Transcripts For CSPAN2 Key Capitol Hill Hearings 20140425

As for the institutional analysts that follow our business, i really kind of conflicted about the impact of this law in the Health Care System. For example, my friend gary taylor at citigroup believes the trend for will be earnings for the publicly traded care system, hospital systems, the physician group, et cetera because of a large number of folks that are present we not going to be able to afford their care. And in the cases of some of these institutions, like tenet healthcare, for example, 30 million a year income gain as a result of the Affordable Care act, im not so sure. I think the combination of the deductible since, the fact that there is a very significant break for that, 12 to 15 Million People that will have exchange coverage, the fact theyre going to be facing anywhere from 2500 5000 or perhaps even more in front and cost before they get a dimes worth of benefit i think is going to dampen demand. Its a very small number that spend enough to get to the point where theyre actually into the benefit itself. So, you know, i guess im, you know, i guess im a little bit less bullish than some of my Investment Analyst friends. I think right now, certainly if 2014, the Affordable Care act has been cash flow negative for the hospital industry because they gave up updates, they then took a huge hit from the sequester. I think it will probably be 2016 or maybe 2017 before we reach that kind of crossover where the additional demand created by the Affordable Care act actually generates revenues to compensate for the front end payment that they made to cover the cost of this act which began in 2011. With the physicians its a harder thing to say. Again, i think the thing that we really havent been able to get our hands on is the breadth of the networks that are covered by the Exchange Plans, how many physicians are actually covered. Its just still pretty much a history. Those networks were thrown together in this great haste, in many cases physicians are alleged to be covered by the plans that arent actually covered. Theres no contractual relations. So i think theres going to be a very interesting period of shaking out when people actually begin using the benefits and theyre actually, whether theyre actually able to get access to Physician Practices or not, i think, is going to be another question. There is no question in my mind that the industrys bad debts for the big bills are going to go down as a result of this act. That is a good thing. But if you talk to hospital and medical Group Finance people, what they will tell you is that the majority of their bad debt growth during the last five years hasnt been from people without Health Insurance. Its been from people with Health Insurance that dont pay the patient portion of the bill. That number is probably going to continue to increase. So, you know, when you think about the three groups of people that we talked about earlier, the uninsured, the 48 million uninsured, the 3540 million that have insurance but dont have any cash and then the 5 3w million on medicaid, in macro terms what this law really does is move maybe 25 Million People from the first group into one or the other of the second or third groups. So i have trouble believing that this act is going to generate the increase in demand for services that most people have been expecting. Now, of course, we saw in massachusetts there were a lot of people flooding into emergency rooms. Theres been a good deal of emphasis on the fact that newlycovered medicaid folks see a significant spike in emergency room demand. But if you work in a hospital, the biggest battlefield right now is over the decision to admit the patient from the emergency room to the hospital where there has been very significant regulatory complication in the last two to three years and the creation of this kind of limbo called observation status. Its sort of like purgatory, you know . You kind of move into et. No one really wants to take care of you. It isnt really acute care. But both private insurers and the Medicare Program have been increasingly stringent about whether or not to define a persons illness as sufficiently acute that it is, it justifies admission to the hospital as a medically necessary event. I think were going to see that in 70 of the medicare population now comes into the emergency room rather than being admitted by a private physician or as a result of his actions. So its far from clear how much volume or demand growth were going to see as a result of in this law. Thank you, jeff. We will now go to tracy watts. Thank you. Thank you. Thank you. So i appreciate being here. I always enjoy being invited to share our survey data in these settings. Im from mercer, my names tracy watts, and i lead our efforts around Health Care Reform, and i partner very closely with our Research Department from time to time to gather information on either what employers are doing, have already done or are thinking about doing. And so what im going to do today is share with you some of our survey data that we collected the end of january into february of this year. And the timing was so that we could find out what happened in open enrollment. We, this is the seventh survey that weve done specifically focused on Health Care Reform. Youre probably the most familiar with our large survey that we do of about 3,000 employers across the u. S. Every year on just General Health care benefit practices, but this is a special survey on Health Care Reform. And we had 723 employers participate, as you can see on the screen, a nice crosssection by size. Survey was open only a couple of weeks, so thats why the number was not quite as large as the 3,000 that participate in our large survey. And so the big issue for employers going into 2014 was what impact the individual mandate would have on their enrollment. Currently, employers have about a 15 optout rate. So they offer benefits to their employees, but some people decline coverage either because they have coverage elsewhere, maybe some go without. We think most of them have coverage elsewhere. And so we wanted to see what the impact was of the individual mandate. It was a big question mark for employers in terms of how to budget for what percentage of that 15 who currently had been opting out might come back into the program in 2014. And as you can imagine, the more people that come back in, the bigger impact that has on their overall budget for Health Care Benefits. And what we found in our survey was that the enrollment was the impact on enrollment was practically zero. We asked a lot of questions around the eligible data barely increased in 2014 and not a huge increase projected for 2015. Now, one of the questions around that is, well, maybe they were already offering benefits to everybody that they needed to to begin with. And so the next thing that we asked about were the three really big provisions of shared responsibility to employers. We asked, you know, how many of you are providing coverage to everybody that works 30 hours or more today. And so as you can see from the first graphic, 58 already extend eligibility under that criteria. 10 went ahead and expanded their eligibility in 2014 to get to that point, and then youll see weve got another 21, 31 that will do that going forward. So thats probably the most challenging aspect of the law for a Smaller Group of employers. But, again, the biggest challenge. When you get into the minimum value plan and the affordable contributions, you can see from the survey data over 80 of employers who offer benefits easily meet those criteria. It was not a problem. In the affordable contribution category, those who did not currently have a plan with an affordable plan for individual coverage, many of them added a lower option plan so that they could, you know, easily meet that affordable contribution requirement. So that was one of our Big Questions going into 2014, you know . Whats the situation, and how were employers dealing with that. We do have just a little bit of Industry Data an whos the most affected by the 30hour workweek. One of the things i think is kind of interesting is that everybody just assumes that its retail and hospitality, and ill tell you from the cases that i deal with its a huge issue across other sectors as well. In higher ed we have the issue with adjunct professors and students, graduate students who work there at the university, we have issues with perty yes, maam nurses that work in per diem nurses. Nonetheless, sharing with you the data by industry on those most affected. Another thing that i just thought would be interesting to this group when i looked at the agenda and the other speakers today would be what employers perceive happened with the enrollment of those not currently ebb rolled in their plans enrolled in their plans. We asked whether or not they believe some portion of their employees had either enrolled in the Public Exchange or gone to medicaid. And as you can see, 25 thought that they had employees that had formally because offed coverage waiverred coverage, that actually came into their plan as a result of the individual mandate. 9 said that they think that some of their employees actually went to medicaid or the Public Exchange. Now, this is i wouldnt say that this is Scientific Data because this is their perception. We dont have, you know, solid data on that. But given the fact that they provide access to care to most of their employees, we thought that, you know, this would be interesting. We asked questions about the average value of the plans because we wanted to know, you know, now that the 60 plan is sort of the new benchmark for employers, in fact, i would say that prior to this law being passed most employers did not know the actuarial value of their medical plans. Thats only a recent phenomenon as a result of the Affordable Care act. So we wanted to just gather some information on, okay, what is the average value of your medical plan. So as you can see on the illustration, when only one plan is offered, its reported that the average value is 79 . When two or more plans are offered, the average value of the lowest cost plan is around 77 , the average value of the highest cost plan is around 83 . So a couple of ahas here. First of all, the average value when only one plan is provided, i would suspect if we had Historical Data on this, thats been a slight decline every year because we have seen deductibles and outofpocket maximums increase each year even before the Affordable Care act was passed. But the aha to me was how tight the difference is between the average value of the lowest cost plan and the highest cost plan, because i thought that the lower cost value would be lower than 77 . I think that thats yet to come. And so the other thing that we looked at was how many for that lowest cost plan have a plan thats really close to that 60 plan value. And only 11 of the 700 that participated in this survey said that they have a plan with a plan value thats less than 65 . So thats pretty low. I mean, nobodys really working the low end of the range for plan value. I think that well see some movement there, but this is a good benchmark, this is kind of startingout point, be you will. Ever since the law was passed, weve been asking employers about their greatest areas of concern, and from the first survey that we did back in 2010, the excise tax in 2018 was the number one issue for employers. And it actually has continued to be the number one issue for employers until this survey in january where the increased Administrative Burden outpaced the excise tax on the high cost plans. And i think that were just at a point where its, you know, figuring out and filing and paying the fee, and now we have the temporary reinsurance fee, and plus we have the communication requirements on top of that, the summaries of coverage and now the Exchange Notices that we had to do in the fall around open enrollment times. So, and, you know, now were getting into, you know, how are we going to measure our hourly employees for the 30hour requirement and reporting and disclosure requirements. And so i think that we finally got employers to the point where theyre saying, enough. And so as a result, increased Administrative Burden is at the top of the list. The other things, higher enrollment in plans or higher costs, i mean, those were things that we have seen since the beginning and continue to be an issue for employers. I want to just spend a couple of minutes on the excise tax because, as i mentioned, it has been the number one issue from employers since the very beginning. An interesting finding from a survey that we did last summer, we had about 900 employers that participate inside that survey. A third of them told us, you know, last summer that they were already making changes to their benefit plans for 2014 in anticipation of the excise tax in 2018. So they know. Theyve done the projections, they know, and theyre planning for it. And the thing thats interesting to me, we had the pleasure yesterday of meeting with economists and lawyers at both labor and treasury to share survey data and have a discussion around the data, and everybody seems to think that not that Many Employers are going to hit the excise tax and even seemed to be a bit of a theme in the prior panel. When we take our survey data and we project it out to 2018, about half of the employers that participate in our 3,000employer survey have a plan. Their highest cost plan is going to hit the threshold in 2018. Now, i will say it assumes that they dont make any changes to the current plan, and that is not a true assumption. We know that they will make changes. It assumes a trend around 6 . That might be a little high for some, but for some its not too high. And so, you know, i think that this is a real issue, and employers are taking action, and, you know, the very first thing that they did was to decouple tear dental plan from their their dental plan from their medical plan if they had those packaged together. The next thing thats been the most popular strategy has been to resurrect a consumerbased plan. From our survey we know that they cost on average about 20 less than a ppo plan. And so even if you only get a portion of your population to enroll in that plan, youre bringing costs down. So consumerdirected plans have been a very significant parking lot of that strategy. Part of that strategy. The thing i think that is interesting when you look at this graphic is that the new focus in terms of greater employer attention is adding or improving wellness programs. And as i listened to your remarks about the decline in demand, you know, all that kept going through my head was maybe were getting healthier, you know . And were trying to. I dont think that the data suggests that were getting healthier, unfortunately, but there is a very strong employer commitment to wellness and to helping improve the Overall Health of their population. I would even go back to in 2008 when we, you know, really saw a huge recession and Financial Impact on what employers were able to do with their benefit plans, and there was still a very strong commitment to wellness programs. And so just to put that out there as something that is very much core to the framework of employersponsored Coverage Today. The last thing i want to comment on on this slide is the use of private Health Exchanges. And im not going to spend a lot of time talking about this, but youll see that 2 of those who participated in our survey said that they were offering coverage through a private Health Exchange in order to help bring their costs down in anticipation of the excise tax. We, mercer, launched a private Health Care Exchange in january. We had 35 employers that signed up for it, and they ranged in size from, you know, a couple of hundred employees to 30,000 employees. One of the things i want to share with you just in terms of the ability of the private exchange to do that, you know, everybody always assumes that for a private exchange that its a defined contribution model. So its the employer saying, heres, you know, a bucket of money, 5,000. Heres the exchange, you know, go spend the money on your health care, kind of peace be with you. And, you know, when you think about it that way, youre, you know, you automatically kind of get to the conclusion that they probably cant buy as much on the private exchange as what they were previously getting. And we did a bunch of things with the design of ours to try to prevent that from happening. One of the things that needs to happen and that makes this work successfully is giving people a easytounderstand Decision Support tool so that they make a smart decision about the plan that they buy. Most people who have employersponsored Coverage Today are overinsured, and they buy the richest plan, the most expensive plan because theyre scared that somethings going to happen to their health, and they want to be sure that they have access to the very pest health care. So we the very best health care. We rely heavily on a Decision Support tool. I want to share a couple of facts. For these 30 employers, we did a summary of the enrollment results. What did people have prior to going into the private exchange, and what did they sign up for. And i will tell you, you know, when you log on to our exchange platform, you are immediately asked five questions to answer, and theyre very basic questions about your economic value and your Health Situation so that it can help guide you as you go through the enrollment process. So the average value of plans that people were involved in prior to enrolling was 80 . Once they went through the enrollment process, the average value of the plan that they enrolled in was 71. 9 . And the difference in, you know, the Financial Impact of that was an 800peremployee savings as a result of rightsizing the benefits to better address what that persons need was for purchasing health care. And so i just put that out there as an example. Im sure that well see a lot more data on how these are working, but i think that initially, you know, thats a really good story to tell and to think about. I want to, the last thing i want to talk about are the wellness incentives. So a really nice the thing for employers that happened through the aca provisions was the expansion of wellness incentives from 20 to 30 . And so we asked questions in the january survey in terms of whether or not employers had expanded the use of incentives for their wellness programs. And ill also add, as you know, in addition to the expansion from the 20 to 30 , it could be up to 50 for incentives around nontobacco use. And so we wanted to know was anybody used the full 50 , you know, for nontobacco use, and only 2 said that they were. But youll see from the data on here that there was a increase in the incentive around tobacco use, 8 percent for all respondents, 14 percent in those that were larger employers. And really strong interest in increasing rewards and penalties around wellness. Youll see, you know, over a third for both all of responsibilities and the larger employers respondents and the largest employers to be able to take advantage of that. And back to the point that its such a core part of their programs. I want to just wrap up with data from a totally different survey. Our Administration Business does a survey called whats working. Its a workplace survey. And they survey actual employs. And employees. And i will start off by saying that the employees that get surveyed do have access to benefit, a medical plan and a 401 k plan. So its not representative of every person that is employed in the u. S. But we ask a question about whether or not getting Health Benefits through work is just as important as getting a salary. And what im sharing with you on this slide is the percent of employees who agree or strongly or somewhat agree with that statement, that getting benefits through work is just as important to me as getting a salary. And what i think is interesting about these data is that we saw an increase from 90 saying that in 2012 to 93 saying that in 2013. And this is at a time when employers are making pretty dramatic changes to their Health Care Benefits, big movements to consumerdirected health plans, big increases in deductibles, you know, incentives to do things in order to even be able to enroll in your Health Care Benefit plans or tie today what your contributions are tied to what your contributions are. So i think it just underscores how important Health Care Benefits are in the employment equation that employers have with their employees and that it will continue to drive keen Employee Interest in being able to provide benefits for their employees. Okay, thank you very much. Lets now take a look at the stage with alan. Alan . Got to turn it on. Its on the side. There we go. Okay. Im going to offer some perspective on where the states are in implementing the Affordable Care act and mostly do it through a series of maps that will be hard to read but are designed primarily to give you an impression, and then we can go deeper if you want. And cover sort of three topics in trying to capture the state of implementation at the state level. Beginning with the story that is almost certainly the most familiar and definitely the most reported which has to do with the coverage elements of the law, this is a map my organization prepared, but youve seen others about the state choices around building the Health Insurance exchange, half the states deferring entirely to the federal government, the other half, many building their own, some doing so this partnership with the federal government, some brokering a little deal. But the division of the country between those states that have taken in this on and those that have not is well reported. And this is a map, the this one comes from the Advisory Board company, they update regularly about Medicaid Expansion not required due to the Supreme Courts decision, and again, we see half the states now are weve just passed the halfway mark in states that have decided to go ahead with the expansion in the haw and the other half law and the other half choosing not to do so. In the shorthand, i often hear people talk about states that embrace the law and states that dont, and i think at this point in implementation it might be a little more accurate when it comes to the coverage provisions to think of four categories of states rather than two. So ill begin with the happy embracers. Tease are the states that said they want these are the states that said they want to do the covering positionses, and theyre basically happy with having made that decision and view that things are going well. But we do have a second category that was not anticipated a few months ago which is what ill call the uncomfortable embracers, these are the states that said they want to do it and found particularly when it comes to the Insurance Exchange that this was a little more complicated than they thought, and they are now looking at the mistakes they made and trying to figure out what their path forward is. I should point out, though, that despite the lack of comfort, in none of those states do i see a wholesale interest in stepping away from the coverage elements of the law. Its more trying to understand how to deal with the operational challenges. A third category of states is what i would call the happy rejecters, these are the states that had no interest in the Medicaid Expansion or building an Insurance Exchange, and thats fairly settled policy within the state. Theres relatively little controversy in some states about that set of choices. But we do also have a fourth category which i would call the up comfortable rejecters which is uncomfortable rejecters which is states that due to a variety of circumstances over the past couple of years made certain decisions but are not sure that thats the longterm path they want to be on, particularly you could show an evolving slide of the Medicaid Expansion be choice, and each month we get another state or two that is in the no column starting to have a discussion about what might it take to get into the yes column, what negotiations do they want to have with the federal government about terms that would make a Medicaid Expansion more appealing to them. In many instances you have disagreement between the governor and the legislative leadership about whether or not to move forward. And so in some states the discussion is quite quiet, but there is a category of states that have not done the expansion elements, but i would not consider that to be settled. So this is sort of the standard whats happening at the state level exchanges medicaid, and i dont actually think theres a lot more to say, and youve probably heard it before. What i want to do is spend more time in the second and third elements and show you some maps that are you are less that you are less likely to have seen although if youve bounced around our web site, you have. But im not going to assume that everyone in the room has done so. So lets start with sort of the garden variety state efforts to build a patientcentered medical homes. This is a map we keep, and all the states in the two shades of yellow orange are doing something around the financing models, some that are more mature than others, to encourage primary care practices, to expand their purview to improve their infrastructure so that they are able to meet the tenants of the patientcentered medical home. This is activity that a began about a decade ago and has accelerated and spread throughout the country. In the Affordable Care act, there are many, but this focuses on two initiatives designed to build out the primary care infrastructure beyond the patientcentered medical home which is one model, but this reflects states, and one of these initiatives has localities. But between the comprehensive primary Care Initiative and the multicare primary care practice program, these are two federal initiatives designed to move beyond the core patientcentered medical home, the building out primary Care Capacity to meet more patient needs and to integrate a with a larger swath of the Health Care System. I move into section 123 of a the Affordable Care act, this is a section that gave states enhanced federal funding to work with people with chronic conditions, and many of the states led with efforts to work with people with Chronic Mental Health Conditions to, again, build out our capacity in the Health Care System, in the Health Care Sector to meet the needs in a more comprehensive way of people with Chronic Health care needs, and the states in the various shades of blue are at various stages in seeking and obtaining funding for that kind of transformation. And, of course, a lot of discussion about medicares use of Accountable Care models. We keep a map p of states a map of states that are working on their own versions of Accountable Care os. So taking organizations. So taking the medicare design and trying to figure out how might it apply to a medicaid population can which in many instances is very different. How would you think about the funding flows within those models for a different population. And we see a large number of states trying to figure out, and particularly based on providers saying were reengineering to meet the medicare Design Elements of an aco if. If were going to do that, wed like to see payment model that is match it by other payers, and so theyre trying the trying to figure out these kinds of questions. And although somewhat separate from many of these other programs, i do think its important to remind everyone if youre interested in where states are focused that where the Affordable Care acts also created a whole new set of models for coordinate nights between, for people who are both on tulle eligibles, these are the highest cost enrollees in both programs. We have a long history of poor integration between these two Large National programs when it comes to people who are served by both, and again, states around the country are figuring out how to realign financing and delivery models for this very complex population. Now, i did not intend and i know i didnt succeed in explaining all of these initiatives, but what i want to try to do is capture why i think its important to look at these maps and not just the first two that are the ones that are usually brought up in a discussion about whats going on at the state level. And there are a few things i want to say about this constellation of initiatives. The first and from my perspective the most important given the work i do with states on Health Policy is that there is a tendency in washington to think of the Affordable Care act as sort of the beginning of Health Policy or the only thing thats happened in Health Policy in a really long time. And at state level the aca really enters a historical stream of transition, and interest in the evolving Delivery System and evolving delivery models, evolving models of accountability, evolving models of payment. And the view i hear from state officials around the country is that the aca offered them a whole bunch of tools, some of them they like, some of them they dont like, some of them in some states they like metropolitan in other states. More than in other states. Some are shaped like a hammer when they need a claw. But it is still a tool box, and they are state by state trying to figure out how these tools fit into a stream of Health Policy evolution that long predates the aca and will continue after mark is successful in getting the aca treated as just a pure accuratic morass and nobodys bureaucratic morass and nobodys paying attention to it anymore. The second reason for, the second reason for showing you all of these maps is to note that the Party Divisions that are so apparent on the coverage provisions are largely absent or at least significantly less apparent when it comes to these Delivery System models. That the polarization around the aca is felt in all areas but is a lot easier to overcome when youre talking about trying to make the Health Care System more efficient. When youre the payers, the businesses in your state are saying we cant afford the Health Care System we have, we need to be a part of reengineering it to one that delivers us better results and is more affordable and Higher Quality and these are tools we want to use to do so, thats a very different conversation than whether you are doing obamacare or you love or hate the law. And so the Party Divisions are much, are much less apparent in these Delivery Systemoriented programs than they are in the coverage. And the final thing that, the final observation i want to make is that most of these are actually a whole lot harder than coverage because with they involve pause they involve the complexities of care, organization, delivery and finance which, belief it or not to, is a whole lot tougher than figuring out whether or not someone should get a card and getting it to them at the right place, at the right time although weve learned that can sometimes be hard as well. But this is a multiyear, more like multidecade endeavor. These are tools and pieces. But they are what you have to understand is the sector you have to work with and the interests you have to work with are actually far more complex and, therefore, federal support for these initiatives and state efforts to do these kinds of things has a very different timeline and trajectory than the timeline of bringing up an exchange or bringing up a Medicaid Expansion. So these are slides and maps that most of america hasnt seen, and most of the policy debate around the law tends to forget even exists. But again, they demonstrate, i think, that state Health Policy has been active long before the aca, that these kinds of activities dont necessarily divide along the same partisan dimensions as much as the law and that they offer a level of they require work at a level of complexity that many people dont want to take on. And, frankly, for reporters its very hard to describe this stuff which is part of why people dont know about it. Which leads me to the final segment which is to make sure in any discussion right now about where states are that people are aware of initiative of the centers for medicare and Medicaid Innovation called the state innovation models program which is the federal governments largest investment that i can think of ever in state efforts to improve the organization delivery of care with the goal of achieving the triple aim. And these awards and, again, i wont go into huge detail, but these awards were made a little bit more than a year ago. States were divided into different categories, but basically, we have a small number of states that were far enough along in their thinking about where they wanted to go that they were given funds to implement. A larger group of states that were given funds to design the models they want to use. And for a couple of months now, we have heard that any week now the federal government will announce a second round of this competition, but were still waiting for it. So what is, why is it so important that i, that i make sure youre aware of the, of this program . Because of the attributes of what states are trying to do under it. Because it has, in my mind, become much more of a catalyst for state thinking about Health Care Reform than i would have imagined when it was first released. So one element of these models, of the approaches states are taking and the states take very different approaches but one element is multipayer payment reform. So we hear all the time about how the payment models are broken, and fee for service encourages fragmentation ask overuse, but its very hard to get those who actually deliver care to change how they think about care delivery if different payers are paying them for different things. And so medicare criticized when it doesnt change from its current model, but is also criticized when it changes from its current model because those who are delivering care have difficulty understanding how to respond to these variable signals. And a key feature of the state models is to bring million billion pay multiple payers together; medicaid, private pairs, but also the ability to bring in medicare to think differently about payment. The second attribute of these models that is such a critical component of them is efforts to integrate across systems that have built up as silos. So theres a tremendous amount of work right now going on trying to figure out how to integrate Mental Health into the Delivery System thats focused so much around physical health when we know that the interactions between these are profound and that poor Mental Health and poor management of Mental Health conditions is a huge drive of physical health care costs. So theres a lot of work going on at the state level to do this, around oral health, even efforts to integrate in the social services systems. Theres just a tremendous amount of discussion about bringing systems together that is not, to my knowledge, occurring anywhere else. And i think one of the particularly interesting elements of many of these models is their interest in building a Community Infrastructure to support the health of communities without regard to the Insurance Coverage that the people in those communities might have. And so while we have a lot of plans and in many instances providers trying to build infrastructure to reduce unnecessary readmissions or help people with their chronic conditions not have those conditions deteriorate, those when you build that infrastructure inside a health plan whenever someone changes coverage, they lose that support. And increasingly, states are realizing that if they want to achieve longitudinal improvement in population outcomes, they need to take some of that infrastructure and put it in the community where people actually live so that theyre able to access it even as other parts of their lives go through transitions. These are just a few examples of the kinds of things states are trying to do under these models. So let me just close with, as bob said, the admonition that we look forward, and i want to close by circling back to the first two slides, although i wont show them to you again. Which is i think the most interesting dynamic that im observing in the evolution of state implementation of the Affordable Care act is that were now starting to see this part of the curve, the Delivery System reform efforts, feeding back in to this decision about the coverage elements, meaning medicaid and the exchange. And that, basically, as states are getting more mature in their thinking about what it takes for multiple payers to come together and demand a more, a higher functioning, more efficient Delivery System, some of the important tools that you want to use in sending that signal to the Health Care System are your medicaid contracting rules and your Exchange Plan certification rules. And if you dont do a Medicaid Expansion and if you leave the exchange to the federal government, youve left those tools on the table. And so the less idealogically fraught elements of the law that have to do with improving delivery theyre very complicated, but theyre not as ideological i believe are beginning to drive reexamination of the coverage elements in those states that are starting to see these tools as critical for delivering better value for their citizens which is something that is embraced by political leaders of both parties. And so i think over the next few years what were going the start to see is that if there is a sense that these models are successful in improving Health Care Systems, it is a going to lead to a revisiting of some of the state coverage decisions as they realize that in order to achieve these outcomes, they have to have these tools at their disposal. Okay. Thank you very much. Weve got a few minutes. Id like to, i promised to give you a cannes to wrap up and so on a chance to wrap up and so on, but i want to go to the audience and see if weve got some questions. I know you, mayorty, asked morty, asked one. So i want to go to doug. Quick question for tracy. One strategy that ive heard about that employers might consider is offering what are called bare bones policies since phobe knows what minimum essential coverage is, so they avoid the 2,000 penalty, but maybe almost worthless, but its there. But not worry about but pay the 3,000 penalty. Are you seeing employers thinking about that . We are aware of some employers who have very large variable hour work forces that have implemented something less than a 60 plan. They go under several tame names. I think the one thats most commonly used is a skinny medical plan which tends to be 100 coverage for Preventive Care packaged with the hospital indemnity type coverage that was spoken about earlier that kind of replaces the mini med plan. They are relatively inexpensive, and for somebody that previously had a limited medical plan, attractive. It, you know, it insulates them from being subject to the tax for the individual mandate, so it is actually a bonus to the employee if thats something that they want to protect against. And it does meet, you know, the offer of coverage requirement to avoid the initial, the 2,000 penalty. There are also employers that are considering those in addition to a plan that woulda 60 plan that would be a 60 percent plan and have contributions as a way to offer a more affordable option for somebody that doesnt think that they can afford that minimum 60 percent plan. If youre using the safe harbor for the affordable contribution so its somewhere around 90 a month, for some people, you know, the idea of paying 90 a month for a 60 plan that has, you know, a 3,000 deductible doesnt really seem like a good economic decision for them. But paying less than that for something where you get Preventive Care and if you have to be hospitalized, at least you get that daily payment or, you know, however its designed, you know, maybe is a better financial decision for them. So, yes, we are seeing them. Any idea of the percentage . Yeah, actually, i do know that. [laughter] so we asked a question in our survey about offering finish we just said offering a plan thats less than 60 minimum value. And so we asked whos doing it and who is considering doing it. And i want to say i thought i had that piece of paper that, here we go, 8 are currently offering a plan that has a value of less than 60. And another 15 said that they are considering doing that. When we offer up a spectrum of strategies for employers to consider, we have sort of a third category that we call alternative strategies. And they are ideas around offering even like a ppo plan thats hess than 60 less than 60 plan, perhaps a skinny medical plan or how do you leverage the accepted benefits. Im sorry, the last question was tim jost from the first panel, so, yes. Please. Would you wait for the mic and please identify yourself . Im barbara dello, im a nurse, im a caretaker and parent. And i come here because i find the process that states are employing by and large to do that kind of work is far more participatory and collaborative in part because its not as challenged by the partisan divides that make it almost impossible to have a conversation about many of the other elements of the law. And, in fact, states and i dont want to romanticize state government, but i do work with people in it its pretty hard to move these agendas without consensus, and its often quite difficult to achieve consensus unless you have brought a very large number of people to the Table Including patients and caregivers who are not quiet about their concerns and hopes for where the Health Care System is going. And so i view these kinds of discussions that are occurring state and locally about reallocating and redesigning the care Delivery System to better meet the needs of patients and to be more affordable to those of us who are paying for it as an opportunity for that engagement. And as i say, i think those engagements are far more genuine than much of the discussion that occurs about the parts that are more politically polarized. You know, i talk to direct caregivers all the time, physicians, nurses, nurse practitioners, people out in the field, and the thing the overwhelming message that im getting from them is were absolutely inundate aing them if paperwork. And this may be the only industry this the history of american industry thats actually seen a decline in productivity as its automated. What i hear people saying when i ask a nurse what percentage of your time is actually spent with patients, its rarely more than a third. And when you ask, well, what are you doing the rest of the time . Well, theyre typing. Theyre checking boxes, theyre, you know, coping with a flood of, you know, documentation that is in the most minimal way connected to to actually improving the welfare of the patient. So i think thats one element of this that we really need to attend to. We need to begin reducing that paperwork burden and asking serious questions about how important is it to divert a nurse or a physicians time to answering these questions . I disagree with the people on the first panel. I think theres going to be a very significant shortage of frontline caregivers, and a lot of it weve done to ourselves. Yeah. I just want to comment from an employer perspective. First of all, Many Employers have their data, their medical claims and utilization data in a Data Warehouse where theyre actually able to segment out their population to know whos at risk, whos in the middle and those who are actually healthy. And a lot of effort goes into trying to improve those ratios so they have more people at the healthy end of their spectrum. Everything that goes on within their Health Care Benefits program is aimed at being sure that people who need the care get the right care in the right place at the right time. And those who have health challenges, in particular chronic conditions, are getting tools, resources, health coaches, everything that they knead to help them need to help them manage their condition. Secondly, ill say that weve had an effort underway with several of the Major Insurance Companies where weve actually built new Care Management models within the Insurance Company that our clients take advantage of, its called Mercer Health advantage where we have a higher ratio of clinicians to patients. And we have already demonstrated much Better Outcomes as a result of those efforts through that its called Mercer Health advantage, that Care Management program. So i think that employers are very much dedicated to centers of excellence, to programs that drive health and wellness, to a lot of medical home pilot projects so that somebody has one place that they go for all of their care. And if they wake up in the middle of the night and somethings going on and they think they need the go to the emergency room, they call their medical home and say im having these symptoms, what should i do, and the person says go to the emergency room, ill meet you there with their medical records, or theyll say, you know what . Do this first and call me back if that doesnt help. And so i think employers have invested a lot in providing better care to their employees. Okay. Were almost out of time but, john, a quick question, please. [inaudible] john graham with the National Center for policy analysis, and im going risk looking very foolish by misunderstanding the private exchanges. So point of clarification, do i understand that were moving out of the arace saw benefit and looking at a choice of stateregulated policies . Have i misunderstood that . Well, in most of the marketplaces which is our private exchange we have a mix of insured and selfinsured product, and of the 30 some odd employers that signed up on january 1, all of those that were previously insured in their Group Programs remained insured, and those that were previously insured if their Group Programs stayed selfinsured, so we have the flexibility to administer with both insured and selfinsured plans. Okay. Ive been told that we must end this, and so that means i cant ask all the questions i wanted to ask. So i want to thank our panelists and all of you for participating, and were going to have lunch. [applause] yeah. Joe says were invited to lunch which should be right out here [inaudible] 12 15 well start the lunch. [inaudible conversations] [inaudible conversations] [inaudible conversations] we will continue with our coverage from the American Enterprise institute and their discussion on implementing the Health Care Law. The keynote speaker, the lunch speaker coming up in about 20 minutes at 12 15 eastern or so. Well have that live for you. In the meantime, were going to show you some of the earlier comments. The first panel this morning talked about the changing policies of the Affordable Care act, and well show you as much as we can until we wait for the lunch speaker. [inaudible conversations] [inaudible conversations] good morning. Good morning. Good morning. Its great to welcome all of you here to the American Enterprise institute. We are going to be talking about the Patient Protection and Affordable Care act. Thats too many syllables, i wont say it again. I might refer to it as the aca, the Affordable Care act. Other people might call it obamacare. Whatever you call it, thats what it is. The, this is a particularly auspicious moment for at least a couple of reasons. One is that, apparently, we have the latest statistics on how many people signed up. Of course, theres always a debate abo wut what those numbes mean, but, you know, the Administration Says eight Million People, so they feel that theyve reached an important milestone. And the other auspicious aspect of this is that congress is not in session. So we didnt have much competition. Let me introduce the first panel, and well get rolling here. The first speaker is jim capretta. Jim is with the American Enterprise institute and the ethics and Public Policy center. Hes spent a good, long time on the hill and at the office of management and budget and will have some positive things to say about reform. Not necessarily the current one. Tim jost is the Robert Willett family professor of law at washington university, and tim actually is well known for writing virtually on a daily basis blogs in the Health Affairs web site explaining the incredible details of the latest incomprehensible regulations that hhs puts out. Ideally, we wont get that deep into it today, but who knows . And then mark pauly is the a professor at the Wharton School at the university of pennsylvania. Mark is well known to aei audiences and has written many papers for us, and were looking forward to what he has to say. With that, lets start with jim. Well, good morning. This is a great time to sort of take a snapshot at whats going on with the Health Care Law. I think i would agree, though, with some of the commentators identify read recently, some of whom are very strong supporters of the law that its going to take much longer than the three months weve been into this to really understand full implications of this. Its probably going to be a two or threeyear process before you can really figure out whether its changed the insurance landscape in a way thats positive or negative and the cost structure of the country in a positive or negative way. Or is it a story of survival . I do think it is much more a story of survival than it is a Success Story so far. So the thought process is lets look back, think about if you were talking about the prospects of Health Care Law a year ago and someone described to you a series of events that kind of goes as follows, that the Obama Administration over the course of a one year period would unilaterally delay the employer mandate not once but twice, would take unilateral action to announce the nonenforcement of insurance rules on several million individually issued insurance policies, not once but twice, and now there will be quote subject to enforcement of the law for a threeyear period, whatever that means. Issued a series of extensions to the individual mandate that are so vague and, you know, without meaning that it would appear to just about anything to be exempt. That was coincidental with a two month period where a multibilliondollar project to build a photo website and state exchanges essentially collapsed for 60 days, and then later became partially functional through a series of workarounds initiated by people who are not under federal contract but just kind of got flown in to help resuscitate the project, the back and still doesnt work and cant be used to they subsidy payments to the insurance plans, after a taxpayer investment of as i said probably in the range of about 2 billion. Three state exchanges are so dysfunctional that theyre on the verge of being, having the plug pulled on them after an investment of federal dollars of upwards of several hundred million dollars, 300 million i believe alone in oregon. A little more than 2 of u. S. Population has enrolled into insurance through these exchanges a program that would be smaller than schip, and about maybe a third of them are on the target population of people who are supposedly so bad off that they were previously uninsured because of previous arrangemen arrangements. The Congressional Budget Office issued new estimates of the labor market effect for the law, indicating that in a 10 year period of time, frankly within a few years, two and a half million americans were dropped out of the workforce because of the incentive structure of the law, and thus shrink the size of the working population by, you know, a noticeable percentage. Health spending commensurate with the launch of the law would return to a pattern that looks like it was previous to the 2009 excuse me, late 2007 through mid2009. The latest estimates are that Health Spending grow in the Fourth Quarter of 2013 at a rate of about 5. 6 , 5. 3 . And in the period of february 2014 relative to the prior year of about 6. 7 . This is the rate of growth the fastest in many years, and theres lots of evidence now coming forward that were in a period of pretty rapid Health Spending escalation here then maybe they can do really is just the ongoing evidence of what this means from a public perspective, just some of the more recent polling data would indicate that the one measure of this, this could be asked and whole bunch of different ways for you will see all different kind of polling data, but one i think most indicative, really whats going on on the ground is if you are asking americans, do you have come hold a very favorable or very unfavorable view of the law, the very unfavorable and a very recent poll was 38 , in the very favorable was 21 . Those are the people that are most likely to act on their point of view ultimately one way or the other. So if one were to describe the Health Care Law with these kinds of, if you would have looked ahead a year ago and said that this was how the first year was going to look for the law, would this be viewed as a smashing success and everything was going great, or would you view it as, well, its often a bit of a rough start but maybe it survived so far. And i think the administration has done a very good job of essentially lowering the bar of success, jumping over it and then celebrating with an exaggerated threeweek long dance your there is a lot more could be done here to see whether this is working or not, and as i said at the beginning its going to take a couple of years to peace through all of that. The second point i want to make has to do with what lies ahead in terms of what has been promised to the public in terms of what the law is going to deliver on, and these are cbos latest estimates of coverage estimates for implementation just between 20142016, and what its going to mean for sorting out peoples Insurance Coverage status. First thing to note is that the Congressional Budget Office latest estimate issued a couple weeks ago, the numbers were probably, to be fair to them, develop six weeks or so ago, they estimated that in 2014 the reduction in uninsured would be about 12 Million People, and that is comprised of a number of ups and downs but they estimate the number of people in the exchanges will be about 6 Million People. Is probably going to be about where it ends up on average through the year. Remember, they may be at about 8 million now, but that includes a lot of folks are likely not to pay their premiums throughout the full year that also at any given year you will have turnover in the insurance system as people go and find a job with employmentbased coverage and, therefore, leave the exchanges. The entry into the exchanges will be less rapid than the exit from the because of the rules that are set up for open enrollment. So george likely to see that number shrink a little bit each month over time, on average, 6 million is not a bad guess yet. Medicaid, they have it as 7000000 increase relative to what it would have been absent theres so much noise and medicaid and its hard to tell at the moment if they are quite disappointed i think that pretty well shot of it myself but if you look at the data as of the spring of this year it was probably an increase of three or 4 Million People relative to what wouldve happened otherwise. By the way, many of those people are in states that didnt even expand medicaid. In other words, there were people who were eligible for medicaid anyway but now have signed up because of the outrage, the advertisements, you know, outreach, general informational overload thats come about through the application of the law. More people have ended up signing up for medicaid even in states where the never even expanded the program. So 7 million, they still have a lot of work to do to get to 7 million. They expected the employer based system to be essentially unchanged. They could be off on that one by a fair amount, that there might be some data coming forward saying that to avoid individual mandate tax theres been a little bit of a sorting out where people could, who could go into the employer based system can have done so to avoid attacks. That number may actually go up by a fairly large number. And then nongroup coverage a reduction of 1 million, again, that one will have to wait to see. Theres been a lot of cancellations, a lot of sorting out going into the exchanges. All of this portion later in the Program Schedule and cspan. Org well take you back live now to the American Enterprise institute where jim capretta is introducing the luncheon speaker, the present of Health Policy and strategy associates. He is a consultant to the policy commend as was to the Marketplace Community with great expertise in the Insurance Industry. Hes been doing this for more than 20 years now, and he was named because of his incisive and clear writing about the implementation issues in 2013. Is meant by the Washington Post as the 23rd games wonkblog pundit of the year which is actually a pretty fine distinction. He was chief operating officer of it health and Group Benefits and sure and has been active in and around the Health Policy in workplace issues in this field for a very long time. Hes a real expert and we are very, very grateful, op, vigilant to come to talk to us today. Thank you, and join me in thanking bob for coming today. [applause] its great to be here, great to be with all of you today. Ive been a real fan of tim and joke for a long time, as scholarship aei and i appreciate very much getting the invitation. I would give my perspective today. It will be a different perspective than youve heard, at least from where i come from. Just so all of you know, i work in the marketplace, and i learned long ago that my job was to figure out to satisfy customers. Number of clients out there and what they expect me to do is to figure out whats going on in the marketplace, and whats going on in federal policy and help them navigate their business through that change. If they want the conservative perspective they will go to fox news. They want the liberal perspective they will go to msnbc. As Business People they need to know whats going to happen and how its going to impact them. Ill try to bring that perspective here for you today. Ive been working and washed them one way or another either as an executive or somebody running his own business for more than 25 years. As an Insurance Industry executive it occurred to me way back that the Insurance Industry could not sustain itself if its Business Mission was to figure out who not to cover. In order for the Insurance Industry to survive economically and politically if you how to cover everybody. I also figured out pretty quickly that as an industry we couldnt do that ourselves if as a chief operating officer ive got preexisting conditions tomorrow afternoon, i wouldve had a long line down berkeley street in boston of people lined up to sign up for my coverage and i would be broke pretty quickly. I realize there is a willful government as a referee in this whole process. Jay carney said a few months ago that i had been an opponent of obamacare for 20 years. Which i guess makes me the first opponent of a bunker since it is all about five years old. I dont see myself as an opponent of obamacare. Survey not an opponent of Health Insurance reform or of Health Care Reform. Most of you know those are two different things. I am a critic of obamacare and i think it leads to lots of changes but i guess everybody says that todays of it doesnt make me any different. Im going to firstly when going to do a bit of do my best to tell you. The Affordable Care act has not cleared the tower to borrow a headline from one of washington, d. C. Is media outlets. It needs fixing. Particularly in its Health Plan Offerings your want to clear the sprinkler and it was launched and present of almost elected theres never been any doubt in my mind that this law will be enacted. I dont think its going to look that much like it does today 10 years from now or even five years from now. But its also clear to me were not going backward in this country. Were only going forward. Now, it does need a lot of fixing. One of the things that concerns me about the socalled 8 million enrollment is it my convinced the ardent supporters of obamacare that it doesnt need fixing. As a whole lot of difference between offering a monopoly in Health Insurance in the United States today and a small group and individual Health Markets and actually have created something that people like and want to be part of. Theres a big difference, a big distinction and i think its the most important thing to understand where we are with the Affordable Care act today. Ill tell you what i think we need to go and that they were i think the fixes need to be, shortterm and longterm but ill tell you i dont think theres any chance we will have any fixes before at least 2017. It doesnt matter what happens in the election in 2014 whether the republicans capture the senate or not. Were not going have the environment or the votes for any kind of substantial change to the Affordable Care act. We will probably not have the political atmosphere for any substantial can change. I think this thing limps along for a number of reasons. It livelong actuary our financial and it lets along politically. I will also tell you that i think while the supporters of obamacare citing 8 million account of his days i think republicans are overconfident as well. I actually think the democrats could take this issue back by november if the republicans are not careful. So there are two very different interpretations of the socalled 8 million enrollments. The first is the enrollment estimate of the exceeded expectations by we have hardly made a dent in the number of people who are uninsured. Or the enrollment process program is working. Its on its threeyear projected cbo track and doesnt need any major fixes, or the program is still a regulatory nightmare and needs to be repealed and replaced. I expect most people are sort of in one camp or the other on this. But i would also suggest theres more commonality than that if we really think about it. Weve seen a lot of the surveys and its been at the heart of whether obamacare is, in fact, succeeding or not. The Mckinsey Survey came out first. This data was early, february. But it does include the late surge in enrollment and what they point out is that most of the people who were signing up where previously insured, that we werent really attracting the uninsured into the program. These numbers have almost certainly changed in the last two months but i will suggest that chronic problem this program has is attracting people who are not insured before. Fundamentally because the way the product, and in my context of my background these are roddick stem cells, the products are not all that attractive to people. The Rand Corporation came up with a survey that went into midmarch, came up with some of the same conclusions that we were getting more of the people moving over from the insured market that we were picking up on in church. This is a fundamentally important question. Because why did we turn the Insurance Market upside down and in such a Small Group Market if were not going to be successful in getting the people we wanted to get in first place. This is at the core and the heart of whether we can become to you on the right track or not. I will also tell you that when you look at these polls, be careful. This particular poll says that the majority of people who were gaining insurance were gaining it in the Employer Market. You heard the mercer represents a few minutes ago there didnt seem to a lot of indication from the surveys thats happening. I was with one of the largest selfinsured Insurance Companies in the United States yesterday, ensures millions of people in the selfinsured market and went to the head of marketing and i said, are you seeing any increase in the Employer Market and the number of people signing up . He said no, nothing, flat. Thats what i continue to hear all over the marketplace. This survey indicates signing of all kinds of people in the Employer Market. I dont know where they are. Im not saying that my information is better than something the Rand Corporation has put out but i will tell you we need to be very, very careful when we look at these polls. We need hard data. The most recent poll came from gallup through april 14 reflecting more of the search. The bottom line is that gallup has found that probably about one in four people who were uninsured have found insurance even medicaid or otherwise. That makes some sense to me because when you look at the enrollment numbers and put a look at the 8 Million People coming through the exchanges, you can make some comparison to hard numbers rather than just do polling. The 8 million needs to be reduced by the people who are not think how many are not paying . 17 . Its a pretty good number. As i go around talking to people as recently as yesterday, this particular carrier, hundreds of thousands of people in the exchange, more than 20 its not as bad as only 15 , and its not 20 either but its in the middle. If you adjust that 8 million by about 17 , it would be a pretty good estimate i think when its all said and done, and then you adjust for the fact that 83 of the people are subsidy eligible, you get a number that you can compare to the Kaiser Foundation estimate of 17. 2 million are subsidy eligible and what you get . Somewhere between 2530 have signed up. If youre inclined to believe in the cbo numbers that were going to get onethird, going to get onethird, 130, onethird over the next three years you can say we are on track. If youre someone who spent his grid and marketing as i have, and you look at an open enrollment that effectively lasts december, and into april, and 30 of the elves will sign up and 70 didnt, that tells me youve got a problem with the customers, that you need to worry about. So i would also, its also interesting as i talked to Insurance Agents who were signing people up, very big part of getting people signed up. As a talk to people who run call centers and Insurance Companies who are talking to the customers at the other end of the line, what theyre hearing is a lot of complaints about the product. About the offering. At the heart of the problems i think obamacare has, as economists and Health Policy experts and so forth, you can on your opinions on these things and the macroeconomics and the micro economics. I did a post on my blog not long ago, i recounted a marketing story from the 80s, about dog food, Dog Food Company went out and created this absolutely tide list doctor. Site is got involved. The manufacture people got involved. They went out and got the best consoles from all over the country and they created this new dog food. But they were not consulted a doctor. Nobody bought the dog food. They had this meeting. They brought that see the oh in and at the expense of consults in a country of why nobody is buying the doctor. Finally, some in turn back of the room raises his or her hand and says, mr. President and it may be that dogs dont like the dog food. And i think theres a problem here when you get 30 of the people walking away and 70 30 of the people signing up, 70 walking away. Random something important about obamacare. Obamacare is a monopoly. Theres not another place to buy Health Insurance. If youre a responsible person and want of Health Insurance for your family, you could have afforded it anyway, and you want to be that responsible person, theres only one place to buy it. If youre a person with preexisting additions and you can finally buy Health Insurance, theres only one place to buy it. So theres only one place to get this product. In addition to that, the government will pay a big portion of your costs. So youve got a product here that is a monopoly where somebody is paying a good share if not all of the costs for you to buy it. So you put out a product where you dont have to pay most of the cost and its the only place you can buy it and its the responsible thing to do to buy it, 70 pass on buying it. Theres a customer issue. The fundamental problem is that people are still after the subsidies expected to pay about 10 of afterta their aftertaxe for a plan with predeductibles. The average deductible is 2600. A bronze plan is 2500. Then we got the Narrow Networks. We dont understand the consequences either in the market or anywhere else of the Narrow Networks so far. There are a number of issues there. Take a look at the way the california individual Health Insurance market has rearranged itself. Where the insurance carriers with Narrow Networks have taken disproportionate marketshare and carriers with a less known networks have lost share. Clearly people in california voted with their feet towards the Narrow Networks. If you watch the covered california situation carefully you in the covered california had a hell of a time with a provider. If you want on the exchange to buy a plan, you will have an Impossible Task of figuring out who your doctor and hospital w was. But they bought Narrow Networks. Why . Because Narrow Networks will produce a price 25 cheaper, thats what. If they dont know whos in the network and its wifi cheaper, which direction do they move . The Narrow Networks are interesting from another perspective. In the Employee Benefits market for years weve been expanding, insurance covers of Large Employers, with highperformance networks. These on Narrow Networks where the Insurance Company or the Large Employer determines that the best provider is, the hives quality providers are very often the lowest cost providers. So you go find the centers for excellence for your heart procedures and so and so forth and to contract within inches to your people toward these networks are not because theyre cheaper but because he are lower cost and they are better. Thats not what we have here. What we have in these Narrow Networks in these exchanges is literally the Insurance Company mailing out a contract to all the doctors and hospitals in town with medicaid reimbursement rates, or Something Like that, with the assurance that if the doctor or hospital signs the contract they will get the exclusive business from the Insurance Company in the exchange and then see how many signed it and send it back. Thats the selection process. This business of Narrow Networks is really going to have to play itself out and you have to wonder from a Customer Satisfaction perspective where we are on this. Comments were made this morning that maybe we will evolve towards a medicaid start program. I think is an their network is basically medicaid contract i think theres a fair risk that can happen, and then the context of the conversation, if it happens its not so bad because people will have Health Insurance anyway. Wait a second. The people entering the system or new didnt have Health Insurance before, but there were some of between 10 and 12 many people in the individual market, they tend to be higher income people, selfemployed income people, intelligent, welleducated people running their own business out there. They could afford before to buy Health Insurance. They got Health Insurance was important that assets to protect. These people can only buy now from the Affordable Care act insurance monopolies but are they going to be happy with these Narrow Networks . More than that, anybody who thinks this is about the individual market under take another look. A Small Group Market is regulated in exactly the same way as the individual market is. It has to comply with all the same things and its undergoing the same changes as the individual market. What are the, 35 million or so people in small market. 10 people in the old individual market, where in the process of moving something approaching 50 Million People in this country into the obamacare regulated monopoly. If that starts sliding towards medicaid sal programs, is it a sustainable political thing to do . So again i think the core of this is for my perspective the issue is have a lot to do with the kind of program that we have really created. That they questions ill get is what will the health plans do . Conservatives were convinced health plans will go insolvent or back out of the market and thats just crazy. Thats not going to happen. The first thing to understand is this is little or no data knowing what we have today. I was talking to actuaries yesterday. Where do you think we are . I do know. Thats where we will be for some time. The first indications though are if youre only getting 2030 of the eligible group, this is not sustainable. If you believe in the cbo projections and this is on autopilot towards 70 , then take the weekend off. If you are concerned about the level of signup, this thing has got to get to about 70 market acceptance to be sustainable and it can be sustainable. The comment was made earlier today that he would are going to need high risk pools anyway that if you try to bring all the sick people into the marketplace, you cant really rationalize that in an efficient way. You got a subsidy somewhere. You do have have a subsidy and thats why the Insurance Scheme and obamacare was created, a threeyear transition pool. But if you get a good spread of risk you dont need big subsidies to bring the sick people into the pool. And employer with 1000 employees and no mandate has a good spread of risk and an efficient cross structure. You dont need, you need reinsurance pools in the short run because theyre all going to show up on day one really thick, but if you can attract people into the pool you will rationalize the costs. Every employer out there that stands on its own himself insurance with no individual mandate proves that. All individual employers also prove you dont need an individual mandate. What you need to do is attract enough people. What obamacare tries to do is coerce people with lousy products. And thats the fundamental challenge it has towards success. But having said all that, the rate increases the Insurance Companies will have will be fairly moderate going into the next you. I said in my blog there will probably be 9. 9 . It really well. Why would they be 9. 5 . Because 10 , you get scrutinized by the federal government. If you come in again you will not scrutinized. They dont have any doubt and they dont know. I continue Health Care Trends in the Small Group Market is probably in the doubledigit range. Its probably in the seven or 8 range, individual is higher than the large market because there still is antiselection in the end of the to market before the obamacare. You so only 30 showed a. Theres something called deductible leveraging and dont ask me what that is. That will take another hour but these deductibles are so darn high that it actually boosts the trend rate. Theoretically they probably have got to be 12, 13 to 14 increases because they dont have the data to prove it and they dont want to make this any worse than it is now and theyve got the protection for three years, i expect to see moderate increases. You will see some big and little increases. What you had in this market place some people came in late july, some people came in way too low. They will get towards the middle. Anybody wants to be example of someone with a 45 increase will find anybody wants an example of someone who dropped their rates will find anybody wants an example of Insurance Company coming in and sustained them they will find. What you got is the basis of the next three years as people figure out what theyve got. And a lot of people say what are the Insurance Companies in this market . What are they upset and getting out, yada, yada. . Obamacare, the Affordable Care act is a monopoly. If youre going to participate in the small group and individual market, as it effectively the same market, folks, go look up the rules, if youre going to participate in this individual and Small Group Market, not just the individual market, if theyre going to produce the indus 59 person market, it isnt an alternative. It isnt plan b. Kerry is a general believe is going to evolve and they will be protected by the reinsurance pool for three years. Theyve got time. Carriers. One way or another this will all work its way out and i believe that, too. That doesnt mean we are in great shape but it means were not stupid. Will figure a way to manage ourselves out of the. Carriers are a lot more worried about Medicare Advantage payments right now and they are about obamacare. Obamacare aetna the other day said about it doesnt even move the needle for publicly traded company. The other thing to remember is Health Insurance plans are getting used to the government being their biggest customer. This is a picture of with Health Insurance industry looked like today. When i grew up in this industry i was an Employee Benefits business. I was in Health Business but you can imagine. Not Health Insurance business is only half of what they do. The other half is managed medicaid, managed medicare. The federal Employee Health benefit program will probably be bigger than obamacare the next three or four years. Medigap, medicare supplement, all of these products. With obamacare gets on this chart india it will probably be the smallest piece of the pie. But it is a monopoly and thats part of the market and theyve got to deal with it. What will employers to . Ive talked to a lot of employers. You should activate board of directors meeting at blue cross. It was a great cocktail party, let me tell you. There is a Movement Towards defined Contribution Health care, no questions about the. Private exchanges, these are all product terms but all product terms but becomes invasive forms, colors and varieties. One of the observations i will make about the marketplace over the last 12 months that i think is important is that obamacare really has changed things but it used to be your average blue cross, 80 20 standard option blue cross plan withstand health plan in america. Thats what we give everybody had Something Like that and thats a we consider good Health Insurance. That was standard. Whats starting to happen now is the perspective to start a more to move towards the Affordable Care act enlistee exchanges. Today, an employer saying do i need the 80 20 blue cross standard option, or do i just need to be better than whats in the exchanges . With much higher deductibles, 60 actuarial value, tracy potter most plans are 70 of the Employer Market. The new standard in Employee Benefits come you can sort of see this Reference Point growing is obamacare. You dont like what im give you . Go to the exchanges. Im getting a lot better than what the government gives you. People are really worried about the cadillac tax. Will employers will not get the cadillac tax because they are changing their plans now. When you change, and the changes youve got to make a you cant just shift costs to the worker because the cadillac tax aggregates worker and employer costs. Youve got to cut the benefits. So obamacare actually gives them permission to do that. Anybody who says that obamacare isnt having a direct impact on the Employer Market hasnt spent time in the Employer Market in the last year. Dont presume its not having an impact with the Employer Market to ask your friends were employed by fortune five from companies whats happened to the benefits of the last couple of years and whats happening next year and you will get an earful. There is an entirely different perspective. Theres a dichotomy starting to grow in the Employer Market. Between employers who have to compete for skilled workers and lawyers who dont have to compete for skilled workers. If i got a bunch of restaurant workers, i dont need to worry about providing good benefits anymore. It used to be not that long ago that the guy who swept the floor in the shop with a broom at exactly same Health Insurance as the ceo had. We all have the same health plan. That is changing very quickly. Part of it wouldve happened anyway. There was clearly a movement going on. Unmeasured blame the Affordable Care act for all this stuff but if anybody doesnt think that the Affordable Care act is part of this mosaic, they are dead wrong. Medicaid expansion from one of my favorite comments, i may be one of the biggest critics of obamacare but am also one of the biggest critics of republican governors who dont expand medicaid. Might view is put up or shut up. For years ive been hearing republicans say, give the flexibility of let me run it my way. The Medicaid Program is broken. You bet it is. We need to experiment with different things. You bet we do. We need to try market based principles. Go for it. The Supreme Court gave the republican governors a golden opportunity. Now, some of them have taken advantage of that in controversial was the arkansas is one of the first ones out of the box. Whether that is the ability to put people in private plans. They havent got the flexibility and plan design. But they got flexibility in moving into managed care. That is not an insignificant concession, folks. Thats pretty big. You will now have managed Care Companies manage these people rather than the government. Thats an insignificant concession and its not enough . Then theres my hero who put a plan on the table that change is not only how its delivered but how the incentives that consumers will have. I dont know if the Obama Administration is going to accept that your i really hope they do because i would love to see a competition between blue state governors and read state governors about who can make this system work. And i dont know why republicans are so afraid of that competition. They tell me because its not a perfect a block grant. Well, im sure that in 2171 in 70 votes in the United States senate and they doubled their majority in the house and Ronald Reagan is back in the white house [laughter] they can get the perfect block grant. Until then, grow up. Take the challenge and do it. Republicans and obamacare. Im an equal opportunity critic. Silly republican points. Unacquainted into detail on this because i dont have a lot of time. You can go to my blog and theres a post on selling insurance across state lines and Association Health plans in the schools and you can see the perspective indeed you. Let me give you this perspective. I spent a lot of time with insurance executives. I spent a lot of time with people. When i talk to them about something insurance across state lines and these other things, do you know what the reaction is to those republican proposals . To the one, they laugh. Im not kidding, they laughed. Its ironic that conservatives believe in using the market, makes the system more efficient, but the people who were actually the most successful to date and making the market efficient, the winners and Health Insurance business, think these proposals are silly. And the second thing i hear from them is, why dont they ever ask us . [laughter] im not lying to you here. The nixon youre sitting facetoface with an insurance executive, ask them about that. Why is it that conservatives dont consult the marketplace they believe in . I have a lot of criticism for the way the democrats hatched a bunker in the way it works, the naivety and what it reflects in the way the Insurance Markets work. Its just as bad as bad on the conservative side. Coburn is a lot smarter and it has a lot of common sense ideas and has a lot of really good ideas. I will suggest the fundament problem is it takes us back to 2013. I dont think thats realistic that we are not going backward here, folks, were going forward. Theres a republican visual reaction to bunker that makes it impossible for them to want to fix it. Part of that is political. Which republicans go to the primary in North Carolina saying he wants to fix obamacare . We can all understand that, but that is where we are headed. That is where we are headed. We are not going backward anymore. That i think opens up a chart update for democrats, even the party who wants to claim to fix obamacare. When we look at the poll and then no weve got a lot of polls to bring conclusions i think this one from the kaiser folks is the best one. The bottom line here is its as if youre republican you better tell people you want to repute and replace because thats the populist. If you look with the independent voter is and where the voters are over all when you go to the general election, they want it fixed. They dont want to go backwards and that is theres a fox thoughtful recent visit people overwhelmingly vote for the candidate that wants to repeal a bumpy rather than definitive they forgot to ask the third question. What do they want to fix it . You saw some more reports in the New York Times the last couple of days, and the same conclusion occurred. People dont like obamacare because the health and primary because the health plans are so lousy in the. The product is lousy. But they dont want to go back to the days we had before. They want it fixed. It will be the candidates in the long run i think the figure out a way to position that that will be the winners. So where do we go from here . Obamacare less along through 2016th of Insurance Programs will protected the democrats want to see it play out. The health plan reinsurance came keeps them above water. The real rates are going to need to be charged towards the end of this but thats a few years down the road. Neither side in the 2016th elections i dont think are going to have 60 votes in the senate even after the 2016th elections. In 2017 a new president and congress i think will be part of the obamacare wars and i hope well be ready to move on. I think that the first opportunity we will have to get a major course correction. Maybe not. If you bet on washington agreeing on things and doing bipartisan things, its always better to bet against it but i clearly dont see that happening before 2017 and i hope it happens afterwards. I do think the obamacare, obama and magician can get this thing on track any number of ways. They dont take my advice. Take out a pad of paper and this can be your idea and maybe you can help them out. All they really have to do is broaden the health plan. Tim jost made a good point and hes on the right track. Do we did in part d the dont know, provide benefits up front the people, Healthy People can see value which is not what were getting, please dont tell me there are wellness benefits there. 27 year old kids dont care about wellness benefits. They are well. You need some benefits the people utilize and see value. Catastrophic coverage. Go ask the people what they want. A family of four making 59,000 a year have to pay 5000 in premiums. Think about this for a second, washington, d. C. 59,000 a year. Do you think of 5000 you think of 400 the Checking Account to buy this for a 2600 deductible . Its a piece of paper for 5000. Of course, they are not buying it. Of course, the dogs or not eating it. But nobody asks them. Theres lots of opportunity here. The government is propping 6under dollars a a month in premiums subsidies for the people. They would probably be willing to pay one and 50 the amount and premium. Ive got six and 50 of premium. Give them something. What i would do is use the existing actually force the 50 so you dont get junk Health Insurance plans and then let Insurance Companies come up with plans that are more flexible. This section of the train for that mandates the benefits is this long. Theres nothing in the statute that mandates the kind of benefits the Obama Administration has mandated through regulation. If they back off on the regulations and let people, the number of moving parts, theres the premium, everythings its the premium. Its the premium, the deductibles, copays, Narrow Networks and the benefits. But the benefits are not one of the variables under obamacare. So what variables do you have left . Premiums, deductibles and trend 10. Put benefits back on the table. And do it in a transparent way. Leave the standard silver plan there. In the interest of the that offers anything else has to of a 60 actuarial floor and have to give you a piece of paper combat to give you a chart that shows you how what youre buying is different than the standard silver plan and then presume the dogs are smart enough to figure the rest out for themselves. If the obam Obama Administration could do that through regulation tomorrow morning, and they would put this thing back on track. All the other faults its got to any the democrats i hope you of this done. They wont listen to me but i just told you how to fix it. Theyve got to do it quick, get it over to the white house fast because new rates have to be submitted to the insurance consensus in the new rates between may 27 and june 27. Theyve got about one month but they could get this thing back on track. And, of course, the reaction you get is the 8 million. I think is a more fundamental fix to office thats fairly easy to do. I suggest my 25 years in this town that is remarkable agreement between democrats and republicans on Health Care Reform. There is remarkable agreement. Banning presenting conditions, Insurance Exchange from subsidizing low and moderate income people, using the market demand, jerry brown asian the market in california. There is agreement on doing these things. Democrats are right when they say that obamacare was built on a republican chassis. Republicans are right when you said democrats overregulate the heck out of it, and have created a lousy product to so they are both right. If you back off and see we agree on and what we can fix, and most importantly to listen to the customer, stop arguing with each other and g go listen to that found a four making 59,000 a year, they will tell you how to do this. They know how to do it. A more robust market for republicans and a solid safety net for democrats is a place that people can compromise. The more robust market i didnt explain that i didnt explain the i didnt explain that it is the same to just talk about. Giving the carriers flexibility to offer things people want to buy so we get rid of the junk policies. They are are nowhere near as many junk policies and individual market as liberals would like to think there are. Youre looking at the guy with a catholic plan to get a 60 rate increase. They increase by deductible and narrowed my networks. There was a junk out there but it wasnt that much. Better value by offering more choices consumers can spread to the tax credit for the. The government would be paying the vast majority of this if we have the flexibility. You dont need an individual mandate. Ive underwritten hundreds if not thousands of employer plans over my career and not a single one of them had a mandate. Not one. Why did it work . People wanted to buy. In the people want to buy it. The dogs wanted to buy because the dog food tasted good. It is a good product. Thats why they bought it. Give them the ability to do that. I go with no mandate, no fine, no free riders. The catch is you dont sign up during the open enrollment, your preexisting condition is banned for to use but youve got to have a no free rider. Dont dwell on the negative. Dont say bob got preconditions bacthat could i do but dont dwl on the negatives. Youve got to emphasize the positive. Which is if you give people plans they value and they can afford and they appreciate, you are going to have people not buying. They will buy. Never had an individual mandate in the Employer Market because the plans have value. The only people youre going to catch in the no free rider provision of the people deserve to get caught in the no free ride provision because youre giving people affordable Health Insurance which is the objective. Make the tax code equitable. I believe that deductibility and, for employers and the Tax Exemption for employees to exact the same thing and thats the subsidy people eligible for in the standard silver plan. I suppose republicans dont want to be a silver plan. Wevweve got to go to the rootr something, but create a standard plan that the tax credits are tied to, and whatever were willing to give people, thats the maximum we should willing to give them through the tax code. Thats equitable and that will make the system more efficient. Its a solid safety net. Because democrats can look at that and say, we are subsidizing this fellow over here, why should we be subsidizing that fellow over there with tax policy any differently . Thats equitable. Republicans should like it because it makes the market more efficient. Tort reform, dont just put caps on the dysfunction system. Reform the system. Use the additional money you get by changing the tax deductibility of Health Insurance to strengthen medicare. Medicare cuts and obamacare are not a terrible problem for medicare today. Medicare stuff was overdone. Dont ask the medicare actuary to run sustainable in the long term. Weve got to fix that. In the longterm and theres funding to do that. Implement the medicare documents to the medicare doc fix Bill Mckibben a bigger bill in terms of changing the financing of American Health care and the Affordable Care act was. The doc fix bill really creates the incentives to find move it away from feeforservice and onto systems that are accountable for the combination. Medicaid expansion to codify into law the ability so they dont also states dont have to go begging a Democratic Health and Human Services secretary or republican secretary, conflict and the leather bound to have that flexibility as long as the state to state what six and 100 and take the 100 money, fine, theyve got to prove the program is going to get a sneak people in the nitpick of want to go to 138 , give them the 138 might but they got to prove they will be able to get those people. If they can do that let them do it. Give them the ability pashtun lets put competition between democrats and republicans but stop arguing about it. Why is everybody so afraid to put Governor Cuomo against governor 10 . I think its a fantastic idea. And medicare will have to be a reform down the road. I think we need to bring back weidner write. I think 2017 we will. A platform of guaranteed medicare benefits, access to the old medicare plan, but a platform that grades and much more robust market, gives people choices and makes the market more efficient i think well get to that someday. The best hope ive got and 2017 are these two guys. I think ryan and presuming hes in ways and means, and widen, the Ranking Member on the chairman of ways and means, this is where really exciting things can do. Im one of thanks i see the liberals is they stole. Progressives progressive that began in wisconsin and its about people with new, fresh it is whether the conservatives or republicans. Paul ryan is a progressive conservative. Ron wyden is a progressive democrat. God bless them both and i think in 2017 this could be the place was really interesting things get done. So the Affordable Care act hasnt cleared the tower. It needs fixing but it was never going to be repealed and replaced. The lat late surge in april that will probably have people saying we dont need to fix it. This to me this look like watching football can come watching football game. The two teams on the field and someone fumbles. The ball is bouncing down the field and, of course, what you do in a game like that is to try to jump on the ball as fast as you can. Obamacare is a fumble. There are important things about it, there are need things to be fixed by the space of a fumble and its bouncing down the field. The democrats are standing there, there is one team and they are saying we dont have to jump on the ball. Weve got 8 million. Its not a fumble. The republicans are standing to come watching the ball bouncing down the field addressing we dont have to jump on the ball because we are so far ahead, we will win anyway. But look at the polls, look at the kaiser polls. People want it fixed. I think the electorate is waiting for somebody to jump on the ball and take us to the next step and i think thats where the political opportunity is. I know weve got to do that. This is not going to work the way its working right now. I also think the first real chance for reform or change, the next generation on this journey toward Health Insurance reform and hopefully Health Care Reform probably doesnt come before 2017. I think the republicans could cede the issue back to democrats. I was watching their lead to the other. Shes figured this out. I think more and more democrats will figure how to take this issue of the republicans better Pay Attention because this election is not over. We have a couple mess of questions but i think jim will moderate. Ill be happy to answer as many as i can appl. [applause] lets start over here. Good job, bob. Youve advised Health Insurance executives angela forward to 2014 as a lot of ominous stuff there. The soft catch, the political caps on the increases that you talk about, the fact that it will be re accelerating and that theres a very good likelihood that that 30 of the people that ate dog food are going to be sicker than the folks that didnt. How is it that two of the big publicly plans raised their Earnings Guidance for 2014 . How do you reconcile those earnings races with the ominous forecast . Obamacare, the Affordable Care act doesnt move the needle on Health Insurance company earnings. First of all its a tiny percentage of what they do. You saw the chart. The federal Employee Health benefit plan is more revenue than obama theres going to be over the next three years. Thats number one. Number two, youve got the three r. s, reinsurance provisions, the reinsurance provisions to me the Insurance Companies wont lose money but they will only lose a couple points on premium. Thats couple of points on premium on that small sliver of business is not a Material Impact on their bottom line. They are much more worried about medicaid. A big issue is boy, this is a terrific opportunity for Medicaid Expansion and much more what about the medicaid advantage is that its the biggest part of the profits right now. Thats one of the reasons they did so well in october and november. And somebody said the other day, blue cross of iowa and south dakota are getting back in the business. United might be going into connecticut. That means its working, right . Im not going to do what those guys were thinking. Idleness to know what those guys were thinking but ill just leave you with this. If i were back running a Health Insurance plan in the good old days and i were confronted by all this, i might just wait out on exchange is the first you, but in the sick people are ready with the other guys with a couple of different interpretations for the move as well. [inaudible] in the mid 80s to early 90s i had kaiser in Northern California and my hope for obamacare was to see something silly but it was what you talk to, the healthy options. It was very easy, very affordable, did not have a high deductible. Do you ever see a plan like that . And also quickly comment on singlepayer stay you and i share a best actor in a Health Insurance business in los angeles in the mid 80s so i no kaiser very well and have enormous respect for kaiser and what theyve always done. But yeah, i mean, what we are talking about are crafting health plans that provide real tangible benefits. That by the relatively inexpensive. It im going to pay for somebody to go to the doctor for strep throat, its got to be copays. You can have people over utilizing and not going to the doctor when they need to wait the extra day to make sure its not strep throat or go to the nurse that can give them the strep culture. So you have to have incentives for people to think about how theyre going to utilize but there are ways to create really valuable players. Part d as a good model actually. Because there is no individual mandate part d. They offered it the first year, 30 signup, probably 70 or 80 signed up the first year. Why do they signed up . And part d by the way is a catastrophic Health Insurance plan. Part d is a few benefits of front, a big donut hole, and catastrophic insurance. The people love it. That was a product that hits the mark. Unlike these products to your second question was singlepayer. I think [inaudible] well, some people question, particularly my republican friends to really mad at the insurance commissioner in cooperative obamacare. They forget obamacare is managua. What choice do they have . They really do want obamacare to work. Who has worked harder to make obama to work than the Insurance Industry . And been more cooperative and got slapped around quite a bit. By the customer, the federal government. Why did you want to make it work . Its 59 people in the market, thats a good reason. But the other reasons i think is they dont have a lot of confidence in republicans when it comes to health care policy. If obamacare blows up and fails, and its just this godawful mess that looks like new york or new jersey individual insurance pool did in 2013, its in terrible, terrible mess, and will republicans grab this thing by the hordes and deal with that . They havent had history of the. They like to sell insurance across state lines but they do not get terribly serious in the congress. U