[V]ermont may join the federal exchange in some fashion if its beleaguered health insurance website fails to meet new deadlines announced by Gov. Peter Shumlin on Friday.
If Vermont Health Connect and its primary contractor, Optum, have not automated the process for changing personal or plan information by the end of May, and have not automated the renewal process by October — in time for next year’s open enrollment period — Shumlin says he will deliver lawmakers a plan in November to transition the exchange to the federal system.
The governor will deliver a separate plan in August for how Vermont should handle the coming open enrollment period, which starts in November, because it won’t be possible to migrate to the federal system by then, according to administration officials.
After making the announcement on WDEV’s the Mark Johnson Show, Shumlin told reporters he’s “optimistic” Optum and VHC can meet those deadlines, but the contingencies his team will develop are an acknowledgement that the current state of affairs — which he described as “extraordinarily frustrating” for all concerned — can’t continue.
“We think we’re going to deliver, finally, an exchange that’s going to work for Vermont. If not, we want Vermonters to know what the contingency would be,” he said.
That contingency would involve migrating the roughly 35,000 commercial plans on the exchange to the healthcare.gov system or to a modified version of the federal option known as a Supported State Based Model (SSBM). Shumlin stated his preference for the SSBM, which would allow Vermont to retain more authority over the insurance products sold.
Republicans have long called on Vermont to transition to the federal exchange, and in January a group of centrist lawmakers proposed the SSBM as an alternative. Asked if he got the idea from them Shumlin said: “No, we got this idea from ourselves.”
Rep. Patti Komline, R-Dorset, was the lead sponsor of that proposal. She researched the SSBM model while working on Lt. Gov Phil Scott’s re-election campaign, and has been in contact with officials in Oregon — one of three states using the SSBM model. Komline said she’s pleased the governor is taking the Supported State Based Model seriously, but said he should have started the process months ago.
Cloudy with a chance of contingency
The details of how Vermont would make the transition are vague, riddled with caveats and, according to administration officials, almost certain to cost the state more money.
“This is not an attractive option,” concluded Lawrence Miller, chief of Health Care Reform.
The state will still need to complete the current exchange, which doubles as its Medicaid portal and will eventually be the bridge to an overhauled management system for the program. Removing the commercial plans is unlikely to decrease its anticipated $200 million cost, Miller said.
It’s also unlikely to reduce ongoing maintenance and operational costs, he said. There is $51 million for operating VHC in the governor’s proposed FY 16 budget — with the state paying $27.7 million of that. Transitioning to the federal exchange would only shave $4 million off the total. Those savings are likely to be wiped out by a 3.5 percent premium tax the feds use to pay for the healthcare.gov exchange, though they agreed to waive the tax for Oregon in its first year of the Supported State Based Model.
On top of that, Vermont will have to develop its own program to offer $17.5 million in state-funded premium assistance — or, as Miller put it, take that money “out of people’s pockets.” Much of the exchange’s current complexity derives from bundling Vermonters’ premium payments and the state premium assistance, which would still have to happen, and is unlikely to be supported by the federal exchange, according to Miller.
Virtually every aspect of the transition, including how much of the cost Vermont will bear, would be subject to negotiations with federal officials, who, Miller said, have experienced many of the same problems and want states to have well-functioning exchanges.
There are other “policy tradeoffs,” to consider as well, Miller said. Families with some members on commercial plans and others on Medicaid will have to deal with two separate entities. It could also mean people who go to the modified federal exchange may not find out they’re eligible for Medicaid.
“It’s not a very positive outcome if we wind up there, but we can’t just keep doing what we’re doing,” Miller said.
Finally, there is the matter of the King v. Burwell U.S. Supreme Court case, which could prevent states using the federal exchange from offering subsidies. A ruling in that case is expected in June. Legal experts have said the Supreme Court case won’t affect SSBMs.
Because of the court case and the myriad challenges of making the transition, Miller said “it’s not possible” for the state to transition to the federal exchange this year.
Oregon made the transition to the SSBM exchange in six months, and Komline and other lawmakers that supported her proposal are likely to introduce legislation that would accelerate the timeline for Vermont.
They’ll have that opportunity — though it’s questionable whether they will have the votes — because Shumlin said he wants lawmakers to reflect the contingencies in statute, so that “our contingency plans are not only totally transparent,” but also so that “everybody can tell their constituents what we would do in the event of disappointment from our contractors.”
Miller previewed draft language for the proposal for the House Health Care Committee, which is likely to tack it onto other legislation. The administration will move forward with its plan whether or not lawmakers decide to put it in statute, he said.
The governor was adamant that the likelihood of Optum failing to meet the deadline is minimal, stressing that to this point the company has met contractual obligations on time and under budget. VTDigger requested evidence to support that claim, but administration officials did not respond Friday.
Optum is under a “time and materials” contract, meaning the agreement covers expenses as they are incurred. The original contract signed in August was for $9 million, and as work continued, its total value through the end of May is $57 million. Miller said he’s unaware of how much of that money, if any, the state has actually paid.
“I don’t know that (Optum)’s yet submitted, I don’t know if we’ve finalized an invoice,” Miller said. “I think they sent us a bill for one month, I don’t know,” he said, who confirmed the company has not been paid.
Shumlin’s announcement was well-received by Democratic leaders in the Legislature as well as Blue Cross Blue Shield of Vermont, which has more than 90 percent of the business in the exchange.
House Speaker Shap Smith, D-Morristown, who earlier this session encouraged his colleagues to look for alternatives for the exchange, said he was “encouraged” by the concrete milestones offered by the governor.
Senate President Pro Tempore John Campbell, D-Windsor, said it gives Vermonters a “clear time frame” for when they can expect a properly functioning exchange, but added that his support is not an endorsement of the exchange’s “increasing operating costs.” Campbell pledged continued legislative oversight.
Blue Cross officials said they will continue to work with the administration to establish a path forward for the exchange, adding that they are “pleased” the governor has offered milestones and contingencies that will guide that process.
Lt. Gov.Scott, who has been critical of the exchange’s poor performance, said Friday that the decision should have been made sooner.
“In my opinion, the administration should have developed a contingency plan at the very first sign of trouble, not after a year-and-a-half of dysfunction and spending over a hundred million dollars,” Scott said in a statement. “While positive news, this isn’t an announcement to celebrate. In short, and to put it simply: It’s about time.”
