TAILIEUCHUNG - Best Alternatives to a Federal Insurance Exchange in Tennessee: A Summary of Stakeholder Feedback

Tax compliance researchers begin with the supposition that people compare the marginal benefit of noncompliance (reduced tax payments, for example) with the expected marginal costs, which account for both the likelihood of punishment and its severity. That perspective provides an approach for evaluating the effective penalties uninsured people could anticipate under an individual health mandate. Allingham and Sandmo (1972) first analyzed tax compliance under the assumption that taxpayers are risk averse and policymakers have three policy tools: the marginal tax rate, the probability of audit, and the penalty for misreporting income | State of Tennessee Insurance Exchange Planning Initiative Best Alternatives to a Federal Insurance Exchange in Tennessee A Summary of Stakeholder Feedback October 21 2011 Executive Summary best alternatives to a FEDERALLY-OPERATED insurance exchange in TENNESSEE Introduction Tennessee has a choice either the state or the federal government will likely operate an insurance exchange within our borders beginning in late 2013. To help inform this decision this report summarizes the feedback that we have received from stakeholders over the past year. The report examines each of the key policy questions explains the relevant options and the advantages disadvantages afforded by each and summarizes several preliminary thoughts if the State were to opt for a state-run exchange. This report does not recommend whether the State should run an exchange. Rather the report synthesizes the input of stakeholders to describe the best alternatives to a federally-operated exchange in Tennessee. As a point of departure we summarize the requirements of the federal health reforms related to exchanges. To provide some context we discuss the types of uncertainty . legal and political challenges to the PPACA and the impact on our planning effort. We describe the limited amount that is known about a federally-facilitated exchange. We then report the types of feedback that we have received from Tennesseans during a number of presentations and listening sessions across the state. Finally we present our framework for evaluating various options - and we summarize our results by describing the features of a state-run exchange that appear most appropriate for Tennessee. Listening to Tennesseans about Alternatives This document is based on what we have heard from stakeholders in Tennessee. Tennessee is home to many people with expertise and perspective on health insurance such as small business owners insurance agents healthcare providers consumers and insurance companies. Over the past year we

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