A proponent of the plans for a single-payer style system in Vermont is worried about the financial impact of the new federal health care law on low-income Vermonters who now have insurance coverage through Catamount Health and the Vermont Health Access Plan.
Peter Sterling, executive director of the Vermont Campaign for Health Care Security, said an “exchange” mandated under the federal Patient Protection and Affordable Care Act is a step in the right direction, but it may cause some growing pains on Vermont’s path toward universal coverage.
Under the federal law, “all health insurance plans will be offered by private insurance companies like Blue Cross Blue Shield,” Sterling says.
“VHAP and the state subsidy for Catamount Health will no longer be offered and most enrollees will have to purchase other private insurance,” Sterling wrote in an op-ed.
The required shift to private insurance, Sterling warns, could cause financial hardships for low- and middle-income Vermonters.
Under the federal Patient Protections and Affordable Care Act, signed by President Obama in 2010, every state is required to create a “Health Benefits Exchange” that will offer residents the means to compare information on available health insurance plans. Every state must have an exchange in place by 2014.
The Shumlin administration plans to run the exchange until plans for a universal health care system go into effect by 2017.
In the new insurance exchange, individuals who make less than 133 percent of the federal poverty level will be covered under an extended Medicaid plan, according to Sterling. Those making between 133 percent and 400 percent will be eligible for tax credits and cost-sharing subsidies. For 2011, the federal poverty level for a family of four was $22,350 or $1,863 a month. Families of four that make more than 400 percent above the poverty level, or $89,400, would not receive credits.
The federal government sets benefits packages under the exchange, Sterling said. The state would have to pay for additional coverage beyond what the feds approve.
Despite federal subsidies, Sterling said, the exchange could mean higher costs for low- and middle-income Vermonters who are insured through Catamount Health and the Vermont Health Access Plan.
“In Vermont, we’re used to doing more,” Sterling said.
Unlike other states, where the exchange will expand coverage, for some Vermonters, Sterling said, it could mean less coverage unless the Legislature decides to continue subsidizing care for low-income residents when enrollment in the exchange begins in the fall of 2013.
Sterling said one of the main issues is out-of-pocket costs. Currently, those on the Vermont Health Access Plan have limited co-pays up to $25 for an emergency room visit. For Catamount, out-of-pocket costs are capped at around $1,000 annually. Although there will be federal subsidies for people who make up to 400 percent of the federal poverty level, Sterling said current Catamount Health enrollees could see out-of-pocket costs spike to nearly $4,000 annually.
To avert this issue, Sterling said, the Legislature needs to ensure that all plans in the exchange cover a comprehensive range of services and provide additional subsidies to ensure low-income residents keep the affordable coverage they have under VHAP or Catamount.
Stripped down to its simplest form, an “exchange” under the act would be similar to a travel Web site like Orbitz or Kayak.com for health insurance policies. In its more complex form, states create a new, regulated marketplace. States then rate “qualified” health plans based on quality. If states do not implement an exchange, the federal government will step in and do it for them, and may also withhold federal funds.
On top of providing a marketplace for individuals and small businesses (in 2016 “small businesses” will include employers up to 100), Vermont aims to take full advantage of the mandate to further its goal of creating a universal health care system.
Robin Lunge, director of Health Care Reform for the state, said Vermont will try to expand the exchange option and use it as a platform for a universal health care system, which would go into effect in 2017.
For example, Lunge said the state is considering including state employees in the portal rather than just small employers and individuals, as the federal law mandates. Bringing more people into the fold will help spread risk among more people and create a more efficient system, Lunge said.
“We’re looking for creative ways to reuse and maximize the efficiency and administration in the system,” Lunge said.
As part of Act 48, Vermont’s new health care law, the state will apply for a waiver from the exchange program in 2017 and operate its own unique system. The federal law allows this, Lunge said, so long as the program covers as many people and does not cost more than the federal mandate. The state’s tentative proposal will also allow it to capture certain tax credits and subsidies and apply them toward the bottom line of the universal system. Under the federal law, these credits would go to employees whose bosses do not cover health insurance. They would decrease the premiums these individuals pay for their health insurance.
Some large businesses, including IBM, and insurance brokers who profit from the current system, are less than enthusiastic about the plan.
Bob Gaydos, an insurance consultant and principal at Digital Insurance, said the exchange grants an enormous amount of freedom to states to create their own market for health insurance and that is a “double-edged sword” that allows for creativity but also means 50 different state systems.
Gaydos says the system in Utah is essentially just a “portal” that gives consumers information about different insurance plans. Vermont, at the other end of the spectrum, plans to have a system where the state program plays a heavy role, while a separate market outside of the exchange is not permitted.
Act 48, which sets the initial framework for a universal health care plan, mandates that the state “make a reasonable effort to maintain contracts with at least two health insurers to provide qualified health benefit plans” under the federal act. Gaydos is worried the state will limit this number to two and eliminate the free-market forces that would drive down costs. He claims this would create a system where employers will opt out of paying employee health insurance, and “the state is left holding the bag.”
Gaydos points to a study by the business journal McKinsey Quarterly that finds that a greater number of employees covered by employee-sponsored insurance will switch to subsidized exchange policies in 2014 than predicted by the Congressional Budget Office. This would mean less funding coming from the private sector. He said the system needs to allow for more insurance companies to keep the market competitive. Otherwise, he said, the cost will get shifted to higher-income people and businesses in the state.
Limiting the system to just two insurers could force the state to bear the brunt of health care costs if employers realize they cannot offer employees insurance, Gaydos said.
Gaydos warns that companies will leave Vermont if health insurance costs escalate.
