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.”

Andrew Stein

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