By George Coppenrath
Vermont residents enjoy some of the lowest insurance rates for business, homeowner and automobile insurance in the country. Combined with the fact that every employer must provide workers’ compensation insurance for its employees and that all vehicles operated on Vermont highways must have insurance, that is quite amazing.
How is that possible? Vermont has one of the most competitive market-based property and casualty insurance industries in the country especially compared to Massachusetts and New Jersey where the states attempt to control the costs.
The property and casualty insurance climate allows insurance companies from other states to file rates and use them while they are being reviewed and approved. This results in more companies competing in the marketplace. All companies provide discounts for safer work environments, better driving records, vehicles with lower repair costs, and for homes that have been renovated and well maintained. As a result Vermont residents pay less for insurance and maintain equal or better coverages than residents in other states.
What about those who have bad driving records, e.g., DUI or multiple accidents or several employee injuries resulting in much higher auto rates or workers compensation rates? Vermont has two insurance “pools” that are imperceptible to the average resident. They both work a little differently but the concept is the same; if a person or business needs to purchase automobile or workers compensation insurance they can purchase it from a pool mechanism. For example the auto insurance pool consist of individuals who, due to driving records, would not be eligible for a policy in the marketplace. Every company that sells property or casualty insurance inVermont must participate and issue a policy based on the type of vehicle and driving record, so there is guaranteed insurance coverage.
A similar system can be designed and used for health insurance, i.e., allowing insurance companies ease of entry, establishing a pool concept, requiring companies to issue policies, pricing based on health indicators with discounts for non-smoking, weight control, lower blood pressure, etc. and surcharges for existing conditions, etc. The number of pool policies required to be taken by each company would be based on the size of their Vermont customer base. The cost for some of the policies could be substantial. However, I am confident that our Legislature and executive branch could focus their efforts on the design of a sliding scale premium basis that would provide caps on health care premiums that exceeded a specified percent of their income. The cost of the premium subsidy could be paid for from tax revenues charged to each company for each policy issued.
This proposal would reduce health care premiums within 12 months, provide access to health insurance for anyone who wants to purchase it, and limit the cost for individuals and families who are not eligible for Medicaid and who cannot afford the full premium due to income or health conditions. In addition, the Legislature could, with the assistance of the insurance industry, design health insurance “package plans” similar to Medicare Supplement plans to make the pricing and benefit comparison easier for consumers.
The Green Mountain Health Care legislation currently marching through the Senate committees will force increased taxes on employers and employees, drain resources from hospitals, reduce the quality of services, remove choices from doctors and patients, and entangle Vermonters with the prospect of health care costs consuming more and more of the human services budget, thus reducing resources for services to our most vulnerable populations All legislators who have watched the Medicaid program consume larger and larger portions of the Human Services budget should take particular note that assuming financial responsibility for all health care costs will guarantee less resources for residents who rely on those services on a daily basis. My proposal is a far better solution for Vermont.
The pool concept is similar to existing products with the addition of a sliding scale for low middle income residents. For example the Legislature can design three packages (similar to Medicare Supplements) that would standardize coverages so that consumers can compare coverage/pricing and companies can easily price out each package. A basic plan might have free prevention, 80/20 or 70/30 outpatient with high deductibles and hospitalization; with a second, more comprehensive benefit package with higher premiums, etc. All health insurance companies who register and file could participate in selling to all residents at market based premiums. For persons with existing conditions or otherwise high risk residents the pricing would be higher (similar to VtAIP or NCCI surcharges.) Every health insurance company would be required to take a percentage of the pool based on their writings each year. The Legislature could determine a percentage of income compared to health insurance premium cost (similar to property tax rebate) and provide either a cap for residents or a sliding scale with the state absorbing the additional premiums. This plan would require additional tax revenues (possibly by a tax on health ins premiums?), but the state would not be responsible for the total cost of health care and would focus on standards, quality control, assisting high risk and low income residents.
I am not sure how this would price out, but it would depend on several factors… types of packages, amount of subsidy, etc., but the process would be market driven with optional benefit selections and lower premiums due to competition while allowing everyone to have access to health insurance.
George Coppenrath is a certified insurance counselor.