This is confusing because what Green Mountain Care is right now is not what the health reform law contemplates for the future.  Green Mountain Care is currently the collective name for Vermont’s public health insurance programs:  Medicaid, Catamount Health, VHAP, Dr. Dynasaur, Medicaid, Premium Assistance, and Pharmacy Assistance.  Information about the insurance options offered in Green Mountain Care is available at www.greenmountaincare.org or 1-800-250-8427.

Ultimately, Green Mountain Care is to become the “publicly financed health care program delivering affordable, high-quality health care coverage to all residents of Vermont.”  This is the single payer plan.  There are a number of essential milestones that must be met before Green Mountain Care will go into effect, including getting a waiver under the federal ACA from the obligation to operate a health insurance exchange and arranging sustainable financing that provides a “silver” level of coverage for Vermonters while cutting the cost growth curve, reducing administrative expenses, and paying providers fairly.

We are not there yet, however, and will likely not be there until after 2017, when the federal waivers are scheduled to become available.  For now, it is the creation and implementation of Vermont’s health insurance exchange that is the pivotal “next step” for Vermonters, and it will affect all small businesses (50 or less employees) and individuals starting in 2014.

We will continue to stay abreast of the developments associated with state and federal health care reform and write about them here, so please stay tuned.

There are individual tax credits available for low and middle income individuals and families to help them buy health insurance.  If you are a small employer with 50 or fewer employees, you may decide to stop offering insurance and allow your employees to buy on the exchange if it is cheaper for them to get better coverage than you could afford to provide as a business.  A large part of the impetus for reform in Vermont is to relieve employers of the responsibility to provide health insurance to their employees.  There is no penalty attached to dropping coverage for employers with 50 or fewer workers.

Starting in 2014, these premium tax credits will be available to help individuals and families who make up to 400% of the Federal Poverty Level (currently $89,400 for a family of 4) afford private coverage by offsetting a portion of the cost of health insurance premiums.  The tax credits are structured so that individuals and families will spend no more than a specified portion of their income on health insurance premiums.  The size of the tax credits is on a sliding scale based on income, so people with the lowest incomes will receive the largest tax credit.  You should consult with your attorney or tax professional about these credits and your potential eligibility to take advantage of them.

The Affordable Care Act helps small businesses and small tax-exempt organizations afford the cost of providing health insurance to their employees through tax credits.  Businesses that employ 25 or fewer employees and pay $50,000 or less in annual wages are eligible for a tax credit that may cover up to 35 percent (up to 25% for non-profits) of the employer’s contribution to health insurance premiums.  This tax credit is available for eligible businesses for the 2010-2013 tax years.  If you learn that you were eligible for a tax credit in an earlier year, you may file an amended return.  The tax credit will increase in 2014 to 50% (35% for non-profits).

Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. More information about the credit, including tax tips, guides, and answers to frequently asked questions, is now available on the IRS Web site, www.IRS.gov.  Of course, you should consult with your attorney or tax professional about these credits.

Next week’s post will discuss Step Four: Understand the Tax Credits Available for Individuals and Families.

Many businesses are spooked because of the uncertainty of a health insurance exchange.  To understand whether you should be concerned and to prepare for purchasing on the exchange, you should look at your costs over the last few years.  Have they been predictable?  Have they helped or interfered with your planning?  Has your business changed in the recent past to accommodate the cost of coverage?  Understanding your past and current cost trends for providing health coverage is the foundation for understanding the future effects the coming changes may have on your business.

One of the certainties businesses all over the state and nation have been talking about for years is how insurance costs are rising and gobbling up an increasingly large chunk of their overhead.  Health insurance premiums are reported to be up to 18% higher for small businesses, in part because they don’t have the bargaining power of larger companies.   It is also increasingly expensive for employers to administer and maintain health insurance for their employees.  Some companies offer insurance to a subset of their employees, some to all employees, and some to an employee’s family.  Employers also struggle with the number of plans to offer and the percentage of premium they can afford to pay, which in turn affects employee morale and retention.  Also, the illness or injury of an employee in a small workplace can cause premiums to increase.

Often, rising health insurance costs consume any raises businesses would otherwise give to their employees.  Health insurance premiums have gone up three times faster than wages in the past ten years.  Businesses are being buffeted by interests purporting to speak on their behalf, but the reality is that all businesses are slightly different and have different cost pressures.  Knowing your own experience will help you to understand the debate going on in Montpelier and plan for the future as you evaluate and price your options on the exchange.    Thus, enacting step two, knowing your insurance costs and trends, and assessing their predictability and increases will help you evaluate your financial picture relative to the changes to the marketplace brought on by health care reform.

The next post will address Step Three: Understand the Tax Credits Available to You for Purchasing Insurance on the Exchange.

The biggest question for most businesses in Vermont right now is, “What will health care reform cost for our business?”  Right now, that question is unanswered and is producing political wrangling from groups and individuals who want answers before the November 2012 election rather than next January, when last year’s health care reform law requires that the estimated costs be presented to the Legislature.  But, stepping outside the storm of uncertainty and politics, there are five real steps a small business can take now to better prepare for the proposed changes in how it will buy health insurance in 2014.  During the next several weeks, I will discuss each of these steps in detail.  The five steps are:

1. Understand what a health insurance exchange is and what it means for your business.
2. Understand your current cost trends for providing health insurance.
3. Understand the tax credits available to you for purchasing insurance on the exchange.
4. Understand the tax credits that are available for individuals and families, as it may affect whether you provide health insurance.
5. Understand what Green Mountain Care is now and what it may become in the future.

Step 1:   Understand what a health insurance exchange is and what it means for your business.

One way or another, it is likely that a health insurance exchange is coming your way, and you need to know what it is and what it is supposed to do.  The federal Affordable Care Act (ACA) requires that all states have a health insurance exchange starting in 2014.  A health insurance exchange is a place where individuals and small businesses will shop for and enroll in a health plan that meets their needs; it is a marketplace that will allow for better comparison shopping than that available to insurance purchasers now.

The exchange will be a website, and on it insurance plans will be divided into several categories.  Although what the plans will include is still under consideration, the idea is to have a pre-defined set of “essential benefits” which will include at least: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse services, including behavioral health treatment; prescription drugs; rehabilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.

All the plans offered on the exchange will provide these essential benefits, but their price will differ based on the “actuarial value” of the plan.  “Actuarial value” is defined as the measure of the level of protection a health insurance policy offers by looking at the percentage of health costs that, for an average population, are covered by the health plan, as compared to the percentage of costs that are covered by the insured.  This measure is made more understandable by the “metal” levels that have been defined by the ACA: For a platinum plan, an average individual will pay 10% out of pocket for his or her covered benefits and the plan will pay 90%. In a gold plan, the plan will pay 80% of the costs of the benefits and the average consumer will pay 20% out of pocket.  In the silver plan, the plan will pay 70% percent of the costs and the consumer 30%.  And, if a bronze option is included on the exchange, as Vermont now seems likely to require, the plan will pay 60% of the costs of coverage and the insured consumer will pay 40%.  Bronze plans are the controversial “high-deductible” and HSA plans.  Obviously, the more the insurance company is on the hook to pay, the more expensive the plan.

To understand what this sort of purchasing arrangement means to you, you should assess how much time your business spends understanding the cost and coverage differences among plans, and then selecting, negotiating, and explaining to your employees each year what their plan will cover and how much it will cost.    Many businesses find themselves taking an increasingly large amount of time buying health insurance for their employees.  The costs of coverage are going up, premiums are going up, the cost to the employee is going up, and the benefits are usually slimmed down to make coverage more affordable and more palatable.  Some employers give up, which at present may cost them competitively.

In Vermont, under a bill that passed the House last week and will now be taken up in the Senate, starting in 2014, all individuals and businesses with 50 employees or fewer must purchase from the exchange.  Employers with between 50 and 100 employees will wait until 2016 before joining the pool of businesses and individuals buying on the exchange.

The next post will discuss Step 2:  Know your current cost trends for providing insurance.