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VT gov. denies rising health-care costs

By   /   February 4, 2014  /   No Comments

By Jon Street | Watchdog.org

BUDDING EVIDENCE: New report on health care costs singles out Vermont.

BURLINGTON, Vt. – Vermont Gov. Peter Shumlin denies health insurance costs are rising, despite contrary evidence.

The cheapest monthly health insurance premium under the Obamacare state exchange in Vermont — Vermont Health Connect — will be $413, says PricewaterhouseCoopers, an international consulting firm headquartered in London.

PwC’s findings are comparable to other studies, which Vermont Watchdog has reported. The Manhattan Institute, a New York-based free-market think tank, suggested health insurance premiums would increase by a whopping 157 percent under the new system.

Vermont Watchdog asked Shumlin about that report, but he denied its credibility.

“If it were true, we wouldn’t be doing it,” Shumlin responded.

Vermont Watchdog asked Shumlin’s office to respond to PwC’s report, released just last week, but, so far, no response is forthcoming.

According to a summary of its findings, PwC’s “(Health Research Institute) examined unsubsidized monthly exchange premiums for a 27-year-old and a 50-year-old in metropolitan areas across the US … The second-lowest-cost silver plans — which are used to determine an individual’s tax credit — were mapped from state-based exchanges and HealthCare.gov to capture a full 50-state snapshot.”

A 27-year old living in Chittenden County, Vermont’s most populous county, would be expected to pay anywhere from $395-$429 per month for one of the so-called silver plans, PwC says. A 50-year old living in the same area would pay the same amount for monthly.coverage.

Government subsidies are likely to ease the burden of higher costs, but the subsidies are limited and not available for everyone.

The amount in health insurance cost subsides one can receive depends on annual income, according to the Washington-D.C. based economic think tank Center on Budget Policies and Priorities. For example, a person making $11,490 to $15,282 annually will receive a 94 percent reduction in the price of their health coverage; a person making 40,215  to $45,960 will receive only a 70 percent reduction.

While PwC said it predicts generally higher costs in the Northeast, health insurance prices in the Green Mountain State are expected to climb even higher. Weaker competition and high-cost providers are partly to blame, but so are the generous benefit mandates, the levels of management needed to run the exchange and the uncertainty among health insurers’ regarding who they will need to cover.

“(Insurance companies) have to build in what is an older, sicker group of people signing up for health care for the first time,” Darcie Johnston, president of Vermonters for Health Care Freedom, said about the increased costs.

Johnston said the shortage of providers dates back to the early 1990’s, when she said other health-care providers were “driven out” because of community ratings. Johnston said the report’s numbers are only based on what insurers expect will happen.

“Yet they might not be high enough. The costs might go up even more,” she said.

In Vermont, only two health insurers are participating in the exchange: MVP and Blue Cross Blue Shield of Vermont. Between the two providers, consumers can choose from a total of six bronze and silver plans. Because bronze plans are the cheapest available and silver plans are the only plans eligible for cost-sharing subsidies, it’s predicted the plans will be the most popular in the exchange.

Chris Jones, an assistant professor of surgery at the University of Vermont Global Health Economics Unit, said the absence of more health insurance providers in Vermont is understandable, based on its size.

“It’s a small state so by definition there’s weaker competition,” said Jones.”There’s no real money in it for them, aside from name recognition. Jones also acknowledged that reform efforts will cause “sticker shock” for some residents, particularly young people.

That doesn’t surprise Massachusetts Institute of Technology economics professor Jon Gruber, who said, “Vermont has always had high medical costs, as have most Northeastern states. On top of that you don’t have a very competitive insurance market, which further raises premiums.”

Contact Jon Street at jstreet@watchdog.org and find him on Twitter @JonStreet.

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