[T]he Senate has thrown a lifeline to association health plans, though the future of those insurance options still remains uncertain.
Senators on Tuesday gave preliminary approval to a version of H.524 that no longer includes language that would have crippled association plans, which are aimed at small businesses.
That’s good news for purveyors of association plans and bad news for those who worry that associations will drive up the cost of coverage for many Vermonters.
It’s clear, however, that the Senate’s vote is just the latest move in an ongoing regulatory debate that includes the federal government. Even if the Senate’s language survives deliberations at the end of the 2019 session, it likely is only a precursor to further legislative action in 2020.
“There are many layers here,” said Sen. Chris Pearson, P/D-Chittenden. “We’re doing our best to catch up and, in some cases, predict or anticipate further changes at the federal level and give ourselves the opportunity to respond as those come to light when we’re back here in January.”
It’s been a rough road for association plans since President Donald Trump’s administration enacted a rule last year that made it much easier for associations to form and expand.
Proponents say associations, which allow small employers to band together to offer health insurance, meet a need for more affordable coverage options. But others were concerned that associations would offer inadequate coverage and would siphon healthy people from exchanges like Vermont Health Connect, driving up costs for those who remain.
A regulatory tug of war has ensued. In Vermont, the Department of Financial Regulation drew up rules that associations must follow, though many lawmakers said the department didn’t go far enough.
At the federal level, a U.S. District Court judge in March ruled that the U.S. Department of Labor exceeded its authority in expanding association plans. The Trump administration has appealed that ruling, but Vermont regulators have temporarily frozen the growth of association plans here pending the case’s outcome.
H.524 adds another layer of complexity. The bill passed the House in late March with language called the “look-through doctrine,” which strips a key regulatory and financial advantage from association health plans.
But senators disagree with that tactic. On Tuesday, the Senate adopted an amendment proposed by the Senate Finance Committee that strips all look-through language from the bill.
“Given that it is a shifting landscape, to say the least, we just were not comfortable moving forward with the proposal that came over from the other body,” Pearson said.
That won’t be the final word. One more vote is required in the Senate before the bill goes back to the House, and some lawmakers expect that a conference committee will be necessary to resolve differences between the two chambers.
In recent weeks, Senate Finance members had discussed inserting a one-year freeze on association health plan growth into H.524. That would allow time for further developments at the federal level and for a study of Vermont’s insurance market structure that’s called for in another part of the bill.
The Finance Committee didn’t ultimately call for a freeze, but Chair Ann Cummings, D-Washington, said it’s still a possibility as legislative negotiations continue. “I’m assuming we will be discussing that with the other body,” Cummings said Tuesday.
For now, though, the Senate’s action is a rare piece of good news for those who are administering association health plans in Vermont.
Betsy Bishop, president of the Vermont Chamber of Commerce, called the Senate vote a “positive step.” The Montpelier-based Vermont Association of Chamber Executives has about 20 percent of the association market in Vermont.
“High health care costs are a major issue for these small businesses and their employees, so allowing this option to continue is progress and shows the Senate is more in tune with the needs of our small businesses,” Bishop said.
Christine Oliver, who consults for South Burlington-based Business Resource Services – the other player in Vermont’s association plan market – said elimination of the look-through doctrine was “the right action for the Senate to take.”
Oliver said small businesses testified before the Senate Finance Committee about the benefits of association plans, including reduced premiums and lower out-of-pocket expenses. She also said business owners have been able to offer additional benefits, such as short-term disability coverage and profit-sharing programs, due to their savings from association health plans.
“I believe it shows that once the senators heard from small businesses about the positive impact the (association plans) had on their employees … the senators did not see any reason to remove the (association) option,” Oliver said. “And I don’t believe they could justify doing so prior to any study of the marketplace.”
Critics of association plans will continue to lobby for tougher regulations as the session winds down. Mike Fisher, chief health care advocate at Vermont Legal Aid, said he was “very concerned” about the Senate’s vote and said further regulation is needed “to protect Vermonters from increased rates.”
H.524 also includes provisions for Vermont’s forthcoming mandatory health insurance law, which takes effect next year. Following in the footsteps of the House, senators allowed the mandate to stand but chose not to enact a financial penalty for those who don’t comply.