Legislation introduced Tuesday could lay the groundwork for the first phase of substantive health care reform in Vermont as the state inches toward universal health care.
Rep. Mike Fisher, D-Lincoln, and Rep. Ann Pugh, D-South Burlington, introduced H.559, legislation from the Shumlin administration that would set out the ground rules for a health benefits exchange that the state is required to put into effect in 2014.
The two controversial aspects of the legislation include a requirement that small employers only buy insurance through the exchange. In addition, the definition of a small business under the Shumlin administration plan would be a company with 100 or fewer employees.
Last year, Anya Rader Wallack, then a special assistant to the governor, pushed for one insurer in the exchange. Act 48 was amended to include one or more, but critics have alleged that the exchange would likely only include two insurers. The state currently has three health insurance companies.
The exchange is a federal mandate for states to develop a marketplace for individuals and small groups to purchase health insurance. Plans in the exchange must offer what are called “essential benefits” that states will flesh out, subject to a minimal federal baseline. For 2014 and 2015, states have the choice between defining “small employers” as those with 50 or fewer employees or 100 or fewer. In 2016, states must include employers with 100 or fewer employees in the exchange, and in 2017, the state hopes to obtain a waiver from the federal government to enact a universal health care system.
Which employers to include in the exchange has created a tension throughout the health care reform process with bills in the House and Senate that would require the state to only include businesses with 50 or fewer employees.
Robin Lunge, director of health care reform, said including the larger businesses would add roughly an additional 20,000 lives to the insurance “pool” in the exchange.
“The general rule in insurance coverage is that a larger pool creates more stability,” Lunge said.
The legislation and accompanying reports also propose that insurance companies will not be able to sell plans for the individual and small group markets outside the exchange. This will allow for a more simplified administrative process, Lunge said, by requiring only one set of rules. If plans were sold outside the exchange, she said, there would be different sets of rules for plans inside and for those outside.
One report from the administration notes that premiums for employers with between 50 and 100 employees will likely increase once the exchange goes into effect. Insurance premiums for individuals and those in the small group market will likely decrease. While premiums for low-income plans like the Vermont Health Access Plan and Catamount will also rise, Lunge said the bulk of these costs will fall to federal tax credits and subsidies that will be offered through the exchange.
What happens to people on these low-income plans still concerns Peter Sterling, director of the Vermont Campaign for Health Care Security.
Sterling has been raising the issue of what will happen to low-income Vermonters in 2014 when these programs, as they are now, will go away. The feds will offer subsidies for people who make up to 400 percent of the federal poverty level to buy insurance in the exchange, but Sterling has expressed concerns that low-income Vermonters could still see increased out-of-pocket costs and premiums.
Under the proposed bill, the administration could go in two directions, Sterling said. It can offer a basic health plan that covers individuals up to 200 percent of the federal poverty level (Catamount covers people up to 300 percent) or offer state subsidies to “wrap around” the federal money.
“We don’t know about people who are in that 200 to 300 percent range,” he said.
Sterling said he hopes to learn more of the details, which are sure to come when the federal government outlines what exactly it plans to subsidize. He said he hopes lawmakers and the administration avoid a “cliff” where people’s premiums and out-of-pocket costs shoot up at a certain income level. This steep rise in costs can cause people not to enroll in insurance plans, leaving a smaller insurance pool and more uninsured residents.
While Sterling is concerned with low-income Vermonters, other lawmakers have expressed concerns over what the exchange will mean for the business community.
Sen. Vince Illuzzi, R-Essex-Orleans, has co-sponsored a bill in the Senate that is mirror opposite of the administration’s proposal. It would only require employers with 50 or fewer employees to be in the exchange, and it would allow insurance to be sold outside the exchange. Given the vast majority of Democrats in the Senate who support the Shumlin administration, he admits his bill does not stand much of a chance. He said the goal of his legislation was to protect businesses from unintended consequences that could result from an overhaul of the health care system when a single-payer system might never happen.
“There’s no evidence that groups of 50 or greater experiencing problems,” Illuzzi said. “Let’s walk and not run. Let companies that are successful at managing 50 to 100-employee plans keep doing good work.”
While health care reform in Vermont is moving ahead, some things are still up in the air. A Supreme Court case could overturn the so-called individual mandate in the federal health care law that everyone have health insurance and possibly overturn the entire law. While this could throw a monkey wrench into the state’s plans, Vermont could implement its own mandate. Other details, like what benefits insurance plans must cover will be decided this year.