Betsy Bishop, president of the Vermont Chamber of Commerce, said that when small business owners approached her with concerns about state health care reform, she and her team came up with a solution: Chamber Preferred.
The Vermont Chamber teamed up with Digital Benefit Advisors in Colchester — owned by Atlanta-based Digital Insurance — to create this new, online insurance exchange. The plan will allow Vermont Chamber members to access a range of insurance plans, from life to vision to pet to dental starting Jan. 1.
The central “one-of-a-kind” idea behind the marketplace, as Bishop put it, is that employers inject benefit funds into the exchange and employees decide how to use them, choosing the insurance plans and coverage levels they deem most appropriate. Furthermore, the private exchange offers insurance benefits that aren’t included in the Vermont Health Benefit Exchange.
Participating businesses will be able to use Chamber Preferred to administer employee health care insurance before the state’s benefits exchange takes effect on Jan. 1, 2014. After that date, state law stipulates that companies with 50 or fewer employees must purchase insurance through the state’s health benefit exchange. Businesses with more than 50 employees will continue purchasing health insurance privately.
Bishop said the Chamber decided to move forward with this idea after hearing concerns from numerous small businesses about losing a competitive edge when the state’s health benefit exchange takes effect.
According to Robin Lunge, director of health care reform for the Shumlin administration, the state is required under federal law to define small business insurance groups. But the state did not need to require small business groups to participate in the exchange. The Legislature made that decision in order to simplify administrative processes, create clearer consumer options and give employees greater choice.
Bishop, however, is concerned that the exchange will negatively affect insurance rates for some employees.
“Some higher-income earners that are working at a small business might find themselves paying a lot more for health care than they are now,” she said. “That will give some folks pause: ‘Should I work for a larger employer?’ I’m worried about that for recruitment and retention for small businesses in Vermont.”
Lunge maintains that small business employees won’t be paying more for health insurance under the exchange than they otherwise would in 2014. The reason behind that, she said, is that the federal Affordable Care Act mandates that individuals, small businesses and association groups will merge into one risk pool by 2014.
“There was a misperception during the legislative session that if we had a market where people could purchase (insurance) in and out of the exchange that would change the price of the product,” she said. “Under federal law, the individual and small group market is rated as a unit regardless of whether people purchase through the exchange or not. So, if we had ways for those people to sign up for insurance outside of the exchange, it would still be the same price.”
Large businesses, as Bishop asserted, would be able to operate outside of the exchange, and she believes that will give some of them a competitive advantage. Lunge said that to keep in line with current federal law, those businesses would go from being defined by 50-plus employees in 2014 to 100-plus employees in 2016.
“They will be in the same risk pool they are in today. Each large employer is its own individual risk pool: that’s good for some and bad for others,” she said. “In insurance, the bigger the risk pool, the more stable the premiums are over time. So it’s generally thought that fewer (bigger) risk pools are better in terms of providing stability and less volatility in the market.”
Merging small business employees and individuals into one risk pool, said Lunge, would benefit most ratepayers. But, a small business with younger employees could end up paying more.
The state uses a community rating system, where younger insurance payers pay the same rate as older payers. Therefore, it is possible for a small group of young payers that previously shared a business risk pool to pay higher rates when they enter the larger risk pool in 2014, as they will be paying to offset the costs of those who need more care.
