Insurance rate hikes proposed by Vermont’s two principal health insurers have raised new questions about whether the state will be able to afford the plan by Gov. Peter Shumlin to move to a single-payer health care system in 2017.
Supporters of a single-payer system say the state can’t afford not to move to single-payer. But the Shumlin administration has yet to unveil a financing plan for its single-payer proposal, leaving many Vermonters wondering about what is ahead.
The two health insurers are Blue Cross Blue Shield of Vermont and MVP, and their requested rate hikes are the first to occur since the creation of Vermont Health Connect, the state’s online health care site. Blue Cross requested an increase of 9.8 percent; MVP requested an increase of 15 percent.
That is the sort of unsustainable rate hike that has propelled the movement toward health care reform, and it is disconcerting that rates would jump so quickly after the establishment of Vermont Health Connect, under the auspices of the federal Affordable Care Act.
It so happens that much of the price hike is linked to provisions of the federal law and is not a consequence of pressures within the health care system in Vermont. Robin Lunge, director of health care reform for the state, said that federal money had been used to ensure that insurance companies had sufficient reinsurance capacity — essentially, insurance on insurance — to protect them through the roll-out of the Affordable Care Act. Thus, insurance rates have been artificially low. The federal government is no longer supplying the money to bolster reinsurance, so the rates are going up.
Also, some federal fees are going up. The federal government levies an excise tax on all insurance and self-insured employers to cover the costs of the Affordable Care Act, such as subsidies helping people pay for premiums. Those taxes are slated to go up in increments through 2018. The rate increases requested by the Vermont insurers reflect those higher taxes.
Vermont’s insurance rate increases are in line with increases requested in other states, Lunge said. But those higher rates raise the question of whether the state and nation are making progress in containing the rising costs of health care.
Al Gobeille, chairman of the Green Mountain Care Board, stressed the importance of cost containment during an interview Friday on Vermont Public Radio. He was asked if he thought the state would be ready to put a single-payer system into operation by the target date of 2017. He said health care reform would not be dictated by the calendar and before a financing plan for a single-payer system could be determined the state needed to show results in cost containment.
Much progress is being made in the effort to shift the state away from the traditional fee-for-service model toward other methods. At present, health care providers are paid for every service rendered, creating an incentive to provide ever more services, driving up costs. Providers who are paid a fixed fee for caring for an individual have an incentive for keeping the person healthy, which restrains costs.
Instituting reforms to reward preventive care and encourage health is a complicated job. For example, it is in the interest of patients, as well as the fiscal health of the state, for physicians to provide regular care and oversight of patients with heart disease to prevent heart attacks. Regular preventive care is far cheaper than acute care, and people are better off, too.
Gobeille said Vermont faces some special circumstances that drive up its health care costs. The state has the second-oldest population, and older people tend to require more care. Also the insurance options provided by the state are richer than in other states. These are among the reasons why insurance premiums here are the fifth highest in the nation.
Gobeille’s demurral on the question of whether 2017 was a realistic date for the launch of single-payer suggests that policymakers at the highest levels are looking seriously at the question of whether the state will be able to afford single-payer when 2017 arrives. Gobeille is saying that work remains to be done on cost containment. It is good that state officials are focused on those reforms, and no one wants to rush into a system that is not affordable. Then again, the single-payer system itself is seen by its supporters as the most powerful weapon in the campaign for cost containment.
It is a conundrum that will not be resolved easily. Next year, when Shumlin is expected to unveil his financing plan, we will learn more.