Vt. Moves Toward Single-Payer System With Bill Dependent on Waivers in Reform Law

Featured Health Business Daily Story, April 19, 2011 - AIS Health

Vt. Moves Toward Single-Payer System With Bill Dependent on Waivers in Reform Law

By James Gutman, Managing Editor

The Vermont House on March 24 passed a bill that could pave the way for a single-payer health care system. There is a host of reform-law-related issues in the bill that at least one major insurer in the state considers “unworkable” in the legislation’s current form. But even this insurer, MVP Health Care, concedes that the state Senate is likely to pass the measure — perhaps in a modified form — and says that Gov. Peter Shumlin (D), who ran on a single-payer platform, is expected to sign it into law.

The legislation, however, depends on getting certain federal waivers, and that is not a sure thing. Moreover, other than $1.3 million in development financing, there is nothing in the House-passed bill on how the system would be paid for, although the governor would have to propose a payment method by 2013.

The bill, H202, passed 92-49 in a vote that followed party lines. Its three major components are:

(1) Establishing a governor-appointed board that would start in July and have the authority to make all decisions on the setup of the state’s insurance exchange, as well as the benefit package, payment methodology and budget for a move to a single-payer system.

(2) Setting the framework for the Vermont Health Benefit Exchange, which would start operating in 2014 as per the federal reform law, and which could limit participation to a single insurer.

(3) Putting in place the superstructure for Green Mountain Care, which would be a single-payer program providing “universal access” to all Vermonters, subject to receipt of federal waivers.

The legislation, Shumlin said, would make Vermont “the first state in the country to make the first substantive step to deliver a health care system where health care will be a right and not a privilege, where health care will follow the individual, not be a requirement of the employer.”

The bill, though, has “a number of unanswered questions that bear directly on the feasibility of the initiative,” Frank Fanshawe, vice president, corporate affairs of MVP Health Care, tells HRW. Schenectady, N.Y.-based MVP has about 45,000 members in Vermont, the vast majority of them commercial. Most of the commercial members are administrative-services-only (ASO) rather than insured covered lives, and many of them involve employers with cross-border beneficiaries.

The biggest question, he says, is financing. Fanshawe notes that the bill is “modeled” on the work of Harvard professor and single-payer proponent William Hsiao, Ph.D. Hsiao proposed in his 132-page report to the Vermont legislature in January a payroll tax to be shared by employers and employees. There is no such tax in the House-passed bill, but Fanshawe acknowledges this is not likely to prevent its approval by the Senate, which he says may modify the bill.

There are “several cross-border issues,” according to Fanshawe. The majority of Vermont’s residents live within 30 miles of the state borders, leading to a situation in which many state residents work for employers in other states and many Vermont employers have staffers who reside elsewhere. That raises questions of how a single payer will handle those situations, MVP says in a special section on Vermont linked to the home page of its website.

Other issues, says Fanshawe, relate to access to care. Roughly 40% of the services the New Hampshire-based Dartmouth-Hitchcock Medical Center delivers, for instance, are to residents of neighboring Vermont. “How would a single payer account for this?” he asks. The new board created by the legislation would determine reimbursement rates for providers, he notes, but it’s not clear how, and the board would have no authority over Dartmouth-Hitchcock charges.

Impact on Employers Raises Concerns

There are questions within Vermont’s borders too. About 100,000 Vermont residents get health coverage from self-insured employers covered under federal law. The House defeated a proposed amendment to exempt those employers from being taxed to support Green Mountain Care, thereby raising the potential for paying fees for coverage that its beneficiaries don’t get. The economic implications of such situations aren’t addressed in the bill, says Fanshawe, adding, “What impact will it have on businesses now in the state? Will they leave?”

He also notes that there are other kinds of medical coverage not addressed in the bill, such as via Medicare, TRICARE, workers’ compensation and no-fault auto insurance, plus “interstate commerce” issues. Some of those relate to the 30,000 higher-education students in Vermont, 20,000 of them from out of state. Moreover, Vermont recognizes it would need federal waivers for Green Mountain Care, and it’s likely, in Fanshawe’s view, that Congress will not allow the Obama administration to accelerate the date for states to opt out of some of the reform law’s provisions from 2017 to 2014. Similarly, the bill depends on reform-law funding, some of which continues to be at risk from Republican assaults, he notes.

This then raises the question of what multistate insurer MVP will do if the legislation is enacted. “We’ve been committed to Vermont for well over 15 years now and expect to continue to be a partner — a part of the solution,” he responds. While saying the company will work with officials in the state capital, he acknowledges “there could come a time” when “we’d have to make a business decision.” The time frame for this, Fanshawe adds, “will be determined by the state.” He also tells HRW that “in this case, there are lots of legal questions and, if things develop, we will look at our legal remedies.”

A big issue, according to Fanshawe, is whether Vermont aims to eliminate the commercial insurance market. He suggests that if it does, there wouldn’t be any role left for MVP in the state. This makes its situation perhaps different from the state’s largest insurer, Blue Cross and Blue Shield of Vermont, which has taken an alternate profile on the issue. In fact, Blues plan spokesperson Leigh Tofferi has been quoted as saying, “If there’s a single-payer system, we’d like to be the single payer.”

However, the 150,000-member Vermont Blues plan does have concerns with the bill. The legislature-created not-for-profit plan has “been supportive of the reform effort” in Vermont, but it has cited, as needing “more detail,” such parts of the bill as financing, border issues and how the exchange will work, Kevin Goddard, vice president, external affairs, tells HRW. “The state cannot see itself as an island,” he says, noting that 60,000 out-of-staters got care through the Vermont Blues last year.

Goddard contends that the insurer is “not trying to establish a role for ourselves” in the legislation, which he agrees has a “fairly high” chance of adoption. The Blues plan has had “no conversations” regarding the possibility of its running Green Mountain Care, he says, and suggests that such a role would involve just claims administration and not fit its orientation as a benefits company. If there were to be a single payer in Vermont, adds Goddard, “we can’t imagine who could do that better than us, but that’s not our focus.”

The plan has a major stake in the employer market, albeit generally via offering “cost-plus” rather than strict ASO services, Goddard says. The Vermont Blues do want the state to talk more with employers about their concerns regarding the bill, he says, and see another issue in that a “one-payer exchange” is not what the federal reform law envisioned and doesn’t have a clear method of operation in the Vermont legislation.

Industry group America’s Health Insurance Plans (AHIP) has been monitoring the situation on behalf of its insurer members, including Vermont’s other large commercial insurer, CIGNA Corp., which has 92,195 members in the state, according to AIS’s Directory of Health Plans: 2011. CIGNA referred HRW questions about the bill to the association. “This legislation would reduce patients’ access to health plans’ innovative programs and services that they rely on today, and will put Vermont taxpayers on the hook for the soaring cost of medical care,” AHIP spokesperson Robert Zirkelbach tells HRW.

But Shumlin clearly sees it differently. “We are Vermonters,” he has said in talking with Hsiao. “We think independently. We take care of each other, and we do things that others dare not do.”

View the bill by visiting the April 1 From the Editor entry at http://aishealth.com/newsletters/healthreformweek.

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