Later this month, the Green Mountain Care Board will announce its decision about Blue Cross Blue Shield of Vermont’s request to increase premiums by 12.6 percent for about 70,000 Vermonters enrolled in the insurer’s individual plans. The GMCB must balance BCBS’s need to maintain financial solvency with the crisis of affordability in the individual health insurance market in Vermont.
BCBS insures about 90 percent of the participants in this market. In recent years, its premiums have increased considerably faster than Vermont’s overall economy, or the growth of wages and salaries in the state.
Between 2014 and 2016, premiums increased at 239 percent of Vermont GDP growth and 294 percent of Vermont wage growth. In other words, BCBS health insurance premiums increased nearly three times as fast as the wages earned by Vermonters. If GMCB were to approve the full increase requested by BCBS for 2018, insurance rates since 2014 will have risen by more than 37 percent.
The office of the Vermont Health Care Advocate, which represents consumers in insurance rate proceedings, has noted that the proposed rate increases would make health insurance unaffordable for many Vermont households. One criterion for affordability is that a household should not pay more than 10 percent of its income on premiums, or more than 5 percent of its income on deductibles and other out-of-pocket costs.
Using this definition, BCBS’ proposed cost of a “silver-level” health plan would be unaffordable for singles with incomes less than $64,500, two-person households with incomes below $129,000, and families with incomes below $181,300. These numbers encompass most households in Vermont. The statewide median household income last year was $71,600, or $66,300 outside of Chittenden County. For many Vermont households, the cost of health care is a greater challenge than the cost of property and other taxes that receives so much attention in Montpelier.
BCBS’s rate filing assumes continuation of the federal “cost sharing reduction” payments for all of 2018, even though President Trump and others in his administration periodically threaten to stop making these payments, claiming they are “bailouts” for insurance companies. What these payments do is enable insurers to reduce deductibles, co-pays and other out-of-pocket costs for middle-income households. In effect, Trump is threatening to raise health insurance costs for millions of consumers because Congress has so far refused to take health insurance away from millions of consumers. If the cost sharing reduction payments were not continued, BCBS estimates premiums would go up by an additional 1.5 to 2 percent.
On the basis of previous years’ decisions, the GMCB will probably reduce BCBS’s requested premium increases below 12.6 percent, but probably not all the way down to the 8.6 percent recommended by the Health Care Advocate. Even at the lower level, premiums in the individual market would increase much faster than either hospital budgets, which are projected to rise by a low-single-digit number, or premiums paid by the employees of large employers that self-insure those employees’ health care costs.
The Trump Administration has indicated that it will not enforce the individual mandate, the provision in the Affordable Care Act (“Obamacare”) that requires individuals to have health insurance or pay an income tax penalty. If so, some younger and healthier Vermonters may decide that the cost of health insurance is simply too high, and drop their coverage. If that happens, the pool of people insured by BCBS will become older and sicker over time, resulting in a spiral of larger premium increases and more people dropping coverage. In the absence of a bipartisan congressional response in the short term, and the establishment of a publicly financed universal health care system in the longer run, the sustainability of the individual health insurance market in Vermont is very much an open question.
Eric L. Davis is professor emeritus of political science at Middlebury College.