The House Health Care Committee is looking at the question right now about when it is right to do something to help a whole lot of people, knowing that your action will negatively impact a few. There is very little that we can do to directly influence how people must pay for health insurance, because it is so heavily regulated by federal law. A specific part of the new American Rescue Plan Act gives us a window of opportunity, however, to help ease health care premium increases for small businesses, non-profits and municipalities next year. Understanding the opportunity gives a glimpse into the complexities of our current system of paying for health care.
I should begin by saying the most important part of ARPA for many individuals is that you stand to benefit tremendously from the increase in premium tax credits. If you currently buy health insurance as an individual, rather than through work, should be checking immediately at Vermont Health Connect to see whether you should change your plan. This is most important if you are buying a plan directly from Blue Cross/Blue Shield or MVP and receiving no tax credits.
It is highly likely that you are now eligible for some help, but it requires that you buy your plan directly through Vermont Health Connect. VHC is open right now for new enrollment in part for this reason. In addition, if you are going without insurance because it was simply unaffordable to you at full price, you may now be eligible for help. Please check!
The Deeper Dive
The first background piece about our opportunity to help small business groups is these new, increased tax credits. Regardless of my angst over the huge deficits we are taking on as a nation through the economic stimulus efforts, I strongly support the aspect regarding the new investments to help people with health care.
Another “regardless”: whether moving to some sort of universal coverage system would be a wise solution in the future or not, I think our current gross disparities in the ability of people to get coverage – which means getting access to health care itself – is unconscionable. Hardworking people making the same amount of money may pay virtually nothing, or huge percentages of their income, to get insurance. If you are very poor and eligible for Medicaid, you are in great shape. If you have a job that provides excellent benefits, you are in great shape. If for reasons outside of your control you are working for an employer who offers minimal coverage, or you are self-employed, you are in a highly inequitable position.
Ever since the Affordable Care Act passed, one such moderate income group was the folks buying their own insurance who fell “off the cliff.” Tax credits go up to 400 percent of the poverty level, and up to that point, the ACA standard was that someone should not have to pay more than about 10 percent of their income for insurance. Tax credits (and at lower incomes, premium subsidies) filled in the rest. At 400 percent, the supports were cut off, and those individuals could end up having to pay 15 or 17 or even a higher percentage of their income. You fell off a cliff.
Under ARPA (the new federal rescue plan), those credits have no cutoff. It sets about 8.5 percent of income as the “affordable” standard, and as long as the basic plan exceeds that based on your income, you can get help. That puts many folks on a more equitable footing, and the cliff is eliminated.
The individual market is always the most expensive. The smaller the market the higher the cost, because the risk cannot be spread out over as many individuals. The next market group is the small business market, those with fewer than 100 employees. There is a large group market as well, but very few employers are in it in Vermont (about 3% of Vermonters) because at that size, they flee to the “self-insured” market, because that is regulated solely by federal law. None of Vermont’s requirements and protections apply to that category.
Since the ACA, there has been a 40% shift of large employers to becoming self-insured, and that market is now 33% of private insurance in Vermont. Dividing the other biggest pieces of pie up, Vermont has about 25% under Medicaid, 22% under Medicare, 15% in the combined small group and individual market, and about 3% uninsured. The 15% is split about 55/45 between small group and individual.
I mentioned that the individual market is the most expensive. Vermont made a controversial policy decision at the start of the ACA, requiring small business to be combined with the individual market, called a “merged market.” This helped individuals save some money because the market was bigger.
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The savings comes at the expense of the small business group, which had to pay rates that are higher. Small business is subsidizing people who have to buy as individuals. When we did an analysis from 2018, we found that this saved about 7% of the premium cost for individuals, and cost small businesses about 5% extra. The numbers may have shifted since, but that’s the ballpark we have, to work with. It has always been unfair to do this – but the dilemma was that it would strand individuals if we “unmerged” this market, and we were blocked by federal law from spreading the cost further by including larger employers.
The increase in federal tax credits has changed this picture. If the individual market cost increases by 7%, the vast majority of those people will be 100% shielded from that increase because of the new credits. We can unmerge the market and reduce premiums for small businesses, non-profits, and municipalities and their employees without a negative impact on the individual market.
Wow! A win-win. Well, not 100 percent.
First, this tax credit boost only lasts for two years; it can only help small business without hurting individuals for one insurance coverage year. It does seem likely that public pressure across the country will prevent Congress from repealing this, and the small business community has testified to us that even if it is only a one-year break, it is still worth it for them.
Second, not quite everyone wins. People in the individual market who have an income high enough that results in a plan costing less than 8.5% of their income would see that 7% increase. That actually represents the actual cost within that market, but it would be a change from existing cost for them. That is estimated to be fewer than 10% of folks currently in the individual market, because most folks at this income level have robust employer coverage. (Currently, about 32% in the individual market do not receive credits or subsidies; the drop would represent the impact of the ARPA increases.)
An even smaller number of people could be hurt in a more complicated scenario from something called the “family glitch.” This is an inequity that was unintentionally created by the ACA. People cannot go to the individual market and get subsidies if they are offered employer insurance, unless that insurance is deemed “unaffordable.” Unaffordable is defined as basic coverage that would cost more than about 10% of the employee’s household income.
The glitch is that the percentage is based upon full household income, but in relation to the cost of an individual (single-person) plan. The federal administration is trying to find a way to address this glitch, but it is not clear whether it will get resolved. Thus, those folks may remain not eligible for tax credits if they go to the individual market, but might still want to, if it provides better coverage than their employer plan. If we “unmerge” the markets, that market plan would cost them that estimated 7% increase in premium. This is fewer than 300 people in Vermont, but it still means we cannot say that this change would only benefit people, and cost no one.
These two sub-groups would have to pay the actual cost of the very small individual market, without the current benefit of being subsidized by small businesses. It is still the right thing to do. The estimate is that the small group and its employees could save about $17 million in this one year. But we have to have our eyes open, and acknowledge that there will be some individuals whose premiums would go up as a result.
Other Bits of Action
A bill requiring anyone who does any project valued at more than $3,500 to sign up on a new state registry as a contractor passed the House last week. The registry ties into a slew of requirements. Picture a college kid doing a summer project for a neighbor who fails to keep the records for seven years, or doesn’t provide her email change within 30 days.
The potential penalty? A $5,000 fine. It that likely to ever happen? Of course not. But we ought not to put things in statute that we do not intend to ever happen on the premise that it’s “not likely.” I can claim direct credit for one thing. I pointed out that the bill also had a cross-citation that allowed up to a one-year jail term for failure to register. As a result, the committee amended the bill to remove that penalty.
It is an honor to represent you. Please contact me (firstname.lastname@example.org) or Ken (email@example.com) any time for questions; you can also ask to get on my direct mailing list for these updates.