Editor's note: Tamara Cofman Wittes testifies before the Senate Committee on Foreign Relations for a session on aggravating factors and ways to stem the violence in the Syrian conflict. Read her full written testimony below or watch the live coverage.

Thank you, Mr. Chairman and Senator Cardin, for the invitation to appear before you today. I’d like to request that my full statement be entered into the record, and I’ll give you the highlight reel. And let me begin by emphasizing, as always, that I represent only myself before you today – the Brookings Institution does not take institutional positions on policy issues.

Opportunities Lost

When I last testified before this committee regarding Syria, in April 2012, I expressed my concern that American reticence to act to shape the emergent civil war and the involvement of regional powers in it risked enabling an unbridled escalation of the conflict. I suggested then that uncontrolled escalation could entrench sectarian violence, empower radicals, destabilize the neighborhood, and generate wide human suffering. While the Obama Administration has taken incremental steps over the last four years to try and shape both the battlefield and the context for diplomacy, those steps have proved too little and too late to alter the conflict’s fundamental dynamics.

President Obama’s initial read of the Syrian conflict as holding only narrow implications for American interests was a signal failure to learn the lessons of the post-Cold War period, and the civil wars of the 1990s, by recognizing the risk that Syria’s civil war could spill over in ways that directly implicated U.S. interests. The experience of the 1990s clearly suggested how a neglected civil war offered easy opportunities for a violent jihadist movement—just as the Afghanistan war did for the Taliban in the mid-1990s—and how large-scale refugee flows would destabilize Syria’s neighbors, including key U.S. security partners like Jordan and Turkey. And as we now know, ISIS used the security and governance vacuums created by the Syrian civil war to consolidate a territorial and financial base that the United States has been seeking since late 2014, with limited success, to undermine.

Unfortunately, the realistic policy options available to the United States have narrowed considerably since 2012, the violence is entrenched, the spillover is creating serious challenges for the neighborhood and for Europe, and the number of actors engaged directly in the Syrian conflict has proliferated. All of this means that the continuation of the Syrian civil war has direct and dire consequences today, not just for regional order, but for international security. This reality, combined with the tremendous human suffering this war generates every day, drives two clear imperatives for U.S. policy: to intensify efforts to contain the spillover and misery, and to seek an end to the conflict as soon as possible.

Ending the War

We must be realistic, however, about what steps will, and will not, end the Syrian conflict. Recently, some policy experts have suggested that, in the name of advancing great-power concord to end the war, the United States should relax its view that Bashar al-Assad’s departure from power is a requisite for any political settlement. This view rests on the assumption that Russia will not bend in its insistence on Assad’s remaining in place, and on the assumption that a U.S.-Russian agreement on leaving Assad in place would override the preferences of those fighting on the ground to remove him. Both of these premises, in my view, are incorrect.

We must therefore understand clearly the interests and imperatives driving the major players in this conflict, and we must understand, too, that the battlefield dynamics will heavily condition the prospects of any political settlement. Ending the bloody war in Bosnia in the 1990s involved getting the major external powers with stakes in the outcome – the United States, the Europeans, and Russia – to agree on basic outlines of a settlement and impose it on the parties. But imposing it on the parties required a shift in the balance of power on the battlefield, brought about by Croat military victories and ultimately a NATO bombing campaign. Bosnia also required a large-scale, long-term United Nations presence to separate the factions and to enforce and implement the agreement.

So I believe that, absent a change on the ground, diplomacy alone is unlikely to end the Syrian war – but I certainly agree with diplomatic efforts to advance a country-wide cessation of hostilities and advance a vision for a political settlement. A full-scale cease-fire could create more space for political bargaining, and in the meantime reduce human suffering and mitigate the spillover effects of the ongoing violence. Right now, however, the Assad government and its patrons in Tehran and Moscow have no interest in a sustained cease-fire, because the battleground dynamics continue to shift in their favor. They used the partial cease-fires of the past weeks to consolidate territorial gains from opposition forces and to further weaken those forces through continued air attacks. Without agreement amongst the various governments around the table as to which fighting groups constitute terrorist organizations, a ceasefire will inevitably disadvantage opposition factions as the Assad regime targets them in the name of counterterrorism. That will likewise advantage the most extreme among the rebel factions as well as jihadi groups like ISIS and Al Qaeda’s affiliate, Jabhat al-Nusra, who will all continue to use force to acquire and hold territory and to force their political opponents and inconvenient civilians off the field.

Likewise, some suggest that the sectarian nature of the conflict, and the deep investment of regional powers in backing their preferred sides, mean that it is not possible to hasten an end to the war at all, and that it must be allowed to “burn itself out.” This policy option is infeasible for the United States, from moral, political, and security standpoints. The scale of death and destruction already, over nearly five years of war, should shame the conscience of the world. Those seeking to escape this misery deserve our succor, and those seeking to end the carnage deserve our support. And it is beyond question that Bashar al-Assad and his allies are the ones responsible for the vast majority of this death, destruction, and displacement.

In political and security terms, the war’s spillover into neighboring countries and now into Europe can still get worse. Key states like Lebanon and Jordan are at risk of destabilization and/or extremist terrorism the longer the conflict goes on and the more of its consequences they must absorb. Turkey, as we know, has already suffered attacks by extremist groups. And the war has continued to be a powerful source of recruitment for extremists, drawing fighters and fellow travelers from around the world. ISIS and Al Qaeda feed on the civil conflict and the chaos on the ground is what gives them room to operate. It is indeed imperative that the United States remain engaged, and intensify its engagement as needed, to secure an end to the conflict as soon as possible.

Understanding the Geopolitical Context

In the ongoing diplomacy over how the conflict ends and what political settlement results, there are two issues on which the parties involved in the Vienna talks demonstrate sharp disagreement, and about which the United States needs to advance clear views. The first is a disagreement over the primacy of preserving the central Syrian government, currently headed by Assad. Russia, along with some regional actors (even some opponents of Assad), believe that the most important determinant structuring a political settlement must be the preservation of the Syrian central government, even if that means preserving Bashar al Assad in office. If Assad is ousted without an agreed-upon successor in place, they argue, then Syria will become a failed state like Libya, in which ISIS will have even more space to consolidate and operate, with dire consequences for regional and international security. It is this concern over state collapse and the desire for strong central authority that keeps Russia united with Iran behind Assad.

It’s understandable to desire the preservation of Syrian government institutions as a bulwark against anarchy, and to want a central government in Syria with which to work on counterterrorism and postwar reconstruction. The problem with elevating this concern to a primary objective in negotiations is its embedded assumption that any Syrian government based in Damascus will be able to exercise meaningful control over most or all of Syria’s territory after rebels and government forces stop fighting one another. That’s a faulty assumption, for several reasons.

First, it is extremely unlikely that we’ll see swift or effective demobilization and disarmament of sub-state fighting factions in favor of a unified Syrian military force. If the central government remains largely in the form and structure of Assad’s government, and even more so if Assad himself remains in power, it is hard to imagine rebel groups agreeing to put down their weapons and rely on security provided by the central government. Thus, local militias will remain important providers of local order and also important players in either defeating or enabling extremist groups like ISIS and Al Qaeda.

Second, effective governance from Damascus is extremely difficult to imagine, much less implement. The degree of displacement, the extent of physical destruction, and the hardening of sectarian and ethnic divisions due to five years of brutal conflict (and decades of coercive rule before that) all present steep challenges to centralized rule. Those with resources and capacity within local communities will end up being the primary providers of order at the local level – and it is local order, more than a central government, that will enable communities to resist ISIS infiltration. Thus, countries concerned with having effective governance in Syria as a bulwark against extremists need to recognize the value and importance of local governance in any post-war scenario.

Finally, there is the unalterable fact that Bashar al-Assad and his allies have slaughtered perhaps as many as 400,000 of Syria’s citizens; have used chemical weapons against civilians; have imprisoned and tortured thousands and displaced millions; and, through Assad’s own horrific decisions, have broken Syria’s government, the Syrian state, and the Syrian nation to bits. Those who demand his ouster as a prerequisite for ending the war are justified in their view that Assad does not have and will not have legitimacy to govern from a majority of Syrians, that his continued rule would be divisive and destructive of Syrian unity and security, and that he should instead face justice for war crimes and crimes against humanity. As a practical matter, and because of all this, many Syrian fighting factions on the ground and their supporters, are committed to Assad’s ouster. US-Russian concurrence on setting that goal aside will not induce them to end their fight. The only way that might occur is if Turkey, Qatar, and Saudi Arabia – who are committed to Assad’s ouster – relent on their demands and agree to curtail support to rebel factions who continue to fight. This is hard to imagine in the current circumstances.

In other words, while preserving the Syrian state is a laudable goal, it will not alone achieve the objectives set by those who hold it out as the primary imperative in the political negotiations over the future of Syria. I would suggest that, while the fate of Bashar al Assad is not perhaps of primary concern from the perspective of U.S. interests, the United States should be pressing Russia and others involved in the talks to relax their fixation on Syria’s central government (and who runs it) as a counterterrorism goal, and to recognize that a significant degree of decentralization and international engagement with local actors inside Syria will be necessary to preserve the peace, to carry out reconstruction, and to defeat ISIS. Likewise, the Syrian opposition and those states demanding Assad’s ouster as a precondition for peace must recognize that they have even more to gain from insisting on decentralization and local autonomy than they do from Assad’s departure from power. They might even be able to trade their current demand for Assad’s immediate departure against robust assurances for empowerment of local authority, release of detainees and internationally guaranteed transitional justice.

The second major issue under contention regarding a negotiated end to the Syrian war is the role that Iran will play in post-conflict Syria. Iran’s efforts to expand its infuence – in Syria and in the region as a whole – present a concern that unites all of the United States’s partners in the region, and should be a major concern for Washington as well. The gains made by the Assad regime (with Russian and Iranian help) over the past eight months enhance the disturbing prospect of a Syrian government remaining in power in Damascus that is dependent on Iranian funding, Iranian military support, and the importation of Iranian-backed militias. While the Russians are perhaps concerned more about the Syrian state as a bulwark against extremism, Iran is deeply committed to the survival of its Alawi client and the maintenance of Syria as a channel for Iranian support to Hizballah. And while some Sunni Arab states embrace the goal of preserving Syrian territorial integrity and the central government, all are troubled at the prospect that this government would be under the thumb of Tehran. Any political settlement that institutionalizes Iran’s overwhelming role in Syria will likewise increase Iran’s ability to impact to threaten Israel’s northern border, to destabilize Lebanese and perhaps also Jordanian politics, and to interfere with ongoing efforts to assuage the anxieties of Iraqi Sunnis and bring them back into alignment with the government in Baghdad.

The rising likelihood of an Iranian-dominated Syria emerging from the war has induced a change in attitude toward the Syrian conflict by America’s closest regional partner, Israel. Israeli officials took a fairly ambivalent stance toward the civil war for several years, although they were always wary of the Syrian-Iranian alliance. But today, they judge Assad’s survival as possible only through effective Iranian suzerainty, putting their most powerful enemy right on their border. Iranian domination of post-conflict Syria would also likely spell an escalation in Iranian weapons transfers to Hizballah – and Israel cannot expect to have 100% success in preventing the provision of increasingly sophisticated rocket and missile technology to Hizballah. These and other types of support from Iran through Damascus could increase Hizballah’s capacity to wage asymmetric war against Israel, at great cost to Israel’s civilian population. Israeli observers are increasingly alarmed at this scenario, and Israeli officials now state clearly that, if faced with a choice, they’d prefer to confront ISIS than Iran across the Israeli-Syrian frontier.

American diplomacy in Vienna must take greater account of the destabilizing implications of an Iranian-dominated Syrian government, even a rump government that does not control all of Syrian territory. A U.S. focus on constructing a political settlement that limits Iran’s influence in postwar Syria could induce greater coherence among American partners in Vienna currently divided over the fate of Assad; and it could prevent a situation in which the United States trades the threat of ISIS in Syria for the threat of Iranian-sponsored terrorism and subversion emanating from Syria.

Al Qaeda and the Syrian conflict

Al Qaeda’s affiliate Jabhat al-Nusra has particularly benefited from the war’s continuation, from the weakness and partiality of the ceasefires negotiated earlier this year, and from the inability of the U.S.-Russian diplomatic process to generate any progress toward a political transition. Shrewdly, Nusra has focused on building its reputation as the most consistent, and most effective, military opponent of the Assad regime, and on its readiness to cooperate with anti-Assad factions with whom it has other, ideological and political, disagreements. The failures of diplomacy feed Nusra’s strength and win it allies amongst more nationalist rebel factions. And while it’s tempting for American efforts to focus on rallying forces to defeat ISIS, our diplomats and decision makers must beware that leaning too far back on the issue of political transition for the sake of building an anti-ISIS coalition might just end up pushing more hardline opposition elements into the arms of a different extremist movement, one with demonstrated intent and capability to attack the United States.

To summarize, it’s imperative that American diplomacy to produce a political settlement of the Syrian war be firmly focused achieving two goals crucial to the interests of the United States and its regional partners: first, enabling and institutionalizing local governance as a bulwark against ISIS (more than central government institutions), and second, establishing hard limits on Iran’s role in a post-conflict Syria and on its ability to use Syria as a conduit for support to Hizballah.

Managing Spillover and Restoring Stability

A second major priority for US policy, in addition to this refocused diplomacy, must be stepped-up efforts to mitigate the destabilizing consequences of the Syrian war, no matter how long it goes on. And, while the United States continues to work through diplomacy and pressure to produce an end to the war, work must also begin now to prepare for the long-term and wide-scale effort needed for post-conflict stabilization and reconstruction.

The scope of death, displacement and destruction threatens to rob Syria of the basic ingredients for social stability, regardless of what lines might be drawn at a negotiating table in Vienna. Without concerted effort to ameliorate the effects of this conflict for people on the ground, to rebuild social trust, and to nurture resilience within these battered communities against conflict and division, any peace settlement could quickly unravel the face of local security dilemmas and intercommunal tensions, as well as in light of the unaddressed scars and grievances of Assad’s brutality against the Syrian people.

Meeting this challenge requires at least four lines of effort:

• doing more to engage Syrians in building local governance and community resilience, especially skills and platforms for conflict resolution;
• doing more to stabilize and secure frontline states, including support for integrating refugees into the economy and society;
• helping more refugees create new lives far from the conflict zone, including much more resettlement in the United States; and
• working diligently with regional partners to tamp down the sectarianism that both drives and is driven by the war, and that feeds extremist recruitment and violence.

As we have seen, ISIS markets itself partly on the order it provides to local communities – a brutal order to be sure, but still a contrast with the chaos and insecurity of civil war. To counter ISIS effectively, we must help local communities with governance and service delivery. More can be done even now to put into place the ingredients for successful and sustainable conflict resolution for Syrians. These steps include enabling and encouraging Syrians displaced by the fighting, whether in neighboring countries or in areas of Syria not under ISIS or regime control, to engage in dialogue over, and planning for, their own communal future. Neighboring states accepting refugees have understandably sought to tamp down political discussion and debate within refugee camps, for example. But these refugee populations need to engage in dialogue to build the basis, in social trust, that will enable them to manage daily governance and resolve differences peacefully if and when they are no longer living under refugee agencies and host-government security services. These processes can also connect, over time, to negotiating efforts on a political transition in which the Syrian opposition is represented, yielding greater legitimacy and efficacy to that more formal political process.

Too often, in discussing Syria, we posit a choice between working with the central government and working with unsavory non-state actors. There is an obvious additional option, already in play, that deserves greater emphasis: empowering and engaging local municipalities, local business sectors, local civil society, and other actors who exist in territory not under extremist or regime control and who have an obvious stake in the success of their own communities and their defense against coercion either from ISIS or from the Assad government. It is these local actors who will make or break the implementation of any political settlement, because they are the ones who will give it life and legitimacy. They are the ones who will help manage differences within their own communities and with their neighbors to avoid outbreaks of violence, and they are the ones who will lead the establishment of a new social compact to enable long-term stability in Syria. USAID and its implementing partners have been creative in developing programs to engage local communities and local governing institutions, and this work deserves robust, sustained support from Congress.

The United States continues to lead in international support for refugee relief – but it lags woefully in refugee resettlement. Only about 1300 of the 10,000 Syrian refugees the Obama Administration promised to admit into the United States have been resettled here so far; and the United States can and should accept more.

In addition, American policy efforts to address the refugee crisis must go beyond humanitarian relief and expanded resettlement. Working with European partners, the United States government can work to save lives along the transit routes for refugees fleeing the region, can support successful integration of refugees into European cities (again, working at the municipal level), and can do more to support social stabilization, livelihoods, and development for the large refugee communities in Lebanon, Jordan, and Turkey and for the societies hosting them.

On June 14 and 15^th, the Brookings Institution will convene a high-level gathering of regional, European, and American leaders to develop new responses and more robust forms of cooperation to meet this global humanitarian crisis. I look forward to reporting back to you on our results.

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• War in Syria: Next steps to mitigate the crisis

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As President Obama's second term winds down and the 2016 presidential election draws ever closer, the United States finds itself involved in two wars and other global hotspots continue to flare. As is often the case, defense and national security will be critical topics for the next president. Questions remain about which defense issues are likely to dominate the campaigns over the coming months and how should the next president handle these issues once in office. In addition, with the defense budget continuing to contract, what does the future hold for U.S. military and national security readiness, and will those constraints cause the next president to alter U.S. strategy overseas?

On February 1, the Center for 21st Century Security and Intelligence at Brookings hosted an event examining defense and security options for the next president. Panelists included Mackenzie Eaglen of the American Enterprise Institute, Robert Kagan of Brookings, and James Miller, former undersecretary for policy at the Department of Defense. Brookings Senior Fellow Michael O’Hanlon, author of “The Future of Land Warfare” (Brookings Institution Press, 2015), moderated the discussion.

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On February 2 and 3, 2010, the Brookings Institution Metropolitan Policy Program and Lazard convened leaders from the public sector, energy, infrastructure, finance and venture capital communities for an in-depth conversation focused on innovative policy and business practices that will help build the next American economy.

California Governor Arnold Schwarzenegger and Pennsylvania Governor Edward G. Rendell provided the keynote remarks. Both stressed the need for strategic investments in innovative infrastructure and energy practices going forward.

Framing the conference was the notion that the next American economy must be export-oriented, low carbon, innovation-fueled and opportunity rich—an idea which has been proposed by leading economists such as Director of the National Economic Council Larry Summers. It is with this mindset that Brookings and Lazard put together high-level, dynamic panels that centered around the private sector needs for building out the next American economy—and the policy implications. Specifically, they focused on how the traditional industry leaders (e.g., utility companies), the new industry leaders (e.g., venture capital investors), and public sector leaders can work together to move our country forward, especially within the metro areas where the resources and networks that drive innovation are rooted.

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• The Keys to American Competitiveness

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• The Next American Economy: Transforming Energy and Infrastructure Investment

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The issue of Armenia enters the Turkish foreign policy agenda almost exclusively in the context of Western attempts at legislating genocide resolutions. The result is often a reactive nationalist defense.

In less than two years, by 2015, Turkey will find itself in a similar dilemma. Once again, it will be external dynamics that will drive the domestic and foreign policy debate, and quite predictably Turkey will react with anger and resentment to Western attempts at commemorating the centennial of the Armenian genocide. In order to avoid such an ordeal, Ankara needs to think about Armenian-Turkish relations now, before Western pressure builds up. The fact that Foreign Minister Ahmet Davutoğlu visited Yerevan last week is a step in the right direction and needs to be congratulated. Instead of panicking shortly before 2015, the Turkish government needs to pursue a multidimensional strategy, starting now. The first dimension of the strategy should be the opening of the border and the establishment of diplomatic relations between the two countries.

As it is well known, shortly after the signature of the two protocols aiming at achieving these two goals in 2009, Ankara decided to index the ratifications of the protocols to the resolution of the Nagorno-Karabakh conflict. Linking the normalization of relations to a “frozen conflict” had the impact of freezing the protocols as well. It also showed that Turkey had no empathy for the Armenian political leadership, which took a lot of heat from the diaspora for dropping genocide recognition as a precondition for the normalization of relations with Ankara.

In retrospect, the Turkish decision to establish a precondition for normalization with Armenia was shortsighted because it practically gave Azerbaijan de facto veto power over Turkish-Armenian normalization. Instead, what Turkey should have done was to establish diplomatic and economic relations with Armenia with the hope that such a policy of engagement would in time create positive momentum and leverage in favor of a resolution in Nagorno-Karabakh. It remains unclear whether a breakthrough in this frozen conflict can be achieved in the absence of Turkey gaining more leverage in relations with Armenia. It looks like sequencing is the main problem here. The Turkish side is reportedly ready to open the border, establish diplomatic relations and even provide financial support to Armenia in return for an Armenian withdrawal from two of the seven occupied regions surrounding Nagorno-Karabakh. This proposal looks like the same one Prime Minister Recep Tayyip Erdoğan made a few years ago to his Armenian counterpart at the time, Robert Kocharyan. Kocharyan had refused the Turkish demand on the grounds that there should be no linkage between Nagorno-Karabakh and normalization with Turkey. It is hard to see why today the Armenian reaction to a very similar Turkish proposal would be any different.

Therefore, this most recent Turkish attempt at rapprochement with Armenia is also likely to fail in the absence of a unilateral Turkish gesture such as the opening of the border without preconditions. On the other hand, since Turkey is always in some kind of election season, it is almost impossible to see the Justice and Development Party (AKP) invest serious political capital in rapprochement by taking such a courageous step. Under such circumstances, it is not surprising that the Armenian media saw Davutoğlu's Yerevan visit as nothing more than a public relations campaign. If Turkey is really serious about normalizing relations with Armenia, it will have to take some risks in relations with Azerbaijan. The key will be to convince Baku that only the normalization of Turkish-Armenian relations will create positive momentum in solving the Nagorno-Karabakh dispute. Turkey needs to open the border first and expect its diplomatic and economic engagement policy with Armenia to pay off in the long run. The alternative is to continue with the current policy. The current Turkish policy has produced no change in Nagorno-Karabakh in the last 20 years. It is time to think more creatively.

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The Center for 21st Century Security Intelligence seventh annual military and federal fellow research symposium

On March 1, the seventh annual military and federal fellow research symposium featured the independent research produced by members of the military services and federal agencies who are currently serving at think-tanks and universities across the nation. Organized by the fellows themselves, the symposium provides a platform for building greater awareness of the cutting-edge work that America’s military and governmental leaders are producing on key national security policy issues.

With presidential primary season well underway, it’s clear that whoever emerges in November 2016 as the next commander-in-chief will have their hands full with a number of foreign policy and national security choices. This year’s panels explored these developing issues and their prospects for resolution after the final votes have been counted. During their keynote conversation, the Honorable Michèle Flournoy discussed her assessment of the strategic threat environment with General John Allen, USMC (Ret.), who also provided opening remarks on strategic leadership and the importance of military and other federal fellowship experiences.

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• Beyond 2016: Security challenges and opportunities for the next administration

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On August 7, the White House announced cancellation of the planned Moscow summit in early September between Presidents Obama and Putin, saying there were no prospects for significant progress on key issues at the meeting.  The White House also said cooperation with Russia remains a priority, and on August 9 Secretaries Kerry and Hagel met with their Russian counterparts, Ministers Lavrov and Shoigu.  While President Obama intends to travel to St Petersburg for the G20 summit on September 6 and 7, there has been no word on whether there will be a bilateral meeting with President Putin on the margins of the summit.  Clearly, U.S.-Russian relations have entered troubled times.

On August 28, the Center on the United States and Europe hosted a panel discussion to address these developments and future prospects for the bilateral relationship between Washington and Moscow.  Brookings Senior Fellows Clifford Gaddy, Steven Pifer and Angela Stent will take part.  Brookings Visiting Fellow Jeremy Shapiro moderated.   Following opening comments, the panelists took questions from the audience.

Watch full video from the event at C-SPAN.org »

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• What the U.S. Does in Syria Will Be Costly for Russia
• Russia Reluctant to Intervene in Syria
• Russia Fears Increased Instability in the Middle East

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• The U.S.-Russia Relationship: What's Next?

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Health reform (aka Obamacare) is entering a new stage. The recent announcement by United Health Care that it will stop selling insurance to individuals and families through most health insurance exchanges marks the transition. In the next stage, federal and state policy makers must decide how to use broad regulatory powers they have under the Affordable Care Act (ACA) to stabilize, expand, and diversify risk pools, improve local market competition, encourage insurers to compete on product quality rather than premium alone, and promote effective risk management. In addition, insurance companies must master rate setting, plan design, and network management and effectively manage the health risk of their enrollees in order to stay profitable, and consumers must learn how to choose and use the best plan for their circumstances.

Six months ago, United Health Care (UHC) announced that it was thinking about pulling out of the ACA exchanges. Now, they are pulling out of all but a “handful” of marketplaces. UHC is the largest private vendor of health insurance in the nation. Nonetheless, the impact on people who buy insurance through the ACA exchanges will be modest, according to careful analyses from the Kaiser Family Foundation and the Urban Institute. The effect is modest for three reasons. One is that in some states UHC focuses on group insurance, not on insurance sold to individuals, where they are not always a major presence. Secondly, premiums of UHC products in individual markets are relatively high. Third, in most states and counties ACA purchasers will still have a choice of two or more other options. In addition, UHC’s departure may coincide with or actually cause the entry of other insurers, as seems to be happening in Iowa.

The announcement by UHC is noteworthy, however. It signals the beginning for ACA exchanges of a new stage in their development, with challenges and opportunities different from and in many ways more important than those they faced during the first three years of operation, when the challenge was just to get up and running. From the time when HealthCare.Gov and the various state exchanges opened their doors until now, administrators grappled non-stop with administrative challenges—how to enroll people, helping them make an informed choice among insurance offerings, computing the right amount of assistance each individual or family should receive, modifying plans when income or family circumstances change, and performing various ‘back office’ tasks such as transferring data to and from insurance companies. The chaotic first weeks after the exchanges opened on October 1, 2013 have been well documented, not least by critics of the ACA. Less well known are the countless behind-the-scenes crises, patches, and work-arounds that harried exchange administrators used for years afterwards to keep the exchanges open and functioning.

The ACA forced not just exchange administrators but also insurers to cope with a new system and with new enrollees. Many new exchange customers were uninsured prior to signing up for marketplace coverage. Insurers had little or no information on what their use of health care would be. That meant that insurers could not be sure where to set premiums or how aggressively to try to control costs, for example by limiting networks of physicians and hospitals enrollees could use. Some did the job well or got lucky. Some didn’t. United seems to have fallen in the second category. United could have stayed in the 30 or so state markets they are leaving and tried to figure out ways to compete more effectively, but since their marketplace premiums were often not competitive and most of their business was with large groups, management decided to focus on that highly profitable segment of the insurance market. Some insurers, are seeking sizeable premium increases for insurance year 2017, in part because of unexpectedly high usage of health care by new exchange enrollees.

United is not alone in having a rough time in the exchanges. So did most of the cooperative plans that were set up under the ACA. Of the 23 cooperative plans that were established, more than half have gone out of business and more may follow. These developments do not signal the end of the ACA or even indicate a crisis. They do mark the end of an initial period when exchanges were learning how best to cope with clerical challenges posed by a quite complicated law and when insurance companies were breaking into new markets. In the next phase of ACA implementation, federal and state policy makers will face different challenges: how to stabilize, expand, and diversify marketplace risk pools, promote local market competition, and encourage insurers to compete on product quality rather than premium alone. Insurance company executives will have to figure out how to master rate setting, plan design, and network management and manage risk for customers with different characteristics than those to which they have become accustomed.

Achieving these goals will require state and federal authorities to go beyond the core implementation decisions that have absorbed most of their attention to date and exercise powers the ACA gives them. For example, section 1332 of the ACA authorizes states to apply for waivers starting in 2017 under which they can seek to achieve the goals of the 2010 law in ways different from those specified in the original legislation. Along quite different lines, efforts are already underway in many state-based marketplaces, such as the District of Columbia, to expand and diversify the individual market risk pool by expanding marketing efforts to enroll new consumers, especially young adults. Minnesota’s Health Care Task Force recently recommended options to stabilize marketplace premiums, including reinsurance, maximum limits on the excess capital reserves or surpluses of health plans, and the merger of individual and small group markets, as Massachusetts and Vermont have done.

In normal markets, prices must cover costs, and while some companies prosper, some do not. In that respect, ACA markets are quite normal. Some regional and national insurers, along with a number of new entrants, have experienced losses in their marketplace business in 2016. One reason seems to be that insurers priced their plans aggressively in 2014 and 2015 to gain customers and then held steady in 2016. Now, many are proposing significant premium hikes for 2017.

Others, like United, are withdrawing from some states. ACA exchange administrators and state insurance officials must now take steps to encourage continued or new insurer participation, including by new entrants such as Medicaid managed care organizations (MCOs). For example, in New Mexico, where in 2016 Blue Cross Blue Shield withdrew from the state exchange, state officials now need to work with that insurer to ensure a smooth transition as it re-enters the New Mexico marketplace and to encourage other insurers to join it. In addition, state insurance regulators can use their rate review authority to benefit enrollees by promoting fair and competitive pricing among marketplace insurers. During the rate review process, which sometimes evolves into a bargaining process, insurance regulators often have the ability to put downward pressure on rates, although they must be careful to avoid the risk of underpricing of marketplace plans which could compromise the financial viability of insurers and cause them to withdraw from the market. Exchanges have an important role in the affordability of marketplace plans too. For example ACA marketplace officials in the District of Columbia and Connecticut work closely with state regulators during the rate review process in an effort to keep rates affordable and adequate to assure insurers a fair rate of return.

Several studies now indicate that in selecting among health insurance plans people tend to give disproportionate weight to premium price, and insufficient attention to other cost provisions—deductibles and cost sharing—and to quality of service and care. A core objective of the ACA is to encourage insurance customers to evaluate plans comprehensively. This objective will be hard to achieve, as health insurance is perhaps the most complicated product most people buy. But it will be next to impossible unless customers have tools that help them take account of the cost implications of all plan features and report accurately and understandably on plan quality and service. HealthCare.gov and state-based marketplaces, to varying degrees, are already offering consumers access to a number of decision support tools, such as total cost calculators, integrated provider directories, and formulary look-ups, along with tools that indicate provider network size. These should be refined over time. In addition, efforts are now underway at the federal and state level to provide more data to consumers so that they can make quality-driven plan choices. In 2018, the marketplaces will be required to display federally developed quality ratings and enrollee satisfaction information. The District of Columbia is examining the possibility of adding additional measures. California has proposed that starting in 2018 plans may only contract with providers and hospitals that have met state-specified metrics of quality care and promote safety of enrollees at a reasonable price. Such efforts will proliferate, even if not all succeed.

Beyond regulatory efforts noted above, insurance companies themselves have a critical role to play in contributing to the continued success of the ACA. As insurers come to understand the risk profiles of marketplace enrollees, they will be better able to set rates, design plans, and manage networks and thereby stay profitable. In addition, insurers are best positioned to maintain the stability of their individual market risk pools by developing and financing marketing plans to increase the volume and diversity of their exchange enrollments. It is important, in addition, that insurers, such as UHC, stop creaming off good risks from the ACA marketplaces by marketing limited coverage insurance products, such as dread disease policies and short term plans. If they do not do so voluntarily, state insurance regulators and the exchanges should join in stopping them from doing so.

Most of the attention paid to the ACA to date has focused on efforts to extend health coverage to the previously uninsured and to the administrative stumbles associated with that effort. While insurance coverage will broaden further, the period of rapid growth in coverage is at an end. And while administrative challenges remain, the basics are now in place. Now, the exchanges face the hard work of promoting vigorous and sustainable competition among insurers and of providing their customers with information so that insurers compete on what matters: cost, service, and quality of health care.

Editor's note: This piece originally appeared in Real Clear Markets. Kevin Lucia and Justin Giovannelli contributed to this article with generous support from The Commonwealth Fund.