Even as legislators move quickly to protect federal subsidies for Vermonters’ health plans, a newly proposed state cut may mean higher costs for some of the same people lawmakers have been hoping to help.
The Department of Vermont Health Access wants to eliminate the state’s cost-sharing reduction benefit, which lowers deductibles and maximum out-of-pocket expenses for income-qualified residents who are buying silver-level health plans through Vermont Health Connect.
Cutting the state benefit for fiscal year 2019 could significantly drive up health care costs depending on a resident’s income and level of coverage: One plan’s deductible would nearly quadruple, while another deductible would double, according to state documents.
Commissioner Cory Gustafson said the change is driven by budget-cutting pressures.
“It is not necessarily an easy thing to propose,” Gustafson told House Appropriations Committee members in recent testimony.
The department’s fiscal 2019 budget proposal, which is $22.5 million lower than the current year’s spending plan, eliminates the cost-sharing benefit in order to save $827,175.
That represents six months of savings because the benefit would be eliminated Jan. 1, 2019, which is halfway through the fiscal year.
Gustafson said the fact that the benefit consists entirely of state money – rather than a federal match – maximizes the cut’s impact on the department’s bottom line.
“We think that this is something that allows us to keep … the overall budget goals and target met,” Gustafson said.
The state has its own cost-sharing reduction benefit administered by the Department of Vermont Health Access. It assists Vermonters who are enrolled in silver health plans through Vermont Health Connect and have household incomes falling between twice and three times the federal poverty level.
For individuals, that means annual income between $24,120 and $36,180. For a family of four, the income range is $49,200 and $73,800.
The state pays insurers about $1.6 million annually in cost-sharing benefits, allowing for lower deductibles, out-of-pocket maximums and co-payments for qualifying customers. About 6,100 state residents are enrolled in those cost-sharing plans.
The proposal is already getting pushback. Mike Fisher, chief health care advocate for Vermont Legal Aid, opposes the change, as does Sen. Claire Ayer, D-Addison, chair of the Senate Health and Welfare Committee.
“A proposal to increase out of pocket costs is exactly a move in the wrong direction,” Fisher said. “It will have a real impact. So I’m going to work against it and I’m going to be putting as much information as possible before the committee about how it will hurt people.”
One of the governor’s goals is to protect vulnerable Vermonters, and “that sure seems backwards to me,” Ayer said. “So I’m very worried about that. That group of people won’t have access to health care if they don’t have health care insurance.”
Rep. Catherine Toll, D-Danville, and chair of the House Appropriations Committee, told Gustafson that “$49,000 would be a real struggle in Vermont” for a family of four.
“When I think of affordability (issues in Vermont), I don’t want to forget our young, working families,” Toll said.
The impact of the state’s proposed benefit cut varies based on the type of insurance plan through the exchange. In a few cases, deductibles and out-of-pocket maximums wouldn’t change at all.
But in other cases, there would be a big difference for individuals who obtain plans through Vermont Health Connect. For example, those with incomes falling between 200 and 250 percent of the federal poverty level would see a standard silver plan’s deductible rise by 28 percent to $2,550.
Those in the same income category would see a Blue Cross Blue Shield of Vermont deductibles for the blue rewards silver plan more than double from $1,000 to $2,100.
In the worst-case scenario, a MVP non-standard silver plan deductible would jump from $300 to $1,100 for that income group.
Maximum out-of-pocket expenses also would rise, but by smaller margins.
Sean Sheehan, the department’s deputy director of eligibility and enrollment, said there will be many variables for customers to consider. For example, he noted that some insurance plans waive deductibles for certain services.
He also said “the vast majority” of customers don’t reach out-of-pocket maximums in a given year.
Sheehan acknowledged, however, that “it’s a hit, and potentially a pretty significant hit if they need to hit the maximum out-of-pocket.”
The department maintains an online plan comparison tool that will help customers see the differences if the benefit cut is enacted, though the tool doesn’t yet reflect any such changes.
“This is going to obviously change the calculus that people do,” Sheehan said.
Gustafson’s testimony came during the same week that the state House passed a bill, S.19, which creates what is known as the silver-loading solution. The Senate previously approved the bill.
The silver-loading solution is a reaction to President Donald Trump’s decision last year to end a federal cost-sharing subsidy for health insurers. The federal subsidies had allowed insurers to offer reduced-price plans to customers with incomes less than 250 percent of the federal poverty level.
Silver-loading is a two-tiered response that has been enacted in 37 other states. It taps into a different source of federal money to subsidize silver-level health plans while also creating a nearly identical, low-cost silver plan outside the state health insurance exchange for those who don’t qualify for subsidies.
The end result is “essentially no increase in costs” for those enrolled in silver plans, said Rep. Tim Briglin, D-Thetford, and ranking member of the House Health Care Committee.
The Scott administration budget reduction proposal could increase out of pocket costs for some of the same people the legislative proposal aims to help.