The Deeper Dig is a biweekly podcast from the VTDigger newsroom, hosted and produced by Sam Gale Rosen. Listen below, and subscribe on Apple Podcasts, Google Play, Spotify or anywhere you listen to podcasts.
Earlier this month, the Green Mountain Care Board made a decision that would affect most people and companies that get their health care through the state’s health insurance marketplace.
The board said that two companies that offer insurance through Vermont Health Connect would be able to increase premiums by double digits in 2024.
These increases will be less than insurers had asked for. Despite that, they’ll be among the highest annually since 2014, the first full year of the marketplace’s operation.
“We had double digit rate increases last year and, from the looks of it, we are going to have double digit rate increases again this year, for insurance, for hospitals, for pharmaceuticals, clearly there is a nexus between these three things,” Charles Becker, a lawyer with the Office of the Health Care Advocate, said at a recent Green Mountain Care Board meeting. “To Vermont consumers, the dynamics of this system seem like a wildfire burning out of control.”
To find out about these increases, what they mean and where they fit into the wider conversation about health insurance, host Sam Gale Rosen spoke with health care reporter Kristen Fountain on this episode of The Deeper Dig.
This transcript has been edited for length and clarity.
Sam: Kristen has been following the ins and outs of this story, which — fair warning — is a little complicated and involves a lot of numbers.
She wanted to start by talking about the broader landscape of health insurance and how the particular rate increases we’re talking about fit into the big picture.
Kristen: I did want to talk a little bit just about the shape of the insurance market because I think not everyone understands it. It’s really complicated in this country, and these percentages sort of differ from state to state, but in Vermont, around half right now of the population is insured by the public in some way.
They either are insured through Medicare, which is a federal program, that’s about a quarter of everyone, or they’re insured through Medicaid — the state and federally funded together and is administered at the state level.
So it’s really that other 50% in the private market, or 47%, if you don’t count the 3% that are uninsured, that we’re talking about. And of that group, two-thirds of that group gets their insurance through their employer that self insures. So what that means is, the company is large enough to fund the claims themselves. Like they set aside a chunk of money, usually they have a commercial insurer, manage the claims, manage the payments — administrative services is what they call that — and there’s a fee for that. But the claims are being paid by the employer. So they are self-insured.
You know, the state of Vermont is self-insured for its employees, along with teachers, very large companies.
It’s interesting because this is the process on which the public has the greatest amount of insight. It’s a very public and clear process through the Green Mountain Care Board, but it actually impacts fewer Vermonters than you might think.
So basically, the rates that were announced affect the Vermont Health Connect marketplace, which follows the federal Affordable Care Act rules. There’s actually three different types of plans you can buy on the marketplace. But only two are covered in this ruling. So if you do not have an employer that offers health insurance, or you don’t have an employer, say you’re self-employed or you’re doing the many kinds of work that we do that is not paid like a job, then you could buy individual health insurance through the exchange.
And then, employers with fewer than 100 employees can buy their health insurance through the small group market on the exchange. And that is what is affected by these rate increases: the individual market and the small group market.
And there’s only two companies that sell plans on this marketplace: Blue Cross Blue Shield of Vermont and MVP.
So the individual and small group market on Vermont Health Connect, the rates are set annually at this same time every year. So it’s an annual process.
And then the larger group markets, there are actually three companies that sell to that: MVP, Blue Cross Blue Shield of Vermont and Cigna, and each one of those files at different times, so those changes tend to be less dramatic, for whatever, for a variety of reasons.
But anyway, it’s only about 11% of Vermonters. They think it potentially could get a little bit bigger as folks try to find alternatives to Medicaid as they’re found to be ineligible. But I think the maximum I’ve seen in recent years is 14% of Vermonters. Right now, they say it’s around 68,000 people are affected. And it may go up to like 71,000 they’re projecting with a few more thousand people joining from Medicaid.
Sam: So to recap, we’re talking rate decisions that affect about 11% of Vermonters. We’re not talking about Medicare or Medicaid. We’re also not talking about big employers that self-insure. We’re only talking about plans from the Health Connect marketplace, and even among those plans, we’re talking about a segment of them that are easiest to follow and report on because their rates are subject to a public, regular process.
But they’re subject to many of the same cost drivers as other negotiations that might be happening behind the scenes, or at different times, so they can be indicators of the wider market.
So for these particular plans, how does the process work? The companies come up with a number. They come up with an increase, and they make an ask, and then the Green Mountain Care Board, it gets to decide what they’ll actually get. Is that right?
Kristen: Yeah, it’s actually a very formal process. It is sort of quasi judicial. So it’s almost like they go through a court, and different people give testimony. And so there’s a lot of paperwork that’s filed prior to a hearing that occurs, and present at the hearing are — kind of treated as like opposing attorneys would be — the attorneys and representatives of the health insurer, and then the health care advocate, which is an office staffed by Vermont Legal Aid. And so they have their own attorneys that come and argue on behalf of the rate payer, that would be the customer, the one paying the bill.
Sam: Here’s Owen Foster, chair of the Green Mountain Care Board.
Owen Foster: I think the biggest thing that we need to think about is what is driving the rates higher: Is it insurer greed? Is it executive salaries? Is it excessive increases on the rate? And if it’s not those things, then what is driving the rate? Is it primarily the inputs? Is it the cost of the claims they are supporting and paying for with this money? If they are paying that, then you actually have to look more at what those costs are and how those costs can be contained before they feed into the rates.
Sam: And so before going any further, what are some of these rate increases that we’re talking about?
Kristen: It’s interesting to try to explain it because as folks will know, if they go on to the exchange, each insurer has like a dozen-plus different plans with different permutations and different kinds of cost sharing through deductibles and copayments and different metal levels: gold, silver, bronze, platinum.
So the insurer actually files a very long document that gives the exact increases for each one of those plans. But it’s pretty hard to talk about that in a news article. And it’s also pretty hard to talk about that in a hearing. So they talk about the range of increases, and they talk about an average increase. And this year, there have been some pretty large increases. What’s been approved for Blue Cross Blue Shield is an average of 14% increase in the individual market and a 13% increase in the small group market. And for MVP, 11% in the individual market and 12% in the small group market. And so double digit increases for both.
Sam: And that sounds big. How does that compare to the kind of increases we usually see?
Kristen: Well, so obviously, a lot of things changed through the pandemic. Last year, there were big increases, so folks will remember last year’s large increase, and this year’s increase is sort of the same scale. It’s a little bit smaller than the increase awarded last year to MVP for its plans, and it’s a little bit bigger increase for what was awarded to Blue Cross Blue Shield.
But then the previous year and the year before that was a little bit different and a little less easy to talk about, but it’s safe to say though, if you look historically, the cost has gone up significantly over time. But you have to really look at the same plan over time, which is also difficult because within each plan, the benefits have changed over time.
So to get an apples to apples comparison is challenging, but I looked at the silver plan for both companies. And you know, in both companies, you could buy a silver plan in 2014, for a little over $400 a month for an individual. And this year, depending on whether you’re buying as an individual or as part of a small group through your small group employer, the individual rates for small group was a little under $700 a month, and for individuals a little under like $850-ish a month. So you know, it’s gone up a lot — doubled.
Sam: And I assume if you compare it to average wage increases or something like that, they haven’t matched at all, I would assume?
Kristen: Yes, that is true. I mean, they’ve gone up more than they have previously, just in recent years, but certainly they haven’t doubled.
Sam: And I’ve been following this through your reporting, obviously. But one of the interesting things here is, you know, first reaction, this sounds like a lot, but it’s also considerably less than the insurance companies were asking for. Is that right?
Kristen: That’s right. The Green Mountain Care Board, with the assistance of an actuarial company that they hire as a third party reviewer of the health insurers package, found that there were several places that they felt like the insurer did not need the increase they were seeking. So they reduced by, I would say, around 4 percentage points for each. So like initially Blue Cross Blue Shield was, I think, asking for 17% and 18% increases, and instead they got 13% and 14%, something like that.
Sam: Blue Cross Blue Shield had initially asked for an average rate increase of 18.1% for plans sold on the marketplace to individuals and families and 17.6% for plans sold to small groups. The board’s decision was that individual plan premiums will be allowed to increase by 14% and the small group plans by 13.3%.
Sam: And you said there were a couple places where they decided that that scale of increase wasn’t needed. Can you talk through what you know of their reasoning?
Kristen: Yes, well, to get into that, we have to talk a bit about what drives health care insurance cost increases, but the major driver for both of our insurers on the exchange, they’re both nonprofit plans. They’re both regional small plans. MVP is based in New York, and most of their business is in New York, but they’re not like a huge, huge company. Anyway, 90%, roughly, of all the premium dollars collected, is going out the door to pay claims. So it’s really the projected cost of the claims that is driving most of the increase. And within that, the biggest two drivers are the charges being levied by hospitals, both for inpatient and outpatient care, and pharmaceutical costs.
Sam: Let’s get into the hospital question a little bit because sort of the next step here is that the board is now going to consider budget requests from many of the state hospitals. Is that right?
Kristen: Yes, that’s right. And in their insurance decision, they, more or less, made a promise in a sense to the insurers. They basically told the insurers, you know, you said you need this much of a rate increase to match what the hospitals have asked to increase their commercial rates that they charge you. And they said, we’re going to cut that back by several percentage points because we believe we’re going to be cutting what they are allowed to ask you to pay by up to 50%. So that’s a big shave in the aggregate.
Sam: And just to clarify, if they’re cutting 50% off of what hospitals are asking for? Is that right? Or what they’ve paid previously?
Kristen: So it’s all about the rate of increase. So it’s not about the total at all. It’s about the rate of increase, how much more are they going to ask next year over this year. That’s what everyone’s talking about.
Sam: So a 50% smaller increase this year than there would be?
Kristen: That is what the Green Mountain Care Board told the insurers in their rate decisions. Prior to the hospitals submitting their proposed budgets for 2024 to the Green Mountain Care Board, the Green Mountain Care Board had told the insurers in their sort of guidance documents that they could use a historic average of their adjustment of what hospitals were being allowed to charge for their services. And that historical adjustment, the Green Mountain Care Board said, was 17%.
So this is a significantly larger cut that they have basically said they will do. And my understanding from talking to insurers, is that the cuts in that regard that were made, they are fine with as long as the board actually follows through with the cuts that it promised, right?
Sam: So why are they now anticipating larger cuts to the increases for hospital budgets than they were before?
Kristen: Yeah, that’s a really good question. And it varies quite a bit by hospital. And to be honest, I’m not sure I can answer that right now. Because the hearings are happening on a regular basis every day or two. Each hospital comes and presents and is asked questions about their proposed 2024 budget. All I can say is that some of the hospitals are asking for budgets that would require increases in their rates of, you know, 10%, 11%, 13%.
Sam: If you know, how are hospitals reacting to this to the board’s promise or suggestion that they’re going to be looking at 50% cuts to what they’re asking for?
Kristen: I don’t think that was a welcome piece of news for sure. I think it’s a little bit difficult because there are many of our 14 hospitals that are asking for increases in what they charge that actually are below the rate of inflation, you know, they are low. And then there are others that are looking for rate increases that are extremely high. So I would be surprised if the care board requests reductions in the asks of those low hospitals. I think what we’re looking at is potentially decisions that would lower those larger increases.
Sam: Is the argument that hospitals are making that the quality of care is going to be reduced if they aren’t allowed to increase the budgets to the extent they are asking for?
Kristen: I mean, nobody knows how the 50% reduction in aggregate would be spread out, right? So all of the hospitals are concerned — and say that should they not receive the increase that services that they offer would have to be cut back, and quality of care would be at risk. I mean, they would have to do more with less.
Sam: And to move back to the impact on people who participate in these plans with the premium rate increases, obviously it’s a financial hardship to have to pay more money. What other kinds of arguments were being made from people representing the ratepayer? I mean, were there also concerns about people just not ending up paying for and then (not) having health insurance?
Kristen: Yeah, there was definitely a lot of concern about that. In a historic context, Vermont has an incredibly low rate of uninsured people right now. It seems like it will increase as people are not renewed in Medicaid, often that leads to a period of being uninsured. But currently, just around 3% of the population doesn’t have insurance.
But there’s an estimate that more than 40% of Vermonters are underinsured. That means their co-pays and deductibles are such that they cannot afford those, and they choose not to go see their doctor, go to the hospital, go get a procedure or a test they might need because of those costs. And that’s basically because as premiums increase, and you have to pay more for the same thing, you look at, well, what can I get for what I can actually afford?
And that is usually a lower cost plan with a higher deductible and higher co-pays. And you see individuals making those choices in real time, year after year. And you see businesses making those choices for what they can afford to support. They’re not just businesses, but all sorts of organizations.
Sam: Here’s Mike Fisher, Chief Health Care Advocate for Vermont Legal Aid, speaking at a Green Mountain Care Board meeting.
Mike Fisher: There is a lot of research that’s been done out there, and there is a lot of data about the pressures that Vermonters and Americans are facing around being forced to make — about what happens when they are forced to make economic decisions that interfere with their ability to follow medical advice.
Kristen: It’s interesting, historically, the Green Mountain Care Board has told hospitals since they started doing this, you know, we approve this budget, we approve this rate. It’s really hard to talk about this because there’s so many different rates, but we approve this increase to the charges that you would like insurers to pay.
And at least for the current board, they see that approval as a cap. Like this is the maximum you are allowed to charge insurers, but insurers and the hospitals can negotiate lower rates. They want that to happen. But I guess historically that hasn’t been the case that hospitals have told insurers that these are the approved increases, and that’s what they’re going to be paid, is what the insurers tell the board.
Sam: This is all super helpful, Kristen. I appreciate you sort of walking through it because, you know, it can be weedy and hard to get a handle on.
Kristen: It’s so much money. It’s so many numbers. But it is so important, right? It just dominates anxiety for people. It dominates anxiety for businesses, school districts, municipalities, like this enormous increase in what they’re going to have to pay for next year.
Sam: Here’s Manny Mansbach, a mental health professional and meditation teacher, speaking at a rate review public comment period:
Manny Mansbach: I have to say that I find these hearings to be somewhat of rearranging the deck chairs on the Titanic. … The fact is that health care for most people, most working people in Vermont is getting more inaccessible, more unaffordable, as others have said. That the wages and salaries are not keeping up with health care increased rates. … It’s kind of an ongoing violence to most people, most working people, that is considered polite and acceptable but is really a violent system that excludes so many people that is getting worse and not better.
Kristen: The Green Mountain Care Board has this really amazing graphic that I’m looking at right now that they pulled from another source.
Sam: The chart Kristen is referring to has data from the federal Bureau of Labor Statistics and was originally created by economist Mark Perry for a blog at the American Enterprise Institute, a conservative think tank. You can find a link on our website.
Kristen: It’s really helpful to look. You know, pharmaceuticals are not on this list, but it shows, you know, average hourly wages have gone up since the year 2000 by 104%. So a little over doubled over the last 23 years. The overall inflation has gone up around 75%. Medical services in general have gone up 130%. Hospital based services have gone up 230%. So it just shows just the rate of increase in the cost of hospital based care has just been much, much faster than other kinds of services.
Sam: And I’m sure there are a million answers to this. But what are some of the big reasons why?
Kristen: Well, that is a question that many academics are spending a lot of time trying to answer. And I think if we can answer that, we could go a long way towards making health care more affordable for everyone. But I mean, I will say one thing — within that hospital services charge — I believe you will find some pharmaceutical costs hidden in there, right? They just do use pharmaceuticals in the hospital. And that is bundled into those hospital increases. So the high cost of drugs in this country plays a huge role. And on top of whatever theory you have about the political process and the role of lobbying and money, one thing I think is clear is that the U.S. consumer is paying the lion’s share of the world’s research and development budget for new pharmaceuticals. And that is one big reason.
Sam: And that’s because in other countries that have different health care systems, there’s more government control over drug prices, is that right?
Kristen: Yes, in most other countries, the government negotiates prices with the pharmaceutical company and has a lot more leverage than individual insurers, or self insured plans. Yeah, I would say that’s probably a really big reason. I’m sure there’s other reasons too. But I do think it’s baked into the process that the pharmaceutical companies are assuming they’re going to be able to charge these very large prices to U.S. consumers, and, and then because of that, they can offer more discounted prices to other countries.
I think obviously, hospitals will point to that as their big driver because that is not in their control. But then there are a lot of other costs that are within the hospital’s control as well.
I do want to say that all this talk of pricing, within all that it costs, it’s really also important to underscore that within our health care system, there are many thousands of providers that care very deeply about people’s health and work very hard to try to improve it. So it’s just important to remember that, too.
