[T]he federal government is touting new regulations designed to make health insurance more accessible and affordable, but Vermont officials are concerned they'll have the opposite effect.
So even as President Donald Trump's administration rolls out an expansion of “association health plans,” the state has begun drafting new rules to ensure that such plans are solvent and offer adequate coverage.
While affordability is important, the state must take action to regulate a type of insurance that could become increasingly popular in the near future, said Michael Pieciak, commissioner of the Vermont Department of Financial Regulation.
“We want to make sure those association health plans from out of state have rigorous standards and are not acting deceptively and are a safe option in terms of Vermonters seeking a health care plan,” Pieciak said.
The U.S. Department of Labor last week announced final rules promoting the expansion of association health plans, which allow smaller employers to band together to offer health coverage.
The changes include allowing businesses to form an association based only on geography, which hadn't been allowed previously. Also, sole proprietors now will be able to get involved with association plans.
In announcing the new rules, U.S. Labor Secretary Alexander Acosta said association plans “are about more choice, more access and more coverage. The president's decision helps working Americans – and their families – purchase quality, affordable health coverage.”
Advocates say such plans will fill a need: According to the U.S. Labor Department, the number of small business employees covered by employer-provided health benefits is declining, and Affordable Care Act exchange plans “are often unaffordable for small businesses and sole proprietors.”
Pieciak said there currently are no association health plans operating in Vermont -- a state statute prohibited association plans under the health care exchange. But he believes that could change under the new federal rule, which takes effect this summer.
“It allows people potentially to band together more easily than it did previously,” Pieciak said. “That's why we think we'll see an interest across the state and across the country.”
Some say that wouldn't necessarily be a good thing.
Association health plans operate under less regulation than other types of insurance. They don't have to offer “essential health benefits,” which could leave some customers without mental health or prescription coverage, for example.
Pieciak said there's a “history of deceptive behavior” among self-funded association health plans.
“Someone might think they're getting a great health care plan, at an affordable price,” Pieciak said. “And then when they get sick, they realize, 'Well, I didn't really have the coverage for this. This deductible is too high – I can't afford it.'”
Fiscal responsibility is another potential issue.
“There's been experience in other states where self-funded plans weren't properly overseen, and then all of the sudden there was a solvency issue,” Pieciak said. “So halfway through the year, the association goes kaput, and people are left with claims that are not being paid.”
Pieciak said he's not very concerned about Vermont-based association plans springing up. Rather, he's worried about “association health plans across the country that are trying to sell into every state, including Vermont.”
Because Trump gave notice last fall of his intent to change the association rule, Vermont officials had a head start on addressing such concerns. In February, Pieciak and Green Mountain Care Board Chairman Kevin Mullin wrote a letter urging legislators to “solidify” the Department of Financial Regulation's rule-making authority in regard to association health plans.
The result was Act 131, which was signed by Gov. Phil Scott on May 16. The statute directs the department to adopt rules “to protect Vermont consumers and promote the stability of Vermont’s health insurance markets … including rules regarding licensure, solvency and reserve requirements, and rating requirements.”
Pieciak said the state's rule-making process had been on hold until the federal government released its final regulations. Since the federal announcement on June 19, state officials have been working with the National Association of Insurance Commissioners and the U.S. Labor Department “to fully understand exactly what the regulation is and how it's changed,” Pieciak said.
One big question – whether the new federal regulations would pre-empt state authority – has been answered. Pieciak said Vermont has received assurances, “both orally and in the rule itself,” that the state can regulate association health plans “whether they're based in Vermont or whether they're based outside of Vermont, looking to sell into Vermont.”
Such regulations have been supported by the state Health Care Advocate's office “really out of a consumer-protection stance,” said Mike Fisher, Vermont's chief health care advocate.
“It doesn't mean much to a consumer if they can afford the premium but can't afford to get care,” Fisher said. “Consumers want plans that are going to cover them when they need the care.”
Beyond the association health plan issue, there's a good chance another, similar matter will come up later this year: The Trump administration has said it wants to expand the availability of “short-term, limited-duration” health plans.
Those plans are meant for people who have a temporary lapse in health care coverage, and they're currently limited to three months. Trump says they should be expanded to last up to 364 days.
But Vermont's Act 131 addresses that issue by saying short-term plans can last only for three months and can't be renewed. The statute also directs the Department of Financial Regulation to come up with new rules regarding such plans.
Pieciak called that “another pre-emptive attempt to ensure that the (insurance) market remains stable.” He said the state's concerns about short-term plans are similar to concerns about association plans, including the lack of a mandate to provide comprehensive coverage.
“There's a place for (short-term health plans), and it's that limited transitional period that people might be experiencing in their lives,” Pieciak said. “But it shouldn't be in place of a fully benefitted health care plan.”
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