A tale of two insurance industries

by Robert Maynard

This past Thursday Governor Shumlin marked a milestone with Vermont’s captive insurance industry.  That milestone, as pointed out by Vermont Digger, was highly celebrated: “The state’s 1,000th captive insurance company was announced in a Statehouse news conference, attended by state regulators, industry representatives and service providers.”  There is good reason the celebrate this industry: “Vermont is one of the world’s captive insurance leaders, state officials say. The Vermont Captive Insurance Association website says the state holds the third-highest number of registered captive insurance companies in the world, and the second-most value of insured assets. Bermuda and the Cayman Islands rival Vermont as the captive industry’s world leaders.”

It is too bad we cannot celebrate the health insurance industry in the same manner.  Instead of celebrating the health insurance industry, our political leadership has done ints best to wreck this industry.  In 2005 a study was published by the Council for Affordable Health Insurance and The Heartland Institute entitled “Destroying Insurance Markets: How Guaranteed Issue and Community Rating Destroyed the Individual Health Insurance Market in Eight States.”  Here is what it had to say about Vermont:

Former Vermont Gov. Howard Dean (D), a physician and unsuccessful candidate for the Democratic presidential nomination, considers his state a model for health care reform. “In Vermont, where I served as governor for the last 11 years, nearly 92 percent of adults now have [health insurance] coverage,” boasted Dean’s campaign Web site. “Most importantly, 99 percent of all Vermont children are eligible for health insurance and 96 percent have it.” Universal health care—more accurately, universal health insurance—has been a Dean rallying cry for more than a decade. In 1992, his first year as governor, Dean pushed through to passage Act 160, which created the Vermont Health Care Authority, and charged it with bringing forth two sweeping health care reforms: a single-payer plan Dean had championed in 1991 as lieutenant governor and a measure he dubbed “regulated multi-payer.”

So how did this model program for health care reform work out?

Dean’s effort to make health insurance universally available in Vermont has in many ways backfired. What has really become “universal” in the state are high health insurance premiums and a heavy tax burden needed to support the growing number of Vermonters covered not by private insurance, but by government-run Medicaid. Moreover, the number of uninsured Vermonters has increased, not fallen, since Dean’s reforms took effect.

Guaranteed issue and community rating have wreaked havoc on Vermont’s small group and individual insurance markets, just as they have in states across the country. The percentage of the state’s population that is uninsured has actually increased since the mandates were imposed; premium rates have increased; and more Vermonters than ever are having to settle for government-run Medicaid in order to get insurance. Vermont is now second in the nation, after Tennessee, in the proportion of its under-65 population covered by Medicaid (21 percent).

The results may not all be unintentional:

Some observers have suggested Vermont’s shift from private sector to government-run insurance was not an “unintended” consequence of the Dean reforms at all. “The root cause of Vermont’s problem came in the late 1980s,” explained McClaughry, “well before the Dean era, when Blue Cross Blue Shield of Vermont was threatened with insolvency. It used all of its political muscle to impose community rating and guaranteed issue on its competitors,who were taking away their customers.

“The competitors then obligingly departed the state,” McClaughry continued. “Now, liberals stoutly defend a regressive single-payer health care system, managed by Blue Cross Blue Shield as a ward of the government.”

It now looks like Shumlin and company are determined to finish the job of totally wreaking Vermont’s health insurance industry.  This is quite a contrast to how the captive insurance industry has been treated in Vermont.

2 thoughts on “A tale of two insurance industries

  1. Missing from above. ……..Mr Costle to come to Vt to sell the legislature Act – “200 in a manner of a few weeks” Citizens………….

  2. Vt Health care decline certainly started with Gov. Ms Kunin who brought in Betsey Costle, Wash DC bureaucrat lawyer to be chief of “everything money including health care”. We looked for weeks for insurance and had a hard time chosing among a huge number of policies and options. Chose Aetna. Costle fined them for selling what we wanted, and they left Vt. In short order we lost 3 other well known companies, regulated and harrassed away by Costle from providing insurance in Vt. Costle told me directly to just buy Blue Cross, when BC was on verge of bankruptcy, and providers were not accepting BC insurance. She said don’t worry, I’ll take care of BC. In short order they were our ONLY choice.
    Gov, Ms Kunin also got MR Costle to come to Vt to sell our legislature Act Vt. Citizens and Citizens for Property Rights convinced Gov Ms. Kunin to not run again, and we saw her off with a Big sendoff at Gov Snellings inaguration.

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