Interview with Peter Hood: An insurance executive looks at Green Mountain Care

By Caitie Banfield

The concerns many Vermont small businesses and business owners have about Green Mountain Care focus mostly on the potential

Peter Hood

financial burden the new law poses for their firms. The concern Peter Hood, co-owner of Noyle W. Johnson Insurance, has is not only what will his company will have to pay, but also that the law could cause the firm to lose a portion of their business. “I’m afraid they have the bulls-eye right on my forehead and on all the other small businesses in Vermont,” said Hood.

Hood’s primary financial concern with Green Mountain Care isn’t necessarily having to pay a payroll tax (Noyle W. Johnson already pays out roughly eight percent of their payroll providing health insurance for the business’s 41 employees), but rather the size of the tax. “They aren’t telling us how they’re going to pay for it. So, it if it’s going to be a payroll tax, which it seems like it’s going to have to be, how much? How does it compare to what I’m paying now?” Hood said.

“At 8 percent [payroll tax] it would be about a breakeven,” explained Hood. Providing health insurance to the employees will be one less thing his company will have to deal with, because the state will be coming in and providing it. Yet, Noyle W. Johnson will still be paying for it.

But, Hood went on, “If it’s more than 8 it would be a loss for me…. I’m scared to death that it’s going to be more [than 8 percent], because I’m not only paying for my employees, in sense, I’m paying for everybody that doesn’t have insurance now.” The Hsiao Report, the foundation upon which Green Mountain Care is based, calls for a roughly 14% payroll tax, 11% would be shouldered by the employer and 3% by the employee.

Hood’s second concern is that Green Mountain Care could steal a portion of their business. “We sell health insurance as part of our business, so on one hand these guys are trying to put us out of business, and on the other hand, maybe they are solving a problem, which might or might not be good on the other side.”

Noyle W. Johnson mostly sells property and casualty insurance, including auto, home owner, property insurance for businesses and workers comp. They also sell some group health insurance to businesses, which, Hood estimates, represents less than 10 percent of Noyle W. Johnson’s business. It would be that aspect of their business that would be affected by Green Mountain Care.

For their employees, Noyle W. Johnson offers a comprehensive health insurance plan. “We buy a high deductable plan for our employees. And then we have a plan where we reimburse them for their deductable and co-insurance.” As Hood explains it, they are partially self-insuring, which is a way of keeping the cost under control. It is a strategy that has worked well because the employees have been relatively ‘healthy.’ In addition to health insurance, Noyle W. Johnson provides life insurance and disability insurance to their employees. “We pay the cost for the employee, and we pay for most but not all for dependents,” Hood added.

Hood’s concern over the new law isn’t just for his own business. Where it’s really going to be a loss is for the businesses that can’t or won’t provide health insurance for their employees now. Those businesses will have to pay a cost with Green Mountain Care that they are not paying now. Now they can decide if they provide health insurance or not, a choice they will not be able to make under Green Mountain Care.

Hood set up this scenario that made a good point, ‘if you are a small restaurant with five employees, you don’t provide health insurance and you’re barely making it, the good news now is you’re going to have health insurance. The bad news is going to be that you are going to pay for it, and you don’t have any choice.’

According to Hood, “[The] fundamental problem is we all want more health care and with all the technology and everything else, health care is expensive and it gets more expensive every day.” From Hood’s perspective, there are three ways to save money, “cut down what you pay to the providers, number two, somehow or other you’re going to ration health care. And number three, healthcare will also be rationed because there will be some stuff that they are not going to cover.”

From an employment stance Hood doesn’t believe Noyle W. Johnson would be faced with having to cut employees or close down shop. Rather, is the consequence of the healthcare law may be holding off on hiring new employees. But, “There are a lot of people in Vermont with good jobs in the insurance industry, and a lot of those jobs are going to go away… because you won’t need people to sell insurance.”

Representative Jim Eckhardt’s made the statement of “business hates uncertainty,” in a prior interview. Hood agreed and added that, “We hate things mandated by the government. Businesses don’t like to be told by the government what they have to do.”

One piece of the puzzle that is unclear to Hood is that if everybody will be covered by this plan, does that mean that people who aren’t working are going to get it for free? As of last week’s press conference with the governor, unemployment in Vermont stands at approximately 5.6 percent. With no reportable income how will these folks be taxed for the new health care?

“I give them credit, there are some smart, good people trying to figure this out. But I think it’s a lot easier to put together the plan of benefits and that whole part of it, than to figure out how you’re going to pay for it,” Hood said.