For many years, the cost of health insurance has been one of the most pressing issues facing Vermonters — and one of the most vexing challenges for state policy-makers to deal with.
For legislators, the frustrating part is that our patchwork system of insurance coverage is mostly controlled at the federal level. Only a fraction of Vermonters — mostly employees of small businesses and individuals who use Vermont Health Connect — have insurance that the state can fully regulate.
So a little-noticed change the Legislature was able to provide for small employers this session is cause for some celebration. It should lead to lower insurance rates next year for small businesses and non-profits who have been struggling, as well as for cities and towns throughout the state.
The change was an indirect result of provisions of President Biden’s American Rescue Plan Act, signed into law in March, that are already providing significant financial help to individuals who purchase their own coverage.
Some background: the Affordable Care Act (Obamacare) offers premium tax credits for households up to a certain income level (for example, $86,880 for a family of three in 2020). But earn just one dollar more and the credit drops to zero — an illustration of what’s known as the benefits cliff.
ARPA essentially increases the credit and eliminates the “cliff” for 2021 and 2022, which is particularly good news for middle-income Vermonters who aren’t able to get insurance through their employer. Now a member of that same family of three could accept a small raise — or take a new, better paying job — without losing the tax credit. Over the course of a year, the family in this example would see savings in excess of $10,000.
For families with lower incomes who currently qualify, credits will also be increasing, so premium payments will be going down. For example, a single person earning $38,000 will now see premium payments of less than $200 a month for a benchmark plan, saving about $1,400 annually.
These changes at the federal level laid the groundwork for the Legislature to step in and restructure the health insurance market for small employers. For the last decade or so, the markets for individuals and small employers have been merged and rated together. This has had the intended effect of buffering the premium impact for the riskier individual market.
But with the new broader premium subsidies in ARPA providing help for more individuals, the legislature has “unmerged” the markets for 2022 — which should lead to lower rates for small employers.
The desired impact is already noticeable. In its annual rate request filing for 2022, Blue Cross Blue Shield of Vermont has proposed an average decrease of nearly eight percent for its small group plans — potential savings that will benefit both small employers and their employees.
The change for small employers will take effect in January and for the time being is only in place for 2022. But Vermonters who get coverage directly through the marketplace can begin applying the new tax credits to their premium payments this summer. And if you are enrolled directly with Blue Cross or MVP or aren’t currently insured, you can sign up today at vermonthealthconnect.gov and begin benefitting immediately.
The new ARPA tax credits and the unmerging of the markets provide a rare, if temporary, win-win for individual Vermonters and small employers, without impacting healthcare providers or insurance companies. Our hope is that Congress will extend the ARPA provisions beyond 2022, paving the way for continued lower rates into the future.