Department of Vermont Health Access urges committee to make small-group/individual market split permanent

Representatives of the Department of Vermont Health Access told the House Healthcare Committee at a committee meeting that H.35 would codify Vermont’s current separation of the individual and small-group insurance markets and that keeping the markets unmerged would protect small employers from potential premium increases if enhanced federal subsidies expire.

Alex McCracken, director of communications and legislative affairs for the Department of Vermont Health Access, said the individual market covers about 34,000 covered lives, roughly 30,000 of whom enroll through the Vermont Health Connect exchange, while the small-group market covers about 36,000 lives. “The individual market is about 34,000 covered lives. 30,000 of those are through the exchange, the Vermont Health Connect marketplace,” McCracken said.

The department recommended making permanent the 2022 separation of the markets — enacted in statute change after Act 171 (2012) had previously merged the markets — arguing that separate markets give Vermont more flexibility to pursue affordability tools targeted at the individual market and shield small employers from market-driven premium increases. McCracken said that in 2025 the average small-group premium in the Vermont qualified health plan market is about 17% lower than the average individual premium, and that restoring a merged market could raise small-group costs; department materials estimate a roughly 7% increase or about $23,200,000 in aggregate if the markets were remerged.

Deputy Commissioner Adi Stromelow said the state faces a funding gap if the enhanced federal subsidies enacted during the pandemic are allowed to lapse. “The enhanced subsidies represent more than 65,000,000, coming into the marketplace, and there's just there's no way to completely backfill that loss,” Stromelow said. Both officials noted that 94% of exchange enrollees receive subsidies and that those enhanced subsidies are scheduled to expire at the end of 2025 without action from Congress.

Committee members pressed department staff on alternative options if enhanced federal subsidies end. Stromelow described state-level approaches the department studied, including reconfiguring Vermont premium assistance (funded through the state’s waiver) and considering a reinsurance program to reimburse insurers for very high claims. She warned, however, that reinsurance or a state subsidy would not fully replicate the effect of the federal subsidies, which effectively cap enrollee costs as a share of income under current law.

McCracken told the committee the department must notify federal partners of Vermont’s market structure by a CMS deadline of March 1, creating a compressed timeline for any statutory change. He said H.35 was introduced for the committee’s consideration and that department staff are available to provide the committee with the technical report and follow-up briefings.

No committee vote on H.35 was recorded during the session. Department staff recommended passage of H.35 to codify the current market structure; committee members asked for additional information about state-level subsidies, employer obligations, and potential impacts on small businesses and employees.

The department offered to return with more detail from its report and actuaries should the committee request it. With the March 1 CMS deadline and the potential expiration of enhanced subsidies at year-end 2025, department officials said federal action is the department’s top priority but that the state is preparing contingency options.

Acknowledging the timeline, the committee took testimony on H.35 and indicated it would continue review and follow-up with department staff.