March 10, 2017 Legislative Update

Special Legislative Update: the Health Care Bill in Congress

Rep. Anne Donahue

March 10, 2017

Our Health Care Committee in the House has been waiting anxiously for information on what shape the “repeal and replace” of the Affordable Care Act might take. We’re on town meeting break this week as the news is breaking in Washington on the bill that has been introduced, so I went and sat in as Governor Phil Scott’s staff did a special media briefing Friday.

It’s obviously still very early to know much, but the Scott administration drilled down to make best estimates of what impact it would have on Vermont if the current bill passes. About the only good news is that the major financial impacts would not hit until 2020.

But as feared, it would be a very big hit: potentially a $200 million shortfall in our Medicaid – and therefore our state – budget.

For many of the 26,000 low-income Vermonters who currently receive subsidies to help buy insurance, it would mean a significant drop in assistance. However assistance would be newly available to the next higher income bracket.

Vermonters who get insurance through work as part of the “large group market” would see the least change, but rates might increase more rapidly than they do now, because of what was called “market destabilization.”

There is nothing in the bill that addresses ways to contain cost or reform payment structures. In theory, that will come in a later, “Part 2,” of the repeal and replace.

One of the first things to be repealed would be the individual mandate: the requirement that you buy insurance or face a federal penalty.

One impact of that is an expected increase among those who do not get insurance, and since those people tend to be healthier individuals, it increases insurance premiums for everyone else who remains. Those without insurance still get care if they end up in a hospital, so that cost also gets shifted to everyone else.

The new tax credits would be based on age groupings, up to $75,000 in annual income – the same rate regardless of whether you earn $20,000 or $75,000.

Here are the contrasts that were presented between current subsidies and the proposed law:

An individual earning $20,000 currently can receive a subsidy of $4,920 for a “silver” plan that costs $6,251. That leaves them with $1,331 to pay – still pretty steep at that income, and that is just the premium. A silver plan still leaves some pretty high co-pays and deductibles.

Under the new proposal, that individual would receive a $2,000 credit if they are age 27, a $3,000 subsidy if they are age 40, and a $4,000 subsidy at age 60. Part of the premise is that insurance is more expensive as you get older, but that isn’t true in Vermont, where insurers are not allowed to charge different rates based on age.

For someone at a $40,000 income level, the current subsidy is $2,016. So it would stay about the same for the 27-year-old, who would get the $2,000 subsidy. The 40-year-old would do better, with the new $3,000 subsidy, and the 60-year-old would receive almost double the current subsidy.

At $75,000, no one currently gets a subsidy, so regardless of age it would be a bonus for those folks.

It gets more complicated when you introduce families, but one sample family of four, including two children, gives the basic picture:

At a family income of $51,020, with two children eligible for Dr. Dynasaur, the cost for a health care for the family is $14,060. The current subsidy under the Affordable Care Act is $9,110, leaving the family with $4,950 to pay in premiums.

Under the new proposal, the subsidy would drop to $5,000, so the family’s cost would be $9,060.

So what happens if you can’t afford insurance, and drop your coverage, and then realize it was a mistake, and sign back up? If you allowed more than two months to lapse, you get hit with a penalty of 30 percent of the cost of the plan: a major disincentive to buy insurance.

As Vermont’s new Secretary of the Agency of Human Services said, one of the problems with the Affordable Care Act was that for most individuals, health care was still unaffordable. If the bill before Congress passes, it will become more so.

Vermont prides itself as the state with the second-highest level of persons with health insurance coverage – about 97 percent have coverage. That rate would certainly fall.

There are a lot more details yet to dig through, and a lot of uncertainties, including what changes the bill might undergo in Washington. So it will continue to be a waiting and watching game, but in this first iteration, the picture is as ugly for Vermont as has been feared.