Blue Cross Blue Shield of Vermont, the state’s dominant health insurer, last week filed with regulators a request for an average 12.7 percent increase in premiums for 2018 for the individual and small business markets.
While this request is likely to be reduced by the Green Mountain Care Board, BCBS customers should expect to pay more for health insurance next year than this, even if they are eligible to receive subsidies through Vermont Health Connect. Large-group employer plans are also looking at premium increases for next year considerably above either the rate of inflation or increases in personal income.
One of the reasons for the requested premium increases is that Vermont’s population is steadily aging. While participants in these plans are nearly all under age 65 (older Vermonters are usually covered by Medicare as their primary insurer), each year the percentage of Vermont’s population that is over age 50 increases. People in their 50s and early 60s use health care services more intensively than people in their 20s and 30s.
Older Vermonters should be thankful that Vermont has been a “community rating” state for more than 20 years. This means that all participants in a given insurance plan pay the same premium, regardless of their age or medical condition. However, community rating does mean that younger participants are, in effect, subsidizing some of the higher insurance costs of older participants.
Under the Affordable Care Act (“Obamacare”), insurers in states without community rating may charge older participants premiums that are up to three times higher than younger participants. The American Health Care Act passed by the U.S. House of Representatives (“Trumpcare?” “Ryancare?”) would allow that disparity to increase up to five times. A 60-year-old who might pay $600 a month for an individual policy in Vermont might have to pay nearly $2,000 a month for comparable coverage in a non-community rating state if the AHCA were to become law.
Another reason for the large increases in insurance costs in Vermont is the “cost-shift” from Medicaid and Medicare to the individual, small business and large-employer sectors. The public programs, especially Medicaid, often pay providers considerably less than their actual costs of delivering services. The providers make up the difference by charging higher fees to the commercial insurers. These fees in turn get passed on to the participants in the commercial programs through premium increases.
Vermont has fully participated in the expansion of Medicaid (and Dr. Dynasaur, for children’s health care) established in the Affordable Care Act. Increased access to these programs has had salutary effects in improving the health of the population, and in reducing the incidence of high-cost illnesses later on by emphasizing preventive care. However, as Medicare and Medicaid together become the primary insurers for nearly 40 percent of Vermonters, the revenue pressures on providers increase, leading to higher premium increases for the commercial insurance participants.
For six years, Gov. Shumlin tried to reduce the cost-shift by increasing Medicaid payments to providers. However, most of his ideas for paying for the increase were not accepted by the Legislature. So far, Gov. Scott has been focused primarily on education expenditures and property taxes. Will he try to reduce the health care cost-shift in future budgets?
Health care in Vermont will be in a state of considerable flux over the next few years. Will federal policy changes result in reduced payments to the state for Medicaid, and reduced subsidies and tax credits for participants in the individual insurance marketplace? Will the state and the providers continue moving toward a model in which primary care is paid for largely on a per capita, rather than a fee-for-service, basis? Meanwhile, consumers and businesses should prepare for large increases in health care premiums next year.
Eric L. Davis is professor emeritus of political science at Middlebury College.