Health Care

Businesses divided on health care exchange legislation

The business community sent a mixed message to lawmakers Wednesday about the future of health care for their employees.

Some business owners are concerned that they will have to give up the health insurance plans they have worked hard to set up as the state transforms its health care system.

Others feel their costs of paying for health care are breaking the bank, and they want everyone to pay into a program that provides care for everyone.

Both camps gave testimony Wednesday before two legislative committees that will consider pending legislation to set the stage for health care reform in Vermont. By the end of the legislative session, lawmakers plan to have a road map for how they will set up a health benefits exchange.

The exchange is a federal mandate that requires states to set up virtual marketplaces for individuals and small groups to purchase health insurance. The 2010 federal health care reform law allows some wiggle room for states to tailor their own systems.

For businesses, the main issue is whether they will be required to buy an insurance policy through a health benefits exchange. Under House Bill 559, businesses with 100 or fewer employees must purchase health insurance through what will be the virtual marketplace.

Under the federal Affordable Care Act, the decision whether to treat businesses with up to 50 or up to 100 employees as “small” for 2014 and 2015 is up to the states. Starting in 2016 employers with 100 or fewer employees will be considered “small” and eligible for the exchange.

Some businesses have been rattled by the state’s decision to prohibit larger employers from purchasing insurance outside the exchange.

Nigel Mucklow, owner of New England Floor Covering in Burlington, said the plan he buys for his employees has a $2,500 deductible. He said the flexibility he has with his insurance provider enables him to keep costs down.

“We don’t want you to box us in to a certain category and a certain way of doing business,” he said.

Mucklow said he was skeptical of the state’s ability to control costs.

“We’re scared you’re going to make us have a product that costs a lot,” he said. “We are responsible people, and we don’t necessarily need you guys to tell us how to run our businesses.”

One consistent concern from many businesses is the lack of high-deductible, low-premium plans in which employers contribute to health savings accounts. These plans, which most likely will not meet the qualifications the legislation proposes, save business owners money.

Craig Fuller of the Employer Health Alliance, which lobbies on behalf of businesses, expressed concerns that such plans may be illegal under the administration’s proposal.

Tom McKeown, executive director of Business Resource Services, polled his business owner clients and he says more than 90 percent believe that so-called “bronze” plans should be offered in the exchange.

The concept behind the federal health care law, McKeown said, is to offer choices. He said businesses want more choice to choose their own plans, inside or outside the exchange.

“The current system is working,” he said. “Don’t disrupt what’s happening.”

Sara Byers, vice president of Leonardo’s Pizza, echoed that the state should be hesitant to move forward too quickly. Byers said the state should keep the exchange limited to smaller groups in order to avoid “unintended complications and kinks.”

The administration’s proposal will likely increase the costs of providing insurance for companies with 51 to 100 employees who “shouldn’t cross-subsidize smaller businesses,” Byers said.

But not all businesses think the state should put the brakes on health care reform.

Bram Kleppner, CEO of Danforth Pewter in Middlebury, hopes bringing larger businesses into the exchange will level the playing field.

Like many businesses, Kleppner said he has been forced to pass on high health care costs on to his employees.

“It has caused significant suffering for these people and their families,” he said.

Kleppner said he hopes bringing more people into the exchange will lower costs for employers collectively as more businesses share the costs.

Michael Roche, an arborist who owns Stowe Tree Experts, agrees. Roche employs five people. He says the cost of paying for their health insurance puts him at a competitive disadvantage against other employers who don’t offer the benefit.

Roche said even with the modest insurance plan he offers, he can’t charge enough for his services to cover the cost. With a $12,000 premium for each employee, Roche estimates it costs around $200 a day.

If he charges $1,000 for a service, and another employer who does not offer insurance charges $800, he said, “A customer might look at me and say, ‘Mike, I really like your social responsibility but I want the $200.’”

For this reason, Roche said he wants everyone to have skin in the game.

“I want everybody in because everybody’s got to feel the pain,” he said.

Some single-payer advocates have also expressed concerns that the state is “herding” small businesses into the exchange. According to John Franco, a Burlington attorney and proponent of health care reform, the mandate to require employers with 100 or fewer employees to purchase health insurance on the exchange will affect about one quarter of the 355,000 Vermonters with private insurance.

These individuals, Franco said, will be forced to cover the administrative costs of the exchange while large businesses and those with grandfathered plans will not be in. Furthermore, Franco asserts, more people in the exchange does not create a larger risk pool necessarily because each insurance carrier will have its own pool.

“The exchange is a shopping mall, not an insurance pool,” Franco said. Single-payer, he says, is a uniform benefit package provided through a single insurance fund. They are not the same idea, he said.

Franco said the whole point of the exchange as it relates to a universal health care system is to encourage individuals to enroll and receive federal subsidies for their health insurance. This will set the bar for a block grant that the state can receive in 2017 when it aims to request a waiver from the federal law to implement its universal system. Franco adds that he is not trying to attack the administration for its proposal but rather save it from a bad policy decision.

Bill Driscoll, vice president of Associated Industries of Vermont, said the business community reiterated the concern with limiting choices and flexibility. He said he is concerned the state may do away with things like high deductible plans which have saved money for the past 20 years. Bringing in larger businesses, he said, could eliminate the benefit for some of the largest cost-savers.

Plans with health savings accounts, Driscoll said, help to decrease the costs of health care utilization because people have to pay for services out of their own pockets.

“We have to be able to have to link to some degree health care consumption choices with the cost of those choices,” he said.

Peter Sterling, executive director of the Vermont Campaign for Health Care Security, helps people get on plans like Catamount Health and the Vermont Health Access Plan. He said while these high deductible plans may save money for employers, he fields calls constantly from employees trying to get off them and onto the more robust state plans. The problem, he said, is that employees are not eligible in some cases because they have not met a requirement that they be uninsured for one year.

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Alan Panebaker

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  • David Schoales

    Creating the exchange illustrates the complexity of building a state-wide health care system. Perhaps the governor should reconsider his reaction to hiring a communications professional to help explain all this to the citizens. It would be unfortunate if the exchange continues to be understood as the same as the single-payer system, and you can be sure those who fear universal health care will do all they can to further the confusion.

  • Walter Carpenter

    Thanks, Dave, for Your post. While high deductible plans save the employer money,mor may in th short run, and make the insurance companies a lot of money, they do nothing for the employee who is faced with thousands of dollars for health care that they cannot afford and could bankrupt them. High deductibles andnhsa’s are like paying for no insurance at all.

  • Carol Frenier

    The key issue here is choice. Many small businesses have figured out cost efficient ways to buy health insurance through high deductibles (HD). Many of these businesses are contributing heavily to employee HSAs to bring down the cost to employees as well. But they get little credit for that in the view of people like Walter Carpenter who assert without substantiation that employees are paying out thousands of dollars that could “bankrupt” them and that having these plans are “like paying for no insurance at all.” I can assure you that if you get a $200,000 medical bill, a $5,000 deductible policy would be considerably better than having no insurance at all.

    The exchanges have to conform to federal law, so these HD policies are not likely to be acceptable, whether or not employers pay for their employees’ deductibles. Thus, the cost to businesses will skyrocket. What will that do to the economy of Vermont?

    I support Senator Iluzzi’s S208 which would allow everyone to buy outside the exchange. If the exchange turns out to be all that it is cracked up to be, small businesses will use it. Let them prove themselves to be better at cost containment than the private sector.

  • Bob Zeliff

    It is important to remember that the exchanges were put in the federal Affordable Care Act by interests supporting the traditional medical insurance establishment. They are mean to break down the shared benefit of “community rating”. (Every insurance company must insure the whole population,,not cherry pick young, health, low risk job..etc). What we are hearing is that some business benefit by low risk demographic, very high deductibles, caped insurance pay outs. People outside these favorable demographic are almost impossible to insure at any cost. One can easily see that exchange do NOT lower cost.
    What Vermont needs is fairly price medical coverage for all.
    We will have to put up with the flawed exchanges because it is federal law.
    H559 is attempting to give good coverage to all employers and employees of small business….and preclude the current cost shifting to the backs of our hospitals and Doctors of those with poor or no health insurance.

  • walter carpenter

    “I can assure you that if you get a $200,000 medical bill, a $5,000 deductible policy would be considerably better than having no insurance at all.”

    Carol, have you ever had to actually face this? I have. The figures were different than your example above, but it was essentially the same thing. Medical debt is terrifying. And the thing that you forgot to mention in your post was that if we had an equitable and fair health system that worked for all Vermonters, businesses would not have to scramble to offer these ridiculous high deductible plans (which make the health insurance companies a great deal of money since employees cannot use their health insurance because of the deductibles) or Health Savings Accounts, which are only as good as long as the savings is there, then it is medical debt. Employees would not have to look at a $5,000 or $10,000 deductible along with hundreds of dollars in premiums every month.