, and then they would be updated through a process. so that's the essential benefits package. with respect to the cost-sharing, both bills to your packages in terms of actuarial

value. and the senate has four tiers plus a catastrophic planet that's available to some people coming young people and to people -- i forget the other category, can't afford insurance. in the house bill has i believe it for tears. cost-sharing then it is determined by those tears. the tears basically i did fine in terms of actuarial value. so they basically drive cost-sharing. so cost-sharing is standardize and then, of course, there are maximum out-of-pocket bills. there also offer group health plans maximum deductibles. but there's a lot of flexibility in both plans. if you want to have assessed a high deductible health plan you can do it under both bills. >> can that be it the way of avoiding high-risk individuals?

>> yes,. one concern i have is that under the senate bill every insurer who participates in the exchange has to market both the silver and gold plan but they don't have to market the brown's plan which means they can market the bronze plan outside of the exchange or someone can stay at the exchange altogether in market the bronze plan and a higher deductible higher cost sharing plans tend to attract healthy people. and so i do see that as one of the wrinkles in the senate bill that makes me a little nervous about adverse selection of. >> one of the things he was saying but its worth emphasizing is that while the actuarial peers project some overall level of cost-sharing, we have used actual tiers for example with the $2,000 deductible and $25 copiague or a zero deductible and 35% coinsurance so they can be very very different kinds of cost-sharing that have the same overall value from an actuary's

perspective so your point about nonstandard i station which is one of the reasons bill and i over time have moved toward standardize benefits and standardize cost-sharing with comparability. in the range frankly a cautionary in massachusetts and what we think of as minimum would be considered middle of the road in texas. so these preferences affordability issues are very different across the country and are going to be a real issue particularly in the house version which has the floor and 7% which is frankly above but most of all employers provided in many parts of the country, they provided more cost-sharing than 30%. >> standardize benefits is i feel one of our key is. if we haven't had standardize benefits between the four health plans you just opening up problems and is very concerning

and then john's point across the country just jerry's tremendously. >> as it turned to sarah collins were final, and let me just ask you to reiterate my pressed the two fill out the blue valuation forms of the can continue to improve the programs for you. sarah. >> thank you so much to the panel. it's just been an excellent conversation and i do want to emphasize the critical of this piece of reform bill is. as we have focused a lot on the public a plan of the last. other pieces of proposals that i think it is critical, the individual is where people lose their coverage in the united states and a drop to the system at that point so this is the fix to those markets if we are going to build on the existing system and issues raised in tim's paper and by this panel i think are critically important in terms of a society on the provisions in the bill, federal versus state

control, and also implementing the bill over the next two years. >> thank you, sarah. things are friends of the commonwealth fund for supporting some of the research that was used to such good effect in this conversation and for supporting in participating in this briefing. thank you for your fortitude listening to a lot of actuarial a terminology over the last hour-and-a-half. and let me ask you to hobble think the panelists. i think of the insurance exchanges in whatever format run as well as this exchange has run a. [laughter] the country is going to be well served. so thanks very much to all of it. in [applause] [applause] [inaudible conversations]

[inaudible conversations]

a look at today's state department briefing including security lapses during the christmas day terrorist bombing attempt, secretary state clinton with jordanian counterpart on the middle east peace process in the future role of contractors in iraq and afghanistan following the recent dismissal of criminal charges against five former blackwater security guards. a spokesman p.j. crowley speaks

with reporters for 35 minutes. >> good afternoon and welcome to the department of state. just a couple of things before taking your questions. as you saw, the secretary provided a statement on the anniversary of a comprehensive peace agreement with in sudan and talked about the challenges that the parties in sudan face and encourage them to rise to the challenge, to show the political will and vision necessary to move sudan through two words a lasting peace. in a element of that is, of course, it credible elections beginning in april within sudan and then leading to the kinds of processes and systems that would lead to an attractive referendum vote next january.

but at the same time, we will work with the parties in sudan. as special envoy scott gration indicated he will be going out into the region in the coming weeks, we will work with the parties to implement the various laws and agreements, the cpa and other assets, and we will hold all the parties accountable for that implementation. the secretary has also -- has had one and will have another important meeting relating to peace in the middle east. this morning she hosted in the form is there -- the foreign minister of jordan and this afternoon will have a working lunch with the foreign minister of egypt ahmed ali gheit as well as omar soliman, the director of the general intelligence service here at the government of egypt.

you will see after the briefing a statement regarding the case involving blackwater contractors. the united states does not tolerate attacks on innocent by iraqi civilians. and the department of justice indicted in the security contractor is a dangerous possible for the september 16th, 2007 shooting at nisour square in baghdad, it announced that at least 34 unarmed iraqi civilians, including women and children, were killed or injured without justification or provocation. the department of justice also stated our goal of that, quote, for those who engage an unprovoked illegal attacks on civilians weather during times of conflict for times of peace will be held accountable. and this remains our objective. the state department fully supported the department of justice and his investigation

and prosecution of these individuals. with respect -- respect the independence of the judiciary. the decision does not exonerate the defendant unnecessarily timid the proceedings. the department of justice in consultation with the state department will carefully review the judge's decision and assess all available legal options. whatever the case on ultimate outcome, we deeply regret the suffering and loss of life caused by the nisour square shootings and we are fully committed to holding accountable persons who commit such crimes whether at home or abroad additionally we have taken some definite steps to improve the oversight and accountability of our security contractors worldwide to prevent the recurrence of tragedies such as this. and finally ambassador robert kane, special envoy for number three and humanitarian rights issues will visit south korea from january 11 through 14 and

japan on january 15th. this will be ambassador king first visit to the region since been confirmed by the senate in november. ambassador king bowl meet with south korean and japanese government officials as well as north korean defectors, family members of adoptees, and non-governmental organizations. and with that, i will take your questions. >> and i asked about the blackwater statement? what took so long? >> well, we quite simply -- >> the judge's decision was last year. >> it was several days ago. >> last year. >> several days ago. >> it was more than a brick adel. >> para not. >> last. didn't you feel the need to put some -- say something before then? >> it was the holiday season at. >> it wasn't in iraq and they were quite upset about this decision. >> i understand that. we have a statement. it remains something that we continue to consult closely with

the government particularly with the department of justice. as it says, we are assessing our options but as we assess our options we felt it was important to communicate their feelings to the iraqi people. >> well, is there something new? is very development today or yesterday that makes -- that would make a proper to put the stabenow today? >> well, we communicate with various countries in various regions all the time. understanding that the judge's reaction has had a significant -- submitted a fact -- a significant effect within iraq. we felt it was a born to help them understand that the process, in our view, is not finished. now there's action that we believe -- we will continue on a both a criminal front and the civil front. there are cases here at the united states proceeding in terms of civil suits but we

remain committed to try to do everything in our power to see justice done in this case. >> p.j., a follow-up on that, the ruling walk-through pretty conclusively that despite the state department's best efforts to try to hold these five defendants accountable that there seemed to be willful intent to disregard of the garrity airline which says -- how concerned are you if you tried to revisit this case that is going to be really difficult to work with the justice department attorneys and how concerned are you beyond that the there's not going to be another district court judges is not going to be suspicious of this case when it finally is brought back?

>> well, i think in terms of as we say the same and, we are still evaluating the ruling and assessing future stops with the department of justice will take. i'm not a lawyer so i will defer to my colleagues and the department of justice to characterize the judge's ruling and the implications. we obviously respect the rule of law, we promote the rule of law around the world but obviously there are potential options available to the depression of justice moving toward. our lawyers year the department of state will continue to work closely with them. >> in general about the presence of contractors for the u.s. and iraq, in the summer i think the dod numbers were that there were 120,000 military contractors and iraq on 130,000 -- 132,000 troops. with that number according to the dod expected to increase, what does that say about iraq's sovereignty with such a large number of both foreign troops and military contractors in

their country? >> i don't have -- i can't verify those numbers. i think there have been some gao numbers more recently i think that puts your numbers well below. i mean, contractors play an important role in any significant operation anywhere in the world whether it's a military operation, whether it's a humanitarian operation and it's something that we're going to see in the future. the real issue is whether they doing, how are they doing it, how are they integrating. in the case of buyback, how well are the operations of the contractors integrated within military operations. and other cases, how well are they integrated within the institutions within specific countries. obviously, as you heard here yesterday, richard holbrooke, in

a different context in afghanistan was talking about how we hope to change to the delivery of vital services and use our support, the involvement of government officials, non-governmental officials in certain cases contractors, but do it in a way that increases the capacity of the host nation to ultimately to tight -- take on these challenges directly. there are some very specific instances in iraq, for example rehab police training building up a vitally important institution that will be critical to stabilize the situation there, helping the iraqi government move forward in the future. so it's not to say that you make blanket statements. a lot of this is situational dependent. a lot of it is based on timing. if you have to move some are rapidly, chances are contractors

may well play a significant role over time. but we're looking here at the state department at the role of contractors. you've heard the secretary talked about this issue on a regular basis. she did so in her speech to days ago so that we understand foley and make sure that, first of all, we have the capabilities resident within the united states government to do what we need to do. she talked yesterday about a commitment to rebuild internally the capabilities of usaid so we do not have to rely it also cases and contractors. but nonetheless i think it's safe to say that in afghanistan, in iraq and other places contractors will have a role to play in a valuable role to play. but we're looking to make sure that not only their role is appropriate but that where there are there and they have effective oversight, there of

when the terms of their contract and they're held accountable when things go wrong. >> do you see the role in iraq for example of contractors, extending beyond the role of troops? and tried to ask as the u.s. tries to draw personal armed forces from my iraq will contractors follow them home were it be staying in iraq? >> it could be a little of both. you have a transition here where, in fact, once we get through the election in early march and iraq working closely with the government of iraq and fallen the strategic agreement that we have with iraq, will begin to transform our relationship. military forces will withdraw overtime. that will have some impact on contractors to read their two primarily support our military presence and iraq. more of the effort will shift from the military component to

the civilian component. we may well have contractors at the state department, for example will continue to function and iraq coming to help iraq itself build institutions of government, but over time more of this activity will shift from being a u.s. responsibility to being an iraqi responsibility. >> just one more on that, and i may not have seen this during the holiday season but have there been any official communications, and the marches, criticism coming from the iraqi government specifically to the state department criticizing the judge's decision? have you had any direct conversations with them explain this is the american justice system? >> i'm not aware of any specific to marches. washington. i have confidence that our embassy in baghdad has been

communicating with the government divert iraq or able ambassador chris hill to make sure that they understand what this case means, where it is in the legal process. >> today you have it both, as you said earlier jordanian and egyptian leaders and ministers here. on now, we're coming up on the first anniversary of the israeli cause a hamas confrontation. it in other areas such as the west bank there's a new launch appearance center, who have both israelis and palestinians actively daily working together to build a science center and other economic pursuits, yet this isn't occurring with gossip.

and it appears that fatah and hamas are political and odds. what to do it the times will egyptians enjoy dance as well as secretary clinton bring to the table to lessen those animosities? >> let me take half of that question and certainly you heard some passionate staymans little while ago from said net -- from secretary clinton from foreign minister judah, and that the critical importance of the middle east peace, the urgency that we all feel, the need to make progress as soon as possible. we will be meeting with the egyptians this afternoon. egyptians have been working over several months on the reconciliation process. we certainly support the formation of a unity government in palestine, one that, of course, and here's to the quartet principles.