Individuals could end up holding and expensive bag
by Rob Roper
MONTPELIR – It was a bit of déjà vu, but not “all over again,” in the Senate Finance Committee on Tuesday as many of the same business leaders who made their case to the healthcare committees last week made their case to the money folks.
The big change that occurred between the two hearings was the announcement by Governor Shumlin, Speaker Smith and the chairs
of the two healthcare committees that they had agreed to business leaders’ requests that “bronze” insurance plans would be included in the federally mandated “exchange,” and businesses of 51 to 100 employees would not be forced to participate.
George Malek, representing the Central Vermont Chamber of Commerce and it’s 9000 families and 17,000 individuals, was ebullient in his opening remarks, praising and thanking the governor and legislative leadership… until he was cut off sharply by Senator Ann Cummings, Chair of the Senate Fianace Committee.
“You understand that the rest of us have to vote,” snapped Cummings.
Malek replied, “Yes, and I hope -”
Cummings cut him off again. “And that this committee was not consulted before the decision.” She was clearly miffed, and Malek was clearly taken aback. “So our job is to make sure that there is a large enough pool, that things are going to be able to be supported and sustained. So, at this point I have an open mind.”
Questions and comments from many on the committee throughout the testimony indicated that they are not at this time inclined to support the Governor’s position. At one point Cummings stated, “One of my concerns is, if we’re going to do this, and the Federal Government says we are, that we have a large enough pool to make it successful.” That would indicate she is leaning toward forcing the larger 51-100 member businesses to participate in the exchange.
However, more problems surfaced with the plan during the testimony that should leave Vermonters concerned.
Malek outlined a scenario in which an employee is currently insured under a $6000 deductible bronze plan through his/her employer. It is the most popular (perhaps ‘prevalent’ is a better term) plan within his association.
“With an 18% rate increase the annual premium on that plan, would go from roughly $10,000 now to approaching $12,000. The current ‘silver’ premium with an 18% increase would rise to about $16,000. Therefore, an employer could very reasonably be looking at a $10,000 premium today to finding the lowest premium available to them in the exchange at $16,000, and determining that they can’t eat that kind of cost increase….”
The result will likely be, according to Malek and others testifying as well, that the employer dumps coverage and sends the employee off into the exchange to buy insurance. In the most generous scenario, the employer gives the employee the full $10,000 that was being utilized for healthcare as salary to the employee to purchase insurance on the exchange. “The employee is only going to end up with roughly $7500 of that because the IRS is going to claim somewhere in the neighborhood of 25%,” explained Malek. The silver plan [in the exchange] costs $16,000. The employee has $7500. That $8000 gap is faced by the employee.”
Now, it is expected that some subsides will be available for the individual in the exchange from the federal government, the state, or both to close that gap. However – and this is a really critical point — nobody has a clue as what those subsidies will ultimately amount to, and there is no guarantee that an individual dumped into this new system would qualify for a subsidy in the first place.
Craig Fuller of the Employers Health Alliance put the cherry on top of this particular cake with the observation, “The really perverse part of this is if I decide to take [the money spent on healthcare] and give it to you [the employee forced into the exchange] in increased wages, that will reduce the subsidies you’re eligible for, because it raises your income.” He admonished the committee, “I’m not sure you’ve thought this all the way through and how this is going to impact people.”
Fuller had another jibe for the politicians, “These people who are asked to handle this 18% increase – they are already paying millions of dollars through the Medicaid cost shift, millions of dollars for taxes, bill backs, assessments and fees. If you remember last year, 75% of the money we raised to plug the hole in the budget increased the hospital tax and a fee on employers. Both of those things are finding their way onto these premiums. If you want to know why it’s so expensive, you must look to yourselves to some extent.”