By Louis Porter Vermont Press Bureau – Published: June 6, 2010
MONTPELIER – The state’s landmark Catamount health insurance program is not terminally ill, but it needs a checkup.
A smaller-than-expected infusion of federal money and other factors mean the nearly four-year-old program needs help – about $3.8 million – from the state’s General Fund to stay afloat this fiscal year, sooner than expected. The goal of having 96 percent of Vermonters insured by the end of 2010 seems unlikely to be met. About 7.6 percent lack health insurance now.
One of the two private insurers offering Catamount insurance requested a 26 percent rate increase for the product earlier this year on top of an 11 percent increase approved last year. State regulators, however, plan to limit the new rate increase to 15 percent.
Additionally, federal health care reform may hit the program with a one-two punch. First will come the requirement that private insurers extend coverage to their customers’ children or other dependents up to age 26. That could rob Catamount of the "young invincibles," generally healthy younger Vermonters who typically pay more in premiums than they cost in claims.
Then, in 2014, Americans who earn up to 138 percent of the federal poverty level (about $18,310 is the poverty level for a family of three) will be covered by public health insurance programs like Medicaid. Those who earn more, including people eligible for Catamount in Vermont, will be required to obtain health insurance, but if they want federal assistance to pay for it, that insurance will have to be purchased through an insurance exchange system. Nobody knows whether the rules for those new insurance exchanges will allow Catamount to continue, but it seems likely the program will have to be folded into that exchange system.
But a couple of things are important to remember about Catamount, said Peter Sterling, executive director of the nonprofit Vermont Campaign for Health Care Security. Its mission is to get the word out about and help enroll people in Catamount and other public health plans.
The coverage goal for Catamount may not be met, but over three years the number of Vermonters on public insurance programs — including Catamount, the Vermont Health Access Program (for uninsured adults who meet income guidelines), Dr. Dynasaur (for children and pregnant women) and traditional Medicaid — has grown to about 149,000 from 116,000, in large part because of the promotional efforts for Catamount and its associated programs.
"At the end of the day there are 35,000 people who have public health care who did not have it in ’07," Sterling said. "I think that is an amazing accomplishment in a tiny state like ours."
About 12,000 of those 35,000 are on Catamount; the rest are on other state and federal programs like Medicaid.
The future insurance mandate may add more people – and more younger people – to the system, strengthening a lot of insurance programs including Catamount, Sterling said.
"The solvency of all of the health care programs will get better," he said.
If there is a problem with Catamount, it is that the cost discourages participation, Sterling said.
"The reason Catamount and VHAP, for that matter, have not helped us reach the 96 percent threshold is that the premiums are too high," he said.
But the number of uninsured Vermonters has not declined by all of those 35,000. That’s because even as more enroll in government health programs, others lose their jobs or their private insurance, or both.
That’s where Jeanne Keller comes in.
Keller, a consultant for Business Resource Services, a small business association working on health care costs and group purchasing of insurance, worries that Catamount is unsustainable and is putting the cost – and therefore the availability – of private insurance at risk.
It is not the premiums for public insurance that are to blame for the uninsured rate, but the high cost and lack of availability of private insurance, she said.
"If they did more to make the private-sector insurance stay affordable, they would have an easier time getting there," she said. "Make private insurance more expensive, you have more people becoming uninsured."
The cost shift
But does Catamount make private insurance more expensive?
For years policymakers have known about the "cost shift." That’s what happens when a person goes into the hospital with no insurance, or with government insurance that pays less than a procedure costs. The person receives care but in many cases doesn’t pay, or the government pays less than private insurers would. How do hospitals (or other care providers) stay afloat? They increase the cost for those with private insurance or for those who don’t have insurance but pay their bills.
When Catamount was created, it was designed not to add to that cost shift, by having reimbursement rates high enough to cover medical procedures. In fact, it was hoped that Catamount would reduce uncompensated care by insuring more people.
But that has not come to pass, Keller said.
"The promise that this was going to reduce that debt always seemed specious to me," she said. "Uncompensated care has gone up dramatically since Catamount went into effect."
But Keller worries there may be a new cost shift. That could occur if regulators limit the rates for Catamount insurance to below the cost to insurers, leading them to raise rates for private customers.
"It’s like a new cost shift that would be completely hidden from us," she said.
But is it happening?
In 2009 "we lost money on Catamount," said Bill Little, vice president of Vermont for MVP Health Care, one of the two nonprofit insurers that sell coverage under the program. "We will lose money again in 2010 on Catamount."
"We have a limited set of tools to help alleviate some of that," he concluded.
MVP, which insures 2,500 customers through Catamount, asked for a 26 percent rate increase this year, saying it needed that amount to cover its costs. State regulators said they would approve only a 15 percent increase, but Little said that would mean the company would not cover its costs.
Blue Cross Blue Shield of Vermont, which covers the rest of those on Catamount, did not ask for a higher rate this year, although it received an 11 percent rate increase last year, as did MVP.
"We did not put an increase in to generate large surpluses or fund shareholders. We don’t have any as a not-for-profit organization," Little said.
With only 2,500 Catamount customers (out of its 40,000 in Vermont) those insured through MVP will not see a jump in their rates if some of the cost of Catamount is covered through other business, and, Little is quick to add, it may be simply a one-year phenomenon with Catamount claims.
With such a relatively small amount of business, the cost shift among MVP insurance products is not likely to be significant, said Christine Oliver, the state regulator in charge of health insurance premiums. For one thing, regulators are examining other insurance premium rates at the same time.
In cutting the requested rate increase, "we thought it was important to put more pressure on them to get costs down or make it up another way," Oliver said.
Other questions
Even if the insurance premiums for Catamount stayed flat, changes would be on the horizon for the program.
Will Catamount be pushed into the new insurance exchange system or risk not getting federal money? It’s just too early to tell since the rules (which go into effect in 2014) have not been written, said Oliver.
And will $8 million a year in federal money being set aside to cover uninsured, high-risk Vermonters with pre-existing conditions be available to be used in Catamount? That is still being worked out as well.
And, starting this fall, the federal health care bill will require insurers to offer coverage to dependents of customers until those dependents are older.
"Will that take the young invincibles out of Catamount Health, out of that risk pool we have worked so hard to get them into?" Oliver wondered. "I can’t say we are concerned about that just yet, but it is something we will take a look at."
Whether it is a problem depends on how many young people opt out of Catamount to go back on their parents’ insurance, said Steve Kappel, an independent health care policy analyst based in Montpelier.
"If it is a lot, it is going to be a problem. If it is only a few, it is not going to be a problem at all," he said. "What insurance companies like is young healthy people getting coverage."
Finally, Catamount also needed some additional state General Fund money this year. So do many of the public insurance programs in the state – but it was hoped that either Catamount would not need that money, or at least not this soon.
When Catamount began, like many programs, it started collecting money (including fees from employers who don’t provide insurance; Medicaid money through a special agreement with the federal government; and money from tobacco taxes and the settlement of lawsuits against tobacco companies) before it began offering insurance to Vermonters on a sliding scale based on income.
That meant it began with a reserve. But the program has been spending about $600,000 a month more than it has taken in. The bottom line in the Catamount fund has been drifting toward zero – and in fact faced an anticipated shortfall of roughly $6 million for fiscal year 2011.
That hole will be filled with a combination of the $3.8 million in General Fund money and changes to the program, such as increased deductibles.
Sterling is blunt about where he directs much of the blame for Catamount’s money woes: on a federal decision several years ago not to let Vermont use Medicaid money to cover higher-income people, as had been anticipated.
"A lot of the problems with the Catamount fund not balancing or being in the black is because the Bush administration stiffed us for a couple of years for about $8 million a year," he said.