Editor’s note: This commentary is by Scott Woodward, an information technology consultant and an eminent domains/takings specialist. He is former Republican candidate for the Vermont House who lives in North Pomfret.
[T]he Medicare population of Vermont has received much attention as a key constituency for Green Mountain Care. This commentary suggests that we are looking in the wrong direction and that the Medicare topic has generally been a political distraction. A very real problem is addressing how the state will entice employers within scope of the Employee Retirement Income Security Act (ERISA) to participate. ERISA employers are the crucial constituency that will determine whether we can expect a larger or significantly smaller number of primary members to be enrolled in Green Mountain Care. However, federal law generally pre-empts state government from directly compelling ERISA employers to participate in schemes such as Green Mountain Care and, absent some indirect stick or carrot, there is little the state can do. But, having the right mix and right volume of primary members is crucial to the forthcoming financing plan and the overall success of Green Mountain Care; it will be important for the governor and the Legislature to thoroughly consider how it will work with ERISA employers.
The January 2013 Health Care Reform Financing Plan includes high, medium and low scenarios for Green Mountain Care enrollment (p. 15). Appendix 3 of the report also includes a predicted level of enrollment (I’m not sure why the report authors included a predicted set of numbers in addition to the envisioned scenarios). The percentage of Vermonters that are expected to enroll in primary Green Mountain Care, based upon the high, medium and low scenarios, ranges from 64-74 percent with a predicted membership of 67 percent (including Medicaid recipients).
VPR recently reported on “Morning Edition” that there are approximately 110,000 Vermonters covered by ERISA employers. That number is consistent with what VTDigger reported this past February. In the table above, that population is baked within the “Large Group/Self Insured” membership category and comes with a generous assumption that the vast majority of ERISA covered lives will be transitioned to Green Mountain Care. (The term “ERISA” is nowhere to be found in the January 2013 plan.) On average, the expectation is that 91 percent of ERISA employers will participate. How many of them actually choose to do so will have a dramatic impact on the overall enrollment numbers.
When the governor reveals his financing plan in January, I call upon him to address this issue and how the administration and the Legislature will convince ERISA employers to participate.
If none participate, however unlikely, then the overall member range across high, medium and low scenarios plummets to a range of a high of 57 percent to a low of 46 percent (including the Medicaid population). This would likely spell disaster for Green Mountain Care’s enrollment numbers. If half of the ERISA employers choose to participate, then the range is from a high of 65 percent to a low of 55 percent, better, but this still might not result in the kind of numbers necessary to make the program solvent. Thus, not only do the scenarios contain a generous assumption, they are also reflective of necessity. But, a November 2013 Avalere study (p. 22) questioned this assumption:
GMC may be unfavorable for large employers that operate in multiple states and self-insure for employee health care coverage. Such organizations cannot be required to participate in GMC as they are governed by the federal ERISA law, though they may still be called upon to help fund GMC since they conduct business in Vermont. This will create a significant disincentive for such organizations to continue doing business in Vermont. At minimum, these employers might seek exemption from any payroll tax meant to fund GMC, which could leave other employers or taxpayers shouldering a larger burden.
It’s difficult to imagine the right combination of incentives. If Vermont takes the stick approach, my guess is that we’ll pay for it somehow, whether it means throwing more economic development dollars at the larger companies (which means less investment for small businesses), or whether these companies choose to dilute the imposition of the payroll tax through internal cost-cutting measures, including headcount reduction. Moreover, it’s entirely possible that a payroll tax, as it applies to ERISA employers, could be invalidated by a federal court because it presents a Hobson’s choice, thus violating ERISA. On the other hand, using the carrot approach has consequences as well. Monetary incentives, including tax breaks, will likely require offsetting the effect of those incentives elsewhere in the budget and the budget is already under duress. Companies to keep an eye on that will help indicate which way the wind is blowing are Liberty Mutual and now Globalfoundaries. When the governor reveals his financing plan in January, I call upon him to address this issue and how the administration and the Legislature will convince ERISA employers to participate. It’s high time for details.
