JUDY WOODRUFF: But, first, we step back for a fuller explanation of how the exchanges should work. One state has already been running its own insurance marketplace for years, and in many ways, it has served as a model for the new ones.

Economics correspondent Paul Solman reports from Massachusetts. It’s part of his ongoing reporting Making Sense of financial news.

DEB DORSEY, filmmaker: In 1997, I was diagnosed with breast cancer after a routine mammogram.

PAUL SOLMAN: Boston filmmaker Deb Dorsey, whose health nightmare became a documentary.

DEB DORSEY: I went through four rounds of chemotherapy and six weeks of radiation. Then it turned out that the adriamycin that they had given me with the chemotherapy had done damage to my heart, and I went into heart failure. And they said, we think you’re a candidate for a pacemaker.

PAUL SOLMAN: Dorsey had health insurance through the company she owned with her filmmaker husband, who freelances for the NewsHour. But when the business tanked, Dorsey’s prior conditions put her in peril.

DEB DORSEY: Me without insurance would have been a disaster because nobody would have insured me.

PAUL SOLMAN: Disaster didn’t happen. Dorsey could buy insurance because of the Massachusetts health law signed by Republican Governor Mitt Romney in 2006 and its online marketplace, the Health Connector, where some quarter-of-a-million people now get insurance from nine private companies. It’s the model for the state exchanges being set up under the Affordable Care Act.

So, what is the Connector, and how has it worked?

MAN: Good afternoon. Thank you for calling the Health Connector.

PAUL SOLMAN: At a Boston call center which fields consumer questions, the Connector’s executive director, Jean Yang, described it this way. 

JEAN YANG, Health Connector: The experience that you get is not going to be that different from when you typically go to an e-commerce Web site, where consumers can easily browse, compare options and complete a transaction. And then that fosters competition, so eventually it leads to a more efficient market.

JON GRUBER, Massachusetts Institute of Technology: You can look for health insurance for individuals and families, employers who want to shop for their businesses and for brokers.

PAUL SOLMAN: MIT economist Jon Gruber, who helped craft the Connector, gave us a walk-through.

So, let’s say it’s just you as an individual.

JON GRUBER: OK, then it’s going to ask about my income, and the reason is, because if I’m lower income, I’m eligible for special subsidies to the low-income families.

PAUL SOLMAN: Got it.

JON GRUBER: I’m not, so I’m going to continue.

PAUL SOLMAN: Then you type in your zip code and your birthday.

JON GRUBER: OK, now it’s retrieving all my available plans and rates.

PAUL SOLMAN: The Connector has different levels of choices. That’ll be the case in other states, too. Bronze has the lowest premiums or up-front costs, but higher out-of-pocket costs when you receive care. Silver and gold are next, and the Affordable Care Act adds platinum, which has the most expensive premiums, but lowest out-of-pocket.

JEAN YANG: A platinum plan, which is the highest tier, the insurance plan will be covering 90 percent of the cost, where a consumer will be responsible for 10 percent. A gold plan is 80 percent cost assumed by the insurance company, and a silver is 70 percent, and a bronze is 60 percent.

PAUL SOLMAN: Within the metallic tiers, insurance companies offer competing plans. The benefits are the same, but prices vary, based in part on which doctors and hospitals participate. But it wasn’t always this simple.

JEAN YANG: We started with very much a any-willing-plan model.

PAUL SOLMAN: So, I just — I would have gone to the Web site.

JEAN YANG: Yes.

PAUL SOLMAN: And I would’ve just seen plan after plan after plan after plan?

JEAN YANG: Correct, yes. And it very quickly became too confusing. So, we standardized our product design. You know what is covered, what is not covered, how much is covered. If I go see a doctor, if I go to the emergency room, how much am I supposed to pay? It’s the same.

PAUL SOLMAN: By contrast, the new federally-run exchanges will not require that plans have the same features, at least not at first.

JON GRUBER: Hi, Phoebe.

PAUL SOLMAN: MIT’s Gruber shares his home in Lexington, Massachusetts, with more than a few feathered friends, among them, Phoebe the cockatoo.

JON GRUBER: Phoebe is going to live about 100 years.

PAUL SOLMAN: We mention Phoebe as a reminder that long life is a key economic good. But it tends to require health care, which, for most of us requires insurance. So, from his economics perch, Gruber’s Connector was first and foremost about insuring the uninsured.

JON GRUBER: However, you can’t just do that in a vacuum, because if you tell insurers you have to insure everyone at the same price, but people can wait until they’re sick to buy insurance, they will lose money and get out of the business.

PAUL SOLMAN: Insuring everyone, therefore, is just the first leg of a three-legged stool.

JON GRUBER: So you cant get the first goal without a second leg of the stool and that’s the individual mandate. Individuals, you make sure you buy health insurance sick or healthy. But then the third leg of the stool is the government needs to make the system work by making insurance affordable.

PAUL SOLMAN: While some of the uninsured are healthy and young, some are poor and sick, yet can’t afford insurance. So, the Connector subsidizes them based on income.

Today, 97 percent of Massachusetts residents have insurance, the highest rate in the country. But that’s caused other problems.

RICHARD DUPEE, Tufts Medical Center: Who’s going to take care of these patients?

PAUL SOLMAN: Richard Dupee, an internist and chief of geriatrics at Tufts Medical Center.

RICHARD DUPEE: We’re really covering more of the population. We don’t have enough physicians to do it. So, as a result, patients are ending up in clinics and waiting to be seen. Many are going to the emergency room with their insurance card, but waiting to be seen.

PAUL SOLMAN: And that’s another problem. Reform hasn’t reduced expensive E.R. visits as much as hoped, since many newly-insured now go there for care.

RICHARD DUPEE: The reason for that is that we don’t have enough primary care doctors, and we also have a lot of physicians who feel that the reimbursement structure for patients who are in the Connector is not sufficient to be able to help them support their practice overhead.

PAUL SOLMAN: It’s just they’re not going to get paid enough money?

RICHARD DUPEE: Yes, they feel the payment is inadequate.

PAUL SOLMAN: But Dupee’s 6,000-patient practice is big enough to absorb new subsidized patients, even if he’s paid less to see them. Plus, he’s helping people.

RICHARD DUPEE: I have seen a ton of new patients, all of whom were pretty sick or were going to be sick, and now they’re not. For example, they come in and they get their physical and they’d find out their cholesterol’s over 300, and they never knew that. Their blood pressure is 160/100. They never knew that. And now it’s all controlled.

PAUL SOLMAN: But medical costs continue to climb in Massachusetts, which still spends more on health care than any state in the country.

So, what does all this imply for the success of exchanges in other states? We asked the bird man of Lexington.

JON GRUBER: The effectiveness of this law depends on broad participation. That requires outreach and social agreement to be part of this new social contract where everyone gets health insurance. That worked in Massachusetts. We ran ads between the first and second inning of every Red Sox game in the summer of 2007.

TIM WAKEFIELD, Boston Red Sox: The state’s Health Connector has affordable plans, lots to choose from, and easy sign-up.

JON GRUBER: No one ran ads saying, don’t get health insurance. There were no protests. That may not be true in some of these states.

PAUL SOLMAN: Indeed, it already isn’t, as this ad from a group called Generation Opportunity makes clear.

JON GRUBER: If they convince healthy people to stay out of the pool, that raises rates for everyone else and makes the law less successful.

PAUL SOLMAN: On the other hand, some 24 million people like Deb Dorsey are expected to get insurance through an exchange over the next two years.

DEB DORSEY: I have to have insurance. I have a pacemaker. It costs money. I have to see my oncologist once a year. I have medication that I’m on that I have, and it’s expensive. It can be very, very expensive.

PAUL SOLMAN: But as more people needed expensive care sign up for insurance, the system’s success will depend on getting the young and healthy to sign up, too.