By Kevin Joseph Ryan
The Shumlin proposal for health care reform has been likened to the iceberg that sunk the Titanic. Icebergs are slow-moving, unyielding, and the closer you get to them, may well leave you a bit cold. Governor Peter Shumlin is hoping Vermonters will warm up to his plan by likening it to proposals he claims Republican Governor Richard Snelling made twenty years ago.
Governor Shumlin officially kicked off his re-election campaign this week with a rally at Nectar’s Nightclub in Burlington, and a centerpiece of his campaign was his commitment to make Vermont the first state, in his own words, to offer a single-payer health care system. To drive home the wisdom of the goal, Shumlin invoked the memory of former Republican Governor Richard Snelling, whom Shumlin says had a vision for a better health care system for the sick. Shumlin pointed out, “Republican Governor Dick Snelling, a moderate republican, passed community rating to protect those folks to fix a broken system, 21 years ago.” The only thing wrong is, that isn’t what Snelling did.
Community rating is a concept where insurance companies, typically in relation to health care coverage, are required to price insurance coverage within a certain range, and cannot account for the actual risk they face in providing that coverage. For example, as tragic as it might be, a senior with a history of heart trouble has a much higher risk of requiring medical care than a healthy 18 year old. Therefore, it is less costly to insure the younger folks as individuals. Community rating would set the price for their insurance based on the area they lived in or the pool of customers, rather than their age, gender or medical history. This tends to keep rates low for the sick or elderly, but raises insurance rates for others. Twelve states require Community rating, with some pricing limitations on others. Of those, Only Vermont and New York require pure (zero-deviation) community rating and individual guaranteed issue health insurance.
In 1991, then Vermont Governor Richard Snelling announced that he would be forming a 24 member blue-ribbon commission to examine the health care marketplace. Two days before that commission’s first meeting, the Vermont Legislature passed Act 52, which required community rating on what is known as small-group insurance, but specifically not on individuals, associations, large-groups or the self-insured. That made up roughly 15% or 30,000 Vermonters under community rating, with the remaining 85% rated, as with most insurance, based on relative risk. The Snelling Commission did not release its findings until December of 1991, and they did not include community rating.
On the morning of August 13, 1991, Richard Snelling passed away at his home in Shelburne, ending his reign as Governor of Vermont and the totality of his involvement with health care policy.
His successor, liberal Democrat Howard Dean, later the Chairman of the Democratic National Committee, became Governor, and quickly passed Act 160, the Vermont Health Care Act, which extended community ratings to the individual markets, most of whom today are enrolled in Vermont’s Catamount Health Care program. Prior to community ratings, Vermont had 33 companies offering individual health insurance, today, there are two, Blue Cross and MVP. MVP only covers 100 individual insurance customers, today Vermont has dropped from 33 competing companies, to one in that market.
Most states that require community rating make exceptions, such as allowing for risk differences in gender, age of the insured and lifestyle and limit the difference in cost to about 3 to 1. Implementation of such limits can nearly double the cost of insurance for the sick, elderly and other high-risk groups. Shumlin did note this week, “Governor Snelling, the Republican Governor, wanted to solve a terrible problem for the Vermont health care system. What he wanted to solve was the problem where, for profit greedy insurance companies would come into the state and say to people who were old, who were sick, who were disabled, or who had a pre-existing condition, you will pay 300 times more than young, healthy people for insurance in Vermont.” Shumlin probably misspoke, as the difference would be 300%, not 300 times. However, most states, and nations that use community rating offer government subsidies or coverage for those high-risk groups to mitigate the costs.
Maine, which recently changed their community ratings law from a 150% differential to the 300% allowed under the federal ACA, or Obamacare law, and has seen premiums drop for some as much as 60%, according to Joel Allumbaugh, President of the Maine Association of Health Underwriters.
One of the biggest hurdles for Shumlin in implementing the single-payer system he has advocated for years is that there currently is no plan to pay for it, the costs are unknown, the coverage is unknown and the plan overall has been described by Republican Gubernatorial Candidate Randy Brock as like “driving through the fog” or as “Titanicare”, because we cannot see “where the icebergs are below the surface.”
Randy Brock may be understating the analogy. We can see where the icebergs are and we can hear the foghorns near the reef. Based on how the insurance marketplace has behaved in the past, we can tell that choices in insurance coverage will likely decrease, premiums will increase under increased community ratings, costs will have to be capped as the State of Vermont takes on more high-risk insured and that means health care will have to be rationed. While Randy Brock is wisely warning Vermonters of the risks of the unknown in the Shumlin plan, frankly, it’s not the icebergs under the water we need to worry about. It’s the iceberg right in from of the boat. We’ve just revved the engines.
One thing is certain. Richard Snelling never proposed signing anything into law like Peter Shumlin is talking about.