Governor responds to press questions about picking winners and losers

By Guy Page

In an effort to reduce ever-escalating health care insurance costs, Gov. Phil Scott announced an executive order to – among other changes – reduce health care premiums for younger Vermonters and non-tobacco users.

The order appears to nick away at Vermont’s longtime commitment to strict “community rating” – in which all insureds – young and old, healthy and ill, but not rich and poor – pay much the same health care insurance premiums and deductibles. 

At a press conference yesterday, a consultant and two business owners discussed what most Vermonters already know: health insurance costs are making Vermont more unaffordable and non-competitive.

“I recently worked with a nonprofit who was facing a 38% increase in their health insurance plan,” health care consultant Christine Oliver, a former Scott administration official, said. “A few years ago, a 30% increase was considered a wild crazy aberration. Unfortunately, right now, that’s not so rare.”

It’s gotten so bad that employees are declining promotion and more pay because of how it would increase health insurance costs, Chris Flanagan from Arrowhead Construction of Colchester said. 

“In the last seven years we’ve struggled as everyone has to have staff,” Flanagan said. But now, “people are not willing to take promotions because they can’t take the increase in pay because they will increase their health care. I’ve had family members who are officers in my company have to lose their healthcare coverage and have us find alternatives because the pricing was such a large increase. I never thought in my life that we would have people not want a substantial raise or a promotion which gives a really great future.”

Flanagan said this “makes me feel sad for Vermont. People have explained to me they could take a job making less and actually end up making more because of their healthcare coverage.” 

Attracting top talent is tough because “We don’t have that many carriers that come to Vermont,” Jeff Williams, owner of Spafford and Sons Drilling, said. “We don’t have the competition that we need. We don’t have the metrics in place to be competitive on a world stage to attract those people.”

After the business people described the problem, Kaj Samson, Scott’s Director of the Office of Financial Regulation, explained why Vermont joining the rest of the age-rating nation is part of the solution. 

“So how did we get here? One of the reasons is that we don’t age rate in Vermont. Age rating recognizes that as we get older, we use more health care.” For most people, Samson said, “The older you get, the more utilization you have of medical services, the more likely you are to be on pharmaceuticals, and the more likely you are to have hospital visits, you name it. It’s dramatic on the order of 3 or four to one in terms of your utilization,” Samson said. 

“48 states do this. Two states do not do age rating. We are one of them. The problem with [Vermont’s system of community] rating is that as an older state, the subsidy that younger Vermonters are paying into this system becomes more and more as our average age continues to rise,” Samson added. 

“Unfortunately, in a state like Utah, where the median age is 29, you wouldn’t see age rating offering that much relief to younger residents of that state. By law, I have the ability to promulgate a regulation to allow insurers to change that rate by up to 20% from what the community rate would be. And that is what this executive order directs DFR to pursue.”

Scott’s orders also take aim at giving health insurance breaks for somehealth-related behavior, as well. It permits insurers to offer incentives to non-tobacco users. 

A reporter followed up with the obvious question: Is the executive order picking health care insurance winners and losers?

“But what you’re putting forward here is full of winners and losers, right? Like if we go towards association health plans, we push more people towards or enable more people to go self-insured, there is a risk there that we tank the exchange, right? Then that market enters an even deeper death spiral.”

Scott and Sampson said the proposed changes, taken together, would benefit all health care insureds.

“I think we are all in this together,” Scott said. “We need to help as many sectors as possible. Sure there’s going to be winners and losers in everything that we do. Our focus should have been much much broader. Again, when we look at some of what we’ve done over the last number of years, we have probably one of, if not the highest, costs of health care of any state in the country. Yet right next door in New Hampshire they’re eating our lunch. We need to do something different. We need to broaden opportunity to those folks as well.”

Scott said there’s only so much the executive branch can do to reduce health care costs. He said he plans to introduce more far-reaching legislation if re-elected in November.

Gov. Scott’s office published this description of the EO:

The Executive Order begins changing that policy direction by directing state agencies to pursue reforms that can be implemented immediately under existing law, including:

• Modernizing health insurance rating rules to improve affordability while maintaining strong consumer protections;
• – Developing a federal Section 1332 State Innovation Waiver to pursue reinsurance and other proven strategies that have lowered premiums in many other states;
• Reviewing and modernizing Vermont’s framework governing Association Health Plans (AHPs), Multiple Employer Welfare Arrangements (MEWAs), and other small-business health coverage options;
• Evaluating tax incentives that encourage small employers to offer affordable coverage through Individual Coverage Health Reimbursement Arrangements (ICHRAs); and
• Encouraging the Green Mountain Care Board to fully utilize its existing statutory authority to implement reference-based pricing reforms and pursue system-wide savings that benefit all Vermonters.