As we continue the good public debate about implementation of the federal Affordable Care Act and Vermont’s 2011 health care reform law (Act 48), let’s pause for just a moment to recall the context for that work.
The first paragraph of Act 48 declares that health care coverage is a “public good.” This means that it needs to be available to all Vermonters on a fair basis, like electricity; because just like all Vermonters rely on our electric system for power, we all depend at some point in our life on our health care system. Transforming our health care system to meet this goal requires several strategies: a global budget for health care expenditures, a single system of administrative rules and fair provider payments, and guaranteed coverage that is not linked to employment.
The last point, “not linked to employment,” had been largely overlooked until the details of ACA requirements began to be understood by somebody other than policy wonks. Obtaining health insurance coverage through the workplace is actually an accident of history. During World War II, employers needed a way around government-imposed wage and price controls that were limiting employment growth. One thing the IRS did to help was to allow exclusion of health insurance premiums paid by employers for their employees from the employees’ taxable income.
The reason for this exclusion has long since disappeared. And its value to employees is shrinking rapidly as their share of premiums increases and as co-pays and deductibles do the same. Attempts to preserve the employment-based health insurance system have led to the creation of low premium/high deductible insurance plans that are affordable to employers but result in more and more employees ending up with bad coverage and huge out of pocket costs.
If we want to control health care costs and make sure all Vermonters have good health coverage, we need to separate health care from employment.
The federal Affordable Care Act is a first step in this direction, with tax credits for small employers who decide to continue offering coverage to their employees. These tax credits are good for four years, not two as some commentators have said, with the last two years at up to 50 percent of the employer’s premium contribution. Those small employer tax credits will cushion the impact of the market fairness requirements of the ACA.
More important, small employers can simply get employee health insurance off their backs by dropping coverage with no penalty. Their employees with gross income up to $92,208 for a family of four will be eligible for subsidies through the exchange that will generally exceed the shrinking portion of the cost of coverage that Vermont’s small employers can afford. Strictly on the basis of income, approximately 86 percent of all Vermonters would be eligible for some amount of tax credit if they bought insurance in the exchange.
We need an informed conversation between Vermont’s small employers and their employees about the opportunities presented by the ACA when its exchange provisions kick in on Jan. 1, 2014. One way to get that conversation going is through use of the health reform subsidy calculator available courtesy of the Kaiser Family Foundation at http://healthreform.kff.org/subsidycalculator.aspx?source=QL. Employees can anonymously type in their income, family size and other details and determine the value of the subsidy in their particular situation. Then it can be compared with their employer’s contribution. In many cases, it will be best for everyone for the employer to drop coverage and let their employees enter the exchange.
The final step is to create a truly universal health system not tied to employment. This is the real solution to our current broken system of poor coverage and increasing costs. That’s the prize that we all need to keep our eyes focused on.
