Administration cuts low-income subsidy for health exchange

Two weeks ago, Gov. Peter Shumlin proposed $10.3 million in health insurance subsidies for low-income Vermonters. The assistance was meant to cushion the blow of rising health care costs associated with the state’s new health insurance marketplace, or health benefit exchange, set to take effect in 2014. The exchange is a required part of health reform under the federal Affordable Care Act.

Thursday, the administration made the decision to scratch that proposal and replace it with a lower $7 million recommendation to the Legislature, which would mean Vermont’s low-income, working-class would be hit harder by a spike in health care costs.

The lowered subsidy comes even as many groups that represent the chronically ill — such as the American Cancer Society and the American Heart Association — were pleading with the Vermont Legislature to raise the subsidies under the governor’s initial proposal. Those individuals who need care most would be hit the hardest under the new exchange.

Mark Larson, commissioner of the Department of Vermont Health Access

Mark Larson, commissioner of the Department of Vermont Health Access

The maximum out-of-pocket costs some low-income Vermonters were slated to pay annually were already set to more than double under Shumlin’s initial proposal.

Now, those low-income populations are facing a grimmer proposal.

The administration’s revised plan was triggered by the federal government’s unwillingness to fund 20 percent of the $10.3 million in subsidies with Medicaid dollars.

Specifically, the federal Centers for Medicaid and Medicare (CMS) told the administration on Tuesday it won’t fund 55 percent, or $2.1 million, of a proposed $3.8 million cost-sharing program. This program was aimed at reducing the annual out-of-pocket maximum costs for income earners up to 350 percent of the federal poverty line. (This year the poverty line is roughly $11,500 annual income for an individual and about $23,600 for a family of four.)

CMS did say, however, that it was willing to fund 55 percent of the $6.5 million to help pay for premiums of Vermonters earning up to 300 percent of the federal poverty line. That 55 percent represents the standard Medicaid reimbursement rate for Vermont.

Both of the new programs are meant, in large part, to aid Vermonters who are currently enrolled in the state-subsidized Catamount and VHAP health insurance programs. Those programs will end in 2014 when the exchange takes effect, and without state assistance these Vermonters would see sharp increases in their health care costs.

Vermont is one of only 18 states creating its own exchange. Some states will use a federal exchange and other states will use a hybrid federal-state system. Selling health insurance on a government-regulated online marketplace by 2014 is requisite under the Affordable Care Act.

The breakdown

Mark Larson will oversee these two new subsidy programs as commissioner of the Department of Vermont Health Access. He told VTDigger that without the federal dollars for cost-sharing assistance, the administration made the decision to reduce the subsidies.

“Without the federal funds that we had requested, we simply can’t support the gross expenditure within the general fund dollars we have available,” he said.

The administration recommends decreasing the cost-sharing subsidy from $3.8 million to $2.6 million — all of which the state must pay. The premium assistance would then drop from $6.5 million to $4.4 million, and the feds would fund 55 percent of that amount.

What this means is that the administration will not fund cost-sharing subsidies for individuals and families 300-350 percent of the federal poverty line, as it initially proposed. It will only provide those subsidies to income earners 133-300 percent of the poverty line.

These subsidies would also decrease by $300-$500 for income earners at 200-300 percent of that line. Those are individuals earning between $23,000 and $34,500 annually.

The administration would also scale back premium assistance, but provide extra help on top of federal subsidies.

The feds limit premiums on a linear scale. For example, Vermonters earning 150 percent of the federal poverty line would pay 4 percent of their income on premiums. Vermonters earning 200 percent of the poverty line would pay 6.3 percent of their income. And residents earning 300 percent to 400 percent would pay 9.5 percent of their income.

The Shumlin administration originally proposed the same linear calculation that the feds use, but with a cap 1.5 percent lower. This proposal would have provided better premium assistance for many Vermonters than they receive now.

The administration’s new proposal recommends only going 1 percent lower than the federal cap, which sugars out to 3 percent of an individual’s income at 150 percent of the federal poverty line, 5.3 percent at 200 percent and 8.5 percent at 300 percent.

Both of these proposed subsidy programs reduce the amount that individuals would pay under Affordable Care Act provisions that will take effect in 2014. But many Vermonters between 133 and 300 percent of the federal poverty line will pay more for premiums and out-of-pocket costs under this proposal than they do now. And they will pay more than they would have under Shumlin’s original proposal.

Larson said the administration is not dead set on the proposal that it created in less than two days.

“We remain open to working with legislators about whether there’s a better balance between those two proposals with the general fund dollars we have available,” he said.

Mike Fisher, who chairs the House Health Care Committee, said next week his committee must set its priorities for how Vermont’s government can best mitigate health care costs for the most economically vulnerable, working-class Vermonters.

“We’re going to spend the time to understand the details of the administration’s proposal and how various populations are affected,” he said. “Then we’ll start exploring whether we support a state assistance program and how much support is necessary in order to help families access the care they need.”

Follow Andrew on Twitter @andrewcstein

Comments

  1. Kathy Callaghan :

    This is unconscionable. Isn’t it government’s job to protect the most vulnerable? So far in this session we have poor people paying more than they can afford for health care (in some cases a lot more), tax credits being taken away from low income people so they will pay more taxes, and the Legislature trying to pass a bill to help people kill themselves. What comes next?

  2. Bob Zeliff :

    While I understand that the details of the Affordable Care Act that is !00% private insurance companies that makes it so expensive for Vermont to maintain coverage for the working poor. The net result many will likely not to able to afford the coverage they have today.

    This is step backward.

  3. rosemarie jackowski :

    The State has been playing a “bait and switch” game. Tell the people they are soon to get Single Payer, while at the same time the insurance companies are the big winners.

  4. Craig Powers :

    It is very hard to believe that the administration…Lunge, Larson, Fisher, Shumlin et al, could not see this coming. Shame on all of you for disrupting two very decent health care programs for those who actually need it. What were you thinking???

    The health care players in our VT government better quickly change their completely misguided belief that the Feds will be there with buckets of money to help them. Governor Shumlin can smile and glad hand all he wants but the line for federal dollars is very long and filled with broken promises.

  5. Walter Carpenter :

    ” The State has been playing a “bait and switch” game. Tell the people they are soon to get Single Payer, while at the same time the insurance companies are the big winners.”

    Rosemarie, this is wrong. Shumlin has not been playing a bait and switch game. The exchanges and single-payer are two completely different entities, these exchanges are by law, fed law, and are not the single-payer which Shumlin wants. According to federal law, states cannot attempt their own thing, like single-payer, until 2017, which is a bummer. I agree with you that, under these exchanges, the health insurance companies are smiling even more, though Vermont was trying to do all it could with them like divorcing health insurance from employment as it should be. I agree with Bob that this is “a step backward.”

    • Cheryl Pariseau :

      The state has mandated that companies that have less than 50 employees must participate in the exchange. This is not part of federal law this is some state mandated B.S. As I’ve stated before this will be a huge “step back” for me in regards to health care. I will be paying 4+ times more then I pay now and receiving much worse coverage. Who cares if my health insurance isn’t tied to my employment status anymore. I won’t be able to afford it either way. Also you’ve stated in past comments that my employer “will no longer be weighed down by health insurance” but how exactly do you think that is going to benefit me? Do you think that my employer is going to be giving me a raise that is equal to what they are now saving? So what if I lose my job I won’t lose my insurance. I’m currently employed and may lose it because I can not pay for a quadruple increase that I would face going into the exchange.

  6. The real problem has been the health insurance industry and their Congressional allies(PAC Money etc.) that have prevented anything resembling real universal health care in the past. All other advanced countries have such health care with better results at half the cost. On the national level, we could of had Medicare for all decades ago and not be in the mess we’re in today.

    Because of the above, the administrators here in Vermont shouldn’t be blamed for trying to deal with an unequal, cumbersome, and overly costly system that today has resulted in 200,000 + Vermonters that are either uninsured or underinsured.

    • Craig Powers :

      They made it worse.

  7. Renée Carpenter :

    Are we all missing something here?

    I read, “CMS did say, however, that it was willing to fund 55 percent of the $6.5 million to help pay for premiums of Vermonters earning up to 300 percent of the federal poverty line. That 55 percent represents the standard Medicaid reimbursement rate for Vermont.”

    So, if I understand this correctly, CMS will fund all but the top fraction (up to 300%, but not up to 350%) of the Federal Poverty level (FPL) of Vermont’s request.

    And because of this, the Shumlin Administration proposes to pull out the rug (again) from under the most vulnerable.

    Wrong move. I have to keep asking myself what I might be missing, because this doesn’t make sense … unless it’s another red herring.

    As I read it, the program could still function, as planned, for all but those between 300 & 350 % of the FPL. If Shumlin had a special affinity for those folks, he could add the needed amount to his proposed budgets and raise revenue accordingly.

    It’s time we had a “People’s Budget”: Look at what are the needs of people and infrastructure in the state and develop a more progressive tax structure to cover the need. Also (as I recall, a skill at which the Kunin Administration was so adept), develop public-private partnerships where possible.

    If Peter Shumlin thinks he wants Vermont to lead the nation under his watch, it is time he contemplated the meaning of economic justice.

  8. Dave Bellini :

    Isn’t it more important to fund healthcare than to expand daycare or sink millions of tax dollars into programs that help wealthy people insulate their homes?

  9. Governor Shumlin has turned his back on ethics and common sense. By cutting the low-income subsidy for health care, in the new single-payer plan, he defeats the purpose of the plan. Governor Shumlin justifies police murdering mentally ill people with tazers, destroying ridge lines for money when there are viable environmentally sound alternatives, and now cutting the health care subsidy for those who need it most? He has betrayed everything he once claimed to stand for. I am surprised to say this but he is worse than Douglas was, and he was terrible.

  10. Deborah Wright :

    Truthfully the plan is still untenable for many and they will be asking employers to bear the burden and then passing it along to their employees, who will quit because of the added financial burden, businesses will die in the state and more people will attache themselves to unemployment and welfare. Good Job Montpelier! DOes anybody up there speak to real businesses will limited resources and real employees with real issues?

  11. Jim Barrett :

    The professional BS artists in Montpelier are already out of money and there is no end in sight……….we just voted in a governor who can’t begin to tell us how much this boondoggle will cost……..enjoy!

  12. sandra bettis :

    single payer is easy – they do it all over the world – it’s paid for by our tax dollars – it will be cheaper than paying the for profit insurance company premium – and everyone will be covered!!!

  13. Walter Carpenter :

    “Good Job Montpelier! DOes anybody up there speak to real businesses will limited resources and real employees with real issues?”

    One of those real issues is health care. Employers, especially smaller employers, cannot afford health insurance because the costs are too heavy now, If their employer can afford health insurance, their employees get to pick costly plans with one high deductible of thousands of dollars or another of the same or similar amount. Health care costs are rising to over $6 billion a year; by 2020 they could reach $10 billion. Is this not a real issue?

  14. Mike Kerin :

    Why don’t they cut some of the administrators ? There are too many people telling too few people what to do and how to do it.

  15. It is not over until it is over. I have confidence in the administration to do the right thing when it comes to financing this interim system, which certainly is a challenge. Single payer will be so very much better than this interim gift to the private insurance companies. My hope is that we will at least be able to find out which company or consortium provides the best coverage during this interim period, so we can truly have a cost effective single payer system paid for by income taxes and not by employers or state and federal subsidies. If only we could have a federal “Medicare for All” plan, we could really start competing with other industrialized countries, even Canada, on a level playing field.

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