The Rolling Hills Group

1. The Rolling Hills Group Creating the Plan for Healthcare Reform for Tennessee

2. About The Rolling Hills Group • Goal is to create healthcare reform in Tennessee that could serve as a model for other states and the nation • Prominent Tennessee “thought leaders” chaired by Clayton McWhorter • Representatives from Nissan, BlueCross, hospital industry, banking, attorneys, physicians • Staffed by former CMS administrator and former staff to Senator Ron Wyden • Routinely met from October 2007 through November 2008

3. Goals for Healthcare Reform • Universal insurance employing a mix of private and public structures and funding • Health system reforms that produce a higher value for the dollars spent on care and increase the use of best practices and evidence-based decision making • Funded through changes to the federal tax code and the better use of existing funding and resources without adding new costs

4. Overall Approach to Expanding Access to Coverage • Requires all Americans to have comprehensive health insurance coverage by 2019 • Requires the creation of state or regional risk pools • Comprised of private insurance offerings • All offerings must be actuarially equivalent to the standard BlueCross plan offered Federal employees • Oversight of the pools will be by Regional Federal Health Reserve Boards • Medicaid, Medicare and SCHIP remain intact

5. Federal Health Reserve Board Oversight of Risk Pools Health Insurance Connector

6. Oversight of Plans Insure participation in the pool is adequate to provide a strong base of private insurance offerings Require all insurers to minimally provide a comprehensive benefit package Guarantee access to insurance for all Limit insurer’s ability to vary premiums based on health risk or other factors Establish administrative standards for participating insurers Monitor insurer profits and medical loss ratios Connector Role Provide outreach and enrollment support Provide standard information on participating plans Assist uninsured and employers in selection of plans Establish and monitor subsidies Determine criteria for and amounts of subsidies Assist individuals determining eligibility for and in applying for subsidies

7. The Requirement“Everyone Covered” Uninsured Individuals Direct purchase of insurance from the risk pool Random assignment at time of interaction with the health system Move employees to the lower cost pool Maintain current insurance Employers Employer group lower risk than FHR pool plans pays into the pool Employer group higher risk than FHR pool plans receives payments form the pool

8. EnforcementNo New Bureaucracy Proof of insurance required to complete usual interactions with government OR Random assignment when an uninsured person attempts to interact with the health care system Lower Income Higher Income Premium paid directly to risk pool plan by US Treasury Cost becomes an IRS tax liability

9. Premium Subsidies For The Uninsured Income < 150% of poverty – full cost subsidized Income between 150% and 350% of poverty – sliding scale subsidy Subsidies paid directly to risk pool plan – not to individual Low income with credible coverage are not eligible for subsidies Tax subsidies will be limited to the “actuarial value” of a Blue Cross Standard Option PPO, with a $750 deductible indexed to inflation

10. Funding The System Currently Insured Individuals Taxed on health insurance benefits that exceed the cost of the FHR benchmark plan Employers Business expense deduction only allowed for cost of FHR benchmark plan Deduction phased down to 50% of the cost of the FHR benchmark plan by 2019 Providers Phase out of special payments currently used to offset the cost of unreimbursed Medicare, Medicaid and charity care

11. How the Funding is Generated Currently Insured Individuals Employer provides health insurance benefit that costs $5,000 The cost of the risk pool plans is $4,000 The individual is taxed on the difference, or $5,000 - $4,000 = $1,000 Employers Employer provides health insurance benefit that costs $5,000 The cost of the risk pool plans is $4,000 The employer may only claim the risk pool cost of $4000 as a business expense ( instead of $5,000) By 2019 the amount the employer may deduct as a business expense is reduced to $2,000 ( half of the cost of the risk pool plan) Providers In 2012, a hospital receives $5 million in disproportionate share hospital payments (DSH) payments from the state and federal government to help offset the cost of charity care In 2019, the hospital charity care volume has virtually been eliminated and the $5 million will be redirected to fund cost of the FHR and the subsidies

12. Phasing In The Plan 2010 - Tax Code Changes 2012 - Initial Coverage Requirement Those with income <100% of poverty Those with income >350% of poverty 2019 - Virtually Everyone Covered • Full subsidies for those <150% of poverty • Partial subsidies for those from 150% to 350% of poverty

13. Additional Federal Reforms to Reduce Costs and Improve Quality • Return to the original rules prohibiting direct to consumer advertising for prescription drugs • The FHR system should make drug coverage recommendations that would guide plan formularies for cost and effectiveness • Pharmacy benefit managers should provide increased transparency concerning drug costs and utilization • Research to expand evidence - based guidelines would become a priority • Support for health information technology initiatives to improve quality and reduce costs • Align payments and incentives for coordinated care through the FHR system, CMS, and other agencies

14. Tennessee Reform Initiated in 2010 • Create a state risk pool that meets the requirements for federal reform • All Tennesseans in families with incomes above 400 percent of poverty would be required to have at least the basic health plan offered through the insurance pool or have other public services disallowed (licenses, benefits, etc) • Children in families with incomes up to 250 percent of the federal poverty level should be required to enroll in Tennessee’s CoverKids program

15. Tennessee as a Laboratory for Additional Reforms to Reduce Cost and Improve Quality • Outcomes and Quality • Design and test new methods of provider education that foster adoption of best practices • Leverage national research organizations and Tennessee’s medical schools and universities to develop ongoing review of all elements of the healthcare system • Payment Reform • Test new models of payment that align incentives among providers • Evaluate new payment systems that include incentives for providers who successfully treat chronic care patients, including a medical home model • Require payers to have plans evaluated periodically to ensure payment is supporting the use of primary care and disease management • Evaluate alternative payment and delivery models that emphasize health and wellness

16. Tennessee as a Laboratory for Additional Reforms to Reduce Cost and Improve Quality • Transparency • Develop and encourage the use of standardized quality measures among payers and providers • Provide patients and purchasers information concerning cost and quality of providers and insurers • End of Life Care • Enhance information and understanding about end of life care. • Provide ongoing education concerning living wills, advanced directives and health proxies • Tort Reform • The liability system should be reformed to minimize risk for providers who follow evidence-based guidelines