Scott Keefer: Good morning.
My name is Scott Keefer.

I represent Blue Cross
Blue Shield of Minnesota,

and I'm pleased to be here

this morning to
welcome you to start,

finally, our 2013
health reform series.

I say, finally, we've
had some fits and

starts first with snow

and then the
conference committee,

and many guests that we

had hoped to have today are
tied up over at the Capitol.

But before I get started,

just a few housekeeping
notes first,

I want to remind
everyone this series is

being audio recorded
and video recorded,

especially for our panelists.

Those in the audience, if I
could remind you to silence

any ringers you might have on

electronic devices,
smartphones, etc.

I'm really pleased, as I said,

to kick off the series today.

Before I get started,

I want to pay a
special thanks to

Professor Jacobs and his team,

especially Lee, for their
efforts in pulling this off.

I think those who have attended
this series previously,

we did, I think, six
events last year,

would agree that we've done

quite a job of creating
an environment to have

discussions about
the implications of

health reform for the state
of Minnesota outside of

much of the political
noise that has

set the tone or really the

stage for that environment
and the discussions.

What I'll say this
morning is there's

a lot of discussions
going on in St. Paul.

What we're not trying to do
here is to replicate that.

We have enough of the soured
political environment

and the challenges
that that presents.

What we want to do, again,

is focus on the
implications of moving

forward with respect to
health reform implementation

for the state of Minnesota,

frame up some of the choices
and the policy decisions,

and have a discussion, a
discussion rather than a debate.

With that debate, I think one
thing that I would comment

on some of the discussion

that's been going
on in the media,

at the Capitol, in
Washington, DC, as well.

I think there's lost in
that discussion some of

the successes that we've had

previously around the country,

but in particular
here in Minnesota.

I think much of the
conversation has started from

the standpoint of the system
that we would like to have.

Of course, at Blue
Cross and Blue Shield,

we have a legacy of
supporting reform efforts,

not just with respect
to access to care,

but dating to being

the state's first health
plan to our history,

taking on big tobacco
successfully in the litigation,

and most recently with
the sponsorship of

the nice ride bikes
that you all see around

the cities or I should
say, you'll see soon,

when the snow melts and the ice,

but there's a legacy there of

being for the health of all,

which is our mission statement

as a not-for-profit
organization.

I'm especially delighted
today that we've been

joined by Assistant
Commissioner of DHS,

Scott Leitz, because, of course,

an important part
of our legacy is

the success of programs
such as Minnesota Care,

which I know that
Scott, I'm sure,

will tell us a little bit

about the department's plans and

hopefully an update for
that important program.

Also, as a member
of the board of

directors for the

Minnesota Comprehensive
Health Association,

I think it's important to

consider in light of some
of our past successes,

the challenges that we have

in implementing health reform,

as well, when we look
at federal rules,

as we see with the recent
federal reinsurance rule

that actually, in many respects,

disadvantages Minnesota
within those successes,

such as the MSHA program.

This is all a way of saying,

let's have a good conversation

about the policy implications,

how we take our system,
move it forward,

make improvements
within the contours

of the Affordable Care Act.

Let's leave the
debate in St. Paul.

Thanks very much for being
here this morning. [APPLAUSE]

Lawrence Jacobs: Thank you for
coming. Just want to remind you in

the back of the programs is
a list of upcoming events.

You'll see it's
quite comprehensive.

We're anticipating
that the conversation

about health reform will not

stop after conference committee

and whatever vote the
legislature makes,

whatever decision
the governor makes.

There's going to be a
whole series of issues.

We're going to be
putting out a program in

April on financial
sustainability of health reform,

looking at Medicare
and Medicaid,

we're going to be bringing in

some national people
to talk about that.

Then we're going to look as
we rush in Minnesota to meet

some fast approaching
deadlines about some of

the unanticipated challenges
that will likely emerge.

Some of them are
being anticipated,

but we'll do a check in on that.

We're going to look at
the medical care system

itself and how it's

responding to what will be

a rapidly evolving
new situation.

Then we're going to come back to

a topic that we talked

about last year, but
it's so important,

which is public
health and how this

affects citizens in Minnesota

and some of the challenges
they're going to be facing.

Scott, thanks so
much for joining us.

I know this is a hectic period.

A lot of big stuff being
decided at the Capitol.

Let me start off with a question
that I've often wondered

about you hear this phrase
health reform all the time,

and I think people nod like,
"Oh, yeah, health reform."

What is health reform as
you see it looking at

the legislation that's now

moved through the
House and the Senate?

Scott Leitz: Just a
narrow little question

to start off with.

Well, I think it's multifaceted,

actually, the way
that we look at it.

I think you've framed
it up the right way,

which is that it's
about health reform.

I think we, for many,

many years, talked about
health care reform.

I think the right framing on

this is absolutely around

health reform
because, ultimately,

I think what we're striving for

is actually a
healthier populace,

healthier folks who can
live productive lives,

and that has to have
multiple facets.

I think the work that
you see that's going

around on the exchange
right now is really

related to ensuring that
folks have the ability

to access health insurance
at an affordable cost.

Regardless of what
the discussions

are around the details,

I think at a high level,
that's what that's about.

I think what you
see with regards to

the programs that the

Department of Human
Services oversees,

the Medicaid program,
for example,

it's really about making
sure that we have

a sustainable program there
that gets people into

coverage and allows them to

access services
when they need to.

Then there's a whole other set

of issues underneath that really

relate to regardless of

how people are coming
into the system,

that the system itself is

delivering care in an
effective and efficient.

That's really about
getting some of

the payment incentives and
provider incentives right.

I think for many, many years,

we haven't done enough
collectively to really put

the right incentives in
front of both people who are

accessing care as well

as providers who are
delivering care.

We're starting
down the road with

some demonstration
projects within

Medicaid to really try

to change some of
those incentives.

I think the private sector,
the commercial market,

has already started to do some

of that work ahead of that.

I think what you're seeing is

reform of a system that's

really about trying to get
better health for people,

trying to bring more
affordability to

the system in a
multifaceted way.

Lawrence Jacobs: When we
think about health reform,

it's both about the health
of our communities,

it's about financing
for medical care,

and it's about, potentially,

transformation of the
medical system itself.

When we think about the impact

of the legislation moving
through the capital,

should we be
thinking about it in

terms of the health
insurance part?

Or should we be thinking about

the health insurance part

for those who don't
have coverage

or are in the individual
small markets

where they're really facing
some of those high premiums?

Or should we be thinking
about it in terms of

a much more broad
sweeping transformation

that's going to affect
insurance markets for many,

many Minnesotans, maybe,
most of those are insured,

the healthcare
system that's really

the core of what goes
on in the state?

Scott Leitz: Well,
I mean, I think at

a really immediate level,

what some of the
legislation addresses

is that immediate question of,

the Supreme Court
spoke last summer,

and there's a requirement
that people have

health insurance
coverage by 2014.

I think the legislation

that's moving through
on the exchange really

addresses that
immediate question of

providing an access
point for people

who may need a subsidy

up to 400% of poverty

to buy that health
insurance coverage.

I think some of the discussions
around the future of

Minnesota Care play into that as

well for people below
200% of poverty.

But I do think that
that groundwork

that's being laid is
really about getting

a stable system of

people of a robust
risk pool of people in

the system accessing care

at the appropriate
times as opposed

to now when we see that

people aren't accessing care

at times when they should be,

meaning they're using EDs and

other things more
than they should be,

getting people in the coverage

should help with that issue.

As that stabilizes,

I really think that
we need to think,

as a state moving forward
for the next several years,

that the system itself needs

to continue to
evolve and change.

I'm saying it's both
of those things,

but I think the more
immediate question

is making sure that people have

that ability to meet

the requirements that
are there in 2014,

making the market a little fair,

a little bit easier
to access and

more affordable
in the short run,

moving towards something
that's a little bit

more large scale down the road.

Lawrence Jacobs: You could
think about this as, like,

the proverbial throwing
a rock in the pond.

It's like the immediate impact
right away of the splash.

But then there are going to
be these ripple effects.

As we change the insurance
opportunities and

markets for those who are

individuals and
small businesses,

and as we create new payment
systems for those affected,

it's going to have
these effects.

It's going to affect the much
broader insurance markets,

the much broader
medical care system.

It's a pretty big deal.

Scott Leitz: I think
you've stated it well.

It's true, not just in health in

healthcare, but any area.

When you make changes
to laws or changes

the way markets work or
how people access things,

those have effects
that come out of that.

We don't always know

exactly what those
effects are going to be.

I think, in this
case, we can talk

a little bit about the
fact that people will

have a much cleaner access point

into healthcare. We know that.

We know that we have a system

of subsidies that'll be

available to people that
isn't currently available.

Those are all good things,
and those are all things that

should help people to get into
health insurance coverage.

Do we know exactly two, three,

five years from now
exactly what the

market's going to
look like? We don't.

I think that's why you see

a lot of really robust debate at

the Capitol right now around

how things should be structured.

Without getting into
the details of that,

I think that's very
legitimate and

very appropriate debate
to be having right now.

Lawrence Jacobs: We're
going to get into

those details in a second.

But before we do, I'm curious,

as you think about both the

immediate effects and then these

overtime ripple effects that
we've been talking about,

do you think the public
understands what's coming?

My sense is that health reform,

at least in terms
of media coverage,

is about at the level of

fracking in terms
of press coverage.

You've got a lot more attention,

and maybe it's just where
I'm catching my news,

but it seems there's

a lot more attention
about gay marriage,

about tax bill, some
of the budget issues.

Does that strike you as right

that there's something huge
going on at the Capitol,

and the public
isn't tracking it?

Scott Leitz: Well,
this is, I think,

a long-standing challenge in

some sense that healthcare has.

It's a complex topic.

It's a complex topic to

explain in a way

that I think the public
fully understands.

I think the public is
smart on these issues,

and I think we can't stop trying

to have the discussion and

ensure that people are engaged.

But it is complex when you get

below a very high level of it.

I do think you make

a valid point that
there are issues that

are going on at the Capitol

that might be easier
to capture in

a sound bite than the
complexity of health reform.

Nevertheless, it's going to
have a big impact on people,

both however you want,

whichever perspective
you view it from

positive or less positive,

but I think that the

general notion that
this is a complex topic

that the public is challenged

sometimes to fully understand
is probably accurate.

Lawrence Jacobs: Let me just

put together a couple
of these things.

We've got a public that
may not be tracking

the magnitude of
the changes that

are coming down the tracks.

You've got changes
that are immediate,

but will have long-term impacts,

perhaps really transforming

our financing and
medical care systems.

It raises the question,
at least for me,

about the scope of the reform
we should be attempting.

Should we be attempting
to comply with

the Affordable Care Act

and what current law
requires us to do,

or should we be doing
something more ambitious?

Given all this uncertainty,

the lack of public
understanding.

Why not just comply
rather than do

the full monte of
health reform or

something in that direction that

we seem to be doing
in Minnesota?

Scott Leitz: I
mean, I think what

you have to understand is

that Minnesota

is out in front of a lot
of where states have been.

I really think what
we've been trying

to do is actually build on

what Minnesota has
already built over time.

Even if you look at the
Affordable Care Act,

there are many, many
elements of that law,

which are really nods to

things that Minnesota pioneered
or had already started.

There are a lot of things
that we would be doing,

regardless of whether
the Affordable Care Act

was there because of

the right things from

a public policy
perspective to be doing.

We need to change
the way that we

pay healthcare providers,

working more collaboratively
with them so that

they're in the business of
continuing to deliver very,

very high-quality
care, but also have

the right incentives to
help people stay healthy.

We need to make sure that

people get into health
insurance coverage.

There's robust debate around

the best way to do
that, but nevertheless,

I think everyone does
agree that the more people

who are actually covered with
health insurance coverage,

the better, however
you get there.

All those things are things
that I think we would be

working on regardless of whether

the Affordable Care
Act was there.

But I think the opportunity
that we have that I

think we're looking
at right now is to do

that in a way that's
very Minnesotan,

that really builds
on our strengths,

and really builds on the
system that we've built

over the last 50 years.

Minnesota Care, I think, is
a great example of that.

I have a program in
place for 20 years that

served close to a million
Minnesotans over time,

150,000 today receive coverage
through that program.

The Affordable Care Act provides
an opportunity for us to

continue to keep
Minnesota Care in place,

but it's one where we've
actually had to do a lot of

pushing on the federal
government to help us do that.

We'll get there from here,

but I think that's a
classic example of

a program that we
built in Minnesota.

It's an appropriate program.

It's been the model for many
programs around the country.

No reason we shouldn't continue

to build on the strings
that we have here.

Lawrence Jacobs: For folks who
say this is so gargantuan,

the public is really not
up to speed on this.

We should just comply with

the requirements of the
Affordable Care Act

rather than going beyond them,

your response is,
well, if we comply,

we'd actually might
be stepping back in

some areas because
Minnesota has already

been done affordable care

in some respects
and move beyond it.

In other areas, we
have the experience,

we have the know-how to

take that opportunity as a
way to continue and build on,

as you said, what
we have been doing.

Scott Leitz: We should do

the things that are
appropriate for

Minnesota and the things that

really move us to
where we collectively

want to be with the system
and how it's organized.

There are some opportunities

embedded in the Affordable
Care Act that let us do that.

If we strictly complied with

every single thing, and
I think you're right,

in some cases, we'd
actually be moving in

a direction that wasn't as
positive for Minnesota.

We really view it as
how do we continue to

move the system forward
in a way that is

very Minnesotan and very

much appropriate for
our nature here.

Lawrence Jacobs: That's great.
This has been, I think,

a helpful starting point,
some of the big issues.

Let's start getting a
little more specific.

A lot of the aspirations
are admirable.

I think most of the people
involved in the debate,

whichever party you're in at

the Capitol, meanwhile
from Minnesota.

But at the end of the
day, the question will

be, does this work?

Will the reform work?
Is it feasible?

There are a series of
issues that are raised,

maybe the most important,

at least in the
immediate context

of standing up this exchange,

is whether the health
plans have enough time

and the data and the
federal regulations and

the state law to

file and then to get approval
for a process that really,

when you boil it down,
it's probably six weeks.

Is it feasible just
at the level of

the health plans to achieve

what lawmakers appear
to be expecting?

Scott Leitz: Well, I think
that's probably a question

that the health plans
will be able to

answer better than I can,

but I don't think

it's any great secret
that the timelines

on the implementation of

the law are
extraordinarily tight.

The exchange, having it up

and running by January of '14,

is a very large task,

just from an information
technology perspective.

Then you, I think,
have introduced

the whole other issue of which
policies will be on there,

what the plans need
to do to do that.

I mean, I think
the answer is yes,

this will get done.

I don't think it's
going to be without

some bumps along the way.

I think that we're
going to need to

think about this incrementally.

I do think that it's very highly

likely that there's
going to be needs,

that this will be phased
in over a period of time.

While there'll be something
certainly available 1-1-14,

I think you can expect the

way that that's going to look in

1-1-16 may look different
than it does in 1-1-14.

Timing-wise, very tight.
Will it get done?

Yes. Will it need to
evolve over time?

I think the answer to
that is yes, as well.

Lawrence Jacobs: When Republican
Senate leader David Hann

says that the enterprise of

standing up the exchange is
such a short timeline with

the ambition that
the legislature

has on the Democratic side is,

to quote him, "a huge gamble."

What I hear you saying is,

well, there is a little
bit of a gamble here.

Scott Leitz: Anytime
that you have

timelines that are short,

certainly that's the case.

I mean, I think I
have a great deal of

faith in our collective
ability to stand

this up and to continue the
reforms that we've started.

But there's certainly risk
involved in short timelines,

but again, I mean,

I think you will see 1-1-14

a functional exchange that'll be

operating but with some
evolution over time.

Lawrence Jacobs: I
like this evolution.

Evolution seems to
be the new word.

You remember Barack Obama

evolved his position
on gay marriage?

I'm really tracking this word.

It's not a gamble.
It's an evolution.

[LAUGHTER] I want to

ask you about the evolution
of something else,

which is the information
technology infrastructure.

When you really look at the
exchange or the connectors,

I like to think of
it, a large part

of it relies on this new IT
system that's being built up.

What I've asked and
gone to conferences,

what I hear a lot about is the
vendors hitting deadlines.

What I don't hear
a whole lot about

is actual functionality.

Will this thing actually work?

What can you tell us about

the evolution of the
IT infrastructure?

Will it be actually
functioning in

the way in which people have in

their mind like travelocity,

or I mean, you hear
all these metaphors,

and to me, it sounds
like magical thinking.

Bring me back to
Earth. [LAUGHTER]

Scott Leitz: Well, and I
don't represent the exchange,

so I don't have all the
specifics on those pieces of it.

What I can say is that,

I think, stepping back from
a Medicaid perspective,

we know that the exchange
will be actually doing

eligibility
determination on behalf

of enrollees in the
Medicaid program.

That's something that we're

expecting and counting
on being the case.

Lawrence Jacobs: This is the
line I hear all the time

: we expect it,

our vendors are on timelines.

Can you give us any
assurance that you've

actually seen the IT
system up and running?

I mean, in the
backroom somewhere,

is there a web page,

an IT program that's
not gone live yet,

but it actually works?

Scott Leitz: Well, I
think the answer to that

is the products

that the vendors are
working with are ones that,

I think, we're comfortable,

will be functional, that

the determinations
will be made on time,

starting in October probably of

-13 in preparation for 1-1-14.

We continue to work

certainly on the Medicaid
side very closely with

the exchange and with the
vendors on the timelines.

They're very, very tight,

and things are being
built as we go.

We are seeing efforts and
products coming out from them.

But I want to go back
to my previous answer,

I think that there's going to be

a functional exchange in 1-1-14.

Will it have every bell

and whistle that
you might hope for?

I think the expectation is

probably not everything
that you'd want in 1-1-14,

but that's where your favorite
word evolution comes in.

I do think over time,

you will see those
functionalities built in.

But again, I think you have
to think about what are

the core functions that
need to occur in 1-1-14.

Will those happen? Beyond that,

we start to add the
functionalities that people

will also find to be useful.

Lawrence Jacobs: It's
very interesting to me.

I mean, these questions linger,

and it's really an
enormous uncertainty

about how this is going
to work, what will work?

I think you've been very
candid in saying, look,

what we start with is not going

to be the best we're
going to have.

We have to stand down some
things and come to it later.

It strikes me that the
administration and

legislators who
support the reform

are a little bit of
a difficult spot.

On the one hand, they want
to provide reassurance

that we're not holding hands,

closing our eyes, and
jumping into a void.

But on the other hand,

don't want to raise
expectations to

a point that on January 2,

2014, people are really upset

because it's not what
they were led to believe.

This is something I think
we're going to have to track.

Let me dig in on a few of

the differences
between the House

and the Senate legislation

and get your thoughts about it.

One of the big issues
is, of course,

that with this exchange,

there's going to be a
governing board that's going

to have some significant power.

The question has come up,

who should sit on that board?

One perspective is, well,

you want people who
have experience,

who have expertise about

what the insurance exchange
is going to be about,

which is providing
insurance products

versus others who
say, wait a second.

If you've got the insurers,

they've got a
conflict of interest,

and they're just
going to be working

their way to improve their
profits. How do you view that?

The House has, I
don't want to say,

taken the position
on the insurers,

but they're more
favorable in that way.

The Senate has gone
more in the direction

of having a prohibition

against those who worked in

the insurance industry for a
year serving on the board.

How do you and

others in the administration
think about that issue?

Scott Leitz: Well, I mean,
I think you've laid out

the two perspectives,

the ends of the spectrum that
people are thinking about.

We heard a lot of debate
on this very issue during

the task force work
that occurred in

advance of the legislation

and certainly very strongly
held opinions on both sides,

I think, and some legitimacy
to both points of view.

I think that the folks
who feel that there is

an inherent conflict feel

like there should be a
more strict prohibition.

There are those
who argue that for

something as complex as

an exchange and something
as new as an exchange,

you really need to have
expertise available,

and that board members
should be allowed to

sort bring that
expertise to the table.

I've certainly heard perspectives
that have said, well,

you can find expertise,

but it can be for
people who may not

necessarily be working
within the industry itself.

Lawrence Jacobs: No, I think
you've redescribed it well.

The question I asked was,

how does the administration
view this choice?

Scott Leitz: Well, I think
the administration has

been working with the authors.

We haven't necessarily landed

on a perspective on

that that we're going
to be talking about.

That's going to be a question

for the governor to decide
as things move forward.

Lawrence Jacobs: Well, let me see
if there's another question here.

You can give us some insight
in the administration.

Scott Leitz: I
might just restate

your question again, though.

Just be prepared. [LAUGHTER]

Lawrence Jacobs: One of
the magics of watching

folks in the political sphere

is how they handle questions.

I've noticed that some
people filibuster,

don't answer it, but they

take up 20 minutes
with a question.

Others just redescribe
the problem.

Scott Leitz: I'll
try to shortly,

briefly redescribe the problem
for you. Not 20 minutes.

Lawrence Jacobs: Well, this
is one issue, obviously.

Those of you have been following

the debate at the
Capitol know this well.

The second issue,

and this one I think

is particularly important
for where we started

out about the
impact of reform on

the broader insurance system

for those who already
have coverage,

which is, should we
be thinking about

the exchange as reflecting
the existing market,

a kind of a clearinghouse
in which plans that meet

minimum standards can bring

forward the products
and offer them,

or should the exchange
be more selective?

I'm curious about the
administration position

on clearinghouse or
this selectivity.

Scott Leitz: Again, I
think you've identified

one of the major issues

of debate that's
occurring on the issue.

I think that these

are issues that we're going

to need to make
some decisions on.

I think you'll see some bills

when conference
committee is done that

the governor will have
to make some decisions

as to where things are at.

The exchange presents a number

of choices and a number
of opportunities.

There are differing perspectives
around these things.

Again, what you may
see in the end is

an exchange that looks

different in 2016
than it does in 2014,

and I think that that's part of

that evolutionary
process it's going

to occur within the exchange.

Again, I'm not going
to be able to reflect

a specific position on
those issues today,

but I do think that
they're ones that

while they may get decided
in a conference committee,

I'd be surprised if
they didn't continue to

be questions that people
are going to be asking,

even moving forward as
part of that evolution.

Lawrence Jacobs: Well, that's
for sure. [LAUGHTER] Absolutely.

I completely agree with you
that this will be evolving.

Let me ask you, though,

this debate, how
it's been framed.

Maybe you could help
illuminate this.

The debate has been
framed in terms

of whether the exchange is

a passive process or
an active process.

I'm curious, how do
you define active?

How do you think about that?

You listen to some
of the criticism,

and it sounds as if
people are imagining

there'll be a faceless
bureaucrat or

this kind of board
that will be making

decisions which some people
may find arbitrary or unfair.

Others describe this passive
process as really driven by

a dynamic competitive
market process

that forces the health plans

to compete in terms
of price and value.

What does the active
part mean to you?

Scott Leitz: Just to
be speaking here,

but when I think about active,

I certainly think about the idea

that when you have
a governing body,

the ability of that
governing body

to use the power of the exchange

to really try to provide

products that have the best
value associated with them.

That is the best premium,

the best types of
providers available,

and so forth, and

uses that authority that's
inherent in that to do that.

That's one way of thinking about

it as an active purchaser,

that is something that
a board could do.

The other side of that,
the folks who argue,

you can actually get
that same outcome

by allowing it to be
more of a marketplace,

and if you have

robust competition
within among the plans,

you're going to get
that same outcome.

Those are two perspectives
that are out there on it.

But I think the more
active piece of

this for those who
advocate for it is really

trying to use the
authority of the exchange

to bring products to market that

are understandable to
consumers that have good value

associated with
them and that folks

are able to easily enroll in.

Lawrence Jacobs: Scott, I've
got a series of questions

here from the audience.

We want to roll through them,

and then we'll bring up
our other panelists.

The exchange is
estimated to cost

about 50 million a year to

operate once it's
fully operational.

Why does the exchange cost

so much money on
an ongoing basis?

Scott Leitz: Again,

this would probably be
a better question if

folks from the exchange are

actually here to
be able to answer.

What I can say is that you have

to think about the
fact that, well,

it gets described as

a Travelocity in Orbitz
for health care.

It is vastly more than
that when you start

to think about what I
described earlier is,

the fact that the
exchange will be

doing eligibility determination
on behalf of Medicaid.

Well, the rules that go

underneath Medicaid
eligibility determination,

while we're trying
to streamline them

as part of the process here,

are complex. They're
very complex.

The systems that need to be

able to handle things
like that or to be able

to provide what the options

are to individuals are
really quite complex.

I think part of the cost

associated with this isn't

just the building of a website.

I think people think
about it that way,

but it is hundreds
of times more than

that when you start
to think about

what actually needs to occur,

eligibility for a determination
for a Medicaid person,

then providing options of how

and having the functionality
to be able to actually

enroll them in a
government program through

the exchange as just an
example of one thing,

and that's just a
slice of something.

I think many of the
costs are really

inherent to the system's
work that needs to occur.

Lawrence Jacobs: Thank you.

Another question
from the audience.

State public programs have

a stunningly complex eligibility
gauntlet to run through.

Will eligibility
rules be streamlined?

Scott Leitz: Yes. [LAUGHTER] You

were asking for straight
answers earlier.

Can I just comment on that one?

They are incredibly complex,

and they grew that way over

time for a lot of what
seemed like good reasons

at the time to help to
create niches for people to

become eligible for programs

as needs were
available for them.

What we're stepping
back and doing as

part of this process
is to really think

about how do we
flatten those rules

and eliminating some
of the asset tests,

eliminating some of
the barriers that

people have to getting
into coverage.

That'll be part of the process.

In fact, part of the
governor's bills

this year will be doing

that very thing and starting to

really streamline some
of our eligibility.

That will make the systems
work and much easier, frankly,

moving forward, but we

have to do the work
to actually do that.

Lawrence Jacobs: When
the exchange and

the IT infrastructure
up and working,

there should be more of a
one-stop shop determination

across a number of
different categories.

Scott Leitz: Yeah, and I

think the opportunity
that we have,

just for two seconds, step back.

The systems that actually

handle this work are
about 25 years old.

We actually program
the systems in COBOL.

We can't find COBOL
computer programmers

anymore because they're retired.

They've left the system.

Lawrence Jacobs: I'm
one. I actually took it.

Scott Leitz: Well, if
you're available, Larry,

we have job opportunity
if you're looking for

some work outside the
Humphrey Institute.

This is a real opportunity
for us to actually modernize

our systems and bring ourselves

if not into the 21st century,

at least into the 20th century.

We're trying to take

advantage of that opportunity
to really do that.

Lawrence Jacobs: Great.
Thank you. I want to

invite some really remarkable
people who have joined us

today to give us

some other perspectives and
fill out this conversation.

I'd like to invite the panelists

to come up, and I'll
introduce them.

We're getting one more chair.

I'm going to hover over Scott.

[LAUGHTER]

MALE_1: Good. Thank you.

Starting to your right,

let me introduce Senator
Michelle Benson,

Republican who is
assistant minority leader.

Thank you very much for coming,

senator. We appreciate it.

Then on your far left,

Prof. Steve Parente who's

director of the Medical
Industry Leadership Institute,

just next door in
the Carlson School,

thanks very much for coming,

and Michelle Kimball, state
director of Minnesota ARP.

Senator Benson, let
me start with you.

You've heard a number
of comments from

Scott about the exchange in
legislation moving through.

Let me give you a
chance to respond.

Michelle Benson: Sure. Well,
one of the things that I'm

truly surprised at is

the conference committee
is wrapping up tonight,

and the administration isn't

taking positions this afternoon.

I just got to note
they're going to

wrap up the exchange tonight,

so it can be on the
house floor tomorrow.

If we're not clear
on where this is

going at nine o'clock
this morning,

we're going to have
to get some things

straightened out this afternoon.

It's going to be a busy
day at the Capitol.

The most significant provisions

for where Minnesota's
health insurance industry

is going to go are
still left open.

We do have an opportunity

for the governor to engage
and to get this right.

I fundamentally disagree
with the positions that are

in the bill on the
active purchaser model,

on the conflict of interest
positions on the board.

Let me explain a little bit.

By not allowing industry
experts onto the board,

we are tying the hands

of how this is going
to be developed.

I was trying to
think of an analogy,

and so if somebody explains to

you how to change
the oil in the car

and you go to Google and
you do some research,

how to change the
oil in the car,

the first time you do it,

you're going to spill
oil all over yourself.

We need people who
actually have done this.

We need people who
have been through

the process of licensing the
Department of Commerce so

they can see the
roadblocks that are

ahead and anticipate
how we shortcut

them because the
industry normally takes

18 months to bring

a policy to market going through

the Department of
Commerce process.

We are giving them from
April 1st until October 1st,

not only to have
the policy ready,

but to have the
IT infrastructure

and the staff in
place to support it.

Yes, not having a conflict
of interest sounds nice,

but on this timeline,

it is not going to help us get

a good product standing
up by October 1st.

That's Number 1. Number 2,

if the active selector
model was gone,

the conflict of
interest wouldn't be

such a big deal because

the board would be
defining the box.

Now, these plans already
have to go through

qualified health plan status
at the federal level,

follow Department of Commerce
Minnesota licensing rules.

What those of us who

wanted a more passive
model would say,

the board sets up some
broad guidelines.

Everybody who qualifies goes in,

especially for this first step,

so then you can have experts on

the board without worrying
about a conflict of interest.

I asked on the floor,
what would prevent

this board from
selecting two policies?

Even if they met
all the guidelines

and the board set
up strict criteria.

If there were 11
policies available,

the board could still say,
no, we're only picking two.

That's how powerful
this board is.

From my perspective and

the perspective of
many in my caucus,

it is better for Minnesotans
to have more choice.

Other people say that
choice is confusing.

We actually had someone
in committee say when I

see 30 cans of
soup on the shelf,

I get confused and I leave

hungry because I don't know
how to make that choice.

I trust that Minnesotans
are more capable than that,

particularly when we have

brokers who are well trained and

walking people through
the process of

choosing what's right
for their family.

Particularly, we're going
to be training navigators,

and Scott talked about

MA enrollment and
how confusing it is.

We already have county employees
who know how to do this.

They're already being paid,

so some of the expense of
the exchange, I think,

is double counting, frankly,

counties are not
getting a reduction in

their budgets when
their employees

are being paid
through the exchange.

We've got some budget
things to figure out.

The governor's budget
hasn't been presented yet,

but the Senate budget

will start hearing provisions
in that this afternoon.

We have a lot of things to
watch out for the IT system.

Tom Baden, CIO of the
Department of Health,

said, we're at situation

Relo halfway between
red and yellow.

That's not a good place
to be at this point.

I talked to Commissioner
Showalter months ago.

If the conversation changes now,

it will make this look
like it's going to fail.

If we had started months ago

saying we are going
to transition

in the MA population in
October and November,

and we're going to ask Washington
for permission to delay

enrollment until after
April 15 of next year,

it gives us a chance
to get our IT system

standing up for the population

that's most critical to cover.

It lets us transition
data out of

these very antiquated systems.

I mean, the MAXI

system that our programs
run through the county,

the field where you put
income is a text field.

It's not searchable
as a dollar amount.

That's how underground we
are on this information,

so we have to transition
all that data,

clean it, test it,

move it into a new system,

and then re verify
it once it's there,

and we have to actually

do some pretty extensive
testing to make

sure that when we get navigators

who are not trained
IT professionals,

they're not trained in
the insurance industry.

Now we have people who
really want to help

this critical population and

we don't even know if
the systems that they're

using are going to
be well tested.

I would have preferred
early communication

saying we are going
to make this a

stepwise transition so that

we start with that
smaller MA population,

500,000 people, and work
up to the 1.2-1.3 million.

But that is not the approach

the administration has taken.

Being the loyal opposition,

I will continue to work
very hard to make sure that

this is ready to go on

the timelines presented
by the administration.

But I think there are
better ways to do this.

If we had stepped back and
instead of just saying,

we're going to do what
the federal government

says and pushed back

even more on the federal
government and said,

no, Minnesota is good at this.

Let us manage our
healthcare system

and do it on our timeline,

and that would have
been my preference.

But that's not where we're at.

Conference committee
will wrap up tonight.

Remember, once you leave
a conference committee,

there are no amendments.

Whatever closes tonight
when the signatures go on

those jackets, it's done.

If you want any other changes,

you have to wait
till the legislature

comes back in session.

We're done with
all our deadlines,

so we can't do
another bill to fix

problems that come out of

the conference committee
until next session.

This afternoon is going
to be very critical to

make this thing work
for October 1st.

MALE_1: Senator Benson,
you've raised a number of

pretty significant
questions and challenges.

I'm curious it's true that

the timeline is
frighteningly short.

It seems almost impractical to

expect all of things that
are going to have to happen.

I think Scott's
point about, well,

what we end up with beginning
in January is probably not

what we would most desire.

We're going to have to
step it down a little bit.

But the question I have for you,

Senator Benson is looking
at that timeline now,

do you think Minnesota
would have been better

served if the first two years of

the Dayton administration
had focused on the

how of health reform

rather than the weather
of health reform?

I felt like a series
of conversations here.

There are a lot of
conversations in the Capitol,

and a lot of that time
was spent on the weather.

Now we're standing there,

and we're all like parachuters
with our parachutes

on 20,000 feet up frightened.

But do you think our time
would have been better spent

the first two years of
the Dayton administration

on the practical part?

Michelle Benson: The IT system
that we're talking about

now has been in the works.

There's nothing legislatively
that prohibited us

from having functioning
IT systems in place.

We waited for a
Supreme Court hearing.

A lot of us really
would have preferred to

keep control of Minnesota's
healthcare in Minnesota.

We didn't prevail on
Supreme Court case,

and by that time,

we were past the window where

a Republican voice
would have been able

to work on an exchange.

I don't know if a
Republican legislature

could have passed
something that complied

with the rules coming out of

a Kathleen Sebelius run
Department of Human Services.

We still don't have
clarity on Minnesota Care.

They gave us a time when they
will have made a decision,

but we don't have clarity.

We don't have clarity on
our essential benefit set,

even though we met the
Washington rules for

when the essential
benefit set came out,

they haven't gotten back to us.

When you talk about
people missing,

this is the most
significant thing

we will do in the legislature.

For 20 years, possibly.

It's the most
significant change to

healthcare in 50-60 years.

It is my opinion and
the opinion of many of

my colleagues that because
of the federal law,

when we want to make change

in healthcare in Minnesota, now,

we will have one hand
tied to Washington,

and that is really
disappointing.

Much as I might have disagreed

with Linda Berglan
and Tony Laurie,

at least we could have
those discussions

around our table and here at

the Humphrey School
and working with

the providers and patients
and payers in Minnesota.

But now we will have one
hand tied to Washington,

and that's the most
frustrating part for me.

I didn't come to
the legislature to

be a scribe for Washington, DC.

I came here to be a voice
for people in Minnesota.

I know we're not supposed
to do the partisan piece,

but this is a fundamental
change in the way

we make decisions
about healthcare

in Minnesota, and
it's important.

MALE_1: Steve Parente, imagining

you've got a lot of things
you'd like to raise.

I'd like to target you on
something where you've really

been a lead researcher,

which is private
insurance markets.

I want you to step back from

almost the back and forth
of legislative debate.

Just give us a sense,

how do the dynamics of

private health
insurance markets work?

What impact would you

anticipate based on
the research you

and others have done of

the changes that are being
talked about in Minnesota?

Steve Parente: Well, I guess

if you take a real big step
back and look at Susie,

the Affordable Care Act,
I can boom this out,

but we are going to
have an infusion of

federal dollars go into

this system so that
will increase coverage.

At the same time,

in terms of insurance,

there are going to
be restrictions

placed on the
marketplace that will

change the variation
in premiums.

To senator's point about choice,

the choice set for the
plans may be different,

but the choice and
the variation in

the premiums is going to be
substantially different.

Most of my research
is showing that with

the rules coming from
the Affordable Care Act,

folks that are pretty much
younger somewhere between

25-40 will be paying
substantially more,

maybe 30 or 40% more.

Folks that are good
news, I suppose,

is if you're basically 45,

50 and above, you'll be paying

less and you'll have options

that you hadn't had previously.

The concern I have
is, furthermore,

some of the restrictions on
consumer driven health plans

or high-deductible health plans,

although they're
allowed, I mean,

this is where the federal
law supersedes entirely

what the state might
want to do or not.

I mean, Minnesota birthed

consumer driven health plans

as an industry, to be honest.

I mean, the ones that survived
came out of this state.

The near as I can tell

the benefit restrictions that
are being placed upon them,

looking at my research will
pretty much come close to

killing half the market.
The reason why is.

MALE_1: Let's just pause
here for a second.

When you say kill
half the market,

you're talking about half

of the health plans or
half of [OVERLAPPING]?

Steve Parente: High-deductible
health plan market,

which is the fastest
growing part

of the insurance market over

the last seven or eight years.

Quietly, it's not something that

basically gets talked
about very much.

In the employer
sponsored market,

which is really somewhat not
totally immune from this,

the large employer market,

high-deductible
health plans have

displaced in the proportion
of choices, HMOs.

They've displaced
Kaiser Permanente.

They've displaced
health partners in

terms of being a grower share.

What the law provides is to say

that the deductibles
for a family plan,

which now can be as high
as 10,000, $15,000,

even in Minnesota, can't be
greater than five roughly.

Out of pocket can go to $10,000,

but it's a mix of
copayment and coinsurance.

That distinction of not

allowing the deductibles
to go up to $10,000

from an underwriting
perspective will

destroy the premiums
and make them too high.

That's just from an insurance

theory standpoint about what

concerns me based on

research and how people
have chosen plans.

The reason why it's from
my own research is that if

you are looking at what will
dampen demand for insurance,

you may actuarily
get the same thing

out with a premium between
coinsurance and deductible.

But the consumer
understands what a

deductible is far better
than coinsurance,

and to the point
where it dampens

the demand for that product,

even though it's actuarially

equivalent by as
much as 40 or 50%.

MALE_1: Now, when you talk about

the increase in the premiums,

that's after accounting
for the subsidies?

Steve Parente: Yes.
They'll still grow.

This is something
I've been modeling

nationally as well, the state.

It's just the there will
be a variety of folks

that didn't have to

be uninsured if high deductible
health plans were not,

if you will, a policy target.

MALE_1: Let me ask
you another question.

Again, if you could help
us work it through based

on the research
that's been done.

There's this quite intense
debate going on at the Capitol

between whether the
exchange should

be a passive or
active purchaser.

Stripping aside the position
taking by both parties,

what is the fundamental
issue there?

Steve Parente: Honestly,
it's hard to me to say,

because I think the
state exchanges

as the legislation
is rolling forward.

I mean, to Scott's point,

Minnesota took the lead in

creating the notion of what

an insurance exchange should be.

I mean, the Pawlenty
administration

floated the term exchange up.

The Massachusetts
Romney administration

floated up connector.

The Obama administration
picked up

a Pawlenty administration
term and turned

it into a national phrase.

The Republican
right demonized it.

Now, ironically, it's being

relabeled in the
legislation as marketplace,

which is interesting because

that's the course
I'd normally be

teaching now. I
love that course.

But besides that,

what concerns me is that if
you look at how the law is,

it's putting the state almost by

default into a
very passive role,

even if they select to get
involved in this market,

because the prescriptive nature

of the law about what

the benefit designs
are going to be like,

and they have to be these
different categories

and how they're going
to be administered.

I mean, this law as
near as I can tell

about 18 pages or
so, give or take,

printed out versus just
the prescriptive nature

of what's in the
Affordable Care Act,

determining the health plan
choices comes to 40 pages.

>> This is, I guess, as
much as [OVERLAPPING].

MALE_2: >> Your
point is basically

the activism has already been
done at the federal level.

Steve Parente: >> Pretty much.

MALE_2: >> What we're
talking about in Minnesota,

it's not without consequence,

but it's it's small potatoes.

Steve Parente: >> My
home these days is in

a finance department at
the Business School.

If you follow the
money, which one way is

that most of the
money to make any

of this works is
coming from the feds.

This is different than Minnesota

care where we
self-financed that.

We had provider taxes.

We figured out different ways to

handle things for
our population.

In this instance, at best,

we're acting as a
routing service from

the treasury department to
folks for their subsidies,

either for the Medicaid
expansion that will go through

Minnesota Care and be rebranded

as Lisa as our own to keep that.

But for the most part,
the other heavy lift

of this is to move
the money from

Treasury through the exchange

or potentially
directly to the plans.

One thing going
through legislation,

I see no mention of how the
money moves for the subsidy,

other than to say,
that'll be handled by how

the federal provisions handle

data sharing and
other components.

That to me is the
most intriguing part.

Actually, that can help
ensure that it'll make it.

I'll actually be something
there on 1114 because

you're going to
have to move very

quickly to make this happen.

But it does show
that if the state is

not and Scott can correct
me about this or April.

If the state is not moving
the money through its system,

we are really acting
up just as essentially

a website that connects people

for the money to move from

the federal government through.

If we don't control the money,

we don't control the process.

MALE_2: >> Scott, do you have
an answer to that question

about the handling of the money?

Are we just pass
through from the feds?

Scott Leitz: >>
Well, so let me just

step back to a couple of things
that Steve's been saying.

He makes an interesting point

about the role of
what the ACA set up

relative to how the
state is dealing

with the legislation
that's going through.

The exchange is really
that mechanism,

I think which you're pointing

out for the subsidies to flow.

You're absolutely
right that they are

federal subsidies that
are flowing through.

I guess I would agree
with Steve's points

on the fact that it is
federal money that's

flowing through to actually
do those premium buy downs.

The only other point though
that I would make is that as

we think about the way that

the policies that are going to

be sold through the
exchange are structured,

I'll just speak very briefly
from a Medicaid perspective,

I think that's very much
why we've thought about

the continuation of
Minnesota care because I

think that we've
taken a position,

and I think it's
fairly well shared

that for folks below
200 to poverty,

there's a different set of

decisions that they
need to make where

there' a much more

binding financial
constraint that they have.

There's probably an
appropriate place in

public programs for
folks below 200,

where we would have
basic health plan money

to help fund that program.

I think we view that
as you're right,

we structured Minnesota Care,

we created a funding mechanism.

We have the ability
to actually have

a more sustainable funding

mechanism through the
federal government

moving forward
through a funneling

of money into supporting that.

Above 200, it is a different
question in the exchange.

MALE_2: >> Steve, you raised

some pretty significant
questions about

operations and
also about impact.

I want to turn to
Michelle Kimball,

who's State Director of
ARP here in Minnesota.

Michelle, I'm hearing some
alarming issues being raised.

Scott Leitz from
the administration

has talked about what we

stand up in January of
2014 being just the start,

which is a pretty
significant concession

that we're gonna be far short

of perhaps what some
people have in mind.

We've heard Steve
Parente talk about

substantial increase in premiums

for at least part of
the insurance market.

We've heard Michelle Benson
from the Senate talking about

her real concerns
about whether this

is going to be
operational on a couple

of different dimensions and

really raise the specter
this is a large gamble.

Should consumers be worried?

Michelle Kimball: >> No.
[LAUGHTER] Here's why.

Politics and implementation,
technicalities,

difficulties aside,
I don't think

we should lose sight of
what this is all about.

This is about
insuring millions of

people who are not
otherwise insured.

Yes, standing it
up is difficult.

Are we going to
meet the deadlines?

Most likely not.

We've got some
technical difficulties

we have to deal with.

But the reality is that
at the end of the day,

there are going to be roughly
one million people in

the state of Minnesota who
are not otherwise insured,

who have the opportunity
to purchase insurance.

The reality is that roughly
70% of people who will enter

into a health exchange will see

their premiums either
stay the same or go down.

The reality is we now have

a insurance industry
thanks to the ACA,

they can no longer
deny coverage based on

a preexisting condition
can no longer put

a cap on the limits,

the financial limits that are

allowed to pay for the
care that you may need.

The reality is there will be

fewer families going bankrupt

because of extraordinary out
of pocket healthcare costs.

Now, when the exchange was

conceived a number of years ago,

when they were debating

the ACA and debating what
types of things need to be put

in place to ensure that there is

adequate coverage
available for those who

otherwise cannot access it now.

They looked at a current

existing health insurance
exchange model.

It's called the FEHBP

the Federal Employees
Health Benefit Plan.

In that model, there is

a board that oversees
the exchange,

and there are no insurers
that sit on that board.

That board's interest
is allowing plans

into the FEHBP that provide

the best coverage at

an affordable price for

those who are allowed
into that exchange,

which at this moment,

are federal employees,

members of Congress
and their staffs.

Now, in that exchange,

there are 17 plans that met
the high quality standards,

the criteria to
compete and to be

a part of that plan of
that particular exchange.

That is the initial model that

the current health
exchange was designed for.

Now, as a state,

we had the opportunity.
We had a choice.

The ACA said, "Look,

we're going to have to make

exchanges mandatory in order to

provide the greatest coverage

nationally for as many
people as possible."

The idea, of course, around
that is eventually in

the out years with
more people covered,

you will see healthcare
costs begin to come down.

The federal government was
given a choice by Congress.

That was, "Look,

you need to create a
health insurance exchange,

but we want to give states
as much choice as possible."

States will have the opportunity

to set up their own exchange.

If they don't do this
by the deadline,

which is January of 2014,

then the federal
government who has been

working to set up
their own exchange for

those states who choose not to

or don't meet the
deadline will step in

and provide the exchange

for that particular
state That said,

Minnesota has had this
tremendously unique opportunity

to lead the country

once again and establish

an exchange that is
one of the best,

if not the best in the country.

You do that and you

want as much consumer
choice as possible.

But you also want to allow into

the exchange those plans
that are high quality,

that meet certain quality
standards set by the state.

That's our opportunity to
lead and that are affordable.

The way that the
legislation is currently

being put together and debated
can allow that to happen.

That is what is most
important to consumers,

having the access to

those quality standards or

quality plans at an
affordable price.

Now, on the IT side,

yes, there are
technical difficulties.

There are difficulties
in doing that.

However, there are
several models

that currently exist out there.

One is medicare.gov.

Any of you seen KSTP news
at 10:00 last night,

you saw a story
about medicare.gov.

The story referenced going
to that site and being able

to see wait times
in emergency rooms,

which I had no idea could do.

Very fascinating.

But one of the things
the story did not

touch on that this does do.

It allows consumers to go
to this site, medicare.gov,

Medicare beneficiaries
and compare

plans that are available
under the Medicare program.

When I went and I compared

plans that are
available in Minnesota,

up to pop 60,

I believe it was
63 or 66 choices.

And there were plans that

were just straight
Medicare plans,

Medicare with drugs,
or just drugs.

When I looked at
Medicare with drugs,

I had 24 choices.

Those are a reasonable number
of choices to choose from.

It was all very well laid out.

I knew how much I
was going to pay,

what the deductibles were,

what the benefits were, etc.

That's the type of
thing we want to

see in a health
exchange in Minnesota.

We don't want to
see so many plans,

technically, if any
plan was allowed,

we have 11 insurers

that could participate in the
health insurance exchange.

In the House bill, for example,

there are four different
categories at a minimum.

They're saying each of

these insurers could offer

two plans per these categories.

We're talking 88 choices

for consumers in the
state of Minnesota.

That is without a
certain level of

quality standard being met

that we'd like to see in place.

That's a lot to choose from.

That's fine, but we want to
make sure that if there are

88 choices or if there are

60 choices or if
there are 25 choices,

that each of those plans meets

higher quality
standards and that

they are as affordable as

possible so that there is
real choice for consumers.

Michelle Benson: >> Larry, I
need to correct something.

MALE_2: >> Senator Benson.

Michelle Benson:
>> There are not

millions of
Minnesotans uninsured.

Michelle Kimball:
>> Up to a million.

Michelle Benson: >>
There are not millions

of Minnesotans uninsured.

Your statement was
there are millions

who are uninsured who will be

getting insurance
through the plan.

Michelle Kimball: >>
I met nationally.

Michelle Benson: >>
Nationally. But in Minnesota,

we are going to be moving

there 400-500,000
Minnesotans uninsured.

Half of them are eligible
for public programs already.

We will be moving
less than 300,000.

According to Gruber and
Gorman, about 298,000 people.

Who currently do not have

insurance will be moving
into the exchange.

Most of those people are already

eligible for public programs.

That will leave us with about

200,000 Minnesotans remaining

uninsured and we're working on

some safety net provisions
for those 200,000.

But we need to be careful

about what problem we
think we're solving.

Minnesota has the
lowest uninsurance

in the United States.

As I said, half of those people

are eligible for
public programs.

MALE_2: >> Senator Benson,
you raise a puzzle

that I've wrestled with,

and I'd like to pose it to
Michelle Kimball from the ARP,

which is if I was in Texas,

where there was a large number

of uninsured, where frankly,

state regulation
is not that great,

I might be quite
enthusiastic about reform.

Here in Minnesota, as
Senator Benson just said,

we don't have very
many uninsured,

at least proportionately and

certainly compared
to other states.

We have a nonprofit insurance
market that are generally,

compared to other states,

pretty good players
in the community.

There's not a lot
of scheming here.

The horror stories you
hear from other states,

pretty rare in Minnesota.

Our state regulators
do a pretty good job.

What I wrestle with is why

in Minnesota where things
are working so well?

Would there be such a push for,

not only meeting the
federal standards,

but going beyond those
federal standards

to a more active purchaser,

for putting on more rules.

Could you help me
walk through that,

particularly as we've heard,

some of the risks in terms of IT

or premium increases
or some other issues?

Michelle Kimball: >>
Sure, absolutely.

I think things are
working very well.

You are absolutely right.

We have one of the lowest
uninsured rates in the country,

and that is fantastic.

But try telling that to
someone who is uninsured.

The fact remains that we do have

hundreds of thousands
who are still uninsured.

We have an opportunity
to even lower

that number that I think
it's what it's 7% or 8%,

maybe 9% are uninsured.

We have the opportunity
to lower that even more.

Why not take that?

Why settle? We also have

the opportunity to continue
to lead the country.

I think it's great. We have

a terrific healthcare
system here in

Minnesota. Can we do more?

Absolutely. This is
part of bringing in

those small
businesses who cannot

afford to provide
healthcare coverage

for their employees
to date but could,

under the health
insurance exchange.

This is an opportunity
to bring in families

who currently do not have
the coverage that they need,

perhaps, they now have

a new opportunity here and
can afford to do that.

We have the opportunity
for those over

the age of 50 who
may have had to

retire early, for example,

and because they had
no other choice,

I know of a nurse that actually
is a volunteer with ARP,

who was forced to because of

physical disability
to retire earlier,

and her COBR payments

were so outrageous that
she had to drop them.

This is an opportunity
for people like her

to have healthcare
coverage while

they wait to become eligible for

the Medicare program and have

that healthcare coverage
in an affordable way

that does not take up so much of

their monthly income that

they can't continue to
pay their other bills.

MALE_2: >> Thank you
very much. See, Ferney,

I want to ask you about

unanticipated or ripple
effects from reform.

One of the aspects of

the Affordable Care Act
is to try to lower risk,

and there are several
different changes.

But one is to
change reinsurance.

I'm particularly interested in

the transition that's going
to go on from state to

federal reinsurance programs and

the effects it's going to
have in Minnesota as we move

from the largest high risk
pool in the country of

about just short of 30,000
to this federal system.

There are two issues,
and I'd love to get

your response to this
as we ponder them.

One is, it seems to

be once again another area
where Minnesota is going to

pay in more than it gets back

because our employers
have to pay

money into this transitional
reinsurance system.

The question is
whether Minnesota is

actually going to get
back what we put in.

The second is, what would
be the impact of dissolving

this large state high risk
pool on the premiums?

Steve Parente: The second
question is that the effect

of the premium is
not quite clear.

It depends upon
whether or not how

well that federal
reinsurance pool

is developed and
how it can expand.

Right now, there has been a
federal high risk pool that

was developed 90 days after
the law was passed in 2010.

It barely got nationally to
the number of people we have

in Minnesota by the end of
2011 in terms of coverage.

It has not been regarded
as a success the same

way MCHA has been in

this state in terms of
what it's been doing.

I know for a fact that MCHA was

the model that the feds
used to try to do this.

What makes the Minnesota
high risk pool model work

is a very good and
collaborative relationship

between the insurers
and the regulators

and the insurance
amitr' office to

make those innovations operate.

It's harder to do at
the federal level.

It's a little bit different
and quite honestly,

it hasn't deployed as well.

But if it doesn't get the
numbers that it wants,

it'll probably get reinvested.

The question is how
much additional money

has to go into it to make it go.

Already, it's not hitting
its budgetary target,

and you might say,
well, that's great

for fiscal austerity.

The downside is that it
was supposed to attract

a lot more people into it on

the federal level that it
hasn't otherwise already done.

MALE_1: Senator Benson?

Michelle Benson: Yes. Thank you.

The federal high risk pool
was funded at $5 billion.

It was slated to have
375,000 people in it.

It has 100,000, and

it is such a financial train
wreck that on March 2nd,

they closed it to
any new enrollees.

No one else can go in that
federal high risk pool.

Now, once the ACA
is fully in place,

there's a guaranteed
issue provision.

What we're doing in Minnesota
and the legislation

is keeping our MCHA
pool in place.

Our insurers are
paying $60 million to

Washington for a high risk pool

that none of our
people will go in,

and none of our
people will go in

it because you have to gap

six months insurance in
order to qualify for

the federal high risk
pool, which is now closed.

Our 27,000 MCHA enrollees
are going to stay in MCHA.

There's going to be
a transition that

the MCHA board will guide.

Again, Gruber Gorman,
and I'll defer to you,

Professor, Gruber
Gorman estimates

that if we did an
immediate dump,

of all of the MCHA enrollees
into the exchange,

basic health plan or
wherever they qualify,

it would bump premiums
in Minnesota about 49%.

We're going to do this in

a slower transition to mitigate
premium impact number 1.

Number 2, there are people
in the MCHA pool who have

rheumatoid arthritis
that might not be active

that can make a transition
to private insurance.

But if you're on stage
renal disease or you're

on an HIV protocol
that's very unique,

right now, we don't know what

the benefits in the
exchange look like.

For those very high risk
sensitive populations,

the MCHA board in
working with in

particular the Senate side said,

let's keep that last 20%.

Let's make sure we
have a good plan for

the 20% that's going
to remain in MCHA,

through the transition with

a goal that once the
exchange is up and running,

their products in
place, the board would

advise how to move
those populations over.

We're doing it the
most expensive way,

but particularly for
that population,

we want to make sure
we get it right.

MALE_1: As the guardian
against acronyms,

MCHA refers to a high
risk pool in Minnesota.

It's called

the Minnesota Comprehensive
Health Association.

As I said, it's the largest in

the country and as Professor
Steve Parente said,

it played a significant role on

how Congress thought
about this element.

Steve, Senator Benson has
raised a number of questions.

Can you reassure us that
some of her concerns

are probably not as big
as she's imagining,

or should we be worried?

Steve Parente: We should
be a little worried.

It's good to know that

the state wants to at least

have a backup plan
and pay extra.

Meaning, one way
you could look at,

essentially the state paying

extra money is that the state

is being maybe
unduly risk averse.

But that's not a bad thing,

given the safety
net aspect of this.

But I will say that the plan

for the high risk pools
is for it to be phased

out and for the plans to be

compensated based upon the
risk that they take in.

The thing that's not maybe clear

about this is that there will be

a federal formula or

algorithm by which
that will be done.

The question will be how well

that federal formula will work.

Again, another place for
Minnesota leads the nation.

There are several researchers,

one of which who worked
at HHS, Dave Knutson.

Actually, it's one of
the coolest things

I've seen in health economics.

They literally have run war
game scenarios to model what

the insurers
reactions will be to

different premiums
to make sure there

won't be death spirals,

and the premiums
won't actually spike.

They've been running
these for over a year

with Deloitte out of Germany.

The same folks who do
NADA war simulations to

see how people would actually
react to these differences.

MALE_1: There's a
very big issue here,

which is this transition.

It's going to be three
years to how we adjust

the insurance markets for

the risk that's going
to come into it.

You've got folks who, let's say,

have a high risk of cancer

versus some of our students

are at the U with very low risk.

You've got to find a way for
the insurance markets to

work at least in a sensible
way to spread that risk.

The Affordable Care Act and
federal government are in

process of pursuing

several different
strategies for doing that,

but there's enormous
uncertainty.

I'm hearing this from
a lot of states.

We've got a couple of pretty
straightforward questions

that we should have asked
more clearly upfront.

Scott, you're the guy who's

going to get a couple of these.

What exactly is the exchange
and what is being exchanged?

[LAUGHTER]

Scott Leitz: The exchange is

described as a marketplace for
health insurance coverage,

and it is targeted at people

who don't have job based
insurance coverage,

but who are subject
now starting in

January of 14th of

a requirement of having
health insurance coverage.

It's intended to be a
place where they can

go see their options
for coverage,

see what the prices are, what

the quality of those plans are,

and if they're below 400%

of the federal
poverty guidelines,

receive a subsidy to

purchase coverage through that
mechanism of the exchange.

What's being exchanged? Well,

you've used the term connector.

I think in some ways, that's why

Massachusetts actually chose
to use the term connector

because I think the goal
was to connect people

with a subsidy if
they're eligible for

it to coverage that's
available to them

and if they will pay a
premium in most cases.

I guess you could say
they're exchanging

money for health insurance

coverage through that mechanism,

but it was really intended
to be the mechanism

to really hook people
up to that coverage.

MALE_1: Thank you.

Second straightforward
question, I think,

which is the exchange
is nothing but

a veneer hiding the
true issue, cost.

How would the
exchange do anything

about the underlying
medical costs?

Scott Leitz: Well, I think
there's a couple of issues there.

The first is that
the exchange is

really meant to be the
mechanism that people

buy the coverage through and
to see what the options are.

I would argue that there is

an underlying
question here around

the cost of medical
care generally,

and that's really where some of

the broader system
reforms really fit in.

I think the exchange fits in as

part of that discussion in being

a mechanism to connect
people to coverage and

make sure that we have
people in coverage.

But I do think there's
a whole host of

questions that are outside of

some of the exchange
discussion that relate

to how we pay
healthcare providers,

what the incentives are for them

to reform the delivery system.

Generally, those are
the issues that are

actually going to affect
healthcare costs down the road.

MALE_1: Steve
Parente, there's been

four decades of discussion
in the United States

about how we use markets to

incentivize health plans to
compete on price and value.

This has just been an
ongoing discussion.

The idea of an exchange,

as you mentioned earlier,

actually comes out
of this idea of how

do create a marketplace.

It would have to be regulated to

some extent to
create that dynamic.

Assuming that Minnesota
is able to stand up

the exchange and operates

broadly as it's being conceived,

do you think the exchange itself

will create or could create

a competitive dynamic among

health plans that drives down
costs and raises quality?

Steve Parente: Maybe.
The competition

in terms of revealing
the prices to consumers,

I think will be a useful
thing, because right now,

even when I have classes
with students who

are taking an MBA class
in healthcare markets,

and I say, how many of you

have been on
ehealthinsurance.com?

Which sounds almost like

harmony for health
insurance, in a way.

It is.

Sixty people in a class
three put their hands up.

Several of which are working
for insurance companies.

Basically,
ehealthinsurance.com has

been doing essentially what

healthcare gov or medicare.gov
has been doing since 2000,

which is having a national
market post to the prices.

If nothing else, this actually

builds community
awareness and gets

the consumer to actually
shop, I think that's fine.

My fear about the exchange
is that it has been

oversold as a health
policy solution,

and that I think for
the Medicaid market,

for what Scott's doing
in terms of getting

Minnesota Care to
operate, it's awesome.

Actually will, I think,

clean up a lot of
things that should have

been cleaned up a long time ago.

For the folks that are
above the 200 or 233% line,

wherever Minnesota wants
to settle and there's

this expectation that there's

free coverage,
none of it's free.

A minimum requirement of

a certain portion of your
income has to go in.

That disconnect in
terms of the marketing

of how this law has been
sold and the reality

once people actually go to

the exchange will occupy at
least several segments of

public radio for the
first few months

of 2014, I'm pretty certain.

To the larger
question of whether

or not cost will
ultimately go down,

it really comes
down to a question

of what are the plans
going to be allowed to do

given the heavy
prescriptive nature

of the Affordable
Care Act to keep

costs down in
traditional mechanisms

that would actually reduce
year over year inflation.

Again, high deductible
health plans,

they are a very imperfect tool

for cost control, but they work.

If we effectively outlaw them,

we're going to be left
trying to hope that

the payment reform will
deliver the goods.

But the problem is we don't have

the accounting systems that
all the payment reform stuff

requires all the hospitals
and physicians to

do yet to make that
system operation.

MALE_1: Thank you very
much, Steve Parente.

I've got a couple more questions
here from the audience.

Scott Leitz, a question
from the audience.

I'm a retired IT executive

who purchases individual
health plan insurance.

What is Plan B if

the software for the exchange
isn't ready October 1?

Secondly, when they stand
it up and there are bugs,

what is the mechanism
for identifying them,

reporting them, and fixing them?

Scott Leitz: First of all,
if he programs in COBOL,

a job opportunity if he's

looking for some
work or he or she.

In terms of the backup plans,

if you will, I think,
is the question

or what will happen.

Again, I think we

will have an exchange
operating in January 14th.

That will be the plan that's
going to be moving forward.

MALE_1: We're very impressed
by your confidence.

Scott Leitz: Yes. But I
think the question is,

how will we need to continue

to work around as
things move forward?

If and one of the stand
up, what are the bugs?

How are we going to
report that back?

There will be bugs
along the way here.

I think everyone has acknowledged
that there's going to

be some challenges and
bumps along the way.

I think that the process that

the exchange is going to
be having moving forward,

from what I can tell from the

way the bills are structured,

is a fairly open public
process and that there'll be

opportunity for
public input along

the way as this gets built.

I think that's going to be
a really critical element

of this because it's new.

It's something
that will need to,

as I like to say, evolve.

Over time, that's
going to happen.

I think the answer is it'll be

an open public
process that people

have an opportunity
to have input into.

MALE_1: I'm going to make
a prediction right now.

I'm going to predict that

the year after Minnesota
passes health reform,

we'll have more coverage
about the problems than

the year before
in the discussion

about the challenges
and the questions.

That's going to be an
issue. Senator Benson,

I've got a question here,
I'd like to put to you.

Given the millions of dollars

the insurers will
gain in new premiums,

why shouldn't the
insurers pick up

the cost of running
the health exchange?

Michelle Benson: Thank
you. A couple things.

Ultimately, consumers
pay for everything.

There are two different
funding mechanisms in place.

You know what?

I'm not even sure what the House

ended up as their final
funding mechanism,

but I think it is still
the 3.5% withhold.

The decision on how
the exchange will

be funded will be made today.

The Senate version takes

it out of the
Health Impact fund,

which is the tobacco tax.

Right now, that money goes
into the general fund

to cover the tobacco costs
in our MA population.

Taking that money out means we

have a hole in our general fund.

Somebody's not going to
get their program or

somebody's taxes are going to go

up to pay for the exchange.

Ultimately, the lowest user

pays for whatever costs are
incurred by the exchange.

Now, I apologize.

I've lost my train of thought.

The 3.5% because the pricing

has to be the same inside
and outside of the exchange.

All the consumers
of that product,

whether inside or
outside the exchange,

will pay the 3.5% withhold.

I actually prefer that mechanism

for cost containment and

budgeting purposes
because it puts

more pressure on
the actual consumer

to determine if they're getting

value for the 3.5% that the
exchange is going to cost.

Now, there's disagreement in

the insurance community and
among the provider community,

particularly the
insurance community,

that that should be spread out

because it is a public good.

That's the debate that we
had on the Senate floor.

As I said, that
decision will be made

this afternoon so
I'll check back in.

Probably midnight
tonight, we'll know.

MALE_1: Michelle Kimball,
what's your view about funding?

Should it be the premium
withhold, the 3.5%?

Should we be going into

general revenue with
the healthcare access?

Michelle Kimball: I
actually agree with Senator

Benson on this one.

It should be the 3.5% withhold.

I think the Senate's version

is significantly less stable.

It's from the
tobacco tax, which,

as fewer people in
the out years are

smoking becomes less and
becomes a smaller pot,

and it does create a hole
in our general fund,

which we don't want
to see happen.

The 3.5 holdback comes from

the profits that are made
within the insurance industry,

which we estimate can be
as much as $3 billion.

But it is also on the consumer

to shop around for the
best value possible.

We do think that is a
much stabler source,

is that a word?

Much more stable source of
funding for the program,

and that's exceptionally
important.

MALE_1: We have run
out of time. I want

to thank the panelist,

Senator Benson.
Thank you very much.

Very busy day, Assistant
Commissioner Scott Leitz,

Michelle Kimball from AARP,

and my colleague, Steve Parente,

and thank all of you for coming.

[APPLAUSE]

FEMALE_1: That's
fine. [inaudible]