Editor’s note: This commentary is by John Franco, a Burlington attorney who has been active in health care reform for over 25 years.
One of the biggest challenges to finding a solution to the finance of a Vermont single payer health care system is the prospect of serious economic dislocation to small businesses and small nonprofits, who account for 97 percent of all employers. Half do not provide coverage at all. The amount paid by those who do ranges from 2 percent to 25 percent of their payrolls. Finding a financing number that does not result in sticker shock to a significant number of them is problematic.
Suppose that during the fall 2015 open enrollment period we could achieve universal health insurance coverage, have resolved the riddle of economic dislocation to small employers, and have relieved all but 725 of our employers of any health coverage burden? With a modest investment and a little imagination we can. The key is to maximize the drawdown of Obamacare’s federal premium subsidies available right now.
Part 1 – Cover everyone by closing the affordability gap.
Vermont employers pick up most of the premium cost of the coverage they supply, with their employees contributing about a quarter. The problem was that people without coverage available through work could not afford to pick up the whole cost, and therefore went without it. That is where the Obamacare subsidies, and the state subsidies under Catamount Health Care before them, have stepped in. Obamacare, coupled with Vermont’s premium assistance program, are together now picking up over two-thirds of the overall premium cost for individuals enrolled in the health insurance exchange. This is a tremendous accomplishment of our reform efforts, and is one of the reasons that Vermont ranks second nationally in percentage of the population covered, second only to Massachusetts.
But this leaves individuals in the exchange, on average, still paying more than those who get their coverage from work. This gap in affordability is one of the key hurdles in getting the uninsured signed up in the exchange. Vermont needs to subsidize that gap by significantly enhancing its premium assistance program.
Compared to what we are already spending on health care, the cost of doing so is negligible. After we net out the reduction in the cost of uncompensated hospital care which will result from the expansion of coverage (a cost which is now marbled into the cost of premiums), the cost would be less than $20 million. In other words, for an investment of less than one-half of 1 percent of the $5 billion plus we are already spending on health care, we can finally grab the brass ring of universal coverage, and do so in the enrollment period that begins in the fall of 2015.
Part 2 — Get all small employers out of the health insurance business.
This, as it turns out, is an essential part of the solution to getting to universal coverage.
A supplemental subsidy that significantly cuts the cost of exchange premiums will induce even more small employers to drop coverage in favor of their employees getting individual coverage in the exchange. Under Obamacare, small employers — meaning those with under 50 full-time employees — have no legal obligation to provide health insurance coverage, and are free to drop it without consequence. Many already have so, with their employees “migrating” to individual coverage in the exchange. This inducement will, in turn, increase the cost of the supplemental state subsidy.
So how would we pay for the supplemental subsidy that would make this possible? Find a financing source that is a mile wide and an inch deep.
Rather than a problem, this turns out to be just what the doctor ordered. For all intents and purposes, that will replace the premiums that were being paid by small employers with Obamacare subsidies going directly to their employees. Increased “migration” will leverage much more in Obamacare refundable tax credits than would be paid out by the state in supplemental subsidies, for a net savings to Vermonters. Bottom line – if you want to drastically reduce the health care burden for Vermont small employers, encourage all of them to get out of the health insurance business.
So how would we pay for the supplemental subsidy that would make this possible? Find a financing source that is a mile wide and an inch deep.
Part 3 – “1% for Universal Coverage.”
Remember Ben & Jerry’s “1% for Peace” campaign? A tax of about 1 percent on all payrolls would do the trick. This rate is so low that it would mean minimal dislocation to those small employers who currently do not provide coverage at all. Those who do provide coverage would experience significant relief in their cost structure. This, in turn, would make a reality the very aggressive program of small business start-ups and job creation for the economy as a whole that the governor campaigned on back in 2010.
For the cost of this small tithe, we will have accomplished several major steps toward the construction of Green Mountain Care. Everyone will have coverage. Premiums for those covered in the exchange will be income-sensitive. For the overwhelming majority of the business community, coverage will have been divorced from employment in favor of an affordable, tax financed replacement, most of it paid courtesy of the USA.
