from georgetown university. view --guest: there is at leaste of diversity in urban life. but i also think there is diversity of economics in terms of background and education. the issue for students is, once they get into college, it is where the two worlds meet. hopefully what we are able to do at the university level is to make an enriching experience despite their background. host: let's go to john on the independent line. good morning. caller: i just love c-span and i call occasionally. it is a pleasure to see a gal like crsystal come on and be so

intelligent and well spoken. i am 53 years old and we still have racial problems. it is a shame that we cannot appreciate each other more than we do. that is what makes america great. we do have to be, i mean, united we stand. if everyone gets on the same page, it is a fantastic thing. i think obama is a good man and i think his heart is in the right place. hopefully, better days are yet to come. guest: i agree with you. i do think that we ought to stand as -- we have to stand as one america. there will continue to be racial problems. my fear is that oftentimes we have discussions about race and

diversity, had become so polarized that we never really get the opportunity to talk about what the real issues are instead of choosing sides. i think all sides of on this issue need to be heard and diversity is not only about race, gender, etc., but also about perspectives and political background. it is all kinds of things. we do need to stand as one america, but that necessarily means we need to have a discussion about diversity that is genuine and not contrived. . .

this is happening simply because we have a black president? is that part of it? there are some people who do not like that. however, i do not think that is the majority of people. we have to be careful not to over-generalized on this particular issue. host: how do cultures best share their diversity? how do they share those life stories? do you have a sense of the most effective way to do that? does it take place in community

centers or college campuses? guest: a think it does take place in those big news. we have to be predisposed to listen to the other person's perspective. that is the problem. on the one hand, if you have people saying that the tea partiers are racist and others said it or not. above the noise, we hear nothing but noise. there is never a discussion on perspective. it is possible that everyone is not racist. that is possible. in order to be able to do that, we need to be able to listen to each other's perspective. that is my concern. we're not predisposed to do that. we really want to take sides in stick to our position. host: let's check in with midge in cleveland. caller: i have a question and

comment. i do not know what everybody is talking about all the time with diversity. maybe that sounds ignorant, but i am from the 1960's. it seems that there was openness and then. i think our kids now are more open. host: we are just about out of time. guest: think people are much more open to discussion. people are more open to the discussion, but they are more open to shouting and not predisposed to listening to every prospective whether you agree with it or not. at the end of the day, that is really what diversity is all about. host: thank you so much for joining us. thank you for joining us today on "washington journal." we will now go to the chamber of commerce.

>> it remains a bit of an open question. the fact of the matter is that we have a new law. changes to the system are already beginning. big changes are coming bigger changes will come in january. other changes will be implemented between 2014 and 2018. some of these provisions may never be implemented, at least not in the current legislative form. after all, 2018 is four federal elections and two presidential elections away. health care dominated congress for a year. now we have a bill that has become law and health care will dominate the regulatory agencies for some time to come. we expect thousands of pages of new regulations.

groups like the chamber and others will become highly active in trying to shape the outcome of those regulations and efforts to minimize the cost they will impose on business and the overall economy. with any 3000 page bill, without the benefit of being invested in a variety of conference committees, it is highly likely we will also see numerous rounds of technical corrections evolves over time. employer groups have varied memberships. they sometimes have competing priorities. the number one priority right now is explaining the new law to businesses so they understand what it will mean to them, their employees, and how best to cope with it. we're not here to give legal advice nor are we here to give financial advice. one of the complaints we had

during the health care reform debate was that this legislation would end up being a bit of the stimulus bill for actuaries, consultants, and compliance attorneys. nonetheless, we're here to try to provide guidance and general understanding of what the new landscape will mean for businesses and their employees, as it relates to providing health care coverage. before our expert panel begins to delve into the specific provisions of the new law, i thought it would be worth noting what is not in the law to eliminate some confusion that still seems to circulate outside. for one thing, there is no government-1 public option. there's no expansion of medicare to people below 65 years of age. those are two important points.

there could be serious consequences still yet to come stemming from putting another 80 million people into the government run medicaid program. the fact that the government run option in the expanded option did not make it into the final bill helps to contain government expansion into the health care marketplace. there is no payroll tax employer mandate. the bill would of had an 8% payroll tax on businesses that did not offer government- approved health insurance. that did not make it into the final bill. there will still be consequences for businesses that do not offer coverage. we believe they are a lot less damaging than they could of been. there is no special committee of bureaucrats that gets to determine what every health plan must cover.

businesses are not required to offer coverage to employees' dependents. if they do, that responsibility is expanded, but it is left up to the businesses to decide. help savings accounts are not outlawed by this new law. -- health savings accounts are not outlawed by this new law. overall, you can still keep your savings account and you will not be fined for not having coverage. you can offer it to employees and still not be fined. private insurance has not been outlawed. there are changes that will make it more expensive. there are compliance issues that need to be resolved with all of the new rules. but private health insurance will still be available. many of you are well aware of all that, but we wanted to start today with a clean slate to

eliminate any outstanding confusion. there was an important report released last week by the centers for medicare and medicaid services the department administers government health care programs. it contains sobering findings. the savings in the new law are more than erased by the new spending in the new law. people who go without insurance and employers who do not provide coverage meeting federal standards will pay $120 billion in penalties from 2014 to 2019. individuals pay $33 billion of that total. employers will pay the remaining $87 billion. the report found that if the medicare cuts in the bill are maintained, an estimated 15% of

providers who treat medicare patients will become unprofitable within the next decade. that means they may also stop seeing medicare patients. the savings estimates with the $500 billion in medicare cuts cannot be used to keep medicare from going bankrupt while simultaneously being used to fund a new subsidy program. another important finding in that work was the class act, the long term care act imbedded in the bill. it will go bankrupt after the five-year waiting period when it begins to pay claims. if those points sound of all familiar to you, that is because groups like the chamber and many others in the business community have been repeating them over the past year. as i said at the beginning, this

bill has passed and is now law. it is time to start thinking about what businesses need to know in order to comply with the new law, how to avoid fines, and to explore options to reduce or minimize the cost. before we go to our panel, let's remember that the solutions to make the health care delivery system more efficient that keep people healthy, that those changes have never been invented in congressional committee rooms. they come from partnerships between people who provide health insurance, the people who administer the claims for health insurance, networks, and the people who pay for health insurance, including american businesses. as we go forward, we need to remember the important things we can do and that we're working on in the private sector. that is where real budgets and

real bottom lines forces to come up with real, practical, and workable solutions. we will continue to highlight the successful well as programs that businesses are implementing to help control costs and keep people healthy. the chamber has already held two major symposiums to help businesses navigate the world of wellness programs. we plan to continue our outreach on our own and with our partners, like the u.s. workplace wellness alliance. we will convened stakeholders to discuss best practices for businesses, insurers, and providers to get the best returns on investment for the benefits they provide. the first step towards collaboration always lies in dialogue. we will bring together small businesses, insurers and foster a conversation about premium

increases, the cost curve, new insurance rules, and the realities of our current health care system. we will support efforts to broaden the implementation of health information technology and move the health care delivery system forward into the 21st century. we will continue to encourage efforts to curb frivolous liability lawsuits. we may not have gotten tort reform in the law, but that does not mean we cannot continue to showcase successful programs of the state level and hope that others adopt similar strategies of the federal level. we will continue to urge real discussions on how to address costs at the end of life. we will educate more americans and businesses about the benefits of consumer-directed health care, value driven health plans, transparency, the value- based payment systems, and

personal ownership of health care funds and their cost. businesses want to provide quality benefits to employees, but we will never get costs under control in a system where patients and consumers are disconnected from the costs and quality of care delivery. we will continue to support programs built around the patient-centered medical home, reimbursement reforms that provide incentives to the doctors to keep patients healthy, to coordinate care, maximize efficiency, and to focus on quality outcomes. we're going to keep talking about solutions that should have been included in this bill, real medical liability reform, small business purchasing options, tax. for the self-employed, purchasing of health insurance across state lines, and more freedom to use consumerism like

health savings accounts to cover insurance. in this debate, a health care reform is not over. fixing the health care system and managing the parts of the broken and managing those who are working well is a challenging job. it is going to take a lot of time, effort, and move from the floor debate to much more than a signing ceremony. we will continue to work for good regulations, to make legislative changes, and if necessary to pursue legal action. we will hold members of congress accountable for helping or hurting america's job creators in the toughest economic climate they have had. businesses do not have the luxury of waiting for our work to be completed today. they know there is a massive new law on the books and they are on

the hook for making sure the parts of it implements new flea and correctly. that is why the chamber, along with the american benefits council and the national federation of independent business, are pleased to be holding this conference with businesses large and small on what they need to know. i know you are eager to hear from our expert panel. thank you for attending the day. let me call james gelfand appear to introduce our panelists. [applause] >> i am james gelfand on the health care team here at the chamber of commerce. i have a special message for those of you watching. you can participate in the conversation today by email in a question to the panel at any time.

we will be able to get those here on stage and passed them on to our panelists. that is if you are watching on the web cast. if you are watching on c-span, you can e-mail the questions as well. i will be manning the computer during the q&a the presentations will not be money -- i will be manning the computer during the q&a. the presentations will not be by me. marilyn werber serafini has been that health care reporter for "national journal" since 1995. she is one multiple awards. the most recent was from the association of health care journalists. she also got an award from the journalism center on children and families for an article that scrutinized president bush' controversy a proposal to give states money to encourage marriage and discourage divorce. she is written extensively about medicare policy, the insured, and by terrorism.

she is covered congress since 1985. she served two terms as a member of the executive committee of the congressional periodical galleries. she received a master's in journalism and public affairs. she is the umpire for the national journalism health care experts blog, a highly regarded website where people talk about the best solutions for health care. she was the natural choice for a referee to daday. thank you. i will hand it over to the panel. [applause] >> and good morning. i am not sure i have ever been called an umpire before. i have never thought of my job that way, but i guess it is in

many ways. let me have a show of hands who has heard in the past month or so since the law as passed are you relieved it is all over and done? everyone in this room has been following it closely. everyone in this room knows that health reform is far from done. there is a very long journey ahead of us. most of us have become busier as opposed to having free time on our hands since the law has passed. very early on this year and into the beginning of 2011, there will be a handful of early provisions to be implemented. most of them focus on new requirements on insurers.

we even have a small business tax credit. most of the work will take place over the next decade or so throughout a long implementation. we are expecting there will be some bumps in the road that could lead to some adjustments in the law and perhaps the repeal of some provisions. some folks are already looking in that direction. much is going to depend on the public perception of the law. that is rapidly changing. in january, the public was roughly equally split between supporters and opponents of the overall law. today, it is quite different there have been a number of polls in april. the opposition has been increasing. in some polls, the opposition is now 54%. that is the highest number i have seen. the opposition is increasing.

the support tends to be decreasing. there are pockets of specific provisions where the support is greater than that. clearly for businesses, this is going to be a very new world. here to help us understand what that world is going to look like our paul dennetanis paul d. he is an expert on help businesses reduce benefits with larger businesses. his head at congressional relations of the blue cross/blue shield association. he works on health care issues for the chairman of the finance committee.

before that, he was at the department of health and human services. he worked in the office of management and budget. also with us is amanda austin, director of federal public policy for the national federation of independent business. she works with policymakers on capitol hill regarding the impact of health care positions on small businesses. before joining them, she worked for several members of congress. we will go first to amanda will focus mostly on the impact of the law on small businesses. then we will move to paul who will help us understand what larger businesses can expect and when. amanda, start us off. >> this has been a long process for the business community.

we were at the table. we were involved. at the end of the day, we felt like this bill was more about coverage than cost. an important statistic that came to light at the end of the debate for us was that overall, this bill was going to at best do this a 2% savings on small group premiums. in the individual market, it could be a 13% increase on those premiums. to us, that was a concern. our interest in being involved in this legislation was to reduce the cost for small employers. we feel like this bill as a number of tax increases on the business community that will offset the spending. i will run through two key points that a timely for small employers today. i will talk about what employers

can look forward to on the road. their questions about grandfathered status. all of our policies are "grandfathered." what does that mean? and small employers make changes to their plans? and they increase their deductible? -- candice small employers make changes to their plans? can they increase their deductibles? we're looking forward to more guidance from them on this. we do know some specifics. we do know that for grandfathered plans, there will be changes. these will affect smaller employers and employees that have coverage today. they will begin eliminating pre- existing conditions in group plans for children under the age

of 19. they go on to limit them for everyone in group coverage over the years. you see some of the carriers now are already allowing dependence up to age 26 to jump on to their parent's plans if they do not have an offer of employer- sponsored coverage today. there will be a prohibition of annual and lifetime limits. that could increase the costs of plants. there's going to be an elimination of waiting periods. employers typically to have a waiting period because of high turnover rates, especially with employers like restaurants. another important point that is timely is the small business tax credit. that was a big talking point for why this bill should be passed. of the most in this room would agree that small employers and

self-employed individuals need all the help they can get in a foreign coverage. a tax credit could offset the amount that the employer is paying. the key word is "offset." we do not want to go back year after year and ask congress for another offset and tax credit. we want them to drop costs of long-term and help market stability and competition. we're thankful that the credit is there. we do believe it will offset some costs. but we believe the credit is tight and limited. it is available now for four years outside of the exchange. when the exchanges of been going, it is available for two years. that means the employer has to go into the exchange in two years to get the credit. they will give up the grandfather plant and get the new plan if they want to retain the credit.

that is something to keep in mind. the credit is only available for employers with 25 or fewer full- time employees. the full credit of 35% is only available in full for employers with 10 and under full-time employees. it begins to phase out between 10 and 25. if you are in the sweet spot, you can get the full credit. there are a lot of employers who may have won high-wage workers and may not be able to get the credit. i think it is limited. we're not sure how many people will be able to access the credit. looking to the future, there are a few key tax provisions and requirements on small employers. starting this year, we will see

a 10% tax on tanning. they're adding this to gain more revenue. they can look forward to a new 10% tax on usage. in 2011, employers will begin reporting their employees'health insurance costs on their w0-2. there will be new drug taxes on every type of drug use. there are no over the counterpurchases with pre-tax dollars. you will not be able to get a eye solution. -tax in 2011. there will be a new business reporting requirement. all businesses now will be required to report any services

or property transactions to the federal government. this will require all businesses the purchase these services over $600 to acquire attacks by the number -- to acquire a tax i.d. number and send in paperwork. businesses are spending almost $100 per hour dealing with requirements from the government. in 2013, we are looking at an increase in medicare payroll tax. we're looking and a new tax on investments for earners making overt $200,000 single. there's another medical device tax. there are limitations on fsa at $2,500.

2014 is a big year for employers. there is a lot of discussion about exchanges. the individual and small group market will be turned upside down. each state will be required to operate an exchange. if they do not, the federal government will come in and set one up. there are a host of new things going on in these exchanges. let me say who is able to access these. individuals, self-employed can access the exchange. in 2014, the states can do one to 50 with discretion to go up to one to 100. in 2017, it is that state discretion to implored -- allow employers with above 101 employees to come into the exchange. these are designed to provide insurance options for small group individual policies and

for people gaining access to subsidies for poverty. we will have tight reaching rules requirements. -- we will have tight reaching -- rating rule requirements. right now, the states vary widely. the northeast is much tighter on what they can rate someone's health up or down on. this will have a significant impact on premiums when the scuds into place. in 2014, they will require minimal coverage. we have worked hard to figure out how we can get the coverage affordable and what will be required of small employers. we feel strongly that the coverage requirement on individuals is too high. we remain concerned about how

hhs will report on what will be required on individuals and small employers to have. we do not know yet. the bill set a minimum threshold. there's more meat to be put on those bones by hhs. there will still be a market for employers. they do not have to purchase within the exchange. the real driver will be to see how these plans and exchange match up to what people currently have when the exchanges open. we do not know yet. people may want to retain their plan or come into the exchange. it is an unknown at this point. the individual mandate goes into place in 2014. the employer mandate was 58 for more employees.

paul will talk more about that. it can have an effect on growing businesses and businesses having employees seeking coverage in the exchange. i could go on and on. that is kind of where we are. we look forward to working with the regulatory process and watching the national association of insurance commissioners developed models for the exchanges. we think it is one to be a long road. thank you -- we think is going to be a long road. thank you. >> let me start off by thanking the chamber for having us with you today. i want to pick up on one of the remarks that burris made. now that health care is completed from the legislative phase and far from complete in terms of the regulatory phase, it is the number-one issue for

employers, simply to understand what the law requires and what their responsibilities are. presumably, that is why you are here today or tuning in from the web cast. there's tremendous interest in knowing what these new responsibilities are. i want to start by highlighting some of the good news and not so good news aspects of the law for large employers. i want to touch on a few more aspects of the grandfathering rules. it is a terribly important issue to get straight for employers from a complex point of view and for decision making purposes down the road. i will then talk about the employer responsibility provisions of the legislation and touch on a couple of the other tax issues. in terms of the good news, for large employers the first and

central issue that they organized around was the notion that the current federal framework for regulating health insurance coverage in large groups is the erisa framework. that allows plans to operate under a uniform theme of regulations and federal law. the good news there is that message was understood and resonated in the legislation. there is some new state flexibility provided in the legislation that is given to hhs and the department of treasury. erisa remains intact. there will still be the option for large employers to operate under that uniform scheme to have relied on since it was enacted in 1974. that was terribly important. there is no public plan option

in this overall scheme. that is important for large employers who are very much concerned that it could have a disruptive effect on cost shifting and adversely impact on their plans. another important feature is that for large employers, they retain the ability to do their own plan designed in terms of the coverage they provide to their employees. we will talk about that more than a minute. the coverage requirements for the small group market and the individual markets will largely be determined by regulation that will come from hhs and other agencies. the larger group market will be determined by what employers provide, although they will have to meet new minimum standards for affordability.

i will talk about what those look like. i totally agreed there is a big disappointment on major initiatives in the legislation to address the problem that all employers have on the cost front. there are at least some seeds that could grow into a more robust changes down the road. most of those are things like investing in comparative effectiveness research, making more strides in the medicare program towards measuring quality and performance for health care providers and reporting that information to consumers and purchaseers so they can make more intelligent decisions about where to get care. there are some glimmers of hope.

on the not so good side, there are no major changes whatsoever on the medical liability front. there is a little bit of seed money for state experimentation. there's going to be tremendous new administrative and regulatory requirements. employers will have to pay much closer attention to that the we have had to in the past. for many of us, there are a lot of unknowns about how this will impact in keeping groups together. for the first time, this is good news and bad news. the good news of having a reformed insurance market through exchanges will mean that people can vote with their feet as to whether they think a better deal will come from employer-sponsored coverage or the new health insurance

exchanges. that will present challenges for employers as well in terms of trying to keep their employees groups intact so that they can make the coverage is affordable as possible to all their employees. let me turn and talk about some of the plan requirements that apply to the grandfathered plans. the most important thing to know is both what they are and what the timing is for them. for all plans, grandfathered or new, the magic date is march 23, 2010. that is when the present but did

sign the first of the two laws related to health insurance reform. in the first year, for any plant your the begins within six months -- after six months from the date of enactment, that would be september 23, 2010. any plan that begins after that point has to remove any lifetime dollar lent its rigid limits on the plan. the annual limits will only be permitted under regulations to be issued by the secretary. we do not know yet what the annual limits will be that will be permitted. those will also phase out as of 2014 that is when the insurance exchanges will be up and running. there is a transition rule.

there is the ability to maintain annual limits if the secretary allows them, but only until 2014. then those are prohibited as well. the waiting times that plans can have for after someone is initially hired cannot exceed 90 days. that provision kicks in in 2014 when the insurance exchanges become effective. starting on the same 2010 schedule, pre-existing conditions for children up to age 19 are prohibited. when employers are getting the most questions about from employees would be for adding dependents on to family

coverage. i will hold for questions on that. there probably are quite a few. one of the issues where there has been a lot of ambiguity has been that until 2014, there is a special rule that says you do not have to offer an individual up to the age of 26 the option to enroll in the family planned if they have coverage for another employer-sponsored plan. we think some of the initial information from hhs makes it clear that exception only applies if the adult child themselves as employment through another source. if i am 24 years old and working and have the availability to enroll in coverage through my own employer, the family coverage

for my parents would not be available to me, at least initially. that exception goes away in 2014. it is a transition rule. the other two that apply to all plans are the prohibition on rescinding in force coverage and minimum loss ratio requirements. those provisions would primarily affect insured coverage rather than any self-insured plans. there are a lot of other provisions that you are grandfathered for. one is preventive health care services, if you would not be required to meet the new requirements for those until you

are a new plan or would potentially fall out of grandfathering status. that is a plan in effect prior to the date of enactment. there are new appeals requirements in the legislation. those would apply to new plans. the plans in effect now are already subject to claims review an appeals requirements. a third one of interest to a lot of employers is that the legislation has a provision that applies non-discrimination standards that already apply to self-insured coverage to fully insured coverage. it says you cannot discriminate in your health care offering on the basis of income. this would primarily before plans structured for executive

-- this would primarily be for plans structured for executives. they would have higher level plans. in the future, those would not be allowed under the non- discrimination provision. that would be a grandfather provision so it would apply to new coverage after the 2011 effective date for those provisions. let me talk about the coverage requirements for employer- sponsored coverage. it does not go into effect until 2014. it is one of the major changes in the legislation. starting in 2014, individuals will have the responsibility to have something called minimum essential coverage. that is the term in the legislation.

employers will have the responsibility to provide minimum essential coverage or face penalties. for an individual, they have three different places where they can obtain minimum essential coverage. one is through their employer. the other will be through the new insurance exchanges that will be created. if they did not have coverage through their employer, they could obtain coverage on their own in the new exchange. that would satisfy the requirement. the third would be if they're eligible for coverage under a government plan like medicare or medicaid. those would be the three basic sources for coverage. for employers it is important to keep in mind that this requirement applies to any employer that has more than 50 employees. i will talk about how that works. the basic responsibility is that an employer with more than 50

employees has to provide the opportunity for employees to enroll in minimum essential coverage. the basic responsibility is that the employer has to give someone at least the opportunity to enroll in coverage offered to that employer plan. it implies -- applies to full- time employees. the basic responsibility is to make the offer of coverage available to full-time employees. when you determine whether you have more than 50 employees, you count that on a full-time equivalent basis. that becomes really important for smaller employers. you do not discount the individuals or working 30 or 35 hours a week. you also add up all of the part- time employees and calculate those on a full-time equivalent

basis to determine if you have 54 more employees. if you fail the test because you do not provide coverage to your employees, there is a little bit of relief in the legislation were you are not penalized for the first 30 employees. but then you pay a penalty of $2,000 on each of your full-time employees above that 30 exemption on all the rest if you fail to provide coverage. another important responsibility that the legislation establishes for employers is to provide affordable coverage. this situation applies to employers that are providing health insurance coverage, but the losses to have to make it affordable as of 2014. affordable basically means that

the coverage you provide has to cost more rigid no more than 9.5% income for that employee, household income. the coverage has to have a value of at least 60%. that is the actuarial value. it is a measure of how much the plan pays in aggregate vs how much the employee pays out of pocket for things like deductibles. whenever the plan is providing, it has to pay an average debt -- aggregate of 60% of the cost of the claims for those covered benefits. if the plan fails to provide affordable coverage because it is not affordable to the employee because it cost more than 9.5% or does not deliver at least 60% value, then the

employer is required to pay $3,000 for each employee to obtain health insurance coverage in the health insurance exchange and receives a subsidy in the exchange for the coverage they obtained their. that same trigger also applies in the case of not providing coverage at all. what triggers the penalty for employers in that case is if even one employee goes into the health insurance exchange and obtains a premium tax subsidy. there is also a unique affordability test in the legislation that would require employers to provide a voucher to employees if they do not provide affordable coverage through the work force. that comes in at a lower amount

starting at 8%. if the coverage costs the employee more than 8% of their income, then the employee is required to provide a voucher that would go to that employee. they could take that voucher and purchase coverage on their own in the health insurance exchange. that voucher has to be equal to the largest amount that the employer would provide for coverage for employees to which the offer coverage. if you are providing a range of options, this the largest contribution you make to any of those options. that was added to the legislation by senator widen. larger employers will be required for the first time to automatically enrolled employees into health insurance coverage

at the time of highere. that will be subject to regulations to be issued by the secretary. we do not know details on that or when the timing would kick in for the requirement. we expect it would be another 2014 effective date, but that will be determined by the secretary for regulation. there is a new notice requirement that employers will have to let employees and new hires know about the existence of health insurance exchanges and what the consequences of that would be if they do not elect employer coverage but instead decide to get coverage through the exchanges. i also wanted to mention a couple of the other tax provisions and then we will open it up for questions. in addition to the tax provisions that amanda

mentioned, there is one that would be important to a lot of employers. starting in 2013, there is a limit on the amount that can be contributed to flexible spending accounts. it is limited to $2,500 starting in 2013. then for each year after that, it is indexed by the consumer price index. nothing in the legislation prohibits helalth savings accounts. that is good news. but there is an important tax change. starting in 2011, the penalty for using phones from held savings account for something other than qualified medical expenses doubles to discourage

the use of health savings accounts for non-medical uses. it goes up to 20% starting in 2011. one that was of particular concern to the large employer community is that starting in 2013 large employers face a major tax change in the treatment of federal subsidies that encourage them to continue to provide prescription drug coverage to medicare eligible retirees. that was established when medicare created the prescription drug benefit. it was the subsidy provided to employers on a tax-free basis. this change means that employers would now have to lower their tax deduction that they are otherwise entitled to by the amount that they received in the subsidy payments.

as you probably saw immediately after the legislation, that impact of large employers significantly. for those employers that receive the subsidy on behalf of their eligible retirees, they had to post a major change in their earnings immediately upon enactment. in some cases, those hundreds of millions of dollars as a result of that single tax change. for some, it was over $1 billion for that provision alone. that was a significant provision in the large employer community. we can stop and see if folks have any questions. >> thank you for the overview. i will take the opportunity to ask the first question. then we will spend the rest of the time and your questions. amanda, when you are talking

about coverage requirements, you said there is more meat to be put on the bones by hhs. that statement applies to many provisions that affect businesses. how much leeway does hhs have in writing these regulations? what kind of an impact could there be on businesses, depending on how these regulations are written? are there any areas of particular concern moving forward? >> this was an enormous issue of debate and discussion about the health care bill discussion.

for small employers today, what is allowable for them to purchase means of the insurer takes on the risk. that is dictated by the state. we know what state benefit mandates are. some states have a higher threshold of benefit requirements than others. it is extremely hard to find a perfect point of what would be affordable for small employers. there are regional differences. the northeast tends to be more expensive with the larger scope of coverage for small employers than the midwest and the south. our major concern was how you will find affordable for small employers. what is that? today, it is already unaffordable.

our concern lies with what else they are going to dictate be included in the new minimum the essential benefits package. this is the baseline for where all health benefit plans will pivot off of. small employers shop. they tend to change policies often, if not your to your, every couple of years. . .

>> i think the only state that has done that so far is massachusetts. what kind of impact will that have? we're going to look to what are the buckets that will be required of carriers to cover, and what will that do and how will impact the cost? >> there are lots of questions players are asking now about the legislation -- some of them are very technical and some of them are very broad. let me mention a few people are very eager to get answers to.

amanda mentioned one of the issues would be for plans and are grandfathered in effect on march 23rd when the president signed the bill. how do they maintain that grandfather status? in the house bill, there were some provisions that said you could not make changes that change the premium amount played by -- paid by employee or the cost sharing my board and certain percentages. if it did, that ended grandfather status. that was not improved in the senate bill or the bill the president signed. what was signed was largely based off the senate package. it's not clear whether the intent was to provide that flexibility in the future --

they need to make adjustments to keep the packages affordable and there are simply best practices people are trying to incorporate all the time into the way they design health-insurance plans. or if they do that, could any of those things inadvertently trigger them to lose their grandfather status and face all these new plan requirements. another big unanswered question we get asked all lot is how does this legislation affect retiree plans? was it even if -- with even intended to affect plans offered to retirees? much of the legislation refers to employees, but there are big unanswered questions about whether the plans require -- the plans apply to retirement only plans. annual limits are going to be

subject until 2014 to restrictions issued under guidance by the secretary. we do not know what those are yet. yet a lot of plans to that annual limits, either on the plan as a whole in terms of the total about available or by category of benefits. people really want to know the answer to that probably the last one people ask all the time is they are very much aware it can take the agency's many months to interpret legislation this sort. they have to go through their own internal review before it is finalized, yet employers and insurers have to make decisions right now about the types of plans they will be offering starting next year. they are already well into the planning schedule. one of the things they want to

know is if i make a decision based on the best information i have and try to take a reasonable, good, safe interpretation of the legislation, am i protected from agency enforcement actions or liability? otherwise, if i do the best i can in the guidance because that is in the real world will not happen for many employers. >> let's turn to your questions. there are two microphones, so if you have a question, give us a sign and one of the microphones will come to you. we already have some questions coming in by e-mail. any questions in the room? >> i work with anchor national organization. i have a basic question that

four different webinars have been unable to answer. what is the requirement for coverage of dependence? requirement, -- most of the focus has been on allowing adults to the age of 26. second question -- when you get reconciliation talked about, that's an issue of full-time. then there was full time equivalent, and you added up of the part-time and/120. would you explain to me what that means it you have to hundred employees and 75 of them are part-time. >> let me take a stab at the

first one. this is going to be this this webinar that does not give you an answer. the reason is there is not an answer. what it says in the employee responsibility provisions is if an employer fails to provide full-time employees and their dependents the opportunity to enroll in minimal essential coverage, they're subject to penalties i described. in the house bill and the bill approved by the senate health committee, there was a much more clear statement about the required to cover employees and their dependents. our understanding is in the discussion of the senate bill when those were ultimately emerged between the two committees, -- ultimately emerged between the two committees, there was what i

would call constructive ambiguity. it is clear yet to provide the opportunity to full time and place to obtain minimal essential coverage or be subject to penalty. it is not clear what the parentheses means. if you have to make it available to dependence or whether it remains as it is today, an option. we would hope and expect legislation leaves it an option because that goes on to make clear the only penalties apply to an employer if he did not provide affordable coverage would be based on the assessment of your full-time employees. whether the front end requirements is meant to require employers to require coverage to dependence maine -- remains ambiguous. on a full-time equivalents issue, in the example you gave,

the employer would be subject to the employer responsibility provisions because this begin with 50 full-time and police -- full-time employees, 75 which -- 75 of which are part time, would be subject to the provision. basically, you count up all of the hours worked by part-time employees and divide by 120 hours, which is 30 hours a week minimum times for weeks and determine how many of those part-time and police are full- time equivalent employees and add them -- part-time employees are full time equivalent and add them -- but once you are over that, that's the only reason you count part-time employees at all.

>> the coverage offered to the so-called part-time -- is that prorated or must be the entire package? >> is not covered for part-time. it is for the purposes of whether the employer fails the test. you're not technically providing coverage to part-time workers. they just assess what triggers the employee size and weight can be exposed to. >> what is the requirement for the employer -- anderson would you are saying what triggers that -- i understand what you are saying triggers that -- which have given the best answer yet on the dependent one. what would an employer's obligation be for those 75 people who provide part-time -- >> you only consider the part time for the purpose of

determining if you have more than 50 employees and have requirements with respect to full-time employees if you do not offer coverage or affordable coverage. there is no employer responsibility to cover part- time employees, and that is defined as an individual working less than 30 hours a week on a monthly basis. somebody working less than 120 hours a month. that remains an employer option. if that individual does not have affordable coverage, they would have the ability to get coverage through the exchanges in the future. >> other questions? >> and with the associated press. my question has to do with the extension of dependent coverage

for kids up to age 26. last week we saw some of the insurance companies said it would make this effective immediately for people to buy insurance directly from them. what do you think large employers are going to do? are they going to follow suit and make it effective, available immediately, or, practically speaking, when do you think we will start to see that for employees at big firms that are self insured? >> it's a good question. it's probably the number-one question employers are getting from their employees -- how soon can i offer coverage for my children up to age 26 and get them on my family plan? there are a number of questions that need to be asked by the agencies and to the extent

employers get guidance on this questions will determine the lot as to how quickly they can act. for example, one of the things that them that -- that affects employers and and police are what are the tax consequences of moving rapidly to add a dependent age 26 on to family coverage. there are provisions, but it's not clear when they are intended to be affected. if you do that, you don't have to add to the belly of that dependent coverage to the employee so they would have to pay taxes on that. that affects employers because that amount or value of the coverage is considered to be taxable income to the employees and the employer has to pay payroll taxes on that amount.

they need to know what tax consequences of making that change before the beginning of next year. there is a similar issue that arises for the timing of all this. that has to do with this clarification of whether until 2014, an individual has coverage through another source of employment and is not offered coverage through the parents plan but is required to obtain it through other employer plans, whether that is only as we think is the case, only applies if the adult child has

covers their unemployment. there are just a few questions that need to be clarified so that people can make sure if they make these decisions, they're doing it in the right way and can inform employees what the tax consequences would be for that change. >> there are a lot of employees out there that have more than one job and often work two 30 hour per week jobs. which employer would be possible and where would they get coverage from? >> any employee working more

than 30 hours, the employer would have a responsibility to provide that individuals the opportunity to enroll in coverage or would face penalties if they did not. if they were working to jobs, working more than 30 hours a week, presumably they would have that opportunity for both jobs and would simply choose which was the better offer for them. if there are working under 30 hours a week, they might have that opportunity as a part-time and lee and many employers to have the opportunity to provide part-time workers to enroll in a plan. the employer would be required to and if they didn't, they have an individual responsibility to obtain coverage after 2014. they would get that to the

health insurance exchanges. >> if the new law opens up a lot of privacy-related issues between the relationship of the employer and employee. how does the spouse obtain coverage? who is going into the exchanges to is not? there are still lot of unanswered questions as to applications on penalties and to is getting coverage where. we still assume these questions will be asked because the individual mandate will precipitate a lot of that and probably precipitate more conversation between employers and employees on their requirements. >> we have a question -- she would like to know if you believe there would be a clarification of grandfathering before september 23rd?

>> i will take the bet. yes, i believe so. >> i don't think we will have to wait a lot longer. the first batch of agency guidance is to out this friday, april 30th. that's an important day to walk of -- to mark on your calendar. our understanding is there will be some guidance that will be out on annual and lifetime limits and on the age 26 requirement and the pre-existing condition of to age 19. something we did not touch on today is a new reinsurance program for early retirees, individuals between the ages 55 and 65. that becomes effective within 90 days after the date of enactment. all those provisions will see some initial guidance possibly this friday.

when they do that, it would seem to me it's pretty likely we would start to see some initial agency thinking around the grandfathering rules. >> let's take one more question from e-mail. this person wants to know whether the exchanges are intended to lower the cost for small businesses and will work -- will it work? >> @ think the intent behind the exchange's is to set up a more functional marketplace. these exchanges have been obtained at the state level and state regulatory oversight is that the state level so the federal rules come out and the states implement them. a couple of the comments over what the concerns are are frankly what they wanted to do is to achieve more efficiency

with administrative costs -- small group policies and individual policies and have more costs than a large employer. drafters would hope these exchanges can shave some costs there. the agent and broker role is an important one for most small businesses. i think it is unclear to the extent of how the exchanges will utilize agent-broker and will look to shave off the cost -- like selling your house for sale by owner as to paying a commission -- a broker. i think they will be a source of the information and there's a lot of uncertainty about what the new law is going to look like.

probably the biggest issue for us is what the benefit will be on the actual exchange. that will be the driver of cost and the driver of utilization. if more people use this system, the cost is going to go up. that's not funny mass, is the way it goes. that is why the question is what is middle essential coverage going to look like in this package compared to what people have today? we're working with a smaller risk pool. some states are bigger than others. we're hopeful more people come into these exchanges and access coverage, both young and old. but right now, we have to separate pools where looking at -- grandfather policies retain pooling of the rhone and the exchanges will pool outside of it. -- retain pulling on their own and the exchanges will pull out side of it. we do not know what that risk is

going to look like yet. i think it is uncertain right now how much is going to be shaved off at the end of the day for purchasers in the exchange, but we are hopeful. >> i would add one other item -- starting in 2017, states will make decisions about whether to make exchanges available to larger and players -- large either being about 50 or 100 and and how the state defines small employer. the same question about small employers, large employers may be confronting it as well after 2017. does make sense for me to get health coverage as large employers do today outside of health insurance exchange or does the availability of coverage through an exchange in some states down the road, does that provide for some new

opportunities for large employers who were not there before? a lot of that will turn on the issue of what is the most affordable choice but as for the employer, but for the employee. >> i'm with the tire industry association. back to the 200 figure for a moment. with regards to automatic enrollment, to questions -- are the fte's part of that and what are the ramifications of automatic enrollment. >> they're not included for automatic enrollment, that's only when you include part-time employees on an fte basis. it's apple -- applicable only for that 50-employee threshold.

that is the responsibility of providing coverage and affordable coverage, but that's an interesting question. in terms of administrative, we don't know yet because the way the way -- the way the provision is written is pursuant to regulations issued by the secretary. the basic requirement is simply that you provide the opportunity for individuals to be auto- enrolled in a policy once those policies are issued and toss with the effective dates would be. -- and they tell us what does effective dates will be. they will tell us if the employee can opt out of and they were bought a-enrolled in. this will be holding a practice.

it only applies to employees -- employers with more than 200 employees. we will have to see exactly what the requirements are. it is consistent with the notion that everybody has in 2014 and beyond a responsibility to obtain coverage. the idea here for coverage is to get everybody in as quickly as possible in a plan of the have went through their employer, but not to requirement. the individual can still opt out of that placement into a plan if they choose to. >> good morning. what would the federal law mean with regard state-imposed health benefit mandates for the small group plans in the states and with the health insurance exchange of policy that can be

picked up? >> i believe the states can go over and be on the level of coverage required by the federal government. maryland is pretty high already. i don't know if there is more a question of whether minimal essential coverage is going to be lower than what a state has and what does that do as far as requirements? as far as i know, it can be sold or at the federal level. >> i don't think that would be the case. i think once the federal rules for minimum coverage are issued, that state flexibility for insured coverage would begin above this federal minimum requirement. the coverage would only apply to

the insured plans and provide obligations on a minimum basis -- as far as the exchanges, understanding is the way the legislation is crafted is there are many states that have exchanges today but the secretary could review -- but the state could deem these requirements for leas own exchanges of as one hour has put one in place before 2014. >> but the bottom line is the coverage in maryland will be what is applicable. it will be over in your opinion? they can go over what the

federal floor sets cluster >> any state can go over the federal floor, but i do not think they can go under it. >> we have a couple of e-mail questions on the same subject. people want to know how much they're going to be on the hook for in terms of premiums? how much employees premiums does a business with more than 50 employees have to pay? is there a maximum planned deductible for employees? a body shop worker wants to know if he is already paying 50% of premiums, is the going to have to pay more than that? >> the basic requirement is to make coverage affordable. if an employer provides coverage that the amount of the premium paid by the employee may

not exceed more than 9.5% of that employees household and come -- household in come. if it does exceed that out, they employee gets coverage in the exchange and receives a tax credit or subsidy in exchange for the coverage and the employer would be subject to a penalty of $3,000 for that employee. the only other thing to keep in mind is we're talking about full-time employees. in most cases, they only know what they paid the employee, so they do not know what their total household income is. they will have a notice responsibility to tell employers about the availability of coverage in the exchange and the availability of premium tax credits in the exchange and i am

assuming this notice requirement will require you to give you some examples if the income from your total household is above this amount -- you along qualified for premium tax credits. if it is below a certain amount, this is how much of a premium tax credit you would qualify for. employees would be able to go to the exchange and say this is my household income and this is how much i have to pay for employer- sponsored coverage. it's going to be affordable because it will cost more than 9.5% that of my income. the exchange would certify that pan informed the employer that they are responsible for paying a penalty. the basic obligation is to keep affordable as far as the 9.5% threshold. as far as the deductible question, i do not think we know

yet because one of the really important issues that will be determined by the secretary when they define the essential benefit package will be what the level of deductible would be. >> i thought it was a cap on the deductible level for single policy of $3,000 or $4,000 for a family. that is my understanding. >> i would like to follow up on a point about maryland. the anticipate states will get their exchanges up and running before 2014?

>> and its possible. the only states right now with the exchanges are massachusetts and utah. they will have to be certified at some level for the subsidies to flow through -- which is another question on how many can have subsidies flowing to the state. i ask the commissioners and they assume it will start before 2014, possibly 2013, but they do not see any activity before that. >> is kind of a more academic question for larger employer groups because they will mollify to participate in the health insurance exchange if you have more than 50 employees or if the state defines that at 2100. at the discretion to allow

groups to participate in the exchange. any employer that has more than that will not be permitted to offer insurance through the exchange trader question is well taken. there are 48 states to go and there is a pretty good blueprint for what a qualifying the exchange would have to look like. that requires action in state legislative bodies throughout the country now, so there will be a big push for a state law to come in with these requirements. >> it seems like u.s. pressure building in a few areas where companies are being told they'll have to lower the cost of these plans for employees, yet this scope of the plant is expected at some level to be higher

quality plan. how do you see cost pressures building in small companies and how you think they deal with it? >> i was looking last night at the report bruce talked about earlier. it looks like they are going to lose a million out of employer- sponsored insurance at the end. it looks like people will switch over to medicaid and the exchange. there are different triggers attached now and people were can -- and where people can get coverage. i think the cost pressures are always there, particularly for small employers. particularly for the rate spikes a of seen and it could potentially make them drop. most typically, for us, we see them move that deductible around to retain the coverage.

i think you are going to see a lot of concern and probably more retaining the grandfather plan as opposed to changing. that's probably going to be a discussion between the employer and their agent a utilizing today on what their options are. it is not typical, like a large employer with a january 1st. i think the uncertainty is there and cost pressures are probably going to go up. it is possible we're going to continue to see a drop in small employers. that said, the individual mandate is going to pressure on employers to offer coverage and to the extent that makes the rates go up and is sustainable for the employer from a bottom line perspective -- because these are pocketbook issues for

employers -- they either have the money or they doubt. they will shed a worker of the need to retain coverage or not hire. there is no money pot. we just don't know yet the full scope of what we're going to see in the next three to six years. >> there is a question about the dependent kids up to age 26. can 26-year-old dependents be offered cobra? >> the question is whether employers could be [inaudible] on the effective date. it begins six months after the date of enactment. one of the unanswered questions is if you do offer coverage, how

the price the coverage for the employee? if i am the parent and i want to add my 24-year-old, do they come on to the plan at the same premium otherwise for family coverage or does it work the way it does in many states where they have had similar requirements, where the employer or insurer can create a separate rate for the coverage offered to that individual. you could have a rate that would be equivalent of a cobra rate -- what would it cost for coverage provided to a 24-26 year-old or a 21-26 year-old individual? that is an unanswered question.

there is not any thing in the legislation that prohibits their being a separate rate created just for adding the adult child onto family coverage. also does not say the rate must be the same as the family rate. i think that is one of those unanswered questions we will be looking for further guidance on. >> which employer pays the penalty for two working spouses? >> if both spouses are working more than 30 hours a week, they're both required to have the opportunity to enroll in minimum essential coverage. both employers would have that responsibility and both looked at -- both would pay a penalty if they did not provide coverage to those workers.

it's not done on a spousal basis, it is whether the individuals working more than 30 hours a week. >> how often must employers calculate full-time equivalents considering those employers to ramp up with seasonal workers? >> that's a good question. the actual obligation over the $2,000 penalty and $3,000 penalty, while we talk about them that way, they are assessed to an employer on a monthly basis. one of the questions -- this is one for guidance -- how often does the employer determine if they have more than 50 employees because they're

subject to penalties not on a calendar basis, but each month. for people that have a employees that fluctuate around at and fit the magic employee mark, this could be their confusing if sometimes they're depending on how they account seasonal workers or the influx of workers to take on a search of work that occurs in their schedule which occurs only at certain times of the year. they have more than 50 employees and other times they would not. it is possible that this calculation could be made numerous times during the year. >> we interpreted it as a monthly, the same way paul did. certainly more guidance is needed and seasonal workers are exempt, aren't they? we have gone back and forth on that.

>> only certain categories of seasonal workers. the legislation says the only individuals that are seasonal workers who worked during the holiday season are not included in the calculation of whether you have more than 50 employees. some employers don't bring on seasonal workers just for holidays, but because the need for seasonal workers related to other factors other than just the holiday season. i believe the legislation says for those people you bring on just for a short time, if they are working more than 30 hours a week on a monthly basis, that they be required to offer health insurance coverage just like anyone else. >> somebody from jetblue has a

question and wants to address the underlying question of health-care costs. does the bill provided the specific tools are programs that can be used to reconnect employees to the true cost of health care? >> i think there were a lot of those, we would all be much happier. there would be of more people satisfied with the legislation. it's also the criticism of the massachusetts law. the coverage requirements came first, the cost requirements will be the things we will continue to struggle with overtime. there are few things that help. one of those we considered it important is it allows employers to provide stronger incentives for participating in employer- sponsored well as programs. all right now, under regulations, you can only very premiums are cost sharing by as much as 20%.

in wellness programs, it gives a little more flexibility, allowing for a variation of up to 30%. i mentioned briefly there is comparative effectiveness research that will be underway very shortly. a new infusion of funding for that purpose in the legislation and there is a new quality measures for performance of health-care providers and services already used in medicare now, but will be increased under the legislation. that is important because while it only apply it to medicare, they are the 800 pound gorilla, the biggest player in the system. some of those practices are likely to be picked up the the private-sector as well and could give us better tools at individuals when we have the

ability to choose between health-care providers and services to make more intelligent and better informed choices in can today. there is some of that but it is certainly not as robust as some of us would have liked. >> if you are going to tip your hat and individual responsibility and engage the individual, the have to get to a system of true individually- purchased policies. for far too long, employees have taken more of a backseat approach to employer-sponsored insurance. what we are seeing now is obviously more money coming out of the pocket of the employee and more concerned about where it is going and how it is being spent. i think the bill tries to address some of the transparency of the system and how people view it and can shop in it more efficiently and at the exchange will set up more of a

relationship, potentially between the consumer and the insurance policy. along with the wellness and prevention aspect of it, the individual getting more from the system than they would expect in the past. i think is an attempt and employees have been in the backseat a little too long. i think the inertia of the individual mandate will drive more interest from a consumer interest as far as what i am getting from my dollar. because there is a penalty attached if you don't have it. that will drive behavior long term in the system. >> what take one more quick question in the back and then we will wrap up with an e-mail question. >> thank you. i represent clarion health systems. how do you think drafters were planning on hsa's?

where they encouraging a more was some of the language in the bill be more discouraging? i think it plays out of with a recent conversation with personal response ability. >> i will let paul elaborate more on that. it collapsed on the ability to utilize more consumer-based products. with the limitations on deductibles, the total out of pocket cost, all of the first dollar coverage now being required -- not that carriers are not going that way anyway, but i just don't think it incentivize is it much. at the end of the day, it's a cost comparison for our employers -- what is less expensive? tonight maintain the coverage and what are my options? if they require these plans to cover x, y, and see, i'm not

sure there will be there long term. i'm not sure you can put anything in these pretexts accounts anything, s -- into anything, so the direction is opposite for me. >> for me, it's more of a mixed picture. there wasn't any language in the legislation that specifically says cannot offer hsa's, or high deductible health coverage. there was a provision that says a few do use and hsa for non- qualified medical expenses, you'll pay a higher penalty for using the funds for something they weren't entitled to it. there is also a change for using them for the reimbursement of over-the-counter drugs, and that is also restricted. those are pretty modest changes, but the bigger picture issue is

as they translate this benefit package into the specifics, are there any regulatory requirements in the translation that will be in conflict with the standards that apply for hsa's, for high deductible health plans. there's nothing that requires that results and we would certainly hope in the translation of the legislation that nothing interferes in the future with being able to offer that type of benefit package. the other important provisions have to keep in mind is what every offer has to deliver at least a 60% value in terms of the coverage. while i am no actuary, the actuaries say most high deductible health plans to date would well exceed that amount,

so presumably if they keep that in mind as they develop the benefit package, as% payout in aggregate that they would be built to comply with that provision as well. >> no panel discussion would be complete without [inaudible] how will the arisa plans be affected by the rules given by the office of management and budget redefining welfare plans? >> the department of labor has sent a rule over to the office of management and budget which has not yet been published. so we don't know what tenet. -- we don't know what's in it.

in the case where the coverages provided by a government entity, a state or local government, to a non-government employee -- if you think about that, that would describe this that they have in the city of san francisco, where they have created a government sponsored plan but it is available to non-government employees within san francisco and would find that as not being an employee welfare plan. that has important implications because of that the case, many other cities or states could do the same thing and it would not be prohibited. you could end up with cities and

states the saying they could do it and would undercut the purpose that congress created the uniform from work available. we think employers' average -- we think employees -- employers have urged me what office of management and budget and that should be withdrawn because the president has just signed a major new piece of health-care legislation, the first order of importance is to interpret that law and make sure it is implemented properly before we add anything that would have any ambiguity with the laws currently in effect that employers have been relying on for over 30 years when they offer coverage to their employees. we think the time for that

proposal has come and gone. instead of issuing that rule, they will do the things to provide guidance and all of the questions being asked today about the legislation the president assigned. >> thank you very much to amanda and paul the venture lots of questions and left us with the attending are many questions we cannot understand now and will be asking for a least a decade. thank you very much. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> we're going to answer those questions in the next 10 minutes. >> my name is randy johnson and

i had the privilege of working on capitol hill when the clinton health care bill went up and, testified in the senate before the health committee and house ways and means committee on the present legislation. in spite of that, i always remain confused as to what the impact of this legislation will be. i think we will short -- will sort through this as this paneling clear, for some time to come. the consultants and lawyers would return this deal. in that case, it's good for one part of the industry in this country. a lot has come out already, 10 pages summaries of what will happen and the time deadlines we have to me. in a year from now, we will seek treaties come out in the 500 page range. so hopefully we did this with that 40-page primer you have an affront to be. we will be issuing a more formal

version in a couple of weeks. to put that together, i made a decision to hire someone i knew for several years that as banking on health care area for some time. he spent many years on capitol hill working in the health care area and is the executive director of the health i.t. coalition. i think you will find that filling in the gap between not enough information and too much information. with that, i will turn it over to him and we look forward to your comments. >> thank you. they gave me be enviable task of going through a 2700 page bill in 10 minutes. so i would like to thank the chamber. i would also like to thank my staff for helping to put this primer together.

it should be in front of you. it's a little less than 40 pages and it's an attempt to break down the issues that are of critical importance to employers and easily understood language. hopefully with some references and source material that you can go back and take a look at. because we focused on very specific questions about of the law, i thought we would take a step back and talk about some broader themes -- take a step down into the weeds and talk about specific examples, and then take a step back to talk about some of the issues coming up this year. hopefully you will not get nauseous in our step back, step forward, and step back. i have had that happen in some presentations recently. it's okay to laugh. it is important to note that the law does largely address some coverage issues and it is not very robust in the cost- reduction area. that was one of the last

questions we had come up. i think that is for several reasons. one of the most important is with these mandated benefit packages on some insurance policies, consumers become less sensitive to cost and the effects of the benefit mandates in this bill act as novocain on price sensitivity to consumers. there was a memo that came out at the end of last week that said more than anything, that utilization of health services is going to drive up costs fairly significantly. it talks about on the order of somewhere around two under $20 billion. the revised memo is somewhere in the area of $300 billion trade that the major factor in the cost equation. constraints apply -- doctors and hospitals available to treat the newly-covered and formally -- formerly uninsured, means that supply and demand are not equaling out and providers will have a better negotiating lever

to negotiate higher reimbursement rates from health plans. one issue that is absolutely critical, because there is a large expansion of medicaid as part of this law, reductions in public plan reimbursement will do a cost shift onto private plans, including employers. there was an estimate released last week that showed about $65 billion would be cost shifted onto private plans which means employers and insurers would be faced with raising rates and consumers would be faced with more expensive health coverage. the combination of those three things is going to mean that employers are going to be looking at more robust packages, but more expensive packages. so the desire to get costs under control here is critically important. the second point i would make is we are moving away from a more

flexible, nimble environment for employers to provide employee benefits to a much more structured and punitive environment. you have heard a lot of those issues here -- employers are going to be on the hook for about $52 billion in penalties for not offering affordable health care coverage. that is a very real cost to employers in this country. in addition, 7.3 million individuals will end up paying a penalty for not getting individual coverage as required by law. that's a very real burden by families and individuals. one of the issues that was talked about a little bit -- the excise tax -- excise tax on high-cost insurance plans -- these are known as the cadillac policies, very robust packages of benefits. about 26.7 million people will

be subject to that high-cost 40% excise tax -- excise tax beginning in 2018. with the joint economic committee has estimated is your average family plan premium would be subject to the high cost excise tax -- high-cost excise tax by 2017, subject to the supposedly high cost excise tax. the last one i would make on a broad level as this bill relies on interesting financing mechanisms. it is not all about health care. i know this shocks a lot of view, but half of the revenues, the $430 billion in revenues, is made up by $210 billion in taxes in the form of new medicare increased payroll tax and a new 3.8% investment tax. that's a tax on labor and o