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Health Care Cost Shift

Statement by the Vermont Businesses for Social Responsibility Board of Directors:

Vermont Businesses for Social Responsibility continues to believe that the state cannot depend on employer-sponsored insurance as the foundation for our health care system. The fact that our business members have coped with double-digit increases in health care premiums almost annually is proof that the current system is not sustainable.  Businesses that provide health insurance for their employees incur significant overhead, but they often compete against companies that provide no insurance benefits making the system inequitable. In order to address these issues, we call for de-coupling health insurance from employment and for public financing based on ability to pay.

Regardless of the setback in health care reform that we have experienced this year, VBSR remains committed to enacting essential measures to improve the quality of our system, increase access to care, and control costs. Essential to this work will be fixing the cost shift between government funded programs and private insurance. The government underpays providers and hospitals for the treatment of Medicare and Medicaid patients causing the unfunded costs to be shifted to those who pay private insurance premiums. This has led to higher health care costs and a lack of transparency about the true costs of services in our health care system.  Underfunding can also limit patient access to health care providers because some practitioners are unable to make up the difference on their insured patients so they decline to serve Medicaid patients. 

The deficit in Medicare and Medicaid funding has grown dramatically over the last decade. The shift in costs to private insurance has increased from $154 million in 2005 to more than $400 million in 2014[1]. This is why the 3.1% hospital budget increase this year resulted in a 7.7% increase in the BCBS insurance plans on the Exchange[2].

Financing Equity

There is a second kind of health care cost shift – businesses that pay for employee health care often subsidize, both directly and indirectly, businesses that do not provide health insurance for their employees. VBSR believes that the financing of health care should be equitable and there should be a level playing field between businesses.  We believe that reducing the cost shift will bring more equity and more transparency to our current financing system.

Our employer-sponsored health insurance system creates gaps in health care and grave inequities between businesses. Many VBSR businesses help their employees pay for health insurance and compete against businesses that don’t. This creates an unlevel playing field for businesses “doing the right thing” – punishing them for offering good benefits to their employees.

Additionally, the government and businesses that do provide health insurance benefits subsidize businesses that do not pay for health insurance. A family of three (one married couple and a child) with an annual household income of less than $30,000 and no access to employer-sponsored health insurance qualify for Medicaid[1]. Vermont’s employer assessment amounts to about $500 a year per FTE –about the cost of one-month premium for an employee – and is not an effective deterrent.

 There are several ways to raise money to pay for health care and reduce the cost shift, including increases in the payroll tax, the income tax, taxes on unearned income, or a variety of “sin” taxes including tobacco and sugar. VBSR could support many of these proposed mechanisms because we believe the proposed expenditures are wise investments that can help bring systems costs down.

 The Green Mountain Care Board has a proven track record of exerting its’ authority effectively and in working with Vermont’s hospitals and insurance companies in a collaborative and productive manner. Preventive care and home health are less expensive than deferred treatment and hospital care and those investments will reduce costs over time.

 The 0.7% payroll tax proposed by the Administration[2] meets our financing criteria since it helps level the field between employers that pay for health insurance and those that do not (e.g. employers currently not paying would be contributing some to systems costs). 

Smart businesses are willing to make smart investments

 If state funds can leverage additional federal funds, reduce the cost shift, and ultimately reduce the rate at which premiums increase, that makes good business sense. With a payroll tax all businesses “pay-in” which is a step in the right direction compared to the “voluntary” health insurance benefit many business offer.

VBSR believes that the Vermont Legislature needs to address the health care cost shift this session because:

•   We need to work toward fully funding our public health care programs to increase the sustainability, transparency, and fairness of our health care system. The current system increases costs for businesses that provide health insurance while making care harder to access for Vermonters on Medicaid.

•   Federal funds will more than match state funds used to reduce the cost shift and improve the quality of health care in Vermont. This is a smart investment. No good business would leave that money on the table.

 •  Requiring all businesses to pay, possibly through a payroll tax dedicated to health care reform, will level the playing field, reduce subsidies to businesses that do not provide healthcare benefits and allow businesses in Vermont to compete more fairly.


 For more information please contact Daniel Barlow, VBSR Public Policy Manager,


[1] 2014 Green Mountain Care Board Annual Report

[2] Don George, BCBC President and CEO, Op-ed, September 2014

[3] Vermont Campaign for Health Care Security Education Fund, Vermont Medicaid eligibility criteria.

 [4] The Administration has proposed a plan to increase Medicaid payments to health care providers by $50 million annually, fund an increased Medicaid caseload by $30 million annually, and make other investments in Vermont’s Blueprint for health, home health care, and other systems investments intended to bend the healthcare system cost curve. The total package of investments would be $90 million annually which is proposed to be raised by a .7 % payroll tax on employers.  On the savings side of the equation, these investments are expected to bend the private insurance premium cost curve and be used to leverage 110% in federal matching funds. The proposition is that the $90 million annual expenditure would bring an additional 110 million in federal funds annually to support the health care system in Vermont.

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