At the federal and state level, businesses have lobbied to ensure new health care laws don’t force them to bear more than their fair share of the burden for expanded insurance coverage to more Americans.
But as new federal rules are implemented for the Affordable Care Act, and the state embarks on plans for a single-payer health care system that would provide universal coverage for all Vermonters, businesses worry about restrictions that could drive up their costs for medical benefits for workers.
In the second of five briefings on health care reform, Susan Gretkowski, an attorney with the government and public relations firm MacLean, Meehan & Rice, provided an overview of health care reform in Vermont and what it means for employers in Montpelier on Wednesday. The Associated Industries of Vermont is sponsoring similar events at locations around the state.
Several prominent business people who attended were apprehensive about the changes. George Malek, executive vice president of the Central Vermont Chamber of Commerce, said companies would like to be able to reasonably predict what their costs will be for the next five years. Uncertainty about health care expenditures make that impossible, he said.
“Expense and predictability, those are the two huge components out there,” Malek said. “What’s it going to cost, and when will I know what it’s going to cost? And then out in the longer term is how much is it going to cost me over time?”
At the federal level, the Affordable Care Act, which was signed into law in 2010, includes an individual mandate that nearly all Americans buy health insurance or pay a penalty. The U.S. Supreme Court decided this month to take up a constitutional challenge on the issue.
The mandate, according to proponents, brings both sick and healthy people into the insurance system and premiums paid by the healthy offset the cost of covering the sick. Otherwise, healthy people wait until they are ill to buy insurance, which leads to what policy analysts call a “death spiral” — premiums skyrocketing out of control. The exchange also serves as a vehicle for consumers and businesses purchasing qualifying health insurance. States must have an exchange in place by the beginning of 2014.
Vermont plans to use the exchange as a platform for a single-payer system by 2017. The logic goes like this: the fewer the number of insurers and the larger the number of patients in the pool, the more administrative costs the state can save, and the more the exchange will mimic the “single-pipe” payment system.
Vermont’s health care reform law, Act 48, requires the state to make an effort to include at least two insurers in the exchange. The implicit goal of Gov. Peter Shumlin’s single-payer initiative, however, is to narrow the field to one “single-pipe” payment system for medical reimbursements. The state currently has three main health insurers — MVP, BlueCross BlueShield of Vermont and Cigna. The federally mandated health benefit exchange will likely limit the number of insurers and plans employers can choose from, and it’s this squeeze on the variety of available options and associated costs that Vermont companies are worried about.
In 2016, the “small employer” qualification for the exchange includes employers with 100 employees or fewer. Before that time, states can choose to qualify small employers as those with 50 employees or fewer. Large employers will be included in state exchanges in 2017.
David Sichel, deputy director of risk management services for the Vermont League of Cities and Towns, said the vast majority of towns in the state fall under the 50 employees or fewer group and will be impacted by the exchange.
“Our primary concerns are to minimize any disruption that might happen,” Sichel said.
Sichel said a lot of towns offer high-deductible plans where the employer and the employee share the costs of premiums and deductibles. Certain plans that are offered now he said could be a better option for workers, but may not qualify as part of the exchange. For example, a plan with a high deductible where the employer foots the bill for the entire premium and contributes to a health savings account, which is not subject to federal income tax, could be a better deal than a plan offered through the exchange.
Sichel said keeping the 51-100 employee group out of the exchange would give employers more flexibility to choose from a wider array of plans and insurers and take advantage of benefits like the health savings account tax incentive.
Malek agreed with that assessment. “Choice is critical, and right now the people from 50 to 100 have a lot more choices than they will if they are in the exchange,” he said.
William Driscoll, vice president of Associated Industries of Vermont, summed up employer worries: “There’s been concern about how many choices are there going to be in the exchange and will plan designs increase cost?”
A report by Harvard economist William Hsiao recommended a payroll-tax funding mechanism that could result in employers paying about 11 percent of total payroll in 2019. Driscoll says most employers who offer insurance are paying about 4 percent to 7 percent of payroll now for health care. The governor has not endorsed a payroll tax to pay for a single-payer plan; the Shumlin administration, charged with developing financing for the universal medical system, will make recommendations to the Legislature in 2012, after Election Day.
Driscoll said multi-state corporations could be required to offer different benefits in Vermont than in other states. Furthermore, providing universal care would increase utilization of health care services, by severing the connection between individual choices to utilize health care services and costs.
Another potential cost issue for businesses, he said, is that they may have to offer supplemental insurance if, for example, a union contract offers better benefits than that offered in an exchange. In this case, businesses could be subject not only to the payroll tax, but they would also have to buy supplemental insurance to make up the difference between what employers receive under reform and what they received under the contract.
Robin Lunge, director of health care reform for the State of Vermont, said the governor’s office and the Department of Banking, Insurance, Securities and Health Care Administration are working on actuarial models to develop a recommendation for the legislature regarding the 50 or 100-employee level in the exchange.
As for buying insurance on or off the exchange, Lunge said there will probably not be much difference as far as flexibility in plans.
“One common misconception is that folks think buying insurance outside the exchange is more flexible and a different risk pool,” Lunge said. This is not necessarily true, she said, since the exchange is a mechanism for buying insurance rather than a completely separate market.
The amount of flexibility in a benefit package will depend on how the feds design different levels (i.e. gold, silver or platinum). That flexibility will be the same inside and outside the exchange, Lunge said. There are also five criteria that apply for plans within the exchange, Lunge said. Aside from the restriction on advertising designed to eliminate fraud, the other criteria are similar to current Vermont law.
If the Affordable Care Act was determined to be unconstitutional, she said, Vermont could still enact its own individual mandate or provide coverage without a mandate as it has done for children with the Dr. Dynasaur program.
For now, the fate of the individual mandate is in the hands of the Supreme Court. Vermont received an $18 million federal grant to fund the exchange, and it should be up and running by 2014. A plan for which employers will be in the exchange will reach the legislature in January. For more details, individuals and businesses will have to wait and see.
