Vermont: Legislators (of both parties) going down the same path Rhode Island is...with the same glaring logical error

A few days ago I posted an article about how Rhode Island is having trouble scraping together the $19 million or so that they need to operate HealthSource RI, now that the federal funds have pretty much dried up and the exchange has to pull its own weight. Some exchanges were set up with a funding mechanism in place (generally by charging either the insurance companies operating on the exchange, or the enrollees themselves, some sort of tax or fee), but others, like Rhode Island, were funded with federal dollars but never got around to setting up a way to pay for themselves after that funding stopped.

Anyway, a Republican state legislator in RI came up with an ingenious solution: Dump the exchange, even though it's functioning perfectly well. The reasoning is that the federal exchange, Healthcare.Gov, is operating more efficiently, so why not just do what Oregon and Nevada had to do this year (due to technical problems) and add themselves to the pile of 3 dozen states already being run through HC.gov?

Aside from the incredible irony of Democrats being the ones reluctant to let the Feds "take over" their operations while the "states' rights" Republicans are the ones trying to let Big Gub'mint take over, there's one other tiny flaw in this plan: King v. Burwell.

As I noted the other day, if the Supreme Court ends up kicking the King case to the curb, and there are no further threats to the federal exchange operating and sending out tax credits to enrollees, then yes, moving home to HC.gov might be a reasonable solution for Rhode Island.

However, until the case is decided (which isn't expected to be until sometime in June), it would be absolute lunacy to make such a move.

Anyway, that was Monday. Today I bring you another northeastern state running its own exchange:

House Republican leaders are rejecting Gov. Peter Shumlin's plan to impose a payroll tax to finance a package of health care initiatives. Instead, they're developing an alternative proposal.

The governor wants to impose a 0.7 percent payroll tax on all Vermont businesses. His plan would raise roughly $90 million on an annual basis and the money would be matched with almost $100 million in federal funds

...Instead, Turner wants to drop the state's health care exchange, known as Vermont Health Connect, and sign up for the federal model. He says the state could save at least $20 million with this switch.

Facepalm.

Now, in this guy's defense, it is true that unlike Rhode Island, Vermont's ACA exchange was a technical mess last year, and is still having some issues this year (though it's still miles ahead of where it was in 2014). However, again: Wait until you know whether the SCOTUS is going to effectively destroy the individual insurance market in 3 dozen states before volunteering to add yourselves to the body count, ok?

Even worse: In the case of Rhode Island, I suppose it's at least conceivable that the state legislator in question isn't aware of the impending King decision. I mean, it'd be pretty infuriating if they weren't, but who knows?

In Vermont, however, this guy doesn't even have that excuse:

One potential wildcard in this plan is that the U.S. Supreme Court will rule this spring if subsidies should be allowed in states that use the federal system. Turner says it's a risk worth taking.

"We understand there may be a potential for Vermonters to lose federal subsidies,” Turner says. “However, 35 other states are in the same boat."

Ah, yes. The old "If I'm going down, I'm taking all of you with me" philosophy.

I'm not even sure I understand what he means by that. Is he saying that he's confident that the SCOTUS will shoot down the case, because too many people would have their lives destroyed if they did? If so, then he's playing Russian Roulette with 25,000 Vermonters lives (likely closer to 40,000 by the time open enrollment is over).

Alternately, he might be saying that even if the King plaintiffs do prevail, that the fallout won't be as big of a deal as some are making it out to be.

Again, I suppose he could be proven correct about this; the nightmare scenarios that folks like Nicholas Bagley are fearful of might prove to be overblown.

Then again, they might not...and at a bare minimum, the national uninsured rate, which has plummeted by over 25% over the past year since the exchanges went into effect, would reverse course and suddenly increase by millions of people who are put right back in the situation they were in the first place, unable to afford healthcare coverage.

I've already been screaming at the 30+ states without their own exchanges to quit sitting on their asses and start prepping for their own exchanges. It's even worse to think tha not one but two states which already have their own exchanges might consider going exactly the opposite direction.

UPDATE: Title updated; to be fair, the point that the RI article does note that the move-to-HC.gov idea does have at least some bipartisan support...and according to this story from Morgan True of VTDigger, that's true in Vermont as well.

In addition, I should reiterate something: There's nothing wrong with either state discussing this as a possibility...as long as everyone involved understands that it wouldn't be done UNLESS they're certain that doing so wouldn't jeopardize the federal tax credits.

True's story goes more in-depth into just how it would work; the state would do exactly what Nevada and Oregon did, becoming "Supported" State-Based Marketplaces. The problem is noted later in the article:

It’s also unclear if going to an SSBM would allow Vermont to retain its own additional subsidies. There is also the question of whether an SSBM would be impacted by the King v. Burwell Supreme Court case that could prohibit states using the federal exchange from offering subsidies at all — though a recent Oregonian newspaper article suggests it would not.

This is exactly what makes the legislation being pushed so infuriating:

The group will introduce a bill calling on the Agency of Administration to transition to the new type of Affordable Care Act marketplace by the end of March.

...Part of the reason for introducing their legislation is to have those questions answered, Scheuermann said.

Again, does anyone see the problem with this logic?

If the bill was simply to explore this as an option, that would be reasonable...but if I'm understanding this correctly, this bill would require the move without knowing for sure whether the federal credits would remain or not.

UPDATE x2: OK, Morgan True has clarified the situation for me...the legislation in question (in Vermont, at least) does not necessarily require the move to the federal exchange, it just requires them to come up with a plan for doing so...although the wording of the accompanying press release certainly makes it sound like the state would have to do so.

Here's the actual wording of the bill in question (emphasis mine):

Introduced by Representatives Komline of Dorset and Scheuermann of Stowe

Referred to Committee on (Date:)

Subject: Health; health insurance; Vermont Health Benefit Exchange; supported State-based model

Statement of purpose of bill as introduced:  This bill proposes to direct the Secretary of Administration or designee to develop a plan to transition the Vermont Health Benefit Exchange from a fully State-based exchange to a supported State-based marketplace exchange.

An act relating to developing a supported State-based marketplace exchange

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  SUPPORTED STATE-BASED MARKETPLACE EXCHANGE;

                           TRANSITION PLAN

On or before March 31, 2015, the Secretary of Administration or designee shall provide to the General Assembly a plan for the Vermont Health Benefit Exchange to transition from a fully State-based exchange to a supported State‑based marketplace exchange similar to those already implemented or in the transition process in Idaho, Nevada, New Mexico, and Oregon.

Sec. 2.  EFFECTIVE DATE

This act shall take effect on passage.

I still have serious problems with this, however...because it's basically saying "I don't care how you do it, figure out a way, dammit!!" which is still crazy. It doesn't say "report on the viability of a transition" or "develop a plan for transition pending certain circumstances", it just says "develop a plan" regardless of the fallout.

Maybe I'm just reaching the limits of my understanding about how legislation works here. After all, the now-on-hold Single Payer law didn't include a funding mechanism either, but I assume there was some sort of wording in it which explained that yes, the entire law was pending a funding mechanism being developed before it being implemented.

I've completely changed the title since a) there seems to be some bipartisan support in both states and b) in the case of Vermont, at least, it may not be as rash a move as I thought at first...but both states still seem to be vastly underestimating the worst case scenario here.

Look, folks: I know that I was the one who spent months touting my "Denny's Grand Slam" workaround to the King (then Halbig) tax credit issue, which is effectively what Oregon and Nevada were forced to do this year for technical reasons. And if the SCOTUS shoots down the tax credits from the federal exchange and if states can use the "Supported State-Based Marketplace" as a legally sound workaround to this to keep their credits, then that's exactly what I would recommend for states which don't want to run the whole show themselves.

However, that was from a website developer's perspective, not a legal one. Nicholas Bagley has convinced me that it's far from certain whether even Oregon and Nevada are in the clear in the event of SCOTUS ruling for the King plaintiffs, much less Vermont or Rhode Island.

Again: Until the King issue is resolved, every state should operate on a worst-case scenario assumption and be doing everything in their power to move off of the federal exchange, not to move onto it.