Vermont has a state-run health insurance exchange (Vermont Health Connect), and has long been a pioneer in health care reform. Initially, Vermont was planning to switch to a single-payer system as of 2017, but abandoned that plan in late 2014.
Vermont is one of only two states that has merged its individual and small group risk pools, and one of only a few states that has continued with the original plan to include groups of up to 100 employees under the definition of “small group” as of 2016, despite the federal PACE Act that became law in the fall of 2015 and allowed states to keep groups of more than 50 employees classified as large groups.
It’s also the only state (in addition to DC) where off-exchange plans are not allowed to be sold – all non-grandfathered individual and small group plans in Vermont are on-exchange plans (although small groups enroll in Vermont Health Connect plans directly through the state’s two carriers – see more details below).
Despite Vermont’s longtime dedication to healthcare reform, the state-run exchange has struggled with IT problems from the beginning. Many of them have since been resolved, but some remain, even in the third year of exchange operation.
As a result of the challenges that Vermont Health Connect has faced, lawmakers have authorized an independent study to be conducted in 2016, aimed at determining the best course of action going forward. By January 2017, the results of the study will be presented to Vermont’s legislature and the incoming governor, so that the state can make an informed decision regarding the future of Vermont Health Connect. The study will consider several options, including keeping Vermont Health Connect as-is, joining with other states to create a regional exchange, or switching to Healthcare.gov.
2017 rates: 8.3% average increase proposed
The proposed weighted average rate increase for the combined individual and small group markets in Vermont is 8.3 percent for 2017:
- MVP has requested an average rate increase of 8.8 percent
- BCBS of Vermont has requested an average rate increase of 8.2 percent
BCBS of VT has 91.4 percent of the combined individual and small group market in the state.
For 2016, the carriers had requested a weighted average rate increase of 7.75 percent, but regulators only approved an average increase of 5.5 percent. It remains to be seen whether the rates for 2017 will be approved as-proposed.
According to the 1332 waiver proposal that Vermont submitted in March, 44,347 Vermont residents were covered under small group plans as of January 2016, all of which were Vermont Health Connect-certified (this number does not count grandfathered small group plans, but even in 2012, there were “very few” grandfathered plans in Vermont, and there are no grandmothered/transitional plans in Vermont).
Vermont Health Connect has not released any enrollment reports for 2016, although HHS reported that they had 28,258 individual plan enrollees as of December 26, and 29,440 as of January 31. But there are the following footnotes on the bottom of the third page of the 1332 waiver proposal:
- As of January 2016, BCBSVT has a total small employer and individual count of 69,794 lives.
- As of January 2016, MVP has a total small employer and individual count of 5,816 lives.
These are the only two carriers in Vermont, so the total enrollment count as of January 2016 was 75,610. If 44,347 of those enrollees were in small group plans, that leaves 31,263 enrolled in individual plans.
But that’s more than 1,800 higher than the open enrollment total reported by HHS (29,440). It’s possible that those plans are grandfathered, but it’s also possible that there’s an error in the numbers reported by the exchange and/or the carriers. I’ve contacted Vermont Health Connect about this but have not heard anything further.
Vermont has also been auditing their Medicaid program, and have ascertained that approximately 87 percent of the adults enrolled in expanded Medicaid in Vermont are actually eligible for the program. Because of the technology problems that Vermont Health Connect has experienced the state automatically moved about 30,000 people from VHAP and Catamount (prior state-sponsored health insurance programs) to Medicaid in 2014, and re-enrolled them for the following two years without requiring eligibility verification. But starting in early 2016, the state began sending out notifications to enrollees alerting them to the need to verify eligibility. The verification process will continue through October.
Vermont submits 1332 waiver to avoid SHOP portal
In March 2016, Vermont became the first state to file a 1332 waiver with CMS (Hawaii and Massachusetts have both created 1332 waiver drafts, but Vermont is the first state to officially submit a waiver proposal to CMS). Vermont’s 1332 waiver proposal is a request to waive the ACA’s requirement that exchanges include an online portal for small businesses to enroll in health plans (SHOP).
Instead, Vermont wants to maintain the system they’ve been using since 2014, which requires direct enrollment through the two carriers that offer small business plans in Vermont. Although Vermont has not yet established a working online SHOP exchange portal, all small business health plans available in Vermont are certified by Vermont Health Connect, the state-run exchange – there are no off-exchange individual or small group plans for sale in the state.
1332 waivers, also known as “innovation waivers” are permitted under the ACA, with effective dates of 2017 or later, and allow states to propose alternatives to many of the ACA’s provisions, as long as residents would still have access to health insurance that’s no less affordable or comprehensive than what’s available without a waiver. Under a 1332 waiver, a state would also have to cover at least a many people as would be covered without the waiver, and 1332 waivers cannot be any more costly to the federal government than the current system. Vermont’s waiver proposal states that it meets all of the requirements laid out by CMS.
Vermont’s small group enrollment in 2014 (33,696 employees and dependents) was by far the highest of all the state-based exchanges. Vermont was the only state that didn’t have an online SHOP enrollment portals, but all of the other states (with the exception of DC) also had competition from off-exchange plans.
Despite the fact that enrollment in SHOP plans in Vermont is conducted directly through the carriers, employers have the option of offering plans from both health insurance carriers, and employees can select from among any of the plans offered by the carrier or carriers chosen by the employer. The current system is working well, and especially given Vermont’s IT struggles with the individual exchange, they’re concerned that switching to an online SHOP portal might disrupt the existing small group market.
GOP Gubernatorial candidates vow to dismantle exchange
Vermont will elect a new governor in November 2016, as incumbent Peter Shumlin announced last year that he would not seek re-election in 2016. Both of the Republicans who are vying for their party’s nomination have vowed to dismantle Vermont Health Connect and switch to Healthcare.gov instead (Lieutenant Governor Phil Scott, one of the Republicans in the Gubernatorial race, has called for an investigation into the logistics and cost of “moving to the federal exchange or some other exchange,” which also leaves open the possibility of piggy-backing on a more successful state-run exchange).
The two Democrats who are running for Governor also agree that changes are needed at Vermont Health Connect, but they both prefer the idea of fixing the current system rather than dumping it and switching to Healthcare.gov, cautioning that doing so might end up being more expensive in the long run.
Exchange backlog nearly down to target number
In 2014 and 2015, Vermont Health Connect struggled with technology problems that caused significant backlogs in the system. In May 2015, there was a backlog of more than ten thousand change of circumstance requests that needed to be processed – quite significant given that effectuated enrollments in June stood at just 33,306.
On October 1, Governor Peter Shumlin announced that Vermont Health Connect has made huge strides. The change of circumstances backlog had been cleared (except for 186 cases that have been assigned to customer service representatives who were handling the cases and expected to have them completed by mid-October), and customers were able to begin using online reporting for many change of circumstances situations on Monday, October 5. It appeared that the exchange was heading into the third open enrollment period with a much improved system.
But on January 19, Vermont Public Radio reported that the backlog had returned, and was up to 3,000 people. The problem stemmed from the delayed delivery of a software upgrade for the plan renewal process. It was supposed to be ready in December, but as of mid-January it had not yet been implemented. The exchange noted that they expected it to be ready “within weeks” and said that the problems surrounding the 2016 renewal process shouldn’t reoccur in future years. They also explained that the current technology problems were also related to larger-than-normal number of Medicaid reenrollments being processed, and the fact that an exchange contractor went out of business last year.
But by mid-March, the backlog stood at around 4,200 people. The exchange said that the backlog was related to the third-party call center (Maximus) that the exchange uses, and noted that the call center is opening more change of circumstance service requests than they’re processing, which keeps the total count from declining.
By early June, the backlog had decreased to 3,236 people. But the exchange has noted that this doesn’t mean these cases are being held up in the system. They get about 4,000 change of circumstances requests each month, and the exchange consideres a realistic ongoing target to be in the 2,500 to 3,000 range – meaning that those are in-process at any given time. They are close to their goal as of June, and are training call center reps to handle as many change of circumstances requests as possible over the phone with the customer, rather than adding them to the queue of pending changes.
Initial optimism for technology improvements
The change of circumstances backlog was among the most vexing problems for Vermont Health Connect, and the new system that was put in place in 2015 appeared to be a significant upgrade over the manual work-arounds the exchange had been using for the past two years. Shumlin noted that the exchange receives about 125 change of circumstances submissions per day, but staff members had been able to keep up with new submissions while also dealing with the backlog during the summer of 2015.
When the Governor announced that the backlog had been cleared in the fall of 2015, he noted that going forward, enrollees who submit a change of circumstances request by the 15th of the month would see the changes reflected on their next invoice.
The carriers that offer plans through Vermont Health Connect – Blue Cross Blue Shield of Vermont, MVP Health Care, and Delta Dental – expressed optimism regarding the exchange’s technology upgrades, and have “worked closely with the health insurance marketplace to integrate the new technology.”
But in January 2016, Blue Cross Blue Shield of Vermont – the largest carrier in the state – explained that the technology problems that had returned during open enrollment (related to processing renewals) had made it impossible for the carrier to process changes to BCBS enrollees’ plans. And by March 2016, BCBS was still finding that data from Vermont Health Connect was not being accurately transmitted to the carrier’s database.
Silver especially valuable in Vermont
In every state, the Affordable Care Act includes a provision to lower out-of-pocket costs for people who qualify based on household income (no more than 250 percent of the poverty level), and who select a silver plan through the exchange. But in Vermont, cost-sharing reductions are also funded by the state. Thanks to the combination of state and federal funding, cost-sharing reductions are available to Vermont Health Connect enrollees with incomes up to 300 percent of the poverty level, as long as they select a silver plan.
In early 2015, there were concerns that the budget proposal for Fiscal Year 2016 wouldn’t include state funds for cost-sharing reductions past the end of 2015. But in June 2015, Governor Shumlin signed Senate Bill 139 into law (Act 54). The Act provides funding (about $761,000) to maintain the additional cost-sharing reductions provided by the state of Vermont in Fiscal Year 2016.
In Vermont, cost-sharing reductions are the same as other states for people with incomes up to 200 percent of the poverty level. But the state provides additional cost-sharing reductions (on top of what’s covered by federal funds) for people with incomes between 200 and 250 percent of the poverty level, and also provides some cost-sharing reductions for people with incomes between 250 and 300 percent of the poverty level (that group doesn’t get federal cost-sharing reductions at all).
Regulators get 2016 rate hikes down to 5.5%
In Vermont, regulators approved a 5.5 percent weighted average rate increase for the individual market for 2016. The two exchange carriers submitted proposed 2016 rates with a weighted average rate increase of 7.75 percent (8.06 percent for the small group market), but regulators reduced the rate hikes before finalizing them:
- BCBS of Vermont had proposed an average rate increase of 8.6 percent, which regulators reduced to 5.9 percent
- MVP had proposed an average rate increase of 3 percent, which regulators reduced to 2.4 percent.
- Vermont does not allow the sale of off-exchange plans, so those two carriers represent the full individual market in Vermont.
This was the second year in a row that Vermont approved rates lower than proposed for both carriers. And although the Green Mountain Care Board was able to reduce the proposed rate hikes during the review process, supporters of Vermont’s push for a single payer system were quick to note that a rate increase of nearly six percent was not commensurate with the much smaller income increases that people were likely to see in 2016. Although 64 percent of Vermont exchange customers receive premium tax credits (subsidies) to offset their premiums in 2015, the other 35 percent had to bear the full brunt of the rate increases for 2016. And although Vermont abandoned it’s progress towards a single payer system at the end of 2014, many proponents are pushing to resurrect it.
Kaiser Family Foundation reported that the benchmark (second lowest-cost silver) plan premium in Burlington would be 7.3 percent higher in 2016 than it was in 2015. Benchmark premiums don’t tell the whole story of how rates are changing, but they do give us an idea of how subsidies in the area will change, since subsidies are tied to the cost of the benchmark plan.
In June 2015, the exchange announced that five navigator organizations would receive grants to fund the enrollment assistance process from July 1, 2015 through June 30, 2016.
In November 2015, Vermont Health Connect officials responded to the results of two audits that were critical of the exchange. One was conducted in 2014 by Grant Thornton, a national firm. The other was conducted by Vermont State Auditor Doug Hoffer’s office.
Exchange officials noted that many of the problems revealed in the 2014 audit had since been resolved, although they explained that there are ongoing issues that they’re still addressing, specifically the need to have written procedures in place for various exchange functions. Hoffer’s audit found security risks in the exchange, and although officials are working to resolve them, they noted that they’re within the parameters allowed by the federal government.
In a March 2015 update about Vermont Health Connect, Governor Shumlin didn’t mince words: the exchange would solve their technological problems on a tight deadline, or else other options would be pursued – including a switch to Healthcare.gov or the possibility of piggy-backing on Connecticut’s successful exchange.
Shumlin’s administration announced a timeline for improving the exchange: By the end of May, technology must be in place to “significantly reduce” the amount of time it takes to complete account changes (things like an address change, adding or removing a dependent, cancelling coverage, etc.). And by October, improvements must be finalized to allow for smooth plan renewals heading into the 2016 open enrollment period.
On June 1, Gov. Shumlin announced that the exchange had met the first deadline successfully. Change-of-circumstances adjustments to accounts could be made automatically, albeit only by exchange staff. At that point, the goal was to have online change-of-circumstances updates available to the public by October – a target that was successfully met. But throughout the summer, staff were able to make requested changes to customer accounts automatically. The first order of business was to tackle the 10,000 backlogged cases that needed adjustments, and staff worked throughout the summer to address them using the new automated functionality. By mid-August, the backlog had dropped to 4,200, and Governor Shumlin noted at the time that he was “cautiously optimistic” that the backlog would be fully cleared by the time open enrollment began in November. Shumlin’s October 1 announcement confirmed that they had successfully dealt with the backlog (although it has returned in early 2016 due to a delayed software upgrade).
But the fix came with a price tag. Vermont Health Connect had anticipated federal funds to cover 90 percent of the cost of the system upgrade, but found out in August that the federal government would only pay 55 percent of the bill. That means the state may have to pay up to $2.7 million more than expected for the software updates that were completed in the first part of 2015.
In August 2015, Vermont officials announced that the exchange would pay BCBS of Vermont $1.6 million because of the technological problems with Vermont Health Connect in 2014 that resulted in past-due premiums and the carrier paying claims that shouldn’t have been paid.
That sum covers the errors that occurred between October 2013 and December 2014, although BCBSVT is also seeking more than $6 million from Vermont Health Connect for unpaid premiums and overpaid claims from 2015, mostly caused by communication errors when plans were terminated by the exchange but that information wasn’t transmitted to BCBSVT.
96.3 percent of Vermont residents insured
In 2012, Vermont’s uninsured rate was 6.8 percent – far lower than the national average, but Governor Shumlin knew the state could do better. Although Shumlin’s administration ultimately pulled back from their push for single-payer coverage in the state, they’ve come very close to achieving universal coverage. The uninsured rate in Vermont as of early 2015 was just 3.7 percent – the second-lowest rate in the country. Only Massachusetts, which implemented healthcare reform several years ahead of the rest of the country, has a lower uninsured rate.
Only 1 percent of Vermont’s children are without health insurance, which is the lowest in the nation.
2015 enrollment numbers
By February 15, 2015, Vermont Health Connect had 45,280 total enrollees for 2015, including private plans and Medicaid. This was an increase of nearly five thousand people since February 9, and included:
- 6,211 new private plan enrollees (3,471 had paid for their plan already)
- 25,341 private plan renewals (20,442 had paid for their plan already)
- 9,211 new Medicaid/Dr. Dynasaur enrollees
- 4,517 Medicaid/Dr. Dynasaur renewals
Of the 31,552 enrollees in private plans, 75.7 percent (23,913 people) had paid for their coverage as of February 15. And of the people who had completed their enrollments by February 21, 62 percent were receiving premium subsidies. This is much lower than the percentage in most states, but Vermont is one of only two exchanges (DC is the other) where all plans must be purchased through the exchange – there are no off-exchange plans for sale in Vermont, although lawmakers introduced a bill in 2015 to change that (it didn’t advance).
Officials had predicted somewhere between 3,000 and 8,000 new enrollees in Vermont for the entire open enrollment period. With 6,211 new private plan enrollments, the exchange clearly met their target.
By the end of March, total effectuated private plan enrollment in Vermont Health Connect stood at 34,923, and that number had fallen to 33,306 by June 30. Attrition is a normal part of the individual health insurance market, particularly when the bulk of enrollments are confined to one quarter of the year.
Until early January 2015, Vermont Health Connect had been lumping their Medicaid enrollments in with private plan enrollments rather than separating them out the way most states do. This caused some discrepancies between the state reports and the HHS report, but Vermont began reporting Medicaid enrollments separately in early 2015.
2015 premiums and renewals
Two health insurance carriers – Blue Cross Blue Shield of Vermont and MVP Health Care – offered nine plans each in Vermont Health Connect in 2015. Rates in Vermont’s exchange were the fifth highest in the nation in 2014, due in part to the low number of carriers participating, and also to the fact that Vermont has the second-oldest population in the country and utilizes community rating, with no variation in premiums based on age.
In September 2014, the Green Mountain Care Board made reductions to the proposed rate increases for both of the carriers that participate in the state’s exchange. BCBSVT (which covers more than 90 percent of the exchange’s enrollees) had submitted 2015 rates with an average increase of 9.8 percent, and the board cut that down to 7.7 percent. MVP Health Care had proposed a rate increase of 15.3 percent, which was reduced to 10.9 percent during the review process. The weighted average rate increase for 2015 was about 7.8 percent, owing largely to BCBSVT’s significant market share.
The average rate increase for the benchmark plan (second-lowest-cost silver plan) in Vermont was 8.3 percent in 2015.
Mark Larson, Commissioner of the Department of Vermont Health Access (DVHS), and the person who oversaw the roll-out of Vermont Health Connect in 2013, stepped down from the Shumlin Administration in March 2015. DVHS oversees Vermont Health Connect, along with other Vermont health programs. Governor Shumlin announced on February 9 that he had selected Rhode Island’s former Secretary of HHS and lawmaker, Steven Costantino, to be the new Commissioner of DVHS.
Lawrence Miller had been in charge of daily operations at Vermont Health Connect, but Vermont’s Human Services Secretary, Harry Chen, took over that role in January so that Miller could work more closely with the legislature. Miller’s official capacity is Chief of Health Care Reform, so his time is devoted to legislation while lawmakers are in session.
Improving the exchange
To address the web problems that the exchange experienced in 2014, Vermont Health Connect temporarily shut down its website for repairs in mid-September 2014, and it remained off-line for two months. During that time, interactive tasks like enrollment (triggered by a qualifying event) and payments could not be processed through the website – visitors had to contact the call center instead.
The problems were mostly resolved and the exchange website was up and running again as of November 15, 2014, just in time for the 2015 open enrollment period.
For much of the first open enrollment, premiums could not be processed online and instead had to be sent by mail. That was eventually resolved and starting on March 3, 2014, online payment became available through Vermont Health Connect. 50 percent of new enrollees were using the e-pay feature after it became available.
In early June 2014, Vermont Health Connect hired IT contractor Optum to help with the “change of circumstances” backlog stemming from a flaw in the exchange website. The transition from CGI to Optum is explained in this August 4 press release from Vermont Health Connect.
2014 enrollment numbers
At the end of the 2014 open enrollment period, Vermont was the clear leader in terms of the percentage of eligible residents who had enrolled in the exchange (85%; 38,048 people had completed their private plan Obamacare enrollments in the Vermont exchange by April 19. An additional 41,704 were eligible for Medicaid by that date).
This is more than double the second place state (California, with 42%), but Vermont is the only state, other than the District of Columbia, that has required everyone to enroll through the exchange, with no off-exchange plans available. So it’s understandable that the exchange enrolled such a high percentage of eligible residents in 2014.
In August 2014, the state’s Chief of Health Care Reform, Lawrence Miller, explained that they were considering the possibility of direct-to-carrier enrollment for people who don’t qualify for subsidies, but noted that adding this option is “not as simple as flipping on a switch” and cautioned that in other states, people who enroll in plans outside the exchange are locked out of subsidies for the whole year unless they have a qualifying event, even if their income drops mid-year. This is certainly a valid point, and has been an issue in 2014 for people in other states who enrolled in off-exchange plans.
Single payer no longer on the table for 2017
Vermont created a health benefit exchange to comply with the Affordable Care Act, but the state had plans to go well beyond that. A 2011 state law envisions Vermont with a single-payer health care system as soon as 2017, although reports surfaced in April of a memo from consultant Ken Thorpe (hired by the Vermont legislature to help them wade through the ins and outs of creating the single-payer system) regarding the possibility of a less-robust system that would let people purchase supplemental coverage through private plans in the exchange rather than relying solely on a single-payer model.
But after four years of working towards the single payer goal, Governor Shumlin announced on December 17, 2014 that the “time is not right” to continue to pursue a single payer system for Vermont. Although Shumlin had pushed for single payer harder than just about any high ranking elected official, it ultimately came down to money, and there was just no way that Vermont could afford the switch to single payer for now. It would have come with payroll taxes about 11.5 percent higher than they are now, and income taxes about 9 percent higher. Not surprisingly, reactions were mixed after Shumlin’s announcement, with single payer advocates deeply disappointed in the decision, while other groups welcomed the news.
For the time being, it’s not clear if or when Vermont will re-examine the issue of single payer healthcare.
No grandmothered plans in Vermont
Vermont’s 2012 Act 171 required that all non-grandfathered existing individual and small group policies terminate at the end of 2013 and be replaced with ACA compliant plans. Unfortunately, Vermont’s exchange was plagued with technological difficulties and was still not operational as of the beginning of November 2013, a full month into open enrollment. As a result, Governor Shumlin opted at the end of October to utilize a contingency plan that was built into Act 171, allowing for existing policies to be extended into 2014 in order to avoid lapses in coverage. The Governor allowed existing individual and small group policies to be extended until March 31, 2014, and residents had until that time to enroll in a policy through Vermont Health Connect.
In November 2014, Governor Shumlin won the popular vote over Republican Scott Milne by roughly 2,400 votes. But neither candidate received over 50 percent of the vote, so the final decision was left to the state legislature. In January 2015, the state legislature voted for Shumlin, and he began his third two-year term as governor. Shumlin announced in mid-2015 that he would not seek a fourth term in 2016; residents in Vermont will pick a new governor in November 2016.
Vermont Health Connect history
Vermont received $172 million in four federal grants designated for creation and implementation of the exchange as well as outreach efforts to get as many people enrolled a possible. Vermont received more federal funds for its exchange than any other state. As of mid-2014, the exchange had spent about $72 million of that money, leaving them with about $100 million to work with as they headed into the 2015 open enrollment period.
Vermont Health Connect was authorized by the state legislature and signed into law by Governor Shumlin in 2012. Vermont used a 2012 federal grant of $104.2 million to design a technology system that supports the state-based health insurance exchange (and would have transitioned to single payer in 2017 had the state continued on that path).
Vermont’s health insurance assistance programs VHAP and Catamount ended on March 31, 2014 and members needed to transition to Vermont Health Connect by March 15 in order to have new coverage as of April 1. There was concern that the new plans – even with heavily subsidized premiums – are unaffordable for many VHAP and Catamount members, since the out of pocket costs on the new plans are significantly higher.
Vermont health insurance exchange links
Vermont Health Connect