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.”