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Vermont health insurance marketplace: history and news of the state’s exchange

Individual mandate will take effect in 2020, but without a penalty for non-compliance (state will use data to provide outreach to uninsured residents)

Highlights and updates

Vermont exchange overview

State legislative efforts to preserve or strengthen provisions of the Affordable Care Act

Vermont is one of the states fighting the hardest to preserve the Affordable Care Act’s gains. See the steps Massachusetts has taken.

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 and has continued to use the same general private insurance market structure used in the rest of the country.

But Vermont has taken a more hands-on approach to health care reform than most states, and has some fairly unique regulations. In addition to the subsidies provided by the federal government under the ACA, Vermont also provides state-based premium subsidies and cost-sharing reductions (Vermont Premium Assistance and Vermont Cost-Sharing Reductions) to people earning up to 300 percent of the poverty level.

Vermont had planned to have an individual mandate in place as of 2020 with a penalty for noncompliance. But lawmakers ultimately scrapped the penalty during the 2019 legislative session, so Vermont’s individual mandate does not have a penalty for non-compliance in 2020, and data generated under the mandate will instead be used by the state in order to target their outreach towards people who are uninsured.

For 2016, Vermont began to allow people to enroll in individual market coverage directly through an insurance company (prior to that, all enrollments were through the exchange). In 2017, they began encouraging that pathway for all applicants who aren’t subsidy-eligible, in an effort to reduce costs and improve customer service (details below).

More than 25,000 people enrolled in individual market plans through Vermont Health Connect during the open enrollment period for 2019 coverage, in addition to nearly 10,000 people who enrolled in the same plans directly through the two insurers that offer ACA-compliant plans in the state (total enrollment in Vermont’s individual market — via the exchange and directly through the insurers — stood at 34,396 at the end of the open enrollment period for 2019 coverage). In addition, more than 40,000 people are enrolled in small group plans in Vermont.

Vermont is one of only two states that has merged its individual and small group risk pools, and one of only four 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.

In order to ensure that consumers would be able to continue to receive assistance from brokers, and to ensure that brokers would remain impartial in the assistance they provide, Vermont’s legislature established standards in 2012 to ensure uniform broker compensation for all Vermont Health Connect enrollments. Under the terms of Act 171, insurers no longer pay commissions to brokers, and brokers aren’t “selling” insurance; they’re providing guidance and advice instead. In return for that assistance, brokers’ clients (individuals or employers) pay them a fee. From 2014 through 2019, the standard broker compensation has been $20 per month for each employee or individual who enrolls in a plan through Vermont Health Connect with the help of a broker. Brokers are also allowed to set up “alternative contractual arrangements” with their clients, with an agreed-upon fee.

Vermont’s uninsured rate was far lower than the national average in 2013, at 7.2 percent. By 2016, it had fallen to 3.7 percent, although it increased to 4.6 percent by 2017. That was still below the national average of 8.7 percent.

Open enrollment for 2020 plans: November 1, 2019 to December 15, 2019

Vermont Health Connect was one of just two state-run exchanges that began following the new, shorter open enrollment schedule in the fall of 2017. The exchange has continued to use that schedule, although due to high volume, they added a few extra days to the end of the open enrollment period for 2019 coverage.

For 2020 coverage, open enrollment will continue until December 15, 2019. An extension is not likely, as Vermont has only issued one short extension (in December 2018) in recent years.

Rate changes in Vermont: 2014 through 2020

In August 2019, Vermont regulators announced the approved rate increases for the state’s two insurers for 2020. Since Vermont’s individual and small group markets are merged, these average rate changes apply to both markets:

  • Blue Cross Blue Shield of Vermont: 12.4 percent average increase (the insurer initially proposed a rate increase of 15.6 percent, and later revised it to 14.3-14.5 percent).
  • MVP: 10.1 percent average increase (the insurer initially proposed an average increase of 9.4 precent, but later revised it to 10.9 percent).

As has been the case every year since 2014, the Green Mountain Care Board approved rate changes that were smaller than the two insurers proposed. But the rate increases are still much more significant than the national average for 2020, and average unsubsidized premiums in Vermont will be well above the national average in 2020 (an estimated $637 per month, versus $593 nationwide).

In announcing the approved rates, the Green Mountain Care Board expressed frustration at the size of the increases, but noted that both insurers had been losing money in 2018, and that their reserves had been dwindling. The rate increases are an effort to protect insurer solvency, and are actuarially justified. But they will make coverage less affordable for people who don’t qualify for premium subsidies, including 16 percent of exchange enrollees plus all of the people with direct enrollments through the two insurers. For people who do qualify for subsidies, however, the subsidies (ACA premium subsidies plus Vermont’s Premium Assistance) will increase in 2020 to offset the higher rates.

As described below, Vermont’s insurers began adding the cost of cost-sharing reductions (CSR) to silver plan premiums as of 2019, rather than having to simply absorb the cost as they did for 2018. This resulted in larger premium subsidies in Vermont for 2019, making coverage more affordable than it would otherwise be for most people who get premium subsidies (84 percent of Vermont Health Connect’s individual market enrollees were receiving premium subsidies in 2019, and the exchange noted that most uninsured Vermonters could qualify for free bronze plans in 2019 due to the size of the premium subsidies).

Vermont’s insurers are continuing to add the cost of CSR to on-exchange silver plan rates for 2020. They are also offering “reflective” silver plans that can be purchased directly through the insurers, and that don’t include the cost of CSR added to the premiums. These reflective silver plans are very similar to the on-exchange silver plans in terms of coverage, but they’re a lower-priced option for people who want a silver plan but don’t qualify for premium subsidies.

For perspective, here’s a look back at rate changes in Vermont over the years.

  • 2014: Rates in Vermont’s exchange were the fifth highest in the nation in 2014, due in part 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.
  • 2015: For 2015 plans, the Green Mountain Care Board made reductions to the proposed rate increases for both of the state’s insurers. BCBSVT (which covered 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.
  • 2016: For 2016, Vermont regulators approved a 5.5 percent weighted average rate increase. 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.
  • 2017: The proposed weighted average rate increase for the combined individual and small group markets in Vermont was initially 8.3 percent for 2017, but some new rates were later filed, public hearings were held, and state regulators ultimately approved lower-than-filed average rate increases for both carriers: For MVP, regulators approved a 3.7 percent average increase, and for BCBSVT, regulators approved a 7.3 percent average increase.
  • 2018: For 2018, the Green Mountain Care Board (GMCB) announced approved rate changes for MVP and BCBSVT that were once again smaller than the insurers had proposed. MVP had proposed a 6.74 percent increase, but regulators approved an average increase of just 3.5 percent. BCBSVT had proposed an average rate increase of 12.69 percent, but the approved average increase was 9.2 percent. Across the full individual and small group market, the weighted average approved rate increase was just 8.47 percent, which was far smaller than other states saw for 2018.
    For both insurers, the approved rates were based on the assumption that federal funding for cost-sharing reductions (CSR) would continue. But on October 12, 2018 (less than three weeks before the start of open enrollment) the Trump Administration announced that funding for cost-sharing reductions (CSR) would end immediately. Insurers in many states had already prepared for this eventuality in their rate filings, although some states scrambled in the subsequent days to revise rate filings to add the cost of CSR to 2018 premiums. Vermont, however, stuck with the rates that they approved in August — which were based on the assumption that the federal government would continue to fund CSR. But even if Vermont’s insurers had been allowed to add the cost of CSR to premiums for 2018, the impact would have been smaller than it was in most states. This is due in large part to the fact that the individual and small group risk pools are combined in the state, meaning that an increased cost situation that impacts rates for the individual market is spread across the small group market too, resulting in a more stable rate situation.
  • 2019: Vermont insurers were allowed to start adding the cost of CSR to on-exchange silver plans for 2019, under the terms of S.19 (described below), and have created “reflective silver plans” (sold outside the exchange) that are slightly different from the on-exchange silver plans, and which do not have the cost of CSR added to their premiums. For 2019 plans, the Green Mountain Care Board once again approved rates that were lower than the insurers had proposed. The approved average rate increases were:
    • MVP (25,223 members in the individual and small group market): 6.6 percent — but after accounting for the larger premium subsidies due to silver loading the cost of CSR, the average effective rate increase will be just 1.9 percent. MVP had proposed an average rate increase of 10.9 percent, with an effective average rate increase (after accounting for the larger premium subsidies) of 6.4 percent. But the average rate increase was reduced by the Green Mountain Care Board in August.
    • BCBSVT (53,664 members in the individual and small group market): 5.8 percent — but after accounting for the larger premium subsidies due to silver loading the cost of CSR, the average effective rate increase was just 3.2 percent. BCBSVT had initially proposed an average increase 7.5 percent (with an effective rate hike of 5.3 percent after accounting for the larger subsidies), and had revised the rate filing in July 2018, requesting a 9.6 percent average increase. But in August, the Green Mountain Care Board approved an average rate increase of just 5.8 percent. Those are the overall average approved rate increases, but it’s worth noting that the average increases for silver plans are much more significant, due to the added cost to cover CSR. The filing for MVP noted that their silver plan rates would increase by between 25.3 and 30.7 percent. And BCBSVT’s filing called for an average increase of 16 percent on silver plan rates. That was before overall rates were adjusted downwards by the Green Mountain Care Board, but it’s indicative of how much larger the rate hike is on silver plans for 2019 (in most states, this large jump in silver plan rates happened in 2018). BCBSVT’s initial rate filing memo noted that the federal government’s proposal to expand access to Association Health Plans and short-term health insurance plans “could significantly disrupt the single risk pool,” but the insurer didn’t initially price that into the proposed 2019 rates, opting instead to assume that associated rate increases would be necessary for 2020 instead. BCBSVT revised their filing in July 2018, requesting a larger rate increase, primarily due to the fact that the Association Health Plan rules had been finalized by the Trump Administration after the initial rates were filed, and would allow healthy small groups to purchase non-QHP coverage via association health plans (thus harming the risk poor for ACA-compliant coverage). The approved rates for both BCBSVT and MVP allowed a 1.6 percent increase in premiums due to the elimination of the federal individual mandate penalty.

MVP’s memo also noted that they expected the 2019 approach to CSR funding (ie, adding the cost to silver plan premiums) would result in some members becoming eligible for free bronze plans and/or some gold plans that cost less than some silver plans. These phenomena became widespread in 2018 in many other states, and Vermont residents have access to the same sort of increased affordability for bronze and gold plans as of 2019. The exchange confirmed this in a letter published in December 2018.

Legislation allows Vermont insurers to load cost of CSR only onto on-exchange silver plans starting in 2019; most uninsured residents are eligible for free plans as a result

A 45-year-old in Burlington, Vermont earning $30,000 in 2019 qualifies for a premium subsidy of $453/month. That’s large enough to fully cover the cost of the four lowest-priced plans — under any of those four plans, he’ll pay nothing in premiums each month. Or he could pick from among six other bronze plans that are all priced at less than $60/month. And he can choose from gold plans priced as low as $130/month (for comparison, the lowest-priced silver plan is $145/month).

Deals like those were not available in Vermont prior to 2019. The new bargains are a result of how the state is handling the cost of cost-sharing reductions.

For 2018 coverage, Vermont, North Dakota, and the District of Columbia were the only states that didn’t allow insurers to add the cost of cost-sharing reductions (CSR) to premiums after the Trump Administration cut off federal funding for CSR. In most states, insurers were allowed to either add the cost of CSR to all silver plan premiums, to all on-exchange silver plan premiums, or, in a few cases, to all metal-level plan premiums. But in Vermont and North Dakota, insurers simply had to absorb the cost of CSR, estimated at $12 million a year in Vermont.

The impact of adding CSR to premiums, if it had been allowed for 2018, would have been much smaller in Vermont than the national average, due in large part to the state’s combined individual and small group risk pools. But even with a fairly small impact, it’s not sustainable to expect insurers to continue to absorb the cost indefinitely. Without federal funding allocated to reimburse insurers for the cost of CSR, adding the cost to premiums is the only solution that makes sense.

If the cost of CSR is going to be added to premiums, adding it to only on-exchange silver plan premiums is the solution that benefits the most consumers, since it allows the additional cost to be borne almost entirely by larger premium subsidies (which are tied to the cost of silver plans). If there are off-exchange silver plans available that don’t include the cost of CSR in their premiums, people who don’t get premium subsidies can purchase those plans instead of the on-exchange silver plans, and avoid having to pay the added premium to cover CSR. People who buy plans at other metal levels avoid the cost altogether, since it’s only added to silver plans. And if they get premium subsidies, those subsidies are larger due to the higher cost of silver plans in the exchange and the commensurately larger premium subsidies.

But this was not an option in Vermont for 2018, since the state didn’t allow insurers to add the cost of CSR to premiums at all, and the plans that were for sale outside of Vermont Health Connect were identical to those sold within Vermont Health Connect, and thus equally priced. People who aren’t eligible for premium subsidies are encouraged to enroll directly through BCBSVT and MVP, using the full-cost direct enrollment pathway, but prior to 2019, the plans were the same as the ones offered through Vermont Health Connect and there was no difference in pricing.

For 2019, however, Vermont addressed the situation, and insurers are now allowed to add the cost of CSR to silver plan premiums. Vermont enacted legislation (Senate Bill 19, signed into law in February 2018) that codifies the process that insurers use, allowing them to add the cost of CSR to on-exchange silver plans, and offer “reflective silver plans” outside the exchange, without the cost of CSR added to the premiums for the reflective plans. The off-exchange reflective silver plans are similar to the on-exchange silver plans, but with at least one variation, which allows for differential pricing, letting the insurers add the cost of CSR only to the on-exchange versions (as outlined in the insurers’ rate filings, the modifications are modest: either a $5 difference in copays, a 5 percent difference in coinsurance, or a $25 difference in the deductible). As of March 2019, there were 2,641 Vermont residents enrolled in these “reflective” silver plans.

In December 2018, Vermont Health Connect published an open letter detailing the effects of the change in how the cost of CSR is handled in Vermont:

  • Premium subsidies are much larger than they were in prior years.
  • Most uninsured Vermont residents now qualify for zero-premium bronze plans
  • Many enrollees would be better served by switching to a plan at a different metal level, or by switching from an on-exchange silver plan to a silver plan sold directly by MVP or BCBSVT.

Vermont’s individual mandate will take effect in 2020, but it won’t have any penalty for non-compliance

Vermont will have an individual mandate as of 2020, requiring residents to maintain minimum essential coverage. But there will not be a penalty for non-compliance. Instead, Vermont tax filers will simply have to indicate whether they had coverage during the year when they file their state tax return, and the data will be used by the state to “provide targeted outreach to assist those residents [without minimum essential coverage] in enrolling in appropriate and affordable health insurance or other health coverage.”

In March 2018, the Vermont House of Representatives passed H.696 to implement an individual mandate in the state of Vermont. The Senate also passed the legislation, but without the January 1, 2019 effective date that the House had included. Ultimately, members from both chambers formed a conference committee and agreed on a compromise, calling for the state’s individual mandate to take effect on January 1, 2020. The bill was signed into law by Governor Scott in May 2018.

The specifics of how Vermont’s individual mandate would work were not part of the 2018 legislation. Instead, a working group was tasked with coming up with recommendations that lawmakers would consider during the 2019 legislative session. The working group included representatives from both insurers (MVP and BCBSVT) as well as representatives from the Green Mountain Care Board, the Office of the Health Care Advocate, and the Departments of Tax, Financial Regulation, and Human Services.

They published their final report in November 2018, noting that they had not reached a consensus in terms of all of their recommendations for how the mandate should be structured and enforced. But the report included a wealth of information and numerous recommendations for lawmakers to use as a reference during the 2019 legislative session when they were tasked with finalizing the details of how the state’s individual mandate will be implemented.

In general, the recommendations of the working group were similar to how the ACA’s individual mandate penalty was designed and enforced, but with some changes:

  • The group recommended that the exemption for a short gap in coverage be extended to three months or less (as opposed to the federal exemption for a gap of fewer than three months) to match the state’s rules for short-term plans (although there are no short-term plans available in Vermont, due to the state’s strict regulations).
  • BCBSVT recommended that people with health care sharing ministry coverage NOT be exempt from the individual mandate penalty (under ACA rules, there’s an exemption for people with health care sharing ministry coverage).
  • Some members of the group felt that the best approach to enforcement would be a financial penalty modeled on the federal penalty that was used until the end of 2018. Others preferred a focus on outreach and enrollment assistance with ongoing monitoring of the situation.

Once the 2019 legislative session got underway, lawmakers began considering H.524. The legislation includes various health care reform consumer protection elements, but sorting out the details of the individual mandate was among its primary goals. Initially, the legislation included an individual mandate penalty modeled after the ACA’s penalty that applied at the federal level until the end of 2018. But the final version of the bill that was signed into law (as Act 63) in June 2019 did not include any of the mandate penalty language.

Instead, the bill simply requires residents to report their health insurance status on their tax returns, and the state will use that data to provide “targeted outreach” to assist uninsured residents with enrolling in health insurance coverage.

Massachusetts has had an individual mandate since 2006, and new individual mandates were implemented in New Jersey and DC as of 2019, and in California and Rhode Island as of 2020. Vermont is technically joining them with an individual mandate as of 2020, but their approach to implementation is very different as they will not have a penalty, at least initially.

H.524 does include various other health care reform provisions, including:

  • Codifying some of the ACA’s consumer protections into state law, including guaranteed-issue coverage without pre-existing condition exclusions, annual out-of-pocket caps, a ban on lifetime and annual benefit limits, coverage for dependents until age 26, and preventive care covered without cost-sharing.
  • Strictly limiting association health plans, including a ban on new association health plans as of 2020.
  • A ban on broker commissions for health care sharing ministry plans (ie, brokers cannot be compensated for enrolling people in health care sharing ministry plans).
  • Directing the Vermont Agency of Human Services to develop recommendations for making coverage more affordable and accessible, and submit their findings and recommendations to the legislature by December 2019.
  • The bill also directs the Agency of Human Services to study the state’s current merged market approach for the individual and small group markets, and determine whether it should be maintained or changed. Changing it could include merging the large group market as well, or possibly separating the markets the way they are in most other states.

Enrollment in Vermont’s exchange: 2014-2019

For 2019, a total of 34,396 people enrolled in individual market health plans in Vermont, including on-exchange and direct-to-carrier (off-exchange) enrollments. According to CMS, 25,223 were enrolled via the exchange; the rest were enrolled in off-exchange plans, including the state’s new “reflective” silver plans that don’t have the cost of CSR included in their premiums. As of March 2019, enrollment in these “reflective” silver off-exchange plans stood at 2,641 people. Total exchange enrollment in Vermont dropped by about 12 percent in 2019, but this was due in part to people shifting from on-exchange to off-exchange coverage under the state’s new consumer-friendly approach to handling the cost of CSR. When we look at total individual market enrollment in the state (all of which is ACA-compliant), it was very steady from 2018 to 2019.

For perspective, here’s a look back at enrollment in Vermont’s exchange over the years:

  • 2014: 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 was more than double the second place state (California, with 42%), but Vermont was the only state, other than the District of Columbia, that required everyone to enroll through the exchange, with no off-exchange plans available. So it was 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. Ultimately, Vermont did implement this option in 2016. (and as of 2020, HHS will begin allowing enrollees in states that use HealthCare.gov to switch from an off-exchange plan to an on-exchange plan mid-year if their income changes to a level that makes them newly eligible for subsidies).
  • 2015: By February 15, 2015, Vermont Health Connect had 31,552 private plan enrollees, including 6,211 new enrollees. 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.
  • 2016: This was the first year that Vermont allowed people to enroll directly through MVP and BCBSVT (as opposed to requiring all enrollments to be completed via the exchange). As of April 2016, Vermont Health Connect’s enrollment report indicated that the exchange had 28,167 people enrolled in QHPs, along with 4,606 people who were enrolled directly through the carriers, utilizing the new full-cost individual direct enrollment option. The enrollment report from the federal government indicated that Vermont Health Connect had 27,883 effectuated enrollees as of March 31, 2016.
  • 2017: By the time open enrollment ended on January 31, enrollments in Vermont Health Connect stood at 30,682. That’s a 4.2 percent increase over the 2016 enrollment (29,440), despite the fact that full-cost direct-to-carrier enrollments were being encouraged during open enrollment for people not eligible for subsidies. As of February 2017, enrollment in on-exchange plans stood at 28,775, in addition to 5,662 people enrolled in full-cost direct enrollment through the state’s two insurers.
  • 2018: Vermont Health Connect confirmed that effectuated enrollment as of late January 2018 stood at roughly 27,223 people, with an additional 6,900 people enrolled in full-cost individual direct enrollment coverage.

Navigator funding cut, but overall in-person assistance in 2018 was more than double what it was in 2015

Navigators are employed by the exchange (HealthCare.gov or state-run exchanges like Vermont Health Connect) to help people enroll in coverage. The Trump Administration announced that HealthCare.gov navigator organizations would receive significantly less federal funding heading into the open enrollment period in the fall of 2017: about $36 million as opposed to the $63 million they got in 2016. Funding was reduced even more, to $10 million, in the fall of 2018.

State-run exchanges can choose to fund their navigator programs at the level they deem appropriate, as that funding is now state-based (for the first two years, state-based exchanges had federal funding they could use for their navigator programs, but they’ve been funded with state money since then). The VT Digger reported in August 2017 that Vermont had reduced funding for the state’s navigator program to just $50,000 for the 2018 fiscal year — down from $200,000 in the 2017 fiscal year, and as much as $500,000 in prior years.

This was alarming for groups that rely on navigator funding to facilitate enrollment among Vermont residents who need in-person assistance, particularly given that open enrollment was much shorter for 2018 (and future years). But Vermont Health Connect’s Sean Sheehan explained that while funding was being reduced for the navigator program, the Certified Application Counselor (CAC) program was growing, with Vermont Health Connect actively reaching out to suitable organizations throughout the state to encourage them to have a staff member go through the CAC training.

Sheehan noted that there would be a total of 180 navigators and CACs in Vermont by the fall of 2017, which was roughly 60-70 percent more than the total number of in-person assisters in the state two years earlier. So although there were fewer navigators, there were a lot more CACs, who go through the same training as navigators. But while navigators are paid by the state, CACs are paid by the hospitals and clinics and various advocacy organizations where they work. A clinic might have one of its medical assistants or receptionists go through CAC training, for example, so that uninsured patients can have on-site assistance with the process of getting enrolled in Medicaid or a qualified health plan in the exchange.

The new system encourages more buy-in on the part of all the organizations in the state that benefit from having more insured residents, although there are concerns that CACs are really only set up to help the clientele that their employer serves (or could potentially serve, as might be the case for an uninsured person who seeks enrollment assistance a clinic that could then become his or her medical home) rather than any person who walks in off the street needing assistance. This is why the navigator program is being maintained to some degree, so that there will still be some independent navigators available throughout the state.

State-funded premium subsidies make coverage more affordable; State-funded CSRs make silver plans especially valuable

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. And the ACA also includes premium subsidies for people with income up to 400 percent of the poverty level who select a bronze, silver, gold, or platinum plan in the exchange.

But in Vermont, premium subsidies are also funded by the state (Vermont Premium Assistance or VPA) and cost-sharing reductions are also funded by the state (Vermont Cost-Sharing Reductions). Thanks to the combination of state and federal funding, premium subsidies are larger in Vermont than they would be if only federal (ACA) funding was used. And 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 provided funding (about $761,000) to maintain the additional cost-sharing reductions provided by the state of Vermont.

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).

Although Medicaid enrollment in Vermont has declined as the state works to verify eligibility, the number of Vermont residents receiving state-based cost-sharing subsidies has climbed (presumably as some people who were previously enrolled in Medicaid have been switched to private plans during the push to accurately verify Medicaid eligibility). In January 2016, there were 14,893 residents receiving state-based subsidies, and that had grown to 17,915 by January 2017, and to 18,727 by early 2018. As of February 2017, 76 percent of Vermont Health Connect enrollees who were eligible for Vermont Premium Assistance/Vermont Cost-Sharing Reductions were enrolled in silver plans (the assistance is only available to those who are eligible and also pick a silver plan).

Off-exchange enrollment became available in 2016 and is being promoted as an option for people who don’t qualify for subsidies

In 2014 and 2015, Vermont was the only state (in addition to DC) where off-exchange plans were not allowed to be sold — all non-grandfathered individual and small group plans in Vermont were on-exchange plans (although small groups enroll in Vermont Health Connect plans directly through the state’s two carriers – see more details below).

But starting in 2016, Vermont introduced “full-cost individual direct enrollment” which essentially created an off-exchange market in the state. People have the option of enrolling in qualified health plans (QHPs) directly through Blue Cross Blue Shield of Vermont or MVP, with the understanding that no subsidies are available if they enroll directly with the carriers rather than through the exchange (in every state, enrollments completed outside the exchange are ineligible for subsidies).

By February 2017, there were 5,662 people enrolled in full-cost individual direct enrollment plans in Vermont. HHS estimated in October 2016 that there were 1,000 people in Vermont enrolled in off-exchange coverage who would be eligible for subsidies if they switched to on-exchange plans.

Vermont Health Connect has gone to great lengths to explain that subsidies are not available via the full-cost individual direct enrollment path (indeed, even using the term “full-cost” in the name). It’s essential that people only select that pathway if they’re 100 percent certain that they will not qualify for any subsidies during the year. If in doubt, the exchange is the safer way to go, as that allows people to keep the option of claiming the subsidies on their tax returns, even if they don’t want to take them up front throughout the year.

Once Governor Scott took office, he announced that more enrollees would be purchasing Vermont Health Connect plans directly from BCBSVT and MVP, in a move intended to take some volume and pressure off the customer service team at Vermont Health Connect, and simultaneously save the state an estimated $2.8 million per year.

I spoke with BCBSVT about this in 2017, and they explained that people who receive premium subsidies still have to enroll through the exchange, and that the direct-to-carrier enrollment is the same full-cost individual direct enrollment that has been in place since 2016. But the state is now putting more emphasis on promoting that path, encouraging non-subsidy-eligible enrollees to enroll directly through the carriers, while subsidy-eligible enrollees continue to sign up through Vermont Health Connect.

By 2018, enrollment in private plans through Vermont Health Connect stood at 27,595, while 6,440 people were enrolled in plans purchased directly from MVP and BCBSVT. And the exchange actively encouraged non-subsidy-eligible enrollees who want silver plans to use the full-cost direct enrollment pathway in order to obtain lower-cost plans for 2019. As a result, on-exchange enrollment dropped by about 2,000 people, while direct-to-carrier enrollment grew by roughly 2,000 people.

Vermont submitted 1332 waiver to avoid SHOP portal, it was deemed incomplete and the state has continued to use direct-to-carrier enrollment for SHOP

In March 2016, Vermont became the first state to file a 1332 waiver with CMS (Hawaii and Massachusetts had both created 1332 waiver drafts, but Vermont was the first state to officially submit a waiver proposal to CMS). Vermont’s 1332 waiver proposal was 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 was seeking permission 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 never 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, 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. That system has worked well in Vermont, and especially given Vermont’s early IT struggles with the individual exchange, they were concerned that switching to an online SHOP portal might disrupt the existing small group market.

CMS responded in June 2016, notifying Governor Shumlin that the 1332 waiver proposal was incomplete in some areas. But the state never responded with additional information, so the 1332 waiver never progressed through the approval process. Vermont’s Strategic Solutions report in December 2016 noted that the CMS waiver (not a 1332 waiver) that allows Vermont small businesses to enroll directly through carriers (as opposed to using a SHOP portal) remained in place for 2017, and that continues to be the case in 2019.

Single payer was planned for 2017, but that path was abandoned at the end of 2014

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 envisioned Vermont with a single-payer health care system as soon as 2017, although reports surfaced in April 2014 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 at that point. It would have come with an 11.5 percent increase in payroll taxes and a 9 percent increase in income taxes. Not surprisingly, reactions were mixed after Shumlin’s announcement, with single-payer advocates deeply disappointed in the decision, while other groups welcomed the news.

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 technical 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.

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 — were unaffordable for many VHAP and Catamount members, since the out-of-pocket costs on the new plans were significantly higher.

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.

Vermont health insurance exchange links

Vermont Health Connect
855-899-9600

Vermont Health Care Reform


Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.