[A] newly expanded – and frequently controversial – type of health insurance has gotten off to a slow start in Vermont.
Only about 5,000 people are enrolled in the latest version of “association” health coverage, which is marketed as a way for small businesses to save money in an increasingly expensive insurance market.
But the relatively low number of customers hasn’t stopped a tug-of-war over the future of association health coverage in Vermont. Some are pushing lawmakers for further regulation of association plans, while those who have begun offering such plans don’t want the rug pulled out from under them so soon.
“We invested a significant amount of time, a significant amount of staff and a significant amount of money standing up this (program), making sure that we were in compliance with both federal and state law,” said Betsy Bishop, president of the Vermont Chamber of Commerce.
Association plans allow small employers to band together to offer health coverage. President Donald Trump’s administration last year announced new rules that made it easier for associations to form and expand.
Those changes included allowing associations to be based only on geography and allowing sole proprietors to join.
The move was hailed as a step forward for small business owners who are struggling with the costs of health coverage for themselves and their employees.
But detractors feared that association plans could leave members with sub-par insurance. Experts also are concerned that association plans will siphon significant numbers of customers from marketplaces like Vermont Health Connect, thus driving up premiums on the exchange.
Vermont officials responded to the Trump changes with new regulations regarding the operation and oversight of association health plans. One of the state’s most significant countermoves was to mandate that associations cover the 10 essential health benefits listed in federal law.
Some say the state’s rules still don’t go far enough. Vermont lawmakers have signaled their intent to consider enacting a “look-through doctrine,” which would take away a key advantage of association health plans by not allowing small businesses and individuals to be treated as larger groups in the insurance marketplace.
But even as that regulatory argument heated up, association health plans weren’t generating a lot of buzz among consumers.
Recent legislative testimony shows that just 5,000 people were covered by association plans as of the beginning of the year. A majority – about 4,000 – signed up through South Burlington-based Business Resource Services, one of two entities licensed to provide association coverage in Vermont.
The other licensed entity is the Montpelier-based Vermont Association of Chamber Executives, which has the other 20 percent of the market at this point.
The relatively low enrollment doesn’t surprise Bishop. There are a wide variety of well-established insurance options and available subsidies, she said, and consumers won’t quickly switch in large numbers.
Also, Bishop said Vermont Health Connect has shown significant improvement since its early troubles.
“Those are some of the reasons that we haven’t seen this mass exodus (to association plans) … and probably won’t,” Bishop told members of the House Health Care Committee.
Blue Cross and Blue Shield of Vermont is providing coverage for both organizations offering association plans. Sara Teachout, a spokesperson for the insurer, said the low enrollment for 2019 “is exactly what our actuaries predicted.”
Teachout cited consumers’ hesitancy to leave their current insurance and the novelty of association coverage as two reasons why the plans didn’t immediately attract more people.
“They were developed rather quickly,” Teachout said. “There wasn’t a lot of lead-up.”
Nevertheless, advocates still believe there are clear benefits in association plans for some businesses.
Christine Oliver, a consultant for Business Resource Services, said many of those who signed up for association plans this year achieved significant reductions in out-of-pocket maximums on those plans.
For its association plans, the Chamber touts regulatory advantages and “competitive rates” – though Bishop acknowledged that association prices are “not necessarily lower than what you can find on the exchange.”
She noted other potential draws, including the “strong brand” of the chamber executive group. The organization offered association plans under a previous regulatory regime and at one point covered 17,000 people.
The Chamber also can offer personalized customer service and flexibility in health plan design, and “all those things add up to a greater choice for businesses,” Bishop said.
Those arguments haven’t convinced Mike Fisher, Vermont’s chief health care advocate, that association plans are sufficiently regulated. Fisher says the plans are designed to “more effectively sort healthier people from the riskier population,” which will drive up costs for consumers who aren’t in associations.
Both Fisher and MVP Health Care – the other insurer on Vermont Health Connect – want lawmakers to enact the look-through doctrine in order to counteract that effect. Massachusetts, New Hampshire and New York are among the states to do so, Fisher said.
Fisher also is unmoved by the association plans’ low enrollment at this point. Those numbers could change, he said, if regulatory uncertainty subsides.
Furthermore, Fisher said it doesn’t take much disruption to have an effect on the insurance marketplace – particularly if a healthier population begins to migrate to a new type of coverage.
“A relatively small number of people, if they’re well-sorted, can have a big impact,” he said.
Blue Cross is opposed to further regulation of association plans. Teachout said there are larger adverse forces at work in the health insurance marketplace, and association health plans are a symptom – not a cause – of those problems.
So, only a few months into their existence, the future of association health plans in Vermont remains uncertain.
The Chamber says adoption of the look-through doctrine “would essentially prevent” associations from offering health coverage next year. And Oliver warned lawmakers against a “knee-jerk reaction” that could lead to “significant rate shock” for businesses that joined association health plans this year.
“If they go back to using the exchange, they’ll have two years of (rate) increases to catch up on,” Oliver said.
