Posted By Andrew Stein On May 14, 2013
In a final-hour move, the Vermont House voted on Tuesday to strip a charge on health insurance premiums from Senate bill 152.
The bill, which began this legislative session as a streamlining of the state’s health insurance rate review process, became the vehicle for financing the operation of the state’s new health insurance marketplace, Vermont Health Connect. The language the House added to S.152 — concerning a new health care advocate’s office [1], the rate review process and a prior authorization pilot project — was removed from the bill and rolled into House bill 107, with some minor changes. H.107, which cleared the Legislature on Tuesday, is a procedural bill that aligns state law with newly adopted federal laws.
To meet federal standards, the Legislature must provide a sustainable financing mechanism to pay for the operational costs of the state-based insurance exchange, set to take full effect in 2014. The Shumlin administration estimates that the state will need $18.4 million [2]annually to maintain and run the marketplace.
When the Senate passed out S.152 on Monday [3], it included two taxes: the extension of an assessment on employers and a new 1 percent charge on annual premiums for an estimated 118,000 Vermonters who are expected to purchase insurance on the exchange. When the bill passed out of the House on Tuesday, it only included the employer assessment, and the Senate agreed to the change.
Rep. Janet Ancel, D-Calais, who chairs the House Ways and Means Committee, proposed the amendment to strip the charge from the bill.
“What I recommend is to not do the surcharge because it raises more money than we need,” she said. “As we know, there’s a commitment in 2017 to move to a different system of funding health care … It’s pretty much understood by the administration and the Legislature what we need to do for sustainable funding only has to take us through 2016.”
In 2017, Vermont is eligible to apply for a federal waiver to deviate from the regulations of the Affordable Care Act. The Shumlin administration and many legislators hope to transition to a publicly financed health care system at that time.
Ancel pointed out that the employer assessment raises enough money to fund the exchange until then.
Breaking down the math
In fiscal year (FY) 2015, the Joint Fiscal Office estimates that the employer assessment will raise $14.4 million. In FY 2016, the office estimates that amount will go up to $15.9 million.
The state won’t begin funding the operational costs of the exchange until January 2015, which falls in the middle of FY 2015. Therefore, the administration estimates that the state needs $9.2 million in FY 2015 to run the exchange. This would result in a surplus of $5.2 million moving into FY 2016, considering the state only needs $18.4 million a year to run the exchange.
When that $5.2 million surplus is combined with the $15.9 million raised by the assessment in FY 2016, it creates a surplus just shy of $3 million, which is expected to carry the exchange forward with the new employer assessment dollars until the state shifts to a single payer system in 2017, if those monies are needed.
The employer assessment is applied to employers that don’t cover their employees’ health insurance. Currently, employers are assessed roughly $120 for each employee they don’t cover.
The employer assessment is presently used to fund the state-subsidized Catamount health insurance program, but that program is ending in 2014, when the exchange takes full effect. At that time, individual policyholders and employees of Vermont businesses with 50 or fewer employees must purchase their health insurance via the exchange
The employer assessment is currently indexed to the Catamount plan, but in 2014 it will be adjusted based on the percentage change in premiums of “the second lowest cost silver-level plan” in the exchange. For more on that plan and other plans on the exchange, read here [4].
The administration expects many employers to drop coverage. Employees earning between 133 and 400 percent of the federal poverty line are eligible for federal assistance, but only if their employers don’t cover them. Premium subsidies that are scalable to income apply to individuals earning between $15,282 and $45,960 annually.
Many business groups complain that by continuing the employer assessment the administration has encouraged small businesses to drop their coverage, and yet they are continuing to be taxed extra for doing so.
Rep. George Till, D-Jericho, raised this issue on the House floor Tuesday.
“It seems like we have it backwards,” he said. “We have been encouraging employers explicitly or implicitly to drop insurance so that their employees can bring down federal subsidies.
“On one hand we’re telling employers to drop employees,” he added, “but then we’re turning around and saying we’re going to make you pay for the exchange.”
Till and others comprised the minority voice that voted against S.152.
Had the administration got its way, the exchange would have been funded by a 1 percent hike in the state’s insurance claims assessment. That assessment is presently pegged at 0.8 percent of an insurance company’s total annual claims, and the increase would have been phased in over two years — FY 2015 and 2016. The administration estimated the hike alone would have raised an additional $17 million annually.
The administration also recommended continuing the employer assessment at the beginning of the session, and it pushed for the 1 percent charge on premiums when the legislators put the option on the table.
H.107
H.107 was considered a “must-pass” bill by the Legislature and the administration.
“This was, in some ways, the worst kind of must-pass bill. It had a lot of technical cleanup changes necessary in order to meet federal law,” said Robin Lunge, the administration’s director of health care reform. “That is important to us because we need to make sure Vermont law represents something that is accurate. It allows us to ensure that our statutes are legally accurate.”
The original components of S.152 were also tacked onto this technical bill, which is headed to the governor’s desk.
The bill would create the Office of the Health Care Advocate, which replaces the Health Care Ombudsman’s Office. The responsibilities of the office will still be contracted out to Vermont Legal Aid, but the bill establishes a more sustainable source of funding for the office by allowing the state to allocate up to $300,000 in fiscal year 2014 by billing back hospitals for the appropriation.
The bill would also streamline the health insurance rate review process. Rather than duplicating the process by involving both the Department of Financial Regulation and the Green Mountain Care Board, the Green Mountain Care Board will now oversee the process and the Department of Financial Regulation will evaluate plans for solvency purposes. For more on that process, read here [1].
Lastly, H.107 would create a pilot program for testing out the absence of prior authorizations.
One of the biggest points of contention among physicians and health insurance providers is insurers requiring doctors to obtain coverage authorizations prior to certain treatments and medications. To read more about this dispute, click here [5].
The bill tasks the Green Mountain Care Board with developing and implementing a pilot program or programs to measure “the change in system costs within primary care associated with eliminating prior authorization requirements for imaging, medical procedures, prescription drugs, and home care.”
Physician lawmakers say that if prior authorizations are removed, Vermont could attract more doctors from across the country.