Last month, the Department of Vermont Health Access sent letters to roughly 2,100 state employees encouraging them to drop their kids from the state’s family insurance plan and enroll them in Dr. Dynasaur.
Prior to March 2010, state employees across the United States were barred from enrolling their kids in the federally subsidized Children’s Health Insurance Programs, or CHIP. When Congress established CHIP in 1997, the feds were concerned cash-strapped states would try to take advantage of the program by shifting state employee health care costs to the federal government, as Kaiser Health News and the Washington Post reported. Although federal employees who met income eligibility markers were able to benefit from these programs, state staffers were not.
But Congress threw out that prohibition on state employees when it drew up the Affordable Care Act, and the state of Vermont and some of its employees are now looking to capitalize. The issue, said some regulators and critics, is that this measure doesn’t reduce overall costs — it simply shifts them.
Dr. Dynasaur is Vermont’s CHIP program. Only children (younger than 18) of families under 300 percent of the federal poverty line are eligible. For a family of four, that’s an annual household income threshold of almost $70,000 a year (income eligibility link).
“It’s more affordable coverage for families and for the state,” said Mark Larson, commissioner of the Department of Vermont Health Access (DVHA). “The public plan is cheaper than (the state’s Cigna) private insurance (plan), and we’re splitting the costs between state and federal governments.”
The feds pay about 55 percent of a given Dr. Dynasaur plan and the state pays 45 percent. State plans for one or two adults are also cheaper than family plans are.
A DVHA cost-savings analysis shows that the state would net almost $10,000 a year in savings for a parent with two children who put their kids on Dr. Dynasaur, and a two-parent family with two kids would save the state $3,460 annually. A parent with two children would save a bit more than $2,000 a year, and a two-parent, two-child family would net almost $500 in annual savings.
While Larson wasn’t sure what the state’s total savings would be, Kaiser and the Washington Post reported in November 2011 that Kentucky had saved $2 million from similar measures and Texas expected to save $16 million over two years.
Asked if these state savings are true savings or simple cost shifts, state health regulators were unequivocal: They are not true savings.
“Enrolling children in Dr. D will not reduce overall health spending,” said Larson.
Al Gobeille, who sits on the states’ Green Mountain Care Board, which is charged with adopting policy to reduce overall health care costs in Vermont, said that this policy could come back to bite some Vermonters.
“A person that doesn’t have children will pay more so that (state employees’) children will go on Dr. Dynasaur at Medicaid rates,” he said. “Ultimately, the doctors are going to try to get that money out of the commercial payers.”
Anya Rader Wallack, chair of the board, added to Gobeille’s statement: “If they don’t (get that money), their income will drop, and it’s conceivable that some (doctors) could go out of practice.”
Fletcher Allen Health Care spokesman Mike Noble said that Dr. Dynasaur doesn’t even cover the cost of care. Private insurance companies, like Cigna, the state’s health insurer, pay extra to patch such revenue holes for providers.
“Dr. Dynasaur pays at Medicaid rates and so those rates are substantially lower than the cost of providing care — way lower than our cost and others of providing care,” he said. “Commercial payers pay providers at negotiated rates and they are higher than the rates of Dr. Dynasaur.”
Jeffrey Wennberg, who runs the 501(c)(4) anti-single-payer Vermonters for Health Care Freedom, is concerned that Vermonters will perceive this cost shift as actual savings. He cautioned that he is not accusing the Shumlin administration of acting hypocritically, but rather, he is worried that if all private employers encouraged their employees to take advantage of such opportunities, it would present a severe fiscal drain on the state.
“The state as an employer can definitely realize savings from convincing Dr. Dynasaur employees to drop a family plan,” he said. “But there’s also a cost because that savings is not due to Dr. Dynasaur operating much better than Cigna — the difference is that the federal government picks up a (large percentage). It’s shifting the cost to federal taxpayers from the state’s budget, and that makes sense for the state.”
Larson responded to such warnings by laying out the state’s position.
“We either pay 100 percent for private insurance plans for the whole family or we pay for coverage that is more affordable to both the state and the families,” he said. “If people feel that ideologically we should eliminate this option even though it’s cheaper, that’s certainly a position someone can take.”