Public Assets Institute > Policy Areas > Health Care > Don’t mess with success

Don’t mess with success

The Legislature postponed its planned adjournment last week ostensibly over a disagreement with the governor about health care for Vermont’s local teachers. A lot of numbers have been thrown around—and I’ll get to those in the minute—but the crux of the dispute is that the governor claims he can drive a better bargain with the teachers than local school boards can. He’s not trying to make himself out to be Donald “Art of the Deal” Trump, but he says he has a plan to save $26 million.

The thing is, the plan the governor is promoting is a variation of one already underway. It was developed by the Vermont Education Health Initiative—better known as VEHI, which is managed cooperatively by the teachers and Vermont school boards. Changes in federal law are forcing teachers to change from the health care plans most of them currently have. So for the last two years, VEHI has been working with the teachers and other stakeholders to come up with new plans. And an important part of the design of the new plans is encouraging smarter utilization of health care services to reduce costs for teachers and their communities.

Achieving the savings envisioned in the new VEHI plans will depend on the teachers’ success in being more cost-conscious about health care, which is something we all need to pay attention to. But in the long run it’s a more sustainable way to slow the growth of health care costs than simply shifting costs or, as they’re doing in Washington, leaving more people uninsured.

It’s easy to get lost in the weeds when talking about health insurance. There are two essential components: premiums, which are paid to the insurer for the services it covers, and out-of-pocket expenses, which is the share of the costs borne by the individual. Premiums and out-of-pocket costs can be split between employers and employees in lots of different ways. Currently, most teachers have plans with relatively high premiums and low out-of-pocket costs. The new plans developed by VEHI all change the mix—lower premiums and higher out-of-pocket costs.

One of the VEHI plans, which is the one the governor is promoting, would reduce premiums by approximately $75 million in 2018. Since the plan would increase out-of-pocket costs, the governor would use some of the premium savings—just under $50 million—to help teachers cover those additional costs. The idea is that his plan would not require teachers, as a group, to pay more next year than they are paying now, and it would result in an estimated net savings to the system of $26 million.

The cooperative, collaborative approach, which has served VEHI for years, has been providing the best value health insurance for the lowest cost for teachers and school boards. The new VEHI plans will take effect Jan. 1, 2018, and schools board around the state are already in the process of negotiating the specific terms of the health plans with their teachers. Which plans the district will offer, how the premiums will be split, and how the out-of-pocket costs will be shared are part of the negotiations. Those details are being worked out.

The governor only recently jumped into this process that has been going on for nearly two years. He claims that if he is given the authority to negotiate with the teachers—even though teachers are not state employees—he will achieve savings that the boards won’t be able to achieve on their own.

But premium savings for 2018 are already locked in, and for 2019 and beyond, no one, including the governor, knows what premiums will be. There are too many factors in play.

The governor has not explained why he suddenly needs to intervene in a process that is working and is actually on track to deliver cost savings to taxpayers.

Posted by Jack Hoffman on May 10, 2017 at 9:21 am

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