[T]he House on Thursday gave preliminary approval to a bill that would cripple association health plans, a newly expanded type of insurance that is geared toward small businesses.
H.524 contains a provision known as the “look-through doctrine” that strips a key regulatory and financial advantage from association plans. Advocates of the look-through argue that association plans were formed quickly late last year without proper oversight.
The growth of association plans “has the potential to destabilize the marketplace,” said Rep. Brian Cina, P/D-Burlington.
Those who are offering association plans say it’s unfair to regulate them out of existence.
“I’m disappointed in the vote today,” said Betsy Bishop, Vermont Chamber of Commerce president. “It’s clear to me that those that voted for this bill are interested in eliminating choices for small businesses and their employees.”
Aside from the association plan issue, H.524 is a wide-ranging bill that tackles topics including administration of the state’s forthcoming “individual mandate” health insurance requirement.
The initial version of the bill, approved by the House Health Care Committee earlier this month, included an income-based financial penalty for those who don’t have health coverage as of 2020. That’s when the state’s mandatory insurance law takes effect.
The House Ways and Means Committee subsequently deleted the penalty from H.524. Rep. George Till, D-Jericho, told House members on Thursday that Ways and Means received the bill too close to mid-session deadlines to address concerns including the expense and administrative difficulties of collecting the penalty.
“This was neither a political or philosophical decision,” Till said. “This was purely a practical amendment to say, ‘We do not have time to do this properly, and as it stands, it isn’t going to work.’”
The proposed penalty also had spurred concerns that the state would be trying to collect additional money from those who already are struggling to make ends meet. Mike Fisher, the state’s chief health care advocate, had supported the concept of a penalty but was unhappy with House Health Care’s affordability provisions.
“I had been in favor of a penalty that applied to people who we thought could afford health insurance,” Fisher said. “We had a difference of opinion about who could afford health insurance.”
On Thursday, there was no debate in the House about the deletion of the penalty. If the House’s decision is also adopted by the Senate, Vermont will have an insurance mandate and no means to enforce it – though state income tax filers still would be required to report annually on whether or not they maintained health insurance during the previous year.
H.524 also includes two other key provisions. It seeks to place certain patient protections from the federal Affordable Care Act into state law, and it orders the Agency of Human Services to examine the structure of Vermont’s health insurance market and to come up with ways to make health care more affordable and accessible.
On Thursday, though, the focus was on the portions of the bill affecting association health plans, which were reinvigorated and expanded due to regulatory changes announced in 2018 by the administration of President Donald Trump.
The Vermont Department of Financial Regulation adopted rules governing association plans, but some say the department didn’t go far enough. That led to the “look-through” provision in H.524, which removes an important benefit of association health plans by not allowing small businesses and individuals to be treated as larger groups in the insurance marketplace.
Rep. Lori Houghton, D-Essex Junction and ranking member of the House Health Care Committee, minced no words about the effect of enacting the look-through policy: “The passage of this bill … will effectively cause association health plans to not exist as of January 2020,” she said.
Critics of association coverage argue that the plans will siphon a significant number of customers from the state’s individual and small business insurance market, thus driving up premiums for those who remain.
Houghton said the House Health Care Committee is “very sympathetic to the impact the look-through doctrine might have on small businesses.” She said her family owns a small business.
“But as a legislator, I often have to look at the bigger picture,” Houghton said.
Others argue that look-through supporters aren’t accounting for the pressures faced by small businesses that are trying to provide health coverage.
Rep. Jim Harrison, R-Chittenden, offered an amendment that would have allowed existing association health plan members to continue coverage in 2020. Those businesses could operate under the “status quo,” Harrison said, while the state conducts the study of the health insurance market that’s also included in H.524.
While Harrison’s amendment would not have allowed association plans to grow or to continue in perpetuity, “it at least recognizes those businesses that are trying to band together, trying to do the right thing for themselves, their business and most importantly, their employees – to give them one more year, and give us a chance to look at it,” he said.
There are about 5,000 Vermonters covered by association plans under the new federal and state rules adopted for 2019.
Harrison said those association members have seen lower premiums in some cases and, in many instances, much lower out-of-pocket costs. Forcing small businesses and their employees back to the insurance exchange could lead to “significant rate shock” in 2020, he said.
Harrison’s amendment had support from many Republican members but failed on a roll-call vote, with 50 in favor and 87 against.
The House then approved the full bill on a voice vote. One more vote is needed in the House before the bill moves to the Senate, where the debate over association health plans will continue.
“I honestly can’t fault a small business for wanting to have lower (insurance) rates. Everyone wants lower rates,” said Fisher, who favors implementation of the look-through doctrine. “But we have a responsibility to everybody to not shift costs from one party onto another.”
Bishop said association plan advocates will “continue to have this conversation in the Senate and explain to them how these choices should be allowed for small businesses and their employees to give them options on price, plan design and customer service.”
