The goals of the Catamount Health bill are laudable. Universal health care for every resident of Vermont. But as with so many social problems that governments attempt to address through the legislative process, the Devil is in the details. In the case of Catamount health, the way that the program is funded will likely leave the state holding the financial bag.
For the first two years, those covered by the program will actually have private insurance. The law forces the state’s two largest insurance carriers, Blue Cross & Blue Shield of Vermont and MVP to offer discounted plans that will be subsidized by the state.
The amount that subscribers will pay will be based on their income. An individual making under $20,000 per year will only have a $60 per month premium for full coverage. And the maximum deductible under the plan is $250, maximum co-insurance amount is 20% and doctors’ office visits will cap out at $10.
From a consumer standpoint, the Catamount plan is fantastic. The minimum cost of a healthcare plan through Blue Cross in Vermont is $450 per month so the consumer in the example above is saving at least $390 each month.
But that savings has to be made up somewhere. In the case of Catamount Health, the state will make up a portion of the difference. When crafting the law, the legislature reasoned that the average uninsured person in Vermont was younger and healthier than the average Blue Cross customer. Therefore, the law mandates that both Blue Cross and MVP sell insurance plans to the State at a rate of $300 per month through 2009. Again, using the example of someone making less than $20,000 per year, this would mean that the state would pay $240 of the total monthly cost of that persons plan.
At the end of 2009, the insurance companies can refuse to continue offering coverage to Catamount if they find that it is not profitable to do so. And the chances are very good that Catamount is going to cost them money. If that happens, the program will become one of the largest state run health programs in the country and that is when problems are likely to begin to appear.
Vermont is going to fund Catamount using three main sources of revenue. First, the state is increasing its cigarette taxes by $0.60 a pack. Second, the state will tax employers who don’t offer insurance to their employees at a rate of $365 per year, per uncovered employee. And finally, the federal government will pick up a portion of the cost through Medicare. But these sources of revenue are unlikely to cover the costs of the program even using the rosiest of estimates.
In the event the plan runs into a revenue problem, administrators will have two choices. They can opt to not accept new enrollees or they can ask the legislature to raise taxes.
There is a very good chance that they will face revenue issues almost immediately after taking the plan over from private insurers. Because of the low tax on employers who don’t offer insurance, many employers are likely to dump their private healthcare insurance in favor of the state-run plan. But the law also has very loose requirements for residency in order for people to qualify. Virtually anyone can enter the state, get a hotel room and declare their intent to make Vermont their home. Anyone doing this will qualify for state subsidized insurance.
ACCESS is very happy to see that many states are making serious efforts to deal with the problem of covering the uninsured. Large medical bills are the leading cause of bankruptcy in the United States. We intend to follow Vermont’s plan carefully but we suspect that it will require an overhaul sometime prior to the end of 2009.
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