The Senate Finance Committee got it from all sides on Friday. The subject? H.202, the universal health care bill. Lobbyists and advocates across the spectrum (right to left) pitched amendments in a last-ditch attempt to shape the bill before it goes to the floor of the Senate this coming week.
In speed-dating mode, during 90 minutes of testimony, insurance brokers, representatives from business associations, lobbyists for doctors and insurers, and advocates for a single-payer health care style system converged on the committee to make their final pitches and complaints.
About a dozen individuals handed out written testimony and new draft amendments to the bill.
None of the aforementioned constituencies are happy with the latest iteration of H.202, as it emerged from the Senate Health and Welfare Committee on a 5-0 vote.
Members of Health and Welfare altered the bill to satisfy business interests, and the compromise has engendered resistance from all sides, as evidenced by the testimony Senate Finance heard on Friday.
If the tug-of-war over H.202 is any indication, the fight over future legislation is sure to be intense. After all, H.202 is, in essence, a visionary document that sets more studies in motion and gives a board authority to make more recommendations regarding the development of a single-payer style health care system. It doesn’t include concrete decisions about any of the nitty gritty stuff — what the benefits package will look like, how providers will be paid, how much the system will cost and how it will be financed. That gnarly bit of sausage-making is yet to come — in 2013, well after the next election cycle.
At the moment, the bone of contention is tangential to that single-payer vision. Opponents of H.202 are dismayed by the way the Shumlin administration uses the federally-mandated insurance exchanges as a stepping stone toward a single-payer style health care system.
The Shumlin administration has pushed for language that would give them enough wiggle room to create an integration plan for a “single-payer exchange” under the federal Affordable Care Act; businesses want specifics built into the plans for the exchange that allow them as much “choice” and flexibility as possible.
Business representatives who testified last Friday say the Senate’s changes to the bill don’t go far enough to protect them from regulations that they say could drive up their health care costs.
Single-payer advocates, on the other hand, say the bill is now slanted toward corporate interests and lawmakers have lost sight of the original intent of the bill, which, activists say, is to provide universal care to Vermonters. The Health Care is a Human Right Campaign held a press conference on Friday to publicize their amendments to the bill and insist that lawmakers “put people first.” Activists object to certain economic sustainability requirements in H.202 that they say could set the universal health care effort up for failure.
Sen. Ann Cummings, D-Washington, chair of Senate Finance, tried to reassure business leaders and advocates alike. “It’s no one’s intention to have fewer people with insurance and more expensive (insurance) plans going forward,” she told the lobbyists and activists who packed the room. (At one point, the committee had to open the door onto the hallway to allow for the influx of visitors.)
Cummings’ committee is expected to send H.202 to the Senate Appropriations Committee early this week. The Senate will likely vote out the bill before the end of the week. At that point, it will go to conference committee, where members of the House and Senate will hammer out a compromise version of the bill.
The evolution of H.202
H.202, as passed by the House, was originally more closely aligned with Professor William Hsiao’s report to the Legislature, which recommended that the state pursue a single-payer health care plan. H.202 attempts to create a roadmap that would enable the state to adopt most of Hsiao’s recommendations for a single-payer plan. (The label single-payer in the House plan, however, was dropped for political reasons in favor of a unified, universal health care system.)
According to Hsiao, a uniform payment system is the only way to ferret out waste and ensure quality care for patients. He described the current health insurance and medical delivery as fragmented. Insurers and state and federal governments reimburse providers at different rates for the same procedures; providers are rewarded for the number of procedures they perform as opposed to preventing illness; and insurers spend a large percentage of the money they receive in premiums on administrative costs, which include marketing and lobbying. Hsiao showed that a variety of interests — insurance companies, brokers, pharmaceutical and prosthetic corporations, lab companies, hospitals and sometimes individual doctors — siphon money from the system. Under a single-payer payment program, Hsiao said it’s also possible to control waste, fraud and abuse and prevent duplicative procedures.
He proposed a “single-pipe,” or uniform claims management system, for billing, as opposed to the current “fragmented” payment system, in which insurers and state and federal plans pay providers at different rates for the same procedures.
Hsiao estimated that a single-payer system could generate an anticipated savings of $500 million in the first year of the implementation. In his plan, about $400 million would be invested in expanding care to all Vermonters; the total net savings would be $100 million.
The world-renowned professor from Harvard caused a stir, however, when he suggested that the system could be financed with a payroll tax in lieu of insurance premiums. His preliminary estimates showed employers would need to contribute 11 percent of payroll; employees 3 percent.
Since the heady early days of the session when many Democrats in the Legislature were enthralled with the potential for Hsiao’s plan, lawmakers and members of the Shumlin administration have been engaged in the difficult process of transforming the overarching goals set out by Hsiao into practical steps that would enable the state to shift from the current model to a single-payer system.
The legislative process has been met with stiff resistance, even though H.202 puts off until 2013 the tough choices about the scope of medical benefits for Vermonters, the overall cost of the system and the financing mechanism. Special interests, namely businesses, insurers, brokers, hospitals and doctors, have tacitly or overtly questioned the efficacy of single payer at every legislative turn and aggressively followed each committee machination.
You are asking us to trust that this health care financing and delivery system overhaul will produce lower costs and better health outcomes for employers like IBM than we can accomplish for ourselves. This is a significant risk for our company to take.”
~ John O’Kane
If the “framework” eventually yields full implementation of Green Mountain Care, there will be winners and losers. Individuals and entities that benefit under the current system fear they will see a reduction in revenues in the new, universal health care scenario. Single-payer advocates, primary docs, nurses and affiliated preventive care medical professionals believe they will see better patient care (and perhaps better remuneration and less bureaucratic hassle) if Green Mountain Care is implemented.
Businesses, however, object to the notion of a payroll tax, as suggested under the Hsiao report, because they say it would eliminate the flexibility they need to remain competitive. Companies like IBM, Biotek and Dealer.com say they offer health insurance benefits to their employees for much less than the 11 percent payroll tax suggested by Hsiao.
Complicating the situation further is the fact that the federal government requires the state to implement a health care insurance “exchange” by 2014, under which residents are given tools to evaluate the actuarial value, or the total amount insurance companies will pay for a patient’s care under a given health insurance “product.” The exchange is meant to serve as a “marketplace” where consumers are given the information they need to determine what a plan is really worth.
The exchange as stepping stone
H.202 sets up a framework for the development of a universal health care system called Green Mountain Care. The timeline for the transition from the current medical payment system to the single-payer style approach is six years, though it is possible that Green Mountain Care could be in place by 2014 — if the state is able to obtain a waiver from the federal government.
Starting in August, a director of health care reform and a deputy commissioner of the Department of Vermont Health Access would conduct research and design the three fundamental elements of Green Mountain Care — a benefits package, financing system and provider reimbursement program. In January, the Vermont Health Care Reform Board would form and begin to review the aforementioned plans developed by Shumlin administration officials. The Legislature would vote on the proposals in 2013.
Meanwhile, the state must offer insurance “exchanges” under the federal Affordable Care Act by 2014. Under the exchange, insurers must offer standardized benefit packages for Vermonters. The federal government has set actuarial values for the packages and given them corresponding precious metal monikers — bronze, silver, gold and platinum plans. (There is also a catastrophic plan.) The silver plan, for example, has an actuarial value — or the percentage of total health care costs the insurer actually pays — of 70 percent. Bronze is 60 percent. The idea behind the values is to enable consumers to determine, based on different insurance “products” with their various copays, coverage limitations, coinsurance percentages and deductibles, what their actual out-of-pocket liability is for a given insurance plan. (It’s kind of like comparing the shelf price with the per-pound price for foodstuffs at the grocery store.) The feds haven’t yet released details about what the benefits plans would look like.
The average actuarial value of plans offered to Vermonters in 2010 was 87 percent, according to Hsiao’s report. Under H.202, the only benefit levels that could be offered would be silver (70 percent), gold and platinum levels. If Green Mountain Care is eventually implemented, it would offer the state’s residents benefits with an actuarial value of 80 percent or greater.
The exchange provides tax credits for individuals and families that have annual incomes that are at the 400 percent of poverty level or lower. On average, those credits are worth about $5,000 for families earning less than $73,000 a year. (The tax credits are built into the tax code and are not subject to the federal appropriations process.) According to the state Department of Banking, Insurance, Securities and Health Care Administration, about half of all Vermonters fall under the 400 percent of poverty level.
Anya Rader Wallack, the governor’s special assistant on health care, has said these credits, worth more than $100 million, would be “captured” by the state, in order to help fund the universal health care system.
The Shumlin administration must present an “integration plan” for the “single-payer exchange” to the Legislature in 2012.
Under the congressionally-enacted Affordable Care Act, businesses with fewer than 50 employees that don’t offer insurance to workers would be fined $2,000 per employee. Certain companies with low-wage workers that don’t currently offer health benefits would receive tax credits toward insurance for employees (the amounts haven’t been specified by the feds yet).
Wallack has argued that it’s important to get as many Vermonters as possible into the exchange “pool” in order to achieve economies of scale in the future under the Green Mountain Care system. The federal law requires all businesses with 50 or fewer employees to become part of the exchange, and it has allowed states the flexibility to require businesses with fewer than 100 employees to participate in the exchange.
Wallack would like to see this larger employer group included in the exchange; businesses and insurance brokers vehemently oppose the move to include companies with 50-100 workers.
The state’s two largest unions — the Vermont State Employees Association and the Vermont-NEA — would, in theory, become part of the Green Mountain Care system, according to early models developed by the administration. Betsy Bishop, executive director of the Vermont Chamber of Commerce, has said the state wouldn’t need to include mid-sized businesses in the exchange if unions were required to become part of the state’s insurance pool.
The legislation postpones a decision about whether employers with 50-100 workers will be part of the exchange until the financial implications of the state program have been examined. Under H.202, the director of health care reform would hire an actuary who would create financial models for the different-sized employer pools in the exchange, according to Wallack. The board would then make a recommendation to the Legislature about employer pools.
There were 21,849 businesses in Vermont with fewer than 50 workers that employed 125,698 workers in 2010, or about 53 percent of the entire workforce, according to the Vermont Department of Labor. Businesses that have 50-99 workers employ 28,965 or 12.4 percent of working Vermonters. The largest firms, those with more than 100 workers, employ about 80,000 Vermont residents, or about 34 percent. The last group tends to self-insure workers.
CORRECTED The state’s largest private employer, IBM, adamantly opposes the Shumlin administration’s approach to health care reform. John O’Kane, the government programs manager for IBM, says a payroll financing system for a single-payer system could affect the corporation’s competitiveness.
O’Kane has made no bones about his position. He maintains that the state is poised to create a higher cost system for large employers because he says it will impose a payroll tax on companies that prefer to offer their own health insurance programs.
“You are asking us to trust that this health care financing and delivery system overhaul will produce lower costs and better health outcomes for employers like IBM than we can accomplish for ourselves,” O’Kane said. “This is a significant risk for our company to take.”
The middle men cometh
One of the key elements of the legislation is the concept of the “single pipe,” a payment model based on German and Swiss systems, in which all health care billing goes through one claims processing center. Under this unified approach to medical billing, insurers offer standardized benefit packages and doctors are potentially paid the same rates for the same type of care.
The all-claims management approach would cut out the middle men — the brokers and insurance associations — who benefit from the current, private insurance system.
Mitch Fleischer, the head of Fleischer Jacobs Group, and Jeanne Keller, who represents the Business Resource Association, led the charge on behalf of their clients and fought the inclusion of employer groups with 50-100 workers in the exchange. Keller drafted four amendments to the Senate version of H.202.
Keller’s amendments propose that businesses be permitted to purchase insurance outside the federally-mandated exchange, require the state to allow two insurers to operate inside the exchange and define the employer group size required to purchase insurance as businesses with less than 50 employees.
In addition, Keller suggests that the legislation “provide a clear message that self-funded employer health insurance plans will not be subject to double costs for health insurance.” The last proposal, according to Wallack, would have left the state open to a lawsuit under ERISA.
Keller’s push led to significant changes to the bill, most notably a requirement that there be two insurers in the exchange. Wallack countered that the change “reduces our ability to achieve savings” and “undermines the single pipe” because it will add complexity to the administration of the exchange.
Business groups under the aegis of the Employer Coalition, a loosely affiliated group of Vermont companies and associations spearheaded by Fleischer and Keller, recently formed a united, anti-single-payer front at the Statehouse.
Ten days ago, IBM, Vermont Country Store and about a dozen other businesses represented by the Vermont Chamber of Commerce, Fleischer Jacobs Group and Business Resource Specialists held back-to-back meetings with Gov. Peter Shumlin and buttonholed lawmakers in an attempt to change H.202.
The governor asked the companies to support the plan and help the state save money; the business groups pushed back and have insisted on changes to undercut the bill.
The objections appear to be leveled at the intent of the House bill, as proposed by the Shumlin administration, which is to create a framework the state can build on as it moves toward a single-payer system.
Brokers help businesses determine which health insurance plans best suit their needs. For this service, brokers make a 6 percent commission on the health care premiums they sell, according to Steve Kimbell, the commissioner of the Department of Banking, Insurance, Securities and Health Care Administration. Last year, Vermont brokers grossed about $18 million. Associations attract more members through pooled insurance plans offered by companies like Cigna, which provide high deductible plans, for example.
Under Green Mountain Care, or even a “single- payer” exchange, brokers’ services could be rendered obsolete.
The cheat sheet on Green Mountain Care
If you had to read just one section of the Senate version of H.202, that section would be No. 4, on page 72. The section, written by Sen. Kevin Mullin, R-Rutland, summarizes all of the conditions that have to be met before Green Mountain Care is launched.
Mullin’s one-pager sets out the parameters for implementation of the single-payer style system.
- The benefits package must have an actuarial value of 80 percent or greater;
- Green Mountain Care “will not have a negative aggregate impact on Vermont’s economy;
- The financing for Green Mountain Care is “sustainable”;
- Administrative expenses will be reduced;
- Cost-containment efforts will result in a reduction in Vermont’s per-capita health care spending as compared to the national rate of increase of health costs;
- Health care professionals will be reimbursed at levels sufficient to allow Vermont to recruit and retain high-quality health care professionals.
Mullin said these provisions built into the bill provide “safeguards” for the state’s economy. Without these built-in assurances to businesses and health care providers, Mullin said, the state could be “headed down a path of no return.”
“It’s a summary of what’s essential to make it work,” Mullin said. “We want to be able to keep good jobs and benefits. We don’t want to adversely impact the economy.”
Businesses ill at ease still
In spite of efforts by Mullin and Sen. Hinda Miller, D-Burlington, to provide language in the bill that protects business interests, corporations and company associations continue to oppose the way the Shumlin administration uses the exchanges as a foundation for a universal health care system. They say they need health insurance choices in the transition period. They worry that they won’t be able to afford the benefit packages offered through the exchange.
Retailers and grocers object to the Shumlin administration’s proposal to allow no more than two insurers in the federal insurance exchange. In addition, a requirement under H.202 for businesses to offer plans with an actuarial value of 80 percent or higher is problematic, according to Jim Harrison of the Vermont Grocers’ Association, and Tasha Wallis, the Vermont Retail Association.
Many businesses, according to Harrison and Wallis, offer high deductible plans with health savings accounts for their employees. If the state required employers to provide low-deductible plans to workers, Harrison said, they would bear the brunt of the cost. (It’s not clear what the actuarial value of such plans might be under the federal exchange benefit system.)
Wallis told Senate Finance on Friday that the federal law allows the states to create insurance exchanges with the full range of benefit packages (catastrophic to platinum) and multiple insurance products. The problem with the administration’s proposal for the exchange as outlined in H.202, in her view, is that “it’s been designed as a transition for Green Mountain Care, rather than as an exchange.” H.202, for example, allows no more than two insurers in the exchange, she said.
“What we’ve observed in employers we work with is they shop around a lot,” Wallis said. “Some are driven by price, or by deductibles or pharmacy (benefits). Quite often they design their plans with employees. If you only have two products, and if those products are priced higher than a group of employers or an employer has been paying, there is no way to control costs but to push costs onto employees. There is nowhere else to go with that model.”
Sen. Tim Ashe, D/P-Burlington, acknowledged that while financial “uncertainty” seemed to be the biggest concern for some businesses, others believe they could benefit. (Small companies affiliated with Vermont Businesses for Social Responsibility report premium increases of 20 percent to 25 percent. They support H.202 because they believe it will lower health care costs.)
“For those who support single payer, it (the bill) doesn’t go far enough, for those who don’t it goes too far,” Ashe said. “My personal interest is in delivering health care broadly at an affordable price. Otherwise, I don’t know why we’d be doing this.”
Wallis replied that businesses are split on the issue, but they want “to make sure this interim step works for them.” She said unless the products offered put cost controls in place, businesses will continue to be uneasy.
Sen. Cummings tried to reassure Wallis. “That’s why we’re doing the actuarial work to find out how plans are likely be priced before we make further decisions until we know,” Cummings said. “We need to do an analysis of the (employer) pools and see what they look like as they get bigger and smaller.”
Single-payer advocates say bill is slanted toward business
The Vermont Workers’ Center had a rally on Friday to encourage lawmakers to “put people first,” rather than to allow businesses and insurers to dictate changes to the system.
Single-payer advocates took issue with Mullin’s language in the Senate version of H.202 that would make implementation of Green Mountain Care subject to a metric they said is impossible to meet. The bill requires that the state’s growth rate of health care spending not exceed the national rate. Currently, the rate of growth for medical expenditures in Vermont is outstripping the national growth by 3 percentage points.
Advocates say it will be difficult for Vermont to align with the national rate because Vermont has an aging population and other states are poised to drop services to Medicaid recipients.
Mary Gerisch, a member of the Health Care Is A Human Right Campaign, said the peg to national medical spending rates could set up an impossible standard for implementation of Green Mountain Care.
Gerisch also took issue with a requirement that the proposed implementation of Green Mountain Care not have an adverse economic effect on the state. “This could be as simple as one major employer withdrawing from the state,” Gerisch said.
“We are suggesting that this section of (the bill) be stricken,” Gerisch said. “If we want to establish health care as a public good, we can’t set it up with conditions that cannot be fulfilled.”
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