A legislative committee has rejected regulations proposed by Gov. Phil Scott’s administration regarding “association” health coverage, signaling that lawmakers intend to explore even tougher rules for the controversial insurance plans.
Thursday’s vote by the Legislative Committee on Administrative Rules is the latest development in Vermont’s attempt to counter the federal government’s expansion of association health plans, which allow smaller employers to band together to offer health coverage.
After extensive debate, the rules committee decided that the Department of Financial Regulation’s proposed regulations governing association plans don’t fulfill a legislative mandate to “protect Vermont consumers and promote the stability of Vermont’s health insurance markets.”
That vote is largely symbolic, since the department says it will implement the rule anyway. But the move shows that some lawmakers are of the same mind as Vermont Chief Health Care Advocate Mike Fisher, who argued that the state should do more to curb association plans.
“My real intent here is to send the strongest message to the community that this is not settled,” Fisher told committee members. “And I want to send the strongest word to the legislators in this room and beyond that there’s work to be done in this area.”
Earlier this year, the U.S. Labor Department announced new rules designed to loosen restrictions on association health plans. The changes include allowing businesses to form an association only on the basis of geography, as well as allowing sole proprietors to get involved in associations.
Proponents – including the administration of President Donald Trump – say the new federal rules make it easier for small businesses to find and afford health insurance in an increasingly expensive market.
But detractors worry that association plans can be loosely regulated and offer less comprehensive coverage. There’s also concern that association plans will pull a significant number of people out of insurance exchanges like Vermont Health Connect, driving up premiums for those who remain.
Working under a tight deadline after the federal changes were announced, the Vermont Department of Financial Regulation enacted emergency rules that placed a variety of new licensing, registration and operational changes on association health plans. Among the most significant was a requirement that association plans cover the 10 essential health benefits as defined in federal law.
After some additional tweaks, the department sought the rules committee’s endorsement of final regulations governing association health plans. Emily Brown, the department’s assistant director of rates and forms, told lawmakers on Thursday that “we have a regulatory framework in place that we believe protects the marketplace and does provide protection for Vermont consumers.”
But not everyone agrees. Fisher says the department’s regulations are “contradictory to the clear legislative intent” in Act 131, the law passed by the Legislature earlier this year ordering the department to adopt new rules for association health plans.
Fisher has been arguing for further regulation via what’s called the “look-through” doctrine. Essentially, that would take away a major financial and regulatory advantage of association health plans by not allowing small businesses and individuals to be treated as larger groups in the insurance marketplace.
Fisher said states including Massachusetts, New York, New Hampshire, Maryland and Connecticut have applied the look-through doctrine. But Brown said Department of Financial Regulation officials didn’t believe they could adopt the provision in Vermont without a statutory change.
“The department went as far as we thought we could within the current statutory framework,” Brown said.
Some members of the rules committee, including Sen. Ginny Lyons, D-Chittenden, and Rep. Michael Yantachka, D-Charlotte, noted the possible benefits of the look-through provision.
“In the absence of a look-through doctrine, the (insurance market) stability is threatened,” Yantachka said.
A representative of Blue Cross and Blue Shield of Vermont, which is involved in offering association health plans, urged the committee to adopt the rules created by the Department of Financial Regulation.
But the committee eventually voted, 5-2, to reject those rules. Sen. Christopher Bray, D-Addison, led the effort to vote down the proposal because he said it “seems contrary to legislative intent” to protect the insurance market.
In the short term, the committee’s lack of endorsement doesn’t doom the department’s association health plan regulations. Under state law, the department can implement the rules anyway, though the state will be on somewhat shakier legal ground if anyone challenged those rules in court.
Financial Regulation Commissioner Mike Pieciak said his department will go ahead with the rules, saying they are as “robust as possible” given current statutory limitations. “Not doing so would create an unregulated environment prone to fraud, misinformation and instability, which is exactly what we are trying to prevent,” Pieciak said in a statement issued Thursday.
But it now seems clear that there’s a battle looming over tighter restrictions on association health plans when lawmakers return to Montpelier next month for the 2019 session.
Fisher says the issue “requires legislative action.” But association plan advocates like Betsy Bishop, president of the Vermont Chamber of Commerce, are not so sure.
The Vermont Association of Chamber Executives is one of two groups currently authorized to sell association plans in the state.
“We are examining the look-through provision to see what impact it would have on (association health plans) past 2019,” Bishop said. “We certainly have heard that it might make them not available to Vermonters, which we think is a mistake.”
Bishop said it’s “difficult to digest” the potential for further legislative action before association health plans have a chance to get off the ground. The enrollment period for 2019 association plans is still open, though it ends this week.
“They are making an assumption that the (association plans) will have an impact on the market and destabilize the market, and without further information, we don’t know that to be true,” Bishop said.
