UPDATE: Virginia: Whoa. New law to allow self-employed to enroll in sm. group market?

Hat Tip To: 
Esther Ferington

Holy smokes. A huge shout-out to Esther F. for the heads up on this. I have no idea how this story slipped under my radar the past few months:

Northam signs healthcare bill to provide relief to Virginia entrepreneurs
Published Wednesday, Apr. 11, 2018, 12:42 pm

Gov. Ralph Northam signed a new healthcare bill into law that will provide relief to many small business owners currently struggling with the Central Virginia insurance premium crisis.

Members of local advocacy group Charlottesville For Reasonable Health Insurance had provided testimony at the Virginia General Assembly and organized an email campaign, helping to ensure passage of the bill through the legislative session. Introduced by Sen. Creigh Deeds and effective July 1 2018, SB672 will allow self-employed people to take advantage of the much more affordable health plans in the small group business marketplace, without having to hire employees.

Let me be clear: I've known since last fall about how ugly things have gotten on the ACA markets in the Charlottesville, Virginia area. Heck, the citizen group referred to above and I even follow each other on Twitter. However, somehow this development completely escaped my attention.

Charlottesville and surrounding counties (Albemarle, Green, Fluvanna) have by far the most expensive healthcare premiums in the nation in 2018. Rates more than tripled for consumers buying coverage on the ACA Individual Exchange, making comprehensive insurance unaffordable for people who do not qualify for subsidy assistance. A typical family of four is being charged $3000 per month for high deductible plans.

“SB672 will provide critical relief for our self-employed community, who are unable to afford the 300% premium increases foisted upon us this year by Optima” said Shawn Cossette, who made numerous trips to Richmond to lobby for the bill. “These small group policies are ACA compliant covering pre-existing conditions and preventative care, which I feel is as important as being affordable.”

...“The new law will help many people in our group who operate their own business but don’t have a full-time employee on payroll to qualify under the old regulation. But it’s a work-around, not a fix to the issue of the BOI approving Optima’s scandalous rates in the individual market. And there are many people in our group still out in the cold, like early retirees.”

Here's a podcast interview with Ms. Cossette in which she provides more details on the situation in Charlottesville...

"This bill unfortunately doesn't help everybody who's in this predicament in our area. But it does help quite a few people. This bill… Right now if you are self-employed, you have no other option, but to purchase your insurance on the individual marketplace, also known as the Affordable Care Act. And up until now that was a great situation. I have always been purchasing an individual insurance plan versus a small group insurance plan.

Previously the law was that you needed to have at least one full time employee before you qualify for a small business insurance premium or insurance policy. And in the past, to be honest, it typically was that the small business insurance policies were more expensive than the individual policies. But at some point that slipped, and really for the first time, the business plans are cheaper than the individual market plans. So this bill will allow for those folks who are self-employed, but who do not have a full time employee to purchase insurance basically as a group of one. So they are able to buy a small group insurance.

...and also makes it clear that she actually supports the ACA, and again clarifies that this is only a stopgap workaround:

..."I personally supported — the Affordable Care Act, the premise. I mean I think there's a lot of problems and they need to be fixed. But I think it provided a lot of security, especially for people like me, who are a small business owner or self-employed, because you're not dependent on a job to get your insurance. But what I love about this bill and why I advocated so strongly for it, is that all of the plans that you're allowed to purchase have to cover the mandated essential benefits, as well as cover preexisting conditions, which I think, that's the gift that the ACA gave to people, especially self-employed and small business owners. Yeah, so it's definitely a win for small business owners and self-employed folks, this signing of the bill."

Apparently the law passed unanimously in both the state Senate and House, which is a stunner given how ugly the stalemate between Republicans and Democrats has been in Virginia, especially over healthcare (and specifically Medicaid expansion).

As Esther noted:

It is meant to address the unique situation in Charlottesville, but I'd assume it applies to the entire state (though maybe it's not of value elsewhere??). The podcast episode spells out just how much premiums escalated in Charlottesville, outstripping increases anywhere else in the country for 2018.

That's a good point--it's possible that Charlottesville may be the only part of the state where ACA-compliant individual policies are significantly more expensive than corresponding small group policies, making it a region-specific workaround. This might also explain the complete lack of opposition from anyone in the legislature as well as the low profile of the legislation in the media.

As for myself, I'm torn about this. I just got done editing and uploading an entire video explaining, in explicit detail, the dangers of slicing up the individual market in this fashion. However, there are a couple of important distinctions here:

  • First, in most parts of the country, the damage to the ACA risk pool (much due to deliberate sabotage, some due to other factors), while not good, hasn't crossed the point of no return yet; with proper legislative fixes at either the federal (hah!) or state level, most areas can be brought back from the brink. In Charlottesville, the situation is already so dire that there appears to be little choice but to do something like this.

To be honest, in many ways this law sounds sort of like a de facto, partial merging of the Individual and Small Group risk pools in Virginia. This is something which Massachusetts, Vermont and the District of Columbia have already done officially...except that in this case it would only partially merge the two. As Cossette notes in the podcast, this moves self-employed folks over to the small group market, but still leaves those who work for small businesses which don't provide coverage or who are retirees (but under 65, so not on Medicare yet). If anything, this could make the risk pool situation even worse for those groups...although perhaps not. I don't imagine there's that much of a health status distinction between "middle class/self-employed" and "middle class/working for small business w/out employer coverage". If not, then the remaining exchange risk pool won't be worse, it'll just be smaller.

Anyway, it's a fascinating stopgap solution, at least in the short term (no pun intended).

And again, what's even more amazing to me is that besides the podcast link above, I've only found a total of six news articles mentioning this bill...three of which are from the local Augusta Free Press. Amazing.

The only national mention I found was this brief mention in the Washington Post from April 25th:

Their greatest victory came with the passage of SB 672. This law redefined what a “small employer” is so that self-employed people can buy insurance in the small-group market.

The group sought this change because many people, including Dixon, found that the cost of adding an employee to a company of one allowed them to save money by obtaining insurance as a small group, though it still added significant overhead costs to these businesses.

Many in the group see this success as only a band-aid fix. Though it allows some people to obtain cheaper insurance, it doesn’t address the root of the problem: Optima’s rate increases.

UPDATE: The Charlottesville citizen's group just posted this:

Thanks for covering. We do have concerns about the impact this could have on the individual market risk pool. In the end, we decided we’d support bandaid fixes if they had the essential benefits. It also doesn’t fix the problem for many in our area.

— Cville Healthcare (@cvillehlthcare) May 11, 2018

UPDATE: Hmmm...ok, after discussing this with Louise Norris, it sounds like this might not be a done deal after all. Apparently there could be any number of conflicts:

  • It might violate the ACA outright, since the ACA actually requires at least one employee for small group status
  • It's possible that these policies would end up being categorized as Association Health Plans (AHPs) instead of Small Group...which, thanks to Trump's #ShortAssPlans executive order, could mean they'd end up being treated as Large Group plans, which in turn would allow them to have some ACA protections stripped.
  • Even if they're allowed legally and categorized as Small Group plans as intended, it's possible that none of the carriers will want to offer them, since Group plans can be sold year-round under the ACA instead of being restricted to the Open Enrollment Period.

The law doesn't go into effect until July (meaning policy coverage wouldn't kick in until August), so there's still a few months to sort all of this out, but it sounds like there's a lot of unknowns involved. Stay tuned...