Gov. Peter Shumlin, Feb. 22, 2012. VTD/Alan Panebaker
As the House health care reform bill heads to the floor for debate, both sides of the issue framed their strategies Wednesday.
At Gov. Peter Shumlin’s weekly press conference, he and prominent Democrats touted the benefits of H. 559 and the health benefits exchange it will implement.
“I have long advocated that one of the biggest obstacles to job growth in Vermont is the inability of employers to afford the rising cost of health insurance,” Shumlin said. “It is killing business. This exchange will allow employers to get out of the health care business and allow their employees to get subsidies by buying health insurance in the exchange.”
The sticking point of the health care reform bill is its requirement that businesses with fewer than 50 employees and individuals buy health insurance in the exchange. The “exchange” is a federally mandated online marketplace that will lay out the options for consumers. People who buy health insurance there will be able to access federal subsidies and tax credits to help cover the cost.
The Shumlin administration predicts increased Medicaid funding and federal incentives will bring $300 million to Vermont starting in 2014 when the exchange goes into effect. Nearly 100,000 Vermonters (about one sixth of the state’s population) and more than 16,000 businesses will be required to purchase health insurance through the exchange.
Since most subsidies in the exchange are for individuals only, the administration proposes that many smaller businesses would prefer to drop health insurance coverage for their employees and send them to the exchange — a proposition that makes some employers who have offered insurance for their employees uneasy.
“We believe there are many instances where employers may choose to get out of health insurance business for employees,” Shumlin said.
The administration offered a chart outlining the benefits for people enrolling in the exchange. For example, an individual earning $40,000 and paying $600 per month in premiums could save $283 a month with tax subsidies, the administration claims.
Michael Roche, owner of Stowe Tree Experts, joined the governor’s press conference in support of the bill.
Roche has five employees including himself. He said the exchange will help him be more competitive since he will not have to pay for insurance for his employees.
“I have a small accident insurance plan for my staff but it’s not adequate,” Roche said. “I feel their efforts will have direct effects on my employees. I feel my company is the type of company they are trying to help.”
House GOP: H.559 “not ready for prime time”
Shortly after the administration touted the benefits of participation in the exchange, Republican leadership announced a plan to make substantive amendments to the House bill.
House Minority Leader Don Turner said his party wants to make sure there are options for health insurance outside the exchange market and provide information on the financing system for Green Mountain Care — the universal health care system the state aims to put into effect in 2017.
Turner released a statement Tuesday on the Vermont GOP website expressing concerns that many lawmakers do not understand the complex piece of legislation that will have widespread effects.
“The simple truth is that H. 559 is not ready for prime time,” Turner’s statement reads. “Legislators cannot and should not be asked to vote on this bill until we can better understand how it will impact Vermont employers, Vermont employees, and Vermont families. We simply cannot afford to make mistakes when the health care coverage of thousands of Vermonters is at risk.”
Turner said Wednesday that the idea to herd individuals and small businesses into the exchange is a bad strategy. He thinks if people have a choice, they will choose the exchange if it is better than their current insurance.
Don Turner. VTD/Josh Larkin
“Business people are smart,” Turner said. “If the system is robust and it makes sense financially, people will join.”
Turner said the Republican caucus hopes to integrate into H, 559 a requirement that the administration move up the financing plan for Green Mountain Care from Jan. 15, 2013, to Sept. 15, 2012 — before the November gubernatorial election.
“The only opportunity Vermonters are going to have to weigh in on this issue is during the election,” Turner said.
Sen. Randy Brock, R-Franklin, has announced his bid to run for governor against Shumlin, and he said health care will play a major role in his campaign.
Brock introduced a bill in the Senate that would require an early release of the financing plan for Green Mountain Care also. The Shumlin administration has made clear that the exchange is a step toward its goal of universal health care in 2017 when the state can receive a federal waiver.
Brock said he had not studied the House bill, but as a policy matter he thinks the exchange should be optional.
“We should expand the [insurance] marketplace and use the exchange as it was intended — as a marketplace in which consumers can go and pick things that best fit their needs, and their family’s and business’ at prices they can afford,” Brock said.
More options in the health insurance marketplace, Brock said, will drive down prices.
Bill Driscoll, vice president of Associated Industries of Vermont, said mandatory exchange participation raises red flags for his constituents.
Associated Industries represents businesses, primarily in the manufacturing sector. Driscoll said they are concerned about costs.
“I think [the administration’s] shift in rhetoric toward emphasizing that 50 or under employers should drop insurance indicates that the exchange could be more expensive than their current options,” Driscoll said.
Dropping health insurance for employees raises a number of issues, Driscoll said. For one, multistate companies that provide insurance for employees in other states could be inconsistent. Additionally, he said, while employers with 50 or fewer employees do not face penalties if they drop coverage for their employees, larger businesses will be penalized under the federal Affordable Care Act. This could create problems in 2016, when companies with 51 to 100 employees will be included in the exchange.
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The Administration has already admitted that H.559–in it’s current form with mandatory participation by small employers–will create a 18% minimum increase in premiums. How is that reducing the cost of health care for Vermonters?
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In response to Wendy Wilton’s question on how H.559 will help to reduce the cost of health care for Vermonters I can point out what is stated in the article that perhaps she missed . People buying health insurance through the exchange set up by the bill will be able to access federal subsidies and tax credits to help cover costs of the premium. This will vary depending on their income. The example cited was of someone with an annual income of $40,000 who pays $600/mo. premium who will have a savings of $283/mo. This strikes me as a substantial reduction in cost.
I, too, am just trying to get a basic understanding of a topic filled with complexities : the specific steps we must navigate to bring about the health care reform the state has legislated . H.559 exists to respond to the mandate of the federal health care bill. By itself it will not fulfill the mandate of the Vermont health care bill, which calls for universality and affordability among other things,and has the most promise of actually reducing the cost of providing quality health care for all in our state. H.559 is a federally mandated and temporary step along the way.
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I believe that much of the “affordability” of this bill relies on “free” money that comes from the Federal government. It does nothing to control costs, and it has been said that in order to get more “free” money, it will be a Cadillac plan that will be expensive for those who need to purchase it but don’t have the benefit of the subsidies.
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Has anyone run the numbers for what the income level is where the federal subsidy is not enough to replace the employer’s current contribution to premium? In the case of families in the $50K + income range, I wonder if the family’s share of premium in the Exchange (after the federal subsidy) will be higher or lower than it currently is in their employer plan.
It seems like these kinds of numbers should be run before assuming employers dropping coverage is going to be better for everyone. I have to believe that whether you are better or worse off depends on many factors – e.g. your family income, your current employee share of premium versus your Exchange share after a federal subsidy, whether your employer makes a contribution to an HSA, HRA or FSA for any of your expenses (because those will go away along with the employer premium share, won’t they?). And of course, we’d need to know what the available products on the Exchange are going to cost to do the final math on this.
It would be helpful if the Administration produced this information so people could know whether the idea of employers dropping coverage is beneficial or not, instead of just assuming it will be beneficial to all. If this can’t be finished in time for the House vote, I hope the Senate asks for it.
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“I have long advocated that one of the biggest obstacles to job growth in Vermont is the inability of employers to afford the rising cost of health insurance,” Shumlin said. “It is killing business. This exchange will allow employers to get out of the health care business and allow their employees to get subsidies by buying health insurance in the exchange.”
It has been estimated that forcing businesses into the exchange will increase the cost of insuring employees by over 18%, by the Shumlin administration’s own estimates. Shumlin wants to decouple health insurance from employment, but will not the employer be paying an 11% or more payroll tax on each and every employee in the near future, as suggested by the Hsiao report? (Hsiao recommended the employee contribute an additional 4% payroll tax.) The administration also doesn’t fully weigh into this matter is that many small businesses don’t currently cover every employee’s health insurance, as some have coverage through a spouse, many who work in a large company that has lower insurance rates and (or) are self insured. So now we will be shifting this cost from the larger and self insurance companies onto the backs of small businesses, most certainly through an employer payroll tax on every employee. This added burden may force some business to move out of state and discourage others from coming here. Vermont already is a small business unfriendly state. It ranks 48th on the 2011 small business survival index (http://sbecouncil.org/survivalindex2011/). Small businesses with 50 or less employees, employee 2/3rds of Vermonters (http://www.vpr.net/news_detail/93410/shumlins-health-care-strategy-would-pave-way-for-s/). Shouldn’t we be trying to improve the environment for our small business employers instead or worsening it.
The federal ACA law calls for participation in the exchanges to be optional, and I strongly believe it is wrong for our legislature to force participation against the free will of Vermonters. It seems to me that the real reason we are forcing small businesses into the exchange where the costs will be much higher, is to get them to drop the coverage on their employees. After all there is no penalty for dropping them. Why would the Shumlin administration want this to happen? Because the state does not get subsides for employees with health insurance covered by their employers, but does get subsidies for employees who are not covered.
We should not build our health care system so heavily dependent on subsides from the federal government as these subsides will very likely be on the chopping block when our federal government gets serious about addressing our huge and growing federal deficit. It is very risky building our universal health care system on a foundation of federal money that, when it dwindles, may leave our health care system worse off than it is now. If Green Mountain Care proves to be financially unfeasible (yes there are doubters out there) and we construct an exchange with little competition, what will our fall-back plan be? Shouldn’t we be making an effort to build a robust exchange with lots of competition among insurers both inside and outside the exchange as the ACA law intended, in case GMC fails to come to fruition?
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Mr. McCauliffe said, “Vermont already is a small business unfriendly state. It ranks 48th on the 2011 small business survival index.”
These indices are deeply flawed. They make grand assumptions about the connection between tax rates and job creation but they don’t prove it.
For example, they often ignore the critical structural elements that differentiate states (e.g., using the top marginal personal income tax rate without considering the number of brackets, if any, or where the brackets kick in). This makes them nearly useless for comparing state tax systems.
But even more importantly, these rankings make no effort whatsoever to consider the facts on the ground. As the latest state revenue forecast makes clear, Vermont’s rate of job growth exceeds the national average and is as good or better than New Hampshire. According to the rankings, this is not supposed to happen.
In the end, the rankings have absolutely no predictive value but their findings are repeated so often they become received wisdom. Policy should be based on facts.
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Doug,
I agree that ratings are not perfect but anyway you spin it a ranking of 48th is not good. You can try to loose us in the weeds as you often do, but these are ratings that people read and they don’t reflect well on Vermont.
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I didn’t “spin” it, I offered some information about how they are constructed and some shortcomings.
And if we don’t at least look at some of the details (the “weeds”), how can we be certain the rankings aren’t just a device used by anti-tax advocates instead of a serious analytic tool? The evidence shows clearly that they are much less than meets the eye.
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From the survey (http://www.sbecouncil.org/uploads/SBSI2011%5B1%5D.pdf):
Vermont
Rank: 48th
SBSI Score: 78.291
Highlights:
• High personal income, individual capital gains, corporate income, and corporate capital gains taxes
• High property taxes
• Imposes a state death tax
• High electric utility costs
• High workers’ compensation costs
• High level of state and local government employees
• High level of state and local government spending
• High five-year rate of increase in state and local government spending
• Poor private property protections
• High state minimum wage
• No individual or corporate alternative minimum tax
• Low crime rate
Doug, I strongly encourage you to submit your critique to the originators of this study so they can determine if it has any merit and if so, we might expect to see Vermont move up a bit in the next survey.
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Vermont has the 5th lowest unemployment rate in the country.
Spin it anyway you want, but Vermont is doing a lot better than the vast majority of states.
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“So now we will be shifting this cost from the larger and self insurance companies onto the backs of small businesses, most certainly through an employer payroll tax on every employee.”
We are? Are you sure? Hsiao did recommend it, but are we adopting it? No matter what, though, business will no longer have to be health insurance agents as well.
“we construct an exchange with little competition.”
Why do we need competition in health care? We have had competition and a free-market system for the last thirty years and it has only erected barriers to care and left us with the world’s most expensive hc system that delivers comparatively little for what we spend.
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Mr. McCauliffe
I will discuss a few of the components of the ranking methodology and let you make up your own mind.
1. High personal income tax: As I said earlier, they are referring to the top marginal rate which, without more information, tells us nothing about the actual tax liability for a given family. For example, the JFO Tax Study looked at tax returns for various families in 12 states. Three states had no income tax but of the other nine, Vermont’s top marginal rate was the highest. Nevertheless, the report found that for a family earning $80,743, Vermont’s income tax was the lowest of the nine states.
2. High Property Taxes: Here too, the SBEC does not account for the distribution of the tax obligation. They measure property taxes as a share of personal income. This is terribly misleading for a few reasons. First, like other popular second home states, Vermont “exports” a considerable amount of the property tax, which is paid by non-residents. Second, Vermont’s unique income sensitive statewide education tax means that the cost for low- and moderate-income families as a percentage of income is much less than for higher income families. The point is that without more detail, this measure is not an appropriate way to compare the tax obligation across states.
3. High electric utility costs: The ranking is based on state average revenue per kWh (a surrogate for average rates). Sounds good right? But it’s not. First, these are rates not costs. Costs are rates x usage. As it happens, Vermont is third lowest for average monthly consumption. So even though we’re 42nd for rates, we are 13th for average monthly bill. The SBEC ranked us 44th because they ignored the other half of the equation.
4. High level of state and local government employees: SBEC would have us believe that the number of public sector employees affects competitiveness. They may be right, but for the wrong reasons. The number of public employees tells us nothing about the social, economic, and environmental impacts of state government expenditures; these are attributes that help attract people and businesses. In Phase 10 of the Job Gap Study I compared Vermont to the eight states with the fewest public employees per capita along with rankings data for various quality of life indicators.
Obviously, the quality of life rankings reflect influences other than public expenditures and public policy. But most would agree that there is a strong relationship. The point is that while Vermont has more public employees per capita than many other states, it also has significantly better outcomes and blew away the states with the fewest public employees per capita. This is important because quality of life is important to CEO’s (and families). When asked to prioritize location factors in a 1998 survey of Vermont businesses, instate CEO’s listed quality of life number one.
5. Poor private property protections: This may be my favorite. Using a controversial decision by the U.S. Supreme Court regarding eminent domain as a point of departure, the SBEC argues that states must enact new legislation to combat what they fear are enhanced powers of the state. But no effort was made by SBEC (or the organization that funded the report) to determine the actual use of eminent domain powers in the 50 states. So the ranking for this measure is based solely on whether the state legislature has adopted new laws; not whether the state has used (or abused) its authority.
In the end, as bad as the SBEC methodology is, the final straw is that the organization doesn’t even bother to test their rankings against real world results. That is, how do the states fare on key measures like job growth, unemployment, and change in gross state product? When you examine the data, it’s evident that the SBEC rankings are of no value whatsoever. This work is advocacy, not objective analysis.