Unease about Vermont's coming health exchange
Burlington Free Press
By: Nancy Remsen
December 30, 2012
Mike Plageman’s remodeling crew was busy the week before Christmas finishing a job on a house at the base of Lincoln Peak at Sugarbush ski resort.
“We could use another set of hands or two,” said Plageman, co-founder of Plageman, Gagnon and Daughters of Williston.
The crew numbers eight now, but Plageman said he won’t be hiring because he worries about the future financial impact of the federally mandated health insurance exchange that Vermont will launch next fall.
Plageman’s small business will be required to buy health insurance for its workers through the exchange rather than through the Lake Champlain Regional Chamber of Commerce where the firm has bought for years. That is if Plageman and his partner decide to continue to offer health insurance.
“I believe health care will not be sustainable as it is right now, but I have concerns about the way it is being approached here,” Plageman said noting the many unanswered questions he has about the exchange.
“I don’t know what the coverage is going to be and I don’t know what it is going to cost. I’m not sure the exchange is going to be ready and I’ve heard nothing that there is a Plan B someplace,” Plageman complained. “We’re in limbo.”
The new Internet-based marketplace will become the source of health insurance for 96,000 Vermonters beginning Jan. 1, 2014 and ramp up as larger businesses are required to use it in later years. It will also become the portal that 160,000 Vermonters eligible for Medicaid will use to sign up for coverage.
For the Shumlin administration, the October launch of Vermont Health Connect, the name state officials have given the state’s health insurance exchange, is an interim step on the way to the government-financed health care system the governor would like to put in place in 2017. In the meantime, state officials say Vermont Health Connect will make the insurance marketplace work better for individuals, families and small business owners who often struggle to find affordable health insurance deals.
For Blue Cross and Blue Shield of Vermont, the insurer that currently covers three-quarters of the people who will end up shopping on Vermont Health Connect in a year, 2013 looms as challenge. The company foresees a huge educational campaign to reach these customers with information about how the exchange will work, because Blue Cross plans to offer insurance products on the exchange.
Advocates for Vermonters currently served by two state-subsidized health insurance programs that expire when the exchange opens — Vermont Health Access Program and Catamount Health — worry about the likely jump in costs these folks face.
Critics of the federal and state health reforms argue Vermont policymakers were “reckless” to head the state toward this new technology-dependent marketplace without keeping open an option for small businesses and individuals to buy insurance the old-fashioned way should the timeline to develop the exchange prove too ambitious or the technology fail to deliver satisfactory service.
Lindsey Tucker, deputy commissioner for the health benefits exchange in the Vermont Department of Vermont Health Access, acknowledges this widespread unease about the new world Vermont Health Connect will usher in during 2013, but suggests, “I think it is less of a change than people think.”
A federal mandate
The federal Affordable Care Act passed by Congress in 2010 called for the creation of health benefit exchanges that will let individuals and small businesses comparison shop for health insurance. All the plans in exchanges will offer the same essential benefits but with an assortment of cost-sharing models. Each state could set up its own exchange — or should states elect not to operate exchanges as many have — the federal government will provide the new marketplace.
Vermont laid the groundwork for Vermont Health Connect in a health reform law passed in 2011 that is better known for setting the state on course to eliminate private insurance in 2017. State health officials have undertaken both initiatives simultaneously, with the exchange coming on line first.
This winter lawmakers must make a decision about how to pay for the exchange after its first year — for however long it will function. The federal government has provided Vermont with $125 million since 2010 to plan and build the exchange and operate it during 2014. Then its operation becomes the state’s responsibility.
“On Jan. 15 there will be a report to the Legislature proposing financing for the exchange,” said Tucker, hired a year ago to guide development of the exchange. “The Legislature needs to take action on that.”
Under the federal health reform law, exchanges open in two phases.
First, on Jan. 1, 2014, exchanges become sources of insurance for people without coverage and for those who now buy insurance in the individual market — meaning they purchase their own coverage rather than get insurance through an employer.
The federal law includes carrots and sticks to bolster individuals’ use of the exchange.
The stick, beginning in 2014, is that nearly everyone must have health insurance or pay a penalty. In the first year the penalty is $95 per uninsured individual or 1 percent of household income above a certain threshold. The penalties increase, with, for example, the per person fine jumping to $325 in 2015 and $695 in 2016.
The carrots are tax credits offered next year that will help lower monthly premium costs for lower income households. For example, individuals with incomes less than $44,680 or families of four with household income of less than $92,200 could be eligible for tax credits.
In a Vermont-specific analysis two years ago, Families USA ran numbers for a couple of typical scenarios. In one, the report found that a single woman with income of $22,000 a year would pay a maximum of $1,386 a year or $115 a month for health insurance plan with an actual annual premium cost of $6,000. The rest of the cost would be covered by a tax credit. If she wanted a more expensive insurance plan — meaning one with a higher premium and lower cost-sharing — she would still get this same tax credit amount.
Also on Jan. 1, 2014, businesses with 50 or fewer employees also must begin buying on the exchange rather than on their own or more commonly through associations such as chambers of commerce.
Unlike most other states, Vermont lawmakers decided last winter to give these businesses no option but the exchange. The Legislature wanted to make sure there would be a broad spectrum of people buying in the exchange, not just people with medical needs — which would drive up the cost of coverage.
In 2016, more businesses — those with 50 to 100 workers — will be required to use the exchanges.
Each health insurance plan offered on an exchange must cover “essential benefits” as defined by the federal government. In Vermont, the Green Mountain Care Board, a new regulatory panel, picked a commonly purchased Blue Cross plan as the template for the products that will be offered on Vermont Health Connect.
With benefits essentially identical, the difference among the insurance products sold on Vermont Health Connect will be their cost-sharing combinations. Insurance companies will offer plans under metal labels — bronze, silver, gold and platinum — that represent different cost-sharing schemes.
Bronze, for example, will offer purchasers the lowest monthly premiums but highest potential out-of-pocket costs because of the deductibles that must be paid before insurance coverage kicks in and co-payments required for each visit to a health-care professional. Platinum plans are structured just the opposite — high premiums, but lower co-payments and deductibles.
In January, insurance companies that want to sell on Vermont Health Connect will tell the Green Mountain Care Board what plans they would offer. In March these insurers will propose rates for all their plans, which the Green Mountain Care Board will approve or reject by summer.
That’s when Plageman and all the other Vermonters who will have to shop on the exchange will know the details and price tags for the products from which they will have to choose.
Leora Dowling of Ferrisburgh has insurance through Catamount Health, which means she will be purchasing through Vermont Health Connect next fall. Vermont’s Catamount and Vermont Health Access Program end when the exchange launches.
Worries in Ferrisburgh
“I wasn’t really focused on it too much. I knew the day was coming when we would be shifting over,” Dowling said. As a cancer survivor, she knows she can’t go without insurance. She also knows that some cost-sharing schemes can quickly put a strain on an individual’s bank account.
“You might like your insurance until you really use it,” Dowling said. She often faces a slew of tests, checkups and therapies because of her past cancer diagnosis. “Once you start the cancer dance or some other chronic disease, then those co-pays really add up.”
Dowling worries about the cost-sharing options she will be able to choose from on the exchange. “How do I know what is right for me?”
Donna Sutton Fay, policy director for the Campaign for Health Care Security Education Fund, predicts people like Dowling will find that all the insurance coverage offered on the exchange will require greater cost-sharing than she and the 17,000 other VHAP and Catamount clients have now.
Even if some people qualify for tax credits to reduce their premiums, Fay worries the higher deductibles and co-pays could still make the health insurance unaffordable.
Some Catamount and VHAP clients may decide to risk going without insurance, although Dowling said that would not be an option for her because of her cancer history.
The latest state health insurance survey pegs the current percentage of uninsured in Vermont at 6.8 percent of the population, down from 7.6 percent in 2009 and 9.8 percent in 2005. VHAP and Catamount have played roles in shrinking the percentage of uninsured in Vermont by offering affordable coverage made possible by state subsidies.
Fay argues that making insurance more expensive “seems to be the exact opposite direction from where we want to go.” She cautioned, “If people find the exchange unaffordable and it doesn’t work, we think they are going to be a lot less inclined to trust government to do single payer.”
Fay’s organization will press lawmakers “to put in place subsidies to hold people on VHAP and Catamount harmless” when they move to the exchange.
Sen. Claire Ayer, D-Addison, who chaired the Senate Health Care Committee for the past two years, said the potential for sticker shock for VHAP and Catamount clients isn’t a newly discovered problem. “We knew this was going to happen.”
“We know we want to do what we can to make sure people have health care,” Ayer said. “We are very concerned, but it really comes down to money.”
Gov. Peter Shumlin estimated the cost to protect VHAP and Catamount clients from cost shock on the exchange might be $18 million and added that was more than the state can afford with revenues still sluggish and many spending pressures.
That doesn’t mean the Shumlin administration plans to do nothing, Secretary of Administration Jeb Spaulding clarified. “We are definitely planning to give them considerable assistance, but we haven’t determined what level yet.”
Plageman has yet to sit down with his crew of remodelers to talk about the exchange — because he hasn’t had enough concrete information to share, he said. Nor have he and his partner figured out whether their employees would be better off buying their own coverage on the exchange if the company stopped offering the insurance benefit.
“There is no way we can make this decision for them,” Plageman said.
The federal health reform law doesn’t require businesses of any size to provide insurance, but businesses with 50 or fewer employees won’t face any fees if they drop coverage.
Beginning in 2014, however, bigger companies could have to pay a “shared responsibility fee” if any of their workers qualify for federal tax credits or other subsidies — even if a company provides insurance but their employees opt out because they can’t afford it.
Cathy Davis, government policy director at the Lake Champlain Regional Chamber of Commerce, said some businesses are struggling to understand how to count their employees — a critical calculation to determine whether they have to buy in the exchange and whether they have to worry about the paying the shared responsibility fee.
“I thought we had it figured out,” Davis said, referring to how to count workers, but now she’s not so sure.
Some larger businesses have told Davis the shared responsibility penalty could put them out of business. Here’s why businesses are worried:
If a larger company offers no insurance, it could be liable for an annual payment of $2,000 for each full-time worker in excess of 30 if a single worker at the company receives a premium tax credit or cost-sharing subsidy on the exchange. The penalty will increase in the future if insurance premiums increase.
If a larger company offers insurance that some employees can’t afford, it could be liable for annual payments of $3,000 for each full-time worker receiving a tax credit on the exchange. There is a annual cap, but the size of the penalty will increase based on growth in insurance premiums.
Davis and also Jeff Wennberg of Rutland, executive director of Vermonters for Health Care Freedom, report another concern they have heard from executives at firms employing highly paid professionals. These business leaders worry the insurance plans on the exchange won’t give them the same flexibility to offer their employees attractive benefit packages.
“It does become more difficult for businesses to help their employees,” Davis said.
“Employees see this coming,” Wennberg added. “They are looking for jobs” with larger companies that won’t have to use the exchange or with firms outside Vermont where participation in the exchange would be voluntary.
“There is this brain drain that is beginning,” Wennberg suggested. “That is something that is going to have to be watched.”
Plageman says none of his workers have asked him about health exchange and how it might affect them. It is likely most haven’t even heard of it.
Leigh Tofferi of Blue Cross said his company held information sessions about the exchange during the fall. “Our experience when we are out there talking to folks is that there isn’t as much awareness as we would like.”
State officials acknowledge that many Vermonters don’t yet know about the exchange. A survey conducted last March found that many of the people most likely to become exchange customers — uninsured, lower income and younger Vermonters — have the least awareness about it.
The state plans a $7.3 million outreach and education effort to bring Vermont Health Direct into the spotlight. A 39-page plan for this effort explains, “Vermonters who will enroll through Vermont Health Connect will always be the main focus of outreach and education.”
Still, the plan notes, “All Vermonters should be made aware of exchange — Vermont Health Connect — and its new role in the state’s health care system; raising awareness and demonstrating the value of Vermont Health Connect broadly will contribute to its success.”
Tucker, the deputy commissioner charged with developing the exchange, said she believes much of the unease people may have about the exchange will dissipate once “we can start to do demonstrations.”
$79.5 million project
Earlier this month, the state selected CGI, an international technology company founded in 1976 in Quebec City, to build the state’s online interactive marketplace. It’s a $79.5 million project.
CGI, which stands for Consultants to Government and Industry, also has contracts to build the online exchange structure for the federal government and three other states.
In announcing the contract award, state officials stressed Vermont wasn’t asking CGI for unique innovation. That’s because several recent information technology projects in state government have ended in failure because the state requested and vendors promised never-before developed systems. With this contract, state officials said, the state wants to benefit from the lessons CGI is learning in the other states.
Wennberg at Vermonters for Health Care Freedom and Davis at the Lake Champlain Chamber said they still worry about ambitious technological challenge of the project.
CGI has nine months to fashion a website that will not only walk customers through an array of health insurance options, but determine their eligibility for tax credits and enroll them in plans. And it has to process Medicaid clients, too.
“The notion, given the experiences the state has had, that we will have the exchange up and running and working flawlessly or close to flawlessly on Oct. 1 — that would be a miracle,” Wennberg said.
Tucker, the state’s exchange chief, counters that securing a contract with CGI represents “an incredible milestone.” They already have built an “exchange product,” she said, “which will accelerate the development of our project.”
“We are completely confident we will be able to do it,” Tucker countered.
She added she expects to know soon if the Centers for Medicare and Medicaid Services share the state’s confidence. CMS is in the midst of reviewing the state’s request for permission to move ahead with Vermont Health Connect. The decision is expected in early January.
“When we hear from CMS, that will be a good measure of their confidence,” Tucker said.