Shumlin bends on health benefits exchange

In a substantial policy shift, the Shumlin administration announced a proposal Monday to include “bronze” plans in the health benefits exchange and exempt larger employers from the insurance marketplace.

The decision came after business owners testified last week to House and Senate health care committees, many of whom expressed concern that the administration’s original proposal would increase the cost of doing business in Vermont by disallowing high-deductible plans for employees.

At a press conference, Gov. Peter Shumlin told reporters that the exchange is merely one part of his signature health care reform effort.

“We feel strongly that the exchange is not the answer to all of Vermont’s health care problems,” Shumlin said. “If we just passed the exchange, we would not contain costs adequately and be able to provide universal access.”

The exchange, he said, should provide maximum flexibility and ensure that patients have many of the same insurance options they have now.

The federal government requires states to set up electronic marketplaces for individuals and small groups to purchase health insurance by 2014.

The federal health care reform law sets basic requirements for an exchange, but states have authority to decide matters such as essential benefits insurance companies in the exchange must cover. In 2016, all businesses with 100 or fewer employees must be able to purchase insurance through these exchanges. For 2014 and 2015, states can decide whether to include businesses with 100 or fewer or 50 or fewer employees.

The administration’s original proposal, embodied in House Bill 559, included larger employers and allowed only plans rated “silver” and above by the federal government. The bill also requires these companies to buy insurance in the exchange — a requirement that would remain for smaller businesses and individuals under the governor’s proposal.

Plans are rated by the value of health care benefits they covered compared to what individuals end up paying. Bronze is the lowest level plan under federal law.

While the exchange has been pitched as a stepping stone to a universal health care system that the state could implement in 2017 with a federal waiver, Shumlin emphasized Monday it is not the fix for all of the state’s health care problems.

What the exchange will do, Shumlin said, is allow businesses and individuals to access huge tax subsidies. It also allows the state to draw down millions of dollars in federal funding for things like technology to coordinate health care providers and reduce administrative costs.

“The exchange is helpful to Vermont to bring us federal dollars to achieve our single payer goal,” Shumlin said. “The exchange itself is not the panacea to all our problems and challenges in Vermont. It is a helpful tool but by no means a solution to Vermont’s challenges.”

The exchange will help Vermonters save millions of dollars they spend on insurance brokers who help employers choose insurance plans and help insurance companies assess risks, Shumlin said.

Speaker of the House Shap Smith told reporters Monday the choice to propose bronze plans and exclude larger businesses was a “very hard decision.”

“I don’t think businesses speak with one voice on this issue,” Smith said.

Opposing views in the business community

Reactions to the governor’s announcement resonated that message.

Betsy Bishop, president of the Vermont Chamber of Commerce, gave legislative testimony last week advocating for inclusion of a “bronze” plan, excluding businesses with 50 to 100 employees and allowing an off-exchange market.

Bishop praised the governor and the Speaker of the House for a proposal that would allow more choice for businesses.

“By allowing bronze plans, those employers being forced into exchange will have a greater choice of what to purchase,” Bishop said.

The Chamber has worked with Sens. Hinda Miller and Vince Illuzzi to introduce legislation that would limit the exchange to smaller employers, include bronze plans and make the exchange voluntary by allowing an outside market for individuals and small groups.

“We’re still hoping to see some movement along making the exchange voluntary,” Bishop said.

Allowing this separate market would allow more options for employers in 2014, Bishop said. If the exchange provided attractive, cost-effective options, people would choose it over other plans, she said.

Meanwhile, Vermont Businesses for Social Responsibility expressed disappointment in the governor’s announcement.

Andrea Cohen, the organization’s executive director, said the group has a preference for including the larger businesses in the exchange and restricting it to higher level plans.

These will both create a more vibrant exchange and provide higher quality plans for Vermonters, she said.

Vermont Businesses for Social Responsibility’s end goal, she said, is decoupling health insurance from employment, and the exchange does not do that. It can be a means to an end, however.

“We just want to see good progress,” she said.

Cohen said businesses that don’t offer health care are more competitive because they save money on labor costs, while companies that offer insurance pick up the tab not only for their own employees but also higher premiums for the uninsured.

Cassandra Gekas, a health care advocate for the Vermont Public Interest Research Group, said including high-deductible “bronze” plans in the exchange would increase the number of underinsured Vermonters.

People with high-deductible plans are more likely to forgo preventive and primary care, which can lead to catastrophic illnesses and increased costs for the system as a whole, Gekas said.

Dr. Deb Richter has been advocating for a publicly finance universal health care system for years. She said the governor’s proposal was “not a catastrophic decision, but it’s not a good trend.”

High deductible plans appeal to healthy people and result in insurance companies cherry-picking healthy individuals, she said.

Patients insured with high-deductible plans cannot afford to get sick, Richter said. When people cannot afford to pay their medical bills, hospitals are forced to increase costs to make up for that undercompensation. This costs are then shifted to other payers.

Under the “bronze” plan, an insurer has to pay for 60 percent of the cost of care. In theory, if a patient had a catastrophic illness and incurred $100,000 in medical bills, his or her liability would be $40,000. Out-of-pocket limits would, however, cap an individual’s personal costs to a little under $6,000 or slightly less than $12,000 for a family under the federal law.

Darcie Johnston of Vermonters for Health Care Freedom, a group that opposes the state’s health care reform effort, said provisions of H.559 still in place remain problematic for businesses.

Prohibiting individuals and businesses with 50 or fewer employees from purchasing insurance outside the exchange will limit competition and increase costs, she said.

“I think it’s critical for people to buy insurance off the exchange,” she said. “If the exchange has merit, it will stand on its own.”

Comments

  1. Wendy Wilton :

    A bronze plan is not underinsured, and many high deductible plans have benefits more like gold or platinum plans, here’s how: I manage a benefit plan which has a $5,000 deductible for a family plan, but the employer pays for most of that deductible. Because the first dollar spent is the employee’s share of the deductible, the second dollar spent is the employer’s share of the deductible and insurance picks up after $5,000 of costs have been incurred the premiums are substantially lower than a comparable low deductible plan. As a result of this choice, our plan saves over $300,000 per year, even after the employer share of the deductible is made, compared to a low deductible plan. Therefore, this plan design costs less and allows the employer to deliver greater benefit.
    You can see why Shumlin had no choice but to back this change and the stubborness of the majority of the legislature to oppose it before Shumlin’s epiphany made no sense. It was clear that the majority of the legisalture did not like the testimony they heard from most of the employers. VBSR-type employers are a minority and you can see why based on my example.
    The federal law allows states have an off-exchange insurance market and even to buy coverages across state lines. Maine has already approved this with their health care exchange law of last year (LD 1333). There is no good reason to disallow businesses from buying outside the exchange unless the state knows their plans will be more expensive, or less favorable. By restricting Vermonters to the exchange we are held captive for the conversion to single payer; Catamount, VHAP and Medicaid can easily be rolled in with the insured group sooner, as well.
    As indicated by the Governor’s comments, the VT exchange is the glide path to single payer, even though he has promised that he will not embark on single payer if the numbers don’t work out. Well, if the Administration doesn’t know how the financing is going to work yet, then how can he make such statements?

  2. David Rogers :

    Wendy,

    Does your plan cover preventive care 100%

    David

  3. Just a quick comment on Wendy’s statement that ” VBSR-type employers are a minority”:

    VBSR is the largest socially responsible business organization in the country (not per capita but simply the largest) with over 1300 member businesses. Our members generate over $3.5 Billion of Vermont’s economy and employ over 15% of the Vermont workforce.

    VBSR is made up of larger businesses (Green Mountain Power, People’s Bank, Ben & Jerry’s to name a few) medium businesses and small businesses. We have been working on health care reform for over 2 decades and clearly are not a minority. Providing a human oriented workplace with extraordinary benefits has been the hallmark of Socially Responsible Business.

    We have fought long and hard for health care reform that separates employment from health care and provides for publicly funded universal health care.

    Don Mayer
    Small Dog Electronics

  4. Jim Mulligan :

    After 20 years at least we are being told the type of casket – “bronze”.

  5. Karen McCauliffe :

    David,

    Preventative care is covered as of last year at the very first dollar and at 100% in the state of Vermont when mandates were put on the health insurance so we do not even have to look at Wendy’s specific health care plan.

    So it is not an issue as presented in the article when Gekas with VPIRG is worried about preventative care with the high ded. plans.

  6. Art Bell :

    This is precisely the ‘subtle, invisible dilution’ that Wendell Potter foreshadowed.

    He was asked how the entrenched HMO’s, Big Pharma and the Chambers would protect their turf. He said we would not even notice the seeming innocoious thousand little ‘minor’ changes that would dilute to the point that in the end, nothing changes: Health care costs continue to skyrocket, the Insurance industry shuffles a few chairs and we are left covering the ever increasing premiums with higher deductibles, and less actual ‘care’.

  7. @David: The federal law (ACA) requires all plans – inside or outside of the Exchange and starting last year – to cover Public Health Service defined list of preventive services first-dollar at 100%. Only federally “grandfathered” plans do not have to meet this requirement, but virtually all of the BCBSVT high deductible health plans are not grandfathered. So the argument that HSA/HRA eligible plans discourage preventive care is, generally speaking, without basis. Individual plans cannot be grandfathered; if you have employer-sponsored insurance, ask your employer if your plan is grandfathered.

    @Dr. Deb: Your comment “High deductible plans appeal to healthy people and result in insurance companies cherry-picking healthy individuals” also fails to recognize the nationwide changes resulting from the ACA. As of 1/1/2014, all plans sold in the small group and individual group market will be community rated across an insurance carriers entire pool of people in those groups. This is specifically designed to prevent cherry picking.

    But I can also turn the argument around and say if a high deductible plan is all someone can afford, then the people most likely to buy it are the people with high health costs who can’t afford to take the risk of being uninsured. My hypothesis is supported by the fact that the currently uninsured in Vermont tend to be younger and healthier people. (BISHCA has done the studies that show this). Maybe ten years ago your statement was true, Dr. Deb, but I don’t believe it is in Vermont any more.

    • Doug Hoffer :

      Jeanne

      I’m sure you’re right that a significant percentage of the uninsured are young (I too have seen the stats). But I’m not so sure about your suggestion that “the people most likely to buy [high deductible plans] are the people with high health costs who can’t afford to take the risk of being uninsured.”

      I know a great many healthy people who have been forced to switch to high deductible plans because the cost of traditional coverage was no longer affordable. Unfortunately, some of those people put off necessary care because they can’t afford the deductible. We have to do better.

  8. Wendy Wilton :

    @David, yes our plan covers 100% of preventive care, outside the deductible, so you see it’s very good coverage.
    I believe that’s a mandate as well.

  9. Bob Zeliff :

    What is clear here that the the Vt Chamber of Commerce, supporters of the health care Status Quo, like Wendy Wilton, Jeanne Keller are celebrating a victory of insuring the mandated Exchange includes a poorer, more expensive to the individual or family bronze level of coverage.

    What is a victory for them is a loss for the average Vermonter.

    Gov. Shumlin administration, listened to this establishment, and compromised.

    Remember the Exchanges were included in the federal affordable care act by the Health Insurance lobby as as a money make for them. It is NOT Vermont’s Green Mountain Care/ Self-insurance. It is just more Insurance company policy for them to sell us.

  10. Craig Powers :

    Mr. Zeliff must live inside of a Progressive bubble, where everything he demands is paid for by others.

    Thank goodness Shumlin included the “bronze” plan so that businesses would not receive a nice 18% (or higher) rate shock and limited choice.

    • Bob Zeliff :

      I’m not sure who is in the “bubble” of miss information. If you read the publish document you will see that only some of the business in Asoociations could se up to an 18.4 cost increase, Individual would likely see a decrease in cost to about 12% and small business <50 people would likely see a decrease of about 8%. As there is more people in Individual and small business groups vs those in Association it is possible there will be a total net reduction in cost.

      Those tied to the health insurance eatablishment have strong financial interest to maintain the state quo. There is lots of miss information out there and there will be big $$ to pump out more.

      Take the time to get all the faces….. We vermonters can get this right is we do our home work

  11. Alan Panebaker :

    I wanted to clarify something for everybody. This story states that in 2016, businesses with 100 or fewer employees must purchase health insurance through the exchange. The governor’s proposal aims to require these businesses to purchase through the exchange at that time. Under the federal law, states have to allow businesses that opportunity. It is not a federal mandate that businesses with 100 or fewer employees buy health insurance in the exchange in 2016. It is part of the administration’s proposal. Hope this helps to clarify and not further confuse anyone.

  12. I want to respond to the comments related to “preventative care.” It is true that the Affordable Care Act guarantees access to preventative care, with no cost sharing, to people with private insurance plans. But as always, the devil is in the details. Anecdotally, we’ve heard things like: if your screening test identifies a problem, it’s no longer preventative care. But the point is that high deductible plans discourage people from getting routine care. They’re more likely to ignore nagging pains or illnesses because their out-of-pocket expenses are too high. Not only does this spell trouble for families and a less healthy workforce, it can lead to higher costs down the road when things get worse. The data is out there. It’s clear. High deductible plans do not equal better outcomes or healthier patients. period.

  13. walter carpenter :

    “Thank goodness Shumlin included the “bronze” plan so that businesses would not receive a nice 18% (or higher) rate shock and limited choice.”

    High deductible plans are wonderful for insurers. They make tons of money off of them and can shift the costs to businesses and employees. Big Businesses love them because they offer the employee nothing that seems like something; for small businesses who want to do what they can for their employees, it is often the only kind of plans that they can afford. Many small business owners can barely, if they can at all, afford health care themselves. The employee gets shafted into paying for a plan that they cannot use without going into major debt. I know what this is like. I’ve been an employee on one of these plans.

    In countries where health care is treated as a public good these problems are unknown.

    “I’m sure you’re right that a significant percentage of the uninsured are young (I too have seen the stats).”

    Thanks, Doug. Many of the uninsured are also middle-aged. They are not eligible for the catamount or Vhap programs. I know one couple, for instance, that run a health food store. They do not qualify for catamount and cannot afford to buy a private plan, where deductibles can be $5,000. Their insurance is eating as well as they can. That is all that they have. Good luck when something goes wrong. There goes their store.

    “This is precisely the ‘subtle, invisible dilution’ that Wendell Potter foreshadowed.”

    You’re right, art.

  14. Joanna Cummings :

    I am beginning to believe what could have been a solid move toward equitable health insurance covered for everyone by a progressive state, is going to be cherry-picked until there isn’t any real difference from the current status quo. Before making decisions based on lobbying from business and health insurance interests, ask actual people who have high-deductable health insurance plans if it works for them. My answer is no, these plans don’t work for most people.

  15. walter carpenter :

    “ask actual people who have high-deductable health insurance plans if it works for them.”

    I wish that they would have. I have been stuck on those high deductible plans before. They are paying for something that you cannot use.

Comments

*

Comment policy Privacy policy
Thanks for reporting an error with the story, "Shumlin bends on health benefits exchange"