By Meg Hansen
Public discourse about health insurance has become so politicized that few address policy with dispassion. When the commentariat assesses every law and rule through the prism of Obamacare, championing only those that protect the legislation, the people lose. Obamacare, or the Affordable Care Act, contains substantial design inequities, such as the individual health insurance mandate, that disproportionately hurt vulnerable segments of the population and thus should be corrected. This is why Congress eliminated the mandate last December.
However, a number of Democrat-controlled state legislatures have sought to resurrect the individual mandate at the state level. This May, New Jersey and Vermont passed laws requiring citizens to buy health insurance or endure the consequences. The former foisted a financial penalty without flinching, but unlike the Garden State, Vermont will hold gubernatorial and legislative elections this year.
Not surprisingly, Montpelier postponed the bad news till November 2018, by which time a working group is expected to have decided on a “financial penalty or other enforcement mechanism” for noncompliance. Yet, Gov. Scott’s campaign spokeswoman said that he does not support a “financial mandate.” She made the claim in the aftermath of an embarrassing fact-check by VTDigger last week, which compelled the governor to admit that he “misspoke.” In a VPR debate, he repeatedly called the new law a “study” to determine whether the state should move forward with the mandate.
Euphemisms notwithstanding, Scott did enact the mandate. In 2012, the U.S. Supreme Court ruled that the individual mandate functions as a tax, which means that Scott approved a new health tax despite pledging no new taxes. How should Vermonters make sense of this discrepancy?
Contrary to assertions by proponents in the Vermont Legislature and Scott administration, a mandate does not “go hand in hand” with ensuring coverage for individuals with pre-existing conditions. The ACA offers subsidies for which 85 percent on the exchange qualify. These monies finance the insurance expenses sustained by the chronically ill. When the premiums for those in an exchange rise – say, if healthy individuals leave the insurance marketplace – federal subsidies expand accordingly to ensure that the enrollees do not pay more for coverage.
Subsidies, not the mandate, enable the care for persons with chronic illnesses. The mandate instead concentrates the high costs incurred by the chronically ill on low- to mid-income individuals that are ineligible for subsidies and lack employer- or government-based insurance. These include Vermonters on the cusp of adulthood, the self-employed, small business owners, and those juggling multiple part-time jobs without benefits. Consequently, many are compelled to remain uninsured. The individual mandate penalizes those that cannot afford to purchase health insurance.
A Vermont Joint Fiscal Office report shows that 78.4 percent of Vermonters that paid individual mandate penalties for the 2015 tax year (total of $6.1 million) made an annual income between $10,000 and $50,000. Further, according to the 2014 Vermont Household Health Insurance Survey, Vermonters aged 25-34 years formed the largest uninsured group at 11.0 percent. Some may argue that younger persons do not purchase insurance because they are healthy, but a 2016 Harris Poll indicates that they increasingly cannot afford it.
Thus the mandate sets up an inequitable system of obligatory cross-subsidization, requiring the younger and healthier to pay for the expensive, long-term medical care of persons with chronic conditions. The latter tend to be older and comparatively wealthier, as a result of greater lifetime savings and lesser debt. In effect, Scott signed legislation that makes health insurance unaffordable for thousands by forcing the poor to subsidize the rich.
Additionally, the Legislature passed Act 131 and the Scott Administration issued emergency rules to push back against new federal health insurance reforms (reforms that correct other ACA injustices). This year, the U.S. departments of Health and Human Services, Labor and the Treasury expanded association health plans and short term limited duration coverage to promote affordability. These federal measures extend more choice, in price and quality, enabling more Americans to purchase plans tailored to meet individual needs.
But the legislative and executive branches of our state government took measures that preclude Vermonters from participating in these different types of well-functioning health insurance arrangements. 2019 monthly premiums of the unsubsidized benchmark plan for a 40-year-old non-smoker in Vermont will rise by 28 percent – third highest in the nation.
The clarion call of Scott’s gubernatorial tenure has been to solve the state’s “crisis of affordability.” How will escalating health insurance costs attract younger people to build their lives in this state? (Vermont experienced workforce growth due to the federal Tax Cuts and Jobs Act; data about the nature of the 4,400 new jobs is not available).
Or is holding onto the only Republican statewide office worth sacrificing economically sound governance at the altar of political power?
Meg Hansen is executive director of Vermonters for Health Care Freedom, a nonprofit committed to free-market reforms in American health care.