The original recommendation to require purchase of health insurance in the exchange starting in 2014 has now been downsized to include individuals and only small business with 50 or fewer employees. “Bronze” levels of coverage — policies that cover only 60 percent of medical costs — will now also be allowed to be sold in the exchange, a major retreat from the promise last year not to allow the dumbing down of coverage. This is a bad idea on a number of counts.
1) There is no money in it.
The amount of the block grant to be given in the 2017 waiver is based mostly on the amount of health insurance premium tax credits Vermonters get in 2014, 2015 and 2016. The only reason to monkey around at all with the exchange prior to instituting Green Mountain Care is to get the refundable tax credits. The compromise proposal has completely lost sight of that objective.
2) Employer-sponsored plans are not eligible for the tax credits.
Only individuals who are not offered insurance through work (or who are offered insufficient coverage) are eligible. Employers are not eligible, even if they provide their insurance through the exchange. There is simply no purpose to forcing employers of any size to get their insurance through the exchange.
3) Bronze-level plans are not eligible for tax credits or cost-sharing subsidies.
They are available only to individuals enrolled in a silver plan.
4) The exchange is not a pool.
The exchange is a shopping mall. It is not a “stepping stone” to single-payer because it does not add any horsepower to better negotiate with health care providers.
5) Small employers and the self-employed are to be selectively forced into the exchange.
Employers do not insure the same portion of the population they employ. Two-earner households tend to get their insurance through the larger of the employers.
Nearly 85 percent of privately insured Vermonters will be exempted from participating because their insurance comes from “large” employers. The original proposal to include employers with 100 or fewer employees was not much better — they account for only 22 percent of those privately insured.
5) Individuals and small employers will be unfairly force-fed the exchange’s $9 million to $11 million annual overhead cost.
Compulsory exchange participation in Vermont requires individuals and the smallest of employers to help defray the large cost of administrative overhead to run the exchange, which must be self-sustaining after the first year. That is not a level playing field.
6) The focus: maximize the tax credits through voluntary incentives.
Participation in the exchange is voluntary under the Affordable Care Act and in neighboring Massachusetts where the idea originated. Our focus must be on maximizing the tax credits.
There are huge opportunities to generate substantial savings for insuring small employers. Small employers may stand to save one-third to two-thirds of the cost to insure their employees by using the exchange in combination with Heath Reimbursement or cafeteria benefit plans. This will in turn increase the participation in the exchange, and ultimately the size of the waiver block grant the state will receive for Green Mountain Care in 2017.
John Franco is a Burlington lawyer who has been active in health care reform for more than 25 years.