Ducking the health exchange bullet
Jan. 26, 2012
By John McClaughry
Just two years from now — if you are among the 143,000 Vermonters covered by private health insurance — you are highly likely to find your health insurance in complete limbo. That is, if Gov. Peter Shumlin has his way with the legislature — which given its composition, is also highly likely.
To understand why this will probably happen, let’s go back to the 2009 passage of ObamaCare. The centerpiece of that legislation is the requirement that by 2014 each state must establish a health insurance “Exchange.”
This Exchange will operate on a state-managed web site where small businesses and individuals will compare available health insurance policies, and choose the one that best meets their needs. Individuals will then qualify for Federal income-based subsidies to purchase their chosen coverage.
This doesn’t sound too threatening on its face — but there’s more.
Last spring, the Vermont legislature enacted the legislation to create an ObamaCare-compliant Exchange. The state has some leeway in deciding which carriers and policies will be offered to Vermont residents. Since only two carriers essentially offer health insurance in Vermont — thanks to laws passed in 1991 and 1992 specifically to drive their competitors out — there will not be a lot of offerings to choose from.
That act also required that policies sold on the Exchange must offer what ObamaCare designates as a “silver” level of benefits. That is, the insurer must cover at least 70 percent of the costs and the insureds no more than 30 percent. This provision of the act will kill off all but the most expensive and impractical Health Savings Account-qualified high-deductible policies, to the dismay of thousands of Vermont HSA owners.
A new bill just submitted by the Shumlin administration (H.559) contains two key provisions, specifying which businesses will be forced into the Exchange, and prohibiting insurers from offering health plans outside of the Exchange.
ObamaCare allows states to define “small groups” as businesses with 1-50 or 1-100 employees. The Shumlin bill proposes to require all small businesses with up to 100 employees to purchase insurance only through the Exchange.
This would merge the present small group market with the individual market as an important step toward Shumlin’s goal of installing single payer Green Mountain Care in 2017. After that date, if Green Mountain Care is actually put in place, private health insurance would disappear.
The state government would then pay for and in effect ration all health care for every resident of Vermont not covered by Medicare, VA, or self-insured plans commonly provided by large companies like IBM.
Vermont businesses are quickly getting behind an alternative measure that makes more responsible choices. A bill by Sens. Vince Illuzzi and Hinda Miller (S.208) specifies that only small businesses with fewer than 50 employees can be forced into the Exchange, and businesses and individuals will remain free to buy insurance — including HSA-qualified plans, outside of the Exchange.
The great merit of passing the Illuzzi-Miller bill is that when Shumlin’s ambitious Green Mountain Care effort collapses, as seems likely, Vermont will still have a working — although severely restricted — health insurance market. Its enactment would also spare 143,000 Vermonters from a huge amount of government-caused grief.
John McClaughry is vice president of the Ethan Allen Institute in Concord, Vt.