[L]t. Gov. Phil Scott, who has talked on the campaign trail about sharing health insurance risk with other states as a way to reduce prices, said Wednesday that idea was relevant “only if we had to start over.”
He has also proposed moving to a multistate exchange instead of Vermont Health Connect, an idea experts say would involve a variety of legal and technical hurdles that no other state has experienced.
Scott, a Republican who is seeking to succeed Gov. Peter Shumlin, has said emphatically that he would get rid of Vermont Health Connect, the embattled exchange that went online in 2013 under the Affordable Care Act.
His economic development plan says: “It’s time to move to the federal exchange or to a multistate exchange that works and offers Vermonters more affordable health insurance choices.”
The plan built off his comments to VTDigger on Sept. 7, when he said, “I think sharing in resources, attaching to another plan in another state to spread out the burden, would be advantageous for Vermont,” and comments to Vermont Public Radio in June.
But when contacted Wednesday to discuss the potential challenges of making such a move, Scott said “there has been some confusion” and that he “never was” interested in using health insurance plans from another state like Connecticut.
“I just want us to note that there are other options available, options that are working, and we just have to accept the fact and accept, take the position that this has failed, and as difficult as this is, it’s essential that we have something that’s workable,” Scott said.
His interest in a multistate exchange goes back to 2015, when Scott took two Vermont senators to a meeting to discuss how Connecticut’s state-run health exchange works. Connecticut officials later gave a presentation on the model in Vermont. Scott said Shumlin’s administration was not interested.
Scott told VPR in June that Vermont’s prices are high because the state uses a process called community rating that charges young people the same price for their insurance as older people, who often have higher health needs, and the state has a lot of older people in its population.
“But, let’s just say, if we could partner up with another couple of states, spread the risk out a bit, utilize some of their plans, maybe, more competition, I think we could actually have lower rates than we’ve had previously,” he told VPR.
Differences between Connecticut and Vermont
The idea of partnering with other states in an exchange has been drawing scrutiny in light of Scott’s statements.
Jennifer Tolbert, the director of state health reform for the Kaiser Family Foundation, the leading national think tank for health care issues, told VTDigger in an interview Oct. 5 that setting up a multistate exchange would be challenging, with several unknowns.
“It has not been done before,” Tolbert said. “I’m not sure actually that I know all that it would entail to put this together. I think there are just a number of logistical and technological challenges that that entails.”
She said: “I don’t think these issues are irresolvable, but there are a set of issues that arise around sharing an eligibility platform.”
One of them involves Vermont’s use of community rating.
The exchange in Connecticut, called AccessHealthCT, served about 100,000 commercial customers in 2016, according to the Kaiser Family Foundation. Going into 2017, two insurers intend to sell plans.
Because Connecticut does not use community rating, prices for insurance plans there vary by the person’s age and whether the person smokes cigarettes. For example, a 40-year-old nonsmoker with no financial help from the federal government paid about $318 for a midlevel plan in 2016, compared to $468 per month in Vermont. However, Vermont customers could get financial help from both the federal government and the state.
Tolbert said that while different insurers sell products in different states, insurance companies don’t combine the residents of the different states into the same risk pool. “If you’re talking about integrating a market, the rules have to be the same, so again, that would be another hurdle,” she said.
Cory Gustafson is the spokesperson for Blue Cross Blue Shield of Vermont, which covers 90 percent of people who use Vermont Health Connect. He said he was not in a position to say whether the insurer could combine risk pools in Vermont and Connecticut.
Gustafson said every state has its own laws on insurance plans, and insurers that want to operate in Vermont need to follow them. “For an out-of-state insurer, if they’re covering Vermonters they’d still have to live up to state law, and they’d still have to live up to community rating,” he said.
Vermont is on track to require health insurance companies to cover services such as acupuncture and have insurance companies pay doctors based on the quality of their services, not the number of procedures they perform.
“You would need a legislative change because what you’d need to do is align your insurance rate review across two states,” said Robin Lunge, the director of health care reform for Shumlin.
Lunge said it was unclear whether the Green Mountain Care Board would be able to continue its regulation of Vermont Health Connect prices under a Connecticut model.
“The place where my head always gets stuck is on this idea,” Lunge said. “I don’t know if that means if one state defers to the other state. Does Vermont say, ‘Connecticut, you do the rate review,’ or does Connecticut say, ‘Vermont, you do the rate review’?”
When contacted Wednesday for comment, Scott agreed with the experts. “Our laws are a bit different in Vermont, and with community rating in Vermont and so forth, it’s a little different than just using their plans. It’s something to just consider,” he said.
When Connecticut pitched to Scott
Vermont has looked at simply adopting technology from Connecticut to replace Vermont Health Connect, but people who were involved say that didn’t extend to combining with other states on insurance plans.
Scott said he first got the idea to use Connecticut’s exchange when he was talking to Nancy Wyman, that state’s Democratic lieutenant governor, at a conference. Wyman has broad authority in Connecticut to procure contracts for AccessHealthCT and sell the state’s technology to other states to bring in revenue.
At the time, Maryland had already bought the software code from Connecticut to set up its own exchange. Tolbert, from Kaiser, said Connecticut’s exchange worked well from the start.
In April 2015, Scott took a group of Vermont lawmakers to Rhode Island, where officials from Connecticut and Vermont joined them, and the three states discussed whether they could work together to solve problems.
Sen. Tim Ashe, D/P-Chittenden, attended the meeting in Rhode Island because he is the chair of the Senate Finance Committee. He said the stakeholders had “a pretty free-ranging discussion” but there was never a concrete plan to move to Connecticut’s exchange.
Ashe said there were opportunities for the three states to collaborate — such as bidding out the exchanges’ call center contracts together to save money by buying in bulk — but he said there were challenges because Connecticut has different contract procurement rules than Vermont.
“What I heard was having the same platform to sell plans, but with Vermont- and Connecticut-specific policies,” Ashe said. “I never heard about creating a Vermont-Connecticut plan, not that I can recall. It was more about using the technology in both states.”
Stakeholders from Connecticut joined Scott, representatives of the Shumlin administration, and lawmakers in Scott’s office in May 2015. The Connecticut team built a model for what a Vermont exchange would look like, according to Scott’s spokesperson, Rachel Feldman.
Lunge, from the Shumlin administration, said she was personally involved in reviewing whether Vermont should move forward with a partnership with Connecticut or another state, such as Kentucky.
Lunge interviewed stakeholders from Maryland, Hawaii, Nevada and Oregon. The first three states eventually ditched their exchanges and moved to the federal one. Maryland still has its own state-run health care exchange, and it purchased technology from Connecticut to build it.
Lunge said the two states “literally did a code drop,” where Maryland bought Connecticut’s software code and then “continued to invest dollars into building the technology to fix what was still in the code.”
Lunge said Vermont officials then faced a dilemma of whether to buy and fix a new technology or work on fixing the old Vermont Health Connect technology.
The cost of transitioning
Scott’s Comprehensive Blueprint for Economic Growth says moving to the federal exchange or to a multistate exchange “that works and offers Vermonters more affordable health insurance choices” could “save Vermont millions of dollars in maintenance and operational costs each year.”
Aside from the complications of selling multistate integrated policies, the Shumlin administration disputed the idea that transitioning would be cheaper in a report from November 2015, which the administration said was peer reviewed by a team at Princeton University.
The administration’s report said the minimum cost of transitioning to the federal exchange would be $24.5 million in state and federal money up front, including $11 million in state money. The report projected that operational costs would be $24.6 million in state money per year — about $5 million more than the state costs for maintaining Vermont Health Connect.
Under that plan, if the state transitioned customers with commercial insurance, it would need to maintain Vermont Health Connect to serve the state’s Medicaid population. By the time the next governor takes office, that population — nearly 200,000 people — will have been moved over from the old system, ACCESS, to Vermont Health Connect.
Lunge said the state would keep Vermont Health Connect to enroll Vermont’s Medicaid population because it should seek to get as much value out of the product as possible.
“You wouldn’t ditch and then completely restart,” Lunge said. “You’d reuse whenever possible obviously because it’s cheaper. There may be some circumstances where just throwing out something wholesale and starting over is cheaper, but it’s not like you’re taking a laptop and throwing it out.”
A more expensive transition envisioned dropping Vermont Health Connect for all purposes and updating ACCESS to handle the Medicaid patients. That option would cost $80 million in state and federal money, and the state would be responsible for $23.8 million of that, according to the report. The ongoing operational costs would be $32.8 million, including $18.2 million in state money.
In both cases, much of the increased operational costs came from paying $6.3 million in state money to use the federal system.
The report said the ongoing cost of keeping Vermont Health Connect was $45.7 million a year, including $19.5 million in state money. Therefore, the report found that it was cheaper to finish and maintain Vermont Health Connect.
Vermont Health Connect’s subsidy programs
If the state ditched Vermont Health Connect, it would lose the mechanism that delivers state subsidies to some residents to help them afford health insurance.
Vermont is one of two states to offer extra financial help — above what the federal government pays on customers’ behalf through the federal exchange — to people who buy commercial insurance through the exchange.
Tolbert, from the Kaiser Family Foundation, said the other state is Massachusetts. It also had trouble with its health care exchange, but the state did not switch to the federal exchange because it wanted to keep its state-level subsidy programs. Instead, Massachusetts went back to the drawing board on its exchange and essentially rebuilt it, she said.
Officials in Vermont agreed the state should not get rid of its subsidy programs. In the 2015 report describing options for the exchange, the Shumlin administration cited Vermont’s low uninsured rate and a survey for 2014 saying that the 3.7 percent of people who lacked insurance did so because of the cost.
Without the subsidies, according to the report, a person making $34,000 would pay $500 more a year in premiums, plus up to $2,350 more in out-of-pocket costs. A family of four making $70,000 would pay $1,000 more a year in premiums and $4,700 more in out-of-pocket costs, the report said.
One of Vermont’s most generous subsidies is called cost-sharing reduction, which allows a customer to pay a very low premium and be responsible for only 6 percent of health care costs. The other is Vermont premium assistance, which is essentially cash paid to the insurance company to lower the premium. About 19,000 people used one or both of these subsidies in 2015, according to data from the Department of Vermont Health Access.
The only way for Vermont to get the additional money to those customers is to have its own technology to do it — either Vermont Health Connect or a new mechanism.
Lawrence Miller, the chief of health care reform for Shumlin, said the new system would need to be set up before the switch to the federal exchange. He said the subsidies could not simply be handled through the Tax Department.
The likely option to get subsidies to people would be a system called integrated eligibility, part of a more than $771 million IT system that was in the works for years to replace the old ACCESS system. However, the proposed system has faced substantial hurdles and is not yet able to deliver subsidies, according to the Shumlin administration.
Scott said Connecticut told him the state could build an integrated eligibility system for $10 million. “It’s possible” to set up the system, he said. “I don’t know the intricacies of doing so, but knowing that we’ve done it before leads me to believe that it can be done again.”
