Prognosis unclear for proposed state health insurance mandate

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Should Vermonters be legally required to buy health insurance?

Officials are struggling with that question, and legislative testimony on Thursday showed there is no consensus on how or when to enact a state “individual mandate.”

The discussion is driven by last year’s congressional approval of a tax overhaul that took the teeth out of the federal government’s individual mandate. While the law remains on the books, the financial penalty for those who don’t buy insurance soon will disappear.

Lawmakers are considering whether to introduce a penalty at the state level.

A state mandate, however, would be complicated to implement, state tax administrators say. They have concerns about the cost and administrative burden of creating a new state program that would determine whether residents have insurance, offer exemptions to those who qualify and penalize those who don’t participate.

Officials say they also don’t want to add a new layer of confusion to an already-confusing topic.

“I do think we policy folks have a tremendous challenge in front of us right now,” said Mike Fisher, Vermont’s chief health care advocate.

Some fear that will spur large numbers of people to drop their coverage, which could lead to premium hikes for those who remain.

A recent study commissioned by the Green Mountain Care Board and the state Department of Financial Regulation estimated that Vermont may not be hit especially hard by the end of federal mandate’s penalty.

But there would be some effect: The study says Vermont’s uninsured rate could rise from 3.7 percent to 4.3 percent in the first year.

The impacts mostly would be felt in two insurance categories – small group (employers with 100 or fewer employees) and individual (those without employer-provided insurance). For those categories, the study predicts a combined 3.5 percent to 6 percent drop in insurance enrollment and a resulting 1.6 percent to 2.4 percent hike in premiums.

Rep. Bill Lippert, D-Hinesburg, and chairman of the House Health Care Committee, noted that Vermont has maintained a “historically low” uninsured rate. But even a slight upward trend “is not the direction generally we want to be going in,” he said.

The individual mandate was identified as a legislative priority prior to the 2018 session, and there’s a bill – H.696 – proposing a state mandate. There’s also a working group that includes state agencies and insurers meeting regularly to discuss the issue.

But it’s not yet clear where the effort is going. Some who testified Thursday proposed that the state implement a mandate as soon as possible, but without immediately enacting a penalty for those who don’t comply.

Susan Gretkowski, a lobbyist who represents MVP Health Care, said her employer would prefer to have an individual mandate in place. But the mechanics of a penalty are “extremely complicated” and the Legislature is approaching important mid-session deadlines, she said.

When Lippert questioned the value of a mandate with no penalty, Gretkowski said there could be some merit to Vermont making “a statement” about the need for health insurance while also taking “a little more time to plan how to do this well.”

Some also say a Vermont mandate – with or without an immediate penalty – could alleviate some confusion among residents who are wondering whether they are still required to buy insurance.

Enacting a mandate would provide continuity and also would capitalize on the current political debate on the issue, said Sara Teachout of Blue Cross Blue Shield of Vermont. “A year out, it could be harder to talk about this,” she told lawmakers.

Others say taking more time and gathering more information is better than enacting a state mandate right away.

“Our primary message is that it makes sense to wait and evaluate what makes the most sense for Vermonters,” said Addie Strumolo of the Department of Vermont Health Access.

“Our market is relatively stable compared to other states,” Strumolo added. “Keeping people insured is a huge priority, but it’s not clear that instituting a mandate at this point is the way to do that.”

The proposed state mandate legislation – which would require all Vermonters to buy “minimum essential health coverage or pay a penalty” – also is causing concern.

“That, from our perspective, is going to be a real challenge operationally,” Strumolo said, citing her department’s proposed administration of exemptions from the state mandate.

The bill sets up a system that also relies heavily on the Department of Taxes, since penalties for those who don’t comply with the mandate must be included with tax returns.

Doug Farnham, a policy director and tax economist for the department, said the mandate bill essentially would set up a new type of tax for the state to calculate and collect. That’s in part because it employs a different definition of household income than the one the state currently uses for property tax adjustments.

A “significant” price for implementing the mandate system “would not be a cost that we would be able to just absorb without additional funding,” Farnham said.

Also, enforcing compliance with a state individual mandate would be complex and “might result in us having to shift away from other activities, and that could be potentially impacting the tax revenues of the state,” Farnham told the committee.

“We want to work toward something that might not require so many state resources but might get at the same value outcome,” he added.

It’s hard to say what that might look like. But officials say they’ll continue to discuss the issue in the coming weeks.

“The goal for the mandate is not simply to have a mandate,” Lippert said. “The goal for the mandate … is to have a health insurance market where as many people as possible are participating.”

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